The proliferation of mobile devices and wireless connections is driving demand for digital information storage. That trend helped data centre provider Telecity (TCY) raise its operating profit by 15 per cent to £55m last half. But its shares dipped 5 per cent in morning trading, after it reported increased churn in the UK and a 5 per cent slump in underlying revenue per kilowatt sold.
Telecity also risked renewed criticism of overinvestment as it increased its available customer power by 18 per cent to over 106 megawatts. But predicting future capacity needs and customer demand is "more of an art than a science," says chief executive Michael Tobin. And the company is showing signs of operating more efficiently: its return on capital employed rose from 15.1 to 15.4 per cent year-on-year, while the proportion of its power sold increased by 1.3 percentage points to 72.4 per cent.
UK sales rose 3.3 per cent, trailing a 14 per cent jump in Europe. That reflected its closure of an inefficient data centre in London and continued industry consolidation. Similarly, the fall in revenue per kilowatt sold was a product of stronger trading in Europe than in the UK, where it charges higher prices, and new customers' tendency to ramp up their power usage over time.
Telecity expects underlying sales growth of between 9 and 11 per cent this year. Broker Investec is forecasting 2014 pre-tax profits of £108m, giving EPS of 39.9p.
| TELECITY (TCY) | ||||
|---|---|---|---|---|
| ORD PRICE: | 751p | MARKET VALUE: | £1.5bn | |
| TOUCH: | 751-754p | 12-MONTH HIGH: | 889p | LOW: 625p |
| DIVIDEND YIELD: | 1.5% | PE RATIO: | 22 | |
| NET ASSET VALUE: | 208p* | NET DEBT: | 70% | |
| Half-year to 30 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2013 | 159 | 44.0 | 16.4 | 3.5 |
| 2014 | 174 | 50.0 | 18.8 | 4.5 |
| % change | +9 | +14 | +15 | +29 |
Ex-div: 13 Aug Payment: 19 Sep *Includes intangible assets of £172m, or 85p a share | ||||
