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How the data centre world is dealing with COVID-19

AndBMITtom

As the far-reaching impact of COVID-19 is felt across several industries, such as travel, hospitality and restaurants, the implications of this pandemic have also presented several challenges to technology related companies.

Such implications were also felt by BMIT Technologies Company plc (BMIT), whereby it recently announced several changes and delays regarding the Group’s strategic plans/outlook.

COVID-19 impact

BMIT recently announced that the majority of online gaming operators continued to register stable demand, whereby only betting operators without a diversified gaming portfolio registered some form of slowdown. However, some of these gaming operators tapped new streams, including eSports. While the Group has had an impact on its core business, with service requests from local businesses registering a slight drop, management also explained that there has been a growth in demand concerning cloud services.

As economic uncertainty continued to loom large in the face of COVID-19, BMIT recently announced that all major investments, including the previously anticipated investment at the Zejtun data centre (€10m), are currently being re-evaluated. Until the final decision is taken, management confirmed that the Group prefers to take a conservative approach and wait until the current COVID-19 climate stabilises further.

Moreover, should this investment be called off, BMIT’s data centre excess capacity will amount to 10 per cent as both of the Group’s current data centres, namely Handaq and Smart City, are at present 90 per cent utilised. The permanent suspension of this investment would also mean that the Group will incur a lower level of capital and operating expenditure which include finishing works to the building, technical staff remuneration and other direct costs required to run the data centre.

In furtherance, in an attempt to further combat the implications brought about by COVID-19 and the aforementioned restriction in terms of data centre capacity, BMIT appears to be gradually shifting its sole focus on data centre services to other offerings within the IT services industry. However, it is crucial to highlight that there still needs to be a more clear direction from the Group on the decision of the Zejtun expansion and on the other services which are anticipated to be offered moving forward.

Outlook and growth prospects

More recently, BMIT entered into a partnership agreement with an artificial intelligence virtual agent company, EBO, with the focus to enhance the quality of customer support offered by operators and the general gaming community. While EBO will be focusing on building and operating artificial intelligence aimed at connecting businesses with customers, the main objective of BMIT in this partnership is to automate and channel this technology to the respective customers.

Moreover, the Group recently finalised a managed services contract agreement with a large gaming client. Management anticipate that revenue generation pertaining to this client will commence during the third and fourth quarter of the current financial year.

BMIT also reiterated their intentions to expand internationally, mainly in Cyprus through their existing synergies with GO plc’s subsidiary, Cablenet. This is considered as being a proactive move aimed towards mitigating any potential implications brought about by the recent increase in local competition and the consequent drop in demand within the local market.

Financial performance: FY19

As per latest financial results, BMIT registered a 4.8 per cent increase in revenue, which is attributable to additional revenue derived from the Group’s data centre division.

Operating expenditure was relatively in line with the previous financial period, apart from a marginal increase of €0.7m which is attributable to increased sales activity within the sales of hardware segment. Other administration expenses which were on the rise in 2019 relate to marketing costs as result of BMIT’s rebranding exercise and listing fees.

Moreover, during FY19, the Group concluded the acquisition of the Handaq data centre and completed the replacement of the cooling system at this data centre with new energy-efficient plant.

Despite the COVID-19 situation, the Board decided to proceed with the final net dividend payment of €4.4m or €0.022/share pertaining to FY19 performance. This translates into a net dividend yield of circa 4.4 per cent as of this writing.

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