Iomart eyes deals after £80 million funding boost
IOMART has underlined its appetite to make further acquisitions after securing a funding package worth £80 million.
The Glasgow firm, which supplies cloud computing solutions to companies and publicsector bodies, has declared the opportunity for its business model is as compelling as ever. That came as it unveiled revenue growth of nine per cent to £97.7 million in the year ended March 31.
Pre-tax profits edged up 1% to £14.8m, after items such as acquisition costs and software licences were accounted for, with adjusted profit before tax having risen 7% to £24m.
The firm proposed a final dividend of 4.93p per share, resulting in a 20% increase in total dividend for the year at 7.18p.
However, shares in the company slipped by nearly five per cent, closing at 376p.
The period saw Iomart complete three acquisitions, taking its tally to more than 20 since it completed its first in 2009. The latest additions were Dediserve, a Dublinbased cloud solutions provider it acquired for €7.9m, and the UK companies Sonassi and Simple, which arrived in deals worth £11.8m and £4.9m respectively.
Asked whether the funding facility provided by Bank of Scotland meant further deals were imminent, chief executive Angus Macsween said the firm is “always having conversations” over prospective acquisitions.
“The fact we have been making acquisitions for so long [means] we are known to be acquirers, so not many opportunities pass us by,” he said. “We reject 90%-plus of the businesses that are put in front of us. We are still fairly disciplined about the criteria.”
Companies which are cash generative, offer services which complement Iomart’s “core competencies”, and have a low risk model are attractive, he said, adding: “We don’t look to buy businesses that soak up a lot of working capital”.
Mr Macsween said the renewal of Iomart’s banking facilities had also been driven by a decision to renegotiate its terms before Brexit takes effect next year.
While the vote to leave the European Union has had a limited effect on the company, which earns most of its revenue in the UK, it was keen to avoid renegotiations with its bank “right in the middle of so-called Brexit time”. Its previous funding deal had been due to end in 2019.
“We thought it was best to get the bank facility refreshed and out the way,” Mr Macsween said.
“It takes us out to 2022, which is probably when Brexit may happen anyway. There was a two-fold reason for doing it.
“We are actually paying less for it as well, as an interest charge, [though] there are fees associated with it. It means we have got the firepower available to use to do slightly bigger deals if we wanted to as well.”
Mr Macsween emphasised that the opportunity open to Iomart is as strong now as it was when the company started in 2007.
He said that although much of the growth in the market is coming from tech giants such as Amazon, Google and Microsoft, there is “plenty of room” for companies such as Iomart to expand.
“It’s a long-term trend,” he said. “The frustration we have is that we know that we are not in every opportunity we could or should be in, on a daily, weekly, monthly basis.
“The stuff we sell is not a discretionary spend, like a new ipad or a new iphone. We sell big storage arrays – you only buy that stuff when you need to buy it. It is finding the opportunities but we know they are out there.”
Asked whether recent, highprofile cyber-attacks are good for business, he said: “Probably yes, in as much as IT departments probably understand more than they did in the past that you are probably more secure in a third-party data centre than you are in your own environment.”
Meanwhile, Iomart announced chairman Ian Ritchie, who has held the post since joining the board in December 2007, will not stand for re-election at the firm’s annual general meeting in August. He will be replaced by Ian Steele.