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NEXTDC share price on watch after strong first half earnings growth

The NEXTDC Ltd (ASX: NXT) share price will be one to watch on Friday following the release of the data centre operator’s half year results.

How did NEXTDC perform in the first half?

For the six months ended December 31, NEXTDC reported revenue of $97.7 million and underlying EBITDA of $50.9 million. This represents an 8% and 21% increase, respectively, over the prior corresponding period.

Also growing strongly was its operating cash flows. They increased 34% or $5.1 million to $20.1 million during the first half.

Things were not as positive on the bottom line, with NEXTDC reporting a first half statutory loss after tax of $4.9 million. This compares to a loss of $3.1 million in the prior corresponding period. Management advised that this reflected higher depreciation and interest costs after a record period of investment.

At the end of the period NEXTDC had cash and cash equivalents of $197 million and an undrawn senior syndicated debt facility of $300 million.

What were the drivers of its growth?

During the first half, contracted utilisation was up 2.8MW or 6% to 53.3MW. This comprised new sales of 3.2MW, before adjusting for a one-off clawback of wholesale capacity of 0.4MW.

NEXTDC’s customer numbers continue to grow at a solid rate. They were up 174 or 16% over the prior corresponding period to 1,264. Another positive was the number of interconnections increased by 2,030 or 20% to 12,012. They now represent 8.2% of recurring revenue, up from 7.7% a year ago.

NEXTDC Chief Executive Officer and Managing Director, Craig Scroggie, said: “Today’s results are in line with our FY20 guidance and reflect the inherent operating leverage of the business. The first half was a record period for new investments in both the development of our next generation of world class Tier IV data centres P2 and S2, as well as our innovative connectivity service offerings.”

“NEXTDC achieved a robust level of sales in the first half, despite limited inventory in our key market of Sydney that will be addressed with additional capacity coming online at S2 in the second half. The Company continues to see strong demand across the national portfolio, noting that we are in advanced negotiations in relation to some large customer opportunities that have the potential to significantly increase NEXTDC’s contracted utilisation base,” he added.

Guidance.

Based on current billing and contracted utilisation levels and expected new customer contracts, management has been able to reiterate its guidance for FY 2020.

It continues to expect to deliver:

  • Revenue in the range of $200 million to $206 million.
  • Underlying EBITDA5 in the range of $100 million to $105 million.
  • Capital expenditure towards the top end of $280 million to $300 million.

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Motley Fool contributor James Mickleboro owns shares of NEXTDC Limited. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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