By Kristy Dorsey

Cloud computing provider iomart says it has corrected issues that led to an October profits warning and remains on the hunt for acquisitions after securing a fresh £100 million credit facility at the end of last week.

Speaking after the Glasgow-headquartered group posted its interim results for the six months to the end of September, chief financial officer Scott Cunningham said the new credit facility will give iomart additional firepower to undertake deals for firms with revenues in the “sweet spot” of about £10m.

“We are looking to extend our skills and capability,” he said. “We are looking at security businesses and businesses that have strong skills in Microsoft, for example – these are two areas that are perhaps a bit more of a focus for us at the moment.”

Shares in AIM-listed iomart fell by nearly 18 per cent on October 1 after the company warned that increased customer churn rates would drag on revenues and profits in the first half of the current financial year.

READ MORE: Customer churn drags on iomart profits

Confirming those numbers yesterday, the company posted an 8% decline in revenues to £51.9m, leading to a 7% fall in adjusted pre-tax profits at £9.1m. Profit before tax was unchanged at £6m.

Chief executive Reece Donovan said the company has addressed the issues leading to increased customer churn, and now expects that trend to reverse. This has involved a reorganisation of how its teams operate to better handle “simpler” customer requests, where most of the problems were arising.

“Depending on the nature of the requests, if it’s something really simple and quick then it goes to a team that deals with simple and quick,” Mr Donovan said. “If it’s something that’s more complicated and takes longer and takes more fundamental changes to the solution we are providing to them, it goes to a team that is capable of handling that.

“We took that live at the beginning of October and certainly over the last two months the feedback has been positive. We have seen turnaround times much more in line with what we would expect.”

The company launched two new products during the first half and has secured its first customers for both. Further new offerings are planned as iomart works towards its goal of increasing revenues to £200m within the next five years.

READ MORE: New broom at iomart looks to ‘tweaks’ for future growth

Mr Donavan added that the company’s new branding has been well-received by stakeholders, setting the “tone and foundation for future growth initiatives”.

“Our refresh strategy is now starting to deliver,” he said. “We’ve secured some of our first customers with our new offerings, and I guess that underpins our group-wide confidence that performance during the period will continue.

“We have got strong levels of recurring revenue and cash generation, and the confidence in the business model has been demonstrated with the recent successful bank financing that we’ve done.”

The market remains “active and growing”, Mr Donovan said, but companies are also casting greater scrutiny over how they spend their IT budgets.

“From a customer perspective, people remain cautious,” he said. “I think they are definitely now looking at how they come away from the Covid solutions that they have been running now for the last year, year and a half.

“From a large project transformation perspective, those are fewer and further between. It’s more small pieces of discretionary spend to incrementally improve the solutions that they’re working with.”

House broker Peel Hunt said in the wake of October’s trading update, the first half results contained no surprises.

It added that the new product offerings are going well, with notable successes including a win against “key peers” to secure the custom of a Scottish housing association. Such wins evidence “the good progress being made”.

“Over time, layering these managed services contracts wins should build up a tidy revenue stream in secure connectivity from customers who do not have the in-house skills to do so,” Peel Hunt said.

“Similarly, having now completed its strategic milestone for ‘hybrid prep’, iomart has won its first six-figure managed public cloud deal involving the full suite of Microsoft Azure services.”

Shares in iomart closed yesterday’s trading more than 8% higher, up 11.6p at 156p.