Glasgow cloud computing firm Iomart 'proactively managing' energy inflation amid upbeat outlook

Iomart, the Glasgow-headquartered cloud computing group, is having to pass on higher energy costs to customers but is confident businesses will continue to invest in their IT provision despite the economic squeeze.

Releasing full-year results in line with figures flagged in April, the firm said it continued to benefit from a “robust business model” delivering strong levels of recurring revenues, amounting to 93 per cent of group revenues.

A reduction in overall revenue, to £103 million from £111.9m a year earlier, reflected lower non-recurring equipment and consultancy sales, along with lower customer renewal levels at the start of the year, which have since returned to normal levels.

Chief executive Reece Donovan said the first two months of the new financial year had seen the group perform in line with expectations.

He noted that while some businesses were cutting back on spending, IT provision remained a high priority amid the migration of computing services to the cloud.

Inflation in energy prices is being “proactively managed” via price increases to customers while the firm is using hedging options to provide “some certainty for customers and our own planning”.

Chief financial officer Scott Cunningham noted that energy accounted for about 10 per cent of the group’s costs and the company was having discussions with its customers on an individual basis regarding pricing.

Donovan said: “We have made good progress on all aspects of our strategic growth plan and start the second year of this plan in an improved position.

Iomart chief executive Reece Donovan. Picture: Peter Devlin

“With an expanded offering and strengthened team, as well as an established reputation within the UK’s cloud computing market place, we have a strong platform from which to return to a growth phase of the business.

“We are mindful that the wider business environment continues to be challenging. As Iomart has shown in the past, during periods of uncertainty, we have a robust business model and strong financial position to manage such short-term pressures.

“This is especially the case as the market for cloud computing solutions continues to offer long term growth and our strategic actions taken, together with our M&A [merger and acquisition] plans, puts us in a stronger position to benefit from this over the coming year and beyond.”

He pointed to a £100m financing facility, agreed towards the end of 2021, to back the group’s growth plans, including the potential for bolt-on acquisitions.

The results for the year to the end of March also showed adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) dipping 8 per cent to £38m, again in line with forecasts.

Analysts at house brokerage Investec, which has a buy rating on the stock, noted: “The M&A outlook is active and could provide a meaningful inorganic boost to numbers in due course. This is an excellent tech defensive in terms of revenue mix/model, and has an under-rated capability to accelerate its growth profile, something that may be increasingly rare as economic conditions worsen.”

Andrew Darley, head of technology at broker finnCap, said: “While the group will likely not get credit for prospective organic growth until it actually happens, Iomart has been a serial acquirer since establishing its current strategy in 2007, with a notable recent hiatus, and we expect a return to the M&A path.”