REG - Cordiant Digital Inf - Interim report to 30 September 2024
27/11/2024 07:00
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RNS Number : 7648N Cordiant Digital Infrastructure Ltd 27 November 2024
27 November 2024
LEI: 213800T8RBBWZQ7FTF84
Cordiant Digital Infrastructure Limited
Interim report for the six months ended 30 September 2024
Good performance, reflecting strength of underlying portfolio companies
Cordiant Digital Infrastructure Limited (the Company), the operationally
focused specialist digital infrastructure investor, is pleased to announce its
unaudited interim results for the six months to 30 September 2024.
Financial highlights:
- Strong overall portfolio EBITDA growth for the six-month period, increasing
15.2% over the prior year to £77.4 million and revenue increasing 9.3% to
£160.8 million, on a like‑for‑like, pro forma, constant currency basis,
reflecting:
o New broadcast and telecom contracts at Emitel and CRA
o Strong growth in CRA's cloud and data centre business
o Impact of inflation-linked revenues
- NAV per share increased to 124.4p at 30 September 2024 (31 March 2024: 120.1p
or 117.9p ex-dividend), driven by portfolio company EBITDA growth and a small
(10bps) reduction in the weighted average discount rate, offset by adverse
foreign exchange movements.
- Profit for the period of 5.4% of opening ex-dividend NAV (7.9% excluding
adverse foreign exchange movements), ahead of the 9% annual target. Share
price total return over the period was 38.9%.
- Growth capital expenditure of £13.3 million in the six-month period to drive
future revenues, including:
o Connection capex to new customers at Speed Fibre
o DAB+ radio network investment at CRA and Emitel following contract wins
o Construction of new telecom towers at Emitel
o Cloud and data centre investment at CRA
- Interim dividend of 2.1p per share, in line with 4.2p per share target for the
year. Full year target dividend of 4.2p is 4.7x covered by EBITDA, 1.8x
covered by AFFO (adjusted funds from operations).
- c.£800 million of debt facilities refinanced and extended by the Investment
Manager. No debt facilities maturing before mid-2029, removing medium-term
refinancing risk. Net gearing ratio at 30 September 2024 of 4.2x EBITDA, or
38.1% on a GAV basis. 71% of all debt is on a fixed interest basis.
- Three million additional shares acquired by the Company Directors, the
Investment Manager and staff, since 31 March 2024, including 2.6 million by
Steven Marshall, Chairman of Cordiant Digital Infrastructure Management. Total
ownership now at 1.8%.
- Post period end: acquisition of 37.2% interest in Belgian data centre
businesses DCU Invest and DCU Brussels announced, in partnership with TINC NV,
with the Company's consideration expected to be €72.3 million, subject to
customary adjustments. These transactions are expected to close in Q1 2025.
Outlook
The Board has previously acknowledged that the Company's shares have continued
to trade at a significant discount to NAV and expressed its belief that the
causes of this are macroeconomic and being felt market wide, rather than being
specific to the Company. During the period, the Board has noted that the
discount to NAV has begun to narrow. At 30 September 2024, the discount to NAV
was 30.5% (31 March 2024: 46.7%). While this is a positive development, there
remains a differential between the two, which the Board believes is
unwarranted in light of the Company's performance and prospects. The
underlying strengths of the Company and our portfolio, the continuing demand
for digital infrastructure and the attractiveness of our core markets together
lead the Board to look forward to the remainder of the financial year with
confidence.
Commenting, Shonaid Jemmett-Page,Chairman of Cordiant Digital Infrastructure
Limited, said:
"I am pleased to report a good performance by the Company for the six months
to 30 September 2024, reflecting the excellent performance of our portfolio
companies, which offer robust cashflows and strong earnings growth. We
maintained our focus on efficient investment in the existing portfolio,
through disciplined capex spend, coupled with bolt‑on acquisitions where
appropriate. We also continued to selectively look at opportunities which
reflect the current pricing environment, and which further diversify the
portfolio by geography and asset class. Post period end, we announced
agreements to acquire and combine interests in Belgian data centre operators,
DCU Invest and DCU Brussels. The Company is in a strong position to continue
its approach to the allocation of capital in support of shareholder returns
through its Buy, Build & Grow model."
Interim Report and results webcast for analysts
The 2024 Interim Report will be available to download at
cordiantdigitaltrust.com/investors/results-centre/ from 27 November 2024.
The Company will be hosting an analyst meeting at 10.00am GMT 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.
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
PR Advisor
Philip Dennis / Ali AlQahtani / Charles Denley-Myerson
Notes to editors:
About the Company
Cordiant Digital Infrastructure Limited primarily invests in the core
infrastructure of the digital economy: data centres; fibre-optic networks;
telecommunications and broadcast towers - in Europe and North America.
Further details about the Company can be found on its website
at www.cordiantdigitaltrust.com (http://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 £795 million in equity, along with
a €375 million debt package comprising a €200 million Eurobond and €175
million of committed capex and revolving facilities, deploying capital into
five acquisitions: CRA, Hudson, Emitel, Speed Fibre and Norkring, which
together offer stable, often index-linked income, and the opportunity for
growth, in line with the Company's Buy, Build & Grow model.
About the Investment Manager
Cordiant Capital Inc 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.
Cordiant focuses on the next generation of infrastructure and real assets:
sectors (digital infrastructure, energy transition infrastructure and the
agriculture value chain) characterised by growth tailwinds and technological
dynamism. It also applies a strong sustainability and ESG overlay to its
investment activities.
With a mix of managed funds offering both value-add and core strategies in
equity and direct lending, Cordiant's sector investment teams (combining
experienced industry executives with traditional private capital investors)
work with investee companies to develop innovative, tailored financing
solutions backed by a comprehensive understanding of the sector and
demonstrated operating capabilities. In this way, Cordiant aims to provide
value to investors seeking to complement existing infrastructure equity and
infrastructure debt allocations.
Chairman's statement
I am pleased to present the Interim Report for Cordiant Digital Infrastructure
Limited (the Company) for the six months ended 30 September 2024.
Introduction
The Company achieved a good financial performance for the six months to
30 September 2024, which resulted in a total return for the period of 5.4%
of ex-dividend opening NAV, ahead of the 9% annual target and notwithstanding
the adverse impact of foreign exchange during the period. NAV per share rose
to 124.4p at 30 September 2024 (31 March 2024: 120.1p or 117.9p
ex-dividend).
The profit for the period reflected the strong overall performance of the
underlying portfolio companies, offset by adverse foreign exchange movements
(totalling £22.6 million). Excluding foreign exchange movements in the
period would have resulted in a total return of 7.9%.
Portfolio strategy
The Investment Manager has a Core Plus strategy that aims to generate a stable
and reliable 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.
Since its IPO in January 2021, the Company has prudently sought out
high-quality, cash-generating mid-market assets that we viewed as attractive
investment opportunities. We have maintained our focus on capital efficient
investment in the existing portfolio, through disciplined capex spend, coupled
with bolt‑on acquisitions where appropriate. The benefit of both of these
activities is reflected in the financial performance of the portfolio.
In June 2024, we agreed a new €200 million Eurobond, in order to refinance
our existing fund-level facility and extend its maturity to July 2029. As part
of this refinancing, the Company also agreed complementary additional
facilities totalling €175 million. At the same time, the Company fully
repaid the c.€30 million vendor loan note issued as part of the acquisition
of Speed Fibre. As a result, the Company and its portfolio companies now have
no third‑party debt with a term that matures before June 2029. We believe
that this positions the Company well considering the current geopolitical and
economic uncertainties, and provides significant runway to underpin the
Company's continuing growth.
We have continued to look at opportunities which reflect the current pricing
environment and which further diversify the portfolio by geography and asset
class. In October 2024, we announced that the Company had agreed to partner
with TINC, the listed Belgian infrastructure investor, local management and
another fund managed by the Investment Manager, to invest in Belgian data
centre operator, DCU Invest, and combine it with DCU Brussels, the data centre
business of Proximus, the Belgian telecommunications group. The Company
expects the consideration for its 37.2% interest in the combined group to be
€72.3 million (£60.1 million) and to meet this from its existing undrawn
debt facilities. When completed, anticipated early 2025, the combination of
DCU Invest and DCU Brussels is expected to create a leading data centre
provider in Belgium. Further details about these acquisitions below.
Our disciplined acquisition approach has resulted in a portfolio acquired for
an EV/EBITDA multiple of approximately 10.5x, pro forma for the DCU Invest and
DCU Brussels transactions, which is predominantly supported by blue‑chip
customers and capable of generating strong cash flows through long-term
contracts.
Portfolio performance
The strong overall performance of our portfolio was again key to the Company's
results for the six months to 30 September 2024.
For the six months to 30 September 2024, on a like-for-like, constant
currency, pro forma basis, aggregate portfolio company EBITDA increased by
15.2% to £77.4 million, driven by contract wins or enhancements, cost
control, the beneficial effects of inflation on revenues and contributions
from bolt-on acquisitions. Aggregate portfolio company revenue increased by
9.3% to £160.8 million.
Emitel performed well during the period, with revenues increasing by 9.1% and
EBITDA increasing by 15.7%. Performance was primarily driven by the impact of
new broadcast contracts signed at the end of last year and the effect of
higher inflation in Poland in 2023 feeding through into 2024 revenues. Emitel
also continued to show growth in telecom infrastructure revenues, supported by
the contribution from the Polish portfolio of American Tower Corporation,
acquired in June 2023.
CRA also performed strongly, with revenue and EBITDA growth of 16.5% each
during the period. This was the result of growth across its business but was
primarily driven by the contribution from Cloud4com, which was acquired in
January 2024. CRA's broadcast business also benefited from the impact of
inflation indexation on revenues. In August 2024, CRA, working with the
Investment Manager's team, refinanced and extended its debt facilities to
2030, with a group of blue‑chip lenders. CRA continues to diversify, with a
strong focus on data centre growth. During the period, it opened its eighth
data centre, located at Cukrák, near Prague, and there was further good
progress on the proposed 26MW data centre at Zbraslav, with final permits
expected later this financial year and a memorandum of understanding to
cooperate on its construction entered into with the Czech Ministry of Industry
and Trade.
Speed Fibre's revenues for the half year increased by 4.3% through sales
growth, while EBITDA increased 7.2% over the same period. The increase in
EBITDA was driven by a weighted revenue recognition toward the front half of
the year in its Enet business. Important contract wins were also achieved with
the renewal of an agreement with National Broadband Ireland and for duct
infrastructure with a global hyperscaler.
Following its leadership change in 2023, Hudson's interim management has made
steady progress. For the period, Hudson delivered revenue growth of 1.3%.
While its EBITDA continued to be negative, the loss was 17% less than the
prior comparable period, reflecting management's focus during the year. In
August 2024, Hudson announced the construction of two new data halls with 2MW
of capacity.
For further information about each of our portfolio companies see below.
Share price performance
The Board has previously acknowledged that the Company's shares have continued
to trade at a significant discount to NAV and expressed its belief that the
causes of this are macroeconomic and being felt market wide, rather than being
specific to the Company. During the period, the Board has noted that the
discount to NAV has gradually begun to narrow. While this is a positive
development, there remains a differential between the two, which the Board
believes is unwarranted in light of the Company's performance and prospects.
At 30 September 2024, the discount to NAV was 30.5%
(31 March 2024: 46.7%).
During the period, the Board and the Investment Manager have continued to
focus on optimising portfolio performance through our Buy, Build & Grow
model and the active participation of the Investment Manager's team at the
portfolio level, while also engaging with shareholders to provide greater
insight about the drivers of value within the portfolio. My Board colleagues
and I met with a number of shareholders on a bilateral basis during the
period, to discuss the capital market challenges facing the Company and the
sector and to explain our approach to these.
The Board and the Investment Manager have previously engaged directly and
indirectly with the UK Government and the FCA in relation to the UK cost
disclosure regime and are pleased that some progress has been made in
mitigating the effects of these regulations. The Board hopes that further
progress will be made in addressing the remaining related challenges for those
wishing to invest, in order to make the sector generally more attractive.
Dividends and share buybacks
The Company's dividend policy continues to be based on the underlying
principles that, at the point the Company is fully invested, the dividend must
be covered by free cash flow generated by the portfolio and be sustainable in
future periods. The Company monitors dividend cover using an adjusted funds
from operations (AFFO) metric calculated over a 12-month period. AFFO is
calculated as normalised EBITDA less net finance costs, tax paid and
maintenance capital expenditure.
The Company continues to remain committed to a progressive dividend policy.
Reflecting that policy and the cash generative characteristics of its
portfolio companies, in June 2024 the Board approved an increase in the
annual dividend to 4.2p per share, with the payment of the second interim
dividend for the year ended 31 March 2024 of 2.2p per share on
19 July 2024. On 26 November 2024, the Board declared a dividend of 50%
of the 4.2p target, 2.1p per share, to shareholders as at the record date of
6 December 2024, to be paid on 20 December 2024.
For the 12 months to 30 September 2024, the 4.2p dividend was approximately
4.7x covered by EBITDA and 1.8x by AFFO.
In February 2023, the Company announced a discretionary share buyback
programme of up to £20 million. Under this programme it has
acquired 7.8 million ordinary shares for £5.9 million, at an average price
per share of 75.0p, or an average discount to 30 September 2024 NAV of
39.7%. The NAV accretion of the Company repurchasing these shares at such a
discount is to increase NAV per share by c.0.4p. The programme is not subject
to a set cut-off date.
Gearing and liquidity
At 30 September 2024, the Company and its portfolio companies had gross debt
equivalent to £653.3 million and net debt of £587.3 million.
This resulted in gearing as at 30 September 2024 of 4.2x, measured as net
debt divided by LTM EBITDA (including Company-level costs) or 38.1%, measured
as net debt divided by gross asset value (GAV).
The Company had total liquidity equivalent to £243.8 million at
30 September 2024, on a pro forma basis, including the DCU Invest and DCU
Brussels acquisitions, comprising £14.1 million held directly at the Company
level, £51.9 million held at portfolio level and undrawn facilities at
portfolio level equal to £177.8 million.
Principal risks and uncertainties
Although both interest rates and inflation have continued to fall, their
effects persist and capital markets for new equity investment remain
effectively closed for many investment trusts, including the Company. However,
the refinancing of debt facilities around the group, with extensions in tenors
to 2029 at the earliest, demonstrate that debt capital markets remain open to
us.
A number of our portfolio companies have growth initiatives which include
significant capital projects. This will entail some increased construction
risk and we have updated our principal risks accordingly. Further details of
the Company's risks are set out below.
Sustainability
We are a long-term investor with a clear focus on sustainability. The Board
and Investment Manager continue to prioritise reducing the impact of the
Company and its portfolio companies on our environment.
For the first time, in order to improve transparency and provide greater
granularity, in July 2024 we published a voluntary standalone Responsible
Investment Report, available on our website at www.cordiantdigitaltrust.com.
The report provides an in‑depth view of the Company's responsible investment
strategy and a detailed overview of the sustainability performance of its
portfolio companies for the year to 31 March 2024.
Board and governance
The Board receives regular updates on Company and portfolio performance from
the Investment Manager and provides objective oversight of the Investment
Manager's activities. In June 2024, the Board held one of its regular
meetings at the offices of CRA in Prague, giving us an opportunity to meet the
CRA management team in person, visit a number of operational sites and develop
a deeper insight of initiatives that are underway, such as the proposed new
data centre at Zbraslav.
During the period, the Investment Manager has again demonstrated the benefits
to shareholders of possessing deep, senior-level experience of managing and
operating world-class Digital Infrastructure businesses. The Investment
Manager has also shown to shareholders the benefit of its ability to arrange
debt facilities in‑house, without using an arranging bank to coordinate and
negotiate with a lending group. The financing outcomes achieved are believed
to be best-in-class and position the Company's capital structure optimally for
the next few years. This was achieved at a relatively low level of management
fee, based on market capitalisation and not NAV, unlike most of the Company's
peers.
Outlook
We are seeing the demand for Digital Infrastructure continue to grow. The
Company and its portfolio companies are well placed to benefit from this
demand growth and have undrawn debt facilities to invest to support this. The
underlying strengths of the Company and our portfolio, the growth in the
sector and the attractiveness of our core markets together lead the Board to
look forward to the remainder of the financial year with confidence.
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 São 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 good performance in the six months to
30 September 2024, again based on a strong operating performance by the
portfolio. NAV per share increased at 30 September 2024, reflecting a
positive total return of £49.0 million (5.4% on ex-dividend opening NAV,
6.4p per share) earned in the six months, less the second interim dividend of
£16.9 million (2.2p per share) paid in July 2024, in respect of the year to
31 March 2024.
NAV growth continues to be driven by increasing aggregate EBITDA, a result of
successful implementation of the Company's Buy, Build & Grow model. This
is to buy good quality platforms and bolt-on acquisitions; to build new assets
at construction cost from which new revenues can be earned; and to grow
existing revenues using the operational expertise of the Investment Manager.
Headwinds from the Company's aggregate foreign exchange position caused an
impact on total return for the period of −2.5%, meaning that the underlying
performance before taking foreign exchange movements into account was a total
return of 7.9%. These headwinds were offset by a modest 10bps decrease in the
weighted average discount rate of the portfolio, increasing total return by
£31.1 million.
Capital allocation
The Company has cash at Company and portfolio company level of
£66.0 million, and undrawn loan facilities across the group of
£177.8 million at 30 September 2024, pro forma for the DCU acquisitions.
This totals £243.8 million of available liquidity.
As a result of this limited available liquidity, the Investment Manager and
Board face decisions about how to allocate capital to achieve the best
outcomes for shareholders over the medium to long term.
As a result, the Investment Manager and Board have intensified engagement with
shareholders over the past 18 months to discuss the issue of capital
allocation and the discount of the Company's share price to the NAV per share.
In acknowledgment of the variety of opinions expressed, the Company continues
to take a multi-pronged approach to capital allocation.
A buyback programme was initiated in February 2023, with £20 million
approved by the Board, of which £5.9 million has been deployed, at an
average price of 75.0p, crystallising a NAV gain of 0.4p per share.
The Company remains committed to its progressive dividend policy, and
increased the dividend 5% for the year to 31 March 2024, from 4.0p per year
to 4.2p per year. To reflect this increase, a second interim dividend of 2.2p
was paid in July 2024, following the first interim dividend of 2.0p in
December 2023. For the year ended 31 March 2025, it is proposed that the
first interim dividend is 2.1p per share, being half of the previous year's
total amount. The increased 4.2p dividend remains well covered by AFFO.
The Company has also continued to prudently diversify the portfolio, agreeing
to acquire a 37.2% interest in DCU Invest and DCU Brussels, creating a
combined group of 13 data centres in Belgium, acquired for €72.3 million.
The Company is investing in partnership with another Cordiant-managed fund,
TINC, the listed Belgian infrastructure investor, and the DCU CEO, in a
complex transaction brought together by the Investment Manager.
Finally, the Company, supported by the operational expertise of the Investment
Manager, has made investments in accretive growth capital expenditure projects
at portfolio level such as: the buildout of the DAB radio networks in the
Czech Republic and Poland; build‑to‑suit tower portfolios in Poland; and
the buildout of CRA's sixth edge data centre facility at Cukrák, near Prague.
Progress on obtaining the permits for Central Europe's expected largest and
most modern data centre at Zbraslav in Prague, Czech Republic, on a
decommissioned AM radio site owned by CRA, has been made, with the final
zoning permit expected by the end of 2024.
The Investment Manager believes that the portfolio valuation remains prudent
at 30 September 2024 at 10.2x LTM EBITDA on a NAV basis, or 8.3x LTM EBITDA
if the share price discount of 30.5% at 30 September 2024 is taken into
account. Recent transaction multiples observed in the market for both tower
and data centre businesses are generally well in excess of the Company's
implied multiples. While broadcast assets typically attract a lower valuation
multiple, the Company's broadcast assets are growing faster than most European
mobile tower businesses and have higher escalation rates and a wider customer
base.
The Investment Manager is pleased with the recent progress in the share price
and observed market conditions seem to show that recent headwinds caused by
substantial redemptions of capital from across the sector are beginning to
abate. The Company's share price has increased 37.1% to 86.4p at
30 September 2024, from a six-month low of 63p in April 2024. However,
86.4p remains a 30.5% discount to the 30 September 2024 NAV of 124.4p.
The Investment Manager believes that demonstrated strong operational
performance, value-creating capital expenditure, acquisition price discipline
and significant alignment of interests through the Company's management fee
based on market capitalisation and not NAV, should all be attractive features
appealing to shareholders and prospective shareholders.
Since 31 March 2024, the Directors, the Investment Manager and its staff
have made further investments in the Company's shares, acquiring in total
3.0 million more shares to bring the combined total to 13.8 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 10.5 million shares. At the date of this report, the
Directors, the Investment Manager and its staff owned 1.8% of the ordinary
issued share capital of the Company.
Activity in the period
In April 2024, CRA announced that it had opened a new edge data centre at
Cukrák, near Prague. This is CRA's eighth data centre and is located on land
owned by CRA in repurposed buildings on site. CRA is assessing offers from
potential tenants to lease the whole space. In addition, the final zoning
permit for the proposed new 26MW data centre at Zbraslav is expected to be
received before the end of 2024, and the construction permit is expected in Q1
2025.
In July 2024, the Company announced the refinancing of its fund-level
€200 million Eurobond debt facility, now repayable as a bullet in 2029. The
Company also arranged additional complementary undrawn credit facilities
totalling €175 million, split between a growth capex facility of
€105 million and a multi‑currency revolving credit facility of
€70 million. These additional facilities have the same maturity date and
repayment structure as the Eurobond and provide the Company with an
incremental long-term funding commitment for growth investments under the
Buy, Build & Grow model, and can enable more efficient management of the
group's balance sheet.
The terms on the refinanced Eurobond represent an improvement on the original
Eurobond, with a longer tenor and improved credit margin ratchet, which will
range from 3.75% to 4.75% over EURIBOR or the five-year EURIBOR swap rate,
depending on net leverage. Three-quarters of the new Eurobond was issued as a
fixed rate instrument, with the remaining amount to be floating rate in
nature.
In August 2024, the Company announced the successful refinancing of CRA's bank
debt facilities. The term of all facilities was extended to August 2030 and
additional undrawn revolving credit facilities of CZK1.1 billion (£36.4
million) were secured. The new debt package has a margin of 2.00% over PRIBOR,
which could reduce to 1.75% depending on net leverage. CRA will benefit from
the existing interest rate swaps that hedged the previous facility until March
2025 when they expire. This hedge results in an effective all-in interest rate
on the hedged portion of the loan of 2.76%. Following the expiry of the hedge,
the company will look to hedge the interest cost.
Taken together with the Eurobond refinancing in July 2024, and the Emitel
refinancing in 2023, the Investment Manager has successfully refinanced and
extended c.£800 million of bank debt.
In August 2024, Hudson announced that it was beginning work on expanding
capacity at 60 Hudson Street by developing two data halls. Completion of the
project is currently scheduled for Q3 2025.
During the six-month period, Emitel agreed two new ten-year TV broadcast
contracts on MUX 8 with two new broadcasters, Fratria and Telewizja Republika,
both of which began broadcasting and generating revenue during the period.
Both new contracts have revenues that are fully indexed to inflation.
After the period end, the Company announced that it had entered into
agreements in partnership with TINC, the listed Belgian infrastructure
investor, and another fund managed by the Investment Manager, to acquire 37.2%
of DCU Invest from TINC and Friso Haringsma, the CEO of DCU Invest, who will
continue in role, and to combine DCU Invest with DCU Brussels, the data centre
business of Proximus, the Belgian telecommunications group. More details are
provided below.
Financial highlights
During the six months to 30 September 2024, the Company achieved a profit of
5.4% of opening ex-dividend NAV, or £49.0 million (30 September 2023: £9.4
million), or 6.4p per share. Net assets were £952.4 million
(31 March 2024: £920.7 million, £903.8 million ex-dividend),
representing a NAV per share of 124.4p (31 March 2024: 120.1p, 117.9p
ex-dividend). This movement in NAV per share comprised a positive total return
for the six-month period of 6.4p, offset by the payment of the second interim
dividend for 2024 of 2.2p in July 2024.
The total return reflects strong underlying operating performance across the
portfolio and a modest 10bps decrease in the weighted average discount rate,
offset by adverse foreign exchange movements in the period. The Company
remains a net beneficiary of foreign exchange movements when measured from
inception in February 2021 to 30 September 2024.
Application of IFRS
As disclosed in the Company's Annual Report 2024, the Company holds only
Hudson directly. Emitel, CRA, Speed Fibre and Norkring are all held through
its wholly-owned subsidiary, Cordiant Digital Holdings UK Limited. The
Eurobond was refinanced in July 2024 and is issued by 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, Speed Fibre,
Norkring and the Eurobond. As in previous reports, the underlying elements of
the overall value movement attributable to foreign exchange movements and
value movement and income from each portfolio company are identified in Table
3. 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 2 shows the underlying components of the IFRS
Statement of Financial Position.
.
Table 1: Reconciliation of Statement of Comprehensive Income to Table 3
Accrued income Total unrealised value movement Net foreign exchange movement Intercompany balances Fund expenses Interest expense IFRS P&L
Movement in fair value of investments 9.4 74.6 (25.5) 3.8 0.5 (8.7) 54.1
Investment acquisition costs - - - - (1.3) - (1.3)
Other expenses - - - - (4.0) - (4.0)
Foreign exchange movements on working capital - - 2.9 - - - 2.9
Finance income 1.1 - - - - - 1.1
Finance expense - - - (3.8) - - (3.8)
10.5 74.6 (22.6) - (4.8) (8.7) 49.0
Table 2: Underlying components of Statement of Financial Position
Emitel CRA Speed Hudson Norkring Cash Inter-company balances Other assets and liabilities Eurobond IFRS Total
Fibre
Investments 558.5 403.3 81.6 40.8 5.6 0.5 156.8 7.1 (166.4) 1,087.8
Receivables and prepayments - - - - - - 0.1 8.9 - 9.0
Cash - - - - - 13.6 - - - 13.6
Payables - - - - - - (1.9) (1.1) - (3.0)
Group payables - - - - - - (155.0) - - (155.0)
558.5 403.3 81.6 40.8 5.6 14.1 - 14.9 (166.4) 952.4
Financial performance in the period
This section, including valuation, foreign exchange, costs and gearing, refers
to the figures in Table 2 and Table 3 on the non‑IFRS basis.
Table 3: NAV bridge for the six-month period to 30 September 2024
£m
Opening NAV as at 1 April 2024 920.7
Dividend paid July 2024 (16.9)
Opening ex-dividend NAV 903.8
Accrued income 10.5
Value movement 74.6
Foreign exchange movement (22.6)
Fund expenses (4.8)
Interest expense (8.7)
Net change in shares (0.4)
Closing NAV as at 30 September 2024 952.4
Valuation
The Investment Manager prepares semi-annual valuations according to the IPEV
Valuation Guidelines and IFRS 13. These valuations are reviewed and
challenged by the Board. The Board also commissions independent third party
valuations at the half year and at year end from an expert valuations group
at a Big 4 accounting firm.
The Investment Manager and Board are keenly aware of the scepticism that some
valuations of private assets elicit at a time of substantial share price
discounts, and so take great care to maintain a rigorous process, using market
information from reputable third party sources wherever possible. Discounted
cash flow (DCF) is the primary methodology of valuation, as noted in the
Company's IPO prospectus. The Investment Manager remains confident that the
quality of earnings included in the DCF models, and the actual cash accretion
observed in the net debt figures for each asset included in the bridge from
enterprise value to equity value show the qualities of the portfolio,
notwithstanding volatility in the market-observable inputs used every six
months to construct the weighted average cost of capital (WACC) used for each
valuation as a discount rate.
Table 4 shows the movement in the Company's average WACC over time, weighted
for the investments held at each reporting date. Since the low point for risk
free rates at March 2022, the Investment Manager raised the WACC 173bps to
the high point at September 2023. The WACC has decreased slightly between
September 2023 and September 2024 by 28bps to 9.5%. This is substantially
less than the decrease in risk free rates in the Company's two main markets,
Poland and the Czech Republic, where risk free rates have decreased 100bps and
275bps respectively since 1 September 2023 as it reflects the longer term
view taken by the Investment Manager in reflecting market volatility in risk
free rates.
Table 4: Weighted average discount rates over time
31 Mar 2022 8.05%
30 Sep 2022 8.52%
31 Mar 2023 9.60%
30 Sep 2023 9.78%
31 Mar 2024 9.60%
30 Sep 2024 9.50%
Table 5 shows the breakdown of the WACC at 30 September 2024, compared to
31 March 2024.
Table 5: Weighted average cost of capital at 30 September 2024
Range low point Range high point Weighted average mid-point
Cost of equity 10.2% 12.1% 11.1%
Cost of debt 4.4% 7.0% 6.1%
WACC 8.3% 10.8% 9.5%
Weighted average cost of capital at 31 March 2024
Range low point Range high point Weighted average mid-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%
In aggregate, the value of the investment portfolio increased 6.9% in the
six‑month period. This comprised an unrealised valuation increase of 7.3%,
unrealised foreign exchange losses of −2.5%, and 2.1% attributable primarily
to the cash repayment of the Speed Fibre vendor loan note.
The largest unrealised valuation movements before foreign exchange movements
were observed on Emitel (+£47.2 million) and CRA (+£26.5 million), driven
by slightly reduced WACCs, new contract wins, and strong growth in EBITDA over
the period.
The equity value of Speed Fibre increased £22.9 million before foreign
exchange movements, due to the repayment of the vendor loan note
(£25.5 million) and a marginal valuation increase of £0.8 million. While
EBITDA has increased 7.2% for this six‑month period over the prior
comparable period, the Investment Manager has prudently reflected some
expected softness in future sales in the cash flows included in the DCF.
Hudson remains an asset that is not performing to expectations and the
Investment Manager recognised a modest write‑down of £(0.4) million as a
result of a slight increase in WACC. The carrying value at the period end was
£40.8 million, or 4.3% of the value of the portfolio.
Table 6: Bridge table breakdown of unrealised value movement
Unrealised value movement
Emitel 47.2
CRA 26.5
Speed Fibre 0.8
Hudson (0.4)
Norkring 0.5
Total unrealised value movement 74.6
Foreign exchange
The Company has recognised an unrealised foreign exchange loss in the six
months of £22.6 million (from inception to 30 September 2024: gain of
£27.3 million). This loss in the six months comprises a loss of
£(11.8) million on Polish zloty, a loss of £(9.1) million on Czech crowns
and combined net loss of £(1.7) million on US dollar and Euro. While the
Investment Manager hedges individual cash flows between the Company and
portfolio companies through forward contracts, no balance sheet hedging has
been undertaken to date. The cost of doing so using forward contracts,
considered to be the lowest cost approach, has been disproportionate to the
benefit, such that the aggregate cost of hedging would, over several years,
consume the gain being protected. Notwithstanding, the Investment Manager and
Board have kept the Company's hedging strategy under regular review, given the
volatility in foreign exchange rates and movement in forward points in the
Company's respective currency pairs. The Company is a long-term investor in
the portfolio and currently does not seek to manage balance sheet foreign
exchange exposure from reporting period to reporting period.
Table 7: Bridge table breakdown of unrealised foreign exchange movement
Unrealised foreign exchange movement
Emitel (11.8)
CRA (9.1)
Speed Fibre (2.1)
Hudson (2.6)
Norkring (0.1)
Working capital FX 3.1
Total unrealised FX movement (22.6)
Costs
In the six-month period, the Company and its intermediate holding subsidiaries
incurred £4.8 million of costs. The management fee of £2.9 million (30
September 2023: £3.1 million) is reduced from the prior comparable period
because management fees are calculated on the basis of the Company's market
capitalisation, not its NAV, thus aligning the Investment Manager's interests
with those of shareholders. Other costs of £1.7 million relate to fund
operating costs and directors' fees. The annualised ongoing costs ratio,
calculated in accordance with the guidelines published by the AIC is 1.0% per
annum.
Of £8.7 million interest expense incurred in the period, £8.4 million of
costs related to the Eurobond debt facility. The Eurobond has been
€200 million drawn since 5 June 2023, and was refinanced in July 2024;
the costs include interest, commitment fee, agency fees and amortised deal
arrangement costs. The balance of £0.3 million related to interest on the
Speed Fibre vendor loan note.
Gearing
Since inception, the Investment Manager has taken a prudent approach to the
levels of debt within the Company and its portfolio companies. The Investment
Manager has implemented a capital structure that was intended to be robust if
the interest rate environment did not remain as benign as when the Company
began operations, and this has so far proved resilient to macro and debt
market shocks since 2021. The Investment Manager has the expertise internally
to arrange debt facilities, and so does not use banks or other intermediaries
for this purpose. The Investment Manager has successfully rearranged
c.£800 million of debt facilities, securing a strong package of terms and
including extra liquidity, primarily in the form of growth capex facilities to
support value creation opportunities in the portfolio.
At 30 September 2024, there were four debt facilities in the Company's group
at; Emitel, CRA, Speed Fibre and the fund‑level Eurobond. The €375
million Eurobond is a term loan, with €200 million drawn as at
30 September 2024 and a bullet repayment in July 2029. 75% of the drawn
Eurobond interest is fixed in nature.
Aggregated together, gearing as measured by net debt (i.e. including cash
balances held around the group) divided by aggregate EBITDA (including the
costs at Company level such as management fee) the Company's gearing is 4.2x.
Each of Emitel and CRA have individual net gearing on this basis of less than
2.7x. This is substantially lower than most tower companies which might be
viewed as comparators of either business.
Net debt as a percentage of gross asset value was 38.1%. 50% is the maximum
for this ratio, calculated at the time of drawdown, as required in the
Company's IPO prospectus.
71% of all debt is on a fixed-interest basis, with the remainder floating;
none is inflation linked. The Company has executed interest rate hedging for
60% of the new Emitel facilities and is assessing options for fixing the
remainder. The average margin across all facilities remains 2.9%, which the
Investment Manager still considers to represent good value.
The Investment Manager believes that the quality of gearing is as important as
the quantum and so has put in place long-dated facilities (including the
Eurobond term loan) with good quality groups of banks and with interest hedged
at advantageous rates where possible. The group now has no refinancing
requirement until mid‑2029.
Dividend coverage
The Company's progressive dividend policy is ahead of the schedule laid out in
its prospectus at IPO. The Company reaffirms its commitment to a progressive
dividend policy, supported at all times by a strongly cash‑generative
portfolio, as measured by the AFFO. The dividend remains very well covered by
AFFO, which seeks to track whether the portfolio generates sufficient earnings
less fund-level costs, finance costs, tax and maintenance capex to cover the
dividend. AFFO has increased to 1.8x. The 4.2p per share dividend is covered
4.7x by aggregate portfolio company EBITDA.
Table 8 shows the calculation of AFFO for the 12 months to
30 September 2024.
Table 8: Calculation of adjusted funds from operations (AFFO)
Twelve months to 30 September 2024(1) (unaudited)
£m
Portfolio company revenues 318.1
Portfolio company normalised EBITDA 150.6
Dividend coverage, EBITDA basis 4.7x
Net Company-specific costs (9.8)
Net finance costs (40.1)
Net taxation, other (23.5)
Free cash flow before all capital expenditure 77.2
Maintenance capital expenditure(2) (19.8)
Adjusted funds from operations 57.4
Dividend at 4.2p per share (32.2)
Dividend cover 1.8x
(1)At average foreign exchange rates for the period.
(2)Aggregate growth capital expenditure of £27.2 million was invested in the
12 months to 30 September 2024 across the portfolio.
Investee company performance
For the six months to 30 September 2024, the portfolio companies generated
combined revenue of £160.8 million, representing a 9.3% increase over the
prior year, on a like-for-like, pro forma, constant currency basis. Aggregate
portfolio EBITDA increased 15.2% over the prior year, on a like‑for‑like,
pro forma, constant currency basis, to £77.4 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, strong growth at CRA's cloud and data centre business,
together with the impact of inflation-linked revenues feeding through, usually
with a year's lag.
During the six months to 30 September 2024, across the portfolio companies
£9.6 million was invested in maintenance capital expenditure and
£13.3 million in growth capital expenditure.
Growth capital expenditure included new customer connection build-out at Speed
Fibre, investment related to the DAB+ contract win (previously announced by
the Company on 8 November 2023), 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 £653.3 million, a slight reduction of £41.4 million since
31 March 2024 reflecting the repayment of the Speed Fibre vendor loan note
in July 2024, offset by balances drawn by portfolio companies on capex
facilities.
Aggregate cash balances at the Company, subsidiary and platform level, were
equivalent to £66.0 million. This comprised £14.1 million at the Company
and holding company level, and £51.9 million at portfolio company level.
Including undrawn debt facilities at fund and portfolio company level, total
liquidity was equivalent to £243.8 million, pro forma for the DCU
acquisitions.
Outlook
The Investment Manager is pleased with the overall quality of assets and
underlying cash flows in the portfolio. The liquidity that the Company has
available will support the dividend and fund growth capital expenditure in
value-creating opportunities in the portfolio. With the innovatively
constructed acquisition and combination of the DCU Invest and DCU Brussels
data centre businesses signed in October 2024, the Investment Manager has
demonstrated its ability to put together a complex transaction with partners,
which it expects to contribute to shareholder returns.
Based on the solid performance since inception, which has continued up to 30
September 2024, the Investment Manager believes the Company remains well
placed to deliver as planned in the year ending 31 March 2025. The
Investment Manager looks forward to the remainder of the year and beyond with
confidence.
Emitel
Emitel £m
Original cost 353.0
Value at 1 April 2024 525.0
Interest accrued on shareholder loan in the period 1.4
Repayment by Emitel of shareholder loan principal and accrued interest in the (3.3)
period
Unrealised value gain in the period 47.2
Unrealised foreign exchange loss in the period (11.8)
Value at 30 September 2024 558.5
Total distributions paid by Emitel to the Company in the period, including 11.3
£3.3m of shareholder loan and interest repayment and £8.0m in dividends
Financial performance in the period
Emitel has had a strong start to the year. For the first six months to
30 June 2024 of its financial year to 31 December 2024, revenue increased
9.1% to PLN 319.2 million (£63.3 million at average exchange rates for the
period) and EBITDA increased by 15.7% to PLN 218.3 million (£43.3 million
at average exchange rates for the period).
This performance primarily reflected the effect of the two new channels for
which contracts were signed at the beginning of the year, and which have
contributed new revenues for the majority of the first six months.
There was also a time lag in the receipt of contractual inflation-adjusted
revenues. For such contracts, 2023 inflation of 11.4% is incorporated from
1 January 2024 onwards; approximately 86% of Emitel's revenues have full or
partial inflation-linkage.
Emitel has also successfully controlled energy costs during the period,
judiciously hedging costs forward at advantageous prices, supporting EBITDA
growth.
In Q3 2023, Emitel signed a new loan facilities agreement with a consortium
of leading Polish and international banks. As at 30 September 2024, the
aggregate amount of debt drawn was PLN 1,328 million (£ 258 million).
Emitel is less than 2.7x geared, as measured by net debt divided by EBITDA at
30 September 2024, which is conservative compared to comparable tower
businesses. Of the interest payable on the bank debt at 30 September 2024,
60% was fixed rate and 40% floating rate. Emitel and the Investment Manager
are keeping the hedging approach towards the floating rate debt under constant
review as interest rates in Poland appear to slowly trend downwards.
Emitel continues to be strongly cash generative and since March 2024 has paid
distributions totalling PLN 57 million (£11.3 million) to the Company.
Notwithstanding this distribution, Emitel's cash balances increased to
PLN 171 million (£33.2 million) over the course of the six-month period.
Underlying cash generation during the period was offset by the distributions
to the Company mentioned above.
Operations
Emitel's contracted orderbook remains strong at more than PLN 2.8 billion
(more than £544 million), with contracts extending out as far as 2043. The
weighted average contract length in TV broadcasting is six years, three years
in radio broadcasting and 12 years in telecom infrastructure services.
During the period, Emitel signed a further two new 10-year DTT broadcast
contracts. The first, with Telewizja Republika, began broadcasting in
July 2024, and the second, with Fratria (channel wPolsce24), began
broadcasting in September 2024. Both contracts are to be broadcast from MUX8,
and both contracts' revenues are linked to inflation.
In May 2024, Emitel concluded an agreement with broadcaster CDA S.A. to
include an online shop, Kapitan.pl, accessible to viewers via broadcast from
MUX8. This hybrid TV offer is the first service of its kind on a Digital
Terrestrial TV (DTT) platform and illustrates how Emitel is developing hybrid
TV technology to offer new services for additional revenues.
In June 2024, Emitel acquired a small local mobile tower company, RTTS, with
five towers and four under construction, with Orange Poland as the anchor
tenant. This acquisition was funded using Emitel's own cash resources and
further cements its relationship with Orange.
In June 2024, Emitel signed a new contract with the water authorities in
Wrocław for the installation of 25,000 smart water meters, further extending
its IoT network in Poland.
Emitel continues to build out the national and regional DAB radio networks for
which it won the contracts to build and run in 2023. The contract is a
renewal, as well as an expansion, of an existing contract held by Emitel and
is also expected to result in incremental extra revenues.
On 31 December 2024, Emitel CEO Andrzej Kozłowski will step down from his
current role but remain with the company, joining its supervisory board.
Current CFO, Maciej Pilipczuk, will take over as CEO.
Outlook
Demand for data and Digital Infrastructure in Poland remains strong and was
supported by continued growth in GDP during the year. Emitel remains well
positioned to benefit from these positive trends in Poland.
CRA
CRA £m
Original cost 305.9
Value at 1 April 2024 385.9
Unrealised value gain in the period 26.5
Unrealised foreign exchange loss in the period (9.1)
Value at 30 September 2024 403.3
Financial performance
CRA has also made a strong start to the year.
Revenue for the first six months of its financial year to 30 September 2024
increased by 16.5% to CZK 1.4 billion (£47.9 million at average exchange
rates for the period) and EBITDA also increased 16.5% to CZK 0.7 billion
(£23.9 million at average exchange rates for the period).
The revenue performance was driven by double-digit growth in the data centre,
cloud and mid single digit growth in broadcast and towers, assisted by the
acquisition of Cloud4com in Q1 2024.
EBITDA performance was driven by strong performance across all business units
and effective control of costs, particularly personnel and energy costs, the
latter of which were hedged in advance.
On an organic basis, excluding the effects of the Cloud4com acquisition
completed in January 2024, EBITDA increased 5.8% over the prior comparable
period.
CRA also saw continued demand for its existing data centre capacity, as
measured in racks occupied (+18%) and power (+21%). This reflected the
acquisition of DC Lužice and the completion of DC Cukrák, together with
robust demand dynamics from new and existing customers.
In September 2024, CRA was particularly pleased to have agreed with Czech
Television an extension of its existing contract to 2030. This covers the
channels broadcast from MUX21, including nine TV channels and 10 radio
stations.
In November 2024, DVTV, a leading internet‑based video producer generating
paid content, signed a broadcast contract with CRA to broadcast content free
from MUX23. This is evidence of the complementary relationship between
digital TV and internet‑based services.
Cash balances decreased slightly to CZK 300 million (£9.9 million) at
30 September 2024 from CZK 352 million six months earlier. This reduction
reflected strong cash generation through the year, offset by some deleveraging
during the period as CRA repaid its RCF.
CRA's third-party bank debt was fully refinanced in August 2024 with a group
of leading international and local lenders.
The term of all facilities was extended to August 2030 and additional undrawn
revolving credit facilities of CZK 1.1 billion (£37.3 million) were
secured. The new debt package has a margin of 2.00% over PRIBOR, which could
reduce to 1.75% depending on net leverage. CRA will benefit from the existing
interest rate swaps that hedged the previous facility until March 2025 when
they expire. This hedge results in an effective all-in interest rate on the
hedged portion of the loan of 2.76%. CRA will look to put new hedges on the
interest cost. after March 2025.
The undrawn facilities are available to support the funding of new investments
by CRA in digital infrastructure in the Czech Republic.
Third‑party bank debt increased slightly to CZK 3.9 billion
(£129.2 million). As measured as a multiple of EBITDA, CRA's net debt is
2.6x LTM 30 September 2024 unaudited EBITDA.
Operations
Cloud4com, a leading cloud services provider in the Czech Republic (acquired
for CZK 870 million, £30.6 million) continues to perform above
expectations, and a further payment as a result of an agreed earn out of
CZK 485 million (£17 million) will be due in 2025 as a result of this
strong performance.
In April, CRA announced that it had opened a new edge data centre at Cukrák,
near Prague. This is CRA's eighth data centre and is located on land owned by
CRA in repurposed buildings on site. CRA is now engaged in marketing the
space.
In addition, work on securing the required permits for the proposed new 26MW
data centre at Zbraslav continues, with the important zoning permit expected
shortly and construction permitting expected in early 2025. In September 2024,
CRA entered into a memorandum of understanding with the Czech Ministry of
Industry and Trade to cooperate on its construction.
CRA has committed to 100% of its power requirement coming from renewable
sources within the next five years; as at 31 March 2024 68% of the company's
electricity use came from renewable sources.
CRA continues to monitor the long running dispute relating to a former family
shareholding in a predecessor entity.
Outlook
Inflation in the Czech Republic in 2023 was 10.7%. For those revenue contracts
with inflation escalation built in, this will typically have taken effect from
1 January 2024. Over 66% of CRA's revenue has either full or partial
inflation linkage (excluding Cloud4com).
Speed Fibre (acquired October 2023)
Speed Fibre £m
Original cost* 55.0
Value at 1 April 2024 60.8
Net repayment of vendor loan note in the period 25.5
Deferred acquisition consideration not required (3.4)
Unrealised value gain in the period 0.8
Unrealised foreign exchange loss in the period (2.1)
Value at 30 September 2024 81.6
*Net of €4.0 million (£3.4 million) of accrued deferred consideration that
was no longer required to be paid, and reported net of £25.5 million vendor
loan note.
Financial performance in the period
Speed Fibre had a good first six months of its financial year. Speed Fibre has
a 31 December financial year end and so trading data included here is for the
first six months of that year to 30 June 2024.
Revenues increased by 4.3% to €43.3 million (£37.0 million at average
exchange rates for the period) and EBITDA increased 7.2% to €12.2 million
(£10.5 million at average exchange rates for the period).
Revenue growth in the first half of the financial year was modest and driven
by higher recurring revenues from fibre and wireless sales. EBITDA growth was
higher than revenue growth and was driven by effective cost control during the
period. Speed Fibre is expected to show some softness in EBITDA growth in the
second half of the financial year as a result of increased local competition
for customers and a weighting of revenue recognition towards the first half of
the year. Prudently, the Investment Manager has accordingly adjusted the
forecast cash flows in the DCF model used to value the investment in Speed
Fibre at 30 September 2024.
At 30 September 2024, Speed Fibre had €7.0 million of cash
(£5.8 million) and gross debt of €119.2 million (£99.3 million),
comprising a term loan of €100 million and drawn RCF of €19.2 million,
both due for repayment in 2029.
The interest on Speed Fibre's term loan is 85% fixed and the interest on the
RCF is all floating rate. Speed Fibre's debt facilities were put in place
before the general rise in interest rates in the second half of 2022, and so
the fixed interest cost of these loans represents good value.
In July 2024, the Company repaid the vendor loan note of €29.6 million
(£26 million) together with unpaid accrued interest, in full out of cash
balances on hand. The Company has the ability to draw the same amount from the
new undrawn commitments of the Eurobond to make itself whole in cash terms. As
at 30 September 2024, no drawing had yet been made from the Eurobond in
respect of this.
Additionally in July 2024, the Company successfully negotiated a modest
reduction in the deferred consideration for the acquisition of Speed Fibre
that was due to be paid in 2024, as some minor items provided for did not
materialise. Accordingly, €1.55 million was paid to the seller compared with
the €4.85 million originally agreed. The €4.85 million was included in
the original cost of the investment disclosed by the Company at
31 March 2024. This has now been updated to reflect the reduced cost.
Operations
Speed Fibre's business comprises two principal units: Enet, a provider of
backbone fibre in Ireland, which generates approximately two thirds of
revenues, and Magnet Plus, operator of Ireland's largest connectivity network,
providing connection and service to approximately 10,000 business and retail
customers in Ireland, which generates a third of revenues.
In June 2024, Speed Fibre won a new 5+2 year contract with National Broadband
Ireland (NBI) following a nationwide tender to provide national backhaul
connectivity for its fibre network throughout the Republic of Ireland. Further
investment in Enet's SuperCore high-speed backbone network is required to
facilitate the provision of the NBI contract, and the SuperCore investment
will further future-proof Speed Fibre's product offering by increasing
capacity in Enet's 100GB network.
In August 2024, Speed Fibre won a multi-year €4.5 million IRU contract for
the provision of duct infrastructure for inter-DC connectivity from a global
hyperscaler. This multi‑bundle deal will require the building of new duct
infrastructure assets which can be leveraged to generate incremental revenue
for Enet, and the project immediately delivers incremental cost-savings from
alleviating the need to use existing third‑party tails in the relevant
areas.
Speed Fibre has a strong ESG and sustainability focus, earning a 5-star rating
during the period from GRESB, an independent organisation providing validated
ESG performance data, and is targeting net zero carbon emissions by 2040.
Outlook
Speed Fibre is a national digital network in a strategically located market.
The management team has demonstrated a track record of operational success,
attracting blue chip clients that include Vodafone, AT&T, Three and
Verizon. Notwithstanding the expected slower second half to the year, the
Investment Manager believes Speed Fibre is a quality fibre business, with the
ability to judiciously deploy capital expenditure to grow revenues and
earnings.
Hudson
Hudson £m
Original cost 55.8
Value at 1 April 2024 42.3
Further investment by the Company in the period 1.5
Unrealised value loss in the period (0.4)
Unrealised foreign exchange loss in the period (2.6)
Value at 30 September 2024 40.8
Financial performance in the period
During the six months to 30 September 2024, Hudson saw revenue increase by
1.3% to $11.3 million (£8.8 million at average exchange rates for the
period) and EBITDA loss reduce by 17% to $(2.2) million (£(1.7) million at
average exchange rates for the period).
During the period, as announced in the Company's Annual Report 2024, Hudson
signed a contract with a leading US IT services provider for 120kW of power
in addition to 45kW of power to other blue chip customers. Once fully
deployed, this is expected to increase capacity utilisation of the 60 Hudson
Street sixth floor to 465kW. In total, space utilisation is now at 60% of the
fifth and sixth floors. Other contract wins during the period have included
blue‑chip customers such as a major US mobile operator and a leading
provider of advance network communications. The fifth floor remains fully
occupied by the anchor tenant.
Management continue to explore a number of options to take the business
forward, engaging with the landlord of 60 Hudson Street, other tenants,
customers and industry operators to increase value from the asset.
Hudson continues to control the main source of new power into the building,
which represents a competitive advantage and a valuable resource for the
business.
Sales for the first part of the year were on budget; however, the Investment
Manager reiterates its belief that realisation of the sales pipeline
is likely to continue to be lumpy going forward.
Hudson's management continues to market the remaining space and power to
interested potential customers, and is in early discussions with
counterparties which would be able to take a considerable portion of the free
space.
Operations
The Hudson team also continues to explore the potential benefits of
technological improvements and upgrades to the business, together with other
innovative strategic solutions to increase the attractiveness of the offering
to potential tenants. The team is now increasingly active in the market, with
a campaign to target customers in the financial and AI-driven sectors where
low‑latency interconnection and colocation are required.
In August 2024, Hudson announced the construction of two new data halls with
2MW of capacity. Completion of the project is expected to take place towards
the end of 2025.
Outlook
Hudson remains an attractive opportunity for growth. While the space is 60%
utilised, power utilisation is at 44%. The Investment Manager confirms its
view, given in the Company's Annual Report 2024, that Hudson is relatively
unlikely to show positive EBITDA in the next 12 months.
Norkring AS (acquired January 2024)
The Company acquired Norkring for €6.1 million (£5.2 million) in
January 2024. Norkring is a tower business located in the Flemish speaking
part of Belgium, and operates 25 communication and broadcast towers. Of these,
eight are owned freehold and 17 are leased. At 30 September 2024, Norkring is
also the holder of one DAB broadcast licence and one digital terrestrial
television multiplex licence. This small business is EBITDA positive.
At 30 September 2024, the Investment Manager values Norkring at €6.7 million
or £5.6 million, a slight increase due to cash generation in the period.
Norkring is of most interest to the Company and its portfolio due to its
participation in trials as part of a consortium using 5G broadcast technology,
which are partially funded and supported by the Flemish regional government.
5G broadcast technology opens the potential to offer additional services to
broadcasters and mobile operators to meet the growing demand for watching
video content on the move. Video content already drives the most traffic on
public mobile networks, accounting for around two-thirds of overall global
mobile data consumption.
DCU Invest and DCU Brussels (acquisitions agreed October 2024)
DCU £m
Original cost 60.1
After the period end, the Company announced that it had signed agreements in
partnership with TINC NV (TINC) and another Cordiant‑managed fund, to
acquire and combine Belgian data centre provider DCU Invest with DCU Brussels,
the data centre business of Proximus Group.
The Company and the other Cordiant-managed fund will acquire a total 47.5%
economic interest in the combined group for a total equity consideration of
€92.3 million (£76.8 million). The Company's economic interest will be
37.2% in the combined group, for an expected equity consideration of
€72.3 million (£60.1 million). The final consideration will be subject to
customary adjustments.
DCU Invest is a Tier III/IV data centre operator with nine data centres across
eight locations in Belgium. The Company and the other Cordiant‑managed fund
have agreed to acquire their interests in the share capital of DCU Invest via
a mix of new primary equity and secondary share acquisitions from TINC, the
Belgian infrastructure investor, and DCU Invest's chief executive officer,
Friso Haringsma. Following completion of the transactions, TINC will continue
to hold 47.5% of the share capital of DCU Invest and Mr Haringsma 5.0%
(non‑voting). The new primary equity will provide funding for DCU Invest's
acquisition of DCU Brussels.
DCU Brussels consists of four data centres across three locations in Belgium.
DCU Invest has agreed to acquire DCU Brussels from Proximus Group, the
incumbent Belgian telecoms provider, for an enterprise value of
€128 million. Mr Haringsma will become the CEO of the combined group and
Steven Marshall, Chairman of Cordiant Digital Infrastructure Management, will
chair its board of directors.
The combined group, on a pro forma basis, has 13MW of IT power, generated
revenues of c.€40.3 million and had EBITDA of €15.1 million in 2023.
Closing leverage is expected to be modest, with outstanding gross debt of
c.€10.5 million as at 31 December 2023. The combined group has a capacity
expansion potential of an additional 11.1MW, most of which could be built
across the existing 11 locations.
As part of the transaction, Proximus has agreed a long-term inflation-linked
master services agreement with the combined group, for 10 years with two
five‑year option periods, as well as certain other ancillary agreements
which will govern the overall commercial relationship between the parties.
Upon completion of the transaction, Proximus, as a direct customer, will use
37% of the combined group's IT power capacity. Other customers across the
combined group include a mix of blue-chip corporates and government bodies,
resulting in overall current capacity utilisation of c.80%.
The Investment Manager will contribute its expertise in data centres to help
drive the performance of the combined group.
Both transactions are linked and are subject to regulatory and certain
business related conditions. Completion is expected in early 2025.
Risk management
Principal risks and uncertainties
1. The equity 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, including debt and co-investment. During the period, the Company
refinanced, increased and extended the Eurobond, giving increased financial
capacity.
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, although this situation has improved somewhat over the
last six months. The Company's increasing geographical and asset diversity is
likely to increase the attractiveness of the Company to lenders and potential
coinvestment partners.
Movement in the period
Level
2. There is a risk that, even when the equity 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
Conditions in the equity market for investment trusts have begun to improve.
However, it is not possible to predict whether this improvement will continue
or how far it will extend.
Movement in the year
Level
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, where competition for those assets has been a less significant
factor, as well as participating in carefully chosen auction processes.
However, there can be no guarantee that suitable further bilateral
opportunities will arise. Current equity market conditions and the consequent
limitations on the Company's ability to access equity capital markets may mean
that it is not currently able to pursue certain investment opportunities,
although the recently refinanced, increased and extended Eurobond has
increased its financial capacity.
Movement in the year
Level
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, and valuations may be affected by foreign exchange
fluctuations. 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 results of the Company's investments to date are materially in line with
the Investment Manager's 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
Level
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 any material variation from
budget and forecast returns.
How the risk is changing
The results of the Company's investments to date are materially in line with
the Investment Manager's projections at the time of their acquisition and
their aggregate fair value has increased, contributing to NAV total return of
39.8% since IPO. This demonstrates the quality of the Investment Manager's
projections and its ability to manage the investments for growth.
Movement in the year
Level
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 senior members of the team have had leadership
roles 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. The Company's prudent leverage position, in terms both of quantum and
terms of its debt, mean that the risk of a forced divestment is very low.
Exposure to divestment risk is limited in the short to medium term.
Movement in the year
Level
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. Construction of new
assets is only undertaken where there is a high degree of confidence in the
target market for those assets.
How the risk is changing
The Company's investments have begun to undertake a small number of relatively
significant capital construction projects, in line with its Buy, Build &
Grow model. These projects are described further in the Investment Manager's
report. Capex will be funded by a combination of free cash flow generated by
the portfolio companies, debt raised in the portfolio companies, and the capex
facility recently added to the refinanced Eurobond.
Movement in the year
Higher
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
26 November 2024
Condensed Statement of Financial Position
As at 30 September 2024 (unaudited)
Note As at As at
30 September 2024
31 March 2024
£'000
£'000
Non-current assets
Investments at fair value through profit or loss 8 1,087,825 1,005,937
1,087,825 1,005,937
Current assets
Receivables 10 8,998 17,279
Cash and cash equivalents 13,584 60,085
22,582 77,364
Current liabilities
Loans and borrowings 13 (155,037) (157,629)
Accrued expenses and other creditors (2,996) (5,012)
(158,033) (162,641)
Net current liabilities (135,451) (85,277)
Net assets 952,374 920,660
Equity
Share capital 11 774,214 774,656
Retained earnings - Revenue (21,238) (14,538)
Retained earnings - Capital 199,398 160,542
Total equity 952,374 920,660
Number of shares in issue
Ordinary shares 11 765,715,477 766,290,477
765,715,477 766,290,477
Net asset value per ordinary share (pence) 7 124.38 120.15
The unaudited condensed interim financial statements were approved and
authorised for issue by the Board on 26 November 2024 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 2024 (unaudited)
For the six months ended For the six months ended
30 September 2024 30 September 2023
Note Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Net gain on investments 8 - 54,155 54,155 1,316 19,734 21,050
at fair value through profit or loss
Operating expenses
Investment acquisition costs - (1,327) (1,327) - (1,198) (1,198)
Other expenses 4 (3,951) - (3,951) (6,869) - (6,869)
Operating (loss)/profit (3,951) 52,828 12,983 (5,553) 18,536 12,983
Foreign exchange movements on working capital - 2,866 2,866 - 332 332
Finance income 1,077 - 1,077 6,275 - 6,275
Finance expense (3,826) - (3,826) (4,902) - (4,902)
(Loss)/profit for the period before tax (6,700) 55,714 49,014 9,467 18,868 9,401
Tax charge 5 - - - - - -
(Loss)/profit for the period after tax (6,700) 55,714 49,014 9,467 18,868 9,401
Total comprehensive (loss)/income (6,700) 55,714 49,014 9,467 18,868 9,401
for the period
Weighted average number of shares
Basic 7 766,009,708 766,009,708 766,009,708 772,435,390 772,435,390 772,435,390
Diluted 7 766,009,708 766,009,708 766,009,708 772,435,390 772,435,390 772,435,390
Earnings per share
Basic earnings from continuing operations in the period (pence) 7 (0.87) 7.27 6.40 (1.22) 2.44 1.22
Diluted earnings from continuing operations in the period (pence) 7 (0.87) 7.27 6.40 (1.22) 2.44 1.22
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 2024 (unaudited)
Note Share capital Retained earnings-Revenue Retained earnings-Capital Total equity
£'000
£'000
£'000
£'000
Opening net assets attributable to shareholders at 1 April 2023 779,157 (196) 96,750 875,711
Shares repurchased in the period 11 (1,086) - - (1,086)
Dividends paid during the period 12 - - (15,449) (15,449)
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
Note Share capital Retained earnings-Revenue Retained earnings-Capital Total equity
£'000
£'000
£'000
£'000
Opening net assets attributable to shareholders at I October 2023 778,071 (9,663) 100,169 868,577
Shares repurchased in the period 11 (3,415) - - (3,415)
Dividends paid during the period 12 - - (15,396) (15,396)
Total comprehensive (loss)/income for the period - (4,875) 75,769 70,894
Closing net assets attributable to shareholders as at 31 March 2024 774,656 (14,538) 160,542 920,660
Note Share capital Retained earnings-Revenue Retained earnings-Capital Total equity
£'000
£'000
£'000
£'000
Opening net assets attributable to shareholders at 1 April 2024 774,656 (14,538) 160,542 920,660
Shares repurchased in the period 11 (442) - - (442)
Dividends paid during the period 12 - - (16,858) (16,858)
Total comprehensive (loss)/income for the period - (6,700) 55,714 49,014
Closing net assets attributable to shareholders as at 30 September 2024 774,214 (21,238) 199,398 952,374
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 2024 (unaudited)
Note For the six For the six
months ended
months ended
30 September 2024 30 September 2023
£'000 £'000
Operating activities
Operating profit for the period 48,877 12,983
Adjustments to operating activities
Net gain on investments at fair value through profit or loss 8 (54,155) (21,050)
Decrease/(increase) in receivables 8,281 (801)
(Decrease)/Increase in payables (2,016) 3,485
Net cash flows generated from/(used in) operating activities 987 (5,383)
Cash flows used in investing activities
Investment additions 8 (27,733) (2,761)
Finance income 502 175
Net cash flows used in investing activities (27,231) (2,586)
Cash flows (used in)/generated from financing activities
Shares repurchased (442) (870)
Loan drawn down 155,554 148,992
Loan repaid (155,554)
Finance costs paid (3,425) (4,042)
Bank interest received 79 385
Dividends paid 12 (16,858) (15,450)
Net cash flows (used in)/generated from financing activities (20,646) 129,015
Decrease in cash and cash equivalents during the period (46,890) 121,046
Cash and cash equivalents at the beginning of the period 60,085 10,498
Exchange translation movement 389 (676)
Cash and cash equivalents at the end of the period 13,584 130,868
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. 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. Material accounting policies
The material accounting policies applied in the preparation of these unaudited
condensed interim financial statements are set out below. These policies have
been consistently applied to all the periods presented, unless otherwise
stated.
Basis of preparation
The unaudited condensed interim financial statements have been prepared in
accordance with IFRS as issued by the IASB, the Statement of Recommended
Practice issued by the Association of Investment Companies (the AIC SORP)
and the Companies (Guernsey) Law 2008.
The unaudited condensed interim financial statements have been prepared on an
historical cost basis as modified for the measurement of certain financial
instruments at fair value through profit or loss. 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 material accounting policies are set out below.
Going concern
The unaudited condensed interim 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 ongoing geopolitical conflicts and market volatility in different
parts of the world during the period have affected the way in which the
Company's investee companies' businesses 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 have reviewed different scenarios and stress testing of the cash
flow forecasts prepared by the Investment Manager to understand the resilience
of the Company's cash flows to adverse scenarios.
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 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 above risks have created a
material uncertainty over the assessment of the Company as a going concern.
As further detailed in note 8 to the unaudited condensed interim financial
statements, the Board 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
26 November 2024 to 29 November 2025, being the period of assessment
considered by the Directors. Accordingly, they continue to adopt the going
concern basis in preparing the unaudited condensed interim 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
then 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
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 receivables.
Financial assets are recognised at the date of purchase or the date on which
the Company became party to the contractual requirements of the asset.
Financial assets are initially recognised at cost, being the fair value of
consideration given. Transaction costs of financial assets at fair value
through profit or loss 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 but no longer has control over the asset 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 measured 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 interim and annual valuation point, 30 September
and 31 March respectively.
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 plus outstanding interest. Any gain or loss on the loan
investment is 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 for 31 March and
30 September annually.
The Investment Manager reviews the key assumptions of the valuations of the
assets proposed to the Board.
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.
Cash collateral
Cash collateral is classified as a financial asset at amortised cost. It is
measured at amortised cost. Cash collateral is recorded based on agreements
entered into with an entity without notable history of default causing
expected credit loss to be immaterial and therefore not 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 accrued
expenses, loans and borrowings 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 are recognised on an accruals basis in the Statement of Comprehensive
Income in the period in which they are incurred.
Taxation
The Company has met the conditions in section 1158 Corporation Tax Act 2010
and the Investment Trust (Approved Company) (Tax) Regulations 2011 for each
period to date, and it is the intention of the Directors to conduct the
affairs of the Company so that it continues to satisfy those conditions and
continue to be approved by HMRC as an investment trust.
In respect of each accounting period for which the Company is approved by HMRC
as an investment trust, the Company will be exempt from UK corporation tax on
its chargeable gains and its capital profits from creditor loan
relationships. The Company will, however, be subject to UK corporation tax on
its income (currently at a rate of 25%).
In principle, the Company will be liable to UK corporation tax on its dividend
income. However, there are broad-ranging exemptions from this charge which
would be expected to be applicable in respect of most of the dividends the
Company may receive.
A company that is an approved investment trust in respect of an accounting
period is able to take advantage of modified UK tax treatment in respect of
its 'qualifying interest income' for an accounting period. It is expected that
the Company will have material amounts of qualifying interest income and that
it may, therefore, decide to designate some or all of the dividends paid in
respect of a given accounting period as interest distributions.
To the extent that the Company receives income from, or realises amounts on
the disposal of, investments in foreign countries it may be subject to foreign
withholding or other taxation in those jurisdictions. To the extent it relates
to income, this foreign tax may, to the extent not relievable under a double
tax treaty, be able to be treated as an expense for UK corporation tax
purposes, or it may be treated as a credit against UK corporation tax up to
certain limits and subject to certain conditions.
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
reporting date. 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 is not a business combination and
that affects neither the taxable profit nor the accounting profit. Deferred
tax assets and 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; 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 the pound sterling, reflecting the
primary economic environment in which it operates. The Company has chosen
pounds sterling as its presentation currency for financial reporting purposes.
Foreign currency transactions during the period, including purchases and sales
of investments, income and expenses are translated into pounds sterling at the
rate of exchange prevailing on the date of the transaction.
Monetary assets and liabilities denominated in currencies other than pounds
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 pounds sterling are translated using the exchange rates
at the dates of the initial transactions.
Non-monetary items measured at fair value in a currency other than pounds
sterling are translated using the exchange rates at the date as at which 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 a
finance income or expense.
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 Directors 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 Annual 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 2024
The Board of Directors has considered new standards and amendments that are
mandatorily effective from 1 January 2024 and with the exception of the
Disclosure of Accounting Policies (Amendment to IAS1) have not had a
significant impact on the financial statements. The Disclosure of Accounting
Policies amendment generated a review of and reduction in the accounting
policy disclosures to reflect only material accounting policy information.
Accounting policy information is material if, when considered together with
other information included in an entity's financial statements, it can
reasonably be expected to influence decisions that primary users of the
financial statements make on the basis of those financials statements.
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 2024
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 and 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.
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 key estimates made by
the Company are disclosed in note 8.
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.
Judgements
In the process of applying the Company's accounting policies, management has
made the following judgements, which have the most significant effect on the
amounts recognised in the financial statements:
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 unaudited condensed interim financial
statements. Further details of the impact of this accounting policy are
included in note 9.
Climate change
In preparing the unaudited condensed interim financial statements, the
Directors have considered the impact of climate change, particularly in the
context of the climate change risks identified in the ESG report section of
the Strategic report.
In preparing the unaudited condensed interim financial statements, the
Directors have considered the medium- and longer‑term cash flow impacts of
climate change on a number of key estimates within the financial statements,
including:
- the estimates of future cash flows used in assessments of the fair value of
investments; and
- the estimates of future profitability used in the assessment of distributable
income..
These considerations did not have a material impact on the financial reporting
judgements and estimates in the current period. This reflects the conclusion
that climate change is not expected to have a significant impact on the
Company's short- or medium-term cash flows including those considered in the
going concern and viability assessments.
4. Other expenses
Other expenses in the Condensed Statement of Comprehensive Income comprise:
Note For the six For the six
months ended
months ended
30 September 2024
30 September 2023
£'000
£'000
Management fees 6 2,969 3,100
Legal and professional fees 427 259
Aborted deal fees - 2,873
Directors' fees 93 93
Fees payable to the statutory auditor 97 85
Other expenses 365 459
3,951 6,869
5. Finance income
For the six For the six
months ended
months ended
30 September 2024
30 September 2023
£'000
£'000
Bank interest received 79 385
Interest on fixed term deposits(1) 855 603
Other income 143 -
1,077 988
(1)During the period ended 30 September 2024, the Company invested:
£5.0 million in JP Morgan and £4.7 million in Investec fixed term deposits
at an average interest rate of 3% per annum. At 30 September 2024
£5.0 million of these deposits had not matured.
6. Management and performance fees
Under the Investment Management Agreement, 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 using
the closing market capitalisation for each LSE trading day for the relevant
month, and paid monthly in arrears. 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 £500 million;
― 0.90% of the average market capitalisation between £500 million and
£1 billion; and
― 0.80% of the average market capitalisation in excess of £1 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 2024, the Investment Manager has
charged management fees of £3.0 million (30 September 2023: £3.1 million)
to the Company, with £0.6 million (31 March 2024: £0.6 million) owed at
period/year end.
During the six months ended 30 September 2024, the Investment Manager did
not subscribe for additional ordinary shares (30 September 2023: nil) and
made open market purchases of 346,980 shares (30 September 2023: 444,772
shares) at an average price of 76.6 pence per share (30 September 2023: 73.8
pence per share).
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 was
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 2024, no performance fee is due to the
Investment Manager (30 September 2023: £nil) 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
Ordinary shares For the six months ended 30 September 2024
Earnings per share Basic Diluted
Allocated profit attributable to this share class - £'000 49,014 49,014
Weighted average number of shares in issue 766,009,708 766,009,708
Earnings per share from continuing operations in the period (pence) 6.40 6.40
Ordinary shares For the six months ended 30 September 2023
Earnings per share Basic Diluted
Allocated profit attributable to this share class - £'000 9,401 9,401
Weighted average number of shares in issue 772,435,390 772,435,390
Earnings per share from continuing operations in the period (pence) 1.22 1.22
As at 30 September 2024, there were 6,434,884 (31 March 2024: 6,434,884)
Subscription Shares in issue. During the six months ended 30 September 2024,
no additional Subscription Shares were issued (30 September 2023: nil) and
none were exercised (30 September 2023: nil).
As at As at
30 September 2024
31 March 2024
Weighted average number of shares used in the calculation of basic earnings 766,009,708 770,510,117
per share
Weighted average number of shares used in the calculation of diluted earnings 766,009,708 770,510,117
per share
Net asset value - £'000 952,374 920,660
Number of ordinary shares issued 765,715,477 766,290,477
Net asset value per ordinary share (pence) 124.38 120.15
8. Investments at fair value through profit or loss
As at 30 September 2024 Loans Equity Total
£'000
£'000
£'000
Opening balance 9,444 996,493 1,005,937
Additions 1,547 26,186 27,733
Shareholder loan interest capitalised - - -
Interest on promissory notes - - -
Shareholder loan repayment - - -
Net gains/(losses) on investments at fair value through profit or loss - 54,155 54,155
10,991 1,076,834 1,087,825
As at 31 March 2024 Loans Equity Total
£'000
£'000
£'000
Opening balance 37,350 834,965 872,315
Additions 4,807 61,485 66,292
Shareholder loan interest capitalised - - -
Interest on promissory notes 1,877 - 1,877
Shareholder loan repayment (32,530) - (32,530)
Net gains/(losses) on investments at fair value through profit or loss (2,060) 100,043 97,983
9,444 996,493 1,005,937
During the period ended 30 September 2024, the Company subscribed for 20
million additional ordinary shares (31 March 2024: 43.5 million) in its
subsidiary Cordiant Digital Holdings UK Limited (CDH UK) for cash
consideration of £26.2 million (31 March 2024: £61.5 million).
As at 30 September 2024, the equity investment in CDIL Data Centre USA LLC,
the legal entity operating as Hudson Interxchange (Hudson) was valued at
£30.4 million (31 March 2024: £32.8 million) and the loan investment in
Hudson at £10.4 million (31 March 2024: £9.4 million). The total investment
in Hudson was valued at £40.8 million (31 March 2024: £42.3 million).
The fair value of the Company's equity investment in České Radiokomunikace
a.s. (CRA) held through its indirect subsidiary Cordiant Digital Holdings Two
Limited (CDH Two) as at 30 September 2024 was £403.3 million (31 March 2024:
£385.9 million).
During the year ended 31 March 2024, the Company's indirect subsidiary,
Cordiant Digital Holdings One Limited (CDH One) restructured part of its
equity investment in Emitel S.A. into a loan investment. £37.2 million (PLN
192.5 million) was transferred from equity to loan. As at 30 September 2024,
the Emitel S.A loan investment was valued at £32.4 million (31 March 2024:
£35.0 million) and the remaining equity investment was valued at £526.1
million (31 March 2024: £490.0 million).The fair value of the Company's total
indirect investment in Emitel S.A. was £558.5 million (31 March 2024: £525.0
million).
During the year ended 31 March 2024 the Company, through its indirect
subsidiary Cordiant Digital Holdings Ireland Limited (CDHI), acquired Speed
Fibre DAC. The fair value of the Company's indirect investment in Speed Fibre
DAC at 30 September 2024 was £81.6 million (31 March 2024: £86.4 million).
The vendor loan note included in the value of the investment at 31 March 2024
has been settled in full during the period ending 30 September 2024. After
taking into account the settlement of the vendor loan note, the fair value of
the investment at 30 September 2024 was £81.6 million (31 March 2024: £60.8
million).
During the year ended 31 March 2024 the Company, through CDH UK, acquired
Norkring België NV (Norkring) at a cost of £5.4 million. The fair value of
the Company's indirect investment in Norkring as at 30 September 2024 was
£5.6 million (31 March 2024: £5.2 million).
The table below details all gains on investments through profit or loss.
For the six months ended 30 September 2024 Loans Equity Total
£'000
£'000
£'000
Movement in fair value of investments - 56,763 56,763
Unrealised foreign exchange loss on investment - (2,608) (2,608)
Shareholder loan interest income - - -
Total investment income/(loss) recognised in the period/year - 54,155 54,155
For the six months ended 30 September 2023 Loans Equity Total
£'000
£'000
£'000
Movement in fair value of investments - 20,974 20,974
Unrealised foreign exchange loss on investment - (1,240) (1,240)
Shareholder loan interest income 1,316 - 1,316
Total investment income/(loss) recognised in the period/year 1,316 19,734 21,050
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.
During the period ended 30 September 2024, there were no transfers of
investments at fair value through profit or loss from or to Level 3
(31 March 2024: nil)
The Company's investments have been valued using a DCF methodology. This
involves modelling the entity's forecast 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, December 2031 for Speed Fibre, March 2037 for
Hudson Interxchange and December 2030 for Norkring. 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 the subsidiaries of the Company. As the Company
qualifies as an Investment Entity as referred to in note 3, these
subsidiaries have not been consolidated in the preparation of the unaudited
condensed interim financial statements:
Investment Place of business Ownership interest Ownership interest
at 30 September 2023
at 31 March 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%
Cordiant Digital Holdings Three Limited United Kingdom 100% 100%
Cordiant Digital Holdings Four Limited United Kingdom 100% 100%
Cordiant Digital Holdings Ireland Ireland 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%
Cloud4com s.r.o. Czech Republic 100% 100%
Datové centrum Lužice s.r.o. Czech Republic 100% 100%
Prague Digital TV s.r.o 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%
Hub Investments sp. z o. o. Poland 100% 100%
Norkring België NV Belgium 100% 100%
Speed Fibre DAC Ireland 100% 100%
Speed Fibre 2 Holdings Limited Ireland 100% 100%
Speed Fibre Intermediate Holdings Limited Ireland 100% 100%
Speed Fibre Borrower Limited Ireland 100% 100%
Airspeed Communications Holdings ULC Ireland 100% 100%
Airspeed Communications Solutions ULC Ireland 100% 100%
Airspeed Investments Limited Isle of Man 100% 100%
Airspeed Networks Limited Isle of Man 100% 100%
Airspeed Ventures Unlimited Isle of Man 100% 100%
E-Nasc Éireann Teoranta Ireland 100% 100%
Enet Telecommunications Networks Limited Ireland 100% 100%
Enet Telecommunications Networks Limited Ireland 100% 100%
The amounts invested in the Company's unconsolidated subsidiaries during the
period and their carrying value at 30 September 2024 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, Ireland, Belgium and in 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
As at 30 September 2024 As at 31 March 2024
£'000
£'000
Cash collateral 8,481 8,963
Other debtors 517 8,316
8,998 17,279
Cash collateral relates to one security deposit held in money market accounts.
An amount of USD 11.3 million (£8.4 million) relates to collateral for a
letter of credit relating to the lease of the building occupied by Hudson, and
during the period ended 30 September 2024, the cash collateral generated
interest at a rate of 6.9% per annum (31 March 2024: 5.4% per annum).
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 among the
holders of ordinary shares pro rata according to their respective holdings of
ordinary shares.
Ordinary shares
30 September 2024 £'000 31 March 2024 £'000
Number of shares Number of shares
Issued and fully paid 773,559,707 780,100 773,559,707 780,100
Shares held in treasury (7,844,230) (5,886) (7,269,230) (5,444)
Outstanding shares at period/year end 765,715,477 774,214 766,290,477 774,656
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 shares carry no right to any dividends paid by the Company and
have no voting rights.
No subscription shares have been exercised between 30 September 2024 and the
date of this report.
Treasury shares
30 September 2024 31 March 2024
Number of shares Number of shares
Opening balance 7,269,230 1,050,000
Shares repurchased during the period/year 575,000 6,219,230
Closing balance at period/year end 7,844,230 7,269,230
The Company has undertaken market buybacks during the period/year. The
movements are shown in the table above. The average purchase price of the
shares bought back during the period is 76.9 pence (31 March 2024: 72.4
pence). The average price at which shares were repurchased represents a 38.2%
discount to the NAV per share (31 March 2024: 39.8%) at the time of
repurchase. The shares repurchased were funded out of distributable reserves.
Subscription shareholders have no right to any dividends paid by the Company
and have no voting rights.
12. Dividends paid with respect to the period
Dividends paid during the period ended 30 September 2024 Dividend Total dividend
per ordinary share
£'000
pence
Second interim dividend in respect of the year ended 31 March 2024 2.2 16,858
Dividends paid during the period ended 30 September 2023 Dividend Total dividend
per ordinary share
£'000
pence
Second interim dividend in respect of the year ended 31 March 2023 2.0 15,449
On 26 November 2024, the Board approved a distribution of 2.1 pence per share
with respect to the six months ended 30 September 2024. The record date for
the distribution is 6 December 2024 and the payment date is
20 December 2024.
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 2024
amounted to £92,500 (30 September 2023: £92,500), of which £nil
(30 September 2023: £nil) was outstanding at the period end.
The shares held by the Directors at 30 September 2024 are shown in the table
below:
Ordinary shares held at Ordinary shares held at
30 September 2024
31 March 2024
Shonaid Jemmett-Page 88,719 63,355
Sian Hill 77,500 57,500
Marten Pieters 103,125 103,125
Simon Pitcher 63,125 63,125
Investments
The Company has provided additional funding of £1.5 million (USD 2.0 million)
as a loan to its subsidiary, CDIL Data Centre USA LLC during the period ended
30 September 2024. The balance of the loan investment at 30 September 2024
was £10.4 million (31 March 2024: £9.4 million).
During the period, the Company subscribed for 20 million additional ordinary
shares in CDH UK as disclosed in note 8.
Loans and borrowings
On 30 June 2024, the Company's direct subsidiary CDH UK signed a new
€375 million Eurobond facility to refinance the existing €200 million
Eurobond facility held by the Company's indirect subsidiary, CDH Two. This
triggered the settlement of the existing €190 million loan and interest
owed by the Company to CDH Two. On 29 July 2024, the Company received
€190 million from CDHUK which it used to partially settle the intercompany
loan due to CDH Two of €191.8 million. The remaining €1.8 million was
settled from other cash reserves held by the Company. The loan was provided on
an arm's length basis and interest is charged on the principal amount at a
variable rate. At 30 September 2024, the CDH UK loan principal was
£155.0 million and no interest was accrued or due.
Company subsidiaries
The expenses paid by the Company on behalf of subsidiary companies during the
period amounted to £0.1 million (31 March 2024: £1.6 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 25 October 2024, the Company announced the acquisition of 37.2% of the
share capital of Belgian data centre provider, DCU Invest, and the linked
acquisition by DCU Invest of DCU Brussels, the data centre business of
Proximus Group, for a total expected consideration payable by the Company of
£60.1 million (€72.3 million), subject to customary adjustments. These
transactions are expected to complete in early 2025.
With the exception of dividends declared and 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 2024 means the Company's annual report for the year
ended 31 March 2024
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
DCU Invest means DCU Invest NV.
DCU Brussels means Datacenter United Brussels NV.
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
DTRs 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 2024
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
Listing Rules means the listing rules published by the FCA.
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) Limited Computershare Investor Services
East Wing (Guernsey) Limited
Trafalgar Court 1st Floor Tudor House
Les Banques Le Bordage
Guernsey St Peter Port
GY1 3PP Guernsey
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 Limited 100 Bishopsgate
Royal Bank Place London
1 Glategny Esplanade EC2N 4JL
St Peter Port
Guernsey
GY1 4BQ
Receiving agent
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol
BS99 6AH
Cautionary Statement
This document 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 terms or expressions, including
'believes', 'estimates', 'anticipates', 'expects', 'intends', 'may', 'plans',
'projects', 'will', 'explore' or 'should' or, in each case, their negative or
other variations or comparable terminology or by discussions of strategy,
plans, objectives, goals, future events or intentions. These forward-looking
statements include all matters that are not historical facts. They may appear
in a number of places throughout this document and may include, but are not
limited to, statements regarding the intentions, beliefs or current
expectations of the Company, the Directors and/or 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 future 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, or described in or suggested by, the forward-looking
statements contained in this document. Further, this document may include
target figures for future financial periods.
Any such figures are targets only and are not forecasts. Nothing in this
document should be construed as a profit forecast or a profit estimate. In
addition, even if actual investment performance, results of operations,
financial condition, liquidity, distribution policy and the development of its
financing strategies, are consistent with any forward-looking statements
contained in this document, those results or developments may not be
indicative of results or developments in subsequent periods. A number of
factors could cause results and developments of the Company to differ
materially from those expressed or implied by the forward-looking statements
including, without limitation, general economic and business conditions,
industry trends, inflation and interest rates, the availability and cost of
energy, competition, changes in law or regulation, changes in taxation
regimes, the availability and cost of capital, currency fluctuations, changes
in its business strategy, political and economic uncertainty. Any
forward-looking statements herein speak only at the date of this document.
As a result, you are cautioned not to place any reliance on any such
forward-looking statements and neither the Company, the Directors, the
Investment Manager nor any other person accepts responsibility for the
accuracy of such statements. Subject to their legal and regulatory
obligations, the Company, 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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