So what was disappointing about the numbers earlier today? At face value 15-18% growth in both revenue and ebitda plus a 40% rise in the dividend (to a 1.5%+ yield now) seems attractive enough.
Taking a step back first, from a structural theme perspective, the company remains in a good spot, as this slide from their presentation pack shows.
- +12.3% FX neutral revenue growth
- 90% recurring revenue
- 9% churn
- +0.3% rise in revenue per kW
- +2.9% rise in ebita per kW
For me though, the most interesting statistics are the latter two which show that pricing is under some pressure.
Now part of this can be linked to some rise in competition but - as noted in the December note - this area is quite oligopolistic and does have barriers-to-entry. Additionally, returns do ramp up as data centres mature. There will be some negative mix issues in these numbers too.
The other aspect is to look at the cash flow side. Pre M&A and dividend the company did generate around £10m of free cash during the year. With £300m of net debt and a facility worth £100m more than this, I don't see any issues today. Looking forward the company did guide for slightly higher overall capex (£110-130m pa) but, as noted in the chart above, they should anticipate higher underlying cash flows too. I would say this should not be a huge concern today for the market.