Strong performance in Cloud Services and Hosting divisions after acquisitions

Companies: Iomart Group

Cloud computing specialist Iomart Group released a bumper pre-close trading update on Friday, saying it had been an "exciting" year of growth, and that it expected to deliver another "excellent" set of results.


The update sent Iomart shares down 4.2% early on Friday despite the positive numbers.


For the full year, Iomart says it expects to deliver revenue growth of 17%, and adj EBITDA growth of 13% to c.£36m, both in-line with consensus expectations. As a result, adj pre-tax profit is expected to rise 19% to £22.4m.


Growth was driven by the firm's Cloud Services division which saw a "substantial" amount of new business coming in over the past year as it benefitted from the growing adoption of cloud services by organizations.


The Cloud division also saw sizeable revenue from SystemsUp, the public cloud consultancy, which was acquired in June 2015:


"The choices for businesses considering a move to the cloud are ever more complex and iomart's ability to provide consultancy and services across the whole cloud spectrum, including public, private and hybrid cloud, leaves us well positioned for future growth."

Meanwhile, Easyspace the hosting division delivered results in line with expectations, returning to organic revenue growth after the falling in FY2016. This division also benefitted from the contributions of an acquisition, following the purchase of United Communications in November 2015.

Iomart has a progressive dividend policy, paying out up to 25% of adj diluted earnings per share each year. This year, however, the firm says it is anticipating announcing a payout ratio in excess of the 25% cap, and as a result has raised its payout ratio cap to 40% after hefty cash generation:


"In line with past performance the Group has continued to generate high levels of operating cash over the year and in addition we are currently carrying a very low level of gearing with our net debt likely to be around one third of our adjusted EBITDA at the end of this financial year. Consequently, the Board has decided to review the upper limit of the dividend payout ratio. As a result, we now intend to increase the maximum payout ratio to 40% of adjusted diluted earnings per share."

The update included the news that COO Sarah Haran had decided to leave the company after 18 years, standing down immediately. 


CEO Angus MacSween said it had been a year of "exciting" growth, with long-term opportunities remaining very real in his opinion:

"...iomart continues to broaden its cloud skills, experience and breadth of management to ensure it is well positioned for future growth. Our strong balance sheet and our increasing cashflow leaves us in good financial health. I would like to add my personal thanks to Sarah Haran who has made a significant contribution to the success of iomart for many years."



The information contained within this post is based on personal experience and opinion and should not be considered as a recommendation to trade nor financial advice.