REG - Digital 9 Infrastr. - Unaudited Net Asset Value

Digital 9 InfrastructureAnnouncement

05/02/2025 07:00

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RNS Number : 9211V  Digital 9 Infrastructure PLC  05 February 2025

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION AS STIPULATED UNDER
THE UK'S MARKET ABUSE REGULATION. UPON THE PUBLICATION OF THIS ANNOUNCEMENT,
SUCH INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.

 

5 February 2025

DIGITAL 9 INFRASTRUCTURE PLC

 

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

 

 Unaudited Net Asset Value

 

In preparation for the Company's annual results, the Board of Directors of the
Company (the "Board") today announces an unaudited net asset value ("NAV") as
at 31 December 2024 ("FY24").

 

The valuation process for FY24 has included a thorough bottom-up review of
each of the underlying portfolio companies and their valuations. This process
was conducted by InfraRed Capital Partners ("InfraRed"), overseen by the
Board, and further supported by an independent review from a newly appointed
leading accountancy firm.

 

A description of key movements in the Company's portfolio valuation is set out
below. Further detail will be provided on the underlying assumptions and
methodology of the valuation process upon publication of the Company's audited
annual results in March 2025.

 

NAV

 

The Board announces an estimated unaudited portfolio NAV for FY24 of
approximately £302 million, a £101 million reduction since the last reported
NAV of £403 million as at 30 June 2024. The NAV per share as at FY24 is
expected to be approximately 35 pence, a decline of approximately 11.6 pence
per share from the Company's last announced NAV as at 30 June 2024.

The reduction in NAV principally reflects:

·    Adjustments to reflect the agreed sale prices of Aqua Comms and
EMIC-1 in line with prior announcements, net of approximately £6 million of
transaction fees based on contractual terms entered into at the start of the
sale process;

·    Changes in key assumptions for Arqiva Group ("Arqiva"), Elio
Networks, SeaEdge and the Verne Global earn-out, including: macroeconomic;
discount rate; capital structure; terminal value; and revenue forecasts that
reflect the view of the Board and Investment Manager; and

·    £8 million of interest costs incurred in FY24 related to the
Revolving Credit Facility ("RCF") and the Arqiva Group Vendor Loan Note
("VLN").

The key drivers of the movement in NAV per share over the six-month period are
summarised in the table below:

                                                             Net Asset Value (pence per share)  Negative Movements
 NAV per share at 30 June 2024                               46.6p
 Adjustment for agreed asset sales net of transaction costs                                     (3.3)p
 Portfolio performance and underlying assumption revisions                                      (7.3)p
 RCF Interest and VLN costs                                                                     (1.0)p
 Estimated unaudited NAV per share at 31 December 2024       Approximately 35p

The Board continues to determine that it is in the shareholders' best
interests to publish an aggregate NAV to protect the Company's commercial
position during live sale processes of portfolio companies. The Company
intends to provide further granularity in its audited full year results in
March 2025.

 

Portfolio performance and underlying portfolio company assumptions

 

The valuation process led to a revision of certain assumptions in relation to
Arqiva, Elio Networks, SeaEdge and the Verne Global earn-out. The key factors
driving the above-mentioned 7.3p impact are summarised below:

 

·     Arqiva - InfraRed undertook a detailed assessment of the valuation
assumptions for each of Arqiva's key value drivers. The valuation was revised
to reflect a balanced position on a range of key assumptions. These include:
macroeconomic; discount rate; terminal value; capital structure; the long-term
economic outlook of the broadcast sector based on Ofcom's published scenarios;
and smart metering forecasts following recent water utility bid successes.
This latest valuation assessment confirmed the intrinsic value of the
Company's stake in Arqiva, which is underpinned by a diversified and evolving
business model with a strategically located tower network adding to
traditional broadcast revenue streams;

 

·     Elio Networks - Adjustments made related to the adoption of revised
business plan assumptions reflecting Elio Networks' management's latest views
and current market conditions for fixed wireless access connectivity
businesses;

 

·    Verne Global earn-out - The Company is currently considering all
options for the optimum risk-adjusted route to monetise the earn-out,
including continuing to hold and the potential for negotiation of an early
settlement. Adjustments have been made to the valuation to reflect the
contractual mechanism, which references the performance target on which the
earn-out is calculated to specific areas in the original sell-side business
plan, and current market dynamics; and

 

·       SeaEdge - Adjustments made to the valuation to reflect changes
in market conditions and the underlying credit profile of the tenant and the
lessee.

 

The valuation process is yet to be completed, which may result in further
changes. Further information on the valuation process will be provided in the
annual report.

Asset divestments

 

On 31 December 2024, the Board announced the divestment of EMIC-1 for $42
million (£33 million), net of transaction costs, with a completion expected
by March 2025. The net consideration represents a 15% discount (approximately
0.7p per share) to the valuation of $49.6 million (£41 million) as at 30
June 2024, or a 10% discount (approximately 0.4p per share) before transaction
costs.

 

After the period end, on 17 January 2025, the Board announced the divestment
of Aqua Comms for $48 million (£40 million), net of transaction costs. This
represents a 36% discount (equating to c. 2.6p per share) to the Aqua Comms
valuation incorporated in the NAV as at 30 June 2024, or a 28% discount
(approximately 2.1p per share) before transaction costs. The sale is subject
to multi-jurisdictional regulatory approvals, which are expected to take
approximately 12 months.

 

Taking into account the combined subsea business (which includes Aqua Comms
and EMIC-1), the sale consideration represented a discount to the Company's
combined valuation of these two investments as at 30 June 2024, of 28% (c.
3.3p per share) post-transaction costs, or 21% (c.2.6p per share) before
transaction costs.

 

The Company is continuing to assess options in relation to the remaining
portfolio companies to maximise value for shareholders, in light of the
orderly managed wind-down objective.

 

Capital allocation

 

The net proceeds of the EMIC-1 and Aqua Comms transactions will be used to
further de-lever the Company's balance sheet and repay the £53 million
balance of the RCF outstanding as at 5 February 2025. Given the contractual
maturity date of the RCF is 17 March 2025, the Company is in advanced
discussions with the lender group to extend the RCF to facilitate anticipated
timing of net proceeds from the announced divestments. The Company expects to
provide a full update when the new facility has been agreed. Following the
repayment of the drawn balance of the RCF, allowing for any working capital
requirements, the Board intends to use net proceeds to prioritise returns of
capital to shareholders over the Group's longer-term obligations.

 

Annual Report and Accounts

 

The Annual Report and Accounts for FY24 will be published in March 2025 and
the audit by PricewaterhouseCoopers LLP is currently underway.

 

ENDS.

 

Contacts

 Digital 9 Infrastructure plc                                                                                       via FTI Consulting

 Eric Sanderson

 InfraRed Capital Partners Limited                                                                        +44 (0) 207 484 1751

 James O'Halloran

 Mohammed Zaheer
 Panmure Liberum Limited (Financial Adviser to the Company)                                               +44 (0) 203 100 2222

 Chris Clarke

 Darren Vickers
 J.P. Morgan Cazenove (Corporate Broker)                                                                  +44 (0) 20 7742 4000

 William Simmonds

 Jérémie Birnbaum
 FTI Consulting (Communications Adviser)                                                                  dgi9@fticonsulting.com (mailto:dgi9@fticonsulting.com)

 Mitch Barltrop                                                                                           +44 (0) 7807 296 032

 Maxime Lopes                                                                                             +44 (0) 7890 896 777

 

LEI Code: 213800OQLX64UNS38U92

 

The person responsible for arranging the release of this announcement on
behalf of the Company is Helen Richardson, Company Secretary.

 

About Digital 9 Infrastructure plc

 

Digital 9 Infrastructure plc (DGI9) is an investment trust listed on the
London Stock Exchange and a constituent of the FTSE All-Share, with the ticker
DGI9. The Company's investment objective is to undertake a Managed wind-down
of the Company and realise all existing assets in the Company's portfolio in
an orderly manner. For more information, please visit www.d9infrastructure.com
(http://www.d9infrastructure.com) .

 

About InfraRed Capital Partners (Investment Manager to D9)

 

The Investment Manager to D9 is InfraRed Capital Partners Limited ("InfraRed")
which has successfully invested in infrastructure projects since 1997.
InfraRed is a leading international investment manager, operating worldwide
from offices in London, New York, Seoul, Madrid and Sydney and managing equity
capital in multiple private and listed funds, primarily for institutional
investors across the globe. InfraRed is authorised and regulated by the
Financial Conduct Authority.

 

The infrastructure investment team at InfraRed consists of over 100 investment
professionals, all with an infrastructure investment background and a broad
range of relevant skills, including private equity, structured finance,
construction, renewable energy and facilities management.

 

InfraRed implements best-in-class practices to underpin asset management and
investment decisions, promotes ethical behaviour and has established community
engagement initiatives to support good causes in the wider community. InfraRed
is a signatory of the Principles of Responsible Investment.

 

Further details can be found on InfraRed's website www.ircp.com
(http://www.ircp.com/) .

 

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