REG - Cordiant Digital Inf - Full year results for the year ended 31 March 2024
20/06/2024 07:00
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RNS Number : 1338T Cordiant Digital Infrastructure Ltd 20 June 2024
20 June 2024
LEI: 213800T8RBBWZQ7FTF84
Cordiant Digital Infrastructure Limited
Full year results for the year ended 31 March 2024
Strength of the portfolio underpins good performance
Cordiant Digital Infrastructure Limited (the Company), the operationally
focused, specialist digital infrastructure investor, is pleased to announce
its full year results for the year to 31 March 2024.
Financial highlights:
- Total return for the year of 9.3%(1), increasing NAV per share to 120.1p.
- NAV total return since inception of 32.8% (2023: 21.1%), or 10.5% annualised,
exceeding IPO expectations.
- Total dividend for the year increased 5.0% to 4.2p, ahead of guidance; 4.4x
covered by earnings and 1.6x covered by adjusted funds from operations (AFFO).
- NAV increased to £920.7 million, underpinned by strong underlying EBITDA
growth.
- Equity raised at IPO and in subsequent capital raises now fully invested at an
average EV/EBITDA multiple(2) of c10.2x.
- Continuation of share buybacks. Further purchases by Steven Marshall to make a
total holding of 8.3 million shares. The Directors, Steven Marshall, the
Investment Manager and its employees now own 1.45% of the Company's ordinary
share capital.
Operational highlights:
- Buy, Build & Grow model proving successful at growing EBITDA and NAV.
- Continued strong overall performance by portfolio companies, which generated
aggregate EBITDA growth(3) of 7.2% year on year to £139.3 million.
- Portfolio diversification improved with Speed Fibre acquisition, contributing
solid revenue and EBITDA growth(4) of 3.8% and 5.0% respectively. The Norkring
portfolio of 25 towers in Belgium was also acquired.
- Four bolt-on transactions completed, including acquisition of American Tower's
Polish portfolio of 60 towers by Emitel and CRA's acquisition of Cloud4com, a
leading Czech cloud business.
- Capital expenditure deployed by the portfolio of over £33 million in the
year, to build assets that generate future income streams: build-out of CRA's
data centres, construction of build-to-suit towers by Emitel for MNO
customers, construction and operation of nationwide DAB radio networks by CRA
and Emitel, build-out by Speed Fibre of Ireland's backbone fibre network.
- New contracts won at CRA on DAB, T-Mobile and Ministry of Interior; Emitel
signed two new ten-year broadcast contracts with Polsat and Red Carpet TV as
well as a new DAB contract in Poland.
- Hudson won new contracts and reduced its EBITDA losses after a management
change.
Commenting, Shonaid Jemmett-Page, Chairman of Cordiant Digital
Infrastructure Limited, said:
"I am pleased to report a good overall performance by the Company,
notwithstanding the headwinds from adverse foreign exchange movements during
the year. The Company made a total NAV return for the year of 9.3% (11.0%
excluding foreign exchange movements) ahead of the 9% annual target and the
aggregate EBITDA of the portfolio companies for the year to 31 March 2024 grew
7.2% year on year to £139 million driven by contract wins or enhancements,
cost control and the beneficial effects of inflation on revenues. During the
year, significant achievements included; the refinancing of Emitel's loan
facilities, new and extended long-term contracts at both companies and CRA's
acquisitions of Cloud4com and DC Lužice.
"The portfolio we have constructed is high quality with strong potential for
growth, with predominantly blue-chip customers, and it is generating robust
cash flows through long-term, largely inflation-linked contracts. Our
disciplined investment approach has resulted in a portfolio acquired for an
EV/EBITDA multiple of approximately 10.2x. In light of this, the Board remains
deeply disappointed with the performance of the share price and its continuing
discount to NAV and believes the causes are macroeconomic rather than specific
to the Company. The underlying strengths of the Company and our portfolio, the
growth in the sector and the attractiveness of our core markets together lead
the Board to look forward to the year ahead with confidence."
1 Based on opening ex-dividend NAV at 1 April 2023 of 111.4p.
2 Based on enterprise value upon acquisition divided by EBITDA upon acquisition
for each portfolio company, weighted for relative size.
3 On a pro forma, normalised, constant currency basis.
4 Speed Fibre has a 31 December year end; figures quoted are growth in revenue
and EBITDA from the year ended 31 December 2022 to the year ended 31 December
2023.
Annual report and results webcast for analysts
The 2024 Annual Report will be available to download
at cordiantdigitaltrust.com/investors/results-centre/
(http://cordiantdigitaltrust.com/investors/results-centre/) from 20 June
2024 and will be posted to shareholders on 27 June 2024.
The Company will be hosting an analyst meeting at 10.00am BST at the offices
of Investec, 30 Gresham Street, London, EC2V 7QN. For those wishing to attend,
please contact Ali AlQahtani at Celicourt via CDI@celicourt.uk
(mailto:CDI@celicourt.uk) .
For further information, please visit www.cordiantdigitaltrust.com
(http://www.cordiantdigitaltrust.com/) or contact:
Cordiant Capital, Inc. +44 (0) 20 7201 7546
Investment Manager
Stephen Foss, Managing Director
Aztec Financial Services (Guernsey) Limited +44 (0) 1481 749700
Company Secretary and Administrator
Chris Copperwaite / Laura Dunning
Investec Bank plc +44 (0) 20 7597 4000
Joint Corporate Broker
Tom Skinner (Corporate Broking)
Lucy Lewis / Denis Flanagan (Corporate Finance)
Jefferies International Limited +44 (0) 20 7029 8000
Joint Corporate Broker
Stuart Klein / Gaudi Le Roux
Celicourt +44 (0)20 7770 6424
Financial Communications Advisor
Philip Dennis / Felicity Winkles / Ali AlQahtani
Notes to editors:
Cordiant Digital Infrastructure Limited
Cordiant Digital Infrastructure Limited (the "Company") primarily invests in
the core infrastructure of the digital economy - data centres, fibre-optic
networks and telecommunication and broadcast towers - in Europe and North
America. Further details about the Company can be found on its website
at www.cordiantdigitaltrust.com (http://www.cordiantdigitaltrust.com/) .
The Company is a sector-focused specialist owner and operator of Digital
Infrastructure, listed on the London Stock Exchange under the ticker CORD.
In total, the Company has successfully raised £795 million in equity, along
with a further €200 million through a Eurobond with four European
institutions; deploying the proceeds into five acquisitions: CRA, Hudson,
Emitel, Speed Fibre and Norkring, which together offer stable, often
index-linked income, and the opportunity for growth, in line with the
Company's Buy, Build & Grow model.
Cordiant Capital Inc
Cordiant Capital Inc ("Cordiant") is a specialist global infrastructure and
real assets manager with a sector-led approach to providing growth capital
solutions to promising mid-sized companies in Europe, North America and
selected global markets. Since the firm's relaunch in 2016, Cordiant, a
partner-owned and partner-run firm, has developed a track record of exceeding
mandated investment targets for its clients.
Cordiant focuses on the next generation of infrastructure and real assets:
sectors (digital infrastructure, energy transition infrastructure and the
agriculture value chain) characterised by growth tailwinds and technological
dynamism. It also applies a strong sustainability and ESG overlay to its
investment activities.
With a mix of managed funds offering both value-add and core strategies in
equity and direct lending, Cordiant's sector investment teams (combining
experienced industry executives with traditional private capital investors)
work with investee companies to develop innovative, tailored financing
solutions backed by a comprehensive understanding of the sector and
demonstrated operating capabilities. In this way, Cordiant aims to provide
value to investors seeking to complement existing infrastructure equity and
infrastructure debt allocations.
Basis of preparation:
The information below is an extract from the 2024 Annual Report. The 2024
Annual Report will shortly be available for inspection at:
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) . It can also be
obtained from the Administrator or from the Results Centre section of the
Company's website, at https://www.cordiantdigitaltrust.com/
(https://www.cordiantdigitaltrust.com/) .
Chairman's statement
I am pleased to present the full year results for Cordiant Digital
Infrastructure Limited (the Company) for the year ended 31 March 2024.
Introduction
The Company achieved a good financial performance for the year to 31 March
2024, which resulted in a total return for the year of 9.3% of ex-dividend
opening NAV, ahead of the 9% annual target and notwithstanding the adverse
impact of foreign exchange during the year. NAV per share rose by 7.9% to
120.1p at 31 March 2024 (31 March 2023: 113.4p or 111.4p ex-dividend).
The profit for the year reflected the strong overall performance of the
underlying portfolio companies, offset by adverse foreign exchange movements
(totalling £14.2 million). Excluding foreign exchange movements in the
period would have resulted in a total return of 11.0%.
Portfolio strategy
The Investment Manager has a Core Plus strategy that aims to generate a stable
and reliable annual dividend while also continuing to invest in the asset base
of the Company's portfolio companies to drive higher revenues and increase net
asset values. The Company is implementing this approach through its Buy, Build
& Grow model.
Since its IPO, the Company has prudently sought out high-quality,
cash-generating mid-market assets that we viewed as attractive investment
opportunities. We have continued to focus on capital efficient investment in
existing portfolio companies, through disciplined capex spending across the
portfolio coupled with bolt-on acquisitions where appropriate. In the last
year, these included the acquisition of American Tower's Polish telecom towers
business by Emitel, and the acquisition of Cloud4com, a major Czech cloud
services provider, and DC Lužice, a data centre located in the 'Digital
Danube' triangle between Vienna, Brno and Bratislava, by CRA. This has been
alongside the acquisition during the year of new businesses in Speed Fibre, a
leading fibre network provider in Ireland and Norkring, a provider of
broadcast, colocation and site hosting services in Belgium, that reflect the
current pricing environment and further diversify the portfolio geographically
and by asset class.
Capex spending in the year has focused on the delivery of DAB radio networks
at CRA and Emitel, continued data centre build-out at CRA and build-to-suit
mobile towers at Emitel, together with Speed Fibre's continued construction of
backbone fibre networks in Ireland.
Our disciplined approach has resulted in a portfolio acquired for an EV/EBITDA
multiple of approximately 10.2x, which is predominantly supported by blue-chip
customers and capable of generating strong cash flows through long-term
contracts.
For the year to 31 March 2024, on a like-for-like, constant currency, pro
forma basis, aggregate portfolio company EBITDA increased by 7.2% to £139.3
million, driven by contract wins or enhancements, cost control and the
beneficial effects of inflation on revenues. Aggregate portfolio company
revenue increased by 7.9% to £296.6 million.
Portfolio performance
The strong overall performance of our portfolio was again key to the Company's
results for the year. This performance was achieved against the backdrop of
levels of inflation and central bank interest rates not seen in many years.
The portfolio companies were able to benefit from significant levels of
inflation protection through a combination of contractual revenue escalators,
pass-through costs and hedging policies. Active management of long-term
contracts also provided opportunities to renegotiate contractual terms with a
number of customers. Together, these provided an offset to the adverse effects
of inflation and interest rates on costs.
Emitel performed well during the year, with revenues increasing by 8.3% and
EBITDA increasing by 4.4%. Performance was driven by the launch of a new sixth
digital TV multiplex and the effect of inflation-linked price increases,
offset by high energy costs and the delay in regulatory approval for a new
channel until late in the year. In addition, Emitel won tenders for important
broadcast contracts in TV and radio, including for the new channel from
Polsat, the Polish TV broadcaster, on MUX 1 with a duration of ten years and
inflation-linked revenues, which are expected to drive further future revenue
and EBITDA growth. Alongside this, Emitel, working with the Investment
Manager, successfully refinanced its loan facilities during the year, with a
range of global, pan-European and local banks. The facilities were 1.6x
oversubscribed and achieved an improved credit margin over the previous
facilities.
CRA also performed strongly, with annual revenue and EBITDA growth of 10.7%
and 8.8% respectively, driven by growth across all business areas. The company
continues to make progress in diversifying its business, with its data centre
and cloud activities now approaching 20% of revenues following the completion
in January 2024 of the acquisitions of Cloud4com and DC Lužice, which are
expected to provide substantial revenue and EBITDA growth opportunities. CRA
also acquired Prague Digital in the Czech Republic, a regional broadcast
company, which is expected to yield good synergy benefits. Telecom
infrastructure was also boosted by a new 15-year contract with T-Mobile, which
significantly expanded the scope of service previously provided. In January
2024, CRA successfully bid for and won the Czech spectrum tender which will
enable it to launch one national commercial DAB network and seven regional
networks, including Prague.
Speed Fibre's revenues for the year increased by 3.8% through sales growth,
while EBITDA increased 5.0% over the same period. The increase in EBITDA was
driven by higher than expected recurring service revenue and lower than
expected customer churn in Speed Fibre's wholesale business. The business has
performed in line with our acquisition assumptions following the completion of
the transaction in October 2023.
Following a leadership change in 2023, Hudson's interim management is showing
steady progress in growing revenues while managing costs and cashflow
effectively. For the year to 31 March 2024, Hudson delivered revenue growth
of 8.5%. While its EBITDA continued to be negative, the loss was 17.0% less
than the prior comparable period, reflecting management's focus during the
year.
Share price performance
In light of the progress made in constructing the portfolio and the positive
financial performance achieved, the Board remains deeply disappointed with the
performance of the share price and its continuing discount to NAV. We believe
the causes of this are macroeconomic and are being felt market wide, leading
to widespread redemptions across the sector, rather than being specific to the
Company. At 31 March 2024, the discount to NAV was 46.7% (31 March 2023:
28.3%).
As a result, the Board and the Investment Manager have continued to focus on
optimising portfolio performance, while also seeking greater engagement with
shareholders to provide a deeper understanding of the drivers of value within
the portfolio. The views of our shareholders are important. My Board
colleagues and I met with a number of shareholders on a bilateral basis during
the year to listen to those views, to discuss the capital market challenges
facing the Company and the sector and to explain our approach to these
challenges.
The Company and the Investment Manager have also engaged with the UK
government and the FCA, both directly and through industry bodies such as the
AIC and the London Stock Exchange, in relation to the UK cost disclosure
regime, which is generally viewed as being more onerous than comparable EU
legislation and potentially creating a misleading picture of investment
company costs.
Dividends and share buybacks
The Company's dividend policy continues to be based on the underlying
principles that, at the point the Company is fully invested, the dividend must
be covered by free cash flow generated by the portfolio and be sustainable in
future periods. The Company monitors dividend cover using an adjusted funds
from operations (AFFO) metric calculated over a 12-month period. AFFO is
calculated as normalised EBITDA less net finance costs, tax paid and
maintenance capital expenditure.
In November 2023, the Board approved an interim dividend of 2.0p per share for
the six months ended 30 September 2023. The Company also continues to remain
committed to a progressive dividend policy. Reflecting that policy and the
cash generative characteristics of its portfolio companies, the Board has
approved an increase in the annual dividend with the payment of the second
interim dividend of 2.2p per share on 19 July 2024.
For the 12 months to 31 March 2024, the 4.2p dividend was approximately 4.4x
covered by EBITDA and 1.6x by AFFO.
In February 2023, the Company announced a discretionary programme of share
buybacks of up to £20 million. Under this programme it has acquired 7.3
million ordinary shares for £5.4 million, at an average price per share of
74.9p, or an average discount to 31 March 2024 NAV of 37.6%. The NAV accretion
of the Company buying back these shares at such a discount is to increase NAV
per share by ca.0.4p. The programme is not subject to a set cut-off date.
Gearing and interest
The Company had total liquidity equivalent to £167.7 million at 31 March
2024, comprising £62.8 million held directly at the Company, £46.8 million
held at portfolio company level and undrawn facilities at portfolio company
level equal to £59.1 million. In aggregate, the Company and its portfolio
companies had gross debt equivalent to £694.7 million at 31 March 2024, and
therefore net debt of £585.1 million. This resulted in gearing as at 31 March
2024 of 4.5x measured as net debt divided by LTM EBITDA (including
Company-level costs) or 38.9% measured as net debt divided by gross asset
value (GAV).
Principal risks and uncertainties
In November 2023, we updated the principal risks identified by the Company.
These changes were largely driven by macroeconomic factors. With inflation
rates having fallen substantially in the UK and those countries where our
portfolio companies operate, and with consequent reductions in interest rates
either having been announced or being predicted, these factors are no longer
considered to be principal risks. However, there have been lasting impacts on
the financial markets, in particular on the Company's share price which, along
with many others in the sector, has continued to trade well below NAV. This in
turn has restricted the ability to raise additional equity capital and to take
advantage of some of the opportunities to develop the portfolio. Accordingly,
we have amended our principal risks to reflect this change in risk. Further
details of the Company's risks are set out below.
Sustainability
We are a long-term investor with a clear focus on sustainability. The Board
and Investment Manager continue to prioritise reducing the impact of the
Company and its portfolio companies on our environment. It is pleasing to
report the continued progress being made across a number of initiatives in the
portfolio focused on our climate: Emitel's procurement of 91% of its
electricity from renewable sources; CRA's progress towards its target of 100%
electricity being from renewable sources, with an increase to 68%; and Speed
Fibre's procurement of 89% of its electricity from renewable sources.
We consider the ESG approach as well as the risks and opportunities of
potential targets in our pipeline as part of our pre-investment analysis, and
following each acquisition we work with our portfolio companies to improve
their ESG performance. For the first time this year, in order to improve
transparency and provide greater granularity, we will be releasing a
standalone Responsible Investment Report, which will be available on our
website at www.cordiantdigitaltrust.com.
Board and governance
The Board receives regular updates on the Company's performance and that of
the individual portfolio companies from the Investment Manager and provides
objective oversight of the Investment Manager's activities. The Board
continues to support the Investment Manager's active management of the
portfolio's operations, whether through driving performance and thereby
increasing revenues and earnings growth, its leadership of strategic financing
activities and bolt-on acquisitions and its championing of the Company's ESG
agenda. The management fee structure is closely aligned to shareholder
returns, being based on the Company's market capitalisation and not NAV.
Outlook
We are seeing the demand for digital infrastructure continue unabated, a trend
that we expect to be maintained, particularly with the pace of evolution of
AI. Interest rates now appear to be to be on a downward trajectory in our key
geographies and, more broadly, Poland, the Czech Republic and Ireland are all
forecast to outperform the EU's overall economic growth rate in 2024. The
underlying strengths of the Company and our portfolio, the growth in the
sector and the attractiveness of our core markets together lead the Board to
look forward to the year ahead with confidence.
Shonaid Jemmett-Page
Chairman
Investment Manager's report
Introduction
The Company delivered a good performance in the year to 31 March 2024, again
driven by a strong operating performance by the portfolio. NAV per share
increased from 111.4p (ex-dividend) at 31 March 2023 to 120.1p at 31 March
2024, reflecting a total return of 9.3% on ex-dividend opening NAV (31 March
2023: 10.0%).
NAV growth is driven by successful implementation of the Company's Buy, Build
& Grow model: to buy good quality platforms and bolt-on acquisitions; to
build new assets at construction cost from which new revenues can be earned;
and to grow existing revenues using the operational expertise of the
Investment Manager.
Headwinds from the Company's aggregate foreign exchange position caused an
impact on total return for the year of -1.7%, meaning that the underlying
performance before taking foreign exchange movements into account was a total
return of 11.0%.
The Company paid two dividends in the period: the second interim dividend of
2.0p per share, relating to the year ended 31 March 2023, which was paid on
21 July 2023; and the interim dividend of 2.0p per share relating to the
year ended 31 March 2024, which was paid on 22 December 2023. The Company
also proposes a second interim dividend for the year of 2.2p, making a total
dividend for the year to 31 March 2024 of 4.2p, an increase over the
previous year of 5.0%. This is in line with the Company's progressive dividend
policy announced at IPO, and this level of dividend remains well covered
(1.6x) by adjusted funds from operations (AFFO), being EBITDA less net
financing costs, maintenance capex, tax and other cash flows.
Capital allocation
The Investment Manager and Board have engaged with shareholders frequently
over the past year to discuss the issue of capital allocation and the discount
of the Company's share price to the NAV per share. In acknowledgment of the
variety of opinions expressed, the Company has elected to take a multi-pronged
approach to capital allocation. A buyback programme was initiated, with
£20 million approved by the Board, of which £5.4 million has been deployed,
at an average price of 74.9p, crystallising a NAV gain of 0.4p per share.
The Company remains committed to its progressive dividend policy and has
allocated capital to a 5.0% increase in dividend from 4.0p per year to 4.2p
per year, to take effect from the second interim dividend expected to be paid
in July 2024. The increased dividend remains well covered by AFFO.
The Company has also sought to diversify the portfolio, acquiring Speed Fibre
in Ireland for €190 million and Norkring in Belgium for €6 million.
Accretive bolt-on acquisitions have also been completed by Emitel and CRA,
leveraging the Company's existing high-quality platforms and adding assets
that provide a measure of diversification to existing businesses. These
include Emitel's acquisition of American Tower's Polish telecoms towers
business and CRA's acquisitions of Cloud4com, a cloud business, DC Lužice, a
data centre business and Prague Digital, a broadcast business. CRA has now
built a data centre and cloud business accounting for almost 20% of revenues,
from a minimal amount at the time of the Company's initial investment.
Finally, the Company, relying on the operational expertise of the Investment
Manager, has made investments in accretive growth capital expenditure projects
such as: the build-out of the DAB radio networks in the Czech Republic and
Poland; build-to-suit tower portfolios in Poland; and the build-out of CRA's
sixth edge data centre facility at Cukrák. Planning for Central Europe's
largest and most modern data centre at Zbraslav in Prague, Czech Republic, on
a decommissioned AM radio site owned by CRA, continues.
The Investment Manager believes that the portfolio, valued at 31 March 2024 at
10.6x LTM EBITDA, is undervalued compared to recent transaction multiples.
Lower growth mobile tower assets have been valued in other countries at over
18x earnings, and data centre assets at over 20x. While broadcast assets
typically attract a lower valuation multiple, the Company's broadcast assets
are growing faster than most European mobile tower businesses and have higher
escalation rates and a wider customer base.
The Investment Manager considers that there is no 'magic bullet' to resolve
the Company's share price discount to NAV, but that continued strong
operational performance, value-creating capital expenditure, acquisition price
discipline, significant alignment of interests and continuing the buyback
programme should all be recognised when macroeconomic issues affecting equity
markets, and especially the investment trust sector, abate.
Since 31 March 2023, the Company's Directors, the Investment Manager and its
staff have made further investments in the Company's shares, acquiring in
total 5.0 million more shares to bring the combined total to 11.1 million
shares. This included Steven Marshall, Chairman of Cordiant Digital
Infrastructure Management, who acquired a further 3.9 million shares, bringing
his total personal holding to 8.3 million shares. At the date of this report,
the Directors, the Investment Manager and its staff owned 1.5% of the ordinary
issued share capital of the Company.
In February 2023 the Company announced that, in light of the c.20% discount at
which the Company's shares were then trading, and in consultation with the
Company's brokers, the Board had approved a discretionary share buyback
programme of up to £20 million. Shares acquired under the programme will
either be held in treasury by the Company or cancelled. The buyback programme
is not subject to a set cut-off date. To the date of this report, 7.3 million
shares had been acquired by the Company at an average price of 74.9p and held
in treasury.
Activity in the period
In June 2023, the Company announced that Emitel had acquired American Tower
Corporation's subsidiary in Poland, whose portfolio comprises 65 modern
lattice telecoms towers. The portfolio has a low tenancy ratio providing
available load capacity for additional lease customers, which will be
accretive to Emitel's revenue and is distributed across attractive locations
that complement Emitel's existing telecoms network.
In July 2023, Emitel successfully refinanced its senior debt facilities.
Emitel secured a debt package of PLN 1.57 billion (£312 million), which
comprises a senior loan of PLN 1.27 billion, a capex facility of PLN 250
million and an RCF of PLN 50 million. As at 31 March 2024, PLN 187 million
(£37 million) of the capex facility and the entirety of the RCF remain
undrawn.
The new facilities were 1.6x oversubscribed and have a blended credit margin
lower than the 2.9% of the previous senior debt facilities. The banking group
included international banks Citi, BNP, Credit Agricole and DNB Bank ASA, as
well as leading Polish banks and financial institutions. The capex facility
and RCF will be applied to support Emitel's growth trajectory by financing its
operational activities, new investments and acquisition plans.
In August 2023, the Company announced that it had agreed to acquire Speed
Fibre, a leading open access fibre infrastructure provider in Ireland. Speed
Fibre was acquired by the Company for an enterprise value of €190.5 million
(£165 million), a multiple of 8.3x 2022 audited EBITDA. The acquisition was
funded by a combination of cash on hand plus a vendor loan note of
€29.6 million (£26 million) bearing initial interest of 6.0% and repayable
in four years.
In November 2023, Emitel announced that it had won a nationwide tender to
extend DAB coverage to 17 regional radio stations for state broadcaster,
Polskie Radio. As a result of this, Emitel expects to extend DAB coverage
across the country, from 67% to 88% of households. The contract is a renewal,
and an expansion, of an existing contract held by Emitel and is also expected
to result in incremental extra revenues. The contract runs to Q3 2027 and has
a gross value of PLN 59.5 million (£12 million), with revenues linked to
inflation. DAB is far more energy efficient than FM or AM radio, and so, as
Emitel (and CRA) progressively decommission AM radio sites, there is a
consequential reduction in carbon footprint.
In November 2023, the Company announced the acquisition of Norkring, which was
completed in January 2024. The final consideration on completion after
adjustments was €6.1 million (£5.2 million). Norkring operates 25
communication and broadcast towers in Belgium. Of particular interest to the
Company are the 5G broadcast trials that Norkring is conducting as part of a
consortium.
Emitel recently signed a new ten-year digital terrestrial television (DTT)
broadcast contract expiring in 2034 with Polsat, the most watched free-to-air
TV channel in Poland. The channel will be broadcast from MUX1, and revenues
under the contract are inflation-linked. The Polish National Broadcast Council
has extended Polsat's DTT MUX licence to 2034.
In January 2024, CRA successfully bid for and won the spectrum tender which
will enable the launch of one national commercial DAB network and seven
regional networks, including Prague. This DAB spectrum gives CRA the strongest
DAB coverage in the country. The company will install DAB transmitters during
2024 and expects to conclude agreements with existing FM radio customers
(representing additional incremental revenues), which are expected to commence
in 2025.
In January 2024, CRA completed the acquisition of Cloud4com, a leading cloud
services provider in the Czech Republic (acquired for CZK 870 million,
£29.4 million), and DC Lužice, a Tier III data centre (acquired for
CZK 130 million, £4.4 million). A further potential payment of up to
CZK 485 million (£16.4 million) is payable subject to Cloud4com's EBITDA
for 2024.
In addition, the highly synergistic acquisition of Prague Digital TV (a
regional TV operator) by CRA at the beginning of 2024, has enabled the Company
to consolidate transmissions from its sites and cease transmission from Prague
Digital's three locations, reducing energy and other expense for the company.
Financial highlights
During the year to 31 March 2024, the Company achieved a NAV total return of
£80.2 million (31 March 2023: £81.2 million), being 9.3% of opening
ex-dividend NAV, or 10.4p per share. Net assets were £920.7 million
(31 March 2023: £875.7 million, £860.3 million ex-dividend),
representing a NAV per share of 120.1p (31 March 2023: 113.4p, 111.4p
ex-dividend). This movement in NAV per share comprises a positive total return
for the six-month period of 10.4p, plus a 0.4p gain arising from the share
buyback programme, offset by the payment of the second interim dividend for
2023 of 2.0p in July 2023 and the first interim dividend of 2.0p for 2024 in
December 2023.
The total return reflects strong underlying operating performance across the
portfolio, offset by adverse foreign exchange movements in the period. The
total return, excluding the adverse underlying foreign exchange movement in
the period, would be 11.0%. The Company remains a net beneficiary of foreign
exchange movements when measured from inception in February 2021 to
31 March 2024.
Application of IFRS
As disclosed in the Company's Annual Report 2023, the Company holds only
Hudson directly. Emitel, CRA, Speed Fibre and Norkring are all held through
its wholly-owned subsidiary, Cordiant Digital Holdings UK Limited. The
Eurobond was issued by Cordiant Digital Holdings Two Limited, which is a
wholly-owned subsidiary of Cordiant Digital Holdings UK Limited. Consequently,
under the application of IFRS 10 and the classification of the Company as an
investment entity, the Company's investment in Cordiant Digital Holdings UK
Limited is recorded as a single investment that encompasses underlying
exposure to Emitel, CRA, Speed Fibre, Norkring and the Eurobond. As in
previous reports, the underlying elements of the overall value movement
attributable to foreign exchange movements and value movement and income from
each portfolio company are identified in Chart 1. The Company's profit and NAV
under this approach are exactly the same as in the audited IFRS Statement of
Comprehensive Income and the Statement of Financial Position.
Table 1 shows the reconciliation of Chart 1 to the IFRS Statement of
Comprehensive Income.
Table 1: Reconciliation of Statement of Comprehensive Income to Table 3
Accrued income Total unrealised value movement Net FX movement Intercompany balances Fund Interest expense IFRS P&L
expenses
Movement in fair value of investments 1.9 113.7 (11.7) 10.2 (3.0) (11.5) 99.6
Unrealised foreign exchange gains - - (3.0) - - (3.0)
Management fee income - 1.4 - - - - 1.4
Interest income - - - 1.9 - - 1.9
Investment acquisition costs - - - - (0.6) - (0.6)
Other expenses - - - - (9.5) - (9.5)
Foreign exchange movements on working capital - - 0.5 - - - 0.5
Finance income 2.1 - - - - - 2.1
Finance expense - - - (12.1) - - (12.1)
4.0 115.1 (14.2) - (13.1) (11.5) 80.3
Table 2 shows the underlying components of the IFRS Statement of Financial
Position.
Table 2: Underlying components of Statement of Financial Position
Emitel CRA Speed Fibre Hudson Norkring Cash Inter-company balances VLN Other assets and liabilities Eurobond IFRS
Total
Investments 525.0 385.9 86.5 42.3 5.2 1.6 158.7 (25.7) (2.6) (171.0) 1,005.9
Receivables - - - - - - 2.8 - 14.5 - 17.3
Cash - - - - - 60.1 - - - - 60.1
Payables - - - - - - (3.9) - (1.1) - (5.0)
Loans and borrowings - - - - - - (157.6) - - (157.6)
525.0 385.9 86.5 42.3 5.2 61.7 - (25.7) 10.8 (171.0) 920.7
Financial performance in the period
This section, including valuation, foreign exchange, costs and gearing, refers
to the figures in Table 3 and Table 2 on the non-IFRS basis.
Table 3 : NAV bridge for the year to 31 March 2024
£m
Opening NAV as at 1 April 2023 875.7
Dividend paid July 2023 (15.4)
Opening ex-dividend NAV 860.3
Accrued income 3.8
Value movement 115.1
FX movement (14.2)
Fund expenses (13.1)
Interest expense (11.5)
Net change in shares (4.5)
Interim dividend paid (15.4)
Closing NAV as at 31 March 2024 920.7
Valuation
The Investment Manager prepares semi-annual valuations according to the IPEV
Valuation Guidelines and IFRS13. These valuations are reviewed and challenged
by the Board. The Board also commissions independent third party valuations at
the half year and at year end from an expert valuations group at a Big 4
accounting firm. The Investment Manager reviews the key assumptions of the
valuations and performs a sensitivity analysis on them as included in note 6
to the financial statements.
The Investment Manager and Board are keenly aware of the scepticism that some
valuations of private assets elicit in certain sections of the market and so
take great care to maintain a rigorous process, using market information from
reputable third party sources wherever possible. Discounted cash flow (DCF) is
the primary methodology of valuation, as noted in the Company's prospectus.
The Investment Manager is confident that the quality of earnings included in
the DCF models, and the actual cash accretion observed in the net debt figures
for each asset included in the bridge from enterprise value to equity value
show the qualities of the portfolio, notwithstanding volatility in the
market-observable inputs used every six months to construct the weighted
average cost of capital (WACC) used for each valuation as a discount rate.
Table 4 shows the movement in the Company's average WACC over time, weighted
for the investments held at each reporting date. Since the low point for risk
free rates at March 2022, the Investment Manager raised the WACC 173bps to the
high point at September 2023. The WACC has decreased slightly between
September 2023 and March 2024 by 18bps to 9.6%. This is substantially less
than the decrease in risk free rates in the Company's two main markets, Poland
and the Czech Republic, where risk free rates have decreased 100bps and 175bps
respectively since September 2023 as it reflects the longer term view taken by
the Investment Manager in reflecting market volatility in risk free rates.
Table 4 : Weighted average discount rates over time
31 Mar 2022 8.05%
30 Sep 2022 8.52%
31 Mar 2023 9.60%
30 Sep 2023 9.78%
31 Mar 2024 9.60%
Table 5 shows the breakdown of the WACC at 31 March 2024, compared to the
prior period.
Table 5 : Weighted average cost of capital at 31 March 2024
Range Range Weighted average mid- point
low point
high point
Cost of equity 10.0% 12.1% 11.2%
Cost of debt 5.0% 7.5% 6.7%
WACC 8.5% 10.8% 9.6%
Weighted average cost of capital at 31 March 2023
Range Range Weighted average mid- point
low point
high point
Cost of equity 9.6% 12.9% 11.0%
Cost of debt 5.0% 7.0% 6.5%
WACC 8.2% 11.0% 9.6%
The largest value movements were observed on Emitel (+£78.0 million) and CRA
(+£51.6 million), driven by calibration to actual inflation and new contract
wins and a slightly reduced discount rate (in the case of Emitel). These
reflected annual increases in underlying currency equity values of 15.9% and
9.9% respectively. Speed Fibre, the acquisition of which closed in October
2023, though the acquisition price was set in December 2022, saw an increase
in equity value from cost of 5.2%. An increase in net debt since acquisition,
arising from working capital timing and capex out flows, obscured an
enterprise value increase of 10.8% since acquisition.
Hudson remains an asset that is not performing to expectations and the
Investment Manager recognised a prudent write-down of £18.4 million in the
year on a DCF basis. The carrying value at the year end was £42.3 million, or
4.2% of the value of the portfolio.
Table 6: Bridge table breakdown of unrealised value movement
Unrealised value movement
Emitel 78.0
CRA 51.6
Speed Fibre 3.9
Hudson (18.4)
Total unrealised value movement 115.1
Foreign exchange
The Company has recognised an unrealised foreign exchange loss in the year of
£14.2 million (since inception: gain of £50 million). This aggregate number
comprises a gain of £24.0 million on Polish zloty, a loss of £37.3 million
on Czech crowns and combined net losses of £0.9 million on US dollar and
Euro. While the Investment Manager hedges individual cash flows between the
Company and portfolio companies through forward contracts, no balance sheet
hedging has been undertaken to date. The cost of doing so using forward
contracts, considered to be the lowest cost approach, has been
disproportionate to the benefit, such that the aggregate cost of hedging
would, over several years, consume the gain being protected. Notwithstanding,
the Investment Manager and Board have kept the Company's hedging strategy
under regular review, given the volatility in foreign exchange rates and
movement in forward points in the Company's respective currency pairs. The
Company is a long-term investor in the portfolio and currently does not seek
to manage balance sheet foreign exchange exposure from reporting period to
reporting period.
Table 7: Bridge table breakdown of unrealised foreign exchange movement
Unrealised foreign exchange movement
Emitel 24.0
CRA (37.3)
Speed Fibre (0.8)
Hudson (1.2)
Working capital FX 1.1
Total unrealised FX movement (14.2)
Costs
In the year, the Company incurred £24.6 million of costs. The largest
component was £10.8 million of costs relating to the Eurobond debt facility,
recorded within the Company's subsidiary, Cordiant Digital Holdings Two
Limited. The Eurobond has been fully drawn since 5 June 2023, and the costs
include interest, commitment fee, agency fees and amortised deal arrangement
costs.
The management fee of £5.9 million (31 March 2024: £7.2 million) is
greatly reduced from the prior year because management fees are calculated on
the basis of the Company's market capitalisation, not its NAV, thus aligning
the Investment Manager with shareholders. Deal costs of £3.0 million relate
to the acquisitions of Speed Fibre and Norkring. Other costs of £4.8 million
relate to transactions that did not proceed, interest paid on the vendor loan
for the acquisition of Speed Fibre, administrative and other running costs and
directors' fees. The ongoing costs ratio, calculated in accordance with the
guidelines published by the AIC, is 0.9% per annum.
Gearing
The Investment Manager has taken a prudent approach to the levels of debt
within the Company and its portfolio companies since inception. The Investment
Manager has the expertise internally to arrange debt facilities, and so does
not use banks or other intermediaries for this purpose.
At 31 March 2024, there were four debt facilities in the Company's group, at
Emitel, CRA, Speed Fibre and the fund-level Eurobond. The €200 million
Eurobond is a term loan, with a bullet repayment in September 2026. 83% of the
interest is fixed in nature.
Aggregated together, gearing as measured by net debt (i.e. including cash
balances held around the group) as a percentage of gross asset value was
38.9%. 50% is the maximum for this ratio, calculated at the time of drawdown,
as required in the Company's IPO prospectus. As measured by net debt divided
by aggregate EBITDA (including fund level costs such as management fee), the
Company's gearing is 4.5x. Each of Emitel and CRA have individual net gearing
on this basis of 3.0x. This is substantially lower than most tower companies
which might be viewed as comparators of either business.
73% of all debt is on a fixed-interest basis, with the remainder floating,
none of which is inflation linked. The Company has executed interest rate
hedging for 50% of the new Emitel facilities and is assessing options for
fixing the remainder. The average margin across all facilities remains at
2.9%, which the Investment Manager considers to represent good value.
CRA's debt package is due for renewal in mid 2025. The investment Manager and
CRA have begun work on refinancing these facilities well in advance of the
term date.
The Investment Manager believes that the quality of gearing is as important as
the quantum and so has put in place long dated facilities (including the
Eurobond term loan) with good quality groups of banks, with interest hedged at
advantageous rates where possible.
Dividend coverage
The Company's progressive dividend policy is ahead of the schedule laid out in
the prospectus at IPO. The dividend remains very well covered by AFFO, which
seeks to track whether the portfolio generates sufficient earnings less fund
level costs, finance costs, tax and maintenance capex to cover the dividend.
AFFO remains stable at 1.6x. The dividend is covered 4.4x by aggregate
portfolio company EBITDA.
As noted in the Chairman's statement, the Company has announced an increase in
the second interim dividend from 2.0p to 2.2p, to be paid on 19 July 2024
following the Company's AGM. The annual dividend of 4.2p is an increase of
5.0% over the prior year, and a reflection of the Company's commitment to its
progressive dividend policy, supported at all times by a strongly
cash-generative portfolio, as measured by the AFFO. Table 8 shows the
calculation of AFFO for the 12 months to 31 March 2024.
Table 8 : Calculation of adjusted funds from operations (AFFO)
Twelve months to
31 March 2024(1)
£m
Portfolio company revenues 304.7
Portfolio company normalised EBITDA 142.1
Dividend coverage, EBITDA basis 4.4x
Net Company-specific costs (13.1)
Net finance costs (38.2)
Net taxation, other (17.0)
Free cash flow before all capital expenditure 73.8
Maintenance capital expenditure(2) (20.9)
Adjusted funds from operations 52.9
Dividend at 4.2p per share (32.2)
Dividend cover 1.6x
1. At average foreign exchange rates for the period.
2. Aggregate growth capital expenditure of £33.2 million was invested
in the twelve months to 31 March 2024 across the portfolio.
Investee company performance
For the year to 31 March 2024, the portfolio companies generated combined
revenue of £296.8 million, representing a 7.9% increase over the prior year,
on a like-for-like pro forma, constant currency basis. Aggregate portfolio
EBITDA increased 7.2% over the prior year, on a like-for-like pro forma,
constant currency basis, to £139.3 million.
These increases in revenue and EBITDA reflect the impact of new contracts
being entered into, including in the broadcasting and telecoms business units
at Emitel and CRA, together with the effect of inflation-linked revenues
feeding through, usually with a year's lag. During the year to
31 March 2024, across the portfolio companies £20.9 million was invested in
maintenance capital expenditure and £33.2 million in growth capital
expenditure. Maintenance capital expenditure included investment in IT systems
and security at CRA and infrastructure modernisation at Emitel.
Growth capital expenditure included fibre backbone network build-out at Speed
Fibre, investment related to the DAB+ contract win (previously announced by
the Company on 8 November 2023) and construction of new telecoms towers at
Emitel; and data centre investment at CRA.
Total gross debt at the Company, subsidiary and platform level was equivalent
to £694.7 million, an increase of £229 million since 31 March 2023
reflecting the full drawdown of the Eurobond in June 2023 and the inclusion
of Speed Fibre's senior debt facilities offset by a de-levering of Emitel's
drawn facility by PLN 200 million (£39.8 million) as part of the refinance
during the period. Aggregate cash balances at the Company, subsidiary and
platform level were equivalent to £108.5 million. Including undrawn debt
facilities at portfolio company level, total liquidity was equivalent to
£167.7 million.
The Investment Manager's team
Building on the significant strength of the existing digital team reflects the
Investment Manager's continued commitment to supporting platform companies in
achieving their growth ambitions, along with being able to source and deliver
investment opportunities that are in line with target returns. Unlike its
peers in this market, the digital team at the Investment Manager possesses
deep, senior-level experience of managing and operating world-class Digital
Infrastructure businesses. This is combined with private equity executives
having decades of experience advising and investing in the sector, making for
a unique marriage of capabilities.
Environmental, social and governance highlights
The Investment Manager focuses its attention on reducing emissions and the
climate impact of the Digital Infrastructure sector. The Investment Manager's
Digital and ESG and Impact Teams engage with portfolio companies to integrate
renewable energy and energy efficiency measures where appropriate. Despite
growth in the asset base, the portfolio's emissions (Scope 1 and Scope 2)
during the period decreased.
During the year, the Investment Manager became an official supporter of the
Task Force on Climate-related Financial Disclosures (TCFD) and has begun the
further integration of its recommendations. Additionally, the Investment
Manager became an early adopter of the Task Force on Nature-related Financial
Disclosures (TNFD) during the period.
Outlook
The Investment Manager is pleased with the overall quality of assets and
underlying cash flows in the portfolio. These have been assembled at what the
Investment Manager believes to be a highly attractive price without
sacrificing growth potential. Internally generated cash flows and the
remaining proceeds of the Eurobond facility will allow the Company to cover
the dividend, engage in appropriate maintenance capital expenditures, expand
existing platforms and invest in new assets to further diversify the
portfolio, both geographically and by asset type.
The Investment Manager remains closely focused on the Company's target of 9%
return to shareholders, comprising dividend and capital growth. The Investment
Manager continues to see some improvement in the pricing environment for
digital assets in the middle market and the purchase terms available. The
Investment Manager has recruited a large and capable team of digital
specialists with the skills and experience required to manage the Company's
assets and to succeed in maximising total return from Core Plus assets.
Based on the solid performance since inception, which has continued up to
31 March 2024, the Investment Manager believes the Company remains well
placed to deliver as planned in the year ending 31 March 2025. The
Investment Manager looks forward to the year ahead with confidence.
Emitel
£m
Original cost 353.0
Value at 1 April 2023 429.0
Further investment by the Company in the year -
Distributions paid to the Company in the year 6.0
Unrealised value gain in the year 78.0
Unrealised foreign exchange gain in the year 24.0
Value at 31 March 2024 525.0
Financial performance in the year
Emitel has had a solid year. For Emitel's audited financial year ending
31 December 2023, revenue increased 8.3% to PLN 594 million (£113.8
million at average exchange rates for the year) and EBITDA increased by 4.4%
to PLN 384 million (£73.7 million at average exchange rates for the year).
This performance reflected strong growth in telecoms infrastructure and TV
broadcast, offset by high energy costs and the regulatory delay in approving a
new channel during the year. There was also a time lag in the receipt of
contractual inflation-adjusted revenues.
Overall revenue growth was driven by inflation-linked price increases as 2022
inflation of 14% passed through to 2023 revenues; approximately 75% of
Emitel's revenues are generated by either full or partial inflation-linked
contracts. 2023 inflation will principally be reflected in indexed revenue
contracts from January 2024 onwards. Inflation in Poland for 2023 was 10.9%.
Telecoms infrastructure revenue growth in the period was driven by continued
growth in 'build-to-suit' provision for MNOs, and Emitel's acquisition of 65
telecoms towers in Poland from American Tower Corporation. The acquired towers
are less than three years old and have robust long-term contracts (14 years
average) with inflation-linked escalators.
In Q3, Emitel signed a new loan facilities agreement with a consortium of
leading Polish and international banks. The new facilities include senior
secured term loans of PLN 1,270 million (of which PLN 370 million - €83
million - is denominated in euros), a capex facility of PLN 250 million and a
revolving credit facility (RCF) of PLN 50 million. The new facilities have a
blended credit margin lower than the 2.9% of the previous senior facilities.
The capex facility and RCF will support Emitel's growth trajectory by
financing its operational activities, new investments and acquisition plans.
Of the interest payable on the third-party bank debt at 31 March 2024, 50%
was fixed rate and 50% floating rate. Emitel and the Investment Manager are
keeping the optimal hedging approach towards the floating rate debt under
constant review as interest rates in Poland trend downwards.
The aggregate amount of debt drawn at 31 March 2024 was PLN 1,320 million
(£262 million). Emitel is 3.0x geared, as measured by net debt divided by
EBITDA at 31 March 2024, which is viewed as conservative compared to other
tower businesses.
Emitel continues to be strongly cash generative and in March 2024 paid its
first distribution of PLN 30 million (£6.0 million) to the Company.
Cash balances reduced to PLN 135 million (£26.9 million) over the year.
Underlying cash generation during the year was offset by the partial repayment
of the senior debt facilities as part of the refinance; the acquisition of
American Tower Corporation's telecoms tower portfolio in Poland and the
distribution to the Company mentioned above.
Operations
Emitel's contracted orderbook remains strong at more than PLN 3 billion
(more than £596 million), with contracts extending out as far as 2043. The
weighted average contract length in TV broadcasting is seven years, three
years in radio broadcasting and 12 years in telecom infrastructure services.
During the year, Emitel signed a new ten-year DTT broadcast contract expiring
in 2034 with Polsat, the most watched free-to-air TV channel in Poland. The
channel will be broadcast from MUX1, with revenues under the contract being
inflation linked.
Emitel also signed a new ten-year DTT contract with Red Carpet TV, to
broadcast from a vacant slot on MUX8. Broadcasting started in March 2024.
Regarding other broadcast contracts, following the Polish election in November
2023, the company's contracts with the state-owned media providers have
continued in accordance with their terms, with payments being made as
expected.
In November 2023, Emitel won a nationwide tender to extend DAB coverage to 17
regional radio stations for state broadcaster, Polskie Radio. As a result of
this, Emitel expects to extend DAB coverage across the country, from 67% to
88% of households. The contract is a renewal, as well as an expansion, of an
existing contract held by Emitel and is also expected to result in incremental
extra revenues. The contract runs to Q3 2027 and has a gross value of PLN 59.5
million (£12 million), with revenues linked to inflation.
Emitel has also been working on the development and commercial implementation
of new technology to deliver dynamic advertisement insertion (DAI) which
enables the delivery of targeted advertising which is adapted to the viewer.
Proof of concept trials were completed in partnership with the Warsaw Stock
Exchange. Commercial launch is planned for later in 2024.
A further illustration of its forward-looking approach has seen Emitel partner
with ISWireless to create a 5G campus network at Bialystok University of
Technology, the first of its kind in Poland. As part of this initiative,
Emitel provided the distributed antenna system (DAS) to this innovative
network. 5G networks operate at high frequencies and require advanced levels
of design and implementation. It is believed that the creation and operation
of the network will also educate future 6G specialists working at the
University.
Outlook
Demand for data and Digital Infrastructure in Poland remains strong and was
supported by continued growth in GDP during the year. Emitel remains well
positioned to benefit from these positive trends in Poland.
CRA
£m
Original cost 305.9
Value at 1 April 2023 389.1
Further investment by the Company in the year(1) 1.9
Distributions paid to the Company in the year (19.4)
Unrealised value gain in the year 51.6
Unrealised foreign exchange loss in the year (37.3)
Value at 31 March 2024 385.9
1. Interest on shareholder loan capitalised during the period
Financial performance
CRA had a strong performance for the year. Revenue for the 12 months to
31 March 2024 increased by 10.7% to CZK 2.5 billion (£89.0 million at
average exchange rates for the year) and EBITDA increased 8.8% to
CZK 1.3 billion (£44.9 million at average exchange rates for the year).
The revenue performance was driven by double-digit growth in the data centre,
cloud and IoT business lines, assisted by the acquisition of Cloud4com in Q1
2024.
EBITDA performance was driven by strong performance across all business units
and effective control of costs, particularly personnel and energy costs, the
latter of which were hedged in advance to protect the business against the
increase in wholesale energy prices seen in the period.
In January 2024, CRA completed the acquisition of Cloud4com, a leading cloud
services provider in the Czech Republic (acquired for CZK 870 million,
£30.6 million), and DC Lužice, a Tier III data centre (acquired for CZK 130
million, £4.4 million). A further potential payment of up to CZK 485 million
(£17 million) is payable subject to Cloud4com's EBITDA for 2024.
The acquisition of these businesses, all funded by organic cash flow at CRA,
substantially increases the data centre and cloud proportion of CRA's revenue
mix and marks an important step in CRA's continued growth in the Czech data
centre and cloud services markets. On a pro-forma basis for 2023, CRA's
broadcast revenues would have accounted for less than 50% of the company's
overall revenues. This will inevitably reduce further as CRA's data centre and
other businesses expand at a faster rate than the growth in the broadcast
business.
CRA also saw continued demand for its existing data centre capacity, as
measured in racks occupied (+33%) and power (+92%). This reflects the
acquisition of DC Lužice and the completion of DC Cukrák, together with
robust demand dynamics from new and existing customers.
Cash balances reduced to CZK 352 million (£11.9 million) at 31 March 2024
from CZK 1.3 billion a year earlier. This reduction reflected strong cash
generation through the year, offset by the acquisitions mentioned above, and
the distribution made to the Company in December 2023.
Third-party bank debt increased slightly to CZK 4.1 billion
(£137.0 million). Interest on the bank debt is 100% hedged until the second
half of 2025 when the loan falls due. As measured as a multiple of EBITDA,
CRA's net debt is 3.0x unaudited financial year EBITDA.
The Investment Manager and CRA have begun work on refinancing CRA's senior
debt facilities, which extend until mid-2025.
Operations
Planning work continues on the construction of the Zbraslav data centre on the
outskirts of Prague. This 26MW data centre will be built on a former AM radio
mast site wholly owned by CRA.
CRA successfully bid for and won the spectrum tender which will enable the
launch of one national commercial DAB network and seven regional networks,
including Prague. The company will install DAB transmitters during 2024 and
expects to conclude agreements with existing FM radio clients (representing
additional incremental revenues) which are expected to commence in 2025. CRA
also increased available spectrum through the acquisition of Prague Digital in
January 2024.
In July 2023, CRA signed a new 15-year contract with T-Mobile, in which extra
revenues are expected to be earned from leasing further towers to T-Mobile
that were not in scope of the previous contract.
In Q1 2024, CRA signed a new five-year contract with blue chip US content
provider, Warner Bros Discovery, to broadcast free-to-air Warner Bros content
in DVB-T2.
In line with power planning for the new data centre, CRA has committed to 100%
of its power requirement coming from renewable sources within the next five
years; as at 31 March 2024 68% of the company's electricity use came from
renewable sources.
Outlook
Inflation in the Czech Republic in 2023 was 10.7%. For those revenue contracts
with inflation escalation built in, this will typically take effect from 1
January 2024. Over 66% of CRA's revenue has either full or partial inflation
linkage (excluding Cloud4com).
The date centre and cloud businesses, now strengthened by the addition of
Cloud4com and DC Lužice, are expected to continue to grow revenues and EBITDA
as vacant space is utilised and a higher volume of cloud services are sold.
The 'stickiness' of data centre and cloud contracts with customers is one of
the key attractions of this business unit to CRA.
The addition of the Warner Bros TV broadcast contract, following on from new
broadcast contracts with US content provider AMC, Swedish shopping channel
Topmerch and local broadcaster the A11 group will also support stronger
broadcast revenues during the coming year.
Speed Fibre
£m
Original cost(1) 58.4
Vendor Loan Note interest paid and accrued (0.7)
in the year
Unrealised value gain in the year 3.9
Unrealised foreign exchange loss in the year (0.8)
Value at 31 March 2024 60.8
1. Including €5.6 million (£4.8 million) of accrued deferred
consideration and reported net of £25.5 million Vendor Loan Note.
Speed Fibre is a leading open access fibre infrastructure provider based in
Ireland. The acquisition of Speed Fibre from the Irish Infrastructure Fund was
agreed in August 2023 for a total enterprise value of €190.5 million
(£164.6 million). The equity consideration of €97.2 million
(£83.9 million) was funded by €67.6 million (£58.4 million) in cash and
€29.6 million (£25.5 million) through a vendor loan note with an initial
interest rate of 6% and a maturity of four years. The acquisition completed in
October 2023.
Speed Fibre is the fourth Digital Infrastructure asset acquired by the Company
since its launch in 2021 and is consistent with its investment strategy of
buying cash flow generating platforms capable of growth under its Buy, Build
& Grow model. The acquisition further diversifies the Company's portfolio
on a sub-sector and geographic basis.
Financial performance
Speed Fibre performed well in its financial year to 31 December 2023. Revenues
increased by 3.8% to €78.6 million (£68.4 million at average exchange
rates for the year) and EBITDA increased 5.0% to €23.8 million
(£20.7 million at average exchange rates for the year).
Revenue growth was driven by higher recurring revenues from fibre and wireless
sales and lower than expected churn. EBITDA growth was affected by higher than
expected maintenance costs and the pass through of power costs on some
contracts at low or no margin.
At 31 March 2024, Speed Fibre had €6.1 million of cash (£5.2 million) and
gross debt of €116.0 million (£98.8 million) comprising a term loan of
€100 million and drawn RCF of €16.0 million, both due for repayment in
2029.
The interest on Speed Fibre's term loan is 85% fixed and the interest on the
RCF is all floating rate.
Operations
Speed Fibre continues to deploy growth capital expenditure in the form of
building out fibre networks and connecting new customers. These connections
form the greater part of the annual growth capital expenditure of
€17.9 million (£15.4 million) deployed by the company.
During the year, Speed Fibre completed the upgrade of its DWDM software,
technology that increases the usable bandwidth of fibre networks. The company
also continues to build out connections to Dublin business parks adjacent to
Dublin airport.
About Speed Fibre
Speed Fibre operates 5,400 kilometres of owned and leased fibre and wireless
backhaul across Ireland, on which it provides dark fibre, wavelength and
ethernet services to a mix of carriers, internet service providers, corporate
customers, and the government. The business is also well-positioned to serve
Ireland's growing data centre sector, which is expected to be the fastest
growing hyperscale data centre market in Western Europe over the next six
years. While primarily a backbone provider, Speed Fibre's subsidiary, Magnet
Plus, provides connection and service to approximately 10,000 business and
retail customers in Ireland.
Speed Fibre has a strong ESG and sustainability focus, earning a 5-star rating
from GRESB, an independent organisation providing validated ESG performance
data, and is targeting net zero carbon emissions by 2040.
Outlook
Speed Fibre is a national digital network in a strategically located market.
The management team has demonstrated a track record of operational success,
attracting blue-chip clients that include Vodafone, AT&T, Three and
Verizon. Strong recurring revenues give visibility over future performance,
and support a strong platform from which to invest in accretive strategic
organic and inorganic opportunities.
Hudson
£m
Original cost 55.8
Value at 1 April 2023 57.0
Further investment by the Company in the year 4.9
Unrealised value loss in the year (18.4)
Unrealised foreign exchange loss in the year (1.2)
Value at 31 March 2024 42.3
Financial performance
During the year, Hudson saw revenue increase by 8.5% to $22.3 million
(£17.7 million at average exchange rates for the year) and EBITDA loss
reduce by 17% to $(4.4) million (loss of £3.5 million at average exchange
rates for the year). The reduced loss was a result of the cost control and
operational improvements implemented by Atul Roy as Interim CEO.
Shortly after the year end, Hudson signed a contract with a leading US IT
services provider for 120KW of power. Once fully deployed, this is expected to
increase capacity utilisation of the sixth floor to 475kW, up 36% since March
2023. In total, space utilisation is now at 61% of the fifth and sixth floors.
Other contract wins in the year have included blue-chip customers such as a
major US mobile operator and a leading provider of advance network
communications. The fifth floor remains fully occupied by the anchor tenant.
Notwithstanding these wins, the pace of new sales has continued to be slower
than the Investment Manager had anticipated. In order to improve business
flexibility, Hudson has negotiated with the landlord of 60 Hudson Street to
give up the call options on the seventh and eighth floors for which it was
previously paying. Due to the proximity of the operations to these floors and
the advantageous ownership and control of critical power supply exercised by
Hudson, management consider it unlikely that the space will be taken by an
alternative tenant.
Management continues to market the remaining space and power to interested
potential customers and is in early discussions with counterparties which
would be able to take a considerable portion of the free space.
Operations
The team continue to explore the potential benefits of technological
improvements and upgrades to Hudson, together with other innovative strategic
solutions to increase the attractiveness of the offering to potential tenants.
The team is now increasingly active in the market, with a campaign to target
customers in the financial and AI-driven sectors where low-latency
interconnection and colocation are required.
Outlook
Hudson remains an attractive opportunity for growth. While the space is 61%
utilised, power utilisation is at 43%. The business has no requirement for
upfront investment without new contracts having been signed. The Investment
Manager confirms its view, given in the Interim Report, that Hudson is
unlikely to show positive EBITDA in the next twelve months.
Norkring
The Company acquired Norkring for €6.1 million (£5.2 million) in January
2024. Norkring is a tower business located in the Flemish speaking part of
Belgium, and operates 25 communication and broadcast towers. Of these, eight
are owned freehold and 17 are leased. Norkring is also the holder of two DAB
broadcast licences and one digital terrestrial television multiplex licence.
This small business is EBITDA positive.
The digital television market in Flanders currently has a limited number of
viewers. However, there is a strong market for radio, with average listening
times among the highest in Europe at 3.3 hours per day per listener, together
with a healthy radio advertising market.
Norkring is of most interest to the Company and its portfolio due to its
participation in trials as part of a consortium using 5G broadcast technology,
which are partially funded and supported by the Flemish government. 5G
broadcast technology opens the potential to offer additional services to
broadcasters and mobile operators to meet the growing demand for watching
video content on the move. Video content already drives the most traffic on
public mobile networks, accounting for around two-thirds of overall global
mobile data consumption.
Principal risks and uncertainties
Risk identification, monitoring and review
Under the FCA's Disclosure Guidance and Transparency Rules, the Directors are
required to identify those material risks to which the Company is exposed and
take appropriate steps to mitigate those risks.
The Company maintains a comprehensive risk matrix, on which are recorded the
significant risks that have been identified and that could affect the
Company's operations and those of its subsidiaries and investments. This
includes risks that were identified in a comprehensive risk identification and
assessment process which was undertaken before the launch of the Company,
together with other risks that have been identified since IPO.
The risk matrix is maintained by the Investment Manager and is reviewed
quarterly by the Audit Committee. It is updated whenever a new risk is
identified or when the assessment of a previously identified risk changes.
Risk assessment
Every risk that is identified is considered by the Investment Manager and by
the Directors, with specialist third party advice where necessary. That
assessment is both qualitative and quantitative, considering the nature of the
risk and the likelihood of it crystallising, together with the financial,
legal and/or operational consequences if it does. For each risk, a two-part
score is assigned, assessing the likelihood and impact on a scale of 1 (low)
to 5 (high). This initial assessment is before any risk mitigation activity.
This scoring system has changed slightly since the previous year, when the
likelihood and impact of each risk was assigned a score of high, medium or
low. The change to the scoring system was made to allow for a more rigorous
and granular assessment of each risk.
Risk management
The Board thoroughly considers the process for identifying, evaluating and
managing any significant risks faced by the Company, including emerging risks,
on an ongoing basis and these are reported to and discussed at each Board
meeting. The Board ensures that to the extent practicable effective controls
are in place to mitigate these risks and that a satisfactory compliance regime
exists to ensure all applicable local and international laws and regulatory
obligations are met.
Whenever a new risk is identified, it is assessed and scored, and the Audit
Committee considers how best to manage the risk. For risks whose scoring
changes as a result of a review, the Audit Committee considers whether any
previously identified mitigating factors remain appropriate and sufficient, or
whether additional controls are necessary.
There are several options for managing risks once identified. Some risks are
likely to have minimal impact and the Company may choose simply to accept
them. Some risks can be shared with or transferred to other parties, such as
by purchasing insurance. Some risks can be avoided altogether by declining to
participate in the process which gives rise to the risk, for example by
declining to make an offer for an asset where insufficient information is
available to allow a properly informed assessment of the returns available
from it. Most risks, though, are managed by identifying mitigating actions
which can be taken, either to minimise the probability of the risk
materialising or to minimise any impact, or both.
Having assessed the options for managing risks, and having put in place
appropriate risk mitigation measures, the risks are reassessed using the same
two-part scoring system as before to determine a post-mitigation score. This
reassessment enables the Directors to measure the effectiveness of the risk
management measures put in place, and to identify any areas where further
measures may be required.
The Company's assets consist primarily of investments in Digital
Infrastructure assets, with a predominant focus on data centres, mobile
telecommunications/broadcast towers and fibre-optic network assets. Its
principal risks are therefore related to market conditions in the Digital
Infrastructure sector in general, but also the particular circumstances of the
businesses in which it is invested. The Investment Manager seeks to mitigate
these risks through active asset management initiatives and carrying out due
diligence work on potential targets before entering into any investments.
Investment valuation
The Company's business model, and many of the specific principal risks
identified and shown in the table, relate to the Investment Manager's ability
to value a business appropriately. This is relevant at several stages in
acquiring and managing
an investment:
¾ At the initial stage of considering whether a particular target is an
attractive investment prospect, and therefore whether
to apply resources to pursuing it;
¾ At the offer stage, in considering at what level to pitch a bid,
setting that level high enough to be attractive to the seller but not so high
as to dilute the returns that may potentially be achieved by the Company from
the asset;
¾ After acquisition, in considering the performance of an investment in
delivering the Company's target returns and whether the investment should be
retained or whether a disposal could achieve greater shareholder value;
¾ When a disposal is contemplated, in determining what price should be
sought for the asset; and
¾ At each financial reporting date, in determining the value at which
the investment should be recognised in the Company's financial statements.
The Investment Manager has extensive expertise in valuing businesses at all
stages of making, holding and disposing of investments. It has formed an
Investment Committee, consisting of six senior members of the Investment
Manager's team, which meets whenever significant decisions are required
involving making, holding or disposing of investments. That Investment
Committee informs and makes recommendations to the Board, and the Board has
the opportunity to ask questions and seek further information. The Company has
also appointed an independent valuation expert, who provides a reasonableness
check of the Investment Manager's valuations at each half-year financial
reporting date, and performs a full independent valuation at each financial
year end. The key areas of risk faced by the Company are summarised below.
1 The capital markets may remain effectively closed to the Company for a
significant period. As a consequence, the Company may be unable to raise new
capital and it may therefore be unable to progress investment opportunities.
To mitigate the risk, the Company has acquired a portfolio of cash-generating
assets with significant organic growth prospects, which together are capable
of providing returns meeting the investment objective without further
acquisitions. The Investment Manager also continues to consider potential
alternative sources of capital, including debt and coinvestment. Risk: Level
2 There is a risk that, even when the capital markets are open, insufficient
numbers of investors are prepared to invest new capital, or that investors are
unwilling to invest sufficient new capital, to enable the Company to achieve
its investment objectives. To mitigate the risk, the Company has established a
track record of successful investments, which together are capable of
providing returns meeting the investment objective without further
acquisitions. The Investment Manager has deep sector knowledge and investment
expertise and is well-known and respected in the market. Risk: New
3 The Company may lose investment opportunities if it does not match investment
prices, structures and terms offered by competing bidders. Conversely, the
Company may experience decreased rates of return and increased risk of loss if
it matches investment prices, structures and terms offered by competitors. To
mitigate the risk, the Investment Manager operates a prudent and disciplined
investment strategy, participating in transaction processes only where it can
be competitive without compromising its investment objectives. Risk: Level
4 There can be no guarantee or assurance the Company will achieve its investment
objectives, which are indicative targets only. Investments may fail to deliver
the projected earnings, cash flows and/or capital growth expected at the time
of acquisition, and valuations may be affected by foreign exchange
fluctuations. The actual rate of return may be materially lower than the
targeted rate of return. To mitigate the risk, the Investment Manager performs
a rigorous due diligence process with internal specialists and expert
professional advisers in fields relevant to the proposed investment before any
investment is made. The Investment Manager also carries out a regular review
of the investment environment and benchmarks target and actual returns against
the industry and competitors. Risk: Level
5 Actual results of portfolio investments may vary from the projections, which
may have a material adverse effect on NAV. To mitigate the risk, the
Investment Manager provides the Board with at least quarterly updates of
portfolio investment performance and detail around any material variation from
budget and forecast returns. Risk: Level
6 The Company invests in unlisted Digital Infrastructure assets, and such
investments are illiquid. There is a risk that it may be difficult for the
Company to sell the Digital Infrastructure assets and the price achieved on
any realisation may be at a discount to the prevailing valuation of the
relevant Digital Infrastructure asset. The Investment Manager has considerable
experience across relevant digital infrastructure sectors, and senior members
of the team have had leadership roles in over $80 billion of relevant
transactions. To further mitigate the risk, the Company seeks a diversified
range of investments so that exposure to temporary poor conditions in any one
market is limited. Risk: New
7 The Company may invest in Digital Infrastructure assets which are in
construction or construction-ready or otherwise require significant future
capital expenditure. Digital Infrastructure assets which have significant
capital expenditure requirements may be exposed to cost overruns, construction
delay, failure to meet technical requirements or construction defects. The
Investment Manager has significant experience of managing construction risks
arising from Digital Infrastructure assets and will also engage third parties
where appropriate to oversee such construction. Risk: Level
Statement of Financial Position
As at 31 March 2024
Note As at As at
31 March 2024 31 March 2023
£'000 £'000
Non-current assets
Investments at fair value through profit or loss 6 1,005,937 872,315
1,005,937 872,315
Current assets
Receivables 8 17,279 14,680
Cash and cash equivalents 60,085 10,498
77,364 25,178
Current liabilities
Loans and borrowings 9 (157,629) (20,287)
Accrued expenses and other creditors (5,012) (1,495)
(162,641) (21,782)
Net current (liabilities)/assets (85,277) 3,396
Net assets 920,660 875,711
Equity
Equity share capital 10 774,656 779,157
Retained earnings - Revenue (14,538) (196)
Retained earnings - Capital 160,542 96,750
Total equity 920,660 875,711
Number of shares in issue
Ordinary shares 10 766,290,477 772,509,707
766,290,477 772,509,707
Net asset value per ordinary share (pence) 14 120.15 113.36
The financial statements were approved and authorised for issue by the Board
of Directors on 19 June 2024 and signed on their behalf by:
Shonaid
Jemmett-Page
Sian Hill
Chairman
Director
The accompanying notes form an integral part of these financial statements.
Statement of Comprehensive Income
Year ended 31 March 2024
Year ended 31 March 2024 Year ended 31 March 2023
Note Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Movement in fair value of investments 6 - 99,588 99,588 - 73,079 73,079
Unrealised foreign exchange (loss)/gains on investment 6 - (3,013) (3,013) - 6,143 6,143
Management fee income 6 1,408 - 1,408 - - -
Realised loss on restructure 6 - - - - (3,927) (3,927)
Interest income 6 1,877 - 1,877 2,749 - 2,749
3,285 96,575 99,860 2,749 75,295 78,044
Operating expenses
Investment acquisition costs - (568) (568) - (6,553) (6,553)
Other expenses 4 (7,628) (1,888) (9,516) (9,553) (1,793) (11,346)
(7,628) (2,456) (10,084) (9,553) (8,346) (17,899)
Operating (loss)/profit (4,343) 94,119 89,776 (6,804) 66,949 60,145
Foreign exchange movements on working capital - 518 518 - 11,119 11,119
Gain on expired foreign exchange forwards - - - - 580 580
Finance income 5 2,126 - 2,126 9,706 - 9,706
Finance expense 17 (12,125) - (12,125) (374) - (374)
(Loss)/profit for the year before tax (14,342) 94,637 80,295 2,528 78,648 81,176
Tax charge 12 - - - - - -
(Loss)/profit for the year after tax (14,342) 94,637 80,295 2,528 78,648 81,176
Total comprehensive (loss)/income for the year (14,342) 94,637 80,295 2,528 78,648 81,176
Weighted average number of shares
Basic 14 770,510,117 770,510,117 770,510,117 773,442,556 773,442,556 773,442,556
Diluted 14 770,510,117 770,510,117 770,510,117 773,442,556 773,442,556 773,442,556
Earnings per share
Basic earnings from continuing operations in the year (pence) 14 (1.86) 12.28 10.42 0.33 10.17 10.50
Diluted earnings from continuing operations in the year (pence) 14 (1.86) 12.28 10.42 0.33 10.17 10.50
The accompanying notes form an integral part of these financial statements.
Statement of Changes in Equity
Year ended 31 March 2024
Note Share capital Retained Retained Total equity
£'000 earnings earnings £'000
- Revenue - Capital
£'000 £'000
Opening net assets attributable to shareholders at 1 April 2022 779,896 (2,724) 45,174 822,346
Issue of share capital 295 - - 295
Share issue costs (91) - - (91)
Shares repurchased in the year (943) - - (943)
Dividends paid during the year 15 - - (27,072) (27,072)
Total comprehensive income for the year - 2,528 78,648 81,176
Closing net assets attributable to shareholders as at 31 March 2023 779,157 (196) 96,750 875,711
Note Share capital Retained Retained Total equity
£'000 earnings earnings £'000
- Revenue - Capital
£'000 £'000
Opening net assets attributable to shareholders at 1 April 2023 779,157 (196) 96,750 875,711
Shares repurchased in the year (4,501) - - (4,501)
Dividends paid during the year 15 - - (30,845) (30,845)
Total comprehensive (loss)/income for the year - (14,342) 94,637 80,295
Closing net assets attributable to shareholders as at 31 March 2024 774,656 (14,538) 160,542 920,660
The accompanying notes form an integral part of these financial statements.
Statement of Cash Flows
Year ended 31 March 2024
Note Year ended Year ended
31 March 2024 31 March 2023
£'000 £'000
Operating activities
Operating profit for the year 89,776 60,145
Adjustments to operating activities
Movement in fair value of investments 6 (99,588) (73,079)
Unrealised foreign exchange loss/(gain) on investments 6 3,013 (6,143)
Management fee income (1,408) -
Realised loss on restructure 6 - 3,927
Interest capitalised and receivable on shareholder loan investments 6 (1,877) (2,749)
Increase in receivables (2,979) (4,444)
Decrease in payables 31 474
Cash received on settled foreign currency contract 37,167 361,652
Cash paid on foreign currency contract (37,177) (353,000)
Net cash flows used in operating activities (13,104) (13,217)
Cash flows used in investing activities
Investment additions 6 (66,224) (384,415)
Cash collateral held for investing purposes - 41,469
Finance income 449 9,549
Loan interest received 3,978 -
Repayment of shareholder loan received 26,384 -
Net cash flows used in investing activities (35,413) (333,397)
Cash flows generated from/(used in) financing activities
Issue of share capital - 295
Payment of issue costs - (91)
Shares repurchased (4,501) (943)
Loan drawn down 9 148,992 20,287
Loan repaid (7,610) -
Finance costs paid (7,428) (374)
Bank interest received 5 418 157
Dividends paid 15 (30,845) (27,072)
Net cash flows generated from /(used in) financing activities 99,026 (7,741)
Increase/(Decrease) in cash and cash equivalents during the year 50,509 (354,355)
Cash and cash equivalents at the beginning of the year 10,498 353,734
Exchange translation movement (922) 11,119
Cash and cash equivalents at the end of the year 60,085 10,498
The accompanying notes form an integral part of these financial statements.
Notes to the financial statements
1. General information
Cordiant Digital Infrastructure Limited (the Company; LSE ticker: CORD) was
incorporated and registered in Guernsey on 4 January 2021 with registered
number 68630 as a non-cellular company limited by shares and is governed in
accordance with the provisions of the Companies (Guernsey) Law 2008. The
registered office address is East Wing, Trafalgar Court, Les Banques, St Peter
Port, Guernsey GY1 3PP. The Company's ordinary shares were admitted to
trading on the Specialist Fund Segment of the London Stock Exchange on
16 February 2021 and its C Shares on 10 June 2021. On 20 January 2022,
all C Shares were converted to ordinary shares. A second issuance of ordinary
shares took place on 25 January 2022. Note 10 gives more information on
share capital.
2. Material accounting policies
The material accounting policies applied in the preparation of these financial
statements are set out below. These policies have been consistently applied to
all the years presented, unless otherwise stated.
Basis of preparation
The financial statements have been prepared in accordance with IFRS as issued
by the IASB, the Statement of Recommended Practice issued by the Association
of Investment Companies (the AIC SORP) and the Companies (Guernsey) Law 2008.
The financial statements have been prepared on an historical cost basis as
modified for the measurement of certain financial instruments at fair value
through profit or loss. They are presented in pounds sterling, which is the
currency of the primary economic environment in which the Company operates,
and are rounded to the nearest thousand, unless otherwise stated.
The material accounting policies are set out below.
Going concern
The financial statements have been prepared on a going concern basis as the
Directors have a reasonable expectation that the Company has adequate
resources to continue in operational existence for the foreseeable future.
While the ongoing geopolitical conflicts and market volatility in different
parts of the world during the year have affected the way in which the
Company's investee companies are conducted, this did not have a material
direct effect on the results of the business. The Directors are satisfied that
the resulting macroeconomic environment is not likely to significantly
restrict business activity.
The Directors have reviewed different scenarios and stress testing of the cash
flow forecasts prepared by the Investment Manager to understand the resilience
of the Company's cash flows to adverse scenarios.
The Directors and Investment Manager are actively monitoring these risks and
their potential effect on the Company and its underlying investments. In
particular, they have considered the following specific key potential impacts:
- increased volatility in the fair value of investments
- disruptions to business activities of the underlying investments; and
- recoverability of income and principal and allowance for expected credit
losses.
In considering the above key potential impacts on the Company and its
underlying investments, the Investment Manager has assessed these with
reference to the mitigation measures in place. Based on this assessment, the
Directors do not consider that the effects of the above risks have created a
material uncertainty over the assessment of the Company as a going concern.
As further detailed in note 6 to the financial statements, the Board uses a
third-party valuation provider to perform a reasonableness assessment of the
Investment Manager's valuation of the underlying investments. Additionally,
the Investment Manager and Directors have considered the cash flow forecast to
determine the term over which the Company can remain viable given its current
resources.
On the basis of this review, and after making due enquiries, the Directors
have a reasonable expectation that the Company has adequate resources to
continue in operational existence for at least the period from 19 June 2024
to 30 September 2025, being the period of assessment considered by the
Directors. Accordingly, they continue to adopt the going concern basis in
preparing the financial statements.
Accounting for subsidiaries
The Directors have concluded that the Company has all the elements of control
as prescribed by IFRS 10 'Consolidated Financial Statements' in relation to
all its subsidiaries and that the Company satisfies the three essential
criteria to be regarded as an Investment Entity as defined in IFRS 10. The
three essential criteria are that the entity must:
- obtain funds from one or more investors for the purpose of providing these
investors with professional investment management services;
- commit to its investors that its business purpose is to invest its funds
solely for returns from capital appreciation, investment income or both; and
- measure and evaluate the performance of substantially all of its investments
on a fair value basis.
In satisfying the second essential criterion, the notion of an investment time
frame is critical and an Investment Entity should have an exit strategy for
the realisation of its investments. The Board has approved a divestment
strategy under which the Investment Manager will, within two years from
acquisition of an investment and at least annually thereafter, undertake a
review of the current condition and future prospects of the investment. If the
Investment Manager concludes that:
- the future prospects for an investment are insufficiently strong to meet the
Company's rate of return targets; or
- the value that could be realised by an immediate disposal would outweigh the
value of retaining the investment; or
- it would be more advantageous to realise capital for investment elsewhere than
to continue to hold the investment
then the Investment Manager will take appropriate steps to dispose of the
investment.
Also as set out in IFRS 10, further consideration should be given to the
typical characteristics of an Investment Entity, which are that:
- it should have more than one investment, to diversify the risk portfolio and
maximise returns;
- it should have multiple investors, who pool their funds to maximise investment
opportunities;
- it should have investors that are not related parties of the entity; and
it should have ownership interests in the form of equity or similar interests.
The Directors are of the opinion that the Company meets the essential criteria
and typical characteristics of an Investment Entity. Therefore, subsidiaries
are measured at fair value through profit or loss, in accordance with IFRS 9
'Financial Instruments'. Fair value is measured in accordance with IFRS 13
'Fair Value Measurement'.
Financial instruments
In accordance with IFRS 9, financial assets and financial liabilities are
recognised in the Statement of Financial Position when the Company becomes a
party to the contractual provisions of the instrument.
Financial assets
The classification of financial assets at initial recognition depends on the
purpose for which the financial asset was acquired and its characteristics.
All purchases of financial assets are recorded at the date on which the
Company became party to the contractual requirements of the financial asset.
The Company's financial assets principally comprise investments held at fair
value through profit or loss, cash and cash equivalents, and trade
receivables.
Financial assets are recognised at the date of purchase or the date on which
the Company became party to the contractual requirements of the asset.
Financial assets are initially recognised at cost, being the fair value of
consideration given. Transaction costs of financial assets at fair value
through profit or loss are recognised in the Statement of Comprehensive Income
as incurred.
A financial asset is derecognised (in whole or in part) either:
- when the Company has transferred substantially all the risks and rewards of
ownership; or
- when it has neither transferred nor retained substantially all the risks and
rewards and when it no longer has control over the assets or a portion of the
asset; or
- when the contractual right to receive cash flow has expired.
Investments held at fair value through profit or loss
Investments are measured at fair value through profit or loss. Gains or losses
resulting from the movement in fair value are recognised in the Statement of
Comprehensive Income at each interim and annual valuation point, 30 September
and 31 March respectively.
The loans provided to subsidiaries are held at fair value through profit or
loss as they form part of a managed portfolio of assets whose performance is
evaluated on a fair value basis. These loans are recognised at the loan
principal value plus outstanding interest. Any gain or loss on the loan
investment is recognised in profit or loss.
Fair value is defined as the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market
participants at the measurement date. Fair value is calculated on an
unlevered, discounted cash flow basis in accordance with IFRS 13.
When available, the Company measures fair value using the quoted price in an
active market. A market is regarded as 'active' if transactions for the asset
or liability take place with sufficient frequency and volume to provide
pricing information on an ongoing basis. If there is no quoted price in an
active market, then the Company uses valuation techniques that maximise the
use of relevant observable inputs and minimise the use of unobservable inputs.
The chosen valuation technique incorporates all of the factors that market
participants would take into account when pricing a transaction.
Valuation process
The Investment Manager is responsible for proposing the valuation of the
assets held by the Company, and the Directors are responsible for reviewing
the Company's valuation policy and approving the valuations for 31 March and
30 September annually.
The Investment Manager reviews the key assumptions of the valuations of the
assets proposed to the Board and performs sensitivity analysis on them. The
results of this sensitivity analysis are included in note 6.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits and other
short-term highly liquid investments with an original maturity of three months
or less that are readily convertible to a known amount of cash and are subject
to an insignificant risk of changes in value.
Cash Collateral
Cash collateral is classified as a financial asset at amortised cost. It is
measured at amortised cost. Cash collateral is recorded based on agreements
entered into with an entity without notable history of default causing ECL to
be immaterial and therefore not recorded.
Financial liabilities
Financial liabilities are classified according to the substance of the
contractual agreements entered into and are recorded on the date on which the
Company becomes party to the contractual requirements of the financial
liability.
The Company's financial liabilities measured at amortised cost include trade
and other payables, intercompany loans and other short-term monetary
liabilities which are initially recognised at fair value and subsequently
measured at amortised cost using the effective interest rate method.
A financial liability (in whole or in part) is derecognised when the Company
has extinguished its contractual obligations, it expires or is cancelled. Any
gain or loss on derecognition is taken to the Statement of Comprehensive
Income.
Equity
Financial instruments issued by the Company are treated as equity if the
holder has only a residual interest in the assets of the Company after the
deduction of all liabilities. The Company's ordinary shares and Subscription
Shares are classified as equity.
Share issue costs directly attributable to the issue of ordinary shares are
shown in equity as a deduction from share capital. When shares recognised as
equity are repurchased, the amount of the consideration paid, which includes
directly attributable costs, is recognised as a deduction from equity.
Dividends
Dividends payable are recognised as distributions in the financial statements
when the Company's obligation to make payment has been established.
Revenue recognition
Dividend income is recognised when the Company's entitlement to receive
payment is established. Other income is accounted for on an accruals basis
using the effective interest rate method.
Expenses
Expenses are recognised on an accruals basis in the Statement of Comprehensive
Income in the period in which they are incurred.
Taxation
The Company has met the conditions in section 1158 Corporation Tax Act 2010
and the Investment Trust (Approved Company) (Tax) Regulations 2011 for each
period to date, and it is the intention of the Directors to conduct the
affairs of the Company so that it continues to satisfy those conditions and
continue to be approved by HMRC as an investment trust.
In respect of each accounting period for which the Company is approved by HMRC
as an investment trust, the Company will be exempt from UK corporation tax on
its chargeable gains and its capital profits from creditor loan relationships.
The Company will, however, be subject to UK corporation tax on its income
(currently at a rate of 25%).
In principle, the Company will be liable to UK corporation tax on its dividend
income. However, there are broad-ranging exemptions from this charge which
would be expected to be applicable in respect of most of the dividends the
Company may receive.
A company that is an approved investment trust in respect of an accounting
period is able to take advantage of modified UK tax treatment in respect of
its 'qualifying interest income' for an accounting period. It is expected that
the Company will have material amounts of qualifying interest income and that
it may, therefore, decide to designate some or all of the dividends paid in
respect of a given accounting period as interest distributions.
To the extent that the Company receives income from, or realises amounts on
the disposal of, investments in foreign countries it may be subject to foreign
withholding or other taxation in those jurisdictions. To the extent it relates
to income, this foreign tax may, to the extent not relievable under a double
tax treaty, be able to be treated as an expense for UK corporation tax
purposes, or it may be treated as a credit against UK corporation tax up to
certain limits and subject to certain conditions.
Current tax is the expected tax payable on the taxable income for the period,
using tax rates that have been enacted or substantively enacted at the
reporting date. Deferred tax is the tax expected to be payable or recoverable
on temporary differences between the carrying amounts of assets and
liabilities in the financial statements and the corresponding tax bases used
in the computation of taxable profit. Deferred tax liabilities are generally
recognised for all taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable profits will be
available against which deductible temporary differences can be utilised.
Deferred tax assets and liabilities are not recognised if the temporary
differences arise from goodwill or from the initial recognition of other
assets and liabilities in a transaction that is not a business combination and
that affects neither the taxable profit nor the accounting profit. Deferred
tax assets and liabilities are recognised for taxable temporary differences
arising on investments, except where the Company is able to control the timing
of the reversal of the difference and it is probable that the temporary
difference will not reverse in the foreseeable future. Deferred tax is
calculated at the tax rates that are expected to apply in the period when the
liability is settled or the asset is realised. Deferred tax is charged or
credited to the Statement of Comprehensive Income except when it relates to
items charged or credited directly to equity, in which case the deferred tax
is also dealt with directly in equity.
Deferred tax assets and liabilities are offset when: there is a legally
enforceable right to set off tax assets against tax liabilities; they relate
to income taxes levied by the same taxation authority; and the Company intends
to settle its current tax assets and liabilities on a net basis. Deferred tax
assets and liabilities are not discounted.
Foreign currencies
The functional currency of the Company is the pound sterling, reflecting the
primary economic environment in which it operates. The Company has chosen
pounds sterling as its presentation currency for financial reporting purposes.
Foreign currency transactions during the year, including purchases and sales
of investments, income and expenses are translated into pounds sterling at the
rate of exchange prevailing on the date of the transaction.
Monetary assets and liabilities denominated in currencies other than pounds
sterling are retranslated at the rate of exchange ruling at the reporting
date. Non-monetary items that are measured in terms of historical cost in a
currency other than pounds sterling are translated using the exchange rates at
the dates of the initial transactions.
Non-monetary items measured at fair value in a currency other than pounds
sterling are translated using the exchange rates at the date as at which the
fair value was determined. Foreign currency transaction gains and losses on
financial instruments classified as at fair value through profit or loss are
included in profit or loss in the Statement of Comprehensive Income as part of
the change in fair value of investments.
Foreign currency transaction gains and losses on financial instruments are
included in profit or loss in the Statement of Comprehensive Income as a
finance income or expense.
Segmental reporting
The chief operating decision maker, who is responsible for allocating
resources and assessing performance of the operating segments, has been
identified as the Board of Directors as a whole. The key measure of
performance used by the Directors to assess the Company's performance and to
allocate resources is the Company's NAV, as calculated under IFRS as issued by
the IASB, and therefore no reconciliation is required between the measure of
profit or loss used by the Board and that contained in the Annual Report.
For management purposes, the Company is organised into one main operating
segment, which invests in Digital Infrastructure Assets.
Due to the Company's nature, it has no customers.
New standards, amendments and interpretations issued and effective for the
financial period beginning 1 April 2023
The Board of Directors has considered new standards and amendments that are
mandatorily effective from 1 January 2023 and with the exception of the
Disclosure of Accounting Policies (Amendment to IAS1) has not had a
significant impact on the financial statements. The Disclosure of Accounting
Policies amendment generated a review of and reduction in the accounting
policy disclosures to reflect only material accounting policy information.
Accounting policy information is material if, when considered together with
other information included in an entity's financial statements, it can
reasonably be expected to influence decisions that primary users of the
financial statements make on the basis of those financials statements.
New standards, amendments and interpretations issued but not yet effective
There are a number of new standards, amendments to standards and
interpretations which are not yet mandatory for the 31 March 2024 reporting
period and have not been adopted early by the Company. These standards are not
expected to have a material impact on the financial statements of the Company
in the current or future reporting periods and on foreseeable future
transactions.
3. Significant accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make
judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets, liabilities, income,
and expenses.
Estimates and judgements are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances. The key estimates made by
the Company are disclosed in note 6.
The resulting accounting estimates will, by definition, seldom equal the
related actual results. Revisions to accounting estimates are recognised in
the period in which the estimate is revised and
in any future periods affected.
Judgements
In the process of applying the Company's accounting policies, management has
made the following judgements, which have the most significant effect on the
amounts recognised in the financial statements:
Assessment as an Investment Entity
In the judgement of the Directors, the Company qualifies as an Investment
Entity under IFRS 10 and therefore its subsidiary entities have not been
consolidated in the preparation of the financial statements. Further details
of the impact of this accounting policy are included in note 7.
Assumptions and estimation uncertainties
Information about assumptions and estimation uncertainties that have a
significant risk of resulting in a material adjustment to the carrying amounts
of assets and liabilities within the year ended 31 March 2024 is included in
note 6 and relates to the determination of fair value of investments with
significant unobservable inputs.
Climate change
In preparing the financial statements, the Directors have considered the
impact of climate change, particularly in the context of the climate change
risks identified in the ESG report section of the Strategic report.
In preparing the financial statements, the Directors have considered the
medium- and longer-term cash flow impacts of climate change on a number of key
estimates within the financial statements, including:
- the estimates of future cash flows used in assessments of the fair value of
investments; and
- the estimates of future profitability used in the assessment of distributable
income.
These considerations did not have a material impact on the financial reporting
judgements and estimates in the current year. This reflects the conclusion
that climate change is not expected to have a significant impact on the
Company's short- or medium-term cash flows including those considered in the
going concern and viability assessments.
4. Other expenses
Other expenses in the Statement of Comprehensive Income comprises:
Note Year ended Year ended
31 March 2024 31 March 2023
£'000 £'000
Management fees 13 5,928 7,271
Legal and professional fees 713 1,281
Aborted deal fees 1,888 1,793
Directors' fees 185 185
Fees payable to the statutory auditor 11 198 195
Other expenses 604 621
9,516 11,346
5. Finance income
Finance income in the Statement of Comprehensive Income comprises:
Year ended Year ended
31 March 2024 31 March 2023
£'000 £'000
Bank interest received 418 157
Interest on fixed term deposits(1) 1,708 9,549
2,126 9,706
1. During the year ended 31 March 2024, the Company invested
£180.5 million in RBSI and £7.0 million Investec fixed term deposits at an
average interest rate of 3% per annum. At 31 March 2024, £53.8 million of
these deposits had not matured.
During the year ended 31 March 2024, the Company entered into two foreign
exchange forward contracts totalling £37.2 million. The maturity date of one
of these foreign exchange forwards was 27 March 2024 and the other instrument
was 3 May 2024. The fair value gain or loss on these instruments during the
year was immaterial.
6. Investments at fair value through profit or loss
Year ended 31 March 2024 Year ended 31 March 2023
Loans Equity Total Loans Equity Total
£'000 £'000 £'000 £'000 £'000 £'000
Opening balance 37,350 834,965 872,315 27,671 382,185 409,856
Additions 4,807 61,485 66,292 4,691 379,724 384,415
Shareholder loan interest capitalised - - - 521 - 521
Interest on promissory notes 1,877 - 1,877 2,228 - 2,228
Shareholder loan repayment (32,530) - (32,530) - - -
Net (losses)/gains on investments at fair value through profit or loss (2,060) 100,043 97,983 2,239 73,056 75,295
9,444 996,493 1,005,937 37,350 834,965 872,315
During the year ended 31 March 2024 the Company, through its indirect
subsidiary Cordiant Digital Holdings Ireland (CDHI), acquired Speed Fibre DAC.
The Company subscribed for 40 million additional shares in CDH UK for cash
consideration of £56.1 million in order to provide funds for CDHI to complete
the acquisition of Speed Fibre DAC. The value of the Company's indirect
investment in Speed Fibre DAC at 31 March 2024 was £86.4 million; after
taking into account the vendor loan note, the net value is £60.8 million.
The Company also subscribed for an additional 3.5 million ordinary shares in
CDH UK for cash consideration of £5.4 million which was directed towards
acquisition of Norkring België NV (Norkring) at £5.4 million on 15 January
2024. The timing of this transaction was close to the year end and therefore
the investment has not been revalued as the price of the recent acquisition is
considered to be equal to its fair value at 31 March 2024.
In the prior year ended 31 March 2023, the Company restructured its loan and
equity investments in Communication Investments Holdings s.r.o. (CIH), an
entity incorporated in the Czech Republic and the parent company of České
Radiokomunikace a.s. (CRA), to hold them indirectly through Cordiant Digital
Holdings UK Limited (CDHUK) and Cordiant Digital Holdings Two Limited (CDH2),
two wholly owned subsidiaries of the Company. CDH2 issued shares and
promissory notes to the Company in consideration for the transfer of the loan
and equity investments in CIH. CDHUK then issued shares and promissory notes
to the Company in consideration for the transfer of the shares and promissory
notes of CDH2. The value of the Company's indirect investment in CRA as at 31
March 2024 was £385.9 million (31 March 2023: £389.1 million), comprising an
equity investment only as the loan of £32.5 million (31 March 2023: £26.2
million) including the accrued interest during the year was fully settled.
The Company, through its indirect subsidiary Cordiant Digital Holdings One
Limited (CDH1), acquired 100% of the equity of Emitel S.A. during the year
ended 31 March 2023. During the year ended 31 March 2024, CDH1 restructured
part of its equity investment in Emitel S.A. into a loan investment. £37.2
million (PLN 192.5 million) was transferred from equity to loan. At 31 March
2024, the value of CDH1's equity investment was £490.0 million (31 March
2023: £429.0 million) and the loan investment was £35.0 million (31 March
2023: £ nil).
The fair value of the shares and promissory notes issued by CDHUK are included
in the table above, and represent the fair values of the underlying
investments together with other assets and liabilities of its subsidiaries.
The promissory notes were repaid in full on 19 December 2023. The fair value
of the Company's equity investment in CDHUK amounted to £963.8 million at 31
March 2024 (31 March 2023: £782.8 million) and the loan investment amounted
to £nil (31 March 2023: £32.5 million). Movements in the fair value of CDHUK
are driven largely by movements in the fair value of the underlying investee
companies calculated in their local currencies, and by the effects of foreign
currency fluctuations when those fair values are translated into sterling.
Further information regarding foreign currency exposure is given in note 16.
The Company has direct investments in CDIL Data Centre USA LLC, the legal
entity operating as Hudson Interxchange (previously operating under the name
DataGryd). As at 31 March 2024, the equity investment was valued at £32.8
million (31 March 2023: £52.3 million) and the loan investments amounted to
£9.4 million (31 March 2023: £4.7 million).
The table below details all gains on investments through profit or loss.
As at 31 March 2024 As at 31 March 2023
Loans Equity Total Loans Equity Total
£'000 £'000 £'000 £'000 £'000 £'000
Movement in fair value of investments - 99,588 99,588 - 73,079 73,079
Unrealised foreign exchange (loss)/gain on investment (2,060) (953) (3,013) - 6,143 6,143
Management fee income 1,408 - 1,408 - - -
Realised loss on restructure - - - - 3,927 3,927
Shareholder loan interest income 1,877 - 1,877 2,546 3,597 6,143
Total investment income recognised in the year (183) 100,043 99,860 4,988 73,056 78,044
Fair value measurements
IFRS 13 requires disclosure of fair value measurement by level. The level of
fair value hierarchy within the financial assets or financial liabilities is
determined on the basis of the lowest level input that is significant to the
fair value measurement. Financial assets and financial liabilities are
classified in their entirety into only one of the following three 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 determination of what constitutes 'observable' requires significant
judgement by the Company. The Directors consider observable data to be market
data that is readily available, regularly distributed or updated, reliable and
verifiable, not proprietary, and provided by independent sources that are
actively involved in the relevant market.
The Company's investments have been classified within Level 3 as the
investments are not traded and contain unobservable inputs. The valuations
have been carried out by the Investment Manager. In order to obtain assurance
in respect of the valuations calculated by the Investment Manager, the Company
has engaged a third-party valuations expert to carry out an independent
assessment of the unobservable inputs and of the forecast cash flows of the
Company's investments.
During the year ended 31 March 2024, there were no transfers of investments
at fair value through profit or loss from or to Level 3 (31 March 2023: nil)
The Company's investments in CRA, Hudson Interxchange, Speed Fibre DAC and
Emitel have been valued using a DCF methodology. This involves forecasting the
entity's future cash flows, taking into account the terms of existing
contracts, expected rates of contract renewal and targeted new contracts, and
the economic and geopolitical environment. These cash flows are discounted at
the entity's estimated weighted average cost of capital (WACC). This method
also requires estimating a terminal value, being the value of the investment
at the end of the period for which cash flows can be forecast with reasonable
accuracy, which is March 2030 for CRA, December 2030 for Emitel, December
2031 for Speed Fibre and March 2037 for Hudson Interxchange. The terminal
value is calculated using an assumed terminal growth rate (TGR) into
perpetuity based on anticipated industry trends and long-term inflation rates.
The Norkring investment has been valued at cost, the price of the most recent
transaction being regarded as the most appropriate indicator of fair value.
The DCF valuation methodology requires estimation of unobservable inputs. The
following table summarises the effect on the valuation of the Company's
portfolio of reasonably possible alternative investment assumptions with
regards to those estimates; these are calculated using the DCF valuation
models referred to above.
31 March 2024
Unobservable input Range Valuation if Movement in Valuation if Movement in
rate increases valuation (£m) rate decreases valuation (£m)
by 1% (£m) by 1% (£m)
WACC 9.00%-10.13% 858 (182) 1,276 236
TGR 1.25%-2.40% 1,194 154 920 (119)
31 March 2023
Unobservable input Range Valuation if Movement in Valuation if Movement in
rate increases valuation (£m) rate decreases valuation (£m)
by 1% (£m) by 1% (£m)
WACC 8.20%-11.00% 729 (146) 1,063 188
TGR 1.25%-2.25% 993 118 7832 (92)
Changes to WACC and TGR could be driven by, among other factors: market
movements in interest rates, inflation rates and other macroeconomic
indicators; perception of risk and volatility in debt and equity markets
affecting general market returns; and by political and societal changes and
technological developments affecting the operations of the portfolio companies
and the countries in which they operate.
Both the Investment Manager and the third-party valuation expert use a
combination of other valuation techniques to verify the reasonableness of the
DCF valuations, as recommended in the International Private Equity and Venture
Capital (IPEV) Valuation Guidelines:
- earnings multiple: applying a multiple, derived largely from comparable listed
entities in the market, to the forecast EBITDA of the entity to calculate an
enterprise value, and then deducting the fair value of any debt in the entity;
- DCF with multiple: calculating a DCF valuation of the cash flows of the entity
to the end of the period for which cash flows can be forecast with reasonable
accuracy, and then applying a multiple to EBITDA at the end of that period to
estimate a terminal value; and
- dividend yield: forecasting the entity's capacity to pay dividends in the
future and applying an equity yield to that forecast dividend, based on
comparable listed entities in the market.
The DCF valuations derived by the Investment Manager and those derived by the
third-party valuation expert were not materially different from each other,
and the other valuation techniques used provided assurance that the DCF
valuations are reasonable.
7. Unconsolidated subsidiaries
The following table shows the subsidiaries of the Company. As the Company
qualifies as an Investment Entity as referred to in note 3, these
subsidiaries have not been consolidated in the preparation of the financial
statements:
Investment Place of Ownership Ownership
business interest at interest at
31 March 2024 31 March 2023
Held directly
Cordiant Digital Holdings UK Limited United Kingdom 100% 100%
CDIL Data Centre USA LLC USA 100% 100%
Held indirectly
Cordiant Digital Holdings One Limited United Kingdom 100% 100%
Cordiant Digital Holdings Two Limited United Kingdom 100% 100%
Cordiant Digital Holdings Three Limited United Kingdom 100% 0%
Cordiant Digital Holdings Four Limited United Kingdom 100% 0%
Cordiant Digital Holdings Ireland Ireland 100% 0%
Communications Investments Holdings s. r. o. Czech Republic 100% 100%
České Radiokomunikace a.s. (Czechia) Czech Republic 100% 100%
Czech Digital Group, a.s Czech Republic 100% 100%
Cloud4com s.r.o. Czech Republic 100% 0%
Datové centrum Lužice s.r.o. Czech Republic 100% 0%
Prague Digital TV s.r.o Czech Republic 100% 0%
Emitel S.A. Poland 100% 100%
Allford Investments S.A. Poland 100% 100%
EM Properties sp. z o. o. Poland 100% 100%
EM Projects sp. z o. o. Poland 100% 100%
Hub Investments sp. z o. o. Poland 100% 100%
Norkring België NV Belgium 100% 0%
Speed Fibre DAC Ireland 100% 0%
Speed Fibre 2 Holdings Limited Ireland 100% 0%
Speed Fibre Intermediate Holdings Limited Ireland 100% 0%
Speed Fibre Borrower Limited Ireland 100% 0%
Airspeed Communications Holdings ULC Ireland 100% 0%
Airspeed Communications Solutions ULC Ireland 100% 0%
Airspeed Investments Limited Isle of Man 100% 0%
Airspeed Networks Limited Isle of Man 100% 0%
Airspeed Ventures Unlimited Isle of Man 100% 0%
Speed Fibre Group Limited Ireland 100% 0%
Airspeed Communications Limited Ireland 100% 0%
E-Nasc Éireann Teoranta Ireland 100% 0%
Enet Telecommunications Networks Limited Ireland 100% 0%
Enet Telecommunications Networks Limited Ireland 100% 0%
The following additional information is provided in relation to unquoted
investments as recommended by the AIC SORP.
Turnover Pre-tax Net assets/
profit/(loss) (liabilities)
Emitel(2) £113.8 million (£24.3 million) £214.2 million
CRA(3) £80.0 million £16.9 million (£57.3 million)
Hudson Interxchange(4) £18.2 million (£12.4 million) £46.8 million
Speed Fibre DAC(5) £68.4 million (£11.4 million) (£99.3 million)
Norkring België NV(6) £7.7 million £1.7 million £4.8 million
2. Figures from Emitel's audited IFRS accounts for the year ended
31 December 2023
3. Figures from CRA's audited IFRS accounts for the year ended
31 March 2023
4. Figures from Hudson's audited US GAAP accounts for the period from
13 January 2022 to 31 March 2023
5. Figures from Speed Fibre DAC audited IFRS accounts for the year ended 31
December 2023.
6. Figures from Norkring management pack at 31 December 2023.
The amounts invested in the Company's unconsolidated subsidiaries during the
year and their carrying value at 31 March 2024 are as outlined in note 6.
There are certain restrictions on the ability of the Company's unconsolidated
subsidiaries in the Czech Republic to transfer funds to the Company in the
form of cash dividends or repayment of loans. In accordance with the
documentation relating to loans made by various banks to CRA, such cash
movements are subject to limitations on amounts and timing, and satisfaction
of certain conditions relating to leverage and interest cover ratio. The
Directors do not consider that these restrictions are likely to have a
significant effect on the ability of the Company's subsidiaries to transfer
funds to the Company. In addition, during the year, the Investment Manager
received immaterial fees from Emitel and CRA for advisory services rendered.
Subsidiaries held in the Czech Republic, Ireland, Belgium and in Poland are
profitable and cash generative, and do not need the financial support of the
Company. The subsidiary based in the US will receive the financial support of
the Company for a period of at least 12 months from the publication of this
report.
8. Trade and other receivables
As at As at
31 March 2024 31 March 2023
£'000 £'000
Cash collateral 8,963 9,130
Other debtors 6,582 2,573
Expenses paid on behalf of related parties 1,599 2,866
Prepayments 105 77
Interest receivable 30 34
17,279 14,680
Cash collateral relates to one security deposit held in money market accounts.
An amount of USD 11.29 million (£8.96 million) relates to collateral for a
letter of credit relating to the lease of the building occupied by Hudson, and
generated interest of 5.4% per annum during the year ended 31 March 2024.
9. Loan and borrowings
As at As at
31 March 2024 31 March 2023
£'000 £'000
Opening balance 20,287 -
Drawdown of principal during the year 148,962 20,287
Repayments of principal during the year (9,990) -
Unrealised exchange loss (1,630) -
157,629 20,287
As at 31 March 2024, the Company had borrowings of £157.6 million
(€184.4 million) from CDH2 compared to £20.3 million (€23.1 million)
at 31 March 2023. The loan between the Company and CDH2 is repayable on
demand and carries interest at a fixed margin over a variable EURIBOR rate set
at the beginning of each six-month interest period. Note 17 provides more
detail on interest charged during the year ended 31 March 2024.
10. Share capital
Subject to any special rights, restrictions, or prohibitions regarding voting
for the time being attached to any shares, holders of ordinary shares have the
right to receive notice of and to attend, speak and vote at general meetings
of the Company and each holder being present in person or by proxy shall upon
a show of hands have one vote and upon a poll shall have one vote in respect
of each ordinary share that they hold.
Holders of ordinary shares are entitled to receive and participate in any
dividends or distributions of the Company in relation to assets of the Company
that are available for dividend or distribution. On a winding-up of the
Company, the surplus assets of the Company available for distribution to the
holders of ordinary shares (after payment of all other debts and liabilities
of the Company attributable to the ordinary shares) shall be divided amongst
the holders of ordinary shares pro rata according to their respective holdings
of ordinary shares.
Ordinary shares 31 March 2024 £'000 31 March 2023 £'000
Number Number
of shares of shares
Issued and fully paid 773,559,707 780,100 773,559,707 780,100
Shares held in treasury (7,269,230) (5,444) (1,050,000) (943)
Outstanding shares at year end 766,290,477 774,656 772,509,707 779,157
Holders of ordinary shares are entitled to all dividends paid by the Company
on the ordinary shares and, on a winding up, provided the Company has
satisfied all of its liabilities, ordinary shareholders are entitled to all of
the surplus assets of the Company attributable to the ordinary shares.
Subscription shares carry no right to any dividends paid by the Company and
have no voting rights.
No subscription shares have been exercised between 31 March 2024 and the
date of this report.
Treasury shares 31 March 2024 31 March 2023
Number Number
of shares of shares
£'000 £'000
Opening balance 1,050,000 -
Shares repurchased during the year 6,219,230 1,050,000
Closing balance at year end 7,269,230 1,050,000
The Company has undertaken market buybacks during the year. The movements are
shown in the table above. The average purchase price of the shares bought back
during the year is 72.4 pence. The average price at which shares were
repurchased represents a 39.75% discount to the NAV per share (31 March 2023:
20.78%) at the time of repurchase. The shares repurchased were funded out of
distributable reserves.
Subscription shareholders have no right to any dividends paid by the Company
and have no voting rights.
11. Audit fees
Other operating expenses include fees payable to the Company's auditor, which
can be analysed as follows:
Year ended Year ended
31 March 2024 31 March 2023
£'000 £'000
Fees payable to the statutory auditor
for audit of the statutory financial statements 198 195
for other audit-related services - -
for non-audit services - -
198 195
At 31 March 2024, there were no audit fees from the year ended
31 March 2023 remaining unpaid.
12. Taxation
a) Analysis of the tax charge for the year
Corporation tax Year ended Year ended
31 March 2024 31 March 2023
£'000 £'000
Taxation for the year (see note 12b) - -
b) Factors affecting the tax charge for the year
The tax assessed for the year ended 31 March 2024 is lower than the Company's
applicable rate of corporation tax for that year of 25%. The factors affecting
the tax charge for the year are as follows:
Year ended Year ended
31 March 2024 31 March 2023
£'000 £'000
Profit for the year before tax 80,427 81,176
Net return before taxation multiplied by the Company's applicable rate of 20,107 15,423
corporation tax for the period of 25%
Effects of:
Capital return on investments (24,306) (17,275)
Expenses not deductible for corporation tax 2,180 1,586
Realised loss on restructure not deductible - 746
Utilisation of expenses brought forward - (480)
Amounts taxable in different periods (173) -
Unrelieved current year expenses 2,192 -
Total tax for the year (see note 12a) - -
c) Deferred taxation
The Company has an unrecognised deferred tax asset of £2,192,000 (Prior year:
£77,000) based on a main rate of corporation tax of 25%, in respect of excess
management expenses of £6,768,000 and non-trading relationships of
£2,000,000.
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.
Due to the Company's status as an investment trust and the intention to
continue to meet the conditions required to retain that status, the Company
has not provided for tax on any capital gains arising on capital gains or
losses arising on the revaluation of investments.
13. Management and performance fees
Under the Investment Management Agreement, the Investment Manager is entitled
to receive an annual management fee and a performance fee, plus any applicable
VAT, in addition to the reimbursement of reasonable expenses incurred by it in
the performance of its duties.
Management fee
The Investment Manager receives from the Company an annual management fee,
based on the average market capitalisation of the Company, calculated using
the closing market capitalisation for each LSE trading day for the relevant
month, and paid monthly in arrears. The management fee has been payable since
30 April 2021, being the date on which more than 75% of the IPO proceeds
were deployed in investment activities.
The annual management fee is calculated on the following basis:
- 1.00% of the average market capitalisation up to £500 million.
- 0.90% of the average market capitalisation between £500 million and £1
billion; and
- 0.80% of the average market capitalisation in excess of £1 billion.
Following the publication of each Interim Report and Annual Report, the
Investment Manager is required to apply an amount, in aggregate, equal to 10%
of the annual management fee for the preceding six-month period in the
following manner:
a) if the average trading price, calculated over the 20 trading days
immediately preceding the announcement date, is equal to, or higher than, the
last reported NAV per ordinary share (as adjusted to reflect any dividends
reflected in the average trading price) the Investment Manager shall use the
relevant amount to subscribe for new ordinary shares (rounded down to the
nearest whole number of ordinary shares), issued at the average trading price;
or
b) if the average trading price is lower than the last reported NAV per
ordinary share (as adjusted to reflect any dividends reflected in the average
trading price) the Investment Manager shall, as soon as reasonably
practicable, use the relevant amount to make market purchases of ordinary
shares (rounded down to the nearest whole number of ordinary shares) within
two months of the relevant NAV announcement date.
Even though the annual management fee is payable on a monthly basis, ordinary
shares will only be acquired by the Investment Manager on a half-yearly basis.
Any ordinary shares subscribed or purchased by the Investment Manager pursuant
to the above arrangements are, subject to usual exceptions, subject to a
lock-up of 12 months from the date of subscription or purchase.
For the year ended 31 March 2024, the Investment Manager has charged
management fees of £5.9 million (31 March 2023: £7.3 million) to the
Company, with £0.6 million (31 March 2023: £0.6 million) owed at year
end.
During the year ended 31 March 2024, the Investment Manager was not required
to subscribe for new ordinary shares (31 March 2023: £0.29 million) but
was required to conduct open market purchases for aggregate consideration of
£0.63million (31 March 2023: £0.39 million).
Performance fee
The Investment Manager may in addition receive a performance fee on each
performance fee calculation date, dependent on the performance of the
Company's NAV and share price. The first performance fee calculation date is
31 March 2024 and subsequent calculation dates are on 31 March each year
thereafter. The fee will be equal to 12.5% of the excess return over the
target of 9% for the NAV return or share price return, whichever is the lower,
multiplied by the time-weighted average number of ordinary shares in issue
(excluding any ordinary shares held in treasury) during the relevant period.
Any performance fee is to be satisfied as follows:
- as to 50% in cash; and
- as to the remaining 50% of the performance fee, subject to certain exceptions
and the relevant regulatory and tax requirements:
a) if the average trading price, calculated over the 20 trading days immediately
preceding the performance fee calculation date, is equal to or higher than the
last reported NAV per ordinary share (as adjusted to reflect any dividends
reflected in the average trading price) the Company will issue to the
Investment Manager such number of new ordinary shares (credited as fully paid)
as is equal to the performance fee investment amount divided by the average
trading price (rounded down to the nearest whole number of ordinary shares);
or
b) if the average trading price is lower than the last reported NAV per ordinary
share (as adjusted to reflect any dividends reflected in the average trading
price) then the Company shall (on behalf of, and as agent for, the Investment
Manager) apply the performance fee investment amount in making market
purchases of ordinary shares, provided any such ordinary shares are purchased
at prices below the last reported NAV per ordinary share.
Any ordinary shares subscribed or purchased by the Investment Manager pursuant
to the above arrangements will, subject to usual exceptions, be subject to a
lock-up of 36 months from the date of subscription or purchase.
For the year ended 31 March 2024, no performance fee is due to the
Investment Manager (31 March 2023: £nil) and no amount has been accrued as
the share price performance hurdle has not been met.
14. Earnings per share and net asset value per share
Ordinary shares Year ended 31 March 2024
Earnings per share Basic Diluted
Allocated profit attributable to this share class - £'000 80,295 80,295
Weighted average number of shares in issue 770,510,117 770,510,117
Earnings per share from continuing operations in the year (pence) 10.42 10.42
Ordinary shares Year ended 31 March 2023
Earnings per share Basic Diluted
Allocated profit attributable to this share class - £'000 81,176 81,176
Weighted average number of shares in issue 773,442,556 773,442,556
Earnings per share from continuing operations in the year (pence) 10.50 10.50
As at 31 March 2024, there were 6,434,884 (31 March 2023: 6,434,884)
Subscription Shares in issue. During the year ended 31 March 2024, nil
(31 March 2023: 187) Subscription Shares were exercised.
Year ended Year ended
31 March 2024 31 March 2023
Weighted average number of shares used in the calculation of basic earnings 770,510,117 773,442,556
per share
Weighted average number of shares used in the calculation of diluted earnings 770,510,117 773,442,556
per share
Net asset value - £'000 920,660 875,711
Number of ordinary shares issued 766,290,477 772,509,707
Net asset value per share (pence) 120.15 113.36
15. Dividends declared and paid with respect to the year/period
Dividends paid during the year ended 31 March 2024 Dividend per Total dividend
ordinary share £'000
pence
Second interim dividend in respect of the period ended 31 March 2023 2.00 15,450
Interim dividend in respect of the period ended 31 March 2024 2.00 15,395
30,845
Dividends declared Dividend per Total dividend
ordinary share £'000
pence
Second interim dividend in respect of the period ended 31 March 2024 2.20 16,858
Dividends paid during the period ended 31 March 2023 Dividend per Total dividend
ordinary share £'000
pence
Second interim dividend in respect of the period ended 30 September 2023 2.00 11,599
Interim dividend in respect of the year ended 31 March 2023 2.00 15,473
27,072
On 14 June 2024, the Board approved a second interim dividend of 2.20 pence
per share in respect of the period from 1 April 2023 to 31 March 2024,
bringing the total dividend for the year to 4.20 pence per share. The record
date for this dividend is 28 June 2024 and the payment date is 19 July 2024.
16. Financial risk management
Financial risk management objectives
The Company's investing activities intentionally expose it to various types of
risks that are associated with the underlying investments. The Company makes
the investment in order to generate returns in accordance with its investment
policy and objectives.
The most important types of financial risks to which the Company is exposed
are market risk (including price, interest rate and foreign currency risk),
liquidity risk and credit risk. The Board of Directors has overall
responsibility for the determination of the Company's risk management and sets
policy to manage that risk at an acceptable level to achieve those objectives.
The policy and process for measuring and mitigating each of the main risks are
described below.
The Investment Manager and the Administrator provide advice to the Company
which allows it to monitor and manage financial risks relating to its
operations through internal risk reports which analyse exposures by degree and
magnitude of risks. The Investment Manager and the Administrator report to the
Board on a quarterly basis.
Categories of financial instruments
For those financial assets and liabilities carried at amortised cost, the
Directors are of the opinion that their carrying value approximates to their
fair value.
As at As at
31 March 2024 31 March 2023
£'000 £'000
Financial assets
Financial assets at fair value through profit or loss:
Investments 1,005,937 872,315
Other financial assets at amortised cost:
Cash and cash equivalents 60,085 10,498
Trade and other receivables (excluding prepayments) 17,174 14,603
Financial liabilities
Financial liabilities at amortised cost:
Loans and borrowings (157,629) (20,287)
Accrued expenses and other creditors (5,012) (1,495)
Fair value hierarchy
The table below analyses financial instruments measured at fair value at the
reporting date by the level in fair value hierarchy into which the fair value
measurement is categorised. The amounts are based on the values recognised in
the Statement of Financial Position. All fair value measurements below are
recurring.
31 March 2024 Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Financial assets
Financial assets at fair value through profit or loss:
Investments - - 1,005,937 1,005,937
- - 1,005,937 1,005,937
31 March 2023 Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Financial assets
Financial assets at fair value through profit or loss:
Investments - - 872,315 872,315
- - 872,315 872,315
Capital risk management
The Company manages its capital to ensure that it will be able to continue as
a going concern while maximising the capital return to shareholders. The
capital structure of the Company consists of issued share capital and retained
earnings, as stated in the Statement of Financial Position.
In order to maintain or adjust the capital structure, the Company may issue
new shares. There are no external capital requirements imposed on the Company.
Market risk
Market risk includes price risk, foreign currency risk and interest rate risk.
Price risk
The underlying investments held present a potential risk of loss of capital to
the Company. As outlined in note 6, investments are in the form of
shareholder loans and equity with protective provisions in place. Price risk
arises from uncertainty about future prices of underlying financial
investments held by the Company. As at 31 March 2024, the fair value of
investments, excluding cash and cash equivalents, was £1,005.9 million
(31 March 2023: £872.3 million) and a 5% increase/(decrease) in the price
of investments with all other variables held constant would result in a change
to the fair value of investments of +/- £50.3 million (31 March 2023:
£43.6 million).
Please refer to note 6 for quantitative information about the fair value
measurements of the Company's Level 3 investments.
The Company is exposed to a variety of risks which may have an impact on the
carrying value of its investments. The risk factors are set out below.
Not actively traded
The Company's investments are not generally traded in an active market but are
indirectly exposed to market price risk arising from uncertainties about
future values of the investments held. The investments of the Company vary as
to geographic distribution of operations and size, all of which may impact the
susceptibility of their valuation to uncertainty.
Concentration
The Company invests in the Digital Infrastructure sector. While the Company is
subject to the investment and diversification restrictions in its investment
policy, within those limits material concentrations of investments may arise.
Although the investments are in the same industry, each individual underlying
data centre, mobile telecommunications tower or segment of a fibre-optic
network held within the portfolio constitutes a separate Digital
Infrastructure Asset. This risk is managed through careful selection of
investments within the specified limits of the investment policy.
Each of these investment restrictions is calculated and applied as at the time
of investment and non-compliance resulting from changes in the price or value
of assets following investment is not considered a breach of the investment
restrictions.
Foreign currency risk
The Company invests in financial instruments and enters into transactions that
are denominated in currencies other than its functional currency, primarily in
Polish zloty, Czech koruna, Euros and US dollars.
The Company's currency risk is managed by the Investment Manager in accordance
with the policies and procedures in place.
The Company also has exposure to foreign currency risk due to the payment of
some expenses in Polish zloty, Czech koruna, Euros, US dollars and
Canadian dollars. Consequently, the Company is exposed to risks that the
exchange rate of its currency relative to other foreign currencies may change
in a manner that has an adverse effect on the value of that portion of the
Company's assets or liabilities denominated in currencies other than pounds
sterling. Any exposure to foreign currency risk at the underlying investment
level is captured within price risk.
The following table sets out, in pounds sterling, the Company's total exposure
to direct and indirect foreign currency risk and the net exposure to foreign
currencies of the monetary assets and liabilities. Of the total exposure set
out below, the Company's direct foreign exchange exposure is £66.7 million.
As at 31 March 2024
USD CZK CAD PLN EUR GBP Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Non-current assets
Financial assets at fair value through profit or loss 42,262 385,941 - 525,050 52,654 30 1,005,937
Total non-current assets 42,262 385,941 - 525,050 52,654 30 1,005,937
Current assets
Receivables and prepayments 9,171 - - - 2,568 5,540 17,279
Cash and cash equivalents 67 - - 40,734 19,284 60,085
Total current assets 9,238 - - - 43,302 24,824 77,364
Current liabilities
Loans and borrowings - - - - (157,629) - (157,629)
Accrued expenses and other creditors (29) - - - (3,862) (1,121) (5,012)
Total current liabilities (29) - - - (161,491) (1,121) (162,641)
Total net assets 51,471 385,941 - 525,050 (65,535) 23,733 920,660
As at 31 March 2023
USD CZK CAD PLN EUR GBP Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Non-current assets
Financial assets at fair value through profit or loss 56,993 389,101 - 429,002 (2,984) 203 872,315
Total non-current assets 56,993 389,101 - 429,002 (2,984) 203 872,315
Current assets
Receivables and prepayments 9,164 - - - 2,639 2,877 14,680
Cash and cash equivalents 168 - 1 - 1 10,328 10,498
Total current assets 9,332 - 1 - 2,640 13,205 25,178
Current liabilities
Loans and borrowings - - - - (20,745) - (20,745)
Payables (30) - - - - (1,007) (1,037)
Total current liabilities (30) - - - (20,745) (1,007) (21,782)
Total net assets 66,295 389,101 1 429,002 (21,089) 12,401 875,711
The table below sets out the effect on the net assets against a reasonably
possible weakening of the pound against the US dollar, Czech koruna, Polish
zloty and euros by 5%, at 31 March 2024. The analysis assumes that all other
variables remain constant.
Effect in increase of pounds sterling As at As at
31 March 2024 31 March 2023
£'000 £'000
USD 2,574 3,315
CZK 19,297 19,455
PLN 26,253 21,450
EUR (3,277) (1,054)
A strengthening of the pound against the above currencies would have resulted
in an equal but opposite effect to the amounts shown above.
Interest rate risk
The Company's exposure to interest rate risk relates to the Company's cash and
cash equivalents and intercompany loans and borrowings. The Company is subject
to risk due to fluctuations in the prevailing levels of market interest rates.
As at 31 March 2024, the cash balance held by the Company was £60.1
million (31 March 2023: £10.5 million). A 1% increase/(decrease) in
interest rates with all other variables held constant would result in a change
to interest received of +/- £0.6 million (31 March 2023: +/-
£0.1 million) per annum.
As at 31 March 2024, the intercompany loans and borrowings balance held by the
Company was £157.6 million (31 March 2023: £20.3 million). A 1%
increase/(decrease) in interest rates with all other variables held constant
would result in a change to interest payable of +/- £1.6 million (31 March
2023: £0.2 million). This effect at the Company level would be off-set by an
equal and opposite change in the investments as the loan is with a 100% owned
subsidiary (note 17).
Liquidity risk
Ultimate responsibility for liquidity risk management rests with the Board of
Directors.
Liquidity risk is defined as the risk that the Company may not be able to
settle or meet its obligations on time or at a reasonable price. The Company's
policy and the Investment Manager's approach to managing liquidity is to
ensure, as far as possible, that it will always have sufficient liquidity to
meet its liabilities when due, under both normal and stress conditions,
without incurring unacceptable losses or risking damage to the Company's
reputation. The Company's liabilities are made up of estimated accruals and
trade creditors which are due to be settled within three months of the year
end.
The Company's liquidity risk arises principally from the fact that there is no
liquid market for its investments and it may not be able to realise their full
value on a timely basis. The Company will maintain flexibility in funding by
keeping sufficient liquidity in cash and cash equivalents, which may be
invested on a temporary basis in line with the cash management policy as
agreed by the Directors from time to time.
The Company adopts a prudent approach to liquidity management and through the
preparation of budgets and cash flow forecasts maintains sufficient cash
reserves to meet its obligations.
Credit risk
Credit risk refers to the risk that a counterparty will default on its
contractual obligations resulting in financial loss to the Company.
Financial assets mainly consist of cash and cash equivalents and investments
at fair value through profit or loss. The Company's risk on liquid funds is
managed by only depositing monies with institutions with a short term credit
rating of A1/P-1 - A1/F1 or equivalent. The Company mitigates its credit risk
exposure on its investments at fair value through profit or loss by the
exercise of due diligence on the counterparties and the Investment Manager.
The table below shows the material cash balances and the credit rating for the
counterparties used by the Company at the year/period-end date:
Location 31 March 2024 31 March 2023
£'000 £'000
Royal Bank of Scotland International Guernsey 24,414 10,498
Investec Bank Plc UK 36,685 -
Credit ratings:
S&P Moody's Fitch
Royal Bank of Scotland International A/A-1 A1/P-1 A1/F1
Investec Bank Plc Not rated A1/P-1 BBB+/ F2
The Company's maximum exposure to loss of capital at the year/period end is
shown below:
Carrying value and maximum exposure
31 March 2024 31 March 2023
£'000 £'000
Financial assets (including cash and equivalents but excluding prepayments) 77,259 25,101
Gearing
As at the date of these financial statements the Company had gearing of 17.1%
(31 March 2023: 2.3%) calculated as loans and borrowings divided by net
assets.
17. Related party transactions
Directors
The Company has four non-executive Directors, each of whom is considered to be
independent. Directors' fees for the year ended 31 March 2024 amounted to
£185,000 (31 March 2023: £185,000), of which £nil (31 March 2023:
£nil) was outstanding at the year end.
The shares held by the Directors at 31 March 2024 are shown in the table
below:
Ordinary Ordinary
shares held at shares held at
31 March 2024 31 March 2023
Shonaid Jemmett-Page 63,355 28,039
Sian Hill 57,500 37,500
Marten Pieters 103,125 48,125
Simon Pitcher 63,125 38,125
Investments
As part of the initial acquisition of Communications Investments Holdings
s.r.o. (CIH) in April 2021, the Company acquired a loan due from CIH which
accrues interest at 9.9% per annum. Total interest receivable by the Company
in relation to the year was £1.9 million (31 March 2023: £0.5 million),
of which £nil (31 March 2023: £nil) remained outstanding at the
year/period end. The loan investment was transferred to the Company's
subsidiary Cordiant Digital Holdings Two Ltd (CDH2) on 31 May 2022, in
exchange for a promissory note. The balance on the promissory note investment
at 31 March 2024, including accrued interest, was £nil (31 March 2023:
£32.6 million). In January 2022, the assets of Hudson Interxchange were
acquired by the Company's subsidiary CDIL Data Centre USA LLC. The Company
provided funding for this transaction in the form of equity contributions. The
balance of the equity investment at 31 March 2024, was £32.8 million
(31 March 2023: £52.2 million).
Company subsidiaries
On 16 December 2022, the Company borrowed £20.3 million from CDH2, and a
further £149.0 million on 6 June 2023, representing proceeds from
Eurobonds issued by CDH2. At 31 March 2024, the loan principal was valued at
£157.6 million (31 March 2023: £20.3 million). The loan is subject to
interest charged at a variable rate. Interest charged during the year amounted
to £12.1 million (31 March 2023: £0.4 million) of which £3.9 million
remained outstanding as at 31 March 2024 (31 March 2023: £0.4 million).
The expenses paid by the Company on behalf of subsidiary companies during the
year amounted to £1.6 million (31 March 2023: £2.9 million).
During the year ended 31 March 2024, the Company charged management fees
amounting to £1.4 million related to management services provided to CRA and
Emitel investments.
18. Ultimate controlling party
In the opinion of the Board, on the basis of the shareholdings advised to
them, the Company has no ultimate controlling party.
19. Subsequent events
With the exception of dividends declared and disclosed in note 15, there are
no material subsequent events.
Glossary of capitalised defined terms
Administrator means Aztec Financial Services (Guernsey) Limited
AIC means the Association of Investment Companies
AIC SORP means the AIC Statement of Recommended Practice
AFFO means adjusted funds from operations
Board means the Directors of the Company as a group
CDH2 means Cordiant Digital Holdings Two Limited
CIH means Communications Investments Holdings s.r.o.
Company means Cordiant Digital Infrastructure Limited.
Company Law means the Companies (Guernsey) Law 2008
CRA means České Radiokomunikace s.a.
C Shares means C shares of no par value each in the capital of the Company
issued pursuant to the Company's placing programme as an alternative to the
issue of ordinary shares
DCF means discounted cash flow
Digital Infrastructure means the physical infrastructure resources that are
necessary to enable the storage and transmission of data by telecommunications
operators, corporations, governments and individuals. These predominantly
consist of mobile telecommunications/broadcast towers, data centres, fibre
optic networks, in-building systems and, as appropriate, the land under such
infrastructure. Digital Infrastructure assets do not include switching and
routing equipment, servers and other storage devices or radio transmission
equipment or software
Directors means the directors of the Company
DTTs means digital terrestrial television
EBITDA means earnings before interest, taxation, depreciation and amortisation
Emitel means Emitel S.A.
ESG means environmental, social and governance
EV means enterprise value
FCA means the UK Financial Conduct Authority (or its successor bodies)
Hudson means Hudson Interxchange (previously operating under the name DataGryd
Datacenters LLC)
IAS means international accounting standards as issued by the Board of the
International Accounting Standards Committee
IASB means International Accounting Standards Board
IFRS means the International Financial Reporting Standards, being the
principles-based accounting standards, interpretations and the framework by
that name issued by the International Accounting Standards Board
Interim Report means the Company's half yearly report and unaudited condensed
interim financial statements for the six-month period ended 30 September 2022
Investment Entity means an entity whose business purpose is to make
investments for capital appreciation, investment income, or both.
Investment Manager means Cordiant Capital Inc.
IoT means the Internet of Things
IPEV Valuation Guidelines means the International Private Equity and Venture
Capital Valuation Guidelines
IPO means the initial public offering of shares by a company to the public
LSE means the London Stock Exchange
NAV or net asset value means the value of the assets of the Company less its
liabilities as calculated in accordance with the Company's valuation policy
and expressed in pound sterling
Norkring means Norkring België NV
RCF means revolving credit facility
Speed Fibre means Speed Fibre Designated Activity Company
Subscription Shares means redeemable subscription shares of no par value each
in the Company, issued on the basis of one Subscription Share for every eight
ordinary shares subscribed for in the IPO
UK or United Kingdom means the United Kingdom of Great Britain and Northern
Ireland
US or United States means the United States of America, its territories and
possessions, any state of the United States and the District of Columbia
USD means United States dollars.
WACC means weighted average cost of capital.
Directors and general information
Directors (all appointed 26 January 2021)
Shonaid Jemmett-Page Chairman
Sian Hill Audit Committee Chairman and Senior Independent Director
Marten Pieters
Simon Pitcher
All independent and of the registered office below.
Website www.cordiantdigitaltrust.com
ISIN (ordinary shares) GG00BMC7TM77
Ticker (ordinary shares) CORD
SEDOL (ordinary shares) BMC7TM7
Registered Company Number 68630
Registered office Legal advisors to the Company
East Wing Gowling WLG (UK) LLP
Trafalgar Court 4 More London Riverside
Les Banques London
St Peter Port SE1 2AU
Guernsey
GY1 3PP
Investment manager Carey Olsen (Guernsey) LLP
Cordiant Capital Inc. Carey House
28th Floor Les Banques
Bank of Nova Scotia Tower St Peter Port
1002 Sherbrooke Street West Guernsey
Montreal GY1 4BZ
QC H3A 3L6
Company secretary and administrator Registrar
Aztec Financial Services (Guernsey) Limited Computershare Investor Services
East Wing (Guernsey) Limited
Trafalgar Court 1st Floor Tudor House
Les Banques Le Bordage
Guernsey St Peter Port
GY1 3PP Guernsey
GY1 4BZ
Auditor Brokers
BDO Limited Investec Bank plc
PO Box 180 30 Gresham Street
Place du Pre London
Rue du Pre EC2V 7QP
St Peter Port
Guernsey
GY1 3LL
Principal banker and custodian Jefferies International Limited
The Royal Bank of Scotland International Limited 100 Bishopsgate
Royal Bank Place London
1 Glategny Esplanade EC2N 4JL
St Peter Port
Guernsey
GY1 4BQ
Receiving agent
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol
BS99 6AH
Cautionary Statement
This document may include statements that are, or may be deemed to be,
'forward-looking statements'. These forward-looking statements can be
identified by the use of forward-looking terms or expressions, including
'believes', 'estimates', 'anticipates', 'expects', 'intends', 'may', 'plans',
'projects', 'will', 'explore' or 'should' or, in each case, their negative or
other variations or comparable terminology or by discussions of strategy,
plans, objectives, goals, future events or intentions. These forward-looking
statements include all matters that are not historical facts. They may appear
in a number of places throughout this document and may include, but are not
limited to, statements regarding the intentions, beliefs or current
expectations of the Company, the Directors and/or the Investment Manager
concerning, amongst other things, the investment objectives and investment
policy, financing strategies, investment performance, results of operations,
financial condition, liquidity, prospects and distribution policy of the
Company and the markets in which it invests.
By their nature, forward-looking statements involve risks and uncertainties
because they relate to future events and depend on circumstances that may or
may not occur in the future. Forward-looking statements are not guarantees of
future performance. The Company's actual investment performance, results of
operations, financial condition, liquidity, distribution policy and the
development of its financing strategies may differ materially from the
impression created by, or described in or suggested by, the forward-looking
statements contained in this document. Further, this document may include
target figures for future financial periods. Any such figures are targets only
and are not forecasts. Nothing in this document should be construed as a
profit forecast or a profit estimate. In addition, even if actual investment
performance, results of operations, financial condition, liquidity,
distribution policy and the development of its financing strategies, are
consistent with any forward-looking statements contained in this document,
those results or developments may not be indicative of results or developments
in subsequent periods. A number of factors could cause results and
developments of the Company to differ materially from those expressed or
implied by the forward-looking statements including, without limitation,
general economic and business conditions, industry trends, inflation and
interest rates, the availability and cost of energy, competition, changes in
law or regulation, changes in taxation regimes, the availability and cost of
capital, currency fluctuations, changes in its business strategy, political
and economic uncertainty. Any forward-looking statements herein speak only at
the date of this document.
As a result, you are cautioned not to place any reliance on any such
forward-looking statements and neither the Company nor any other person
accepts responsibility for the accuracy of such statements. Subject to their
legal and regulatory obligations, the Company, the Directors and the
Investment Manager expressly disclaim any obligations to update or revise any
forward- looking statement contained herein to reflect any change in
expectations with regard thereto or any change in events, conditions or
circumstances on which any statement is based.
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