Macquarie Telecom delivers strong EBITDA growth thanks to cloud computing boom

The Macquarie Telecom Group Ltd (ASX:MAQ) share price will be on watch on Thursday after it delivered solid first half EBITDA growth thanks to the cloud computing boom…

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The Macquarie Telecom Group Ltd (ASX: MAQ) share price will be one to watch on Thursday following the release of its half year results after the market close.

How did Macquarie Telecom perform in the first half?

For the six months ended December 31, the data centre, cloud, cyber security and telecom company delivered a 9% increase in revenue on the prior corresponding period to $131.9 million.

The main driver of this growth was the company's Hosting business. It reported an 18% lift in revenue to $62.7 million. The company's other business, its Telecom business, posted a 2% lift in revenue to $71.8 million.

Also growing was the company's earnings before interest, tax, depreciation, and amortisation (EBITDA). Macquarie Telecom's EBITDA jumped 24% (post AASB16) to $31.6 million in the first half. Once again, this was driven by the higher margin Hosting business, which reported a 21% increase in EBITDA pre-AASB16 to $18.6 million.

However, its conversion of EBITDA to operating cash flows generated total operating cash flows of only $13.9 million.

On the bottom line, the company reported a net profit after tax of $6.7 million post AASB16. This was a decrease of 24% on the prior corresponding period.

Management commentary.

Chairman Peter James said: "Consistent execution of our strategy has delivered eleven halves of profitable growth. We will continue to invest in the megatrends of Data Centres, Cloud and Cyber Security to drive further shareholder value and ongoing returns."

Looking ahead, the company is focused on capturing the growing demand for data centre services by expanding its network.

Chief Executive, David Tudehope, said, "In January we commenced construction of IC3 East at the Macquarie Park Data Centre Campus to meet the strong demand from corporate and government customers, as well as wholesale customers seeking access to the much sought after Sydney North availability zone."

Outlook.

Management expects further strong sales growth in the second half, leading to full year FY 2020 EBITDA in the range of $63 million to $66 million post AASB 16 or $55 million to $58 million pre AASB16.

This is expected to be driven partly by its Cloud Services offering successfully leveraging the Hybrid IT megatrend and increasing demand from its Federal Government Agencies for cybersecurity and secure cloud services.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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