NextDC commits near $1bn to data centres after profit drops

Tech company NextDC has outlined plans to spend nearly $1bn on data centres over the next 12 months and has started construction at locations in Malaysia and New Zealand.

NextDC has outlined plans to spend near $1bn on data centres over the next 12 months as the technology company starts construction on centres in Malaysia and New Zealand.

The plans were outlined as the listed data centre provider slumped to a $25.6m loss for the year to June 30, down from a $9.1m profit the previous year.

The company lifted its revenue by $71.3m to $362.4m and no final dividend was declared.

Its shares retreated 2.6 per cent or 36c to $13.26 after it disappointed the market with lower-than-expected earnings guidance and higher capital expenditure guidance.

Earnings before interest, taxes, depreciation and amortisation grew $24.6m – or 15 per cent – to $193.7m in the 2023 financial year. NextDC expects to deliver between $400m and $415m in revenue in the current financial year, while EBITDA is expected to be only slightly above FY23 with guidance of $190m-$200m.

Chief executive Craig Scroggie said its near $1bn investment plans would be spread across its 13 operational data centres and a further nine centres it has in development.

About 10 per cent of that spend – near $100m – would be spent on developing a data centre in Kuala Lumpur, Malaysia, where the company had also committed to spending $1bn over the next decade.

“The capex in Asia is mostly the first year of KL1 Malaysia,” Mr Scroggie said. “We also plan to develop further countries in Asia and Japan in future years.”

In the past year operating cash flow was higher, while capital expenses grew 14 per cent.

Direct costs including power and consumables nearly doubled in FY23, growing from $43.5m to $83m. Facility costs grew by $10m to $38.2m, while corporate costs shrank from $50.8m in FY22 to $48.8m in FY23.

Capital expenditure for FY24 is expected to be between $850m and $900m, as the company has begun construction on new projects and continues to buy land for data centres.

The results arrive after The Australian last week revealed NextDC had purchased a second block of land in the Pilbara, where it plans to build a data centre in partnership with BHP, Microsoft and Vocus.

Mr Scroggie said he expected major demand in the year ahead as companies invested in digital infrastructure.

“FY24 represents a critical investment year for NextDC to expand and enhance its market-leading platform capabilities, making the necessary investments to leverage the next decade of growth, both domestically and internationally,” he said.

E&P analyst Paul Mason said once the market understands the results he would expect the stock to go up.