Trading has been strong since the interim results in September 2006, with EBITDA in line with market expectations and revenues significantly ahead.
The Contracted MRR (Monthly Recurring Revenue) has increased to £3.5m (including power revenue of £0.9m) as at 30 November 2006 from £2.7m (including power revenue of £0.5m) as at 30 June 2006. This compares with Contracted MRR of £2.0m (including power revenue of £0.3m) as at 31 December 2005.
Revenue is ahead due principally to increases in power revenues (pricing and volume increases) and installation revenues, both of which have typically low gross margins. The increase in installation revenues reflects stronger sales of net space and the high specification requirements of customers.
A number of contracts have been signed with blue-chip customers since the interim results, including one of Europe's top five banks, a multi-national fast food chain and one of the top European outsourcers. In addition, up to 20 financial customers are being transferred to IXEurope's business continuity facilities at its 13-acre IXDatacentre campus in Frankfurt under an agreement with Sungard Germany.
Customer demand for the new London4 IXDatacentre, currently under construction, is significantly ahead of expectations in terms of volume and pricing. A significant proportion of this demand is coming from the financial services sector, traditionally highly demanding in terms of location and specification. The London4 design has been well received by customers. The first contract has already been signed with an initial value of £20m over 10 years excluding power provision and represents over 15% of phase 1 datacentre capacity (contract not included in the November Contracted MRR above).
To capture the market demand, the Board has decided to increase the planned specification and accelerate the fit-out of phase 1 (5,000m2 net space). This will result in substantially higher EBITDA and revenue from H2 2007 onwards, thus raising the return on investment. Total capital expenditure for phase 1 of London4 is now expected to increase to £20.4m (£19.4m in 2007 and £1m in 2008). 8). In addition, due to the strong demand, the Board has decided to prepare for phase 2 of London4 by building the mezzanine floor at a cost of £1.1m in preparation for future datacentre build-out. Phase 2 would provide up to an additional 5,000m2 net space at London4.
In the second half of the year, the build-out of net space within the Group has progressed well. In particular, Paris1 expansion (1,500m2) generated first revenues in September 2006 and Paris2 (1,700m2) will generate first revenues in January 2007. Munich (4,600m2) has continued to attract customers and London4 (5,000m2) is on line to be open to customers end H1 2007. All these build-out projects are part of the current plan to bring on line a total of 35,400m2 net space within the current portfolio of sites.
The Board remains confident that the trading environment will continue to be healthy during 2007.