REG - Digital 9 Infrastr. - Results for the period ended 30 June 2022
14/09/2022 07:00
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RNS Number : 3553Z Digital 9 Infrastructure PLC 14 September 2022
THIS ANNOUNCEMENT HAS BEEN DETERMINED TO CONTAIN INSIDE INFORMATION FOR THE
PURPOSES OF THE UK VERSION OF THE MARKET ABUSE REGULATION (EU) NO. 596/2014.
14 September 2022
DIGITAL 9 INFRASTRUCTURE PLC
("D9" or the "Company" or, together with its subsidiaries, the "Group")
RESULTS FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2022
The Board of Digital 9 Infrastructure plc (ticker: DGI9) is pleased to
announce the Company's unaudited results for the six-month period ended 30
June 2022.
30 June 2022 31 December 2021(1) 30 June 2021
For the period:
Earnings per share 3.43p 9.77p 9.34p
Dividends declared per share (in respect of the period) 3.00p 4.50p 1.50p
As at:
IFRS Net Asset Value ("NAV") £852.3m £755.86m £482.3m
NAV per share 105.13p 104.62p 103.34p
IFRS Investment Valuation £825m £746m £193.2m
Ongoing charges ratio (annualised) 1.09% 1.04% 0.93%
Highlights
· IFRS Net Asset Value as at 30 June 2022 was £852.3 million,
equal to a NAV per share of 105.13 pence (31 December 2021: £755.86 million,
104.62p), reflecting an increase of 12.8% since 31 December 2021.
· Capital deployed and committed(2) at the period end was £1.0
billion, including £414 million of committed, but not yet deployed, funding
for the acquisitions of Ficolo and Arqiva (31 December 2021: £462 million
(including committed funds)). Following the period end, the Company has
committed a further £17 million towards capex.
· The portfolio was valued on an IFRS basis at £825.0 million as
at 30 June 2022 (31 December 2021: £746 million), an uplift of 10.6% since 31
December 2021.
· The portfolio valuation methodology has been amended to be based
only on a cost of equity (currently 13.7%).
· 69% of the total recurring revenues from the portfolio of
investments have some form of inflation protection, including 58% with
uncapped CPI/RPI linkage.
· During the period to 30 June 2022, the Company raised further
gross equity proceeds of £95.2 million (£93.3 million of net proceeds) via a
secondary fundraise at a price of 108 pence per share. This was followed by
further gross equity proceeds of £60 million (£58.8 million of net proceeds)
raised in July 2022 via a further fundraise at a price of 110 pence per share.
· In March 2022, the Group completed on a new syndicated revolving
credit facility ("RCF") for £300 million plus an uncommitted accordion of up
to an additional £200 million. Following the equity raise in July 2022, the
Group triggered the accordion facility, extending the initial £300 million
facility by a further £75 million in August 2022.
· Profit before tax for the period to 30 June 2022 was £27
million (30 June 2021: 16.7 million).
· Ongoing Charges Ratio(2) of 1.09% (annualised) as at 30 June
2022 (31 December 2021: 1.04% (annualised)).
· Total Return(2) (based on NAV performance and dividends paid for
the period) since IPO is 13.4% or 10.7% on an annualised basis compared to a
target of 10% per annum (31 December 2021: 9.82% since IPO or 13.09%
(annualised)).
· Market capitalisation(2) as at 30 June 2022 was £897 million
(31 December 2021: £822 million).
Other Post Balance Sheet Activity
· The Company declared a dividend of 1.5 pence per ordinary
share in respect of the period from 1 April 2022 to 30 June 2022 in line with
the Company's target of 6.0 pence per share for the year ending 31 December
2022(3). This dividend will be paid on or around 30 September 2022 to
shareholders on the register at 16 September 2022.
· In July 2022, the Group completed the acquisition of Finnish data
centre provider, Ficolo, for a total consideration of £114 million following
regulatory approval.
· On 30 August 2022, the Ordinary Shares of the Company
were admitted to the premium listing segment of the Official List of the
Financial Conduct Authority and to trading on the Premium Segment of the Main
Market of London Stock Exchange plc.
Notes:
1 June 2021 comparators were in respect of the shorter period from
incorporation on 8 January 2021 to 30 June 2021; the Company listed on the
Specialist Fund Segment of the Main Market of the London Stock Exchange on 31
March 2021 ("IPO").
2 Alternative Performance Measure.
3 This is a target only and not a profit forecast and there can be
no assurance that it will be met.
Phil Jordan, Chair of Digital 9 Infrastructure plc, commented:
"The digital transformation of our societies has been evident over the last
few decades, but no more so than in the last two years. The Covid-19 pandemic
dramatically accelerated the key drivers and trends already fundamental to the
growth in demand for Digital Infrastructure. I believe that, as a result of
these societal shifts and the clear and urgent global requirement to grow in
an environmentally sustainable way, we are at the dawn of a much broader
transformation which supports the long-term investment case of the Company and
provides the Board with confidence in its future prospects.
We intend to build on our initial cornerstone investments into Aqua Comms and
Verne Global. The addition of Host Ireland, Volta, Ficolo and Arqiva into our
portfolio continues our focus on global investment into the critical
infrastructure that underpins the digital transformation. Digital inclusion
and environmental impact will continue to be at the heart of all our
investment decisions. The internet is fundamental to all our futures. We are
committed to helping to shape that future, and we are leading the way in
promoting carrier-neutral connectivity globally, and in democratising access
to critical sustainable digital infrastructure."
Meeting for analysts and audio recording of results available
The Company presentation for analysts will be held at 9am today via live
webcast. The presentation will also be accessible on-demand later in the day
via the Company website: www.d9infrastructure.com
(http://www.d9infrastructure.com) .
Those wishing to access the live webcast are kindly asked to contact Luke
Cheshire at Hanway Advisory on +44 (0) 20 3909 3519 or
cosec@hanwayadvisory.com (mailto:cosec@hanwayadvisory.com) .
The Interim Results will also be available to view and download on the
Company's website at www.d9infrastructure.com
(http://www.d9infrastructure.com) and hard copy will be posted to shareholders
on or around 21 September 2022.
FOR FURTHER INFORMATION ON THE COMPANY, PLEASE CONTACT:
Triple Point Investment Management LLP +44 (0)20 7201 8989
(Investment Manager)
Thor Johnsen / Andre Karihaloo
J.P. Morgan Cazenove (Corporate Broker) +44 (0)20 7742 4000
William Simmonds / Jérémie Birnbaum (Corporate Finance)
James Bouverat / Liam MacDonald-Raggett (Sales)
Akur Capital (Financial Adviser) +44 (0)20 7493 3631
Tom Frost / Anthony Richardson / Siobhan Sergeant
FTI Consulting LLP (Communications Adviser)
Mitch Barltrop +44 (0) 7807 296 032
Ed Berry +44 (0)7703 330 199 dgi9@fticonsulting.com (mailto:dgi9@fticonsulting.com)
LEI: 213800OQLX64UNS38U92
NOTES:
Digital 9 Infrastructure plc (DGI9) is an investment trust listed on the
London Stock Exchange with ticker DGI9. The Company invests in the
infrastructure of the internet that underpins the world's digital economy:
digital infrastructure.
The Investment Manager is Triple Point Investment Management LLP ("Triple
Point") which is authorised and regulated by the Financial Conduct Authority,
with extensive experience in infrastructure, real estate and private credit,
while keeping ESG principles central to its business mission. Triple Point's
Digital Infrastructure team has over US$ 300 billion in digital
infrastructure transaction experience and in-depth relationships across global
tech and global telecoms companies.
The number 9 in Digital 9 Infrastructure comes from the UN Sustainable
Development Goal 9, which focuses the fund on investments that increase
connectivity globally and improve the sustainability of digital
infrastructure. The assets DGI9 invest in typically comprise scalable
platforms and technologies including (but not limited to) subsea fibre, data
centres, terrestrial fibre, and wireless networks.
From its IPO in March 2021 and four subsequent placings, DGI9 has raised total
equity of £905 million and a revolving credit facility of £375
million, and invested into the following data centres, subsea fibre and
wireless networks:
· Aqua Comms, a leading owner and operator of 20,000km of the most
modern subsea fibre systems - the backbone of the internet - with a customer
base comprising global tech and global telecommunications carriers (April
2021);
· Verne Global, the leading Icelandic data centre platform, with 40MW
of high intensity computing solutions in operation or development, powered by
100% baseload renewable power (September 2021);
· EMIC-1, a partnership with Meta on a 10,000km fibre system from
Europe to India (July 2021);
· SeaEdge UK1, a data centre and landing station for the North Sea
Connect subsea cable, part of the North Atlantic Loop subsea network,
improving connectivity between the UK, Ireland, Scandinavia and North America
(December 2021);
· Host Ireland, a leading enterprise broadband provider that owns and
operates Fixed Wireless Access networks (April 2022);
· Volta, a premier data centre based in central London, providing 6MW
retail co-location services (April 2022);
· Ficolo, a leading Finnish data centre and cloud infrastructure
platform, with c.23MW of data centre capacity, powered by 100% renewable power
and distributing surplus heat to district heating networks (July 2022); and
· Arqiva, the only national terrestrial television and radio
broadcasting network in the United Kingdom - providing data, network and
communications services, as well as a national IoT connectivity platform
(announced June 2022).
The Company's Ordinary Shares were admitted to trading on the Specialist Fund
Segment of the Main Market of the London Stock Exchange on 31 March 2021.
The Company was admitted to the premium listing segment of the Official List
of the Financial Conduct Authority and migrated to trading on the premium
segment of the Main Market on 30 August 2022.
For more information on the Investment Manager, please
visit www.triplepoint.co.uk (http://www.triplepoint.co.uk) . For more
information on the Company, please visit www.d9infrastructure.com
(http://www.d9infrastructure.com) .
CHAIR'S STATEMENT
Introduction
I am pleased to present the Company's interim report for the six month period
to 30 June 2022. Building on the momentum since our Initial Public Offering
("IPO") in March 2021, we have continued to raise capital, including two
equity fundraises in January and July 2022, raising total gross proceeds of c.
£155 million. Supplementing this, in March 2022, we secured a £300 million
revolving credit facility, which was extended by a further £75 million in
August 2022. This brings total funds raised to date to c. £1.3 billion which
has put us in a strong position to act decisively when securing investments,
which are typically off-market.
Underpinning these capital raises is the growing demand for our differentiated
strategy. We are investing in resilient Digital Infrastructure on a
sustainable basis where, not only are we closing the digital divide through
improved access and the potential for integration, but doing so using green
and cleaner power as far as possible. This reduces the environmental impact of
such infrastructure and remains in line with our focus on UN Sustainable
Development Goal 9.
The deployment of funds into investments such as Aqua Comms and Verne Global,
in particular, unlocked access to larger, more attractive investment
opportunities. This has led to us refining the Company's Investment Policy,
providing enhanced flexibility in making acquisitions during this growth
phase, all whilst targeting recurring income and capital growth for our
shareholders. As a result, we were able to agree to the investment in Arqiva,
a prime UK-based Digital Infrastructure asset; facilitate the expansion of our
subsea cable and data centre platforms; and undertake our first wireless
network investment.
With access to funds and our improved mandate, our vision of creating
integrated Digital Infrastructure platforms is rapidly starting to take shape,
none of which would have been possible without the support of our
shareholders, our lenders and our other stakeholders.
Investment Activity
We had an active first half of 2022, with the deployment of £96 million into
two new assets in April: Host Ireland, a leading enterprise broadband provider
which owns and operates the highest capacity licensed Fixed Wireless Access
network in Greater Dublin; and Volta Data Centres, a premier data centre
facility providing 6MW of retail co-location services located in the centre of
London.
In addition, we committed a total of £414 million of equity to the
acquisitions of: Ficolo, a leading Finnish data centre and cloud services
platform, which completed in July; and Arqiva, the only UK provider of
national terrestrial TV and Radio broadcasting and a leading national Internet
of Things (IoT) utilities connectivity platform, which we expect to complete
within the next few months.
We also continued to commit capital towards our growth platforms in the subsea
and data centre sectors, committing a total of £83 million for deployment
over the next 18 months.
Individually, we expect these investments to deliver both income and capital
growth. Arqiva, in particular, is expected to provide such an opportunity with
its high growth IoT platform and mature broadcast business. In addition, its
highly cash-generative, core business supports our progressive dividend
policy.
Most importantly, these investments contribute to our integrated platform
approach to Digital Infrastructure and commitment to providing sustainable
solutions to global data demand. Further details and how our existing
investments have performed is set out in the Investment Manager's Report.
The Company's intercontinental reach is illustrated in the map in the Interim
Report.
Environmental, Social and Governance
We, as a Board, recognise that Digital Infrastructure is critical to a future
sustainable economy, and requires ESG considerations at its core in order to
be successful. Our Investment Manager has long been committed to responsible
investment, and to offering strategies which help solve society's problems,
while creating opportunities for investors. In alignment with this position,
D9's purpose driven strategy is closely aligned with the UN's Sustainable
Development Goal 9 and takes a structured and material approach to ESG
integration throughout the investment decision making process and asset
ownership. More information can be found in the Investment Manager's Report.
Corporate Activity
Our ability to build a diverse portfolio of Digital Infrastructure assets has
been facilitated by the various corporate initiatives over the period.
Notwithstanding the volatile equity capital markets, we have successfully
raised a total of c. £155 million to date this year. This has come through a
placing with institutional shareholders in January under the placing programme
launched at IPO. A further placing and small offer for subscription, enabling
participation from qualifying retail investors, was launched at the end of
June and completed in July, using a portion of the authorities available to us
to issue new shares. These equity raises were supported by both existing
shareholders and new investors, which was a pleasing result considering the
wider market conditions.
In March, we were also pleased to announce we had signed a £300 million
revolving credit facility ("RCF") with an international syndicate of four
banks including the Royal Bank of Scotland International Limited, DNB (UK)
Limited, Royal Bank of Canada and Banco Santander, for an initial term of
three years. We also agreed a further £200 million uncommitted accordion
provision (available subject to agreement of the lenders), from which we
agreed an increase to the RCF of £75 million in August. We have been
encouraged by the lenders' desire to seek exposure to the Digital
Infrastructure sector which they view as an increasingly important market.
In light of the rapid, positive developments to our pipeline of investment
opportunities, and our move to the Official List (see below), we have refined
our Investment Policy. In February, shareholders approved an increase to the
amount that can be invested in a single asset while the Company is in its
initial growth phase. In addition, shareholders also approved a change to the
basis on which investment restrictions are calculated, using an "Adjusted
Gross Asset Value" figure which includes third-party debt funding drawn by, or
available to, unconsolidated holding companies within the Group (not investee
companies).
These changes provide us with additional flexibility to pursue larger, more
value accretive assets through a higher threshold and by accounting debt
funding that would ordinarily be included if we produced consolidated Group
accounts. In addition, we are also able to contract on such assets without
having to draw down available debt, unless otherwise necessary and thereby
avoiding unnecessary interest charges; a feature which is particularly useful
where there is a delay between exchange and completion on an acquisition.
In August, as a result of the review of the Company's eligibility for the
Official List, the Company confirmed that any maintenance, repairs and
expansion capital expenditure, including investment into new assets via an
existing investee company, will be required to be within the overall single
asset investment size restriction of 25% of Adjusted Gross Asset Value. This
is in line with the Company's Investment Objective of investing in a
diversified portfolio of Digital Infrastructure investments.
Financial Results
At the reporting date, the portfolio, consisting of six investments held via
the Company's subsidiaries, was valued at £643 million, excluding cash, and
the Company and its subsidiaries held unrestricted cash of £187 million.
The NAV per share was 105.13 pence at 30 June 2022, resulting in a Total
Return since IPO of 13.7%, or 10.9% on an annualised basis, above the 10%
target return.
Profit before tax was £27.4 million for the period, equal to 3.43 pence per
share calculated on the weighted average number of shares in issue during the
period. This was the net result of income received from investments acquired
and revaluation gain arising on the investments held at fair value through
profit or loss as at 30 June 2022.
The portfolio companies have continued to trade successfully, despite the
ongoing disruptions affecting major economies and continuing to demonstrate
significant and predictable forward cash flows. As at 30 June 2022, the
portfolio's LTM & Run-Rate EBITDA totalled £44 million, implying a
weighted average trading EV/EBITDA multiple of 13.8x. Including Ficolo and
Arqiva transactions in the portfolio, the pro-forma trading EV/EBITDA multiple
reduces to 13.2x. Besides the RCF at fund level, the existing portfolio
currently does not include third-party debt. We expect these businesses to
take on appropriate levels of debt finance in future to facilitate growth.
After including Arqiva, the pro-forma net-debt-to-EBITDA ratio increases to
5.9x.
Distributions and Share Price
We are targeting a total dividend for the year of 6 pence per share, payable
quarterly, underpinned by robust long-term contractual payments. I am pleased
to report that we have declared dividends totalling 3.0 pence per share in
respect of the six month period to 30 June 2022, in line with our target.
The share price over the first six months of the year has performed well, with
closing share price at 30 June 2022 of 110.60 pence per share. Furthermore,
the shares have typically traded at a premium to the prevailing NAV (c. 5%
premium to NAV per share at the period end) with increasing liquidity,
reflective of our strong and growing shareholder base.
We have also initiated a programme of enhanced shareholder engagement,
including multiple site visits to our new Volta data centre in London with a
number of our key shareholders and prospective new investors.
We continue to believe that there is a significant market opportunity for
Digital Infrastructure investments and are confident that delivering on our
outlined strategy will continue to support our share price performance.
Total Shareholder Return since IPO, based upon share price movements and
assuming reinvestment of dividends, was 16.7%, reflecting the increase in
share price from IPO to 30 June 2022. This equates to an annualised Total
Shareholder Return of 13.3%.
Transfer to Premium Segment
In August 2022, we were pleased to announce we had received approval from the
Financial Conduct Authority ("FCA") for the inclusion of the Company's shares
in the Official List of the FCA and the transfer of trading to the Premium
Segment of the Main Market of the London Stock Exchange.
We believe that the transfer of trading platform and inclusion in the Official
List will benefit the Company with: an increased profile as an investor,
potentially unlocking further attractive investment opportunities;
diversification of the share register, with access to blue chip UK and
international investors; and further liquidity in our shares from potential
inclusion in the FTSE indices and greater retail investor participation. In
turn, we expect this to enable us to achieve the ambitions of our shareholders
by continuing to grow the Company, providing further access to the Digital
Infrastructure investment opportunity and benefiting from further portfolio
diversification and economies of scale.
Outlook
The digital transformation of our societies has been evident over the last few
decades, but no more so than in the last two years. The Covid-19 pandemic
dramatically accelerated the key drivers and trends already fundamental to the
growth in demand for Digital Infrastructure. I believe that, as a result of
these societal shifts and the clear and urgent global requirement to grow in
an environmentally sustainable way, we are at the dawn of a much broader
transformation which supports the long-term investment case of the Company and
provides the Board with confidence in its future prospects.
That said, the deeply distressing events unfolding in Ukraine and the
after-effects of the pandemic have far-reaching implications for the world,
the economy and capital markets. For us, these events highlight the need for:
robust inflation protection mechanisms in our investment portfolio; security
of income both on an absolute basis and in respect of currency exposure; and
access to reliable power sources with price protection.
We believe that the quality and growth of our portfolio companies, supported
by inflation protections at contract level, positions us well to steer through
the current economic backdrop. For example, Verne Global has a 10-year fixed
power supply contract for 100% baseload renewable electricity. We have no
exposure to Russia or eastern European territories and our currency exposure
is primarily to US Dollars, Sterling and Euro. We will, however, continue to
remain vigilant in maintaining a resilient portfolio, particularly when
considering future data centre acquisitions and their associated power terms.
We intend to build on our initial cornerstone investments into Aqua Comms and
Verne Global. The addition of Host Ireland, Volta, Ficolo and Arqiva into our
portfolio continues our focus on global investment into the critical
infrastructure that underpins the digital transformation. Digital inclusion
and environmental impact will continue to be at the heart of all our
investment decisions. The internet is fundamental to all our futures. We are
committed to helping to shape that future, and we are leading the way in
promoting carrier-neutral connectivity globally, and in democratising access
to critical sustainable digital infrastructure.
Phil Jordan
Chair
13 September 2022
INVESTMENT MANAGER'S REPORT
Review of the period
As already outlined in the Chair's statement, the macroeconomic backdrop for
the first half of this year has presented the global economy with significant
challenges to navigate. Nonetheless, we believe D9 is well positioned to
tackle these obstacles due to the resilience of our business model. This is
based upon the strength of the investments we have made and the robustness of
the contracts in place with high quality counterparties, as well as inflation
protections, all whilst delivering critical Digital Infrastructure.
Our cornerstone growth platform investments into Aqua Comms and Verne Global
created a launchpad for D9 from which to enable further accretive investment
into the subsea and data centre sectors. The investments are aligned to our
wider strategy of bridging the digital divide, decarbonising digital
infrastructure and generating sustainable returns for our Shareholders. As we
continue to build the portfolio, we believe further accretive opportunities
will continue to compound, as represented by the synergistic acquisitions of
Volta and Ficolo earlier this year. We also made our first investment in the
wireless space, Host Ireland. D9 now has four growth platforms, with subsea,
Nordic data centres, wireless IoT and SeaEdge landing stations.
Market Review
Any business that requires the internet to function is reliant on Digital
Infrastructure in order to operate. In essence, the greater the demand for the
internet, the greater the need for the infrastructure to support it.
Digital Infrastructure is a growing asset class with strong fundamentals that
requires more than $400 billion of annual invested capital, growing
year-on-year. It is also growing rapidly as our demand and dependency on the
internet continues to increase. This demand continues to be driven by a set of
growth pillars, which have been accelerated by Covid-19's impact on
lifestyles, work practices and the global supply chain.
More users: There are almost 3 billion people yet to be connected around the
world, 850 million coming online in next 2 years.
More devices: There will be an estimated 30 billion networked devices by 2023,
nearly half of which will be machine-to-machine.
Consuming more data: A connected car will create 25GB of data per hour,
equivalent to nearly 30 hours of HD video.
At faster speeds: Amazon claims that every 100 milliseconds of latency costs
them 1% in sales.
Portfolio Overview
During the period, D9 continued to build out a diversified portfolio of high
quality assets by acquiring a further two companies in Host Ireland and Volta
Data Centres, with the acquisition of Ficolo completing as a post balance
sheet event, and Arqiva expected to complete in the second half of 2022
pending customary regulatory approvals. The portfolio now consists of eight
attractive and complimentary investments (including Arqiva), with four
high-quality growth platforms comprising best in sector operators, benefitting
from accretive convergence value throughout the portfolio. The below table
show the portfolio sector splits as at 30 June 2022, and on a pro-forma basis
including the acquisitions of Ficolo and Arqiva.
Sector breakdown:
Sector 30 June 2022 Pro-Forma
Data Centre 55% 44%
Subsea Fibre 37% 22%
Wireless 8% 34%
Terrestrial 0% 0%
Five of these assets were secured in bilateral transactions, highlighting the
access and attractiveness of D9's $300 billion of expertise and clear purpose
of improving connectivity, bridging the digital divide, and environmentally
sustainable investments in digital infrastructure. The diversity and
resilience now built across the portfolio puts D9 in a strong position to
tackle the economic headwinds we are experiencing today in the short term, and
prosper in the longer term.
Our focus since IPO has been on investments with long-term contracted income,
with some form of inflation protection, in major currencies.
• Long-term contracts
We have invested in businesses with high revenue visibility, with the fund now
having a weighted average contract term for recurring revenue of 7.7 years
(see table below). This is part of our investment philosophy, with investments
underpinned by diversified contract stacks with high-quality counterparties.
7.7 years - Weighted average contract term for recurring revenue across the
portfolio
1-3 years 14%
3-5 years 12%
5-10 years 39%
10+ years 35%
• Inflation protection
Amidst an economic backdrop of record inflation levels not seen in decades, we
believe D9 is well positioned to cope with the risks arising from rising
inflation with 69% of recurring revenues benefitting from a form of inflation
protection at underlying contract level (see table below). The remaining 31%
are shorter term contracts which would be repriced in line with inflation when
up for renewal.
69% - Recurring revenues with some form of inflation protection (1)
RPI / CPI linked with no cap 58%
Fixed uplift of 2% to 5% (2.6% weighted average) 10%
CPI / RPI / PPI linked with a cap of 2% to 3% 1%
Total 69%
• Currency exposure
Currency markets have fluctuated as central banks respond to rising inflation
by increasing interest rates and adopting a contractionary monetary policy. D9
has 99% exposure to major currencies (GBP, USD, EUR), offering a balanced
currency mix to major economies.
99% - Exposure to major currencies (2)
GBP 57%
USD 24%
EUR 18%
ISK 1%
Notes:
1 A portion of the inflation protection (from Arqiva) is subject to
swaps. Inflation metrics are shown pro forma the acquisition of Arqiva. Note,
Arqiva has predominantly uncapped, 0% floor, RPI-linked escalators within its
core customer contracts. Taking advantage of the favourable and high
proportion of inflation-linked revenue in the underlying business, Arqiva has
Inflation Linked Swaps on its fixed rate bonds expiring in 2027. Swap payments
are financed by the inflation linked customer contracts that run beyond 2027.
2 Based on asset GAV at 30 June 2022 (unaudited), including Ficolo
Oy and Arqiva.
Investment Approach
D9 is promoting a faster, fairer and cleaner internet globally. The fund is
purpose driven to seek investments that increase connectivity globally and
improve the sustainability of Digital Infrastructure.
We target investment opportunities which align to the UN SDG9, have high
revenue visibility, and benefit from high-quality management teams with a
comprehensive understanding of the sector. Additionally, we target attractive
growth platforms with accretive convergence value by driving the breadth and
depth of customer relationship across global tech and telecom operators.
Through this investment approach, we aim to build a global platform that
promotes scalability, flexibility, reliability and neutrality across the
Digital Infrastructure value chain.
We intend to build upon our deep sectoral expertise within the Digital
Infrastructure ecosystem - with over $300 billion of transaction experience -
by optimising network convergence across our investments amidst a rapidly
shifting landscape. Our ultimate focus is to provide a network and
infrastructure which offers high reliability and superior experience
consistent with SDG9. This in turn will deliver long-term, reliable returns to
our shareholders, portfolio companies and investments.
Our environmentally sustainable investments include decarbonising data centres
by shifting energy-intensive data processing to areas of abundant green
energy.
The internet is the lifeblood of the future. We are leading the way in
carrier-neutral connectivity, democratising access to the internet, and
bridging the digital divide.
Investment Performance
Subsea Fibre
D9 has made two investments into the subsea fibre industry, Aqua Comms and
EMIC-1. EMIC-1 is currently a standalone subsea fibre cable undergoing
development expected to be ready for sale ("RFS") in 2024, before which point
it will become part of Aqua Comms' subsea fibre platform, offering
connectivity from Europe to India, via the Middle East.
We are pleased with the platform's performance over the period. The platform
finished the first half of 2022 with revenues of £14 million, a 5% uplift on
the final six months of 2021 and 10% increase on the same period last year. It
generated EBITDA of £7 million over the first six months, a 19% uplift on the
previous six months and a modest increase over the same period last year.
Aqua Comms
Aqua Comms is a leading carrier-neutral owner and operator of subsea fibre
systems. Its cables benefit from a long-established customer base of global
tech and telecoms carriers. Aqua Comms is the owner and operator of 15,000km
America Europe Connect-1 (AEC-1), America Europe Connect-2 (AEC-2), and
CeltixConnect-1 (CC-1). New systems that have come online or are coming online
imminently are America Europe Connect-3 (AEC-3), CeltixConnect-2 (CC-2) and
North Sea Connect (NSC), expanding Aqua Comms network to 20,000km.
Operational highlights during the year included:
• In February 2022, the final splice on the Havhingsten system
went live. This system comprises of two cables: CeltixConnect-2, from Dublin,
Ireland to Blackpool, UK, including Isle of Man; and NorthSeaConnect-1,
connecting Newcastle, UK to Houstrup, Denmark. The NorthSeaConnect-1 cable
lands in D9's SeaEdge UK1 landing station data centre in Newcastle.
• In May 2022, Aqua Comms entered into a new memorandum of
understanding ("MoU") with Celtic Norse in relation to the development of the
Celtic Norse-1 subsea cable system, which will run between the West Coast of
Ireland and Trondheim, Norway. Celtic Norse-1 will address the growing demand
for reliable and resilient data centre interconnectivity and provide a diverse
international fibre route into the Nordics from a recognised Atlantic hub. We
expect that the contract will be in force by year-end.
• We are also expecting Aqua Comms to launch the AEC- 3
subsea fibre cable at the start of 2023, providing connectivity from the US to
the UK, adding further resilience to its existing transatlantic AEC-1 and
AEC-2 fibre network links.
• Looking ahead, customer pipeline development remains the biggest
management priority. We are encouraged by customer engagement and Aqua Comms
is actively working towards presales on the AEC-3 (RFS: 2023) and EMIC-1 (RFS:
2024) routes, and large capacity sales on Havhingsten while continuing to grow
the customer base on the existing Atlantic network.
EMIC-1
In July 2021, D9 entered into definitive agreements to deploy a further £50
million over a three-year period into the development of a new 10,000km
intercontinental fibre system, alongside a leading global content provider.
The new system is an innovative, carrier-neutral network platform between
Europe, the Middle-east and India comprising subsea and terrestrial fibre
assets which will connect key locations in these regions. Aqua Comms markets
and operates this route under the name Europe Middle-East India Connect 1
(EMIC-1).
At the project's inception, the Company entered a partnership with Meta to
develop the cable and receive one fibre pair on the system. This agreement
committed £22 million as previously reported, including equipment orders.
Subsea fibre cable developments require further agreements to be entered into
to deliver an operational product, such as securing land rights to lay cables,
regulatory licenses to sell telecom services to customers in certain
jurisdictions, amongst other key components. Since the previous reporting
period, the Company has completed two critical landing and terrestrial fibre
crossing agreements with Telecom Egypt, Egypt's first integrated telecom
operator and one of the largest subsea cables operators in the region, along
the EMIC route and a licensing agreement with an independent telecom services
provider. All told, these agreements commit a further £20 million of capital,
bringing total commitments to date of £42 million.
The Company has released £9 million to date for equipment orders and
milestone payments.
Data Centres
The data centre platform continues to grow, both organically and through
acquisitions. Since the start of the year we have acquired two data centre
businesses in Volta (central London, UK) and Ficolo (three campuses across
Finland), which deliver on D9's Metro and Nordic data centre strategies,
respectively. They are an excellent complement to the Verne Global platform,
with clear synergies having been identified and exceeding expectations at the
point of acquisition.
We are excited by the growth prospects for the sector, particularly as we
continue to educate our customers about the financial and environmental
benefits of shifting latency-insensitive data sets to the Nordics with its
abundance of cheap, renewable power.
The portfolio now consists of four investments (Ficolo as a post balance sheet
event), generating £54 million in revenue and £31 million in contracted
run-rate EBITDA (figures at 30 June 2022).
D9's Nordic data centre portfolio now has 63MW of IT capacity with total
potential capacity up to 190MW on the existing four campuses.
Verne Global
Verne Global is an operational data centre platform which offers flexible,
scalable, and highly optimised data centre infrastructures, uniquely located
all within the same campus in Iceland. Verne Global's primary asset is a
40-acre former NATO site. It is powered by predictably priced 100% renewable
energy that is drawn from one of the world's most affordable and stable grids.
Verne Global outperformed its budgets in 2021, and has started the year
strongly, despite equipment delays slowing growth. It continues to establish
itself as a market leader for high performance compute services in the Nordics
and Europe. Its revenues have grown 30% compared to the same six-month period
last year to £18 million, with EBITDA rising 46% to £11 million, with a
margin of over 60%. Due to this continued growth, the implied acquisition
price of Verne Global is at a 12x run-rate EBITDA multiple, compared to the
20x paid at acquisition in September 2021.
In January 2022, D9 announced a follow-on investment of $93 million (£69
million) in Verne Global over a 12-to-18-month period to fund the expansion of
capacity by a further 20.7MW in response to accelerated customer demand from
new and existing customers. This will take total capacity at Verne Global to
approximately 40MW out of a possible 100MW on the existing campus. Since this
announcement, Verne Global has continued to build and sell capacity and
expects further demand driving more investment into the platform. Once this
expansion is complete and sold, the effective EBITDA multiple will reduce to
below 9x based on its latest valuation.
Other highlights during the first half of the year included:
• The first half of the year's commercial activity was
dominated by the construction and development of new capacity, some of which
is already complete and the remaining capacity will be completed in 2023.
• There have been multiple expansions of capacity from existing
customers, particularly in the financial services industry, which continued to
see significant growth in demand.
• A further key focus has been the development of key operational
sustainability metrics, which will be reported in detail during the year and
will help identify Verne Global as a market leader for sustainability.
SeaEdge UK1
D9 owns the underlying real estate of the SeaEdge UK1 (also known as Stellium
DC1) data centre asset and multiple subsea fibre landing stations. It is
located on one of the UK's largest purpose-built data centre campuses in
Newcastle. The asset is leased on fully repairing and insuring terms to the
tenant and operator, Stellium Data Centres Limited, via a 25-year occupational
lease, with just under 24 years remaining. The lease benefits from annual
reviews tied to the higher of 3% or RPI. The triple net lease with the
operator delivers on D9's yield at acquisition with a starting rent of £1
million per annum.
Volta Data Centres
Volta is a premier data centre facility providing 6MW of retail co-location
services. Located in the centre of London, Volta delivers state-of-the-art
certified and accredited data services for its diversified customer base,
including the finance, media, tech, telecom and energy sectors. Its
carrier-neutral facility has over 40 networks available, ranking it in the top
10 for connectivity amongst all London data centres, and first amongst
independents. In line with the Company's ambition to decarbonise digital
infrastructure, Volta sources its power from renewable energy sources and is
the 8th most energy efficient data centre in London by PUE (and leading
amongst the independent providers). D9's acquisition of Volta delivers on our
metro edge data strategy, identifying facilities located in or near urban
centres offering robust connectivity to customers requiring low latency
solutions.
Although only recently joining the portfolio, since acquiring Volta, we have
adopted a hands-on approach with the Verne Global team taking on the
day-to-day operations within the facility. This includes negotiating new and
existing customer contracts, implementing a hedged power procurement strategy
and designing the expansion within the facility as it builds towards full
capacity over the coming years. This will include a new 2.1MW contract with a
key financial services customer, bringing total utilisation to 4.2MW out of a
total available 6MW.
We will continue to promote convergence value across our various data centre
strategies, including our broader Nordic data centre platform, as we educate
UK customers on the benefits of shifting energy-intensive, latency-insensitive
data workloads into the Nordics.
Ficolo Oy
Ficolo is a leading Finnish data centre and cloud services platform. It has
ultra-modern infrastructure, spread across three campuses (The Air, The Rock
and The Deck) with industry-leading sustainability credentials and surplus
heat distribution, offering a full suite of cloud infrastructure, connectivity
and cybersecurity services.
Ficolo was acquired after the reporting date and we are delighted to add such
a complementary business with similar values and ambitions for growth to the
portfolio. This acquisition expands D9's Nordic data center portfolio and
continues to deliver on our strategy of sustainable data storage.
Ficolo has a large presence in Finland, with available data centre capacity of
c. 23MW, and further expansion potential on its existing sites to c. 90MW,
employing an innovative, proprietary modular design to quickly respond to
increasing customer demand and optimise costs. In particular, The Air facility
in Helsinki has an additional 11MW planned to be added within the next three
years, with up to 60MW further capacity on available land. The Air is a
climate neutral data centre that fulfils all the requirements for cloud
service delivery - for every cloud.
Wireless Infrastructure - Fixed Wireless Access
This year D9 completed its first investment in the Fixed Wireless Access
sector through the acquisition of Host Ireland.
Host Ireland
Host Ireland is a leading enterprise broadband provider that owns and operates
the highest capacity licensed Fixed Wireless Access ("FWA") network in Greater
Dublin. The company provides high-quality, wireless connectivity to 1,600
enterprise customers, including multinational corporates, government bodies
and technology companies. Host Ireland Business Broadband was launched to
address the growing requirement for affordable high speed broadband in the
greater Dublin area. Since then, they have grown to become the largest
wireless Internet Service Provider ("ISP") in the greater Dublin region and
are continuing to connect businesses from small professional services, retail
and hospitality to some of the largest multinationals in the world. This is
D9's first investment into wireless infrastructure and is in line with the
fund's focus on supporting the UN Sustainable Development Goal 9, by providing
lower cost and latency connectivity to Irish businesses.
For the first half of 2022, Host Ireland generated revenues of £4 million and
adjusted EBITDA of £2 million (adjusted for transaction expenses) showing
steady growth relative to comparable figures last year.
Since D9 acquired Host Ireland, the business has continued its operations and
is now looking to expand its network beyond the Dublin region into other key
metro regions in Ireland and Northern Ireland, including Belfast, Cork and
Galway.
Wireless Infrastructure - Internet of Things
In June 2022, D9 announced its first investment into the wireless
infrastructure - Internet of Things sector through an agreement to acquire a
52% economic stake in UK broadcast provider, Arqiva, with completion subject
to customary regulatory approvals. We expect this to complete in Q4 2022 and
look forward to updating investors on performance in the 2022 Annual Report.
Arqiva
Arqiva is the only UK provider of national terrestrial TV and Radio
broadcasting and has a leading national Internet of Things (IoT) utilities
connectivity platform.
It owns critical national UK infrastructure, including c. 1,450 broadcast
transmission sites, reaching 98.5% of UK households and carrying freeview into
24 million households every day. Its innovative smart meter network boasts 12
million users, generating 50 million daily data points.
We believe the IoT platform provides a unique growth opportunity given its
position in the market, whilst its core, mature, cash-generative business
benefits from long-standing relationships with high-quality customers, some
spanning more than 80 years.
Terrestrial Fibre
D9 is yet to make an investment into the terrestrial fibre sector but we are
actively progressing several transactions which we hope to be able to update
investors on before the year-end.
Valuation Performance
The portfolio has held up to a challenging economic backdrop with the interim
valuation reflecting an uplift of 10.6% since December 2021, with Aqua Comms
increasing by 12% and Verne by 4%. The other portfolio investments have been
held at fair value at investment cost (see "Investments held at cost" below).
For the interim valuation, and going forward, we have refined our valuation
methodology from a Free cash flow to the Firm ('FCFF') value to a Free cash
flow to Equity ('FCFE') basis, applying the cost of equity as the discount
rate to the relevant equity cash flows, rather than a blended WACC including
the cost of debt. In consultation with our auditors, we have adopted this
approach to reflect the methodology of other listed investment trusts and to
account for the currently unlevered status of the assets and expected
evolution to an optimal capital structure over time. This refinement has a
one-time impact of dampening valuations due to the higher discount rate
applied. The fair value for each investment is derived from the application of
an appropriate market discount rate and period-end foreign exchange rate.
· Discount rates: The discount rates applied to valuation are driven by
each portfolio company's cost of equity. This considers specific risks
associated with the company, which may be differentiated by the phase of the
investment's life (e.g. in construction or in operation) and evolve over time.
As at 30 June 2022, the weighted average cost of equity across the portfolio
was 13.7%, which increased from 13.2% as at 31 December 2021.
There are several components of the discount rate which have impacted the cost
of equity and which we expect to shift over time (both
positively and negatively):
o Risk free rates: Aqua Comms and Verne Global are both
dollar-denominated businesses and the risk-free rate applied is derived from
long-term US treasury yields. These have risen materially during the period
from 1.9% to 3.2% as the Federal Reserve has raised interest rates to combat
inflation. This has the impact of increasing the cost of equity.
o Company risk premium: As we are valuing each investment separately, we are
currently applying an appropriate cost of equity for each investment taking
into account the company size and maturity of ownership. As the businesses
grow and execute on their investment plans, one could expect the company risk
premiums to reduce over time, thereby reducing the cost of equity.
· Investments held at cost: All investments are held at fair value in
accordance with the IPEV (International Private Equity and Venture Capital)
valuation guidelines where appropriate to comply with IFRS 13 and IFRS 9. This
typically takes the form of a discounted cash flow valuation approach which
forms the basis of making judgements about the fair value of assets not
readily available from other sources. For assets acquired during the period,
the most readily available and observable fair valuation of the asset is
considered to be the investment cost. It has been assumed that investments
acquired during the period (Host and Volta) and development or property assets
(EMIC-1 and SeaEdge UK1) are valued on a fair value basis at investment cost.
These valuations have been reviewed by the Company's auditor as part of their
interim review procedures and will also be reviewed as part of the year-end
audit carried out during the annual reporting period post year end in December
2022. As the portfolio has grown and diversified during the year, this may
dilute valuation performance across the group, although the dilution impact is
expected to reduce as the Company achieves scale.
· Foreign exchange: As Aqua Comms and Verne Global are
dollar-denominated businesses, they are valued in dollars, and then converted
into British pounds.
We remain enthusiastic about the performance of our investment companies. The
global digital transformation of our societies is continuing to accelerate the
underlying fundamentals that drive the Digital Infrastructure sector. We look
forward to updating our shareholders further in due course.
Pipeline
Whilst D9 has built a diversified portfolio, we continue to seek investment
opportunities which would complement the portfolio and investment strategy.
Activity and competition for high quality Digital Infrastructure projects
remains strong as we expect the market will begin to recognise the sector as
core infrastructure. New entrants from the wider infrastructure sector are
coming into the market seeking diversification from their existing portfolio
in response to the impact of the Covid-19 pandemic and are attracted by its
resilience demonstrated during this period. Nevertheless, a combination of our
alignment to the UN SDG9 and improving connectivity globally, our subsea and
data centre platforms, as well as our team's sectoral specialism, gives us a
unique advantage in competitive processes and bilateral opportunities.
As such, we continue to build out our strong pipeline of opportunities. The
pipeline is spread across the subsectors and is reflective of the longer-term
asset mix we intend to achieve for D9. At a target £2 billion AUM, we would
expect data centres and subsea fibre to form approximately 60-70% of assets,
and terrestrial fibre and wireless 30-40%. The opportunities are global,
primarily in the UK & Ireland, the Nordics, North America, the Middle East
and Asia Pacific, with longer term opportunities in Africa and Latin America.
D9 has c. £1.7 billion of pipeline opportunities under consideration,
including over £300 million of more immediate opportunities that the
Investment Manager is actively progressing. We have secured exclusivity on
over £250 million of opportunities.
Many opportunities are bilateral, off-market projects that are not part of a
competitive process, sourced via the Investment Manager's network of
relationships. These projects amount to £480 million of high-quality deal
flow. While these projects can take longer to execute and ensure the necessary
robust due diligence is carried out, this enables us to secure better
acquisition terms. We remain encouraged by the significant and growing
pipeline that the Company's investment strategy presents. The pipeline will be
funded through optimising the capital structure at asset level, access to the
RCF, the additional £125m accordion, co-investment opportunities and future
equity raises.
Looking forward, we have conducted due diligence on over £2 billion of
transactions during the period which did not make it through the various
stages of our investment funnel, underpinning our disciplined approach to
investments. Each transaction is assessed on its own merits.
Total pipeline:
Category £m % of total No. of assets
Data Centre 260 15 5
Subsea 700 41 5
Terrestrial 190 11 3
Wireless 560 33 3
1,710 100 16
Sustainability
D9's approach to sustainability remains a key element of the assessment and
ownership approach for the strategy. D9 is managed as a thematic investment
with ESG integration. The theme is sustainable digital infrastructure, and the
Investment Manager uses Sustainable Development Goal 9 as the framework
through which to manage this thematic alignment. Specifically, the manager
seeks assets which contribute to connectivity increase and/or environmental
sustainability, in particular decarbonisation. The manager will also consider
assets where performance against this alignment could be significantly
improved through ownership.
Examples of investments we have rejected on the grounds of poor SDG9
alignment:
• A data centre opportunity housing bitcoin mining operations but
obtaining its power from a gas power plant. This deal did not align to either
of the SDG9 purpose-driven overlay themes, and it did not present any
opportunity to engage for improvement, as a result the opportunity was not
progressed beyond the initial screening stage.
• A data centre opportunity housing purely bitcoin mining was
rejected on the grounds of no potential to transition the capacity away from
bitcoin mining to enterprise, despite the renewable energy credentials.
• A data centre opportunity was rejected on the grounds of weak
environmental and governance credentials. There was no strong pathway to
greening the power, coupled with evidence of poor management.
• A data centre opportunity based in the United States was
rejected due to lack of alignment with the SDG9 purpose-driven overlay theme
of Decarbonisation. This facility had unclear environmental credentials, was
powered off a carbon intensive grid and had poor efficiency credentials due to
a sub-optimal building layout.
• A subsea cable opportunity based in Latin America was
rejected as it did not address our goal of expanding connectivity globally,
thus resulting in a lack of alignment with the SDG9 theme of connectivity.
• Several terrestrial fibre opportunities that focus on urban
areas and cities were rejected due to lack of alignment with the SDG9 theme of
connectivity. The opportunities were mainly focused on overbuild and did not
address the digital divide.
The table shows the key metrics used to track SDG9 alignment, which are
reported annually, and will be reported in the 2023 annual report.
SDG 9 alignment Sub sector Metric
Target 9.4 Decarbonisation of digital infrastructure All sub sectors Scope 1 and 2 emissions
Data Centre Data Centre PUE
% Low carbon energy use
Target 9.c.1 Increasing connectivity and reducing digital shortfall Sub sea and terrestrial fibre POPs - Points of presence (presented as a number)
Kilometres of fibre
Growth in network capacity (a % of terabyte growth)
Assets being considered for the Company are also subject to ESG due diligence
across a wide range of ESG topics. These are designed to assess at a broad
level (predominantly using the UN Global Compact) and then at a sub-sector
specific level (predominantly using the Sustainable Accounting Standards Board
and industry-specific expertise such as that from the Sustainable Digital
Infrastructure Alliance). This process acts as the beginning of an on-going
sustainability engagement, should the asset be brought into Digital 9
Infrastructure. Engagement activity with the portfolio companies over the
prior 6 months has included, for example, maturity mapping of cyber security
and establishing action for progress; identifying industry collaboration
opportunities to drive forward best practice, and on-going engagement with
sub-sea fibre consortium partners to deepen understanding on key environmental
and social behaviours. A full update on the Company's ESG KPIs, risks and
opportunities and portfolio company engagement and outcomes will be included
in the next annual report.
Furthermore, and in alignment with the Investment Manager's commitment to
sustainable investment, Triple Point has instigated plans for a net zero
roadmap to establish near and long-term targets for net zero with a pathway to
reduction. The Board were consulted in this process and will continue to be
updated as progress is made with target implementation. Further details will
be included in the next annual report. This strategy will also further inform
the TCFD details, and this disclosure will also be updated at reporting year
end. The strategy continues to disclose under SFDR as Article 8, and the
disclosure is available on the D9 website:
https://www.d9infrastructure.com/documents/
(https://www.d9infrastructure.com/documents/) .
Financing
Since the start of the year, D9 has raised aggregate gross equity proceeds of
£155 million through the issue of ordinary shares in January and July 2022,
bringing total gross equity proceeds raised since the IPO in March 2021 to
£905 million. We were particularly pleased with investor sentiment during the
July fundraise during a challenging backdrop for the equity markets witnessed
by many funds.
Aside from equity financing, to achieve an efficient capital structure, D9
intends to introduce prudent leverage, resulting in enhanced returns for our
investors. Despite rising interest rates, domestic borrowing rates remain well
below our portfolio yields. In March 2022, D9 raised £300 million through its
first debt facility, being a bespoke RCF with an international syndicate of
four leading banks in the European infrastructure space in what was a first
digital infrastructure focused RCF. RBSI acted as structuring bank, sole
coordinator and bookrunner for the new facility. Following the acquisition of
Arqiva later this year, we expect the facility to be near fully drawn. The RCF
includes an uncommitted accordion providing £200 million, of which £75
million was agreed in August by the syndicate to support with immediate
pipeline and expansion projects for our existing investments. As such, the
total amount available under the RCF to date is £375 million.
We are thrilled with the level of lender interest received on this
transaction, reaffirming the attractive fundamentals and growth prospects of
this asset class and the credit quality of our existing portfolio.
Over the next six months, we may seek to expand the size of the RCF further,
if appropriate at the time.
Gearing will only be used by the Company to finance acquisitions on a
short-term basis, with long-term gearing likely to be applied at an investee
company level.
Outlook
Looking forward for the rest of 2022 and beyond, the longer-term economic
outlook has been adversely affected by a combination of supply chain issues,
resulting in business disruption when ordering equipment and high inflation
caused by the Covid-19 pandemic. Since the start of this year, the outlook has
deteriorated further with the Russian invasion of Ukraine, resulting in
sanctions on trade and significant disruption to energy markets. Fiscal and
monetary policies in the US and Europe have had to react to the impact of the
pandemic and the war, including measures to combat inflation, manage borrowing
levels and address the rising costs of living.
Whilst the direct impact of Russia's invasion of Ukraine on our portfolio is
limited, we will continue to monitor its impact on the broader political and
economic environment.
Notwithstanding the various economic headwinds, the high revenue visibility
and inflation adjusted contracted revenues of the sector will continue to
provide a robust and attractive investment opportunity to own and invest in
sustainable digital infrastructure. Furthermore, although competition and
interest in the sector has increased, we remain confident in the strengths of
the investment team and strategic approach to the sector.
Thor Johnsen
Head of Digital Infrastructure
13 September 2022
KEY PERFORMANCE INDICATORS
In order to track the Company and/or Group's progress, the following key
performance indicators are monitored:
KPI AND DEFINITION RELEVANCE TO STRATEGY PERFORMANCE EXPLANATION
1. Dividends per share (pence)
Dividends paid and declared on every ordinary outstanding share in relation to The dividend reflects the Company's ability to deliver a growing income stream The Company is targeting a dividend of 6.0 pence per share for the year ending The Company has paid or declared dividends of 3.0 pence per share in respect
the period. from the portfolio. 31 December 2022, equivalent to 3.0 pence per share in respect of the period of the period from 1 January 2022 to 30 June 2022, in line with our target.
from 1 January 2022 to 30 June 2022.(1) (see note 9)
2. Total return (%)(2)
The increase in share price and dividends paid per share. The total shareholder return highlights the gross return to investors 13.4% (10.7% annualised) in respect of the period from IPO to 30 June 2022. A medium-term total return target of 10% per annum was set out at IPO.
including dividends paid.
3. Total shareholder return (%)(2)
The increase in NAV in the period and dividends paid per share in the period. The total return highlights the underlying performance of the portfolio's 16.7% since IPO, or 13.3% annualised A medium-term total shareholder return target of 10% per annum.
investment valuations, including dividends paid.
4. Earnings per share (pence)
The post-tax earnings attributable to shareholders divided by weighted average The EPS reflects our ability to generate earnings from our investments 3.43 pence per share for the period from 1 January 2022 to 30 June 2022. (see EPS is based on earnings and including the fair value gain on investment,
number of shares in issue over the period. including valuation increases. note 14) calculated on the weighted average number of shares in issue during the period
5. 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 105.13 pence per share. (see note 15) This is an increase of 7.3% since IPO driven by growth in the underlying
to it throughout the life cycle of our assets. valuation of the Company's investments.
6. Cash dividend cover(2)
Operational cash flow divided by dividends paid to shareholders during the The cash dividend cover reflects the Company's ability to cover its dividends Dividend cover for the period to 30 June 2022 was 53.34%. Dividend cover is D9 will monitor dividend cover as the Company continues to deploy funds.
year. from the income generated by its portfolio. measured as total dividends paid and payable at 30 June 2022, as a percentage
of total operating cashflows for the Company and its subsidiaries.
7. Ongoing Charges Ratio(2)
Annualised ongoing charges are the Company's management fee and all other Ongoing charges show the drag on performance caused by the operational 1.09% annualised. A key measure of our operational performance. Keeping costs low supports our
operating expenses (i.e. excluding acquisition costs and other non-recurring expenses incurred by the Company. ability to pay dividends.
items) expressed as a percentage of the average published undiluted NAV in the
period, calculated in accordance with Association of Investment Companies
guidelines.
8. Points of presence (POPs)(3)
A Point of Presence is a discrete geographic location within the portfolio Points of presence represent a physical demonstration of the fibre networks 17 POPs, with kilometres of fibre and growth in network capacity provide a
company network, containing portfolio company owned exchange equipment and distribution to a wider set of customers. We seek growth in this value over picture of the connectivity provided by the Company. These KPIs are intended
allows for connection into the wider network. time. to be tracked over time and their growth demonstrate an increase in
connectivity as a result of the Company's investments.
9. Kilometres of fibre(3)
The total length of fibre (operational and in development) owned or part-owned Kilometres of fibre represent a physical demonstration of the fibre networks 32,000 km Kilometres of fibre, with POPs and growth in network capacity provide a
by portfolio companies(4). presence. We seek growth in this value over time. picture of the connectivity provided by the Company. These KPIs are intended
to be tracked over time and their growth demonstrate an increase in
connectivity as a result of the Company's investments.
10. Growth in network capacity(3)
The increase in sold capacity across fibre networks, between two points in Growth in network capacity represents the network's ability to respond to and 7% Growth in network capacity, with kilometres of fibre and POPs provide a
time. deliver on demand for more connectivity. We seek a positive percentage growth picture of the connectivity provided by the Company. These KPIs are intended
year on year. to be tracked over time and their growth demonstrate an increase in
connectivity as a result of the Company's investments.
11. Power Usage Effectiveness (PUE)(3)
PUE is the total energy entering a datacentre divided by the energy used by IT PUE is a measure of our energy efficiency and represents the decarbonisation 1.22 (5) PUE is applicable to Data Centre assets and represents an important measure in
equipment inside the datacentre. of our investments either through targeting assets with the most advanced the environmental sustainability of an asset. Efficiency and increases in
energy efficiency practices, or through improvements of existing systems. The efficiency can contribute to a lower carbon emission and better use of natural
decarbonisation measure reflects the Company's success in aligning to SDG9, resource. Industry average is commonly reported to be 1.3 in cold air
target 9.4. temperature locations and 1.4 in warm air temperature locations.
Notes:
1 The target dividend is a target only and not a forecast.
There can be no assurance that the target will be met and it should not be
taken as an indication of the Company's expected or actual future results.
2 Alternative Performance Measure. See Unaudited Performance
Measures for further information.
3 As at 31 December 2021. This figure will be reported
annually in the Company's Annual Report.
4 Total kilometres of fibre owned or part-owned 32,035km
(14,268km operational; 17,767km in development).
5 This figure includes power used in construction. The
unaudited number excluding construction is 1.18.
PRINCIPAL RISKS AND UNCERTAINTIES
The table below sets out what we believe 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 Description Risk Impact Risk Mitigation Impact Likelihood
1. Expensive or lack of capital may limit our ability to grow and pay a Without sufficient capital at sustainable rates, we will be unable to pursue D9 has the ability to put in place a placing programme which would give the Moderate to High Moderate to High
progressive dividend. suitable investments in line with our Investment Policy. This would Company the ability to fund the acquisition of further Digital Infrastructure
significantly impair our ability to pay dividends to shareholders at the assets in line with its Investment Policy, raising further equity capital on
targeted rate. an "as needed" basis. This should enable D9 to capitalise on its strong
pipeline of internal and external investment opportunities, acquiring high
quality assets with a wide geographical spread, while minimising cash drag.
2. Risk of volatility in supply and cost for power supply for data centres in Data centres require a high and constant supply of power, and fluctuations in Verne Global has strong relationships with both Landsvirkjun and Landsnet Moderate Moderate to High
investee companies. power may result in reduced or no service. (renewable power suppliers in Iceland) which will help ensure the availability
of supply of power for future needs as demand increases.
In addition, increasing energy prices may result in a reduction of revenue and
profits for the investee companies. Verne Global continues to work with the local grid providers to ensure
investment in higher power capacities continue.
D9 has identified a fixed cost structure for Volta which is being implemented
and passed on to customers.
3. Competitive markets, including where a well funded competitor enters the D9 invests in an increasingly competitive environment, as new investors seek Before acquiring assets, the Investment Manager carries out thorough due Moderate Moderate to High
market or aggressively acquires market share across the respective markets and to invest into the sector from traditional infrastructure or other sectors. diligence and applies realistic assumptions to ensure the total return target
segments of D9's investee companies, which may adversely affect the revenue Global content companies, such as the FAANGs, may choose to invest in the can be met. Where possible, the Investment Manager seeks to secure off-market
and margins of D9's investments. infrastructure directly, rather than as a customer. This increased competition assets with strategic benefits through an alignment with D9's other investee
could make it harder to find new assets, access good pricing and gain market companies, thus avoiding competitive bidding situations.
share.
Frequent communication between D9 and its investee companies will lead to
Such competition creates pricing risk when bidding on target acquisitions, innovative and reactive thinking regarding its services to remain competitive
potentially driving higher pricing. This could result in the Company being and adapt to emerging technologies and customer preferences.
out-bid on a particular asset or paying a premium. This competition can also,
in certain markets, lead to a decline in prices the operators of such assets
are able to charge for the services provided once acquired. As a result, this
could impair D9's ability to deploy funds therefore affecting the NAV, the
Company's earnings and returns to Shareholders.
4. Risk of supply-chain vulnerabilities and disruptions. D9's investee companies need to maintain and develop their assets to deliver As part of the procurement process, due diligence is conducted on third Moderate Moderate
to customers. Significant supply chain pressure could lead to an inability to parties and SLAs are put in place to ensure the delivery of service. All
meet customer contracts and/or delay in business development projects. investee companies are now taking into account longer lead times in their
planning and their boards continue to scrutinise planning. Inventory and
accelerated capital growth investments have increased. In addition, they are
managing supply chains more closely for a better understanding of
vulnerabilities.
5. Dependence on key personnel at the investee companies that D9 acquires. Key personnel leaving or being incapacitated long term could impact the D9 will ensure that in any businesses it acquires that key personnel have Moderate Moderate
performance of the investee company therefore adversely impact the NAV of D9. appropriate incentive and succession plans in place.
6. Reliance on the Investment Manager. We rely on the Investment Manager's services and its reputation in the Digital Unless there is a default, either party may terminate the Investment Moderate Moderate
Infrastructure market. As a result, our performance will, to a large extent, Management Agreement by giving not less than 12 months' written notice, with
depend on the Investment Manager's abilities in the market. Termination of the such notice not to expire before the fourth anniversary of the date of
Investment Management Agreement would severely affect our ability to admission. The Board will regularly review and monitor the Investment
effectively manage our operations and may have a negative impact on the share Manager's performance. In addition, the Board meets regularly with the Manager
price of the Company. to ensure that we maintain a positive working relationship.
7. Investments not performing in line with expectations. Investments not performing in line with expectations may reduce the returns Thorough due diligence is carried out and where possible valuations will be Moderate Moderate
for shareholders and may adversely impact the NAV, which may lead to the carried out by third parties.
Company failing to achieve its Investment Objective and target returns.
There is active portfolio monitoring to ensure any under-performance is
identified early and allow corrective action to be taken. In addition,
directors with extensive industry expertise are appointed to the portfolio
company Boards.
8. Interruptions or poor-quality services to our customers as a result of failure D9's investee companies rely on infrastructure and technology to provide their The Digital Infrastructure Investments in which the Group invests use Moderate to High Low to Moderate
of infrastructure, equipment and/or third-party networks. customers with a highly reliable service. There may be a failure to deliver
this level of service as a result of numerous factors. Failure to deliver may proven technologies, typically backed by manufacturer warranties, when
breach performance conditions in contracts with customers and therefore affect installing applicable machinery and equipment.
revenue streams, which in turn could impact the performance of D9 and
therefore adversely impact the NAV.
D9's investee companies hire experts with the technical knowledge, and seek
third party advice where required
Where appropriate, there are insurances in place to cover issues such as
accidental damage and power issues.
9. D9 acquires Digital Infrastructure Investments which operate in a highly Failure of D9's investee companies to comply with their regulatory obligations Experts are engaged to ensure compliance with all relevant regulations. Moderate to High Low to Moderate
regulated sector and which will be subject to the different regulatory regimes and/or maintain a relevant permit or licence may result in sanctions from the
of all the countries in which they operate. applicable regulator including fines and/or the revocation of its
authorisation to provide services. This could result in the relevant
infrastructure Thorough due diligence is carried out prior to completing on investments to
assess the likelihood of regulatory risk taking place and in what shape it may
ceasing to be operable and possibly subject to decommissioning requirements do so. After completion, the Investment Manager and Investee Companies
which may in turn, have a material adverse effect on the performance of the maintain a frequent and ongoing dialogue on the subject to ensure compliance
Company, the NAV, the Company's earnings and returns to Shareholders. and preparedness for any change.
10. An investee company counterparty may become insolvent, be unable to make Issues may arise with counterparties that could affect their ability to make Prior to investing in a Digital Infrastructure Investment, the Investment Moderate to High Low to Moderate
contractual payments or terminate a contract early. contractual payments or result in the early termination of such projects due Manager will undertake due diligence to assess the material contracts in
to counterparty insolvency. place, including termination provisions and whether any such contracts are
close to termination. Where possible, the Investment Manager will seek to
build in suitable mechanisms to protect the Group's income stream, including
the diversification of its investments.
This could result in a material effect on the Group's revenue stream,
resulting in a material adverse effect on the performance of the Company, the Further, the number of Counterparties in respect of a particular Digital
NAV, the Company's earnings and returns to Shareholders. Infrastructure Investment may be significantly diversified so as to reduce
the impact of a Counterparty terminating an agreement at will, or deciding not
to renew such contract on expiry.
11. Digital Infrastructure Investments, in particular data centre assets, may be Increased regulation, laws, rules and standards related to cyber security, Cyber security policies and procedures implemented by key service providers Moderate Moderate
vulnerable to cyber attacks and security could impact the Company's reputation or result in financial loss through the are reported to the Board regularly to ensure conformity. Thorough third-party
imposition of fines. Suffering a cyber breach will also generally incur costs due diligence is carried out on all suppliers engaged to service the Company.
breaches which could include unauthorised access to computer systems, loss or associated with repairing affected systems, networks and devices. The effect All providers have processes in place to identify cyber security risks and
destruction of data, of a cyber security breach may result in reputational damage which may affect apply and monitor appropriate risk plans.
relationships D9 has with partners, investors and other third parties, impair
computer viruses, malware, distributed denial-of-service attacks or other the ability of the Company to operate and/or expose D9 to fines and penalties
malicious activities. which could have an effect on the Company's revenue and ultimately the
Company's NAV.
In addition, attempts may be made to access the IT systems and data used by
the Investment Manager, Administrator and other service providers through a
cyber attack or malicious breaches of confidentiality.
12. Significant abortive costs, including financial cost and time taken. The time and cost spent pursuing assets that are not acquired impacts on the Internal due diligence is completed before full due diligence by external Low to Moderate Moderate
return of the fund and the ability of the Investment Manager to make providers to limit cost in the early stage of the process if the deal is then
alternative acquisitions. aborted.
There is early and ongoing engagement with the Investment Manager's Investment
Committee to ensure that appropriate due diligence is undertaken at each stage
of the process, and deals are aborted at the earliest opportunity in the
process.
Growth of the Investment Manager in size and reputation has resulted in
increased ability to drive better deals, and therefore reduce aborted deals.
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 recent events such as Covid-19 and 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.
As part of our purpose-driven investment strategy and thorough ESG due
diligence process, we will continue to actively seek acquisitions that deliver
on sustainability targets and are aligned with our ambition to decarbonise
Digital Infrastructure.
Increasing power prices
Russia's invasion of Ukraine and the disruption to power supplies
(particularly gas), has resulted in significant increases in power prices
across Europe, and across the Nordic countries, expected to be a short-term
increase which persists long-term. We are constantly monitoring the situation
and, where possible ensure that D9's investee companies can pass on power
price increases to their customers.
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. We constantly monitor the emerging
technology trends with digital infrastructure to ensure investee companies
evolve their business models where required and new investment opportunities
are accurately assessed.
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 11.
A list of the Directors is shown in the Interim Report.
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:
Phil Jordan
Chair
13 September 2022
UNAUDITED INTERIM FINANCIAL STATEMENTS
For the six months ended 30 June 2022
CONDENSED STATEMENT OF COMPREHENSIVE INCOME
For the six month period ended 30 June 2022
Six months ended 30 June 2022 8 January 2021 to 30 June 2021
(unaudited) (unaudited)
Revenue Capital Total Revenue Capital Total
Note £'000 £'000 £'000 £'000 £'000 £'000
Income
Income from investments held at fair value 1,404 - 1,404 - - -
Gains on investments held at fair value 7 - 30,007 30,007 - 23,070 23,070
Interest income - - - 11 - 11
Total income 1,404 30,007 31,411 11 23,070 23,081
Expenses
Acquisition expenses - - - - (5,487) (5,487)
Investment management fees 5 (2,514) (838) (3,352) (360) (120) (480)
Other operating expenses (682) - (682) (423) - (423)
Total operating expenses (3,196) (838) (4,034) (783) (5,607) (6,390)
Operating (loss)/profit (1,792) 29,169 27,377 (772) 17,463 16,691
Finance expense (1) - (1) (1) - (1)
(Loss)/profit on ordinary activities before taxation (1,793) 29,169 27,376 (773) 17,463 16,690
Taxation 6 - - - - - -
(Loss)/profit and total comprehensive (expense)/income attributable to (1,793) 29,169 27,376 (773) 17,463 16,690
shareholders
(Loss)/profit and total comprehensive (expense)/income attributable to 14 (0.22p) 3.65p 3.43p (0.43p) 9.77p 9.34p
shareholders
The total column of this statement is the Income Statement of the Company
prepared in accordance with IAS in accordance with IFRS as adopted by European
Union. 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.
This Statement of Comprehensive Income includes all recognised gains and
losses.
The accompanying notes form part of these Condensed Interim Financial
Statements.
CONDENSED STATEMENT OF FINANCIAL POSITION
As at 30 June 2022
30 June 31 December 2021
2022
(unaudited) (audited)
Note £'000 £'000
Non-current assets
Investments at fair value through profit or loss 7 824,645 746,229
Total non-current assets 824,645 746,229
Current assets
Trade and other receivables 77 228
Cash and cash equivalents 29,868 11,311
Total current assets 29,945 11,539
Total assets 854,590 757,768
Current liabilities
Trade and other payables (2,340) (1,912)
Total current liabilities (2,340) (1,912)
Total net assets 852,250 755,856
Equity attributable to equity holders
Stated capital 8 786,565 717,547
Capital reserve 67,769 38,600
Revenue reserve (2,084) (291)
Total Equity 852,250 755,856
Net asset value per ordinary share - basic and diluted 15 105.13p 104.62p
The Financial Statements were approved and authorised for issue by the Board
on 13 September 2022 and signed on its behalf by:
Phil Jordan
Chair
13 September 2022
The accompanying notes form part of these Condensed Interim Financial
Statements.
CONDENSED STATEMENT OF CHANGES IN EQUITY
For the six month period ended 30 June 2022
8 January 2021 to 30 June 2021 Stated capital Capital reserve Revenue reserve Total
(unaudited)
Note £'000 £'000 £'000 £'000
Balance at 8 January 2021 - - -
Transactions with owners
Ordinary shares issued 475,000 - - 475,000
Share issue costs (9,418) - - (9,418)
Profit /(loss) and total comprehensive income/(loss) for the period - (773) 16,690
17,463
Balance at 30 June 2021 465,582 17,463 (773) 482,272
Six months ended 30 June 2022 Stated capital Capital reserve Revenue reserve Total
(unaudited)
Note £'000 £'000 £'000 £'000
Balance as at 31 December 2021 717,547 38,600 (291) 755,856
Transactions with owners
Ordinary shares issued 8 95,201 - - 95,201
Share issue costs (1,865) - - (1,865)
Dividends paid 9 (24,318) - - (24,318)
Profit /(loss) and total comprehensive income/(expense) for the period - 29,169 (1,793) 27,376
Balance at 30 June 2022 786,565 67,769 (2,084) 852,250
The accompanying notes form part of these Condensed Interim Financial
Statements.
CONDENSED STATEMENT OF CASH FLOWS
For the six month period ended 30 June 2022
Six months ended 30 June 2022 8 January 2021 to
30 June 2021
(unaudited) (unaudited)
Note £'000 £'000
Cash flows from operating activities
Profit on ordinary activities before taxation 27,376 16,690
Adjustments for:
Gains on investments held at fair value 7 (30,007) (23,070)
Cash flow used in operations (2,631) (6,380)
Decrease/(Increase) in trade and other receivables 152 (74)
Increase in trade and other payables 441 702
Net cash outflow from operating activities 593 628
Cash flows from investing activities
Purchase of investments at fair value through profit or loss 7 (48,409) (137,111)
Net cash flow used in investing activities (48,409) (137,111)
Cash flows from financing activities
Proceeds from issue of Ordinary Shares 8 95,201 442,012
Dividends paid 9 (24,318) -
Cost of issue of shares (1,879) (9,379)
Net cash flow generated from financing activities 69,004 432,633
Net increase in cash and cash equivalents 18,557 289,770
Reconciliation of net cash flow to movements in cash and cash equivalents
Cash and cash equivalents at the beginning of the half-year 11,311 -
Net increase in cash and cash equivalents 18,557 289,770
Cash and cash equivalents at end of the half-year 29,868 289,770
The accompanying notes form part of these Condensed Interim Financial
Statements.
NOTES TO THE FINANCIAL STATEMENTS
For the six month period ended 30 June 2022
1. 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 is tax domiciled in the United Kingdom.
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. It was admitted to the premium listing segment of the
Official List of the Financial Conduct Authority and migrated to trading on
the premium segment of the Main Market on 30 August 2022.
The Company's principal activity is 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.
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.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Preparation
2.
These condensed interim financial statements for the half-year reporting
period ended 30 June 2022 has been prepared in accordance with International
Accounting Standard 34 as adopted by European Union ("IAS 34 Interim Financial
Reporting").
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 period ended 31 December
2021 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.
The accounting policies adopted are consistent with those of the previous
financial year and corresponding interim reporting period.
(a) Investment entities
The sole objective of the Company and through its subsidiary D9 Holdco is to
acquire Digital Infrastructure Projects, via individual corporate entities. D9
Holdco will issue equity and loans to finance its investments in the Digital
Infrastructure Projects.
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:
1. It obtains funds from one or more investors for the purpose of
providing these investors with professional investment management services;
2. 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
3. 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 time frame 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 underlying assets with 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
intends to hold the investments on a medium to long-term basis, the Company
may also 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.
The Company's Investment Manager, and the Company's Board will regularly
review the market and consider whether any disposals should be made.
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 of 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
out 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 acquisitions made during the period and changes in the group structure
have not impacted 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
The Company was admitted to trading on the Specialist Fund Segment of the Main
Market of the London Stock Exchange on 31 March 2021, which was a year after
the UK entered into its first lockdown in response to the Covid-19 pandemic.
As a result, the Investment Manager and Administrator had already implemented
business continuity plans to ensure business disruption was minimised and had
been operating effectively whilst working remotely. All Investment Manager and
Administrator staff are able to continue to assume their day-to-day
responsibilities. To date, Covid-19 has not impacted the Company's ability to
continue as a going concern. As a result, the Directors believe that the
Company is still well placed to manage its financing and other business risks
and will remain viable, continuing to operate and meet its liabilities as they
fall due despite the risk of Covid-19.
As at 30 June 2022, the Company had cash balance of £29.9 million and the
remaining uninvested cash of £164 million is held by its wholly owned
subsidiary D9 Holdco for investment purpose. The major cash outflows of the
Company are the payment of fees and costs relating to the acquisition of new
assets, both of which are discretionary.
The Directors have reviewed Company forecasts and pipeline projections which
cover a period of at least 12 months from the date of approval of this report,
considering foreseeable changes in investment and the wider pipeline.
On the basis of this review, the Directors have a reasonable expectation that
the Company has adequate resources to continue in operational existence for at
least 12 months from the date of approval of this report. Accordingly, the
going concern basis continues to be adopted in preparing these financial
statements.
(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. The
Directors 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) Amendments to IAS 16 Property, Plant and Equipment: Proceeds
before Intended Use.
(b) Amendments to IAS 37 Provisions, Contingent Liabilities and
Contingent Assets: Onerous Contracts - Cost of Fulfilling a Contract.
(c) Amendments to IFRS 3 Business Combination: Reference to the
Conceptual Framework.
(d) Annual Improvements to IFRS Standards 2018-2020.
(e) IFRS 17 Insurance Contracts.
(f) Classification of Liabilities as Current or Non-current -
Amendments to IAS 1.
(g) Disclosure of Accounting Policies - Amendments to IAS 1,
Practice Statement 2 and IAS 8 aiming to improve accounting policy
disclosures.
(h) Definition of Accounting Estimates - Amendments to IAS 8.
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.
The Annual Report for the year ended 31 December 2021 sets out the estimates,
critical accounting judgements, and key sources of estimation uncertainty,
made by the Directors in the application of the Company's accounting policies,
at that date, which have the most significant effect on the amounts recognised
in the financial statements. Other than the key sources of estimation
uncertainty set out below, these estimates, critical accounting judgements,
and key sources of estimation uncertainty are consistent with those applied in
these condensed interim financial statements.
(a) Significant judgements in applying the Company's
accounting policies
(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 fair value of 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 and equity redemptions 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.
Estimates such as the forecasted cash flows of the investments, are believed
to be reasonable, the results of which form the basis of making judgements
about the fair value of assets not readily available from other sources.
Discount rates used in the valuation represent the Investment Manager's and
the Board's assessment of the rate of return in the market for assets with
similar characteristics and risk profile.
In the income approach, the discounted cashflow from revenue is forecasted
over a fifteen-year period followed by a terminal value based on a long-term
growth rate. 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.
The following significant unobservable inputs were used in the model:
· Discount rate of 12.0% to 15.2%
· Foreign exchange rates as at 30 June 2022
· Inflation rate of 3%
The Company also used the following non-significant unobservable inputs in the
model:
· Long-term growth rate of 2.50%
· Risk free rate of 3.2%
· Pre-tax cost of debt of between 6.2% and 7.6%
The Company has also carried out sensitivity analysis of these unobservable
inputs and the results are disclosed in Note 7.
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 2022.
The financial position and performance of the Company was particularly
affected by the following events and transactions during the six months to 30
June 2022:
· Raised equity of £95.2 million via placing of new Ordinary Shares.
Further 88,148,880 Ordinary Shares were admitted to trading on the London
Stock Exchange.
· Acquisition of 100% of issued share capital of GAData Holdings Limited
group (trading as Volta Data Centres, "Volta") for £45.5 million through D9
DC Opco 1 Limited, a 100% indirect subsidiary of D9. Volta wholly owns and
operates a premier data centre facility based in central London, providing
co-location services.
· Acquisition of 100% issued share capital of Leeson Telecom Limited
("Host Ireland") for €60.6 million through D9 Wireless Opco 1 Limited, a
100% indirect subsidiary of D9. Host Ireland owns and operates the highest
capacity licensed microwave-based Fixed Wireless Access network in Greater
Dublin.
· Digital 9 Holdco Ltd, a 100% subsidiary of D9, completed on a
syndicated revolving credit facility ("RCF") for £300 million. The Company
plans to use the RCF to finance acquisitions on a short term basis.
· EMIC - £2.4m (USD3.5m) of costs for the construction of the Sub Sea
cable in Africa were paid during the period.
· Verne Global - Capex during period of £9.6m was funded by D9 Holdco
for expanding the data centres In Iceland.
The Company has assessed its position on the significant implications of
Russia's invasion of Ukraine to its business. The most significant implication
for the Group is the increase in power prices which affect the data centre
operators given their power consumption.
Verne is isolated from wider European power price movements as it has a
long-term contract with an Icelandic power provider with fixed uplifts. Volta
is most affected by power price given it is on the UK grid, which although
does not get much of its power from Russia unlike other European countries, is
not isolated from wider market movements. There are secondary impacts as a
result of spiking Nord Pool prices. Volta has re-negotiated some of the
contracts to pass on the increased costs to its customers.
For a detailed discussion about the Company's operations during the period,
please refer to Investment Manager's Report.
5. INVESTMENT MANAGEMENT FEES
Six months ended 30 June 2022 8 January 2021 to 30 June 2021
(unaudited) (unaudited)
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Management fees 2,514 838 3,352 360 120 480
2,514 838 3,352 360 120 480
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 £2
million.
The management fee is calculated at the rates set out below:
Adjusted Net Asset Value Annual Management Fee (% 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 per cent 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 19%.
The interim 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 19%. The differences are explained below.
Six months ended 30 June 2022 8 January 2021 to 30 June 2021
(unaudited) (unaudited)
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Net (loss)/profit before tax (1,793) 29,169 27,376 (773) 17,463 16,690
Tax at UK corporation tax standard rate of 19% (341) 5,542 5,201 (147) 3,318 3,171
Effects of:
Gain on financial assets not taxable - (5,701) (5,701) - (4,383) (4,383)
Exempt UK dividend income (267) - (267) - - -
Acquisition expenses not allowable - - - - 1,042 1,042
Other disallowed expenses - - - - - -
Excess of allowable expenses 608 159 767 147 23 170
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 £4 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 £1 million. The Finance Act 2021 received Royal Assent on 10 June 2021
and the rate of Corporation Tax of 25% effective from 1 April 2023 has been
used to calculate the potential deferred tax asset.
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 2021:
Opening Balance on incorporation -
Investments in D9 Holdco (1) 700,727
Change in fair value of investments 45,502
As at 31 December 2021 746,229
At 30 June 2022:
Opening Balance on 1 January 2022 746,229
Investments in D9 Holdco (1) 48,409
Change in fair value of investments 30,007
As at 30 June 2022 824,645
During the period, the Company through its subsidiary companies made further
acquisitions as follows:
Date D9 Subsidiaries(2) Investments Value
April 2022 D9 DC Opco 1 Limited GAData Holdings Limited - Owns a long leasehold property and data centre £45.5m
operator in Central London
April 2022 D9 Wireless Opco 1 Limited Leeson Telecom Limited - Operates fixed wireless access network in Dublin €60.6m
April 2022 Digital 9 Holdco Limited Provided Capex loans to Verne Global for the construction of data centres £9.6m
June 2022 Digital 9 Subsea Limited EMIC 1 - progress payments for the construction of Subsea cables $3.5m
1 D9 Holdco was incorporated as a 100% subsidiary undertaking and
the amount reflects the Company's investments through D9 Holdco
2 Subsidiaries of Digital 9 Holdco Limited are the companies that
make acquisitions
Valuation process
The Investment Manager includes a team that is responsible for carrying out
the fair valuation of financial assets for financial reporting purposes,
including level 3 fair valuations. This valuation is presented to the Board
for its 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 on 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 Investment Manager has carried out fair market valuations of the SPV
investments as at 30 June 2022 and the Directors have 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 main Level 3 inputs used by the Group are derived and evaluated as
follows:
· Discount rate: The Investment Manager uses its judgment in arriving
at the appropriate discount rate using a capital asset pricing model to
calculate a cost of equity that reflects current market assessment. This is
based on its knowledge of the market and discussions with financial advisers
in the appropriate markets and publicly available information. For instance,
the appropriate beta is based on comparable listed companies in each
investment's market segment. A company risk premium is also applied taking
into account the investment's size and maturity, which can evolve throughout
the lifetime of the investment, whereas an appropriate risk-free rate is
determined based on the denomination of the investment's cashflow breakdown.
As at 30 June 2022, the weighted average cost of equity across the portfolio
was 13.7%, which increased from 13.2% as at 31 December 2021
· Inflation: long term expected inflation rate of 3% has been applied
to cash flows
· Foreign exchange: foreign exchange spot rates of GBP against USD, EUR
and ISK are applied where appropriate.
All investments are held at fair value in accordance with the IPEV
(International Private Equity and Venture Capital) valuation guidelines where
appropriate to comply with IFRS 13 and IFRS 9. This typically takes the form
of a discounted cash flow valuation approach which forms the basis of making
judgements about the fair value of assets not readily available from other
sources. For assets acquired during the period, the most readily available and
observable fair valuation of the asset is considered to be the investment
cost. It has been assumed that investments acquired during the period (Host
and Volta) and development and property assets (EMIC-1 and SeaEdge UK1) are
valued on a fair value basis at investment cost. Those investments held at
cost represent 20% of the portfolio. These valuations have been reviewed by
the Company's auditor as part of their interim review procedures and will also
be reviewed as part of the year-end audit carried out during the annual
reporting period post year end in December 2022.
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 2022 and 31
December 2021:
Total Quoted prices in active markets (Level 1) Significant observable inputs Significant unobservable inputs
(Level 2) (Level 3)
Date of valuation £'000 £'000 £'000 £'000
Assets measured at fair value: 30 June 2022 824,645 - - 824,645
Investment in D9 Holdco
Assets measured at fair value: 31 December 2021 746,229 - - 746,229
Investment in D9 Holdco
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
period.
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. There were no significant inter-relationships between significant
unobservable inputs that materially affect fair values. 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 1%:
Unobservable inputs Valuation if rate increases by displayed % Relationship of unobservable inputs to fair value Valuation if rate decreases by displayed % Relationship of unobservable inputs to fair value
£'000 £'000
Discount rate (1%) 762,347 Increasing the discount rate by 1% would change the FV by (£62.3m) 898,189 Decreasing the discount rate by 1% would change the FV by £73.5m
Inflation (3%) 847,448 Increasing the inflation rate by 3% would change the FV by £22,8m 884,096 Decreasing the inflation rate by 3% would change the FV by £59.5m
Foreign exchange rates (5%) 797,997 Increasing the foreign exchange rates by 5% would change the FV by (£26.6m) 853,765 Decreasing the foreign exchange rates by 5% would change the FV by £29.1m
8. STATED CAPITAL
Ordinary shares of no par value 30 December 2021
Allotted, issued and fully paid: No of shares Price £'000
Allotted following admission to London Stock Exchange
31 March 2021 300,000,000 100.0p 300,000
10 June 2021 166,666,667 105.0p 175,000
1 October 2021 255,813,953 107.5p 275,000
Ordinary Shares at 30 June 2021 722,480,620 750,000
Dividends (note 9) (17,837)
Share issue costs (14,616)
Stated capital at 31 December 2021 717,547
Ordinary shares of no par value 30 June 2022
Allotted, issued and fully paid: No of shares Price £'000
As at 1 January 2022 722,480,620 717,547
Allotted during the period
28 January 2022 88,148,880 108.0p 95,201
Ordinary Shares at 30 June 2022 810,629,500 812,748
Dividends (note 9) (24,318)
Share issue costs (1,865)
Stated capital at 30 June 2022 786,565
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.
On 28 January 2022, the Company raised gross proceeds of £95.2 million via
the Placing of new Ordinary Shares at a price of 108.0p. A further
88,148,880 Ordinary Shares were admitted to trading on the London Stock
Exchange.
As per Note 12, on 8 July 2022, the Company announced it raised £60 million
via placing and offer for subscription of new ordinary shares at a price of
110.0p. Subsequently, 54,545,454 new ordinary shares were issued.
9. DIVIDENDS
Dividend per share Six months ended 30 June 8 January 2021 to 31 December
2022 2021
£'000 £'000
Dividends period 31 March 2021 to 30 June 2021 1.5 pence - 7,000
Dividend period 1 July 2021 to 30 September 2021 1.5 pence - 10,837
Dividends period 1 October 2021 to 31 December 2021 1.5 pence 12,159 -
Dividend period 1 January 2022 to 31 March 2022 1.5 pence 12,159 -
Total dividends paid 24,318 17,837
As per Note 12, the Company announced a dividend of 1.5 pence per share
equivalent to £12,977,624 with respect to the period from 1 April 2022 to 30
June 2022 to be paid on 16 September 2022 to shareholders on the register on
15 September 2022.
10. 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 United Kingdom 100% Holding company 1 King William Street, London EC4N 7AF
The following companies are held by D9 Holdco Limited and its underlying
subsidiaries:
Digital 9 DC Limited United Kingdom 100% Intermediate holding company 1 King William Street, London EC4N 7AF
Digital 9 Fibre Limited United Kingdom 100% Intermediate holding company 1 King William Street, London EC4N 7AF
Digital 9 Wireless Limited United Kingdom 100% Intermediate holding company 1 King William Street, London EC4N 7AF
Digital 9 Subsea Holdco Limited United Kingdom 100% Intermediate holding company 1 King William Street, London EC4N 7AF
Digital 9 Subsea Limited United Kingdom 1 100% Subsea fibre optic network 1 King William Street, London EC4N 7AF
Digital 9 Seaedge Limited United Kingdom 2 100% Leaseholding company 1 King William Street, London EC4N 7AF
D9 DC Opco 1 Limited United Kingdom 2 100% Intermediate holding company 1 King William Street, London EC4N 7AF
D9 DC Opco 2 Limited United Kingdom 2 100% Intermediate holding company 1 King William Street, London EC4N 7AF
D9 DC Opco CAN 1 Limited United Kingdom 2 100% Intermediate holding company 1 King William Street, London EC4N 7AF
D9 DC Opco 3 Limited United Kingdom 2 100% Intermediate holding company 1 King William Street, London EC4N 7AF
D9 Wireless Opco 1 Limited United Kingdom 3 100% Intermediate holding company 1 King William Street, London EC4N 7AF
D9 Wireless Midco 1 Limited United Kingdom 3 100% Intermediate holding company 1 King William Street, London EC4N 7AF
D9 Wireless Opco 2 Limited United Kingdom 4 100% Intermediate holding company 1 King William Street, London EC4N 7AF
Aqua Comms Designated Activity Company Ireland 1 100% Holding company The Exchange Building, 4 Foster Place, Dublin 2
Aqua Comms Connect Limited Ireland 5 100% Intermediate holding company The Exchange Building, 4 Foster Place, Dublin 2
America Europe Connect 2 Limited Ireland 5 100% Subsea fibre optic network The Exchange Building, 4 Foster Place, Dublin 2
America Europe Connect 2 Denmark ApS Denmark 5 100% Subsea fibre optic network c/o Bech-Bruun Langeline Alle 35, Copenhagen
North Sea Connect Denmark ApS Denmark 5 100% Subsea fibre optic network c/o Bech-Bruun Langeline Alle 35, Copenhagen
Aqua Comms Management (UK) Limited United Kingdom 5 100% Management company 85 Great Portland Street, London W1W 7LT
Aqua Comms Denmark ApS Denmark 5 100% Subsea fibre optic network c/o Bech-Bruun Langeline Alle 35, Copenhagen
Aqua Comms (Ireland) Limited Ireland 5 100% Subsea fibre optic network The Exchange Building, 4 Foster Place, Dublin 2
America Europe Connect Limited Ireland 5 100% Subsea fibre optic network The Exchange Building, 4 Foster Place, Dublin 2
Celtix Connect Limited Ireland 5 100% Subsea fibre optic network The Exchange Building, 4 Foster Place, Dublin 2
Aqua Comms Management Limited Ireland 5 100% Management company The Exchange Building, 4 Foster Place, Dublin 2
Sea Fibre Networks Limited Ireland 5 100% Subsea fibre optic network The Exchange Building, 4 Foster Place, Dublin 2
Aqua Comms (IOM) Limited Isle of Man 5 100% Subsea fibre optic network c/o PCS Limited, Ground Floor, Murdoch Chambers, South Quay, Douglas, IOM IM1
5AS
Aqua Comms (UK) Limited United Kingdom 5 100% Subsea fibre optic network 85 Great Portland Street, London W1W 7LT
Aqua Comms Services Limited Ireland 5 100% Subsea fibre optic network The Exchange Building, 4 Foster Place, Dublin 2
America Europe Connect (UK) Limited United Kingdom 5 100% Subsea fibre optic network 85 Great Portland Street, London W1W 7LT
America Europe Connect 2 USA Inc USA 5 49% Subsea fibre optic network 251 Little Falls Drive, Wilmington, Delaware, 19808 USA
Aqua Comms (Americas) Inc USA 5 49% Subsea fibre optic network 3500 South Dupont Highway, Dover, Delaware 19901 Kent, United States
Verne Holdings Ltd United Kingdom 2 100% Holding company Hays Galleria, 1 Hays Lane, London SE1 2RD
Verne Global GmbH Germany 6 100% Data centre solutions Äußere Sulzbacher Straße 118, 90491 Nürnberg
Verne Global hf. Iceland 6 100% Data centre operation Valhallarbraut 868, 262 Reykjanesbaer, iceland
Verne Global Ltd United Kingdom 6 100% Data centre solutions Hays Galleria, 1 Hays Lane, London SE1 2RD
Verne Global Inc. USA 6 100% Data centre solutions 1825 Washington Street, Canton MA 02021 USA
GAData Holdings Limited Jersey 7 100% Holding company 28 Esplanade, Ste Helier, Jersey JE3 3QA
Volta Data Centres Limited United Kingdom 8 100% Data centre operator 36-43 Great Sutton Street London EC1V 0AB
GSS Propco Limited Jersey 8 100% Property investment 28 Esplanade, Ste Helier, Jersey JE3 3QA
Leeson Telecom Limited Ireland 9 100% Enterprise broadband 6-9 Trinity St, Dublin, D02 EY47, Ireland
Leeson Telecom One Limited Ireland 9 100% Enterprise broadband 6-9 Trinity St, Dublin, D02 EY47, Ireland
Leeson Telecom Holdings Limited Ireland 10 100% Enterprise broadband 6-9 Trinity St, Dublin, D02 EY47, Ireland
W R Computer Network Limited Ireland 10 100% Enterprise broadband 6-9 Trinity St, Dublin, D02 EY47, Ireland
Key
1 - held by Digital 9 Subsea Holdco Limited 2 - held by Digital 9 DC Limited 3 - held by Digital 9 Wireless Limited 4 - held by D9 Wireless Midco 1 Limited
5 - held by Aqua Comms Designed Activity Company 6 - held by Verne Holdings Limited 7 - held by D9 DC Opco 1 Limited 8 - held by GAData Holdings Limited
9 - held by D9 Wireless Opco 1 Limited 10 - held by Leeson Telecom Limited
11. 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 Chairman receives a director's fee of
£55,000 per annum, the senior independent director receives a fee of £45,000
per annum and the other directors of the Board receive a fee of £40,000 per
annum.
Directors' fees for the period ended 30 June 2022 amounted to £138,073 (2021
- £71,077). During the period, £3,010 was paid to Directors as reimbursement
for travel and other incidental expenses (2021 - £Nil).
Directors' shareholdings as at the period end and dividends received during
the period were as follows:
Director Number of Ordinary shares held Dividends paid
Jack Waters (resigned 23 May 2022) 70,000 £2,100
Philip Jordan (from 23 May 2022) - -
Aaron Le Cornu (from 1 Apr 2022) 45,000 £1,350
Lisa Harrington 38,604 £1,158
Keith Mansfield 58,604 £1,758
Monique O'Keefe (resigned 23 May 2022) 10,000 £300
Charlotte Valeur 10,000 £300
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.
12. EVENTS AFTER THE REPORTING PERIOD
Placing and Offer for Subscription
On 8 July 2022, the Company announced it raised £60 million via placing and
offer for subscription of new ordinary shares at a price of 110.0p.
Subsequently, 54,545,454 new ordinary shares were issued.
Investments
Acquisitions
Ficolo Oy
In April 2022, the Company signed a sale and purchase agreement for the
acquisition of Ficolo Oy ("Ficolo") subject to regulatory approval. On 8 July
2022, the Company announced that Finland's Ministry of Economic Affairs and
Employment has approved the acquisition of Ficolo by D9 DC Opco 3 Limited, a
100% indirect subsidiary of the Company.
The investment relates to an acquisition of 100% issued share capital of
Ficolo for approximately €135 million. Ficolo is a Finnish data centre and
cloud services platform.
Arqiva Group Limited
On 27 June 2022, the Company agreed on the terms of an acquisition of a 48.02%
voting stake in Arqiva Group Limited, to be funded through a combination of
£300 million in cash and a vendor loan note. Arqiva is a UK-based data,
network and communications service provider, the sole operator of digital
terrestrial television and radio infrastructure in the United Kingdom and an
Internet of Things ("IoT") connectivity platform. The Company has applied for
regulatory approval and the completion of the acquisition is subject to
customary regulatory approvals.
EMIC
At the project's inception, the Company entered a partnership with Meta to
develop the cable and receive one fibre pair on the system. This agreement
committed £22 million as previously reported, including equipment orders.
Subsea fibre cable developments require further agreements to be entered into
to deliver an operational product, such as securing land rights to lay cables,
regulatory licenses to sell telecom services to customers in certain
jurisdictions, amongst other key components.
Since the previous reporting period, the Company has completed two critical
landing and terrestrial fibre crossing agreements with Telecom Egypt, along
the EMIC route and a licensing agreement with an independent telecom services
provider. These agreements commit a further £22 million of capital, bringing
total commitments to date of £44 million. The Company has released £9
million to date for equipment orders and milestone payments.
Dividends
The Company announced a dividend of 1.5 pence per share equivalent to
£12,977,624 with respect to the period from 1 April 2022 to 30 June 2022 to
be paid on 30 September 2022 to shareholders on the register on 16 September
2022.
The Directors have determined that there have been no other significant events
after the reporting date requiring recognition or disclosure in these
financial statements.
13. CONTINGENT LIABILITIES AND COMMITMENTS
The Company, through its subsidiary undertakings has committed £497 million
for acquisitions and capital expenditures at 30 June 2022.
14. 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 2022:
Revenue Capital Total
Calculation of Basic Earnings per share
Net profit attributable to ordinary shareholders (£'000) (1,793) 29,169 27,376
Weighted average number of ordinary shares 797,480,220 797,480,220 797,480,220
Earnings per share - basic and diluted (0.22p) 3.65p 3.43p
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
01-Jan-22 28-Jan-22 30-Jun-22
No of days 181 154 181
Ordinary Shares
No. of shares
Opening Balance 722,480,620 722,480,620 810,629,500
New Issues - 88,148,880 -
Closing Balance 722,480,620 810,629,500 810,629,500
Weighted Average 722,480,620 74,999,600 797,480,220
Period ended 30 June 2021:
Revenue Capital Total
Calculation of Basic Earnings per share
Net profit attributable to ordinary shareholders (£'000) (773) 17,463 16,690
Weighted average number of ordinary shares 178,735,633 178,735,633 178,735,633
Earnings per share - basic and diluted (0.43p) 9.77p 9.34p
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
08-Jan-21 31-Mar-21 10-Jun-21 30-Jun-21
No of days 174 92 21 174
Ordinary Shares
No. of shares
Opening Balance - 2 300,000,000 -
New Issues 2 299,999,998 166,666,667 466,666,667
Closing Balance 2 300,000,000 466,666,667 466,666,667
Weighted Average 2 158,620,689 20,114,943 178,735,633
15. 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 Jun 2022 31 December 2022
Net assets at end of period (£'000) £852,249,103 £755,855,727
Shares in issue at end of period 810,629,500 722,480,620
IFRS NAV per share - basic and dilutive 105.13p 104.62p
UNAUDITED PERFORMANCE MEASURES
We also assess our performance using other methods not specifically defined
under IFRS and therefore termed as Alternative Performance Measures ("APM").
The APMs that that we use may not be directly comparable with those used by
other companies. These APMs provide additional information of how the Company
has performed over the year and all are financial measures of historical
performance. These are the common APMs used by investment companies.
1. ONGOING CHARGES RATIO
Ongoing charges show the drag on performance caused by the operational
expenses incurred by the Company. A key measure of our operational performance
as keeping costs low supports our ability to pay dividends.
Period to Annualised to Period to Annualised to
30 June 2022 31 Dec 2022 31 Dec 2021 31 Dec 2021
£'000 £'000 £'000 £'000
Management fee 3,352 7,423 2,952 4,209
Other operating expenses 682 1,364 1,012 1,253
Total management fee and other operating expenses 4,034 (a) 8,787 3,964 5,462
Average undiluted net assets* (b) 804,052 524,904
Ongoing charges ratio % (c) 1.09% 1.04%
(c = a/b)(%)
* - Average undiluted net assets has been calculated as the average of net
asset value at 1 January 2022 of £756 million and net asset value as at 30
June 2022 of £852 million.
Annualised expenses are the estimate of the annual cost of management fee and
other operating expenses based on the six months' cost in the period to 30
June 2022.
2. TOTAL RETURN
The total shareholder return highlights the gross return to investors
including dividends paid.
30 June 2022 31 December 2021
Closing NAV per share (pence) 105.13p 104.62p
Add back dividends paid (pence) 6.00p 3.00p
Adjusted closing NAV (pence) 111.13p 107.62p
Adjusted NAV per share as at the period end less NAV per share at 31 March (111.13p - 98.00p) (a) (107.62p - 98.00p)
2021
NAV per share at 31 March 2021 98.00p (b) 98.00p
Total return % (c = a/b)(%) 13.40% (c) 9.82%
The above return is for the period from IPO to 30 June 2022, this equates to
annualised total return of 10.72% (31 December 2021 - 13.09%).
3. CASH DIVIDEND COVER
The cash dividend cover reflects the Company's ability to cover its dividends
from the income generated by its portfolio.
Period to Period to
30 June 2022 31 December 2021
£'000 £'000
Operating cash flows* 13,408 11,882
Dividends paid and declared for the period 25,137 29,996
Dividends covered by operating cash flows 53.34% 39.61%
Dividend cover is measured as total dividends paid and declared for the period
to 30 June 2022, as a percentage of total operating cashflows.
* - Estimated cash flows of the underlying investee companies net of operating
expenses
4. MARKET CAPITALISATION
30 June 2022 31 December 2021
Closing share price at period end (a) 110.6p 113.8p
Number of shares in issue at period end (b) 810,629,500 722,480,620
Market capitalisation (c) = (a) x (b) (c) £896,556,227 £822,182,945
5. CAPITAL DEPLOYED AND COMMITTED
30 June 2022 31 December 2021
£'000 £'000
Deployment
Aqua Comms DAC £177,127 £175,615
EMIC-1 £8,943 £6,100
Verne Holdings Limited £263,520 £247,190
SeaEdge UK1 £16,292 £16,292
Leeson Telecom £50,807 -
Volta Data Centre £45,480 -
Deployment as at the period end £562,169 £445,197
Committed but not yet paid^
Existing Portfolio Capex commitments £47,814 -
EMIC £35,248 £16,696
Ficolo OY* £114,000 -
Arqiva* £300,000 -
Total commitments £497,062 £16,696
Total capital deployed and committed £1,059,231 £461,893
* - Committed acquisitions not completed at the period end. RCF facility will
be drawn to complete Arqiva acquisition
^ - Committed by subsidiary undertakings
6. TOTAL SHAREHOLDER RETURN
The total return highlights the underlying performance of the portfolio's
investment valuations, including dividends paid. A measure of the return based
upon share price movements over the period and assuming reinvestment of
dividends
30 June 2022 31 December 2021
Closing share price (pence) 110.60 113.80
Add back effect of dividend reinvestment (pence) 6.12 3.14
Adjusted closing share price (pence) (a) 116.72 116.94
Opening share price at IPO (pence) (b) 100.00 100.00
Total shareholder return (c = ((a-b)/(b)) (%) (c) 16.72% 16.94%
The above return for the period of 15 months from IPO to 30 June 2022, this
equates to annualised total return of 13.28% (31 December 2021 - 23.08%
annualised).
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. END IR LJMBTMTJBTMTRecent news on Digital 9 Infrastructure
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