Telecity hikes dividend 40% as profits jump

Data centre provider Telecity hiked its dividend by 40% today as it revealed double-digit growth in both revenues and profit.

Telecity, whose data centres provide the backbone for internet traffic and the telecoms industry, announced a 15.6% jump in operating profit last year to £97.4m.

Revenue also rose 15.1% to £325.6m, although the figure missed market expectations.

The company proposed a final dividend of 7p with chief executive Mike Tobin saying the business was focused on “driving real shareholder value creation now”.

“We’ll grow our dividend at least in line with earnings, but I’d like to think we can continue along the lines of this year's increase for the next two to three years.”

Telecity bought businesses in Istanbul, Sofia and Warsaw in 2013 and Tobin said these acquisitions put it in a good position for growth.

“We’re looking for these tollbooths on the highways of internet traffic. If you look at where traffic flows from the Middle East into Western Europe, that all goes through Istanbul - Warsaw is a very similar situation.”

Tobin said the FTSE 250 firm was also beginning to reap rewards from investment in technology, saying: “The data centres we’ve currently built have a much higher density of power than the original ones so we’re driving more revenue through a largely fixed cost base.”

Telecity said it had drawn up a short list for a new finance chief, but Tobin said the firm was “not in a hurry to fill a gap”.

The company also gave forward guidance on revenue for the first time, predicting a turnover between £355m and £362m in 2014.

Reacting to the results Morgan Stanley said in a note: "We don't think expectations were high going in and the market should welcome the improved disclosure and commentary on capital (with an improved dividend). However, there will still be concerns on churn and pricing."

Telecity shares fell 10% on the news.