Cloud firm aims to be consolidator
Iomart on lookout for transformational deal
Angus MacSween, chief executive, told Daily Business, that the firm was constantly monitoring potential acquisition targets and it would consider a deal of between £50 million and £100m.
This would represent a step-change in operations and confirm the company as a leading consolidator in a booming but fragmented sector.
The company today reported a 14% rise in adjusted profit before tax to £16.6m as it builds on a strategy of growing both organically and by acquisition. Revenue rose by 18% to £65.8m.
The figures include the purchase of ServerSpace, its only acquisition during the period, but come just a day after it acquired London-based SystemsUp for an initial £9 million in cash. A further payment could be made in the region of £1m to £3.5m in respect of expected revenue for this year.
“Clearly, as we get bigger and move the needle we need to make bigger acquisitions. Our immediate ambition is to get beyond £100m revenue and we are looking at doing bigger deals,” said Mr MacSween, “There is nothing concrete just now, but the market continues to consolidate and it is remarkable how many opportunities we get offered.”
He said any deal would be funded largely through debt which is currently cheap, but there may be a need to involve equity and which may require moving from the Alternative Investment Market to the Official List. He acknowledged that this might also help the firm’s visibility with investors. “Technology stocks can be a bit ‘flavour of the month’,” he said.
The company is cash generative, allowing it to pay a healthy dividend, and chairman Ian Ritchie said shareholders would benefit from the company’s strong growth with a 43% recommended increase in the final dividend to 2.5p (2014: 1.75p). This represents 19.8% of adjusted diluted earnings per share. The company intends to raise this over time to 25%.
“We have started the 2015 financial year in a strong position and I look forward to another exciting year of growth with considerable confidence,” said Mr Ritchie.
Mr MacSween added: “We are working hard to ensure we remain at the leading edge in terms of the skill sets and experience to provide an ever more complex set of services to our customers and are confident of our abilities to do so, reinforced by the acquisition of SystemsUp in recent days. We are well positioned for further significant growth.”
SystemsUp is a consultancy focused on the public cloud. It has a range of expertise in the design and delivery of public cloud solutions and is a G-Cloud partner to Google, an authorised government partner to Amazon Web Services and a Microsoft gold partner.
The company made a pre-tax profit of £1.5m on turnover of £4m in the last year. It has net assets of £1.25m.
Iomart is financing the acquisition out of existing banking facilities and is expected to be immediately earnings enhancing before acquisition costs and normal acquisition adjustments including any fair value adjustments and the amortisation of intangible assets.
Mr MacSween said: “The market for cloud computing is becoming incredibly complex and the demand for public cloud services is increasing at pace.
“With the acquisition of SystemsUp, iomart has broadened its ability to engage at a strategic level and act as a trusted advisor on cloud strategy to organisations wanting to create the right blend of cloud services, both public and private, to fit their requirements.”