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Bullish Iomart in expansive mood as profits surge

FAST-growing cloud computing specialist Iomart has seen its annual profits rise more than 11 per cent and signalled further expansion is on the cards.

OPPORtunities: Iomart chief executive Angus MacSween is on the look out for acquisitions. Picture: Peter Devlin
OPPORtunities: Iomart chief executive Angus MacSween is on the look out for acquisitions. Picture: Peter Devlin

Chief executive Angus MacSween said there was no reason the Glasgow company could not keep growing "significantly".

That came as he unveiled a 29 per cent surge in revenue from £43.1 million to £55.6 million in the 12 months to March 31.

Pre-tax profits rose from £8.7 million to £9.7 million while Iomart also announced plans to increase its dividend by 25 per cent to 1.75p per share.

Adjusted profit before tax, which does not include amortisation charges on acquired intangible assets, share-based payment and some financing costs, was up 37 per cent from £10.7 million to £14.6 million,

Mr MacSween said: "Whilst we have grown significantly [this year] there is no reason for us not to grow even more significantly as the adoption of cloud gathers pace in the future. It is still very much in its infancy and there is a long way to go. While we can't dictate the pace of that progress we are better positioned [now] than we were at this time last year.

"We are pleased with where we are and there is more to come."

Mr MacSween identified trends such as a growing number of mobile devices, greater connectivity options and larger volumes of data being generated as being important drivers of the business in the coming years.

He believes those trends will make it easier to drive greater amounts of data into the cloud while also increasing the need for that information to be securely stored. Iomart has made 11 acquisitions in the past five years but continues to be in the market for more deals as a way to expand its customer base and infrastructure. Its buy-and-build strategy has been strongly backed by funding from Bank of Scotland.

Mr MacSween said: "We get offered businesses every week of the year but are still very disciplined in what we will entertain.

"There are still opportunities out there. Clearly as we get bigger then the things we buy have to get a bit bigger, as otherwise they don't make much of an impact.

"There are always ongoing conversations on the mergers and acquisitions front."

During the financial year Iomart completed the multi-million pound fit-out of 600 server racks at its data centre in Maidenhead. Mr MacSween says that means there is now enough spare capacity across its network of eight data centres across the UK to comfortably meet the company's organic growth targets over the next few years.

He said: "Our data centres are just over half full so we have plenty of capacity for the next four or five years."

In the financial year the larger cloud hosting segment saw its revenue rise 40 per cent from £32 million to £44.7 million helped by the impact of deals for Melbourne, made in August 2012, and for Redstation and Backup Technology, which were completed in September 2013.

The division saw its organic revenue rise by 14 per cent. According to Mr MacSween Iomart is working with the likes of Microsoft, Cisco, Dell and EMC to make sure it follows the technology roadmaps those corporations are introducing.

He said: "We are investing with them and hopefully through that will come opportunity. As we get bigger we become a more credible partner."

Iomart's Easyspace arm, which provides domain names and web hosting, saw revenues dip one per cent from £11.1 million to £11 million.

Mr MacSween confirmed future growth will come from the hosting business but stated Easyspace remains a good source of cash generation for the group.

Trading in the current year was said to be "encouraging" with good visibility of revenue.

Analysts Tintin Stormont and Pia Tapley, from N+1 Singer, kept a hold rating on the stock.

In a note they said: "Iomart reported another set of robust preliminary results that were slightly ahead of our expectations.

"We believe its financial metrics (margins, in particular) have limited room for significant improvement from here and 20 per cent of sales (Easyspace) do come from a segment seeing no organic growth.

"It is a highly cash generative business which will continue to have options to boost its growth going forward and has been well-managed for a number of years; as such, we believe it should be able to sustain its current premium rating."

Iomart shares closed down 5.5p, or two per cent, at 237.5p.

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