NEXTDC (ASX:NXT) share price on watch after strong half and guidance upgrade

The NEXTDC Ltd (ASX:NXT) share price could be on the move tomorrow after delivering a strong half year result and upgrading its guidance…

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All eyes will be on the NEXTDC Ltd (ASX: NXT) share price on Thursday.

This afternoon the data centre operator released its half year results following the market close.

How did NEXTDC perform in the first half?

NEXTDC was a very strong performer during the first half thanks to the accelerating shift to the cloud. This has led to a sharp increase in demand for capacity at its data centres.

For the six months ended 31 December, NEXTDC reported a 27% increase in data centre services revenue to a record $121.6 million.

This was underpinned by a 33% lift in contracted utilisation to 71MW, a 16% lift in customers, and a 16% rise in interconnections.

In respect to earnings, NEXTDC delivered a 29% increase in earnings before interest, tax, depreciation and amortisation (EBITDA) to $65.7 million.

Also growing very strongly was its operating cash flow, which increased 219% over the prior corresponding period to $64.1 million.

This left NEXTDC with liquidity of $1.8 billion at the end of the period.

Management commentary

NEXTDC’s Chief Executive Officer and Managing Director, Craig Scroggie, was very pleased with the half.

He commented: “We are pleased to deliver another record result in 1H21, against a more difficult economic backdrop due to the COVID-19 global pandemic. Despite lockdowns and travel restrictions the Company delivered its largest historical contracted build capacity for customers in 1H21.”

“Whilst COVID-19 has presented headwinds for many globally, it continues to be a positive catalyst for digital services and technology providers supported by our data centre platform.”

Guidance upgrade

This strong first half and the favourable trading conditions has led to NEXTDC upgrading its guidance for FY 2021. This could be a big positive for the NEXTDC share price tomorrow.

Based on current billing and contracted utilisation levels, as well as expected new customer contracts, the company now expects full year data centre services revenue in the range of $246 million to $251 million. This compares to previous guidance of $242 million to $250 million.

Whereas underlying EBITDA is now forecast to be in the range of $130 million to $133 million. This is an increase from its previous guidance of $125 million to $130 million. It will also be a 19.5% to 24.3% increase on FY 2020’s underlying EBITDA.

NEXTDC’s capital expenditure guidance remains unchanged at $380 million to $400 million.

Mr Scroggie concluded: “During 1H21 we delivered our largest construction and development backlog of sold capacity to customers on time, on budget, giving us a high degree of confidence for a full year revenue and EBITDA upgrade. Second half sales in FY21 have already exceeded our expectations and we expect further strong demand for our premium data centre services into FY22.“

The NEXTDC share price is up 46% over the last 12 months. Shareholders will be hoping this strong result drives it even higher tomorrow.

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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. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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