Join our community of smart investors

Iomart's sales pipeline builds on restructuring

The cloud computing group reported decent revenue growth and underlying profitability, with prospects boosted by “substantial” growth in the sales pipeline
Iomart's sales pipeline builds on restructuring

There was much to satisfy investors within Iomart’s (IOM) half-year results to September. Even though statutory earnings were down on the 2017 half year, this simply reflects accounting treatment. Acquisitions made in 2017 outperformed pre-set hurdles, triggering £1.4m in contingency payments, which were booked as a loss. Disregard the treatment and adjusted pre-tax profits matched top-line growth, up 7 per cent to £12.4m. 

IC TIP: Buy at 349p

The dominant cloud services business saw sales rise 10 per cent to £44.3m – comprising 4 per cent organic momentum. Adjusted cash profits here climbed 12.2 per cent to £20.2m. The division’s global datacentre footprint continues to expand, supported by Iomart’s acquisition of Bytemark – a managed hosting business in York – in August, which brings additional space and a skilled workforce.

Cloud services are expected to drive revenue and profit growth in future, but the smaller ‘Easyspace’ business still reported robust numbers. Revenues and adjusted cash profits were flat at £6.7m and £3.1m, and cash generation here remained particularly strong.

Broker FinnCap expects adjusted pre-tax profits of £25.9m and EPS of 19.9p for the year to March 2019 (from £24.1m and 18p in FY2018).

IOMART (IOM)   
ORD PRICE:349pMARKET VALUE:£378m
TOUCH:349-351p12-MONTH HIGH:475pLOW: 336p
DIVIDEND YIELD:2.1%PE RATIO:31
NET ASSET VALUE:92p*NET DEBT:34%
Half-year to 30 SepTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201747.07.85.92.25
201850.97.35.52.45
% change+8-5-6+9
Ex-div:20 Dec   
Payment:31 Jan   
*Includes intangible assets of £104m or 96p a share