REG - Digital 9 Infrastr. - Results for the period ended 30 June 2023
28/09/2023 07:00
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RNS Number : 9140N Digital 9 Infrastructure PLC 28 September 2023
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INFORMATION AS STIPULATED UNDER THE UK'S MARKET ABUSE REGULATION. UPON THE
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28 September 2023
DIGITAL 9 INFRASTRUCTURE PLC
("D9" or the "Company" or, together with its subsidiaries, the "Group")
Results for the period ended 30 June 2023
The Board of Digital 9 Infrastructure plc (ticker: DGI9) announces the
Company's unaudited results for the six-month period ended 30 June 2023.
30 June 2023 31 December 2022 30 June 2022
As at:
IFRS Net Asset Value ("NAV") £866m £950m
IFRS Investment Valuation £839m £921m
NAV per share 100.13p 109.76p
Capital Deployed 1 £1,219m £1,243m
For the period:
Portfolio company EBITDA growth 5% 1%
(year-to-date)
(Loss) / Earnings per share (6.63)p 3.43p
Dividends declared per share (in respect of the period) 1.5p 3.00p
Annualised Total Return 2 (11.2)% 10.7%
Key Updates
· As announced today alongside the results for the period ended 30
June 2023:
o The Company is pleased to announce it has significantly progressed the
syndication of the Verne Global group of companies, including its operating
sites in Iceland, Finland, and the United Kingdom (together, "Verne Global")
and is in receipt of several non-binding offers at, or around the USD net
asset value of Verne Global as at 31 December 2022. Those offers comprise
transaction structures for both a co-controlling and majority stake sale.
Executed terms for the syndication are now expected to be announced in Q4
2023.
o Due to the sustained and accelerated customer demand for its
facilities, from both new and existing customers, the growth capital
expenditure pipeline for the Verne Global companies of £493 million reported
in January 2023 has increased to £610 million.
o The Board has elected to not declare the Q2 2023 dividend and withdraw
its target dividend of 6.0 pence per Ordinary Share for the year ending 31
December 2023.
o The Board will start a formal consultation with its shareholders, starting
on 2 October 2023, to determine the optimal future dividend policy and discuss
the future direction of the Company, acknowledging the diverging views among
the Company's shareholders regarding the Company's capital allocation policy.
· IFRS Net Asset Value as at 30 June 2023 was £866 million, equal to
a NAV per share of 100.13 pence (31 December 2022: £950 million, 109.76p),
reflecting a decrease of 8.8% since 31 December 2022. The key drivers for the
reduction in NAV were adverse foreign exchange movements (c.4%), dividend and
the continued escalation of interest rates resulting in elevated borrowing
costs. The portfolio was valued on an IFRS basis at £839 million as at 30
June 2023 (31 December 2022: £921 million), a decrease of 8.9% since 31
December 2022.
· Total Return 3 (based on NAV performance and dividends paid for the
period) annualised for the six-month period is (11.2)% and 6.4% annualised
since IPO (31 December 2022: 10.7% for the six-month period, 13.4% since IPO).
· 66% of the total recurring revenues from the portfolio of investments
have some form of inflation protection, including 52% with uncapped CPI/RPI
linkage.
· In June 2023, Verne Global Iceland completed a $100 million green
term-loan debt facility, with a $50 million uncommitted accordion provision.
· In June 2023, Arqiva implemented an inflation collar on its
existing inflation-linked swaps to between 2.5% and c.6.0%, effectively
capping the corresponding accretion payment and limiting the downside exposure
of cash flows, improving visibility for Arqiva's cashflows. Arqiva also drew
c.£345 million of new debt to repay the c.£262 million existing debt which
was approaching maturity whilst also providing Arqiva with an additional
c.£83 million for general corporate purposes. This £83 million has not yet
been drawn.
· On 1 September 2023, Diego Massidda joined Triple Point as Head
of Digital Infrastructure.
· On 1 July 2023, Gailina Liew was appointed to the Board as a
Non-Executive Director and member of the Company's Management Engagement and
Risk Committees.
Other Post Balance Sheet Activity
· After the period end, D9 Holdco made a repayment of £7.0 million
against the revolving credit facility ("RCF") from the partial repayment of
the shareholder loan from Verne Global Iceland following entering into the
debt facility and withdrew a total of £14.5 million for capital expenditure
purposes.
Phil Jordan, Chair of Digital 9 Infrastructure plc, commented:
"Whilst cognisant of the dividend target set out at IPO, the high interest
rate environment and therefore the critical importance of prioritising
liquidity and sustainable balance sheet management have compelled the Board to
not declare the Q2 2023 dividend and withdraw the dividend target for the
year. In light of this, the Board will be commencing a formal consultation
with shareholders. We look forward to speaking with shareholders to understand
their views and help the Board to determine the optimal dividend policy and
future direction of the Company, acknowledging the diverging views concerning
regarding the Company's capital allocation policy."
Diego Massidda, Head of Digital Infrastructure at Triple Point, commented:
"Our capital allocation policy is underpinned by a desire to enhance the
Company's near-term liquidity and further accelerate the deleveraging of its
balance sheet. We believe that remaining disciplined in our capital management
approach in the current high interest rate environment, will contribute to the
Company's sustainable long-term financial performance."
Meeting for analysts and audio recording of results available
The Company presentation for sell-side analysts will be held at 9.30am today
via live webcast, which will be available at the following link
https://secure.emincote.com/client/digital9/interimresults2023
(https://secure.emincote.com/client/digital9/interimresults2023) .
Pre-registration for the live webcast is encouraged. The presentation will
also be accessible on-demand in due course via the Company's website.
FOR FURTHER INFORMATION ON THE COMPANY, PLEASE CONTACT:
Triple Point Investment Management LLP +44 (0)20 7201 8989
(Investment Manager)
Diego Massidda
Ben Beaton
J.P. Morgan Cazenove (Joint Corporate Broker) +44 (0)20 7742 4000
William Simmonds
Jérémie Birnbaum
Peel Hunt (Joint Corporate Broker) +44 (0)20 7418 8900
Luke Simpson
Huw Jeremy
FTI Consulting (Communications Adviser) dgi9@fticonsulting.com
Ed Berry +44 (0)7703 330 199
Mitch Barltrop +44 (0)7807 296 032
Maxime Lopes +44 (0)7890 896 777
LEI: 213800OQLX64UNS38U92
For the purposes of UK MAR, the identity of the person making this
notification is Luke Cheshire.
About Digital 9 Infrastructure plc:
Digital 9 Infrastructure plc (DGI9) is an investment trust listed on the
London Stock Exchange and a constituent of the FTSE 250, with ticker DGI9. The
Company invests in the infrastructure of the internet that underpins the
world's digital economy: digital infrastructure.
The Investment Manager is Triple Point Investment Management LLP ("Triple
Point") which is authorised and regulated by the Financial Conduct Authority,
with extensive experience in infrastructure, real estate and private credit,
while keeping ESG principles central to its business mission. Triple Point's
Digital Infrastructure team has over $300 billion in digital infrastructure
transaction experience and in-depth relationships across global tech and
global telecoms companies.
The number 9 in Digital 9 Infrastructure comes from the UN Sustainable
Development Goal 9, which focuses the fund on investments that increase
connectivity globally and improve the sustainability of digital
infrastructure. The assets DGI9 invests in typically comprise scalable
platforms and technologies including (but not limited to) subsea fibre, data
centres, terrestrial fibre and wireless networks.
From its IPO in March 2021 and subsequent capital raises, DGI9 has raised
total equity of £905 million and a revolving credit facility of £375
million, invested into the following data centres, subsea fibre, terrestrial
fibre and wireless networks:
· Aqua Comms, a leading owner and operator of 20,000 km of the most
modern subsea fibre systems - the backbone of the internet - with a customer
base comprising global tech and global telecommunications carriers (April
2021);
· Verne Global Iceland, the leading Icelandic data centre platform,
with 40 MW 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 10,000 km fibre system from
Europe to India (July 2021);
· SeaEdge UK1, a data centre and landing station for the North Sea
Connect subsea cable, part of the North Atlantic Loop subsea network,
improving connectivity between the UK, Ireland, Scandinavia and North America
(December 2021);
· Elio Networks (previously Host Ireland), a leading enterprise
broadband provider that owns and operates Fixed Wireless Access networks
(April 2022);
· Verne Global London (previously Volta), a premier data centre based
in central London, providing 6 MW retail co-location services (April 2022);
· Verne Global Finland (previously Ficolo), a leading Finnish data
centre and cloud infrastructure platform, with c.23 MW of data centre
capacity, powered by 100% renewable power and distributing surplus heat to
district heating networks (July 2022); and
· Arqiva, the only UK national terrestrial television and radio
broadcasting network in the United Kingdom - providing data, network and
communications services, as well as a national IoT connectivity platform
(October 2022).
The Company's Ordinary Shares were admitted to trading on the Specialist Fund
Segment of the Main Market of the London Stock Exchange on 31 March 2021. It
was admitted to the premium listing segment of the Official List of the
Financial Conduct Authority and migrated to trading on the premium segment of
the Main Market on 30 August 2022.
For more information on the Investment Manager please visit
www.triplepoint.co.uk. For more information, please visit
www.d9infrastructure.com.
CHAIR'S STATEMENT
Introduction
I am pleased to present the Company's interim report for the six-month period
to 30 June 2023. The period has been characterised by a continued challenging
macroeconomic backdrop across major developed economies, with rising inflation
and interest rates resulting in continued uncertainty for the capital markets.
That same difficult macroeconomic environment has continued to impact the
Company's liquidity and sustainable balance sheet management.
Despite these headwinds, the Company's underlying portfolio has continued to
perform strongly overall and in line with management expectations,
demonstrating the strength of the Investee Companies in which we have invested
and the sectors in which they operate.
Notwithstanding the strong operating performance of the Investee Companies,
the persistently higher interest rate and inflation environment in which the
Company trades has led the Board not to declare the Q2 2023 dividend and
withdraw its target dividend of 6.0 pence per Ordinary Share for the year
ending 31 December 2023.
Whilst the forecast operating cash flow ("OCF") from Investee Companies
remains materially unchanged since 31 December 2022, further increases in net
interest costs, related to the RCF and the Group's reinvestment into its
growth capital expenditure pipeline reduce actual cash available for
distribution. Additionally, the Arqiva Group vendor loan note ("VLN"), and the
Company's share of the Arqiva Group accretion payment on its inflation-linked
swaps, which expire in 2027, continue to restrict the Company's access to OCF
to support the Company's dividend policy in the medium-term.
Whilst cognisant of the dividend target set at IPO, the Board believes a more
conservative approach to capital allocation is required in order to enhance
the Company's medium-term liquidity and further accelerate the deleveraging of
its balance sheet in the current high interest rate environment.
Share Price
In the 2022 Annual Report, released in March 2023, we outlined a series of key
milestones to be executed over the course of the year. We are pleased to have
successfully delivered on a number of these key milestones, alongside
additional portfolio activity to further improve the positioning of the
Company and deliver shareholder value.
Despite this progress, the Board acknowledge these milestones have not yet
delivered the expected impact on the widened share price discount to NAV. We
believe the current discount is unjustified and does not reflect the inherent
value and capital appreciation potential of the portfolio.
The widening discount follows a continued period of high market volatility for
global equity markets, and particularly UK investment trusts, following
several increases in interest rates in the UK, European and North American
markets. Interest rates in the UK particularly has escalated and remain high
as inflation has proven more persistent than elsewhere. We expect inflation to
fall in the UK over the rest of the year, and interest rates to remain stable
and subsequently start to fall over the medium-term which will in turn improve
the macroeconomic landscape.
In the meantime, we have mitigated our exposure to both elements through the
introduction of the inflation collar on Arqiva's inflation-linked swaps, and
the refinancing of Arqiva's senior debt structure, which were both announced
in June and July 2023. While the inflation collar on its inflation-linked
swaps significantly limits the downside risk exposure to RPI for Arqiva, the
refinancing provides greater flexibility for liquidity management purposes
with later maturity dates. Verne Global Iceland has also entered into an
interest rate swap for its debt facility. After the period end, D9 Holdco made
a repayment of £7.0 million against the RCF from the partial repayment of the
shareholder loan from Verne Global Iceland following entering into the debt
facility and withdrew a total of £14.5 million for capital expenditure
purposes.
In addition, the Company announced in January 2023 it was exploring
complementary sources of growth capital, including (i) structured long-term
debt at an Investee Company level and (ii) a potential syndication of a stake
in existing Investee Companies to strategic capital partners. We announced on
5 June 2023 the signing of a new $100 million (£80 million) green term-loan
debt facility with an uncommitted $50 million (£40 million) accordion
provision for Verne Global Iceland. This facility has been used to help fund
Verne Global's growth capital expenditure pipeline, partly repay outstanding
shareholder loans owed by Verne Global to the Company, and refinance Verne
Global's pre-existing bridge loan facility.
Syndication Update
As announced on 9 March 2023, there is an ongoing competitive process to
syndicate a stake in the Verne Global group of companies, including its
operating sites in Iceland, Finland, and the United Kingdom to a strategic
capital partner (the "Syndication").
The Company is pleased to announce it has significantly progressed the
Syndication and is in receipt of several non-binding offers at or around the
USD net asset value of Verne Global as at 31 December 2022. These offers,
which are currently under review, comprise various proposed transaction
structures, for both a co-controlling and majority stake sale, and funding
solutions for the significant capital expenditure commitment for Verne
Global's platform. Due to the sustained and accelerated customer demand for
its facilities, from both new and existing customers, the growth capital
expenditure pipeline for the Verne Global companies of £493 million reported
in January 2023 has increased to £610 million.
Cash proceeds (net of costs) from the Syndication will enable D9 to pay down a
significant portion of the Group's drawn RCF and cancel part of it, thereby
reducing costs. As at 30 June 2023, £356 million was drawn under the Group's
£375 million RCF.
In the medium term, upon Syndication completion, the incoming investor is
expected to support Verne Global's growth capital expenditure pipeline which
will help scale the platform's capacity to over 100 MW through pro-rata equity
injections and an additional funding facility. By maintaining a direct
interest in Verne Global, D9 will continue to benefit from the data centre
platform's anticipated earnings growth.
Executed terms for the Syndication are now expected to be announced in Q4
2023.
Dividend Cover
OCF dividend cover reflects the Company's ability to cover its dividends from
the operational cash flow generated by its Investee Companies, after deducting
Investee Companies' maintenance capex and interest costs.
In the period ending 30 June 2023, there was no OCF coverage of the Company's
dividend. As previously communicated, the spike in inflation resulted in the
Arqiva accretion payment paid in June 2023 being significantly higher than
anticipated at acquisition, which had a material adverse effect on the
operating cash flow. As illustrated below, D9's share of this accretion
payment was £58.5m. Since then, we have also taken out the collar on the
inflation linked swaps which would effectively cap D9's share of the accretion
payments at c.£40m out to 2026. The inflation-linked swaps, expire in 2027,
after which point Arqiva will benefit from the incremental revenue growth from
the inflationary period without the added cost of the accretion payments.
EBITDA to OCF Bridge £'000
EBITDA 105,932
(-) Cash tax (246)
(-) Δ Working Capital (8,869)
(-) Maintenance Capex (6,814)
(+) Adjustment for exceptional transaction expenses -
(-) IFRS 16 Adjustment (10,626)
Gross Operating Cash Flow 79,376
(-) VLN interest (5,198)
(-) Interest Costs (26,328)
(-) Accretion Payments (58,531)
Adjusted cash flow (10,681)
(-) D9 Financing costs (14,306)
(-) Fund Operating expenses (5,463)
Net cash flow (30,449)
Dividends to Q2'23 25,137
The forecast OCF from Investee Companies remains materially unchanged since 31
December 2022, save that the launch of EMIC-1, and therefore the receipt of
cash, has been delayed by up to 6 months to Q2 2025 due to deployment
restrictions in the Red Sea. The Board and Investment Manager expect operating
cash flow dividend cover to be substantially achieved by 31 December 2024 as
Investee Companies' operations mature. This is primarily due to:
· Verne Global Iceland, Verne Global London, and Verne Global Finland
have presold existing data centre capacity, the take up of which will ramp up
over time. Actual ramp up is ahead of the expected ramp up profile disclosed
in the Company's 2022 Annual Report. In the 2022 Annual Report, it was
reported that an additional 4.2 MW was due to be fully ramped by December
2023. Due to additional contracts signed during the year, 6.6 MW will be fully
ramped by December 2023. Of the 8.6MW which was previously reported to be
ramped by December 2024, 11.5 MW is now forecast to be ramped by the same
date. It is expected that all remaining contracted capacity reported at 31
December 2022 to be fully ramped by the end of 2026.
· As announced on 21 June 2023, Arqiva Group entered into an inflation
collar on its existing inflation-linked swaps which applies to 100% of the
Retail Price Index ("RPI") exposure of the swaps and caps the impact of RPI
from 2024 at c.6.0% until the swaps' expiry in 2027. This significantly limits
the downside risk of inflation for Arqiva Group and D9's exposure to it. The
Company expects inflation to fall significantly by March 2024, and therefore
expects the Arqiva Group OCF for the period to June 2024 to materially
increase.
· The launch of EMIC-1, the Group's 10,000 km fibre system from Europe
to India.
While the Board and Investment Manager expect operating cash flow dividend
cover to be substantially achieved by 31 December 2024, further increases in
net interest costs, related to the RCF and the Group's reinvestment into its
growth capital expenditure pipeline reduce actual cash available for
distribution. Additionally, the Arqiva VLN, and the Company's share of the
Arqiva Group accretion payment on its inflation-linked swaps, which expire in
2027, continue to restrict the Company's access to OCF to support the
Company's dividend policy in the medium-term.
The Board continue to work with the Investment Manager to evaluate other
strategic portfolio management initiatives and other complementary sources of
growth capital including other partial disposals to accelerate the receipt of
cash by D9 from the Investee Companies.
Initiation of Shareholder Consultation
In light of the above, the Board will start a formal consultation with its
shareholders, starting on 2 October 2023, to determine the optimal future
dividend policy and discuss the future direction of the Company, acknowledging
the diverging views among the Company's shareholders regarding the Company's
capital allocation policy. The Company will provide a further update following
the conclusion of the shareholder consultation.
Shareholder Returns
The Company generated an annualised total return for shareholders for the
period of (11.2)%, (5.6)% since 31 December 2022). The Company's NAV decreased
to £866 million or a NAV per share decrease of 8.8% to 100.13 pence (2022:
109.76 pence). In addition, as indicated above, the Board has elected to not
declare the Q2 2023 dividend, which had an adverse impact on total returns.
The key drivers for the reduction in NAV during the period were adverse
foreign exchange movements, which contributed c.4 pence of the total NAV per
share reduction. Furthermore, the continued escalation of interest rates
resulted in elevated borrowing costs, which in turn had a negative impact on
the overall financial performance of the Company.
D9 reported a loss before tax of £57 million (2022: profit of £27 million)
for the period, equal to (6.63) pence per share (2022: 3.43 pence per share)
calculated on the weighted average number of shares in issue during the
period. This was primarily a result of the unrealised valuation movements
incurred during the period on the Company's portfolio of investments held at
fair value through profit or loss.
The Company's annualised ongoing charges ratio ("OCR") was 1.2% (December
2022: 1.1%). As the Company has largely deployed its available capital since
the end of 2022, we expect the OCR to decrease as economies of scale and
operating efficiencies are achieved. The Board will continue to monitor the
OCR closely.
Portfolio performance
During the six-month period to 30 June 2023, the Company's portfolio generated
aggregated revenues of £222.6 million and EBITDA of £105.9 million achieving
a portfolio EBITDA margin of 48%. When compared to the same period in 2022,
portfolio revenues have increased 10% with EBITDA increasing 5%.
Our diversified portfolio performed strongly during the period in line with
management expectations. Consolidated Investee Company revenue was 4% above
forecasts and consolidated Investee Company EBITDA was 5% above management
forecasts for the six-month period to 30 June 2023.
Board and Investment Manager personnel
The Board was pleased to announce the appointment of Gailina Liew on 1 July
2023 as an Independent Non-Executive Director and member of the Company's
Management Engagement and Risk Committees. In line with the FCA's targets
under the Listing Rules and following Lisa Harrington succeeding Keith
Mansfield as Senior Independent Director on 13 February 2023, this appointment
further supports the Board's commitment to gender diversity. Gailina Liew's
biography can be found in the RNS announcement dated 30 June 2023.
We are also pleased to note the appointment of additional personnel to the
Investment Manager team during the period, including Diego Massidda who joined
as Head of Digital Infrastructure at the beginning of September 2023, the
appointment of Laureen Cook as an Operating Partner and the promotion of
Arnaud Jaguin to Head of investment - Digital Infrastructure. Further
information on these appointments can be found in the Investment Manager's
Report below.
Environmental, Social and Governance
The Company has a mission to deliver a network of sustainable assets which
collectively contribute to increased digital connectivity for the greatest
number of people with the lowest possible carbon footprint.
The Board remain committed to the alignment of the Company to this mission,
the achievement of which creates contribution to Sustainable Development Goal
(SDG) 9 (Industry, Innovation & Infrastructure). The Company tracks and
reports each Investee Company's progress against metrics which demonstrate
alignment to SDG9 through targets 9.4 (resource efficient and environmentally
sound technologies) and 9.c (increase in access to information and
communication technology). This detail is reported annually, in addition to
operational ESG metrics for each company (e.g. turnover, training, diversity
statistics, carbon emissions, customers complaints etc.) and outcomes relative
to sustainable activity improvements committed to. The current commitments,
announced in our 2023 annual report, are:
· The implementation of net zero roadmaps within portfolio companies
· The implementation of biodiversity action plans
· The development of diversity and inclusion measures
· The implementation of Cyber Essentials Certification Plus, as a
minimum level where IT management is in-house
· The alignment of CEO remuneration to ESG criteria
Following the period end, the Board issued a 'Dear CEO' letter to Investee
Company CEOs to increase awareness of the importance of sustainability to D9,
with particular emphasis on diversity and inclusion and highlighting best
practice and areas of potential improvement across the portfolio. The Board
continue to receive quarterly updates on ESG activity conducted by the
investment manager to ensure alignment continues, resource is adequate, and
progress is on track.
Going Concern
The Directors have concluded that it is appropriate for the condensed
financial statements to be prepared on a going concern basis. Full details are
set out in Note 2 of the attached financial statements.
The Directors consider that the Company and the Group will have sufficient
resources to continue to meet their liabilities for the foreseeable future.
However, given that a degree of uncertainty exists in the timing of ongoing
strategic initiatives which includes the previously announced Syndication, and
management's ability to refinance the Group's £375 million RCF due in the
next eighteen months (March 2025), there exists a material uncertainty which
may cast significant doubt over the Company's ability to continue as a going
concern.
Outlook
The shareholder consultation announced today will provide the Board with
valuable feedback, which will help determine the optimal dividend policy of
the Company and shape the future direction of the Company, acknowledging the
diverging views among the Company's shareholders regarding the Company's
capital allocation policy.
Notwithstanding the currently challenging economic backdrop, which continues
to feature high-single digit CPI growth and softening consumer confidence in
the UK, we remain of the view that our Investee Companies are well positioned
to weather the ongoing challenges.
Following the completion of the Syndication, we look forward to working
closely with a new strategic capital partner as we embark on the next phase of
Verne Global's growth journey. We are poised to harness the synergies that
will drive Verne Global's evolution, enabling us to capitalise on emerging
opportunities and enable the Verne Group to solidify their position as a
leader in the industry.
We remain committed to enhancing the Company's medium-term liquidity and
further accelerating the deleveraging of its balance sheet in the current
higher interest rate environment as we look to strike the optimal balance
between growth, financial leverage and total return.
Phil Jordan
Chair
27 September 2023
INVESTMENT MANAGER'S REPORT
Review of the Period
We are pleased to have executed on a number of the key milestones outlined in
the Company's annual report over the first half of this year.
In January 2023 we set out a strategic plan to further enhance the depth and
experience of the Investment Manager's Digital Infrastructure team, improve
disclosure and reporting transparency, optimise the capital structure at
Investee Company level and ultimately drive shareholder value. With the
exception of the Syndication for which terms are expected to be announced in
Q4 2023, all of these initiatives have been delivered successfully.
$100 million green loan debt facility for Verne Global Iceland
In June, Verne Global Iceland completed a $100 million (c.£80 million) green
term-loan debt facility, with a $50 million (c.£40 million) uncommitted
accordion provision. The facility was the first successful step in our
commitment to explore complementary sources of growth capital, including the
prudent use of structured long-term debt at an Investee Company level, to
create and enhance long-term shareholder value.
The facility was structured as a syndicated facility, fully underwritten by
Natixis on a 5-year fixed term expiring in June 2028. Following execution,
Verne Global entered into an interest rate swap for the first 3 years; the
fixed rate for the tenor of the swap is 4.14% and the all-in fixed rate of
7.14%, to mitigate against continued interest rates rises. Verne Global has
also signed up to a Green Financing Framework, which complies with the Green
Bond Principles (International Capital Market Association) and the Green Loan
Principles (Loan Market Association) and is highly aligned to the Company's UN
SDG9 ambitions.
Further detail on the loan can be found in our announcements dated 5 June 2023
and 12 June 2023.
Inflation collar on Arqiva's inflation-linked swaps
In June, Arqiva Group agreed an inflation collar on its existing
inflation-linked swaps in line with the Investment Manager's active asset
management plan to optimise the Arqiva Group's capital structure.
Through annual accretion payments on these swaps, the Arqiva Group has
historically been exposed to Retail Price Index ("RPI") fluctuations, with
high RPI figures resulting in sizeable cash outflows. The recently implemented
collar is a bespoke instrument that restricts the swaps' RPI exposure within a
fixed range of 2.5% to c.6.0%. This means that if future RPI figures exceed
expectations, effective RPI will be capped in each case at c.6.0%, in turn
effectively capping the corresponding accretion payment at c.£40m out to
2026. This limits the downside exposure of Arqiva Group to inflation rising
and improves visibility over cash flows available to D9 from Arqiva Group, and
D9's future operating cash flow dividend cover.
Arqiva senior debt refinancing
Through late June and early July, Arqiva Group raised £345 million of new
debt, the proceeds of which were used to repay £262 million of existing debt
which was approaching maturity, whilst providing Arqiva Group with an
additional £83 million for general corporate purposes. This followed £45
million of senior debt amortisations over the previous 12 months, as well as
the net £175 million deleveraging of Arqiva Group's junior debt in Q3 2022.
Arqiva Group's interest rate swap portfolio has also been rebalanced to
maintain compliance with hedging covenants, such that increases in gilt yields
continue to have no material impact on Arqiva Group's interest costs net of
the pre-existing swaps portfolio.
Appointment of Investment Manager personnel
The Company announced on 13 June 2023 the appointment of additional personnel
to the Investment Manager's digital infrastructure team. This included the
appointment of Diego Massidda as new Head of Digital Infrastructure, the
promotion of Arnaud Jaguin as Head of Investment, Digital Infrastructure, and
the appointment to the Triple Point Digital Infrastructure team's Operating
Partner panel of Laureen Cook.
Triple Point and the Board thoroughly evaluated the skills and experience D9
would benefit from to complement the skillset of the existing portfolio
management team, including Investee Companies' executive management, and of
the Operating Partner panel at Triple Point.
Diego Massidda, Head of Digital Infrastructure
We are thrilled to have Diego on board to lead the active management of D9's
portfolio to further optimise its operating and financial performance and help
drive the growth and convergence of D9's platforms.
Diego is a seasoned industry veteran with over 20 years' operating experience
in global telecommunications and digital infrastructure. Diego has spent 16
years with Vodafone Group plc ("Vodafone"), and was most recently CEO of
Vodafone Partner Markets, responsible for all services provided by Vodafone to
other mobile operators in c. 50 countries where Vodafone does not operate
directly. In this role, he provided strategic guidance and operational
expertise to partner market CEOs to grow revenue share, profitability, and
drive operational excellence.
Until recently, Diego was also CEO of Vodafone Carrier Services, responsible
for the commercial strategy and execution of Vodafone data and voice wholesale
business globally, including sub-sea and terrestrial optical fibre assets.
Diego spent five years as CEO of Vodafone Hungary, taking the mobile
operator from number three to number two in revenue share in the market,
through sustained double-digit revenue and profit growth and best customer
experience. His experience in Vodafone includes leading the development and
launch of a satellite/cable/IPTV broadcasting and streaming service for
Vodafone Germany, and the responsibility for the development of Vodafone's
fixed broadband activities globally. He was previously the CEO of Telecom
Italia France and Tiscali (South Africa and later France), during which time
he was responsible for the B2B hosting and co-location business of these
entities based on their data centre assets. Diego started his career as a
civil engineer, and later worked for McKinsey & Company. He is a qualified
civil engineer and holds an MBA from INSEAD Business School.
Arnaud Jaguin, Head of Investment - Digital Infrastructure
Arnaud Jaguin was promoted to Head of Investment - Digital Infrastructure.
Arnaud has been integral to D9's development since IPO in 2021, leading the
origination and execution of the Company's investments into Aqua Comms, Arqiva
Group and Elio Networks (formerly, Host Ireland).
Laureen Cook, Operating Partner
Laureen Cook was appointed to the Triple Point digital infrastructure team's
Operating Partner panel alongside Alan Harper, Simon Beresford-Wylie and Steve
Andrews. Laureen now sits on Triple Point's Digital Infrastructure Investment
Committee and, alongside an established panel of Operating Partners, will
support Investee Companies' commercial development in partnership with the
executive management teams.
Laureen has a leading track record of over 25 years in the wireless, fibre,
subsea, towers and data centres sectors, in addition to investment expertise
in emerging technologies including IoT, cloud convergence, and satellite.
Laureen has deployed over $16 billion to telecoms infrastructure projects in
these sectors globally on behalf of institutional investors and was most
recently the former principal of the TMT private equity investment group at
the World Bank's International Finance Corporation.
Syndication of Verne Global and complementary sources of growth capital
Today, as set out in the Chair's statement above, the Company announced that
it has significantly progressed the Syndication and is in receipt of several
non-binding offers at, or around the net asset value of Verne Global as at 31
December 2022. Executed terms for the Syndication are now expected to be
announced in Q4 2023.
Further to the Syndication, the Board and the Investment Manager continue to
evaluate other complementary sources of growth capital to reduce the Group's
leverage position and support the significant growth capital expenditure
pipeline of the Investee Companies. An update on these processes will follow
their completion.
Other Investment and Portfolio Management Activity
During the first half of the year, the Company, through its subsidiaries
invested or committed c.£16.7 million into the target digital infrastructure
sectors. This investment went into growth capital expenditure to fund the
business plans of the Investee Companies and were made through a combination
of cash held by the Group and drawdowns from its RCF.
Giggle Fibre sale process
Since July 2022, the Group has invested £4.3 million seed capital into
Giggle, a development opportunity that provides affordable broadband to social
housing through a revolutionary Fibre to the Home ("FTTH") network across the
city of Glasgow. Due to its identified growth capital expenditure pipeline of
c.£150 million for the 5-year period to 31 December 2027, the Group has
engaged a TMT Investment Bank to lead a competitive process for either a full
or majority sale of Giggle, however, due to its short cash runway, it is
expected that the Group's investment in Giggle will be wound down in Q4 2023
and as such a provision has been applied against the full value of Giggle. The
impact of the provision on NAV is 0.5pps.
Aqua Comms
The AEC-3 subsea cable, Aqua Comms' third transatlantic submarine cable
system, reached completion in August 2023, adding further resilience to its
existing transatlantic AEC-1 and AEC-2 fibre network links. Aqua Comms is
continuing the development of EMIC-1, with a launch delayed by up to 6 months
to Q2 2025 due to deployment restrictions in the Red Sea. Further information
can be found in the Aqua Comms section.
Total Return and Net Asset Value
At IPO, the Company committed to a 10% total return target comprising dividend
and capital growth. The Company has generated an annualised total return for
shareholders since IPO of 6.4%, which is below the Company's target return of
10%. The Company's NAV decreased to £866 million as of 30 June 2023,
equivalent to a NAV per share decrease of 8.8% to 100.13 pence in the
six-month period (31 December 2022: 109.76 pence).
The key drivers for the reduction in NAV during the period were adverse
foreign exchange movements, which contributed c.4 pence per share of the total
9 pence per share reduction. Furthermore, the continued escalation of interest
rates resulted in elevated borrowing costs, which in turn had a negative
impact on the overall financial performance of the Company. The bridge chart
details out the key drivers for the reduction in NAV.
Outlook
Throughout the year, there has been a notable shift in investor sentiment,
market dynamics, and equity valuations in the sectors within which the Company
operates.
In consideration of central bank strategies, the possibility of an extended
period of elevated interest rates could potentially curtail valuation
multiples expansion. In such a scenario, valuation dynamics would increasingly
depend on a sustained earnings growth trajectory. As we look to navigate these
evolving dynamics, our investment strategy remains on track to achieve growth
and add value for Shareholders.
We are pleased with the progress made on the key milestones this year, as
detailed further in the Chair's Statement. Furthermore, following the
announcement of the appointment of Diego Massidda, we look forward to the
pivotal role he will play in driving our portfolio management endeavours and
helping to refine the strategic direction of the Company, much of which will
be discussed with shareholders at the upcoming shareholder consultation. We
are confident that he will contribute significantly to our commitment to
delivering value to our stakeholders and achieving long-term growth objectives
for the Company.
FINANCIAL REVIEW
Net Asset Value
The Company's net assets were valued at £866 million at the period end (£950
million at 31 December 2022, £852 million at 30 June 2022), reflecting a
decrease of 8.8% versus December 2022.
The key drivers for the reduction in NAV during the period were adverse
foreign exchange movements, which contributed c.4 pence per share of the total
9 pence per share reduction. Furthermore, the continued escalation of interest
rates resulted in elevated borrowing costs, which in turn had a negative
impact on the overall financial performance of the Company.
The NAV per share was 100.13 pence per share at 30 June 2023 (109.76 pence at
31 December 2022, 105.13 pence at 30 June 2022), resulting in an annualised
Total Return for the period of (11.2)% and 6.4% since IPO below the 10% target
return. An update on the total return target will be provided following the
shareholder consultation.
The bridge below shows the movement in NAV during the period and their effect
on a pence per share basis.
Valuation Performance
In accordance with accounting standards, 'Investments at fair value through
profit or loss' as reported in the Statement of Financial Position include, in
addition to the portfolio asset valuation, the cash and other net assets held
within intermediate unconsolidated holding companies. A reconciliation of the
portfolio valuation to IFRS Investment Valuation is set out below.
The Company's investment portfolio remained broadly stable during the
reporting period, influenced by a combination of market forces and strategic
decisions. Across the Investee Companies, there was a total reinvestment of
£12.7 million, reflecting a continued commitment to growth opportunities.
Conversely, Investee Company distributions totalled £40.4 million, with the
largest receipt in the period being a Shareholder loan repayment made by Verne
Global Iceland.
The portfolio's rebased valuation, accounting for these changes, was £1.18
billion. Despite the positive Revenue and EBITDA growth generated by the
portfolio, the overall value movement for the period was slightly negative.
The primary factor contributing to the decline in valuation over the reporting
period was the impact of foreign exchange movements. Fluctuations in currency
exchange rates exerted significant pressure on the overall valuation of the
investment portfolio, contributing c.4% to the overall reduction in the
Company's NAV.
The below chart shows the movement in portfolio valuation for the period and
the key drivers of the valuation movement. A reconciliation of the portfolio
valuation to the IFRS Investment Valuation held on the Company's Balance Sheet
is set out below.
The chart above bridges the combined portfolio valuation of £1,210m as at 31
December 2022 to the combined valuation of £1,153m as at 30 June 2023
(excluding IFRS movements related to the wider Company, these are reconciled
to the IFRS Valuation below).
Following £12.8m of investment in the period, including EMIC-1 (£3.6m),
Verne Global London (£7.9m) and Giggle Fibre (£1.3m), and distributions of
£40.8m including Verne Global Iceland (£39.3m), SeaEdge (£0.6m) and Elio
Networks (£0.9m), the rebased valuation of the portfolio totalled £1,187m as
at 30 June 2023.
A discount rate movement of £5.8m encapsulates the combined movements in
discount rates across the portfolio in light of current market conditions and
our assumptions around risk free rates, betas and company specific risk
premiums. In particular, Aqua Comms, Verne Global London and Elio Networks
have contributed to positive movements as a result of lower company specific
premiums whilst Verne Global Iceland and Verne Global Finland have contributed
negative movements as a result of movements in higher company specific
premiums.
Please see discount rate section below for further details.
As a result of the continued strengthening of Sterling against both the US
Dollar and the Euro since January 2023, the translation of the US Dollar
valuations of Aqua Comms and Verne Global Iceland, along with the translation
of the Euro valuations of Elio Networks and Verne Global Finland, have
resulted in a combined foreign exchange loss of £33m.
Summary of Portfolio Valuation methodology
Investment valuations are calculated at the financial half-year (30 June) and
the financial year-end (31 December) periods. Investments are reported at the
Directors' estimate of fair value at the relevant reporting date.
The valuation principles are based on International Private Equity and Venture
Capital ('IPEV') guidelines, generally using a discounted cash flow ('DCF')
approach, which the Investment Manager considers to be the most appropriate
valuation methodology for unquoted infrastructure equity investments.
Where the DCF methodology is used, the resulting valuation is checked against
other valuation benchmarks relevant to each investment, including EV / EBITDA
trading multiples for publicly traded comparable and recent transactions.
In using a DCF, fair value is estimated by deriving the present value of the
investment using reasonable assumptions for future cashflows and the
appropriate terminal value and date. A risk-adjusted discount rate is applied
to quantify the inherent risk of the investment, which is built up on first
principles applying the capital asset pricing model.
Further information on the Company's approach to valuation can be seen in Note
7.
Discount rates
During the first half of the year, the weighted average discount rate
decreased from 12.6% to 11.8%, as shown in the chart below. Higher risk-free
rates have been offset over the course of the year by lower risk premiums
applied in line with comparatives, whilst also adopting a static discount rate
approach, compared to the previous approach to evolve the discount rate over
time as the investee companies mature.
Across the portfolio, the beta used in the Capital Asset Pricing Model (CAPM),
derived by looking at a basket of comparable companies, has reduced
consequently lowering the implied cost of equity. It is important to highlight
that this adjustment has effectively counterbalanced the impact of a 0.5% rise
in risk-free rates on the UK 10-year gilt yield, resulting in a marginal net
increase in the cost of equity.
Weighted average discount rate by valuation period, (%)
Liquidity
As at the period end, the Group held total cash of £78.3 million, of which
£47.0 million relates to unrestricted cash available for use. At the
Reporting date, the Company had £29.5 million of available cash.
At period-end, the RCF was £356.2 million drawn, with a further £18.8
million available to draw. At the time of writing, the Group had £12.5
million available to draw.
Inflation
Whilst power price inflationary pressures have subdued this year compared to
last, high inflation rates, and particularly sticky inflation in the UK,
remains a prevalent theme. The ability to pass cost inflation to customers
varies by Investee Company so a granular approach was taken to model the
effects of inflation. The Company has used inflation forecasts provided by an
independent third party, and we expect to maintain this approach going
forward.
In the UK, CPI is forecast to end the year at 4.4% and reduce further to 2.0%
by the end of 2024.
For RPI, we expect a drop to 5.3% by March 2024, and a further drop to 3.5% by
March 2025, thereafter reducing gradually by 50bps per year and stabilising at
2.0% in 2028.
As set out in the Chair's Statement, Arqiva has been negatively impacted from
a cash flow perspective due to the recent increased levels of inflation and
the impact this has on the existing inflation linked swaps held on their
balance sheet. While these have a negative impact on cash outflows over the
short term, it should be highlighted that over the longer term this is
positive for Arqiva's enterprise value.
This plays out in two ways, 1) higher revenues in the future as a result of
the compounding effect of inflation on their revenues and 2) a larger EBITDA
used in any exit assumptions. Furthermore, the RPI cap & collar entered
into in June 2023 will cap accretion payments from June 2024 at 6.0%. More
information on Arqiva can be found in the Arqiva section below.
The Investment Manager aims to construct and maintain a portfolio that
generates year-on-year revenue growth on a progressive basis. The Investment
Manager does not aim to construct and maintain a portfolio of investments
purely with direct inflation-linked returns, however it targets any potential
portfolio downside inflation impact to be broadly offset through revenue
growth over the medium to long-term.
Debt Financing
As set out in the IPO Prospectus, gearing will only be used by the Company to
finance acquisitions and growth capital expenditure on a short-term basis,
with longer-term gearing likely to be applied at an asset level.
As at 30 June 2023, the Group had unrestricted cash of £47.0 million and an
undrawn RCF balance of £18.8m, providing £65.8 million in potential
liquidity. In aggregate, excluding Investee Companies and including undrawn
RCF, D9 had gross debt of £544.8 million, comprising of the VLN and RCF as at
30 June 2023 which is 44.0% of Adjusted GAV and below the 50% maximum
permitted in the Company's Investment Policy. This gives the Company headroom
under this restriction of £74.1 million.
The Company takes a conservative approach to monitoring its gearing ratio and
the calculation of Adjusted GAV. In calculating Adjusted GAV the Company does
not include the VLN in the calculation, which would have the impact of
increasing the denominator and reducing the leverage percentage. If the VLN
were included in the calculation, leverage would reduce from 44% to 39%.
Debt Metrics
Gearing Ratio (at 30 June 2023) £'m Leverage as a % of Adjusted GAV
Drawn RCF (as at 30 June 2023) 356.2 28.8
Total RCF (excluding accordion) 375.0 30.3
RCF and VLN 544.8 44.0
As at 30 June 2023, the Company's Net Debt / EBITDA position has marginally
increased since December 2022 as a result of the PIK loan notes on the VLN
being capitalised at 30 June 2023 and the inclusion of the Verne Iceland $100
million loan facility which was completed during the period.
Net Debt / EBITDA Proforma June 2023 December 2022
Drawn RCF 363.7 331.2
VLN* 169.8 163.0
Cash & Equivalents (inc. restricted cash) (78.3) (73.6)
Net Debt 455.2 420.6
Annualised Portfolio EBITDA 208.8 206.3
Net Debt / EBITDA 2.2x 2.0x
Arqiva debt (pro-rated for D9 ownership) 769.5 754.0
Verne Global debt 78.8 -
Adjusted Net Debt 1,303.5 1,174.6
Adjusted Net Debt / EBITDA 6.2x 5.7x
*The increase in the VLN balance includes PIK interest, which was capitalised
into the balance of the loan on 30 June 2023.
The Arqiva figures have been adjusted for the impact of their refinancing
which completed on 5 July 2023.
Revolving Credit Facility
As at the reporting date, the Company had a £375 million bespoke RCF in place
with an international syndicate of four banks. As at the beginning of the
year, the Company had drawn £331.2 million. During the first 6 months of the
year the Company drew a further £25 million and £7.5 million in the
post-balance sheet period bringing total drawn amounts to £364 million as at
the date of signing this report.
The RCF has been instrumental to enable the Company to fund the acquisition of
Arqiva, whilst also providing capital towards Aqua Comms and the Verne Global
platform to meet their growth capital expenditure requirements. However, given
the current landscape in the UK characterised by high interest rates with
SONIA trading around the 5% mark, the Company has sought to de-lever its
balance sheet in order to reduce its financing costs and preserve shareholder
value. As set out in the Chair's statement, the Company has progressed the
competitive process to sell a stake in the Verne Global group of companies,
which will enable D9 to pay down and part-cancel a significant portion of the
Group's RCF.
The Company's debt structure is under permanent review by the Board and the
Investment Manager.
VLN
The Group part-financed the £463 million acquisition of a 48.02% equity stake
in Arqiva with the use of a £163 million non-recourse VLN which is listed on
the International Stock Exchange ("TISE"). The VLN is due to mature in 2029
and has the following stepped interest rate profile:
· 6% per annum up to and including 30 June 2025;
· 7% per annum from 1 July 2025 up to 30 June 2026;
· 8% per annum from 1 July 2026 up to 30 June 2027; and
· 9% per annum from 1 July 2027 to maturity.
Interest on the VLN is due annually in arrears on 30 June, and D9 has the
choice either to settle each payment in cash or to accrue it. For the period
ending 30 June 2023, the Company elected to accrue the interest, increasing
the VLN's outstanding balance from £163m to £170m.
Accrued interest must be repaid in full before distributions can be made to
the Group. After the fourth anniversary of the VLN, the Group can only receive
distributions if the entirety of the VLN principal and any rolled up interest
has been repaid in full. The Company expects Arqiva's future cashflows to
cover D9's VLN interest payments. The Investment Manager expects that the VLN
will be refinanced prior to its fourth anniversary in October 2026, as was
anticipated at acquisition.
Investee Company Leverage
As at 30 June 2023, only two of the Investee Companies had asset level debt;
Arqiva and Verne Global Iceland.
Arqiva:
As of 30 June 2023, Arqiva's pro forma debt balance is £1,487 million
(including project debt), of which the Company's share is £770 million. The
pro forma adjustment accounts for the senior refinancing, which completed in
early July 2023.
Verne Global Iceland:
As previously outlined, the Company has explored the deployment of asset level
financing into selected Investee Companies in the form of long-term structured
debt. Earlier this year, the Company achieved this through Verne Global
Iceland who agreed a $100 (c.£80) million green term-loan facility.
The Facility is structured as a syndicated facility, fully underwritten by
Natixis and with a fixed term of 5 years maturing in June 2028. The interest
rate payable in the first 3 years of the facility is 3% per annum over the
Secured Overnight Financing Rate ("SOFR"), stepping up to 3.25% per annum and
3.5% per annum, in fourth and fifth year, respectively. Verne Global Iceland
has also put in place an interest rate swap for the first three years of the
facility to manage longer-term fluctuations in interest rates. The fixed rate
for the tenor of the swap is 4.14% per annum and the all-in fixed rate
including the applicable margin is 7.14% per annum.
Portfolio Summary and Key Value Drivers
The Company's portfolio now consists of eight 4 (#_edn4) attractive and
complimentary investments, with four high-quality platforms comprising best in
sector operators, benefitting from accretive convergence value throughout the
portfolio. We have invested across the four target sub-sectors: Data Centres,
Subsea Fibre, Terrestrial Fibre and Wireless networks. The below table shows
the portfolio's asset and sector concentration levels comprising valuations as
at 30 June 2023.
High revenue visibility with balanced and stable currency mix:
We have invested in businesses with high revenue visibility, with a weighted
average remaining contract term for recurring revenue of 7.1 years across the
Investee Companies. This is reflective of our investment approach, with
investments underpinned by a combination of diversified and long-term contract
stacks with high quality counterparties.
Balanced and stable currency mix
Currency markets have fluctuated as central banks respond to rising inflation
by increasing interest rates and adopting a contractionary monetary policy.
The Company has over 99% exposure to major currencies (GBP, USD, EUR),
offering a balanced currency mix to major economies.
Inflation protection 5 (#_edn5) :
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 66% of recurring revenues benefitting from a form of inflation
protection at underlying contract level.
Review of Portfolio
Portfolio Financial Performance
2023 YTD 2022 (YTD Comparative) 2022 2021
Revenue £222.6 million £202.0 million £406.1 million £398.3 million
% Growth 10% - 2% 1%
EBITDA 6 £105.9 million £101.1 million £201.8 million £202.9 million
% Growth 5% - (1)% (3)%
On a consolidated basis, the Company's Investee Companies generated £222.6
million in revenue and £105.9 million in EBITDA, over the first half of the
year. This reflects an increase of 10% and 5% respectively on the previous 6
months.
Aqua Comms (including EMIC-1)
Sector Subsea Initial investment £170 million
Currency USD Total capex funded to date £29 million
Date invested April 2021 Total investment to date £199 million
Ownership 100% Closing value (30 June 2023) £227 million
SDG9 alignment Connectivity Valuation Movement (from 31 December 2022) % (3.3)%
Revenue (to 30 June 2023) £14.3 million EBITDA (to 30 June 2023) £4.7million
Aqua Comms has established itself as a leading subsea fibre operator in the
transatlantic market with two of the most modern systems in AEC-1 and AEC-2.
In August 2023 we launched the AEC-3 system, on schedule and on budget,
providing further network connectivity between the US and UK. The cable
provides up to 20 TB of capacity bringing Aqua Comms' total capacity to c.60
TB across its operational subsea cables. The cable is the first to directly
connect Boston to Europe and Bordeaux to North America, spanning 6,783 km.
AEC-3 on Aqua Comms' network, adds a third high-capacity system to their
transatlantic footprint offering enhanced diversity in both the US and Europe
and delivering the latest technology to their customers.
Aqua Comms is also managing the EMIC-1 system with its development continuing
through 2023 before launch in 2025.
In May 2023, Jim Fagan joined as CEO, following Nigel Bayliff standing down
from the role. Jim's appointment follows a competitive recruitment and
selection process, and the Investment Manager continues to support the
leadership transition period closely. Jim brings 25 years' leading industry
experience in Asia-Pacific, North America and EMEA, including executive roles
with Global Cloud Xchange, Rackspace, and Pacnet (later acquired by Telstra).
Aqua Comms remains one of the Company's cornerstone investment platforms since
IPO and the Investment Manager is very confident of the ability to create
accretive organic growth as well as seeking out potential additional pipeline
acquisitions in subsea fibre.
2023 (YTD) 2022 (YTD) 2022 2021
Revenue £14.3 million £14.0 million £27.3 million £25.9 million
% growth 3% - 5% 8%
EBITDA £4.7 million £7.3 £12.8 million £16.1 million
% growth (36)% - (5)% (1)%
% margin 41% 52% 46% 62%
Verne Global Iceland
Sector Data centre Initial investment £231 million
Currency USD Total capex funded to date £50 million*
Date invested September 2021 Total investment to date £281 million
Ownership 100% Closing value (30 June 2023) £275 million
SDG9 alignment Decarbonisation Valuation Movement (from 31 December 2022) % (6.4)%*
Revenue (YTD) £11.4 million EBITDA (YTD) £4.1 million
*The Company has contributed a total of £50m into Verne Global Iceland since
acquisition by way of Shareholder loans. During the period Verne Global
Iceland repaid £39 million of this loan which includes an element of interest
accrued.
Verne Global Iceland ("Verne Global") is a leading data centre platform based
in Iceland. It provides highly scalable data centre capacity to its enterprise
customers in a geographically optimal environment, powered by 100% baseload
renewable energy. Energy is sourced exclusively from local, stable and
predictable hydroelectric and geothermal power generation which is secured
with a 10-year fixed-price supply contract, enabling customers to reduce their
carbon footprint significantly. Verne Global's year-round, free-air cooling
capabilities make it one of the most energy-efficient data centres in the
world and reaffirms the Company's ambition to decarbonise digital
infrastructure in line with UN SDG9.
At 30 June 2023, Verne Global had 99% of recurring revenue benefitting from
fixed annual uplifts ranging from 2% to 5% offering strong revenue inflation
protection generated from c.40 leading global High-Performance Computing,
supercomputing and enterprise customers. This delivers long-term,
inflation-protected income in a variety of sectors including automotive,
artificial intelligence and financial services.
In light of increased global temperatures, increasing ESG reporting
requirements, along with the recent power pricing and availability crisis in
Northern Europe, enterprises are focused on sustainable data centre solutions,
which benefit from low-cost, long-term, renewable power, and that bring
stability, availability and scalability to support their rapidly increasing
high performance compute needs.
As a result, Verne Global is experiencing accelerated customer demand for its
facilities from both new and existing customers and has booked and sold the
majority of its remaining capacity. Due to this level of demand, Verne Global
has identified a substantially increased growth capital expenditure pipeline
in its latest 5-year business plan, with capital expenditure pipeline in 2023
increasing to $115 million (£95 million). Furthermore, its capital
expenditure pipeline for the five years to 31 December 2027 increased from
$208 million (£172 million) in its 2021 plan to c.$472 million (£391
million).
This capital expenditure will fund the expansion of capacity from an existing
40MW in operation or development to a total of 94 MW out of a potential of
more than 100 MW on the site. At 30 June 2023, the Group had funded c.$60
million (c.£50.0 million) of capital expenditure in Verne Global since its
acquisition for £231 million in September 2021. The Group has not currently
committed to any further capital expenditure for 2023 onwards.
As previously noted, Verne Global drew a $100 million (c.£80 million) green
term-loan debt facility in June 2023 and subsequently put in place an interest
rate swap for the first three years of the facility applying an all-in fixed
interest rate of 7.14% to the facility. The proceeds have been used to:
· Fund additional capacity under construction and development in 2023
· Refinance Verne Global's existing bridge loan facility for $26
million (£21 million)
· Repay $50 million (£40 million) of the $62 million (£49.5 million)
shareholder loan owed to the Group by Verne Global
The Company's Investment Policy includes a restriction that the Company will
not invest more than 25% of Adjusted Gross Asset Value in any single asset or
Investee Company (measured at the time of any investment into such asset or
Investee Company) and therefore the Group cannot currently materially increase
its exposure to Verne Global.
The Company and the Investment Manager continue to believe in Nordic data
centres as a significant differentiator for the Company's investment
proposition, giving exposure to the fastest growing market for low-carbon,
low-cost data centre services.
2023 (YTD) 2022 (YTD) 2022 2021
Revenue £11.4 million £11.7 million £20.1 million £18.5 million
% growth (2)% - 30% 25%
EBITDA £4.1 million £3.4 million £7.1 million £6.0 million
% growth 22% - 18% 69%
% margin 36% 29% 35% 32%
Verne Global Finland
Sector Data centre Initial investment £114 million
Currency EUR Total capex funded to date £5 million
Date invested July 2022 Total investment to date £119 million
Ownership 100% Closing value (30 June 2023) £136 million
SDG9 alignment Decarbonisation Valuation Movement (from 31 December 2022) % 3.2%
Revenue (YTD) £6.3 million EBITDA (YTD) £(1.5 million
Verne Global Finland 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. Verne Global Finland
has existing buildings capable of providing up to 23 MW.
Verne Global Finland was acquired in July 2022. This acquisition expands D9's
Nordic data centre portfolio and continues to deliver on our strategy of
sustainable data storage.
As part of the 5-year business plan, Verne Global Finland identified a growth
capital expenditure pipeline of £92 million for the 5-year period to 31
December 2027. This is to realise the potential to expand existing resilient
fit out capacity from 7.4 MW to 17 MW; the Group has not yet committed to
underwrite any of this expenditure.
2023 (YTD) 2022 (YTD) 2022 2021
Revenue £6.3 m £6.1 m £12.6 m £11.1 m
% growth 3% - 14% 33%
EBITDA £1.5m £1.6m £3.5 m £2.4 m
% growth (1)% - 46% 226%
% margin 24% 25% 28% 22%
Verne Global London
Sector Data centre Initial investment £45 million
Currency GBP Total capex funded to date £17 million
Date invested April 2022 Total investment to date £62 million
Ownership 100% Closing value (30 June 2023) £69 million
SDG9 alignment Connectivity Valuation Movement (from 31 December 2022) % 8.3%
Revenue (YTD) £6.7 million EBITDA (YTD) £1.6 million
Verne Global London wholly owns and operates a hyper-connected data centre in
Farringdon, central London, providing up to 6 MW of colocation services. The
London facility is a fully accredited hub for connectivity and content
distribution to networks across the UK and worldwide and is in an ideal
location for latency-sensitive workloads.
Since acquisition, the data centre has been integrated into the Verne Global
platform. We remain focused on expanding the facility towards its full
capacity of 6 MW, with development expected to be completed in the first half
of 2024.
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.
2023 (YTD) 2022 (YTD) 2022 2021
Revenue £6.7 million £3.7 million £9.0 million £6.9 million
% growth 83% - 30% 25%
EBITDA £1.6 million £(1.4) million £(0.7) million £0.9 million
% growth n/a - (182)% 128%
% margin 24% (38)% (8)% 13%
SeaEdge UK1
Sector Data centre Initial investment £16 million
Currency GBP Total capex funded to date Nil
Date invested December 2021 Total investment to date £16 million
Ownership 100% Closing value (30 June 2023) £18 million
SDG9 alignment Connectivity & Decarbonisation Valuation Movement (from 31 December 2022) % 1.5%
Revenue (YTD) £0.5 million EBITDA (YTD) £4.7 million
D9 owns the underlying real estate of the SeaEdge UK1 (also known as Stellium
DC1) data centre asset and subsea fibre landing station, located on the UK's
largest purpose-built data centre campus in Newcastle. It is the UK's only
landing station for the North Sea Connect subsea cable, which improves
connectivity in northern England and forms part of the North Atlantic Loop
subsea network, which includes D9's Aqua Comms' AEC-1 and AEC-2 cables.
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
over 23 years remaining. Stellium continues to meet its payment obligations
under the lease, delivering on the Company's target yield at acquisition.
2023 (YTD) 2022 (YTD) 2022 2021
Revenue £0.5 million £0.5 million £1.3 million £0.8 million
% growth - - 61% -
EBITDA £0.5 million £0.5 million £1.0 million £0.8 million
% growth 7% - 21% -
Elio Networks
Sector Wireless Initial investment £51 million
Currency EUR Total capex funded to date £0 million
Date invested April 2022 Total investment to date £51 million
Ownership 100% Closing value (30 June 2023) £58 million
SDG9 alignment Connectivity Valuation Movement (from 31 December 2022) % (2.5)%
Revenue (YTD) £4.0 million EBITDA (YTD) £2.3 million
Elio Networks is a leading enterprise broadband provider that owns and
operates the highest capacity licensed Fixed Wireless Access ("FWA") network
in Greater Dublin, connecting c.1,600 enterprise customers with high-quality
wireless access across c.50 base stations.
Elio Networks continued its growth in high-quality wireless connectivity
operations in 2023, with unique customer connections of c.2,800 in June 2023.
The Company has a diverse client base including larger multinationals,
government bodies, global technology companies, small professional service
firms, retail and hospitality companies. Elio Networks was launched to address
the growing requirement for affordable high-speed broadband in the greater
Dublin area. Since then, they have grown to become the largest wireless
Internet Service Provider ("ISP") in the greater Dublin region. This was
D9's first investment into wireless infrastructure and is in line with the
Company's focus on supporting the SDG9, by providing lower cost and lower
latency connectivity to Irish businesses.
As part of its 5-year business plan, Elio Networks has identified a growth
capital expenditure pipeline of c.€8 million (c.£7 million) for the period
to 2027, including €1.3 million (£1.1 million) in 2023. At 31 December
2022, the Group had not funded any growth capital expenditure in Elio Networks
since its acquisition for £51 million in April 2022.
In line with its strategic growth plans, Elio Networks completed a re-branding
exercise and launched under its new name in February 2023. Furthermore, the
network launched in Cork city in early 2023, reaffirming its position as a
leading connectivity player.
D9 believe Elio Networks continues to provide an attractive entry point to
Ireland's extensive FWA network and represents a growth platform for further
geographical expansion throughout Ireland and internationally.
2023 (YTD) 2022 (YTD) 2022 2021
Revenue £4.0 million £3.8 million £7.7 million £7.3 million
% growth 6% - 6% 7%
EBITDA £2.2 million £2.0 million £4.7 million £4.9 million
% growth 11% - (4)% 26%
% margin 47% 49% 61% 67%
Arqiva
Sector Wireless Initial investment £300 million
Currency GBP Total capex funded to date £0 million
Date invested October 2022 Total investment to date £300 million
Ownership 48.02% Closing value (30 June 2023) £345 million
SDG9 alignment Connectivity Valuation Movement (from 31 December 2022) % (3.0)%
Revenue (YTD) £179.2 million EBITDA (YTD) £91.2 million
Arqiva is the sole provider of national terrestrial TV and radio broadcasting
infrastructure in the UK. It serves as a key strategic asset for the nation,
owning c.1,450 broadcast transmission sites and reaching 98.5% of UK
households. The breadth of its broadcasting network aligns Arqiva well with
D9's goal to improve connectivity for consumers. Arqiva also operates a
state-of-the-art smart metering platform, which covers c.12 million premises
and delivers c.50 million data points every day.
Arqiva is a large, robust business with c.1,300 employees and predictable
earnings underpinned by long-term, inflation-linked contracts, strong market
positions, diverse revenue streams and long-life assets. Arqiva has a healthy
balance sheet consisting of long-term senior and junior debt, which is
supported by interest rate swaps and inflation-linked swaps to hedge and
manage its exposure to interest rates.
Arqiva's revenue is supported by long-term contracts with blue-chip customers
including the BBC, ITV, Channel 4, Sky, Discovery, the DCC and Thames Water.
Revenue contracts benefit from inflation protection, with an estimated 65-70%
of forecast recurring revenue for the financial year ending 30 June 2023
linked to the Consumer Price Index (CPI) or the Retail Price Index (RPI).
Arqiva's operational cash flow will generally benefit from an inflationary
environment. However, inflation-linked swaps (in place until April 2027)
offset the positive inflationary effect on operational cash flow. Therefore,
while Arqiva will benefit from an inflationary environment in the longer term,
the overall effect in the short-to-medium term is negative.
Vendor loan note interest accrual
D9's 2022 acquisition of a 48.02% equity stake in Arqiva consisted of £300
million paid in cash and a £163 million non-recourse vendor loan note issued
by the vendor. The VLN is due to mature in 2029 and has the following stepped
interest rate profile:
· 6% per annum up to and including 30 June 2025;
· 7% per annum from 1 July 2025 up to 30 June 2026;
· 8% per annum from 1 July 2026 up to 30 June 2027; and
· 9% per annum from 1 July 2027 to maturity.
Interest on the VLN is due annually in arrears on 30 June, and D9 has the
choice either to settle each payment in cash or to accrue it. For the period
ending 30 June 2023, the Company elected to accrue the interest, increasing
the VLN's outstanding balance from £163m to £170m.
Accrued interest must be repaid in full before distributions can be made to
the Group. After the fourth anniversary of the VLN, the Group can only receive
distributions if the entirety of the VLN principal and any rolled up interest
has been repaid in full. The Company expects Arqiva's future cashflows to
cover D9's VLN interest payments. The Investment Manager expects that the VLN
will be refinanced prior to its fourth anniversary in October 2026, as was
anticipated at acquisition.
Details of the inflation collar on the Arqiva inflation-linked swaps and
senior debt refinancing can be found above.
2023 (YTD) 2022 (YTD) 2022 2021
Revenue £179.2 million £162.1 million £328.1 million £327.8 million
% growth 11% - 0% (3)%
EBITDA £91.3 million £87.9 million £177.0 million £174.5 million
% growth 4% - 1% (6)%
% margin 51% 54% 54% 53%
Giggle Broadband
Sector Terrestrial Initial investment £0 million
Currency GBP Total capex funded to date £4.3 million
Date invested July 2022 Total investment to date £4.3 million
Ownership 100% Closing value (30 June 2023) £0.0 million
SDG9 alignment Connectivity
An update on the Giggle fibre sale process can be found above.
Ben Beaton
Fund Manager
Triple Point Investment Management LLP
27 September 2023
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 COMMENT
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 has paid or declared dividends of 1.5 pence per share in respect The Board has elected not to pay a 1.5 pence per share in respect of Q2 2023
the period. from the portfolio. of the six months to 30 June 2023 (30 June 2022: 3 pence per share, or 6 pence and the Board will start a formal consultation with its shareholders, starting
per share on an annualised basis). on 2 October 2023, to determine the optimal future dividend policy. Further
details can be found in the Chair's Statement.
2. Total return (%) 7 (#_edn7)
The change in NAV in the period and dividends paid per share in the period. The total return highlights the underlying performance of the portfolio's 6.4% annualised since IPO ((11.2)% annualised for the six-month period to 30 A medium-term total return target of 10% per annum was set out at IPO.
investment valuations, including dividends paid. June 2023; 10.7% for the six-month period to 30 June 2022).
3. Total shareholder return (%) 8 (#_edn8)
The change in share price and dividends paid per share. The total return highlights the share price movements, including re-investment (26.1)% for the six-month period to 30 June 2023. The decrease was driven primarily by the fall in the share price from 86.4
of dividends. pence per share on 31 December 2022 to 61.2 pence per share on 30 June 2023.
4. (Loss) / Earnings per Share (pence)
The post-tax earnings attributable to shareholders divided by weighted average The EPS reflects the Company's ability to generate earnings from investments (6.63) pence per share for the six-month period to 30 June 2023 (see Note 14) The main driver for the loss per share during the period was the fair value
number of shares in issue over the period. including valuation increases. (3.43 pence per share for the six-month period to 30 June 2022). movement of the Company's investment in D9 HoldCo. The drivers to this
reduction in value are explained in the Investment Manager's Report.
5. NAV per share
NAV divided by number of shares outstanding as at the period end. The NAV per share reflects the Company's ability to grow the portfolio and to 100.13 pence per This is a decrease of 8.8% compared to December 22 and 4.3% compared to June
add value to it throughout the life cycle of its assets.
2022. due to the fair value movement of the Company's investment inD9 HoldCo.
share (31 December 2022: 109.76, 30 June 2022: 105.13) (see Note 15). The drivers to this reduction in value are explained in the Investment
Manager's Report.
6. Operating cash dividend cover 9 (#_edn9)
Operational cashflow divided by dividends paid to shareholders during the The operating cashflow dividend cover reflects the Company's ability to cover Operational cashflow dividend cover for the period to 30 June 2023 was 0.0x. The Board and Investment Manager expect operating cash flow dividend cover to
year. its dividends from the operational cash flow generated by its Investee Operating cash dividend cover is measured as total dividends paid and payable be substantially achieved by 31 December 2024.
Companies, after deducting Investee Companies' maintenance capex and interest at 30 June 2023, as a percentage of total operating cashflows for the Investee
costs. Companies.
For more detail on dividend cover please see the Chair's Statement.
7. Ongoing charges ratio 10 (#_edn10)
Annualised ongoing charges are the Company's management fee and all other Ongoing charges show the drag on performance caused by the operational 1.2% annualised for the six-month period to 30 June 2023 (30 June 2022: A key measure of operational performance.
operating expenses (i.e. excluding acquisition costs and other non-recurring expenses incurred by the Company. 1.09%).
items) expressed as a percentage of the average published undiluted NAV in the
period, calculated in accordance with Association of Investment Companies
guidelines. As the Group has acquired more investments, the Group structure has become
more complex. As a result, audit costs and professional fees have increased.
8. Points of presence (POPs)
A Point of Presence is a discrete geographic location within the Investee Points of presence represent a physical demonstration of the fibre networks 58 at 31 December 2022 11 (#_edn11) . POPs, with kilometres of fibre and growth in network capacity provide a
Company network, containing Investee 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.
allows for connection into the wider network. time.
These KPIs are intended to be tracked over time and their growth demonstrates
an increase in connectivity as a result of the Company's investments. The
number of Points of Presence grew
significantly during the reporting year due to the acquisition of Elio
Networks, a fixed wireless provider with a large network.
9. Kilometres of fibre
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 at 31 December 2022 13 (#_edn13) . Kilometres of fibre, with POPs and growth in network capacity provide a
by portfolio companies 12 (#_edn12) . 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
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 13% at 31 December 2022 14 (#_edn14) . 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 demonstrates an increase in
connectivity as a result of the Company's investments.
11. Power Usage Effectiveness (PUE)
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 1.33 as at 31 December 2022 15 (#_edn15) . 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.
PRINCIPAL RISKS AND UNCERTAINTIES
The table below sets out what the Board believes to be the principal risks and
uncertainties facing the Group. The table does not cover all of the risks that
the Group may face. The Board defines the Group's risk appetite, enabling the
Group to judge the level of risk it is prepared to take in achieving its
overall objectives. Additional risks and uncertainties not presently known to
management or deemed to be less material at the date of this report may also
have an adverse effect on the Group.
Risk Impact Risk Mitigation Impact Likelihood Change-in-Period
1. LIQUIDITY RISK - INABILITY TO RAISE CAPITAL FOR FUTURE INVESTMENTS AND/OR The current portfolio requires ongoing investment in capital expenditure in As set out in the 2022 Annual Report, and subsequent announcements, the Board Moderate-to-High High Stable
INSUFFICIENT CASH GENERATION TO MEET DIVIDEND EXPECTATIONS order to generate future cashflow. and Investment Manager reviewed the sources of funding available for its
working capital requirements and dividends. Two initiatives were undertaken to
support this, being the Verne debt raise and the Syndication. Please refer to
the Chair's Statement.
Without sufficient and ongoing access to capital, the Investment Manager will
be unable to execute the Company's investment strategy.
Debt is in place at both the Company and in the Investee
This would significantly impair the Company's ability to pay dividends to Companies in Verne and Arqiva to support portfolio and cashflow obligations.
shareholders at the targeted rate. Further information on the debt facilities can be found in the Investment
Manager's Report.
2. PERSISTENT, NEGATIVE MARKET SENTIMENT LEADING TO INCREASED ACTIVISM There are a number of drivers behind the market sentiment to include: wider The Board is in regular contact with its shareholders to canvass feedback and, Moderate-to-High High Increase
macroeconomic and market conditions, investment manager personnel changes, as where possible, address these within the Company's forward-looking strategy.
well as the Group's leverage position. This had led to the share price trading The Board will start a formal consultation with shareholders to determine the
at discount to the Company's NAV. optimal future dividend policy and discuss the future direction of the Company
on 2 October 2023.
Details of all initiatives and updates during and post-period end can be found
in the Chair's Statement and Investment Manager's Report.
3. INFORMATION SECURITY BREACH Digital and physical security is crucial for the successful delivery of All Investee Companies have a core suite of controls for the mitigation of Moderate-to-High Moderate-to-High New
services by each of our Investee Companies. A breach of security can lead to a information security risks and where possible companies are working to comply
significant disruption in trading activities and/or exposure to wider with ISO 27001. Cyber security is a regular feature in Risk and Audit
fraudulent activities. Committee monitoring/discussions.
The Investee Companies are subject to a new assurance activity in this regard,
which will support future assessment of this risk and ensure minimum standards
are maintained.
4. RELIANCE ON KEY INVESTEE COMPANY LEADERSHIP Loss of Investee Company key personnel would impact the individual company Where appropriate the following mitigating actions have been completed: Moderate Moderate New
performances, impacting market perception and ultimately NAV.
- strategic changes and enhancements to the leadership teams across each of
the Investee Companies,
- management succession plans are in place, and
- long term incentive plans in place to ensure retention.
5. RELIANCE ON INVESTMENT MANAGER AND DEPENDENCE ON KEY PERSONNEL The Company relies on the Investment Manager's services, its knowledge, The Board will regularly review and monitor the Investment Manager's Moderate Moderate Decrease
expertise, and reputation in the Digital Infrastructure market. performance. In addition, the Board meets regularly with the Investment
Manager to ensure that a positive working relationship is maintained.
The loss of key personnel in the Investment Team could impact the performance
of the Investee Company therefore adversely impacting the NAV of the Company. Unless there is a default, either party may terminate the Investment
Management Agreement by giving not less than 12 months' written notice, with
such notice not to expire before the fourth anniversary of the date of
admission.
Triple Point, as the Investment Manager has appointed a new Head of Digital
Infrastructure that will provide additional expertise, knowledge and bandwidth
to the leadership team. Within the broader team the Investment Manager ensures
that there are retention and succession plans in place for all key
individuals, with incentive schemes and market compensation packages for key
personnel.
6. INTERRUPTIONS OR POOR-QUALITY SERVICES TO CUSTOMERS AS A RESULT OF FAILURE OF D9's Investee Companies rely on infrastructure and technology to provide their The Digital Infrastructure Investments in which the Group invests use proven Moderate-to-High Low-to-Moderate Stable
INFRASTRUCTURE, EQUIPMENT AND/OR THIRD-PARTY NETWORKS customers with a highly reliable service. There may be a failure to deliver technologies, typically backed by manufacturer warranties, when installing
this level of service because of numerous factors. Failure to deliver may applicable machinery and equipment.
breach performance conditions in contracts with customers and therefore affect
revenue streams, which in turn could impact the performance of D9 and
therefore adversely impact the NAV.
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.
7. FAILURE TO COMPLY WITH UK AND INTERNATIONAL REGULATIONS Failure of Investee Companies to comply with their regulatory obligations Experts are engaged to ensure compliance with all relevant regulations. Moderate-to-High Low-to-Moderate- Stable
and/or maintain a relevant permit or licence may result in sanctions from the
applicable regulator including fines and/or the revocation of its
authorisation to provide services. This could result in the relevant
infrastructure ceasing to be operable and possibly subject to decommissioning Thorough due diligence is carried out prior to completing on investments to
requirements which may in turn, have a material adverse effect on the assess the regulatory environment and how compliance is maintained.
performance of the Company, the NAV, the Company's earnings and returns to
Shareholders.
After completion, the Investment Manager and Investee Companies maintain a
frequent and ongoing dialogue on the subject to ensure compliance and
preparedness for any change. This includes a number of compliance KPIs which
form part of regular portfolio monitoring meetings.
8. AN INVESTEE COMPANY COUNTERPARTY MAY BECOME INSOLVENT, BE UNABLE TO MAKE Issues may arise with Investee Companies' counterparties that could affect Prior to investing in a Digital Infrastructure Investment, the Investment Moderate-to-High Low-to-Moderate Increase
CONTRACTUAL PAYMENTS OR TERMINATE A CONTRACT EARLY their ability to make contractual payments or result in the early termination Manager will undertake due diligence to assess the material contracts in
of such projects due to counterparty insolvency. place, including termination provisions and whether any such contracts are
close to termination. Where possible, the Investment Manager will seek to
This could result in a material effect on the Group's revenue stream, build in suitable mechanisms to protect the Group's income stream, including
resulting in a material adverse effect on the performance of the Company, the the diversification of its investments.
NAV, the Company's earnings and returns to Shareholders.
Further, the number of counterparties in respect of a particular Digital
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.
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 D9's purpose-driven investment strategy and thorough ESG due
diligence process, the Investment Manager will continue to actively seek
acquisitions that deliver on sustainability targets and are aligned with D9's
ambition to decarbonise Digital Infrastructure.
Increasing power prices / Supply chain disruption
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. The Investment Manager is constantly
monitoring the situation and, where possible, ensuring 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. The Investment Manager constantly
monitors the emerging technology trends with digital infrastructure to ensure
Investee Companies evolve their business models where required and new
investment opportunities are accurately assessed.
Other information
Going Concern
The Directors have concluded that it is appropriate for the condensed
financial statements to be prepared on a going concern basis. Full details are
set out in Note 2 of the attached financial statements.
DIRECTORS' RESPONSIBILITY STATEMENT
The Directors confirm that to the best of their knowledge this condensed set
of financial statements has been prepared in accordance with IAS 34 as adopted
by the European Union and that the operating and financial review includes a
fair review of the information required by DTR 4.2.7 and DTR 4.2.8 of the
Disclosure Guidance and Transparency Rules of the United Kingdom's Financial
Conduct Authority, namely:
· an indication of important events that have occurred during the
period and their impact on the condensed financial statements and a
description of the principal risks and uncertainties for the remaining six
months of the financial year; and
· material related party transactions in the period as disclosed in
Note 11.
A list of the Directors is shown below.
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
27 September 2023
UNAUDITED INTERIM FINANCIAL STATEMENTS
For the six months ended 30 June 2023
CONDENSED STATEMENT OF COMPREHENSIVE INCOME
For the six-month period ended 30 June 2023
Half-year 2023 (unaudited) Half-year 2022 (unaudited)
Revenue Capital Total Revenue Capital Total
Note £'000 £'000 £'000 £'000 £'000 £'000
Income
Income from investments held at fair value 27,972 - 27,972 1,404 - 1,404
(Losses)/gains on investments held at fair value 7 - (81,520) (81,520) - 30,007 30,007
Interest income 1,211 - 1,211 - - -
Other income 433 - 433 - - -
Total income 29,616 (81,520) (51,904) 1,404 30,007 31,411
Expenses
Investment management fees 5 (3,365) (1,121) (4,486) (2,514) (838) (3,352)
Other operating expenses (977) - (977) (682) - (682)
Total operating expenses (4,342) (1,121) (5,463) (3,196) (838) (4,034)
Operating profit/(loss) 25,274 (82,641) (57,367) (1,792) 29,169 27,377
Finance expense - - - (1) - (1)
Profit/(loss) on ordinary activities before taxation 25,274 (82,641) (57,367) (1,793) 29,169 27,376
Taxation 6 - - - - - -
Profit/(loss) and total comprehensive income/(expense) attributable to 25,274 (82,641) (57,367) (1,793) 29,169 27,376
shareholders
Earnings/(loss) per ordinary share - basic and diluted (pence) 14 2.92p (9.55p) (6.63p) (0.22p) 3.65p 3.43p
The total column of this statement is the Condensed Statement of Comprehensive
Income of Digital 9 Infrastructure Plc ("the Company") prepared in accordance
with International Accounting Standard 34 'Interim Financial Reporting', as
adopted by the European Union ("EU"). The supplementary revenue return and
capital columns have been prepared in accordance with the Association of
Investment Companies Statement of Recommended Practice (AIC SORP).
All revenue and capital items in the above statement derive from continuing
operations. The Company does not have any other income or expenses that are
not included in the net profit for the year. The net profit for the year
disclosed above represents the Company's total comprehensive income.
This Condensed Statement of Comprehensive Income includes all recognised gains
and losses.
The accompanying notes form part of these Condensed Interim Financial
Statements.
CONDENSED STATEMENT OF FINANCIAL POSITION
As at 30 June 2023
Note 30 June 2023 (unaudited) 31 December 2022
(audited)
£'000 £'000
Non-current assets
Investments at fair value through profit or loss 7 839,451 920,971
Total non-current assets 839,451 920,971
Current assets
Trade and other receivables 801 1,417
Cash and cash equivalents 29,489 30,001
Total current assets 30,290 31,418
Total assets 869,741 952,389
Current liabilities
Trade and other payables (3,443) (2,769)
Total current liabilities (3,443) (2,769)
Total net assets 866,298 949,620
Equity attributable to equity holders
Stated capital 8 793,287 819,242
Capital reserve 51,253 133,894
Revenue reserve 21,758 (3,516)
Total Equity 866,298 949,620
Net asset value per ordinary share - basic and diluted 15 100.13p 109.76p
The Condensed Interim Financial Statements were approved and authorised for
issue by the Board on 27 September 2023 and signed on its behalf by:
Philip Jordan
Chair
27 September 2023
The accompanying Notes are an integral part of these Condensed Interim
Financial Statements.
CONDENSED STATEMENT OF CHANGES IN EQUITY
For the six-month period ended 30 June 2023
Stated capital £'000 Capital reserve Revenue reserve £'000 Total equity £'000
£'000
Balance as at 1 January 2022 717,547 38,600 (291) 755,856
Transactions with owners
Ordinary shares issued 95,201 - - 95,201
Share issue costs (1,865) - - (1,865)
Dividends paid (24,318) - - (24,318)
Profit /(loss) and total comprehensive income/(expense) for the period - 29,169 (1,793) 27,376
Balance as at 30 June 2022 786,565 67,769 (2,084) 852,250
Note Stated capital £'000 Capital reserve Revenue reserve £'000 Total equity £'000
£'000
Balance as at 31 December 2022 819,242 133,894 (3,516) 949,620
Transactions with owners
Ordinary shares issued - - - -
Share issue costs - - - -
Dividends paid 9 (25,955) - - (25,955)
Profit /(loss) and total comprehensive income/(expense) for the period - (82,641) 25,274 (57,367)
Balance as at 30 June 2023 793,287 51,253 21,758 866,298
The accompanying Notes are an integral part of these Condensed Interim
Financial Statements.
CONDENSED STATEMENT OF CASH FLOWS
For the six-month period ended 30 June 2023
Note Half-year 2023 Half-year 2022
£'000 £'000
Cash flows from operating activities
(Loss)/profit on ordinary activities before taxation (57,367) 27,376
Adjustments for:
Losses/(gains) on investments held at fair value 7 81,520 (30,007)
Cash flow used in operations 24,153 (2,631)
Decrease in trade and other receivables 616 152
Increase in trade and other payables 674 441
Net cash outflow from operating activities 25,443 (2,038)
Cash flows from investing activities
Purchase of investments at fair value through profit or loss 7 - (48,409)
Net cash flow used in investing activities - (48,409)
Cash flows from financing activities
Proceeds from issue of Ordinary Shares 8 - 95,201
Dividends paid 9 (25,955) (24,318)
Cost of issue of shares - (1,879)
Net cash flow generated from financing activities (25,955) 69,004
Net (decrease)/increase in cash and cash equivalents (512) 18,557
Reconciliation of net cash flow to movements in cash and cash equivalents
Cash and cash equivalents at the beginning of the half-year 30,001 11,311
Net (decrease)/increase in cash and cash equivalents (512) 18,557
Cash and cash equivalents at end of the half-year 29,489 29,868
The accompanying Notes are an integral part of these Condensed
Interim Financial Statements.
Notes to the Interim Financial Statements
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 was incorporated on 8 January 2021 and is a Public Company. The
Company's Ordinary Shares were admitted to trading on the Specialist Fund
Segment of the Main Market of the London Stock Exchange under the ticker DGI9
on 31 March 2021.
The Company's principal activity 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. BASIS OF PREPARATION OF HALF-YEAR REPORT
The condensed interim financial statements for the half-year reporting period
ended 30 June 2023 have 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 year ended 31 December 2022
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 or,
together with its subsidiaries (the "Group"), 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 need 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 timeframe is
critical. An investment entity should not hold its investments indefinitely
but should have an exit strategy for their realisation. The intention of the
Company is to seek equity interests in digital infrastructure projects that
have an indefinite life; the underlying assets that it invests in will have a
medium to long term expected life. The exit strategy for each asset will
depend on the characteristics of the assets, transaction structure, exit price
potentially achievable, suitability and availability of alternative
investments, balance of the portfolio and lot size of the assets as compared
to the value of the portfolio. Whilst the Company 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 its investments on a fair value basis which is the most
relevant for investors in the Company. Management use fair value information
as a primary measurement to evaluate the performance of all the investments
and in decision making.
In assessing whether it meets the definition, the Company shall also consider
whether it has the following typical characteristics of an investment entity:
a) it has more than one investment
b) it has more than one investor
c) it has investors that are not related parties of the entity
d) it has ownership interests in the form of equity or similar interests.
As per IFRS 10 a parent investment entity is required to consolidate
subsidiaries that are not themselves investment entities and whose main
purpose is to provide services relating to the entity's investment activities.
The Directors have assessed whether D9 Holdco satisfies those conditions set
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 investments made during the period and changes in the group structure have
not impacted the management's judgement and conclusion over the IFRS 10
investment entity application and the Company has applied the same accounting
policies described.
The Directors are therefore of the opinion that the Company meets the criteria
and characteristics of an investment entity and therefore, subsidiaries are
measured at fair value through profit or loss, in accordance with IFRS 13
"Fair Value Measurement", IFRS 10 "Consolidated Financial Statements" and IFRS
9 "Financial Instruments".
(b) Going concern
Going concern period and basis
The Company's going concern assessment covers the period to 30 September 2024
("the going concern period"). The period chosen considers at least 12 months
from the date of signing of this report, but also gives consideration to the
re-financing of the Group's revolving credit facility ("RCF") which is due in
March 2025. The going concern assessment uses the forecast that incorporates
historical performance and the Group's future strategy. The assessment also
considers a severe but plausible downside case.
The Group utilises its RCF for committed capital expenditure financing and
aims to maximise cash flow from Investee Companies and strategic initiatives
to support its projects. Financial resources are carefully managed to meet
project commitments and Group working capital requirements.
As a result of these considerations, at the time of approving the interim
financial statements, the Directors consider that the Company and the Group
will have sufficient resources to continue to meet their liabilities for the
foreseeable future. However, given that a degree of uncertainty exists in the
timing of ongoing strategic initiatives which includes the previously
announced syndication of the Verne Global Group, and management's ability to
refinance the Group's £375 million Revolving Credit Facility due in the next
eighteen months (March 2025), there exists a material uncertainty in relation
to the going concern basis adopted in the preparation of the interim financial
statements.
Material uncertainty related to going concern
Whilst the Directors and the Investment Manager remain confident that the
scenario laid out in the Company's Going Concern assessment will be
successfully achieved, this scenario includes the completion of the
Syndication of the Verne Global Group. The timing and value of the transaction
remains outside of management's control and consequently a material
uncertainty exists which may cast significant doubt over the Company's ability
to continue as a going concern.
The Syndication has received considerable investor interest and the Investment
Manager is targeting terms of the Syndication to be announced shortly. The
Board remains focused on an outcome that will best enhance value for
shareholders.
Despite the uncertainty regarding assumptions made in respect of the timing of
ongoing strategic initiatives, the Directors acknowledge the progress made on
these transactions, and therefore maintain confidence in reaching a successful
resolution. As a result, they have chosen to base the preparation of these
interim financial statements on the assumption that the company will continue
to operate as a going concern.
The interim financial statements do not contain the adjustments that would
result if the Company were unable to continue as a going concern.
(c) New and amended standards adopted by the Company
A number of amended standards became applicable for the current reporting
period. The group did not have to change its accounting policies or make
retrospective adjustments as a result of adopting these amended standards.
Management do not expect the new or amended standards will have a material
impact on the Company's interim financial statements. The most significant of
these standards are set out below:
(a) IFRS 17 Insurance Contracts
(b) Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS
Practice Statement 2
(c) Definition of Accounting Estimates - Amendments to IAS 8
(d) Deferred Tax related to Assets and Liabilities arising from a Single
Transaction - Amendments to IAS 12.
FORTHCOMING REQUIREMENTS
The following standards and interpretations had been issued but were not
mandatory for annual reporting periods ending on 31 December 2023.
(a) International Tax Reform - Pillar Two Model Rules - Amendments to IAS
12
(b) Supplier Finance Arrangements - Amendments to IAS 7 and IFRS 7
(c) Lack of Exchangeability - Amendments to IAS 21.
3. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS
In the application of the Company's accounting policies, the Directors are
required to make judgements, estimates and assumptions that affect the
reported amounts of assets, liabilities, income and expenses. It is possible
that actual results may differ from these estimates.
(a) Significant accounting judgements
(i) Investment entity
As discussed above in Note 2(a), the Company meets the definition of an
investment entity as defined in IFRS 10 and therefore its subsidiary entities
have not been consolidated in these financial statements.
(b) Key sources of estimation uncertainty
The estimates and underlying assumptions underpinning our investments are
reviewed on an ongoing basis by both the Board and the Investment Manager.
Revisions to any accounting estimates are recognised in the period in which
the estimate is revised if the revision affects only that period, or in the
period of the revision and future periods if the revision affects both current
and future periods.
(i) Fair value measurement of investments at fair value through profit
or loss
The fair value of investments in Digital Infrastructure Projects is calculated
by discounting at an appropriate discount rate the future cash flows expected
to be generated by the trading subsidiary companies and received by D9 Holdco,
through dividend income, equity redemptions and Shareholder loan repayments or
restructurings and adjusted in accordance with the IPEV (International Private
Equity and Venture Capital) valuation guidelines where appropriate to comply
with IFRS 13 and IFRS 9.
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.
The discounted cash flow from revenue is forecasted over an 8-15 year period
followed by a terminal value based on a long-term growth rate or exit
multiples. The discounted cash flow comprises a bottom-up analysis of the
weighted average cost of capital over time, using unobservable inputs, and
calculation of the appropriate beta based on comparable listed companies.
A broad range of assumptions are used in the Company's valuation models, which
are arrived at by reviewing and challenging the business plans of the Investee
Companies with their management. The Investment Manager exercises its
judgement and uses its experience in assessing the expected future cash flows
from each investment and long-term growth rates. The impact of changes in the
key drivers of the valuation are set out below.
The following significant unobservable inputs were used in the model:
Inflation
A long-term inflation sensitivity of plus and minus 1% is presented in Note 7.
Interest rates
The valuations are sensitive to changes in interest rates; a sensitivity of 1%
has been applied to interest rates applicable to the floating rate debt across
the Company's portfolio.
Discount rates
The Investment Manager considers a variance of plus or minus 1% to be a
reasonable range of alternative assumptions for discount rates.
The Company has also carried out sensitivity analysis of these unobservable
inputs, the results of which 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 2023.
5. INVESTMENT MANAGEMENT FEES
Half-year 2023 (unaudited) Half-year 2022 (unaudited)
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Management fees 3,365 1,121 4,486 2,514 838 3,352
Total management fees 3,365 1,121 4,486 2,514 838 3,352
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 25% (2022 - 19%).
The financial statements do not directly include the tax charges for the
Company's intermediate holding company, as D9 Holdco is held at fair value. D9
Holdco is subject to taxation in the United Kingdom.
The tax charge for the period is less than the standard rate of corporation
tax in the UK of 25% (2022 - 19%). The differences are explained below.
Half-year 2023 Half-year 2022
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Net (loss)/profit before tax 25,274 (82,641) (57,367) (1,793) 29,169 27,376
Tax at UK corporation tax standard rate of 25% (2022 -19%) 6,319 (20,660) (14,341) (341) 5,542 5,201
Effects of:
Gain/Loss on financial assets not taxable - 20,380 20,380 - (5,701) (5,701)
Exempt UK dividend income (6,993) - (6,993) (267) - (267)
Excess of allowable expenses 674 280 954 608 159 767
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 £16 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 £4 million (30 June 2022 - £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 2022:
Opening balance 1 January 2022 746,229
Investments in D9 Holdco(1) additions 48,409
Debt investments in D9 Holdco additions 29,105
Change in fair value of investments 97,228
As at 31 December 2022 920,971
Analysis of financial assets:
Equity investments in D9 Holdco 891,866
Debt investments in D9 Holdco 29,105
As at 31 December 2022 920,971
At 30 June 2023:
Opening balance 1 January 2023 920,971
Investments in D9 Holdco additions -
Debt investments in D9 Holdco additions -
Change in fair value of investments (81,520)
As at 30 June 2023 839,451
Analysis of financial assets:
Equity investments in D9 Holdco 810,346
Debt investments in D9 Holdco 29,105
As at 30 June 2023 839,451
(1) D9 Holdco was incorporated as a 100% subsidiary undertaking and the amount
reflects the Company's investments through D9 Holdco
7. FINANCIAL ASSET AT FAIR VALUE THROUGH PROFIT OR LOSS
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 2023 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
following economic assumptions were used in the valuation of the SPVs.
The main level 3 inputs used by the group are derived and evaluated as
follows:
· The Investment Manager uses its judgement in arriving at the
appropriate discount rate using a capital asset pricing model to calculate a
pre-tax rate that reflects current market assessment. This is based on its
knowledge of the market, considering intelligence gained from its bidding
activities, discussions with financial advisers in the appropriate market and
publicly available information on relevant transactions. The bottom-up
analysis of the discount rate and the appropriate beta is based on comparable
listed companies. Investments are valued using a discounted cash flow
approach, on a Free Cash Flow to Equity ("FCFE") basis. Where Investee
Companies do not have leverage, for the FCFE model, the Investment Manager has
used its knowledge of the market; combined with the ability of the Investee
Companies' cash flows to support leverage on their balance sheets to apply an
appropriate level of debt over the period. A cost of equity has been used as
the discount rate. The portfolio weighted average cost of equity for
investments valued under the FCFE discounted cash flows approach is 11.8%. The
cost of equity could decline further in the future as the portfolio companies
benefit from lower operational risk as they execute on their growth plans.
· To calculate portfolio NAV, 98% of total NAV from investment
companies is valued using the FCFE discounted cash flows approach with the
remaining 2% of investments being valued at cost whilst they were under
construction.
· Expected cash inflows are estimated based on terms of the
contracts and the Company's knowledge of the business and how the current
economic environment is likely to impact it taking into consideration growth
rate factors.
· Foreign exchange rates of GBP against USD, EUR and ISK
7. FINANCIAL ASSET AT FAIR VALUE THROUGH PROFIT OR LOSS
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 2023 and 31
December 2022:
Total Quoted prices in active markets (Level 1) Significant observable inputs Significant unobservable inputs
(Level 2) (Level 3)
Assets measured at fair value: Date of valuation £'000 £'000 £'000 £'000
Equity investment in D9 Holdco 30 June 2023 810,346 - - 810,346
Debt investment in D9 Holdco 30 June 2023 29,105 - - 29,105
Equity investment in D9 Holdco 31 December 2022 891,866 - - 891,866
Debt investment in D9 Holdco 31 December 2022 29,105 - - 29,105
There have been no transfers between Level 1 and Level 2 during the period,
nor have there been any transfers between Level 2 and Level 3 during the year.
The Company's investments are reported as Level 3 in accordance with IFRS 13
where external inputs are "unobservable" and value is the Directors' best
estimate, based upon advice from relevant knowledgeable experts.
7. FINANCIAL ASSET AT FAIR VALUE THROUGH PROFIT OR LOSS
Fair value measurements using significant unobservable inputs (level 3)
As set out within the significant accounting estimates and judgements in note
3(b), the valuation of the Company's financial asset is an estimation
uncertainty. The sensitivity analysis was performed based on the current
capital structure and expected performance of the Company's investment in D9
Holdco. For each of the sensitivities, it is assumed that potential changes
occur independently of each other with no effect on any other base case
assumption, and that the number of investments in the SPVs remains static
throughout the modelled life. The following table summarises the quantitative
information about the significant unobservable inputs used in level 3 fair
value measurement and the changes to the fair value of the financial asset if
these inputs change upwards or downwards by 1%:
Unobservable inputs Valuation if rate increases by 1% Movement in valuation Valuation if rate decreases by 1% Movement in valuation
£'000 £'000 £'000 £'000
Discount rate 719,997 (119,454) 982,921 143,470
Inflation 865,188 25,737 801,184 (38,267)
Interest rates 805,735 (33,716) 873,029 33,578
8. STATED CAPITAL
Ordinary shares of no par value 31 December 2022
Allotted, issued and fully paid: No of shares Price £'000
As at 1 January 2022 722,480,620 n/a 717,547
Allotted during the period
28 January 2022 88,148,880 108.0p 95,201
8 July 2022 54,545,454 110.0p 60,000
Ordinary Shares at 31 December 2022 865,174,954 n/a 872,748
Dividends paid (Note 9) (50,274)
Share issue costs (3,232)
Stated capital at 31 December 2022 819,242
30 June 2023
Allotted, issued and fully paid: No of shares Price £'000
As at 1 January 2023 865,174,954 n/a 819,242
Ordinary Shares at 30 June 2023 865,174,954 n/a 819,242
Dividends paid (Note 9) (25,955)
Stated capital at 30 June 2023 793,287
Shareholders are entitled to all dividends paid by the Company and, on a
winding up, provided the Company has satisfied all its liabilities, the
shareholders are entitled to all of the residual assets of the Company.
9. DIVIDENDS
Dividend per share Six months ended 30 June 2023 Year ended
31 December
2022
£'000 £'000
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
Dividend period 1 April 2022 to 30 June 2022 1.5 pence - 12,978
Dividend period 1 July 2022 to 30 September 2022 1.5 pence - 12,978
Dividends period 1 October 2022 to 31 December 2022 1.5 pence 12,977 -
Dividend period 1 January 2023 to 31 March 2023 1.5 pence 12,978 -
Total dividends paid 25,955 50,274
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 UK 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 UK 100% Intermediate holding company 1 King William Street, London EC4N 7AF
Digital 9 Fibre Limited UK 100% Intermediate holding company 1 King William Street, London EC4N 7AF
Digital 9 Wireless Limited UK 100% Intermediate holding company 1 King William Street, London EC4N 7AF
Digital 9 Subsea Holdco Limited UK 100% Intermediate holding company 1 King William Street, London EC4N 7AF
Digital 9 Subsea Limited(1) UK 100% Subsea fibre optic network 1 King William Street, London EC4N 7AF
Digital 9 Seaedge Limited(2) UK 100% Leaseholding company 1 King William Street, London EC4N 7AF
D9 DC Opco 1 Limited(2) UK 100% Intermediate holding company 1 King William Street, London EC4N 7AF
D9 DC Opco 2 Limited(2) UK 100% Intermediate holding company 1 King William Street, London EC4N 7AF
D9 DC Opco CAN 1 Limited(14) Canada 100% Dormant 44 Chipman Hill Suite 1000 Saint John NB E2L 2A9 Canada
D9 DC Opco 3 Limited(2) UK 100% Intermediate holding company 1 King William Street, London EC4N 7AF
D9 Wireless Opco 1 Limited(3) UK 100% Intermediate holding company 1 King William Street, London EC4N 7AF
D9 Wireless Midco 1 Limited(3) UK 100% Intermediate holding company 1 King William Street, London EC4N 7AF
D9 Wireless Opco 2 Limited(4) UK 100% Intermediate holding company 1 King William Street, London EC4N 7AF
D9 Wireless Opco 3 Limited(3) UK 100% Dormant 1 King William Street, London EC4N 7AF
D9 Fibre Opco 1 Limited(13) UK 100% Dormant 1 King William Street, London EC4N 7AF
D9 Fibre Opco 2 Limited(13) UK 100% Intermediate holding company 1 King William Street, London EC4N 7AF
Giggle Fibre Limited(16) UK 100% Intermediate holding company 1 King William Street, London EC4N 7AF
Giggle Broadband Limited(15) Scotland 100% Fibre broadband services Floor 2, Framework Building, 124 St Vincent Street, Glasgow Scotland G2 5HF
Aqua Comms Designated Activity Company(1) Ireland 100% Holding company The Exchange Building, 4 Foster Place, Dublin 2
Aqua Comms Connect Limited(5) Ireland 100% Intermediate holding company The Exchange Building, 4 Foster Place, Dublin 2
America Europe Connect 2 Limited(5) Ireland 100% Subsea fibre optic network The Exchange Building, 4 Foster Place, Dublin 2
America Europe Connect 2 Denmark ApS(5) Denmark 100% Subsea fibre optic network c/o Bech-Bruun Langeline Alle 35, Copenhagen
North Sea Connect Denmark ApS(5) Denmark 100% Subsea fibre optic network c/o Bech-Bruun Langeline Alle 35, Copenhagen
Aqua Comms Management (UK) Limited(5) UK 100% Management company 85 Great Portland Street, London W1W 7LT
Aqua Comms Denmark ApS(5) Denmark 100% Subsea fibre optic network c/o Bech-Bruun Langeline Alle 35, Copenhagen
Aqua Comms (Ireland) Limited(5) Ireland 100% Subsea fibre optic network The Exchange Building, 4 Foster Place, Dublin 2
America Europe Connect Limited(5) Ireland 100% Subsea fibre optic network The Exchange Building, 4 Foster Place, Dublin 2
Celtix Connect Limited(5) Ireland 100% Subsea fibre optic network The Exchange Building, 4 Foster Place, Dublin 2
Aqua Comms Management Limited(5) Ireland 100% Management company The Exchange Building, 4 Foster Place, Dublin 2
Sea Fibre Networks Limited(5) Ireland 100% Subsea fibre optic network The Exchange Building, 4 Foster Place, Dublin 2
Aqua Comms (IOM) Limited(5) Isle of Man 100% Subsea fibre optic network c/o PCS Limited, Ground Floor, Murdoch Chambers, South Quay, Douglas, IOM IM1
5AS
Aqua Comms (UK) Limited(5) UK 100% Subsea fibre optic network 85 Great Portland Street, London W1W 7LT
Aqua Comms Services Limited(5) Ireland 100% Subsea fibre optic network The Exchange Building, 4 Foster Place, Dublin 2
America Europe Connect (UK) Limited(5) UK 100% Subsea fibre optic network 85 Great Portland Street, London W1W 7LT
America Europe Connect 2 USA Inc(5) USA 49% Subsea fibre optic network 251 Little Falls Drive, Wilmington, Delaware, 19808 USA
Aqua Comms (Americas) Inc(5) USA 49% Subsea fibre optic network 3500 South Dupont Highway, Dover, Delaware 19901 Kent, United States
Verne Holdings Limited(2) UK 100% Holding company 1 King William Street, London EC4N 7AF
Verne Global GmbH(17) Germany 100% Data centre solutions Äußere Sulzbacher Straße 118, 90491 Nürnberg
Verne Global hf.(6) Iceland 100% Data centre operation Valhallarbraut 868, 262 Reykjanesbaer, Iceland
Verne Global Ltd(17) UK 100% Data centre solutions 1 King William Street, London EC4N 7AF
Verne Global Inc.(17) USA 100% Data centre solutions 1825 Washington Street, Canton MA 02021 USA
GAData Holdings Limited(7) Jersey 100% Holding company 28 Esplanade, St Helier, Jersey JE3 3QA
Volta Data Centres Limited(8) UK 100% Data centre operator 36-43 Great Sutton Street London EC1V 0AB
GSS Propco Limited(8) Jersey 100% Property investment 28 Esplanade, St Helier, Jersey JE3 3QA
Leeson Telecom Limited(9) Ireland 100% Enterprise broadband 6-9 Trinity St, Dublin, D02 EY47, Ireland
Leeson Telecom One Limited(9) Ireland 100% Enterprise broadband 6-9 Trinity St, Dublin, D02 EY47, Ireland
Leeson Telecom Holdings Limited(10) Ireland 100% Enterprise broadband 6-9 Trinity St, Dublin, D02 EY47, Ireland
W R Computer Network Limited(10) Ireland 100% Enterprise broadband 6-9 Trinity St, Dublin, D02 EY47, Ireland
Ficolo Oy(11) Finland 100% Data centre operator Konepajanranta 4, 28100 Pori, Finland
Arqiva Group Limited(12) UK 48.02% Holding Company Crawley Court, Winchester, Hampshire SO21 2QA
1 - Held by Digital 9 Subsea Holdco 10 - Held by Leeson Telecom Limited
2 - Held by Digital 9 DC Limited 11 - Held by D9 DC Opco 3 Limited
3 - Held by Digital 9 Wireless Limited 12 - Held by D9 Wireless Opco 2 Limited
4 - Held by D9 Wireless Midco 1 Limited 13 - Held by Digital 9 Fibre Limited
5 - Held by Aqua Comms Designed Activity Company and its intermediate holding 14 - Held by D9 Opco 2 Limited
companies
6 - Held by Verne Holdings Limited 15 - Held by Giggle Fibre Limited
7 - Held by D9 DC Opco 1 Limited 16 - Held by D9 Fibre Opco 2 Limited
8 - Held by GAData Holdings Limited 17 - Held by Verne Global hf
9 - Held by D9 Wireless Opco 1 Limited
11. TRANSACTIONS WITH THE INVESTMENT MANAGER AND RELATED PARTY DISCLOSURE
Directors
Directors are remunerated for their services at such rate as the directors
shall from time to time determine. The Directors are each paid an annual fee
of £40,000 other than the Chair of the Audit Committee and Chair of the Risk
Committee who is entitled to an additional £5,000 and the Chair of the
Company who is entitled to receive an annual fee of £75,000.
Director Number of Ordinary shares held *Dividends paid *Dividends paid
30 June 2023 31 December 2022
Jack Waters (resigned 23 May 2022) 70,000 - £1,050
Philip Jordan (from 23 May 2022) 94,611 £2,838 £1,518
Aaron Le Cornu (from 1 April 2022) 62,031 £1,343 £2,437
Lisa Harrington 38,604 £1,158 £2,316
Keith Mansfield 128,135 £3,218 £3,934
Monique O'Keefe (resigned 23 May 2022) 10,000 - £150
Charlotte Valeur 10,000 £300 £600
* - Dividends disclosed for the period from the date of appointment and up to
the date of resignation.
Investment Manager
The Company considers Triple Point as the Investment Manager as a key
management personnel and therefore a related party. Further details of the
investment management contract and transactions with the Investment Manager
are disclosed in Note 5.
12. EVENTS AFTER THE REPORTING PERIOD
After the period end, D9 Holdco made a repayment of £7.0 million against the
RCF from the partial repayment of the shareholder loan from Verne Global
Iceland following entering into the debt facility and withdrew a total of
£14.5 million for capital expenditure purposes.
13. CONTINGENT LIABILITIES
There were no contingent liabilities at 30 June 2023.
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 2023:
Revenue Capital Total
Calculation of Basic Earnings per share
Net profit attributable to ordinary shareholders (£'000) 25,274 (82,641) (57,367)
Weighted average number of ordinary shares 865,174,954 865,174,954 865,174,954
Earnings per share - basic and diluted 2.92p (9.55p) (6.63p)
There is no difference between basic or diluted Loss per Ordinary Share as
there are no convertible securities.
There is no difference between the weighted average Ordinary or diluted number
of Shares.
Calculation of Weighted Average Number of Shares in Issue
1 January 2023 30 June 2023
No of days 181 181
Ordinary Shares
No. of shares
Opening Balance 865,174,954 865,174,954
New Issues - -
Closing Balance 865,174,954 865,174,954
Weighted Average 865,174,954 865,174,954
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
1 January 2022 28 January 2022 30 June 2022
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
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 June 2023 31 December 2022
Net assets at end of period (£'000) £866,298 £949,620
Shares in issue at end of period 865,174,954 865,174,954
IFRS NAV per share - basic and dilutive 100.13p 109.76p
UNAUDITED ALTERNATIVE PERFORMANCE MEASURES
1. ONGOING CHARGES RATIO
Ongoing Charges Ratio is a figure published annually by an investment company
which shows the drag on performance caused by operational expenses.
Period to 30 June 2023 Annualised to 31 December 2023 Annualised to 31 December 2022
£'000 £'000 £'000
Management fee 4,486 8,972 7,736
Other operating expenses 976 1,952 1,645
Total management fee and other operating expenses 5,462 (a) 10,924 9,381
Average undiluted net assets* (b) 907,959 852,738
Ongoing charges ratio % (c = a/b)(%) (c) 1.20% 1.10%
* - Average undiluted net assets has been calculated as the average of net
asset value at 1 January 2023 of £950 million and net asset value as at 30
June 2023 of £866 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 2023.
2. TOTAL RETURN
Total NAV return is a way to measure the performance of an investment company.
A fund's NAV return is the percentage change between its net asset value at
the beginning and end of a particular period plus dividends paid.
30 June 2023 31 December 2022
Closing NAV per share (pence) 100.13p 109.76p
Add back dividends paid (pence) 12.00p 9.00p
Adjusted closing NAV (pence) 112.13p 118.76p
Adjusted NAV per share as at the period end less NAV per share at 31 Dec 2022 (112.13p - 118.76p) (a) (118.76p - 107.62p)
NAV per share at 31 Dec 2022 118.76p (b) 107.62p
Total return % (c = a/b)(%) (5.58)% (c) 10.40%
The above is for the six-month period to 30 June 2023, this equates to
annualised total return of (11.16)%.
3. MARKET CAPITALISATION
Market capitalisation refers to the market value of a company's equity. It is
a simple but important measure that is calculated by multiplying a company's
shares outstanding by its price per share.
30 June 2023 31 December 2022
Closing share price at period end (a) 61.20p 86.4p
Number of shares in issue at period end (b) 865,174,954 865,174,954
Market capitalisation (c) = (a) x (b) (c) £529,487,072 £747,511,160
4 . CAPITAL DEPLOYED
This is a measure of amounts invested into the portfolio of investments less
any amounts relating to refinance proceeds or sell-downs.
30 June 2023 31 December 2022
Deployed Committed fund £'000 £'000
Aqua Comms DAC £176,077 £13,487 £189,564 £189,564
EMIC-1 £26,186 £21,188 £47,374 £47,374
Verne Holdings Limited £256,595 - £256,595 £292,441
SeaEdge UK1 £16,355 - £16,355 £16,355
Leeson Telecom £50,807 - £50,807 £50,807
Volta Data Centres £61,531 £4,000 £65,531 £61,418
Ficolo Oy £118,927 - £118,927 £118,927
Arqiva £469,830 - £469,830* £462,998*
Giggle £4,340 - £4,340** £3,000
Total deployment £1,180,648 £38,675 £1,219,323 £1,242,884
* - Includes £169 million Vendor Loan Notes issued by D9 Wireless Opco 2
Limited
** - Giggle fair value was written down to £Nil during the period
5. TOTAL SHAREHOLDER RETURN
A measure of the return based upon share price movements over the period and
assuming reinvestment of dividends. This APM, allows shareholders to establish
their return by using share price as a metric rather than NAV.
30 June 2023 31 December 2022
Closing share price (pence) 61.20 86.40
Add back effect of dividend reinvestment (pence) 2.64 5.14
Adjusted closing share price (pence) (a) 63.84 91.54
Opening share price (pence) (b) 86.40 113.80
Total shareholder return (c = (a-b)/b) (%) (c) (26.11)% (19.56)%
The above return is for the period to 30 June 2023 (31 December 2022 - year to
31 December 2022).
OTHER INFORMATION
Glossary and Definitions
"Aqua Comms" Aqua Comms Designation Activity Company, a private company limited by shares
incorporated and registered in Ireland;
"AIFM" the alternative investment fund manager of the Company being Triple Point
Investment Management LLP;
"Board" the directors of the Company from time to time;
"D9" or "Company" Digital 9 Infrastructure plc, incorporated and registered in Jersey (company
number 133380);
"Digital Infrastructure" key services and technologies that enable methods, systems and processes for
the provision of reliable and resilient data storage and transfer;
"DTR" the Disclosure Guidance and Transparency Rules sourcebook containing the
Disclosure Guidance, Transparency Rules, corporate governance rules and the
rules relating to primary information providers;
"EBITDA" Earnings before interest, taxes, depreciation and amortisation;
"EPS" Earnings per share;
"ESG" Environmental, Social and Governance;
"FAANGs" global content providers such as Meta, Amazon, Apple, Netflix, Google;
"GAV" the gross assets of the Company in accordance with applicable accounting rules
from time to time;
"Group" the Company and any other companies in the Company's Group for the purposes of
Section 606 of the Corporation Tax Act 2010 from time to time but excluding
Investee Companies;
"Internet of Things" or "IoT" the network of physical objects (things) that are embedded with technologies
such as sensors or software for the purpose of connecting and exchanging data
with other devices and systems via the internet;
"Investee Company" a company or special purpose vehicle which owns and/or operates Digital
Infrastructure assets or projects in which the Group invests or acquires;
"Investment Manager" Triple Point Investment Management LLP (partnership number OC321250);
"Investment Objective" the Company's investment objective as set out in the Prospectus dated 8 March
2021;
"Investment Policy" the Company's investment policy approved by shareholders on 14 February 2022
in a general meeting, as set out in the notice of the general meeting dated 26
January 2022;
"IPO" the Company's initial public offering launched on 8 March 2021 which resulted
in the admission of, in aggregate, 300 million Ordinary Shares to trading on
the Specialist Fund Segment of the Main Market on 31 March 2021;
"NAV" Net Asset Value being, the net assets of the Company in accordance with
applicable accounting rules from time to time;
"Ongoing Charges Ratio" a measure of all operating costs incurred in the reporting period, calculated
as a percentage of average net assets in that year. Operating costs exclude
costs of buying and selling investments, interest costs, taxation,
non-recurring costs and the costs of buying back or issuing ordinary shares;
"Ordinary Shares" ordinary shares of no-par value in the capital of the Company;
"SDG9" the UN's Sustainable Development Goal 9; and
"Total Shareholder Return" the increase in share price in the period and dividends paid per share in the
period.
(#_ednref1)
1 Alternative Performance Measure.
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.
4 A competitive process for the sale of Giggle is ongoing, however, due to
its short cash runway, a provision has been applied against the full value of
the Company.
5 A portion of the inflation protection from Arqiva is subject to swaps.
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 whose payments are financed by the inflation-linked
customer contracts that run beyond 2027.
6 The Company is now presenting EBITDA excluding Infrastructure as a Service
("IaaS") revenue at the data centre level for Verne Global, which passes
through the profit & loss statement as a cost after EBITDA. This is a more
prudent measure when looking at the Investee Companies' financial performance.
The Company previously reported EBITDA on a reported EBITDA basis, including
IaaS revenue. The comparable figure for 2022 would be £225 million, and £216
million for 2021.
7 The Company reports on these metrics on an annual basis at the year-end.
8 Alternative Performance Measure, see Alternative Performance Measures for
more information.
9 Alternative Performance Measure, see Alternative Performance Measures for
more information.
10 Alternative Performance Measure, see Alternative Performance Measures for
more information.
11 The Company reports on these metrics on an annual basis at the year-end.
12 Total kilometres of fibre owned or part-owned 32,000 km (14,250 km
operational; 17,750 km in development (including EMIC-1)).
13 The Company reports on these metrics on an annual basis at the year-end.
14 The Company reports on these metrics on an annual basis at the year-end.
15 The Company reports on these metrics on an annual basis at the year-end.
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. END IR LRMBTMTMTTBJRecent news on Digital 9 Infrastructure
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