REG - Digital 9 Infrastr. - Results for the half year ended 30 June 2024
30/09/2024 17:30
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RNS Number : 3243G Digital 9 Infrastructure PLC 30 September 2024
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION AS STIPULATED UNDER THE UK'S
MARKET ABUSE REGULATION. UPON THE PUBLICATION OF THIS ANNOUNCEMENT, SUCH
INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.
30 September 2024
DIGITAL 9 INFRASTRUCTURE PLC
("D9" or the "Company" or, together with its subsidiaries, the "Group")
RESULTS FOR THE HALF YEAR ENDED 30 JUNE 2024
The Board of Digital 9 Infrastructure plc announces the Company's unaudited
results for the six-month period ended 30 June 2024.
· The Company's 30 June 2024 NAV was £403 million, equivalent to a NAV
per share of 46.59p, a decline of 41% (£283 million) relative to 31 December
2023.
· Annualised total return based on NAV was (72.0)% (H1 2023: (11.2)%),
principally due to the significant downward revaluation in the period.
· The NAV decline between 31 December 2023 and 30 June 2024 was
primarily due to:
o A downward revision to long-term financial forecasts of portfolio
companies that form the basis of valuation models, affected in substantial
part by a re-assessment of the assumptions relating to the availability of
financing and timing thereof;
o £16 million of interest costs incurred in the period, including £11
million in respect of the Revolving Credit Facility ("RCF") and £5 million in
respect of the Arqiva Group Vendor Loan Note ("VLN");
o A provision for additional vendor consideration which would be in the
form of an increase to the VLN that may be due under the terms of the purchase
agreement for Arqiva; and
o £6 million of professional fees incurred in the period related to the
sale of the Verne Global group of companies ("Verne Global"). This is in
addition to £15 million of professional and transaction related fees incurred
in FY 2023 in respect of the Verne Global sale as disclosed on 30 April 2024.*
· The June 2024 NAV also reflects the Verne Global transaction and
subsequent RCF repayments.
o The Verne Global transaction, which completed on 15 March 2024, resulted
in the receipt of $440 million of cash proceeds (£347 million) which included
initial cash proceeds of $415 million (£327 million) and a deferred
consideration of $25 million (approximately £20 million).
o The sale also triggered the recognition of the potential earn-out payment
("Earn Out") of up to $135 million (approximately £107 million) that will be
based on the underlying performance of Verne Global in 2026. The earn-out was
valued at £29 million as at June 2024 (31 December 2023: £27 million).
o The received proceeds of £347m together with the fair value of the
potential earn out of £29 million totalled £376 million. This compares with
the 31 December 2023 valuation of £372 million.
o £321 million of the proceeds from the Verne Global transaction were
used to pay down the Company's RCF. As at 30 June 2024, the balance on the RCF
was £53 million (December 2023: £375 million) and is due for repayment in
March 2025.
o In the six-month-period to 30 June 2024, consolidated portfolio revenue
declined by 1.5% and consolidated portfolio EBITDA declined by 7.1% compared
with the same period in 2023.**
· On 25 March 2024, the Company's shareholders voted in favour of the
Board pursuing the sale of the Company's remaining assets in an orderly manner
to maximise shareholder value and return capital to shareholders (the "Managed
Wind-Down"), and for a commensurate change to the Company's objectives and
investment policy.
· Sale preparations of Aqua Comms, EMIC-1, SeaEdge UK1 and Elio Networks
were initiated following shareholder approval of the Company's Managed
Wind-Down. The Board will provide material updates on each sale process, as
necessary.
· The Board has determined that it is in shareholders' best interests to
publish an aggregate NAV to protect the Company's commercial position during
live sale processes of underlying portfolio companies. At the point when the
Company's commercial position changes, the Board will provide the customary
transparency on asset valuations.
· The Group's RCF matures in March 2025. Ahead of this the Board intends
either to refinance the outstanding RCF balance or repay it with asset sale
proceeds, subject to progress of the Managed Wind-Down and its timing. The
Group is in breach of one of the RCF covenants and the RCF lenders have
indicated that, at present, they intend to work collaboratively with the
Company, where possible, over the coming weeks to explore the option of
providing a waiver, or alternative action if more appropriate at the time, of
the breach. See further details in the Going Concern section in Note 2 of the
financial statements.
· As announced on 30 April 2024, the Company provided notice to the
Investment Manager, Triple Point Investment Management LLP ("Triple Point"),
to terminate the Investment Management Agreement ("IMA") on the earliest date
permissible under the IMA being 31 March 2025. On 29 January 2024, the
previous Board disclosed its intention to actively explore whether Triple
Point might agree revised commercial terms that would be in the best interests
of the Company and its shareholders. In light of the material downward
revaluation of the portfolio's NAV as at June 2024, announced by the Company
on 6 September 2024, the Board is continuing this review and intends to update
shareholders at the earliest opportunity. As announced on 6 September 2024,
the Board has made significant progress in its independent review of the
Company's investment management arrangements and a further announcement is
expected in the near future.
* As of 31 December, £5.6 million of success fees related to the sale of
Verne Global had not yet been accrued as the transaction had not closed at
this point. As of 30 June 2024, the fees have now been incurred following
completion of the sale.
** Figures presented in the portfolio highlights exclude Verne Global for
the period following completion of its sale on 15 March 2024.
Financial Highlights
As at 30 Jun 2024 31 Dec 2023 30 Jun 2023
IFRS Net Asset Value ("NAV") £403m £686m £866m
IFRS NAV per share 46.59p 79.33p 100.13p
IFRS Investment Valuation £384m £676m £839m
Adjusted Gross Asset Value* £459m £1,067m £1,245m
Aggregate Group debt* £233m £545m £526m
Group Cash (unrestricted)* £23.9m £17.6m £47.0m
For the period 6 months to 12 months to 6 months to
30 June 2024 31 Dec 2023 30 June 2023
Earnings per share (32.73p) (27.43p) (6.63p)
Ongoing charges ratio (annualised)* 1.63% 1.33% 1.20%
Dividends paid per share - 3p 3p
Annualised Total return (based on NAV)* (71.7%) (23.1%) (11.2%)
Annualised Combined portfolio revenue* £389m £447m £445m
Annualised Combined portfolio EBITDA* £180m £198m £212m
* Alternative Performance Measure ("APM"). Further information on APMs can be
found in the Annual Report.
Portfolio Highlights
In £ million 6 months to 6 months to Y/Y
30 June 2024 30 June 2023 Change %
Consolidated Portfolio Revenue
Aqua Comms* £16.0m £13.8m 15.9%
Verne Global** N/A £24.4m N/A
Arqiva £174.0m £179.3m (3.0%)
Elio Networks £4.1m £4.0m 2.5%
Sea Edge UK1 £0.5m £0.5m -
Consolidated Portfolio EBITDA
Aqua Comms* £3.6m £4.1m (12.2%)
Verne Global** N/A £7.2m N/A
Arqiva £83.7m £90.1m (7.1%)
Elio Networks £2.2m £2.2m -
Sea Edge UK1 £0.5m £0.5m -
* Excluding EMIC-1.
** The sale of Verne Global was completed on 15 March 2024.
Aqua Comms
Aqua Comms is a leading carrier-neutral owner and operator of subsea fibre,
providing essential connectivity through 20,000 km of transatlantic, North Sea
and Irish Sea routes.
Revenue for the period increased 16% year-on-year due to increased sales on
existing systems and the launch of AEC-3. EBITDA decreased 12% due mainly to
planned headcount increases to support sales, operations and expansion, as
well as temporary costs related to internalising its Network Operations
Centre.
EMIC-1
Managed by Aqua Comms, EMIC-1 connects key European hubs with Salalah, Oman
and Mumbai, India, bringing a new, high-capacity cable system to underserved
markets experiencing exponential growth in bandwidth requirements.
Following a large pre-sale in Q4 of last year, the leader of the investor
consortium building out the cable system continues to explore alternative
plans to connect the Red Sea and Indian leg of the system, to allow service to
start even if the original wet route is not fully completed.
Arqiva Group
Arqiva is the UK's pre-eminent national provider of television and radio
broadcast infrastructure and provides end-to-end connectivity solutions in the
media and utility industries.
Arqiva generated revenue of £174 million for the period, down 3%
year-on-year. Positive revenue indexation through inflation-linked contracts
was offset by reduced digital terrestrial television ("DTT") channel sales,
lower pricing on contract renewals and customer losses. Profit margins were
impacted by rising power costs and increased headcount expenses, reflecting
macroeconomic wage pressures and strategic investments in new media markets.
Elio Networks
Elio Networks is a high-speed wireless connectivity provider in Ireland.
Revenue for the period increased 3% year-on-year while EBITDA was stable. Elio
Networks has generated strong growth momentum in Cork City since launching in
2023, reaffirming its position as the leading wireless fixed connectivity
player in Ireland.
Sea Edge UK1
Sea Edge UK1 is the UK's only landing station for the North Sea Connect subsea
cable. D9 owns the underlying real estate of Sea Edge UK1 and its revenue is
in the form of rent.
Revenue and EBITDA for the period grew by 6% and 7% year-on-year,
respectively, due to continued positive revenue indexation and reduced
expenses. The Company has agreed to defer the rent due as part of the sale
process of SeaEdge.
Verne Global Earn-Out
An earn-out payment of up to US$135 million is payable to the Company subject
to Verne Global achieving run-rate EBITDA targets for the year ending 31
December 2026.
The Company's Board and Investment Manager continues to receive information
relating to Verne Global's EBITDA under the terms of the Sale and Purchase
Agreement to inform the valuation of the Earn-Out. Based on this information,
the Earn-Out has been valued at £29m.
Liquidity Position
The Group's total unrestricted cash amounted to £23.9 million as of 30 June
2024 (31 December 2023: £17.6 million), of which £4 million was held in
unconsolidated subsidiaries (Digital 9 Wireless OpCo 2 Limited and Digital 9
HoldCo Limited). Restricted cash amounted to £10 million as of 30 June 2024
(31 December 2023: £32 million).
Group Financial Leverage
£'m 30 June 2024 31 December 2023
Drawn RCF inc. Letters of Credit ("LoC") 53 375
Vendor Loan Note ("VLN")* 180 170
Aggregate Group debt 233 545
Group Cash & Equivalents (inc. restricted cash) (34) (49)
Net Debt 199 496
Consolidated Portfolio EBITDA (annualised) 180 198
Net Debt / EBITDA 1.1x 2.5x
Arqiva debt (pro-rated for D9 ownership)** 737 744
Verne Global debt - 79
Adjusted Net Debt 936 1,319
Adjusted Net Debt / EBITDA 5.2x 6.7x
* £10 million of additional notes issued in June 2024 as PIK interest.
** In line with previously reported figures, this is D9's share of Arqiva
gross debt. The balance does not include cash held by Arqiva.
The 57% decline in aggregate Group debt to £233 million as at 30 June 2024
(31 December 2023: £545 million;) resulted from the £322 million reduction
in the outstanding RCF balance to £53 million, while the Arqiva Group VLN
increased by £10 million to £180 million as a result of accrued PIK interest
(for further detail see the 'Capital structure at Arqiva and at HoldCo level'
section).
Going concern
In adopting the appropriateness of the Going Concern basis of preparation the
Board considered the fact that the Company is in Managed Wind-Down. The Board
determined that given associated timelines for realising both the potential
Earn-Out payment from the Verne Transaction and completing the sales of all of
the Company's investments (notably the Company's stake in Arqiva), it is
appropriate to have prepared the Financial Statements included within the
Interim Report on a Going Concern basis.
Despite significant balance sheet deleveraging related to the repayment of
over 85% of the Group's RCF in March and May 2024, £53 million drawn debt
remains outstanding, with the balance due in March 2025. The Company's Going
Concern assessment is dependent on the Group either completing the sale of
assets to fund the repayment of the remaining balance of the Group's RCF by
March 2025 or alternatively refinancing this debt. The Company intends to
explore all options available to repay the RCF including refinancing and/or
using proceeds from divestments should they be successful ahead of the RCF
repayment date.
In addition, the Directors have also considered the fact that Company's wholly
owned subsidiary D9 Holdco has not met one of its covenants under the terms of
the RCF. The RCF Lenders have indicated that, at present, they intend to work
collaboratively with the Company, where possible, over the coming weeks to
explore the option of providing a waiver, or alternative action if more
appropriate at the time, of this breach, but in the meantime they are
reserving their rights in that regard.
No provision has been made for the costs of winding up the Company as these
will be charged to the Income Statement on an accruals basis as they are
incurred or as the Company becomes obligated to make such payments in the
future.
As included within the Going Concern section in the Financial Statements
(Note: 2), the Company continues to disclose a material uncertainty, which may
cast significant doubt over the Company's ability to continue as a going
concern. The Board does believe that the Company and the Group have adequate
resources to continue in operational existence for a period of at least 12
months since the reporting date.
ENDS.
Contacts
Triple Point Investment Management LLP (Investment Manager) D9contact@triplepoint.co.uk (mailto:D9contact@triplepoint.co.uk)
Diego Massidda +44 (0)20 7201 8989
Arnaud Jaguin
The Company
Eric Sanderson
c/o FTI Consulting
Panmure Liberum Limited (Financial Adviser) +44 (0)203 100 2000
Chris Clarke
Darren Vickers
J.P. Morgan Cazenove (Corporate Broker) +44 (0)20 7742 4000
William Simmonds
Jérémie Birnbaum
FTI Consulting (Communications Adviser) dgi9@fticonsulting.com (mailto:dgi9@fticonsulting.com)
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 constituent of the FTSE All-Share. The Company is
focussed on the infrastructure of the internet, holding as of 30 June 2024 a
portfolio of high-quality subsea fibre, data centre and wireless communication
businesses. DGI9's shareholders unanimously approved a Managed Wind-Down of
the Company's portfolio in March 2024 and subsequently, the Company is
undergoing an orderly realisation of its assets to maximise shareholder value.
For more information on DGI9, please visit www.d9infrastructure.com
(https://eur03.safelinks.protection.outlook.com/?url=https://urldefense.com/v3/__http:/www.d9infrastructure.com__;!!O2kDR7mm-zSJ!q-IhiRmOFrs2QYD7gmr9EcM8ukutg1_xde5Fce9GgBpHkvhSc3nlYhW7glbEiZG--1yRCrGc2K4WArD5RA1-$&data=05%257C01%257CHelen.Richardson@triplepoint.co.uk%257C736257c2b4244d9b148e08dbce910edc%257Ccde8812e0dbd4dc3b4463655beb81efb%257C0%257C0%257C638330894771285360%257CUnknown%257CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0=%257C3000%257C%257C%257C&sdata=/d/uhyGQHTb/t4t2e4NW5UNYk/YmW1xyb++alYftf5I=&reserved=0)
.
The Investment Manager is Triple Point Investment Management LLP ("Triple
Point") which is authorised and regulated by the Financial Conduct Authority.
For more information on the Investment Manager please
visit www.triplepoint.co.uk
(https://eur03.safelinks.protection.outlook.com/?url=https://urldefense.com/v3/__http:/www.triplepoint.co.uk__;!!O2kDR7mm-zSJ!q-IhiRmOFrs2QYD7gmr9EcM8ukutg1_xde5Fce9GgBpHkvhSc3nlYhW7glbEiZG--1yRCrGc2K4WAjub3ANF$&data=05%257C01%257CHelen.Richardson@triplepoint.co.uk%257C736257c2b4244d9b148e08dbce910edc%257Ccde8812e0dbd4dc3b4463655beb81efb%257C0%257C0%257C638330894771285360%257CUnknown%257CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0=%257C3000%257C%257C%257C&sdata=2SpCRgIybR8ARfciJBsE4bOmxNcDDFvRX9K9FehSEto=&reserved=0)
.
CHAIR'S STATEMENT
The Company faced significant challenges over the period and in recent years.
Following the constitution of a new Board of Directors over the last few
months, our focus is to reset the Company's priorities in delivering an
orderly wind-down of the D9's portfolio of assets.
To oversee this process, I was appointed Chair on 30 May 2024, and since 12
August 2024, following the appointment of three additional new non-executive
directors, the D9 Board has operated on a near-full time basis, with almost
daily meetings.
During this time, the new Board has overseen the completion of the interim
portfolio valuation, progressed the ongoing sale processes for the Company's
wholly-owned assets, and sought to honour the existing commitments made to
shareholders; including the Investment Management Review.
The Board fully understands shareholders' frustration regarding the persistent
discount at which the Company's share price is trading relative to its NAV,
the cessation of the Company's dividend, and the NAV reduction to 30 June
2024.
We recognise that delivering on the Board's stated commitments is critical for
good governance and ultimately to realise the mandate shareholders voted for
in March 2024, being the implementation of the Managed Wind-Down and taking
every action possible to realise shareholder value over time.
To do so, the Board's decision-making is characterised by four factors:
1. The Board will seek to realise all of the Company's investments in a
manner that achieves a balance between maximising the net value from these
assets and making timely capital returns to shareholders.
2. The Board will seek to repay the remaining RCF, which amounted to £53
million as of 30 June 2024. The RCF remains subject to refinancing in March
2025, when the facility matures. The Company maintains an ongoing constructive
dialogue with RCF lenders as the Managed Wind-Down progresses.
3. The Board will seek to ensure the Company preserves value by actively
managing all costs associated with both its obligations as a listed company
and those necessary to implement the Managed Wind-Down.
4. The Board will seek to regularly engage with its shareholders through
timely market communication. We trust that the Company's shareholders
acknowledge it will often be in the Company's interest to limit sensitive
disclosure to protect its commercial position during live sale processes.
Portfolio Valuation
For the period ended 30 June 2024, the portfolio NAV declined to £403 million
at 30 June 2024 (31 Dec 2023: £686 million). The Board determined that it is
in shareholders' best interests to publish an aggregate NAV to protect the
Company's commercial position during live sale processes of portfolio
companies. At the point when the Company's commercial position changes, the
Board will provide the customary transparency on asset valuations.
In considering the valuation of the larger portfolio positions (Arqiva, Aqua
Comms, Elio Networks and the Verne Global earn out) as at 30 June 2024, for
each position the Board has concluded that the low-end of an acceptable value
range was appropriate; and in arriving at their fair value conclusions for
each of these positions, the Board has obtained an independent valuation.
The Board's adoption of the low-end of an acceptable value range is the same
basis adopted by the previous Board as at 31 December 2023.
The valuation ranges were primarily based on a discounted cash flow model from
revenue forecasted over a 8-10 year period followed by a terminal value based
on a long term growth rate. Revenue projections were derived from the
portfolio company business plans.
In the preparation of the portfolio business plans for the 30 June 2024
valuation, there was a re-assessment of the assumptions relating to the
availability of finance for underlying portfolio companies, and timing
thereof, and the consequential impact on the growth expectations of the
portfolio companies.
The Board is cognisant that had certain of the assumptions adopted in the 30
June 2024 valuation been adopted at 31 December 2023, the valuation at that
date would have been materially lower.
Sale Processes
The Board remains committed to maximising shareholder value from the sale of
the Company's wholly-owned assets at the earliest possible opportunity.
Sale preparations of Aqua Comms, EMIC-1, SeaEdge UK1 and Elio Networks, were
initiated following shareholder approval of the Company's Managed Wind-Down.
The Board will provide material updates on each sale process, as necessary.
The Board continues to believe that the launch of a sale process for D9's
stake in Arqiva requires more consideration due to the complexity of the
business and the co-shareholding structure. The Board continues to explore
various options for Arqiva in consultation with a collaborative shareholder
group. Further detail is set out in the Company's circular dated 28 February
2024.
As part of the Verne Transaction, the Company can benefit from a potential
earn-out payment of up to $135 million (approximately £107 million), subject
to Verne Global achieving run-rate EBITDA targets for 2026 which were outlined
to all prospective bidders at the time of the Verne Global sale. The Company
also has customary protections to ensure Verne Global continues operating and
reporting substantially in line with prior practices, including quarterly
updates on its EBITDA to the Investment Manager and the D9 Board. The growth
trajectory of the business to date is in line with expectations based on
information received to date.
During the Managed Wind-Down, the Company intends to maintain its investment
trust status and listing with due consideration for the regulatory
requirements and costs of doing so following the sale of the Company's wholly
owned assets.
Investment Management Arrangements Review
As announced on 30 April 2024, the Company provided notice to the Investment
Manager, Triple Point Investment Management LLP ("Triple Point"), to terminate
the Investment Management Agreement ("IMA") on the earliest date permissible
under the IMA being 31 March 2025. On 29 January 2024, the previous Board
disclosed its intention to actively explore whether Triple Point might agree
revised commercial terms that would be in the best interests of the Company
and its shareholders. In light of the material downward revaluation of the
portfolio's NAV as at June 2024, announced by the Company on 6 September 2024,
the Board is continuing this review and intends to update shareholders at the
earliest opportunity. As announced on 6 September 2024, the Board has made
significant progress in its independent review of the Company's investment
management arrangements and a further announcement is expected in the near
future.
Capital Allocation
Ultimately, following the full repayment and cancellation of the RCF, the
Board intends to use proceeds to prioritise returns of capital to shareholders
over the Group's longer-term obligations.
As previously disclosed, any cash distributions to shareholders will likely
take the form of returns of capital but with final allocation amounts to be
determined at the time by the Board in conjunction with the Investment Manager
and taking into consideration the Company's liquidity.
No further dividend distributions are planned or foreseen. The Company will
also cease to make any new investments except where there may be a legal or
contractual imperative to do so, or if new investments may facilitate a sale
process and in turn deliver superior shareholder value.
I would like to thank shareholders for their continued engagement with the
Company and the new Board through what was a challenging period.
Eric Sanderson
Chair
30 September 2024
KEY PERFORMANCE INDICATORS
In order to track the Company and/or Group's progress, the key performance
indicators ("KPIs") monitored are set out below.
Sustainability KPIs are reported on a yearly basis, and the KPIs for the year
ended 31 December 2023 can be found in the Company's separate Sustainability
Report which is available here:
https://www.d9infrastructure.com/digital-9-infrastructure-plc-sustainability-report-2023/
(https://www.d9infrastructure.com/digital-9-infrastructure-plc-sustainability-report-2023/)
.
KPI AND DEFINITION RELEVANCE TO STRATEGY PERFORMANCE COMMENT
1. Total return (%)(1)
The change in NAV in the period and dividends paid per share in the period. The total return highlights the underlying performance of the portfolio's (35.9)% for the six-month period to 30 June 2024 (June 2023: (5.6)%). The negative total return is primarily due to the decrease in the fair value
investment valuations, including dividends paid. of the Company's Investment Portfolio, additional expenses incurred in
relation to the Verne Global transaction and RCF and VLN interest expenses.
2. Total shareholder return (%)*
The change in share price and dividends paid per share. The total shareholder return highlights the share price movements, including (24.9)% for the six-month period to 30 June 2024 (June 2023: (26.1)%). The decrease was primarily driven by a significant fall in the share price.
re-investment of dividends. During the period, no dividends were declared, which also contributed to the
share price decline.
3. Earnings per share (pence)
The post-tax earnings attributable to shareholders divided by weighted average The EPS reflects the Company's ability to generate earnings from its (32.73) pence per share for the six-month period to 30 June 2024 (see Note The main driver in the loss per share for the six-month period was the
number of shares in issue over the period. investments, including valuation increases. 13) (June 2023: (6.63) pence per share. movement in fair value of the Company's Investment Portfolio, and costs
incurred during the period. Other key drivers were financing costs incurred
for the Group's RCF and VLN.
4. NAV per share (pence)
NAV divided by number of shares outstanding as at the period end. The NAV per share reflects our ability to grow the portfolio and to add value 46.59 pence per share (30 June 2023: 100.13 pence per share; 31 December The NAV per share fell as a result of the negative fair valuation movement in
to it throughout the life cycle of our assets. 2023: 79.33 pence per share) (see Note 14). the period and costs incurred including financing costs incurred for the
Group's RCF and VLN. The negative fair value adjustment equates to 29.72 pence
per share drop in NAV.
5. Ongoing Charges Ratio*
Annualised ongoing charges are the Company's management fee and all other Ongoing charges show the drag on performance caused by the operational 1.63% annualised for the six-month period to 30 June 2024 (six-month period A key measure of Operational performance.
operating expenses (i.e. excluding acquisition costs and other non-recurring expenses incurred by the Company. ended June 2023, annualised: 1.20%).
items) expressed as a percentage of the average published undiluted NAV in the The Ongoing charges ratio has increased in line with the decrease in NAV.
period, calculated in accordance with Association of Investment Companies Total expenses for the period have decreased compared to the prior year, but
guidelines. the ratio as a percentage of the lower NAV increased.
The calculation does not include costs associated with the sale of investments
nor with the Strategic Review.
* Alternative Performance Measure ("APM"). Further information on APMs can be
found in the Annual Report.
INVESTMENT MANAGER'S REPORT
Company and Portfolio Performance
The Company reported a pre-tax loss of £283 million for the six months to 30
June 2024 (six months to 30 June 2023: £57 million pre-tax loss), equal to a
32.73 pence loss per share (six months to 30 June 2023: 6.63 pence loss per
share), under IFRS 10 investment entity accounting. This was the net result of
income received from investments and revaluation losses arising on the
investments held at fair value as at 30 June 2024. During the six-month
period, the Company's NAV decreased from £686 million (79.33 pence per share)
as at 31 December 2023 to £403 million as at 30 June 2024 (46.59 pence per
share). Further details regarding the decline in NAV are provided in the
Financial Review section.
For the first six months of 2024, aggregate Investee Company revenue declined
by 1% year-on-year, whilst EBITDA fell 7% in the same period due to continued
margin pressure at Arqiva and Aqua Comms. Further details are provided in the
following sections.
Portfolio company debt as at 30 June 2024 consisted of £737 million at Arqiva
(31 December 2023: £744 million), presented pro rata based on D9's 51.76%
economic interest.
Managed Wind-Down
In line with the new investment objective and investment policy approved by
the Shareholders in the General Meeting held on 25 March 2024, non-binding
offers for certain assets have been received and a selected number of
preferred bidders have been admitted to a second phase of the sales processes,
which will include detailed due diligence. Sales processes are also ongoing
for various assets in the portfolio, excluding Arqiva. There can be no
guarantee that the sales will proceed, and the sale processes will only be
progressed if the Board is satisfied that the values achieved are acceptable.
A further update on the sales processes will be made as matters progress.
Financial Review
Net Asset Value
The following chart shows the movement in the Company's NAV on a pence per
share basis, for the six-month period from 31 December 2023 to 30 June 2024.
In the six months to 30 June 2024, the portfolio's fair value reduced by £257
million or 29.72 pence per share.
The total fall in NAV of the Company of £283 million or 32.74 pence per share
was driven by portfolio fair value movement of £257 million, RCF and VLN
interests of £16 million, Verne Global disposal fees of £6 million and net
other costs of £4 million.
NAV per share movement - six months to 30 June 2024
(pence per share)
Reconciliation to IFRS Valuation
The below chart shows the build-up of the IFRS Investment Valuation held on
the Balance Sheet of the Company, which amounts to a total of £384 million.
This includes a £360 million valuation for the Company's wholly-owned
subsidiary Digital 9 HoldCo Limited, which holds the investments in the
underlying Investee Companies. A £24 million shareholder loan the Company has
made to Digital 9 HoldCo Limited is shown separately.
In the chart below, Total Portfolio Value (£424 million) is net of all VLN
deductions, being VLN principal (£163 million), as well as additional VLN
notes issued in June 2023 (£7 million) and in June 2024 (£10 million) in
respect of interest for prior periods (please see below the section entitled
'Capital structure at Arqiva and at HoldCo level' for further detail).
Deductions are also made for the RCF which, for the avoidance of doubt, does
not sit on the Company's Balance Sheet but as it is held in Digital 9 HoldCo
Limited, an unconsolidated subsidiary of the Company.
Digital 9 HoldCo Limited valuation reconciliation as of 30 June 2024
(£ million)
Valuations
The valuation follows an independent valuation process for Aqua Comms, Arqiva
and Elio Networks as at 30 June 2024. The total portfolio valuation is £424
million. This is net of the total VLN balance as of June 2024, which includes
additional PIK notes issued in June 2023 and June 2024.
As of 30 June 2024, Company NAV per share is 46.59 pence per share, a 41%
reduction from 79.33 pence per share as of 30 December 2023. A major part of
the NAV reduction is attributable to a re-assessment of the assumptions
relating to the availability of finance for underlying portfolio companies and
its impact on portfolio companies' growth outcomes in the valuation models, as
compared to those inputs used in arriving at the NAV as at 31 December 2023.
Summary of Portfolio Valuation methodology
The cash flows used in the valuations are based on plans signed off by
Investee Company boards. These models are used to evaluate Investee Company
performance and assess the performance of Investee Company management.
Valuation
Investment valuations are calculated at the financial half-year (30 June) and
the financial year-end (31 December) periods. For the current period ended 30
June 2024, in arriving at their fair value conclusions, the Board obtained an
independent valuation of Aqua Comms, Elio Networks, Arqiva Group and the Verne
Earn-Out. EMIC-1 and SeaEdge UK1 were valued by TriplePoint. The Verne Global
Earn-Out was valued utilising a Monte Carlo Simulation.
Discount rates
As described in Note 7, investments are typically valued on a discounted cash
flow ("DCF") basis. The discounted cash flow from revenue is forecast over an
8-to-10-year period followed by a terminal value based on a long-term growth
rate. Discount rates are arrived at via a bottom-up analysis of the weighted
average cost of capital, using both observable and unobservable inputs, and
calculation of the appropriate beta based on comparable listed companies.
Where appropriate, a sense-check to the DCF analysis is done by comparison to
market multiples. The weighted average discount rate used in these valuations
was 13.80% (31 December 2023: 13.62%).
Liquidity
The chart below shows the unrestricted cash movements for the Group in the
six-month period to 30 June 2024. For the avoidance of doubt, this chart
includes all unrestricted cash across the D9 subsidiaries to 30 June 2024.
At 30 June 2024, the Group held total cash of £33.6 million*. Of this,
unrestricted cash available for use was £23.9 million. Unrestricted cash
includes £19.8m held at the Company level, with the £4.1 million balances
being held in unconsolidated subsidiaries.
As at 30 June 2024, the Group had cash of £5.1 million in a restricted
interest reserve account, under the terms of its RCF. In agreement with its
RCF lenders, the Company negotiated and agreed that from 1 January 2024 the
cash reserves in the RCF's interest reserve account can be used for interest
payments which enables the Company to pay interest for the residual RCF
without using any unrestricted cash until the RCF's maturity in March 2025.
The Group also had £4.6 million restricted cash held in an escrow account in
relation to the EMIC-1 project.
All Letters of Credit relating to Verne Global Iceland were cancelled in Q1
2024.
* Alternative Performance Measure ("APM"). Further information on APMs can be
found in the 2023 Annual Report.
Unaudited Unrestricted Cash Group Waterfall - 1 January 2024 to 30 June 2024
(£ million)
Inflation
In the period, inflation has started to stabilise following the highs of last
year, which has had a strong positive cash flow impact for Arqiva. Last year,
13.5% RPI in March 2023 resulted in Arqiva paying £147 million in accretion
on its inflation-linked swaps. This year, RPI declined to 4.3% in March 2024,
corresponding to a £53 million accretion payment by Arqiva (equating to
c.£28 million prorated for D9's 51.76% economic interest in Arqiva). High
inflation last year had two main impacts on Arqiva. The first was the
immediate but short negative cash flow impact of the large 2023 accretion
payment. The second is positive, increasing EBITDA in the long term due to the
compounding effect of Arqiva's long-term inflation-linked contracts.
Debt financing
Excluding Investee Companies, D9 had gross debt of £233 million as of 30 June
2024, corresponding to 51% of Adjusted GAV. This comprised the Company's RCF,
which was fully drawn at £53 million, as well as the outstanding VLN balance
of £180 million. Interest on the VLN can be paid either in cash or by
issuance of additional notes, and the latter option was exercised in respect
of the 12 months to 30 June 2024, increasing the outstanding balance by £10
million. The current balance consists of £163 million principal and £17
million of additional notes.
Investee company leverage
As of 30 June 2024, Arqiva was the only Investee Company with external debt,
with a balance of £1,423 million (including project debt), of which D9's
share was £737 million (31 December 2023: £744 million).
Debt metrics
The below table shows the Group's leverage position as at 30 June 2024.
30 June 2024 31 December 2023 30 June 2023
£'million £'million £'million
Total Portfolio Value 424.0 1,028.8 1,153.5
Subsidiary Cash & Equivalents 13.8 34.6 48.9
RCF (53.3) (373.8) (355.0)
Net Subsidiary Other Liabilities (24.1) (49.8) (37.1)
PLC inter-company loan 23.9 36.2 29.1
Reconciled IFRS Valuation 384.3 676.1 839.4
PLC Other Current Assets 1.7 1.5 0.8
PLC Receivables & Cash 19.8 14.8 29.5
Total Assets 405.8 692.3 869.7
RCF 53.3 375.0 375.0
Adjusted GAV 459.1 1,067.3 1,244.7
£'million £'million £'million
RCF 53.3 375.0 356.2
VLN (including £17 million additional notes issued in respect of interest) 180.0 169.8 169.8
Total Group Leverage 233.3 544.8 526.0
Leverage / Adjusted GAV 50.8% 51.0% 42.3%
As of 30 June 2024, the Company's net debt / EBITDA position has decreased
since 31 December 2023, mainly as a result of the significant partial
repayment and cancellation of the Company's RCF following the sale of Verne
Global.
Net Debt / EBITDA At 30 At 31 December 2023 (£'million) At 30 June
June
2023 (£'million
2024
(£'million)
Drawn RCF
53 375 355
VLN* 180 170 170
Group Cash & Equivalents (inc. restricted cash) (34) (49) (78)
Net Debt 199 496 447
Annualised Portfolio EBITDA 180 198 209
Net Debt / EBITDA 1.1x 2.5x 2.1x
Arqiva debt (prorated for D9 ownership)** 737 744 769
Verne Global debt - 78 78
Adjusted Net Debt 936 1,318 1,294
Adjusted Net Debt / EBITDA 5.2x 6.7x 6.2x
*Includes £6.8 million additional notes issued in June 2023 and £10.2
million additional notes issued in June 2024 in respect of interest for the
periods prior.
**This is D9's share of Arqiva gross debt. It is not an Arqiva net debt figure
and as a result does not include cash held by Arqiva; it is a more
conservative approach and is in line with previously reported figures.
Please see below the 'Provision in respect of potential VLN adjustment'
section for further details relating to the potential change to the VLN
relating to the Bilsdale matter.
Review of Portfolio as of 30 June 2024
Aggregate revenues for the Investee Companies during the period amounted to
£194.7 million, 1% lower than the same six-month period to 30 June 2023. The
decrease was largely attributable to small customer losses at Arqiva,
mitigated by Aqua Comms' higher-than-expected O&M sales and Elio Networks'
continued drive to grow their higher bandwidth Elio Enterprise product. In
line with business plans, margins have remained under pressure for some of the
businesses, particularly Arqiva and Aqua Comms, resulting in a 7% year-on-year
drop in EBITDA for the period. In the six months to 30 June 2024, the
portfolio's fair value reduced by £257 million or 29.72 pence per share.
Further details on the portfolio revaluation are provided in the Financial
Review section above.
Portfolio Financial Performance
Six months to 30 June 2024 Six months to 30 June 2023 12 months to December 2023 12 months to December 2022
Revenue £194.7 million £197.5 million £396.0 million £363.8 million
Year-on-year growth (%) (1%) 10% 9% 0%
EBITDA £89.9 million £96.9 million £180.6 million £193.2 million
Year-on-year growth (%) (7%) 0% (7%) (0%)
% margin 46% 49% 46% 53%
Aqua Comms (excluding EMIC-1)
Aqua Comms is a leading carrier-neutral owner and operator of subsea fibre
cable systems with a strategic opportunity to expand, connecting the world's
largest traffic hubs. It is a transatlantic leader, with its AEC-1, AEC-2,
AEC-3, CC-1, CC-2 and North-sea Connect cables, and is expanding around the
globe. Through its niche product suite and carefully considered partner
network, Aqua Comms delivers high speed solutions for carriers who desire
best-in-class connectivity, without the complexity.
Sector Subsea Initial investment £170 million
Currency USD Total capex funded to date £17 million
Date invested April 2021 Total investment to date £187 million
Ownership 100% Revenue (six months to 30 June 2024) £16.0 million
SDG9 alignment Connectivity EBITDA (six months to 30 June 2024) £3.6 million
Compared to the six months to 30 June 2023, revenue increased by 16% in the
six months to 30 June 2024 mainly driven by increased sales in Aqua Comms'
existing systems and on AEC-3, which became operational in the third quarter
of last year. EBITDA decreased by 12% mainly because of the planned addition
of headcount to support sales, operations and expansion into new geographies
such as Asian markets, in line with the business' long-term strategy, along
with additional and temporary overlapping costs to internalise its previously
outsourced Network Operations Centre (with the transition on track to finalise
at the end of this year).
Aqua Comms has had a strong start to the year and continues its success in the
transatlantic market with large, announced sales such as a 25% fibre pair sale
on its transatlantic system to Energy Sciences Network (ESnet).
As planned, Aqua Comms has now lit the second fibre pair it owns on AEC-1, as
customer demand has driven the need to supply further capacity on this system.
Six months to 30 June 2024 Six months to 30 June 2023 2023 2022
Revenue £16.0 million £13.8 million £28.3 million £27.2 million
% growth 16% 3% 4% 5%
EBITDA £3.6 million £4.1 million £8.6 million £12.7 million
% growth (12%) (36%) (32%) (5%)
% margin 23% 30% 30% 47%
EMIC-1
Aqua Comms is also managing the EMIC-1 system with its development continuing
through 2024 before earliest expected launch in 2025. EMIC-1 has the potential
to be delayed further based on the geopolitical situation in the Red Sea and
Middle East, which is impacting the ability of new cable systems to be
deployed in the region. Despite the geopolitical situation and potential for
further delay, the Aqua Comms team achieved a large pre-sale on EMIC-1 in Q4
of last year. The leader of the investor consortium building out the cable
system continues to explore alternative plans to connect the Red Sea and
Indian leg of the system, to allow service to start even if the original wet
route is not fully completed.
Sector Subsea Initial investment -
Currency USD Total capex funded to date £39 million
Date invested August 2021 Ownership 100%
SeaEdge UK1
SeaEdge UK1 is a data centre asset and subsea fibre landing station, located
on the UK's largest data centre campus in Newcastle. D9 owns the underlying
real estate of SeaEdge UK1 and leases the facility to data centre operator
Stellium Data Centres Ltd, via a 25-year occupational lease. SeaEdge UK1
offers unique positioning as a premier data centre provider in the UK with
unparalleled connectivity to North America, the Nordics, and the UK via
exclusive subsea Cable Landing Station's and proprietary local network.
Sector Data centre Initial investment £16 million
Currency GBP Total capex funded to date -
Date invested December 2021 Total investment to date £16 million
Ownership 100% Revenue (six months to 30 June 2024) £0.5 million
SDG9 alignment Connectivity & Decarbonisation EBITDA (six months to 30 June 2024) £0.5 million
SeaEdge UK1 is the UK's only landing station for the North Sea Connect subsea
cable, which improves connectivity in northern England and forms part of the
North Atlantic Loop subsea network, which includes Aqua Comms' AEC-1 and AEC-2
cables.
In the six months to 30 June 2024, revenue grew by 6% and EBITDA by 7%
compared with the same period in the previous year. This was due to continued
positive revenue indexation and reduced expenses. The Company has agreed to
defer the rent due as part of the sale process of SeaEdge.
The asset is leased on fully repairing and insuring terms to the tenant and
operator, Stellium Data Centres Ltd, via a 25-year occupational lease with
over 21 years remaining.
Six months to 30 June 2024 Six months to 30 June 2023 2023 2022
Revenue £0.5 million £0.5 million £1.0 million £0.9 million
% growth 6% - 11% n/a
EBITDA £0.5 million £0.5 million £1.0 million £0.9 million
% growth 7% 7% 13% n/a
% margin 95% 94% 94% 93%
Elio Networks
Elio Networks is a leading provider of resilient and high performance B2B
connectivity, operating the highest-capacity Fixed Wireless Access (FWA)
network in Ireland, with dedicated up to 10 Gbps (Gigabits per second) lines
due to a dense base station coverage.
Sector Wireless Initial investment £51 million
Currency EUR Total capex funded to date -
Date invested April 2022 Total investment to date £51 million
Ownership 100% Revenue (six months to 30 June 2024) £4.1 million
SDG9 alignment Connectivity EBITDA (six months to 30 June 2024) £2.2 million
Elio Networks continued growing its high-quality wireless connectivity
operations in 2024, with revenue of £4.1 million achieved in the six months
to 30 June 2024, a 3% increase compared to the six months to 30 June 2023.
Elio Networks has seen strong growth momentum in Cork city since launching in
2023, reaffirming its position as the leading wireless fixed connectivity
player in Ireland.
Elio Networks has a diverse client base, including larger multinationals,
government bodies, global technology companies, small professional service
firms, retail and hospitality companies. Elio Networks was launched to address
the growing requirement for affordable high-speed broadband in the greater
Dublin area. Since then, it has grown to become the largest wireless internet
service provider ("ISP") in the greater Dublin region, with the 2023 expansion
into Cork city reaffirming its position as a leading connectivity player in
Ireland.
Six months to 30 June 2024 Six months to 30 June 2023 2023 2022
Revenue £4.1 million £4.0 million £8.0 million £7.6 million
% growth 3% 6% 5% 6%
EBITDA £2.2 million £2.2 million £4.1 million £4.0 million
% growth - 11% 2% (14%)
% margin 54% 55% 51% 53%
Arqiva
Arqiva is the UK's pre-eminent national provider of television and radio
broadcast infrastructure and provides end-to-end connectivity solutions in the
media and utility industries. It has been an early and leading participant in
the development of smart utility infrastructure in the UK through its smart
water and energy metering services. It is also a leading provider of satellite
uplink infrastructure and distribution services in the UK.
Sector Wireless Initial investment £300 million
Currency GBP Total capex funded to date -
Date invested October 2022 Total investment to date £300 million
Ownership 48.02% Revenue (six months to 30 June 2024) £174.0 million
SDG9 alignment Connectivity EBITDA (six months to 30 June 2024) £83.7 million
Note: Figures presented are prorated based on D9's 51.76% economic interest in
Arqiva.
Arqiva is a large, robust business with c.1,300 employees and predictable
earnings underpinned by long‐term contracts with blue‐chip customers,
including the BBC, ITV, Channel 4, Sky, Discovery, the DCC and Thames Water.
Arqiva's utilities business continues to represent a growth opportunity
grounded in a quality product offering and enabling clear cost savings and
environmental benefits.
Arqiva achieved revenue of £174m in the six months to 30 June 2024, down 3%
year-on-year. Positive revenue indexation through Arqiva's inflation-linked
contracts was offset by reduced DTT channel sales, lower pricing on contract
renewals and customer losses. EBITDA declined year-on-year, with margins
impacted by rising power costs and increased headcount expenses, reflecting
macroeconomic wage pressures and strategic investments in new media markets.
In May 2024, Ofcom published a report on the future of TV distribution, which
outlined how the market could evolve over the next 10-15 years. Arqiva is in
close dialogue with relevant stakeholders including the regulator and relevant
government departments as this area of policy debate progresses.
In the utilities sector, the UK's water industry regulator, Ofwat, published
its draft determinations for the 2025-2030 period, which signal the largest
investment programme since privatisation. This includes an ambitious rollout
of over 10 million smart water meters, presenting Arqiva with a significant
growth opportunity to leverage its smart metering expertise and support the
sector's strategic agenda in water and waste monitoring.
Capital structure at Arqiva and at HoldCo level
In October 2022, D9 acquired a 51.76% economic interest (48.02% equity stake)
in Arqiva for £463 million, which consisted of £300 million paid in cash and
£163 million owed to the vendor in the form of a vendor loan note (VLN).
As of 30 June 2024, D9 owes the £163 million VLN principal to the vendor
along with £17 million of PIK interest (additional notes issued on 30 June
2023 and 30 June 2024). Arqiva also holds a large balance of shareholder loans
owed to its own shareholders. For the avoidance of doubt, these do not
represent an external debt obligation and should be excluded when examining
Arqiva's leverage. Arqiva's total external debt as of 30 June 2024 was £1,423
million, which corresponds to £737 million attributable to D9 pro rata based
on its 51.76% economic interest.
Provision in respect of potential VLN adjustment
Arqiva's Bilsdale site returned to full operation in January 2024 following
the 2021 fire and subsequent restoration. We expect net costs associated with
the incident to be lower than anticipated at acquisition. Per the terms agreed
with the vendor at the time of the acquisition by D9, this cash flow upside
for Arqiva is expected to be offset by an increase to the VLN. The Group holds
a provision in respect of this potential adjustment to the VLN and any such
adjustment to the VLN will be made when it crystallises. The provision has not
been stated explicitly due to its commercially sensitive nature, but it has
been accounted for at D9 HoldCo level such that the impact is reflected within
the fair value of the investments in D9 HoldCo for the period.
Inflation-linked swaps
The six months to 30 June 2024 have seen inflation stabilising, following the
highs of last year, with a strong positive cash flow impact for Arqiva. Last
year, 13.5% RPI in March 2023 resulted in Arqiva paying £147 million in
accretion on its inflation-linked swaps. In stark contrast this year, RPI was
down to 4.3% in March, resulting in a £53 million accretion payment (equating
to c.£28 million prorated for D9's 51.76% economic interest in Arqiva). For
the avoidance of doubt, accretion is paid out of Arqiva's own cash flows and
not by D9. Please see above the 'Provision in respect of potential VLN
adjustment' section for further details relating to the potential change to
the VLN relating to the Bilsdale matter.
As disclosed in June 2023, Arqiva implemented a collar on its inflation-linked
swaps, which applies a cap and floor to future accretion payments, limiting
downside cash flow exposure for the business. Given that March 2024 RPI fell
within the collar's range (2.5% to 6.0%), there were no collar cash flows
relating to Arqiva's 2024 accretion payment.
Vendor loan note interest
D9's 2022 acquisition of a 48.02% equity stake in Arqiva consisted of £300
million paid in cash and a £163 million vendor loan note issued by the
vendor. Please see above the 'Provision in respect of potential VLN
adjustment' section for further details relating to the potential change to
the VLN relating to the Bilsdale matter. The VLN, which matures in 2029, is
non-recourse to the Company. In the event of a default, recourse is limited to
the Company's shares in Arqiva Group Limited, and this charge is registered at
Companies House against D9 Wireless Midco 1 Limited, a subsidiary of the
Company.
The VLN is due to mature on 18 October 2029 and has the following stepped
interest rate profile:
· 6% per annum up to and including 30 June 2025;
· 7% per annum from 1 July 2025 up to 30 June 2026;
· 8% per annum from 1 July 2026 up to 30 June 2027; and
· 9% per annum from 1 July 2027 to maturity.
Interest on the VLN is due annually in arrears on 30 June and can be paid
either in cash or by issuance of additional payment-in-kind ("PIK") notes.
This PIK option was exercised in respect of the 12 months to 30 June 2024,
increasing the outstanding balance from £169.8 million as of 30 June 2023 to
£180 million as of June 2024. This consists of £163 million principal and
£17 million of additional notes. PIK interest is capitalised into the balance
of the VLN annually in June each year, and all interest on the Arqiva VLN was
PIK as of 30 June 2024. No interest on the VLN has been settled in cash.
Accrued interest must be repaid in full before distributions can be made to
the Group. After the fourth anniversary of the VLN (18 October 2026), the
Group can only receive distributions if the entirety of the VLN principal and
any rolled up interest have been repaid in full.
Six months to 30 June 2024 Six months to 30 June 2023 2023 2022
Revenue £174.0 million £179.3 million £358.6 million £328.1 million
% growth (3%) 11% 9% -
EBITDA £83.7 million £90.1 million £166.9 million £175.7 million
% growth (7%) 3% (5%) 1%
% margin 48% 50% 47% 54%
Note: Figures presented are pro-rated based on D9's 51.76% economic interest
in Arqiva.
Verne Global Earn-Out
As previously announced, the Company completed the Verne Transaction which
consisted of a potential earn-out payment of up to approximately £107 million
(US$135million) (the "Earn-Out") payable subject to Verne Global achieving
run-rate EBITDA targets for the year ending on 31 December 2026.
We continue to receive information relating to Verne Global's EBITDA under the
terms of the Sale and Purchase Agreement in order to inform the valuation of
the Earn-Out.
Diego Massidda
Head of Digital Infrastructure
Triple Point Investment Management LLP
30 September 2024
PRINCIPAL RISKS AND UNCERTAINTIES
The table below sets out what the Board believes to be the principal risks and
uncertainties facing the Group. The table does not cover all of the risks that
the Group may face. The Board defines the Group's risk appetite, enabling the
Group to judge the level of risk it is prepared to take in achieving its
overall objectives. Additional risks and uncertainties not presently known to
management or deemed to be less material at the date of this report may also
have an adverse effect on the Group.
Risk Impact Risk Mitigation Impact, Likelihood and Change in Period
1. Persistent, Negative Market Sentiment. Leading to increased activism The fund has suffered as a result of a lengthy period where share price has The Board has continued to maintain an open dialogue with shareholders and
traded at a discount to NAV. There are a number of legacy drivers behind the provided market updates on the execution of its strategy, which has included a
market sentiment, which include: wider macroeconomic and market conditions, formal consultation with shareholders to determine the forward-looking Impact:
Group's leverage position, Investment Manager and Board personnel changes. strategy, which sought to address shareholder concerns re the performance and
management of the fund. High
Combined, these have led to a reduced level of shareholder confidence which
has manifested in a continued level of complaints and increased Board Ongoing, the Board and Investment Manager have sought appropriate corporate Likelihood:
engagements. and legal advice to ensure the fund conducts itself appropriately and informed
decisions and actions have been taken to deliver the best possible outcome to High
shareholders.
Specifically, the Board have experienced multiple changes of membership.
This has in part caused disruption to the ongoing governance and oversight of
Change in period:
the fund and is seen as a contributor to the increased level of activism. There has recently been appointment of new members to the Board including the
appointment of a new Chair - all of which will add depth, capacity and ensure Stable
all Committees can operate appropriately and enable the Board to fulfil its
oversight obligations.
2. Liquidity and Solvency Risk The company made a significant repayment to the RCF debt liability, following The Company has several management actions in place to manage its debt Impact:
the successful sale of Verne. The residual balance requires active management obligations and is in regular dialogue with its funding partners. In addition
given the proximity to the repayment date (March 25), and that the group is in it is working with the Lenders to explore options for a waiver of its breach High
breach of one of its financial covenants. whilst it continues the orderly realization with a view to sales or repayment
of the RCF as soon as practicable.
Likelihood:
General liquidity is managed via regular cashflow monitoring, supplier High
negotiations, and regular visibility at Board level through ongoing reporting.
Change in period: Increased
3. Transaction / Execution Risk The execution of the wind-down strategy will be completed in an appropriate Each transaction will be supported by a carefully selected team of advisers, Impact:
and timely manner and one that achieves best outcomes for investors. The which together with the experience of the Investment Management team are best
underlying quality and performance of the Investee Companies are considered placed to navigate the inherent risks in selecting the most appropriate deal Moderate to High
robust both financially and operationally; notwithstanding that access to and respectively concluding; with the priority of delivering best investor
capital for further investment would enhance value in certain instances. Where outcomes.
appropriate and available, this will still be explored, subject to there being
no detriment to overarching achievement of strategy. The closure of Likelihood:
transactions may prove materially more complex than anticipated given the
geography and regulatory bias of the Investee Companies. Moderate
Change in period:
Stable
4. Future Portfolio Funding A number of the portfolio companies required access to funding to fulfill Portfolio Companies are actively managing funding options to support Impact:
capex requirement, for which projects are dependent upon. fulfillment of their project plans.
Moderate
Likelihood:
Limitations on or access to funding may impact performance and valuations. Where necessary management actions are in place to monitor the impact in
delays in accessing the required capital. Moderate to High
Change in period:
Increased
5. Interruptions to operations including infrastructure and technology D9's Investee Companies rely on infrastructure and technology to provide their The Digital Infrastructure Investments in which the Group invests use proven Impact:
customers with a highly reliable service. There may be a failure to deliver technologies, typically backed by manufacturer warranties, when installing
this level of service because of numerous factors. This could result in the applicable machinery and equipment. Investee Companies hire experts with the Moderate to High
breach of performance conditions in customer contracts, resulting in financial technical knowledge and seek third-party advice where required. Where
or regulatory implications. appropriate, there are insurances in place to cover issues such as accidental
damage and power issues.
Likelihood:
Moderate
Change in period:
Stable
6 Dependency on Investment Manager The Company is heavily reliant on the full range of an Investment Manager's The selection of a new and/or continuation of engagement with the Investment Impact:
services, their expertise and specific knowledge pursuant to the strategic Manager, forms part of the Strategic Review, which the Board is continuing to
direction of the fund. manage with the support of independent advisers. Moderate to High
Successful The decision will be based upon who can achieve the best outcome for Likelihood:
investors.
execution of the strategy to manage a winddown of the fund, maximising
Moderate
shareholder value, is dependent upon the appointment of an Investment Manager
who has knowledge and experience of the individual dynamics of each individual
Change in period:
Investee Companies and the markets that they operate in, which can be Post 31 December 2023, the Board served notice to the existing Investment
leveraged to develop an approach which achieves the maximum for shareholders. Manager, whose current obligations are set to end on 31 March 2025, in line Stable
with the expiry of the lock-in period,
Any changes to the Investment Manager will see new fee arrangements entered
into and the Board will ensure that return and reward are aligned with
delivery of strategy.
7. Regulatory Risk There are several regulatory stakeholders involved both at a Fund but also Compliance with regulatory expectations is a key focus of the Board. Impact:
individual Portfolio Company level. The Board operates in an open and Relationships with FCA and JFSC are supported through engagement with the
transparent manner and have external advisers appointed to support and ensure Investment Manager Triple Point Investment Management LLP and corporate Moderate
obligations are met. Breach of obligation and/or failure to maintain adequate service providers such as Ocorian Fund Services (Jersey) Ltd and INDOS
engagement can lead to increased scrutiny, resulting in financial and/or Financial Limited. Individual Investee Companies have direct engagement with
reputational impacts. their regulators and recruit staff that have experience and deep understanding
of the obligations in which they operate under. Likelihood:
Moderate
Change in period:
Stable
Emerging Risks
Introduction of, or amendment to laws, regulations, or technology (especially
in relation to climate change)
The global ambition for a more sustainable future has never been greater,
particularly in light of various climate-related events across the globe.
There is increasing pressure for governments and authorities to enforce
green-related legislation. This could materially affect organisations which
are not set up to deal with such changes in the form of financial penalties,
operational and capital expenditure to restructure operations and
infrastructure, or even ceasing of certain activities.
The Investment Manager will continue to actively monitor changes and to
actively engage with portfolio companies to improve their alignment with
current and future legislation, regulations and best practices in this field.
Changes to power supply and prices / Supply chain disruption
As demonstrated by the Russia's invasion of Ukraine, global conflicts can have
significant disruption to both power supply and supply chains. The changing
political landscape across the world and increased tensions are monitored by
the Investment Manager. Scenario planning tool are used to understand the
impacts and possible mitigation actions.
Development of disruptive technology
The digital infrastructure sector is constantly evolving. As a result, there
is a risk that disruptive technology emerges which results in current digital
infrastructure assets becoming obsolete. The Investment Manager constantly
monitors the emerging technology trends with digital infrastructure to ensure
Investee Companies evolve their business models where required and new
investment opportunities are accurately assessed.
Other information
Going Concern
The Directors have concluded that it is appropriate for the condensed
financial statements to be prepared on a going concern basis. As included
within the Going Concern section in the Financial Statements (Note: 2), the
Company continues to disclose a material uncertainty, which may cast
significant doubt over the Company's ability to continue as a going concern.
Full details are set out in Note 2 of the attached financial statements.
DIRECTORS' RESPONSIBILITY STATEMENT
The Directors confirm that to the best of their knowledge this condensed set
of financial statements has been prepared in accordance with IAS 34 as adopted
by the European Union and that the operating and financial review includes a
fair review of the information required by DTR 4.2.7 and DTR 4.2.8 of the
Disclosure Guidance and Transparency Rules of the United Kingdom's Financial
Conduct Authority namely:
• an indication of important events that have occurred during the
period and their impact on the condensed financial statements and a
description of the principal risks and uncertainties for the remaining six
months of the financial year; and
• material related party transactions in the period as disclosed
in Note 10.
A list of the Directors is shown in Note 10.
Shareholder information is as disclosed on the Digital 9 Infrastructure plc
website.
Approval
This Directors' responsibilities statement was approved by the Board of
Directors and signed on its behalf by:
Eric Sanderson
Chair
30 September 2024
UNAUDITED INTERIM FINANCIAL STATEMENTS
For the six months ended 30 June 2024
CONDENSED STATEMENT OF COMPREHENSIVE INCOME
For the six-month period ended 30 June 2024
Half-year 2024 (unaudited) Half-year 2023 (unaudited)
Revenue Capital Total Revenue Capital Total
Note £'000 £'000 £'000 £'000 £'000 £'000
Income
Income from investments held at fair value - - - 27,972 - 27,972
Loss on investments held at fair value 7 - (279,463) (279,463) - (81,520) (81,520)
Interest income 1,352 - 1,352 1,211 - 1,211
Other income 190 - 190 433 - 433
Total income 1,542 (279,463) (277,921) 29,616 (81,520) (51,904)
Expenses
Investment management fees 5 (2,497) (832) (3,329) (3,365) (1,121) (4,486)
Other operating expenses (2,022) - (2,022) (977) - (977)
Total operating expenses (4,519) (832) (5,351) (4,342) (1,121) (5,463)
(Loss)/profit on ordinary activities before taxation (2,977) (280,295) (283,272) 25,274 (82,641) (57,367)
Taxation 6 - - - - - -
(Loss)/profit and total comprehensive (expense)/income attributable to (2,977) (280,295) (283,272) 25,274 (82,641) (57,367)
shareholders
(Loss)/earnings per ordinary share - basic and diluted (pence) 13 (0.34p) (32.39p) (32.73p) 2.92p (9.55p) (6.63p)
The total column of this statement is the Condensed Statement of Comprehensive
Income of Digital 9 Infrastructure Plc ("the Company") prepared in accordance
with International Accounting Standard 34 'Interim Financial Reporting', as
adopted by the European Union ("EU"). The supplementary revenue return and
capital columns have been prepared in accordance with the Association of
Investment Companies Statement of Recommended Practice (AIC SORP).
All revenue and capital items in the above statement derive from continuing
operations. The Company does not have any other income or expenses that are
not included in the net profit for the year. The net profit for the year
disclosed above represents the Company's total comprehensive income.
This Condensed Statement of Comprehensive Income includes all recognised gains
and losses.
The accompanying Notes below are an integral part of these Condensed Interim
Financial Statements.
CONDENSED STATEMENT OF FINANCIAL POSITION
As at 30 June 2024
Note 30 June 2024 (unaudited) 31 December 2023
(audited)
£'000 £'000
Non-current assets
Investments at fair value through profit or loss 7 384,300 676,060
Total non-current assets 384,300 676,060
Current assets
Trade and other receivables 1,699 1,471
Cash and cash equivalents 19,763 14,809
Total current assets 21,461 16,280
Total assets 405,761 692,340
Current liabilities
Trade and other payables (2,702) (6,009)
Total current liabilities (2,702) (6,009)
Total net assets 403,059 686,331
Equity attributable to equity holders
Stated capital 8 793,286 793,286
Capital reserve (404,060) (123,765)
Revenue reserve 13,833 16,810
Total Equity 403,059 686,331
Net asset value per ordinary share - basic and diluted 14 46.59p 79.33p
The Condensed Interim Financial Statements were approved and authorised for
issue by the Board on 30 September 2024 and signed on its behalf by:
Eric Sanderson
Chairman
30 September 2024
The accompanying Notes are an integral part of these Condensed Interim
Financial Statements.
CONDENSED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
For the six-month period ended 30 June 2024
Stated capital £'000 Capital reserve Revenue reserve £'000 Total equity £'000
£'000
Balance as at 1 January 2023 819,242 133,894 (3,516) 949,620
Transactions with owners
Dividends paid (25,956) - - (25,956)
Profit /(loss) and total comprehensive income/(expense) for the period - (82,641) 25,274 (57,367)
Balance as at 30 June 2023 793,286 51,253 21,758 866,297
Stated capital £'000 Capital reserve Revenue reserve £'000 Total equity £'000
£'000
Balance as at 1 January 2024 793,286 (123,765) 16,810 686,331
Transactions with owners
Loss and total comprehensive expense for the period - (280,295) (2,977) (283,272)
Balance as at 30 June 2024 793,286 (404,060) 13,833 403,059
The accompanying Notes are an integral part of these Condensed Interim
Financial Statements.
CONDENSED STATEMENT OF CASH FLOWS
For the six-month period ended 30 June 2024
Note Half-year 2024 Half-year 2023
£'000 £'000
Cash flows from operating activities
(Loss) on ordinary activities before taxation (283,272) (57,367)
Adjustments for:
Losses on investments held at fair value 7 279,463 81,520
Cash flow used in operations (3,809) 24,153
(Increase)/decrease in trade and other receivables (228) 616
(Decrease)/increase in trade and other payables (3,306) 674
Net cash (outflow)/inflow from operating activities (7,343) 25,443
Cash flows from investing activities
Loan investment additions 7 (1,300) -
Loan investment repayment 7 13,597 -
Net cash inflow generated in investing activities 12,297 -
Cash flows from financing activities
Dividends paid - (25,955)
Net cash flow generated from financing activities - (25,955)
Net increase/(decrease) in cash and cash equivalents 4,954 (512)
Reconciliation of net cash flow to movements in cash and cash equivalents
Cash and cash equivalents at the beginning of the half-year 14,809 30,001
Net (decrease)/increase in cash and cash equivalents 4,954 (512)
Cash and cash equivalents at end of the half-year 19,763 29,489
The accompanying Notes are an integral part of these Condensed Interim
Financial Statements.
Notes to the Interim Financial Statements
CORPORATE INFORMATION
Digital 9 Infrastructure plc (the "Company" or "D9") is a Jersey registered
alternative investment fund, and it is regulated by the Jersey Financial
Services Commission as a 'listed fund' under the Collective Investment Funds
(Jersey) Law 1988 (the "Funds Law") and the Jersey Listed Fund Guide published
by the Jersey Financial Services Commission. The Company is registered with
number 133380 under the Companies (Jersey) Law 1991.
The Company is domiciled in Jersey and the address of its registered office,
which is also its principal place of business, is 26 New Street, St Helier,
Jersey, JE2 3RA.
The Company was incorporated on 8 January 2021 and is a Public Company. The
Company's Ordinary Shares were admitted to trading on the Specialist Fund
Segment of the Main Market of the London Stock Exchange under the ticker DGI9
on 31 March 2021.
The Company's principal activity was investing in a diversified portfolio of
critical digital infrastructure assets which contribute to improving global
digital communications whilst targeting sustainable income and capital growth
for investors. In line with the new investment objective and investment policy
approved by the Shareholders in the General Meeting held on 25 March 2024, the
Company will not make any new investments save that investments may be made in
existing Investee Companies when considered appropriate to maximise value for
shareholders.
These condensed interim financial statements comprise only the results of the
Company, as its investment in Digital 9 Holdco Limited ("D9 Holdco") is
measured at fair value through profit or loss.
1. BASIS OF PREPARATION OF HALF-YEAR REPORT
These condensed interim financial statements for the half-year reporting
period ended 30 June 2024 have been prepared in accordance with European Union
adopted International Accounting Standard 34, 'Interim Financial Reporting'
and the Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority.
The interim report does not include all the notes of the type normally
included in the annual financial report. Accordingly, this report is to be
read in conjunction with the annual report for the year ended 31 December 2023
and any public announcements made by the Company during the interim reporting
period.
Where presentational guidance set out in the Association of Investment
Companies Statement of Recommended Practice (the "AIC SORP") is consistent
with the requirements of IAS 34 Interim Financial Reporting and International
Financial Reporting Standards ("IFRS") the Directors have sought to prepare
the financial statements on a basis compliant with the recommendations of the
AIC SORP. In particular, supplementary information which analyses the
Condensed Statement of Comprehensive Income between items of a revenue and
capital nature has been presented alongside the total Condensed Statement of
Comprehensive Income.
Following the recent shareholder vote at the General Meeting, the Company is
now in a Managed Wind-Down and as a result the objective of the Company is no
longer to acquire digital infrastructure projects, it is to ensure an orderly
wind down and return proceeds to Shareholders. The Company, via D9 Holdco has
begun the process to start selling select Investee Companies and whilst this
process in on-going, the Directors deem the operations of the Company to be
continuing.
The accounting policies adopted are consistent with those of the previous
financial year and corresponding interim reporting period.
(a) Investment entities
The Directors have concluded that in accordance with IFRS 10, the Company
meets the definition of an investment entity, having evaluated against the
criteria presented below that needs to be met. Under IFRS 10, investment
entities are required to hold financial investments at fair value through
profit or loss rather than consolidate them on a line-by-line basis. There are
three key conditions to be met by the Company for it to meet the definition of
an investment entity.
For each reporting period, the Directors will continue to assess whether the
Company continues to meet these conditions:
· It obtains funds from one or more investors for the purpose of
providing these investors with professional investment management services;
· It commits to its investors that its business purpose is to invest
its funds solely for returns (including having an exit strategy for
investments) from capital appreciation, investment income or both; and
· It measures and evaluates the performance of substantially all
its investments on a fair value basis.
The Company satisfies the first criteria as it has multiple investors and has
obtained funds from a diverse group of shareholders for the purpose of
providing them with investment opportunities to invest in a large pool of
digital infrastructure assets.
In satisfying the second criteria, the notion of an investment timeframe is
critical. An investment entity should not hold its investments indefinitely
but should have an exit strategy for their realisation. The intention of the
Company is to seek equity interests in digital infrastructure projects that
have an indefinite life; the underlying assets that it invests in will have a
medium to long term expected life. The exit strategy for each asset will
depend on the characteristics of the assets, transaction structure, exit price
potentially achievable, suitability and availability of alternative
investments, balance of the portfolio and lot size of the assets as compared
to the value of the portfolio. Whilst the Company is in a Managed Wind-Down
process, the Company may dispose of the investments should an appropriate
opportunity arise where, in the Investment Manager's opinion, the value that
could be realised from such disposal would represent a satisfactory return on
the investment and enhance the value of the Company as a whole.
During the period, the Company sold 100% of its ownership in the Verne Global
Group of Companies, reinforcing the exit strategy point described above. As
the Company enters into its wind- down phase, it will continue to realise its
exit strategy across its portfolio.
The Company satisfies the third criteria as it measures and evaluates the
performance of all of its investments on a fair value basis which is the most
relevant for investors in the Company. Management use fair value information
as a primary measurement to evaluate the performance of all the investments
and in decision making.
In assessing whether it meets the definition, the Company shall also consider
whether it has the following typical characteristics of an investment entity:
a) it has more than one investment
b) it has more than one investor
c) it has investors that are not related parties of the entity
d) it has ownership interests in the form of equity or similar interests.
As per IFRS 10 a parent investment entity is required to consolidate
subsidiaries that are not themselves investment entities and whose main
purpose is to provide services relating to the entity's investment activities.
The Directors have assessed whether D9 Holdco satisfies those conditions set
above by considering the characteristics of the whole group structure, rather
than individual entities. The Directors have concluded that the Company and
D9 Holdco are formed in connection with each other for business structure
purposes. When considered together, both entities display the typical
characteristics of an investment entity.
The Company entering into a Managed Wind-Down, a decision which was made and
voted on by shareholders during the period, and the changes in the group
structure following the sale of Verne Global have not impacted the
management's judgement and conclusion over the IFRS 10 investment entity
application and the Company has applied the same accounting policies
described.
The Directors are therefore of the opinion that the Company meets the criteria
and characteristics of an investment entity and therefore, subsidiaries are
measured at fair value through profit or loss, in accordance with IFRS 13
"Fair Value Measurement", IFRS 10 "Consolidated Financial Statements" and IFRS
9 "Financial Instruments".
(b) Going concern
Material Uncertainty
Following the recent shareholder vote at the General Meeting, the Company is
now in a Managed Wind-Down. The Directors however believe that the Company and
its subsidiaries (together the "Group") have adequate resources to continue in
operational existence until the conclusion of a period of at least 12
months. The unaudited condensed interim financial statements for the
half-year ended 30 June 2024 therefore continue to be prepared on a going
concern basis.
In adopting the appropriateness of the Going Concern basis of preparation the
Board considered the fact that the Company is in Managed Wind-Down. In doing
so various options for realising the stake in Arqiva were considered by the
Board and after careful consideration of Arqiva's plans and current market
conditions, the Board believes that the maximisation of the value of the
Company's stake in Arqiva is likely to take longer to realise than the other
investments held by the Company. This process may take up to 3 years.
Additionally following the recent sale of Verne Global, the Company may
receive a potential Earn-Out payment of up to $135 million, which is subject
to Verne Global achieving run-rate EBITDA targets for the financial year
ending December 2026. As both the sale of Arqiva and the receipt of any
Earn-Out payment are expected to take a number of years, the Board still
believes that the Going Concern basis of preparation of the financial
statements remains appropriate.
However, the Company's going concern assessment is dependent on the Group
either completing the sale of assets to fund the repayment of the remaining
balance of the Group's Revolving Credit Facility due by March 2025 or
alternatively refinancing this debt.
In addition, the Directors have also considered the fact that the Company's
wholly owned subsidiary D9 Holdco has not met one of its covenants under the
terms of the RCF (related to its Global LTV), as reported to the board by
Triple Point on 25 September 2024, and as notified to the RCF Lenders that
same day. The RCF Lenders have indicated that, at present, they intend to work
collaboratively with the Company, where possible, over the coming weeks to
explore the option of providing a waiver, or alternative action if more
appropriate at the time, of this breach, but in the meantime they are
reserving their rights in that regard.
In relation to the remaining term of the RCF, the RCF Lenders have indicated
that they intend to work collaboratively, where possible, with Digital 9
Holdco Limited (the "Borrower") with a view to finding a solution to the
covenant breach for the remaining term of the loan, which could include a
repayment though an asset sale or from a refinancing, as noted above.
The Directors have made this assessment of going concern, taking into account
a wide range of information relating to present and future conditions, current
performance and outlook, including the Company's cash and liquidity position,
and finding a solution for the subsidiary's covenant breach noted above.
In particular the board have considered the position of the Company, and the
following matters:
- The fact that shareholders have already approved the orderly wind down
of the Company and the realisation of the underlying assets, which are
actively being worked on.
- The understanding that the breach was inadvertent (i.e. resulting from
the revaluation of the groups assets) and that all other covenants are being
met, and are forecast to be met for the remainder of the duration of the
facility.
- The understanding that the group is continuing to service the debt and
that all interest payments have been made, and are forecast to continue to be
made on time.
- That the current fair value of the groups investments together with
available cash are around 8 times of the outstanding amount of the RCF.
The Directors believe that the Company and the Group have adequate resources
to continue in operational existence for a period of at least 12 months since
the reporting date. As at 30 June 2024, the Company had a cash balance of
£33.6 million. However, given that a degree of uncertainty exists in the
timing of ongoing strategic initiatives which includes management's ability to
refinance or repay the Group's existing RCF (of which c.£53 million remains
at 26 September 2024) due in the next 12 months (March 2025), and finding a
solution for the subsidiary's covenant breach as noted above, there exists a
material uncertainty which may cast significant doubt over the Company's
ability to continue as a going concern.
Accordingly, no provision has been made for the costs of winding up the
Company as these will be charged to the Income Statement on an accruals basis
as they are incurred or as the Company become obligated to make such payments
in the future.
(c) New and amended standards adopted by the Company
A number of amended standards became applicable for the current reporting
period. The group did not have to change its accounting policies or make
retrospective adjustments as a result of adopting these amended standards.
Management do not expect the new or amended standards will have a material
impact on the Company's interim financial statements. The most significant of
these standards are set out below:
(a) Classification of Liabilities as Current or Non-current and Non-current
liabilities with covenants - Amendments to IAS 1
(b) Lease liability in sale and leaseback - Amendments to IFRS 16
(c) Supplier Finance Arrangements - Amendments to IAS 7 and IFRS 7
FORTHCOMING REQUIREMENTS
The following standards and interpretations had been issued but were not
mandatory for annual reporting periods ending on 31 December 2024.
(a) Amendments to IAS 21 - Lack of Exchangeability (effective date 1 January
2025)
3. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
In the application of the Company's accounting policies, the Directors are
required to make judgements, estimates and assumptions that affect the
reported amounts of assets, liabilities, income and expenses. It is possible
that actual results may differ from these estimates.
(a) Significant accounting judgements
(i) Investment entity
As discussed above in Note 2(a), the Company meets the definition of an
investment entity as defined in IFRS 10 and therefore its subsidiary entities
have not been consolidated in these financial statements.
(b) Key sources of estimation uncertainty
The estimates and underlying assumptions underpinning our investments are
reviewed on an ongoing basis by both the Board and the Investment Manager.
Revisions to any accounting estimates are recognised in the period in which
the estimate is revised if the revision affects only that period, or in the
period of the revision and future periods if the revision affects both current
and future periods.
(i) Fair value measurement of investments at fair value through profit or
loss
The Company owns 100% of D9 Holdco which through its wholly owned subsidiaries
invest in digital infrastructure projects. The fair value of the underlying
investments in digital infrastructure projects is calculated by discounting at
an appropriate discount rate future cash flows expected to be generated by the
trading subsidiary companies and received by D9 Holdco, through dividend
income, equity redemptions and Shareholder loan repayments or restructurings
and adjusted in accordance with the IPEV (International Private Equity and
Venture Capital) valuation guidelines, where appropriate, to comply with IFRS
13 and IFRS 9. The fair value of the underlying investments in turn impacts
the fair value of the Company's investment in D9 Holdco.
During the period, an Independent Valuer was appointed to carry out the fair
valuation of four of the financial assets for financial reporting purposes,
including level 3 fair valuations. The remaining two assets were valued by the
Investment Manager and indicative sale price.
Estimates such as the forecasted cash flows from investments form the basis of
making judgements about the fair value of assets, which is not readily
available from other sources. The discounted cash flows from earnings are
forecasted over an 8-to-10-year period followed by a terminal value based on a
long- term growth rate or exit multiple. Discount rates are arrived at via a
bottom-up analysis of the weighted average cost of capital, using both
observable and unobservable inputs, and calculation of the appropriate beta
based on comparable listed companies where appropriate, a sense-check to the
DCF analysis is compared to market multiples.
The discounted cash flow from earning is forecasted over an 8-to-10-year
period followed by a terminal value based on a long-term growth rate or exit
multiples. The discounted cash flow comprises a bottom-up analysis of the
weighted average cost of capital over time, using unobservable inputs; and
calculation of the appropriate beta based on comparable listed companies.
Where appropriate, a sense-check to the DCF analysis is compared to market
multiples.
The valuation for SeaEdge and EMIC is based on valuations carried out by the
Investment Manager.
A broad range of assumptions are used in the Company's valuation models, which
are arrived at by reviewing and challenging the business plans of the Investee
Companies with their management. The Investment Manager exercises its
judgement and uses its experience in assessing the expected future cash flows
from each investment and long-term growth rates. The impact of changes in the
key drivers of the valuation are set out below.
The following significant unobservable inputs were used in the model, cash
flows, terminal value and discount rates. The key area where estimates are
significant to the financial statements and have a significant risk of causing
a material adjustment to the carrying amounts of assets and liabilities within
the next financial year is in the valuation of the investment portfolio. The
portfolio is diversified by sector, geography and underlying risk exposures.
The majority of assets in the investment portfolio are typically valued on a
discounted cash flow basis which requires assumptions to be made regarding
future cash flows, terminal value and the discount rate to be applied to these
cash flows. The Earn-Out valuation methodology is described in more detail
below.
The discount rate applied to the cash flows in each investment portfolio
company is a key source of estimation uncertainty. The acquisition discount
rate is adjusted to reflect changes in company-specific risks to the
deliverability of future cash flows and is calibrated against secondary market
information and other available data points, including comparable
transactions. The weighted average discount rate used in these valuations was
13.80% derived from the Free Cash Flow to Equity ("FCFE") discounted cashflow
approach.
The cash flows on which the discounted cash flow valuations are based are
derived from detailed financial models. These incorporate a number of
assumptions with respect to individual portfolio companies, including:
forecast new business wins or new orders; cost-cutting initiatives; liquidity
and timing of debtor payments; timing of non-committed capital expenditure and
construction activity; the terms of future debt refinancing; and macroeconomic
assumptions such as inflation and energy prices.
The terminal value attributes a residual value to the portfolio company at the
end of the projected discrete cash flow period based on market comparables.
The valuation of each asset has significant estimation in relation to
asset-specific items but there is also consideration given to the impact of
wider megatrends such as the transition to a lower-carbon economy and climate
change. The effects of climate change, including extreme weather patterns or
rising sea levels in the longer term, could impact the valuation of the assets
in the portfolio in different ways. The weighted average long-term growth rate
used in the valuation was 0.18%.
The fair value of the Earn-Out, attributable to the Verne Global transaction
was computed by way of a Monte Carlo analysis. In this approach a random value
is selected for each of the simulations, based on a range of estimates. The
model is calculated based on this random value. The result of the model is
recorded, and the process is repeated. A typical Monte Carlo simulation
calculates the model hundreds or thousands of times, each time using different
randomly selected values. The results are used to describe the likelihood, or
probability, of reaching various results in the model.
4. SIGNIFICANT CHANGES IN THE CURRENT REPORTING PERIOD
The Company has reviewed its exposure to climate related and other emerging
business risks, but has not identified any risks that could impact the
financial performance or position of the Company and its subsidiaries as at 30
June 2024.
The financial position and performance of the Company was particularly
affected by the following events and transactions during the six months to 30
June 2024:
Completion of Verne disposal
On 14 March 2024, the Company completed the sale of its entire stake through
its 100% owned subsidiary in the Verne Global group of companies to funds
managed or advised by Ardian France SA for an equity purchase price of up to
US$575 million (approximately £450 million). Following the Verne
Transaction's completion the Company received US$415 million (£325.8
million). The completion follows receipt of all applicable regulatory
approvals and the satisfaction of all conditions in line with the previously
communicated timetable.
Managed Wind-Down
The Board published a circular to shareholders on 28 February 2024 to convene
a general meeting and seek approval from shareholders to amend the Company's
Investment Objective and Policy. The appropriate resolution was subsequently
approved on 25 March 2024 with 99.9% of the votes cast in favour.
The Company will not make any new investments save that investments may be
made in existing Investee Companies when considered appropriate to maximise
value for shareholders. A financial advisor has been engaged to support the
proposed wind-down process and to provide the Board with an independent review
of the investment management arrangements. It will include evaluating the
options of the Company (i) continuing to be managed by Triple Point on
different fee arrangements; (ii) managed by a new investment manager, or (iii)
becoming a self-managed alternative investment fund. The Board served the
Investment Manager notice with a termination to take effect in March 2025.
Shareholders should note that during the Managed Wind-Down, the Company
intends to maintain its investment trust status and listing.
RCF Repayment
The Company, through D9 Holdco Limited made total repayment and partial
cancellation of the Group's RCF of c.£321 million. The repayment which
included funds that were released from the Interest Reserve as a consequence
of the repayment itself reducing the drawn RCF amount to c.£53 million.
For a detailed discussion about the Company's performance and financial
position please refer to the Chair's Statement.
5. INVESTMENT MANAGEMENT FEES
Half-year 2024 (unaudited) Half-year 2023 (unaudited)
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Management fees 2,497 832 3,329 3,365 1,121 4,486
Total management fees 2,497 832 3,329 3,365 1,121 4,486
The Company served notice of termination to the Investment Manager before 31
March 2024 following the completion of the Verne Global sale, with the
Investment Management Agreement to terminate on 31 March 2025.
The Company and the Investment Manager entered into an Investment Management
Agreement on 8 March 2021 and a Side Letter dated 17 March 2021.
The Company and Triple Point Investment Management LLP (the "Investment
Manager") have entered into the Investment Management Agreement pursuant to
which the Investment Manager has been given responsibility, subject to the
overall supervision of the Board, for active discretionary investment
management of the Company's Portfolio in accordance with the Company's
Investment Objective and Policy.
The Investment Manager is appointed to be responsible for risk management and
portfolio management and is the Company's AIFM. The Investment Manager has
full discretion under the Investment Management Agreement to make investments
in accordance with the Company's Investment Policy from time to time.
This discretion is, however, subject to: (i) the Board's ability to give
instructions to the Investment Manager from time to time; and (ii) the
requirement of the Board to approve certain investments where the Investment
Manager has a conflict of interest in accordance with the terms of the
Investment Management Agreement.
With effect from 31 March 2021, the date of admission of the Ordinary Shares
to trading on the Specialist Fund Segment of the Main Market of the London
Stock Exchange, the Company shall pay the Investment Manager a management fee
(the "Annual Management Fee") calculated, invoiced and payable quarterly in
arrears based on the Adjusted Net Asset Value which is based on funds deployed
and committed at the relevant quarter date.
The total amount accrued and due to Triple Point at the period end was £1.6
million.
The management fee is calculated at the rates set out below:
Adjusted Net Asset Value Annual Management Fee (percentage of Adjusted Net Asset Value)
Up to and including £500 million 1.0%
Above £500 million up to and including £1 billion 0.9%
Exceeding £1 billion 0.8%
For the period from 1 July 2021, in the event that less than 75 percent of the
net proceeds from the issue of shares have been deployed, Adjusted Net Asset
Value is the Current Net Asset Value at the previous reporting date adjusted
as follows:
(a) Deduction from the Current Net Asset Value for undeployed and uncommitted
cash balances
(b) Addition to the Current Net Asset Value the amount equal to the total
funds (if any) deployed after the Current Net Asset Value Date and before the
end of the relevant Quarter.
In the event that 75 per cent or more of the net proceeds of all relevant
issues have been deployed there will be no deduction from the Current Net
Asset Value for any undeployed cash balances.
6. TAXATION
The Company is registered in Jersey, Channel Islands but resident in the
United Kingdom for taxation. The standard rate of corporate income tax
currently applicable to the Company is 25% (2023: 25%).
The financial statements do not directly include the tax charges for the
Company's intermediate holding company, as D9 Holdco is held at fair value. D9
Holdco is subject to taxation in the United Kingdom.
The tax charge for the period is less than the standard rate of corporation
tax in the UK of 25% (2023: 25%). The differences are explained below.
Half-year 2024 Half-year 2023
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Net (loss)/profit before tax (2,977) (280,295) (283,272) 25,274 (82,641) (57,367)
Tax at UK corporation tax standard rate of 25% (744) (70,074) (70,818) 6,319 (20,660) (14,341)
Effects of:
Loss on financial assets not taxable - 69,866 69,866 - 20,380 20,380
Exempt UK dividend income - - - (6,993) - (6,993)
Other disallowed expenses 33 - 33 - - -
Excess of allowable expenses 711 208 919 674 280 954
Total tax charge - - - - - -
Investment companies which have been approved by HM Revenue & Customs
under section 1158 of the Corporation Tax Act 2010 are exempt from tax on
capital gains. The Directors are of the opinion that the Company has complied
with the requirements for maintaining investment trust status for the
purposes of section 1158 of the Corporation Tax Act 2010. The Company has not
provided for deferred tax on any capital gains or losses arising on the
revaluation of investments.
The Company has unrelieved excess management expenses of £22 million. It is
unlikely that the Company will generate sufficient taxable profits in the
future to utilise these expenses and therefore no deferred tax asset has been
recognised.
The unrecognised deferred tax asset calculated using a tax rate of 25%
amounts to £5.5 million.
7. FINANCIAL ASSET AT FAIR VALUE THROUGH PROFIT OR LOSS
As set out in Note 2, the Company designates its interest in its wholly owned
direct subsidiary as a financial asset at fair value through profit or loss.
Summary of the Company's valuation:
Total
£'000
At 31 December 2023:
Opening balance 1 January 2023 920,971
Debt investments in D9 Holdco additions 7,103
Change in fair value of investments (252,014)
As at 31 December 2023 676,060
Analysis of financial assets:
Equity investments in D9 Holdco 639,852
Debt investments in D9 Holdco 36,208
As at 31 December 2023 676,060
At 30 June 2024:
676,060
Opening balance 1 January 2024
Debt investments in D9 Holdco additions 1,300
Debt investments in D9 Holdco repayment (13,597)
Change in fair value of investments (279,463)
As at 30 June 2024 384,300
Analysis of financial assets:
Equity investments in D9 Holdco 360,389
Debt investments in D9 Holdco 23,911
As at 30 June 2024 384,300
Valuation process
During the period, an independent valuer was appointed to carry out the fair
valuation of four financial assets for financial reporting purposes, including
level 3 fair valuations. The remaining two assets were valued at cost. These
valuations are presented to the Board for their approval and adoption. The
valuation is carried out on a six-monthly basis as at 30 June and 31 December
each year and is reported to shareholders in the Annual Report and Financial
Statements.
Valuation methodology
The Company owns 100% of its subsidiary D9 Holdco. The Company meets the
definition of an investment entity as described by IFRS 10, as such, the
Company's investment in D9 Holdco is valued at fair value. D9 Holdco's cash,
working capital balances and fair value of investments are included in
calculating fair value of D9 Holdco. The Company acquires underlying
investments in special purpose vehicles ("SPV") through its investment in D9
Holdco.
The Board has carried out fair market valuations of the underlying investments
held by the underlying subsidiaries of D9 Holdco Limited in Arqiva, Aqua
Comms, Elio Networks and the Verne Global Earn-Out as at 30 June 2024 based on
the valuation report carried out by the independent valuer. The valuation for
SeaEdge and EMIC is based on valuations carried out by the Investment Manager.
The Directors have considered the valuation and satisfied themselves as to the
methodology used, the discount rates and key assumptions applied, and the
valuations. All SPV investments are at fair value through profit or loss and
are valued using the IFRS 13 framework for fair value measurement. The fair
value of the underlying investments in turn impacts the fair value of the
Company's investment in D9 Holdco.
The following economic assumptions were used in the valuation of the SPVs.
The main Level 3 inputs used by the Group are derived and evaluated as
follows:
• The valuer uses its judgement in arriving at the appropriate discount rate
using a capital asset pricing model to calculate a pre-tax rate that reflects
current market assessment. This is based on its knowledge of the market,
considering intelligence gained from its bidding activities, discussions with
financial advisers in the appropriate market and publicly available
information on relevant transactions. The bottom-up analysis of the discount
rate and the appropriate beta is based on comparable listed companies.
Investments are valued using a discounted cash flow approach, being valued on
a FCFE basis and taking into account non-binding bids received by the Company
for these investments during the period. The portfolio weighted average
discount rate for investments valued under the FCFE discounted cash flows
approach was 13.80%.
• To calculate portfolio NAV, 88% of total NAV from Investment companies is
valued using the FCFE discounted cash flows approach, 3% of total NAV is
valued using evidence of indicative offer and the remaining 9% of investments
being valued at cost.
• Expected cash inflows are estimated based on terms of the contracts and
the Company's knowledge of the business and how the current economic
environment is likely to impact it taking into consideration of growth rate
factors. The portfolio weighted long-term growth rate for investments valued
under the FCFE discounted cash flows approach was 0.18%.
• Future Foreign exchange rates of GBP against USD and
Fair value measurements
As set out above, the Company accounts for its interest in its wholly owned
direct subsidiary as a financial asset at fair value through profit or loss.
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 3 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 following table presents the Company's financial assets and financial
liabilities measured and recognised at fair value at 30 June 2024 and 31
December 2023:
Total Quoted prices in active markets (Level 1) Significant observable inputs Significant unobservable inputs
(Level 2) (Level 3)
Assets measured at fair value: Date of valuation £'000 £'000 £'000 £'000
Equity investment in D9 Holdco 30 June 2024 360,3899 - - 360,389
Debt investment in D9 Holdco 30 June 2024 23,911 - - 23,911
Equity investment in D9 Holdco 31 December 2023 639,852 - - 639,852
Debt investment in D9 Holdco 31 December 2023 36,208 - - 36,208
There have been no transfers between Level 1 and Level 2 during the period,
nor have there been any transfers between Level 2 and Level 3 during the year.
The Company's investments are reported as Level 3 in accordance with IFRS 13
where external inputs are "unobservable" and value is the Directors' best
estimate, based upon advice from relevant knowledgeable experts.
Fair value measurements using significant unobservable inputs (level 3)
As set out within the significant accounting estimates and judgements in note
3(b), the valuation of the Company's financial asset is an estimation
uncertainty. The sensitivity analysis was performed based on the current
capital structure and expected performance of the Company's investment in D9
Holdco. For each of the sensitivities, it is assumed that potential changes
occur independently of each other with no effect on any other base case
assumption, and that the number of investments in the SPVs remains static
throughout the modelled life. The following table summarises the quantitative
information about the significant unobservable inputs used in Level 3 fair
value measurement and the changes to the fair value of the financial asset if
these inputs change upwards or downwards by 0.25% for long-term growth rate
and 1% for discount rate:
Unobservable inputs Valuation if rate increases by 1% Movement in valuation Valuation if rate decreases by 1% Movement in valuation
£'000 £'000 £'000 £'000
Long-term growth rate (+/- by 0.25%) 465,571 4,589 453,602 (7,380)
Discount rates (+/- by 1%) 415,560 (45,422) 510,963 49,981
8. STATED CAPITAL
Ordinary shares of no par value 31 December 2023
Allotted, issued and fully paid: No of shares £'000
As at 1 January 2023 865,174,954 819,242
Ordinary Shares at 31 December 2023 865,174,954 819,242
Dividends paid (Note 9) (25,956)
Stated capital at 31 December 2023 793,286
30 June 2024
Allotted, issued and fully paid: No of shares £'000
As at 1 January 2024 865,174,954 793,286
Ordinary Shares at 30 June 2024 865,174,954 793,286
Stated capital at 30 June 2024 793,286
Shareholders are entitled to all dividends paid by the Company and, on a
winding up, provided the Company has satisfied all its liabilities, the
shareholders are entitled to all of the residual assets of the Company.
9. SUBSIDIARIES
At the reporting date, the Company had one wholly owned subsidiary, being its
100% investment in Digital 9 Holdco Limited. The following table shows
subsidiaries of the Company. As the Company is regarded as an Investment
Entity as referred to in Note 2, these subsidiaries have not been consolidated
in the preparation of the financial statements.
Name Place of business % Interest Principal activity Registered office
Digital 9 Holdco Limited UK 100% Holding company The Scalpel, 18th Floor, 52 Lime Street, London EC3M 7AF
The following companies are held by D9 Holdco Limited and its underlying
subsidiaries:
Digital 9 DC Limited UK 100% Intermediate holding company The Scalpel, 18th Floor, 52 Lime Street, London EC3M 7AF
Digital 9 Fibre Limited UK 100% Intermediate holding company The Scalpel, 18th Floor, 52 Lime Street, London EC3M 7AF
Digital 9 Wireless Limited UK 100% Intermediate holding company The Scalpel, 18th Floor, 52 Lime Street, London EC3M 7AF
Digital 9 Subsea Holdco Limited UK 100% Intermediate holding company The Scalpel, 18th Floor, 52 Lime Street, London EC3M 7AF
Digital 9 Subsea Limited(1) UK 100% Subsea fibre optic network The Scalpel, 18th Floor, 52 Lime Street, London EC3M 7AF
Digital 9 Seaedge Limited(2) UK 100% Leaseholding company The Scalpel, 18th Floor, 52 Lime Street, London EC3M 7AF
D9 DC Opco 2 Limited(2) UK 100% Intermediate holding company The Scalpel, 18th Floor, 52 Lime Street, London EC3M 7AF
D9 DC Opco CAN 1 Limited(10) Canada 100% Dormant 44 Chipman Hill Suite 1000 Saint John NB E2L 2A9 Canada
D9 Wireless Opco 1 Limited(3) UK 100% Intermediate holding company The Scalpel, 18th Floor, 52 Lime Street, London EC3M 7AF
D9 Wireless Midco 1 Limited(3) UK 100% Intermediate holding company The Scalpel, 18th Floor, 52 Lime Street, London EC3M 7AF
D9 Wireless Opco 2 Limited(4) UK 100% Intermediate holding company The Scalpel, 18th Floor, 52 Lime Street, London EC3M 7AF
D9 Wireless Opco 3 Limited(3) UK 100% Dormant The Scalpel, 18th Floor, 52 Lime Street, London EC3M 7AF
D9 Fibre Opco 1 Limited(9) UK 100% Dormant The Scalpel, 18th Floor, 52 Lime Street, London EC3M 7AF
D9 Fibre Opco 2 Limited(9) UK 100% Intermediate holding company The Scalpel, 18th Floor, 52 Lime Street, London EC3M 7AF
Aqua Comms Designated Activity Company(1) Ireland 100% Holding company The Exchange Building, 4 Foster Place, Dublin 2
Aqua Comms Connect Limited(5) Ireland 100% Intermediate holding company The Exchange Building, 4 Foster Place, Dublin 2
America Europe Connect 2 Limited(5) Ireland 100% Subsea fibre optic network The Exchange Building, 4 Foster Place, Dublin 2
America Europe Connect 2 Denmark ApS(5) Denmark 100% Subsea fibre optic network c/o Bech-Bruun Langeline Alle 35, Copenhagen
North Sea Connect Denmark ApS(5) Denmark 100% Subsea fibre optic network c/o Bech-Bruun Langeline Alle 35, Copenhagen
Aqua Comms Management (UK) Limited(5) UK 100% Management company 85 Great Portland Street, London W1W 7LT
Aqua Comms Denmark ApS(5) Denmark 100% Subsea fibre optic network c/o Bech-Bruun Langeline Alle 35, Copenhagen
Aqua Comms (Ireland) Limited(5) Ireland 100% Subsea fibre optic network The Exchange Building, 4 Foster Place, Dublin 2
America Europe Connect Limited(5) Ireland 100% Subsea fibre optic network The Exchange Building, 4 Foster Place, Dublin 2
Celtix Connect Limited(5) Ireland 100% Subsea fibre optic network The Exchange Building, 4 Foster Place, Dublin 2
Aqua Comms Management Limited(5) Ireland 100% Management company The Exchange Building, 4 Foster Place, Dublin 2
Sea Fibre Networks Limited(5) Ireland 100% Subsea fibre optic network The Exchange Building, 4 Foster Place, Dublin 2
Aqua Comms (IOM) Limited(5) Isle of Man 100% Subsea fibre optic network c/o PCS Limited, Ground Floor, Murdoch Chambers, South Quay, Douglas, IOM IM1
5AS
Aqua Comms (UK) Limited(5) UK 100% Subsea fibre optic network 85 Great Portland Street, London W1W 7LT
Aqua Comms Services Limited(5) Ireland 100% Subsea fibre optic network The Exchange Building, 4 Foster Place, Dublin 2
America Europe Connect (UK) Limited(5) UK 100% Subsea fibre optic network 85 Great Portland Street, London W1W 7LT
America Europe Connect 2 USA Inc(5) USA 49% Subsea fibre optic network 251 Little Falls Drive, Wilmington, Delaware, 19808 USA
Leeson Telecom Limited(6) Ireland 100% Enterprise broadband 6-9 Trinity St, Dublin, D02 EY47, Ireland
Leeson Telecom One Limited(6) Ireland 100% Enterprise broadband 6-9 Trinity St, Dublin, D02 EY47, Ireland
Leeson Telecom Holdings Limited(7) Ireland 100% Enterprise broadband 6-9 Trinity St, Dublin, D02 EY47, Ireland
W R Computer Network Limited(7) Ireland 100% Enterprise broadband 6-9 Trinity St, Dublin, D02 EY47, Ireland
Arqiva Group Limited(8) UK 48.02% Holding Company Crawley Court, Winchester, Hampshire SO21 2QA
1 - Held by Digital 9 Subsea Holdco 7 - Held by Leeson Telecom Limited
2 - Held by Digital 9 DC Limited 8 - Held by D9 Wireless Opco 2 Limited
3 - Held by Digital 9 Wireless Limited 9 - Held by Digital 9 Fibre Limited
4 - Held by D9 Wireless Midco 1 Limited 10 - Held by D9 Opco 2 Limited
5 - Held by Aqua Comms Designed Activity Company and its intermediate holding
companies
6 - Held by D9 Wireless Opco 1 Limited
10. TRANSACTIONS WITH THE INVESTMENT ADVISERS AND RELATED PARTY
DISCLOSURE
Directors
Directors are remunerated for their services at such rate as the directors
shall from time to time determine. The current Directors (Philip Braun, Robert
Burrow and Andrew Zychowski) are each paid an annual fee of £50,000 and the
Chair of the Company (Eric Sanderson) is entitled to receive an annual fee of
£100,000. The previous Directors who resigned during the period were each
paid an annual fee of £40,000 other than the Chair of the Audit Committee who
was entitled to an additional £5,000 and the Chair of the Company who was
entitled to receive an annual fee of £75,000.
Director Number of Ordinary shares held
Aaron Le Cornu (resigned 22 July 2024)** 107,024
Keith Mansfield (resigned 4 January 2024)** 294,819
Charlotte Valeur (resigned 30 May 2024)** 10,000
Gailina Liew (resigned 11 June 2024)** -
Richard Boléat (resigned 23 March 2024)** 65,000
Brett Miller (resigned 23 March 2024)** 400,000
Eric Sanderson (appointed 8 May 2024) -
Philip Braun (appointed 22 July 2024) -
Andrew Zychowski (appointed 22 July 2024) 2,630,000*
Robert Burrow (appointed 12 August 2024) -
*Mr Zychowski and persons closely associated to him together hold 2,630,000
shares in the Company, or 0.3% of its share capital. In addition, other family
members of Mr Zychowski hold 603,000 shares in the Company.
**Shares held at the date of resignation.
Investment Manager
The Company considers Triple Point as the Investment Manager as a key
management personnel and therefore a related party. Further details of the
investment management contract and transactions with the Investment Manager
are disclosed in Note 5.
Transaction with subsidiary undertakings
The Company, through its subsidiary undertakings has capital expenditure
commitments totalling £8.1 million relating to EMIC-1 (2023: £11.3 million).
Loan to subsidiary undertaking
As at the period-end, the Company had provided a total loan of £23.9 million
(2023: £36.2 million) to Digital 9 Holdco Limited. During the period, an
additional £1.3 million was provided and £13.6 million was repaid. This was
used to assist the underlying Investee Companies with their capital
expenditure requirements. Interest of £1.3 million (2023: £2.6 million)
were charged on the loan during the period.
Amounts due from subsidiary undertakings
Included within Other receivables is an amount due from subsidiary
undertakings:
30 June 2024 31 December 2023
Subsidiary undertakings: £'000 £'000
Aqua Comms DAC 61 120
D9 DC Opco 1 Limited - 27
D9 DC Opco 3 Limited - 51
D9 Wireless Opco 1 Limited 16 22
D9 Wireless Opco 2 Limited 97 129
Digital 9 Seaedge Limited 5 7
Digital 9 Subsea Limited 10 11
Digital 9 Holdco Limited - 18
189 385
11. EVENTS AFTER THE REPORTING PERIOD
There are no post balance sheet events.
12. CONTINGENT LIABILITIES
There were no contingent liabilities at 30 June 2024.
13. EARNINGS PER SHARE
Earnings per share ("EPS") amounts are calculated by dividing profit for the
period attributable to ordinary equity holders of the Company by the weighted
average number of Ordinary Shares in issue during the period. As there are no
dilutive instruments outstanding, both basic and diluted earnings per share
are the same.
The calculation of basic and diluted earnings per share is based on the
following:
Period ended 30 June 2024:
Revenue Capital Total
Calculation of Basic Earnings per share
Net loss attributable to ordinary shareholders (£'000) (2,977) (280,295) (283,272)
Weighted average number of ordinary shares 865,174,954 865,174,954 865,174,954
Earnings per share - basic and diluted (0.34p) (32.39p) (32.73p)
There is no difference between basic or diluted Loss per Ordinary Share as
there are no convertible securities.
There is no difference between the weighted average Ordinary or diluted number
of Shares.
Calculation of Weighted Average Number of Shares in Issue
1 January 2024 30 June 2024
No of days 181 181
Ordinary Shares
No. of shares
Opening Balance 865,174,954 865,174954
New Issues - -
Closing Balance 865,174,954 865,174,954
Weighted Average 865,174,954 865,174,954
Period ended 30 June 2023:
Revenue Capital Total
Calculation of Basic Earnings per share
Net profit attributable to ordinary shareholders (£'000) 25,274 (82,641) (57,367)
Weighted average number of ordinary shares 865,174,954 865,174,954 865,174,954
Earnings per share - basic and diluted 2.92p (9.55p) (6.63p)
There is no difference between basic or diluted Loss per Ordinary Share as
there are no convertible securities.
There is no difference between the weighted average Ordinary or diluted number
of Shares.
Calculation of Weighted Average Number of Shares in Issue
1 January 2023 30 June 2023
No of days 181 181
Ordinary Shares
No. of shares
Opening Balance 865,174,954 865,174,954
New Issues - -
Closing Balance 865,174,954 865,174,954
Weighted Average 865,174,954 865,174,954
14. NET ASSET VALUE PER SHARE
Net Asset Value per share is calculated by dividing net assets in the
Statement of Financial Position attributable to Ordinary equity holders of the
parent by the number of Ordinary Shares outstanding at the end of the period.
Although there are no dilutive instruments outstanding, both basic and diluted
NAV per share are disclosed below.
Net asset values have been calculated as follows:
30 June 2024 31 December 2023
Net assets at end of period (£'000) 403,059 686,331
Shares in issue at end of period 865,174,954 865,174,954
IFRS NAV per share - basic and dilutive 46.59p 79.33p
UNAUDITED ALTERNATIVE PERFORMANCE MEASURES
1. ONGOING CHARGES RATIO
Ongoing Charges Ratio is a figure published annually by an investment company
which shows the drag on performance caused by operational expenses.
Period to 30 June 2024 Annualised to 31 Dec 2024 Annualised to 31 Dec 2023
£'000 £'000 £'000
Management fee 3,329 6,658 8,668
Other operating expenses 1,116 2,232 2,192
Total management fee and other operating expenses 4,445 (a) 8,890 10,860
Average undiluted net assets* 544,695 (b) 544,695 817,975
Ongoing charges ratio % (c = a/b) 0.82% (c) 1.63% 1.33%
* - Average undiluted net assets has been calculated as the average of net
asset value at 1 January 2024 of £686.3 million and net asset value as at 30
June 2024 of £403.1 million.
Annualised expenses are the estimate of the annual cost of management fees and
other operating expenses based on the six months' cost in the period to 30
June 2024 excluding Strategic Review costs.
2. TOTAL RETURN
Total NAV return is a way to measure the performance of an investment company.
A fund's NAV return is the percentage change between its net asset value at
the beginning and end of a particular period plus dividends paid.
30 June 2024 31 December 2023
Closing NAV per share (pence) 46.59 79.33
Add back dividends paid* (pence) 12.00 12.00
Adjusted closing NAV (pence) 58.59 91.33
Adjusted NAV per share as at the period end less NAV per share at 31 December (a) (58.59-91.33) (91.33 - 118.76)
2023 (31 December 2022)
NAV per share at 31 December 2023 (31 December 2022) (b) 91.33 118.76
Total return % (c = a/b) (c) (35.85%) (23.10%)
* Total cumulative dividends paid since IPO.
4. MARKET CAPITALISATION
Market capitalisation refers to the market value of a company's equity. It is
a simple but important measure that is calculated by multiplying a company's
shares outstanding by its price per share.
30 June 2024 31 December 2023
Closing share price at period end (a) 22.35p 29.75p
Number of shares in issue at period end (b) 865,174,954 865,174,954
Market capitalisation (c) = (a) x (b) (c) £193,366,602 £257,389,549
5. CAPITAL DEPLOYED
This is a measure of amounts invested into the portfolio of investments less
any amounts relating to refinance proceeds or sell-downs.
30 June 2024 31 December 2023
Deployed Committed fund £'000 £'000
Aqua Comms DAC 187,508 - 187,508 187,508
EMIC-1 39,272 8,092 47,364 47,262
Verne Holdings Limited^ - - - 256,595
SeaEdge UK1 16,355 - 16,355 16,355
Leeson Telecom 50,807 - 50,807 50,807
Volta Data Centres^ - - - 65,456
Ficolo Oy^ - - - 118,927
Arqiva* 480,020 - 480,020 469,830
Total deployment 773,962 8,092 782,054 1,212,740
* - Includes £180 million Vendor Loan Notes issued by D9 Wireless Opco 2
Limited.
^ - The sale process for Verne Global entities completed in March 2024.
6. TOTAL SHAREHOLDER RETURN
A measure of the return based upon share price movements over the period and
assuming reinvestment of dividends. This APM allows shareholders to establish
their return by using share price as a metric rather than NAV.
30 June 2024 31 December 2023
Closing share price (pence) 22.35 29.75
Add back effect of dividend reinvestment (pence) - 1.29
Adjusted closing share price (pence) (a) 22.75 31.04
Opening share price (pence) (b) 29.75 86.40
Total shareholder return (c) (24.87%) (64.08%)
(c = (a-b)/b)
The above return is for the period to 30 June 2024 (31 December 2023: year to
31 December 2023).
GLOSSARY AND DEFINITIONS
"Adjusted Gross Asset Value" The aggregate value of the total assets of the Company as determined with the
accounting principles adopted by the Company from time to time as adjusted to
include any third-party debt funding drawn by, or available to, any Group
company (which, for the avoidance of doubt, excludes Investee Companies);
"Admission" The admission of the Company's Ordinary Share capital to trading on the
Premium Segment of the Main Market of the London Stock Exchange;
"Aqua Comms" Aqua Comms Designation Activity Company, a private company limited by shares
incorporated and registered in Ireland;
"AIFM" the alternative investment fund manager of the Company being Triple Point
Investment Management LLP;
"AIFMD" The EU Alternative Investment Fund Managers Directive 2011/61/EU;
"Board" The Directors of the Company from time to time;
"D9" or the "Company" Digital 9 Infrastructure plc, incorporated and registered in Jersey (company
number 133380);
"Digital Infrastructure" Key services and technologies that enable methods, systems and processes for
the provision of reliable and resilient data storage and transfer;
"Digital Infrastructure Investments" An investment which falls within the parameters of the Company's investment
policy and which may include (but is not limited to) an investment into or
acquisition of an Investee Company or a direct investment in digital
infrastructure assets or projects via an Investment SPV or a forward funding
arrangement.
"DTR" The Disclosure Guidance and Transparency Rules sourcebook containing the
Disclosure Guidance, Transparency Rules, corporate governance rules and the
rules relating to primary information providers;
"EBITDA" Earnings before interest, taxes, depreciation and amortisation;
"EU or European Union" The European Union first established by the treaty made at Maastricht on 7
February 1992;
"EPS" Earnings per share;
"ESG" Environmental, Social and Governance;
"FCA" The Financial Conduct Authority
"GAV" The gross assets of the Company in accordance with applicable accounting rules
from time to time;
"Group" The Company and any other companies in the Company's Group for the purposes of
Section 606 of the Corporation Tax Act 2010 from time to time but excluding
Investee Companies;
"Investee Company" A company or special purpose vehicle which owns and/or operates Digital
Infrastructure assets or projects in which the Group invests or acquires;
"Investment Manager" Triple Point Investment Management LLP (partnership number OC321250);
"Investment Objective" The Company's investment objective as approved by shareholders on 25 March
2024;
"Investment Policy" The Company's investment policy as set out in the Prospectus approved by
shareholders on 25 March 2024;
"Investment SPV" A special purpose vehicle used to acquire or own one or more Digital
Infrastructure Investments.
"IPO" The Company's initial public offering launched on 8 March 2021 which resulted
in the admission of, in aggregate, 300 million Ordinary Shares to trading on
the Specialist Fund Segment of the Main Market on 31 March 2021;
"NAV" Net Asset Value being the net assets of the Company in accordance with
applicable accounting rules from time to time;
"Ongoing Charges Ratio" A measure of all operating costs incurred in the reporting period, calculated
as a percentage of average net assets in that year. Operating costs exclude
costs of buying and selling investments, interest costs, taxation,
non-recurring costs and the costs of buying back or issuing ordinary shares;
"Ordinary Shares" Ordinary shares of no-par value in the capital of the Company;
"RCF" Revolving Credit Facility
"SDG9" The UN's Sustainable Development Goal 9; and
"Total Shareholder Return" The increase in Net Asset Value in the period plus distributions paid in the
period.
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. END IR SDIFMSELSEFURecent news on Digital 9 Infrastructure
See all newsREG - Digital 9 Infrastr. - Results for the full year ended 31 December 2024
AnnouncementREG - Digital 9 Infrastr. - Rescheduling of D9’s Investor Presentation
AnnouncementREG - Digital 9 Infrastr. - Notice of Annual Results & Investor Presentation
AnnouncementREG - Digital 9 Infrastr. - Revolving Credit Facility Refinancing
AnnouncementREG - Digital 9 Infrastr. - Unaudited Net Asset Value
Announcement