The head of Glasgow-based iomart has said the cloud computing company is returning to the “regular drumbeat” of bolt-on acquisitions after posting record revenues and a return to organic growth.
Sales during the year to the end of March rose by 12 per cent to £115.6 million as the company had its busiest quarter in two years during the first three months of 2023. Iomart also benefitted from £6.2m of revenue from the August 2022 acquisition of Concepta Capital, a holding company for the Oriium and Pavilion IT brands.
However, pre-tax profits fell to £8.5m against £12.2m previously as inflationary pressures weighed on earnings. This included an additional £7m in energy costs that have now been passed through to customers, plus wage increases, cost-of-living support and extensive staff training.
“We are starting to see the benefits of our strategy coming through that we initiated in [2022]”, chief executive Reece Donovan said. “We have achieved record revenue performance this year and that’s really driven by a return to organic growth within our cloud managed services business, the appropriate pass-through of increased energy costs on to our customers, and the successful re-initiation of our disciplined M&A programme.”
READ MORE: Glasgow-based iomart acquires Extrinsica of Oxford
He added: “We will focus on building that momentum, continuing stability in our customer base, and continuing to grow as we go forward, coupled with on-going M&A programme that we have now re-started, so it will just be a regular drumbeat of bolt-on acquisitions through the coming years.”
The company is targeting firms with annual revenues of up to £10m following last week’s move to snap up English rival Extrinsica Global Holdings, a specialist in Microsoft Azure Cloud solutions. Iomart is paying an initial £4m for Extrinsica, which has what Mr Donovan described as a strong roster of customers and 33 staff with “deep Microsoft skills” that the Scottish company lacked.
“We were absolutely delighted to get that completed because that’s been a priority for us,” he said.
Iomart now employs about 470 people, most of whom are based in the UK. Roughly 160 are based at its headquarters in Glasgow.
READ MORE: Glasgow's iomart in multi-million acquisition deal
In its results statement, the company said the last couple of months’ trading since the close of the financial year have been in line with internal expectations. Revenues were ahead of the same period a year earlier thanks to a mix of organic growth and acquisitions.
Chief financial officer Scott Cunningham said utility prices, one of the company’s biggest expenses, are “definitely” less volatile than a year ago. Iomart has put a hedging strategy in place to provide “pretty good certainty” for the next few years.
Mr Cunningham added that the company can “comfortably” finance between £80m and £100m of acquisitions over the course of the next five years from its own resources.
“We’re carrying less debt than we did last year,” he said.
“Our leverage is only one times EBITDA (earnings before interest, tax, depreciation and amortisation) and we generate some good cashflow, so we will actually fund those bolt-on acquisitions from our own balance sheet. We’re not suggesting that we have to go out and find investments or seek any extra money, we can basically do it from our own resources.”
Shares in iomart closed yesterday’s trading unchanged at 165p.
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