DGI9 Digital 9 Infrastructure Plc

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION AS STIPULATED UNDER THE UK'S MARKET ABUSE REGULATION. UPON THE PUBLICATION OF THIS ANNOUNCEMENT, SUCH INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.

5 February 2025

DIGITAL 9 INFRASTRUCTURE PLC

("D9" or the "Company" and, together with its subsidiaries, the "Group")

 Unaudited Net Asset Value

In preparation for the Company's annual results, the Board of Directors of the Company (the "Board") today announces an unaudited net asset value ("NAV") as at 31 December 2024 ("FY24").

The valuation process for FY24 has included a thorough bottom-up review of each of the underlying portfolio companies and their valuations. This process was conducted by InfraRed Capital Partners ("InfraRed"), overseen by the Board, and further supported by an independent review from a newly appointed leading accountancy firm.

A description of key movements in the Company's portfolio valuation is set out below. Further detail will be provided on the underlying assumptions and methodology of the valuation process upon publication of the Company's audited annual results in March 2025.

NAV

The Board announces an estimated unaudited portfolio NAV for FY24 of approximately £302 million, a £101 million reduction since the last reported NAV of £403 million as at 30 June 2024. The NAV per share as at FY24 is expected to be approximately 35 pence, a decline of approximately 11.6 pence per share from the Company's last announced NAV as at 30 June 2024.

The reduction in NAV principally reflects:

·    Adjustments to reflect the agreed sale prices of Aqua Comms and EMIC-1 in line with prior announcements, net of approximately £6 million of transaction fees based on contractual terms entered into at the start of the sale process;

·    Changes in key assumptions for Arqiva Group ("Arqiva"), Elio Networks, SeaEdge and the Verne Global earn-out, including: macroeconomic; discount rate; capital structure; terminal value; and revenue forecasts that reflect the view of the Board and Investment Manager; and

·    £8 million of interest costs incurred in FY24 related to the Revolving Credit Facility ("RCF") and the Arqiva Group Vendor Loan Note ("VLN").

The key drivers of the movement in NAV per share over the six-month period are summarised in the table below:

The Board continues to determine that it is in the shareholders' best interests to publish an aggregate NAV to protect the Company's commercial position during live sale processes of portfolio companies. The Company intends to provide further granularity in its audited full year results in March 2025.

Portfolio performance and underlying portfolio company assumptions

The valuation process led to a revision of certain assumptions in relation to Arqiva, Elio Networks, SeaEdge and the Verne Global earn-out. The key factors driving the above-mentioned 7.3p impact are summarised below:

·     Arqiva - InfraRed undertook a detailed assessment of the valuation assumptions for each of Arqiva's key value drivers. The valuation was revised to reflect a balanced position on a range of key assumptions. These include: macroeconomic; discount rate; terminal value; capital structure; the long-term economic outlook of the broadcast sector based on Ofcom's published scenarios; and smart metering forecasts following recent water utility bid successes. This latest valuation assessment confirmed the intrinsic value of the Company's stake in Arqiva, which is underpinned by a diversified and evolving business model with a strategically located tower network adding to traditional broadcast revenue streams;

·     Elio Networks - Adjustments made related to the adoption of revised business plan assumptions reflecting Elio Networks' management's latest views and current market conditions for fixed wireless access connectivity businesses;

·    Verne Global earn-out - The Company is currently considering all options for the optimum risk-adjusted route to monetise the earn-out, including continuing to hold and the potential for negotiation of an early settlement. Adjustments have been made to the valuation to reflect the contractual mechanism, which references the performance target on which the earn-out is calculated to specific areas in the original sell-side business plan, and current market dynamics; and

·       SeaEdge - Adjustments made to the valuation to reflect changes in market conditions and the underlying credit profile of the tenant and the lessee.

The valuation process is yet to be completed, which may result in further changes. Further information on the valuation process will be provided in the annual report.

Asset divestments

On 31 December 2024, the Board announced the divestment of EMIC-1 for $42 million (£33 million), net of transaction costs, with a completion expected by March 2025. The net consideration represents a 15% discount (approximately 0.7p per share) to the valuation of $49.6 million (£41 million) as at 30 June 2024, or a 10% discount (approximately 0.4p per share) before transaction costs.

After the period end, on 17 January 2025, the Board announced the divestment of Aqua Comms for $48 million (£40 million), net of transaction costs. This represents a 36% discount (equating to c. 2.6p per share) to the Aqua Comms valuation incorporated in the NAV as at 30 June 2024, or a 28% discount (approximately 2.1p per share) before transaction costs. The sale is subject to multi-jurisdictional regulatory approvals, which are expected to take approximately 12 months.

Taking into account the combined subsea business (which includes Aqua Comms and EMIC-1), the sale consideration represented a discount to the Company's combined valuation of these two investments as at 30 June 2024, of 28% (c. 3.3p per share) post-transaction costs, or 21% (c.2.6p per share) before transaction costs.

The Company is continuing to assess options in relation to the remaining portfolio companies to maximise value for shareholders, in light of the orderly managed wind-down objective.

Capital allocation

The net proceeds of the EMIC-1 and Aqua Comms transactions will be used to further de-lever the Company's balance sheet and repay the £53 million balance of the RCF outstanding as at 5 February 2025. Given the contractual maturity date of the RCF is 17 March 2025, the Company is in advanced discussions with the lender group to extend the RCF to facilitate anticipated timing of net proceeds from the announced divestments. The Company expects to provide a full update when the new facility has been agreed. Following the repayment of the drawn balance of the RCF, allowing for any working capital requirements, the Board intends to use net proceeds to prioritise returns of capital to shareholders over the Group's longer-term obligations.

Annual Report and Accounts 

The Annual Report and Accounts for FY24 will be published in March 2025 and the audit by PricewaterhouseCoopers LLP is currently underway.

ENDS.

Contacts

LEI Code: 213800OQLX64UNS38U92

The person responsible for arranging the release of this announcement on behalf of the Company is Helen Richardson, Company Secretary.

About Digital 9 Infrastructure plc

Digital 9 Infrastructure plc (DGI9) is an investment trust listed on the London Stock Exchange and a constituent of the FTSE All-Share, with the ticker DGI9. The Company's investment objective is to undertake a Managed wind-down of the Company and realise all existing assets in the Company's portfolio in an orderly manner. For more information, please visit www.d9infrastructure.com.

About InfraRed Capital Partners (Investment Manager to D9)

The Investment Manager to D9 is InfraRed Capital Partners Limited ("InfraRed") which has successfully invested in infrastructure projects since 1997. InfraRed is a leading international investment manager, operating worldwide from offices in London, New York, Seoul, Madrid and Sydney and managing equity capital in multiple private and listed funds, primarily for institutional investors across the globe. InfraRed is authorised and regulated by the Financial Conduct Authority.

The infrastructure investment team at InfraRed consists of over 100 investment professionals, all with an infrastructure investment background and a broad range of relevant skills, including private equity, structured finance, construction, renewable energy and facilities management.

InfraRed implements best-in-class practices to underpin asset management and investment decisions, promotes ethical behaviour and has established community engagement initiatives to support good causes in the wider community. InfraRed is a signatory of the Principles of Responsible Investment.

Further details can be found on InfraRed's website www.ircp.com.