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February 13, 2012 1:14 pm
The growth of cloud computing has boosted revenues at Telecity, encouraging the data centre provider to commit to a maiden dividend later this year.
Europe’s largest data centre provider by sales on Monday confirmed that it would pay its first dividend following its interim results in mid-2012, on the back of a 22 per cent year-on-year increase in 2011 revenues.
Telecity has benefited from an increasing tendency among large companies to outsource data hosting as a cheaper and easier alternative to managing it in-house.
The group operates from 27 locations in the UK and Europe, and has attributed much of its recent growth to obtaining prime city centre locations that allow easier access to communications networks.
“It’s about investing in the right locations where there’s a high level of connectivity,” said Michael Tobin, Telecity chief executive.
Telecity, whose customers include Toys R Us, Bwin and Spotify, last year consolidated its position with the £87.6m takeover of Data Electronics, Ireland’s biggest data centre provider by sales, and the purchase of Manchester-based UK Grid for £11.7m.
However, Telecity, which earns almost half of its turnover in euros, has been affected by the economic problems in Europe, and took a £6m hit to full-year revenues from weakness in the single currency.
Over the 12 months to December 31, the data provider expanded its available capacity from 58 megawatts to 68MW, and plans to increase this to 124MW over the next few years.
The growth of cloud computing – where data are stored off-site and accessed remotely through the internet – has been bolstered by the increase in mobile data usage, and Mr Tobin expects this trend to continue.
“Demand is always going to be there. You and I are going to do more on the internet tomorrow than we did yesterday. We’ll download more, we’ll watch more TV over the internet.”
The group reported pre-tax profits up from £45.9m to £59.4m from revenues that rose from £196.4m to £239.8m. Diluted earnings per share increased from 19p to 21.1p, and there was no full year dividend.
Telecity shares slipped back by 3p, or 0.5 per cent, to 650p.
Telecity’s success may have been fuelled by consumers’ growing demand for data access, but it has been facilitated by a shrewd ability to locate its centres in favourable areas. The higher network connectivity that comes with city-based sites allows Telecity to charge a premium over less well connected operators. This success has been recognised in its share price, which rose 40 per cent in 2011. However, Telecity’s reliance on European revenues is cause for concern, as are a slowing of pricing growth and tougher competition. Trading at 21 times forecast earnings for 2012, the shares are not cheap but still worth considering.
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