TIDMCORD
RNS Number : 9775U
Cordiant Digital Infrastructure Ltd
29 November 2023
29 November 2023
Cordiant Digital Infrastructure Limited
Interim report for the six months ended 30 September 2023
Solid performance, reflecting strength of underlying
portfolio
Cordiant Digital Infrastructure Limited (the Company), an
operationally focused specialist digital infrastructure investor,
is pleased to announce its unaudited interim results for the six
months to 30 September 2023.
Financial highlights:
-- Total return for the period of GBP9.4 million, being 1.2p per share or
1.1% of opening ex-dividend NAV.
o Total return reflects positive operating performance, offset by an increase
in the weighted average discount rate to 9.8% and adverse foreign exchange
movements in the period of GBP22.3 million.
-- Interim dividend of 2.0p per share, in line with 4.0p per share target
for the year.
-- Full year target dividend of 4.0p per share is 3.6x covered by EBITDA,
1.2x covered by AFFO (adjusted funds from operations). Addition of Speed
Fibre strengthens EBITDA cover further to 4.3x and AFFO to 1.5x on a pro
forma basis.
-- NAV per share decreased from 113.4p at 31 March 2023 to 112.7p at 30 September
2023 due to payment of the 2.0p per share second interim dividend in July
2023, partly offset by the total return of 1.2p per share.
-- Portfolio EBITDA for the six-month period increased 5.5% to GBP55.5 million,
over the prior comparable period, on a like-for-like pro forma, constant
currency basis.
-- Acquisition of Speed Fibre increases portfolio diversification with investments
now made in the Czech Republic, United States, Poland and Ireland.
-- Total liquidity post-Speed Fibre acquisition is GBP207 million, including
GBP72 million held directly by the Company and GBP135 million at portfolio
company level.
Commenting, Shonaid Jemmett-Page,Chairman of Cordiant Digital
Infrastructure Limited, said:
"I am pleased to report a solid performance by the Company for
the first six months of the year, despite the challenging economic
conditions during the period. The Company's performance reflects
the strength of its portfolio companies, which offer strong
cashflows and growth opportunities in line with our Buy, Build
& Grow model. The strength of the portfolio has been achieved
with a conservative level of debt and through a disciplined
acquisition strategy. The recently announced acquisition of Speed
Fibre is additive to the portfolio as it offers additional
cashflows, growth potential and further diversity in geography and
asset class. With continued liquidity of GBP207 million, the
Company remains well positioned, and as such the Board looks
forward to the second half of the year with confidence".
-S-
For further information, please visit
www.cordiantdigitaltrust.com or contact:
Cordiant Capital, Inc. +44 (0) 20 7201 7546
Investment Manager
Stephen Foss, Managing Director
Aztec Financial Services (Guernsey)
Limited +44 (0) 1481 749700
Company Secretary and Administrator
Chris Copperwaite / Laura Dunning
Investec Bank plc +44 (0) 20 7597 4000
Joint Corporate Broker
Tom Skinner (Corporate Broking)
Lucy Lewis / Denis Flanagan (Corporate
Finance)
Jefferies International Limited +44 (0) 20 7029 8000
Joint Corporate Broker
Stuart Klein / Gaudi Le Roux
Celicourt +44 (0) 20 7770 6424
Financial Communications Advisor
Philip Dennis / Felicity Winkles
/ Ali AlQahtani
Interim Report and results webcast for analysts
The 2023 Interim Report will be available to download at
cordiantdigitaltrust.com/investors/results-centre/ from 29 November
2023.
The Company will be hosting an analyst meeting at 10.00am BST at
the offices of Investec, 30 Gresham Street, London, EC2V 7QN. For
those wishing to attend, please contact Ali AlQahtani at Celicourt
via CDI@celicourt.uk.
Notes to editors:
Cordiant Digital Infrastructure Limited primarily invests in the
core infrastructure of the digital economy - data centres,
fibre-optic networks and telecommunication and broadcast towers in
Europe and North America. Further details about the Company can be
found on its website at www.cordiantdigitaltrust.com .
The Company is a sector-focused specialist owner and operator of
Digital Infrastructure, listed on the London Stock Exchange under
the ticker CORD. In total, the Company has successfully raised
GBP795 million in equity, along with a further EUR200 million
through a Eurobond with four European institutions; deploying the
proceeds into four core acquisitions: CRA, Hudson Interxchange,
Emitel and Speed Fibre, which together offer stable, often
index-linked income, and opportunities for growth, in line with the
Company's Buy, Build & Grow model.
Cordiant Capital Inc (the Investment Manager or Cordiant), the
Company's investment manager, is a specialist global infrastructure
and real assets manager with a sector-led approach to providing
growth capital solutions to promising mid-sized companies in
Europe, North America and selected global markets. Since the firm's
relaunch in 2016, Cordiant, a partner-owned and partner-run firm,
has developed a track record of exceeding mandated investment
targets for its clients.
Chairman's statement
I am pleased to present the Interim Report for Cordiant Digital
Infrastructure Limited (the Company) for the six months to 30
September 2023.
Introduction
The Company has achieved a solid financial performance despite
the headwinds created by the current high interest rate environment
which have continued throughout the period. The Company's NAV has
decreased from GBP875.7 million at 31 March 2023 to GBP868.6
million, due to the payment of the second interim dividend in July
2023. The decrease in NAV was partially offset by the GBP9.4
million profit for the period. Profit for the period would have
been higher but for the adverse movements in the weighted average
discount rate used to value the portfolio and foreign exchange.
At the portfolio company level, we have seen a good financial
performance. The aggregate pro forma(1) normalised EBITDA of the
portfolio companies for the six months to 30 September 2023 was
GBP55.5 million(1) , up 5.5% from the prior comparable period. This
financial performance was accompanied by strong operating
performance, reflecting the overall quality of our portfolio
companies. Among the highlights during the period were the
successful refinancing of Emitel's senior loan facilities, with a
consortium of leading international and national lenders that
secured PLN 1.57 billion (GBP293.5 million) of financing maturing
in 2030 and the new 15-year contract CRA signed with T-Mobile,
which substantially expanded the scope of its existing
contract.
A further strategic step in the construction of the portfolio
has also been achieved with the acquisition of Speed Fibre -
Ireland's leading open access fibre infrastructure provider. This
was the Company's fourth significant investment since its IPO,
announced during the summer and completed in October 2023. In
November 2023, we also announced a smaller transaction - the
agreement to acquire Norkring, the Belgian broadcast and colocation
business, which we expect to complete later in the financial
year.
We recognise that macroeconomic factors have continued to create
challenges for many companies and their shareholders across the
listed investment trust sector and throughout the period we have
continued to consider capital allocation as part our
decision-making process. In this, we have taken into account our
strategy for the portfolio and our aim of further diversification
by geography and asset class, as well as opportunities to drive
further growth through disciplined capital expenditure, while also
acknowledging that some shareholders wish to see capital deployed
through the purchase of the Company's own shares. We have made
further buy backs during the period under the programme announced
in February 2023 and expect to retain this option as part of our
response to current financial market conditions.
Portfolio strategy
The Investment Manager has a Core Plus strategy that aims to
generate a stable annual dividend while also continuing to invest
in the asset base of the Company's portfolio companies to drive
higher revenues and increase net asset values. The Company is
implementing this approach through its Buy, Build & Grow
model.
Following its IPO, the Company began deploying the capital
raised during a period of intense corporate activity where Digital
Infrastructure transaction prices reached a peak. Consequently, we
prudently sought out high-quality, cash-generating mid-market
assets that we viewed as attractive investment opportunities. We
have continued to focus on targeted investment in our existing
portfolio companies and the acquisition of new businesses that
reflect the current pricing environment and further diversifies the
portfolio, both geographically across Europe and North America and
by asset class. This highly focused strategy is exemplified by the
acquisition of Speed Fibre in Ireland, as well as the smaller
acquisition of Norkring in Belgium.
Our disciplined approach to deploying capital since IPO has
resulted in a portfolio acquired for an EBITDA/EV multiple of
approximately 10.2x and which delivers approximately GBP132 million
of annual EBITDA based on most recent last twelve months (LTM)
EBITDA, pro forma including Speed Fibre.
Overall, the portfolio we have constructed is high quality with
a broad diversification by asset type. It is supported
predominantly by blue-chip customers and is capable of generating
strong cash flows through long-term contracts.
We are also a long-term investor with a clear focus on
sustainability. We consider the ESG approach and metrics of
potential targets in our pipeline as part of our pre-investment
analysis and post-acquisition we work with our portfolio companies
to improve their ESG performance.
Operational performance
The strength of the overall performance of our portfolio
companies underpinned the Company's results for the period. This
performance was achieved against the backdrop of rates of inflation
and central bank interest rate levels not seen in many years. The
Company's portfolio companies were able to benefit from significant
levels of inflation protection through a combination of contractual
revenue escalators, pass-through costs and hedging policies.
Excluding Speed Fibre, approximately three-quarters of the
portfolio's contracts are multi-year in nature and offer full or
partial inflation protection, with the remainder being annual in
nature, often renewed automatically, and therefore capable of being
repriced to reflect the renewal year's inflation. Active management
of long-term contracts also provided opportunities to re-negotiate
contractual terms with a number of customers.
Emitel performed well during the period, with revenues
increasing 10.1% and EBITDA increasing 3.6% over the prior
comparable period. Performance was driven by the launch of a new
sixth digital TV multiplex and the effect of inflation-linked price
increases. In addition, Emitel completed a successful refinance of
its loan facilities during the period, with a range of global,
pan-European and local banks. The facilities were 1.6x
oversubscribed and achieved an improved credit margin over the
previous facilities. Recently, Emitel has also won several
important broadcast contracts in TV and radio, which are expected
to drive further future revenue and EBITDA.
CRA also performed well during the period, with revenue and
EBITDA growth of 10.5% and 8.1% respectively, driven by growth in
all business areas. CRA continued to see strong growth in demand
for data centre capacity, +15.1% as measured in racks occupied and
+22.0% as measured in power deployed. A new 15-year contract with
T-Mobile, which significantly expanded the scope of services
provided by CRA completed a successful half year.
Hudson remains a growth opportunity, with the Investment Manager
providing substantial hands-on support in order to develop the
business. During the period, the Investment Manager began to
refresh Hudson's leadership team and has refocused the sales
effort. While Hudson has added customers to its business during the
period, its overall financial progress has been slower than
hoped.
Speed Fibre was acquired after 30 September 2023 and we will
report on its performance in the Company's Annual Report 2023 for
the year ended 31 March 2024.
Returns and dividend
On 28 November 2023, the Board approved an interim dividend of
2.0p per share for the six months ended 30 September 2023 and
confirms that it expects to pay a total dividend of 4.0p per share
for the year ended 31 March 2024. The record date for distribution
is 8 December 2023 and the payment date is 22 December 2023. The
dividend continues to be well covered by earnings and by adjusted
funds from operations (net cash flows from the portfolio
businesses) and represents a significant increase over the
indicative level set out at the time of the IPO in 2021.
The NAV per share as at 30 September 2023 was 112.7p (as at 31
March 2023: 113.4p or 111.4p ex-dividend), reflecting the payment
of the dividend in July 2023 and a return of 1.1% over the period
from the ex-dividend opening NAV, or 1.2p per share.
The profit for the six-month period reflected the strong overall
performance of the underlying portfolio companies, offset by
adverse foreign exchange movements (totalling GBP22.3 million) and
an increase in the weighted average discount rate used to value our
investments of 18 basis points to 9.8% (causing a GBP32.6 million
decrease in value). Excluding foreign exchange movements in the
period would result in a total return of 3.7%. The Company
continues to target an annual NAV total return of at least 9%.
The Company's shares traded at a discount to NAV during the
period. A similar situation exists for many of the companies in the
UK investment trust sector, largely as a result of macroeconomic
factors and dislocations in the market. Both the Board and
Investment Manager remain confident in the Company's strategy and
the reported NAV. While the primary focus has been, and remains,
deploying available capital in support of the Company's Buy, Build
& Grow model, further purchases of the Company's shares have
been made under the discretionary programme of share buybacks of up
to GBP20 million announced in the February 2023 trading update.
Buybacks totalling GBP2.0 million had been executed by 30 September
2023. The buyback programme is not subject to a set cut-off
date.
Gearing and interest
In June 2022, the Company raised a EUR200 million Eurobond
facility from a group of blue-chip financial institutions, further
bolstering its liquidity position and giving it additional
flexibility to invest in the existing portfolio and make further
acquisitions. The Eurobond was issued at subsidiary company level
and fully drawn down by June 2023.
As at 30 September 2023, the Company and its subsidiaries had
total debt on a look-through basis equivalent to GBP552.9 million.
The Company takes a conservative approach to gearing, and on a pro
forma basis, including Speed Fibre, net gearing was 38% of gross
assets (substantially below the level of 50% permitted under the
gearing policy set out in the Company's Prospectus). A majority of
the debt is held at the portfolio platform level on a non-recourse
basis, with the remainder being the full drawdown of the Eurobond
facility during the period.
Of the debt at 30 September 2023, 51% of the Company and its
subsidiaries' total debt is on a fixed-interest basis, with the
rest at floating rates, none of which is inflation linked. The
Company is reviewing the appropriate level of hedging for the
interest rate of the new Emitel facilities, which are currently all
at floating rates.
Principal risks and uncertainties
In the six months to 30 September 2023, we updated the principal
risks identified by the Company. The changes largely continue to be
driven by macroeconomic factors and the resulting impacts on the
financial markets which we have seen persist across the period. As
a result of the high inflation environment, further increases to
interest rates and market volatility, the Company's share price, as
with many other investment trusts listed on the London Stock
Exchange, has been adversely impacted and this in turn has
restricted the ability to raise additional equity capital and to
take advantage of some of the opportunities to develop in
portfolio. These factors are expected to continue for some time
yet.
Sustainability
Both the Board and the Investment Manager continue to focus on
sustainability and reducing the impact of the Company and its
portfolio companies on our environment. It is pleasing to highlight
achievements and progress on initiatives across the portfolio.
Emitel has been the recipient of a number of prestigious awards,
including ranking second in the 'telecommunications, technology,
media and entertainment' group in the XVII edition of the
Responsible Companies Ranking 2023. In the general classification,
the company was ranked twelfth, out of a total of 250, of the
largest companies operating in the Polish market. CRA published its
first 'ESG Sustainability & Responsibility' report in October
2023, issuing a public commitment to meet 100% of its electricity
consumption through the use of renewables by 1 January 2025, having
made progress to reach 46% by December 2022. Hudson has become a
participant in a new initiative being undertaken by major US
utility, Con Edison - the Conservation Voltage Reduction (CVR)
Plan. The CVR plan enables an electric utility to reduce energy and
peak demand by lowering voltage at the distribution system. Hudson
is making the necessary adjustments in its transformers to enable
energy savings. Speed Fibre's ESG performance was considered as
part of the acquisition process. Earlier this year it was awarded a
5-star rating by GRESB, the widely recognised provider of ESG data
to financial markets.
Board and governance
The Board receives regular updates on the Company's performance
and that of the individual portfolio companies from the Investment
Manager and provides objective oversight of the Investment
Manager's activities. During the period, the Senior Independent
Director and I met with a number of shareholders to listen to their
views on the Company and the Investment Manager and to feed these
back for discussion at our Board meetings. The Board, Investment
Manager and the Company's brokers remain available to engage with
shareholders as appropriate. The Board continues to note the
Investment Manager's strong hands-on operational experience and
depth of capability being deployed on a day-to-day basis in support
of portfolio's operations whether through its active engagement
with portfolio company management of commercial initiatives and
technological insights to increase revenue growth, its leadership
on strategic financings and bolt on acquisitions and its support in
taking forward ESG initiatives.
Outlook
There are early indications that financial market conditions
could be entering a new phase, as interest rates begin to plateau
or fall across the Company's markets. This brings uncertainty as
well as opportunity for the Company and its portfolio companies.
However, the overall performance of our portfolio companies
continues to be a positive one, with Speed Fibre well placed to
contribute positively to the results for the full year. The
Investment Manager is actively managing the portfolio to drive that
performance. In addition, Digital Infrastructure's importance to
the functioning of the global economy and our society continues to
increase, with the growth of AI representing a further major
evolution of the sector.
As a result, and notwithstanding the current conditions
affecting financial markets generally, the underlying strength of
the Company and the attractiveness of its core markets lead the
Board to look forward to the year ahead with confidence.
Shonaid Jemmett-Page
Chairman
28 November 2023
(1) Portfolio comprising CRA, Emitel and Hudson; comparison on a
constant currency basis.
Investment Manager's report
About the Investment Manager
Cordiant Capital, the Investment Manager appointed by the
Company, is a sector-specialist investor focused on middle-market
'Infrastructure 2.0' platforms in Digital Infrastructure, energy
transition infrastructure and the agriculture value chain. It
manages approximately $4 billion of funds through offices in
London, Montreal, Luxembourg and Sao Paulo, and offers Core Plus,
Value Add and Opportunistic strategies.
The Investment Manager's Digital Infrastructure group,
consisting of 17 front office professionals, brings considerable
hands-on investing and operating expertise to its investment
approach. This investing strategy can be summarised as acquiring
and expanding cash-flowing Digital Infrastructure platforms in the
UK, EEA and North America.
Introduction
The Company delivered a solid performance in the six months to
30 September 2023 based on a positive operating performance by the
portfolio. NAV per share of 112.7p was slightly down at 30
September 2023, reflecting a positive total return per share of
1.2p earned in the six months, less the payment of the 2.0p second
interim dividend to shareholders in July 2023. The target dividend
remains at 4.0p per share for the year, ahead of the schedule
outlined in the Company's Prospectus. The Company's dividend is
well covered, both by portfolio company earnings and on a cash
basis. Aggregate debt levels in the Company's financing subsidiary
and at the portfolio level are prudent and remain below industry
averages for the Digital Infrastructure sector.
Capital allocation
With the deployment of funds into the acquisition of Speed
Fibre, the Company has remaining pro forma liquidity, including
undrawn debt facilities, of GBP207 million, of which GBP72 million
is held at the Company level, and GBP135 million at portfolio
platform level. The Board and Investment Manager closely monitor
the options for optimal use of these funds and which activities
will be in the best long-term interests of shareholders. Options
for capital deployment include the following:
- The Company announced earlier in the year a programme of share buybacks
up to a total of GBP20 million. To date, the Company has bought
back 2.6 million shares at a total cost of GBP2.0 million. The Company
did not set an end date to the buyback programme.
- The Investment Manager believes that further diversification of
the portfolio is an important strategic aim. The acquisition of
Speed Fibre closed in October and added to the portfolio's diversification
by increasing exposure to Western Europe, a euro-denominated jurisdiction
and fibre-optic networks.
- Capital could also be allocated to substantial capital expenditure
projects at the portfolio company level if that expenditure was
expected to generate significant future growth in earnings and value.
During the six-month period, GBP9.0 million of capital expenditure
was deployed, all funded from internal portfolio company cash flows.
Activity in the period
In May 2023, the Company announced that CRA had signed contracts
with broadcasters for three new TV broadcast channels, A11 TV, A11
Sport and a teleshopping channel from Swedish-based Topmerch
group.
These contracts, together with the previously announced
five-year agreement between CRA and the US blue chip pay TV
broadcaster, AMC Networks International (AMC), demonstrate the
appeal of the digital terrestrial broadcast platform to regional
and international broadcasters as the most sustainable and
efficient way to transmit content to viewers. Terrestrial
television broadcasting is the most widely used method of
television distribution in the Czech Republic, covering 99% of the
population and used by nearly 60% of households. Digital
terrestrial broadcasting brings households a wide range of the most
watched TV channels in the Czech Republic.
In June 2023, the Company announced that Emitel had acquired
American Tower Corporation's subsidiary in Poland, whose portfolio
comprises 65 modern lattice telecoms towers. The portfolio has a
low tenancy ratio providing available load capacity for additional
lease customers, which will be accretive to Emitel's revenue and is
distributed across attractive locations that complement Emitel's
existing telecoms network.
In July 2023, Emitel successfully refinanced its senior debt
package. Emitel secured a debt package of PLN 1.57 billion, which
comprises a senior loan of PLN 1.27 billion, a capex facility of
PLN 250 million and an RCF of PLN 50 million. As at 30 September
2023, PLN 240 million of the capex facility and the whole RCF
remain substantially undrawn.
The new facilities were 1.6x oversubscribed and have a blended
credit margin lower than the 2.9% of the previous senior
facilities. The banking group included international banks Citi,
BNP, Credit Agricole and DNB Bank ASA, as well as leading Polish
banks and financial institutions. The capex facility and RCF will
be applied to support Emitel's growth trajectory by financing its
operational activities, new investments and acquisition plans.
In August 2023, the Company announced that it had agreed to
acquire Speed Fibre, Ireland's leading open access fibre
infrastructure provider. Speed Fibre was acquired from the Irish
Infrastructure Fund for a total enterprise value of EUR190.5
million. The equity consideration of EUR97.2 million was funded by
EUR67.6 million in cash and EUR29.6 million through a vendor loan
note, with an initial interest rate of 6% and a maturity of four
years.
Speed Fibre operates 5,400 kilometres of owned and leased fibre
and wireless backhaul across Ireland, on which it provides dark
fibre, wavelength and ethernet services to a mix of carriers,
internet service providers, corporate customers, and the
government. The business is also well-positioned to serve Ireland's
growing data centre sector, which is expected to be the fastest
growing hyperscale data centre market in Western Europe over the
next six years. While primarily a backbone provider, Speed Fibre's
subsidiary, Magnet Plus, provides connection and service to
approximately 10,000 business and retail customers in Ireland.
With a stable business model, sales growth and high revenue and
cash flow visibility, Speed Fibre generated revenues of ca.EUR80
million and EBITDA of ca.EUR23 million in 2022. Outstanding gross
debt of ca.EUR111 million as at December 2022, which matures in
2029, is provided by three bank lenders, all of whom have committed
to continue to support Speed Fibre under the Company's ownership.
Gross debt was balanced by ca.EUR19 million of cash on hand at
December 2022. This acquisition completed on 18 October 2023.
Since 31 March 2023, the Company's Directors, the Investment
Manager and its staff made further investments in the Company's
shares, acquiring in total 3.1 million more shares to bring the
combined total to 9.2 million shares. This included Steven
Marshall, Chairman of Cordiant Digital Infrastructure Management,
who acquired a further 2.6 million shares, bringing his total
personal holding to 6.9 million shares.
At the date of this report, the Directors, Investment Manager
and its staff owned 1.2% of the ordinary issued share capital of
the Company.
In February 2023 the Company announced that, in light of the
discount at which the Company's shares were then trading, and in
consultation with the Company's brokers, the Board had approved a
discretionary share buyback programme of up to GBP20 million.
Shares acquired under the programme will either be held in treasury
by the Company or cancelled. The buyback programme is not subject
to a set cut-off date.
To the date of this report, 2.6 million shares had been acquired
by the Company at an average price of 79.5p and held in
treasury.
Financial highlights
During the six months to 30 September 2023, the Company achieved
a NAV total return of 1.1% or 1.2p per share. The NAV per share
decreased from 113.4p (111.4p ex-dividend) over the period to
112.7p. This movement comprises a positive total return for the
six-month period of 1.2p, offset by the payment of the second
interim dividend of 2.0p in July 2023.
The total return reflects a positive underlying operating
performance across the portfolio, offset by a slight increase in
the weighted average discount rate and adverse foreign exchange
movements in the period.
With the agreement of the Board, the Investment Manager has
increased the weighted average discount rate (WACC, for further
analysis and explanation see section 'Valuations' below) for the
whole portfolio by 18 basis points to 9.8% at 30 September 2023.
The total return, excluding the adverse underlying foreign exchange
movement in the period, would be 3.7%. The Company remains a net
beneficiary of foreign exchange movements when measured from
inception in February 2021 to 30 September 2023.
The Company's total return of 1.1% or 1.2p per share is equal to
a profit for the period of GBP9.4 million (30 September 2022:
GBP21.0 million). Net assets were GBP868.6 million (31 March 2023:
GBP875.7 million, GBP860.3 million ex-dividend), representing a NAV
per share of 112.7p (31 March 2023: 113.4p, 111.4p
ex-dividend).
Application of IFRS
As disclosed in the Company's Annual Report 2023, the Company
holds Hudson directly whereas Emitel and CRA are both held through
its wholly-owned subsidiary, Cordiant Digital Holdings UK Limited.
The Eurobond was issued by Cordiant Digital Holdings Two Limited,
which is a wholly-owned subsidiary of Cordiant Digital Holdings UK
Limited.
Consequently, under the application of IFRS 10 and the
classification of the Company as an investment entity, the
Company's investment in Cordiant Digital Holdings UK Limited is
recorded as a single investment that encompasses underlying
exposure to Emitel, CRA and the Eurobond. In order to facilitate
shareholders' understanding of the breakdown and performance of the
Company's portfolio, the elements of the overall value movement
attributable to foreign exchange movements and value movement and
income from each portfolio company are identified in Chart 1. The
Company's profit and NAV under this approach are exactly the same
as in the audited IFRS Statement of Comprehensive Income and the
Statement of Financial Position.
Table 1 shows the reconciliation of Table 3 to the IFRS
Statement of Comprehensive Income.
Table 1: Reconciliation of Statement of Comprehensive Income to Table
3
-----------------------------------------------------------------------------------------------------
Accrued Net unrealised Net foreign IFRS
income value movement exchange movement Fund expenses P&L
---------------------------- -------- ---------------- ------------------- -------------- ------
Movement in fair value
of investments 1.3 42.4 (22.6) - 21.1
Investment acquisition
costs - - - (1.2) (1.2)
Other expenses - - - (6.9) (6.9)
Foreign exchange movements
on working capital - - 0.3 - 0.3
Finance income 1.0 - - - 1.0
Finance expense - - - (4.9) (4.9)
---------------------------- -------- ---------------- ------------------- -------------- ------
2.3 42.4 (22.3) (13.0) 9.4
---------------------------- -------- ---------------- ------------------- -------------- ------
Table 2 shows the reconciliation of the closing NAV in Table 3
to the IFRS Statement of Financial Position.
Table 2: Underlying components of Statement of Financial Position
----------------------------------------------------------------------------------------------------------------
Other
Inter-company assets IFRS
Emitel CRA Hudson Cash balances and liabilities Eurobond Total
---------------------- ------- ------ ------- ------ -------------- ----------------- --------- --------
Investments at
fair value through
profit and loss 461.2 388.6 48.9 - 170.2 (0.4) (172.4) 896.1
Receivables and
prepayments - - - - - 15.5 - 15.5
Cash and cash
equivalents - - - 130.9 - - - 130.9
Payables - - - - (1.3) (3.7) - (5.0)
Loans and borrowings - - - - (168.9) - - (168.9)
461.2 388.6 48.9 130.9 - 11.4 (172.4) 868.6
---------------------- ------- ------ ------- ------ -------------- ----------------- --------- --------
Financial performance in the period
Table 3 shows the Company's NAV progression for the six months
to 30 September 2023, with underlying value growth, foreign
exchange movements and costs split out from the IFRS classification
of returns presented in the Statement of Comprehensive Income and
Statement of Financial Position.
Table 3: NAV progression for the six-month period to 30 September 2023
September
--------------------------------------------------------------------------
GBPm
Opening NAV as at 1 April 2023 875.7
Dividend paid July 2023 (15.4)
Opening ex-dividend NAV 860.3
Accrued income 2.3
Value movement 42.4
Foreign exchange movement (22.3)
Fund expenses (13.0)
Share buy back (1.1)
------------------------------------------------------------- -----------
Closing NAV as at 30 September 2023 868.6
------------------------------------------------------------- -----------
Underlying value growth was GBP42.4 million in the period (30
September 2022: decrease of GBP4.0 million), comprised of GBP35.4
million gain in respect of Emitel, GBP18.3 million gain in respect
of CRA (30 September 2022: gain of GBP0.8 million) and an GBP11.3
million decrease in respect of Hudson (30 September 2022: decrease
of GBP4.8 million).
Underlying foreign exchange loss for the Company was GBP22.3
million for the period (30 September 2022: gain of GBP25.8
million), comprising a GBP3.2 million unrealised loss in respect of
Emitel and Polish zloty (30 September 2022: gain of GBP2.9
million), GBP20.1 million unrealised loss in respect of CRA and
Czech crowns (30 September 2022: gain of GBP11.4 million), GBP0.3
million gain in respect of Hudson and the US dollar (30 September
2022: gain of GBP11.5 million) and a GBP0.7 million gain relating
to other balance sheet assets and liabilities.
For the period since the Company's inception, unrealised foreign
exchange gains of GBP42 million have been recognised in the NAV,
equal to approximately 5.4p per share. This comprises GBP18 million
in respect of Emitel and Polish zloty, GBP18 million in respect of
CRA and Czech crowns and GBP6 million in respect of Hudson and US
dollars.
The Investment Manager and Board have kept the Company's hedging
strategy under regular review in light of the volatility in foreign
exchange rates since the Company began operations. The Company is a
long-term investor in the portfolio and is mindful of the costs and
liquidity demands of hedging; it does not seek to manage balance
sheet foreign exchange exposure from reporting period to reporting
period. To date the Company has not undertaken any hedging of
balance sheet foreign exchange exposure, though it has hedged
discrete foreign exchange cash flows where this has been deemed
desirable.
Total Company costs of GBP13.0 million for the period reflected:
management fees paid to the Investment Manager; costs attributable
to the Eurobond facility raised by Cordiant Digital Holdings Two
Limited; operating costs and discontinued deal costs of the
Company; and certain acquisition costs relating to the acquisition
of Speed Fibre accrued during the period. The ongoing charges ratio
for the six months to 30 September 2023, calculated as annualised
management fee and operating expenses (excluding acquisition costs
and non-recurring items) divided by the average NAV during the
period, was 0.9%. This has been calculated in line with the
guidelines published by the AIC.
Valuations
The Investment Manager conducts a rigorous valuation process in
respect of every interim and year end reporting date. The
valuations of the portfolio companies are prepared by the
Investment Manager according to the IPEV Valuation Guidelines and
IFRS 13.
The Investment Manager and Board are keenly aware of the
apparent disconnect between asset valuations and the discounts to
NAV at which many investment companies trade, including for the
present time, the Company. Since the Company's IPO, the Board has
appointed an independent valuation team from a Big 4 accounting
firm. This independent valuer performs a full valuation of each
asset at each interim and financial year end and reports
independently to the Board.
The Investment Manager has increased the weighted average
discount rate applied to the portfolio since the Company's first
valuation in March 2022 by 173bps to 9.8%, to reflect increases in
risk-free rates and risk premia over that time. When assessing
future forecast cash flows to include in the discounted cash flow,
the Investment Manager makes careful judgements about the
probability of cash flows materialising in the future. Prudent
valuations are the result of this approach, with Emitel being
valued at an enterprise value of 9.7x last twelve months (LTM)
EBITDA, and CRA being valued at an enterprise value of 11.1x LTM
EBITDA at 30 September 2023. Hudson currently has negative EBITDA
and has been reduced in value by a further GBP11.3 million.
At Emitel, the value increase during the six months to 30
September 2023 was primarily driven by new business won and the
impact of 2023 inflation on future revenues. The discount rate
selected by the Investment Manager has remained unchanged since 31
March 2023.
At CRA, the value movement in the period is driven by cash flow
generation reducing net debt and strong earnings performance in the
period from long-term contracts, increasing future expected
earnings. This is slightly offset by an increase in the discount
rate at 30 September 2023.
Hudson continues to seek new customers and build out revenues.
During the period, the Company invested a further GBP2.9 million to
support cash flow. At 30 September 2023, the Investment Manager
valued the business at GBP48.9 million, a reduction of GBP8.1
million from 31 March 2023. This was driven by the slower than
expected ramp-up in revenues and EBITDA. The discount rate was
slightly increased compared to 31 March 2023.
The primary valuation methodology of the Company's three
portfolio platforms is a discounted cash flow approach. The
Investment Manager has discounted the near-term forecast cash flows
of each platform and a terminal value using a weighted average cost
of capital (WACC) as the discount rate. This process yields an
enterprise value from which the net debt of the platform is
deducted to arrive at the equity value attributable to the Company.
At 30 September 2023, the Company owned 100% of each platform
either directly or indirectly through intermediate holding
companies.
Table 4: Weighted average cost of capital at 30 September 2023
----------------------------------------------------------------------
Range low Range high Weighted average mid-point
point point
---------------- ---------- ----------- ---------------------------
Cost of equity 10.1% 13.5% 11.4%
Cost of debt 5.5% 7.5% 6.8%
WACC 8.6% 11.0% 9.8%
---------------- ---------- ----------- ---------------------------
Weighted average cost of capital at 31 March 2023
------------------------------------------------------------------------------------
Range low Range high Weighted average mid-point
point point
--------------------------- ------------- ----------- ---------------------------
Cost of equity 9.6% 12.9% 11.0%
Cost of debt 5.0% 7.0% 6.5%
WACC 8.2% 11.0% 9.6%
---------------------------------- ------ ----------- ---------------------------
The WACC for each valuation comprises a weighted average of the
cost of equity attributable to the platform and the cost of debt
attributed.
The cost of equity comprises an appropriate risk-free rate plus
a premium for specific risk relating to the platform, its size and
its geographical location. Table 4 shows the range of cost of
equity and cost of debt used at 30 September 2023 in the valuations
of the three platforms. The weighted average mid-point cost of
equity was 11.4% and the weighted average cost of debt mid-point
was 6.8%.
The weighted average discount rate (WACC) used across the
portfolio at 30 September 2023 was 9.8%. From 31 March 2023 to 30
September 2023, the weighted average discount rate for the
portfolio increased by 18 basis points. Increases in discount rates
since 31 March 2022 have caused an aggregate GBP110 million
reduction in value in the portfolio.
Dividend coverage
The Company's prudent approach to portfolio construction, as
further evidenced by the acquisition of Speed Fibre which completed
after the period end, has created a cash generative, conservatively
geared and strongly diversified pool of assets with scale and the
potential for future growth.
In December 2023, Company will pay a first interim dividend of
2.0p per share for the year to 31 March 2024, as part of the target
for the year of 4.0p per share. This represents a significant
increase over the dividend for the year planned at the time of the
IPO in February 2021. The 4.0p per share dividend is approximately
3.6x covered by EBITDA and 1.2x covered by AFFO, defined as free
cash flow after Company level costs, net finance costs, taxation
and maintenance capital expenditure.
AFFO dividend cover has reduced slightly from the 1.5x disclosed
at 31 March 2023 due to higher net finance costs following the full
Eurobond drawdown in June 2023, and from higher interest costs on
the 33% of Emitel debt that was floating rate, as interest rates in
Poland peaked during the last twelve months. LTM EBITDA increased
5.8% from March to September 2023. Table 5 shows the calculation of
AFFO for the twelve months to 30 September 2023.
Table 5: Calculation of adjusted funds from operations (AFFO)
-----------------------------------------------------------------------------
Twelve months to 30 September 2023(1)
(unaudited)
GBPm
------------------------------------- --------------------------------------
Portfolio company revenues 214.1
------------------------------------- --------------------------------------
Portfolio company normalised EBITDA 111.1
Dividend coverage, EBITDA basis 3.6x
Net Company-specific costs (14.0)
Net finance costs (32.0)
Net taxation, other (14.5)
------------------------------------- --------------------------------------
Free cash flow before all capital
expenditure 50.6
------------------------------------- --------------------------------------
Maintenance capital expenditure(2) (13.4)
Adjusted funds from operations 37.2
------------------------------------- --------------------------------------
Dividend at 4.0p per share (30.8)
------------------------------------- --------------------------------------
Dividend cover 1.2x
------------------------------------- --------------------------------------
(1) At average foreign exchange rates for the period.
(2) Aggregate growth capital expenditure of GBP12.4 million was
invested in the 12 months to 30 September 2023 across the portfolio
(not included in AFFO calculation).
The addition of Speed Fibre to the portfolio after September
2023, with its strong EBITDA generation, supports the Company's
dividend coverage, increasing EBITDA coverage to 4.3x and AFFO
coverage to 1.5x on a pro forma basis with reference to Speed
Fibre's LTM EBITDA and cash flows to 30 September 2023.
Investee company performance
For the six months to 30 September 2023, the portfolio companies
generated combined revenue of GBP108.3 million, representing a
10.7% increase over the prior comparable period, on a like-for-like
pro forma, constant currency basis. Portfolio EBITDA increased 5.5%
over the prior comparable period, on a like-for-like pro forma,
constant currency basis, to GBP55.5 million.
These increases in revenue and EBITDA reflect the impact of new
contracts being entered into, including in the broadcasting and
telecoms business units at Emitel and CRA, together with the effect
of inflation-linked revenues feeding through 2022 inflation rates
into 2023 revenues. Notable new contracts included the new contract
between CRA and T-Mobile that expanded the existing scope of
services and the number of towers made available to T-Mobile,
broadcast contracts at CRA and Emitel with new broadcasters and the
successful tender win by Emitel extending the coverage of the
Polish DAB+ radio multiplex with 17 regional radio stations.
During the six months to 30 September 2023, across the portfolio
companies GBP5.9 million was invested in maintenance capital
expenditure and GBP7.6 million in growth capital expenditure.
Maintenance capital expenditure included investment in IT systems
and security at CRA and infrastructure modernisation at Emitel.
Growth capital expenditure included investment related to the DAB+
contract win (announced by the Company on 8 November 2023) and
construction of new telecoms towers at Emitel; and data centre
investment at CRA.
Total gross debt at the Company, subsidiary and platform level
was equivalent to GBP552.9 million, an increase of GBP87 million
since 31 March 2023 and reflected the full drawdown of the Eurobond
in June 2023 offset by a de-levering of Emitel's drawn debt by PLN
200 million as part of the refinance during the period. Aggregate
cash balances at the Company, subsidiary and platform level were
equivalent to GBP202 million. Including undrawn debt facilities at
portfolio company level, total liquidity was equivalent to GBP259
million, or GBP207 million on a pro forma basis, after the
acquisition of Speed Fibre.
51% of all debt is on a fixed-interest basis, with the remainder
floating, none of which is inflation linked. The Company is
assessing options for fixing the interest rate of the new Emitel
facilities, currently all floating rate. Aggregate net gearing was
38% on a pro forma look-through basis including Speed Fibre, well
below the 50% maximum permitted under the Company's investment
policy.
The Investment Manager's team
Building on the significant strength of the existing digital
team reflects the Investment Manager's continued commitment to
supporting platform companies in achieving their growth ambitions,
along with being able to source and deliver investment
opportunities that are in line with target returns.
Unlike its peers in this market, the digital team at the
Investment Manager possesses deep, senior experience of managing
and operating world-class Digital Infrastructure businesses. This
is combined with private equity executives having decades of
experience advising and investing in the sector, making for a
unique marriage of capabilities.
Environmental, social and governance highlights
For the second year in a row, the Investment Manager has
achieved Carbon Neutral+ accreditation, after verifying and
offsetting emissions associated with operations. The Investment
Manager disclosed in the Company's Annual Report 2023 its intention
to offset emissions associated with operations (covering Scope 1, 2
and select Scope 3 categories associated with its London, Montreal
and Luxembourg offices and employees, for the period 1 January 2022
to 31 December 2022). Since publication of the Company's Annual
Report 2023, the Investment Manager has offset these verified
emissions, as well as an additional 25%, achieving both CO(2) e
Assessed and Carbon Neutral+ organisation accreditation.
Outlook
The Investment Manager is pleased with the overall quality of
assets and underlying cash flows in the portfolio. These have been
assembled at what the Investment Manager believes to be a highly
attractive price without sacrificing growth potential.
Internally generated cash flows and the remaining proceeds of
the Eurobond facility will allow the Company to cover the dividend,
engage in appropriate maintenance capital expenditures, expand
existing platforms and invest in new assets to further diversify
the portfolio, both geographically and by asset type.
The Investment Manager remains closely focused on the Company's
target of 9% return to shareholders, comprising dividend and
capital growth. The Investment Manager is seeing some improvement
in the pricing environment for digital assets in the middle market
and the purchase terms available. The Investment Manager has
recruited a large and capable team of digital specialists with the
skills and experience required to manage the Company's assets and
to succeed in maximising total return from Core Plus assets.
Based on the solid performance since inception, which has
continued up to 30 September 2023, the Investment Manager believes
the Company remains well placed to deliver as planned in the year
ending 31 March 2024.
The Investment Manager looks forward to the second half of the
year ahead with confidence.
Emitel
Emitel GBPm
Original cost 353.0
------
Value at 1 April 2023 429.0
------
Further investment in the period -
------
Unrealised value movement in the
period 35.4
------
Unrealised foreign exchange movement
in the period (3.2)
------
Value at 30 September 2023 461.2
------
May not add due to rounding
Financial performance in the period
For the first six months of Emitel's financial year to 30 June
2023, revenue increased 10.1% to PLN 293 million (GBP55.5 million
at average exchange rates for the period) and EBITDA increased by
3.6% to PLN 189 million (GBP35.8 million at average exchange rates
for the period). This performance reflected strong revenue growth
in telecoms infrastructure and TV broadcast, offset by an increase
in employee costs driven by salary increases to combat the impact
of high inflation in Poland.
The increase in TV broadcast revenues was primarily driven by
the launch of a new sixth digital television multiplex (MUX 6),
which launched with an anchor agreement with Telewizja Polska S.A.
(TVP) in February 2023. MUX 6 is the second DTT multiplex operated
by Emitel exclusively for TVP, the other being MUX 3. The extra
broadcast capacity provided by MUX 6 enables TVP to increase the
number of channels it offers and allows the media market to use
existing MUX 1 and MUX 8 capacity for additional new channels in
Poland.
Telecoms infrastructure revenue growth in the period was driven
by Emitel's acquisition of 65 telecoms towers in Poland from
American Tower Corporation. The towers are less than three years
old and have robust long-term contracts (14 years average) with
inflation-linked escalators.
In addition to volume growth and M&A, revenue growth was
also driven by inflation-linked price increases (approximately 79%
of Emitel's revenues have full or partial CPI-linked contracts).
Inflation in Poland for 2022 was 14.4%, and the latest European
Commission inflation forecast for Poland in 2023 is 11.4%.
In the period, Emitel signed a new loan facilities agreement
with a consortium of leading Polish and international banks. The
new facilities include senior secured term loans of PLN 1,270
million (of which PLN 370 million - EUR83 million - is denominated
in euros), a capex facility of PLN 250 million and a revolving
credit facility (RCF) of PLN 50 million. The new facilities were
1.6x oversubscribed and have a blended credit margin lower than the
2.9% of the current senior facilities. The capex facility and RCF
will support Emitel's growth trajectory by financing its
operational activities, new investments, and acquisition plans.
Cash balances decreased to PLN 83 million (GBP15.5 million) due
to a partial de-levering of the senior debt facilities by PLN 200
million (GBP37 million) upon refinancing, completed in September
2023. The outstanding principal amount of third-party bank debt was
PLN 1,294 million (GBP241.9 million) at 30 September 2023. Of the
interest payable on the third-party bank debt, 100% was floating,
pending negotiation of interest rate swaps with lending banks to
effect some rate fixing; none was inflation linked.
Outlook
Emitel has recently won the tender for extending the coverage of
Polskie Radio's DAB+ multiplex with 17 regional radio stations.
Upon completion of the implementation, the reach of Polskie Radio's
digitally broadcast stations will include 75% of Poland and nearly
88% of the population. This is initially a four-year contract with
revenue inflation linkage commencing in October 2023.
After the period end, Emitel signed a new contract for the
provision of TV broadcasting services via a new channel with
Telewizja Polsat and via the extension of an existing contract with
TV Spektrum. Both agreements cover 62 existing locations and have
the same terms regarding duration, fees, indexation, and SLA as the
other contracts on MUX 1. Following this agreement, MUX 1 is now at
full capacity. Emitel is currently marketing available capacity on
MUX 8 to broadcasters.
CRA
CRA GBPm
Original cost 305.9
-------
Value at 1 April 2023 389.1
-------
Further investment in the period* 1.3
-------
Unrealised value movement in the
period 18.3
-------
Unrealised foreign exchange movement
in the period (20.1)
-------
Value at 30 September 2023 388.6
-------
*Interest on shareholder loan capitalised during the period
May not add due to rounding
Financial performance
Revenues for the six months to 30 September 2023 increased by
10.5% to CZK 1.2 billion (GBP44.0 million at average exchange rates
for the period) and adjusted EBITDA increased 8.1% to CZK 0.6
billion (GBP21.9 million at average exchange rates for the
period).
The revenue performance was driven by year-on-year growth in all
business areas. The broadcast division produced solid mid-single
digit growth, driven mainly by the TV segment. In addition, CRA
experienced strong double-digit growth in the data centre and
cloud, towers and IoT business lines coupled with single-digit
growth in the telecoms business. Inflation escalations have mostly
benefited the TV and tower businesses. As mentioned in the
Company's Annual Report 2023, TV broadcasting won several new
contracts including signing a five-year agreement in March 2023
with blue-chip pay TV broadcaster, AMC Networks International
(AMC), a global provider of well-known content such as AMC, Film+
and Sport1. In addition, in July 2023 CRA signed a new 15-year
contract with T-Mobile related to leasing space on CRA towers.
EBITDA performance was driven by an increase in revenues which
was slightly offset by a decrease in gross margin mainly due to
higher power cost. Operating expenditure as a percentage of revenue
has fallen slightly due to operating leverage effect.
CRA continues to enjoy strong demand for its data centre
capacity, as measured in racks occupied +15.1% and power +22.0%.
This reflects robust demand dynamics from new and existing
customers. CRA tower portfolio benefited from an increase in both
the number of points of presence (PoPs) up 1.2% and the price per
PoP up 7.3%.
Cash balances increased to CZK 1.5 billion (GBP54.5 million) at
30 September 2023. Third-party bank debt remained unchanged at CZK
3.9 billion (GBP138.5 million). Interest on the bank debt is 100%
hedged. The loan falls due in the second half of 2025. The
Investment Manager intends to begin the refinance project before
the end of 2023.
Operations
CRA continued to benefit from its market leading position in all
its areas of operations as evidenced by the increase in utilisation
rates in most of its business lines. This was achieved while
preserving a high-quality blue-chip customer base and pricing
power. In addition, the company is constantly looking for
efficiency improvements in its business lines, further augmenting
the benefits of its operating leverage. In line with power planning
for the new data centre, CRA has committed to 100% of its power
requirement coming from renewable sources within the next two
years. 46% is the most recent measurement at 31 March 2023.
Outlook
Inflation escalations, increased capacity utilisation and new
contracts wins are expected to help drive CRA growth in the second
half of this financial year and in future years. The Czech economy
is expected to grow by 0.1% in 2023 while the inflation rate is
expected to be 11% according to the Czech central bank's August
2023 forecast. CRA's business lines benefit from either full
inflation protection or fixed escalators which help protect the
company's margins. Inflation linked contracts will typically
incorporate 2023 inflation from January 2024 onwards.
Continued demand for data centre capacity is a key driver for
CRA's plans to invest in a new 26MW data centre on a former AM
radio transmission site outside Prague. The new centre is expected
to be a state-of-the-art facility, with market-leading power
utilisation efficiency and on-site solar power. The execution for
the fibre ring of this data centre has now started. With current
plans for the new data centre to be completed in 2025, CRA is also
actively looking at bolt-on acquisition opportunities to further
boost its data centre and cloud operations.
Hudson
Hudson GBPm
Original cost 55.8
-------
Value at 1 April 2023 57.0
-------
Further investment in the period 2.9
-------
Unrealised value movement in the
period (11.3)
-------
Unrealised foreign exchange movement
in the period 0.3
-------
Value at 30 September 2023 48.9
-------
May not add due to rounding
Financial performance
During the six months to 30 September 2023, Hudson saw revenue
increase by 15.8% to $11.2 million (GBP8.9 million at average
exchange rates for the period) and EBITDA loss decrease by 0.9% to
$2.7 million (loss of GBP2.1 million at average exchange rates for
the period). The increase in revenue is due to inflation
escalation, the increase in pass-through power costs and new
contracts signed for the sixth floor of 60 Hudson Street. The
slight improvement in EBITDA loss was a result of higher revenue
which was mostly offset by an increase in rent and power costs and
the additional sales personnel and the impact of sales
commission.
Hudson saw sub-optimal operational and financial progress
through the first six months. The pace of new sales has been slower
than the Investment Manager had hoped, with Hudson's management
also dealing with global supply chain issues affecting the
availability and lead times of data hall construction materials.
Capacity utilisation of the sixth floor has increased to 356kW
resulting from a number of contract wins.
Operations
During the period, the Investment Manager took the decision to
refresh the Hudson leadership team. Atul Roy, former Head of
Strategy at BT Group and Head of Telecoms at the Investment
Manager, has been appointed Interim CEO while the Manager seeks a
leader for the business. In the first six months of the year,
Hudson benefited, to a certain extent, from the investment made in
its sales and marketing teams in the previous period. However, the
Investment Manager is not satisfied with the pace of the sales ramp
up and the team is actively looking with the management team at all
options to improve sales initiatives and operations in order to
bring Hudson to profitability. This will primarily be achieved by
increasing the conversion of the current pipeline to sales, coupled
with attracting anchor connectivity customers who bring other
customers to their ecosystem. In addition, the team is looking at
other services that can be sold on top of rent and power, such as
remote hands and cross connect services.
Outlook
The Investment Manager believes Hudson will struggle to show
positive EBITDA in the next twelve months. Hudson continues to
offer a significant opportunity for growth, with its unique
location, current utilisation below 30%, overall demand for data
centre space in the region and no requirement for additional
upfront investment, essentially de-risking capital expenditure by
linking it directly to new revenue contracts.
Speed Fibre Group DAC (acquired October 2023)
Speed Fibre acquisition details GBPm
Enterprise value 164.6(1)
---------
Net senior debt 80.7
---------
Equity value 83.9
---------
Of which funded by cash 58.4
---------
Of which funded by vendor loan note 25.5
---------
(1) Foreign exchange rate on the date of completion applied.
Speed Fibre is Ireland's leading open access fibre
infrastructure provider. The acquisition of Speed Fibre from the
Irish Infrastructure Fund was agreed in August 2023 for a total
enterprise value of EUR190.5 million (GBP164.6 million). The equity
consideration of EUR97.2 million (GBP83.9 million) was funded by
EUR67.6 million (GBP58.4 million) in cash and EUR29.6 million
(GBP25.5 million) through a vendor loan note with an initial
interest rate of 6% and a maturity of four years. The acquisition
completed in October 2023.
Speed Fibre is the fourth Digital Infrastructure platform
acquired by the Company since its launch in 2021 and is consistent
with its investment strategy of buying cash flow generating
platforms capable of growth under its Buy, Build & Grow model.
The acquisition further diversifies the Company's portfolio on a
sub-sector and geographic basis.
Speed Fibre operates 5,400 kilometres of owned and leased fibre
and wireless backhaul across Ireland, on which it provides dark
fibre, wavelength and ethernet services to a mix of carriers,
internet service providers, corporate customers, and the
government. The business is also well-positioned to serve Ireland's
growing data centre sector, which is expected to be the fastest
growing hyperscale data centre market in Western Europe over the
next six years. While primarily a backbone provider, Speed Fibre's
subsidiary, Magnet Plus, provides connection and service to
approximately 10,000 business and retail customers in Ireland.
With a stable business model, sales growth and high revenue and
cash flow visibility, Speed Fibre generated revenues of
approximately EUR80 million and EBITDA of approximately EUR23
million in 2022. Outstanding gross debt of ca.EUR111 million as at
December 2022 and which matures in 2029 is provided by three bank
lenders, all of whom have committed to continue to support Speed
Fibre under the Company's ownership. Speed Fibre's debt interest is
set as a margin over Euribor, and 70% of the interest is fixed
through an interest rate swap. Gross debt was balanced by ca.EUR19
million of cash on hand at December 2022.
Speed Fibre has a strong ESG and sustainability focus, earning a
5-star rating from GRESB, an independent organisation providing
validated ESG performance data, and is targeting net zero carbon
emissions by 2040.
Key highlights
- A national digital network in a strategically located market acquired
at an attractive price.
- Two complementary operating companies, combined to create a #1 carrier-neutral
wholesale fibre business and vertically integrated ISP able to deliver
100GB across Ireland.
- Strong management team with track record of operational success, and
a strong focus on ESG (5-star rating from GRESB).
- Positive Digital Infrastructure market dynamics with high (and growing)
rates of data consumption.
- High barriers to entry protecting SFG's business and market position,
coupled with long-term relationships with main carriers and retail
service providers in Ireland.
- Blue chip clients include Vodafone, AT&T, Three and Verizon.
Investment case
- Speed Fibre provides a strong platform from which to invest in accretive
strategic organic and inorganic opportunities.
- The valuation multiple reflects the transaction dynamics, change
in macro-economic conditions and our institutional approach to disciplined
M&A.
- This is an attractive entry multiple for the Company's shareholders
for a stable business model with high revenue and cash flow visibility.
- Seasoned and accomplished management team with a proven track-record
and over 125 years of combined experience in the industry.
- Ireland still lags Europe in high-speed internet coverage; the need
for which was further accelerated by remote working trends accelerated
by COVID-19
- Data consumption growth in Ireland expected to be amongst the highest
in Europe.
- Supportive regulatory backdrop; the Irish Government remains committed
to delivering quality, affordable, high-speed broadband to all parts
of Ireland.
Norkring AS (announced November 2023)
In November 2023, the Company announced that it had agreed to
acquire Norkring België NV (Norkring), which operates 25
communication and broadcast towers in Belgium, from its current
shareholders Telenor Communication II AS and
Participatiemaatschappij Vlaanderen NV.
Norkring is being acquired for a total enterprise value of
EUR5.25 million, subject to customary adjustments. The transaction
is being funded from the Company's cash on its balance sheet and is
conditional upon foreign direct investment approval in Belgium. The
acquisition is expected to complete during the course of the
Company's current financial year.
In addition to its towers, Norkring is the holder of two DAB
licences and one DTT multiplex licence. It provides (i) radio and
TV broadcasting services to commercial stations and distributors
and (ii) colocation and site-hosting to broadcasters, niche
communications operators and mobile network operators. As part of a
consortium, Norkring is conducting trials using 5G broadcast
technology, which is expected to provide it with the ability to
offer additional services to broadcast and mobile operator
customers.
Risk management
Principal risks and uncertainties
1. The capital markets may remain effectively closed to the
Company for a significant period. As a consequence, the Company may
be unable to raise new capital and it may therefore be unable to
progress investment opportunities.
How we mitigate risk
The Company has acquired a portfolio of cash-generating assets
with significant organic growth prospects, which together are
capable of providing returns meeting the investment objective
without further acquisitions. The Investment Manager also continues
to consider potential alternative sources of capital.
How the risk is changing
Significant discounts to NAV continue to be evident in the
current share prices of many investment trust companies listed on
the London Stock Exchange, including the Company, and this
situation has worsened somewhat over the last six months.
Movement since 31 March 2023
Higher
2. There is a risk that, even when the capital markets are open,
insufficient numbers of investors are prepared to invest new
capital, or that investors are unwilling to invest sufficient new
capital, to enable the Company to achieve its investment
objectives.
How we mitigate risk
The Company has established a track record of successful
investments, which together are capable of providing returns
meeting the investment objective without further acquisitions. The
Investment Manager has deep sector knowledge and investment
expertise and is well-known and respected in the market.
How the risk is changing
The continuing poor conditions in the investment trust sector
give rise to uncertainty. It is not possible to predict when market
conditions might improve.
Movement in the year
New risk
3.The Company may lose investment opportunities if it does not
match investment prices, structures and terms offered by competing
bidders. Conversely, the Company may experience decreased rates of
return and increased risk of loss if it matches investment prices,
structures and terms offered by competitors.
How we mitigate risk
The Investment Manager operates a prudent and disciplined
investment strategy, participating in transaction processes only
where it can be competitive without compromising its investment
objectives.
How the risk is changing
The Investment Manager has been able to identify and pursue
bilateral opportunities rather than auction processes, where
competition for those assets has been a less significant factor.
However, there can be no guarantee that suitable further bilateral
opportunities will arise. In addition, current market conditions
and the consequent limitations on the Company's ability to access
capital markets may mean that it is not able to pursue certain
investment opportunities.
Movement in the year
Unchanged
4. There can be no guarantee or assurance the Company will
achieve its investment objectives, which are indicative targets
only. Investments may fail to deliver the projected earnings, cash
flows and/or capital growth expected at the time of acquisition.
The actual rate of return may be materially lower than the targeted
rate of return.
How we mitigate risk
The Investment Manager performs a rigorous due diligence process
with internal specialists and expert professional advisers in
fields relevant to the proposed investment before any investment is
made. The Investment Manager also carries out a regular review of
the investment environment and benchmarks target and actual returns
against the industry and competitors.
How the risk is changing
The operational performance of our investments to date is in
line with our expectations, demonstrating that the due diligence
process undertaken at the time of acquisition was appropriately
rigorous to mitigate this risk. The same level of rigour must be
maintained for future investments. Foreign exchange movements have
had a negative effect on the Company's returns.
Movement in the year
Higher
5. Actual results of portfolio investments may vary from the
projections, which may have a material adverse effect on NAV.
How we mitigate risk
The Investment Manager provides the Board with at least
quarterly updates of portfolio investment performance and detail
around material variation from budget and forecast returns.
How the risk is changing
The results of our investments to date are materially in line
with our projections at the time of their acquisition and their
aggregate fair value has increased. This demonstrates the quality
of the Investment Manager's projections and its ability to manage
the investments for growth.
Movement in the year
Unchanged
6. The Company invests in unlisted Digital Infrastructure
assets, and such investments are illiquid. There is a risk that it
may be difficult for the Company to sell the Digital Infrastructure
assets and the price achieved on any realisation may be at a
discount to the prevailing valuation of the relevant Digital
Infrastructure asset.
How we mitigate risk
The Investment Manager has considerable experience across
relevant digital infrastructure sectors, and members of them team
have been involved in over $80 billion of relevant transactions.
The Company seeks a diversified range of investments so that
exposure to temporary poor conditions in any one market is
limited.
How the risk is changing
The Company is still in its relative infancy and, as a vehicle
with permanent capital, is not likely to be seeking a full
divestment of any asset for some time. Its exposure to divestment
risk is limited in the short to medium term.
Movement in the year
No movement
7.The Company may invest in Digital Infrastructure assets which
are in construction or construction-ready or otherwise require
significant future capital expenditure. Digital Infrastructure
assets which have significant capital expenditure requirements may
be exposed to cost overruns, construction delay, failure to meet
technical requirements or construction defects.
How we mitigate risk
The Investment Manager has significant experience of managing
construction risks arising from Digital Infrastructure assets and
will also engage third parties where appropriate to oversee such
construction.
How the risk is changing
The Company's investments to date have not undertaken
significant capital construction projects. This risk has therefore
been relatively low to date but may increase as capital investment
increases under our Buy, Build & Grow model.
Movement in the year
Unchanged
Statement of Directors' responsibilities
The Directors are responsible for preparing this Interim Report
in accordance with the Disclosure Guidance and Transparency Rules
of the UK's Financial Conduct Authority.
In preparing the unaudited condensed set of interim financial
statements included within the Interim Report, the Directors are
required to:
- prepare and present the condensed set of interim financial statements
in accordance with IAS 34 Interim Financial Reporting issued by the
International Accounting Standards Board (IASB) and the DTRs;
- ensure the condensed set of interim financial statements has adequate
disclosures;
- select and apply appropriate accounting policies; and
- make accounting estimates that are reasonable in the circumstances.
The Directors are responsible for designing, implementing and
maintaining such internal controls as they determine are necessary
to enable the preparation of the condensed set of interim financial
statements that is free from material misstatement whether due to
fraud or error.
On behalf of the Board
Shonaid Jemmett-Page
Chairman
28 November 2023
Condensed Statement of Financial Position
As at 30 September 2023 (unaudited)
As at As at
30 September 31 March
2023 2023
Note GBP'000 GBP'000
------------------------------------------- ---- ------------- -----------
Non-current assets
Investments at fair value through profit
or loss 8 896,126 872,315
------------------------------------------- ---- ------------- -----------
896,126 872,315
------------------------------------------- ---- ------------- -----------
Current assets
Receivables 10 15,499 14,680
Cash and cash equivalents 130,868 10,498
------------------------------------------- ---- ------------- -----------
146,367 25,178
------------------------------------------- ---- ------------- -----------
Total assets 1,042,493 897,493
------------------------------------------- ---- ------------- -----------
Current liabilities
Payables (4,980) (1,495)
------------------------------------------- ---- ------------- -----------
(4,980) (1,495)
------------------------------------------- ---- ------------- -----------
Net current assets 141,387 23,683
------------------------------------------- ---- ------------- -----------
Non-current liabilities
------------------------------------------- ---- ------------- -----------
Loans and borrowings 13 (168,936) (20,287)
------------------------------------------- ---- ------------- -----------
(168,936) (20,287)
------------------------------------------- ---- ------------- -----------
Total liabilities (173,916) (21,782)
------------------------------------------- ---- ------------- -----------
Net assets 868,577 875,711
------------------------------------------- ---- ------------- -----------
Equity
Equity share capital 11 778,071 779,157
Retained earnings - Revenue (9,663) (196)
Retained earnings - Capital 100,169 96,750
------------------------------------------- ---- ------------- -----------
Total equity 868,577 875,711
------------------------------------------- ---- ------------- -----------
Number of shares in issue
Ordinary shares 11 771,009,707 772,509,707
------------------------------------------- ---- ------------- -----------
771,009,707 772,509,707
------------------------------------------- ---- ------------- -----------
Net asset value per ordinary share (pence) 112.65 113.36
------------------------------------------- ---- ------------- -----------
The unaudited condensed interim financial statements were
approved and authorised for issue by the Board on 28 November 2023
and signed on their behalf by:
Shonaid Jemmett-Page Sian Hill
Chairman Director
The accompanying notes form an integral part of these unaudited
condensed interim financial statements.
Condensed Statement of Comprehensive Income
For the six months ended 30 September 2023 (unaudited)
For the six months ended For the six months ended
30 September 2023 30 September 2022
-------------------------------------- -----------------------------------
Revenue Capital Total Revenue Capital Total
Note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------ ---- ------------ ----------- ----------- --------- ----------- -----------
Net gain on
investments
at fair value
through profit
or loss 8 1,316 19,734 21,050 1,397 18,017 19,414
------------------------ ---- ------------ ----------- ----------- --------- ----------- -----------
1,316 19,734 21,050 1,397 18,017 19,414
------------------------ ---- ------------ ----------- ----------- --------- ----------- -----------
Operating
expenses
Other expenses 4 (6,869) - (6,869) (5,441) (1,405) (6,846)
Investment
acquisition
costs - (1,198) (1,198) - (717) (717)
------------------------ ---- ------------ ----------- ----------- --------- ----------- -----------
Operating
(loss)/profit (5,553) 18,536 12,983 (4,044) 15,895 11,851
------------------------ ---- ------------ ----------- ----------- --------- ----------- -----------
Foreign exchange
movements on
working capital - 332 332 1,276 1,611 2,887
Finance income 988 - 988 6,275 - 6,275
Finance expense (4,902) - (4,902) - - -
------------------------ ---- ------------ ----------- ----------- --------- ----------- -----------
(Loss)/profit
for the period
before tax (9,467) 18,868 9,401 3,507 17,506 21,013
------------------------ ---- ------------ ----------- ----------- --------- ----------- -----------
Tax charge 5 - - - - - -
------------------------ ---- ------------ ----------- ----------- --------- ----------- -----------
(Loss)/Profit
for the period
after tax (9,467) 18,868 9,401 3,507 17,506 21,013
------------------------ ---- ------------ ----------- ----------- --------- ----------- -----------
(Loss)/Profit
and total comprehensive
(loss)/income
for the period (9,467) 18,868 9,401 3,507 17,506 21,013
------------------------ ---- ------------ ----------- ----------- ----------- -----------
Weighted average
number of shares
Basic
Ordinary shares 7 772,435,390 772,435,390 772,435,390 773,427,686 773,427,686 773,427,686
Diluted
Ordinary shares 7 772,435,390 772,435,390 772,435,390 773,427,692 773,427,692 773,427,692
Earnings per
share
Basic earnings
from continuing
operations
in the period
(pence)
Ordinary shares 7 (1.22) 2.44 1.22 0.45 2.27 2.72
Diluted earnings
from continuing
operations
in the period
(pence)
Ordinary shares 7 (1.22) 2.44 1.22 0.45 2.27 2.72
The accompanying notes form an integral part of these unaudited
condensed interim financial statements.
Condensed Statement of Changes in Equity
For the six months ended 30 September 2023 (unaudited)
For the period from
1 April 2022 to 30 September 2022
-----------------------------------------------------------------
Retained Retained
Share capital earnings-Revenue earnings-Capital Total equity
Note GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------- ---- ------------- ----------------- ----------------- ------------
Opening net assets as at 1 April 2022 11 779,896 (2,724) 45,174 822,346
Issue of share capital 11 295 - - 295
Share issue costs (92) - - (92)
Dividends paid during the period - - (11,599) (11,599)
Profit and total comprehensive income for
the period - 3,507 17,506 21,013
------------------------------------------- ---- ------------- ----------------- ----------------- ------------
Closing net assets attributable to
shareholders as at 30 September 2022 780,099 783 51,081 831,963
------------------------------------------- ---- ------------- ----------------- ----------------- ------------
For the period from
1 October 2022 to 31 March 2023
-----------------------------------------------------------------
Retained Retained
Share capital earnings-Revenue earnings-Capital Total equity
Note GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------- ---- ------------- ----------------- ----------------- ------------
Opening net assets as at 30 September 2022 11 780,099 783 51,081 831,963
Dividends paid during the period 12 - - (15,473) (15,473)
Shares repurchased in the period (943) - - (943)
Share issue costs 1 - - 1
(Loss)/Profit and total comprehensive
(loss)/income for the period - (979) 61,142 60,163
------------------------------------------- ---- ------------- ----------------- ----------------- ------------
Closing net assets attributable to
shareholders as at 31 March 2023 779,157 (196) 96,750 875,711
------------------------------------------- ---- ------------- ----------------- ----------------- ------------
For the period from
1 April 2023 to 30 September 2023
-----------------------------------------------------------------
Retained Retained
Share capital earnings-Revenue earnings-Capital Total equity
Note GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------- ---- ------------- ----------------- ----------------- ------------
Opening net assets as at 1 April 2023 11 779,157 (196) 96,750 875,711
Shares repurchased during the period 11 (1,086) - - (1,086)
Dividends paid during the period 12 - - (15,449) (15,449)
(Loss)/Profit and total comprehensive
(loss)/income for the period - (9,467) 18,868 9,401
------------------------------------------- ---- ------------- ----------------- ----------------- ------------
Closing net assets attributable to
shareholders as at 30 September 2023 778,071 (9,663) 100,169 868,577
------------------------------------------- ---- ------------- ----------------- ----------------- ------------
The accompanying notes form an integral part of these unaudited
condensed interim financial statements.
Condensed Statement of Cash Flows
For the six months ended 30 September 2023 (unaudited)
For the six For the six
months ended months ended
30 September 30 September
2023 2022
Note GBP'000 GBP'000
---------------------------------------------- ---- ------------- -------------
Operating activities
Operating profit for the period 12,983 11,851
Adjustments for non-cash movements
Net gain on investments at fair value through
profit or loss 8 (21,050) (19,414)
(Increase)/Decrease in receivables (801) 39,356
Increase in payables 3,485 1,815
Decrease in foreign exchange derivative - 8,072
---------------------------------------------- ---- ------------- -------------
Net cash flows (used in)/generated from
operating activities (5,383) 41,680
---------------------------------------------- ---- ------------- -------------
Cash flows (used in)/generated from investing
activities
Investment additions 8 (2,761) (3,050)
Finance income received 175 6,275
---------------------------------------------- ---- ------------- -------------
Net cash flows (used in)/generated from
investing activities (2,586) 3,225
Cash flows generated from/(used in) financing
activities
Issue of share capital 11 - 295
Payment of issue costs 11 - (92)
Shares repurchased (870) -
Loan drawn down 148,992 -
Finance costs paid (4,042) -
Dividends paid 12 (15,450) (11,599)
Bank interest received 385 -
---------------------------------------------- ---- ------------- -------------
Net cash flows generated from/(used in)
financing activities 129,015 (11,396)
---------------------------------------------- ---- ------------- -------------
Net increase in cash and cash equivalents
during the period 121,046 33,509
Cash and cash equivalents at the beginning
of the period 10,498 353,734
Exchange translation movement (676) 2,887
---------------------------------------------- ---- ------------- -------------
Cash and cash equivalents at the end of
the period 130,868 390,130
---------------------------------------------- ---- ------------- -------------
The accompanying notes form an integral part of these unaudited
condensed interim financial statements.
Notes to the interim financial statements
1. General information
Cordiant Digital Infrastructure Limited (the Company; LSE
ticker: CORD) was incorporated and registered in Guernsey on 4
January 2021 with registered number 68630 as a non-cellular company
limited by shares and is governed in accordance with the provisions
of the Companies (Guernsey) Law 2008 (as amended). The registered
office address is East Wing, Trafalgar Court, Les Banques, St Peter
Port, Guernsey GY1 3PP. The Company's ordinary shares were admitted
to trading on the Specialist Fund Segment of the London Stock
Exchange on 16 February 2021 and its C Shares on 10 June 2021. On
20 January 2022, all C Shares were converted to ordinary shares. A
second issuance of ordinary shares took place on 25 January 2022.
Note 11 gives more information on share capital.
2. Accounting policies
The principal accounting policies applied in the preparation of
these unaudited condensed interim financial statements are set out
below. These policies have been consistently applied, unless
otherwise stated.
Basis of preparation
The unaudited condensed interim financial statements have been
prepared on a historical cost basis as modified for the measurement
of certain financial instruments at fair value through profit or
loss and in accordance with IFRS, AIC SORP and applicable company
law. They are presented in pounds sterling, which is the currency
of the primary economic environment in which the Company operates
and are rounded to the nearest thousand, unless otherwise stated.
The principal accounting policies are set out below.
The unaudited condensed interim financial statements have been
prepared under IAS 34 'Interim Financial Reporting'. The
presentation and accounting policies used in the preparation of the
unaudited condensed interim financial statements are consistent
with those that are adopted in the annual financial statements,
except for the adoption of new standards effective as at 1 April
2023. The Company has not early adopted any standard,
interpretation or amendment that has been issued but is not yet
effective. These amendments are not expected to have an impact on
the unaudited condensed interim financial statements of the
Company.
The financial information contained in this Interim Report does
not constitute statutory accounts as defined in Section 243 of the
Companies (Guernsey) Law 2008 as amended. The unaudited condensed
interim financial statements do not include all the information and
disclosures required in the annual financial statements and should
be read in conjunction with the Company's annual financial
statements for the year ended 31 March 2023.
Going concern
The financial statements have been prepared on a going concern
basis as the Directors have a reasonable expectation that the
Company has adequate resources to continue in operational existence
for the foreseeable future.
While the conflict in Ukraine and market volatility during the
period have affected the way in which the business activities of
the Company's investee companies are conducted, this did not have a
material direct effect on the results of the business. The
Directors are satisfied that the resulting macroeconomic
environment is not likely to significantly restrict business
activity.
The Directors and Investment Manager are actively monitoring
these risks and their potential effect on the Company and its
underlying investments. In particular, they have considered the
following specific key potential impacts:
- increased volatility in the fair value of investments
- disruptions to business activities of the underlying investments; and
- recoverability of income and principal and allowance for expected credit losses.
In considering the above key potential impacts of the conflict
in Ukraine and market volatility on the Company and its underlying
investments, the Investment Manager has assessed these with
reference to the mitigation measures in place. Based on this
assessment, the Directors do not consider that the effects of the
conflict in Ukraine and market volatility have created a material
uncertainty over the assessment of the Company as a going
concern.
As further detailed in note 8 to the financial statements, the
Company uses a third-party valuation provider to perform a
reasonableness assessment of the Investment Manager's valuation of
the underlying investments. Additionally, the Investment Manager
and Directors have considered the cash flow forecast to determine
the term over which the Company can remain viable given its current
resources.
On the basis of this review, and after making due enquiries, the
Directors have a reasonable expectation that the Company has
adequate resources to continue in operational existence for at
least the period from 28 November 2023 to 30 November 2024, being
the period of assessment considered by the Directors. Accordingly,
they continue to adopt the going concern basis in preparing the
financial statements.
Accounting for subsidiaries
The Directors have concluded that the Company has all the
elements of control as prescribed by IFRS 10 'Consolidated
Financial Statements' in relation to all its subsidiaries and that
the Company satisfies the three essential criteria to be regarded
as an Investment Entity as defined in IFRS 10. The three essential
criteria are that the entity must:
- obtain funds from one or more investors for the purpose of providing
these investors with professional investment management services;
- commit to its investors that its business purpose is to invest its
funds solely for returns from capital appreciation, investment income
or both; and
- measure and evaluate the performance of substantially all of its
investments on a fair value basis.
In satisfying the second essential criterion, the notion of an
investment time frame is critical, and an Investment Entity should
have an exit strategy for the realisation of its investments. The
Board has approved a divestment strategy under which the Investment
Manager will, within two years from acquisition of an investment
and at least annually thereafter, undertake a review of the current
condition and future prospects of the investment. If the Investment
Manager concludes that:
- the future prospects for an investment are insufficiently strong
to meet the Company's rate of return targets; or
- the value that could be realised by an immediate disposal would
outweigh the value of retaining the investment; or
- it would be more advantageous to realise capital for investment
elsewhere than to continue to hold the investment;
- the Investment Manager will take appropriate steps to dispose of
the investment.
Also as set out in IFRS 10, further consideration should be
given to the typical characteristics of an Investment Entity, which
are that:
- it should have more than one investment, to diversify the risk portfolio
and maximise returns;
- it should have multiple investors, who pool their funds to maximise
investment opportunities;
- it should have investors that are not related parties of the entity;
and
- it should have ownership interests in the form of equity or similar
interests.
The Directors are of the opinion that the Company meets the
essential criteria and typical characteristics of an Investment
Entity. Therefore, subsidiaries are measured at fair value through
profit or loss, in accordance with IFRS 9 'Financial Instruments'.
Fair value is measured in accordance with IFRS 13 'Fair Value
Measurement'.
Financial instruments
In accordance with IFRS 9, financial assets and financial
liabilities are recognised in the Statement of Financial Position
when the Company becomes a party to the contractual provisions of
the instrument. Financial assets and financial liabilities are only
offset and the net amount reported in the Statement of Financial
Position and Statement of Comprehensive Income when there is a
currently enforceable legal right to offset the recognised amounts
and the Company intends to settle on a net basis or realise the
asset and liability simultaneously.
Financial assets
The classification of financial assets at initial recognition
depends on the purpose for which the financial asset was acquired
and its characteristics. All purchases of financial assets are
recorded at the date on which the Company became party to the
contractual requirements of the financial asset.
The Company's financial assets principally comprise investments
held at fair value through profit or loss, cash and cash
equivalents and trade receivables.
Financial assets are recognised at the date of the purchase or
the date on which the Company became party to the contractual
requirements of the asset. Investments are initially recognised at
cost, being the fair value of consideration given. Transaction
costs are recognised in the Statement of Comprehensive Income as
incurred.
A financial asset is derecognised (in whole or in part)
either:
- when the Company has transferred substantially all the risks and
rewards of ownership; or
- when it has neither transferred nor retained substantially all the
risks and rewards and when it no longer has control over the assets
or a portion of the asset; or
- when the contractual right to receive cash flow has expired.
Investments held at fair value through profit or loss
Investments are classified upon initial recognition as held at
fair value through profit or loss. Gains or losses resulting from
the movement in fair value are recognised in the Statement of
Comprehensive Income at each valuation point.
The loans provided to subsidiaries are held at fair value
through profit or loss as they form part of a managed portfolio of
assets whose performance is evaluated on a fair value basis. These
loans are recognised at the loan principal value, which is
considered to be equal to its fair value, plus outstanding
interest. Any gains or losses on the loan investment are recognised
in profit or loss.
Fair value is defined as the price that would be received to
sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
Fair value is calculated on an unlevered, discounted cash flow
basis in accordance with IFRS 13.
When available, the Company measures fair value using the quoted
price in an active market. A market is regarded as 'active' if
transactions for the asset or liability take place with sufficient
frequency and volume to provide pricing information on an ongoing
basis. If there is no quoted price in an active market, then the
Company uses valuation techniques that maximise the use of relevant
observable inputs and minimise the use of unobservable inputs. The
chosen valuation technique incorporates all of the factors that
market participants would take into account when pricing a
transaction.
Valuation process
The Investment Manager is responsible for proposing the
valuation of the assets held by the Company, and the Directors are
responsible for reviewing the Company's valuation policy and
approving the valuations.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand
deposits and other short-term highly liquid investments with an
original maturity of three months or less that are readily
convertible to a known amount of cash and are subject to an
insignificant risk of changes in value.
Trade receivables
Trade receivables are classified as financial assets at
amortised cost. They are measured at amortised cost less impairment
assessed using the simplified approach of the expected credit loss
(ECL) model based on experience of previous losses and expectations
of future losses. Trade and other receivables are recorded based on
agreements entered into with entities with no notable history of
default causing the ECL of these receivables to be immaterial and
therefore no ECL has been recorded.
Financial liabilities
Financial liabilities are classified according to the substance
of the contractual agreements entered into and are recorded on the
date on which the Company becomes party to the contractual
requirements of the financial liability.
The Company's financial liabilities measured at amortised cost
include trade and other payables, intercompany loans and other
short-term monetary liabilities which are initially recognised at
fair value and subsequently measured at amortised cost using the
effective interest rate method. A financial liability (in whole or
in part) is derecognised when the Company has extinguished its
contractual obligations, it expires or is cancelled. Any gain or
loss on derecognition is taken to the Statement of Comprehensive
Income.
Equity
Financial instruments issued by the Company are treated as
equity if the holder has only a residual interest in the assets of
the Company after the deduction of all liabilities. The Company's
ordinary shares and Subscription Shares are classified as
equity.
Share issue costs directly attributable to the issue of ordinary
shares are shown in equity as a deduction from share capital. When
shares recognised as equity are repurchased, the amount of the
consideration paid, which includes directly attributable costs, is
recognised as a deduction from equity.
Dividends
Dividends payable are recognised as distributions in the
financial statements when the Company's obligation to make payment
has been established.
Revenue recognition
Dividend income is recognised when the Company's entitlement to
receive payment is established. Other income is accounted for on an
accruals basis using the effective interest rate method.
Expenses
Expenses include legal, accounting, auditing and other operating
expenses. They are recognised on an accruals basis in the Statement
of Comprehensive Income in the period in which they are
incurred.
Taxation
Current tax is the expected tax payable on the taxable income
for the period, using tax rates that have been enacted or
substantively enacted at the date of the Statement of Financial
Position.
Deferred tax is the tax expected to be payable or recoverable on
temporary differences between the carrying amounts of assets and
liabilities in the financial statements and the corresponding tax
bases used in the computation of taxable profit. Deferred tax
liabilities are generally recognised for all taxable temporary
differences and deferred tax assets are recognised to the extent
that it is probable that taxable profits will be available against
which deductible temporary differences can be utilised.
Deferred tax assets and liabilities are not recognised if the
temporary differences arise from goodwill or from the initial
recognition of other assets and liabilities in a transaction that
affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary
differences arising on investments, except where the Company is
able to control the timing of the reversal of the difference and it
is probable that the temporary difference will not reverse in the
foreseeable future. Deferred tax is calculated at the tax rates
that are expected to apply in the period when the liability is
settled or the asset is realised. Deferred tax is charged or
credited to the Statement of Comprehensive Income except when it
relates to items charged or credited directly to equity, in which
case the deferred tax is also dealt with directly in equity.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to set off tax assets against tax
liabilities and when they relate to income taxes levied by the same
taxation authority and the Company intends to settle its current
tax assets and liabilities on a net basis. Deferred tax assets and
liabilities are not discounted.
Foreign currencies
The functional currency of the Company is sterling, reflecting
the primary economic environment in which it operates. The Company
has chosen pounds sterling as its presentation currency for
financial reporting purposes.
Transactions during the period, including purchases and sales of
investments, income and expenses are translated into pound sterling
at the rate of exchange prevailing on the date of the
transaction.
Monetary assets and liabilities denominated in currencies other
than pound sterling are retranslated at the rate of exchange ruling
at the reporting date. Non-monetary items that are measured in
terms of historical cost in a currency other than pound sterling
are translated using the exchange rates at the dates of the initial
transactions and are not subsequently retranslated.
Non-monetary items measured at fair value in a currency other
than pounds sterling are translated using the exchange rates at the
date when the fair value was determined. Foreign currency
transaction gains and losses on financial instruments classified as
at fair value through profit or loss are included in profit or loss
in the Statement of Comprehensive Income as part of the change in
fair value of investments.
Foreign currency transaction gains and losses on financial
instruments are included in profit or loss in the Statement of
Comprehensive Income as 'Net gains on investments'.
Segmental reporting
The chief operating decision maker, who is responsible for
allocating resources and assessing performance of the operating
segments, has been identified as the Board of Directors as a whole.
The key measure of performance used by the Board to assess the
Company's performance and to allocate resources is the Company's
NAV, as calculated under IFRS as issued by the IASB, and therefore
no reconciliation is required between the measure of profit or loss
used by the Board and that contained in the Interim Report.
For management purposes, the Company is organised into one main
operating segment, which invests in Digital Infrastructure
assets.
Due to the Company's nature, it has no customers.
New standards, amendments and interpretations issued and
effective for the financial period beginning 1 April 2023
The Board of Directors has considered new standards and
amendments that are mandatorily effective from 1 April 2023 and
determined that these do not have material impact on the Company
and are not expected to significantly affect the current or future
periods.
New standards, amendments and interpretations issued but not yet
effective
There are a number of new standards, amendments to standards and
interpretations which are not yet mandatory for the 30 September
2023 reporting period and have not been adopted early by the
Company. These standards are not expected to have a material impact
on the financial statements of the Company in the current or future
reporting periods or on foreseeable future transactions.
3. Significant accounting judgements, estimates and assumptions
The preparation of the unaudited condensed interim financial
statements requires management to make judgements, estimates and
assumptions that affect the application of accounting policies and
the reported amounts of assets, liabilities, income and
expenses.
Assessment as an Investment Entity
In the judgement of the Directors, the Company qualifies as an
investment entity under IFRS 10 and therefore its subsidiary
entities have not been consolidated in the preparation of the
financial statements. Further details of the impact of this
accounting policy are included in note 9.
Assumptions and estimation uncertainties
Information about assumptions and estimation uncertainties that
have a significant risk of resulting in a material adjustment to
the carrying amounts of assets and liabilities within the six-month
period ended 30 September 2023 is included in note 8 and relates to
the determination of fair value of investments with significant
unobservable inputs.
Estimates and judgements are continually evaluated and are based
on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the
circumstances.
The resulting accounting estimates will, by definition, seldom
equal the related actual results. Revisions to accounting estimates
are recognised in the period in which the estimate is revised and
in any future periods affected.
4. Other expenses
Other expenses in the Condensed Statement of Comprehensive
Income comprise:
For the six For the six
months ended months ended
30 September 30 September
2023 2022
GBP'000 GBP'000
---------------------------- ------------- -------------
Management fees 3,100 3,932
Legal and professional fees 259 1,546
Discontinued deal fees 2,873 1,110
Directors' fees 93 93
Audit fees 85 83
Other expenses 459 82
---------------------------- ------------- -------------
6,869 6,846
---------------------------- ------------- -------------
5. Taxation
As an investment trust, the Company is exempt from UK tax on
capital gains on any disposal of shares. To the extent it has
qualifying interest income, it may make a streaming election to
treat part or all of its distributions as interest distributions,
and will be entitled to deduct any interest distributions paid out
of profits arising from its loan relationships in computing its UK
corporation tax liability.
It is anticipated that the Company will meet the conditions for
the UK dividend exemption and will be exempt from UK tax on any
dividend income received.
No tax expense or liability has been recognised in these
unaudited condensed interim financial statements because the
Company's tax-deductible expenses exceed taxable income.
The Company does not recognise deferred tax assets in respect of
taxable losses because it does not expect to have profits against
which those losses can be utilised.
6. Management and performance fees
Under the investment management agreement dated 29 January 2021
between the Company, the Investment Manager and Cordiant Digital
Infrastructure Management LLP, the Investment Manager is entitled
to receive an annual management fee and a performance fee, plus any
applicable VAT, in addition to the reimbursement of reasonable
expenses incurred by it in the performance of its duties.
Management fee
The Investment Manager receives from the Company an annual
management fee, based on the average market capitalisation of the
Company, calculated and paid monthly in arrears using the average
market capitalisation for each LSE trading day for the relevant
month. The management fee has been payable since 30 April 2021,
being the date on which more than 75% of the IPO proceeds were
deployed in investment activities.
The annual management fee is calculated on the following
basis:
_ 1.00% of the average market capitalisation up to GBP500
million;
_ 0.90% of the average market capitalisation between GBP500
million and GBP1 billion; and
_ 0.80% of the average market capitalisation in excess of GBP1
billion.
Following the publication of each Interim Report and Annual
Report and financial statements, the Investment Manager is required
to apply an amount, in aggregate, equal to 10% of the annual
management fee for the preceding six-month period in the following
manner:
a) if the average trading price, calculated over the 20 trading
days immediately preceding the announcement date, is equal to, or
higher than, the last reported NAV per ordinary share (as adjusted
to reflect any dividends reflected in the average trading price)
the Investment Manager shall use the relevant amount to subscribe
for new ordinary shares (rounded down to the nearest whole number
of ordinary shares), issued at the average trading price; or
b) if the average trading price is lower than the last reported
NAV per ordinary share (as adjusted to reflect any dividends
reflected in the average trading price) the Investment Manager
shall, as soon as reasonably practicable, use the relevant amount
to make market purchases of ordinary shares (rounded down to the
nearest whole number of ordinary shares) within two months of the
relevant NAV announcement date.
Even though the annual management fee is payable on a monthly
basis, ordinary shares are only acquired by the Investment Manager
on a half-yearly basis.
Any ordinary shares subscribed or purchased by the Investment
Manager pursuant to the above arrangements are, subject to usual
exceptions, subject to a lock-up of 12 months from the date of
subscription or purchase.
For the six months ended 30 September 2023, the Investment
Manager has charged management fees of GBP3.1 million (30 September
2022: GBP3.9 million) to the Company, with GBP0.6 million (30
September 2022: GBP1.6 million) owed at period end. During the six
months ended 30 September 2023, the Investment Manager did not
subscribe for any new ordinary shares (30 September 2022: GBP0.3
million) but made open market purchases of 444,772 shares at an
average price of 73.8p per share (30 September 2022: no open market
purchases).
Performance fee
The Investment Manager may in addition receive a performance fee
on each performance fee calculation date, dependent on the
performance of the Company's NAV and share price. The first
performance fee calculation date is 31 March 2024, and subsequent
calculation dates are on 31 March each year thereafter. The fee
will be equal to 12.5% of the excess return over the target of 9%
for the NAV return or share price return, whichever is the lower,
multiplied by the time weighted average number of ordinary shares
in issue (excluding any ordinary shares held in treasury) during
the relevant period.
Any performance fee is to be satisfied as follows:
- as to 50% in cash; and
- as to the remaining 50% of the performance fee, subject to certain
exceptions and the relevant regulatory and tax requirements:
a) if the average trading price, calculated over the 20 trading days
immediately preceding the performance fee calculation date, is
equal to or higher than the last reported NAV per ordinary share
(as adjusted to reflect any dividends reflected in the average
trading price) the Company will issue to the Investment Manager
such number of new ordinary shares (credited as fully paid) as
is equal to the performance fee investment amount divided by the
average trading price (rounded down to the nearest whole number
of ordinary shares); or
b) if the average trading price is lower than the last reported NAV
per ordinary share (as adjusted to reflect any dividends reflected
in the average trading price) then the Company shall (on behalf
of, and as agent for, the Investment Manager) apply the performance
fee investment amount in making market purchases of ordinary shares,
provided any such ordinary shares are purchased at prices below
the last reported NAV per ordinary share.
Any ordinary shares subscribed or purchased by the Investment
Manager pursuant to the above arrangements will, subject to usual
exceptions, be subject to a lock-up of 36 months from the date of
subscription or purchase.
For the period ended 30 September 2023, no performance fee is
due to the Investment Manager (30 September 2022: GBPnil) and no
amount has been accrued as the share price performance hurdle has
not been met.
7. Earnings per share and net asset value per share
Earnings per share
Ordinary shares
For the six months ended 30 September 2023 Basic Diluted
-------------------------------------------------- ----------- -----------
Allocated profit attributable to this share class
- GBP'000 9,401 9,401
Weighted average number of shares in issue 773,392,830 773,392,830
Earnings per share from continuing operations in
the period (pence) 1.22 1.22
-------------------------------------------------- ----------- -----------
For the six months ended 30 September 2022 Basic Diluted
-------------------------------------------------- ----------- -----------
Allocated profit attributable to this share class
- GBP'000 21,013 21,013
Weighted average number of shares in issue 773,427,686 773,427,692
Earnings per share from continuing operations in
the period (pence) 2.72 2.72
-------------------------------------------------- ----------- -----------
As at 31 March 2023 there were 6,434,884 potentially dilutive
Subscription Shares in issue. During the six months ended 30
September 2023 no additional Subscription Shares had been
issued.
Net asset value per share
As at As at
30 September 31 March
2023 2023
---------------------------------- ------------- -----------
Net asset value - GBP'000 868,577 875,711
Number of shares 771,009,707 772,509,707
Net asset value per share (pence) 112.65 113.36
---------------------------------- ------------- -----------
8. Investments at fair value through profit or loss
Loans Equity Total
As at 30 September 2023 GBP'000 GBP'000 GBP'000
------------------------- -------- -------- --------
Opening balance 37,350 834,965 872,315
Additions 2,761 - 2,761
Net gains on investments 1,316 19,734 21,050
------------------------- -------- -------- --------
41,427 854,699 896,126
------------------------- -------- -------- --------
Loans Equity Total
As at 31 March 2023 GBP'000 GBP'000 GBP'000
------------------------- -------- -------- --------
Opening balance 27,671 382,185 409,856
Additions 4,691 379,724 384,415
Net gains on investments 4,988 73,056 78,044
------------------------- -------- -------- --------
37,350 834,965 872,315
------------------------- -------- -------- --------
The terms of the Company's direct investment in CDIL Data Centre
USA LLC, the legal entity operating as Hudson Interxchange (Hudson)
remains unchanged from those disclosed in the Company's Annual
Report 2023. The Company made an additional loan investment in
Hudson of GBP2.8 million during the period ended 30 September 2023.
As at 30 September 2023, the equity investment in Hudson was valued
at GBP41.3 million and the loan investment in Hudson at GBP7.6
million. The total investment in Hudson was valued at GBP48.9
million.
The value of the Company's indirect investment in České
Radiokomunikace a.s. (CRA), as at 30 September 2023 was GBP388.6
million (31 March 2023: GBP389.1 million), comprising an equity
investment valued at GBP362.5 million (31 March 2023: GBP362.9
million) and a loan investment of GBP26.1 million (31 March 2023:
GBP26.2 million).
During the period, Cordiant Digital Holdings One Limited (CDH1),
a subsidiary of the Company, restructured part of its equity
investment in Emitel amounting to PLN192.5 million to a loan
investment. Interest accrued on the loan investment during the
period ended 30 September 2023 amounted to GBP0.9 million. As at 30
September 2023, the Emitel loan investment is valued at GBP36.9
million and the remaining equity investment is valued at GBP424.3
million (31 March 2023: GBP429.0 million). The Company's total
indirect investment in Emitel is GBP461.2 million.
Fair value measurements
IFRS 13 requires disclosure of fair value measurement by level.
The level of fair value hierarchy within the financial assets or
financial liabilities is determined on the basis of the lowest
level input that is significant to the fair value measurement.
Financial assets and financial liabilities are classified in their
entirety into only one of the following three levels:
- Level 1 - quoted prices (unadjusted) in active markets for identical
assets or liabilities;
- Level 2 - inputs other than quoted prices included within Level
1 that are observable for the assets or liabilities, either directly
(i.e. as prices) or indirectly (i.e. derived from prices); and
- Level 3 - inputs for assets or liabilities that are not based on
observable market data (unobservable inputs).
The determination of what constitutes 'observable' requires
significant judgement by the Company. The Directors consider
observable data to be market data that is readily available,
regularly distributed or updated, reliable and verifiable, not
proprietary, and provided by independent sources that are actively
involved in the relevant market.
The Company's investments have been classified within Level 3 as
the investments are not traded and contain unobservable inputs. The
valuations have been carried out by the Investment Manager. In
order to obtain assurance in respect of the valuations calculated
by the Investment Manager, the Company has engaged a third-party
valuations expert to carry out an independent assessment of the
unobservable inputs and of the forecast cash flows of the Company's
investments.
The Company's investments in CRA, Hudson and Emitel have been
valued using a DCF methodology. This involves forecasting the
entity's future cash flows, taking into account the terms of
existing contracts, expected rates of contract renewal and targeted
new contracts, and the economic and geopolitical environment. These
cash flows are discounted at the entity's estimated weighted
average cost of capital (WACC). This method also requires
estimating a terminal value, being the value of the investment at
the end of the period for which cash flows can be forecast with
reasonable accuracy, which is March 2030 for CRA, December 2030 for
Emitel and March 2037 for Hudson. The terminal value is calculated
using an assumed terminal growth rate (TGR) into perpetuity based
on anticipated industry trends and long-term inflation rates.
Both the Investment Manager and the third-party valuation expert
use a combination of other valuation techniques to verify the
reasonableness of the DCF valuations, as recommended in the
International Private Equity and Venture Capital (IPEV) Valuation
Guidelines:
- earnings multiple: applying a multiple, derived largely from comparable
listed entities in the market, to the forecast EBITDA of the entity
to calculate an enterprise value, and then deducting the fair value
of any debt in the entity;
- DCF with multiple: calculating a DCF valuation of the cash flows
of the entity to the end of the period for which cash flows can
be forecast with reasonable accuracy, and then applying a multiple
to EBITDA at the end of that period to estimate a terminal value;
and
- dividend yield: forecasting the entity's capacity to pay dividends
in the future and applying an equity yield to that forecast dividend,
based on comparable listed entities in the market.
The DCF valuations derived by the Investment Manager and those
derived by the third-party valuation expert were not materially
different from each other, and the other valuation techniques used
provided assurance that the DCF valuations are reasonable.
9. Unconsolidated subsidiaries
The following table shows subsidiaries of the Company. As the
Company qualifies as an Investment Entity under IFRS 10, these
subsidiaries have not been consolidated in the preparation of these
financial statements:
Ownership interest Ownership interest
at 30 September at 31 March
Investment Place of business 2023 2023
-------------------------------------- ------------------ ------------------ ------------------
Held directly
Cordiant Digital Holdings UK Limited United Kingdom 100% 100%
CDIL Data Centre USA LLC USA 100% 100%
Held indirectly
Cordiant Digital Holdings One Limited United Kingdom 100% 100%
Cordiant Digital Holdings Two Limited United Kingdom 100% 100%
Communications Investments Holdings
s.r.o. Czech Republic 100% 100%
České Radiokomunikace a.s.
(Czechia) Czech Republic 100% 100%
Czech Digital Group, a.s Czech Republic 100% 100%
Emitel S.A. Poland 100% 100%
Allford Investments S.A. Poland 100% 100%
EM Properties sp. z o. o. Poland 100% 100%
EM Projects sp. z o. o. Poland 100% 100%
EM Tower sp.z.o.o Poland 100% -
Hub Investments sp. z o. o. Poland 100% 100%
-------------------------------------- ------------------ ------------------ ------------------
The registered office of the subsidiaries located in the Czech
Republic is Skokanska 2117/1, 169 00, Prague 6. The registered
office of the subsidiaries located in the UK is 63 St James's
Street, London, SW1A 1LY. The registered office of the subsidiary
located in the US is 60 Hudson Street suite 116B, New York, NY
10013.
The amounts invested in the Company's unconsolidated
subsidiaries during the six months ended 30 September 2023 and
their carrying value at 30 September 2023 are as outlined in note
8.
There are certain restrictions on the ability of the Company's
unconsolidated subsidiaries in the Czech Republic to transfer funds
to the Company in the form of cash dividends or repayment of loans.
In accordance with the documentation relating to loans made by
various banks to CRA, such cash movements are subject to
limitations on amounts and timing, and satisfaction of certain
conditions relating to leverage and interest cover ratio. The
Directors do not consider that these restrictions are likely to
have a significant effect on the ability of the Company's
subsidiaries to transfer funds to the Company.
Subsidiaries held in the Czech Republic and Poland are
profitable and cash generative, and do not need the financial
support of the Company. The subsidiary based in the US will receive
the financial support of the Company for a period of at least 12
months from the publication of this report.
10. Receivables
31 March
30 September 2023 2023
GBP'000 GBP'000
------------------------------------------- ----------------- --------
Cash collateral* 9,182 9,130
Other debtors 3,380 2,573
Expenses paid on behalf of related parties 2,878 2,866
Prepayments 59 77
Interest receivable - 34
------------------------------------------- ----------------- --------
15,499 14,680
------------------------------------------- ----------------- --------
* Cash collateral relates to one security deposit held in money
market accounts (31 March 2023: one security deposit held in money
market accounts). An amount of USD11.3 million (GBP9.2 million)
relates to collateral for a letter of credit relating to the lease
of the building occupied by Hudson, and generated interest of 0.73%
per annum during the period ended 30 September 2023.
11. Share capital
Subject to any special rights, restrictions, or prohibitions
regarding voting for the time being attached to any shares, holders
of ordinary shares have the right to receive notice of and to
attend, speak and vote at general meetings of the Company and each
holder being present in person or by proxy shall upon a show of
hands have one vote and upon a poll shall have one vote in respect
of each ordinary share that they hold.
Holders of ordinary shares are entitled to receive and
participate in any dividends or distributions of the Company in
relation to assets of the Company that are available for dividend
or distribution. On a winding-up of the Company, the surplus assets
of the Company available for distribution to the holders of
ordinary shares (after payment of all other debts and liabilities
of the Company attributable to the ordinary shares) shall be
divided amongst the holders of ordinary shares pro rata according
to their respective holdings of ordinary shares.
Ordinary shares
30 September
2023 Share capital 31 March 2023 Share capital
Number of shares GBP'000 Number of shares GBP'000
----------------------------------------- ----------------- ------------- ----------------- -------------
Issued and fully paid 773,559,707 780,100 773,559,707 780,100
Cancellation of treasury shares - - - -
----------------------------------------- ----------------- ------------- ----------------- -------------
Issued and fully paid at period/year end 773,559,707 780,100 773,559,707 780,100
----------------------------------------- ----------------- ------------- ----------------- -------------
Shares held in treasury (2,550,000) (2,029) (1,050,000) (943)
Outstanding shares at period/year end 771,009,707 778,071 772,509,707 779,157
----------------------------------------- ----------------- ------------- ----------------- -------------
Holders of ordinary shares are entitled to all dividends paid by
the Company on the ordinary shares and, on a winding up, provided
the Company has satisfied all of its liabilities, ordinary
shareholders are entitled to all of the surplus assets of the
Company attributable to the ordinary shares.
Subscription shareholders carry no right to any dividends paid
by the Company and have no voting rights.
No Subscription Shares have been exercised between 30 September
2023 and the date of this report.
Treasury shares
30 September 31 March 2023
2023 Number of shares
Number of shares
------------------------------------------ ----------------- -----------------
Opening balance 1,050,000 -
Shares repurchased during the period/year 1,500,000 1,050,000
Closing balance at period/year end 2,550,000 1,050,000
------------------------------------------ ----------------- -----------------
During the year ended 31 March 2023, the Company initiated a
share buyback programme. Investec, as the Company's joint broker,
has been given limited authority to undertake market buybacks.
1,500,000 ordinary shares (31 March 2023: 1,050,000 ordinary
shares) have been repurchased and held in treasury by the Company
during the period ended 30 September 2023.
Subscription shareholders have no right to any dividends paid by
the Company and have no voting rights.
12. Dividends declared with respect to the period
Dividend
per ordinary
share Total dividend
Dividends declared pence GBP'000
-------------------------------------------------------- ------------- --------------
First interim dividend in respect of the period ended
30 September 2023 2.00 15,420
Second interim dividend in respect of the year ended 31
March 2023 2.00 15,449
-------------------------------------------------------- ------------- --------------
2.00 15,449
-------------------------------------------------------- ------------- --------------
Dividend
per ordinary
share Total dividend
Dividends declared pence GBP'000
----------------------------------------------- ------------- --------------
Second interim dividend in respect of the year
ended 31 March 2023 1.50 8,920
----------------------------------------------- ------------- --------------
1.50 8,920
----------------------------------------------- ------------- --------------
On 28 November 2023, the Board approved a distribution of 2.00
pence per share with respect to the six months ended 30 September
2023. The record date for the distribution is 8 December 2023 and
the payment date is 22 December 2023.
13. Related party transactions
Directors
The Company has four non-executive Directors, each of whom is
considered to be independent. Directors' fees for the six months
ended 30 September 2023 amounted to GBP92,500 (30 September 2022:
GBP92,500), of which GBPnil (31 March 2023: GBPnil) was outstanding
at the period end.
Investments
As part of the initial acquisition of Communications Investments
Holdings s.r.o. (CIH) in April 2021, the Company acquired a loan
due from CIH which accrues interest at 9.9% per annum. The loan
investment was transferred to the Company's subsidiary Cordiant
Digital Holdings Two Ltd (CDH2) on 31 May 2022, in exchange for a
promissory note. The balance on the promissory note investment at
30 September 2023, including accrued interest, was GBP32.2 million
(31 March 2023: GBP32.6 million).
In January 2022, the assets of Hudson were acquired by the
Company's subsidiary CDIL Data Centre USA LLC. The Company provided
funding for this transaction in the form of equity contributions.
The balance of the equity investment at 30 September 2023, was
GBP52.5 million (31 March 2023: GBP52.2 million). The Company has
also provided additional funding during the period ended 30
September 2023 in the form of loans totalling GBP2.8 million.
Company subsidiaries
During the period ended 30 September 2023, the Company borrowed
an additional GBP149.0 million (EUR 172.9 million) from its
indirect subsidiary, Cordiant Digital Holdings Two Limited (CDH2)
to bring its total borrowings owing to CDH2 to GBP168.9 million
(EUR 196.0 million) as at 30 September 2023. The loan is subject to
interest charged at a variable rate. Interest charged during the
period amounted to GBP4.0 million (30 September 2022: nil) of which
GBP1.3 million remains outstanding at period end and is included in
current liabilities on the Statement of Financial Position.
The expenses paid by the Company on behalf of its subsidiary
companies during the period amounted to GBP2.9 million (30
September 2022: GBP0.2 million).
14. Ultimate controlling party
In the opinion of the Board, on the basis of the shareholdings
advised to them, the Company has no ultimate controlling party.
15. Subsequent events
On 18 October 2023, the Company acquired Speed Fibre DAC,
Ireland's leading open access fibre infrastructure provider which
operates via its subsidiaries Enet and Magnet Plus. The Company has
funded this acquisition through a combination of equity and
debt.
On 30 June 2023, the Company's subsidiary Cordiant Digital
Holdings UK Ltd (CDHUK) entered into an agreement to acquire 74.99%
of the shares of Norkring België N.V. (Norkring), a Belgian
broadcasting company. On 1 November 2023, CDHUK entered into an
agreement to acquire the remaining 25.01% of Norkring. Both
agreements are conditional upon receiving clearance under Belgium's
foreign direct investment rules. CDHUK is acquiring Norkring for a
total enterprise value of EUR5.25 million, subject to customary
adjustments.
Other than the events above and dividends declared as disclosed
in note 12, there are no other material subsequent events.
Glossary of capitalised defined terms
Administrator means Aztec Financial Services (Guernsey) Limited
AFFO means adjusted funds from operations
AIC means the Association of Investment Companies
AIC Code means the AIC Code of Corporate Governance
AIC SORP means the AIC Statement of Recommended Practice
Board means the board of Directors of the Company
CIH means Communications Investments Holdings s.r.o.
Company means Cordiant Digital Infrastructure Limited
Company's Annual Report 2023 means the Company's annual report for
the year ended 31 March 2023
Company Law means the Companies (Guernsey) Law 2008
Company's Prospectus means the prospectus issued by the Company on
29 January 2021 in relation to its IPO
CRA means České Radiokomunikace s.a.
C Shares means C shares of no par value each in the capital of the
Company issued pursuant to the Company's placing programme as an alternative
to the issue of ordinary shares
DCF means discounted cash flow
Digital Infrastructure means the physical infrastructure resources
that are necessary to enable the storage and transmission of data by
telecommunications operators, corporations, governments and individuals.
These predominantly consist of mobile telecommunications/broadcast towers,
data centres, fibre optic networks, in-building systems and, as appropriate,
the land under such infrastructure. Digital Infrastructure assets do
not include switching and routing equipment, servers and other storage
devices or radio transmission equipment or software
Directors means the directors of the Company
DTR means the Disclosure Guidance and Transparency Rules issued by
the FCA
EBITDA means earnings before interest, taxation, depreciation and amortisation
EEA means the European Economic Area
Emitel means Emitel S.A.
ESG means environmental, social and governance
EV means enterprise value
FCA means the UK Financial Conduct Authority
Hudson means Hudson Interxchange (previously operating under the name
DataGryd Datacenters a trading name of CDIL Data Centre USA LLC)
IAS means international accounting standards as issued by the Board
of the International Accounting Standards Committee
IASB means International Accounting Standards Board
IFRS means the International Financial Reporting Standards, being the
principles-based accounting standards, interpretations and the framework
by that name issued by the International Accounting Standards Board
Interim Report means the Company's half yearly report and unaudited
condensed interim financial statements for the six-month period ended
30 September 2023
Investment Entity means an entity whose business purpose is to make
investments for capital appreciation, investment income, or both.
Investment Manager means Cordiant Capital Inc.
IoT means the Internet of Things
IPEV Valuation Guidelines means the International Private Equity and
Venture Capital Valuation Guidelines
IPO means the initial public offering of shares by a company to the
public
LSE means the London Stock Exchange
NAV or net asset value means the value of the assets of the Company
less its liabilities as calculated in accordance with the Company's
valuation policy and expressed in pounds sterling
Norkring means Norkring België NV
RCF means revolving credit facility
Speed Fibre means Speed Fibre Designated Activity Company
Subscription Shares means redeemable subscription shares of no par
value each in the Company, issued on the basis of one Subscription Share
for every eight ordinary shares subscribed for in the IPO
TCFD means Task Force on Climate-related Financial Disclosures
UK or United Kingdom means the United Kingdom of Great Britain and
Northern Ireland
US or United States means the United States of America, its territories
and possessions, any state of the United States and the District of
Columbia
USD means United States dollars.
WACC means weighted average cost of capital.
Directors and general information
Directors (all appointed 26 January 2021)
Shonaid Jemmett-Page Chairman
Sian Hill Audit Committee Chairman and Senior Independent
Director
Marten Pieters
Simon Pitcher
All independent and of the registered office below.
Website www.cordiantdigitaltrust.com
ISIN (ordinary shares) GG00BMC7TM77
Ticker (ordinary shares) CORD
SEDOL (ordinary shares) BMC7TM7
Registered Company Number 68630
Registered office Legal advisors to the Company
East Wing Gowling WLG (UK) LLP
Trafalgar Court 4 More London Riverside
Les Banques London
St Peter Port SE1 2AU
Guernsey
GY1 3PP
Investment manager Carey Olsen (Guernsey) LLP
Cordiant Capital Inc. Carey House
28th Floor Les Banques
Bank of Nova Scotia Tower St Peter Port
1002 Sherbrooke Street West Guernsey
Montreal GY1 4BZ
QC H3A 3L6
Company secretary and administrator Registrar
Aztec Financial Services (Guernsey) Computershare Investor Services
Limited (Guernsey) Limited
East Wing 1st Floor Tudor House
Trafalgar Court Le Bordage
Les Banques St Peter Port
Guernsey Guernsey
GY1 3PP GY1 4BZ
Auditor Brokers
BDO Limited Investec Bank plc
PO Box 180 30 Gresham Street
Place du Pre London
Rue du Pre EC2V 7QP
St Peter Port
Guernsey
GY1 3LL
Principal banker and custodian Jefferies International Limited
The Royal Bank of Scotland International 100 Bishopsgate
Limited London
Royal Bank Place EC2N 4JL
1 Glategny Esplanade
St Peter Port
Guernsey
GY1 4BQ
Receiving agent
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol
BS99 6AH
Cautionary Statement
The Chairman's statement and Investment Manager's review have
been prepared solely to provide additional information for
shareholders to assess the Company's strategies and the potential
for those strategies to succeed. These should not be relied on by
any other party or for any other purpose.
The Chairman's statement and Investment Manager's review may
include statements that are, or may be deemed to be,
'forward-looking statements'. These forward-looking statements can
be identified by the use of forward-looking terminology, including
the terms 'believes', 'estimates', 'anticipates', 'expects',
'intends', 'may', 'will' or 'should' or, in each case, their
negative or other variations or comparable terminology.
These forward-looking statements include all matters that are
not historical facts. They appear in a number of places throughout
this document and include statements regarding the intentions,
beliefs or current expectations of the Directors and the Investment
Manager, concerning, amongst other things, the investment
objectives and investment policy, financing strategies, investment
performance, results of operations, financial condition, liquidity,
prospects, and distribution policy of the Company and the markets
in which it invests.
By their nature, forward-looking statements involve risks and
uncertainties because they relate to events and depend on
circumstances that may or may not occur in the future.
Forward-looking statements are not guarantees of future
performance.
The Company's actual investment performance, results of
operations, financial condition, liquidity, distribution policy and
the development of its financing strategies may differ materially
from the impression created by the forward-looking statements
contained in this document.
Subject to their legal and regulatory obligations, the Directors
and the Investment Manager expressly disclaim any obligations to
update or revise any forward-looking statement contained herein to
reflect any change in expectations with regard thereto or any
change in events, conditions or circumstances on which any
statement is based.
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