GLASGOW-based cloud computing specialist iomart is on course to post record revenues although inflationary pressures have weighed on earnings.
iomart said it expects to report revenue of around £115 million for the year to March 31, compared with £103m in the preceding period.
The increase partially reflects the impact of the purchase of the Concepta business in August, for up to £14.5m. This was the first acquisition made by iomart under the leadership of Reece Donovan.
Analysts also welcomed signs that the company is managing to increase order intake under the strategy developed by Mr Donovan, who took over from iomart’s founder Angus MacSween in October 2020.
Mr Donovan set out to build iomart’s presence in a wider range of markets within the cloud computing sphere and to strengthen awareness of the brand.
He said he was pleased with the progress achieved by the company during the latest financial year, noting: “We saw our pipeline improve in the first half and this converted to stronger order booking levels as we completed the year.”
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However, iomart said it expects to report a fall in profits to £14.6m, on an underlying basis before tax, from £17.1m last time, after facing significant cost increases during the latest year.
iomart noted that its electricity bills increased by around £7m, to an unspecified amount. The company said it had been able to pass on the increase to customers “appropriately” as a result of its robust business model and customer arrangements. However, iomart noted that profit margins had been heavily impacted by what it referred to as the pass-through of energy costs.
The company noted that staff costs had also increased as a result of the investment it made in “upskilling” employees' capabilities alongside appropriate wage increases and cost of living support.
Iomart said the bill for the interest on its borrowings increased by £0.9m in the year to March after the Bank of England pushed through a series of interest rate rises to help bring inflation under control.
The strategy pursued by iomart under Mr Donovan’s leadership has included growing iomart’s hybrid cloud offering. This involves helping customers to operate computing systems that utilise infrastructure shared with other organisations as well as facilities reserved for their use.
Iomart had previously focused on supporting firms in the use of private facilities. These could be on the premises of the customers concerned or in data centres operated by the likes of iomart.
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Companies that go for a hybrid approach might use external providers to help them cope with surges in business or to complete projects.
iomart has also expanded its cyber-security offering.
The purchase of Concepta allowed it to acquire technical skills and capabilities in areas such as data management among with new routes to market and customers.
iomart completed 21 acquisitions in the decade before Mr Donovan became chief executive.
Under Mr Donovan’s leadership iomart has invested in building the iomart brand and awareness of it. The group has provided services under brand names acquired with other businesses.
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Analysts at iomart’s house broker Investec said of yesterday’s trading update: “There are encouraging signs, with order intake up year-on year, and order intake acceleration in H2 meant Q4 was the strongest quarter of the last two years.”
They added: “We see H2 order improvement as less macrodriven and more around the new team (including sales) bedding in, with a more well-rounded offering.”
Shares in iomart closed up 2.6p at 123p, leaving the firm with a stock market capitalisation of around £135m.
The shares sold for 200p in September but fell sharply in October. iomart said in a trading update issued that month that annual profits were likely to be at the lower end of the board’s original expectations citing pressure on margins in the face of potential economic headwinds.
Iomart has around 400 employees in total, with 160 based in Glasgow.
The company grew revenues to £52.6m in the six months to September 30, from £51.9m last time. Underlying profit before tax fell to £7.4m from £9.1m.
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