SHARES in Scottish cloud computing group iomart fell nearly ten per cent after it posted results lowered by the weight of the latest lockdown.

The Glasgow-headquartered firm said the “third, and unexpected, Covid-19 UK lockdown hindered the green shoots of growth we had expected in the second half of the year, causing results to be at the lower end of expectations”.

It said it expects to report revenue of around £112 million for the year to March, down marginally from £112.6m in the prior financial year, and adjusted profit before tax of about £20m, down from £22.8m.

However, the group remains “strongly profitable” it said, and the board "is confident iomart has a strong basis for growth” once UK business confidence returns and a raft of strategic moves currently in progress under new chief executive Reece Donovan have been fully implemented.

It said it expects to deliver a “continued stable financial performance” in the second half of the year. The business also said the group’s strong balance sheet allows the "proactive consideration of acquisitions to broaden the group’s skills and capabilities in new areas”.

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The group said it has seen revenue growth in its core area of managed cloud services, but overall the cloud services division contracted, “primarily due to a drop in non-recurring hardware reselling activities as customers delayed investment decisions”.

It has maintained its sales team throughout the Covid-19 pandemic “in order to position the company optimally” once business confidence returns and has not made use of any Government furlough support, it said.

Combined with the specific mix in revenue in the year this resulted in a lower adjusted EBITDA margin of approximately 37.1%, against 38.6%. Iomart said the margin level remains higher than the industry average and consistent with expectations.

Cash generation outstripped the board’s expectations during the pandemic year though, with the year-end cash position increasing to about £23m at March 31, against £15.5m at the same time last year. Its revolver loan drawn amount remains unchanged from last year and along with lease liabilities iomart expects net debt to be around £56m, compared to £57.6m last year.

The group’s revenue profile continues to move away from legacy self-managed infrastructure revenue to managed cloud revenue, it said, which by its competitive nature tends to have initially lower margins that expand over time and represent a better long term growth opportunity.

It said the trend will continue as the group “refocuses towards higher growth sectors, with managed cloud services at the heart of the iomart offering”.

It said that while the success of the transition will take time to flow through into results, the board is “confident iomart’s valuable datacentre and network infrastructure, market-leading cloud expertise, highly recurring revenue and significant customer base means the business is well positioned to execute on its strategy and return to an accelerated growth trajectory over the medium term”.

The board “remains confident in the outlook for the long term prospects for iomart”.

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Mr Donovan said “iomart has performed resiliently during these unprecedented times, proving the strength of our recurring revenue model, the value our customers place on the services we deliver, and the commitment of our teams.

He added: “We are in a period of transition for iomart, building on a strong starting position in terms of our financial strength, business model and market position.

“We look forward to updating investors further on our revitalised strategy at the Capital Markets Day in May.

“We have high confidence levels on the future success of iomart and our ability to be a leading cloud service provider, supporting customers in each step of their cloud journey.”

Mr Donovan joined the firm in April 2020 as chief operating officer from Newcastle-based Nomad Digital just as lockdown came into force and the majority of iomart’s 400 employees were shifting to remote working.

He took over from founder Angus MacSween in October when he signalled an intention to continue on the acquisition trail that has already led to the takeover of 21 businesses in a decade.

Shares in iomart closed down 9.8% or 31.5p, at 290p.