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Iomart eyes acquisitions after 29% turnover rise

FAST-growing cloud computing and online hosting firm Iomart has posted a strong set of half-year results and is in talks about further acquisitions.

SITTING PRETTY: Chief executive Angus MacSween hailed an excellent performance. Picture: Peter Devlin
SITTING PRETTY: Chief executive Angus MacSween hailed an excellent performance. Picture: Peter Devlin

The Glasgow business reported turnover up 29% from £15.4 million to £19.9m in the six months to the end of September this year. In the same period pre-tax profits jumped 73% to £4.1m, from £2.4m.

Chief executive Angus MacSween described the results as another excellent trading performance, and said around half the sales growth is coming organically and half from acquisitions.

During the period, the company moved from a net cash position of £3.5m to a net debt of £2.6m but Mr MacSween confirmed this will not stop Iomart seeking out more takeover deals.

He said: "We are very cash generative so we would expect [the net debt] to be more or less eliminated by the year-end unless we spend some cash on something else. We have a £20m facility from Lloyds so that is more than enough firepower for anything we are looking at. There is certainly no requirement at the moment to go to shareholders for capital as we have enough firepower to do a few more deals over the next year.

"We generate cash all the time and the things we buy tend to generate cash as well."

In recent months Iomart has bought Manchester-based Melbourne Server Hosting for £6.7m in its biggest acquisition to date. It also paid £1.4m for Surrey web-hosting business Skymarket and £1.5m for Welsh firm Internet Engineering.

Mr MacSween told The Herald Iomart was having conversations with a number of potential targets. He said: "You can never predict if a deal is going to close or not. There is a bit more competition for assets than there was a few years ago. We are always fairly disciplined about what we pay for businesses.

"They have to make sense and fit the profile but we are talking to a few at the moment."

Iomart recently bought an additional 16,000 sq ft of space at its data centre in Maidenhead, Berkshire, with analysts expecting up to £6m to be spent fitting it out.

Mr MacSween said any major capital expenditure at the site was likely to take place in the financial year starting April 2013.

Brokers from Cannacord Genuity said Iomart was "one of the strongest momentum stocks in the technology sector".

In a note, Cannacord's Jonathan Imlah said: "Encouragingly, margins in both divisions [Easyspace and Hosting] improved markedly. Cash flow was also strong in the period, rising 54% to £6.4m. Unsurprisingly, the outlook statement paints a confident picture for the remainder of the year."

Peel Hunt said: "We note the upbeat tone of CEO Angus MacSween's statement, which suggests that cloud adoption among SMEs may be accelerating as it becomes increasingly difficult to find reasons for not moving IT infrastructures into the cloud."

Mr MacSween said Iomart was confident of meeting full-year expectations. He said: "Trading is going well. We have some business to close but the predictability of our business model is very strong. We have good visibility of the months ahead and that gives us confidence we will have a pretty good full year."

Iomart's shares ended the day down 2.5p at 200p.

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