French cloud operator OVHcloud has posted healthy revenue for the first half of the financial year, though the still-unexplained fire disaster at its Strasbourg data center SBG2 last March pushed it into the red.
In the six months to 28 February, the company made an operating loss of €21 million ($23m), on revenue of €382 million ($412m), compared with an operating income of €20 million ($22m) for the first half of 2021. The revenue went up by 13 percent compared with the first half of the previous year, which ended just before the fire which destroyed SBG2.
However, papers filed earlier show the company is still braced for further impact from the fire.
“The first half-year results demonstrate OVHcloud’s ability to deliver a robust, sustainable and profitable growth acceleration strategy,” said CEO Michel Paulin. “Building on this performance, we are entering the second half of the year with confidence.”
Commentators will be most interested in the effects of the fire, which burnt out the SBG2 data center on 10 March 2021, and which still remains unexplained one year on. They will also want to factor in the group’s IPO flotation, which took place in October.
According to the group’s financial announcement, these two factors neatly explain the difference this year’s operating loss of €21 million and last year’s operating income of €20 million for the first half of 2021. The combined impact of the IPO, and the Strasbourg fire, along with costs of recent acquisitions amounted to €41 million in the first half of FY22, the group says.
For the IPO, OVHcloud says it made €21 million share-based payments and €8 million fees. It also made €4 million in earn-out payments connected with acquisitions.
As to the fire, the company appears to have made €3 million of “commercial gestures” (refunds) spent €3 million on accelerated depreciation of damaged servers and paid a €2 million insurance premium.
This sounds like it has got off lightly, and the exact picture may change. The results announcement says the revenue figures were calculated “excluding the direct impacts of the Strasbourg incident”.
In September, a “transparency document” filed in connection with OVHcloud’s IPO warned that the fire could cost the company €105 million, although much of this figure could be covered by insurance. According to the document, it actually paid out €61 million in compensation, but the insurance covered €58 million, leaving the €3 million of “commercial gestures” mentioned above.
The company reported in September that it spent €15.8 million ($18.4m) scrapping fire-damaged servers, and then spend €18.4 million ($21.4m) replacing them – costs which again may have been covered by insurance. The fire also incurred “exceptional charges” of €39.2 million ($45.6m), which includes €32.3 million ($37.6m) for expert appraisals, procedures, and potential liability actions.
Cost of the fire
There’s another big potential cost not addressed here: OVHcloud has compensated customers for the loss of its service, not for any financial losses they incurred, or damage to their reputation, arguing that the fire was not its responsibility, but “force majeure”.
A number of customers argue otherwise, and more than 100 have banded together with legal specialist Ziegler Associes in a class action claiming more than €9 million in damages. Ziegler has calculated the losses experienced by individual customers, and is due to deliver its claim shortly, after which OVHcloud will either have to settle or fight the case in court.
The result of this argument will depend on whether OVHcloud is found to be at fault for the way it operated its data center, or how it sold its services – whether customers were right to expect that they had reliable backups or not.
The latter question will be settled by lawyers, but the former one is still undecidable, as OVHcloud has still not published a detailed fire report, more than one year on from the incident, despite early promises to do so.
The company currently says that it is unable to publish details, because of “the involvement of the French authorities, insurance companies, etc.”
One authority, the Bas-Rhin fire service, released its own report in March, which was critical of OVHcloud, citing wooden floors, and a lack of a power cut-outs and fire prevention equipment. DCD has asked which other authorities are preventing publication.
If it’s the insurance companies, then it suggests OVHcloud may be engaged in negotiations over its level of responsibility.