Glasgow's Iomart warns over profits but insists 'solid foundations' in place

Iomart, the Glasgow-headquartered cloud computing group, has warned of results that will fail to match up to market expectations but insisted that it has built “solid foundations to support future growth”.

The group told investors that it was progressing with the launch of a new brand, the release of new products and scoring its first “hybrid customer win” during the six months to September.

However, bosses warned that the firm’s “refreshed strategy” would take time to flow through into its financial results.

Iomart also cautioned that a “slightly higher than usual” customer churn rate seen in the final months of the last financial year had continued into the first half of the current period.

Iomart CEO Reece Donovan. Picture: Peter Devlin

In addition, non-recurring revenue, principally hardware reselling and one-off consultancy activity was £2 million lower than the equivalent period last year and the group does not expect this revenue to be recovered during the remainder of the current year.

As a result, the board anticipates results for the full year to the end of March 2022 will be below current expectations.

For the six months to September 30 this year, the group expects to report revenue of about £52m, which would be down from £56.3m a year earlier, adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) of approximately £19.5m, down from £20.8m, and adjusted profit before tax of around £9m, against £9.8m previously.

In a trading update ahead of its detailed first-half figures, due to be released in early December, the firm stressed that profit margins have remained strong in the period, at 37 per cent for adjusted Ebitda and 17 per cent for adjusted profit before tax.

The group's cash generation has been “good and ahead of the board's expectations”, with the cash position increasing to some £26m at the end of September, up from £23m as of the end of March.

The firm told investors: “Iomart's valuable datacentre and network infrastructure, market-leading cloud expertise, highly recurring revenue and significant customer base means the business is well positioned to execute on its strategy from a strong and stable foundation and return to growth over the medium term.”

Chief executive Reece Donovan said: “We are on track to achieve the key milestones of our strategic refresh which we laid out in May for delivery in FY22. Our team is energised behind a new brand and vision to attract and retain quality customers. Sales, operational and organisational improvements continue to be made which are vital to scale the business. We are starting to see early signs that the market is responding to our newly launched offerings. While these successes will take time to flow through into our financial results, they provide solid foundations to support future growth.”

In June, Donovan said the firm had identified “a significant market opportunity” to grow its offering as the workplace becomes increasingly digital focused. He also flagged “selective acquisitions” as the business grows its footprint and expands its range of services.

Results for the year to the end of March showed that revenues dipped 0.6 per cent to £111.9m, in line with guidance provided to investors in an April trading update.

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