Scots cloud computing group Iomart sees businesses starting to spend again

Iomart, the Glasgow-headquartered cloud computing group, is seeing business confidence begin to return after reporting a “resilient” first-half performance.

Iomart chief executive Reece Donovan, who recently took the reins from long-serving boss Angus MacSween. Picture: Peter Devlin

Chief executive Reece Donovan, who recently took the reins from long-serving boss Angus MacSween, said new business discussions had gathered momentum in recent weeks pointing to improved confidence in longer-term IT and digital transformation projects.

The latest results showed revenues nudging up 2 per cent, year-on-year, to £56.3 million in the six months to the end of September. The firm benefited from strong levels of recurring revenues, accounting for 90 per cent of the total, up from 87 per cent previously.

Profit before tax was down 29 per cent at £6m, though adjusted underlying earnings held up at £20.8m, a fall of just 4 per cent. The Interim dividend was maintained at 2.6p per share.

Iomart, which has more than 400 staff, said margins were expected to improve in the second half thanks to cost base adjustments and the integration of recently acquired businesses.

Revenue is set to benefit in the months ahead from growth from existing customers and “operational efficiencies”.

Donovan admitted the pandemic had impacted new business and discretionary projects but said the firm was strongly positioned as it entered the “next chapter”.

He said: “Whilst we have exciting plans for the future of Iomart, the focus in the first half of the year had to be the protection of our people, customers and stakeholders in the face of Covid-19.

“I am pleased to report such a resilient set of results and would like to thank our team for their continued efforts and commitment. Iomart’s business model has stood us in good stead and despite the global slowdown in corporate activity, we continue to perform well.

“The previous investments into our sales and operational teams provide us with a strong foundation to accelerate growth once companies regain the economic confidence to make infrastructure transformation decisions.

“We have no doubt the transition to the cloud will continue for many years to come and that we can play a considerable role in being the enablers of that journey for our customers. We remain confident in the long-term prospects for Iomart.”

He said the firm would continue to examine potential acquisitions, either smaller bolt-ons or something larger.

Martin O’Sullivan, an analyst at brokerage Shore Capital, said: “In terms of outlook, Iomart is sheltered from the worst of the expected economic pressures over the coming period given high recurring revenues and its business-critical services.

“Indeed, the outlook could be described as incrementally positive given signs of ‘improved confidence within new and existing customers’ towards the end of the period.

“Recent signs that business confidence may now be returning are also noted, and a ‘growing number of new business discussions’, the benefit of which, if secured, would flow through to revenue growth in future years.”

In September, Iomart announced that MacSween, one of Scotland’s longest serving chief executives, was to leave the top post. Donovan joined the group as chief operating officer in March, as part of the board’s succession planning.

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