The share price of iomart Group plc plunged 23% during Friday trading after it warned of a potential 10% impact on expected profits due to customer churn.
The Glasgow-headquartered cloud computing firm is looking to pivot its offer following the £57m acquisition of Atech in October 2024.
“With growth in newer offerings offsetting legacy business declines, the board continues to anticipate revenue for the year ending 31st March 2025 to be broadly in line with market expectations,” it said.
“However, the accelerated shift in revenue mix towards higher-growth, lower-margin services results in the board now expecting adjusted EBITDA at approximately 10% below current market expectations.
“These impacts will similarly flow through to adjusted EBIT and adjusted PBT (profit before tax).”
iomart is led by CEO Lucy Dimes. She stepped away from the chair role in June 2024, having performed both since September 2023, when former CEO Reece Donovan – who largely steered the company through COVID and its aftermath – stepped down suddenly.
The company expects revenue in the range of £142m-143m, adjusted EBITDA in the range of £37m-38m and adjusted PBT in the range of £10.1m-10.8m for the 12 months. That compares with £127m revenues and pre-tax profits of £8.7m in the prior year.
Net debt is expected to be in the range of £95m-98m.
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“Within the existing core iomart business, order bookings remain strong, demonstrating that strategic investments in the product portfolio and go-to-market approach are delivering results,” the firm continued.
“However, recent trading has seen an acceleration in customer churn in the self-managed infrastructure base, which includes a long tail of smaller customers, along with lower renewal levels in private cloud managed services.
“Given the fixed-cost nature of our data centres and network infrastructure, these faster-than-anticipated shifts in revenue have an amplified impact on profit contribution.”
iomart said that since completing the takeover, Atech has been strong at both the revenue and profit level, while the firm is helping its objective to pivot its product portfolio and capabilities into faster-growing areas of the cloud sector.
“We have seen continued positive new order bookings across both the iomart and Atech offerings and are starting to see the power of the combined business flow through,” said Dimes.
“However, transformation takes time, and churn within legacy offerings continues to present a headwind.
“We will continue to optimise our cost structure, while pivoting the portfolio to higher growth segments, and are confident that we have the right team and offerings to achieve our bold ambitions.”
iomart closed the week with a share price of 46p. It has dropped 68% in the last 12 months and peaked in 2018 around 430p.
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