Iomart describes itself as “the cloud computing company”, though how much of its business is ‘true’ cloud it’s hard to fathom based on its latest set of results for the six month period to 30th September 2012. More than likely, the vast majority of its business is still coming from the traditional managed hosting route. Not that it should matter. What really matters is whether it is growing its business ‘under the covers’ – whether that is via physical or virtual hosting. But to be honest, that’s pretty hard to work out as well!
At the headline level the figures are all positive – and indeed appear to have pleased the market as the share price has nudged up 1.7% in early trading. Total revenue grew 29% to £19.9m (vast majority UK); adjusted EBITDA was up 51% to £7.6m and adjusted PBT up 66% to £4.9m. But Iomart added three new businesses into the fold over the period – Melbourne Service Hosting Ltd (see Iomart finds Melbourne in Manchester), Internet Engineering Ltd and Skymarket Ltd. According to CEO, Angus MacSween, Iomart delivered “substantial growth” organically as well. But we are not told how much.
The business reports under two operating divisions – Hosting and Easyspace. Hosting is by far the biggest part of the business. Revenues were up 36% to £14.6m. Though that included contributions from acquisitions of EQSN and Melbourne Hosting, it does appear that “substantial amounts of new and repeat business across all brands” also contributed to the growth. Meanwhile though, Easyspace, which grew revenues by 13% to £5.3m, only grew as a result of the acquisitions of Skymarket, Global Gold and Switch Media Group and as a result of the transfer of some operations previously included within the Hosting segment. The improvement in Easyspace’s adjusted EBITDA was also predominantly as a result of acquisitions.
Iomart is running a tight ship and has maintained its gross margin at 67% over the period. But, though there is great scope for growth as SMEs shift increasingly to hosted services (see Iomart on a roll), it is not clear at what rate Iomart grew its business over this last report period if acquisitions are discounted. As we noted at the time of the full year results (see Iomart impresses with growth from the mid-market), growth had slowed (though was still strong) in H2 last year. This is a competitive market and while Iomart is snapping up some of the competition there is still plenty more out there. Crucially Iomart continues to invest for future growth (a necessity if it is to remain competitive) and had announced plans to add another 1486m2 of capacity to its datacentre in Maidenhead to “ensure the continued supply of high quality data centre space.” This will be fitted out to a high spec over the next 12 months.