| Iomart - Reach for the Cloud by James Faulkner of WatsHot.com On specialist small cap website Watshot.com, editor James Faulkner provides two hot new recommendations each month, regular updates on his share tips, rumours, book reviews and his daily thoughts and insights into the markets. James will be publishing TWO hot new tips on Monday, on a pair of technology companies he believes have significant growth potential. CLICK HERE TO JOIN WATSHOT.COM NOW Here is an overview of the current situation at Iomart (IOM), one of James' previous technology tips, which since first covered in June 2010 has risen in value by 159%... Cloud computing is about pooling resources to realize the true potential of the internet. Only in recent times has technology advanced to the stage where companies can experience a complete end-to-end IT service over the internet, with applications and infrastructure specialists coming together to make information technology more akin to a utility. The potential benefits for businesses in terms of quality of service and cost savings are huge as there is no requirement for infrastructure spending on the part of the user, thus negating the need for any large up-front outlay. While most companies in the hosting sub-sector focus on data storage, io mart's (IOM) offering is much more comprehensive. By owning its own data centre and network infrastructure, it is able to deliver the complete set of components in the hosting arena from domain names, virtual web space, security, web marketing, websites, dedicated servers through to complex managed hosting solutions, co-location space, power, cooling and bandwidth. The firm's proposition is therefore a premium service, and one of the driving factors behind iomart’s rapid growth is its growing reputation for the quality of its hosted services. In May the company extended its strong record of growth in a terrific set of results for the year to 31st March. EBITDA jumped 68% to £11.2 million (before share based payments and acquisition costs) on revenues up by 33% to £33.5 million. Operational gearing saw adjusted pre-tax profits jump 91% to £6.9 million, taking EPS 96% higher to 6.99p. Profits were matched by equally impressive cashflow from operations, which increased by 36% to £9.6 million. The dividend was raised by 38% to 0.9p per share.
At the divisional level, revenues from hosting services grew by 38% (+21% organic) to £24.3 million. iomart won over 600 new orders in the year, including a substantial amount of additional orders from existing customers. The hosting segment is a particular beneficiary from the fundamental shift to products and services being delivered over the web – a market that is “large, growing, highly fragmented and here to stay”. Meanwhile, revenues at Easyspace increased by 21% over the year to £9.1m, largely due to the contribution of the two acquired businesses. Visibility levels remain excellent, with 95% of revenues recurring. The increase in gross margins from 62% to 67% is yet another indication of the high level of operational gearing within the business. With earnings of 7.5p per share on the cards for the current year, the shares trade on a pretty punchy current rating of 19.3. However, the rating has to be viewed in the context of the continued strong growth anticipated in earnings (+25%); the fact that only c.45% of datacentre space is currently being utilised, providing room for more operationally geared upside; and the takeover potential/potential for further earnings-enhancing bolt-on acquisitions. I also note that the company trades at a significant discount to peers such as Telecity (TCY) despite the premium growth rates being generated by iomart. JAMES WILL BE PUBLISHING HIS LATEST HOT TIPS NEXT WEEK. CLICK HERE TO JOIN WATSHOT.COM NOW To access James' latest thoughts on the market, weekly editorials, hot rumours and lots more, sign up to WatsHot.com now by clicking here | |
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