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Iomart ‘confident in future’; Sainsbury’s; GDP figure

iomart shares

Iomart – click to enlarge (source: LSE)

Wed: Cloud computing firm Iomart said it has continued to perform strongly in the first half of the financial year. Its shares were up 15.5p or 6% in early trade.

Trading in the six months ending 30 September has been in line with management expectations, with both revenue and profits expected to be “materially ahead” of the comparative period last year.

The Glasgow firm said SystemsUp, a cloud consulting business to the public sector, which was acquired in June, has strengthened the public cloud strategy, bringing in consulting experience and stronger relationships with public cloud vendors.

Iomart chief executive Angus McSween, (below) told Daily Business earlier this year that the group was on the look-out for further deals and today said it “continues to seek further strategic acquisitions”. It secured a substantial additional funding package in July from Bank of Scotland to bring the total bank facility to £60m.

Demand for the group’s services remains strong as iomart continues to differentiate its offering in the market with its own datacentres, focus on the SME and mid-market, and a consultative sales approach.

Angus MacSween“Private cloud adoption continues to grow and iomart has an expanding capability here,” it said in a statement.

“A hybrid approach to cloud is increasingly the norm for enterprises and there is a clear market role for companies such as iomart to help manage the complex transformation to the cloud. These strong market drivers with future growth underpinned by existing and new clients leave the Board confident in the outlook for the full year and optimistic for continued success.”

Mr MacSween, said: “We are very pleased with the way the business has performed in the period and the board is highly confident in the future.

“The group is well positioned to sustain its competitive advantage within the hybrid cloud market with its strong customer base and growing expertise in private cloud.  With an outstanding track record and an established reputation as the UK’s leading cloud computing company, we believe the prospects for iomart continue to be excellent.”

 Sainsbury’s

Discount groups Lidl and Aldi continue to erode sales at the big four supermarkets and Sainsbury’s said its full year profit is likely to exceed analysts’ average forecasts despite posting a seventh straight quarter of falling underlying sales.

Underlying profit before tax is expected to be moderately ahead of the £548 million consensus, down from £681m made in the 2014-15 year.

Despie continued expansion of its convenience stores, Sainsbury’s Local, sales at stores open over a year still fell 1.1%, excluding fuel, in the 16 weeks to 26 September.

John Ibbotson, director of the retail consultants, Retail Vision, said: “Declining like-for-likes in the UK supermarket industry is almost the new norm for the Big Four.

“Expect this broader trend to continue for a number of years yet, until Aldi and Lidl run out of sites, especially in the south of England Sainsbury’s heartland.

“My bet is that a much leaner Sainsbury’s will be around in 2020, unlike some of its competitors. These marginally better than expected numbers are proof of its ability to resist.

“In fairness to Mike Coupe, Sainsbury’s has made the right decision in cutting the dividend, store openings and capital outlay, and this will all help if the money is ploughed back into prices.

“The tie-up with Netto to open discount stores will also help Sainsbury’s, but it will need a lot of Nettos to make up the sales drop and risks losing some of its customers in the process.

“UK supermarket retailing has undergone a seismic shift, driven by the arrival of the discounters, new online shopping patterns, sector-wide price-cutting and general food price deflation. And now it has the living wage to deal with.

“Major strategic issues remain for Sainsbury’s, not least the deadly impact on profit margins of the living wage. This is yet another hurdle to overcome.

“Ripe avacados and healthier yoghurts certainly won’t save you in such brutal market conditions.”

Economy

The UK economy grew by 0.7% in the second quarter, unrevised from an earlier estimate, though year-on-year growth rate was revised down slightly to 2.4%.

Growth in 2014  was revised down from 3% to 2.9%.

Economic output is now 5.9% higher than before the financial crisis in 2008.

The figures from the Office for National Statistics also showed that living standards are rising at their fastest rate for five years. Household disposable incomes were 3.7% higher on the year, their biggest increase since the first three months of 2010.

Andrew Sentance, senior economic adviser, PwC, said: “These latest GDP revisions don’t change the picture of the short-term performance of the UK economy.

“Looking back over the recovery more broadly, upward revisions to GDP in earlier years mean that growth has averaged just over 2% in the six years since the economy started growing again in mid-2009. This is respectable growth in the new normal post-crisis world and puts the UK among the leading major western economies – alongside the US and Germany – in terms of growth over the recovery as a whole. UK GDP is now nearly 6% above the 2008 peak.

“Strong investment growth is a positive sign for the UK economy – suggesting that we are an attractive location for business and employment.

“The UK recovery continues to be driven by the services industries, with manufacturing output flat compared with a year ago. But the services sector which has grown most strongly – professional and business services – is one of our leading services exporters. So services-led growth does not mean our economy is becoming unbalanced. Rather, it is a reflection of the changing structure of the UK economy – which has become more services-oriented over a number of decades. Services growth is also good for employment and should help sustain the jobs recovery.”

Equities

The FTSE100 was up more than 152 points to 6,061 at the close on the more positive trading update from J Sainsbury which  lifted supermarket stocks. Sainsbury topped the index helping lift shares in Morrison and Tesco.

Glencore also rallied after saying it has taken proactive steps to position the mining company to withstand current market conditions including weak commodity prices.

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