First half results from Telecity (to end June 2013) show the firm is continuing to prosper in the European data centre services market. Revenue increased 16% to £159.3m, with adjusted EBITDA margin (i.e. adjusted to exclude intangible asset amortisation, other financing items and exceptional items) up 70bps to 46.3%. In May, Telecity acquired Istanbul-based firm, SadeceHosting, for £25m in cash (Telecity IMS confirms solid start). The integration process is underway, starting with any upgrades that are required with Sadece’s systems.
Telecity’s UK business grew 4.9% to £71.1m in the period - a growth rate that is some way off FY12’s rate of 16.9%. This reflects the strategy Telecity has been following to open new sites, which has caused “a little bit of headwind in terms of build up of business”, according to UK MD, Rob Coupland (see Telecity gets new UK MD). However, Coupland expects the order book “pick up this year” and build over time – which is of course the nature of the game in data centres.
During 2012, the company undertook a substantial programme to expand data centre capacity in Manchester and London. It was a huge operational undertaking and at the time CEO Mike Tobin told us it was “the toughest year we’ve had to endure”. However, Telecity should start to see the benefits of this activity flowing through to the topline as 2013 progresses. Furthermore, this is expected to build so that H1 next year is better still.
Of course, what this pattern of investment and growth also demonstrates is the barriers to entry in this market. As we have said many times, data centre services may well be one of the best ‘hotspots’ for growth in the generally slow-growing infrastructure services market. However, suppliers need not only the right capabilities, but the cash to invest in these on an ongoing basis.