Economic headwinds fail to dampen Iomart chief executive’s bullish outlook

PROFITS at Iomart fell by 18 per cent in the first half of the year as the cloud computing provider worked to pass through a six-fold increase in its energy bills to customers.

Chief executive Reece Donovan said the second half will benefit from the full extent of these energy price uplifts, which are expected to boost full-year revenues beyond original expectations. However, annual profits are projected to remain in line with expectations.

Turnover during the six months to the end of September edged 1% higher to £52.6 million, but pre-tax profits fell from £6m to £4.9m. Even so, Mr Donovan was upbeat about the company’s prospects, saying the business is now “stabilised” and ready for growth that will include further acquisitions following the deal in August to take over Yorkshire-based Concepta Capital.

“We are very keen to do another one quickly – we are on the hunt,” he said.

“This is a drumbeat, not a one-off thing. We will continue to look to bring in businesses of about £10m in size over the coming years. It is a key part of our strategy.”

Asked about the scale of rising energy costs, Mr Donovan noted that Concepta recently received notification that its bills will increase from £5,000 to £35,000 per month. Iomart now has a two-year hedging agreement in place across the group to improve visibility on its cost base going forward.

“The real thing our customers are looking for is certainty – cost certainty so they can plan, and they know what they need to spend,” he added.

Energy bills have overtaken staffing as the biggest line in the company’s cost base. Following the Concepta acquisition, the group now employs about 450 people.

Mr Donovan said Iomart gave staff a 3% pay rise in April and will do “something further” in the second half of the financial year that will likely involve bigger increases for those at the lower end of the pay scale smaller ones for those on higher salaries. Along with improvements in energy efficiency, Iomart is also channelling extra funding into training and development.

“There are just not enough skills in the market so we have also invested in… a learning management system and we have invested in a lot more training because the more we can skill people up the better it is for us and the economy,” he said.

Shares in Iomart closed more than 3% higher yesterday, up 3.6p at 116p.