MEGAPORT QUADRUPLES REVENUE AND INVESTS IN EXPANSION

MEGAPORT QUADRUPLES REVENUE AND INVESTS IN EXPANSION

MEGAPORT (ASX: MP1) increased revenue 345 per cent to $4.46 million in the six months to 31 December 2016, the company reported today in its half year results, but it is still trading at a loss.

The elastic interconnection services provider is in a growth phase and is working with partners such as Digital Realty, Seaborn, and CyrusOne to roll out its network in 19 countries.

An expansion is costly, and despite the big boost in revenue Megaport reported a $13.77 million loss, up 38.5 per cent on the previous year. 

The Brisbane-based company has increased its number of ports from 504 to 1,479 in December 2016 compared to the previous corresponding period; upped its total services from 940 to 2,768; and grew the number of data centres it works with from 46 to 141.

Megaport acquired Ecix and Omnix in July 2016 to quickly expand across Europe and is deploying technology to deploy in the United States.

"Compared to the first half of last year, we have seen a significant uptake in direct network costs and that is because we are expanding the network from 71 locations to 141. We doubled the network, and that is reflected in the costs," says English.

"When you look at the revenue, we generated $265,000 in North America and that is all in the latter part of 2016.

"Over 7-8 months, we invested in expanding to 14 locations in North America and when you look at the revenue. we only generated $265,000 and that was all in the latter part of 2016.

English says with the bulk of the core network complete, Megaport's focus in 2017 will be monetising that network. The company's growth is connected to the growing demand for connection to the 'cloud'.

"We have witnessed first-hand the effects of increased cloud adoption as evidenced by the dramatic uptick in our virtual cross connection (VXC) count," says English.

"The addition of several new cloud provider onramps to our software defined networking (SDN) is highly driven by the growing adoption of public cloud services and the demand cloud service providers see for better connectivity to their public cloud offerings."

English says partnering and integrating with cloud service providers to extend the reach of their services creates a powerful market relationship that makes it easier to get more customers connected.

"Concurrently, the demand from data centres and their customers for elastic interconnection, rapid provisioning, and direct cloud access has yielded several excellent partnerships that bring the Megaport SDN to new markets," he says.

The company undertook two capital raisings during the half year: $17.85 million was raised on 5 August in private placements; and $13.5 million was raised on 22 August by a share purchase plan.

The money has been used for capital expenditure, operating costs of the network, services and staff, and network capacity investment. Megaport has around $24 million in the bank as of December.

The group also appointed a new CFO Haidee Van Ruth - and expanded its sales and marketing team. It focused on global reach and setting up corporate legal entities to enable new and further integrated types of partnerships, such as the Seaborn software licensing arrangement. CEO Denver Maddux resigned from the company earlier this month.

Megaport is finished the today's trading down 3.51 per cent at $2.20 per share.

Business News Australia

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