Cordiant Digital Infrastructure generated a total return of 10.0% over the 12 months ended 31 March 2023. The total dividend for the period increased to 4.0p, in line with guidance. This was 3.4x covered by earnings and 1.5x covered by adjusted funds from operations. [These are quite respectable numbers for a fund that investors appear to have fallen out of love with – the shares currently trade on a 29% discount.]
Aggregate pro forma normalised EBITDA of the three portfolio companies (Emitel, CRA, and Hudson) for the year to 31 March 2023 increased from £94m to £104m. Based on that £104m figure, the average acquisition price multiple that Cordiant paid for these businesses was 10.6x EV/EBITDA, which it says is substantially below comparable acquisitions in the market. The NAV uplift would have been higher but the discount rate used to value the portfolio’s future cash flows was increased by an average of 0.81% over the year.
Debt
As at 31 March 2023, the company and its subsidiaries had total debt on a look-through basis equivalent to £466m, representing net gearing of 30% of gross assets, substantially below the level of 50% permitted under the gearing policy disclosed in the prospectus. Of this gearing, 78% of the total debt was on a fixed-interest basis, with the rest at floating rates, none of which is inflation linked. The manager is actively engaged in a planned refinancing of Emitel’s existing debt facilities alongside the company’s management team, which is expected to be finalised in Q3 2023.
In June 2023, the company drew down the €150m balance on its €200m eurobond facility, implying that the ratio of debt to gross assets was now about 36%. On the eurobond, 82.5% of the interest is at fixed rate, and a margin of 4.5% to 4.75% (depending on the overall level of gearing). The eurobond is repayable in a single payment in September 2026.
The chairman Shonaid Jemmett-Page says “the company benefits from a relatively strong liquidity position. This leaves it well placed to act on opportunities without the need to raise additional equity.”
Portfolio
The three acquisitions give the companies a broad portfolio diversification by asset type with:
- 1,260 mobile and broadcast towers;
- Seven data centres;
- 4,368km of fibre-optic network;
- Two national broadcast networks; and
- Nationwide networks of active IoT (internet of things) sensors.
The statement says:
The acquisition of Emitel, which we announced in January 2022, closed on 15 November 2022. Emitel exceeded our expectations during the year, with contractual escalators offsetting an increase in energy prices. This better-than-expected performance lowered our effective purchase multiple to 8.8x LTM (last twelve months) EBITDA at close. Alongside this strong financial performance, Emitel completed its upgrade to its broadcast infrastructure for digital terrestrial TV and continues to roll out new products to leave it well positioned for future growth.
CRA also performed well during the year. It posted an increase in revenues and EBITDA during the period, partly reflecting continued strong demand for data centre capacity. CRA benefited from upgrading its broadcast network, resulting in a 30% increase in capacity. In addition, it increased by 7% the capacity of its tower and rooftop portfolio, which now consists of 658 towers. Commercial initiatives during the year resulted in entering into contracts for four new broadcast channels during the year or shortly afterwards.
Hudson added some marquee customers to its business, including two major US telecommunications carriers. Hudson is a strategically located interconnect data centre which offers a significant opportunity for growth at minimal risk, with further capital expenditure linked to customer acquisition. Our investment in the business during the year has bolstered the sales and marketing teams, which have, in turn, generated an increase in pipeline opportunities.
Buybacks
In February 2023 the board approved a discretionary programme of share buybacks of up to £20m, of which £0.9m had been executed by 31 March 2023.
CORD : Cordiant Digital Infrastructure produces decent result