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    NXT   AU000000NXT8

NEXTDC LIMITED

(NXT)
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NEXTDC : AGM - CEO's Address

11/15/2020 | 05:59pm EDT

ASX Release

13 November 2020

2020 Annual General Meeting - CEO's Address

FY20 was another year of record growth and outstanding accomplishments for NEXTDC. The second half of FY20 saw us navigate a torrent of natural disasters including drought, catastrophic bushfires, smoke- inundated cities, and extreme weather events including flooding rains and cyclonic storms.

Of course, these tests of resilience and the ability of organisations to adapt quickly to change were tested even further by a 1 in a 100 year global health crisis. Clearly, this sequence of events has had an impact on the economy but it has also been a positive tailwind for the accelerated adoption of digital platforms and services and - from a NEXTDC point-of-view - the company was well-prepared to respond and deliver both business continuity and disaster preparedness support our customers expect. We were also able to deliver on the guidance we provided for FY20 and today we are optimistic for a digitally led economic recovery and confident about the financial guidance we are providing for FY21.

As far as our FY20 performance is concerned, there was lot of good news in the set of numbers shown in this slide. I would like to emphasise the significance of the growth in our contracted utilisation which is up by 33% to 70MW. We experienced a record level of sales during the reporting period with contracted utilisation increasing by 17.4MW or 33%, a number which represents by far the single largest sales performance in the company's 10-year history. This included the announcement of significant new contract wins in Victoria and New South Wales, with Victoria in particular exhibiting very strong growth in customer demand, both in the form of contract wins as well as future customer commitments to expansion options and reservations.

With regards to our capital expenditure for the year, our strong funding position means we are poised to take full advantage of future growth opportunities. FY20 capital investment saw us push over the top end of our guidance due to the accelerating growth requirements of our customers, which allowed the company to further accelerate its developments. With the announcements earlier this quarter about our new debt facilities, combined with our recent capital raising - we are in an outstanding position to continue growing the company to meet the strong forward demand for infrastructure capacity that we are experiencing.

New technologies and cloud platforms are driving exponential growth in data volumes. Meanwhile, regulatory control over the security, management, and data sovereignty are also driving organisations to cloud and colocation for the economies of scale and resilience they present. The costs of security, high volume connectivity, network diversity and fault tolerance of power and cooling systems to maintain high availability is challenging to deliver cost effectively and efficiently for all but the largest of organisations. These are just some of the factors driving growth in the data centre services sector. We continue to capitalise on this with our new 2nd generation developments and will be in leadership position again to cater for the future wave of data when our even larger 3rd generation builds come to life over the next few years.

I am also pleased with the continued growth of our connectivity services business. These services are up almost 20% over the reporting period and now represent more than 8% of revenue. This growth reflects the important role our connectivity business and data centre platform plays through our deep and diverse ecosystem. This connectivity between cloud platforms, geo-diverse locations, ecosystem partners, carriers and customers are the glue that binds together the digital economy and that is increasingly evolving within our facilities. This year we celebrated 10 years in business; a milestone that was accompanied by our

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transition into the ASX 100 index. It is wonderful to reflect on how the company has developed over the past decade.

Performance at the edge

We live in extraordinary times of change and innovation. Every second of every day our society creates unprecedented volumes of data, which is streamed, shared, and accessed from a myriad of connected devices.

Today, any individual with a smart phone has the sum of all human knowledge in the palm of their hands and the potential to collaborate with billions of other people. These digital citizens are everywhere, they are impatient and demanding of positive online experiences. They expect the applications that are important to them to not only always be available but also to be responsive and feature rich. In the digital age, slow is the new downtime, with application performance and customer experience becoming the key differentiator. This applies to workforce efficiency as well. High performance interconnected digital platforms represent the keys to enterprise productivity gains in the digital age.

For organisations that rely on this immediate and deep connection between their platforms, their teams and their customers, proximity to the infrastructure that underpins performance is the difference between a good user experience and a bad one. This is why we put great effort in to making sure we grow our geo-diverse infrastructure where the demand is highest. It's why we continue to invest in Sydney and Melbourne and why we are so excited by the opening of P2 which is directly connected to Singapore and the East Coast via submarine cable. That allows the national and global digital economies to close the gap between the heart of data and processing power and the edges of interconnected networks where devices and users are located.

It is estimated that every 18 months, we double the total sum of data created since the beginning of mankind. This information explosion is forecast to accelerate exponentially as a result of further advances in

  • and reliance upon - cloud computing, the Internet of Things, 5G and artificial intelligence to name a few. We play a pivotal role in this new 4th industrial revolution where technology is being built upon technology. As this digital acceleration continues our geo-diverse footprint becomes ever-more important.

Hyperscale facilities and the hybrid multi-cloud

NEXTDC continues to strengthen its strategic partnerships with the world's leading technology companies such as Amazon, Microsoft, Google, IBM, Oracle and Alibaba. Our Cloud Centre partner ecosystem comprises more than 640 of Australia's leading ICT services providers who have points of presence within one or more of our facilities. This combination allows us to offer customers direct and secure access to the market's leading services they need to develop and advance their Hybrid Multi-Cloud architectures. No data centre services provider in Australia has more direct on-ramps to public cloud platforms than NEXTDC and we continue to add new ones every year.

Statistics define future growth opportunities

There are many reasons why we can all be confident that demand for colocation data centre services will continue to boom. We have the capital to continue building the digital infrastructure needed to support the growth of the digital economy. And we house Australia's largest and most active specialist ICT ecosystem. The opportunity ahead is widely reported by industry analysts.

IDC forecasts that global investment in public cloud services and infrastructure will more than double over the period from 2019 to 2023. Keeping in mind that this was before the onset of a global pandemic which is accelerating digital growth, IDC found that public cloud spending is expected to grow from $229 billion in 2019 to nearly $500 billion in 2023. This represents a CAGR of 22.3%. The prediction for APAC is even stronger with a CAGR of 33.9% for the same services with the market almost tripling to reach $76.1 billion over the stated time period. In the same report, IDC identified Australia as APAC's second largest market with current spending of $3.9 billion annually on cloud infrastructure and services.

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Supporting and fuelling this digital acceleration with world's best practices external benchmarks is what NEXTDC excels at, and that has been a key driver and differentiation of the Company's sustained growth over the last 10 years. We build the critical infrastructure that powers the worlds digital platforms and system, we interconnect business to their suppliers and customers, their data and their applications, and we provide the advanced digital infrastructure needed to secure the data that organisations and society heavily depend on.

Global pandemic driving accelerated technology adoption

While cost efficiencies, productivity improvements and customer experience enhancements have been driving the adoption of these megatrends in recent years, a one-in-100-year health crisis during FY20 has served to steepen the growth curve and accentuate the role of digital infrastructure as an essential service. The extraordinary events that have unfolded globally as a result of COVID-19 introduced new barriers to traditional business models including social distancing, closed offices, closed communities, shut boarders, grounded flights and supply chain disruptions.

In a matter of weeks, the global economy was forced to re-think how people live and work, how organisations collaborate and communicate with businesses immediately turning their focus to their infrastructure platforms to support new ways of working. FY20 saw our global communities conduct the single largest remote work experiment in our history.

These macro impacts on all industries have, in turn, driven exponential increases in data usage and therefore increased the dependence organisations and individuals have on digital infrastructure. Industry analysts have called out the trend. In June 2020 IDC forecast that COVID-19 has pushed the digital transformation initiatives for many organisations ahead by as much as three years. Driven by the reduced numbers of people gathering to work in centralised locations and the acceleration of cloud adoption, many organisations are also re-thinking their real estate strategies. Does it still make sense for them to house their critical systems on-premise in data centres located where their people used to be? For many organisations, colocation suddenly makes a lot more sense.

New ways of doing business

This global pandemic has generated new standard operating procedures for many organisations. Often these activities rely on digital platforms and connected ecosystems to function. This pivotal moment in history is now also sparking a new round of innovation where digital solutions are being leveraged to meet present challenges at the same time as enabling them to counter risk around future unexpected change.

The flexibility, agility, and resilience that is inherent in cloud platforms, colocation facilities and connected ecosystems have been critical in the enablement of organisations to respond quickly, keep their teams connected, enact business continuity plans and set a course for a less predictable future. Video collaboration providers are a leading example of user growth and platform adoption, instigated by widespread and mandated social distancing.

Post COVID-19 research from Global Workplace Analytics showed that as many as 77% of knowledge workers want to continue working from home at least some of the time, while 74% of organisations surveyed by Gartner in April 2020 were planning for some workers to be permanently remote. In March this year, Microsoft said it had seen a 110% increase in daily users since November.

Then, in April, Microsoft reported that daily users had jumped a further 70%, increasing to more than 75 million daily active users. During the same time, we saw massive infrastructure and cloud demand activity from retailers as they ramped up online stores to meet increased demand from customers needing to shop from home.

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Safety is everyone's responsibility

Safety is an incredibly important topic. We take a view that safety is everyone's responsibility and maintaining a safety-first culture is the highest priority for the business. Our commitment to providing and maintaining a safe and healthy work environment provided us with unique challenges in FY20, first with thick smoke blanketing our major capitals, and then the COVID-19 pandemic.

Each of these circumstances resulted in swift action, and the implementation of business continuity and disaster recovery protocols across the business to protect our customers, suppliers, and teams. Safety extends far beyond ensuring that our work environments are clear of slip or trip hazards, it is more than reactively dealing with immediate and circumstantial challenges such as COVID; and making sure that our capital works projects are operating to best practice.

Of course, these are all critically important, but we view safety more holistically, in making sure that all of our teams, customers, contractors and visitors to site have a safe experience while working with us. We continue to commit the resources necessary to maintain a safe working environment, and ensure the ongoing operation of the business, and health and well-being of our team. In addition to our COVID response, which includes significant attention to understanding and dealing with mental health challenges, we have implemented a range of strategies and support systems to renew and enhance our workplace safety management across both our operational and capital works portfolios. We continuously review and improve our systems and work closely with our stakeholders, including customers and suppliers, to align ourselves with industry best practice, and achieve our ultimate goal of zero injuries.

Innovation, engineering, and design compliance

With our 2nd generation data centres completed and open for business in Perth and Sydney, M2 in Melbourne is undergoing an expansion that will triple its size and with B2 fuelling Queensland's digital growth, we have inventory now available in all of Australia's key markets that is certified to the highest global standards. Our brand maintains a position as the benchmark for world class design, efficiency and operations with our Uptime Institute Tier IV constructed certifications, and Tier IV Gold Operational Sustainability credentials all representing firsts for colocation data centres in the Asia Pacific region.

Over the past 12 months, we have received a significant number of industry certifications and awards that recognise our global leadership in data centre innovation.

In June 2020, NEXTDC was named by Frost & Sullivan as the market leader in the Australian data centre services industry. This is an accolade that directly reflects the company's hard work and dedication to continuously improve. In Q1FY20, we were recognised as Frost & Sullivan's Global Company of the Year, and acknowledgement of the Company's commitment to innovation, and delivering true customer value.

Our M2 Melbourne data centre also achieved Tier IV Gold Certification for Operational Sustainability during FY20, following in the footsteps of B2 - which, back in FY18, was the first data centre in the Southern Hemisphere to be certified at this level of operational excellence. Gold certification for Operational Sustainability recognises the human factors that must be considered when running a data centre at optimum fault tolerant standards. These certifications reinforce the importance we place on not just designing and constructing this critical infrastructure, but the processes and people required to run them efficiently and in line with world's best practise.

It gives me great pleasure to also announce that that in October NEXTDC was announced as a winner at the Australian Business Awards (known as the ABA100 Awards) in the Sustainability Category, which is a nice segway to our sustainability commitments.

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This is an excerpt of the original content. To continue reading it, access the original document here.

Disclaimer

NEXTDC Limited published this content on 13 November 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 15 November 2020 22:58:05 UTC


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Sales 2021 251 M 194 M 194 M
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Nbr of Employees 248
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Craig Ian Scroggie Chief Executive Officer & Executive Director
Oskar Tomaszewski Chief Financial Officer
Douglas Ronald Flynn Non-Executive Chairman
Jeff Arndt Chief Information Officer
Simon Cooper Chief Operating Officer
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