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:
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Total return for the year of
9.3%1, increasing NAV per share to 120.1p.
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NAV total return since inception
of 32.8% (2023: 21.1%), or 10.5% annualised, exceeding IPO
expectations.
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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).
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NAV increased to £920.7
million, underpinned by strong underlying EBITDA growth.
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Equity raised at IPO and in
subsequent capital raises now fully invested at an average
EV/EBITDA multiple2 of c10.2x.
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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.
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Operational highlights:
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Buy, Build & Grow model
proving successful at growing EBITDA and NAV.
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Continued strong overall
performance by portfolio companies, which generated aggregate
EBITDA growth3 of 7.2% year on year to £139.3
million.
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Portfolio diversification improved
with Speed Fibre acquisition, contributing solid revenue and EBITDA
growth4 of 3.8% and 5.0% respectively. The Norkring
portfolio of 25 towers in Belgium was also acquired.
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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.
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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.
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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.
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Hudson won new contracts and
reduced its EBITDA losses after a management change.
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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
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Based on opening ex-dividend NAV
at 1 April 2023 of 111.4p.
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2
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Based on enterprise value upon
acquisition divided by EBITDA upon acquisition for each portfolio
company, weighted for relative size.
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3
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On a pro forma, normalised,
constant currency basis.
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4
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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.
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Annual report and results webcast for
analysts
The 2024 Annual Report will be
available to download at 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.
For further information,
please visit www.cordiantdigitaltrust.com or contact:
Cordiant Capital, Inc.
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+44 (0)
20 7201 7546
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Investment Manager
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Stephen Foss,
Managing Director
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Aztec Financial Services (Guernsey) Limited
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+44 (0)
1481 749700
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Company Secretary
and Administrator
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Chris
Copperwaite / Laura Dunning
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Investec Bank plc
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+44 (0)
20 7597 4000
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Joint Corporate Broker
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Tom
Skinner (Corporate Broking)
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Lucy Lewis / Denis
Flanagan (Corporate Finance)
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Jefferies International Limited
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+44 (0)
20 7029 8000
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Joint Corporate Broker
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Stuart Klein / Gaudi
Le Roux
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Celicourt
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+44
(0)20 7770 6424
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Financial Communications
Advisor
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Philip Dennis / Felicity
Winkles / Ali AlQahtani
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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.
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.
It can also be obtained from the Administrator or from the Results
Centre section of the Company's website, at 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
expenses
|
Interest expense
|
IFRS
P&L
|
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
low point
|
Range
high point
|
Weighted
average mid- 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
low point
|
Range
high point
|
Weighted
average mid- 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
20241
£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
expenditure2
|
|
|
(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 year1
|
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
cost1
|
58.4
|
Vendor Loan Note interest paid and
accrued
in the year
|
(0.7)
|
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
31 March
2024
£'000
|
As
at
31 March
2023
£'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
£'000
|
|
Capital
£'000
|
|
Total
£'000
|
Revenue
£'000
|
|
Capital
£'000
|
|
Total
£'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
£'000
|
|
Retained
earnings
-
Revenue
£'000
|
|
Retained
earnings
-
Capital
£'000
|
|
Total
equity
£'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
£'000
|
|
Retained
earnings
-
Revenue
£'000
|
|
Retained
earnings
-
Capital
£'000
|
|
Total
equity
£'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.
Year ended 31 March 2024
|
Note
|
Year
ended
31 March
2024
£'000
|
Year ended
31 March
2023
£'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
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.
Other expenses in the Statement of
Comprehensive Income comprises:
|
Note
|
Year
ended
31 March
2024
£'000
|
Year
ended
31 March
2023
£'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
|
Finance income in the Statement of
Comprehensive Income comprises:
|
Year
ended
31 March
2024
£'000
|
Year
ended
31 March
2023
£'000
|
Bank interest received
|
418
|
157
|
Interest on fixed term
deposits1
|
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
£'000
|
|
Equity
£'000
|
|
Total
£'000
|
|
Loans
£'000
|
|
Equity
£'000
|
|
Total
£'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
£'000
|
|
Equity
£'000
|
|
Total
£'000
|
Loans
£'000
|
|
Equity
£'000
|
|
Total
£'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
rate
increases
by 1%
(£m)
|
Movement
in
valuation
(£m)
|
Valuation
if
rate
decreases
by 1%
(£m)
|
Movement
in
valuation
(£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
rate
increases
by 1%
(£m)
|
Movement
in
valuation
(£m)
|
Valuation
if
rate
decreases
by 1%
(£m)
|
Movement
in
valuation
(£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
business
|
Ownership
interest
at
31 March
2024
|
Ownership
interest
at
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
profit/(loss)
|
Net
assets/
(liabilities)
|
Emitel2
|
£113.8
million
|
(£24.3
million)
|
£214.2
million
|
CRA3
|
£80.0
million
|
£16.9
million
|
(£57.3
million)
|
Hudson
Interxchange4
|
£18.2
million
|
(£12.4
million)
|
£46.8
million
|
Speed Fibre
DAC5
|
£68.4
million
|
(£11.4
million)
|
(£99.3
million)
|
Norkring België
NV6
|
£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
31 March
2024
£'000
|
As
at
31 March
2023
£'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.
|
As
at
31 March
2024
£'000
|
As
at
31 March
2023
£'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.
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
Number
of
shares
|
£'000
|
31 March
2023
Number
of
shares
|
£'000
|
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
Number
of
shares
£'000
|
31 March
2023
Number
of
shares
£'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.
Other operating expenses include
fees payable to the Company's auditor, which can be analysed as
follows:
|
Year
ended
31 March
2024
£'000
|
Year
ended
31 March
2023
£'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.
a) Analysis of the tax charge for
the year
Corporation tax
|
Year
ended
31 March
2024
£'000
|
Year
ended
31 March
2023
£'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
31 March
2024
£'000
|
Year
ended
31 March
2023
£'000
|
Profit for the year before
tax
|
80,427
|
81,176
|
Net return before taxation
multiplied by the Company's applicable rate of corporation tax for
the period of 25%
|
20,107
|
15,423
|
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
31 March
2024
|
Year
ended
31 March
2023
|
Weighted average number of shares
used in the calculation of basic earnings per share
|
770,510,117
|
773,442,556
|
Weighted average number of shares
used in the calculation of diluted earnings per share
|
770,510,117
|
773,442,556
|
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
ordinary
share
pence
|
Total dividend
£'000
|
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
ordinary
share
pence
|
Total dividend
£'000
|
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
ordinary
share
pence
|
Total dividend
£'000
|
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
31 March
2024
£'000
|
As
at
31 March
2023
£'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
£'000
|
Level
2
£'000
|
Level
3
£'000
|
Total
£'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
£'000
|
Level
2
£'000
|
Level
3
£'000
|
Total
£'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
£'000
|
CZK
£'000
|
CAD
£'000
|
PLN
£'000
|
EUR
£'000
|
GBP
£'000
|
Total
£'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
£'000
|
CZK
£'000
|
CAD
£'000
|
PLN
£'000
|
EUR
£'000
|
GBP
£'000
|
Total
£'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
31 March
2024
£'000
|
As
at
31 March
2023
£'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
£'000
|
|
31 March
2023
£'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
£'000
|
31 March
2023
£'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
shares
held at
31 March
2024
|
Ordinary
shares
held at
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.
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
East Wing
Trafalgar Court
Les Banques
St Peter Port
Guernsey
GY1 3PP
|
Legal advisors to the
Company
Gowling WLG (UK) LLP
4 More London Riverside
London
SE1 2AU
|
Investment manager
Cordiant Capital Inc.
28th Floor
Bank of Nova Scotia
Tower
1002 Sherbrooke Street
West
Montreal
QC H3A 3L6
|
Carey Olsen (Guernsey)
LLP
Carey House
Les Banques
St Peter Port
Guernsey
GY1 4BZ
|
Company secretary and
administrator
Aztec Financial Services (Guernsey)
Limited
East Wing
Trafalgar Court
Les Banques
Guernsey
GY1 3PP
|
Registrar
Computershare Investor
Services
(Guernsey) Limited
1st Floor Tudor House
Le Bordage
St Peter Port
Guernsey
GY1 4BZ
|
Auditor
BDO Limited
PO Box 180
Place du Pre
Rue du Pre
St Peter Port
Guernsey
GY1 3LL
|
Brokers
Investec Bank plc
30 Gresham Street
London
EC2V 7QP
|
Principal banker and
custodian
The Royal Bank of Scotland
International Limited
Royal Bank Place
1 Glategny Esplanade
St Peter Port
Guernsey
GY1 4BQ
|
Jefferies International
Limited
100 Bishopsgate
London
EC2N 4JL
|
|
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.