Iomart buys data centre firm for up to £8.1m

WEBSITE hosting firm Iomart has made its largest acquisition in almost a decade after buying a rival outfit on the south coast of England for up to £8.1 million in cash and shares.

Angus MacSween, CEO of IOMART. Picture: contributed

The Glasgow-based firm said the purchase of privately-owned data centre operator Redstation would take its total number of servers to about 20,000, and is expected to provide an immediate uplift in its profits.

The acquisition takes the number of Iomart’s data centres to ten, stretching from Glasgow to the south coast of England, and is the firm’s biggest deal since it bought web hosting specialist Easyspace for £12m in September 2004.

Aim-quoted Iomart has paid an initial £6.6m for Hampshire-based Redstation, comprising £5.1m in cash and £1.5m of new shares. A further cash payment of up to £1.5m will be made if the company meets profit targets before 31 March.

Chief executive Angus MacSween, pictured, who earlier this year told The Scotsman that the group receives at least one approach a week from companies looking to be bought over, said: “The addition of Redstation will consolidate our position as the leading player in the dedicated server market in the UK.

“Redstation’s customers deliver a wide variety of cloud applications and services, so this acquisition further underpins Iomart’s position as the main provider of the complex infrastructure required by UK businesses to support the cloud environment.”

In May, Iomart announced a 56 per cent jump in full-year profits to £10.7m as the group benefited from the shift towards cloud computing, where customers outsource the storage of their data and applications.

Profits were also boosted by the £1.4m purchase of website hosting business Skymarket in July 2012 and the following month’s takeover of Melbourne Server Hosting for £6.7m.

Redstation, which owns two data centres in Gosport serving about 3,000 customers, generated an underlying pre-tax profit of £2.4m in the year to 30 June, on turnover of £5.2m.

The firm was founded 15 years ago by Lance Taylor and employs 33 people.

Managing director Martin Groom said: “Redstation has grown to the point where we need to move to the next level, so becoming part of the leading cloud company in the UK makes perfect sense.

“As part of the wider Iomart group we will have access to greater resources and technical innovation and will be able to offer an even wider range of cloud services to our ever-growing customer base.”

Analysts at house broker Peel Hunt raised their target price on Iomart’s shares to 315p following the deal, and the broker is forecasting underlying pre-tax profits of £21.8m for the year to March, up from last year’s £16.5m figure.

Canaccord Genuity analyst Jonathan Imlah, who described yesterday’s deal as “compelling”, said: “We continue to be fans of the Iomart story and business model.”