Annual Report 2023
Company Overview
Key Highlights
4
Strategic Report
Interim Chair’s Statement
8
Investment Objective and
Investment Policy
12
Key Performance Indicators
14
Investment Manager’s Report
16
Section 172(1) Statement
36
Risk Management
40
Going Concern and Viability
46
Board Approval of the Strategic
Report
47
Governance
Interim Chair’s Introduction
50
Board of Directors
52
Corporate Governance
54
Audit Committee Report
60
Management Engagement
Committee Report
66
Nomination Committee Report
68
Risk Committee Report
72
Valuation Committee Report
74
Directors’ Remuneration Report
75
Directors' Remuneration Policy
76
Directors’ Report
82
Directors’ Responsibilities
Statement
88
Independent Auditors’ Report
90
Financial Statements
Statement of Comprehensive
Income
100
Statement of Financial Position
101
Statement of Changes in Equity
102
Statement of Cash Flows
103
Notes to the Financial
Statements
104
Unaudited Alternative
Performance Measures
125
Unaudited Non-Statutory
Information
128
Other Information
Glossary and Definitions
134
Shareholder Information
136
Forward-Looking Statements
137
2023 Annual Report
|
1
Company
Overview
Key
Highlights
2021
2022
2023
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
13.1%
10.4%
(23.1%)
Total Return*
2021
2022
2023
0
200
400
600
800
1,000
746
921
676
IFRS Investment Valuation (£ millions)
2021
2022
2023
0
20
40
60
80
100
120
104.62
109.76
79.33
NAV (pence per share)
2021
2022
2023
-30
-25
-20
-15
-10
-5
0
5
10
15
9.77
11.09
(27.43)
EPS (pence per share)
*
Alternative Performance Measure, further information on APMs can be found on pages 125 to 127.
Company Overview
4
|
D9 Infrastructure plc
**
Within this report, the Company refers to Digital 9 Infrastructure plc. The Group is defined in the Glossary and Definitions section.
Digital 9 HoldCo Limited (“HoldCo”) is directly owned by Digital 9 Infrastructure plc.
*** GBP amounts based on a 1.25 USD/GBP exchange rate as of 25 April 2024.
/ POST BALANCE SHEET ACTIVITY
The Company completed the sale of its entire stake in the Verne Global group of companies
("Verne Global")
post the balance sheet date. Therefore, the Board has included additional
unaudited pro forma information in the ‘Unaudited Non-Statutory Information’ section at the end
of this report on pages 128 to 131
to help readers understand the updated financial position of
the Company, now that a significant portion of the Revolving Credit Facility (“RCF”) has been
repaid and cancelled.
Following year end and as announced on 15 March 2024, the Company** completed the sale
of its entire stake in Verne Global to funds managed or advised by Ardian France SA ("Ardian")
and received initial proceeds of $415 million (£325.8 million) (the “Verne Transaction”). As
announced on 29 April 2024, the Company has received the deferred consideration payment of
$25 million (c.£20
million***), and the indemnification provisions have ceased to apply for which
the Company previously ringfenced c.£23 million for prudent capital management. So, the only
remaining outstanding element of the Verne Transaction is the potential earn-out payment of up
to $135 million (c.£108 million***) (the “Earn-Out”), which remains as an asset of the Company.
As a consequence, the Company intends to make a total additional repayment and partial
cancellation of the RCF of £47 million on 3 May 2024. The repayment will also include funds that
can be released from the Interest Reserve as a consequence of the repayment itself reducing the
drawn amount to c.£53 million.
Since the year end, the Company has contributed additional capital to EMIC-1 of £2 million,
taking its total investment into EMIC-1 as at 29 April 2024 to £38 million.
The Company served notice of termination to the Investment Manager before 31 March 2024
following the completion of the Verne Global sale, with the Investment Management Agreement
to terminate on 31 March 2025. Further details are set out below in the ‘Investment management
review’ section of the Interim Chair’s Statement.
Company Overview
2023 Annual Report
|
5
Strategic
Report
/ INTRODUCTION
2023 was an extremely challenging year for the Company and our shareholders.
The Board engaged extensively with shareholders and undertook several actions
to improve D9’s prospects by strengthening the Company’s balance sheet. The
Board believes these actions have and will enable the Company to maximise
shareholder value going forward.
The Company owns high-quality and best-in-class businesses and assets operating
in digital infrastructure sectors which benefit from attractive structural dynamics,
whether it be subsea fibre or an incumbent competitive advantage in wireless
networks.
The underlying financial and operating
Investee Company performance was
broadly in line with expectations during 2023, as consolidated portfolio company
revenue grew 10% year-on-year, underpinned by robust trading performance
across the portfolio. As anticipated in business plans, margins have remained
under pressure for some of the portfolio companies, particularly Arqiva and
Aqua Comms.
/ BALANCE SHEET DELEVERAGING
To a certain extent, structural dynamics have caused complex challenges for the Company. The Investment Manager
identified growth capital expenditure of approximately £610 million over the next four years required to fully meet the
growth ambitions of D9’s portfolio companies.
More importantly, over the period, a higher-than-expected and more prolonged rise in interest rates and inflation
increased the interest expense burden on the Group and prevented the upstreaming of dividends from Arqiva. These
factors contributed to the poor share price performance which, relative to the NAV of the Company, fundamentally
undervalues the assets which the Company owns.
Accordingly, the Board sought to improve D9’s financial resilience, in order to enable the Company to maximise
shareholder value from the portfolio. The Board and the Investment Manager believed a more conservative approach
to capital allocation was required and the Board elected not to declare the Company’s Q2 2023 dividend. This came
with the decision to withdraw the Company’s target dividend of 6.0 pence per Ordinary Share for the full year 2023
and not to make any further dividend distributions during 2023.
Through the sale of Verne Global to Ardian, the Company has substantially deleveraged its balance sheet by paying
down more than 70% of its RCF, or £274 million, with a further reduction of 13% of its RCF, or c.£47 million, expected
to be paid on 3 May 2024. The resulting outstanding drawn amount of c.£53 million after 3 May 2024 compares with
£373.8 million in March 2024, and this reduction of the RCF is expected to result in a Group net interest expense
saving of c.£28 million to the end of the term of the RCF based on the latest interest rate charged.
Interim Chair’s
Statement
Strategic Report
8
|
D9 Infrastructure plc
/ PORTFOLIO VALUATION
The portfolio’s valuation process for the December 2023
year end has concluded. The review by the auditors,
PwC, has led to the agreement of two revisions to the
unaudited valuations published in March, bringing the
audited portfolio NAV to £686.3 million at year end
(2022: £949.6 million).
The decrease was driven largely by the recognition of
$34 million (25%) of the potential $135 million Verne
Global earn-out. This is lower than the unaudited
valuation of $67 million which was
disclosed in March
2024, as a result of a more conservative treatment
of the risk parameters which had been utilised in the
initial independent valuation. This prudent approach
recognises the inherent uncertainty and perceived risk
around Verne Global’s ability to meet future run-rate
EBITDA targets, which in turn will determine the amount
of the Earn-Out to be received by the Company in
early 2027. Alongside the change to the Verne Global
Earn-Out, it was also agreed as part of the final review
to increase the discount rate for Aqua Comms to reflect
the nascent nature of the business’ expansion into the
Asia region alongside its well-established transatlantic
business, which resulted in an £15.5 million decrease
from the unaudited valuations published in March.
Further details of the changes to unaudited valuations
published on 28 March 2024 and audited valuations
are set out in the Financial Overview of the Investment
Manager’s Report on pages 20 to 21, in addition to
changes in valuation from 31 December 2022.
/ SHAREHOLDER RETURNS
A change of the Company’s Investment Objective and
Investment Policy to enable a Managed Wind-Down was
approved by shareholders on 25 March 2024, from which
the Board will now seek to realise all of the Company’s
investments in a manner that achieves a balance between
maximising the net value from these assets and making
timely capital returns to shareholders.
Ultimately, following the full repayment and cancellation
of the RCF, the Board intends to use proceeds to
prioritise returns of capital to shareholders over the
Group’s longer-term obligations, including the VLN
related to the acquisition of the Company’s stake in the
Arqiva Group.
Any cash distributions to shareholders will likely take
the form of returns of capital but with final allocation
amounts to be determined at the time by the Board in
conjunction with the Investment Manager and taking
into consideration the Company's liquidity. No further
dividend distributions are planned or foreseen in the
medium-term. The Company will also cease to make any
new investments except where there may be a legal or
contractual imperative to do so, or if new investments
may facilitate a sale process and in turn deliver superior
shareholder value.
/ COMPANY GOVERNANCE
2023 was
a period of significant board change. Gailina
Liew was appointed to the Board in July 2023. Having
overseen the sale process for Verne Global, Phil Jordan
and Lisa Harrington resigned as Independent Chair and
Senior Independent Director, respectively, in December
2023, to allow the appointment of new Non-Executive
Directors with experience relevant to the expected
changes to the Company. Since then, Charlotte Valeur
has acted as Interim Independent Chair and Gailina
Liew as Senior Independent Director.
Following the Board’s shareholder consultation and the
initiation of a Strategic Review, Richard Boléat and Brett
Miller were appointed as Independent Non-Executive
Directors of the Company in December 2023. Post-period
end, Aaron Le Cornu was appointed as Independent chair
of the Audit Committee following the resignation of Keith
Mansfield in January 2024, while Brett Miller and Richard
Boléat informed the Board in March 2024 they would also
step down, with immediate effect.
The Board is in advanced stages of recruiting a
permanent Chair and at least one new Non-Executive
Director to lead and support, respectively, the execution
of the Managed Wind-Down.
We look forward to welcoming shareholders at our 2024
Annual General Meeting (“AGM”), and the Notice of
AGM will follow in due course.
/ INVESTMENT MANAGEMENT
REVIEW
Post-period end, the Board served the Investment
Manager notice with termination to take effect on
31 March 2025. As detailed in the Management
Engagement Committee Report on page
s 66 to 67
,
the Investment Management Agreement cannot be
terminated before this date.
The Company is actively exploring revised commercial
terms with the Investment Manager prior to the
termination taking effect, alongside a broader review of
alternative investment management arrangements. The
Board is being supported
by an independent financial
adviser in this process, which is ongoing as of 29 April
2024 and is expected to be concluded before the
Company’s AGM.
Strategic Report
2023 Annual Report
|
9
Irrespective of the outcome of this review, the Board
aims to ensure that the investment management
arrangements are more closely aligned to shareholders’
interests through the course of the Managed Wind-
Down.
/ THE MANAGED WIND-DOWN
Sale preparations for the Company’s wholly owned
assets, which include Aqua Comms, EMIC-1, SeaEdge
UK1 and Elio Networks, are being progressed following
shareholder approval of the Company’s Managed Wind-
Down. Investor outreach for the sale of Aqua Comms,
EMIC-1 and Elio Networks commenced in April 2024.
The Board is committed to executing an orderly wind-
down to maximise shareholder value over time. The
Company owns attractive assets with strong prospects,
and
the benefit of
dedicated management teams
and talented employees. Considering future market
conditions, it may be in shareholders’ best interests
to delay or accelerate the outcome of any sale to
achieve a balance between maximising the net value
from these assets and making timely capital returns to
shareholders. The Board is, of course, committed to
maximising shareholder returns at the earliest possible
opportunity.
The launch of a sale process for D9’s stake in Arqiva
is expected to take more consideration due to the
complexity of the business and the co-shareholding
structure. The Board continues to explore various
options for Arqiva, in consultation with a collaborative
shareholder group. Further detail is set out in the
Company’s circular dated 28 February 2024.
As part of the Verne Transaction, the Company can
benefit from a potential
Earn-Out payment of up to
$135 million (approximately £108 million) subject to
Verne Global achieving run-rate EBITDA targets for
2026. This target is as set in the business plan provided
to all potential bidders at the time of the sale process.
The Company also benefits from customary protections
to ensure Verne Global continues operating and
reporting substantially in line with existing practices,
including quarterly updates on its run-rate EBITDA.
The Board notes that at completion, Ardian disclosed
its intention to support the expansion of Verne Global
with up to $1.2 billion of committed investment through
equity and debt, multiplying the business’ existing sold
capacity of 29 MW for 2023 by close to four times in the
medium term
1
.
As the wind-down is likely to progress over several
years, the Board will carefully manage D9’s operating
costs and seek to reduce them on an ongoing basis,
whilst containing additional advisory and transaction
costs.
During the Managed Wind-down, the Company intends
to maintain its investment trust status and listing with
due consideration for the regulatory requirements and
costs of doing so following the sale of the Company’s
wholly owned assets.
I would like to thank my fellow shareholders for their
continued engagement with the Company and the
Board through what has clearly been a challenging
period.
Charlotte Valeur
Interim Independent Chair
29 April 2024
1
Strategic Report
10
|
Digital 9 Infrastructure plc
Strategic Report
2023 Annual Report
|
11
Investment Objective
and Investment Policy
The Board is responsible for the Company’s Investment Objective
and Investment Policy and has overall responsibility for ensuring the
Company’s activities are in line with such overall strategy.
The Company’s current Investment Objective and Investment Policy, as approved by
shareholders at the 25 March 2024 General Meeting receiving 99.89% of votes in favour, are
published below.
/ INVESTMENT OBJECTIVE
The Company will be managed, either by a third-party investment manager or internally by
the Company’s board of directors, with the intention of realising all the remaining assets in the
Portfolio, in an orderly manner with a view to ultimately returning available cash to Shareholders
following the repayment and cancellation of the Company’s revolving credit facility ("RCF") from
the proceeds of the assets realised pursuant to the Investment Policy.
Strategic Report
12
|
D9 Infrastructure plc
/ INVESTMENT POLICY
The assets of the Company will be realised in an orderly
manner, returning cash to Shareholders at such times
and in such manner (which may be by way of direct
buybacks, tender offers, dividends or any other form
of return) as the Board may, in its absolute discretion,
determine. The Board intends that the proceeds of
any asset realisations will be used to repay and cancel
the RCF before any such proceeds are distributed
to shareholders or used to meet other outstanding
indebtedness of the Company (including the non-
recourse indebtedness to the vendors of the Company's
Arqiva asset, issued by way of a vendor loan note which
the Company may repay or transfer to a future buyer of
the Arqiva asset). The Board will endeavour to realise all
of the Company’s investments in a manner that achieves
a balance between maximising the net value received
from those investments and making timely returns to
Shareholders. The Company will cease to make any new
investments (including any follow-on investments) or
to undertake capital expenditure, except with the prior
written consent of the Board and where, in the opinion
of the Board, in its absolute discretion:
a)
failure to make the investment or capital
expenditure would result in a breach of contract or
applicable law or regulation by the Company, any
member of its group or any vehicle through which it
holds its investments; or
b)
the investment or capital expenditure is considered
necessary to protect or enhance the value
of any existing investment or to facilitate an
orderly disposal, any such investment or capital
expenditure being a “
Permitted Investment
“.
Subject to the ability of the Company to make
Permitted Investments, any cash received by the
Company as part of the realisation process prior to
its distribution to Shareholders will be held by the
Company as cash in Sterling on deposit and/or as cash
equivalents.
/ BORROWING AND HEDGING
The Company may utilise borrowings for short term
liquidity purposes. The Company may also, from time to
time, use borrowing for investment purposes on a short-
term basis where it expects to repay those borrowings
from realisation of investments. Gearing represented
by borrowings will not exceed 20% of Net Asset Value
calculated at the time of drawdown.
The Company may use derivatives for hedging as well
as for efficient portfolio management. Any such hedging
transactions will not be undertaken for speculative
purposes.
Strategic Report
2023 Annual Report
|
13
In order to track the Company and/or Group's progress, the key performance indicators (“KPIs”)
monitored are set out below. Sustainability KPIs can be found in the Company’s separate
Sustainability Report which is available here: https://www.d9infrastructure.com/digital-9-
infrastructure-plc-sustainability-report-2023/. .
KPI AND DEFINITION
RELEVANCE TO STRATEGY
PERFORMANCE
COMMENT
1. TOTAL RETURN (%)
1
The change in NAV in the
period and dividends paid
per share in the period.
The total return highlights
the underlying performance
of the portfolio’s investment
valuations, including
dividends paid.
(23.1%) year to
31 December 2023
((
6.8
%) period from
IPO to 31 December
2023).
The negative total return is due to
the decreases in the fair value of the
Company’s Investment Portfolio, and
interest and expenses incurred in the
year. The valuation of the Company’s
Investments was impacted by the
reduction in value of the Verne Global
group of companies as only c.25% of
the potential $135 million Earn-Out is
being recognised on the balance sheet.
2. TOTAL SHAREHOLDER RETURN (%)
1
The change in share price
and dividends paid per
share.
The total shareholder return
highlights the share price
movements, including re-
investment of dividends.
(64.1%) in respect
of the year to
31 December 2023
(66.2% for the period
from IPO to
31 December 2023).
The decrease was primarily driven by a
significant fall in the share price during
2023. During the period, shareholders
did receive the Q4 2022 dividend
(paid in March 2023) and the Q1 2024
dividend (paid in June 2023), but no
further dividends were declared for
2023, which
also contributed to the
share price decline.
3. EARNINGS PER SHARE (PENCE)
The post-tax earnings
attributable to
shareholders divided by
weighted average number
of shares in issue over the
period.
The EPS reflects the
Company’s ability to
generate earnings from
its investments, including
valuation increases.
Loss of 27.4 pence
per share for the
year to 31 December
2023 (see Note 23)
(11.1 pence per share
period to
31 December 2022).
The main driver in the loss per share
for the year were the movement in fair
value of the Company’s Investment
Portfolio, and costs incurred during
the period. The fall in valuation was
predominantly driven by the Earn-Out
element of the Verne Global Sale which
led to a write down of the Verne Global
Companies. Other key drivers were
financing costs incurred
for the Group’s
RCF and VLN.
Key Performance
Indicators
Strategic Report
14
|
D9 Infrastructure plc
KPI AND DEFINITION
RELEVANCE TO STRATEGY
PERFORMANCE
COMMENT
4. NAV PER SHARE (PENCE)
NAV divided by number
of shares outstanding as
at the period end.
The NAV per share reflects
our ability to grow the
portfolio and to add value
to it throughout the life
cycle of our assets.
79.33 pence per
share (109.76 pence
per share as at
31 December 2022)
(see Note 24).
The NAV per share fell as a result of the
negative valuation movement in the
period and costs incurred. The fall in
NAV was predominantly driven by the
Earn-Out element of the Verne Global
Sale which led to a write down of the
Verne Global Companies. Other key
drivers were financing costs incurred
for
the Group’s RCF and VLN.
5. ONGOING CHARGES RATIO
1
Annualised ongoing
charges are the
Company’s management
fee and all other operating
expenses (i.e. excluding
acquisition costs and
other non-recurring
items) expressed as a
percentage of the average
published undiluted NAV
in the period, calculated
in accordance with
Association of Investment
Companies guidelines.
Ongoing charges show
the drag on performance
caused by the operational
expenses incurred by the
Company.
1.33% for the period
to 31 December 2023
(31 December 2022:
1.10%).
A key measure of Operational
performance.
As the Company has acquired more
investments, the Group structure has
become more complex. As a result,
audit costs and professional fees have
increased.
This is calculated in line with AIC
guidance. Ongoing charges are
those expenses of a type which are
likely to recur in the foreseeable
future, whether charged to capital
or revenue, and which relate to the
operation of the Company excluding
the costs of acquisition and disposal
of investments, financing charges and
gains/losses arising on investments.
For the avoidance of doubt, the
calculation does not include costs
associated with the sale of investments
nor with the Strategic Review.
1
Alternative Performance Measure, further information on APMs can be found on pages 125 to 127.
Strategic Report
2023 Annual Report
|
15
/ REVIEW OF THE YEAR
Introduction
Portfolio companies performed broadly in line with expectations during the course of the year. However,
macroeconomic factors impacted fund-level liquidity, necessitating several steps to protect the Company’s balance
sheet. This began with the sale of the Verne Global platform and the suspension of D9’s dividend with the aim of
freeing up cash to repay the Group’s RCF and reduce interest costs. Following an extensive shareholder consultation,
the Board initiated a Strategic Review of the Company, the outcome of which has been to begin a Managed Wind-
Down of the Company as approved by shareholders on 25 March 2024, with sale processes for D9’s wholly-owned
assets having commenced as of April 2024. Key Investee Company activities during the year included Arqiva’s senior
debt refinancing and inflation collar implementation and the signing of Verne Global Iceland’s green term loan.
Company and Portfolio Performance
The Company reported a pre-tax loss of £237.3 million (2022: £92.1 million pre-tax profit) for the year, equal to
a 27.43 pence loss per share (2022: 11.09 pence earnings per share). This was the net result of income received
from investments and revaluation losses arising on the investments held at fair value through profit or loss as at
31 December 2023.
Revaluation losses were driven mainly by a devaluation of Verne Global, financing and operational
costs as described in more detail in the Financial Review Section. During the period, the Company’s NAV decreased
from £949.6 million (109.76 pence per share) at 31 December 2022 to £686.3 million at 31 December 2023 (79.33
pence per share). The key components driving the drop in NAV are explained below in the Financial Review section.
Portfolio company performance was broadly in line with management expectations. Aggregate revenues for
the Investee Companies during the period amounted to £446.6 million, 10% higher than the prior year with the
increase largely attributable to inflation-indexed contracts, power pass-through and organic growth. Verne Global
Iceland accelerated its top line growth to 24% year-on-year on the back of continued strong customer demand,
whilst Arqiva and Aqua Comms grew by 9% and 4% respectively. In line with business plans, margins have remained
under pressure for some of the businesses, particularly Arqiva and Aqua Comms. Portfolio company debt at year
end consisted of £79 million at Verne Global and £744 million at Arqiva, with the Arqiva balance calculated pro rata
based on D9’s 51.76% economic interest.
Since July 2022, the Company had invested £4.3 million seed capital into Giggle, a development opportunity that
would have provided affordable broadband to social housing through a Fibre to the Home (“FTTH”) network across
the city of Glasgow. As set out in our Interim Report, due to the significant identified capex pipeline of £150 million
and funding constraints, the Company was unable to continue to fund the development capital expenditure
required by Giggle and made a provision against the full value of Giggle.
The Company sold its 100% stake in
Giggle to its senior management in Q4 2023 for £1.
Balance sheet stabilisation
Notwithstanding solid operating performance of Investee Companies broadly in line with management
expectations, liquidity at a fund level was adversely impacted by persistently high interest rates and inflation,
coupled with large growth capital expenditure opportunities. This led the Company to decide on and execute the
following key steps to stabilise D9’s balance sheet:
1.
Sale of the Verne Global group of companies
2.
The suspension of the Company’s dividend
3.
Use of sale proceeds to repay part of the RCF and reduce interest payments.
Investment
Manager’s Report
Strategic Report
16
|
D9 Infrastructure plc
Sale of Verne Global
During the period, the Company ran a competitive
sale process for the Verne Global group of companies
(which has operations in Iceland, Finland and the United
Kingdom).
As announced on 28 September 2023,
the Company received several non-binding offers for
a majority stake in Verne Global. The Company, with
the support of Goldman Sachs International (financial
adviser for the transaction), assessed the merits of the
non-binding offers for a majority stake to maximise
shareholder value. The Company concluded that a
sale of the Company’s entire stake in Verne Global
was in shareholders’ best interests because, amongst
other considerations, it provided an opportunity for
the Company to substantially deleverage its balance
sheet and provide the cash resources necessary for the
Company to strengthen its financial position, particularly
in light of Verne Global’s
significantly increased capital
expenditure pipeline that the Company was unable to
fund.
As announced on 15 March 2024, the Company
completed the Verne Transaction for an equity
purchase price of up to $575 million (approximately
£450 million*). Following completion of the Verne
Transaction, the Company received $415 million (£325.8
million) (the “Initial Purchase Price”). The completion
followed receipt of all applicable regulatory approvals
and the satisfaction of all conditions in line with the
previously communicated timetable. A further deferred
consideration of US$25 million (approximately £20
million**) which formed part of the purchase price has
now been received.
The purchase price also comprised a potential
Earn-Out payment of up to $135 million (approximately
£108 million**), which is payable subject to Verne
Global achieving run-rate EBITDA targets for the
financial year ending December 2026 (the
“Performance
Target”). The total Earn-Out will be payable if 100% of
the Performance Target is met and will be reduced on
a sliding scale with no Earn-Out being payable if Verne
Global does not achieve 80% of the Performance Target.
This target is as set in the business plan provided to all
potential purchasers at the time of the sale process.
The Investment Manager believes that Ardian’s own
value creation objectives are aligned with deploying the
requisite capital expenditures to enable Verne Global
to deliver in line with or close to the Performance
Target.
The Company also benefits from customary
protections to ensure Verne Global continues operating
and reporting substantially in line with existing practices,
including the provision of quarterly updates on its run-
rate EBITDA.
Following the completion of the Verne Transaction as
announced on 15 March 2024, the Initial Purchase Price
proceeds were used as follows:
•
£273.5* million was used for partial repayment of
the RCF (more details on this below);
•
c.£17 million to pay costs incurred in relation to
the Verne Transaction, including a contingency of
£1.6 million
***;
•
Around £12 million was retained to cover future
operational expenses of the Company if and when
required; and
•
Around £23 million was retained for prudent capital
management to cover possible future liabilities
arising from certain indemnification provisions made
in connection with the Verne Transaction.
Suspension of the Company’s dividend
In September 2023, at the time of considering the Q2
2023 dividend, the Board and Investment Manager
were mindful of the uncertainty around the timing of
the completion of the sale of Verne Global and were
conscious, that the persistence of a high interest rate
environment continued to weigh on the Company’s
liquidity position. Therefore it was agreed that a more
conservative approach to capital allocation was required
in the interest of the Company and its shareholders,
and, on 28 September 2023 the Board elected not to
declare the Q2 2023 dividend and withdrew its target
dividend of 6.0 pence per Ordinary Share for the
year ending 31 December 2023.
During the year, the
Company paid a total dividend of 3.0 pence per share:
1.5 pence was paid in March 2023 relating to the period
to 31 December 2022, and a further 1.5 pence per share
in June 2023 in relation to the period to 31 March 2023.
No further dividends have been declared for 2023.
*
GBP amounts based on a 1.28 USD/GBP exchange rate as of 13 March 2024.
**
GBP amounts based on a 1.25 USD/GBP exchange rate as of 25 April 2024.
***
It was agreed with the RCF lenders that £17 million would be set aside to pay costs arising from the Verne Transaction. This includes:.£1.0 million
for financing
arrangement costs related to the accordion facility for Verne Global and legal fees to implement the amendments to the RCF facility; £14.4 million for transaction
advisory services, including£5.8 million for
financial advice,
£5.8 million for legal advice, and £2.8 million forvendor due diligence, tax, and other advice and
expenses in relation to the Verne Transaction.
The remaining £1.6 million represents a contingency which has not yet been utilised and may be further used to
pay down the RCF..
£9.2 million of the above mentioned £17 million was incurred in the period-ended 31 December 2023, and £6.2 million was incurred post-
period end in 2024. The level of costs due to advisory fees incurred
for the Verne Transaction reflects
the transaction's complexity in contemplating different
transaction structures and executing the sale of three separate legal entities in three different jurisdictions.
Strategic Report
2023 Annual Report
|
17
maturity. Part of these funds will also be used for the
further partial repayment and cancellation planned at
the beginning of May, as explained above.
Finally, the Minimum Aggregate Approved Investment
Value threshold has changed from £700 million
previously to 500% of the total commitments under the
residual RCF.
The RCF in an important consideration for the
Company, even though it is not held on the Company’s
balance sheet. The RCF is held by its main subsidiary D9
Holdco, but the Company is a guarantor of the facility.
/ STRATEGIC REVIEW
Following the conclusion of the Strategic Review and
the subsequent shareholder approval for the revised
Investment Objective and Policy, the Company has
entered into a Managed Wind-Down and has started to
work to realise all of the Company’s assets in a manner
that maximises value to shareholders. The next steps for
the Investee Companies are set out below.
Next steps for the wholly owned
assets (Aqua Comms, EMIC-1, Elio
Networks and SeaEdge UK1)
The Board and Investment Manager have commenced
sale preparations and mandated advisers for the
sale of the Company’s wholly owned assets. Investor
outreach for the sale of Aqua Comms EMIC-1 and Elio
Networks was launched in April 2024. Preparations for
sales processes are ongoing and advisers have been
appointed. The Company expects good progress to be
achieved for the orderly sale of the wholly-owned assets
in 2024 and will continue to update shareholders. The
Company will continue to prioritise the achievement of
best value for shareholders over speed of execution.
Next steps for Arqiva
As part of the Strategic Review, various options for
realising the stake in Arqiva were considered on
a preliminary basis by the Board. In consideration
of Arqiva’s complexity as a business and its co-
shareholding structure, the Investment Manager and the
Board believe that the maximisation of the value of D9’s
stake in Arqiva is likely to take longer to realise than
the other investments held by the Company. As such,
the Board has decided to defer launching a formal sale
process for D9’s stake in Arqiva for the time being but
remains open to all value-accretive options, including in
collaboration with Arqiva’s co-shareholders.
It is the company’s intention to retain its Investment
Company status during the managed wind down
process. To maintain this status, under s1158 of the
provisions the Company may be required to pay further
distributions. The Board will continue to monitor this
requirement.
RCF partial repayments and cancellation
Following completion of the Verne Transaction, and
receipt of the Initial Purchase Price, as announced
on 15 March 2024, the Company has been able to
substantially deleverage its balance sheet through the
partial repayment and cancellation of its RCF. Following
receipt of the Deferred Consideration and the cessation
of certain indemnification provisions for which the
Company had ringfenced £23 million for prudent
capital management, the Company intends to further
reduce its drawn RCF to c.£53 million by 3 May 2024,
thus completing the execution of the 3-step plan to
substantially deleverage its balance sheet and reinforce
its financial position.
At the time of the partial RCF repayment and
cancellation effected in March 2024, the RCF
documentation was amended to set revised financial
covenants to make it more bespoke for the reduced
portfolio size going forward until the RCF is fully repaid.
The new set of covenants include:
•
The LTV test threshold at the Digital 9 HoldCo
Limited level (being the ratio of total financial
indebtedness of each obligor under the RCF
documentation to adjusted portfolio investment
value) is 20%;
•
The global LTV test threshold (being the ratio
of total financial indebtedness of Digital 9
Infrastructure plc, Digital 9 HoldCo Limited and all
subsidiaries to enterprise value) is 62.5%; and
•
An interest reserve based on any applicable residual
RCF size must be maintained in the interest reserve
account at all times to legal maturity (March 2025).
In addition to the final bullet point above, the
Company
also negotiated and agreed with its RCF Lenders that
from 1 January 2024, the cash reserves locked up in the
RCF’s interest reserve account can be used for interest
payments, which will enable the Company to pay interest
for the residual RCF without using any unrestricted cash
until the RCF’s legal maturity in March 2025.
As at 29 April 2024, the balance of the interest reserve
account was £9.9 million, which is
sufficient to cover
future outstanding interest payments due to the legal
Strategic Report
18
|
Digital 9 Infrastructure plc
\ FINANCIAL REVIEW
Net Asset Value
The following charts show the movement in the Company’s NAV on a pence per share basis, for the twelve-month
period from 1 January 2023 to 31 December 2023.
In the 12 months to 31 December 2023, the portfolio’s fair value movement including foreign exchange (“FX”) was
a reduction of £179 million or 20.7 pence per share, this is split between fair value movement and FX in the chart
below with adverse FX movements comprising of 3.8 pence per share.
The total fall in value of the portfolio of 20.7 pence per share, was driven largely by a reduction in value of Verne
Global platform, which contributed 14.8 pence of this reduction, whose NAV was rebased in line with the price
realised in the Verne Transaction (further information on this is below on pages 20 to 21). Of the 14.8 pence per
share fall attributable to Verne Global, 9.2 pence was as a result of recognition of the Earn-out at £2
6.8
million
($34.1 million out of a total contingent consideration of $135 million), 2.3 pence was due to adverse FX movements
with the balance being other valuation movement, including additional contributions to and repayments from, the
Verne Group in the 12 month period to 31 December 2023.
NAV per share movement – twelve months to 31 December 2023
(Pence per share)
109.8
(16.9)
(3.8)
(3.6)
(1.2)
(1.0)
(1.1)
(0.3)
(0.4)
1.5
(0.6)
(3.0)
79.3
NAV 1 Jan 23
FV Movement
FX
RCF Interest
VLN Interest
Management Fee
Transaction Costs
Strategic Review
Break fee
Income
Group OpEx
Dividends (3.0pps)
NAV 31 Dec 23
70.0
75.0
80.0
85.0
90.0
95.0
100.0
105.0
110.0
115.0
120.0
Strategic Report
2023 Annual Report
|
19
Reconciliation to IFRS Valuation
The below chart shows the build-up of the IFRS Investment Valuation held on the Balance Sheet of the Company.
£
639.9
million is the valuation of the Company’s wholly-owned subsidiary Digital 9 HoldCo Limited which holds
the investments in the underlying Investee Companies. T
here is also a £36.2
million shareholder loan the Company
has made to Digital 9 HoldCo Limited; this is shown separately. The total valuation on the Balance Sheet of the
Company is £
676.1
million.
The chart below includes the gross equity valuation of the Company’s share of Arqiva
(£503.6 million)
and shows
deductions for the VLN principal
(£163.0 million), for
the additional VLN notes issued in June 2023
(£6.8 million)
and for VLN interest accrued to 31 December 2023 (£5.1 million). This yields a proforma valuation of £328.7 million
net of all VLN deductions. Deductions are also made for the RCF, which, for the avoidance of doubt, do not sit on
the Company’s Balance Sheet, but are held in underlying unconsolidated subsidiaries of the Company, being Digital
9 Wireless OpCo 2 Limited and Digital 9 HoldCo Limited respectively.
A pro-forma consolidation Group position, is provided below in the unaudited non-statutory information section on
pages 128 to 131.
222.5
372.2
14.0
36.0
55.4
503.6
(163.0)
(6.8)
(5.1)
1,028.9
34.6
(373.8)
(49.8)
639.9
36.2
676.1
Aqua Comms
Verne Global
SeaEdge
EMIC - 1
Elio
Networks
Arqiva
VLN
Principal
VLN additional
notes
VLN accrued
interests
Total Portfolio
Value
Cash & Cash
equivalents
RCF
Net
liabilities
Reconciled IFRS
Valuation
D9 HoldCo
SH Loan
Total Hold Co
Valuation
0.0
200.0
400.0
600.0
800.0
1,000.0
1,200.0
1,400.0
Valuations
The independent valuation process of the Company’s portfolio of assets and the audit have now concluded for the
December 2023 year end. During the audit process, the key inputs and assumptions for all operating models used
in the valuation process were revisited and challenged to arrive at the audited fair value figures. As a result, the
unaudited valuations for two of the Company’s assets, Aqua Comms and the Verne Earn-out, have been revised to
reflect a more conservative valuation than had been previously announced
.
For Aqua Comms, the discount rate utilised was increased to reflect the nascent nature of the business’ expansion
into the Asia region alongside its well-established transatlantic business. This more conservative approach has
resulted in a reduction of the Aqua Comm valuation of 7% relative to the unaudited NAV published on 28 March
2024.
For the Verne Earn-Out, measuring the fair value of contingent consideration presented a number of valuation
challenges. In pricing the Earn-Out, a scenario-based technique (Monte Carlo Simulation) was used by the
HoldCo valuation reconciliation as of 31 December 2023 (£ million)
Strategic Report
20
|
Digital 9 Infrastructure plc
independent valuer. This technique involved considering
discrete scenario-specific cash flow estimates around
Verne Global achieving its run-rate EBITDA targets.
These amounts were then probability weighted and
discounted using an appropriate discount rate.
After consultation with the auditor and the independent
valuer the Board took a more conservative approach
to the risk parameters which had been utilised in the
initial independent valuation. This prudent approach
recognises the inherent uncertainty and perceived
risk around Verne Global’s ability to meet future run-
rate EBITDA targets, which in turn will determine
the amount of the Earn-Out to be received by the
Company in early 2027.
This approach reflects
the
most recent update to the AICPA (American Institute
of Certified Public Accountants) guidelines for valuing
contingent consideration. When considering the
above, the calculations were adjusted accordingly
which reduced the Earn-Out valuation by £25.9 million
from the unaudited number previously announced, a
49% reduction when compared to the unaudited NAV
published on 28 March 2024.
Going forward, the fair value of the Earn-Out will be
updated each reporting period to reflect the actual
progress made by Verne Global in achieving the run-
rate EBITDA target.
Valuations for the remainder of the Company’s Investee
Companies are unchanged from the unaudited figures
published on 28 March 2024.
The total portfolio valuation stands at £1,029 million
and this comprises the reduction for the VLN including
additional notes issued in June 2023 and accrued
interest on the VLN as at 31 December
2023 reflecting
a 6% reduction to the unaudited figures published in
March 2024.
The decrease was driven largely by the recognition of
only $34 million (25%) of the potential $135 million
Verne Global Earn-Out, reflecting the uncertainty and
perceived risk around Verne Global’s ability to meet
future run-rate EBITDA targets.
\ SUMMARY OF PORTFOLIO
VALUATION METHODOLOGY
The cash flows used in the valuations are from
Investee
Company operating models, which are reviewed and
signed off by the respective Investee Company boards.
These models are used to evaluate Investee Company
performance and assess the performance of Investee
Company management.
Valuation
Investment valuations are calculated at the financial half-
year (30 June) and the financial year-end (31 December)
periods. For the current period ended 31 December
2023, in arriving at their fair value conclusions the Board
obtained an independent valuation of Aqua Comms,
Elio Networks, Arqiva Group and the Verne Earn-Out
whose sale completion was announced on 15 March
2024 (the “Verne Transaction”). EMIC-1 continues to
be held at cost and reflects cash contributed by the
Company while SeaEdge remains consistent with prior
years.
The fair valuation of the portfolio has also been
reviewed by the Company’s auditors, PwC, as at
31 December 2023 and further details are set out in the
Independent Auditors’ Report on pages 90 to 97.
Discount rates
As described in Note 4, investments are typically
valued on a discounted cash flow (“DCF”) basis. The
discounted cash flow from revenue is forecasted over an
8-to-10 year period followed by a terminal value based
on a long-term growth rate. Discount rates are arrived
at via a bottom-up analysis of the weighted average
cost of capital, using both observable and unobservable
inputs, and calculation of the appropriate beta based
on comparable listed companies. Where appropriate, a
sense-check to the DCF analysis is done by comparison
to market multiples.
In respect of the portfolio of data centres where the
disposals were completed after the year-end, the fair
value of these investments at the year end equals the
agreed disposal value plus an amount for the valuation
of the Earn-Out as per the terms of the share purchase
agreement (“SPA”).
As a result of the above, discount rates are only relevant
to Arqiva, Aqua Comms, Elio Networks and the Verne
Global Earn-Out, which was valued utilising a Monte
Carlo Simulation. The weighted average discount rate
used in these valuations was 13.
62
%.
Strategic Report
2023 Annual Report
|
21
78.3
2.5
(1.3)
(1.2)
(10.3)
(15.4)
(15.3)
18.8
(3.5)
(2.3)
(1.0)
49.4
(31.9)
17.6
O/b -
1 Jul 2023
Income
Verne
Sale
Strategic
Review
EMIC-1
Capex
RCF
Interest
RCF
Capital
Break
Fee
Mgmt
Fee
Admin
expenses
Total Group
Cash
Restricted
Cash
Unrestricted
Cash
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
Unaudited Unrestricted Cash Group Waterfall – 1 July 2023 to 31 December 2023 (£ million)
Liquidity
The chart below shows the unrestricted cash movements for the Group in the six-month period to 31 December
2023. For the avoidance of doubt, this chart includes all unrestricted cash across the D9 subsidiaries to
31 December 2023 and is on a cash basis and not an accruals basis.
A second chart showing
the cash flow movements across the Group from 1 January 2024 to 31 March 2024
has also
been added in the unaudited non-statutory information section on page 129.
As at the period end, the Group held total cash of £49.4 million
iii
. Of this, unrestricted cash available for use was
£17.6 million, shown in the chart below. Restricted cash consisted of an escrow account in relation to the EMIC-1
project, which in 2024 is being unwound as project milestones are hit.
At 31 December 2023, the Group had cash of £24.4 million in a restricted interest reserve account, under the terms
of its RCF. In agreement with its RCF lenders, the Company negotiated and agreed that from 1 January 2024 the
cash reserves in the RCF’s interest reserve account can be used for interest payments which enables the Company
to pay interest for the residual RCF without using any unrestricted cash until the RCF’s legal maturity in March 2025.
Restricted cash of £31.9 million included a Restricted Interest Reserve Account in relation to the RCF of £24.4 million
and an amount in a restricted escrow account in relation to the construction of EMIC-1 of £7.5 million.
Unrestricted cash includes £14.8m held at the Company level, with the balance being held in unconsolidated
subsidiaries.
The Company had fully drawn the RCF as at the reporting date in the form of £373.8* million drawn and
£1.2 million committed through a Letter of Credit in favour of Verne Global Iceland.
As described in both the Interim Chair’s Statement and Investment Manager's Review, the Group closed the sale of
the Verne Global group of companies as announced on 15 March 2024. Subsequent to this, the cash position of the
Group has strengthened.
A cash waterfall for the 3 months to 31 March 2024 is included within the unaudited non-statutory information
section on page 129.
iii
Alternative Performance Measure, further information on APMs can be found on pages 125 to 127.
Strategic Report
22
|
Digital 9 Infrastructure plc
Inflation
The 12 months to 31 December 2023 saw some of the highest inflation in recent years, which had both positive and
adverse effects on the Investee Companies. The Investment Manager and Board monitored developments closely
and took steps to reduce forward macroeconomic exposure through hedging instruments and forward agreements.
High RPI in March 2023 (13.5%) had a direct short-term cash flow impact on Arqiva due to its inflation-linked
swaps, with Arqiva paying £147 million in accretion payments
(equating to c.£76 million prorated for D9's 51.76%
economic interest in Arqiva). For the avoidance of doubt, accretion is paid by Arqiva, not D9. The long-term net
impact of inflation on
Arqiva is positive, increasing EBITDA due to the compounding effect of Arqiva’s long-term
inflation-linked contracts. RPI has fallen substantially from the Q1 2023 peak, dropping to
4.3% in March 2024,
which will result in an accretion payment of c.£53 million in June 2024 (equating to c.£28 million prorated for D9's
51.76% economic interest in Arqiva). Furthermore, Arqiva’s inflation collar implemented in June 2023 limits future
downside inflationary exposure by capping accretion payments at an effective RPI of c.6.0% for the remaining life of
the swaps, which expire in 2027. More information on Arqiva can be found below.
Debt
fi
nancing
As at 31 December 2023, the Group had unrestricted cash of £17.6 million and the RCF was fully drawn at
£375 million (divided into a £373.8** million cash draw and a £1.2 million non-cash draw for a Letter of Credit
provided under the RCF in favour of Verne Global Iceland). In aggregate, excluding Investee Companies, D9 had
gross debt of £544.8 million, comprising the VLN and RCF (including the Letters of Credit described above) as of
31 December 2023, which is 51% of Adjusted GAV. For the avoidance of doubt, the VLN balance also includes the
additional PIK notes issued in June 2023, but does not include the accrued interest of £5.1m to
31 December 2023.
**
Alternative Performance Measure, further information on APMs can be found on pages 125 to 127.
Strategic Report
2023 Annual Report
|
23
Debt metrics
The below table shows the Group’s leverage position as at 31 December 2023. Included within the unaudited non-
statutory information section on page 130 is a pro-forma position as at 31 March 2024, which shows the position
following the Company’s partial RCF repayment in March 2024.
31 December 2023
£'m
Aqua Comms
222.5
Verne Global
372.2
SeaEdge
14.0
EMIC-1
36.0
Elio Networks
55.4
Arqiva
503.6
Arqiva Principal VLN
(163.0)
Arqiva Additional VLN
(6.8)
Arqiva Accrued VLN Interest
(5.1)
Total Portfolio Value
1,028.8
Subsidiary Cash & Equivalents
34.6
RCF
(373.8)
Net Subsidiary Other Liabilities
(49.8)
D9 Shareholder loan
36.2
Reconciled IFRS Valuation
676.1
PLC Other Current Assets
1.5
PLC Receivables & Cash
14.8
Total Assets
692.3
RCF*
375.0
Adjusted GAV
1,067.3
£'m
RCF*
375.0
VLN (including £6.8m additional notes)
169.8
Total Group Leverage
544.8
Leverage / Adjusted GAV
51.0%
*
As at 31 December 2023, the RCF was fully utilised at £375 million, which comprised £373.8** million drawn and the £1.2 million non-cash draw Letter of Credit.
In Q1 2024, the Letter of Credit was cancelled and did not require a cash repayment.
**
Alternative Performance Measure, further information on APMs can be found on pages 125 to 127.
As at 31 December 2023, the Company’s net debt / EBITDA position has marginally increased since December
2022 as a result of the PIK loan notes on the VLN being capitalised on 30 June 2023 and a slight decline in portfolio
EBITDA.
At 31 December 2023
Net Debt / EBITDA
£'m
Drawn RCF inc. Letter of Credit
375.0
VLN*
169.8
Group Cash & Equivalents (inc. restricted cash)
(49.4)
Net Debt
495.4
2023 Portfolio EBITDA
197.7
Net Debt / EBITDA
2.5x
Arqiva debt (prorated for D9 ownership)**
744.4
Verne Global debt
78.6
Adjusted Net Debt
1,318.4
Adjusted Net Debt / EBITDA
6.7x
*
Includes the additional notes of £6.8 million issued in June 2023.
**
This is D9’s share of Arqiva gross debt. It is not an Arqiva net debt figure and as a result does not include cash held by Arqiva; it is a more conservative approach
and is in line with previously reported figures.
Strategic Report
24
|
Digital 9 Infrastructure plc
Revolving Credit Facility
As at the reporting date, the Group had a £375 million
bespoke RCF in place with an international syndicate of
four banks. The Group has fully drawn the facility as at
the reporting date in the form of £373.8 million drawn
and £1.2 million committed through a Letter of Credit
in favour of Verne Global Iceland. As set out above, the
RCF has been partly repaid and cancelled following the
completion of the Verne Transaction.
As previously disclosed and given the current economic
landscape in the UK, characterised by high interest rates
with SONIA trading around the 5% mark, the Group’s
RCF will reduce to c.£53 million on 3 May 2024 in order
to reduce its financing costs and preserve shareholder
value.
VLN
Details of the Arqiva VLN are set out on pages 34 to 35.
Investee Company leverage
As at 31 December 2023, only two of the Investee
Companies had asset-level debt: Arqiva and Verne
Global Iceland.
Arqiva:
As at 31 December 2023, Arqiva’s debt balance was
£1,438 million (including project debt), of which the
Company’s share was £744 million.
Verne Global Iceland:
During the year, the Company sought asset-level
financing into selected Investee Companies in the
form of long-term structured debt. In June 2023, the
Company achieved this through Verne Global Iceland
which agreed a $100 (c.£80) million green term-loan
facility (the “Green Term Loan”).
The Facility is structured as a syndicated facility, fully
underwritten by Natixis and with a fixed term of five
years, maturing in June 2028. The interest rate payable
in the first three years of the facility is 3% per annum
over the Secured Overnight Financing Rate (“
SOFR
”),
stepping up to 3.25% per annum and 3.5% per annum,
in fourth and fifth year, respectively. Verne Global
Iceland has also put in place an interest rate swap for
the first three years of the facility to manage longer-term
fluctuations in interest rates. The fixed rate for the tenor
of the swap is 4.14% per annum and the all-in fixed rate,
including the applicable margin, is 7.14% per annum.
As announced on 15 February 2024, Verne Global
Iceland signed a $17 million increase (the “Accordion
Facility”) under the terms of the Green Term Loan to
help fund growth capital expenditure and strengthen
cash position ahead of closing the Verne Transaction,
bringing the total indebtedness under the facility to
$117 million.
The Green Term Loan debt liability has been transferred
in whole as part of the Verne Global sale.
Strategic Report
2023 Annual Report
|
25
Portfolio Concentration at 31 December 2023
Sector Concentration at 31 December 2023
4%
Net Current Assets
5%
Elio Networks
3%
EMIC-1
21%
Aqua Comms
35%
Verne Global
31%
Arqiva
1%
SeaEdge
4%
Net Current Assets
36%
Wireless
24%
Subsea Fibre
36%
Data Centre
\
PORTFOLIO SUMMARY AND KEY VALUE DRIVERS
As at 29 April 2024, the Company’s portfolio consists of 5 attractive and complementary investments.
The below table shows the portfolio’s asset and sector concentration levels comprising valuations as at
31 December 2023.
A pro forma basis as at 31 March 2024 following the completion of sale of the Verne Global group of companies is
set out in the ‘Unaudited Non-Statutory Information’ section at the end of this report on pages 128 to 131.
Strategic Report
26
|
Digital 9 Infrastructure plc
\
REVIEW OF PORTFOLIO AS OF 31 DECEMBER 2023
In 2023, aggregate Investee Company revenue grew by 10% year-on-year, driven mainly by the performances of
Arqiva, Aqua Comms and Verne Global. EBITDA during the period was negatively affected by Arqiva and Aqua
Comms, as was factored into business plans. Further details are provided in the following sections.
The sale of the Verne Global group of companies, which completed in March 2024, removed the majority of D9’s
exposure to the data centre subsector. Adjusting for the sale, the pro-forma subsector exposure at year-end was
predominantly subsea and wireless, with Aqua Comms and Arqiva being the largest contributors.
Portfolio Financial Performance (including Verne Global)
2023
2022
Revenue
£446.6
million
£405.5 million
% growth
10%
4%
EBITDA
£197.7 million
£202.4 million
% growth
(2%)
0%
% margin
44%
50%
Pro-forma Portfolio Financial Performance (excluding Verne Global)
2023
2022
Revenue
£395.9 million
£363.9
million
% growth
9%
1%
EBITDA
£180.6
million
£193.2 million
% growth
(7%)
(0%)
% margin
46%
53%
Strategic Report
2023 Annual Report
|
27
Aqua Comms is a leading carrier-neutral owner and
operator of subsea fibre, providing essential connectivity
through 20,000 km of transatlantic, North Sea and
Atlantic, and Irish sea routes. Aqua Comms serves mainly
hyperscalers and global carriers who have an exponential
data demand.
Compared to 2022, revenue increased by 4% in 2023
mainly driven by increased sales in Aqua Comms’ lease
business. EBITDA decreased by 33% mainly because of the
planned addition of headcount to support sales, operations
and expansion into new geographies such as Asian markets
in line with the business’ long-term strategy, along with
additional and temporary overlapping costs to internalise
its previously outsourced Network Operations Centre. In
addition, the launch of Aqua Comms’ third transatlantic
cable, AEC-3, in August 2023 temporarily hindered
profitability as all related costs were incurred upfront (e.g.
backhaul leases). Therefore, Aqua Comms expects that
revenue ramp-up will occur in future years. Aqua Comms
also expects customer demand to remain strong in the
foreseeable future whilst capacity demand continues to
grow at very high rates.
Aqua Comms had a successful year in 2023 in its core
transatlantic market, growing its lease business by double
the growth rate of the overall market, demonstrating Aqua
Comms’ ability to capture market share and testament
to the strength of the sales team. Aqua Comms also
launched AEC-3 onto its network in August 2023, adding
a third high-capacity system to their transatlantic footprint
offering enhanced diversity in both the US and Europe and
delivering the latest technology to its customers.
In February 2024, CEO Jim Fagan decided to leave the
business to pursue an external opportunity. He hands
over a company which has a strong, growing Atlantic
business and a significant pipeline of future opportunities
to extend its reach to new markets on the back of strong
competences and market positioning. Aqua Comms’ Chief
Networks Officer Andy Hudson has been appointed acting
CEO after leading all aspects of Aqua Comms’ global
operations and engineering since June 2017. Chair Alan
Harper is providing enhanced commercial and strategic
assistance to Andy Hudson as Aqua Comms continues
to execute on its ambitious sale plans for its multiple
Atlantic routes and the new EMIC-1 system, which is under
construction.
2023
2022
Revenue
£28.1 million
£27.1 million
% growth
4%
5%
EBITDA
£8.5 million
£12.6
million
% growth
(33%)
–
% margin
30%
47%
EMIC-1
Aqua Comms is also managing the EMIC-1 system with its
development continuing through 2023 before expected
launch in 2025. EMIC-1 has the potential to be delayed
based on the geopolitical situation in the Red Sea and
Middle East, which is impacting the ability of all new
cable systems to be deployed in the region. Despite the
geopolitical situation and potential for delay, the Aqua
Comms team achieved a large pre-sale on EMIC-1 in Q4 of
this year.
Sector
Subsea
Currency
USD
Date invested
August 2021
Ownership
100%
Closing value (31 Dec 2023)
£36 million
Initial investment
£0 million
Total capex funded to date
£38 million*
* Includes £2 million of capex funded post balance sheet.
Aqua Comms (excluding EMIC-1)
Sector
Subsea
Currency
USD
Date invested
April 2021
Ownership
100%
SDG9 alignment
Connectivity
Revenue (2023)
£28.1 million
Initial investment
£170 million
Total capex funded to date
£18 million
Total investment to date
£188 million
Closing value (31 Dec 2023)
£223 million
Valuation movement
(from 30 June 2023)
(2%)
EBITDA (2023)
£8.5 million
Strategic Report
28
|
D9 Infrastructure plc
Verne Global Iceland is a leading data centre platform
which provides highly scalable data centre capacity to
its enterprise customers in a geographically optimal
environment, powered by 100% baseload renewable
energy. Energy is sourced exclusively from local, stable
and predictable hydroelectric and geothermal power
generation which is secured with a 10-year fixed-price
supply contract, enabling customers to reduce their
carbon footprint significantly. Verne Global's year-round,
free-air cooling capabilities make it one of the most
energy-efficient data centres in the world and reaffirms the
Company's ambition to decarbonise digital infrastructure in
line with United Nations Sustainable Development Goal 9
("UN SDG 9").
In light of increased global temperatures, increasing ESG
reporting requirements, and the recent power pricing
and availability crisis in Northern Europe, enterprises are
focused on sustainable data centre solutions, which benefit
from low-cost, long-term, renewable power, and which
bring stability, availability and scalability to support their
rapidly increasing high performance compute needs.
During the period, Verne Global generated sustained
and accelerated demand for its facilities from both new
and existing customers. Revenue increased by 24% in
2023, driven by new colocation contracts coming online
along with the continued ramp-up of existing colocation
contracts. EBITDA grew by 41% in the period, with EBITDA
margin increasing to 40% as the business continued to
scale.
At 31 December 2023, Verne Global had 99% of recurring
revenue benefitting from fixed annual uplifts ranging from
2% to 5% offering strong revenue inflation protection
generated from c.40 leading global high-performance
computing, supercomputing and enterprise customers.
This delivers long-term, inflation-protected income across a
variety of sectors including automotive, artificial intelligence
and financial services.
As previously noted, Verne Global drew a $100 million
(c.£80 million) green term-loan debt facility in June 2023 and
subsequently put in place an interest rate swap for the first
three years of the facility,
applying an all-in fixed interest rate
of 7.14% to the facility. The proceeds were used to:
•
Fund additional capacity under construction and
development in 2023
•
Refinance Verne Global’s existing bridge loan facility
for $26 million (£21 million)
•
Repay $50 million (£40 million) of the $62 million
(c.£49 million) shareholder loan owed to the
Company by Verne Global
During the period in which the Company held Verne Global
in its portfolio, the Investment Policy included a restriction
that the Company could not invest more than 25% of
Adjusted Gross Asset Value in any single asset or Investee
Company (measured at the time of any investment into
such asset or Investee Company). Therefore, due to Verne
Global’s large contribution to the portfolio’s Adjusted Gross
Asset Value, prior to the Verne Transaction, the Group could
not have materially increased its exposure to Verne Global
through further capital expenditure without breaching the
Investment Policy.
2023
2022
Revenue
£24.7 million
£19.9 million
% growth
24%
9%
EBITDA
£9.9 million
£7.0 million
% growth
41%
17%
% margin
40%
35%
Verne Global Iceland
Sector
Data centre
Currency
USD
Date invested
September 2021
Ownership
100%
SDG9 alignment
Decarbonisation
Initial investment
£231 million
Total capex funded to date
£14 million
Total investment to date
£245 million
Revenue (2023)
£24.7 million
EBITDA (2023)
£9.9 million
Strategic Report
2023 Annual Report
|
29
Verne Global Finland is a leading Finnish data centre
and cloud services platform. It has ultra-modern
infrastructure, spread across three campuses (The
Air, The Rock and The Deck) with industry-leading
sustainability credentials and surplus heat distribution,
offering a full suite of cloud infrastructure, connectivity
and cybersecurity services. Verne Global Finland has
existing buildings capable of providing up to 23 MW.
Although capital expenditure plans had been delayed
pending closing of the Verne Global Sale, Verne Global
Finland has continued to grow its client base and is
looking to expand its data centre capacity further to
meet increasing customer demand, particularly in its
Helsinki campus.
In 2023, Verne Global Finland achieved revenue growth
of 6% and EBITDA growth of 52% year-on-year as new
customer contracts were secured, increasing utilisation
on its sites. EBITDA growth also reflected year-end
adjustments for one-off items relating to intergroup
recharges and severance payments.
Verne Global Finland
Sector
Data centre
Currency
EUR
Date invested
July 2022
Ownership
100%
SDG9 alignment
Decarbonisation
Initial investment
£114 million
Total capex funded to date
£5 million
Total investment to date
£119 million
Revenue (2023)
£13.4 million
EBITDA (2023)
£4.4 million
2023
2022
Revenue
£13.4 million
£12.7 million
% growth
6%
14%
EBITDA
£4.4 million
£2.9 million
% growth
52%
21%
% margin
33%
23%
Strategic Report
30
|
D9 Infrastructure plc
Verne Global London
Sector
Data centre
Currency
GBP
Date invested
April 2022
Ownership
100%
SDG9 alignment
Connectivity
Initial investment
£45 million
Total capex funded to date
£21 million
Total investment to date
£66 million
Revenue (2023)
£12.6 million
EBITDA (2023)
£2.9 million
Verne Global London wholly owns and operates a
hyper-connected data centre in Farringdon, central
London, providing up to 6 MW of colocation services.
Verne Global London's facility is a fully accredited hub
for connectivity and content distribution to networks
across the UK and worldwide and is in an ideal location
for latency-sensitive workloads.
2023 saw revenue growth of 40% as a result of power
passthrough, customer contracts ramping up, upfront
installation fees and smaller bespoke projects for
customers. This resulted in strong growth overall in 2023,
as revenue grew 40% year-on-year and EBITDA margin
turned positive, at 23%.
Since acquisition, the data centre has been integrated
into the Verne Global platform. The business has
benefitted from this and a hedged power procurement
policy, turning a loss-generating operation into a profit-
making one. During the Company’s ownership, we have
continued to reinvest into the facility to maintain and
improve its critical infrastructure and expand capacity
towards 6 MW.
2023
2022
Revenue
£12.6
million
£9.0 million
% growth
40%
30%
EBITDA
£2.9 million
(£0.7 million)
% growth
N/M*
N/A
% margin
23%
(8%)
* Not material as previous year negative
Strategic Report
2023 Annual Report
|
31
D9 owns the underlying real estate of the SeaEdge
UK1 data centre asset and subsea fibre landing station,
which is located in Newcastle on the UK's largest
purpose-built data centre campus. D9 leases the facility
to data centre operator, Stellium Data Centres Ltd, on a
25-year occupational lease.
SeaEdge UK1 is the UK’s only landing station for the
North Sea Connect subsea cable, which improves
connectivity in northern England and forms part of the
North Atlantic Loop subsea network, which includes
Aqua Comms’ AEC-1 and AEC-2 cables.
Revenue growth of 11% and EBITDA growth of
13% were achieved in 2023 due to positive revenue
indexation and reduced expenses.
The asset is leased on fully repairing and insuring
terms to the tenant and operator, Stellium Data
Centres Ltd, via a 25-year occupational lease with over
21 years remaining. Stellium continues to meet its
payment obligations under the lease, delivering on the
Company’s target yield at acquisition.
Sector
Data centre
Currency
GBP
Date invested
December 2021
Ownership
100%
SDG9 alignment
Connectivity &
Decarbonisation
Revenue (2023)
£1.0 million
Initial investment
£16 million
Total capex funded to date
–
Total investment to date
£16 million
Closing value (31 Dec 2023)
£14 million
Valuation movement
(from 31 Dec 2022)
(21%)
EBITDA (FY)
£1.0 million
2023
2022
Revenue
£1.0 million
£0.9 million
% growth
11%
N/A
EBITDA
£1.0 million
£0.9 million
% growth
13%
N/A
% margin
94%
93%
Strategic Report
32
|
D9 Infrastructure plc
Elio Networks is an enterprise high-speed connectivity
provider that owns and operates the highest capacity
fi
xed wireless access ("FWA") network in Greater Dublin,
connecting c.1,600 enterprise customers with high-quality
wireless access across over 50 base stations.
Elio Networks continued growing its high-quality wireless
connectivity operations in 2023, with unique customer
connections of c.2,700 in December 2023. Elio Networks
completed a re-branding exercise and launched under its
new name in February 2023. Furthermore, Elio Networks
extended its services to Cork c
ity in early 2023, reaffirming
its position as the leading wireless fixed connectivity player
in Ireland. Elio Networks achieved £8.2 million revenue in
2023, a 6% increase on 2022.
The provider has a diverse client base including larger
multinationals, government bodies, global technology
companies, small professional service firms, retail and
hospitality companies. Elio Networks was launched to
address the growing requirement for affordable high-
speed broadband in the greater Dublin area. Since then, it
has grown to become the largest wireless internet service
provider (“ISP”) in the greater Dublin region, with the 2023
expansion into Cork c
ity reaffirming its position as a leading
connectivity player in Ireland.
Elio Networks
Sector
Wireless
Currency
EUR
Date invested
April 2022
Ownership
100%
SDG9 alignment
Connectivity
Revenue (2023)
£8.2 million
Initial investment
£51 million
Total capex funded to date
–
Total investment to date
£51 million
Closing value (31 Dec 2023)
£55 million
Valuation movement
(from 30 June 2023)
(4%)
EBITDA (2023)
£4.2 million
2023
2022
Revenue
£8.2 million
£7.7 million
% growth
6%
6%
EBITDA
£4.2 million
£4.1 million
% growth
2%
(14%)
% margin
51%
53%
Strategic Report
2023 Annual Report
|
33
Arqiva is the UK's pre-eminent national provider of
television and radio broadcast infrastructure and
provides end-to-end connectivity solutions in the
media and utility industries. It has been an early and
leading participant in the development of smart utility
infrastructure in the UK through its smart water and
energy metering services. It is also a leading provider of
satellite uplink infrastructure and distribution services in
the UK.
Arqiva is a large, robust business with c.1,300
employees and predictable earnings underpinned by
long-term contracts with blue-chip customers, including
the BBC, ITV, Channel 4, Sky, Discovery, the DCC and
Thames Water. Arqiva’s utilities business continues to
represent an exciting growth opportunity grounded in a
quality product offering and enabling clear cost savings
and environmental benefits.
Arqiva sustained good business momentum in 2023,
with revenue up 9% year-on-year, reflecting strong
growth in smart water metering, whilst the media
business saw upwards indexation of inflation-linked
revenue contracts and higher passthrough power
charges. Limited offset was driven by some TV channel
customers entering administration. EBITDA dropped
by 5% year-on-year as a result of an increased mix of
utility device sales, higher power costs and TV channel
revenue reductions, as well as some one-offs. The
Arqiva business plan already anticipated a drop in
EBITDA in this period.
The UK government is currently drafting the Media
Bill, which includes a range of provisions to modernise
broadcasting regulation and support public service
broadcasters. At its second reading in the House of
Commons in November 2023, MPs spoke about the
importance of protecting delivery of Broadcast TV in the
long term to ensure broadcast services remain available
to everyone in the UK.
Whilst macroeconomic factors impacted some
customers during the year, Arqiva continued to see
positive commercial momentum in both media and
smart utilities. Several major Digital Audio Broadcasting
(“DAB“) contracts were extended to 2035, with DAB
remaining the UK’s dominant listening platform,
delivering 42% of all listening hours. Arqiva also signed
a multi-year deal with a UK public service broadcaster
(“PSB“), representing the first Satellite Direct to Home
deal (including satellite capacity) that has been signed
with a PSB. Arqiva continues to carefully monitor
customer demand and requirements to ensure efficient
management of satellite transponder capacity. In
November, Arqiva announced the extension of its smart
water meter network through a contract to deliver an
additional 300,000 meters for its existing customer
Anglian Water (“Anglian“) by 2025. This should allow
Anglian to continue to improve network monitoring,
identify and reduce leakages, and engage with
customers to modify behaviour and help them reduce
consumption. To date, Anglian's smart water metering
programme has helped customers find and resolve over
200,000 leaks in their properties, on average saving
three million litres of water per day over the past three
years.
Clarification on capital structure at Arqiva and at
HoldCo level
In October 2022, D9 acquired a 51.76% economic
interest (48.02% equity stake) in Arqiva for £463
million, which consisted of £300 million paid in cash
and £163 million owed to the vendor in the form of
a vendor loan note (VLN). For further details on the
VLN, see below. Per the valuation conducted by the
independent valuation adviser, Arqiva is held at a NAV
of £341 million as of 31 December 2023, representing
a 13.5% increase on the £300 million D9 paid initially.
For comparative purposes, NAV is presented as equity
Sector
Wireless
Currency
GBP
Date invested
October 2022
Ownership
48.02%
SDG9 alignment
Connectivity
Revenue (2023)
£358.6 million
Initial investment
£300 million
Total capex funded to date
–
Total investment to date
£300 million
Closing value (31 Dec 2023)
£341 million*
Valuation movement
(from 30 June 2023)
(1%)
EBITDA (2023)
£166.9 million
Note: Figures presented are prorated based on D9's 51.76% economic interest
in Arqiva.
* To enable comparison in line with previous valuations, NAV is presented as
equity value (£504 million as of 31 December 2023) less VLN principal (£163
million). A proforma NAV is presented as £329 million, and this is net of £7
million PIK notes issued in June 2023 and £5 million further interest accrued to
31 December 2023.
Strategic Report
34
|
D9 Infrastructure plc
value (£504 million as of 31 December 2023) less VLN
principal (£163 million). As of 31 December 2023,
D9
still owes the £163 million VLN principal to the vendor
along with £6.8 million of PIK interest
(PIKed on 30
June 2023) as well as £5.1 million interest accrued from
01 July 2023 to 31 December 2023. Arqiva also holds
a large balance of shareholder loans owed to its own
shareholders. For the avoidance of doubt, these do not
represent an external debt obligation and should be
stripped out when examining Arqiva’s leverage. Arqiva’s
total external debt as of 31 December 2023 was £1,438
million, which corresponds to £744 million attributable
to D9 pro rata based on its 51.76% economic interest.
Collar on Arqiva’s inflation-linked swaps
As disclosed in June 2023, Arqiva implemented a collar
on its inflation-linked swaps, which applies a cap and
floor to future accretion payments, limiting downside
cash flow exposure for the business. For its financial
year ending June 2023, Arqiva paid £147 million in
accretion (equating to c.£76 million prorated for D9's
51.76% economic interest in Arqiva). This was based on
a 13.5% Retail Price Index (“RPI“) inflation rate in March
2023. As a result of the collar, accretion payments
going forwards are effectively limited by the collar's
cap of c.6.0%. If RPI is lower
than c.
6.0%
, the accretion
payment will be proportionally lower as well, down
to an RPI floor of 2.5%.
Driven by 4.3% RPI in March
2024, the June 2024 accretion payment will be c.£53
million, c.£28 million of which is attributed to D9 based
on its 51.76% economic interest. For
the avoidance of
doubt, accretion payments are made by Arqiva out of
its operational cash flows
, not paid by D9. The swaps
expire in April 2027.
Arqiva senior debt refinancing
Through late June and early July, Arqiva Group raised
£345 million of new debt, the proceeds of which were
used to repay £262 million of existing debt which was
approaching maturity, whilst providing Arqiva Group
with an additional £83 million for general corporate
purposes. This followed £45 million of senior debt
amortisations over the previous 12 months, as well as
the net £175 million deleveraging of Arqiva Group’s
junior debt in Q3 2022. Arqiva Group's interest
rate swap portfolio was also rebalanced to maintain
compliance with hedging covenants, such that changes
in gilt yields continue to have no material impact on
Arqiva Group's interest costs net of the pre-existing
swaps portfolio.
Vendor loan note interest accrual
D9’s 2022 acquisition of a 48.02% equity stake in
Arqiva consisted of £300 million paid in cash and a
£163 million vendor loan note issued by the vendor.
The VLN, which matures in 2029, is non-recourse to the
Company. In the event of a default, recourse is limited
to the Company’s shares in Arqiva Group Limited, and
this charge is registered at Companies House against
D9 Wireless Midco 1 Limited, a subsidiary of the
Company.
The VLN is due to mature on 18 October 2029 and has
the following stepped interest rate profile:
•
6% per annum up to and including 30 June 2025;
•
7% per annum from 1 July 2025 up to 30 June 2026;
•
8% per annum from 1 July 2026 up to 30 June 2027;
and
•
9% per annum from 1 July 2027 to maturity.
Interest on the VLN is due annually in arrears on
30 June, and D9 has the choice either to settle each
payment in cash or to accrue it. For the period ending
30 June 2023, the Company elected to accrue the
interest, increasing the VLN’s outstanding balance
from £163
million to £
169.8 million
. The proforma VLN
balance stood at £174.9 million as of 31 December
2023, which consisted of the
£169.8 million of
notes issued as of 30 June 2023 plus £5.1 million of
interest accrued to 31 December 2023. PIK interest is
capitalised into the balance of the VLN annually in June
each year, and all interest on the Arqiva VLN was PIK at
30 June 2023. No interest on the VLN has been settled
in cash.
Accrued interest must be repaid in full before
distributions can be made to the Group. After the fourth
anniversary of the VLN (18 October 2026), the Group
can only receive distributions if the entirety of the VLN
principal and any rolled up interest have been repaid in
full. The Company expects Arqiva’s future cashflows to
cover D9’s VLN interest payments.
2023
2022
Revenue
£358.6
million
£328.2 million
% growth
9%
0%
EBITDA
£166.9
million
£175.7 million
% growth
(5%)
1%
% margin
47%
54%
Note: Figures presented are pro-rated based on D9's 51.76% economic interest
in Arqiva.
Diego Massidda
Head of Digital Infrastructure
Triple Point Investment Management LLP
29 April 2024
Strategic Report
2023 Annual Report
|
35
Section 172(1) Statement
The Board is committed to promoting the success of the Company whilst
conducting business in a fair, ethical, and transparent manner.
The Board makes every effort to understand the views
of the Company’s key stakeholders and to take into
consideration these views as part of its decision-making
process.
As an investment company, the Company does not have
any employees and conducts its core activities through
third-party service providers. The Board seeks to ensure
each service provider has an established track record,
has in place suitable policies and procedures to ensure
they maintain high standards of business conduct, treat
shareholders fairly, and employ corporate governance
best practice.
/ STAKEHOLDER ENGAGEMENT
As a Jersey incorporated entity, the Company
voluntarily discloses how the Directors have had regard
to the matters set out in section 172(1)(a) to (f) and fulfils
the reporting requirements under section 414CZA of
the Companies Act 2002 (the “Act“).
The following disclosure describes how the Directors
have had regard to the matters set out in section 172(1)
(a) to (f) when performing their duty under s172 and
forms the Directors’ statement required under section
414CZA of the Act.
Stakeholder
Why is it
important to
engage?
How have the Investment Manager/
Directors engaged?
What were the
key topics of
engagement?
What was the
feedback obtained
and the outcome of
the engagement?
Shareholders
Shareholders and
their continued
support is critical
to the continuing
existence of
the business
and delivery of
our long-term
strategy.
The Investment Manager and Board
have been continuously engaged with
shareholders throughout the period.
During the period, the Company and
Investment Manager have hosted a
number of events, including webinars
following key Company Updates
and the Capital Markets Day held on
20 March 2023, in addition to direct
engagement.
The Board initiated a formal
consultation with shareholders and in
October 2023 met with shareholders
representing c.74% of the Company’s
issued share capital, in conjunction
with the Investment Manager and the
Company's Joint Corporate Brokers,
J.P. Morgan Cazenove and Peel Hunt
(Joint Corporate Broker from 12 April
2023 to 3 April 2024), and in addition
to hosting a retail shareholder-only
webinar.
The Board has maintained continuous
dialogue with shareholders and the
Directors have made themselves
available to meet to discuss a wide
range of topics.
Key topics through
the year related
to the Investment
Manager Personnel,
the Verne Global
syndication and
sale, the Company’s
dividend policy, the
material uncertainty
around going
concern and future
direction of the
Company.
The Board
considered that
the feedback from
shareholders,
especially that
received during the
consultation, has
been invaluable
this year, through
enhanced
understanding
of shareholder
expectations.
Following the
shareholder
consultation, the
Board initiated a
Strategic Review of
the Company on
27 November 2023.
Strategic Report
36
|
Digital 9 Infrastructure plc
Stakeholder
Why is it
important to
engage?
How have the Investment Manager/
Directors engaged?
What were the
key topics of
engagement?
What was the
feedback obtained
and the outcome of
the engagement?
Investment
Manager
The Investment
Manager is
responsible
for executing
the Investment
Objective within
the Investment
Policy of the
Company.
The Board maintains regular and open
dialogue with the Investment Manager
at Board meetings and has regular
contact on operational and investment
matters outside of meetings.
The Board have
engaged with the
Investment Manager
throughout the year
on the most strategic
topics for the
Company, including
on the syndication
and sale of Verne
Global, the decision
to suspend the
Company’s dividend,
the shareholder
consultation, during
the period of change
of personnel of the
Investment Manager;
and reporting
processes.
As a result of
the engagement
between the Board
and the Investment
Manager, the Group
has been able to
enter into a definitive
agreement for the
sale of Verne Global
during the period.
Post year end, the
Board has served
notice to the
Investment Manager
with the 12 months’
notice period set to
end on 31 March
2025, in line with the
expiry of the lock-in
period.
Investee
Companies
The performance
and long-term
success of the
Company is
linked to the
performance of
the companies
in which the
Company
invests.
The Investment Manager has held
regular meetings with the Board and
management of each of the Investee
Companies and received regular
reporting,
including financial.
The Board has directly engaged with
the Investee Company CEOs and
operating partners during the year,
including inviting key members of
management to present at Board
meetings with the opportunity to ask
questions directly.
The Board has frequently engaged
with Verne management during the
sale process.
On an ongoing
basis the Investment
Manager engages
with the Investee
Companies on
matters including
finance, capex
requirements,
sustainability and
strategy.
During the year, the
Board has engaged
with the Investee
Companies on their
strategy, and other
key matters relevant
to the Investee
Companies.
The key topic of
engagement with
Verne has been in
relation to its sale
and ongoing matters
between signing and
completion.
Through this
engagement,
particularly between
the Investment
Manager and
the Investee
Companies, the
Investment Manager
has enhanced
the sustainability
practices and
reporting of the
Investee Companies,
explored
opportunities
for synergies
and optimisation
between the
Investee Companies.
Strategic Report
2023 Annual Report
|
37
Stakeholder
Why is it
important to
engage?
How have the Investment Manager/
Directors engaged?
What were the
key topics of
engagement?
What was the
feedback obtained
and the outcome of
the engagement?
Suppliers
The Company’s
suppliers include
third-party
service providers,
and the RCF
lenders, each of
which is essential
in ensuring
the ongoing
operational
performance of
the Company.
The Company
relies on the
performance
of third-party
service providers
to undertake
all its main
activities.
The Board maintains close working
relationships with all its key advisers
and with the RCF lenders.
The Management Engagement
Committee has responsibility for
overseeing and monitoring the
performance of each supplier.
A detailed annual assessment is
undertaken of each supplier to ensure
they continue to fulfil their duties to a
high standard.
The Management
Engagement
Committee met
in the year and
undertook a
thorough review of
the performance of
the service providers
and agreed
feedback to provide
to the service
providers to enhance
performance moving
forward or assist
in the process of
changing service
providers where
this was considered
appropriate.
The Board and
Investment Manager
has directly engaged
with the RCF lenders
in respect to the
partial repayment
and cancellation, as
well as the covenants
amendments.
The Board has
continued to be
open in providing
feedback to its
service providers
to make clear
their expectations,
following the
Management
Engagement
Committee
process and, where
appropriate, on an
ad hoc basis.
The relationship with
the RCF lenders has
been key to ensuring
that the Company
can carry out the
actions necessary for
its strategic actions.
Regulators
Engagement
with the
regulator is
imperative to
the Company’s
ability to
operate.
During the year, the Company has
had to engage with various regulators
(including the Financial Conduct
Authority and Jersey Financial Services
Commission) on a number of different
matters.
The key topics of
engagement with
regulators during
the year have
been in relation
to the change of
Directors and receipt
of shareholder
complaints.
Following year-
end, the Company
engaged with
the FCA and
JFSC in relation
to the change of
Investment Policy.
Engagement with
the regulator has
been important
to ensure that the
Company can carry
out strategically
important actions,
including change
of Directors, and
following year-
end the change
of Investment
Policy. In respect
of the shareholder
complaints, this
has been important
in respect of
the Company’s
regulatory
requirements.
Strategic Report
38
|
Digital 9 Infrastructure plc
/ PRINCIPAL DECISIONS
Principal decisions have been defined as those that
have a material impact to the Group and its key
stakeholders. In taking these decisions, the Directors
considered their duties under section 172 of the Act.
Verne Global sale
In November 2023, the Company announced the sale of
its entire stake in the Verne Global group of companies
which completed following the year end in March 2024.
The Board concluded that a sale of the Company's
entire stake in Verne Global was in shareholders' best
interests because it provided an opportunity for the
Company to deleverage its balance sheet and provide
the cash resources necessary for the Company to
strengthen its financial position.
Decision to suspend the Company’s dividend target
The Board elected to not declare the Q2 2023 dividend
and withdrew its target dividend of 6.0 pence per
Ordinary Share for the year ended 31 December
2023. The Board carried out a formal consultation
with shareholders to discuss the future direction of
the Company which included gathering feedback
with regard to dividend policy. The Board met with
shareholders representing c.74% of the Company’s
issued share capital, in conjunction with the Investment
Manager and the Company's Joint Corporate Brokers,
J.P. Morgan Cazenove and Peel Hunt (Joint Corporate
Broker from 12 April 2023 to 3 April 2024), and in
addition to hosting a retail shareholder-only webinar.
Initiation of a Strategic Review
In November 2023, following the announcement of the
Verne Global sale and shareholder consultation, the
Board initiated a Strategic Review to develop a set of
actions with a view to maximising shareholder value
going forward.
The Company announced the conclusion of the
Strategic Review on 29 January 2024 following year
end. Further information in relation to the Strategic
Review can be found in the Investment Manager's
Report on page 18.
Change of Directors
During the year, the Company undertook a formal
recruitment process led by the Nomination Committee,
with the support of an independent search consultancy,
for the appointment of a new Board member. This
process actively encouraged a diverse pool of
candidates who could contribute specific skills and
experience identified by the Board and would support
the Board's commitment to diversity, in line with the
FCA's targets under the Listing Rules. The Board was
pleased to announce the appointment of Gailina Liew
on 1 July 2023 as an Independent Non-Executive
Director.
During the period, Phil Jordan and Lisa Harrington
stepped down as Directors of the Company effective
14 December 2023, and Richard Boléat and Brett
Miller were appointed as Independent Non-Executive
Directors of the Company with effect from 19 December
2023 and 21 December 2023 respectively. Following the
period end on 3 January 2024, Keith Mansfield stepped
down as a Director of the Company, and on 23 March
2024 Brett Miller and Richard Boléat stepped down as
Directors of the Company.
Strategic Report
2023 Annual Report
|
39
Risk Management
/ FRAMEWORK
The Board and the Investment Manager recognise that risk is inherent in the
operation of the Company and are committed to effective risk management to
ensure that shareholder value is protected and maximised.
The Board and the Investment Manager recognise that
risk is inherent in the operation of the Company and are
committed to effective risk management to ensure that
shareholder value is protected and maximised.
As an externally managed investment company, the
Company outsources key services to the Investment
Manager and other service providers and rely on
their systems and controls. The Board has ultimate
responsibility for risk management and internal
controls within the Company and has convened a Risk
Committee to assist it in these responsibilities. The
Risk Committee undertakes a formal risk review twice
a year to assess and challenge the effectiveness of
our risk management and to help define risk appetite
and controls to manage risks within that appetite,
particularly those which would threaten its business
model, future performance, solvency, valuation, liquidity
or reputation. Further details of the Risk Committee’s
activities can be found in the Risk Committee Report on
pages 72 to 73.
The Investment Manager has responsibility for
identifying potential risks at an early stage, escalating
risks or changes to risk and relevant considerations
and implementing appropriate mitigations which are
recorded in the Group’s risk register. Where relevant, the
financial model is stress tested to assess the potential
impact of recorded risks against the likelihood of
occurrence and graded suitably. In assessing risks, both
internal controls and external factors that could mitigate
the risk are considered. A post-mitigation risk score
is then determined for each principal risk. The Board
regularly reviews the risk register to ensure gradings and
mitigating actions remain appropriate.
/ RISK APPETITE STATEMENT
Managing risk is fundamental to the delivery of the
Company’s strategy, and this is achieved by defining risk
appetite and managing risks within that appetite. Risk
appetite is the level of risk the Company is willing to
take to achieve its strategic objectives. Post year end,
this is being re-assessed to align to the revised strategy
of being in a Managed Wind-Down.
The Board is responsible for setting the Company’s
risk appetite and ensuring that the Company operates
within these parameters. The Board define
s its risk
appetite using a category of risks inherent to the
environment in which the Company operates. Risk
appetite is set for each category of risk enabling the
actual risks which are identified by
management to be
compared to the defined appetite, to identify where
any additional mitigation activity is required. Any risks
outside of tolerance are subject to additional oversight
and action planning.
The Board has reviewed the Company’s appetite for
each of the principal risks set out below.
The Board will review and monitor the Company’s risk
appetite at least on an annual basis or when there is a
material change in the internal or external environment,
to ensure that it remains appropriate and consistent
with the Investment Policy.
Strategic Report
40
|
Digital 9 Infrastructure plc
Risk
1.
PERSISTENT, NEGATIVE MARKET SENTIMENT LEADING TO INCREASED ACTIVISM
2.
INFORMATION SECURITY BREACH
3.
TRANSACTION / EXECUTION RISK
4.
LIQUIDITY AND SOLVENCY RISK
5.
DEPENDENCE ON INVESTMENT MANAGER
6.
INTERRUPTIONS TO OPERATIONS
7.
REGULATORY RISK
High
1
Moderate
to High
3, 4,
5, 6
2
Moderate
7
Low to
Moderate
Low
Low
Low to
Moderate
Moderate
Moderate
to High
High
/ PRINCIPAL RISKS AND UNCERTAINTIES
The table below sets out what we believe to be the principal risks and uncertainties facing the Group. The table
does not cover all the risks that the Group may face. The Board defines the Group
's risk appetite, enabling the
Group to judge the level of risk it is prepared to take in achieving its overall objectives. Additional risks and
uncertainties not presently known to management or deemed to be less material at 29 April 2024 may also have an
adverse effect on the Group.
Risk Impact
Likelihood
Strategic Report
2023 Annual Report
|
41
1. PERSISTENT, NEGATIVE MARKET SENTIMENT, LEADING TO INCREASED ACTIVISM
Risk Impact/Context
Risk Mitigation
Impact
The fund has suffered as a result of a lengthy
period where share price has traded at a discount
to NAV. There are a number of legacy drivers
behind the market sentiment, which include: wider
macroeconomic and market conditions, Group’s
leverage position*, Investment Manager and Board
personnel changes.
Combined, these have led to a reduced level of
shareholder confidence which has manifested itself
in increased activism. Post year end, the fund has
been subject to an increased volume of complaints
and Board engagements.
Specifically, the Board have experienced
several
changes to its constitution with both a number
of longer-standing and newer Board members
voluntarily resigning their position. This has in part
caused disruption to the ongoing governance and
oversight of the fund and is seen as a contributor
to the increased level of activism.
There is a risk that changes to, and/or further loss
of the existing Directors from the fund would lead
to further knowledge loss, adversely impacting the
credibility and suitability of governance.
*
The Group leverage position has reduced considerably
following the successful completion of the Verne
transaction.
The Board has continued to maintain an open
dialogue with shareholders and provided
regular market updates on the execution of its
strategy.
At the end of 2023, the Board instigated
a formal consultation with shareholders to
determine the forward-looking strategy,
including the management of the fund; which
sought to address shareholder concerns.
Ongoing, the Board and Investment Manager
have sought appropriate corporate and legal
advice to ensure the fund conducts itself
appropriately and informed decisions and
actions have been taken to deliver the best
possible outcome to shareholders.
Further appointments to the Board are
expected to be made in the near term,
which will add depth, capacity and ensure all
Committees can operate appropriately and
enable the B
oard to fulfil its obligations.
High
Likelihood
High
Risk Exposure
Change in Year
Increase
2. INFORMATION SECURITY BREACH
Risk Impact/Context
Risk Mitigation
Impact
Given the nature of the industry and type
of services being provided by the Investee
Companies, the risk of cyber security breach is
significant.
Depending on the nature of the breach, this could
lead to significant business disruption, data loss
and/or fraud. Any which revolves around data loss
and/or business disruption would materially impact
reputation of the individual portfolio company
resulting in possible going concern issues.
All Investee Companies have a core suite
of controls for the mitigation of information
security risks and, where possible, companies
are working to comply with ISO 27001.
Cyber security is a regular feature in Risk and
Audit Committee monitoring/discussions.
It is recognised that cyber security is
a constantly changing landscape and,
accordingly, each Investee Company has
a commitment to continue enhancements
to ensure that controls keep pace with the
changing profile of the risk.
Moderate to High
Likelihood
Moderate to High
Risk Exposure
Change in Year
Stable
Strategic Report
42
|
Digital 9 Infrastructure plc
3. TRANSACTION / EXECUTION RISK
Risk Impact/Context
Risk Mitigation
Impact
The execution of the wind-down strategy will be
completed in an appropriate and timely manner
and one that achieves best outcomes for investors.
The underlying quality and performance of the
Investee Companies are considered robust both
financially and operationally; notwithstanding that
access to capital for further investment would
enhance value in certain instances.
Where appropriate and available, this will still be
explored, subject to there being no detriment to
overarching achievement of strategy.
The closure of transactions may prove materially
more complex than anticipated given the
geography and regulatory bias of the Investee
Companies.
Each transaction will be supported by a
carefully selected team of advisers, which
together with the experience of the Investment
Management team are best placed to navigate
the inherent risks in selecting the most
appropriate deal and respectively concluding;
with the priority of delivering best investor
outcomes.
Moderate to High
Likelihood
Moderate
Risk Exposure
Change in Year
New
4. LIQUIDITY AND SOLVENCY RISK
Risk Impact/Context
Risk Mitigation
Impact
The Company has an agreed repayment profile with the
RCF lenders and has a suite of management actions in
place to manage this obligation. Other obligations such
as the VLN are considered appropriate in size and nature
and have been structure accordingly and will be fulfilled
through successful execution of the overall strategy.
Quality and performance of the underlying asset is
considered strong.
The Company has several management
actions in place to manage the debt
obligations of the Company, most
notably the sale of Verne which will see
the majority of the RCF repaid.
General liquidity is managed via
regular cashflow monitoring, supplier
negotiations, and regular visibility at
Board level through ongoing reporting.
Moderate to High
Likelihood
Moderate
Risk Exposure
Change in Year
Decrease
Strategic Report
2023 Annual Report
|
43
5. DEPENDENCE ON INVESTMENT MANAGER
Risk Impact/Context
Risk Mitigation
Impact
The Company is heavily reliant on the full range of an
Investment Manager’s services, their expertise and specific
knowledge pursuant to the strategic direction of the fund.
Successful execution of the strategy to manage a wind-
down of the fund, maximising shareholder value, is
dependent upon the appointment of an Investment
Manager who has knowledge and experience of
the individual dynamics of each individual Investee
Companies, the markets that they operate in, which can
be leveraged to developed an approach which achieves
the
maximum for shareholders.
The selection of a new and/or
continuation of engagement with the
Investment Manager, forms part of
the Strategic Review, which is being
facilitated by independent advisers. The
decision will be based upon who can
achieve the best outcome for investors.
Post year end, the Board has served
notice to the Investment Manager with
the 12 months’ notice period set to end
on 31 March 2025, in line with the expiry
of the lock-in period.
Any changes to the Investment Manager
will see new fee arrangements entered
into and the Board will ensure that
return and reward are aligned with
delivery of strategy.
It is acknowledged that a change of
Investment Manager at a critical point in
its strategy carries a risk.
Key personnel within the current
Investment Management team have
suitable retention packages to ensure
continuity of service and delivery of
objective. Knowledge is shared across
the wider business to mitigate reliance
on any single individual.
Support
functions that deliver wider services
are sufficiently resourced and have
experience and competency to ensure
deliverables are met.
Moderate to High
Likelihood
Moderate
Change in Year
Increase
6. INTERRUPTIONS TO OPERATIONS INCLUDING INFRASTRUCTURE AND TECHNOLOGY
FAILURE
Risk Impact/Context
Risk Mitigation
Impact
D9’s Investee Companies rely on infrastructure and
technology to provide their customers with a highly
reliable service. There may be a failure to deliver
this level of service because of numerous factors.
This could result in the breach of performance
conditions in customer contracts, resulting in
financial or regulatory implications.
The Digital Infrastructure Investments in which
the Group invests use proven technologies,
typically backed by manufacturer warranties,
when installing applicable machinery and
equipment.
Investee Companies hire experts with the
technical knowledge and seek third-party
advice where required.
Where appropriate, there are insurances
in place to cover issues such as accidental
damage and power issues.
Moderate to High
Likelihood
Moderate
Change in Year
Increase
Strategic Report
44
|
Digital 9 Infrastructure plc
Emerging Risks
Introduction of, or amendment to, laws, regulations,
or technology (especially in relation to climate
change)
The global ambition for a more sustainable future
has never been greater, particularly in light of various
climate-related events across the globe. There is
increasing pressure for governments and authorities to
enforce green-related legislation. This could materially
affect organisations which are not set up to deal
with such changes in the form of financial penalties,
operational and capital expenditure to restructure
operations and infrastructure, or even ceasing of certain
activities.
The Investment Manager has a strong pedigree in
understanding the current and future expectations with
regards to climate change and all strategic decisions
are assessed against a backdrop of understanding the
impacts on compliance with these obligations and
commitments made.
Development of disruptive technology
The digital infrastructure sector is constantly evolving.
As a result, there is a risk that disruptive technology
emerges which results in current digital infrastructure
assets becoming obsolete. The Investment Manager
constantly monitor, the emerging technology trends
with digital infrastructure to ensure Investee Companies
evolve their business models where required to mitigate
impact.
7. REGULATORY RISK
Risk Impact/Context
Risk Mitigation
Impact
There are several regulatory stakeholders involved
both at a Fund but also individual Portfolio
Company level.
The Board operates in an open and transparent
manner and have external advisers appointed to
support and ensure obligations are met.
Breach of obligation and/or failure to maintain
adequate engagement can lead to increased
scrutiny, resulting in financial and
/or reputational
impacts.
Compliance with regulatory expectations is a
key focus of the Board.
Relationships with FCA and JFSC are
supported through engagement with the
Investment Manager Triple Point Investment
Management LLP and corporate service
providers such as Ocorian Fund Services
(Jersey) Ltd and INDOS Financial Limited.
Individual Investee Companies have direct
engagement with their regulators and
recruit staff that have experience and deep
understanding of the obligations in which they
operate under.
Moderate
Likelihood
Moderate
Change in Year
Increase
Strategic Report
2023 Annual Report
|
45
/ GOING CONCERN
Following the recent shareholder vote at the General
Meeting, the Company is now in a Managed Wind-
Down. The audited Financial Statements for the year
ended 31 December 2023 continue to be prepared on
a going concern basis.
As part of the Strategic Review, various options for
realising the stake in Arqiva were considered by the
Board and after careful consideration of Arqiva’s plans
and current market conditions, the Board believes that
the maximisation of the value of the Company’s stake
in Arqiva is likely to take longer to realise than the
other investments held by the Company. As such, whilst
the Company will continue to consider and be open
to all options for Arqiva which are value-accretive to
shareholders, the Board has decided to defer launching
a sale process for the Company’s stake in Arqiva.
As part of the recent sale of Verne Global, the Company
has the potential to receive an Earn-Out payment of up to
$135 million, subject to Verne Global achieving run-rate
EBITDA targets for the financial year ending December
2026. At the year end, the
Earn-Out was valued at $34
million
(£26.8 million)
. Given the time frame involved, for
both the sale of Arqiva and the receipt of any potential
Earn-Out payment, the Board believes that the Going
Concern approach to the preparation of the Financial
Statements remains appropriate.
No provision has been made for the costs of winding
up the company as these will be charged to the Income
Statement on an accruals basis as they are incurred
or as the Company becomes obligated to make such
payments in the future.
The Directors believe that the Company and the Group
have adequate resources to continue in operational
existence for a period of at least 12 months since
the reporting date. However, given that a degree of
uncertainty exists in the timing of ongoing strategic
Going Concern
and Viability
initiatives which includes management’s ability to
refinance or repay the Group’s existing RCF (of which
c.£100 million remains at 29 April 2024) due in the
next 12 months (March 2025), there exists a material
uncertainty which may cast significant doubt over the
Company’s ability to continue as a going concern.
The Company intends to make a total additional
repayment and partial cancellation of its Group’s RCF in
the amount of c.£47 million in May 2024.
The RCF in an important consideration for the
Company, even though it is not held on the Company’s
balance sheet. The RCF is held by its main subsidiary D9
Holdco, but the Company is a guarantor of the facility.
/ VIABILITY STATEMENT
At least once a year the Directors are required to carry
out a robust assessment of the principal and emerging
risks and make a statement which explains how they
have assessed the prospects of the Company, over what
period they have done so and why they consider that
period to be appropriate, considering the Company’s
current position.
The principal and emerging risks faced by the Company
are described on pages 41 to 45. As detailed above, the
Company is preparing the audited Financial Statements on
a going concern basis despite the recent announcement
that the Company is in a Managed Wind-Down.
Accordingly, the Directors have not assessed the longer-
term viability of the Company other than for a period of
three years to the end of the Earn-Out period, relevant to
the sale of Verne Global, which is noted above.
The Directors have assessed the Managed Wind-
Down
of the Company to be within 24 to 36 months
of the date of the approval of these audited Financial
Statements (being 29 April 2024), although there is no
guarantee that it will be possible to realise maximum
value for the assets within that timeframe and therefore
the Managed Wind-Down could potentially take longer.
Strategic Report
46
|
Digital 9 Infrastructure plc
Board Approval of the
Strategic Report
The Strategic Report has been approved by the Board of Directors
and signed on its behalf by the Chair.
Charlotte Valeur
Interim Independent Chair
29 April 2024
Strategic Report
2023 Annual Report
|
47
Governance
Interim Chair’s
Introduction
I am pleased to present the Company’s Corporate
Governance Report which covers the year ended
31 December 2023. The Board acknowledges that strong
corporate governance is integral to the achievement of
the Company’s objectives and provides the foundation
for open, informed and transparent communication with
our shareholders. In light of the outcome of the Strategic
Review and subsequent shareholder approval of the
proposed Investment Policy at the General Meeting held
on 25 March 2024, the Board continues to work together
to realise the Company’s assets in an orderly manner to
maximise shareholder value.
Gailina Liew, Richard Boléat and Brett Miller joined the
Board as a Non-Executive Directors on 1 July 2023, 19
December 2023 and 21 December 2023 respectively.
A detailed induction process was undertaken by the
new Directors to ensure a streamlined transition and
succession.
I was appointed as Interim Independent Chair of the
Board and Gailina Liew as Senior Independent Director
and Independent Chair of the Nomination Committee
following the resignations of Phil Jordan and Lisa
Harrington, effective 13 December 2023. Aaron Le
Cornu was appointed as Independent Chair of the Audit
Committee following the resignation of Keith Mansfield
effective 3 January 2024.
Following the subsequent resignations of Brett Miller
and Richard Boléat on 23 March 2024, Aaron Le Cornu
assumed the role of Independent Chair of the Valuation
Committee and Gailina Liew assumed the role of
Independent Chair of the Management Engagement
Committee.
I remained as Interim Independent Chair and
Independent Chair of the Risk Committee, Gailina Liew
remained Senior Independent Director and Independent
Chair of the Nomination Committee, and Aaron Le Cornu
remained Independent Chair of the Audit Committee.
Gailina Liew was also appointed as a member of the
Audit Committee.
The Board have initiated an independent external
recruitment process for a new permanent Chair and at
least one additional non-executive board director to
support the future requirements of the Company and its
shareholders.
This section of the Annual Report sets out the corporate
governance principles the Board has adopted, how these
have been applied and highlights the key governance
events which have taken place during the period.
/ STATEMENT OF COMPLIANCE
The Board has considered the Principles and Provisions
of the AIC Code of Corporate Governance (“AIC
Code”). The AIC Code addresses the Principles and
Provisions set out in the UK Corporate Governance
Code (the “UK Code”), as well as setting out additional
Provisions on issues that are of specific relevance to the
Company.
The Board considers that reporting against the
Principles and Provisions of the AIC Code, which has
been endorsed by the Financial Reporting Council and
supported by the Jersey Financial Services Commission,
provides more relevant information to shareholders.
The Company has complied with the Principles and
Provisions of the AIC Code or otherwise explained non-
compliance below.
The AIC Code is available on the AIC website
(www.theaic.co.uk). It includes an explanation of how the
AIC Code adapts the Principles and Provisions set out
in the UK Code to make them relevant for investment
companies.
Governance
50
|
Digital 9 Infrastructure plc
Provision
Explanation
37, 38, 41, 42.
Establishment and reporting of
a remuneration committee
The Company does not have any executive Directors or employees, and, as a
result, operates a simple and transparent remuneration policy with no variable
element; the Board does not consider it necessary to establish a separate
remuneration committee and those functions are undertaken by the Board as a
whole.
26. Externally facilitated Board
evaluation
The Board was committed to undertaking an external Board evaluation, and this
was scheduled for Q4 of 2023. However, this was initially postponed due the
Board’s focus being on completing a sale of Verne Global. A strategic review
was then carried out by the Company, the conclusion of which resulted in a
proposal for the Managed Wind-Down of the Company, which was approved
by shareholders at the general meeting held on 25 March 2024. It has therefore
been decided that the Board’s focus at this time should remain on delivering
a successful disposal process for the assets of the company and a timely
Managed Wind-Down of the Company. The Board did however conduct a
performance evaluation in the period. Further details can be found on pages 59
to 60.
On behalf of the Board:
Charlotte Valeur
Interim Independent Chair
29 April 2024
Governance
2023 Annual Report
|
51
Board of
Directors
Appointed:
8 March 2021
Skills and experience:
Charlotte Valeur has over 40
years’ experience in finance, primarily in Denmark and
UK. Charlotte’s previous non-executive roles include
chairing Blackstone Loan Financing Ltd, Kennedy
Wilson Europe Real Estate Plc (FTSE 250) and DW
Catalyst Fund Ltd, and non-executive director on the
boards of 3i Infrastructure Plc (FTSE 250), NTR Plc,
Renewable Energy Generation Limited and JPMorgan
Convertibles Income Fund Ltd. She is also the former
chair of the UK Institute of Directors.
Appointed:
1 April 2022
Skills and experience:
Aaron Le Cornu comes from a
financial background, having qualified as a Chartered
Accountant with Arthur Andersen and worked for
HSBC for over ten years. During his time with HSBC,
he held several board positions for HSBC subsidiaries,
including as Deputy CEO for HSBC International and
was also involved in acquisitions such as the purchase
of Marks & Spencer Money. He has since held a number
of senior executive roles, including at Ogier (legal and
fiduciary services provider), and Elian (a fiduciary firm)
having participated in the management buyout. He also
previously served as a non-executive Director for Jersey
Electricity for ten years and for a number of Fintech
companies.
\ CHARLOTTE VALEUR
Interim Independent Chair
\ AARON LE CORNU
Independent Non-Executive Director
Committee memberships:
Risk Committee (Chair)
Valuation Committee
Nomination Committee
Management Engagement Committee
Principal external appointments:
The Bankers Investment Trust plc
Blackstone GSO Loan Financing Ltd (Chair)
Laing O’Rourke Corporation Ltd (Director)
Global Governance Group (Director)
Committee memberships:
Audit Committee
(Chair effective 3 January 2024)
Risk Committee
Valuation Committee
Management Engagement Committee
(Chair up to 3 January 2024)
Principal external appointments:
RBSI Holdings and Ltd. (100% subsidiaries of NatWest
Group) (Director)
Volare Capital Offshore Strategy Fund Ltd (Chair)
Governance
52
|
Digital 9 Infrastructure plc
Appointed:
1 July 2023
Skills and experience:
Gailina Liew has a legal,
scientific and commercial background, having qualified
in Canada as a barrister & solicitor, working primarily
in the venture capital and biotech sectors during her
executive career. Previous non-executive director
experience over the past 20 years span several sectors
and include chair of ventureLAB and non-executive
director of J.P.Morgan Global Convertibles Income
Limited investment trust which culminated in a voluntary
liquidation. Current board roles are primarily focussed
on private equity and investment/pension funds. She
will complete her 9 year tenure at Digital Jersey Limited
at 31 December 2024.
Committee memberships:
Nomination Committee (Chair)
Management Engagement Committee (Chair)
(member from appointment, Chair with effect from
23 March 2024)
Valuation Committee
Risk Committee
Audit Committee (with effect from 23 March 2024)
Principal external appointments:
Digital Jersey Limited (Senior Independent Director)
Medicxi Ventures Management (Jersey) Limited
(Director)
TVM Life Science Innovation I Fund (Director)
Public Employees Pension Fund (Jersey) (Member -
Committee of Management)
\ GAILINA LIEW
Independent Non-Executive Director, Senior Independent Director
Governance
2023 Annual Report
|
53
Corporate
Governance
\ RESPONSIBILITIES
The Board is responsible for leading and controlling
the Company and has oversight over the management
and conduct of the Company’s business, strategy and
development. The Board determines the Investment
Objectives and Investment Policy and risk appetite.
Any matters that have had a material impact upon the
Company or any of its subsidiaries will be referred to
the Board of Directors of the Company.
The Board is responsible for the control and supervision
of the Investment Manager (also the Company’s AIFM)
and for compliance with the principles and provisions of
the AIC Code. The Board ensures the maintenance of a
sound system of internal controls and risk management
(including financial, operational and compliance
controls), and reviews the overall effectiveness of
systems in place. The Board is responsible for the
approval of any changes to the capital, corporate and/
or management structure of the Company.
In light of shareholder approval to enter a Managed
Wind-Down of the Company, the Board’s main focus is
to realise the Company’s assets in an orderly manner
to maximise shareholder value. The Board does not
routinely involve itself in day-to-day business decisions
but there is a formal schedule of matters that requires
the Board’s specific approval, as well as decisions that
can be delegated to the Board Committees or the
Investment Manager.
The key matters reserved to the Board include, but are
not limited to:
•
Board membership and powers including the
appointment and removal of Board members;
•
Review of the structure, size and composition of the
Board, taking account of the recommendations of
the Nomination Committee;
•
Ensuring an adequate Board succession planning,
taking into account the recommendations of the
Nomination Committee;
•
The appointment or removal of the Company’s
alternative investment fund manager, reporting
accountants, financial advis
ers, auditors (following
appropriate recommendation by the Audit
Committee), brokers, company secretary, registrar,
receiving agent, depositary and legal counsel;
•
Undertaking of a formal and rigorous annual
review of its own performance and that of Board
Committees and individual Directors;
•
Managing conflict of interests of Directors;
•
Overall leadership of the Company and setting of its
purpose, culture, values and standards;
•
Setting the Company’s investment/business strategy,
including the ongoing review of the Company’s
investment objective and investment policy and
recommending to shareholders the approval of
alterations thereto (if any);
•
Annual assessment of significant risks and
effectiveness of internal controls following
recommendations from the Risk Committee;
•
Approval of contracts not in the ordinary course of
business, including entry into/variation/termination
of agreements with the Company’s alternative
investment fund manager, company secretary/
administrator, registrar, depositary and any other
material advisers or service providers;
Governance
54
|
Digital 9 Infrastructure plc
•
Approval and issue of the half yearly results, half
yearly report, annual results and annual report;
•
Ensuring the maintenance of a system of internal
controls and risk management;
•
Review of the Company’s corporate governance
arrangements and annual review of continuing
compliance with the AIC Code published by the AIC
from time to time;
•
Periodic review and continued approval of the
agreements of, or changes to, the Investment
Manager and other service providers; and
•
Material changes relating to the strategic capital
structure of the Group.
\ BOARD MEMBERSHIP AND ATTENDANCE
During the year ended 31 December 2023, the number of meetings attended by each Director was as below. The
table shows the number of scheduled meetings attended/maximum number of meetings that the Director could
have attended.
Of the 25 Board meetings held in the period, four were scheduled quarterly Board Meetings, there were two
strategy days and the additional Board meetings were convened to discuss various matters, including, but not
limited to, the syndication and subsequent sale of Verne Global, Strategic Review, dividend considerations and
other portfolio actions.
Director
Board*
Audit
Committee*
Risk
Committee*
Nomination
Committee*
Management
Engagement
Committee*
Keith Mansfield
1
25/25
4/4
N/A
N/A
1/1
Lisa Harrington
1
22/22
4/4
N/A
2/2
0/1
Charlotte Valeur
24/25
N/A
2/2
2/2
1/1
Phil Jordan
1
22/22
N/A
2/2
2/2
1/1
Aaron Le Cornu
23/24
4/4
1/1
4
N/A
1/1
Gailina Liew
3
13/16
N/A
0/1
N/A
0/0
Richard Boléat
2
1/1
0/0
0/0
N/A
0/0
Brett Miller
2
1/1
0/0
N/A
0/0
0/0
1
Phil Jordan stepped down as Chair and Non-Executive Director and Lisa Harrington stepped down
as Non-Executive Director effective 13 December 2023. Keith
Mansfield stepped down as Non-Executive Director effective 3 January 2024.
2
Richard Boléat was appointed as Non-Executive Director with effect from 19 December 2023 and Brett Miller was appointed Non-Executive Director effective 21
December 2023. Richard Boléat and Brett Miller stepped down as Directors on 23 March 2024.
3
Gailina Liew was appointed as Non-Executive Director with effect from 1 July 2023. Gailina was unable to attend all meetings in the period due to her
appointment taking place part way through the year, and scheduling clashes with the meetings that had been pre-arranged to the pre-existing Board’s availability.
4
Aaron le Cornu stepped down as a member of the Risk Committee on 1 July 2023.
Governance
2023 Annual Report
|
55
\ COMPOSITION
At the date of this report, the Company has an Interim
Non-Executive Chair and two other Non-Executive
Directors, including a Senior Independent Director,
all of whom were considered independent on and
since their appointment. At 31 December 2023, the
Company had an Interim Non-Executive Chair and
five other Non-Executive Directors, including a Senior
Independent Director. All Directors are independent of
the Investment Manager.
Charlotte Valeur is the Interim Independent Chair of
the Board and is responsible for the Board’s overall
effectiveness in directing the Company. The Interim
Independent Chair, in conjunction with the Company
Secretary, ensures that accurate, timely and clear
information is circulated to the Directors, and that
sufficient time is given in meetings to consider and
discuss all agenda items thoroughly. The Interim
Independent Chair promotes a culture of openness
and constructive debate to ensure the effective
contribution of all Directors, facilitating a co-operative
environment between the Investment Manager and the
Directors, and encourages Directors to critically examine
information and reports to constructively challenge
the Investment Manager and hold third party service
providers to account where appropriate.
The Interim Independent Chair has put mechanisms
in place to ensure effective communication between
shareholders and the Board, to ensure that their views,
issues and concerns are considered as part of the
decision-making process. Lisa Harrington was the
Senior Independent Director during the period, and
was succeeded by Gailina Liew with effect from
14 December 2023, following Lisa Harrington
stepping down from the Board. If required, the Senior
Independent Director will act as a sounding board and
intermediary for the other Directors and shareholders.
The Directors hold or have held senior positions in
industry and commerce and contribute a wide range
of skills, experience and objective perspective to the
Board. The Board Committees allow the Directors to
focus in greater detail and depth on key matters such
as strategy, governance, internal controls and risk
management.
The Directors’ other principal commitments are listed
on pages 52 to 53. During the year, the Board satisfied
itself that all Directors were and remain able to commit
sufficient time to discharge their responsibilities
effectively, having given due consideration to their
other significant commitments. Changes in any
Director’s commitments outside the Group are required
to be, and have been, disclosed and approved prior
to the acceptance of any such appointment. No
external appointments accepted during the year were
considered to be significant for the relevant
Directors,
taking into account the expected time commitment and
nature of these roles.
\ BOARD COMMITTEES
The Board has established a Management
Engagement Committee, an Audit Committee, a
Valuation Committee, a Nomination Committee and
a Risk Committee. Given that the Company has no
executive Directors or other employees, the Board
does not consider it necessary to establish a separate
remuneration committee and those functions are
undertaken by the whole Board. The functions and
activities of each of the Committees are described in
their respective reports.
\ BOARD MEETINGS
The Board meets formally on, at least, a quarterly
basis with additional ad hoc meetings as required. The
Chair, in conjunction with the Company Secretary, sets
the agenda for meetings and ensures that Directors
receive accurate, clear and timely information to help
them to discharge their duties. The Board receives
periodic reports from the Investment Manager detailing
the performance of the Group. The meetings focus
on discussing reports from the Investment Manager,
review of portfolio performance, pipeline and regulatory
matters.
\ DISCUSSIONS OF THE BOARD
During the period, the following were the key matters
considered by the Board:
•
Approval of various Company policies;
•
Appointments of Gailina Liew, Richard Boléat and
Brett Miller;
•
Sale of Verne Global;
•
Initiating a shareholder consultation to discuss the
future direction of the Company with shareholders;
Governance
56
|
Digital 9 Infrastructure plc
Under the AIC governance code, FTSE 350 companies
should undertake an externally facilitated board
evaluation at least every three years. The Board
considered undertaking an external Board evaluation,
however, it was decided that the Board’s focus at this
time should remain on other key matters affecting the
Company, including the change of directors in the
period and the change of direction of the Company.
An external Board evaluation will be reconsidered on a
yearly basis as to whether it would be appropriate.
The Directors were asked to complete a questionnaire,
that considered amongst other areas, the Board
and Committees, Board composition and diversity,
leadership, efficiency of Board processes and
stakeholder engagement.
Having conducted its performance evaluation, the
Board believes that it has been effective in carrying out
its objectives and that each individual Director has been
effective and demonstrated commitment to the role.
The Board discussed the challenges and opportunities
identified through the evaluation and agreed
appropriate development points on which progress will
be assessed in the next financial year.
The Board discussed the key challenges and
opportunities that were identified through the
performance evaluation and agreed appropriate
development points on which progress will be assessed
in the next financial period.
•
Initiation of a Strategic Review following the Verne
Global sale;
•
Decision to suspend the Company’s dividend policy
as announced on 28 September 2023;
•
Appointment of Peel Hunt LLP as the Company’s
joint corporate broker (J.P. Morgan Cazenove have
been appointed sole Corporate Broker following the
resignation of Peel Hunt on 3 April 2024);
•
Review of the Investment Management Agreement
and other service provider agreements;
•
Oversight of Investee Company performance and
asset management initiatives;
•
Input into investment opportunities being reviewed
by the Investment Manager in its role as the AIFM;
•
Review and approval of the annual expense budget;
•
Review of the Company’s risk appetite;
•
The Investment Manager’s process to replace the
personnel who left during the previous year.
\ PERFORMANCE EVALUATION
The Directors recognise that an evaluation process is
a significant opportunity to review the practices and
performance of the Board, its Committees and its
individual Directors to implement action to improve the
Boards effectiveness and contribute to the Company’s
success.
Challenges and
Opportunities
2024 Development Points
Information flow
More timely, comprehensive and accurate forecasting and scenario testing required to support the
Board's decision-making and consideration of strategic options. The Board should be provided
with up-to-date information and made aware of emerging risks.
Size, skills and
composition of the
Board
In light of the orderly wind-down there is a recognised need to shift the emphasis of Director
experience towards executive M&A expertise.
Time commitment and
remuneration
The Board have spent considerable additional time on Company matters outside of the
expected time commitment indicated at appointment. The current fees are not commensurate
with the required level of work, however the Directors have opted not to increase fees in
acknowledgement of the Company’s significant discount to NAV.
Risk management of
portfolio companies
There is a need for enhanced internal controls for portfolio companies and greater reporting
from management to highlight gaps in risk management and implement effective monitoring
programmes.
Oversight of reputation
and messaging
Due to the many critical challenges faced by the Company, the Board believes additional focus
and resource should be dedicated to reputation and messaging.
Governance
2023 Annual Report
|
57
\ CONFLICTS OF INTEREST
The Company operates a conflict of interest policy
that has been approved by the Board and sets out the
approach to be adopted and procedures to be followed
where an individual who is, or is to be appointed as,
a Director of the Company and such other persons to
whom the Board has from time to time has determined
that this policy shall apply, or a person connected with
any such a person, has an interest which conflicts,
or potentially may conflict, with the interests of the
Company or his or her duties in respect of the Company.
It is the responsibility of each individual Director to
avoid an unauthorised conflict of interest situation
arising. All Directors must inform the Board as soon
as they become aware of the possibility of an interest
that conflicts with, or might possibly conflict with
, the
interests of the Company. A register of conflicts is
maintained by the Company Secretary and is reviewed
at Board meetings to ensure that any authorised
conflicts remain appropriate. The Directors are required
to confirm at these meetings whether there has been
any change to their position. Following the year end,
and as announced on 25 March 2023, Richard Boléat
and Brett Miller had indicated they would provide to the
Company a proposal for the Company to become a self-
managed alternative investment fund. This situation had
been identified as a potential conflict of interest and
managed appropriately.
The Company reserves the right to withhold information
relating, or relevant, to a conflict matter from the
Director concerned and/or to exclude the Director from
any Board information, discussions or decisions which
may or will relate to that conflict matter where the Chair
or the Board considers that it would be inappropriate
or prejudicial to the interests of the Company for him or
her to take part in such discussion or decision or receive
such information. Procedures have been established
to monitor actual and potential conflicts of interest on
a regular basis and the Board is satisfied that these
procedures are working effectively.
The Investment Manager maintains conflict of interest
policies to avoid and manage any conflicts of interest
that may arise between themselves and the Group. The
Investment Manager has established a clear and robust
framework to ensure that any conflicts of interest are
appropriately managed.
2023 Development Points
Progress made
The Board could spend more time further analysing
performance against an enhanced set of KPIs that reflect
the genuine metrics by which the Company assesses
progress. KPIs should include robust targets and should
be appropriately monitored, tracked and used for forward
planning.
The Board continue to evaluate the most appropriate KPIs
for the current phase of the Company’s life cycle.
More frequent reporting on an informal basis should be
implemented to ensure the Board is provided with up-to-date
information and is aware and able to oversee emerging risks.
The Board met frequently throughout the year and were
communicated with frequently outside of meeting to ensure
that they were aware of time-critical matters.
The Company can continue to develop its sustainability
approach and targets to ensure they are clearly defined
and sufficiently embedded into the Company’s investment
process.
During the year, progress has been made on a range of
sustainability areas for the Investee Companies, including
net zero action, improving scope 3 data and diversity
training.
Whilst the Board has the right mix of skills, experience and
expertise, diversity could be increased to further enhance the
composition and balance of the Board.
The Board is pleased that during the year the Board‘s
structure changed to meet the FCA’s Listing Rules diversity
targets and continues to do so as at the date of this report.
The performance of service providers should be monitored
periodically with greater scrutiny to address under-
performance.
The Management Engagement Committee reviews the
performance of its service providers during the year and
recommended several changes to enhance the functioning
and advice provided to the Company.
The progress the Board has made against its 2023 development points is set out below.
Governance
58
|
Digital 9 Infrastructure plc
\ PROFESSIONAL DEVELOPMENT
The Directors received a comprehensive induction
programme on joining the Board that covers the Group’s
investment activities, the role and responsibilities of a
Director and guidance on corporate governance and
the applicable regulatory and legislative landscape.
An induction process was undertaken for Gailina Liew,
Richard Boléat and Brett Miller during the year and post-
year end.
The Directors’ training and development is considered
as part of the annual Board performance evaluation and,
in any event, the Chair regularly reviews and discusses
any development needs with each Director. Each
Director is aware that they should take responsibility
for their own individual development needs and take
the necessary steps to ensure they are fully informed of
regulatory and business developments.
During the period, the Directors received periodic
guidance on regulatory and compliance changes at
quarterly Board meetings.
\ SHAREHOLDER ENGAGEMENT
The Board acknowledges the importance of building
and maintaining strong relationships with its
shareholders. The Board and Investment Manager
regularly speak to discuss, amongst other things, the
views of the Company’s shareholders and has done so
throughout 2023. The Company’s Corporate Broker
also speaks to shareholders regularly and ensures
shareholder views are clearly communicated to the
Board. The Board take responsibility for, and have a
direct involvement in, the content of communications
regarding major corporate matters.
During the period, the Board initiated a shareholder
consultation. The consultation provided shareholders
an opportunity to discuss the future direction of the
Company with the Board and helped to determine
shareholders’ views on the Company’s optimal future
dividend policy. The Board engaged with c.74% of the
issued share capital and held a retail shareholder-only
webinar. The Board carefully considered all feedback
received from shareholders and developed a set of
actions focused on maximising shareholder value, along
with the Investment Manager and Company advisers
including the Company’s Joint Corporate Brokers and
Goldman Sachs International. Following the year end, a
portfolio trading update was published on 28 February
2024. The Board valued feedback from all shareholders
following this announcement and has engaged with the
vast majority of the share register during and post year
end.
The Notice of AGM, which will follow in due course,
will provide details of the AGM and the respective
resolutions to be put to shareholders. Shareholders
are encouraged to attend and vote, along with any
other shareholder meetings, so they can discuss
governance and strategy and the Board can enhance
its understanding of shareholder views. The Board
will attend the Company’s shareholder meetings to
answer any shareholder questions and the Chair will be
available, as necessary, outside of these meetings to
speak to shareholders.
The Board is committed to providing shareholders with
regular updates as key initiatives are progressed.
In addition, the Board will also seek to communicate
with shareholders regularly through the following:
annual and interim financial statements
, quarterly
factsheets, and investor presentations.
The Board values feedback from all shareholders
because understanding the views of its shareholders is
a fundamental principle of good corporate governance.
Strong engagement with shareholders and stakeholders
is vital to achieving this.
All investor documentation is available to download
from the Company’s website
\ WHISTLEBLOWING
The Board has considered the AIC Code
recommendations in respect of arrangements by which
staff of the Investment Manager or Administrator
may, in confidence, raise concerns within their
organisations about possible improprieties in matters
of financial reporting or other matters. It has concluded
that adequate arrangements are in place for the
proportionate and independent investigation of such
matters and, where necessary, for appropriate follow-up
action to be taken within their organisations.
Governance
2023 Annual Report
|
59
Audit Committee Report
The following pages set out the Audit Committee’s report on how it has
discharged its duties in accordance with the AIC Code and its activities in respect
of the period ended 31 December 2023.
The Audit Committee has been in operation throughout the period and operates
within clearly defined terms of reference.
Governance
60
|
Digital 9 Infrastructure plc
\ RESPONSIBILITIES
The Audit Committee has the primary responsibility for
reviewing the financial statements and the accounting
principles and practices underlying them, liaising with
the external auditors and reviewing the effectiveness of
internal controls.
The main role of the Audit Committee is to:
•
monitor the integrity of the financial statements
of the Company and any formal announcements
relating to the financial performance and reviewing
significant financial reporting judgements contained
in them;
•
provide formal and transparent arrangements for
considering how to apply the financial reporting and
internal control principles set out in the AIC Code
and to maintain an appropriate relationship with the
external auditors;
•
provide advice to the Board on whether
the Company’s annual report and financial
statements taken as a whole, is fair, balanced and
understandable and provides the information
necessary for shareholders to assess the Group’s
position and performance, business model and
strategy;
•
monitor the integrity of the financial statements
of the Company and any formal announcements
relating to the financial performance and reviewing
significant financial reporting judgements contained
in them;
•
review the investment valuations and underlying
assumptions and provide advice to the Board;
•
review the internal financial controls and the internal
control and risk management systems of the
Company;
•
review the adequacy of the Company’s
arrangements as they relate to compliance,
whistleblowing and fraud;
•
make recommendations to the Board to put to the
shareholders for their approval in general meeting
in relation to the appointment, re-appointment and
removal of the external auditors and to approve
the remuneration and terms of engagement of the
external auditors;
•
review and monitor the external auditor’s
independence and objectivity and the effectiveness
of the audit process, taking into consideration
relevant UK professional and regulatory
requirements;
•
develop and implement policy on the engagement
of the external auditors to supply non-audit services,
taking into account relevant ethical guidance
regarding the provision of non-audit services by the
external audit firm;
•
report to the Board on significant issues relating
to the financial statements and how they were
addressed; its assessment of the effectiveness of the
audit process; any key matters raised by the external
auditors and any other issues on which the Board
has requested the Committee’s opinion;
•
consider the need for the Company to establish an
internal audit function at Company level; and
•
report to the Board on how it has discharged its
responsibilities.
\ COMMITTEE MEMBERSHIP
During the period, the Audit Committee comprised the
Chair of the Committee Keith Mansfield, Lisa Harrington
and Aaron Le Cornu. Following Lisa Harrington and
stepping down from the Board on 13 December 2023,
Richard Boléat was appointed as a member of the Audit
Committee
. Following Keith Mansfield stepping down
from the Board on 3 January 2024, Aaron Le Cornu was
appointed as Chair of the Committee and Brett Miller
was appointed as a member. Following Richard Boléat
and Brett Miller stepping down from the Board on 23
March 2024, Gailina Liew was appointed as a member
of the Audit Committee and Aaron Le Cornu remains as
Chair.
The Board is satisfied that at least one member of the
Audit Committee has recent and relevant financial
experience. Aaron Le Cornu has a financial background,
having qualified as a Chartered Account
ant with
Arthur Anderson, worked for HSBC for over ten years
and previously held Chief Financial Officer positions.
Gailina Liew has previously served as President & Chief
Operating Officer of a listed molecular diagnostics
company and currently serves on several audit
committees as a non-executive director.
The Board is also satisfied that the Committee as a
whole has competence relevant to the sector in which
the Company operates.
Governance
2023 Annual Report
|
61
2023 Annual Report
|
61
\ MEETING ATTENDANCE
The Committee met four times in the financial year, and
the meetings were attended by each member as follows:
Director
Attendance
Keith Mansfield*
4/4
Lisa Harrington**
4/4
Aaron Le Cornu
4/4
Brett Miller***
0/0
Richard Boléat****
0/0
*
Keith Mansfield stepped down as Non-Executive Director on
3 January 2024.
**
Lisa Harrington stepped down as a Non-Executive Director on
13 December 2023.
***
Brett Miller was appointed as Non-Executive Director on 21 December
2023 and member of the Audit Committee with effect from 3 January
2024. Brett Miller stepped down as a Non-Executive Director on
23 March 2024.
****
Richard Boléat was appointed as Non-Executive Director and member
of the Audit Committee on 19 December 2023. Richard Boléat stepped
down as a Non-Executive Director on 23 March 2024.
\ ACTIVITIES
The Audit Committee meets at least three times a year
to consider the annual report, interim report, any other
formal financial performance announcements, and
any other matters as specified under the Committee’s
terms of reference and reports to the Board on how it
discharged its responsibilities.
During the period, amongst other matters, the Committee
reviewed and recommended to the Board for approval,
the annual report for the year ended 31 December 2022,
the interim report for the period ended 30 June 2023,
recommended to the Board that the dividend not be paid
for the second quarter of 2023 and the rest of the year,
reviewed the non-audit services policy, reviewed internal
control reports from key service providers, and met with
PricewaterhouseCoopers LLP (PwC), the external auditors,
to discuss and agree audit plans.
\ PERFORMANCE EVALUATION
Refer to the above Corporate Governance section
on pages 57 to 58 detailing how the review of the
Committee’s performance was conducted, and the
results of such an evaluation.
\ INTERNAL CONTROL AND RISK
MANAGEMENT
The Company has put in place a process for identifying,
evaluating and managing the principal and emerging
risks faced by the Company. The Board has satisfied
itself that the procedures for identifying the information
needed to monitor the business and manage risks are
robust. The adequacy and effectiveness of the Company’s
internal control and risk management systems, and the
implementation of such controls are monitored by the
Audit Committee and the Risk Committee. The Company
has the following internal controls.
•
Internal control reports of the Investment Manager,
Administrator and Depository are reviewed by the
Audit Committee;
•
There is an agreed and defined Investment Policy,
with specified exposure limits; and
•
Compliance reporting is reviewed at each Board
meeting.
\ INTERNAL AUDIT
Company
The Audit Committee has considered the
appropriateness of establishing an internal audit
function at the Company level and, having regard to the
size and nature of the Company and have continued
to conclude that the function is not necessary at a
Company level at this time. The Audit Committee will
continue to review on an annual basis the need for this
function and make appropriate recommendations to the
Board.
Investee Companies
The Audit Committee have undertaken a review of
the Company’s Investee Companies to establish if
an internal audit function at Investee Company level
would be appropriate to provide assurance that
risk management, governance and internal control
processes are operating effectively at an operating
investment level.
Governance
62
|
Digital 9 Infrastructure plc
Governance
2023 Annual Report
|
63
\ SIGNIFICANT AREAS OF FOCUS
The following details the key areas of focus by the Audit
Committee in relation to the financial statements for
the period, which were discussed and debated with the
Investment Manager and PwC.
SIGNIFICANT ISSUES
CONSIDERED BY THE
AUDIT COMMITTEE
Application of Investment Entity Accounting
Standard
Under IFRS 10, investment entities are required
to hold subsidiaries at Fair Value through the
Statement of Comprehensive Income rather than
consolidate them on a line-by-line basis. There are
three key conditions to be met by the Company
for it to meet the definition of an investment
entity. Further detail on this can be found in Note
2(b) to the Financial Statements.
The Directors have reviewed the criteria and
satisfied that the Company meets the criteria of
an Investment Entity under IFRS 10. As explained
in Note 2(b) to the financial statements, the
Directors are of the opinion that the Company
meets the requirements of an “Investment Entity”.
Assessing whether the Company and certain
subsidiaries met the criteria of Investment Entities,
in accordance with the definition set out in IFRS
10 was seen as a key judgement.
The Audit Committee debated the
appropriateness of the current application of
the standard with the Investment Manager and
independent auditors. The Audit Committee
concluded that applying the investment entity
exemption to IFRS 10 will improve stakeholders’
understanding of the financial performance and
position of the Company.
Valuation of Investments
The Valuation of Investments was considered by
the Valuation Committee post year-end (please
refer to the activities section of the Valuation
Committee on page 74), following which the
Audit Committee considered the outcome of the
work of the Valuation Committee.
The Fair Value for an investment is derived from
the present value of the investments’ expected
future cash flows, using reasonable assumptions
and forecasts, and an appropriate discount rate.
During the year, an Independent Valuer was
appointed to carry out the fair valuation of
financial assets for financial reporting purposes,
including level 3 fair valuations. In respect of
the Verne Global entities, the fair value of these
investments equals their agreed disposal value;
completed post year end.
The Board has carried out fair market valuations
of Arqiva, Aqua Comms, Elio Networks and the
Verne Global Earn-Out as at 31 December 2023
and the Directors have considered the valuation
of SeaEdge UK1 and satisfied themselves as to
the methodology used, the discount rates and key
assumptions applied, and the valuations.
To calculate portfolio NAV, 6
2% of total NAV from
investment companies is valued using the FCFE
discounted cash flows approach, 3
5% of total NAV
is valued using evidence of post year end disposal
value either agreed or indicative offer and the
remaining 3% of investments being valued at cost.
The main Level 3 inputs used by the Group are
derived and evaluated as follows:
•
The valuer uses its judgment in arriving at
the appropriate discount rate using a capital
asset pricing model to calculate a pre-tax rate
that reflects current market assessment. The
bottom-up analysis of the discount rate and
the appropriate beta is based on comparable
listed companies. Investments are valued
using a discounted cash flow approach,
being valued on a Free Cash Flow to Equity
(“FCFE”) basis. The portfolio weighted
average cost of equity for investments
valued under the FCFE discounted cash
flows
was 13
.62
%. The cost of equity could
decline further in the future as the portfolio
companies benefit from lower operational risk
as they execute on their growth plans.
•
Expected cash inflows are estimated based
on terms of the contracts and the Company’s
knowledge of the business and how the
current economic environment is likely to
impact it taking into consideration of growth
rate factors. The weighted average long-term
growth rate used in the valuations 0.85%.
The Audit Committee and the Independent
Valuation adviser have considered the value
of investments and discount rates applied
and consider that the valuations derived are
appropriate.
Governance
64
|
Digital 9 Infrastructure plc
\ EXTERNAL AUDITORS,
AUDIT FEES AND NON-AUDIT
SERVICES
PwC were appointed as the external auditors of the
Company on 5 March 2021 with Kevin Rollo as the audit
partner. It is the Audit Committee’s responsibility to
monitor the performance, objectivity, and independence
of the external auditors and this is assessed by the Audit
Committee each year. In evaluating PwC’s performance,
the Committee examines the robustness of the audit
process, independence, objectivity and the quality of
delivery.
On an annual basis, the Audit Committee will review
the external auditors’ performance, objectivity, and
independence.
During the year, the Audit Committee considered the
effectiveness of the external auditors’ performance,
and as a result, recommended their re-appointment
at the 2023 AGM. Similarly, the Audit Committee
considered their re-appointment following year end
and are recommending the re-appointment of PwC as
auditors of the Company at the upcoming 2024 AGM.
The Notice of AGM, which will follow in due course,
will provide details of the AGM and the respective
resolutions to be put to shareholders.
Going concern and viability statement
The Board is required to consider and report on the longer-term viability of the business as well as assess the
appropriateness of applying the going concern assumption. More detail can be found on page 46.
The Audit Committee has considered and had in depth discussion regarding the solvency and liquidity position
of the Company from the financial statements and the information provided by the Investment Manager on the
forecasted cashflow for the Company and expected pipeline.
Following this consideration, the Audit Committee
considers that given that a degree of uncertainty exists in the timing of ongoing strategic initiatives which
includes management’s ability to refinance or repay the Group’s existing RCF (of which £
100.3 million remains as
at
26 April 2024
) due in the next twelve months (March 2025), there exists a material uncertainty which may cast
significant doubt over the Company’s ability to continue as a going concern.
The Audit Committee has approved a non-audit
services policy that determines the services that PwC
can provide and the maximum fee that may be raised
for non-audit services in comparison to the statutory
audit fee. The Audit Committee reviewed the policy
during the financial year and will continue to monitor
the policy on a regular basis to ensure that the external
auditors remain objective and independent. The policy
will also be reviewed annually to ensure it continues to
be in line with best practice. Any proposed changes to
the policy are recommended to the Board for approval.
Any arrangement with the auditors that includes
contingent fee arrangements is not permitted. In
addition, the total fees for non-audit services provided
by the auditor to the Group shall be limited to no
more than 70% of the average of the statutory audit
fee for the Company, of its controlled undertakings
and of the financial statements paid to the auditor
s
in the last three consecutive financial years.
. This will
continue to be monitored by the Company to ensure
that it meets these rules once they apply after three
consecutive financial years.
Total average fees paid to
PwC during the last two periods inclusive of audit of the
portfolio companies were £989,000 of which £131,000
was received for non-audit services, being 13% of the
audit services fee. The nature of the non-audit services
included the half year review and ESG assurance
service. PwC were selected to undertake these services
due to quality of their work and
the efficiencies attained
from their in-depth knowledge of the Company’s
financial information and business models.
Aaron Le Cornu
Audit Committee Chair
29 April 2024
Governance
2023 Annual Report
|
65
Management Engagement
Committee Report
\ RESPONSIBILITIES
The main function of the Management Engagement
Committee is to keep under review the performance
of the Investment Manager (which is the Company’s
AIFM) and to make recommendations on any proposed
amendment to the Investment Management Agreement.
The Committee also regularly reviews the composition of
the key executives performing the services on behalf of
the Investment Manager.
The Committee also monitors and evaluates the
performance of other key service providers to the
Company.
The Management Engagement Committee has been in
operation throughout the period and operates within
clearly defined terms of reference.
\ COMMITTEE MEMBERSHIP
The Management Engagement Committee comprises
all Directors. During the period Aaron Le Cornu was
Chair of the Committee, with Brett Miller appointed
as Chair following year end on 3 January 2024, and
subsequently Gailina Liew appointed as Chair on 23
March 2024 following Brett Miller stepping down as a
Non-Executive Director. The Committee now comprises
Gailina Liew as Chair, and Aaron Le Cornu and Charlotte
Valeur as members.
\ MEETING ATTENDANCE
The Committee met once during the financial year, and
the meeting was attended by each member as follows:
Director
Attendance
Charlotte Valeur
1/1
Aaron Le Cornu
1/1
Gailina Liew*
0/0
Keith Mansfield **
1/1
Director
Attendance
Lisa Harrington***
0/1
Phil Jordan***
1/1
Richard Boléat****
0/0
Brett Miller****
0/0
*
Gailina Liew was appointed as Non-Executive Director with effective from
1 July 2023.
** Keith Mansfield stepped down as Non-Executive Director with effect from
3 January 2024.
*** Lisa Harrington and Phil Jordan stepped down as Non-Executive Directors
with effect from 13 December 2023.
**** Richard Boléat and Brett Miller were appointed as Non-Executive Directors
on 19 December 2023 and 21 December 2023 respectively. Richard Boléat
and Brett Miller stepped down as Non-Executive Directors on 23 March 2024.
\ ACTIVITIES
During the year, the Committee monitored and reviewed
the performance of the Investment Manager and the
Investment Manager’s performance against the IMA.
The Committee also reviewed the performance of the
key service providers to the Company to ensure that the
services provided were in accordance with each supplier’s
terms of engagement, were high quality and represented
fair value for money.
During the year, Peel Hunt LLP was appointed as
Joint Corporate Broker, to work alongside J.P. Morgan
Cazenove, the Company’s existing corporate broker. In
relation to the Company’s Strategic Review, Goldman
Sachs were appointed to act as the Company’s lead
financial advis
er, and Allen & Overy LLP as legal adviser.
Following the approval of the Managed Wind-Down by
shareholders, J.P. Morgan Cazenove have been appointed
sole Corporate Broker following the resignation of Peel
Hunt and the Company has retained Stephenson Harwood
as UK Legal Adviser going forward.
Separately, Liberum have been engaged as Financial
Adviser to provide the Board with an independent review
of the investment management arrangements.
Governance
66
|
Digital 9 Infrastructure plc
\ CONTINUING APPOINTMENT
OF THE INVESTMENT MANAGER
The terms of the Investment Manager Agreement
include a provision that “The Company or the Investment
Manager shall be entitled to terminate this Agreement
upon giving to the other party not less than twelve (12)
months’ prior written notice of termination, such notice
not to expire before the fourth anniversary of the date of
Admission (the “Initial Period”)”. The fourth anniversary
of the date of admission is 31 March 2025.
The Company served notice of termination to the
Investment Manager before 31 March 2024 following the
completion of the Verne Global sale, with the Investment
Management Agreement to terminate on 31 March
2025. The Investment Management Agreement cannot
be terminated before this date.
Following the independent review of the investment
management arrangements by Liberum, the Board will
update shareholders as to the proposed arrangements
for the management of the Company.
Gailina Liew
Management Engagement Committee Chair
29 April 2024
\ PERFORMANCE EVALUATION
Refer to the above Corporate Governance section
on pages 57 to 58 detailing how the review of the
Management Engagement Committee’s performance
was conducted, and the results of such an evaluation.
\ MANAGEMENT
ARRANGEMENTS
The Company operates an externally managed
alternative investment fund for the purposes of the
AIFMD. In its role as AIFM, the Investment Manager
is responsible for the portfolio management and risk
management of the Company pursuant to the AIFMD
subject to the overall control and supervision of the
Board.
Under the Investment Management Agreement, the
Investment Manager is entitled to receive an annual
management fee on the following basis:
Adjusted Net
Asset Value
Annual
Management
Fee (percentage
of adjusted Net
Asset Value)
On such part of the Adjusted
Net Asset Value that is up to
and including GBP 500 million
1.0%
On such part of the Adjusted
Net Asset Value that is above
GBP 500 million and up to and
including GBP 1 billion
0.9%
On such part of the Adjusted
Net Asset Value that exceeds
GBP 1 billion
0.8%
The annual fee accrued and due to the Investment
Manager under the Investment Management Agreement
for the year ended 31 December 2023 was £8.7 million.
In light of the cashflow challenges facing the Company,
the Investment Manager agreed to defer their Investment
Management fees from 1 July 2023 onwards until the
completion of the Verne Global Sale. This was agreed
between the Board and the Investment Manager by
way of a side letter to the Investment Management
Agreement and these accrued fees have now been
settled in full post year end on completion of the Verne
transaction. There is no performance fee payable to the
Investment Manager.
Governance
2023 Annual Report
|
67
Nomination
Committee Report
\ RESPONSIBILITIES
The Nomination Committee’s main function is to
evaluate the performance of the Board, ensure the
Board composition, skills and experience are optimal,
lead the process for appointments, ensure plans are in
place for orderly succession to the Board, oversee the
development of a diverse pipeline for succession and
any other matters as specified under the Committee’s
terms of reference. This includes ensuring that any
appointments and succession plans are based on merit
and objective criteria, and, within this context, promotes
diversity of gender, social and ethnic backgrounds,
cognitive and personal strengths.
The Nomination Committee has been in operation
throughout the year and operates within clearly defined
terms of reference.
\ COMMITTEE MEMBERSHIP
During the period the Nomination Committee
comprised Lisa Harrington as Chair of the Committee,
Phil Jordan and Charlotte Valeur. The Committee now
comprises Gailina Liew who was appointed as Chair
of the Committee with effect from 13 December 2023
and Charlotte Valeur. Brett Miller was a member of the
Committee from appointment on 21 December 2023 up
to 23 March 2024.
The Nomination Committee met twice during the year, and
the meetings were attended by each member as follows:
Director
Attendance
Charlotte Valeur
2/2
Lisa Harrington*
2/2
Phil Jordan*
2/2
Gailina Liew**
0/0
Brett Miller***
0/0
*
Lisa Harrington stepped down as Non-Executive Director and Phil Jordan
as Chair and Non-Executive Director and members of the Nomination
Committee effective 13 December 2023.
** Gailina Liew was appointed as member and Chair of the Committee on
13 December 2023
*** Brett Miller was appointed as Non-Executive Director and member of the
Committee on 21 December 2023. Brett Miller stepped down as a Non-
Executive Director on 23 March 2024.
\ ACTIVITIES
The Nomination Committee met twice in the year
during which it discussed matters including, but
not limited to, tenure policy, diversity policy, Board
composition, Board skills, Board experience, Board
evaluation, Non-Executive Director recruitment
succession planning, time commitments, and the Listing
Rule requirements on Board diversity.
Governance
68
|
Digital 9 Infrastructure plc
\ APPOINTMENT AND
REPLACEMENT OF DIRECTORS
On 1 July 2023, Gailina Liew was appointed as Non-
Executive Director of the Company. The appointment
followed a formal recruitment process led by the
Nomination Committee, with the support of an
independent search firm.
Following an independent recruitment process for
independent directors with complementary skillsets
and experience to support the Board in progressing the
Company’s Strategic Review initiated on 27 November
2023, Richard Boléat and Brett Miller were appointed as
Non-Executive Directors of the Company on 19 December
and 21 December 2023 respectively. Phil Jordan and Lisa
Harrington stepped down from their respective roles as
Independent Chair and Senior Independent Director of
the Company on 13 December 2023.
Following the year end, and an orderly handover of his
role after the announcement of the Strategic Review,
Keith Manfield stepped down as a Non-Executive
Director with effect from 3 January 2024.
Brett Miller and Richard Boléat stepped down as
Non-Executive Directors with effect from 23 March
2024. As announced on 25 March 2024, the Board
has initiated an independent external recruitment
process immediately for a permanent Chair and at
least one additional non-executive board director to
support the future requirements of the Company and its
shareholders.
The resulting changes to membership of the Board
Committees are set out in the respective Committee
reports.
\ PERFORMANCE EVALUATION
Refer to the above Corporate Governance section
on pages 57 to 58 detailing how the review of the
Nomination Committee’s performance was conducted,
and the results of such an evaluation.
\ RE-ELECTION OF DIRECTORS
The Board considers that the performance of each
Director continues to be effective and demonstrates the
commitment required to continue in their present roles.
This consideration is based on, amongst other things,
the business skills and industry experience of each of
the Directors (refer to the biographical details of each
Director as set out below), as well as their knowledge
and understanding of the Company’s business model.
The Board has also considered the other contributions
which individual Directors may make to the work of the
Board, with a view to ensuring that:
i.
the Board maintains a diverse balance of skills,
knowledge, backgrounds and capabilities leading to
effective decision-making;
ii.
each Director is able to commit the appropriate
time necessary to fulfilling their roles; and
iii. each Director provides constructive challenge,
strategic guidance, offers specialist advice and
holds third party service providers to account.
All Directors submit themselves for re-election on an
annual basis.
\ TENURE POLICY AND
SUCCESSION POLICY
In accordance with best practice, the Board considers
that the length of time each Director, including the Chair,
serves on the Board should be between six and nine
years. To facilitate effective succession planning, this
period can be extended for a limited time if necessary.
Continuity, self-examination and ability to do the job
are the relevant criteria on which the Board assesses a
Director’s independence. Length of service of current
Directors, succession planning and independence will
be reviewed each year as part of the Board evaluation
process.
\ DIVERSITY
Diversity and Inclusion Policy
The Board has established and maintains a formal
written diversity policy.
The Board recognises the benefits of all types of
diversity and supports the recommendations of the
Hampton-Alexander Review and the Parker Review.
All Board appointments will be made on merit, and
promote diversity of all kinds, including: gender,
social and ethnic backgrounds, cognitive and personal
strengths. This will ensure that any such appointment
will develop and enhance the operation of the Board to
best serve the Company’s strategy.
The Board recognises the importance of diversity in the
boardroom which introduces different perspectives to
the Board debate and considers it to be in the interests
Governance
2023 Annual Report
|
69
1
Senior positions include Chair and Senior Independent Director
of the Group and its shareholders to take into consideration diversity criteria when appointing a new individual to
the Board. When undertaking the appointment of a new Director, the Nomination Committee will generally instruct
an external search consultancy to undertake an open and transparent process that includes potential candidates
from a variety of backgrounds.
Members of the Board should collectively possess a diverse range of skills, expertise, industry and business
knowledge. The Board will continue to monitor diversity, taking such steps as it considers appropriate to maintain
its position as a meritocratic and diverse business.
FCA Listing Rule diversity targets
The Board is committed to maintaining that the Board, as a whole, will have at least 40% representation of either
gender. At the period end, the Board comprised the Chair and four Non-Executive Directors; three male and two
female. As required by the Listing Rules, a senior Board position should be held by a female and with effect from
13 December 2023, Gailina Liew was appointed as the Senior Independent Director and Charlotte Valeur was
appointed as Interim Independent Chair, following Lisa Harrington and Phil Jordan stepping down from the Board,
and therefore fulfilling this requirement.
Each of the Board’s Committees, with the exception of the Management Engagement Committee and Valuation
Committee of which all Directors are members, has two members and the Board is committed to maintaining at
least one female member on all of its Committees.
FCA Listing Rule requirements
The Company has reported against the Listing Rules on diversity and has complied with the targets. The following
table sets out the gender and ethnic diversity of the Board as at 31 December 2023, with the exception of Brett
Miller and Richard Boléat who stepped down as Directors on 23 March 2024, the disclosure of which in this report
having been approved by each of the current Directors:
Gender Diversity
Number of
Board members
Percentage of the
Board
Number of senior
positions on the Board
1
Men
1
33
–
Women
2
66
2
Not specified/prefer not to say
–
–
–
Ethnic Diversity
White British or other White
(including minority white groups)
2
66
1
Mixed/Multiple Ethnic Groups
–
–
–
Asian/Asian British
1
33
1
Black/African/Caribbean/Black British
–
–
–
Other ethnic group, including Arab
–
–
–
Not specified/prefer not to say
–
–
–
Governance
70
|
Digital 9 Infrastructure plc
The Board has previously engaged with Board
Apprentice, a not-for-profit organisation, which aims
to increase diversity on boards globally. Effective
9 November 2022 to 9 April 2024, the Board appointed
a board apprentice, Maana Ruia, with the aim for her
to gain first-hand experience, through observation, of
the working and dynamics on boards. The objective in
taking a board apprentice is to grow and widen the pool
of board-ready individuals.
As an investment company with solely independent,
Non-Executive Directors, the Group does not have a
Chief Executive or a Chief Financial Officer and has
no employees. Accordingly, no disclosures regarding
executive management positions have been included.
\ EXTERNAL SEARCH
CONSULTANCY
In identifying suitable candidates for an appointment
to the Board, the Nomination Committee will use
open advertising or the services of external advisers to
facilitate the search.
Green Park Limited* were engaged for the recruitment
of a new Non-Executive Director, and Gailina Liew was
appointed on 1 July 2023 following this process. There
was a further independent recruitment process run by
Korn Ferry (UK) Limited*, for the recruitment of two new
Non-Executive directors with complementary skillsets
and experience to support the Board in progressing the
Company’s Strategic Review, and Richard Boléat and
Brett Miller were appointed on 19 December 2023 and
21 December 2023 respectively following this process.
Following the resignations of Richard Boléat and Brett
Miller, Trust Associates was engaged to support an
independent recruitment process for a new permanent
Chair and at least one additional Non-Executive
Director*.
\ COMPANY’S SUCCESSION
PLANS
The Nomination Committee will give full consideration
to the succession planning of the Board as part of the
Board’s formal annual evaluation to ensure progressive
refreshing of the Board, taking into account the
challenges and opportunities facing the Board and the
balance of skills and expertise that are required in the
future.
Gailina Liew
Nomination Committee Chair
29 April 2024
*
The Board confirms that there is no connection between the Company or any individual Directors and the external search consultancies used for Director
appointments during or following the period, or to facilitate the candidate search for the role of the Non-Executive Directors.
Governance
2023 Annual Report
|
71
\ KEY OBJECTIVES
The Risk Committee has been established to assist
the Board in its oversight of risk through ensuring
the Company maintains a high standard of risk
identification, monitoring and management to minimise
investment risks and any other risks not covered by the
Audit Committee.
\ RESPONSIBILITIES
The Risk Committee’s key responsibilities are:
•
ensuring the Company’s compliance with its
investment objectives, policies, restrictions and
borrowing limits;
•
oversee and advise the Board on the current risk
exposures of the Company and future risk strategy,
including identifying and monitoring the key risks
that the Company faces;
•
establish the Company’s risk appetite, review
performance against risk appetite and monitor key
trends and concentrations;
•
review the Company’s procedures for managing and
mitigating principle risks; and
•
reviewing the Company’s systems and controls for
the prevention and detection of fraud, bribery, tax
evasion and anti-money laundering and any other
matters as specified under the Committee’s terms of
reference.
The Risk Committee has been in operation throughout
the period and operates within clearly defined terms of
reference.
Risk
Committee Report
\
COMMITTEE MEMBERSHIP
During the period the Risk Committee comprised
Charlotte Valeur as Chair of the Committee, Phil Jordan,
and Gailina Liew and Aaron Le Cornu who stepped
down from the Committee in July 2023. Following
the Director changes noted earlier in the report, the
Committee now comprises Charlotte Valeur who chairs
the Committee and Gailina Liew. Richard Boléat was a
member of the Committee from his appointment until
his resignation as a Non-Executive Director on 23 March
2024.
\ MEETING ATTENDANCE
The Committee met twice in the financial year, and the
meetings were attended by each member as follows:
Director
Attendance
Charlotte Valeur
2/2
Phil Jordan*
2/2
Aaron Le Cornu
1/1
Gailina Liew**
0/1
Richard Boléat***
0/0
*
Phil Jordan stepped down as Chair and Non-Executive Director effective
13 December 2023.
**
Gailina Liew was appointed as Non-Executive Director with effect from
1 July 2023.
*** Richard Boléat was appointed as Non-Executive Director with effect from
19 December 2023, and stepped down as a Non-Executive Director on
23 March 2024.
Governance
72
|
Digital 9 Infrastructure plc
\ PERFORMANCE EVALUATION
Refer to the above Corporate Governance section on
pages 57 to 58 detailing how the review of the Risk
Committee’s performance was conducted, and the
results of such an evaluation.
\ INTERNAL CONTROL AND RISK
MANAGEMENT
The Company has put in place an ongoing process for
identifying, evaluating and managing the principal and
emerging risks faced by the Company. The adequacy
and effectiveness of the Company’s internal control and
risk management systems, and the implementation of
such controls, are monitored by the Audit Committee
and the Risk Committee. The Company has the
following internal controls, which are monitored by the
Risk Committee.
•
The risk appetite was agreed by the Risk
Committee, which is designed to supplement the
Investment Objective and Policy;
•
A risk register identifying risks and controls to
mitigate their potential impact/likelihood was
maintained by the Investment Manager and
reviewed by the Risk Committee; and
•
On a bi-annual basis, the Risk Committee is
provided with an internal control report of its
key service providers, including the Investment
Manager, to review their effectiveness.
\ ACTIVITIES
During the period, the Risk Committee carried out the
following activities:
•
Received reports from the Investment Manager
on how the risk management process was being
undertaken;
•
Reviewed the Company’s risk appetite for risks,
including regulatory risk, concentration risk,
reputational risk and key personnel risk;
•
Reviewed the Company’s risk register; and
•
Assessed the Company’s principal risks, which are
outlined on pages 41 to 45.
Charlotte Valeur
Risk Committee Chair
29 April 2024
Governance
2023 Annual Report
|
73
\ KEY OBJECTIVES
Following the year end on 3 January 2024 the Valuation
Committee was established to support the Audit
Committee and Board with considering the appropriate
valuation policies in respect to the Company’s
investments, analysing valuation methodologies and
recommending the valuations for the Company’s
investments.
\ RESPONSIBILITIES
The Valuation Committee will operate within clearly
defined terms of reference, and their key responsibilities
are:
•
formulate or amend appropriate valuation policies
in respect of individual investments or classes of
investment;
•
ensure the valuation policy adopted complies with
the obligations within the Company’s prospectus,
any agreements in place, legislation, regulations,
guidance and other policies of the Company that
may be applicable;
•
consider and approve the valuations and/or
valuation methodology of the Company’s listed and
unlisted investments at each period-end date as
recommended and/or undertaken by the Company’s
alternative investment fund manager and/or
investment adviser, or make such amendments as
are deemed appropriate;
•
ensure that the annual report includes a summary of
the valuation of the Company’s investment portfolio
made in accordance with the Listing Rules; and
•
consider at each period-end whether there is a need
for an independent valuation of the Company’s
investment portfolio and, should it deem this to
be required, appoint and utilise the services of an
appropriate third-party independent valuer.
\ COMMITTEE MEMBERSHIP
Richard Boléat chaired the Valuation Committee
until stepping down as a Non-Executive Director on
23 March 2024, and Brett Miller was a member of the
Committee until stepping down as a Non-Executive
Director on 23 March 2024. The Valuation Committee
is now chaired by Aaron Le Cornu and Gailina Liew and
Charlotte Valeur are members of the Committee.
\ MEETING ATTENDANCE
There were no meetings held in the year, as the
Committee was established after the year-end. The
Valuation Committee will meet at least two times in the
financial year, and on an ad hoc basis when required.
Following the year end, the Valuation Committee
engaged with the Independent Valuers in respect to the
valuation as at 31 December 2023.
\ ACTIVITIES
Following year end, the Valuation Committee held
seven meetings to consider the independent valuation
work being undertaken, resulting in an unanimous
recommendation of the fair value conclusions to the
Board for the Company’s portfolio. Further detail of the
work conducted regarding valuations is provided in the
Audit Committee report on page
64
.
Aaron Le Cornu
Valuation Committee Chair
29 April 2024
Valuation
Committee Report
Governance
74
|
Digital 9 Infrastructure plc
\ ANNUAL STATEMENT
Dear shareholder,
I am pleased to present the Directors’ Remuneration
Report on behalf of the Board for the year ended
31 December 2023. It is set out in two sections:
1.
Directors’ Remuneration Policy – This sets out our
Remuneration Policy for Directors of the Company,
which was approved by shareholders at the
Company’s 2022 AGM.
2.
Annual Report on Directors’ Remuneration – This
sets out how our Directors were paid for the period
ended 31 December 2023 and how we intend to
apply our Policy for the year ending 31 December
2024. There will be an advisory shareholder vote
on the Directors’ Remuneration Report at our 2024
AGM.
Prior to our IPO in March 2021, the Company
introduced a remuneration framework to ensure that
remuneration was aligned with best market practice
whilst attracting and securing the right non-executive
directors to deliver our investment objectives. The
scale and structure of the Director’s remuneration was
determined by the Company in consultation with the
sponsor and other advisers having been benchmarked
against companies of a similar size in the sector and
having regard to the time commitment and expected
contribution to the role.
The Group does not have any executive directors or
employees, and, as a result, operates a simple and
transparent remuneration policy with no variable
element, that reflects the Non-Executive Directors’
duties, responsibilities and time spent.
There have been no major decisions or changes related
to the Directors’ remuneration during the period.
\ DISCRETION EXERCISED
UNDER THE DIRECTORS’
REMUNERATION POLICY
At the date of this report, no discretion is intended to
be exercised under the Directors’ Remuneration Policy.
We value engagement with our shareholders and for the
constructive feedback we receive and look forward to
your support at the forthcoming AGM.
Charlotte Valeur
Interim Independent Chair
29 April 2024
Directors’
Remuneration Report
Governance
2023 Annual Report
|
75
\ APPROVAL OF
REMUNERATION POLICY
Our Directors’ Remuneration Policy was last approved
by shareholders at the AGM of the Group held on 23
May 2022 and became effective from the conclusion
of that meeting. As consistent with section 439A of
the Companies Act 2006, with which the Company
voluntarily complies, the provisions of the policy, will
apply until they are next put to shareholders for renewal
of that approval, which must be at intervals of not
more than three years, or if the Remuneration Policy
is varied, in which event shareholder approval for the
new Remuneration Policy will be sought. The approved
Remuneration Policy can be found on the Company’s
website, and is also set out below.
The Remuneration Policy has been prepared in
accordance with Schedule 8 of The Large and Medium-
sized Companies and Group’s (Accounts and Reports)
Regulations 2008. The policy applies to the Non-
Executive Directors; the Company has no executive
directors or employees. There are no planned changes
to the policy in the upcoming financial year.
\ REMUNERATION
POLICY OVERVIEW
The Company’s objective is to have a simple and
transparent remuneration structure, aligned with the
strategy. The Company aims to provide remuneration
packages with no variable element which will retain
Non-Executive Directors with the skills and experience
necessary to maximise shareholder value on a long-term
basis. The remuneration packages for Non-Executive
Directors will be set with reference to the remuneration
packages of comparable businesses.
The Board will assess the appropriateness of the
Remuneration Policy on an annual basis and shareholder
approval will be sought in the event of any changes
being proposed.
Directors’
Remuneration Policy
Governance
76
|
Digital 9 Infrastructure plc
Component
How it Operates
Maximum Fee
Link to Strategy
Annual fee
Each Director received a
basic fee which is paid on a
monthly basis.
The Audit Committee Chair
and Risk Committee Chair is
entitled to an additional fee
over and above their normal
Director fee, reflecting
their additional duties and
responsibilities in those roles.
The total aggregate fees that
can be paid to the Directors
is as set out in the Company’s
articles of association.
The level of the annual fee
has been set to attract and
retain high calibre Directors
with the skills and experience
necessary for the role. The fee
has been benchmarked against
companies of a similar size.
Additional fees
Where a Director performs
services, which in the opinion
of the Board, are outside the
ordinary duties of a Director,
they will be entitled to an
additional fee.
A daily rate of £1,500
for attending additional
meetings or time spent on
the performance of other
duties which result in a
Director spending more than
five days a month on work
for the Company. Any such
additional fees will be subject
to discussion and approval by
the Board.
The additional fee for services
outside the scope of ordinary
duties offers flexibilities for
a Director to be awarded
additional remuneration to
adequately compensate
a Director where this is
considered appropriate for the
effective functioning of, or in
furtherance of, the Company’s
aims.
Other benefits
The Directors shall be
entitled to be repaid
expenses.
All reasonable travelling, hotel
and other expenses properly
incurred in the performance of
their duties as Director.
In line with market practice, the
Company will reimburse the
Directors for expenses to ensure
that they are able to carry out
their duties effectively.
Policy Table
The Directors are entitled only to the fees as set out in the table below from the date of their appointment.
No element of Directors’ remuneration is subject to performance factors.
\ SERVICE CONTRACTS
The Directors are engaged under letters of appointment
and do not have service contracts with the Company.
\ DIRECTORS’ TERM OF OFFICE
Under the terms of the Directors’ letters of appointment,
each directorship is terminable on three months’
written notice by either the Director or the Company.
Each Director will be subject to annual re-election by
shareholders at the Company’s AGM in each financial
year.
\ POLICY ON PAYMENT FOR
LOSS OF OFFICE
Upon termination, a Director shall only be entitled to
accrued fees as at the date of termination together with
reimbursement of any expenses properly incurred to
that date.
\ CONSIDERATION OF
SHAREHOLDER VIEWS
The Company is committed to establishing ongoing
shareholder dialogue and takes an active interest
in voting outcomes. Where there are substantial
votes against resolutions in relation to Directors’
remuneration, the Company will seek the reasons for
any such vote and will detail any resulting actions in the
Directors’ Remuneration Report.
Governance
2023 Annual Report
|
77
\ ANNUAL REPORT ON DIRECTORS’ REMUNERATION
Consideration of Remuneration Matters
The Board does not consider it necessary to establish a separate remuneration committee as it has no executive
directors. The Board as a whole considers the remuneration of the Directors.
Directors’ Fees
The Directors are each paid an annual fee of £40,000 other than the Chair of the Audit Committee and Chair of the
Risk Committee who is entitled to an additional £5,000 and the Chair of the Company who is entitled to receive an
annual fee of £75,000.
Directors are entitled to recover all reasonable expenses properly incurred in connection with performing their
duties as a Director.
Per the terms of the Director appointment letter, Directors are entitled to receive a daily rate of £1,500 for attending
additional meetings or time spent on the performance of other duties which result in them spending more than five
days a month on work for the Company. It is intended that such additional fees would only be incurred in exceptional
circumstances. During the period, additional fees of £9,000 were paid to Phil Jordan, and further details are set
out below. Despite the significant increase in time commitment of the Directors to the Company, it was agreed in
December 2023 and again in February 2024 that the Directors would not charge additional fees for time spent.
Single Total Figure (audited information)
The fees paid to Directors in respect of the period ended 31 December 2023 are shown below.
2023
2022
2021
2021-2022
2022-2023
Director
Total fixed
remuneration
(£)
Total
expenses
(£)
Total
additional
fees
(£)
Total
(£)
Total fixed
remuneration
(£)
Total
expenses
(£)
Total
additional
fees
(£)
Total
(£)
Total fixed
remuneration
(£)
Total
expenses
(£)
Total
(£)
Total
(£)
Annual change
in Directors’
Fees (excluding
expenses)
(%)
5
Annual change
in Directors’
Fees (excluding
expenses)
(%)
5
Phil Jordan
1
71,346
4,572
9,000
84,918
45,769
1,467
–
47,236
–
–
–
–
N/A
56
Keith Mansfield
4
45,000
2,874
–
47,874
45,000
1,481
–
46,481
37,039
75
37,114
21
0
Lisa Harrington
1
38,051
1,105
–
39,156
40,000
54
6,000
46,054
32,923
–
–
32,923
21
0
Charlotte Valeur
45,000
2,777
–
47,777
43,051
1,432
–
44,483
32,923
–
–
32,923
31
5
Aaron Le Cornu
40,000
2,335
–
42,335
30,000
1,549
–
31,549
–
–
–
–
N/A
33
Gailina Liew
2
20,000
–
–
20,000
–
–
–
–
–
–
–
–
N/A
N/A
Richard Boléat
3
1,385
–
–
1,385
–
–
–
–
–
–
–
–
N/A
N/A
Brett Miller
3
1,077
–
–
1,077
–
–
–
–
–
–
–
–
N/A
N/A
Total
261,859
13,663
9,000
284,522
203,820
5,983
6,000
215,803
102,885
75
–
102,960
1
Phil Jordan stepped down as Chair and Non-Executive Director and Lisa Harrington as Non-Executive Director effective 13 December 2023.
2
Gailina Liew was appointed as Non-Executive Director effective 1 July 2023.
3
Richard Boléat and Brett Miller were appointed as Non-Executive Directors on 19 December and 21 December 2023 respectively. Richard Boléat and Brett Miller
stepped down as Non-Executive Directors on 23 March 2024.
4
Keith Mansfield stepped down as a Non-Executive Director effective 3 January 2024.
5
Phil Jordan was appointed on 23 May 2022 and stepped down on 13 December 2023, if he had served a full year to 31 December 2022 and 31 December 2023
the % increase for 2022 to 2023 would have been nil. Keith Mansfield and Lisa Harrington were appointed on 8 March 2021, if they had served a full year to 31
December 2021, the % increase for 2021 to 2022 would have been nil. The changes to Charlotte Valeur’s fees are reflective of her appointment as Chair of the
Risk Committee on 23 May 2022 (for which there is an additional £5,000 fee), and her appointment of Interim Chair which increased her base fee from £40,000 to
£75,000 in line with Phil Jordan’s fee as Chair. Aaron Le Cornu was appointed on 1 April 2022, if he had served a full year to 31 December 2022, the % increase
for 2022 to 2023 would have been nil.
Information required on executive directors and employees has been omitted because the Company has neither
and therefore it is not relevant.
Governance
78
|
Digital 9 Infrastructure plc
Statement of Directors’ Shareholding and Share Interests (Audited table)
Detailed in the table below are details of the Directors’ shareholdings as at 31 December 2023.
The Directors are not required to hold any shares of the Company by way of qualification. A Director who is not a
shareholder of the Company shall nevertheless be entitled to attend and speak at shareholders’ meetings.
At 31
December
2023
At 31
December
2023
At 31
December
2022
At 31
December
2022
At 31
December
2021
At 31
December
2021
% change
year-on-year
between 31
December
2021 and 31
December
2022
% change
year-on-year
between 31
December
2022 and 31
December
2023
Number of
Shares
% of share
capital
Number of
Shares
% of share
capital
Number of
Shares
% of share
capital
Phil Jordan*
94,611
0.011
73,909
0.009
N/A
N/A
N/A
0.002
Keith Mansfield***
294,819
0.034
86,429
0.010
58,604
0.0081
(0.0019)
0.024
Lisa Harrington*
38,604
0.004
38,604
0.004
38,604
0.0053
(0.0013)
–
Aaron Le Cornu
107,024
0.012
72,500
0.008
N/A
N/A
N/A
0.004
Charlotte Valeur
10,000
0.001
10,000
0.001
10,000
0.0014
(0.0004)
–
Gailina Liew
–
–
N/A
N/A
N/A
N/A
N/A
N/A
Richard Boléat**
65,000
–
N/A
N/A
N/A
N/A
N/A
N/A
Brett Miller**
400,000
0.046
N/A
N/A
N/A
N/A
N/A
N/A
*
Phil Jordan resigned and Chair and Non-Executive Director and Lisa Harrington as Non-Executive Director effective 13 December 2023.
**
Richard Boléat and Brett Miller resigned as Non-Executive Directors of the Company effective 23 March 2023.
*** Keith Mansfield resigned as Non-Executive Director effective 4 January 2024.
Total Shareholder Return
The graph below illustrates the total shareholder return of the Company from Admission to the end of the financial
period. This is mapped against the total shareholder return on a hypothetical holding over the same period in
the FTSE All Share. This index has been chosen as it is considered to be the most appropriate benchmark against
which to assess the relative performance of the Company as the Company is a constituent of the FTSE All Share.
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
110.0
120.0
130.0
140.0
150.0
Mar-21
Jun-21
Aug-21
Oct-21
Dec-21
Feb-22
Apr-22
Jun-22
Aug-22
Oct-22
Dec-22
Feb-23
Apr-23
Jun-23
Aug-23
Oct-23
Dec-23
DGI9
FTSE All Share
Governance
2023 Annual Report
|
79
Relative Importance of Spend on Pay
The table below shows the total spend on remuneration
compared to the distributions to shareholders by way
of dividends, share buybacks and the management
fees incurred by the Company. As the Group has no
employees the total spend on remuneration comprises
only the Directors’ fees.
31 December
2023
£’000
31 December
2022
£’000
Dividends paid
25,956
50,274
Share buybacks
–
–
Management fee
8,668
7,736
Directors’
emoluments
271
261
Consideration of Shareholder Views
The Company is committed to ongoing shareholder
dialogue and takes an active interest in voting
outcomes. Where there are substantial votes against
resolutions in relation to directors’ remuneration,
the Company will seek the reasons for any such vote
and will detail any resulting actions in the Directors’
Remuneration Report.
During the year the Group did not receive any
communications from shareholders specifically
regarding Directors’ pay.
The resolutions to approve the Directors’ Remuneration
Report (excluding the Directors’ Remuneration Policy)
and the Directors’ Remuneration Policy were passed on
a poll at the AGM on 23 May 2022.
Votes
for
Votes
against
Votes
withheld
Remuneration
Report
97.58%
2.42%
31,206
Remuneration
Policy
97.58%
2.42%
28,349
On behalf of the Board:
Charlotte Valeur
Interim Independent Chair
29 April 2024
Governance
80
|
Digital 9 Infrastructure plc
Governance
2023 Annual Report
|
81
Directors’
Report
The Directors are pleased to present the Annual Report,
including the Company’s audited financial statements
as at, and for the period ended 31 December 2023.
The information that fulfils the requirements of the
Corporate Governance statement in accordance with
rule 7.2 of the DTR can be found in this Directors’
Report and in the Governance section on pages 50 to
80 all of which is incorporated into this Directors’ Report
by reference.
Details of significant events since the balance sheet
date are contained in Note 18
to the financial
statements.
An indication of likely future developments of the
Company and details of the outlook and pipeline are
included in the Strategic Report. Information about
the use of financial instruments by the Company and
its subsidiaries is given in Note 21
to the financial
statements.
\ PRINCIPAL ACTIVITY
The Company is a close-ended UK investment trust
that invests in Digital Infrastructure assets, listed on the
premium segment of the Main Market of the London
Stock Exchange. The Company is domiciled in Jersey
and is UK tax resident. The Directors do not anticipate
any change in the principal activity of the Company in
the foreseeable future.
\ DIRECTORS
The names of the Directors who served from 1 January
2023 to 31 December 2023 are set out in the Board of
Directors section on page 55; the biographical details
and principal external appointments of the current
Directors are set out on pages 54 to 55.
\ INVESTMENT MANAGER AND
AIFM
A summary of the principal contents of the
Investment Management Agreement are set out in
the Management Engagement Committee report on
pages 66 to 67.
\ INVESTMENT TRUST STATUS
The Company has been approved as an Investment
Trust Company (“ITC”) under sections 1158 and 1159 of
the Corporation Taxes Act 2010. The Company had to
meet relevant eligibility conditions to obtain approval
as an ITC and must adhere to ongoing requirements
to maintain its ITC status, including, but not limited
to, retaining no more than 15% of its annual revenue
profits. The Company derives the majority of its
returns via capital profits, through the revaluation of its
Investee Companies. As a result, the Company has paid
dividends from its stated capital, which it is entitled to
do under Jersey Companies Law.
During the period, the Company has continued to
conduct its affairs to ensure it complies with these
requirements. The Board continues to monitor
compliance with the ITC conditions.
Governance
82
|
Digital 9 Infrastructure plc
\ FINANCIAL RESULTS AND DIVIDENDS
The financial results for the year can be found in the Company Statement of Comprehensive Income on page 100.
The Company declared the following interim dividends in respect of the year to 31 December 2023 totalling
3 pence per share. As announced on 28 September 2023, the Company elected not to declare the Q2 2023
dividend and withdrew its target dividend of 6 pence per Ordinary Share for the year ending 31 December 2023.
Relevant period
Dividend per
share (p)
Ex-dividend date
Record date
Payment date
1 October 2022 to 31 December 2022
1.5 pence
16 March 2023
17 March 2023
31 March 2023
1 January 2023 to 31 March 2023
1.5 pence
15 June 2023
16 June 2023
30 June 2023
\ POWERS OF THE DIRECTORS
The powers given to the Directors are contained within
the current articles of association of the Company (the
“Articles”), are subject to relevant legislation and, in
certain circumstances (including in relation to the issuing
or buying back by the Company of its shares), are
subject to the authority being given to the Directors by
shareholders in general meetings.
The Articles govern the appointment and replacements
of Directors.
\ DIRECTORS’ INDEMNITY
Subject to the provisions of any relevant legislation, the
Company has agreed to indemnify each Director against
all liabilities which any Director may suffer or incur
arising out of or in connection with any claim made, or
proceedings taken against him/her, or any application
made by him/her, on the grounds of his/her negligence,
default, breach of duty or breach of trust in relation to
the Company or any associated Company.
This policy remained in force during the financial
period and also at the date of approval of the financial
statements.
The Company maintains appropriate Directors’ and
Officers’ liability insurance in respect of legal action
against its Directors on an ongoing basis.
\ FINANCIAL RISK
MANAGEMENT
The information relating to the Company’s financial risk
management and policies can be found in Note 20 of
the financial statements.
\ POST-BALANCE SHEET EVENTS
Important events that have occurred since the end of
the financial year can be found in Note 18 of the notes
to the financial statements.
\ AMENDMENT TO THE
ARTICLES
The Articles may only be amended with shareholders’
approval in accordance with the relevant legislation.
Governance
2023 Annual Report
|
83
\ SHARE CAPITAL
As at 31 December 2023, the Company had
865,174,954 Ordinary Shares.
All of the Ordinary Shares
are fully paid and carry one vote per share.
There are no restrictions on the transfer of securities
in the Company other than certain restrictions which
may be impaired by law, for example, Market Abuse
Regulations, and the Company’s Share Dealing Code.
The Company is not aware of any agreements between
shareholders that restrict the transfer of Ordinary Shares.
The Directors are generally and unconditionally
authorised, in accordance with the Articles and the
Companies (Jersey) Law 1991 (as amended), to exercise
all powers of the Company to allot Ordinary Shares up
to a maximum number of 800,000,000 with the authority
expiring on 7 March 2026 in respect of the Initial Issue,
and authority to allot Ordinary Shares up to a maximum
number of 5,000,000,000 in respect of any further share
issuances with the authority expiring on 7 March 2026.
Number of Ordinary
Shares held
% of voting
rights
Schroders plc
106,999,579
12.37%
Rathbone Investment Management Ltd
85,163,713
9.84%
Brewin Dolphin Limited
43,211,460
4.99%
Canaccord Genuity Group INC
41,313,204
4.78%
Insight Investment Management (Global) Ltd
29,315,482
3.39%
J M Finn & Co
26,471,050
3.06%
Jupiter Fund Management plc
14,350,000
1.66%
South Yorkshire Pensions Authority
10,000,000
1.16%
The Company has not
been informed of changes to notifiable interests between 31 December 2023 and the date
of this report.
\ PURCHASE OF OWN ORDINARY
SHARES
A special resolution was passed at the Company’s 2023
AGM, granting the Directors authority to repurchase
up to a maximum of 86,517,495 Ordinary Shares
(representing 10% of the Company’s Ordinary Share
capital as at 8 March 2023); the authority will expire
immediately following the conclusion of the Company’s
2024 general meeting or on 18 August 2024, whichever
is earlier. A resolution to renew the Company’s
authority to purchase shares is expected to be put to
shareholders at the AGM.
The Company did not purchase any of its own shares
during the period.
\ MAJOR SHAREHOLDINGS
In accordance with DTR 5, the Company was advised of the following significant direct and indirect interests in the
issued Ordinary Share capital of the Company as at 31 December 2023:
Governance
84
|
Digital 9 Infrastructure plc
\ DISCLOSURE OF
INFORMATION TO THE
AUDITORS
So far as the Directors are aware, there is no relevant
audit information of which the auditors are unaware.
The Directors have taken all the steps that they ought
to have taken as Directors to make themselves aware of
any relevant audit information and to establish that the
auditors are aware of that information.
\ RELATED PARTY
TRANSACTIONS
Related Party transactions for the year to 31 December
2023 can be found in note 17
of the financial
statements.
\ RESEARCH AND DEVELOPMENT
No expenditure on research and development was
made during the period.
\ DONATIONS AND
CONTRIBUTIONS
No political or charitable donations were made during
the period.
\ BRANCHES OUTSIDE THE UK
There are no branches of the business located outside
the United Kingdom.
\ ANNUAL GENERAL MEETING
The Notice of AGM, which will follow in due course,
will provide details of the AGM and the respective
resolutions to be put to shareholders.
\ BUSINESS RELATIONSHIPS
The Company has a set of corporate providers that
ensure the smooth running of the Group’s activities.
The Group’s key service providers are listed on page
136 and the Management Engagement Committee
annually reviews the effectiveness and performance
of these service providers, taking into account any
feedback received. Each of these relationships is critical
to the long-term success of the business. Therefore,
the Company and the Investment Manager maintain
high standards of business conduct by acting in a
collaborative and responsible manner with all its
business partners that protects the reputation of the
Group as a whole.
\ SIGNIFICANT AGREEMENTS
There are no significant agreements that take effect,
alter or terminate on change of control of the Company
following a takeover. Additionally, there are no
agreements with the Company or a subsidiary in which
a Director is or was materially interested or to which a
controlling shareholder was a party.
\ EMPLOYEES
The Company has no employees and accordingly there
is no requirement to separately report on this area.
The Investment Manager is an equal opportunities
employer who respects and seeks to empower each
individual and the diverse cultures, perspectives, skills
and experiences within its workforce. The Investment
Manager places great importance on company culture
and the wellbeing of its employees and considers
various initiatives and events to ensure a positive
working environment.
\ ANTI-BRIBERY POLICY
The Company has a zero-tolerance policy towards
bribery and is committed to carrying out its business
fairly, honestly and openly. The anti-bribery policies and
procedures apply to all its officers and to those who
represent the Company.
Governance
2023 Annual Report
|
85
\ HUMAN RIGHTS ISSUES
The Company is not within the scope of the Modern
Slavery Act 2015 because it has not exceeded the
turnover threshold and is therefore not obliged to make
a slavery and human trafficking statement.
The majority of services supplied to or on behalf of the
Company
are from the financial services industries and
other services associated with those industries.
Given what the Company understands to be a low
risk profile of anyone supplying it with services being
involved in slavery and/or human trafficking, the Board
believes the Company’s current procedures and ability
to rely on regulatory oversight in relation to professional
services are sufficient in this regard.
\ SUSTAINABILITY
Throughout the reporting period, the Company
continued to uphold its sustainability-related
commitments. During the reporting period the
Investment Manager, on behalf of the Company,
continued to uphold the commitment to consider
environmental, social and governance issues in
interactions with Investee Companies. For example,
during this reporting period there has been a focus
on working with Investee Companies on their net zero
actions and diversity and inclusion.
Details of the sustainability-related commitments and
activities of the Company and the Investee Companies
are captured in a separate Sustainability Report. This
separate report aims to make it easier for investors to
locate sustainability-related information. The report
includes all required the Company sustainability
reporting elements, including, but not limited to, SFDR
indicators and the Task Force on Climate Related
Disclosure (TCFD).
We direct readers to this report, which is available
infrastructure-plc-sustainability-report-2023/.
Governance
86
|
Digital 9 Infrastructure plc
\ GREENHOUSE GAS EMISSIONS
(please refer to page 31 of the Sustainability Report)
Impact
2022
1
Impact
2023
Greenhouse gas
emissions
GHG emissions
Scope 1 GHG emissions
92
637
Scope 2 GHG emissions (location-based)
5,502
13,195
Scope 2 GHG emissions (market-based)
1,397
6,709
Scope 3 GHG emissions
N/A
7,831
2
Total GHG emissions
1,489
15,177
3
Carbon footprint
Carbon footprint
1.25
14
GHG intensity of investee companies
GHG intensity of investee companies
4
23
86
Exposure to companies active in the
fossil fuel sector
Share of investments in companies active in the fossil fuel
sector
0
0
Share of non-renewable energy
consumption and production
Share of non-renewable energy consumption and non-
renewable energy production of investee companies from
non-renewable energy sources compared to renewable
energy sources, expressed as a percentage
1.34
13
Energy consumption intensity per high
impact climate sector
Energy consumption in GWh per million GBP
5
of revenue of
investee companies, per high impact climate sector
N/A
N/A
1.
2022 figures do not include Arqiva data
.
2.
Scope 3 emissions have been disclosed on a best endeavours basis. The methodology and information pertaining to Scope 3 data can be found on page • of
the Sustainability Report. This data encompasses a part of S
cope 3 emissions for Arqiva for the fiscal year ending on 30 June 2023, and for Verne Global, Aqua
Comms, and Elio Networks for the fiscal year ending on 31 December 2022. This follows PCAF recommendations, with their latest guidance stating “PCAF
recognises that there is often a lag between financial reporting and the reporting of required emissions-related data for the borrower or investee. In these
instances, financial institutions should use the most recent data available even if it is representative of different years, with the intention of aligning as much as
possible. For example, it would be expected and appropriate that a financial institution’s reporting in 2020 for its 2019 financial year would use 2019 financial data
alongside 2018 (or other most recent) emissions data.” page 42: https://carbonaccountingfinancials.com/files/downloads/PCAF-Global-GHG-Standard.pdf). We
are committed to collaborating with portfolio companies to actively enhance Scope 3 emission reporting in future reports.
3.
Total GHG emissions for 2022 only include Scope 1 and 2, no Scope 3 emissions were disclosed in 2022.
4.
Weighted Average Carbon Intensity (tCO2e/£M). This includes Scope 1, 2 and 3 for 2023 (previously only included Scope 1 and 2).
\ INFORMATION INCLUDED IN THE STRATEGIC REPORT
The information that fulfils the reporting requirements relating to the following matters can be found on the pages
identified.
Subject Matter
Page
Reference
Likely future developments
8 to 10
On behalf of the Board:
Charlotte Valeur
Interim Independent Chair
29 April 2024
Governance
2023 Annual Report
|
87
Directors’
Responsibility
Statement
The Directors are responsible for preparing the
Strategic Report, the Directors’ Report, the Directors’
Remuneration Report and the Financial Statements in
accordance with applicable law and regulations.
Company law requires the Directors to prepare Financial
Statements for each financial year. Under that law
the Directors have elected to prepare the Financial
Statements in accordance with IAS in conformity with
the requirements of any relevant legislation and in
accordance with International Financing Reporting
Standards (IFRSs) as adopted pursuant to Regulation
(EC) No 1606/2002 as it applies in the European Union.
Under company law, the Directors must not approve the
Financial Statements unless they are satisfied that they
give a true and fair view of the state of affairs and profit
or loss of the Company for that year. In preparing these
Financial Statements, the Directors are required to:
•
Select suitable accounting policies and then apply
them consistently;
•
Make judgements and accounting estimates that are
reasonable and prudent;
•
State whether applicable IFRSs have been followed,
subject to any material departures disclosed and
explained in the Financial Statements; and
•
Prepare the Financial Statements on the going
concern basis unless it is inappropriate to presume
that the Company will continue in business.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the Company’s transactions and disclose
with reasonable accuracy at any time the financial
position of the Company and enable them to ensure
that the Financial Statements and the Remuneration
Report comply with any relevant legislation. They
are also responsible for safeguarding the assets of
the Company and hence for taking reasonable steps
for the prevention and detection of fraud and other
irregularities.
The Directors are responsible for preparing the
Annual Report in accordance with applicable law and
regulations. The Directors consider the Annual Report
and the Financial Statements, taken as a whole, provide
the information necessary to assess the Company’s
position, performance, business model and strategy and
are fair, balanced and understandable.
The Company’s Financial Statements are published on
the Company’s website,
Governance
88
|
Digital 9 Infrastructure plc
To the best of our knowledge:
•
The Financial Statements, prepared in accordance
with IFRSs as adopted by the EU, give a true and fair
view of the assets, liabilities, financial position and
profit or loss of the Company; and
•
The Strategic Report includes a fair review of the
development and performance of the business
and the position of the Company, together with a
description of the principal risks and uncertainties
that it faces.
We consider the financial statements, taken as a whole,
is fair, balanced and understandable and provides the
information necessary for shareholders to assess the
Company’s position and performance, business model
and strategy.
Approval
This Directors’ responsibilities statement was approved
by the Board of Directors and signed on its behalf by:
Charlote Valeur
Interim Independent Chair
Governance
2023 Annual Report
|
89
Independent auditors’
report to the members of
Digital 9 Infrastructure plc
\ REPORT ON THE AUDIT OF THE
FINANCIAL STATEMENTS
Opinion
In our opinion, Digital 9 Infrastructure plc’s financial
statements:
•
give a true and fair view of the state of the
company’s affairs as at 31 December 2023 and of its
loss and cash flows for the year then ended;
•
have been properly prepared in accordance with
International Financial Reporting Standards as
adopted in the European Union; and
•
have been prepared in accordance with the
requirements of the Companies (Jersey) Law 1991.
We have audited the financial statements, included
within the Annual Report, which comprise: the
Statement of Financial Position as at 31 December
2023; the Statement of Comprehensive Income, the
Statement of Cash Flows and the Statement of Changes
in Shareholders’ Equity for the year then ended; and the
notes to the financial statements, comprising material
accounting policy information and other explanatory
information.
Our opinion is consistent with our reporting to the Audit
Committee.
Basis for opinion
We conducted our audit in accordance with
International Standards on Auditing (UK) (“ISAs (UK)”)
and applicable law. Our responsibilities under ISAs (UK)
are further described in the Auditors’ responsibilities
for the audit of the financial statements section of our
report. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis
for our opinion.
Independence
We remained independent of the company in
accordance with the ethical requirements that are
relevant to our audit of the financial statements in the
UK, which includes the Financial Reporting Council’s
(“FRC”) Ethical Standard, as applicable to listed public
interest entities in accordance with the requirements of
the Crown Dependencies’ Audit Rules and Guidance
for market-traded companies, and we have fulfilled our
other ethical responsibilities in accordance with these
requirements.
To the best of our knowledge and belief, we declare
that non-audit services prohibited by the FRC’s Ethical
Standard were not provided.
Other than those disclosed in the Audit Committee
Report, we have provided no non-audit services to the
company or its controlled undertakings in the period
under audit.
Governance
90
|
Digital 9 Infrastructure plc
Material uncertainty related to going concern
In forming our opinion on the financial statements,
which is not modified, we have considered the
adequacy of the disclosure made in note 2 (a) to the
financial statements concerning the company’s ability
to continue as a going concern. The Company’s going
concern assessment is dependent on the wider Digital
9 Group (the “Group”) either completing the sale of
assets to fund the repayment of the remaining balance
of the Group’s Revolving Credit Facility due by March
2025 or alternatively refinancing this debt. These
conditions, along with the other matters explained
in note 2 (a) to the financial statements, indicate
the existence of a material uncertainty which may
cast significant doubt about the company’s ability to
continue as a going concern. The financial statements
do not include the adjustments that would result if the
company were unable to continue as a going concern.
In auditing the financial statements, we have concluded
that the directors’ use of the going concern basis of
accounting in the preparation of the financial statements
is appropriate.
Our evaluation of the directors’ assessment of the
company’s ability to continue to adopt the going
concern basis of accounting included:
•
We obtained management’s latest forecasts that
support the Board’s assessment and conclusions
with respect to the going concern basis of
preparation of the financial statements;
•
We corroborated management’s base case to
appropriate supporting documentation;
•
We evaluated the directors’ assessment of
potential operational impacts, considering their
consistency with other available information and
our understanding of the business and assessed the
potential impact on the financial statements;
•
We evaluated management’s base case forecast
and downside scenarios, challenging the underlying
data and adequacy and appropriateness of
the underlying assumptions used to make the
assessment. We evaluated the directors’ plans for
future actions in relation to their going concern
assessment, should these be required; and.
•
We reviewed the directors’ assessment of the
Company’s financial position in the context of its
ability to meet future expected operating expenses.
In relation to the directors’ reporting on how they have
applied the UK Corporate Governance Code, other
than the material uncertainty identified in note 2 (a) to
the financial statements, we have nothing material to
add or draw attention to in relation to the directors’
statement in the financial statements about whether
the directors considered it appropriate to adopt the
going concern basis of accounting, or in respect of
the directors’ identification in the financial statements
of any other material uncertainties to the company’s
ability to continue to do so over a period of at least
twelve months from the date of approval of the financial
statements.
Our responsibilities and the responsibilities of the
directors with respect to going concern are described in
the relevant sections of this report.
Governance
2023 Annual Report
|
91
Our audit approach
Context
Digital 9 Infrastructure plc is incorporated in Jersey and a listed company on the Main Market of the London
Stock Exchange.
The Company invests in a range of digital infrastructure assets, but during the year changed its
investment objective to focus on a managed wind down of the Company.
Overview
Audit scope
•
The Company invests in digital infrastructure investments through its investment in its wholly-owned subsidiary,
Digital 9 Holdco Limited.
•
The Company is a closed-ended investment company and has appointed Triple Point Investment Management
LLP (the “Investment Adviser”) to manage its assets.
•
We conducted our audit of the financial statements using information from Triple Point Investment Management
LLP, and Ocorian Fund Services (Jersey) Limited (the “Administrator”) to whom the directors delegated the
provision of certain administrative functions.
•
We tailored the scope of our audit taking into account the types of investments within the Company, the
involvement of the third parties referred to above, the accounting processes and controls, and the industry in
which the Company operates.
Key audit matters
•
Material uncertainty related to going concern
•
Valuation of investments held at fair value through profit or loss
Materiality
•
Overall materiality: £6,863,000 (2022: £9,450,000) based on 1% of Net Assets.
•
Performance materiality: £5,147,250 (2022: £7,000,000).
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the
financial statements.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the
audit of the financial statements of the current period and include the most significant assessed risks of material
misstatement (whether or not due to fraud) identified by the auditors, including those which had the greatest effect
on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement
team. These matters, and any comments we make on the results of our procedures thereon, were addressed in
the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
In addition to going concern, described in the Material uncertainty related to going concern section above, we
determined the matters described below to be the key audit matters to be communicated in our report. This is not
a complete list of all risks identified by our audit.
In the audit report for the period ended 31 December 2022 we included a key audit matter on assessment of
going concern. This year, this has been removed because we have identified a material uncertainty related to going
concern, as set out in the ‘Material uncertainty related to going concern’ paragraph above. Other than in respect of
the aforementioned, the key audit matters are consistent with last year.
Governance
92
|
Digital 9 Infrastructure plc
Key audit matter
How our audit addressed the key audit matter
Valuation of investments held at fair
value through profit or loss
Refer to Report of the Audit and Risk
Committee, Notes to the financial
statements – Note 3, 4, and 10.
The Company has £676m of
investments held at fair through
profit or loss. The fair value of the
Company’s investments in Digital 9
Holdco Limited (“the HoldCo”) is
determined based on the fair value
of the net assets of the HoldCo and,
accordingly, the fair value of the
underlying investments within the
Holdco, for which there is no liquid
market.
A third party valuation advisor
(“Valuer”) is engaged to assist the
Company in the preparation of
the fair valuation of a selection of
investments.
The fair value of the underlying
investments has principally been
valued on a discounted cash flow
basis or using a Monte Carlo
simulation, which necessitates
significant estimates in respect
of the forecasted cash flows and
discount rates applied. Determining
the valuation methodology and
determining the inputs and
assumptions within the valuation
is subjective and complex. This,
combined with the significance of the
investments balance in the statement
of financial position, meant that this
was a key audit matter for our current
year audit.
We understood and evaluated the valuation methodologies applied, by
reference to industry practice and applicable accounting standards, and
tested the techniques used by management in determining the fair value of
the investments.
We performed the following over the fair value of investments as at
31 December 2023:
•
Discussed and challenged the Investment Manager and Valuer’s approach
to valuations and significant estimates;
•
Undertook further investigations by holding further discussions with
the Investment Manager and Valuer and obtained evidence to support
explanations received where assumptions were outside the expected
range or showed unexpected movements based on our knowledge;
•
Observed that alternative assumptions had been considered and
evaluated by the Investment Manager and the Valuer before determining
the final valuation.
Challenged management about the rationale of any non-observable inputs or
significant estimates used in valuations and obtained corroborative evidence.
We concluded that the assumptions used in the valuations were supportable
in light of available and comparable market evidence;
•
Performed recalculations of valuation workings to ensure mathematical
accuracy;
•
We tested a sample of inputs into the fair value models to supporting
documentation; and
•
Agreed the amounts per the valuation reports to the accounting records
and the financial statements.
In addition, given the inherent subjectivity involved in the valuation of the
investments, and therefore the need for specialised market knowledge when
determining the most appropriate assumptions and the technicalities of the
valuation methodology, we engaged our internal valuation experts to assist
us in our audit of this area. The experts performed the following procedures
for the investments:
•
Reviewed the appropriateness of valuation methodology;
•
Reviewed key valuation inputs and estimates used, such as comparable
company multiples and discount rates at 31 December 2023; and
•
Reported their findings and conclusions to the audit team for overall
consideration and conclusions.
We considered the appropriateness and adequacy of the disclosures around
the estimation uncertainty and sensitivities on the accounting estimates.
Our testing did not identify any evidence of material misstatement.
Governance
2023 Annual Report
|
93
How we tailored the audit scope
We tailored the scope of our audit to ensure that we
performed enough work to be able to give an opinion
on the financial statements as a whole, taking into
account the structure of the company, the accounting
processes and controls, and the industry in which it
operates.
The Company’s accounting is delegated to the
Administrator who maintains the Company’s accounting
records and who has implemented controls over those
accounting records.
We obtained our audit evidence from substantive tests.
However, as part of our risk assessment, we understood
and assessed the internal controls in place at both the
Investment Manager and the Administrator to the extent
relevant to our audit.
As part of designing our audit, we determined
materiality and assessed the risks of material
misstatement in the financial statements. In particular,
we looked at where the Directors made subjective
judgements, for example in respect of significant
accounting estimates that involved making assumptions
and considering future events that are inherently
uncertain.
The impact of climate risk on our audit
As part of our audit, we inquired of management to
understand and evaluate D9 Group’s risk assessment
process in relation to climate change. We used our
own knowledge and understanding of the Group to
evaluate the impact of climate risk on the performance
of the Company’s digital infrastructure investments. We
read disclosures in relation to climate change made in
other financial information within the Annual Report
to ascertain whether the disclosures are materially
consistent with the financial statements and our
knowledge from our audit. Our responsibility over other
information is further described in the reporting on
other information section of our report.
Materiality
The scope of our audit was influenced by our
application of materiality. We set certain quantitative
thresholds for materiality. These, together with
qualitative considerations, helped us to determine the
scope of our audit and the nature, timing and extent
of our audit procedures on the individual financial
statement line items and disclosures and in evaluating
the effect of misstatements, both individually and in
aggregate on the financial statements as a whole.
Based on our professional judgement, we determined
materiality for the financial statements as a whole as
follows:
Overall company
materiality
£6,863,000 (2022:
£9,450,000).
How we determined it
1% of Net Assets
Rationale for benchmark
applied
We believe that Net Assets
is the primary measure
used by the shareholders in
assessing the performance
of the entity, and is a
generally accepted auditing
benchmark.
We use performance materiality to reduce to
an appropriately low level the probability that
the aggregate of uncorrected and undetected
misstatements exceeds overall materiality. Specifically,
we use performance materiality in determining the
scope of our audit and the nature and extent of our
testing of account balances, classes of transactions and
disclosures, for example in determining sample sizes.
Our performance materiality was 75% (2022: 75%) of
overall materiality, amounting to £5,147,250 (2022:
£7,000,000) for the company financial statements.
In determining the performance materiality, we
considered a number of factors - the history of
misstatements, risk assessment and aggregation risk
and the effectiveness of controls - and concluded that
an amount at the upper end of our normal range was
appropriate.
We agreed with the Audit Committee that we would
report to them misstatements identified during our
audit above £343,150 (2022: £470,000) as well as
misstatements below that amount that, in our view,
warranted reporting for qualitative reasons.
Governance
94
|
Digital 9 Infrastructure plc
Reporting on other information
The other information comprises all of the information
in the Annual Report other than the financial statements
and our auditors’ report thereon. The directors are
responsible for the other information. Our opinion
on the financial statements does not cover the other
information and, accordingly, we do not express
an audit opinion or, except to the extent otherwise
explicitly stated in this report, any form of assurance
thereon.
In connection with our audit of the financial statements,
our responsibility is to read the other information and,
in doing so, consider whether the other information
is materially inconsistent with the financial statements
or our knowledge obtained in the audit, or otherwise
appears to be materially misstated. If we identify
an apparent material inconsistency or material
misstatement, we are required to perform procedures
to conclude whether there is a material misstatement
of the financial statements or a material misstatement
of the other information. If, based on the work we
have performed, we conclude that there is a material
misstatement of this other information, we are required
to report that fact. We have nothing to report based on
these responsibilities.
Corporate governance statement
The Listing Rules require us to review the directors’
statements in relation to going concern, longer-term
viability and that part of the corporate governance
statement relating to the company’s compliance with
the provisions of the UK Corporate Governance Code
specified for our review. Our additional responsibilities
with respect to the corporate governance statement
as other information are described in the Reporting on
other information section of this report.
Based on the work undertaken as part of our audit, we
have concluded that each of the following elements
of the corporate governance statement is materially
consistent with the financial statements and our
knowledge obtained during the audit, and, except for
the matters reported in the section headed ‘Material
uncertainty related to going concern’, we have nothing
material to add or draw attention to in relation to:
•
The directors’ confirmation that they have carried
out a robust assessment of the emerging and
principal risks;
•
The disclosures in the Annual Report that describe
those principal risks, what procedures are in place to
identify emerging risks and an explanation of how
these are being managed or mitigated;
•
The directors’ statement in the financial statements
about whether they considered it appropriate to
adopt the going concern basis of accounting in
preparing them, and their identification of any
material uncertainties to the company’s ability to
continue to do so over a period of at least twelve
months from the date of approval of the financial
statements;
•
The directors’ explanation as to their assessment of
the company’s prospects, the period this assessment
covers and why the period is appropriate; and
•
The directors’ statement as to whether they have
a reasonable expectation that the company will be
able to continue in operation and meet its liabilities
as they fall due over the period of its assessment,
including any related disclosures drawing attention
to any necessary qualifications or assumptions.
Our review of the directors’ statement regarding the
longer-term viability of the company was substantially
less in scope than an audit and only consisted of
making inquiries and considering the directors’ process
supporting their statement; checking that the statement
is in alignment with the relevant provisions of the UK
Corporate Governance Code; and considering whether
the statement is consistent with the financial statements
and our knowledge and understanding of the company
and its environment obtained in the course of the audit.
Governance
2023 Annual Report
|
95
In addition, based on the work undertaken as part of
our audit, we have concluded that each of the following
elements of the corporate governance statement is
materially consistent with the financial statements and
our knowledge obtained during the audit:
•
The directors’ statement that they consider the
Annual Report, taken as a whole, is fair, balanced
and understandable, and provides the information
necessary for the members to assess the company’s
position, performance, business model and strategy;
•
The section of the Annual Report that describes
the review of effectiveness of risk management and
internal control systems; and
•
The section of the Annual Report describing the
work of the Audit Committee.
We have nothing to report in respect of our
responsibility to report when the directors’ statement
relating to the company’s compliance with the Code
does not properly disclose a departure from a relevant
provision of the Code specified under the Listing Rules
for review by the auditors.
Responsibilities for the financial
statements and the audit
Responsibilities of the directors for the financial
statements
As explained more fully in the Directors’ Responsibility
Statement, the directors are responsible for the
preparation of the financial statements in accordance
with the applicable framework and for being satisfied
that they give a true and fair view. The directors are also
responsible for such internal control as they determine
is necessary to enable the preparation of financial
statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the directors
are responsible for assessing the company’s ability to
continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going
concern basis of accounting unless the directors either
intend to liquidate the company or to cease operations,
or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance
about whether the financial statements as a whole
are free from material misstatement, whether due
to fraud or error, and to issue an auditors’ report
that includes our opinion. Reasonable assurance is a
high level of assurance, but is not a guarantee that
an audit conducted in accordance with ISAs (UK) will
always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate,
they could reasonably be expected to influence the
economic decisions of users taken on the basis of these
financial statements.
Irregularities, including fraud, are instances of non-
compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined
above, to detect material misstatements in respect
of irregularities, including fraud. The extent to which
our procedures are capable of detecting irregularities,
including fraud, is detailed below.
Based on our understanding of the company and
industry, we identified that the principal risks of
non-compliance with laws and regulations related
to breaches of section 1158 of the Corporation Tax
Act 2010, and we considered the extent to which
non-compliance might have a material effect on the
financial statements. We also considered those laws
and regulations that have a direct impact on the
financial statements such as the Companies (Jersey)
Law 1991. We evaluated management’s incentives and
opportunities for fraudulent manipulation of the financial
statements (including the risk of override of controls),
and determined that the principal risks were related
to posting inappropriate journals, and management
bias in accounting estimates and judgements applied
by management in valuation of investments held at
fair value through profit or loss, as described in our
key audit matter. Audit procedures performed by the
engagement team included:
•
Discussions with management, risk and compliance,
including consideration of known or suspected
instances of non-compliance with laws and
regulations and fraud impacting the Company;
•
Reviewing relevant meeting minutes, including those
of the Board of Directors, Risk Committee and the
Audit Committee;
Governance
96
|
Digital 9 Infrastructure plc
•
Designing audit procedures to incorporate
unpredictability around the nature, timing or extent
of our testing;
•
Procedures relating to judgemental areas of
accounting and significant estimation, including as
described in the related key audit matter;
•
Identifying and testing journal entries, in particular
any journal entries posted with unusual account
combinations; and
•
Reviewing of financial statement disclosures to
underlying supporting documentation.
There are inherent limitations in the audit procedures
described above. We are less likely to become aware of
instances of non-compliance with laws and regulations
that are not closely related to events and transactions
reflected in the financial statements. Also, the risk of not
detecting a material misstatement due to fraud is higher
than the risk of not detecting one resulting from error,
as fraud may involve deliberate concealment by, for
example, forgery or intentional misrepresentations, or
through collusion.
Our audit testing might include testing complete
populations of certain transactions and balances,
possibly using data auditing techniques. However, it
typically involves selecting a limited number of items
for testing, rather than testing complete populations.
We will often seek to target particular items for testing
based on their size or risk characteristics. In other cases,
we will use audit sampling to enable us to draw a
conclusion about the population from which the sample
is selected.
A further description of our responsibilities for the
audit of the financial statements is located on the FRC’s
website at: www.frc.org.uk/auditorsresponsibilities. This
description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared
for and only for the company’s members as a body in
accordance with Article 113A of the Companies (Jersey)
Law 1991 and for no other purpose. We do not, in
giving these opinions, accept or assume responsibility
for any other purpose or to any other person to whom
this report is shown or into whose hands it may come
save where expressly agreed by our prior consent in
writing.
\ OTHER REQUIRED REPORTING
Companies (Jersey) Law 1991
exception reporting
Under the Companies (Jersey) Law 1991 we are required
to report to you if, in our opinion:
•
we have not obtained all the information and
explanations we require for our audit; or
•
proper accounting records have not been kept by
the company, or proper returns adequate for our
audit have not been received from branches not
visited by us; or
•
the financial statements are not in agreement with
the accounting records and returns.
We have no exceptions to report arising from this
responsibility.
Appointment
Following the recommendation of the Audit Committee,
we were appointed by the directors on 6 March 2021
to audit the financial statements for the year ended
31
December 2021 and subsequent financial periods.
The period of total uninterrupted engagement is 3
years, covering the years ended 31 December 2021 to
31 December 2023.
\ OTHER VOLUNTARY
REPORTING
Directors’ remuneration
The company voluntarily prepares a Directors’
Remuneration Report in accordance with the provisions
of the Companies Act 2006. The directors requested
that we audit the part of the Directors’ Remuneration
Report specified by the Companies Act 2006 to be
audited as if the company were a quoted company.
In our opinion, the part of the Directors’ Remuneration
Report to be audited has been properly prepared in
accordance with the Companies Act 2006.
Kevin Rollo
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Recognized Auditor
London
29 April 2024
Governance
2023 Annual Report
|
97
Financial
Statements
Financials
100
|
Digital 9 Infrastructure plc
Statement of Comprehensive Income
For the year ended 31 December 2023
Year ended 31 December 2023
Year ended 31 December 2023
Year ended 31 December 2022
Note
Revenue
Revenue
£’000
£’000
Capital
Capital
£’000
£’000
Total
Total
£’000
£’000
Revenue
Revenue
£’000
£’000
Capital
Capital
£’000
£’000
Total
£’000
Income
Income from investments held at fair value
5
(Losses)/gains on investments held at fair
value
10
(252,014 )
(252,014 )
Other income
5
Total income
(252,014 )
(220,571 )
Expenses
Investment management fees
6
(6,501 )
(2,167 )
(8,668 )
(5,802 )
(1,934 )
(7,736 )
Other operating expenses
7
(4,615 )
(4,615 )
(2,323 )
(2,323 )
Total operating expenses
(11,116 )
(2,167 )
(13,283 )
(8,125 )
(1,934 )
(10,059 )
Exceptional item
8
(3,478 )
(3,478 )
Operating (loss)/profit
(257,659 )
(237,332 )
(3,223 )
Finance expense
(1 )
(1 )
(2 )
(2 )
(Loss)/profit on ordinary
activities before taxation
(257,659 )
(237,333 )
(3,225 )
Taxation
9
(Loss)/profit and total comprehensive
(expense)/income attributable to
shareholders
(257,659 )
(237,333 )
(3,225 )
(Loss)/earnings per Ordinary Share –
basic and diluted
23
(29.78
(27.43
(0.39
The total column of this statement is the Statement of Comprehensive Income of Digital 9 Infrastructure Plc (“the Company”) prepared
in accordance with International Financial Reporting Standards, as adopted by the European Union (“EU”). The supplementary revenue
return and capital columns have been prepared in accordance with the Association of Investment Companies Statement of
Recommended Practice (AIC SORP).
All revenue and capital items in the above statement derive from continuing operations. The Company does not have any other income
or expenses that are not included in the net profit for the year. The net profit for the year disclosed above represents the Company’s
total comprehensive income.
This Statement of Comprehensive Income includes all recognised gains and losses.
The accompanying notes on pages 104 to 124 form part of these Financial Statements.
Financials
2023 Annual Report
|
101
Statement of Financial Position
As at 31 December 2023
31 December 2023
31 December 2023
31 December 2022
Note
£’000
£’000
£’000
Non-current assets
Investments at fair value through profit or loss
10
Total non-current assets
Current assets
Trade and other receivables
11
Cash and cash equivalents
12
Total current assets
Total assets
Current liabilities
Trade and other payables
13
(6,009 )
(2,769 )
Total current liabilities
(6,009 )
(2,769 )
Total net assets
Equity attributable to equity holders
Stated capital
14
Capital reserve
(123,765 )
Revenue reserve
(3,516 )
Total Equity
Net asset value per Ordinary Share – basic and diluted
24
The Financial Statements were approved and authorised for issue by the Board on 29 April 2024 and signed on its behalf by:
Charlotte Valeur
Independent Interim Chair
29 April 2024
The accompanying notes on pages 104 to 124 form part of these Financial Statements.
Statement of Changes in Shareholders’ Equity
For the year ended 31 December 2023
Financials
102
|
Digital 9 Infrastructure plc
Stated
Stated
capital
capital
£’000
£’000
Capital
Capital
reserve
reserve
£’000
£’000
Revenue
Revenue
reserve
reserve
£’000
£’000
Total
Total
equity
equity
£’000
£’000
Note
Note
Balance as at 31 December 2021
(291 )
Transactions with owners
Ordinary Shares issued
14
Share issue costs
(3,232 )
(3,232 )
Dividends paid
15
(50,274 )
(50,274 )
Profit/(loss) and total comprehensive income/(expense) for the period
(3,225 )
Balance as at 31 December 2022
(3,516 )
Stated
Stated
capital
capital
£’000
£’000
Capital
Capital
reserve
reserve
£’000
£’000
Revenue
Revenue
reserve
reserve
£’000
£’000
Total
Total
equity
equity
£’000
£’000
Note
Note
Balance as at 31 December 2022
(3,516 )
Transactions with owners
Dividends paid
15
(25,956 )
(25,956 )
(Loss)/profit
and total comprehensive (expense)/income for the period
(257,659
)
(237,333 )
Balance as at 31 December 2023
(123,765 )
The accompanying notes on pages 104 to 124 form part of these Financial Statements.
Financials
2023 Annual Report
|
103
Statement of Cash Flows
For the year ended 31 December 2023
Year ended
Year ended
31 December 2023
31 December 2023
Year ended
31 December 2022
Note
£’000
£’000
£’000
Cash flows from operating activities
(Loss)/profit
on ordinary activities before taxation
(237,333 )
Adjustments for:
(Losses)/gains on investments held at fair value
10
(97,228 )
Cash flow used in operations
(5,159 )
Increase in trade and other receivables
11
(55 )
(1,189 )
Increase in trade and other payables
13
Net cash outflow from operating activities
(5,477 )
Cash flows from investing activities
Loans to subsidiaries
(7,103 )
(29,105 )
Purchase of investments at fair value through profit or loss
10
(48,409 )
Net cash flow used in investing activities
(7,103 )
(77,514 )
Cash flows from financing activities
Proceeds from issue of Ordinary Shares
14
Dividends paid
15
(25,956 )
(50,274 )
Cost of issue of shares
14
(3,246 )
Net cash flow generated from financing activities
(25,956 )
Net (decrease)/increase in cash and cash equivalents
(15,192 )
Reconciliation of net cash flow to movements in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Net (decrease)/increase in cash and cash equivalents
(15,192 )
Cash and cash equivalents at end of the year
12
The accompanying notes on pages 104 to 124 form part of these Financial Statements.
Notes to the Financial Statements
For the year ended 31 December 2023
Financials
104
|
Digital 9 Infrastructure plc
1. CORPORATE INFORMATION
registered alternative investment fund, and it is regulated by the
Jersey Financial Services Commission as a “listed fund” under the
Collective Investment Funds (Jersey) Law 1988 (the “Funds Law”)
and the Jersey Listed Fund Guide published by the Jersey
Financial Services Commission. The Company is registered with
number 133380 under the Companies (Jersey) Law 1991.
The Company is domiciled in Jersey
registered office, which is also its principal place of business, is
domiciled in the United Kingdom.
The Company was incorporated on 8 January 2021 and is a public
company. The Company’s Ordinary Shares were admitted to
trading on the Specialist Fund Segment of the Main Market of the
London Stock Exchange under the ticker DGI9 on 31 March 2021.
It was admitted to the premium listing segment of the Official List
of the Financial Conduct Authority and migrated to trading on the
premium segment of the Main Market on 30 August 2022.
The Company’s principal activity is investing in a diversified
portfolio of critical digital infrastructure assets which contribute to
improving global digital communications whilst targeting
sustainable income and capital growth for investors.
These financial statements comprise only the results of the
Company, as its investment in Digital 9 Holdco Limited
(“D9 Holdco”) is measured at fair value through profit or loss.
2. BASIS OF PREPARATION
These financial statements for the year ended 31 December 2023
have been prepared in accordance with International Financial
Reporting Standards as adopted by the European Union.
Where presentational guidance set out in the Association of
Investment Companies Statement of Recommended Practice (the
“AIC SORP”) is consistent with the requirements of International
Financial Reporting Standards (“IFRS”) as adopted by the EU, the
Directors have sought to prepare the financial statements on a
basis compliant with the recommendations of the AIC SORP. In
particular, supplementary information which analyses the Statement
of Comprehensive Income between items of a revenue and capital
nature has been presented alongside the total Statement of
Comprehensive Income.
The functional and reporting currency is sterling, reflecting the
primary economic environment in which the Company operates.
Transactions in foreign currencies are translated into sterling at the
rates of exchange ruling on the date of the transaction. Foreign
currency monetary assets and liabilities are translated into sterling
at the rates of exchange ruling at the balance sheet date.
The financial statements have been prepared on a historical cost
basis, except for the following:
•
Investments at fair value through profit or loss
The accounting policies adopted are consistent with those of the
previous financial year.
A.
GOING CONCERN
MATERIAL UNCERTAINTY
The Directors believe that the Company and the Group have
adequate resources to continue in operational existence until the
conclusion of the Managed Wind-Down of the Company.
However, the Company’s going concern assessment is dependent
on the Group either completing the sale of assets to fund the
repayment of the remaining balance of the Group’s Revolving
Credit Facility due by March 2025 or alternatively refinancing this
debt. Given that a degree of uncertainty exists in the timing of
ongoing strategic initiatives, the Board believes that there
continues to be
a material uncertainty which may cast significant
doubt over the Company’s ability to continue as a going concern.
The Financial statements are prepared on a going concern basis
as disclosed on page 46 of the Strategic report, as the Directors
are satisfied that the Company has the resources to continue in
business for the foreseeable future. The Directors have made an
assessment of going concern, taking into account a wide range of
information relating to present and future conditions, including
the Company’s cash and liquidity position, current performance
and outlook, which has considered the ongoing geopolitical
uncertainties arising from the war in Ukraine
and the conflict in the
middle east
, the volatile macro landscape and existing inflationary
pressures and current and expected financial commitments using
information available to the date of issue of these Financial
statements.
Following the recent shareholder vote at the General Meeting,
the Company is now in a Managed Wind-Down. The audited
fi
nancial statements for the year ended 31 December 2023
continue to be prepared on a going concern basis.
As part of the Strategic Review, various options for realising the
stake in Arqiva were considered by the Board and after careful
consideration of Arqiva’s plans and current market conditions, the
Board believes that the maximisation of the value of the
Company’s stake in Arqiva is likely to take longer to realise than
the other investments held by the Company and therefore no
certainty as to when the wind down of the Company’s business
will conclude and whether this will occur within the foreseeable
future.
As such, whilst the Company will continue to consider and be
open to all options for Arqiva which are value-accretive to
Shareholders, the Board has decided to defer launching a sale
process for the Company’s stake in Arqiva.
Financials
2023 Annual Report
|
105
As part of the recent sale of Verne Global, the Company may
receive a potential Earn-Out payment of up to $135 million, which
is subject to Verne Global achieving run-rate EBITDA targets for
the financial year ending December 2026. Given the time frame
involved, for both the sale of Arqiva and the receipt of any Earn-
Out payment, which are expected to be well in excess of 12
months, the Board believes that the Going Concern approach to
the preparation of the
fi
nancial statements remains appropriate.
No provision has been made for the costs of winding up the
Company as these will be charged to the Income Statement on an
accruals basis as they are incurred or as the Company become
obligated to make such payments in the future.
The Directors believe that the Company and the Group have
adequate resources to continue in operational existence for a
period of at least 12 months since the reporting date. However,
given that a degree of uncertainty exists in the timing of ongoing
strategic initiatives which includes management’s ability to
refinance or repay the Group’s existing RCF (of which
c.£100
million remains at 29 April 2024) due in the next 12 months (March
2025), there exists a material uncertainty which may cast significant
doubt over the Company’s ability to continue as a going concern.
The Company intends to make a total additional repayment and
partial cancellation of its Group’s RCF in the amount of c.£47
million in May 2024.
The RCF in an important consideration for the Company, even
though it is not held on the Company’s balance sheet. The RCF is
held by its main subsidiary D9 Holdco, but the Company is a
guarantor of the facility.
As part of this assessment the Directors considered an analysis of
the adequacy of the Company’s liquidity, solvency and capital
adequacy. As at 31 December 2023, the Company had a cash
two years when assessing its going concern position. The base
case assumption in this scenario, include disposing of the
Company’s portfolio of investments excluding Arqiva and the use
of proceeds to repay the RCF.
Numerous scenarios have been prepared which includes
downside scenarios, including disposing of assets with up to a
40% discount to NAV.
B. INVESTMENT ENTITIES
Following the recent shareholder vote at the General Meeting,
the Company is now in a Managed Wind-Down and as a result the
objective of the Company is no longer to acquire digital
infrastructure projects, it is to ensure an orderly wind down and
return proceeds to Shareholders. The Company, via D9 Holdco
has begun the process to start selling select Investee Companies.
The Directors have concluded that in accordance with IFRS 10,
the Company meets the definition of an investment entity
, having
evaluated against the criteria presented below that needs to be
met. Under IFRS 10, investment entities are required to hold
financial investments at fair value through profit or loss rather than
consolidate them on a line-by-line basis. There are three key
conditions to be met by the Company for it to meet the definition
of an investment entity.
For each reporting period, the Directors will continue to assess
whether the Company continues to meet these conditions:
•
It obtains funds from one or more investors for the purpose of
providing these investors with professional investment
management services;
•
It commits to its investors that its business purpose is to invest
its funds solely for returns (including having an exit strategy for
investments) from capital appreciation, investment income or
both; and
•
It measures and evaluates the performance of substantially all
its investments on a fair value basis.
The Company satisfies the first criteria as it has multiple investors
and has obtained funds from a diverse group of shareholders for
the purpose of providing them with investment opportunities to
invest in a large pool of digital infrastructure assets.
In satisfying the second criteria, the notion of an investment
timeframe is critical. An investment entity should not hold its
investments indefinitely but should have an exit strategy for their
realisation. The intention of the Company is to seek equity
interests in digital infrastructure projects that have an indefinite
life; the underlying assets that it invests in will have a medium to
long-term expected life. The exit strategy for each asset will
depend on the characteristics of the assets, transaction structure,
exit price potentially achievable, suitability and availability of
alternative investments, balance of the portfolio and lot size of
the assets as compared to the value of the portfolio. Whilst the
Company intends to hold the investments on a medium-term
basis, the Company may also dispose of the investments should
an appropriate opportunity arise where, in the Investment
Manager’s opinion, the value that could be realised from such
disposal would represent a satisfactory return on the investment
and enhance the value of the Company as a whole.
Post year end the Company sold 100% of its ownership in the
Verne Global Group of Companies, reinforcing the exit strategy
point described above. As the Company enters into its wind- down
phase, it will continue to realise its exit strategy across its portfolio.
The Company satisfies the third criteria as it measures and
evaluates the performance of all of its investments on a fair value
basis which is the most relevant for investors in the Company.
Management use fair value information as a primary measurement
to evaluate the performance of all of the investments and in
decision making.
In assessing whether it meets the definition, the Company shall
also consider whether it has the following typical characteristics of
an investment entity:
a)
it has more than one investment
b)
it has more than one investor
Notes to the Financial Statements
For the year ended 31 December 2023
Financials
106
|
Digital 9 Infrastructure plc
c)
it has investors that are not related parties of the entity
d)
it has ownership interests in the form of equity or similar
interests.
As per IFRS 10, a parent investment entity is required to
consolidate subsidiaries that are not themselves investment
entities and whose main purpose is to provide services relating to
the entity’s investment activities.
The Directors have assessed whether D9 Holdco satisfies those
conditions set above by considering the characteristics of the
whole Group structure, rather than individual entities. The
Directors have concluded that the Company and D9 Holdco are
formed in connection with each other for business structure
purposes. When considered together, both entities display the
typical characteristics of an investment entity.
The Company entering into a Managed Wind-Down, a decision
which was made and voted on by shareholders following the year
end, and the changes in the Group structure following the sale of
Verne Global have not impacted the management’s judgement
and conclusion over the IFRS 10 investment entity application and
the Company has applied the same accounting policies described.
The Directors are therefore of the opinion that the Company
meets the criteria and characteristics of an investment entity and
therefore, subsidiaries are measured at fair value through profit or
loss, in accordance with IFRS 13 “Fair Value Measurement”, IFRS
10 “Consolidated Financial Statements” and IFRS 9 “Financial
Instruments”.
C.
NEW AND AMENDED STANDARDS
ADOPTED BY THE COMPANY
A number of amended standards became applicable for the
current reporting period. The Group did not have to change its
accounting policies or make retrospective adjustments as a result
of adopting these amended standards. Management do not
expect the new or amended standards will have a material impact
on the Company’s financial statements. The most significant of
these standards are set out below:
New standards and amendments – applicable 1 January 2023
(a)
IFRS 17
Insurance Contracts
(b)
Classification of Liabilities as Current or Non-current –
Amendments to IAS 1
(c)
Disclosure of Accounting Policies – Amendments to IAS 1
and IFRS Practice Statement 2
(d)
Definition of Accounting Estimates – Amendments to IAS 8
(e)
Deferred Tax related to Assets and Liabilities arising from a
Single Transaction – Amendments to IAS 12
(f)
Sale or contribution of assets between an investor and its
associate or joint venture – Amendments to IFRS 10 and
IAS 28
FORTHCOMING REQUIREMENTS
The following standards and interpretations had been issued but
were not mandatory for annual reporting periods ending on
31 December 2023.
(a)
Amendments to IAS 1 Presentation of Financial Statements
•
Non-current liabilities with covenants
•
Deferral of Effective Date Amendment (published
15 July 2020)
•
Classification of liabilities as Current or Non-current
(Amendment to IAS1)
(b)
Lease liability in a Sale and Leaseback (Amendment to
IFRS 16)
(c)
IAS 7 “Statement of Cash Flows” and IFRS 7 “Financial
Instruments: Disclosures (Amendment – Supplier Finance
Arrangements)”
3.
SIGNIFICANT ACCOUNTING
POLICIES
A.
FINANCIAL INSTRUMENTS
Financial assets and financial liabilities are recognised on the
Company’s Statement of Financial Position when the Company
becomes a party to the contractual provisions of the instrument.
Financial assets are to be derecognised when the contractual
rights to the cash flows from the instrument expire or the asset is
transferred, and the transfer qualifies for de-recognition in
accordance with IFRS 9 “Financial Instruments”.
The Company did not use any derivative financial instruments
during the period.
(I)
FINANCIAL ASSETS
The Company’s investment in D9 Holdco comprises both equity
and debt. The Company classifies its financial assets as either
investments at fair value through profit or loss or financial assets
at amortised cost (e.g. cash and cash equivalents and trade and
other receivables). The classification depends on the purpose for
which the financial assets are acquired. Management determines
the classification of its financial assets at initial recognition.
(II)
FINANCIAL ASSET AT FAIR VALUE THROUGH
PROFIT OR LOSS
At initial recognition, the Company measures its investments
through its investment in D9 Holdco, at fair value through profit or
loss and any transaction costs are expensed to the Statement of
Comprehensive Income. The Company will subsequently
continue to measure all investments at fair value and any changes
in the fair value are to be recognised as unrealised gains or losses
through profit or loss within the capital column of the Statement
of Comprehensive Income.
Financials
2023 Annual Report
|
107
IFRS 13 defines fair value 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 (an exit
price). When measuring fair value, the Company takes into
consideration the characteristics of the asset or liability if market
participants would take those characteristics into account when
pricing the asset or liability at the measurement date, including
assumptions about risk.
(III)
FINANCIAL LIABILITIES AND EQUITY
Debt and equity instruments are measured at amortised cost and
are classified as either financial liabilities or as equity in accordance
with the substance of the contractual arrangement.
All financial liabilities are classified as at amortised cost. These
liabilities are initially measured at fair value less transaction costs
and subsequently using the effective interest method.
(IV)
EQUITY INSTRUMENTS
The Company’s Ordinary Shares are classified as equity under
stated capital and are not redeemable. Costs associated or
directly attributable to the issue of new equity shares, including
the costs incurred in relation to the Company’s IPO on 31 March
2021 and its subsequent equity raises, are recognised as a
deduction in equity and are charged against stated capital.
(B)
FINANCE INCOME
Finance income is recognised using the effective interest method.
This is calculated by applying the effective interest rate to the
gross carrying amount of a financial asset unless the assets
subsequently became credit impaired. In the latter case, the
effective interest rate is applied to the amortised cost of the
financial asset. Finance income is recognised on an accruals basis.
(C)
FINANCE EXPENSES
Borrowing costs are recognised in the Statement of Comprehensive
Income in the period to which they relate on an accruals basis.
(D)
FAIR VALUE ESTIMATION FOR
INVESTMENTS AT FAIR VALUE
The fair value of financial investments at fair value through profit
or loss is based on the valuation models adjusted in accordance
with the IPEV (International Private Equity and Venture Capital)
valuation guidelines December 2022 to comply with IFRS 13.
The Company records the fair value of D9 Holdco by calculating
and aggregating the fair value of each of the individual investments
in which the Company holds an indirect investment. The total
change in the fair value of the investment in D9 Holdco is recorded
through profit and loss within the capital column of the Statement
of Comprehensive Income.
(E)
CASH AND CASH EQUIVALENTS
Cash and cash equivalents comprise cash balances and deposits
held on call with banks.
Deposits to be held with original
maturities of greater than three months are included in other
financial assets.
Cash and cash equivalents are measured at
amortised cost using the effective interest method and assessed
for expected credit losses at each reporting date.
There are no material expected credit losses as the bank institution
has high credit ratings assigned by international credit rating
agencies.
(F)
TRADE AND OTHER RECEIVABLES
Trade and other receivables are measured at amortised cost using
the effective interest method, less any impairment. They are
included in current assets, except where maturities are greater
than 12 months after the reporting date, in which case they are to
be classified as non-current assets.
The effective interest rate is the rate that exactly discounts
estimated future cash payments or receipts through the expected
life of the financial instrument to the relevant asset’s carrying
amount.
Impairment provisions for all receivables are recognised based on
a forward-looking expected credit loss model using the simplified
approach. The methodology used to determine the amount of
the provision is based on whether there has been a significant
increase in credit risk since initial recognition of the financial asset.
For those where the credit risk has not increased significantly
since initial recognition of the financial asset, 12 month expected
credit losses along with gross interest income are recognised. For
those for which credit risk has increased significantly, lifetime
expected credit losses along with the gross interest income are
recognised. For those that are determined to be credit impaired,
lifetime expected credit losses along with interest income on a
net basis are recognised.
(G)
AMORTISED COSTS
Assets that are held for collection of contractual cash flows, where
those cash flows represent solely payments of principal and
interest, are measured at amortised cost. Interest income from
these financial assets is included in finance income using the
effective interest rate method. Any gain or loss arising on
derecognition is recognised directly in profit or loss and presented
in other gains/(losses) together with foreign exchange gains and
losses. Impairment losses are presented as a separate line item in
the statement of profit or loss.
Notes to the Financial Statements
For the year ended 31 December 2023
Financials
108
|
Digital 9 Infrastructure plc
(H)
TRADE AND OTHER PAYABLES
Trade and other payables are classified as current liabilities if
payment is due within one year or less from the end of the current
accounting period. If not, they are presented as non-current
liabilities. Trade and other payables are recognised initially at their
fair value and subsequently measured at amortised cost using the
effective interest method until settled.
(I)
SEGMENTAL REPORTING
The Chief Operating Decision Maker (the “CODM”) being the
Board of Directors, is of the opinion that the Company is engaged
in a single segment of business, being investment in digital
infrastructure projects.
The internal financial information to be used by the CODM on a
quarterly basis to allocate resources, assess performance and
manage the Company will present the business as a single
segment comprising the portfolio of investments in digital
infrastructure assets.
(J)
FOREIGN CURRENCY TRANSACTIONS
AND BALANCES
Transactions in foreign currencies are translated at the foreign
exchange rate ruling at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies at the
reporting date are translated at the foreign exchange rate ruling
at that date. Foreign exchange differences arising on translation
are recognised in the Statement of Comprehensive Income as a
revenue or capital item depending on the income or expense to
which they relate.
All exchange differences recognised in income or expenses,
except for those arising on financial instruments measured at fair
value through profit or loss in accordance with IFRS 9, is on an
aggregate net basis. The total amount of exchange differences
recognised in income or expenses includes exchange differences
recognised on subsequent settlement and re-translation to the
closing rate on balances arising from foreign currency transactions.
(K)
REVENUE RECOGNITION
Gains and losses on fair value of investments in the Statement of
Comprehensive Income will represent gains or losses that arise
from the movement in the fair value of the Company’s investment
in D9 Holdco.
Investment income comprises dividend income received from the
Company’s subsidiary. Interest income is recognised in the
Statement of Comprehensive Income using the effective interest
method.
Other income is recognised to the extent that the economic
benefits will flow to the Company and the income can be reliably
measured. Income is measured as the fair value of consideration
received or receivable, excluding discounts, rebates and value
added tax. Other Income comprises fees charged to Investee
Companies under a Management Services Agreement. Other
Income is recognised 100% through revenue.
Dividend income receivable on equity shares is recognised on the
ex-dividend date. Dividend income on equity shares where no
ex-dividend date is quoted is brought into account when the
Company’s right to receive payment is established.
(L)
DIVIDENDS
Dividends payable are recognised as distribution in the financial
statements in the period in which they are paid or when the
Company’s obligation to make payment has been established.
(M)
FUND EXPENSES
Expenses are accounted for on an accruals basis. Share issue
costs of the Company directly attributable to the issue and listing
of shares are charged to stated capital. The Company’s investment
management fee, administration fees and all other expenses are
charged through the Statement of Comprehensive Income.
In order to better reflect the activities of an investment trust
company and in accordance with guidance issued by the AIC
SORP, supplementary information which analyses the Statement
of Comprehensive Income between items of a revenue and a
capital nature has been presented alongside the Statement of
Comprehensive Income.
Expenses have been charged wholly to the revenue column of the
Statement of Comprehensive Income, except as follows:
•
expenses which are incidental to the acquisition or disposal
of an investment are treated as capital;
•
expenses are treated as capital where a connection with the
maintenance or enhancement of the value of the investments
can be demonstrated; and
•
the investment management fee has been allocated 75% to
revenue and 25% to capital on the Statement of
Comprehensive Income in line with the Board’s expected
long-term split of returns, in the form of income and capital
gains respectively, from the investment portfolio.
(N)
ACQUISITION COSTS AND DISPOSALS
In line with SORP, acquisition costs and disposals are expensed to
the capital column of the Statement of Comprehensive Income as
they are incurred for investments which are held at fair value
through profit or loss.
Financials
2023 Annual Report
|
109
(O)
TAXATION
The tax expense represents the sum of the tax currently payable
and deferred tax. The tax currently payable is based on the
taxable profit for the year. Taxable profit differs from net profit as
reported in the Statement of Comprehensive Income because it
excludes items of income or expenses that are taxable or
deductible in other years and it further excludes items that are
never taxable or deductible. The Company’s liability for current
tax is calculated using tax rates that were applicable at the balance
sheet date.
Where expenses are allocated between the capital and revenue
accounts, any tax relief in respect of expenses is allocated
between capital and revenue returns on the marginal basis using
the Company’s effective rate of corporation tax for the accounting
period.
Deferred taxation is recognised in respect of all temporary
differences that have originated but not reversed at the financial
reporting date, where transactions or events that result in an
obligation to pay more taxation in the future or right to pay less
taxation in the future have occurred at the financial reporting
date. This is subject to deferred tax assets only being recognised
if it is considered more likely than not that there will be suitable
profits from which the future reversal of the temporary differences
can be deducted. Deferred tax is measured on a non-discounted
basis, at the average tax rates that are expected to apply in the
periods in which the timing differences are expected to reverse
based on tax rates and laws that have been enacted or
substantively enacted by the balance sheet date.
(P)
EARNINGS PER SHARE
The Company presents basic and diluted earnings per share
(“EPS”).
(I)
BASIC EARNINGS PER SHARE
Basic earnings per share is calculated by dividing:
•
the profit attributable to owners of the
Company, excluding
any costs of servicing equity other than Ordinary Shares
•
by the weighted average number of Ordinary Shares
outstanding during the financial year, adjusted for bonus
elements in Ordinary Shares issued during the year and
excluding treasury shares
(II)
DILUTED EARNINGS PER SHARE
Diluted earnings per share adjusts the figures used in the
determination of basic earnings per share to take into account:
•
the after-income tax effect of interest and other financing costs
associated with dilutive potential Ordinary Shares, and
•
the weighted average number of additional Ordinary Shares
that would have been outstanding assuming the conversion of
all dilutive potential Ordinary Shares.
4.
SIGNIFICANT ACCOUNTING
JUDGEMENTS, ESTIMATES
AND ASSUMPTIONS
In the application of the Company’s accounting policies, the
Directors are required to make judgements, estimates and
assumptions that affect the reported amounts of assets, liabilities,
income and expenses. It is possible that actual results may differ
from these estimates.
(A)
SIGNIFICANT ACCOUNTING
JUDGEMENTS
(I)
INVESTMENT ENTITY
As discussed above in Note 2(b), the Company meets the
definition of an investment entity as defined in IFRS 10 and
therefore its subsidiary entities have not been consolidated in
these financial statements.
(B)
KEY SOURCES OF ESTIMATION
UNCERTAINTY
The estimates and underlying assumptions underpinning our
investments are reviewed on an ongoing basis by both the Board
and the Investment Manager. Revisions to any accounting
estimates are recognised in the period in which the estimate is
revised if the revision affects only that period, or in the period of
the revision and future periods if the revision affects both current
and future periods.
(I)
FAIR VALUE MEASUREMENT OF INVESTMENTS
AT FAIR VALUE THROUGH PROFIT OR LOSS
The fair value of investments in digital infrastructure projects is
calculated by discounting at an appropriate discount rate future
cash flows expected to be generated by the trading subsidiary
companies and received by D9 Holdco, through dividend
income, equity redemptions and Shareholder loan repayments
or restructurings and adjusted in accordance with the IPEV
(International Private Equity and Venture Capital) valuation
guidelines, where appropriate, to comply with IFRS 13 and
IFRS 9. During the year, an Independent Valuer was appointed
to carry out the fair valuation of financial assets for financial
reporting purposes, including level 3 fair valuations.
Estimates such as the forecasted cash flows
from investments
form the basis of making judgements about the fair value of
assets, which is not readily available from other sources. The
discounted cash flows from earnings are forecasted over an 8-to-
10-year period followed by a terminal value based on a long-
term growth rate or exit multiple. Discount rates are arrived at
via a bottom-up analysis of the weighted average cost of capital,
using both observable and unobservable inputs, and calculation
of the appropriate beta based on comparable listed companies
Notes to the Financial Statements
For the year ended 31 December 2023
Financials
110
|
Digital 9 Infrastructure plc
where appropriate, a sense-check to the DCF analysis is
compared to market multiples.
The discounted cash flow from
earning is forecasted over an
8 to 10 year period followed by a terminal value based on a
long-term growth rate or exit multiples. The discounted cash
flow comprises a bottom-up analysis of the weighted average
cost of capital over time, using unobservable inputs; and
calculation of the appropriate beta based on comparable listed
companies. Where appropriate, a sense-check to the DCF
analysis is compared to market multiples.
To do this, implied multiples from the DCF analysis are calculated
and considered against the multiples available for reasonably
comparable quoted companies and any relevant recent sector
transactions. It should be noted that finding directly comparable
companies to Aqua Comms, Arqiva and Elio Networks is
challenging and as a result no directly comparable companies
have been identified. Similarly, there have been few recent
transactions with publicly available information where the target is
directly comparable to the businesses. As a result, whilst the
market multiples approach is a useful crosscheck to the DCF
analysis, less reliance should be placed upon it. Finally, the last
round of funding in each of the business is somewhat dated as at
the Valuation Date and so no reliance was placed on this approach.
In respect of portfolio of data centres where the disposals were
completed after the year-end, the fair value of these investments
at the year-end equal the agreed disposal value, plus an amount
for the valuation of the Earn-Out as per the terms of the SPA.
A broad range of assumptions are used in the Company’s
valuation models, which are arrived at by reviewing and
challenging the business plans of the Investee Companies with
their management. The Investment Manager exercises its
judgement and uses its experience in assessing the expected
future cash flows from each investment and long-term growth
rates. The impact of changes in the key drivers of the valuation
are set out below.
The following significant unobservable inputs were used in the
model, c
ash flows,
terminal value and discount rates. The key
area where estimates are significant to the financial statements
and have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within the next
financial year is in the valuation of the investment portfolio. The
portfolio is diversified by sector, geography and underlying risk
exposures. The key risks to the portfolio are discussed in further
detail in the Risk report.
The majority of assets in the investment portfolio are typically
valued on a discounted cash flow basis which requires
assumptions to be made regarding future cash flows, terminal
value and the discount rate to be applied to these cash flows.
For this reporting period, the Company had a signed SPA for its
data centre assets, including Verne Global Iceland, London and
Finland. At the reporting date, these assets were held at the
value of proceeds to be received under the SPA, with an
allocation of the valuation of the Earn-Out ascribed to each on a
pro rata basis. The Earn-Out valuation methodology is described
in more detail below.
The discount rate applied to the cash flows in each investment
portfolio company is a key source of estimation uncertainty. The
acquisition discount rate is adjusted to reflect changes in
company-specific risks to the deliverability of future cash flows
and is calibrated against secondary market information and
other available data points, including comparable transactions.
The weighted average discount rate used in these valuations
was 13.
62
%.
The cash flows on which the discounted cash flow valuation
s are
based are derived from detailed financial models. These
incorporate a number of assumptions with respect to individual
portfolio companies, including: forecast new business wins or
new orders; cost-cutting initiatives; liquidity and timing of debtor
payments; timing of non-committed capital expenditure and
construction activity; the terms of future debt refinancing; and
macroeconomic assumptions such as inflation and energy prices.
The terminal value attributes a residual value to the portfolio
company at the end of the projected discrete cash flow period
based on market comparables. The valuation of each asset has
significant estimation in relation to asset
-
specific items but there is
also consideration given to the impact of wider megatrends such
as the transition to a lower-carbon economy and climate change.
The effects of climate change, including extreme weather patterns
or rising sea levels in the longer term, could impact the valuation
of the assets in the portfolio in different ways. The weighted
average long-term growth rate used in the valuation was 0.85%.
The fair value of the Earn-Out, attributable to the Verne Global
transaction was computed by way of a Monte Carlo analysis. In
this approach a random value is selected for each of the
simulations, based on a range of estimates. The model is
calculated based on this random value. The result of the model
is recorded, and the process is repeated. A typical Monte Carlo
simulation calculates the model hundreds or thousands of times,
each time using different randomly selected values. The results
are used to describe the likelihood, or probability, of reaching
various results in the model.
5. INVESTMENT INCOME
Year ended
Year ended
31 December
31 December
2023
2023
Year ended
31 December
2022
£’000
£’000
£’000
UK dividends
27,972
3,226
Loan interest income
2,617
903
Other Income
854
772
31,443
4,901
Financials
2023 Annual Report
|
111
Other Income comprises Management Services Fees charged to
the Company’s subsidiaries.
6.
INVESTMENT MANAGEMENT
FEES
Year ended
Year ended
31 December 2023
31 December 2023
Revenue
Revenue
£’000
£’000
Capital
Capital
£’000
£’000
Total
Total
£’000
£’000
Management fees
6,501
2,167
8,668
Total management fees
6,501
2,167
8,668
Year ended
Year ended
31 December 2022
31 December 2022
Revenue
Revenue
£’000
£’000
Capital
Capital
£’000
£’000
Total
Total
£’000
£’000
Management fees
5,802
1,934
7,736
Total management fees
5,802
1,934
7,736
The Company served notice of termination to the Investment
Manager before 31 March 2024 following the completion of the
Verne Global sale, with the Investment Management Agreement
to terminate on 31 March 2025.
The Company and the Investment Manager entered into an
Investment Management Agreement on 8 March 2021 and a Side
Letter dated 17 March 2021.
The Company and Triple Point Investment Management LLP (the
“Investment Manager”) have entered into the Investment
Management Agreement pursuant to which the Investment
Manager has been given responsibility, subject to the overall
supervision of the Board, for active discretionary investment
management of the Company’s portfolio in accordance with the
Company’s Investment Objective and Policy.
The Investment Manager is appointed to be responsible for risk
management and portfolio management and is the Company’s
AIFM. The Investment Manager has full discretion under the
Investment Management Agreement to make investments in
accordance with the Company’s Investment Policy from time to time.
This discretion is, however, subject to: (i) the Board’s ability to give
instructions to the Investment Manager from time to time; and (ii)
the requirement of the Board to approve certain investments
where the Investment Manager has a conflict of interest in
accordance with the terms of the Investment Management
Agreement.
With effect from 31 March 2021, the date of admission of the
Ordinary Shares to trading on the Specialist Fund Segment of the
Main Market of the London Stock Exchange, the Company shall
pay the Investment Manager a management fee (the “Annual
Management Fee”) calculated, invoiced and payable quarterly in
arrears based on the Adjusted Net Asset Value which is based on
funds deployed and committed at the relevant quarter date.
The total amount accrued and due to Triple Point at the year-end
was £4.2 million (2022: £2.2 million).
The management fee is calculated at the rates set out below:
Adjusted Net asset value
Annual
Annual
Management
Management
Fee
Fee
(percentage of
(percentage of
Adjusted
Adjusted
Net
Net
Asset Value)
Asset Value)
On such part of the Adjusted Net Asset Value that is up
to and including GBP 500 million
1.0%
On such part of the Adjusted Net Asset Value that is
above GBP 500 million and up to and including
GBP 1 billion
0.9%
On such part of the Adjusted Net Asset Value that
exceeds GBP 1 billion
0.8%
7. OTHER OPERATING EXPENSES
Year ended
Year ended
31 December
31 December
2023
2023
Year ended
31 December
2022
£’000
£’000
£’000
Legal and professional fees
539
344
Auditors’ fees – audit services
1
389
257
Auditors’ fees – non-audit services
2
145
120
Directors’ fees
271
261
Administration and company
secretarial fees
208
207
Premium segment admission costs
–
677
Strategic review costs
3
2,423
–
Other administrative expenses
640
457
4,615
2,323
1
Fees excludes audit fees on the financial statements of subsidiaries totalling
£616,000
(2022 - £429,000).
2
Fees for non-audit services relate to the review of interim financial statements
and limited assurance on environmental, social and corporate governance.
3
Strategic Review Costs also include technical advisory fees to develop
contingency planning to address the Company’s historical residual financial
uncertainty prior to the completion of the Verne Transaction.
8. EXCEPTIONAL ITEM
During the year, the Company incurred exceptional costs of
£3.5 million in connection with the disposal of its data centre
subsidiaries. The break fee incurred by the Company was under a
previous transaction structure for the sale of Verne Global, which
was under consideration by the Board prior to the definitive
agreement reached on 27 November 2023.
Notes to the Financial Statements
For the year ended 31 December 2023
Financials
112
|
Digital 9 Infrastructure plc
9. TAXATION
The Company is registered in Jersey, Channel Islands but resident
in the United Kingdom for taxation. The standard rate of corporate
income tax currently applicable to the Company is 25%
(2022: 19%).
The financial statements do not directly include the tax charges
for the Company’s intermediate holding company, as D9 Holdco
is held at fair value. D9 Holdco is subject to taxation in the United
Kingdom.
The tax charge for the period is less than the standard rate of
corporation tax in the UK of 25% (2022: 19%). The differences are
explained below.
Year ended
Year ended
31 December 2023
31 December 2023
Revenue
Revenue
£’000
£’000
Capital
Capital
£’000
£’000
Total
Total
£’000
£’000
Net (loss)/profit before tax
20,
326
(257,
659
)
(237,333)
Tax at UK corporation
tax standard rate of 25%
(2022 – 19%)
5,082
(
64
,415)
(59,333)
Effects of:
Loss/(Gain) on financial
assets not taxable
–
63,004
63,004
Exempt UK dividend
income
(6,993)
–
(6,993)
Expenses not deductible
for tax purposes
–
660
660
Excess of allowable
expenses
1,911
751
2,
662
Total tax charge
–
–
–
Year ended
Year ended
31 December 2022
31 December 2022
Revenue
Revenue
£’000
£’000
Capital
Capital
£’000
£’000
Total
Total
£’000
£’000
Net (loss)/profit before tax
(3,225)
95,294
92,069
Tax at UK corporation
tax standard rate of 25%
(2022 – 19%)
(613)
18,106
17,493
Effects of:
Loss/(Gain) on financial
assets not taxable
–
(18,473)
(18,473)
Exempt UK dividend
income
(613)
–
(613)
Expenses not deductible
for tax purposes
–
–
–
Excess of allowable
expenses
1,226
367
1,593
Total tax charge
–
–
–
Investment companies which have been approved by HM
Revenue & Customs under section 1158 of the Corporation Tax
Act 2010 are exempt from tax on capital gains. The Directors are
of the opinion that the Company has complied with the
requirements for maintaining investment trust status for the
purposes of section 1158 of the Corporation Tax Act 2010. The
Company has not provided for deferred tax on any capital gains
or losses arising on the revaluation of investments.
The Company has unrelieved excess management expenses of
£18 million (2022: £8 million). It is unlikely that the Company will
generate sufficient taxable profits in the future to utilise these
expenses and therefore no deferred tax asset has been
recognised.
The unrecognised deferred tax asset calculated using a tax rate of
25% amounts to £4.5 million (2022: £2 million).
10.
FINANCIAL ASSET AT FAIR
VALUE THROUGH PROFIT
OR LOSS
As set out in Note 2, the Company designates its interest in its
wholly owned direct subsidiary as a financial asset at fair value
through profit or loss.
Summary of the Company’s valuation:
Period Ending
Period Ending
31 December
31 December
2023
2023
£’000
£’000
Opening balance 1 January 2023
920,971
Equity investments addition in D9 Holdco
–
Debt investments addition in D9 Holdco
7,103
Change in fair value of investments
(252,014)
As at 31 December 2023
676,060
Period Ending
31 December
2022
£’000
Opening balance 1 January 2022
746,229
Equity investments addition in D9 Holdco
48,409
Debt investments addition in D9 Holdco
29,105
Change in fair value of investments
97,228
As at 31 December 2022
920,971
The Company views equity and debt instruments as one
investment and measures the performance of these investments
together. Therefore, the Company’s equity and debt investments
are presented as investments at fair value through profit or loss in
the Statement of Financial Position.
Included in debt investments as at the year-end is a loan of
£36.2 million (2022: £29.1 million) due from D9 Holdco upon
which interest is charged at a rate of Sterling Overnight Index
Financials
2023 Annual Report
|
113
Average (SONIA) plus a 3.75% margin. Interest of £2.6 million (2022
: £0.9 million) was charged during the year on the loan. The debt
instrument is measured at fair value as at 31 December 2023.
Breakdown of investments in D9 Holdco between equities and debts:
31 December
31 December
2023
2023
31 December
2022
£’000
£’000
£’000
Equity investments
639,852
891,866
Debt investments
36,208
29,105
676,060
920,971
During the period the Company, through its subsidiary companies, made further investments in existing subsidiaries as follows:
Date
Date
D9
D9
Subsidiaries
Subsidiaries
1
1
Investments
Investments
Amount
Amount
Jan-Dec 2023
Digital 9 Subsea Limited
EMIC 1
– progress payments for the construction of subsea cables
$16.7m
(£13.2m)
Jan-Dec 2023
Digital 9 Holdco Limited
Provided capex loans to
GSS Propco for the construction of data centre
£7.9m
Jul 2023
Digital 9 Holdco Limited
Provided capex loan to
Aqua Comms for undersea cables construction.
$14.7m
(£11.6)
Jan-Dec 2023
Digital 9 Holdco Limited
Provided loans to
Volta Data Centres
£4m
1.
Subsidiaries of Digital 9 Holdco Limited are the companies that make investments.
As at the year end, the breakdown of fair valued investments held by D9 Holdco were as follows:
Subsidiary company
Subsidiary company
Investments
Investments
Equity
Debt
Total
Total
£’000
£’000
£’000
£’000
Digital 9 DC Limited
Data centres
343,
638
35,938
379,576
Digital 9 Wireless Limited
Wireless networks
83,838
299,744
383,582
Digital 9 Subsea Holdco Limited
Subsea fibre optic
244,507
18,336
262,843
Digital 9 Fibre Limited
Fibre optic networks
35
–
35
Total
£
672
,018
£354,018
£1,026,036
The subsidiary valuations also include any net current assets or liabilities across the holding company structure.
Included in the above subsidiary valuations, is the valuation of the underlying Investee Company as presented below.
Portfolio Company
Portfolio Company
Investments
Investments
31 December
31 December
2023
2023
31 December
2022
£ '000
£ '000
£ '000
Aqua Comms
Subsea fibre optic
222,509
234,778
EMIC-1
Subsea fibre optic
35,981
22,617
SeaEdge
Data centres
14,042
17,550
Elio Networks
Wireless networks
55,444
59,385
Verne Global
Data centres
372,221
517,255
Arqiva Group
Wireless networks
503,598
518,
266
Arqiva Group
VLN and interests
(174,939)
(162,998)
Giggle
Fibre optic networks
–
3,000
Total
1,028,856
1,209,853
Notes to the Financial Statements
For the year ended 31 December 2023
Financials
114
|
Digital 9 Infrastructure plc
VALUATION PROCESS
During the year, an independent valuer was appointed to carry
out the fair valuation of financial assets for financial reporting
purposes, including level 3 fair valuations. In respect of the Verne
Global entities, the fair value of these investments equals their
agreed disposal value; completed post year end. This valuation is
presented to the Board for its approval and adoption. The
valuation is carried out on a six-monthly basis as at 30 June and
31 December each year and is reported to shareholders in the
Annual Report and Financial Statements.
VALUATION METHODOLOGY
The Company owns 100% of its subsidiary D9 Holdco. The
Company meets the definition of an investment entity as
described by IFRS 10, as such, the Company’s investment in D9
Holdco is valued at fair value. D9 Holdco’s cash, working capital
balances and fair value of investments are included in calculating
fair value of D9 Holdco. The Company acquires underlying
investments in special purpose vehicles (“SPV”) through its
investment in D9 Holdco.
The Board has carried out fair market valuations of Arqiva, Aqua
Comms, Elio Networks and the Verne Global Earn-Out as at
31 December 2023 and the Directors have considered the
valuation of SeaEdge and
satisfied themselves as to the
methodology used, the discount rates and key assumptions
applied, and the valuations. All SPV investments are at fair value
through profit or loss and are valued using the IFRS 13 framework
for fair value measurement.
The following economic assumptions were used in the valuation
of the SPVs.
The main Level 3 inputs used by the Group are derived and
evaluated as follows:
•
The valuer uses its judgement in arriving at the appropriate
discount rate using a capital asset pricing model to calculate a
pre-tax rate that reflects current market assessment. This is
based on its knowledge of the market, considering intelligence
gained from its bidding activities, discussions with financial
advisers in the appropriate market and publicly available
information on relevant transactions. The bottom-up analysis
of the discount rate and the appropriate beta is based on
comparable listed companies. Investments are valued using a
discounted cash flow approach, being valued on a Free Cash
Flow to Equity (“FCFE”) basis. The portfolio weighted average
discount rate for investments valued under the FCFE
discounted cash flows approach was 13.62%
.
•
To calculate portfolio NAV, 6
2% of total NAV from Investment
companies is valued using the FCFE discounted cash flows
approach, 35% of total NAV is valued using evidence of post
year end disposal value either agreed or indicative offer and
the remaining 3% of investments being valued at cost.
•
Expected cash inflows are estimated based on terms of the
contracts and the Company’s knowledge of the business and
how the current economic environment is likely to impact it
taking into consideration of growth rate factors. The portfolio
weighted long-term growth rate for investments valued under
the FCFE discounted cash flows approach was 0.85%.
•
Future Foreign exchange rates of GBP against USD and EUR.
FAIR VALUE MEASUREMENTS
As set out above, the Company accounts for its interest in its
wholly owned direct subsidiary as a financial asset at fair value
through profit or loss.
IFRS 13 requires disclosure of fair value measurement by level.
The level of fair value hierarchy within the financial assets or
financial liabilities is determined on the basis of the lowest level
input that is significant to the fair value measurement. Financial
assets and financial liabilities are classified in their entirety into
only one of the following 3 levels:
Level 1 – quoted prices (unadjusted) in active markets for identical
assets or liabilities;
Level 2 – inputs other than quoted prices included within Level 1
that are observable for the assets or liabilities, either directly
(i.e., as prices) or indirectly (i.e. derived from prices); and
Level 3 – inputs for assets or liabilities that are not based on
observable market data (unobservable inputs).
Financials
2023 Annual Report
|
115
The following table presents the Company’s financial assets and
financial liabilities measured and recognised at fair value at
31 December 2023 and 31 December 2022:
Date of
Date of
valuation
valuation
Total
Total
£’000
£’000
Quoted
Quoted
prices in
prices in
active
active
markets
markets
(Level 1)
(Level 1)
£’000
£’000
Significant
Significant
observable
observable
inputs
inputs
(Level 2)
(Level 2)
£’000
£’000
Significant
Significant
unobservable
unobservable
inputs
inputs
(Level 3)
(Level 3)
£’000
£’000
Assets measured
at fair value:
Equity
investment in
D9 Holdco
31 December
2023
639
,852
–
–
639
,852
Debt
investment in
D9 Holdco
31 December
2023
36,208
–
–
36,208
Assets measured
at fair value:
Equity
investment in
D9 Holdco
31 December
2022
891,866
–
–
891,866
Debt
investment in
D9 Holdco
31 December
2022
29,105
–
–
29,105
There have been no transfers between Level 1 and Level 2 during
the period, nor have there been any transfers between Level 2
and Level 3 during the year.
The Company’s investments are reported as Level 3 in accordance
with IFRS 13 where external inputs are “unobservable” and value
is the Directors’ best estimate, based upon advice from relevant
knowledgeable experts.
FAIR VALUE MEASUREMENTS USING
SIGNIFICANT UNOBSERVABLE INPUTS
(LEVEL 3)
As set out within the significant accounting estimates and
judgements in Note 3(b), the valuation of the Company’s financial
asset is an estimation uncertainty. The sensitivity analysis was
performed based on the current capital structure and expected
performance of the Company’s investment in D9 Holdco. For
each of the sensitivities, it is assumed that potential changes
occur independently of each other with no effect on any other
base case assumption, and that the number of investments in the
SPVs remains static throughout the modelled life. The following
table summarises the quantitative information about the
significant unobservable inputs used in Level 3 fair value
measurement and the changes to the fair value of the financial
asset if these inputs change upwards or downwards by 0.25% for
long-term growth rate and 1% for discount rate:
Unobservable inputs
Unobservable inputs
Valuation if
Valuation if
rate
rate
increases
increases
£’000
£’000
Movement
Movement
in valuation
in valuation
£’000
£’000
Valuation
Valuation
if rate
if rate
decreases
decreases
£’000
£’000
Movement
Movement
in valuation
in valuation
£’000
£’000
Long-term growth rate
(+/- by 0.25%)
683
,030
6,
970
669
,307
(6,7
53)
Discount rates (+/- by 1%)
605
,
682
(70,378)
758,302
82,242
The movement in valuation column is the movement in the value
of D9 Holdco which is held on the Company’s balance sheet.
11.
TRADE AND OTHER
RECEIVABLES
31 December
31 December
2023
2023
31 December
2022
£’000
£’000
£’000
Amounts due from subsidiary
undertakings
385
601
Other receivables
1,086
816
1,471
1,417
The Directors consider that the carrying value of trade and other
receivables approximate their fair value.
12. CASH AND CASH EQUIVALENT
31 December
31 December
2023
2023
31 December
2022
£’000
£’000
£’000
Cash at bank
14,809
30,001
14,809
30,001
The Directors consider that the carrying value of cash and cash
equivalents approximate their fair value.
Notes to the Financial Statements
For the year ended 31 December 2023
Financials
116
|
Digital 9 Infrastructure plc
13. TRADE AND OTHER PAYABLES
31 December
31 December
2023
2023
31 December
2022
£’000
£’000
£’000
Trade payables
421
216
Accruals
5,588
2,553
6,009
2,769
The Directors consider that the carrying value of trade and other
payables approximate their fair value. All amounts are unsecured
and due for payment within one year from the reporting date.
£4.1 million (2022: £2.2 million) of the above accruals figure
relates to fees payable to the Investment Manager, which were
settled following the year end.
14. STATED CAPITAL
Ordinary shares of no par value
Ordinary shares of no par value
Allotted, issued
and fully paid:
No of shares
Price
31 December
2022
£000’s
As at 1 January 2022
722,480,620
717,547
Allotted during the
period
28 January 2022
88,148,880
108.0p
95,201
8 July 2022
54,545,454
110.0p
60,000
Ordinary Shares
at 31 December 2022
865,174,954
872,748
Dividends paid (Note 15)
(50,274)
Share issue costs
(3,232)
Stated capital
at 31 December 2022
819,242
Allotted, issued
and fully paid:
No of shares
Price
31 December
2023
£000’s
As at 1 January 2023
865,174,954
819,242
Ordinary Shares
at 31 December 2023
865,174,954
819,242
Dividends paid (Note 15)
(25,956)
Stated capital
at 31 December 2023
793,286
Shareholders are entitled to all dividends paid by the Company
and, on a winding up, provided the Company has satisfied all its
liabilities, the shareholders are entitled to all of the residual assets
of the Company.
15. DIVIDENDS
Dividend
Dividend
per share
per share
Year ended
Year ended
31 December
31 December
2023
2023
£’000
£’000
Yer ended
31 December
2022
£’000
Dividends period 1 October 2021
to 31 December 2021
1.5 pence
–
12,159
Dividend period 1 January 2022 to
31 March 2022
1.5 pence
–
12,159
Dividend period 1 April 2022 to
30 June 2022
1.5 pence
–
12,978
Dividend period 1 July 2022 to
30 September 2022
1.5 pence
–
12,978
Dividends period 1 October 2022
to 31 December 2022
1.5 pence
12,978
–
Dividend period 1 January 2023 to
31 March 2023
1.5 pence
12,978
–
Total dividends paid
25,956
50,274
Financials
2023 Annual Report
|
117
16.
SUBSIDIARIES
At the reporting date, the Company had one wholly owned subsidiary, being its 100% investment in Digital 9 Holdco Limited. The
following table shows subsidiaries of the Company. As the Company is regarded as an Investment Entity as referred to in Note 2, these
subsidiaries have not been consolidated in the preparation of the financial statements.
Name
Name
Place
Place
of business
of business
% Interest
% Interest
Principal activity
Principal activity
Registered office
Registered office
Digital 9 Holdco Limited
UK
100%
Holding company
1 King William Street, London EC4N 7AF
The following companies are held by D9 Holdco Limited and its underlying subsidiaries:
Digital 9 DC Limited
UK
100%
Intermediate holding company
1 King William Street, London EC4N 7AF
Digital 9 Fibre Limited
UK
100%
Intermediate holding company
1 King William Street, London EC4N 7AF
Digital 9 Wireless Limited
UK
100%
Intermediate holding company
1 King William Street, London EC4N 7AF
Digital 9 Subsea Holdco Limited
UK
100%
Intermediate holding company
1 King William Street, London EC4N 7AF
Digital 9 Subsea Limited
1
UK
100%
Subsea fibre optic network
1 King William Street, London EC4N 7AF
Digital 9 Seaedge Limited
2
UK
100%
Lease holding company
1 King William Street, London EC4N 7AF
D9 DC Opco 1 Limited
2
UK
100%
Intermediate holding company
1 King William Street, London EC4N 7AF
D9 DC Opco 2 Limited
2
UK
100%
Intermediate holding company
1 King William Street, London EC4N 7AF
D9 DC Opco CAN 1 Limited
14
Canada
100%
Dormant
44 Chipman Hill Suite 1000 Saint John NB E2L
2A9 Canada
D9 DC Opco 3 Limited
2
UK
100%
Intermediate holding company
1 King William Street, London EC4N 7AF
D9 Wireless Opco 1 Limited
3
UK
100%
Intermediate holding company
1 King William Street, London EC4N 7AF
D9 Wireless Midco 1 Limited
3
UK
100%
Intermediate holding company
1 King William Street, London EC4N 7AF
D9 Wireless Opco 2 Limited
4
UK
100%
Intermediate holding company
1 King William Street, London EC4N 7AF
D9 Wireless Opco 3 Limited
3
UK
100%
Dormant
1 King William Street, London EC4N 7AF
D9 Fibre Opco 1 Limited
13
UK
100%
Dormant
1 King William Street, London EC4N 7AF
D9 Fibre Opco 2 Limited
13
UK
100%
Intermediate holding company
1 King William Street, London EC4N 7AF
Aqua Comms Designated Activity
Company
1
Ireland
100%
Holding company
The Exchange Building, 4 Foster Place, Dublin 2
Aqua Comms Connect Limited
5
Ireland
100%
Intermediate holding company
The Exchange Building, 4 Foster Place, Dublin 2
America Europe Connect 2 Limited
5
Ireland
100%
Subsea fibre optic network
The Exchange Building, 4 Foster Place, Dublin 2
America Europe Connect 2 Denmark
ApS
5
Denmark
100%
Subsea fibre optic network
c/o Bech-Bruun Langeline Alle 35, Copenhagen
North Sea Connect Denmark ApS
5
Denmark
100%
Subsea fibre optic network
c/o Bech-Bruun Langeline Alle 35, Copenhagen
Aqua Comms Management (UK)
Limited
5
UK
100%
Management company
85 Great Portland Street, London W1W 7LT
Aqua Comms Denmark ApS
5
Denmark
100%
Subsea fibre optic network
c/o Bech-Bruun Langeline Alle 35, Copenhagen
Aqua Comms (Ireland) Limited
5
Ireland
100%
Subsea fibre optic network
The Exchange Building, 4 Foster Place, Dublin 2
America Europe Connect Limited
5
Ireland
100%
Subsea fibre optic network
The Exchange Building, 4 Foster Place, Dublin 2
Celtix Connect Limited
5
Ireland
100%
Subsea fibre optic network
The Exchange Building, 4 Foster Place, Dublin 2
Aqua Comms Management Limited
5
Ireland
100%
Management company
The Exchange Building, 4 Foster Place, Dublin 2
Sea Fibre Networks Limited
5
Ireland
100%
Subsea fibre optic network
The Exchange Building, 4 Foster Place, Dublin 2
Aqua Comms (IOM) Limited
5
Isle of Man
100%
Subsea fibre optic network
c/o PCS Limited, Ground Floor, Murdoch
Chambers, South Quay, Douglas, IOM IM1 5AS
Aqua Comms (UK) Limited
5
UK
100%
Subsea fibre optic network
85 Great Portland Street, London W1W 7LT
Notes to the Financial Statements
For the year ended 31 December 2023
Financials
118
|
Digital 9 Infrastructure plc
Name
Name
Place
Place
of business
of business
% Interest
% Interest
Principal activity
Principal activity
Registered office
Registered office
Aqua Comms Services Limited
5
Ireland
100%
Subsea fibre optic network
The Exchange Building, 4 Foster Place, Dublin 2
Aqua Comms (UK) Limited
5
UK
100%
Subsea fibre optic network
85 Great Portland Street, London W1W 7LT
Aqua Comms Services Limited
5
Ireland
100%
Subsea fibre optic network
The Exchange Building, 4 Foster Place, Dublin 2
America Europe Connect (UK)
Limited
5
UK
100%
Subsea fibre optic network
85 Great Portland Street, London W1W 7LT
America Europe Connect 2
USA Inc
5
USA
49%
Subsea fibre optic network
251 Little Falls Drive, Wilmington, Delaware,
19808 USA
Aqua Comms (Americas) Inc
5
USA
49%
Subsea fibre optic network
3500 South Dupont Highway, Dover, Delaware
19901 Kent, United States
Verne Holdings Limited
2
UK
100%
Holding company
1 King William Street, London EC4N 7AF
Verne Global GmbH
17
Germany
100%
Data centre solutions
Äußere Sulzbacher Straße 118, 90491 Nürnberg
Verne Global hf.
6
Iceland
100%
Data centre operation
Valhallarbraut 868, 262 Reykjanesbaer, Iceland
Verne Global Ltd
17
UK
100%
Data centre solutions
1 King William Street, London EC4N 7AF
Verne Global Inc.
17
USA
100%
Data centre solutions
1825 Washington Street, Canton MA 02021 USA
GAData Holdings Limited
7
Jersey
100%
Holding company
28 Esplanade, St Helier, Jersey JE3 3QA
Volta Data Centres Limited
8
UK
100%
Data centre operator
36-43 Great Sutton Street London EC1V 0AB
GSS Propco Limited
8
Jersey
100%
Property investment
28 Esplanade, St Helier, Jersey JE3 3QA
Leeson Telecom Limited
9
Ireland
100%
Enterprise broadband
6-9 Trinity St, Dublin, D02 EY47, Ireland
Leeson Telecom One Limited
9
Ireland
100%
Enterprise broadband
6-9 Trinity St, Dublin, D02 EY47, Ireland
Leeson Telecom Holdings Limited
10
Ireland
100%
Enterprise broadband
6-9 Trinity St, Dublin, D02 EY47, Ireland
W R Computer Network Limited
10
Ireland
100%
Enterprise broadband
6-9 Trinity St, Dublin, D02 EY47, Ireland
Ficolo Oy
11
Finland
100%
Data centre operator
Konepajanranta 4, 28100 Pori, Finland
Verne Global DC Holdco Limited
2
UK
100%
Intermediate holding company
1 King William Street, London EC4N 7AF
Aqua Comms Ireland 2 Limited
18
Ireland
100%
Subsea fibre optic network
The Exchange Building, 4 Foster Place, Dublin 2
Arqiva Group Limited
12
UK
48.02%
Holding Company
Crawley Court, Winchester, Hampshire SO21 2QA
1
Held by Digital 9 Subsea Holdco
2
Held by Digital 9 DC Limited
3
Held by Digital 9 Wireless Limited
4
Held by D9 Wireless Midco 1 Limited
5
Held by Aqua Comms Designed Activity Company and its intermediate
holding companies
6
Held by Verne Holdings Limited
7
Held by D9 DC Opco 1 Limited
8
Held by GAData Holdings Limited
9
Held by D9 Wireless Opco 1 Limited
10
Held by Leeson Telecom Limited
11
Held by D9 DC Opco 3 Limited
12
Held by D9 Wireless Opco 2 Limited
13
Held by Digital 9 Fibre Limited
14
Held by D9 Opco 2 Limited
15
Held by Giggle Fibre Limited
16
Held by D9 Fibre Opco 2 Limited
17
Held by Verne Global hf
18
Held by Digital 9 Subsea Limited
The Investee Companies above are restricted in transferring cash to the Company due to the need to fulfil their
capex and operational
cash requirements first.
The Company is committed to fund capex totalling £11.3 million for Aqua Comms Ireland 2 Limited in respect of EMIC-1 project.
Financials
2023 Annual Report
|
119
17.
TRANSACTIONS WITH THE
INVESTMENT ADVISERS AND
RELATED PARTY DISCLOSURE
DIRECTORS
Directors are remunerated for their services at such rate as the
directors shall from time to time determine. The Directors are
each paid an annual fee of £40,000 other than the Chair of the
Audit Committee and Chair of the Risk Committee who are
entitled to an additional £5,000 and the Chair of the Company
who is entitled to receive an annual fee of £75,000. Directors are
entitled to recover all reasonable expenses properly incurred in
connection with performing their duties as a director.
Director
Director
Number
Number
of Ordinary
of Ordinary
shares
shares
held
held
*Dividends
*Dividends
received
received
31 December
31 December
2023
2023
*Dividends
*Dividends
received
received
31 December
31 December
2022
2022
Jack Waters
(resigned 23 May 2022)
70,000
–
£1,050
Philip Jordan
(resigned 13 December 2023)
94,611
£2,528
£1,518
Aaron Le Cornu
(appointed 1 April 2022)
107,024
£2,693
£2,437
Lisa Harrington
(resigned 14 December 2023)
38,604
£1,158
£2,316
Keith Mansfield
(resigned 3 January 2024)
294,819
£3,218
£3,934
Monique O’Keefe
(resigned 23 May 2022)
10,000
-
£150
Charlotte Valeur
10,000
£300
£600
Gailina Liew
(appointed 1 July 2023)
–
–
–
Richard Boléat
(appointed 14 December 2023)
65,000
–
–
Brett Miller
(appointed 14 December 2023)
400,000
–
–
* - Dividends disclosed for the period from the date of appointment and up to the
date of resignation.
INVESTMENT MANAGER
The Company considers Triple Point as the Investment Manager to
be key management personnel and therefore a related party.
Further details of the investment management contract and
transactions with the Investment Manager are disclosed in Note 6.
TRANSACTION WITH SUBSIDIARY
UNDERTAKINGS
During the period, the Company made equity investments in
Digital 9 Holdco Limited totalling £Nil (2022: £48.4 million).
During the period, the Company received dividend income of
£28 million (2022: £3.2 million) from Digital 9 Holdco Limited.
As per Note 19, the Company, through its subsidiary undertakings
has capital expenditure commitments totalling £11.3 million
(2022: £46 million).
LOAN TO SUBSIDIARY UNDERTAKING
As at the year-end, the Company had provided a total loan of
£36.2 million (2022: £29.5 million) to Digital 9 Holdco Limited.
The total loan outstanding at the year-end was £36.2 million
(2022: £29.5 million). During the period an additional £7m was
provided. This was used to assist the underlying Investee
Companies with their capital expenditure requirements.
Interest
of £2.6
million (2022: £0.9 million) were charged on the loan
during the year.
AMOUNTS DUE FROM SUBSIDIARY
UNDERTAKINGS
Included within Note 11 is an amount due from subsidiary
undertakings:
Subsidiary undertakings:
Subsidiary undertakings:
31 December
31 December
2023
2023
£’000
£’000
31 December
2022
£’000
Aqua Comms DAC
120
160
D9 DC Opco 1 Limited
27
32
D9 DC Opco 3 Limited
51
34
D9 Wireless Opco 1 Limited
22
30
D9 Wireless Opco 2 Limited
129
–
Digital 9 Seaedge Limited
7
15
Digital 9 Subsea Limited
11
42
Verne Holdings Limited
–
288
Digital 9 Holdco Limited
18
–
385
601
Notes to the Financial Statements
For the year ended 31 December 2023
Financials
120
|
Digital 9 Infrastructure plc
18.
EVENTS AFTER THE REPORTING
PERIOD
COMPLETION OF VERNE DISPOSAL
On 14 March 2024, the Company completed the sale of its entire
stake in the Verne Global group of companies to funds managed
or advised by Ardian France SA for an equity purchase price of up
to $575 million (approximately £450 million). Following the Verne
Transaction’s completion the Company received $415 million
(£325.8 million). The completion follows receipt of all applicable
regulatory approvals and the satisfaction of all conditions in line
with the previously communicated timetable.
MANAGED WIND-DOWN
The Board published a circular to shareholders on 28 February
2024 to convene a general meeting and seek approval from
shareholders to amend the Company’s Investment Objective and
Policy. The appropriate resolution was subsequently approved on
25 March 2024 with 99.9% of the votes cast in favour. The revised
Investment Objective and Policy is set out on pages 12 to 13.
The Company will not make any new investments save that
investments may be made in existing Investee Companies when
considered appropriate to maximise value for shareholders.
INDEPENDENT
REVIEW
OF
INVESTMENT
MANAGEMENT ARRANGEMENTS
The Company served notice of termination to the Investment
Manager before 31 March 2024 following the completion of the
Verne Global sale, with the Investment Management Agreement
to terminate on 31 March 2025.
Liberum Capital Limited (“Liberum”) has been engaged as
financial advisor to support the proposed wind-down process and
to provide the Board with an independent review of the investment
management arrangements. It will include evaluating the
following options for the Company (i) continuing to be managed
by Triple Point on different fee arrangements; (ii) managed by a
new investment manager, or (iii) becoming a self-managed
alternative investment fund, a proposal for which Brett Miller and
Richard Boléat had indicated would be provided to the Company.
19.
COMMITMENTS AND
CONTINGENT LIABILITIES
The Company, through its subsidiary undertakings has committed
£11.3 million for capital expenditures at 31 December 2023
(2022: £46.3 million).
This future capex is related to the Company’s
investment in EMIC-1.
At the year end, the Company had entered into an SPA to sell its
entire equity stake in the Verne Global Group of companies. An
element of the fees applicable to this transaction were contingent
on the transaction being successful. As a result, at the year end
the Company had not accrued £5.
6
million of fees, as there was
still sufficient uncertainty surrounding the closure of the deal.
Following the year end, the deal was successfully completed, and
these fees were paid.
20.
FINANCIAL RISK
MANAGEMENT
The Company is exposed to market risk, interest rate risk, credit
risk and liquidity risk in the current and future periods. The Board
oversees the management of these risks. The Board’s policies for
managing each of these risks are summarised below.
MARKET RISK
The Company’s activities are exposed to a potential reduction in
demand for internet, data centre or cell network service and
competition for assets and services. Whilst the Company seeks to
invest in a diverse portfolio of digital infrastructure, demand for
the Company’s digital infrastructure assets is dependent on
demand for internet, data, network or other telecom services and
the continued development of the internet. Furthermore, the
ongoing use of the infrastructure services D9 is providing requires
competitive prices which are cost-effective to the end users.
Some factors that could impact the volume of demand or the
ability to provide competitive pricing includes:
•
continued development and expansion of the internet as a
secure communications medium and marketplace for the
distribution and consumption of data and video
•
continued growth in cloud hosted services as a delivery
platform
•
ongoing growth in demand for access to high-capacity
broadband
•
continued focus on technologies, assets and services which
can offer competitive pricing and high-quality reliable
services
•
continued partnership with suppliers and Hyperscalers to
maintain and provide the most cost-effective access
Variations in any of the above factors can affect the valuation of
assets held by the Company and as a result impact the financial
performance of the Company.
MARKET RISK ARISING FROM FOREIGN
CURRENCY RISK
Foreign currency risk is the risk that the fair value or future cash
flows of a financial instrument translated into GBP will fluctuate
because of changes in foreign exchange rates. The Company,
being Digital 9 Infrastructure PLC does not hold any cash balances
in different currencies, however its subsidiaries do as detailed
below.
Financials
2023 Annual Report
|
121
As a result, the Company is exposed to changes in fair value in its
investments, as a result of foreign currency changes. The below
tables present the Company’s exposure to currency risk through
its subsidiaries with foreign currency cash balances.
The Group had the following foreign currency and their GBP
equivalent balances at the end of the reporting period:
USD
USD
$’000
$’000
EUR
EUR
€’000
€’000
GBP
GBP
£’000
£’000
Bank balances
11,675
562
9,659
Investment at fair value
779,753
105,362
704,491
The Company is primarily exposed to changes in USD/GBP and
EUR/GBP exchange rates as its investments in Aqua Comms DAC
and Verne Holdings Limited held by D9 Holdco and its subsidiary
are primarily in USD, and to changes in EUR/GBP exchange rates as
its investments in Leeson Telecom (Elio Networks) and Verne
Finland
are primarily in EUR. The sensitivity of profit or loss to
changes in the exchange rates arises mainly on the fair value of
investment. To demonstrate the impact of foreign currency risk (in
GBP), a 10% increase / decrease in USD/GBP and EUR/GBP rates
are measured as this is in line with the relevant change in the rate
during the last six months.
Impact on post
Impact on post
tax profit
tax profit
£’000
£’000
Impact on other
Impact on other
components of
components of
equity
equity
£’000
£’000
USD/GBP and EUR/GBP exchange rates
– increase by 10%
(65,446)
(65,446)
USD/GBP and EUR/GBP exchange rates
– decrease by 10%
65,446
65,446
The above figures represent impacts of changes in USD/GBP and
EUR/GBP exchange rates. The Company’s exposure to other
foreign exchange movements is not material.
INTEREST RATE RISK
Interest rate risk is the risk that the fair value or future cash flows
of a financial instrument will fluctuate because of changes in
market interest rates.
The Company’s interest rate risk on interest bearing financial assets
is limited to interest earned on cash deposit. Exposure to interest
rate risk on the liquidity funds is immaterial to the Company.
CREDIT RISK
Credit risk is the risk that a counterparty of the Company will be
unable or unwilling to meet a commitment that it has entered into
with the Company. It is a key part of the pre-investment due
diligence. The credit standing of the companies which we intend
to lend or invest is reviewed, and the risk of default estimated for
each significant counterparty position. Monitoring is ongoing and
period end positions are reported to the Board.
Credit risk arises on the debt investments held at fair value through
profit or loss, this includes loan provided to Digital 9 Holdco
Limited. The Company’s debt investments at fair value through
profit or loss is considered to have low credit risk, and management
have not recognised any loss allowance during the year.
Credit risk also arises from cash and cash equivalents, derivative
financial instruments and deposits with banks and financial
institutions. The Company and its subsidiaries may mitigate their
risk on cash investments and derivative transactions by only
transacting with major international financial institutions with high
credit ratings assigned by international credit rating agencies.
The Company’s cash and cash equivalents are all deposited with
Barclays Bank plc which has a Fitch rating of A+.
The Company had no derivatives during the period.
The carrying value of the investments, trade and other receivables
and cash represent the Company’s maximum exposure to credit
risk.
LIQUIDITY RISK
Liquidity risk is the risk that the Company may not be able to meet
its financial obligations as they fall due. Prudent liquidity risk
management implies maintaining sufficient cash and marketable
securities and the availability of funding through an adequate
amount of committed credit facilities to meet obligations when
due and to close out market positions.
The Investment Manager and the Board continuously monitor
forecast and actual cash flows from operating, financing, and
investing activities to consider payment of dividends, repayment of
trade and other payables or funding further investing activities. The
Company ensures it maintains adequate reserves and will put in
place banking facilities and it will continuously monitor forecast and
actual cash flows to seek to match the maturity profiles of financial
assets and liabilities. Further analysis on the Company’s liquidity is
included within the Basis of Preparation - Going Concern
assessment.
31 December 2023
31 December 2023
Total
Total
£’000
£’000
1-3
1-3
months
months
£’000
£’000
3-12
3-12
months
months
£’000
£’000
1 -2
1 -2
years
years
£’000
£’000
2- 5
2- 5
years
years
£’000
£’000
More than
More than
5 years
5 years
£’000
£’000
Trade
payables
421
421
–
–
–
–
Accruals
5,588
–
5,588
–
–
–
6,009
421
5,588
–
–
–
31 December 2022
Total
£’000
1-3
months
£’000
3-12
months
£’000
1 -2
years
£’000
2- 5
years
£’000
More than
5 years
£’000
Trade
payables
216
216
–
–
–
–
Accruals
2,553
–
2,553
–
–
–
2,769
216
2,553
–
–
–
Notes to the Financial Statements
For the year ended 31 December 2023
Financials
122
|
Digital 9 Infrastructure plc
21. FINANCIAL INSTRUMENTS
Cash at
bank balances
at amortised
cost
£’000
Financial
assets at
amortised
cost
£’000
Financial
liabilities at
amortised
cost
£’000
Financial
assets at fair
value through
profit or loss
£’000
Total
value
£’000
Year ended 31 December 2023
Non-current assets:
Equity investments held at fair value through profit or loss
–
–
–
639
,852
639,852
Debt investment held at fair value through profit or loss
–
–
–
36,208
36,208
Current assets:
Trade and other receivables
–
1,471
–
–
1,471
Cash and cash equivalents
14,809
–
–
–
14,809
Total Assets
14,809
1,471
–
676,060
692,340
Current liabilities:
Trade and other payables
–
–
(6,009)
–
(6,009)
Total liabilities
–
–
(6,009)
–
(6,009)
Net assets
14,809
1,471
(6,009)
676,060
686,331
Year ended 31 December 2022
Non-current assets:
Equity investments held at fair value through profit or loss
–
–
–
891,866
891,866
Debt investment held at fair value through profit or loss
–
–
–
29,105
29,105
Current assets:
Trade and other receivables
–
1,417
–
–
1,417
Cash and cash equivalents
30,001
–
–
–
30,001
Total Assets
30,001
1,417
–
920,971
952,389
Current liabilities:
Trade and other payables
–
–
(2,769)
–
(2,769)
Total liabilities
–
–
(2,769)
–
(2,769)
Net assets
30,001
1,417
(2,769)
920,971
949,620
22. CAPITAL MANAGEMENT
The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going concern in order to
provide returns for shareholders and to maintain an optimal capital structure to minimise the cost of capital.
In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends paid to shareholders, return
capital to shareholders or issue new shares.
Financials
2023 Annual Report
|
123
23. EARNINGS PER SHARE
Earnings per share (“EPS”) amounts are calculated by dividing profit for the period attributable to ordinary equity holders of the
Company by the weighted average number of Ordinary Shares in issue during the period. As there are no dilutive instruments
outstanding, both basic and diluted earnings per share are the same.
The calculation of basic and diluted earnings per share is based on the following:
Calculation of Basic
Earnings per share
Calculation of Basic
Earnings per share
Year ended 31 December 2023
Year ended 31 December 2023
Revenue
Revenue
Capital
Capital
Total
Total
Net (loss)/profit attributable to ordinary shareholders (£’000)
20,326
(257,659)
(237,333)
Weighted average number of Ordinary Shares
865,174,954
865,174,954
865,174,954
Earnings per share – basic and diluted
2.35p
(29.78p)
(27.43p)
There is no difference between basic or diluted Loss per Ordinary Share as there are no convertible securities.
There is no difference between the weighted average Ordinary or diluted number of Shares.
Calculation of Weighted Average Number of Shares in Issue
Calculation of Weighted Average Number of Shares in Issue
1-Jan-23
1-Jan-23
31-Dec-23
31-Dec-23
No of days
365
365
Ordinary Shares
No. of shares
Opening Balance
865,174,954
865,174,954
New Issues
–
–
Closing Balance
865,174,954
865,174,954
Weighted Average
865,174,954
865,174,954
Calculation of Basic Earnings per share
Calculation of Basic Earnings per share
Year ended 31 December 2022:
Year ended 31 December 2022:
Revenue
Revenue
Capital
Capital
Total
Total
Net (loss)/profit attributable to ordinary shareholders (£’000)
(3,225)
95,294
92,069
Weighted average number of ordinary shares
829,961,949
829,961,949
829,961,949
Earnings per share – basic and diluted
(0.39p)
11.48p
11.09p
There is no difference between basic or diluted Loss per Ordinary Share as there are no convertible securities.
There is no difference between the weighted average Ordinary or diluted number of Shares.
Calculation of Weighted Average
Calculation of Weighted Average
Number of Shares in Issue
Number of Shares in Issue
01-Jan-22
01-Jan-22
28-Jan-22
28-Jan-22
12-Jul-22
12-Jul-22
31-Dec-22
31-Dec-22
No of days
365
338
173
365
Ordinary Shares
No. of shares
Opening Balance
722,480,620
722,480,620
810,629,500
865,174,954
New Issues
–
88,148,880
54,545,454
–
Closing Balance
722,480,620
810,629,500
865,174,954
865,174,954
Weighted Average
722,480,620
81,628,278
25,853,051
829,961,949
Notes to the Financial Statements
For the year ended 31 December 2023
Financials
124
|
Digital 9 Infrastructure plc
24.
NET ASSET VALUE PER SHARE
Net Asset Value per share is calculated by dividing net assets in the Statement of Financial Position attributable to Ordinary equity
holders of the parent by the number of Ordinary Shares outstanding at the end of the period. Although there are no dilutive instruments
outstanding, both basic and diluted NAV per share are disclosed below.
Net asset values have been calculated as follows:
31 December 2023
31 December 2023
31 December 2022
31 December 2022
Net assets at end of period (£’000)
686
,331
949,620
Shares in issue at end of period
865,174,954
722,480,620
IFRS NAV per share
– basic and dilutive
79.33p
109.76p
25.
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.
Financials
2023 Annual Report
|
125
Unaudited Alternative Performance Measures
For the year ended 31 December 2023
1.
ONGOING CHARGES RATIO
31 December
31 December
2023
2023
£’000
£’000
31 December
2022
£’000
Management fee
8,668
7,736
Other operating expenses
2,192
1,645
Total management fee and other operating expenses
(a)
10,860
9,381
Average undiluted net assets
(b)
817,975
852,738
Ongoing charges ratio % (c = a/b)
(c)
1.33%
1.10%
Average undiluted net assets is calculated as the average of net assets at 31 December 2022 and 31 December 2023.
2.
TOTAL RETURN
31 December
31 December
2023
2023
31 December
31 December
2022
2022
Closing NAV per share (pence)
79.33p
109.76p
Add back dividends paid* (pence)
12.00p
9.00p
Adjusted closing NAV (pence)
91.33p
118.76p
Adjusted NAV per share as at the period end less NAV per share at
31 December
2022 (31 December 2021)
(a)
(91.33p – 118.76p)
(118.76p – 107.62p)
NAV per share at 31 December 2022 (31 December 2021)
(b)
118.76p
107.62p
Total return % (c = a/b)
(c)
(23.10%)
10.40%
* Total cumulative dividends paid since IPO.
3.
MARKET CAPITALISATION
31 December
31 December
2023
2023
31 December
31 December
2022
2022
Closing share price at period end
(a)
29.75p
86.40p
Number of shares in issue at period end
(b)
865,174,954
865,174,954
Market capitalisation (c) = (a) x (b)
(c)
£257,389,549
£747,511,160
Unaudited Alternative Performance Measures
For the year ended 31 December 2023
Financials
126
|
Digital 9 Infrastructure plc
4.
CAPITAL DEPLOYED
Deployment including committed fund
Deployment including committed fund
ing
ing
Deployed
Deployed
Committed fund
Committed fund
31 December 2023
31 December 2023
£’000
£’000
31 December 2022
31 December 2022
£’000
£’000
Aqua Comms DAC
187,508
–
187,508
189,564
EMIC-1
35,981
11,281
47,262
47,374
Verne Holdings Limited
256,595
–
256,595
292,441
SeaEdge UK1
16,355
–
16,355
16,355
Leeson Telecom
50,807
–
50,807
50,807
Volta Data Centres
65,456
–
65,456
61,418
Ficolo Oy
118,927
–
118,927
118,927
Arqiva*
469,830
–
469,830
462,998
Giggle**
–
–
–
3,000
Total deployment
1,201,459
11,281
1,212,740
1,242,884
* - Includes £170 million Vendor Loan Notes issued by D9 Wireless Opco 2 Limited.
** - Giggle was disposed during the year.
5.
TOTAL SHAREHOLDER RETURN
A measure of the return based upon share price movements over the period and assuming reinvestment of dividends.
31 December
31 December
2023
2023
31 December
31 December
2022
2022
Closing share price (pence)
29.75
86.40
Add back effect of dividend reinvestment (pence)
1.29
5.14
Adjusted closing share price (pence)
(a)
31.04
91.54
Opening share price at beginning of the year (pence)
(b)
86.40
113.80
Total shareholder return (c = (a-b)/b)
(c)
(64.08) %
(19.56) %
6.
INVESTEE COMPANY FINANCIAL INFORMATION FOR THE YEAR
ENDING 31 DECEMBER 2023
Financial period
Financial period
31 December
31 December
2023
2023
31 December
31 December
2022
2022
Revenue
£446.6m
£405.5m
% growth year on year
10%
4%
EBITDA
£197.7m
£202.4m
% growth year on year
(2%)
0%
% margin
44%
50%
Cash Flow from Operations
£162.0m
£174.3m
Capital Expenditure (“Capex”)
£109.5m
£95.5m
Financials
2023 Annual Report
|
127
7.
DIGITAL 9 HOLD CO REVOLVING CREDIT FACILITY
The Company has fully drawn the facility as at the reporting date in the form of £373.8 million drawn and £1.2 million committed
through a Letter of Credit in favour of Verne Global Iceland. The Letter of Credit restricted the amount available to draw.
This Letter of Credit was cancelled post period end, resulting in a drawn balance of £373.8 million.
31
31
March
March
2024
2024
£’000
£’000
Revolving Credit Facility Closing Balance (Excl. LoC)
373,800
Repayment (18 March 2024)
(273,512)
Revolving Credit Facility Balance (29 April 2024)
100,288
8.
LIQUIDITY
The Group cash position comprised of the following at December 2023 and 31 March 2024:
Total Group Cash at 31 December 2023
Total Group Cash at 31 December 2023
£’000
£’000
D9 PLC Unrestricted Cash Balance
14,809
Subsidiary Cash Balances
34,621
Total Group Cash
49,430
Restricted Cash
Restricted Cash
RCF Interest Reserve
(24,445)
EMIC-1 Escrow
(7,371)
Total Unrestricted Cash
17,614
Total Group Cash at 31 March 2024
Total Group Cash at 31 March 2024
£’000
£’000
D9 PLC Unrestricted Cash Balance
22,054
Subsidiary Cash Balances
43,951
Total Group Cash
66,005
Restricted Cash
Restricted Cash
RCF Interest Reserve
(9,855)
EMIC-1 Escrow
(5,459)
Indemnification provision
(held back by the Company)
(23,548)
Total Unrestricted Cash
27,143
Unaudited Non-Statutory Information
at 31 March 2024
Financials
128
|
Digital 9 Infrastructure plc
As the Company completed its disposal of Verne Global following the period end, it falls outside the scope of these
financial statements. To provide additional information to shareholders, additional unaudited pro-forma information
has been provided to the period ending 31 March 2024.
Unaudited pro forma consolidated Balance Sheet at 31 March 2024
In accordance with IFRS 10, and in line with the criteria presented in Note 2, the Company meets the definition of an
investment entity. Under IFRS 10, investment entities are required to hold financial investments at fair value through
profit or loss rather than consolidate them on a line-by-line basis.
To assist the reader, we have presented below a pro forma consolidated Balance Sheet for the Group as at both
31 December 2023 and 31 March 2024. This is following the successful disposal of the Verne Global group of
companies and shows the total debt of the Group (including D9’s share of debt at the Arqiva company level).
31 March 2024
31 March 2024
31 December 2023
£'m
£'m
£'m
£'m
£'m
£'m
Non-current assets
Investments
1,559.7
1,945.7
Verne Earn-Out
26.8
26.8
Loans to portfolio companies
17.8
54.3
1,604.3
2,026.8
Total non-current assets
1,604.3
2,026.8
Current assets
Trade and other receivables
3.6
4.0
Cash - Unrestricted
27.1
17.6
Cash - Restricted
38.8
31.8
Total current assets
69.5
53.4
Total assets
1,673.8
2,080.2
Current liabilities
Other creditors
(13.7)*
(29.8)
Total current liabilities
(13.7)
(29.8)
Non-current liabilities
RCF loan
(100.3)
(373.8)
Capitalised set-up costs
2.5
2.5
Vendor loan notes 2029
(163.0)
(163.0)
Additional notes issued
(6.8)
(6.8)
Verne Iceland debt
–
(78.6)
Arqiva (D9 share of debt)
(744.4)**
(744.4)
Total non-current liabilities
(1,012.0)
(1,364.1)
Total liabilities
(1,025.7)
(1,393.9)
Total net assets
648.1
686.3
* Includes accrued VLN interest for the period to 31 March 2024.
**As of 31 December 2023
Financials
2023 Annual Report
|
129
Unaudited Non-Statutory Information
at 31 March 2024
Liquidity
The below chart shows the cash movements for the Group from 1 January 2024 to 31 March 2024, on a cash basis
and not an accruals basis. At 29 April 2024, the Group had total cash of £84.0 million. Of this, unrestricted cash
available for use was £25.2 million. The EMIC-1 escrow account has reduced by £1.9 million, since December as
further payments have been made to EMIC-1 to enable continued fulfilment of its contractual obligations.
Unrestricted Cash Waterfall – 1 January 2024 to 31 March 2024 (£ million)
O/b -
1 Jan 2024
Income
Verne
Sale
Strategic
Review
EMIC-1
Verne
proceeds
RCF
Interest
RCF
Capital
Mgmt
Fee
Admin
expenses
Total Group
Cash
Restricted
Cash
Unrestricted
Cash
49.4
1.4
(14.6)
(1.5)
(4.3)
327.0
(13.1)
(273.5)
(0.7)
(4.2)
66.0
(38.9)
27.1
(50.0)
0.0
50.0
100.0
150.0
200.0
250.0
300.0
350.0
400.0
Restricted cash of £38.9 million includes a Restricted Interest Reserve Account in relation to the RCF of £9.9 million,
and an amount in a restricted escrow account in relation to the construction of EMIC-1 of £5.5 million. It also includes
the £23.5 million the Company has set aside for
an indemnification provision
in relation to the Verne Global Sale,
which will be utilised to make a further RCF repayment in May 2024.
In agreement with its RCF lenders, the Company has negotiated and agreed that from 1 January 2024 the cash
reserves locked up in the RCF’s interest reserve account can be used for interest payments which enables the
Company to pay interest for the residual RCF without using any unrestricted cash until the RCF’s legal maturity in
March 2025.
Unrestricted cash of £27.1 million includes £22.0 million held at the Company level, with the balance being held in
unconsolidated subsidiaries.
Unaudited Non-Statutory Information
at 31 March 2024
Financials
130
|
Digital 9 Infrastructure plc
Debt Financing
The below table shows the Company’s leverage position at 31 December 2023 and also on a pro-forma basis as at
31 March 2024, following the completion of the Verne Global sale and the repayment and part cancellation of
the RCF.
The RCF adjustment of £274.7 million includes the cancellation of the £1.2m Letter of Credit and the cash repayment
of £273.5 million. For the avoidance of doubt an adjustment has not been made in the below table in respect of the
c.£47 million repayment to be made in May 2024.
The impact of the Verne Global transaction and the repayment and cancellation of the RCF is to reduce Group
Leverage from 51% at 31 December 2023 to
36
% on a pro forma basis at 31 March 2024.
31 December 2023
Adjustments
Pro forma
Pro forma
31 March 2024
31 March 2024
£'m
£'m
£'m
£'m
Aqua Comms
222.5
-
222.5
Verne Global
372.2
(345.4)
26.8
SeaEdge
14.0
-
14.0
EMIC-1
36.0
2.1
38.1
Elio Networks
55.4
-
55.4
Arqiva
503.6
-
503.6
Arqiva Principal VLN
(163.0)
-
(163.0)
Arqiva additional VLN
(6.8)
-
(6.8)
Arqiva accrued VLN interest
(5.1)
(2.5)
(7.6)
Total Portfolio Value
1,028.8
(345.8)
683.0
Subsidiary Cash & Equivalents
34.6
9.3
43.9
RCF
(373.8)
273.5
(100.3)
Net Subsidiary Other Liabilities
(49.8)
26.5
(23.3)
D9 Shareholder loan
36.2
(12.3)
23.9
Reconciled IFRS Valuation
676.1
(48.8)
627.2
PLC Other Current Assets
1.5
(0.3)
1.2
PLC Receivables & Cash
14.8
7.2
22.0
Total Assets
692.3
(41.9)
650.4
RCF*
375.0
(274.7)
100.3
Adjusted GAV
1,067.3
(316.6)
750.7
£'m
£'m
£'m
£'m
RCF*
375.0
(274.7)
100.3
VLN (including £6.8m additional notes)
169.8
-
169.8
Total Group Leverage
544.8
(274.7)
270.1
Leverage / Adjusted GAV
51%
36%
*
As at 31 December 2023, the RCF was fully utilised at £375 million, comprised of £373.8** million drawn and the £1.2 million non-cash draw Letter of Credit. In Q1
2024, the Letter of Credit was cancelled and did not require a cash repayment.
**
Alternative Performance Measure, further information on APMs can be found on pages 125 to 127.
Financials
2023 Annual Report
|
131
Unaudited Non-Statutory Information
at 31 March 2024
As at 31 December 2023, the Company’s net debt / EBITDA position has marginally increased since December
2022 as a result of the PIK loan notes on the VLN being capitalised on 30 June 2023 and a slight decline in portfolio
EBITDA. Looking forward and on a pro forma basis, the Group’s net debt and adjusted net debt to EBITDA metrics
have reduced following the disposal of Verne Global.
At 31 December 2023
Adjustments
Pro-forma
Pro-forma
at 31 March 2024
at 31 March 2024
Net Debt / EBITDA
£'m
£'m
£'m
£'m
Drawn RCF inc. Letter of Credit
375.0
(274.7)
100.3
VLN*
169.8
-
169.8
Group Cash & Equivalents (inc. restricted cash)
(49.4)
16.5
(32.9)
Net Debt
495.4
(258.2)
237.2
2023 Portfolio EBITDA
197.7
(17.2)
180.5
Net Debt / EBITDA
2.5x
(1.2x)
1.3x
Arqiva debt (prorated for D9 ownership**)
744.4
-
744.4
Verne Global debt
78.6
(78.6)
-
Adjusted Net Debt
1,318.4
(336.8)
981.6
Adjusted Net Debt / EBITDA
6.7x
(1.2x)
5.5x
*
Includes the additional notes of £6.8m issued in June 2023.
**
This is D9’s share of Arqiva gross debt. It is not an Arqiva net debt figure and as a result does not include cash held by Arqiva; it is a more conservative approach
and is in line with previously reported figures.
\
PORTFOLIO CONCENTRATION SUMMARY
As at 29 April 2024, the Company’s portfolio consists of 5 attractive and complementary investments.
The below table shows the portfolio’s asset and sector concentration levels comprising valuations as at 31 March
2024 on a pro forma basis following the completion of sale of the Verne Global group of companies.
Pro forma Portfolio Concentration
Pro forma Sector Concentration
9%
Net Current Assets
7%
Elio Networks
5%
EMIC-1
30%
Aqua Comms
4%
Verne Global
43%
Arqiva
2%
SeaEdge
9%
Net Current Assets
51%
Wireless
35%
Subsea Fibre
5%
Data Centre
Other
Information
134
|
Digital 9 Infrastructure plc
Other Information
134
Glossary and Definitions
“Adjusted Gross Asset
Value”
The aggregate value of the total assets of the Company as determined with the accounting principles
adopted by the Company from time to time as adjusted to include any third-party debt funding
drawn by, or available to, any Group company (which, for the avoidance of doubt, excludes Investee
Companies);
“Admission”
the admission of the Company's Ordinary Share capital to trading on the Premium Segment of the
Main Market of the London Stock Exchange;
“Aqua Comms”
Aqua Comms Designation Activity Company, a private company limited by shares incorporated and
registered in Ireland;
“AIC Code”
AIC Code of Corporate Governance produced by the Association of Investment Companies;
“AIC Guide”
AIC Corporate Governance Guide for Investment Companies produced by the Association of
Investment Companies;
“AIFM”
the alternative investment fund manager of the Company being Triple Point Investment Management
LLP;
“AIFMD”
T
he EU Alternative Investment Fund Managers Directive 2011/61/EU;
“Board”
The Directors of the Company from time to time;
“CTA 2010”
Corporation Tax Act 2010 and any statutory modification or re-enactment thereof for the time being
in force;
“D9”
or the
“Company”
Digital 9 Infrastructure plc, incorporated and registered in Jersey (company number 133380);
“Digital Infrastructure”
key services and technologies that enable methods, systems and processes for the provision of
reliable and resilient data storage and transfer;
“Digital Infrastructure
Investments”
an investment which falls within the parameters of the Company's investment policy and which may
include (but is not limited to) an investment into or acquisition of an Investee Company or a direct
investment in digital infrastructure assets or projects via an Investment SPV or a forward funding
arrangement;
“DTR”
The Disclosure Guidance and Transparency Rules sourcebook containing the Disclosure Guidance,
Transparency Rules, corporate governance rules and the rules relating to primary information
providers;
“EBITDA”
Earnings before interest, taxes, depreciation and amortisation;
“EU
or
European Union”
The European Union first established by the treaty made at Maastricht on 7 February 1992;
“EPS”
Earnings per share;
“ESG”
Environmental, Social and Governance;
“FCA”
The Financial Conduct Authority;
2023 Annual Report
|
135
Other Information
“FTTH”
Fibre to the home;
“GAV”
The gross assets of the Company in accordance with applicable accounting rules from time to time;
“Group”
T
he Company and any other companies in the Company’s Group for the purposes of Section 606 of
the Corporation Tax Act 2010 from time to time but excluding Investee Companies;
“Investee Company”
A company or special purpose vehicle which owns and/or operates Digital Infrastructure assets or
projects in which the Group invests or acquires;
“Investment Manager”
Triple Point Investment Management LLP (partnership number OC321250);
“Investment Objective”
The Company’s investment objective as approved by shareholders on 25 March 2023 and set out
on page 12;
“Investment Policy”
The Company’s investment policy as set out in the Prospectus approved by shareholders on
25 March 2023 and set out on page 13;
"Investment SPV”
A special purpose vehicle used to acquire or own one or more Digital Infrastructure Investments;
“IPO”
The Company's initial public offering launched on 8 March 2021 which resulted in the admission of,
in aggregate, 300 million Ordinary Shares to trading on the Specialist Fund Segment of the Main
Market on 31 March 2021;
“NAV”
Net Asset Value being, the net assets of the Company in accordance with applicable accounting
rules from time to time;
“Ongoing Charges Ratio”
A measure of all operating costs incurred in the reporting period, calculated as a percentage of
average net assets in that year. Operating costs exclude costs of buying and selling investments,
interest costs, taxation, non-recurring costs and the costs of buying back or issuing ordinary shares;
“Ordinary Shares”
Ordinary shares of no-par value in the capital of the Company;
“RCF”
Revolving Credit Facility;
“SDG9”
The UN’s Sustainable Development Goal 9;
“Total Shareholder Return”
The increase in Net Asset Value in the period plus distributions paid in the period;
136
|
Digital 9 Infrastructure plc
Other Information
136
As at the date of publication:
NON-EXECUTIVE DIRECTORS
REGISTERED OFFICE
Charlotte Valeur (Interim Independent Chair)
Aaron Le Cornu
Gailina Liew
26 New Street
St Helier
Jersey
JE2 3RA
Channel Islands
INVESTMENT MANAGER
FINANCIAL ADVISER
Triple Point Investment Management LLP
1 King William Street
London
EC4N 7AF
Liberum Capital Limited
Ropemaker Place
Level 1225 Ropemaker Street
London
EC2Y 9LY
CORPORATE BROKER
UK LEGAL ADVISER
J.P. Morgan Cazenove
25 Bank Street
Canary Wharf
London
E14 5JP
Stephenson Harwood LLP
1 Finsbury Circus
London
EC2M 7SH
JERSEY LEGAL ADVISER
TAX ADVISER
Carey Olsen Jersey LLP
47 Esplanade
St Helier
Jersey
JE1 0BD
Channel Islands
Deloitte LLP
2 New Street Square
London
EC4A 3BZ
ADMINISTRATOR
COMPANY SECRETARY
Ocorian Fund Services (Jersey) Limited
26 New Street
St Helier
Jersey JE2 3RA
Channel Islands
Ocorian Secretaries (Jersey) Limited
26 New Street
St Helier
Jersey
JE2 3RA
Channel Islands
DELEGATED COMPANY SECRETARY
REGISTRAR
Hanway Advisory Limited
1 King William Street
London
EC4N 7AF
Computershare Investor Services (Jersey) Limited
13 Castle Street
St Helier
Jersey
JE1 1ES
Channel Islands
INDEPENDENT AUDITORS
DEPOSITARY
PricewaterhouseCoopers LLP
7 More Riverside
London
SE1 2RT
INDOS Financial Limited
The Scalpel
52 Lime Street
London
EC3M 7AF
Shareholder Information
2023 Annual Report
|
137
Other Information
FORWARD LOOKING STATEMENTS
The Front Section of this report (including but not limited to the Chair’s Statement, Strategic Report, Investment Manager’s Review and
Directors’ Report) has been prepared to provide additional information to Shareholders to assess the Company’s strategies and the
potential for those strategies to succeed. These should not be relied on by any other party or for any other purpose.
The Review Section 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 terminology, including the terms “believes”, “estimates”, “anticipates”,
“expects”, “intends”, “may”, “will” or “should” or, in each case, their negative or other variations or comparable terminology.
These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this
document and include statements regarding the intentions, beliefs or current expectations of the Directors and 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 NAV total return and dividend targets of the Company and the
markets in which it invests.
By their nature, forward looking statements involve risks and uncertainties because they relate to 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 the forward-looking statements contained in this document.
Subject to their legal and regulatory obligations, the Directors 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.
In addition, the Review Section may include target figures for future financial periods. Any such figures are targets only and are not
forecasts. This Annual Report has been prepared for the Company as a whole and therefore gives greater emphasis to those matters
which are significant in respect of Digital 9 Infrastructure Plc.
1 King William Street | London | EC4N 7AF
For further information about Triple Point
please call
020 7201 8990
or send an email to
Triple Point is the trading name for the Triple Point Group which includes the following companies and associated entities: Triple
Point Investment Management LLP registered in England & Wales no. OC321250, authorised and regulated by the Financial
Conduct Authority no. 456597, Triple Point Administration LLP registered in England & Wales no. OC391352 and authorised and
regulated by the Financial Conduct Authority no. 618187, and TP Nominees Limited registered in England & Wales no.07839571,
all of 1 King William Street, London, EC4N 7AF, UK.
We will process any personal data of yours received in connection with the business we carry on with you in accordance with our
privacy policy, which can be found on our website or provided to you upon request.