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RESULTS: Iomart, a Glasgow-based company offering cloud computing and managed hosting services, reports a bumper increase in underlying profits in its latest half year
November 27, 2012

Iomart (IOM), a Glasgow-based company offering cloud computing and managed hosting services, has reported an eye-catching 50 per cent plus rise in half-year cash profits and a bumper cashflow performance to match.

IC TIP: Hold at 206p

The hosting segment, which targets multiple industry sectors, saw revenues jump by 36 per cent to £14.6m and underlying cash profits leap 50 per cent to £6.6m, buoyed by business wins from new and existing customers. At the Easyspace division, which targets the low-end, sub-£100 per year market, revenues increased 13 per cent to £5.3m and, with the unit’s profit margins rising from 40 per cent to 45 per cent, underlying cash profits soared 28 per cent to £2.4m. The beneficial impact from acquisitions (Skymarket, Global Gold and the Switch Media Group) largely explains the improved performance there.

Iomart is investing, too, having rolled out a fibre-optic network to connect its UK datacentres. Mr MacSween believes that owning and managing infrastructure is vital in winning the trust of business customers as they consider outsourcing IT functions. "We can offer a single service level agreement and the so-called 'one throat to choke'," says chief executive Mr MacSween. "Customers like that." Despite the higher levels of capital spending on networks and numerous acquisitions, strong cash flows are helping to keep net debt levels firmly in check.

Broker finnCap forecast full-year adjusted pre-tax profits of £10.6m and EPS of 7.8p, rising to £13m and 9.7p, respectively the year after (2012: £6.9m and 6.4p).

IOMART (IOM)

ORD PRICE:206pMARKET VALUE:£207m
TOUCH:204-206p12-MONTH HIGH:215pLOW: 115.5p
DIVIDEND YIELD:0.4%PE RATIO:29
NET ASSET VALUE:47p*NET DEBT:5%

Half-year to 30 SepTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201115.42.382.23nil
201219.94.123.03nil
% change+29+73+36-

*Includes intangible assets of £38.8m, or 39p a share