REG - Digital 9 Infrastr. - Company Update

Digital 9 InfrastructureAnnouncement

18/07/2023 07:00

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RNS Number : 2947G  Digital 9 Infrastructure PLC  18 July 2023

18 July 2023

DIGITAL 9 INFRASTRUCTURE PLC

("D9", the "Company" or, together with its subsidiaries, the "Group")

 

Company Update

 

The Board of Digital 9 Infrastructure plc (ticker: DGI9), a leading investor
in the infrastructure of the internet, and the Company's Investment Manager,
Triple Point Investment Management LLP ("Triple Point"), today provide an
update on the Company's recent and ongoing activities.

 

Key Highlights

 

·    Considerable investor interest in equity syndication

·    Continued evaluation of additional complementary sources of growth
capital

·    The Board notes the recent volatility in the Company's share price
and maintains confidence in the Group's diversified portfolio which continues
to perform well and in line with management expectations

·    Reaffirmed target aggregate dividend of 6.0 pence per Ordinary Share
for the year ending 31 December 2023 1 

·    Operating cash flow dividend cover to be substantially achieved by 31
December 2024

·    Announcement of an upcoming investor presentation relating to its
recent activities on 19 July 2023

 

 

1.         Equity Syndication Update

 

As announced previously on 5 June 2023, there is an ongoing competitive
process to syndicate a stake in the Verne Global group of companies, including
its operating sites in Iceland, Finland, and the United Kingdom to strategic
capital partners (the "Syndication"). The Syndication has received
considerable investor interest and the Investment Manager is targeting terms
of the Syndication to be announced in Q3 2023. The Board remains focused on an
outcome that will best enhance value for shareholders.

 

Further to the Syndication, the Board and the Investment Manager continue to
evaluate other complementary sources of growth capital to reduce the Group's
leverage position and support the significant growth capital expenditure
pipeline of the Investee Companies. An update on these processes will follow
their completion. The Board will consider the most suitable use of any
additional capital at the time, taking account of efficient management of its
costs (including reducing the revolving credit facility ("RCF") interest
payments through the repayment of the RCF) as well as the financing of
accretive portfolio growth opportunities.

 

2.         Discount Management

 

The Board notes the recent volatility in the Company's share price; however,
maintains confidence in the Group's diversified portfolio which continues to
perform well, in line with management expectations. The Board and the
Investment Manager confirm that they are not aware of any portfolio specific
factors that have led to the recent decline in the share price.

 

The Board remains focused on narrowing the discount to NAV through a plan of
comprehensive actions aimed at enhancing shareholder value which it believes
will, in turn, support a sustainable recovery of the share price over the
medium-term. There continues to be strong growth potential for the underlying
investment portfolio, with the demand for infrastructure that underpins the
digital economy continuing to increase.

 

The Board and Investment Manager routinely assess the ways to preserve and
enhance shareholder value. Share buybacks will only be undertaken to reduce
the discount to NAV where the Company has uncommitted cash, or cash in excess
of scheduled dividend payments, taking into account the Company's working
capital position and other relevant economic factors. Currently, the priority
for cash is reinvestment into the Investee Companies to fulfil customer demand
and create long-term opportunities for sustainable income and capital growth
for the portfolio. The Board has therefore not undertaken share buybacks to
date but will keep this situation under review.

 

As announced on 4 April 2023, the Investment Manager (including senior members
of the Digital Infrastructure team) and the Directors of the Company purchased
further shares in the Company, increasing their total holdings to 2,336,495
shares and 333,381 shares respectively. Given the ongoing Syndication, the
Investment Manager and the Directors are currently subject to a closed period
that prohibits further trading in the Company's shares at this time. The Board
believes that the current share price does not reflect the inherent value and
capital appreciation potential of the portfolio.

 

3.         Balance Sheet and Liquidity Position

 

In line with the Investment Manager's active asset management plan, several
key initiatives to optimise the capital structure and balance sheet of the
Group have been undertaken including:

 

·     As announced on 5 June 2023, signing a new $100 million (£80
million) green term loan debt facility with an uncommitted $50 million (£40
million) accordion provision for Verne Global Iceland. The facility will be
used to help fund Verne Global's growth capital expenditure pipeline, partly
repay outstanding shareholder loans owed by Verne Global to the Group and
refinance Verne Global's existing bridge loan facility.

 

·    As announced on 21 June 2023, Arqiva entering into an inflation
collar on inflation-linked swaps which applies to 100% of the RPI exposure of
the swaps and caps the impact of RPI from 2024 at c.6.0% until the swaps'
expiry in 2027, thereby significantly limiting the downside risk for Arqiva.
The Company expects inflation to fall significantly by March 2024, and
therefore expects the Arqiva Group operating cash flow for the period to June
2024 to materially increase. The collar has no impact on Arqiva's uncapped
inflation-linked revenues.

 

·     As announced on 5 July 2023, the successful refinancing by the
Arqiva Group of £262 million of its senior debt. The refinancing consisted of
£345 million of oversubscribed new issuances, the proceeds of which will be
used for repayment of existing facilities for £262 million and provide Arqiva
with an additional £83 million for general corporate purposes.

 

·     The ongoing Syndication, which the Company expects will generate
significant cash proceeds, will be used to partly pay down the RCF and fund
growth capital expenditure in Investee Companies.

 

The Board reaffirms it is targeting an aggregate dividend of 6.0 pence per
Ordinary Share for the year ending 31 December 2023 2 . The initiatives above
are believed to be accretive to dividend cover, however for the avoidance of
doubt, and as stated before, further capital being invested into the Investee
Companies is not forecast to be required to achieve a future period dividend
covered by the operating cash flow of the Investee Companies. This is expected
to be substantially achieved by 31 December 2024 as a result of the continued
maturity of the high-growth platforms (particularly data centres and subsea
fibre), the reduction and ultimate expiry of the accretion payments made by
Arqiva (in relation to its inflation linked swaps) and the future forecast IRU
sales from the Company's investment in EMIC-1.

 

The Board has considered reducing the above target of 6.0 pence per Ordinary
Share for the year ending 31 December 2023 and understands some shareholders
would support such a reduction. However, on balance, the Board considers it
appropriate to maintain the target given: the route to a covered dividend
outlined above; the income requirements of many shareholders; and the
relatively limited absolute sum that would be saved by reducing the 6.0 pence
target.

 

At 30 June 2023, the Group had c.£78.3 million of cash available and also has
£18.8 million remaining undrawn of the £375 million RCF, excluding the
accordion tranche of up to £125 million.

 

4.         Geological Developments in the Reykjanes Peninsula

 

The Board notes the volcanic activity in Iceland on Monday 10 July 2023,
whereby a new fissure vent was formed in the vicinity of the Keilir and Litli
Hrútur mountains on the southern side of the Reykjanes peninsula.

 

Icelandic geologists expect that this event will be similar to the 2022
eruption, which resulted in a low-velocity flow, with no threat to
infrastructure, buildings or people. As such, it is expected to pose little or
no risk to Verne Iceland's facilities and operations, which continue to
operate as normal. All roads, airports and methods of transport remain open
and unaffected. In any case, Verne Iceland has in place local Natural
Catastrophe insurance arranged with NTI, a mandatory insurance in Iceland.

 

5.         Investor Presentation - 19 July 2023 2:00 pm

 

The Company will be hosting a live webcast presentation relating to its recent
activities at 2.00pm on 19 July 2023. The presentation will be provided by Ben
Beaton and Arnaud Jaguin of the Investment Manager and is open to all existing
and potential shareholders only. Questions can be submitted pre-event up until
9am on the day of the meeting or at any time during the live presentation. No
material new information will be provided during the presentation.

 

Investors can sign up via:
https://secure.emincote.com/client/digital9/companyupdate2023
(https://secure.emincote.com/client/digital9/companyupdate2023) .

 

 

ENDS.

 

 

FOR FURTHER INFORMATION ON THE COMPANY, PLEASE CONTACT:

 

 Triple Point Investment Management LLP         +44 (0)20 7201 8989

 (Investment Manager)

 Ben Beaton

 Arnaud Jaguin
 J.P. Morgan Cazenove (Joint Corporate Broker)  +44 (0)20 7742 4000

 William Simmonds

 Jérémie Birnbaum
 Peel Hunt (Joint Corporate Broker)             +44 (0) 20 7418 8900

 Luke Simpson

 Huw Jeremy
 FTI Consulting (Communications Adviser)        dgi9@fticonsulting.com

 Ed Berry                                       +44 (0)7703 330 199

 Mitch Barltrop                                 +44 (0)7807 296 032

 Maxime Lopes                                   +44 (0) 7890 896 777

 

LEI: 213800OQLX64UNS38U92

 

About Digital 9 Infrastructure plc:

 

Digital 9 Infrastructure plc (DGI9) is an investment trust listed on the
London Stock Exchange and a constitutent of the FTSE 250, with ticker DGI9.
The Company invests in the infrastructure of the internet that underpins the
world's digital economy: digital infrastructure.

 

The Investment Manager is Triple Point Investment Management LLP ("Triple
Point") which is authorised and regulated by the Financial Conduct Authority,
with extensive experience in infrastructure, real estate and private credit,
while keeping ESG principles central to its business mission. Triple Point's
Digital Infrastructure team has over $300 billion in digital infrastructure
transaction experience and in-depth relationships across global tech and
global telecoms companies.

 

The number 9 in Digital 9 Infrastructure comes from the UN Sustainable
Development Goal 9, which focuses the fund on investments that increase
connectivity globally and improve the sustainability of digital
infrastructure. The assets DGI9 invests in typically comprise scalable
platforms and technologies including (but not limited to) subsea fibre, data
centres, terrestrial fibre and wireless networks.

 

From its IPO in March 2021 and subsequent capital raises, DGI9 has raised
total equity of £905 million and a revolving credit facility of £375
million, invested into the following data centres, subsea fibre, terrestrial
fibre and wireless networks:

 

·    Aqua Comms, a leading owner and operator of 20,000km of the most
modern subsea fibre systems - the backbone of the internet - with a customer
base comprising global tech and global telecommunications carriers (April
2021);

·    Verne Global Iceland, the leading Icelandic data centre platform,
with 40MW of high intensity computing solutions in operation or development,
powered by 100% baseload renewable power (September 2021);

·     EMIC-1, a partnership with Meta on a 10,000km fibre system from
Europe to India (July 2021);

·    SeaEdge UK1, a data centre and landing station for the North Sea
Connect subsea cable, part of the North Atlantic Loop subsea network,
improving connectivity between the UK, Ireland, Scandinavia and North America
(December 2021);

·    Elio Networks (previously Host Ireland) a leading enterprise
broadband provider that owns and operates Fixed Wireless Access networks
(April 2022);

·    Verne Global London (previously Volta), a premier data centre based
in central London, providing 6MW retail co-location services (April 2022);

·    Verne Global Finland (previously Ficolo), a leading Finnish data
centre and cloud infrastructure platform, with c.23MW of data centre capacity,
powered by 100% renewable power and distributing surplus heat to district
heating networks (July 2022).

·   Giggle, a revolutionary Fibre to the Home network providing affordable
broadband to social housing in Glasgow (July 2022); and

·    Arqiva, the only UK national terrestrial television and radio
broadcasting network in the United Kingdom - providing data, network and
communications services, as well as a national IoT connectivity platform
(October 2022).

 

The Company's Ordinary Shares were admitted to trading on the Specialist Fund
Segment of the Main Market of the London Stock Exchange on 31 March 2021. It
was admitted to the premium listing segment of the Official List of the
Financial Conduct Authority and migrated to trading on the premium segment of
the Main Market on 30 August 2022.

 

For more information on the Investment Manager please visit
www.triplepoint.co.uk. For more information, please visit
www.d9infrastructure.com (http://www.d9infrastructure.com) .

 1  The target dividend is a target only and not a forecast. There can be no
assurance that the target will be met and it should not be taken as an
indication of the Company's expected or actual future results.

 2  The target dividend is a target only and not a forecast. There can be no
assurance that the target will be met and it should not be taken as an
indication of the Company's expected or actual future results.

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