Iomart to hike dividend by 90% after jump in profits

Web hosting and cloud computing specialist Iomart today said shareholders were in line for a 90% increase in their dividend as it reported higher annual earnings.

Iomart chief Angus MacSween hailed 'another year of strong growth' for the Glasgow group. Picture: Contributed
Iomart chief Angus MacSween hailed 'another year of strong growth' for the Glasgow group. Picture: Contributed

The Glasgow-based group has proposed a final payment of 6p a share to be paid on 6 September – up from 3.15p last time – which chief executive and co-founder Angus MacSween said reflected its high levels of operating cash and low indebtedness.

“Part of the reason for the increase in the dividend is that we’re throwing off a lot of cash now,” MacSween told The Scotsman.

“We’ve made about ten acquisitions over the last five years and never gone beyond one times Ebitda [earnings before interest, tax, depreciation and amortisation] in debt, so I think it was time for us to be a bit more generous and use the dividend tool more than we have in the past.”

Andrew Darley, an analyst at broker FinnCap, said: “The acceleration in dividend growth was expected. However, 6p beat our expectations of 5.1p and highlights board confidence in the business’ combination of growth, profitability and cash generation, while not jeopardising capacity for further acquisitions.”

The boost for investors came as Aim-quoted Iomart said adjusted pre-tax profits jumped 18 per cent to £22.4 million for the year to the end of March, on revenues 17 per cent higher at £89.6m.

The firm also said it was confident of making further acquisitions, having purchased Gloucestershire-based data storage and back-up outfit Cristie for £3.8m in August, followed by last month’s €7.9m (£7m) takeover of Dediserve, a cloud services provider headquartered in Dublin.

House broker Peel Hunt said that Dediserve, which has 17 data centres and about 1,500 customers, “broadens Iomart’s non-UK presence, and in our view, provides a solution to those Iomart customers looking to navigate any complexities arising from Brexit given Dediserve’s broader EU presence”.

MacSween said: “We continue to find things to buy. It’s a long runway that we’re on, and the journey to the cloud will take the next five, ten or 15 years to complete for many people. I believe we’re still in the early days of the opportunity.”

He added that Iomart previously had a “very small” physical presence in the European Union, and while the firm has not seen any impact from last year’s referendum, “other than the weakening of sterling”, it was confident of being able to deal with the “many issues to be resolved” as Brexit looms.

“Dediserve has footprints in Dublin, Vienna, Frankfurt and Amsterdam, so that gives us a bit more scope on the European front,” MacSween said.

“Our global footprint is growing – we now serve customers in 129 countries. There’s no doubt that the world is shrinking and a lot of our customers trade globally as well so they do appreciate us having footprints elsewhere. That will be a trend that will probably slowly continue for us.”