Cloud cover

Iomart has ‘active pipeline’ of deal targets

Reece Donovan
Reece Donovan: comfortable with progress

Cloud computing firm Iomart said it is pursuing an “active pipeline” of acquisition targets as it looks to add £50m to group revenue over the next five years.

The Glasgow-based company, which has been hugely acquisitive over the past two decades, said it had resources to fund a deal by the end of the year.

In a statement with figures to the end of March it said it had made “positive progress in evaluating targeted opportunities to further extend the group’s technology, product capabilities and routes to market, while enhancing revenue, profitability and EPS [earnings per share]”.

In a conference call with Daily Business chief financial officer Scott Cunningham said: “We have identified targets. We had hoped to do something in the last 12 months and we have an active pipeline. Our shareholders want us to do M&A and we are set up to do that.”

CEO Reece Donovan added: “We are comfortable with the progress we are making and confident that we have a strong base on which to work.

“There are some headwinds but we are positioned to ride through them. IT spending will continue will not be impacted as much as other things.”

While pre-tax profit was 2% lower at £12.2m on an 8% fall in group revenue from £112m to £103m, the board said this reflects lower non-recurring equipment and consultancy sales, along with lower customer renewal levels at the start of the year, which have since returned to normal levels.

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The company said the first two months of the new financial year has seen performance in line with the board’s expectations, consistent with its high recurring revenue business model.

The proposed final dividend is trimmed from 4.5p to 3.6p in accordance with the adjusted EPS.

Mr Donovan said the company had completed the transformation of its sales leadership team and its focus on ESG has seen energy consumption fall by 60%, a trend that will continue next year.

Analysts at Investec were upbeat about the company’s prospects. In a newly-published note they said: “The M&A outlook is active and could provide a meaningful inorganic boost to numbers in due course.

“This is an excellent tech defensive in terms of revenue mix / model, and has an under-rated capability to accelerate its growth profile, something that may be increasingly rare as economic conditions worsen.”

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