TIDMDGI9
RNS Number : 9140N
Digital 9 Infrastructure PLC
28 September 2023
THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT MAY
CONSTITUTE 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.
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 30 June 2022
2022
------------------------------ ------------- ------------ -------------
As at:
IFRS Net Asset Value ("NAV") GBP866m GBP950m
IFRS Investment Valuation GBP839m GBP921m
NAV per share 100.13p 109.76p
Capital Deployed[1] GBP1,219m GBP1,243m
For the period:
Portfolio company EBITDA
growth
(year-to-date) 5% 1%
(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
GBP493 million reported in January 2023 has increased to GBP610
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 GBP866 million,
equal to a NAV per share of 100.13 pence (31 December 2022: GBP950
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 GBP839 million as at 30 June 2023
(31 December 2022: GBP921 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.GBP345 million of new
debt to repay the c.GBP262 million existing debt which was
approaching maturity whilst also providing Arqiva with an
additional c.GBP83 million for general corporate purposes. This
GBP83 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 GBP7.0
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
GBP14.5 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 .
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
(Investment Manager)
Diego Massidda
Ben Beaton +44 (0)20 7201 8989
J.P. Morgan Cazenove (Joint Corporate
Broker)
William Simmonds
Jérémie Birnbaum +44 (0)20 7742 4000
Peel Hunt (Joint Corporate Broker)
Luke Simpson
Huw Jeremy +44 (0)20 7418 8900
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 GBP905 million and a revolving credit
facility of GBP375 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 GBP7.0 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 GBP14.5 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 (GBP80 million) green term-loan debt facility
with an uncommitted $50 million (GBP40 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
GBP493 million reported in January 2023 has increased to GBP610
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,
GBP356 million was drawn under the Group's GBP375 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
GBP58.5m. 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.GBP40m 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 GBP'000
EBITDA 105,932
(-) Cash tax (246)
(-) <DELTA> 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 GBP866 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 GBP57 million (2022: profit of
GBP27 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 GBP222.6 million and
EBITDA of GBP105.9 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 GBP375 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.GBP80
million) green term-loan debt facility, with a $50 million (c.GBP40
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.GBP40m 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 GBP345
million of new debt, the proceeds of which were used to repay
GBP262 million of existing debt which was approaching maturity,
whilst providing Arqiva Group with an additional GBP83 million for
general corporate purposes. This followed GBP45 million of senior
debt amortisations over the previous 12 months, as well as the net
GBP175 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, fibr e, 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.GBP 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 GBP4.3 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.GBP150
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 GBP866 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 GBP 866 million at the
period end (GBP950 million at 31 December 2022, GBP852 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 GBP12.7 million, reflecting a
continued commitment to growth opportunities. Conversely, Investee
Company distributions totalled GBP40.4 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 GBP1.18 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
GBP1,210m as at 31 December 2022 to the combined valuation of GBP1,
153m as at 30 June 2023 (excluding IFRS movements related to the
wider Company, these are reconciled to the IFRS Valuation
below).
Following GBP12.8m of investment in the period, including EMIC-1
(GBP3.6m), Verne Global London (GBP7.9m) and Giggle Fibre
(GBP1.3m), and distributions of GBP40.8m including Verne Global
Iceland (GBP39.3m), SeaEdge (GBP0.6m) and Elio Networks (GBP0.9m),
the rebased valuation of the portfolio totalled GBP1, 187m as at 30
June 2023.
A discount rate movement of GBP 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 GBP33m.
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 GBP78.3
million, of which GBP47.0 million relates to unrestricted cash
available for use. At the Reporting date, the Company had GBP29.5
million of available cash.
At period-end, the RCF was GBP 356.2 million drawn, with a
further GBP 18.8 million available to draw. At the time of writing,
the Group had GBP12.5 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 GBP47.0
million and an undrawn RCF balance of GBP18.8m, providing GBP65.8
million in potential liquidity. In aggregate, excluding Investee
Companies and including undrawn RCF, D9 had gross debt of GBP544.8
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 GBP74.1 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 GBP'm Leverage
2023) 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 December 2022
2023
========================================== ============== ==============
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 GBP375 million
bespoke RCF in place with an international syndicate of four banks.
As at the beginning of the year, the Company had drawn GBP 331.2
million. During the first 6 months of the year the Company drew a
further GBP25 million and GBP7.5 million in the post-balance sheet
period bringing total drawn amounts to GBP364 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 GBP463 million acquisition of a
48.02% equity stake in Arqiva with the use of a GBP163 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 GBP163m to GBP170m.
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 GBP1,487
million (including project debt), of which the Company's share is
GBP770 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.GBP80) 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] 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] :
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
2022 (YTD
2023 YTD Comparative) 2022 2021
Revenue GBP222.6 million GBP202.0 million GBP406.1 million GBP398.3 million
------------------- ------------------- ------------------- -------------------
% Growth 10% - 2% 1%
------------------- ------------------- ------------------- -------------------
EBITDA[6] GBP105.9 million GBP101.1 million GBP201.8 million GBP202.9 million
------------------- ------------------- ------------------- -------------------
% Growth 5% - (1)% (3)%
------------------- ------------------- ------------------- -------------------
On a consolidated basis, the Company's Investee Companies
generated GBP222.6 million in revenue and GBP105.9 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 GBP170 million
Currency USD Total capex funded GBP29 million
to date
------------------- ---------------------------- -----------------
Date invested April 2021 Total investment to GBP199 million
date
------------------- ---------------------------- -----------------
Ownership 100% Closing value (30 June GBP227 million
2023)
------------------- ---------------------------- -----------------
Valuation Movement
(from 31 December 2022)
SDG9 alignment Connectivity % (3.3)%
------------------- ---------------------------- -----------------
Revenue (to GBP14.3 million EBITDA (to 30 June GBP4.7million
30 June 2023) 2023)
------------------- ---------------------------- -----------------
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 GBP14.3 million GBP14.0 million GBP27.3 million GBP25.9 million
---------------- ---------------- ---------------- ----------------
% growth 3% - 5% 8%
---------------- ---------------- ---------------- ----------------
EBITDA GBP4.7 million GBP7.3 GBP12.8 million GBP16.1 million
---------------- ---------------- ---------------- ----------------
% growth (36)% - (5)% (1)%
---------------- ---------------- ---------------- ----------------
% margin 41% 52% 46% 62%
---------------- ---------------- ---------------- ----------------
Verne Global Iceland
Sector Data centre Initial investment GBP231 million
Currency USD Total capex funded GBP50 million*
to date
------------------- ---------------------------- -----------------
Date invested September Total investment to GBP281 million
2021 date
------------------- ---------------------------- -----------------
Ownership 100% Closing value (30 June GBP275 million
2023)
------------------- ---------------------------- -----------------
Valuation Movement
(from 31 December 2022)
SDG9 alignment Decarbonisation % (6.4)%*
------------------- ---------------------------- -----------------
Revenue (YTD) GBP11.4 million EBITDA (YTD) GBP4.1 million
------------------- ---------------------------- -----------------
*The Company has contributed a total of GBP50m into Verne Global
Iceland since acquisition by way of Shareholder loans. During the
period Verne Global Iceland repaid GBP39 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 (GBP95 million). Furthermore, its capital
expenditure pipeline for the five years to 31 December 2027
increased from $208 million (GBP172 million) in its 2021 plan to
c.$472 million (GBP391 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.GBP50.0 million) of
capital expenditure in Verne Global since its acquisition for
GBP231 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.GBP80
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 (GBP21 million)
-- Repay $50 million (GBP40 million) of the $62 million (GBP49.5
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 GBP11.4 million GBP11.7 million GBP20.1 million GBP18.5 million
---------------- ---------------- ---------------- ----------------
% growth (2)% - 30% 25%
---------------- ---------------- ---------------- ----------------
EBITDA GBP4.1 million GBP3.4 million GBP7.1 million GBP6.0 million
---------------- ---------------- ---------------- ----------------
% growth 22% - 18% 69%
---------------- ---------------- ---------------- ----------------
% margin 36% 29% 35% 32%
---------------- ---------------- ---------------- ----------------
Verne Global Finland
Sector Data centre Initial investment GBP114 million
Currency EUR Total capex funded GBP5 million
to date
------------------- ---------------------------- ------------------
Date invested July 2022 Total investment to GBP119 million
date
------------------- ---------------------------- ------------------
Ownership 100% Closing value (30 June GBP136 million
2023)
------------------- ---------------------------- ------------------
Valuation Movement
(from 31 December 2022)
SDG9 alignment Decarbonisation % 3.2%
------------------- ---------------------------- ------------------
Revenue (YTD) GBP6.3 million EBITDA (YTD) GBP(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 GBP92 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 GBP6.3 m GBP6.1 m GBP12.6 m GBP11.1 m
----------- ----------- ---------- ----------
% growth 3% - 14% 33%
----------- ----------- ---------- ----------
EBITDA GBP1.5m GBP1.6m GBP3.5 m GBP2.4 m
----------- ----------- ---------- ----------
% growth (1)% - 46% 226%
----------- ----------- ---------- ----------
% margin 24% 25% 28% 22%
----------- ----------- ---------- ----------
Verne Global London
Sector Data centre Initial investment GBP45 million
Currency GBP Total capex funded GBP17 million
to date
------------------ ---------------------------- -----------------
Date invested April 2022 Total investment to GBP62 million
date
------------------ ---------------------------- -----------------
Ownership 100% Closing value (30 June GBP69 million
2023)
------------------ ---------------------------- -----------------
Valuation Movement
(from 31 December 2022)
SDG9 alignment Connectivity % 8.3%
------------------ ---------------------------- -----------------
Revenue (YTD) GBP6.7 million EBITDA (YTD) GBP1.6 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 GBP6.7 million GBP3.7 million GBP9.0 million GBP6.9 million
--------------- ----------------- ----------------- ---------------
% growth 83% - 30% 25%
--------------- ----------------- ----------------- ---------------
EBITDA GBP1.6 million GBP(1.4) million GBP(0.7) million GBP0.9 million
--------------- ----------------- ----------------- ---------------
% growth n/a - (182)% 128%
--------------- ----------------- ----------------- ---------------
% margin 24% (38)% (8)% 13%
--------------- ----------------- ----------------- ---------------
SeaEdge UK1
Sector Data centre Initial investment GBP16 million
Currency GBP Total capex funded Nil
to date
---------------------- ---------------------------- -----------------
Date invested December 2021 Total investment to GBP16 million
date
---------------------- ---------------------------- -----------------
Ownership 100% Closing value (30 June GBP18 million
2023)
---------------------- ---------------------------- -----------------
Valuation Movement
Connectivity (from 31 December 2022)
SDG9 alignment & Decarbonisation % 1.5%
---------------------- ---------------------------- -----------------
Revenue (YTD) GBP0.5 million EBITDA (YTD) GBP4.7 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 GBP0.5 million GBP0.5 million GBP1.3 million GBP0.8 million
--------------- --------------- --------------- ---------------
% growth - - 61% -
--------------- --------------- --------------- ---------------
EBITDA GBP0.5 million GBP0.5 million GBP1.0 million GBP0.8 million
--------------- --------------- --------------- ---------------
% growth 7% - 21% -
--------------- --------------- --------------- ---------------
Elio Networks
Sector Wireless Initial investment GBP51 million
Currency EUR Total capex funded GBP0 million
to date
------------------ ---------------------------- -----------------
Date invested April 2022 Total investment to GBP51 million
date
------------------ ---------------------------- -----------------
Ownership 100% Closing value (30 June GBP58 million
2023)
------------------ ---------------------------- -----------------
Valuation Movement
(from 31 December 2022)
SDG9 alignment Connectivity % (2.5)%
------------------ ---------------------------- -----------------
Revenue (YTD) GBP4.0 million EBITDA (YTD) GBP2.3 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.EUR8 million
(c.GBP7 million) for the period to 2027, including EUR1.3 million
(GBP1.1 million) in 2023. At 31 December 2022, the Group had not
funded any growth capital expenditure in Elio Networks since its
acquisition for GBP51 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 GBP4.0 million GBP3.8 million GBP7.7 million GBP7.3 million
--------------- --------------- --------------- ---------------
% growth 6% - 6% 7%
--------------- --------------- --------------- ---------------
EBITDA GBP2.2 million GBP2.0 million GBP4.7 million GBP4.9 million
--------------- --------------- --------------- ---------------
% growth 11% - (4)% 26%
--------------- --------------- --------------- ---------------
% margin 47% 49% 61% 67%
--------------- --------------- --------------- ---------------
Arqiva
Sector Wireless Initial investment GBP300 million
Currency GBP Total capex funded GBP0 million
to date
-------------------- ---------------------- ------------------
Date invested October 2022 Total investment GBP300 million
to date
-------------------- ---------------------- ------------------
Ownership 48.02% Closing value (30 GBP345 million
June 2023)
-------------------- ---------------------- ------------------
Valuation Movement
(from 31 December
SDG9 alignment Connectivity 2022) % (3.0)%
-------------------- ---------------------- ------------------
Revenue (YTD) GBP179.2 million EBITDA (YTD) GBP91.2 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 GBP300 million paid in cash and a GBP163 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 GBP163m to GBP170m.
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 GBP179.2 million GBP162.1 million GBP328.1 million GBP327.8 million
----------------- ----------------- ----------------- -----------------
% growth 11% - 0% (3)%
----------------- ----------------- ----------------- -----------------
EBITDA GBP91.3 million GBP87.9 million GBP177.0 million GBP174.5 million
----------------- ----------------- ----------------- -----------------
% growth 4% - 1% (6)%
----------------- ----------------- ----------------- -----------------
% margin 51% 54% 54% 53%
----------------- ----------------- ----------------- -----------------
Giggle Broadband
Sector Terrestrial Initial investment GBP0 million
Currency GBP Total capex funded GBP4.3 million
to date
--------------- ------------------------- -----------------
Date invested July 2022 Total investment to GBP4.3 million
date
--------------- ------------------------- -----------------
Ownership 100% Closing value (30 June GBP0.0 million
2023)
--------------- ------------------------- -----------------
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 The dividend reflects the The Company has paid or The Board has elected not
on every ordinary Company's ability to declared dividends of 1.5 to pay a 1.5 pence per
outstanding share in deliver a growing income pence per share in respect share in respect of Q2 2023
relation to the period. stream from the portfolio. of the six months and the Board
to 30 June 2023 (30 June will start a formal
2022: 3 pence per share, or consultation with its
6 pence per share on an shareholders, starting on 2
annualised basis). October 2023, to determine
the optimal future dividend
policy. Further details can
be found in the Chair's
Statement.
---------------------------- ---------------------------- ----------------------------
2. Total return (%) [7]
The change in NAV in the The total return highlights 6.4% annualised since IPO A medium-term total return
period and dividends paid the underlying performance ((11.2)% annualised for the target of 10% per annum was
per share in the period. of the portfolio's six-month period to 30 June set out at IPO.
investment valuations, 2023; 10.7%
including dividends paid. for the six-month period to
30 June 2022).
---------------------------- ---------------------------- ----------------------------
3. Total shareholder return (%) [8]
The change in share price The total return highlights (26.1)% for the six-month The decrease was driven
and dividends paid per the share price movements, period to 30 June 2023. primarily by the fall in
share. including re-investment of the share price from 86.4
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 The EPS reflects the (6.63) pence per share for The main driver for the
attributable to Company's ability to the six-month period to 30 loss per share during the
shareholders divided by generate earnings from June 2023 (see Note 14) period was the fair value
weighted average number of investments including (3.43 pence movement of the
shares valuation per share for the six-month Company's investment in D9
in issue over the period. increases. period to 30 June 2022). 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 The NAV per share reflects 100.13 pence per This is a decrease of 8.8%
shares outstanding as at the Company's ability to share (31 December 2022: compared to December 22 and
the period end. grow the portfolio and to 109.76 , 30 June 2022: 4.3% compared to June 2022.
add value to 105.13) (see Note 15). due to
it throughout the life the fair value movement of
cycle of its assets. the Company's investment in
D9 HoldCo. The drivers to
this reduction
in value are explained in
the Investment Manager's
Report.
---------------------------- ---------------------------- ----------------------------
6. O perating c ash dividend cover [9]
Operational cashflow The operating cashflow Operational cashflow The Board and Investment
divided by dividends paid dividend cover reflects the dividend cover for the Manager expect operating
to shareholders during the Company's ability to cover period to 30 June 2023 was cash flow dividend cover to
year. its dividends 0.0x. Operating cash be substantially
from the operational cash dividend cover is measured achieved by 31 December
flow generated by its as total dividends paid and 2024.
Investee Companies, after payable at 30 June 2023, as
deducting Investee a percentage For more detail on dividend
Companies' maintenance of total operating cover please see the
capex and interest costs. cashflows for the Investee Chair's Statement.
Companies.
---------------------------- ---------------------------- ----------------------------
7. Ongoing charges ratio [10]
Annualised ongoing charges Ongoing charges show the 1.2% annualised for the A key measure of
are the Company's drag on performance caused six-month period to 30 June operational performance.
management fee and all by the operational expenses 2023 (30 June 2022: 1.09%).
other operating expenses incurred by As the Group has acquired
(i.e. excluding acquisition the Company. more investments, the Group
costs and other structure has become more
non-recurring items) complex. As
expressed as a percentage a result, audit costs and
of the average published professional fees have
undiluted NAV in the increased.
period, calculated in
accordance with Association
of Investment Companies
guidelines.
---------------------------- ---------------------------- ----------------------------
8. Points of presence (POPs)
A Point of Presence is a Points of presence 58 at 31 December 2022 [11] POPs, with kilometres of
discrete geographic represent a physical . fibre and growth in network
location within the demonstration of the fibre capacity provide a picture
Investee Company network, networks distribution to of the connectivity
containing Investee Company a wider set of customers. provided by the Company.
owned exchange equipment We seek growth in this
and allows for connection value over time. These KPIs are intended to
into the wider be tracked over time and
network. 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 Kilometres of fibre 32,000 at 31 December 2022 Kilometres of fibre, with
(operational and in represent a physical [13] . POPs and growth in network
development) owned or demonstration of the fibre capacity provide a picture
part-owned by portfolio networks presence. We of the connectivity
companies [12] . seek growth in this value provided by the Company.
over time. 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 Growth in network capacity 13% at 31 December 2022 Growth in network capacity,
capacity across fibre represents the network's [14] . with kilometres of fibre
networks, between two ability to respond to and and POPs provide a picture
points in time. deliver on demand of the connectivity
for more connectivity. We provided by the Company.
seek a positive percentage These KPIs are intended to
growth year on year. 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 PUE is a measure of our 1.33 as at 31 December 2022 PUE is applicable to Data
entering a datacentre energy efficiency and [15] . Centre assets and
divided by the energy used represents the represents an important
by IT equipment inside decarbonisation of our measure in the
the datacentre. investments environmental
either through targeting sustainability of an asset.
assets with the most Efficiency and increases in
advanced energy efficiency efficiency can contribute
practices, or through to a lower
improvements of existing carbon emission and better
systems. The use of natural resource.
decarbonisation measure Industry average is
reflects the Company's commonly reported
success to be 1.3 in cold air
in aligning to SDG9, target temperature locations and
9.4. 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 The current As set out in the 2022 Moderate-to-High High Stable
- INABILITY TO portfolio Annual Report, and
RAISE CAPITAL requires subsequent
FOR FUTURE ongoing announcements, the
INVESTMENTS investment in Board and Investment
AND/OR capital Manager reviewed the
INSUFFICIENT expenditure in sources of funding
CASH order to available for its
GENERATION TO generate working capital
MEET DIVID future requirements and
EXPECTATIONS cashflow. dividends. Two
initiatives were
Without undertaken to support
sufficient and this, being the Verne
ongoing access debt raise and
to capital, the the Syndication. Please
Investment refer to the Chair's
Manager will be Statement.
unable to
execute the Debt is in place at
Company's both the Company and in
investment the Investee
strategy. Companies in Verne and
Arqiva to support
This would portfolio and cashflow
significantly obligations. Further
impair the information
Company's on the debt facilities
ability to pay can be found in the
dividends to Investment Manager's
shareholders at Report.
the targeted
rate.
---------------- ---------------- ------------------------ ----------------- ----------------- -----------------
2. PERSISTENT, There are a The Board is in regular Moderate-to-High High Increase
NEGATIVE MARKET number of contact with its
SENTIMENT drivers behind shareholders to canvass
LEADING TO the market feedback and, where
INCREASED sentiment to possible,
ACTIVISM include: wider address these within
macroeconomic the Company's
and market forward-looking
conditions, strategy. The Board
investment will start a formal
manager consultation with
personnel shareholders to
changes, as determine the optimal
well as the future dividend policy
Group's and discuss
leverage the future direction of
position. This the Company on 2
had led to the October 2023.
share price
trading at Details of all
discount to the initiatives and updates
Company's NAV. during and post-period
end can be found in the
Chair's
Statement and
Investment Manager's
Report.
---------------- ---------------- ------------------------ ----------------- ----------------- -----------------
3. INFORMATION Digital and All Investee Companies Moderate-to-High Moderate-to-High New
SECURITY BREACH physical have a core suite of
security is controls for the
crucial for the mitigation of
successful information security
delivery of risks and where
services by possible companies are
each of working to comply with
our Investee ISO 27001. Cyber
Companies. A security is
breach of a regular feature in
security can Risk and Audit
lead to a Committee
significant monitoring/discussions.
disruption in
trading The Investee Companies
activities are subject to a new
and/or exposure assurance activity in
to wider this regard, which will
fraudulent support future
activities. assessment of this risk
and ensure minimum
standards are
maintained.
---------------- ---------------- ------------------------ ----------------- ----------------- -----------------
4. RELIANCE ON KEY Loss of Where appropriate the Moderate Moderate New
INVESTEE Investee following mitigating
COMPANY Company key actions have been
LEADERSHIP personnel would completed:
impact the - strategic changes and
individual enhancements to the
company leadership teams across
performances, each of the Investee
impacting Companies,
market - management succession
perception and plans are in place, and
ultimately NAV. - long term incentive
plans in place to
ensure retention.
---------------- ---------------- ------------------------ ----------------- ----------------- -----------------
5. RELIANCE ON The Company The Board will Moderate Moderate Decrease
INVESTMENT relies on the regularly review and
MANAGER AND Investment monitor the Investment
DEPENCE ON Manager's Manager's performance.
KEY PERSONNEL services, its In addition,
knowledge, the Board meets
expertise, and regularly with the
reputation Investment Manager to
in the Digital ensure that a positive
Infrastructure working relationship
market. is maintained.
The loss of key Unless there is a
personnel in default, either party
the Investment may terminate the
Team could Investment Management
impact the Agreement
performance of by giving not less than
the Investee 12 months' written
Company notice, with such
therefore notice not to expire
adversely before the
impacting the fourth anniversary of
NAV of the the date of
Company. 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 D9's Investee The Digital Moderate-to-High Low-to-Moderate Stable
OR POOR-QUALITY Companies rely Infrastructure
SERVICES TO on Investments in which
CUSTOMERS AS A infrastructure the Group invests use
RESULT OF and technology proven technologies,
FAILURE OF to provide typically backed by
INFRASTRUCTURE, their customers manufacturer
EQUIPMENT with warranties, when
AND/OR a highly installing applicable
THIRD-PARTY reliable machinery and
NETWORKS service. There equipment.
may be a
failure to Investee Companies hire
deliver this experts with the
level of technical knowledge and
service because seek third party advice
of numerous where
factors. required.
Failure to
deliver may Where appropriate,
breach there are insurances in
performance place to cover issues
conditions in such as accidental
contracts with damage
customers and and power issues.
therefore
affect revenue
streams, which
in turn could
impact the
performance
of D9 and
therefore
adversely
impact the NAV.
---------------- ---------------- ------------------------ ----------------- ----------------- -----------------
7. FAILURE TO Failure of Experts are engaged to Moderate-to-High Low-to-Moderate- Stable
COMPLY WITH UK Investee ensure compliance with
AND Companies to all relevant
INTERNATIONAL comply with regulations.
REGULATIONS their
regulatory Thorough due diligence
obligations is carried out prior to
and/or maintain completing on
a relevant investments to assess
permit or the regulatory
licence may environment and how
result in compliance is
sanctions from maintained.
the applicable
regulator After completion, the
including Investment Manager and
fines and/or Investee Companies
the revocation maintain a frequent and
of its ongoing
authorisation dialogue on the subject
to provide to ensure compliance
services. This and preparedness for
could result in any change. This
the relevant includes
infrastructure a number of compliance
ceasing to be KPIs which form part of
operable and regular portfolio
possibly monitoring meetings.
subject to
decommissioning
requirements
which may in
turn, have a
material
adverse effect
on the
performance of
the Company,
the NAV, the
Company's
earnings and
returns to
Shareholders.
---------------- ---------------- ------------------------ ----------------- ----------------- -----------------
8. AN INVESTEE Issues may Prior to investing in a Moderate-to-High Low-to-Moderate Increase
COMPANY arise with Digital Infrastructure
COUNTERPARTY Investee Investment, the
MAY BECOME Companies' Investment Manager will
INSOLVENT, BE counterparties undertake
UNABLE TO MAKE that could due diligence to assess
CONTRACTUAL affect their the material contracts
PAYMENTS ability to in place, including
OR TERMINATE A make termination provisions
CONTRACT EARLY contractual and whether any such
payments or contracts are close to
result in the termination. Where
early possible, the
termination of Investment Manager
such projects will seek to build in
due to suitable mechanisms to
counterparty protect the Group's
insolvency. income stream,
This could including
result in a the diversification of
material effect its investments.
on the Group's
revenue stream, Further, the number of
resulting in a counterparties in
material respect of a particular
adverse effect Digital Infrastructure
on the Investment
performance of may be significantly
the Company, diversified so as to
the NAV, the reduce the impact of a
Company's counterparty
earnings and terminating
returns an agreement at will or
to deciding not to renew
Shareholders. 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 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income
I ncome 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
shareholders 25,274 (82,641) (57,367) (1,793) 29,169 27,376
------------------------ ----- ------------- -------------- --------- --------------- ------------ --------
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 31 December
(unaudited) 2022
(audited)
GBP'000 GBP'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 Revenue Total
capital reserve reserve equity
GBP'000 GBP'000 GBP'000 GBP'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 Revenue Total
capital reserve reserve equity
GBP'000 GBP'000 GBP'000 GBP'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 Half-year
2023 2022
GBP'000 GBP'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 GBP375 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
--------- --------- --------- --------- --------- ---------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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 GBP2 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 GBP500 million 1.0%
Above GBP500 million up to and including
GBP1 billion 0.9%
Exceeding GBP1 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
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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 GBP16
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 GBP4 million (30 June 2022 - GBP1 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
GBP'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
nancial liabilities is determined on the basis of the lowest level
input that is signi cant to the fair value measurement. Financial
assets and nancial 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 Significant Significant
prices observable unobservable
in active inputs inputs
markets (Level (Level
(Level 2) 3)
1)
Assets measured at fair Date of valuation GBP'000 GBP'000 GBP'000 GBP'000
value:
------------------------- ------------------- -------- ----------- ------------ --------------
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 31 December
D9 Holdco 2022 891,866 - - 891,866
Debt investment in D9 31 December
Holdco 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 Movement Valuation Movement
if rate increases in valuation if rate in valuation
by 1% decreases
by 1%
GBP'000 GBP'000 GBP'000 GBP'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 31 December
value 2022
Allotted, issued and fully No of shares Price GBP'000
paid:
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 No of shares Price GBP'000
paid:
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. DIVIDS
Dividend Six months Year ended
per share ended 30 31 December
June 2023 2022
GBP'000 GBP'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 1.5 pence 12,977 -
31 December 2022
Dividend period 1 January 2023 to 1.5 pence 12,978 -
31 March 2023
------------------------------------ ------------ ------------- -------------
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 % Interest Principal Registered office
of business activity
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 1 King William
holding company Street, London
EC4N 7AF
Digital 9 Fibre Limited UK 100% Intermediate 1 King William
holding company Street, London
EC4N 7AF
Digital 9 Wireless UK 100% Intermediate 1 King William
Limited holding company Street, London
EC4N 7AF
Digital 9 Subsea Holdco UK 100% Intermediate 1 King William
Limited holding company Street, London
EC4N 7AF
Digital 9 Subsea Limited(1) UK 100% Subsea fibre 1 King William
optic network Street, London
EC4N 7AF
Digital 9 Seaedge Limited(2) UK 100% Leaseholding 1 King William
company Street, London
EC4N 7AF
D9 DC Opco 1 Limited(2) UK 100% Intermediate 1 King William
holding company Street, London
EC4N 7AF
D9 DC Opco 2 Limited(2) UK 100% Intermediate 1 King William
holding company 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 1 King William
holding company Street, London
EC4N 7AF
D9 Wireless Opco 1 UK 100% Intermediate 1 King William
Limited(3) holding company Street, London
EC4N 7AF
D9 Wireless Midco 1 UK 100% Intermediate 1 King William
Limited(3) holding company Street, London
EC4N 7AF
D9 Wireless Opco 2 UK 100% Intermediate 1 King William
Limited(4) holding company Street, London
EC4N 7AF
D9 Wireless Opco 3 UK 100% Dormant 1 King William
Limited(3) 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 1 King William
holding company Street, London
EC4N 7AF
Giggle Fibre Limited(16) UK 100% Intermediate 1 King William
holding company Street, London
EC4N 7AF
Giggle Broadband Limited(15) Scotland 100% Fibre broadband Floor 2, Framework
services Building, 124
St Vincent Street,
Glasgow Scotland
G2 5HF
Aqua Comms Designated Ireland 100% Holding company The Exchange Building,
Activity Company(1) 4 Foster Place,
Dublin 2
Aqua Comms Connect Ireland 100% Intermediate The Exchange Building,
Limited(5) holding company 4 Foster Place,
Dublin 2
America Europe Connect Ireland 100% Subsea fibre The Exchange Building,
2 Limited(5) optic network 4 Foster Place,
Dublin 2
America Europe Connect Denmark 100% Subsea fibre c/o Bech-Bruun
2 Denmark ApS(5) optic network Langeline Alle
35, Copenhagen
North Sea Connect Denmark Denmark 100% Subsea fibre c/o Bech-Bruun
ApS(5) optic network Langeline Alle
35, Copenhagen
Aqua Comms Management UK 100% Management 85 Great Portland
(UK) Limited(5) company Street, London
W1W 7LT
Aqua Comms Denmark Denmark 100% Subsea fibre c/o Bech-Bruun
ApS(5) optic network Langeline Alle
35, Copenhagen
Aqua Comms (Ireland) Ireland 100% Subsea fibre The Exchange Building,
Limited(5) optic network 4 Foster Place,
Dublin 2
America Europe Connect Ireland 100% Subsea fibre The Exchange Building,
Limited(5) optic network 4 Foster Place,
Dublin 2
Celtix Connect Limited(5) Ireland 100% Subsea fibre The Exchange Building,
optic network 4 Foster Place,
Dublin 2
Aqua Comms Management Ireland 100% Management The Exchange Building,
Limited(5) company 4 Foster Place,
Dublin 2
Sea Fibre Networks Ireland 100% Subsea fibre The Exchange Building,
Limited(5) optic network 4 Foster Place,
Dublin 2
Aqua Comms (IOM) Limited(5) Isle of 100% Subsea fibre c/o PCS Limited,
Man optic network Ground Floor,
Murdoch Chambers,
South Quay, Douglas,
IOM IM1 5AS
Aqua Comms (UK) Limited(5) UK 100% Subsea fibre 85 Great Portland
optic network Street, London
W1W 7LT
Aqua Comms Services Ireland 100% Subsea fibre The Exchange Building,
Limited(5) optic network 4 Foster Place,
Dublin 2
America Europe Connect UK 100% Subsea fibre 85 Great Portland
(UK) Limited(5) optic network Street, London
W1W 7LT
America Europe Connect USA 49% Subsea fibre 251 Little Falls
2 USA Inc(5) optic network Drive, Wilmington,
Delaware, 19808
USA
Aqua Comms (Americas) USA 49% Subsea fibre 3500 South Dupont
Inc(5) optic network 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 Äußere
solutions Sulzbacher Straße
118, 90491 Nürnberg
Verne Global hf.(6) Iceland 100% Data centre Valhallarbraut
operation 868, 262 Reykjanesbaer,
Iceland
Verne Global Ltd(17) UK 100% Data centre 1 King William
solutions Street, London
EC4N 7AF
Verne Global Inc.(17) USA 100% Data centre 1825 Washington
solutions Street, Canton
MA 02021 USA
GAData Holdings Limited(7) Jersey 100% Holding company 28 Esplanade,
St Helier, Jersey
JE3 3QA
Volta Data Centres UK 100% Data centre 36-43 Great Sutton
Limited(8) operator 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 6-9 Trinity St,
broadband Dublin, D02 EY47,
Ireland
Leeson Telecom One Ireland 100% Enterprise 6-9 Trinity St,
Limited(9) broadband Dublin, D02 EY47,
Ireland
Leeson Telecom Holdings Ireland 100% Enterprise 6-9 Trinity St,
Limited(10) broadband Dublin, D02 EY47,
Ireland
W R Computer Network Ireland 100% Enterprise 6-9 Trinity St,
Limited(10) broadband Dublin, D02 EY47,
Ireland
Ficolo Oy(11) Finland 100% Data centre Konepajanranta
operator 4, 28100 Pori,
Finland
Arqiva Group Limited(12) UK 48.02% Holding Company Crawley Court,
Winchester, Hampshire
SO21 2QA
- Held by Digital 9 Subsea
1 Holdco 10 - Held by Leeson Telecom Limited
2 - Held by Digital 9 DC Limited 11 - Held by D9 DC Opco 3 Limited
3 12
* Held by Digital 9 Wireless Limited * Held by D9 Wireless Opco 2 Limited
- Held by D9 Wireless Midco
4 1 Limited 13 * Held by Digital 9 Fibre Limited
5 14 * Held by D9 Opco 2 Limited
* Held by Aqua Comms Designed Activity Company and its
intermediate holding companies
6 - Held by Verne Holdings Limited 15 - Held by Giggle Fibre Limited
- Held by D9 Fibre Opco 2
7 - Held by D9 DC Opco 1 Limited 16 Limited
- Held by GAData Holdings
8 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 GBP40,000 other than the Chair of the Audit
Committee and Chair of the Risk Committee who is entitled to an
additional GBP5,000 and the Chair of the Company who is entitled to
receive an annual fee of GBP75,000.
Director Number of *Dividends *Dividends
Ordinary paid paid
shares held 30 June 2023 31 December
2022
------------- -------------- -------------
Jack Waters (resigned 23 May 70,000 - GBP1,050
2022)
-----------------------------
Philip Jordan (from 23 May 94,611 GBP2,838 GBP1,518
2022)
----------------------------- ------------- -------------- -------------
Aaron Le Cornu (from 1 April 62,031 GBP1,343 GBP2,437
2022)
----------------------------- ------------- -------------- -------------
Lisa Harrington 38,604 GBP1,158 GBP2,316
----------------------------- ------------- -------------- -------------
Keith Mansfield 128,135 GBP3,218 GBP3,934
----------------------------- ------------- -------------- -------------
Monique O'Keefe (resigned 10,000 - GBP150
23 May 2022)
----------------------------- ------------- -------------- -------------
Charlotte Valeur 10,000 GBP300 GBP600
----------------------------- ------------- -------------- -------------
* - 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 GBP7.0
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 GBP14.5 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 (GBP'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 30 June
2023 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 (GBP'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 28 January 30 June
2022 2022 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 31 December
2023 2022
Net assets at end of period GBP866,298 GBP949,620
(GBP'000)
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 Annualised Annualised
30 June 2023 to 31 December to 31 December
2023 2022
GBP'000 GBP'000 GBP'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 GBP950 million and
net asset value as at 30 June 2023 of GBP866 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 (112.13p - 118.76p) (a) (118.76p - 107.62p)
at the period end less NAV
per share at 31 Dec 2022
-------------------------------- ------------------------ --------------------
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 31 December
2023 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) = (c) GBP529,487,072 GBP747,511,160
(a) x (b)
-------------------------------- ---- --------------- ---------------
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 31 December
2023 2022
Deployed Committed GBP'000 GBP'000
fund
Aqua Comms DAC GBP176,077 GBP13,487 GBP189,564 GBP189,564
EMIC-1 GBP26,186 GBP21,188 GBP47,374 GBP47,374
Verne Holdings Limited GBP256,595 - GBP256,595 GBP292,441
SeaEdge UK1 GBP16,355 - GBP16,355 GBP16,355
Leeson Telecom GBP50,807 - GBP50,807 GBP50,807
Volta Data Centres GBP61,531 GBP4,000 GBP65,531 GBP61,418
Ficolo Oy GBP118,927 - GBP118,927 GBP118,927
Arqiva GBP469,830 - GBP469,830* GBP462,998*
Giggle GBP4,340 - GBP4,340** GBP3,000
----------------------- ------------- ---------- ------------- ----------------
Total deployment GBP1,180,648 GBP38,675 GBP1,219,323 GBP1,242,884
----------------------- ------------- ---------- ------------- ----------------
* - Includes GBP169 million Vendor Loan Notes issued by D9
Wireless Opco 2 Limited
** - Giggle fair value was written down to GBPNil 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 31 December
2023 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.
[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
GBP225 million, and GBP216 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) Dow Jones Newswires
September 28, 2023 02:00 ET (06:00 GMT)
Digital 9 Infrastructure (LSE:DGI9)
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