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Iomart reports 10% revenue growth

Glasgow-based cloud services group, Iomart, reveals revenue growth and lower than expected customer renewal rates.

Iomart expects to report revenue growth of 10% from £115.6m to approximately £127m for the year ended 31 March 2024.

Adjusted earnings before tax should have risen 4% from £36.2m to approximately £37.5m, with adjusted profit before tax up from £14.8m to approximately £15m, reflecting increased interest expense in the year of approximately £4.3m – compared to £2.9m the previous year.

Recurring revenue also remains high, at circa 91% of group revenue.

The Glasgow-headquartered cloud services company’s pre-close trading statement comes ahead of its full year results, which are due to be published on 11 June.

Cash generation continued to be strong, with the year-end net debt expected to have risen from £39.8m to approximately £43m year-on-year, after acquisition-related cash payments in the year of approximately £15m.

The Extrinsica acquisition, which completed last June, brought a demonstrable increase in the Microsoft-based capabilities of the group, and increased revenues year-on-year, albeit while that growth was tempered by the delay of some larger orders from existing customers.

As a result, none of the earn-out consideration will now be payable. The process of integration of Extrinsica is now well underway.

Accesspoint Technologies, acquired on 5 December 2023, is performing “in line with expectations”.

Iomart reported “good growth in order bookings” within its managed services business, although the positive impact of this has been held back by lower than expected customer renewal rates in the second half of the financial year, including across the long tail of smaller customers, that have shown more sensitivity to the energy price rises.

“As the group continues its evolution towards a broader portfolio of managed service offerings, the impact of potential lower level of renewals in our smaller customer base and more commoditised areas of the business will decrease,” noted the trading update.

Lucy Dimes, chief executive of iomart, commented: “Our resilient financial results, extensive customer base and deep technical expertise continue to provide a solid platform for enhanced revenue growth over the medium term, from extended product solutions, focused sales and marketing activity and complementary M&A.

“Our three most recent acquisitions have all added recurring revenue growth in the post-acquisition period, and we see continued M&A activity as an important part of strengthening our overall capability and market growth plans.

“We continue to be active in the identification of targets which add skills, experience and capability to enhance our proposition, as we drive the business to be the UK’s leading secure cloud services provider.”

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