finnCap raised its target price to 400p, saying it was "textbook delivery"
Companies: iomart Group plc
Cloud Computing firm Iomart released its final results on Tuesday, reporting 17% revenue growth, 13% EBITDA growth, and 18% PBT growth, as it hiked its dividend.
Cloud Services saw revenue grow 11%, supported by 10% organic revenue growth. Easyspace, which fell 8% in FY16, returned to organic growth of 4%. Iomart's bolt-on-acquisitions strategy continued to enhance group performance, with 17% headline growth, 40.8% EBITDA margin, and FCF of £19.3m.
Adjusted pre-tax profit margins were maintained at 25%, which, with strong cash generation, has led to a proposed 90% increase to the final dividend of 6p.
finnCap raised its target price to 400p, saying it was "textbook delivery". with prelims in line, cash generation ahead, and unchanged expectations at the year end:
"With such strong levels of cash, visibility and confidence, the board has accelerated the expected dividend growth one year ahead of our expectations, lifting the full-year dividend to 6.0p (+88% vs FY16; +18% vs FY17E), while still retaining a strong balance sheet to fund further strategic acquisitions. The quality of the company remains difficult to match, with expected results routinely delivered with a maximum variation of 1-2% before acquisitions."
While N+1 Singer took a slightly less positive tone, saying while the results were in-line, there was some disappointment in the Group's consulting area:
"Within Cloud Services though, the group did flag a disappointing performance from SystemsUp, the consulting business, which has a higher proportion of non-recurring revenues. As such, we expect market estimates to reflect lower growth in Cloud Services going forward (to c.7-8% vs. 9-10% previously) but the impact on overall profits will be offset by the €7.9m acquisition of Dediserve announced today leaving EPS estimates only marginally changed."
Singers added that iomart has a resilient business model, with high recurring revenue, profit margins, and cash generation, which would allow it to withstand some disappointments in future.
CEO Angus MacSween said it had been another year of strong growth, with the long term opportunity and "runway for success... large and long".
"iomart remains well positioned to take advantage of that opportunity and to deliver further significant growth."
Shares in Iomart fell 5% early on Tuesday.
