iomart continues shift to managed services

Cloud computing player iomart has seen its performance hit by the coronavirus pandemic, but revealed demand for managed services has continued to rise.

The firm shared a pre-close trading update for the year to 31 March 2021, which showed the third and most recent lockdown had had a negative impact on the progress the business had been making in its second half.

“The third, and unexpected, Covid-19 UK lockdown hindered the green shoots of growth we had expected in the second half of the year, causing results to be at the lower end of expectations,” it stated.

Revenues for the year are expected to come in flat, at around £112m, and pre-tax profits of around £20m will be down on last year’s £22.8m. The firm saw an increase in managed cloud services revenues, but a drop in hardware reselling hit the overall performance of its cloud services division.

The business remains profitable and indicated to investors that it would look at mergers and acquisitions where they made sense to support the growth strategy. The group’s cash generation was strong in the fiscal year, ahead of the board’s expectations, with the year-end cash position at £23m, compared with £15.5m in the same period last year.

Staffing levels have been kept high during the pandemic, with iomart choosing not to use the government furlough scheme, so it is in a position to ramp up as customer spending recovers.

Reece Donovan, CEO of iomart Group, has been helping the business transition away from legacy self-managed revenues to managed cloud services, which in the long term will produce the growth the business needs. 

“iomart has performed resiliently during these unprecedented times, proving the strength of our recurring revenue model, the value our customers place on the services we deliver, and the commitment of our teams,” he said.

“We are in a period of transition, building on a strong starting position in terms of our financial strength, business model and market position,” added Donovan. “We have high confidence levels on the future success of iomart and our ability to be a leading cloud service provider, supporting customers in each step of their cloud journey.”

The trading statement also went some way to reassuring investors that the board remains confident that the transformation strategy will deliver results.

“While the success of the transition will take time to flow through into results, the board is confident iomart’s valuable datacentre and network infrastructure, market-leading cloud expertise, highly recurring revenue and significant customer base mean the business is well-positioned to execute on its strategy and return to an accelerated growth trajectory over the medium term,” it stated.