Wednesday, 3 June 2009

Ufindus sale finds Iomart flush with cash

(By Anthony Miller – Tuesday 3rd June 2009 8:00am). The £12.6m net gain from the sale of its online directory operation, Ufindus, to BT last July was a double bonus for UK hosting player, Iomart. Not only did it top up its cash pile and help finance the recent RapidSwitch acquisition (see Iomart ‘hosts’ RapidSwitch), but it also pushed what would have otherwise been a £2m net loss for the year (to 31st March) into an £11m net profit (see here).

As it was, Iomart boosted revenues 45% to £12m and narrowed operating losses from a -28% margin to a -14% margin. The company is also to reintroduce a dividend, at 0.3p a share, though at today’s 38p share price, this is more of a mark of management confidence than a bid for the ‘div of the year’ award.

The money-making part of Iomart’s business is the SME web hosting brand, Easyspace, which notched up a 29% operating margin (FY08: 31%) on £7.2m (+14%). Margins eased “due to sales mix and a stronger US dollar”. Iomart’s corporate-facing Hosting business, which now incorporates its Netintelligence SaaS managed services brand, reduced operating losses by some £540K as revenues soared 155% to £4.6m in its first full year of operations.

Iomart is positioning itself squarely at the Cloud ‘infrastructure as a service’ player (and see our AnalystViews notes on Cloud computing if you want to understand where this fits in to the picture). Buying RapidSwitch adds a few million to the top line but still leaves Iomart slightly over-egging the omelette with claims of being “one of Europe’s largest providers of managed hosting”. As we pointed out before, Telecity declared revenues of £133m last year at 14% operating margin. But with £14m cash and equivalents in the bank, very little borrowings, and reducing losses (but let’s keep an eye on Easyspace margins, folks), we would imagine management will be on the prowl for more acquisitions. Even so, surely it’s more likely Iomart will eventually end up on the other side of a deal.

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