Shares in Scottish cloud computing firm iomart plunged by nearly a quarter after a rise in customer churn prompted it to issue a profits warning.

In a trading update the board said it is now expecting adjusted EBITDA at approximately 10% below current market expectations. This will flow through to adjusted EBIT and adjusted pre-tax profit, said the Glasgow-based company.

Shares closed 13.5p, or 23.15%, lower at 45.65p.

“Recent trading has seen an acceleration in customer churn in the self-managed infrastructure base, which includes a long tail of smaller customers, along with lower renewal levels in private cloud managed services,” it said.

“Given the fixed cost nature of our data centres and network infrastructure, these faster than anticipated shifts in revenue have an amplified impact on profit contribution.”

The company said the acquisition of Atech on 1 October last year marked “a significant milestone in the group’s ambition to be the leading secure cloud services provider in the UK, strengthening our Microsoft credentials, managed security services and global delivery capabilities.”

Since completion, trading at Atech has been strong, at both the revenue and profit level, and aligned with the company’s expectations at the time of the acquisition. Atech is also contributing positively to the group’s objective to pivot its product portfolio and capabilities into the faster growing areas of the cloud sector.

“Within the existing core iomart business, order bookings remain strong, demonstrating that strategic investments in the product portfolio and go-to-market approach are delivering results,” it said.

Lucy Dimes, CEO, said: “We have seen continued positive new order bookings across both the iomart and Atech offerings and are starting to see the power of the combined business flow through.

“However, transformation takes time, and churn within legacy offerings continues to present a headwind. We will continue to optimise our cost structure, while pivoting the portfolio to higher growth segments, and are confident that we have the right team and offerings to achieve our bold ambitions.” 

The latest known sell-side analyst estimates for the full year ended 31 March 2025 are:

·        Revenue in the range of £142m to £143m;

·        Adjusted EBITDA in the range of £37.0m to £38.0m; and

·        Adjusted PBT in the range of £10.1m to £10.8m

·        Net Debt in the range of £95m to £98m