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iomart's cloud services provide a clear outlook

The remote hosting and internet services group grew sales and profits in both divisions
iomart's cloud services provide a clear outlook

Companies looking to shift their operations to the cloud turned to iomart (IOM) in the reported period. Strong demand for 'hybrid cloud', which bundles access to public services such as Microsoft Azure and Amazon Web Services with private data storage drove adjusted cash profits up 13 per cent to £17.6m.

IC TIP: Buy at 290p

Organic sales rose a tenth in the main cloud services division, which provides hosting and support to around 10,000 organisations. Payments to public cloud vendors rose, but the reduced burden on iomart's data centres lowered power and depreciation costs, widening the group's adjusted pre-tax profit margin by 1.4 percentage points to 25.2 per cent.

Exclude the purchase of United Hosting and sales at Easyspace climbed 3 per cent, compared with a decline of a tenth in the same period of 2015. The provider of domain, website and email services to around 90,000 small businesses benefited from price increases and improved renewal rates.

The group's data centres have spare capacity of about 40 per cent, limiting the need for short-term investment. Further acquisitions could also increase headroom. Broker FinnCap expects adjusted pre-tax profits of £23.5m this financial year, giving EPS of 17.8p (from £19m and 14.4p in FY2016).

 

IOMART (IOM)
ORD PRICE:290pMARKET VALUE:£311m
TOUCH:280-290p12-MONTH HIGH:320pLOW: 210p
DIVIDEND YIELD:1.1%PE RATIO:26
NET ASSET VALUE:80p*NET DEBT:26%

Half-year to 30 SepTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201536.45.74.6nil
201642.17.15.4nil
% change+16+26+19-

*Includes intangible assets of £84.2m, or 78p a share