Quarterly Review Quarter This report relates to Peer Groups from within the UK and Global markets.

Transcription

1 Quarterly Review Quarter This report relates to Peer Groups from within the UK and Global markets.

2 Developed specifically to provide actionable insights, our reports analyse developments in peer group dynamics, industry trends and corporate activity for both UK and global companies in the Software, IT services and Telecoms sectors. Our intelligence is accessible through a variety of subscription, pay-as-you go, project or retainer-based options designed to meet the differing requirements of our customer base. For: CXOs Invaluable competitive intelligence delivered through a For: Investors, Advisers and M&A Focused Companies For: CXOs, Investors and Advisers Monitor, quantify and respond regular snapshot of the An indispensable aid to to high-level trends affecting financial performance, share portfolio management, tracking competitive positioning, price and valuation trends and key market trends or monitoring financial performance and corporate activity within deal flow and valuations corporate activity in the individual Megabuyte peer encompassing public and technology sector. groups. private markets. LEARN MORE AT: I S Research Ltd The Blade, Abbey Square, Reading, RG1 3BE +44 (0) info@megabuyte.com 2 PUBLICATION DATE: 27/06/14

3 Software AES Accounting & Enterprise Soft BIS Banking & Insurance Soft MTS Media & Telecoms Soft SA Specialist Applications SIS Security & Infrastructure Soft ICT Services CSI Consulting & Systems Integration DCH Data Centre & Hosting Services IS Infrastructure Services MWS Mobile, Wireless & Satellite TN Telecoms & Networks Supporting Data 11 Megabuyte Headlines 15 MD RT GH MC Media Retail Government & Healthcare Manufacturing & Construction MBO Management Buyout SBO Secondary Buyout P2P Public to Private FF Follow-on Fundraising IPO Initial Public Offering FPO Follow-on Public Offering Document Information All share prices and valuations quoted are as at the close of business on 11 June Significant institutional investment is classified as investment of greater than 3% of issued share capital. Market capitalisation boundaries are defined as follows: Small Cap < 50m Mid Cap 50m< 200m Large Cap > 200m ICT Services Philip Carse Mike Rogers Megabuyte 2014 PUBLICATION DATE: 27/06/14 3

4 UK COMPANIES 1&1 Internet Adapt Group Ark Continuity Limited Attenda Ltd Claranet Group Limited Connexions4London Control Circle Limited Fasthosts Internet Ltd Gyron Internet Ltd Host Europe Group Infinity SDC Limited Iomart Next Generation Data Limited Node4 Ltd OCOM Group Onyx Group Outsourcery Pulsant Limited Six Degrees Telecity Telehouse Europe The Bunker Secure Hosting UK2 Group UKFast.net Ltd Virtus Datacentres GLOBAL COMPANIES Basefarm CoreSite Cyrus One DADA Digital Realty Trust Dupont Fabros Technology Equinix Interxion Rackspace With the bull market for Data Centre & Hosting (DCH) shares having ended in early 2013, the peer group s share prices continue to lack direction. The peer group outperformed over the last quarter, with a 15% rise versus 3% for major indices (NASDAQ and FTSE) and a 1% decline for the broader Megabuyte universe, as measured by the Megabuyte Taylor Wessing (MBTW) All Share. However, a 5% rise in the last month was broadly in line with NASDAQ. Over the last 12 months, DCH companies have returned just 14%, in line with the FTSE but significantly under-performing the 28-32% rise of NASDAQ and the MBTW. The last quarter s 15% rise for the peer group was driven by similar share price performances by the major US listed players: Equinix and DFT (+15%), Interxion, CyrusOne, Rackspace and Digital Realty (14%). All of these share prices were off the back of solid financial results and statements. Equinix and Interxion peer Telecity rose a more muted 10%. FIGURE 1: Share Mkt Cap return price (m) -40% -20% 0% 20% 40% Equinix $ ,669.3 DFT $ ,754.4 DLR $ ,778.3 Interxion $ ,855.4 CyrusOne $ Rackspace $ ,278.0 Telecity 7.6 1,543.0 Coresite $ month 1 month Iomart month DADA Outsourcery All companies highlighted are under full Megabuyte coverage Megabuyte, Capital IQ Letting the side down were Outsourcery (-63%), Italian-listed hosting provider Dada group (-15%), and UK managed hoster Iomart (-5%). All three, along with Telecity, have suffered the biggest share price declines over the last 12 months, highlighting a US/UK & Europe divide in terms of performance. Outsourcery s decline arguably reflects a far too high valuation at its May 2013 IPO combined with estimate downgrades, whilst Telecity continues to suffer from a relative weak performance in its UK business. Iomart s underperformance partly reflects an incorrect read across from Telecity (managed hosting and colocation are very different businesses) as well as a general tech sell off in the UK. Dada Group s underperformance reflects subdued financial results, with EBITDA being hit by changes to Google advertising and UK data centre costs. 4 PUBLICATION DATE: 27/06/14

5 current year valuation multiples QUARTERLY REVIEW QTR FIGURE 2: 2,800 DCH Index MBTW All-Share FTSE All-Share NASDAQ ICT Services 2,600 2,400 2,200 2,000 1,800 1,600 1,400 Capital IQ 1,200 1,000 Jun-13 Aug-13 Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 FIGURE 3: 60 EV/EBITDA (previous quarter) PE (previous quarter) DCH EV/EBITDA EV/EBITDA PE DCH PE Capital IQ 0 DLR DFT Equinix Interxion Coresite Telecity CyrusOne Iomart Rackspace The last quarter s share price outperformance has lifted peer group valuations, with EV/EBITDA rising 4% to 11.9x, 8% ahead of the broader Megabuyte universe at 11.0x and a 17% premium over broader ICT valuations. The range of valuations has widened in the last quarter, with wholesale data centres enjoying the highest valuations - Digital Realty on 14.5x EBITDA and DFT on 12.6x, carrier rich colo next - Telecity, Equinix and Interxion on x - and managed hosters Rackspace and Iomart coming last on 8-9x. This is a considerable fall from grace for Rackspace given that it traded at near 20x at the start of It is noteworthy that despite having the highest valuations, DLR and DFT also have the best dividend yields, of 5.9% and 5.3% respectively. PUBLICATION DATE: 27/06/14 5

6 yoy growth % yoy growth % QUARTERLY REVIEW QTR Our results round up for public companies covers the first quarter 2014 for US listed companies (and Dada) and the second half for Telecity and Iomart (to December 2013 and march 2014) respectively. They generally show continued solid organic growth and improving profitability, albeit with revenue growth rates slowing. There have also been few major surprises in these results. Iomart s headline growth of 34% was aided by full period contributions from Internet engineering, Melbourne Server Hosting and Skymarket acquired the previous year; and maiden contributions from Redstation and Backup Technology. Full year revenues were up 29% (10% organic) to 55.6m, driven by Managed Hosting, whilst shared hosting was flat. However, growth did come at a price in terms of much increased capex (+69%) and heavy M&A costs. Similar organic growth is expected this year. Managed hosting peer Rackspace grew revenues and EBITDA in line with guidance given at the full year results; revenues up 16% to $421m and EBITDA up 12% to $140m (33.2% margin). The approximate $60m revenues added year on year came roughly equally from Public Cloud (up 33% to $121m) and Dedicated Cloud (up 11% to $300m). Capex of $101m was the lowest for several quarters, and down 19% on the year before quarter, giving adjusted FCF of $40m versus spend of $1m in the prior year quarter. The company has subsequently launched a strategic review, which could lead to a sale. Among the carrier rich colocation players, Equinix grew revenues 12% to $580m, above analysts' estimates, while EBITDA rose by a slightly slower 8% to $260m. The growth was predominantly driven by the EMEA region, up 26% to $151m, though all regions progressed. Operating cash flow was $172m, double that of the first quarter of 2013, while capex was up 62% to $123m. Management has increased full year guidance slightly, due to the strong first quarter, while revenue growth for the second quarter looks to follow suit from the first three months. Interxion reported revenues and EBITDA up 8% and 9% to 80.6m and 34.5m respectively, and net profit was 49% ahead at 10.4m. Operating cash flow was strong, up 45% to 34.3m, which was consumed by interest of 10.5m and capex of 57.0m, the latter up 74%. Management noted fastest growth coming from the Cloud-driven managed service provider segment, with 15% recurring revenue growth (versus the company average 7% recurring revenue growth). This trend is several months behind the US, with European MSPs only starting to prepare in earnest for hybrid Cloud deployments towards the end of The major beneficiaries of this spend are Amsterdam and Frankfurt, which has led Interxion to increase 2014 capex by 21-25% as it brings forward capacity upgrades. FIGURE 4: FIGURE 5: Source (left): Company accounts Source (right): Company accounts 40% 30% 20% 10% 0% 16% 29% 9% 16% 12% 8% 34% 16% 14% 60% 40% 20% 0% 32% 21% 10% 14% 7% 9% 55% 12% 18% 6 PUBLICATION DATE: 27/06/14

7 margin % OCC % QUARTERLY REVIEW QTR FIGURE 6: FIGURE 7: Source (left): Company accounts Source (right): Company accounts 80% 60% 40% 20% 0% 47% 54% 60% 64% 45% 43% 45% 49% 33% 120% 80% 40% 0% 89% 91% 68% 66% 50% 99%108% 101%95% N.B. Net OCF used for US-based peers FIGURE 8: FIGURE 9: Source (left): Company accounts Source (right): Company accounts 100% 80% 60% 40% 20% 0% 83% 84% 71% 57% 27% 53% 50% 23% 22% 28% 40% 20% 0% -20% -40% -36% -31% -11% 8% 19% -10% 19% 11% 20% Telecity s second half 2013 saw 14% growth, aided by full period contributions from 2012 acquisitions (Tenue and Academica in Finland) and the May 2013 Sadece (Turkey) acquisition and part period contributions from 3DC and PLIX (Poland and Bulgaria). In a subsequent largely figure free but positive update, Telecity has said that first quarter trading was solid, with underlying growth of 9.4% and stable EBITDA margins and an encouraging performance in the recently underperforming UK division. Telecity noted favourable trading conditions across the European data centre market, driven by demand for Cloud platforms and from corporate outsourcing, with solid performances in Amsterdam, Stockholm and Dublin and an improvement in Frankfurt organic growth expectations were maintained at 10%. Wholesale data centre provider Digital Realty reported 9% year on year and 3% sequential growth in revenues and adjusted EBITDA, to $391m and $234m. The revenue figure was $3m ahead of expectations while adjusted EBITDA was reasonably ahead of market forecasts for $220m. Italian-listed Dada Group, which includes UK hosting providers Names.co.uk and Poundhost, has reported first quarter revenues down 13% to 17.9m, and EBITDA down 30%, with revenues hit by changes in Google advertising and with EBITDA further impacted by UK data centre costs. The company has reiterated its outlook of improving Domain and Hosting growth, to mid single digits, but has refrained from giving an outlook on its Google advertising business. Recently published private company financials include full accounts from ISIS-backed Onyx group, United Internet-owned Fasthosts, major carrier rich data centre provider Telehouse and two relatively young wholesale data centre providers, Next Generation Data and Ark. For calendar year 2013, data centre, hosting and business continuity provider Onyx reported a rare decline in revenues, by 1.0% to 18.8m, but revenue mix and a reduction in operating expenses enabled 12% growth in EBITDA to 4.1m and 22% growth in operating profit to 1.8m. Operating cash conversion was solid at 92% of EBITDA, or 3.7m, funding 1.5m of cash interest and 0.9m of PUBLICATION DATE: 27/06/14 7

8 capex (down from 4.3m the previous year).the standstill in revenues after several years of double digit growth reflected a winding down of non core/low margin managed services business, with growth expected to resume in the current year was a rather slow year for shared hosting provider Fasthosts, with revenues and estimated EBITDA up 2.3% and 3.0% to 37.5m and 12.6m respectively. Headline operating profit was down 23% to 6.3m due to a 2.8m write-off of the value of Streamline, one of the company s resellers acquired for 8m in The company does not publish a cash flow statement; however, the accounts show capex of 3.2m, up 36% on 2012 but below that spent in the three prior years, whilst United Internet took a 5m dividend, down 1m on the previous year. Company accounts FIGURE 10: annual revenue annual EBITDA EBITDA margin -100% -50% 0% 50% 100% m m Ark Continuity Limited Infinity SDC Limited Six Degrees Group Adapt Group Claranet Group Limited Gyron Internet Ltd Pulsant Limited Next Generation Data Host Europe Group UKFast.net Ltd Node4 Ltd &1 Internet Ltd Connexions4London Basefarm The Bunker Secure Hosting Limited Attenda Ltd UK2 Group OCOM Group Telehouse Europe Fasthosts Internet Ltd Onyx Group EBITDA margin revenue growth EBITDA growth -100% -50% 0% 50% 100% latest growth rate Growth rates capped at 100% 2013 accounts from KDDI-owned carrier rich data centre operator Telehouse Europe show subdued revenue growth of 5% to 129m, at stable EBITDA margins; half the growth of peers Telecity, Interxion and Equinix. London let the side down at just 2% growth, whilst 18% growth in Germany is starting to justify the early 2012 Databurg acquisition. Capex represented 30% of revenues, with the UK in line with the company average ( 23.9m capex), France at 16% ( 5.2m) and Germany at 47% ( 8.6m). Speedily-filed 2013 accounts from South Wales wholesale data centre provider Next Generation Data show 33% growth in revenues to 8.0m, 40% EBITDA margins, and positive FCF. The year marked an inflection point with the company easily funding capex out of EBITDA, including more retail focussed, ready-made data centre space. Ark Data Centres ostensibly had a very good 14 months to June 2013 with revenues jumping 8x to 37.9m; however, the large majority of this appeared to represent internal charges, with an 86% increase in gross profit to 3.9m and a doubling of subsidiary turnover to 9.2m a better indicator of progress against over 90m invested to date. 8 PUBLICATION DATE: 27/06/14

9 transaction value (exc. conditional earnouts) m QUARTERLY REVIEW QTR The most significant corporate event of the last quarter was a change in private equity owner for Pulsant, from Bridgepoint to Oak Hill, for 200m, or 11.1x expected 2014 EBITDA. Pulsant is one of the better executed buy and builds in the sector, formed from the combination of four companies spanning colocation, managed IT services and hosting. The buyer, Oak Hill, is a New York based private equity investor and was previously a long standing shareholder in Telecity. Claranet announced its third in-country add on of 2014 NovaData in the Netherlands following Grita in Portugal and Echiron in France. NovaData adds 7m of revenues, taking Claranet to a 165m run rate. FIGURE 11: Company announcements Company accounts Q Q Q Q Q Six Degrees - BIS Telecity Group - Sadece Iomart Group - Redstation Host Europe - domainfactory Iomart Group - Backup Technology Holdings Limited Host Europe - Telefonica Germany Iomart Group - Open Minded Solutions Alternative Networks - Control Circle Telecity Group - PLIX 10.0 Telecity Group - Adapt - Sleek 0.0 3DC Jan-13 Mar-13 May-13 Jun-13 Aug-13 Oct-13 Nov-13 Jan-14 Mar-14 NB: recent undisclosed deals include Claranet NovaData (17/04/2014); Claranet Grita (04/03/14); Claranet Echiron (11/02/14) TABLE 1: TV % Implied Trailing multiple Date Type Investor Target Selling party m acquired EV m EV/Sales EV/EBITDA MBO LDC Node % x 25.0x Company announcements Company accounts SBO Cinven Host Europe Montagu Private Equity - 100% x 11.1x GC Multiple * Infinity SDC SBO Oak Hill Pulsant Bridgepoint Development Capital 100% x 12.7x N.B.* Infinity multiple investors include: RIT Capital Partners, Lansdowne Capital, Caxton Alternative Management LP, Wood Creek Capital Management LLC TABLE 2: Company announcements Company accounts Transaction Mkt Cap Amount Trailing valuations Type Date issue price raised EV/Revenue EV/EBITDA PE IPO Outsourcery 34.6m 12.7m 12x (e) - - FPO Outsourcery 38.7m 4.2m 12.8x - - PUBLICATION DATE: 27/06/14 9

10 Supporting Data 11 Megabuyte Headlines PUBLICATION DATE: 27/06/14

11 TABLE 4: TABLE 5: TABLE 6: TABLE 7: TABLE 8: PUBLICATION DATE: 27/06/14 11

12 TABLE 3: Returns Currency Share price Mkt Cap (m) 1 month 3 months 12 months Coresite $ % 8.0% 9.8% CyrusOne $ % 13.7% 28.4% DADA % -15.2% -11.4% DFT $ % 14.8% 17.4% DLR $ % 14.2% -0.5% Equinix $ % 15.3% 18.7% Interxion $ % 14.1% 10.8% Iomart % -5.1% -11.1% Outsourcery % -63.0% -66.1% Rackspace $ % 13.5% 5.0% Telecity % 9.6% -19.9% Capital IQ DCH Index 4.7% 15.3% 14.2% ICT Services Sector 1.4% -1.7% 31.8% NASDAQ Index % 3.4% 31.6% FTSE All-Share % 3.2% 13.7% MBTW All-Share % -1.3% 28.2% TABLE 4: EV/Revenue EV/EBITDA PER Div Yield % Coresite % CyrusOne % DADA DFT % DLR % Equinix % Interxion Iomart % Outsourcery 1.0 Rackspace Telecity % Capital IQ DCH Index % ICT Services Sector % Premium/Discount 63% 17% 115% 3% Megabuyte Universe % Premium/Discount 58% 8% 112% 18% N.B. Valuations are next twelve month consensus estimates 12 PUBLICATION DATE: 27/06/14

13 Company accounts TABLE 5: Year Currency End Period Revenue EBITDA OCF Capex (12mths) Coresite $ Dec Q CyrusOne $ Dec Q DRT $ Dec Q ,075 DFT $ Dec Q Equinix Dec Q Interxion Dec Q Iomart $ Mar H2 13/ Rackspace Dec Q Telecity $ Dec H2 12/ TABLE 6: Company accounts Revenue EBITDA OCF EBITDA Capex to Revenues FCF to Revenues Growth Growth Growth Margin OCC (12 mths) (12 mths) Coresite 16% 21% 47% 47% 89% 83% -36% CyrusOne 29% 32% 52% 54% 91% 84% -31% DRT 9% 10% 31% 60% 50% 71% -11% DFT 16% 14% -7% 64% 68% 57% 8% Equinix 12% 7% 104% 45% 66% 27% 19% Interxion 8% 9% 45% 43% 99% 53% -10% Iomart 34% 55% 77% 45% 108% 23% 19% Rackspace 16% 12% 24% 33% 101% 22% 11% Telecity 14% 18% 7% 49% 95% 28% 20% PUBLICATION DATE: 27/06/14 13

14 Company accounts TABLE 7: Year Revenue EBITDA FCF Net Cash End Period m m m m 1&1 Internet Ltd Dec FY Adapt Group Jun FY Ark Continuity Limited Apr FY Attenda Ltd Dec FY Basefarm Dec FY Claranet Group Limited Jun FY Connexions4London Oct FY Fasthosts Internet Ltd Dec FY Gyron Internet Ltd Mar FY Host Europe Group Dec FY Infinity SDC Limited Mar FY Next Generation Data Dec FY Node4 Ltd Mar FY OCOM Group FY Onyx Group Dec FY Pulsant Limited Sept FY Six Degrees Group Mar FY Telehouse Europe Dec FY The Bunker Secure Hosting Dec FY UK2 Group Dec FY UKFast.net Ltd Dec FY Virtus Datacentres Dec FY TABLE 8: Company accounts Revenue EBITDA EBIT EBITDA Growth Growth Margin Margin OCC 1&1 Internet Ltd 19% -56% 5% 5% Adapt Group 62% 41% 6% 11% 49% Ark Continuity Limited 695% Attenda Ltd 14% -8% 3% 14% 127% Basefarm 18% 18% 6% 20% Claranet Group Limited 56% 90% 4% 13% 74% Connexions4London 18% 76% 4% 11% Fasthosts Internet Ltd 2% 3% 24% 33% Gyron Internet Ltd 52% 6% 11% 19% 252% Host Europe Group 24% 17% 27% 35% 102% Infinity SDC Limited 363% 28% 266% Next Generation Data 33% 21% 40% 99% Node4 Ltd 20% 57% 17% 23% 80% OCOM Group 5% 21% 16% 36% Onyx Group -1% 12% 12% 22% 92% Pulsant Limited 44% 56% 25% 36% 110% Six Degrees Group 155% 110% 19% 21% 108% Telehouse Europe 5% 4% 36% 49% 100% The Bunker Secure Hosting 15% 1% 5% 21% 79% UK2 Group 6% 6% 3% 18% 83% UKFast.net Ltd 24% 57% 28% 40% 104% Virtus Datacentres 19% -56% 5% 5% 14 PUBLICATION DATE: 27/06/14

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16 10 JUN 2014 GODADDY Capital Markets GoDaddy, one of the world s largest providers of mass market hosting and domain services, with 12m customers, $1.1bn of revenues and 21% of all domains under management, has filed for an IPO. Despite a 17% booking CAGR and solid EBITDA and FCF, it is not clear that the company s private equity backers including KKR and Silver Lake will be in the money on their 2011 purchase. 28 MAY 2014 TIMICO TECHNOLOGY GROUP, DATACENTRED Telecoms & Networks Capital Markets In something of a stark contrast, established and profitable business comms and data centre service provider Timico has pulled its IPO due to softening investor sentiment, whilst DataCentred, the data centre and hosting company founded by Telecity founder Dr Mike Kelly, has raised initial private funding towards a 240m, eight data centre build. Timico s pulled IPO highlights that IPO markets can still be very fickle. 28 MAY 2014 IOMART GROUP As flagged in its year end update, Iomart posted a very strong year to March, with revenues up 29% (10% organic) to 55.6m, expanded margins and very strong cash flows. As ever, growth was driven by Managed Hosting, whilst shared hosting was flat, but growth did come at a price in terms of much increased capex and heavy M&A costs. Similar organic growth is expected this year. 16 MAY 2014 RACKSPACE HOSTING M&A Rackspace has retained Morgan Stanley to help evaluate "inbound strategic proposals". Rackspace's shares rallied 7% on the news and a further 7% after hours, but are still down over 60% since their peak in January 2013 as the company has struggled with growing competition from the likes of Amazon and Microsoft and concerns over its aggressive moves toward Public Cloud services. Who might buy it? 15 MAY 2014 UKFAST.NET According to a company press release, Manchester based data centre and hosting service provider UK Fast grew revenues and EBITDA by 16% and 4% to 23m and 8.2m respectively in calendar year 2013, whilst the first quarter of 2014 has been the best ever. If one is being churlish, this represents somewhat of a slowdown from the sector leading 24% and 57% growth in 2012, particularly as 2013 will have included a contribution from BurstNET acquired in July. At the time, the company said that BurstNET would boost the customer base by one third and add 6m of value. 14 MAY 2014 DADA Italian-listed Dada Group, which includes UK hosting providers Names.co.uk and Poundhost, has reported first quarter revenues down 13% to 17.9m, and EBITDA down 30%, with revenues hit by changes in Google advertising and with EBITDA further impacted by UK data centre costs. The company has reiterated its outlook of improving Domain and Hosting growth, to mid-single digits, but has refrained from giving an outlook on its Google advertising business. 16 PUBLICATION DATE: 27/06/14

17 13 MAY 2014 RACKSPACE HOSTING Data Centre & Hosting Services Following the unexpected retirement of its CEO last quarter, latest results from Rackspace cheered the market with guidance-meeting 16% revenue growth to $421m, generally improving metrics and a confident outlook. Despite an 18% share price gain during and after the day, Rackspace is still about the lowest valued data centre and hosting company that we track, at just 7.3x 2014 EBITDA. 8 MAY 2014 INTERXION European data centre provider Interxion reported an in-line first quarter, with revenues up 8% to 81m, net profit up 50%, strong cash flow, but also capex up 74%, whilst full year guidance was reiterated. In positive commentary, the company highlighted strong Cloud-driven growth from managed service providers, with Amsterdam and Frankfurt benefiting particularly. 7 MAY 2014 DIGITAL REALTY TRUST US-based wholesale data centre operator Digital Realty Trust reported revenues and adjusted EBITDA up 9% in its first quarter, to $391m and $234m respectively, which was ahead of expectations. The company also increased the bottom range of its full year core FFO per share outlook by 5c, to a new range of $4.80-$ MAY 2014 EQUINIX Carrier rich data centre provider Equinix has released first quarter 2014 results showing revenues up 12% to $580m, above analysts' estimates, while EBITDA rose by a slightly slower 8% to $260m. The growth was predominantly driven by the EMEA region, though all regions progressed, helping EPS up 25% to $0.81. On the outlook, management has increased full year guidance slightly, due to the strong first quarter, while revenue growth for the second quarter looks to follow suit from the first three months. 30 APR 2014 OMG, AVANTI COMMUNICATIONS GROUP, OUTSOURCERY GROUP We round up news in the nether regions of AIM with contract wins for OMG in Telford and Avanti Comunications in Zimbabwe, whilst Outsourcery (share price 81p v 110p IPO price) has secured a first trial with a major channel partner. Meanwhile, NFC-based mobile commerce specialist Proxama (market cap of 43m) has reported 2013 revenues down 41% at 0.8m and enhanced EBITDA losses of 3.1m. Telecoms consultancy Norcon has reported 2013 revenues down 7% at $46.1m, and enhanced post-tax losses of $2m. 29 APR 2014 TELECITY GROUP In a largely figure free but positive update, Telecity has said that first quarter trading was solid, with underlying growth of 9.4% and stable EBITDA margins, with an encouraging performance in the recently under-performing UK division. The company also reiterated its capital discipline. Despite the positivity, 2014 guidance was maintained. 25 APR 2014 CORESITE, DUPONT FABROS TECHNOLOGY US data centre providers Dupont Fabros Technology and CoreSite both reported 16% revenue growth in the first quarter, to $102m and $64m respectively, with DFT s normalised funds from operations (FFO) up 40% at $0.59 per share, while CoreSite was up 20% at $0.49 per share, on the same basis. However, the shares of DFT and CoreSite finished down 2% and 0.8% at $23.7 and $30.2 each. PUBLICATION DATE: 27/06/14 17

18 25 APR 2014 AMAZON Amazon reported quarterly revenues at the top end of guidance, up 23% to $19.7bn, whilst just about achieving a small operating profit ($146m) and also publishing strong guidance for the current quarter. The Other revenue category, which is probably largely Amazon Web Services, saw growth accelerate to 58%, to $1.3bn, with the Cloud provider making its 42nd price reduction during the period. 23 APR 2014 ARK DATA CENTRES Ark Data Centres (formerly Ark Continuity) ostensibly had a very good 14 months to June 2013, with revenues jumping 8x to 37.9m. However, the large majority of this appeared to represent internal charges, with an 86% increase in gross profit to 3.9m and a doubling of subsidiary turnover to 9.2m a better indicator of progress against over 90m invested to date. 22 APR 2014 INTERXION Pan-European carrier neutral data centre provider Interxion has increased 2014 capex guidance by 35-40m, or 21-25%, due to accelerated capacity expansion in Amsterdam and Frankfurt in response to customer demand. Even though the spend will have no positive impact on 2014 revenues, the company s share s rose 5% yesterday. 22 APR 2014 CLARANET GROUP M&A Just like buses, hosting provider Claranet has made its third acquisition in a row, buying Dutch firm NovaData for an undisclosed amount, following the recent acquisitions of French Grita and Portugese Echiron. The acquisition doubles Claranet s Dutch presence, adding 7m of revenues, and takes Claranet to about 165m run rate revenues; we got some colour from CEO Charles Nasser. 14 APR 2014 CONNEXIONS4LONDON Accounts from C4L, a provider of connectivity, colocation, Cloud and comms services, show revenues up 18% to 12.2m and a big jump in EBITDA for the year to October 2013, albeit slightly under-shooting management targets. The company is hoping for further growth from its recently launched new data centre-focussed MPLS network, with Digital Realty as a launch partner. 28 MAR 2014 TELEHOUSE EUROPE 2013 accounts from KDDI-owned carrier rich data centre operator Telehouse Europe show subdued revenue growth of just 5% to 129m, at stable EBITDA margins; half the growth of peers Telecity, Interxion and Equinix. London let the side down, at just 2% growth, whilst 18% growth in Frankfurt is starting to justify the early 2012 Databurg acquisition. 27 MAR 2014 UNITED INTERNET, FASTHOSTS INTERNET, 1&1 INTERNET Telecoms & Networks German listed ISP and hosting company United Internet - which owns 1&1 Internet and Fasthosts among other brands - met 2013 targets with 11% revenue growth to 2,656m whilst underlying EBITDA growth to 515m (before 107m of start up losses) was 3% ahead of target. Investments in new hosting products are starting to pay off, with Applications revenue growth now offsetting lower growth in the German ISP business, setting the scene for another 10% growth year in PUBLICATION DATE: 27/06/14

19 26 MAR 2014 IOMART GROUP In a typically positive trading update, managed hosting provider Iomart has said that it expects to announced EBITDA and adjusted pre-tax profit of 23.6m and 14.5m for the year ended March 2014, up 44% and 37% respectively and marginally ahead of consensus. The company expects strong organic and M&A growth to continue, with this year's growth benefiting from the 23m acquisition of Backup Technology among others 25 MAR 2014 PULSANT 2013 accounts from Bridgepoint-backed data centre and hosting provider Pulsant show the company hitting the planned numbers first given to us in June last year, with 44m revenues and 15.8m EBITDA, reflecting headline growth of 44% and 56% respectively. With pro forma organic growth in revenue and profit of 12% and 23%, Pulsant continues to grow ahead of the market, aided by a blend of colocation, managed and Cloud hosting, and a catch up with CEO Mark Howling suggests further teens organic growth in store for 2014, plus a potential refinancing. 20 MAR 2014 DADA Italian-based European hosting company Dada, which owns UK brands Names.co.uk and Poundhost, has reported 2013 revenues and EBITDA down 11/12% at 75.3m and 10.6m respectively, impacted by declines in advertising and the costs of a new UK data centre. Like many shared hosters, Dada is struggling for growth in relatively mature markets, and is having to invest in new managed hosting services as well as in shared hosting services such as website creation and domain name brand protection to kickstart growth. 20 MAR 2014 DIGITAL REALTY TRUST Having parted ways with its CEO earlier this week, wholesale data centre provider Digital Realty Trust has announced an underwritten public offering to raise $300m at a price of $25.0 per share, with an additional 1.8m shares on offer in a 30-day period. The new monies will be used for a combination of balance sheet support (e.g. paying down its revolving credit facility), potential property purchases and to fund development opportunities. Digital Realty hasn t made a large European acquisition since its 716m Sentrum deal in June 2012; though the $300m fundraise would only stretch to 1/7th of an Interxion or 1/9th of a Telecity at the going rate. 19 MAR 2014 OUTSOURCERY GROUP Cloud-based unified comms provider Outsourcery has reported 2013 numbers which, despite impressive 44% revenue growth to 5.2m, came in below expectations at the time of the May 2013 IPO and with higher than expected EBITDA losses of 7.2m. The company still believes that it can meet market expectations for 2014, of revenues more than doubling to 12.3m as major partners such as Vodafone and Virgin Media start generating sales. 18 MAR 2014 DIGITAL REALTY TRUST Major US-based wholesale data centre provider Digital Realty Trust has parted company with its long term CEO Michael Foust, to be replaced in the interim by joint CFO and CIO, Bill Stein. This is a bold statement of intent from Digital Realty as it looks to quell recent investor pressure and recapture growth in the market. This decision also coincides with a recovery in data centre and hosting peers share price performance over the last quarter, following a year of solid mid-teen revenue and EBITDA growth. PUBLICATION DATE: 27/06/14 19

20 13 MAR 2014 NEXT GENERATION DATA Speedily-filed 2013 accounts from South Wales wholesale data centre provider Next Generation Data show 33% growth in revenues to 8.0m, 40% EBITDA margins, and positive FCF. The year marked an inflection point with the company easily funding capex out of EBITDA, including more retail focussed, ready made data centre space. 5 MAR 2014 INTERXION Fourth quarter results from European carrier rich data centre operator Interxion show revenue up 7% organically to 78.2m and adjusted EBITDA up 8% to 33.8m, both slightly below estimates and bringing the full year in at the bottom of guidance first given this time last year. Having achieved 11% revenue growth off the back of 8% volume growth in 2013, Interxion is targeting 10% growth for 2014, similar to Equinix's 10-11% and Telecity's 10%. 4 MAR 2014 CLARANET GROUP M&A Managed hosting provider Claranet has followed up its recent Portuguese acquisition of Echiron with an acquisition in France, of healthcare hosting specialist Grita. Whilst the deal adds just 10% or so to Claranet s French business, according to founder and CEO Charles Nasser it is a symbolic deal in other ways. 17 APR 2014 ATTENDA <Insert P Group> <Insert Found In> ALSO FOUND IN: <insert also found in> Having made a nice return on the sale of its data centre business IFL to Telecity in 2010, managed hosting provider Attenda has invested 7.5m in recreating a colocation capability via its new Datum subsidiary. We spoke to Datum MD Dominic Phillips for progress one year after the data centre opened, with Datum now contributing to the Attenda top line 11 APR 2014 OCOM GROUP <Insert P Group> <Insert Found In> ALSO FOUND IN: <insert also found in> We initiate coverage of the OCOM Group, an 84m revenue owner-managed Dutch hosting, data centre colocation and connectivity business. The company has grown strongly, with solid EBITDA margins, off the back of internal product development and well judged M&A and, according to a call with Managing Director Con Zwinkels, it remains as ambitious as ever 14 MAR 2014 OUTSOURCERY GROUP <Insert P Group> <Insert Found In> ALSO FOUND IN: <insert also found in> Cloud based unified comms provider Outsourcery listed on AIM in May 2013, raising 13m at 110p per share, at a 12x revenue valuation, subsequently raising 4.2m at 112p a share in December. Having been critical of the company s valuation and progress, we recently caught up with cofounders and CEOs Piers Linney and Simon Newton; have our views changed? 20 PUBLICATION DATE: 27/06/14

21 IS Research Ltd will not accept any liability to any third party who for any reason or by any means obtains access or otherwise relies on this report. IS Research Ltd has itself relied on information provided to it by third parties or which is publicly available in preparing this report. While IS Research Ltd has used reasonable care and skill in preparing this report, IS Research Ltd does not guarantee the completeness or accuracy of the information contained in it and the report solely reflects the opinions of IS Research Ltd. The information provided by IS Research Ltd should not be regarded as an offer to buy or sell securities and should not be regarded as an offer or solicitation to conduct investment business as defined by The Financial Services and Markets Act 2000 ( the Act ) nor does it constitute a recommendation. Opinions expressed do not constitute investment advice. Any information on the past performance of an investment is not necessarily a guide to future performance. IS Research Ltd operates outside the scope of any regulated activities defined by the Act. If you require investment advice we recommend that you contact an independent adviser who is authorised by the Act to conduct such services. IS Research Ltd does not have any direct investments in any companies contained in the report and has compiled this report on an independent basis. PUBLICATION DATE: 27/06/14 21

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