29 November 2022

CORDIANT DIGITAL INFRASTRUCTURE LIMITED

Interim report for the six months ended 30 September 2022

 Significant steps forward in challenging market conditions

Cordiant Digital Infrastructure Limited (the Company), an investor in the core digital infrastructure that enables modern communications and the internet, is pleased to announce its preliminary unaudited interim results for the six months to 30 September 2022.

Highlights

Commenting, Shonaid Jemmett-Page FCA, Chairman of Cordiant Digital Infrastructure Limited, said:

"Against the backdrop of what has been a volatile time for the markets and many industries, I am pleased to report a solid underlying operational and financial performance for the period. This has been accompanied by the achievement of major milestones including the raising of the €200 million Eurobond facility and the completion of the Emitel acquisition on 15 November 2022. The operational performance of the Company's investments has been stable and in line with plan. The Company's portfolio benefits from a good element of inflation resilience and both the Company and its investments benefit from a conservative approach to interest rate risk. This, combined with a strong deal pipeline and a buoyant market for Digital Infrastructure Assets, gives us confidence for the rest of this year and beyond."

For further information, please visit www.cordiantdigitaltrust.com or contact:

1.   Based on opening ex-dividend NAV at 1 April 2022 of 104.8p (cum-dividend NAV at 1 April 2022 was 106.3p)

2.   The comparator period is from the inception of the Company on 4 January 2021 to 30 September 2021

Notes to Editors:

Cordiant Digital Infrastructure Limited primarily invests in the core infrastructure of the digital economy - data centres, fibre-optic networks and telecommunication and broadcast towers - 'the plumbing of the internet' - in the UK, Europe and North America. Further details of the Company can be found on the Company's website at www.cordiantdigitaltrust.com.

The Company listed on the London Stock Exchange under the ticker CORD in February 2021. The IPO was upscaled to £370 million. In total the Company has successfully raised £795 million in equity, deploying substantially all of the proceeds into three acquisitions. In June 2022, the Company signed a €200 million Eurobond facility with four European financial institutions, providing fresh committed capital to finance new acquisitions.

The three acquisitions include: CRA, a leading independent digital infrastructure platform in the Czech Republic; Hudson Interxchange, a strategic interconnect datacentre located in New York City; and Emitel, a multi-asset digital infrastructure platform based in Poland. These assets offer stable, often index-linked income, and the opportunity for growth, in line with the Company's Buy, Build & Grow strategy.

Cordiant Capital Inc. (the Investment Manager), the Company's investment manager, is a sector-focused investment manager with particular expertise and experience in digital infrastructure. It invests in global infrastructure and real assets, running infrastructure private equity and infrastructure private credit strategies through limited partnership funds and managed accounts. Its current client base consists of global insurance companies, pension plans and family offices.

Chairman's statement

I am pleased to present the Interim Report for Cordiant Digital Infrastructure Limited (the Company) for the six months to 30 September 2022.

Introduction

The Company has achieved a solid operational and financial performance during a volatile period; increasing NAV by 2.6%, or 2.7p per share, and reporting a profit of £21 million while also achieving major milestones with the raising of a €200 million Eurobond facility and, on 15 November 2022, the completion of the acquisition of Emitel, our largest investment since launch.

With the acquisition of Emitel we have constructed a high-quality portfolio characterised by predictable revenues and cash flows supported by long tenure contracts with a high degree of inflation linkage and a blue-chip client base. This acquisition also aligns with the Company's Buy, Build & Grow strategy and offers the potential to generate additional value and further attractive returns to shareholders. We continue to be well supported, successfully raising a €200 million Eurobond facility in June 2022, and I believe that the strength of interest from global blue-chip institutions in the facility reflects the attractiveness of the Company's assets. This facility leaves the Company and its portfolio companies well placed to execute organic growth or further investments.

Performance

CRA performed well during the six months, and it is encouraging to see increases in revenues from its telecommunications operations, data centre and cloud, and IoT-related services, given the generally higher multiples at which these businesses are valued. To achieve this revenue increase, the team at CRA is delivering on a plan to further improve efficiencies and maximise capital returns. Given the strength of the underlying business, there is also the potential for organic and acquisition led growth opportunities.

Hudson continues to make steady progress, converting its healthy pipeline of opportunities into sales. The client offering is strong, the enterprise is strategically well located and the team have a clear plan in place to deliver stronger growth in the future.

Emitel has shown consistent year-over-year growth based on a stable business model with high revenue and cash flow visibility. The business benefits from long-term contracts with blue chip customers, strong cash flow generation and good inflation-resilient characteristics. Emitel has a strong balance sheet with net gearing at 4.2x EBITDA based on its 31 December 2021 results. Earnings to date for the current financial year (nine months to September 2022) are in line with budget and free cash flow generation is ahead of budget for the same period.       

Returns and dividend

For the first six months of the year the Company achieved a profit of £21.0 million, compared to £14.2 million for the period from 4 January 2021 to 30 September 2021. This profit reflects a movement in the fair value of investments, and portfolio income, offset by transaction and operating costs.

The NAV per share was 107.5p at 30 September 2022, reflecting a 2.6% increase over the period. Net assets were £832.0 million, comprising £432.3 million of portfolio assets and £399.6 million of other net financial assets, principally cash and liquid investments held in Polish zloty in preparation for the completion of the acquisition of Emitel.

It was previously announced that, pending the successful completion of the acquisition of Emitel, the dividend target for the year to March 2023 would be increased from 3.0p to 4.0p per ordinary share and I am pleased to confirm that the Company expects to pay a dividend target of 4.0p in respect of the year to 31 March 2023. This dividend is well ahead of the schedule indicated at the time of the IPO, which envisaged a 4p per share dividend by the fifth full year. On 28 November 2022, the Board approved a distribution of 2p per share with respect to the six months ended 30 September 2022. The record date for the distribution is Friday 9 December 2022 and the payment date is Friday 23 December 2022.

The ordinary shares delivered a total shareholder return of -7.5% from inception to 30 September 2022, equivalent to -4.6% per annum over that period, calculated on the basis of dividends being reinvested and the performance of the Company's share price since inception. Market volatility and negative sentiment in UK equity markets across all sectors adversely affected the Company's share price during this period. The Board has kept the Company's share price under review and considered its approach to this during the period, including the potential use of share buybacks. The Board currently believes that it is in the best interests of shareholders to continue to deploy the Company's capital in support of its Buy, Build & Grow strategy rather than undertake a share buyback programme but will continue to actively monitor this.

Investments

CRA is actively looking at options for organic and strategic growth. This is supported by the strength of the underlying business, including contracted revenue, cash flows and a robust balance sheet. Focus areas include potential bolt-on acquisitions and an investment in a greenfield datacentre.

There remains significant opportunity to invest in Hudson, with increased utilisation of the 6^th floor of the 60 Hudson Street, New York facility and the option over two further on-site floors. Hudson has the flexibility to invest in line with incremental demand so, as its sales and marketing platform evolves, there is potential for a corresponding increase in capital deployed.

Funds committed to the Emitel acquisition accreted significantly in value against UK pounds sterling, having been held in Polish zloty during the period.

The Company also confirms that with the completion of the Emitel transaction on 15 November, it has secured the potential for full utilisation of its Eurobond facility, €80 million of which was conditional on the closing of the acquisition.

Gearing and hedging

As at 30 September 2022, the Company had no debt at the fund level. At the investee company level there is debt, but in overall terms gearing is relatively low. Gearing (measured as aggregate net debt divided by gross assets) is 30% across the group as at 30 September 2022 on a pro forma basis, including Emitel. The Eurobond remained undrawn at 30 September 2022 although the Company subsequently submitted a €25 million drawdown instruction for value in December 2022.

The Company and its investee companies seek either to fix or to hedge the majority of interest costs of existing debt to mitigate the effect of increases in interest rates. Interest costs at both Emitel and CRA are currently largely hedged with 78% of the portfolio's aggregate debt on a fixed or swapped interest basis and so not significantly subject to market interest rate changes. Hudson currently has no debt. A combination of these hedging policies and ability to pass certain costs through to customers, such as power costs at the data centres held in the portfolio, means these businesses are significantly less affected by price inflation, including power price changes, than would otherwise be the case. The Investment Manager continues to work closely with the respective management teams to support ongoing careful input cost management.

Board and governance

The Company benefits from a highly experienced, diverse and independent Board, that is able to draw upon both direct sector and other wider knowledge, to provide effective oversight. That depth and breadth of experience also allows the Board to provide insight and guidance to complement the Investment Manager's team in its delivery for both the Company and shareholders.

Outlook

The Board believes that the Company is well placed to deliver on its target returns for investors. The investment assets acquired provide a good level of dividend cover and offer additional growth opportunities, in line with the Buy, Build & Grow strategy.

CRA is expected to continue to perform well and to continue to benefit from the management-led initiatives to grow the business. While Hudson has made steady progress, the Board believes it has strong underlying fundamentals, and remains confident it will deliver the returns and opportunities expected. Emitel represents a significant acquisition of a profitable and diversified platform in a market where data consumption growth is among the most robust in Europe. It also brings an effective ESG programme that is aligned with the Company's aims in this area, including the increased use of green energy.

The Investment Manager has successfully built a strong pipeline of opportunities in excess of €3.2 billion and that, along with the Eurobond facility, places the Company in a good position to continue to execute value accretive transactions. This, combined with ongoing demand for investment in Digital Infrastructure Assets, gives the Board continued confidence for the second half of this year and beyond.

Investment Manager's review

Introduction

During the six months to 30 September 2022, the Company's portfolio companies demonstrated a solid overall performance, notwithstanding headwinds resulting from macroeconomic factors such as rising interest rates and energy costs. A strong performance at CRA combined with positive foreign exchange movements more than offset the effect of an increase in discount rates associated with rising interest rates and an increasingly inflationary environment.

NAV per share increased by 2.6% over the first six months of the year³ to 107.5p, reflecting a stable performance from the Company's underlying asset base and favourable foreign exchange movements, offset by higher average discount rates.

The Emitel acquisition successfully completed on 15 November 2022 for an equity consideration of PLN1,920 million (£359 million at exchange rates on the date of completion) before customary transaction costs and expenses. Emitel is the Company's largest investment since launch.

Demand for Digital Infrastructure remains strong, with requirements for data processing and both fixed and mobile data transmission continuing to grow. This is underpinned primarily by the increased digitalisation of the economy and rising usage of software-based platforms in the personal, commercial and governmental domains. Digitalisation also enables increased remote working, which remains constant, even while the COVID-19 pandemic recedes.

By giving investors access to the critical assets underpinning the modern internet (mobile towers, data centres, fibre-optic and related infrastructure), the Company offers those investors exposure to long-term income and growth, high levels of inflation protection and long-term contracts - often with blue-chip companies and government entities.

In addition to the funds already deployed, the Company continues to have access to a healthy investment pipeline, valued at over €3.2 billion, offering the opportunity for further growth and income. After the success of raising the €200 million Eurobond facility, the Company remains well placed to execute additional diversifying transactions.

Financial performance

The Company made a profit of £21.0 million in the six-month period (period to 30 September 2021: £14.2 million), representing movements in the fair value of investments of £18.9 million (period to 30 September 2021: £17.6 million) and income from the portfolio of £7.7 million (period to 30 September 2021: £1.3 million), offset by transaction costs of £1.8 million (period to 30 September 2021: £2.5 million) and other operating and finance costs of £6.7 million (period to 30 September 2021: £2.3 million), together with net foreign exchange gains on revaluation of working capital of £2.9 million (period to 30 September 2021: £nil). This represents earnings per share of 2.7p.

The portfolio, consisting of CRA and Hudson, was valued at the reporting date at £432.3 million (31 March 2022: £409.9 million), and the Company had other net financial assets of £399.6 million (31 March 2022: £412.5 million), largely in the form of cash and liquid investments required to complete the acquisition of Emitel. Net assets were £832.0 million at 30 September 2022 (31 March 2022: £822.3 million), representing a NAV per share of 107.5p (31 March 2022: 106.34p, 104.84p ex-dividend).

Table 1: NAV progression for the six months to 30 September 2022

3.   Based on opening ex-dividend NAV

The increase in NAV from 31 March 2022 is based on accrued income and the effect of translating assets from local currency into UK pounds sterling, offset by the payment of the final dividend in July 2022, a small value movement in the portfolio primarily caused by increased discount rates and fund expenses for the period.

Accrued income of £7.7 million comprises interest accruing on the shareholder loan to CRA (£1.4 million) and interest on the cash balances held by the Company available to complete the acquisition of Emitel (£6.3 million).

The gain on foreign exchange translation of £25.8 million relates to the investments in CRA (gain of £11.4 million) and Hudson (gain of £11.5 million), held in Czech koruna and US dollars respectively, together with the Polish zloty cash balance held for the acquisition of Emitel. All three currencies strengthened against UK pounds sterling during the period.

The Company paid the final dividend of 1.5p per share relating to the period ended 31 March 2022 on 21 July 2022. Together with the interim dividend of 1.5p per share paid on 16 December 2021, this represented a dividend yield for the period ended 31 March 2022 of 3.0% on the IPO price of 100p per share.

The value decrease of £(4.0) million (CRA: gain of £0.8 million; Hudson: loss of £(4.8) million), recorded at 30 September 2022, reflects the stable operational performance by the Company's investments, in line with plan, offset by increases in the discount rates applied by the Investment Manager. These rates were used in the discounted cash flow (DCF) valuations of the investments, conducted in line with the International Private Equity Valuation (IPEV) guidelines.

The market has seen some considerable volatility in relevant risk-free interest rates and risk premia over the period, and the Board and Investment Manager have taken account of this volatility in the discount rates used in the DCF valuations of the Company's investments at 30 September 2022. The Investment Manager calculates a discount rate, or weighted average cost of capital (WACC), for each DCF valuation using publicly available sources for a risk-free rate, together with a risk premium and beta appropriate to the geography and industry sector of each portfolio company being valued.

Since 31 March 2022, the mid-point of the range of discount rates selected by the Investment Manager increased by 45 basis points on a weighted average basis. The range of discount rates or WACCs considered by the Investment Manager at 30 September 2022 was 7.86% to 9.88%. In the case of CRA, an increase in the discount rate was fully offset by other factors reflecting CRA's positive operating performance during the period. For Hudson, the increase in discount rate is the primary driver of the decrease in underlying value.

The Company's portfolio benefits from good resilience against inflation. On a pro forma basis including Emitel, 74% of revenues across the portfolio have full or partial inflation protection through index-linking or escalating contracts. At Hudson and other data centres across the portfolio, energy costs are passed through to the customer. Across the rest of the portfolio, dynamic forward hedging policies for energy costs are implemented by management, as well as active control of other input costs.

The Company and its investments also benefit from a conservative approach to interest rate risk, having fixed or hedged 78% of interest rate exposure on debt, on a pro forma basis at 30 September 2022, including Emitel.

Fund expenses, comprising management fees, deal costs and other operating expenses, represent a cost ratio over opening ex-dividend NAV of 1.0%.

Corporate reorganisation and IFRS 10

On 31 May 2022, the Company reorganised the holding structure of its investment in CRA in order to facilitate the raising of additional capital including the Eurobond facility, such that the investment in CRA is directly owned by Cordiant Digital Holdings Two Limited, a 100% owned subsidiary of Cordiant Digital Holdings UK Limited, which is itself a 100% owned direct subsidiary of Cordiant Digital Infrastructure Limited.

As a result of this reorganisation the Company records an investment in Cordiant Digital Holdings UK Limited which is, under IFRS 10 and IFRS 13 valued in line with IPEV guidelines and including the underlying value of its indirect investment in CRA. Returns from the Company's investment in Cordiant Digital Holdings UK Limited are recorded alongside returns from the Company's investment in CDIL Data Centre USA LLC, the legal entity through which Hudson operates, in 'Net gains on investments at fair value through profit or loss' in the Statement of Comprehensive Income presented below.

The table below reconciles the NAV bridge presented in Table 1 to the IFRS Statement of Comprehensive Income.

Table 2: Reconciliation to Table 1

Table 3: Company NAV progression since IPO

The Company has raised a net £780.1 million, through the IPO and subsequent successful placings in June 2021 and January 2022. £10.6 million of accrued income has been earned by the Company on investments and cash balances held. Total unrealised growth in the value of the portfolio to date is £82.2 million, comprising £36.3 million of unrealised valuation gain and £45.9 million of net foreign exchange translation gain. After a total since inception of £20.4 million of fund expenses and aggregate dividends paid to shareholders of £20.5 million, the NAV at 30 September 2022 is £832.0 million.

Assets and deployment

The considerable capital deployed to date has supported two increases in the Company's dividend target since the IPO. The nature of the assets acquired means the dividend is well covered by earnings generated by those assets and there is opportunity for material growth through the Company's Buy, Build & Grow strategy. The Company's portfolio (including Emitel) generates over £95 million of EBITDA on a run rate basis each year.

In addition to asset quality, key to delivering stable ongoing returns is retaining a strong sense of buying discipline. The strength of the Investment Manager's team in the Digital Infrastructure space is a unique advantage in this regard, in terms of both creating and converting opportunities across the market.

Review of portfolio companies

The performance of the underlying investments during the period was broadly in line with expectations, providing a good platform for continued returns and future growth.

Following the completion of the Emitel acquisition, Cordiant has two diversified portfolio assets as well as a data centre asset in the US. The degree of exposure to Central Europe is a function of being able to purchase attractive, cash-generating assets at attractive valuation levels. It is not indicative of the long-term geographic diversification plans of the Company.

The Company's portfolio now offers investors a broad degree of diversification across asset types (communications towers, data centres, fibre and IoT). This offers investors a balance of risk and growth characteristics. These elements support the Company's ability to continue to deliver for investors. They also enable the Company to both pay a well-covered dividend and to deliver higher returns in the future.

České Radiokomunikace

Original cost: £305.9 million

Value at 31 March 2022: £351.6 million

Further investment in the period *: £1.4 million

Unrealised value movement in the period: £0.8 million

Unrealised foreign exchange translation in the period: £11.4 million

Value at 30 September: £365.2 million

Income generated in the period: £1.4 million

* Capitalised interest on shareholder loan to CRA

The performance of CRA during the first half of the year was as expected and, following initiatives taken during the period, it is well placed to see growth advance in the second half. Revenues for the six-month period to 30 September 2022 were on budget at CZK1,097 million. Earnings of the business for the same period, as measured by normalised EBITDA were also on budget at CZK559 million. The business is seeing strong growth in higher value telecommunications operator services, IoT, data centre and cloud services. The data centre business has also seen steady increases in capacity utilisation.

Initiatives undertaken during the period include:

-      DC Zbraslav project: CRA continues to make good progress with regard to its green field data centre project at Zbraslav. It is in the final stages of securing a hard commitment for connectivity leases (optical ring) with leading telecommunications partners.

-      Broadcast revenue sharing model: earlier in the year CRA launched an innovative revenue sharing model to attract more TV channels to its network. CRA is in final negotiations with several TV operators to launch their channels in early 2023.

Other initiatives focused on operational and client development as well as financial management. Operational developments included strengthening the management team, with the appointment of a new CEO, CFO and COO, and greater deployment of capital to telecommunications operator and IoT-related revenue streams. Alongside initiatives to develop new customers, significant focus has been on working with existing key clients in relation to contractual arrangements to optimise pricing and other terms, and on supporting these relationships through a strong alignment of interests. It is expected that these initiatives will further enhance returns in years to come.

CRA's revenue base enjoys substantial mitigations against the impact of inflation, through a combination of indexing and escalators on the majority of revenue contracts. 66% of revenue contracts by value contain full or partial inflation protection through indexation or escalation agreements. CRA operates a dynamic forward hedging policy for energy costs, and typically buys energy 1-3 years in advance. This has seen the effect of rising energy costs in 2022 largely mitigated. Energy costs on data centre operations are passed through to the customer. CRA is highly cash generative and has a strong balance sheet, with net debt of CZK3,285 million representing gearing of 24% at 30 September 2022, calculated as net debt divided by enterprise value, with 100% of interest costs on the debt fixed or hedged on favourable terms.

The underlying strength of the business gives it significant flexibility to deploy additional growth capital. As such, and in line with the Company's Buy, Build & Grow strategy, CRA management is actively examining potential capacity expansions and strategic opportunities for growth.

The market for data and therefore digital assets in the Czech Republic remains robust and is continuing to grow. This is underpinned by continuing growth in the underlying economy, with GDP forecast to increase by 2.5% in 2022 and 0.1% in 2023⁴.

4.   Source: European Commission

Hudson Interxchange

Original cost: £55.8 million

Value at 31 March 2022: £58.2 million

Further investment in the period: £3.1 million

Unrealised value movement in the period: £(4.8) million

Unrealised foreign exchange translation in the period: £11.5 million

Value at 30 September: £68.0 million

Income generated in the period: £nil

Hudson continues to make steady progress, albeit with a somewhat slower pace of converting its healthy pipeline of opportunities into sales than initially expected, notwithstanding the signing of Dish, a major broadcast provider, and Windstream, a major telecommunications operator. The sales team has been augmented to accelerate this process.

In addition, Hudson benefits from having a strategically important location for internet connectivity in New York, an established blue-chip customer base and a strong offering, based around colocation services.

Since being acquired by the Company earlier this year, the firm has been rebranded to Hudson Interxchange, a marketing team has been created and new product positioning tools have been developed.

The current sales focus remains on the take-up of additional space on the 6^th floor of 60 Hudson Street, where several contracts with new customers for the first data hall have been signed since acquisition by the Company. Contracts have been signed for 325KW out of 3.5MW on the 6^th floor and the pipeline opportunity has increased from 1.6MW at 31 March 2022 to 2.5MW at 30 September 2022. In the six months to 30 September 2022, Hudson recognised revenues of $9.7 million, slightly behind budget, and EBITDA of $(2.7) million, slightly ahead of budget, as the business seeks to sign up customers and sell space.

Hudson benefits from being relatively immune to wider changes in inflation. Current revenue contracts contain escalation clauses as a mitigant against the effects of inflation. Energy costs are passed through direct to customers, resulting in no effect on Hudson's earnings. Hudson's principal other cost is rent for the building, which contains similar escalation clauses to the revenue contracts. Due to flexibility built into the business through options over additional space, it is able to align capex directly with sales growth.

Due to considerable market volatility during the period, risk free rates and risk premia have risen substantially. The Investment Manager has reflected these changes in the discount rate selected to value Hudson on a DCF basis. For Hudson, an increase in the discount rate is the primary driver of the unrealised value decrease reported in the period.

Emitel

Equity cost at exchange rates at the date of completion of the acquisition: £359 million

As previously announced, the Company was notified on 4 November 2022 that the final regulatory clearance process for the completion of the Emitel acquisition had concluded. Subsequent to that announcement, the acquisition completed on 15 November 2022. The regulatory process in Poland was multi-stage and included receiving approvals from the Polish Minister of State Assets and anti-trust approval from the Polish Office of Competition and Consumer Protection.

The Company funded the acquisition with cash on its balance sheet, acquiring PLN1,985 million for £353 million via a series of forward contracts in the first half of the year. These zloty cash balances have earned PLN52 million (£9.7 million) in interest from conversion up to the point of completion of the acquisition. The Polish zloty also strengthened against UK pounds sterling in the period before completion of the transaction.

The Company paid equity consideration of PLN1,920 million via its 100% subsidiary Cordiant Digital Holdings One Limited, which, together with Polish stamp duty and net notional interest accruing on the acquisition since the deal was signed in January 2022, made a total of PLN2,023 million (£378 million at current exchange rates) all paid from the zloty cash balances held by the Company. The Company has also paid related transaction fees and expenses falling due upon completion.

Emitel is a multi-asset Digital Infrastructure platform, with strong fundamentals and experienced management offering a good opportunity for growth, in line with the Company's strategy. Digital Infrastructure Assets include a network of over 500 communication towers, a fibre-optic network and a nationwide IoT sensor network, serving utilities.

Emitel has shown consistent year-on-year growth with a stable business model and high revenue and cash flow visibility. Emitel's broadcast revenue contracts have a weighted average duration of eight years, while its mobile contracts average 13 years for anchor tenants. Approximately 76% of Emitel's revenues have either full or partial inflation linkages. It has long been committed to ESG principles and buys 100% of its power from renewable sources. Emitel also routinely purchases 50-60% of its annual electricity requirement 1-2 years in advance via power purchase agreements which provides significant hedging protection in a volatile price environment. Emitel's management is supported by an organisation of around 410 operational and financial professionals with an average tenure of more than 19 years.

Over the full financial year to December 2021, Emitel delivered revenues of PLN486 million and EBITDA of PLN319 million. As at 31 December 2021, Emitel had outstanding debt of PLN1,462 million, and PLN131 million in cash on hand. Gearing represented 41% of enterprise value at 31 December 2021. Emitel also has an interest rate swap in place, which hedges 66% of the outstanding debt in relation to interest rate movements to June 2023. The transaction represents an enterprise value to the last 12 months EBITDA multiple of approximately 9.4x.

Poland remains a strong market for investment, with data use continuing to grow strongly and ongoing underlying economic growth.

Team

The Investment Manager's senior team combines seasoned, senior operating executives from the Digital Infrastructure industry with private capital investment executives with many years of experience in the sector. The ability to deploy operational know-how to drive improved post-investment performance and growth is key to the Company's strategy.

The experience of the team continues to manifest itself in a large and growing pipeline, a meaningful part of which is either privileged or bilateral in nature. The breadth and strength of the team has proved to be a key differentiator in certain deal situations.

The Investment Manager added Mark Tiner to the senior team during the period as Chief Financial Officer for Digital Infrastructure. Mark has experience at two investment trust managers as well as at a private equity firm. He will also be bolstering the team's focus on post-investment operational analytics as well as risk management.

Pipeline

The Investment Manager has developed and retained an attractive pipeline of additional investment opportunities, with an aggregate value in excess of €3.2 billion. This pipeline offers the opportunity for further growth and to diversify the portfolio by asset type, location and customer base. It also offers additional Buy, Build & Grow opportunities, via investment and synergies. As it stands, the current pipeline is weighted towards Western Europe and the United Kingdom.

The Investment Manager's focus on pricing discipline is now paying off as it is starting to see pricing levels become more attractive in light of recent market volatility and rising interest rates. There is significant activity in the fibre sector, in particular the fibre-to-the-premises market, which the Investment Manager is closely monitoring with potential opportunities for consolidation on the horizon. Interconnect and edge data centres remain key target areas and there are other potential multi-asset opportunities being reviewed which could be complementary to the existing portfolio. Overall, the Investment Manager retains its focus on the mid-market, where seller expectations on value are now becoming more realistic.

Table 4

Pipeline by geography

Table 5

Pipeline by sub-sector

With current market volatility and resulting limitations on access to capital markets, the Investment Manager acknowledges that this places restrictions on the Company's ability to convert opportunities in its pipeline. However, the Company remains well placed to be able to execute on additional transactions following the successful raise of the €200 million Eurobond facility on attractive terms. Following the completion of the Emitel acquisition the Company has secured the potential for full utilisation of its Eurobond facility, €80 million of which was conditional on the closing of that acquisition.

The strength of interest from blue-chip institutions in the Eurobond facility is a reflection of the underlying strength of the Company and demonstrates the trust in the ability of the Investment Manager to continue to deliver for the fund and investors.

ESG, impact and sustainability

The Investment Manager recognises the increasingly critical role of Digital Infrastructure to modern society as well as the environmental demands of the sector, in particular from data centre assets. As such, the Company's ESG and impact objectives are based on the aim of mitigating these environment costs, specifically high energy consumption and the associated greenhouse gas emissions, to help realise the net benefits of increased data transfer and access and communication. These are the Company's three guiding principles:

-      The need to reduce the carbon footprint of the digital economy through more efficient infrastructure assets and networks, and the integration of renewable electricity into the energy mix

-      The need to create enhanced communications, diminishing the need for unnecessary travel, and shrink pollution-causing congestion for the betterment of society

-      The need to better connect under-served businesses and households to the digital economy, thereby supporting enhanced opportunity and economic activity.

The Company in its effort to work towards its first guiding principle has been focusing on a three-layered approach to reducing electricity consumption and enhancing sustainability. First, helping to enable efficient network design (e.g. supporting integration of 5G and broadcast); secondly, efficiency at the network component level (e.g. more efficient data centres, and support of the EU Code of Conduct for Data Centres); and finally, integrating renewable energy where possible, and aiming for 100% renewable energy for platform assets.

This has been demonstrated by the Company investing in broadcast tower assets, such as CRA, which enable all households (within broadcast range) to receive the signal through one broadcast or one source of power consumption. In addition, a broadcast network requires fewer towers to cover the same area as a mobile network, limiting energy consumption and environmental impact. Furthermore, as part of the Company's engagement efforts CRA has committed to obtaining its energy from renewable sources.

The Investment Manager continues to apply its ESG and impact standards, policies and principles, tailored for the Digital Infrastructure sector, to its actions as AIFM of the Company. The Investment Manager's ESG team has been building upon its previously implemented ESG methodology and continues to evolve its processes and procedures, with the respective Responsible Investment Policies reflecting updates to the process.

Impact overview

As an inherently impactful sector, the Company has the opportunity to select companies where investment and active engagement can intentionally generate positive and measurable social and/or environmental outcomes. The Company separates the channels through which it can create impact into two distinct approaches: positive external impacts and positive internal contributions within its investee companies.

Offsetting scheme

The Investment Manager resolved to calculate and offset the greenhouse gas (GHG) emissions for its own London office for 2021. It is the Investment Manager's intention to increase the scope of its GHG emissions accounting and offsetting of its own carbon impact in future periods. Emissions have been calculated, assessed, and verified via a third party, Carbon Footprint Ltd, using their Carbon Footprint Appraisal Service. Based on the results, the Investment Manager decided to offset the emissions produced in its London office throughout 2021 by donating to two offsetting projects, one in Brazil and the other in Turkey, both within its focus sectors.

Outlook

The Investment Manager remains confident the Company will continue to be well placed to make further progress in the second half of the year and beyond.

The Company benefits from a robust portfolio of existing investment assets, that not only underpin current returns to investors but also offer opportunities for growth, in line with its Buy, Build & Grow strategy.

The Investment Manager has also developed a significant additional pipeline of investment opportunities, which the Company is well placed to take advantage of following the raising of the Eurobond facility earlier in the year.

Given that the digital economy constitutes part of the essential infrastructure of modern life and given that the growth in this sector is running comfortably above that of the economy in general, the Investment Manager looks to the Company's future with considerable optimism.

Principal risks and uncertainties

Under the FCA's Disclosure Guidance and Transparency Rules, the Directors are required to identify those material risks to which the Company is exposed and take appropriate steps to mitigate those risks. The significant risk factors were disclosed in the Company's prospectus, which is available on the Company's website www.cordiantdigitaltrust.com

The Company's assets consist primarily of investments in Digital Infrastructure Assets, with a predominant focus on data centres, mobile telecommunications/broadcast towers and fibre-optic network assets. Its principal risks are therefore related to market conditions in the Digital Infrastructure sector in general, but also the particular circumstances of the businesses in which it is invested. The Investment Manager seeks to mitigate these risks through active asset management initiatives and carrying out due diligence work on potential targets before entering into any investments.

The Board thoroughly considers the process for identifying, evaluating and managing any significant risks faced by the Company, including emerging risks, on an ongoing basis and these are reported and discussed at Board meetings. The Board ensures that effective controls are in place to mitigate these risks and that a satisfactory compliance regime exists to ensure all applicable local and international laws and regulations are upheld.

For each material risk, the likelihood and consequences are identified, management controls and frequency of monitoring are confirmed, and results reported and discussed at the quarterly Board meetings.

The key areas of risk faced by the Company are summarised below:

These principal risks and uncertainties remain the most likely to affect the Company in the second half of the financial period.

Directors' responsibilities statement

The Directors are responsible for preparing this interim financial report in accordance with the Disclosure Guidance and Transparency Rules (the DTR) of the UK's Financial Conduct Authority (the UK FCA).

In preparing the unaudited condensed set of interim financial statements included within the interim financial report, the Directors are required to:

The Directors are responsible for designing, implementing and maintaining such internal controls as they determine are necessary to enable the preparation of the condensed set of interim financial statements that is free from material misstatement whether due to fraud or error.

On behalf of the Board

Shonaid Jemmett-Page

Chairman

29 November 2022

Condensed Statement of Financial Position

As at 30 September 2022 (Unaudited)

The unaudited condensed interim financial statements were approved and authorised for issue by the Board of Directors on 28 November 2022 and signed on their behalf by:

The accompanying notes form an integral part of these unaudited condensed interim financial statements

Condensed Statement of Comprehensive Income

For the six months ended 30 September 2022 (Unaudited)