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iomart Group – Getting Bigger, Better And Bolder With A Very Strong ARR, Shares Looking Cheap 

“Our vision is to be the UK’s leading secure cloud services provider to the SME market.  

We want to provide a compelling proposition to customers as cloud optimisation experts and a managed service provider that delivers the right cloud for the right workloads, which is secure by design.” 

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That is a very clear strategic aim, certainly enough to get investors to follow this group as it pushes its revenues and profits upwards over the next few years. 

Its shares are bottoming out currently and could well make an attractive medium-term purchase. 

Its recent results to end March, announced a month ago, show a very attractive 91% ARR, a pleasing figure for any CFO. 

The Business 

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The iomart Group (LON: IOM) is a cloud computing and IT managed services business providing hybrid cloud infrastructure, data management, protection and cyber security services, and digital workplace capability.  

The company considers that its mission is simple: to make its customers unstoppable by enabling them to connect, secure and scale anywhere, anytime.  

Its 470-strong team can design and deploy the right cloud solution for its customers from the various data centres that it operates across the UK to connected sites around the world. 

Trading Outlook 

The first two months of the new financial year have seen trading in line with Board expectations, consistent with the company’s high recurring revenue business model which gives good visibility.  

The industry-wide change to VMware licensing introduced by Broadcom has resulted in increased costs ahead of associated revenue enhancing opportunities and this, combined with the timing of revenue recognition from the recently secured customer contracts and inflation driven cost and salary increases, means growth is likely to be more second half weighted in FY25.  

The underlying drivers for cloud computing, increasing complexity of the technical landscape and customers looking for a trusted and experienced service partner gives the Board confidence in the outlook for the long-term prospects for the Group. 

The Equity 

There are some 112.49m shares in issue. 

Major shareholders include Angus MacSween, Dir (15.45%), Bank Julius Bar (15.21%), Gresham House Management (12.28%), Octopus Investments (10.81%), Lombard Odier Asset Management (9.05%), Liontrust Asset Management (9.05%), Rathbones Investment Management (5.60%), Canaccord Genuity Wealth (3.27%), Slater Investments (2.16%) and Banque Lombard Odier (1.98%). 

Analyst Views 

At Cavendish Capital Markets its analysts Andrew Darley and Kimberley Carstens have a Price Objective of 240p on the group’s shares. 

After allowing for VMware licence changes, their estimates for the current year to end March 2025 are for £132.0m (£127.0m) revenues, with adjusted pre-tax profits of £14.7m (£15.0m), with unchanged earnings of 9.8p and an unchanged 4.9p dividend per share. 

For the year to end March 2026 they see £135.0m sales, £16.1m profits,10.6p earnings and a 5.3p dividend. 

Some four analysts follow the company, the average price aim of their consensus views stands at around 200p a share. 

My View 

This £140m capitalised group’s shares, which were 380p four years ago, collapsed to a low of 113p two years later. 

This time last year they were on a recovery climb to 193.60p but have subsequently eased back to around the current 125p level, at which point they have certain attractions for risk-tolerant investors taking a one-year view.

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