Investors sent shares in iomart (IOM) down 10 per cent on news that sales slumped a tenth in the Easyspace business in the six months to 30 September. The cloud computing group's management also launched a recruitment drive that threatens to depress earnings in the short term. But strong demand from enterprises for 'hybrid cloud' services - storing data on public platforms such as Amazon Web Services (AWS) as well as private servers - still drove adjusted cash profit up 11 per cent to £15.5m.
Organic revenue rose a tenth in the key hosting division as orders flowed in from retailers, transport operators and construction companies. The business also benefited from the acquisition of SystemsUp, which deepened its foothold in the public sector. Moreover, the recent takeover of its peer United Hosting - which has a large following among small online retailers - promises further growth. But those deals, together with higher marketing and hiring costs, weighed on the division's margins.
The smaller Easyspace business, which provides domain names, servers and other services, found itself on the wrong side of the replacement cycle. Enterprise customers were also slower to upgrade to Microsoft's Office 365 software than management had expected. But weakness there shouldn't last. Management points out that Amazon and Microsoft are ramping up cloud investments in the UK and are likely to rely on local parties such as iomart for services and support.
Broker N+1 Singer predicts full-year pre-tax profit of £19.6m, giving EPS of 14.7p (from £16.5m and 12.5p in FY2015).
| IOMART (IOM) | ||||
|---|---|---|---|---|
| ORD PRICE: | 275p | MARKET VALUE: | £294m | |
| TOUCH: | 269-275p | 12-MONTH HIGH: | 310p | LOW: 160p |
| DIVIDEND YIELD: | 0.9% | PE RATIO: | 32 | |
| NET ASSET VALUE: | 71p* | NET DEBT: | 31% | |
| Half-year to 30 Sep | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2014 | 31.5 | 5.5 | 4.3 | nil |
| 2015 | 36.4 | 5.7 | 4.6 | nil |
| % change | +16 | +3 | +8 | - |
*Includes intangible assets of £74.4m, or 70p a share | ||||
