Digital 9 Infrastructure PLC (DGI9) Earnings Call Transcript & Summary

Thank you very much. Good morning, everyone, and welcome to the annual results presentation for Digital 9 Infrastructure PLC for the year ended 31st of December 2022. My name is Ben Beaton and I'm a comanaging part of Triple Point and the fund manager to D9. I'm joined today by Arnaud Jaguin, D9 Investment Director, who joined Triple Point back in March 2021 at the time of the IPO. I'm also joined by Chris Flowers, who is the Finance Director at the D9 and who has been a colleague of mine since 2014, say, for a short period as another analyst at an investment fund. In terms of format, I'm going to cover some key highlights. Chris will talk to financial performance. Arnaud will take you through the valuations and the portfolio update. And I'll finish up with an outlook, including path to dividend cover, capital raising initiatives and recruitment. So I'll now turn to the key highlights. During the year, we deployed or committed GBP 768 million and welcome 5 new companies into the portfolio, [indiscernible] Host Ireland, now renamed Elio Networks; Volta, now Verne Global London; Ficolo, now Verne Global Finland; Giggle, a Fiber to the Home business in Glasgow; and Arqiva, which was acquired in October. Important to note that D9 is our fully invested and has a portfolio of 9 businesses, which benefit from diversification by sector, geography, currency and management team. Revenue was GBP 409 million and EBITDA was GBP 206 million, which was in line with forecast. Dividend cover for the period was 0.4x and broadly stable year-on-year. We're confident in the quality of the portfolio and its ability and time to fully cover the dividend target. And later in this presentation, I will talk through the path to dividend cover. During the period, we saw a 26% increase in the IFRS NAV to GBP 950 million, which underpins a 4.9% increase in NAV per share, between December '21 and December '22, the NAV increased by just over 5p to 109.76p. Overall, D9 produced a 10.4% total return to shareholders taking dividends and NAV growth together. This is stat against our target return of 10%. Now looking forward in 2023, our portfolio companies GBP 233 million of CapEx opportunities, reflecting a significant increase in customer demand for their services and products. In January, the trading update we signaled that we were exploring complementary sources of capital, including portfolio company-level debt and possible syndication. On that front, we've made significant progress, having agreed the term sheet for a $100 million debt facility for one of our high-growth portfolio companies. And on the syndication front, we are working with a leading investment bank to run a competitive syndication process, I'll talk about both of these initiatives in more detail towards the end of this presentation. For a trust that is only 2 years old, at the end of this month, we're really pleased with the strong sales results. I'll now pass over to Chris to take us through the financial performance.

Thanks, Ben. Hello, everyone, and thank you for joining us today. We're pleased to deliver the annual results for the year ended 31st of December '22. I'll now take you through the financial review, starting with Slide 7. We're really pleased with the continued growth of our investing companies, which has been driven by strong customer demand and this has underpinned a 10.4% total return for the year. This reflects dividends paid during the year of 6p and not grow 5p. This is a full of 10% total return target. During the year, we have remained focused on striking the right balance between growth, financial leverage and total return as we remain disciplined in our capital management approach. Our NAV increased 4.9% to 109.76x per share. The company had earnings for the year of 11p, and this reflects strong valuation growth. In particular, in the second half of the year as the acquisitions, Elio Networks, Verne Global Finland, Verne Global London and Arqiva were brought into the portfolio of fair value. It is important to know our evaluations are based on cash flow forecasts for management projections, which is typically reset annually. The most recent update to these productions was completed in December '22 with the exception of Arqiva, who we expect to finalize their updated long-term plan in time for the interim valuations in June '23. Alongside the audit, our valuations were also reviewed by an independent valuation adviser. Arnaud will talk to the valuations and the key drivers a little later in the presentation. Alongside these results, the Board approved an interim dividend of 1.5p and this takes total dividends paid for the year to set path in line with our stated annual dividend target. We have reaffirmed our dividend target of 6p in 2023, and we will look to continue our progressive dividend policy in the medium term. The company has an adjusted GAV of GBP 1.3 billion comprising the total assets of the company, including both drawn and undrawn debt facilities of the group, but it does exclude any investee company-level debt. In terms of leverage, the combined RCF and VLN represented 40.5% of our adjusted GAV. As discussed in our trading update in January, the VLN is expected to be accretive. And importantly, our aggregate levels of borrowing remained comfortably below the 50% maximum, which is permitted by the company's investment policy. The company had an ongoing charge ratio for the year of 1.1%. This is a minor increase from the annualized [ 4.09% ] published in June '22. But as the company has now largely deployed its available capital, we do expect the OCR to decrease as economies of scale and operating efficiencies are achieved. Turning to the statement of comprehensive income. On this slide, the Unrealized fair value gain of GBP 97 million represents the uplift in valuation across the portfolio. Other income represents dividends we received from Elio Networks and lease income from our investment in [ CH. ] Dividend cover for the year is 0.4x and then we'll talk to this in the past to our dividend cover in a little more detail later in the presentation. Now turning to the statement of financial position. Investments held at fair value were GBP 921 million. In addition, there's GBP 30 million of cash on the balance sheet retained by the company for working capital purposes, and this takes the net asset value to GBP 950 million. On Slide 10, the bridge presented takes us from an opening NAV of 104.62 in December '21 to the closing out of 109.76. Again, this is an increase of 4.9%. You can see from the bridge that the main driver fee increased now is predominantly due to the gains made on the revaluation of our portfolio. This year, all our investee companies generated a positive return with many outperforming. This highlights the inherent value of capital appreciation potential in the portfolio, particularly regarding the Nordic data centers. Looking at the bridge, working from left to right, accretive equity assurances during the year added 0.5p with income from the portfolio adding 0.8p. Costs incurred making acquisitions during the year contributed a negative 2.2p. As mentioned, an upward revaluation of our portfolio added 14.6p. Financing costs at the RCF and the VLN had a combined impact of 1.27p and then company operating expenses and management fees were 1.32p. And finally, we paid dividends of 6p during the year. All in all, this brings the closing of net asset value to 109.76p per share. Now moving to the company's liquidity and leverage position. The group had GBP 73 million of total cash, and this includes the GBP 30 million that I mentioned earlier on the company's balance sheet. The remainder of this cash is held in the company's unconsolidated subsidiaries. It's worth highlighting that of this cash, GBP 55 million of this is unrestricted and available to the company. It's also worth pointing out, we have existing commitments of GBP 46 million to our investee companies to take advantage of the exciting growth opportunities that they provide. We expect the portfolio will achieve higher returns due to the arbitrage between continuing to invest in our existing asset base compared to making new acquisitions. To further explore these opportunities and increase liquidity, as Ben mentioned, the company has commenced processes to seek sources of complementary capital. Ben will talk to this in a little bit more detail later in the presentation. Turning to leverage. During the year, the company agreed a revolving credit facility of GBP 375 million. At the year-end, we had drawn GBP 331.2 million, and this was to fund the acquisition of Arqiva as well as additional capital expenditure requirements across the portfolio. At year-end, that left us with GBP 43.8 million available to draw. However, since the year-end, we've drawn an addition of GBP 25 million, and this was deferred capital expenditure requirements of London but also Aqua Comms. As a result, the company has drawn a total of GBP 356.2 million, and we have GBP 18.8 million remaining on the facility. In 2022, the company also agreed to additional debt via VLF, and this was done to reduce our equity commitments at Arqiva. As discussed during our January update, this statistics is being issued by the vendor, it matures in 2029 and has a step-up fixed interest rate profile as outlined in the January presentation. There are no penalties for partial or early repayment and the cost of the VLN is lower than the long-term IRR expected from the investment. So we do expect this to be increased its value. Now looking at our leverage position, as at the 31st of December, when you consider only the drawn element of the RCF, the company has leveraged against adjusted GAV of 25%. When we consider a fully drawn RCF of GBP 375 million, this percentage increases to 28.3%. And when you include the VLN, it rises up to 40.5%. All of which are comfortably below the published investment restriction of 50%. Under this restriction, the company has around GBP 120 million of headwind. When we consider company-specific leverage only being the RCF and the VLN, the company has a net debt-to-portfolio EBITDA ratio 2x. However, on a look-through basis, including D9 754 million share Arqiva debts, the company has a net debt portfolio EBITDA ratio of 5.69x. And with that, I'd like to hand you over to Arnaud, who will now take you through the portfolio overview and the valuations in a little more detail. Thank you.

Thank you, Chris. Now moving on to the valuation and portfolio review. Before looking into valuation, we thought it would be useful to focus on the main drivers underpinning the fund valuation, including the ways we create shareholder value at D9. The first driver and by far, the most significant in 2022 was portfolio expansion. Indeed, we deployed significant capital for 5 new acquisitions last year, namely Elio Networks, Verne Global London, Verne Global Finland, Arqiva, [indiscernible]. The second driver is portfolio integration. That basically means that we are building platforms. The best example is Verne Global. We have invested into 3 data center assets, consolidated them under one brand, progressively integrated them commercially and operationally. On top of it, we're also driving collaboration on synergies between our different platforms. The third driver is portfolio resourcing. More specifically here, we are talking about investing in our management teams for all our platforms, we are making sure that we are putting together word class management teams that can help us create shareholder value. The fourth driver is portfolio funding. We are constantly assessing opportunities to fund CapEx projects within our platforms. And typically, those projects are very accretive to shareholder returns. Finally, portfolio planning. Digital 9 is digital infrastructure specialists on our companies, not only benefit from that expertise, but also from all sorts of fund resources available to them. And Recently, for example, the team has been very involved in the 5-year business than reforecasting for each of our portfolio companies, and those are the business plans that were used to drive our valuation exercise. That's a very long transition. Let's have a look at valuation now. So first, let's talk about the fund gross asset value on an aggregate basis. As you can see on the chart on the right, our GAV stood at GBP 1.3 billion as of December '22. This compares to GBP 748 million a year before. Some of this expansion was funded by way of new equity raises, but a lot of it was funded by our [ CF ] facility as well. On a net basis, we moved to GBP 950 million, which represents a 26% uplift as mentioned before. On a per share basis, we are looking at a 5p increase over the year, which is consistent with our commitment to the market. Key drivers of that NAV increase where portfolio expansion on asset revaluation apart from EMIC-1 and Giggle, every asset in the portfolio has seen an uplift in valuation mostly driven by strong operational performance on the impact of foreign exchange. The asset -- per asset details are available in Appendix. As a reminder, those valuations are very fresh as the portfolio companies' business plans were all updated super recently. Now let's have a look at our cost of equity. Here, the key message that our weighted average cost of equity across the portfolio has moved up a little bit to 12.64% despite the acquisition of Arqiva, which carries a lower cost of equity. Obviously, there have been several factors pushing up our cost of equity. So here, I mentioned, first, the risk-free rates have moved up quite significantly during the period. Equity risk premium has also gone up a bit, reflecting a degraded market backdrop on increased productivity and finally, in the course of 2022, we have also made 3 acquisitions that carry a higher cost of equity due to the relatively modest size and that's Elio, Verne Global London, and Verne Global Finland. However, those factors were mostly offset by a couple of other items. So as mentioned earlier, one item is the acquisition of or Arqiva. Arqiva is indeed a large established business that carries a lower cost of equity than the rest of the portfolio. Also, we applied a reduction in the size premium for both Aqua Comms and Verne as they kept executing on their business plan ongoing. As you can see on the chart on the right, our cost of equity is significantly higher than that of other listed digital infrastructure failures. Moving on to portfolio KPIs. These KPIs reflect our commitment to build a portfolio providing access to long-term, recurring, contracted on largely inflation-protected revenue in major currencies. First, I will address the long-term contract point. More than half of our portfolio revenue is coming from contract longer than 10 years and the weighted average remaining contract length currently stands at over 7 years. In terms of inflation, 66% of our revenue benefits from some sort of inflation protection, including 52%, which is directly linked to CPI or RPI with no cap. In terms of currency exposure, 99.7% of our revenue was denominated in either British pounds, U.S. dollars or euros. Now we will have a closer look at each of our platform starting with our Subsea fiber platform. This includes Aqua Comms on EMIC-1 which is still in its development phase, our Subsea business has performed well commercially with a 5% increase in revenue year-on-year. EBITDA was down 6%. However, this was mostly driven by incremental OpEx and that's reporting accelerated growth in years to come. The net increase of 28% reflects both incremental CapEx invested in 2022 on the more ambitious business plan involving further CapEx in coming years. In terms of business update, the big item is the upcoming change in personnel with June 5 replacing [indiscernible] in spring. Another highlight has been the continued development of EMIC-1, still on track to launch in 2024. In addition, we also expect the launch of AEC-3 later this year. This will be our third cable system across the Atlantic. Moving on to our data center platform. So here, we are talking about Verne Global in Iceland, but also Verne Global London, Verne Global Finland. It was a very positive year for the platform with revenue of 15% year-on-year on EBITDA, up 9%. Most importantly, the challenging macro backdrop on global energy crisis has had a very positive impact on Verne's pipeline. This in turn has under insurgent growth CapEx requirements now standing at roughly GBP 0.5 billion over the next 5 years. This CapEx will be used to expand the current Iceland campus from 40 megawatts to 94 megawatts and also keep growing our other locations. As a result, NAV is up 34% year-on-year, reflecting value uplift from increased [indiscernible], but also incremental CapEx spend by [indiscernible] since the acquisition. As for business updates, we would like to highlight again the amazing management team that we have put together, including the hiring of Kate Hennessy as the new CFO and Mike Allen as the new COO. It is fair to say that they have really hit the ground running and are driving ever-tighter integration between the different assets within our platform. Actually, earlier this week, I was in Finland with Dominic, Mike and Tate [indiscernible], it was just great to see how they are integrating our assets together and making sure best practices or the approach across the platform. Now we'll have a look at our wireless access. First, our fixed wireless access business in Dublin. This one was acquired in April '22 and used to be called Host Ireland, it has now been rebranded to Elio Networks to better reflect the nature and vibe of the business. It has been performing well and in line with expectations, with revenue up 6% and EBITDA up 4% year-on-year. Apart from the rebranding, we have again invested both OpEx and CapEx to support future growth, including the core network upgrade on some key hirings. NAV is up 17% since acquisition. Now moving on to Arqiva. As a reminder, we acquired a 48% vote in interest in Arqiva in October 2022. Arqiva has a different reporting cycle, the last numbers published by Arqiva were as of June 2022. So that's what we're looking at here. The business has been performing well and steadily. Revenue was down 4% year-on-year, which was expected and mostly due to discontinued operations on the 700 megahertz clearance program. During the same period, EBITDA was up 2%. For the current financial exercise, we expect Arqiva's revenue to benefit from the high inflation as a lot of Arqiva's revenue indexed on either RPI or CPI. And this positive impact from inflation contributed to a net increase of 18%. Key highlights for 2022 included the refinancing of the junior bond, which has led to a reduction in leverage of GBP 175 million on the appointment of [indiscernible]. Finally, I will not spend too much time on Giggle, as really timing at the moment. So fiber-to-home opportunity in Glasgow with a focus on social housing, we have only spent GBP 3 million [ CD ] investments so far on or looking at options for the next round of funding. It's a very exciting opportunity, though, with the untested management team led by Dave Axam. And now I will hand over to Ben, who will deliver the outlook section.

Thank you very much, Arnaud and Chris. I'm going to spend a little bit of time on this slide actually because I know it's a very important feature for shareholders. So the first thing to say is that we've sought to bring a greater level of transparency to the calculations underpinning dividend cover and have included a bridge from EBITDA to net adjusted operating cash flow. This bridge includes, among other things, a deduction for fund operating expenses, by RCF costs and we fund a loan note associated with the Arqiva acquisition. And importantly, investors can see the impact of the inflation like swaps, label accretion payments in this table that form part of Arqiva's financing arrangements. It's important to note that the table presents a pro forma view, a human ownership of the investee company since the start of the year and a full year impact of the VLN, the accretion payments and the Arqiva. Now of course, we acquired several companies during the period, including Arqiva in October. These calculations produce an OCF dividend cover of 0.4x. We're confident in the portfolio's ability to sustainably cover the dividend in time, and there are 2 principal drivers which will contribute to dividend growth, which I'll just spend a moment on. So the first is done, Verne has presold its existing capacity to a range of customers. And importantly, this capacity is not dependent on future CapEx, its existing capacity. Customers typically take 1 to 2 years to take up the bulk of the capacity they committed to. And so to put it in numbers, Verne has approximately 13 megawatts of capacity that has been sold but it's not yet fully ramped. So 32% of this capacity is expected to be utilized by the end of this year, 66% of it by the end of next year, with the remaining 2% going out in the following years. Once fully ramped, D9 will benefit from an additional circa GBP 21 million of operating cash flow earnings from the -- the second key contributor towards dividend cover is Arqiva and the impact of inflation. You said it before, the inflation is good for our Arqiva in the long run, and that is because a significant proportion of its high-quality revenue base is linked to inflation, as we just heard. And we have seen that benefit play through into the valuation, which has led to NAV growth. However, in the short run, inflation has a negative impact on OCF by virtue of the inflation-linked swaps. So assertively, the swaps were put in place 10 to 15 years ago, they expire in 2027 and the swaps resulted in cash payment and accretion payment to the swap provider in June of each year based on the prevailing inflation figures in March. Now we're obviously in a time of high inflation, which had a negative impact on OCF in June last year and were again in June this year. However, as inflation falls, the accretion payments will reduce and that will feed through to an improved OCF. For illustration, if inflation was to fall back to circa 4% later this year, there would be a circa GBP 24 million benefit to D9's OCF from Arqiva. And I want to discuss that point because I think there's a slight misconception that OCF will be materially impacted by the inflation of linked swaps until 2027 when they expire. And I'm just trying to highlight those, we should see a material benefit from Arqiva's OCF as inflation falls back to more normalized levels over this coming year. Now taken together with the Verne benefit, that provides an additional circa GBP 45 million while operating cash flow generated from our existing portfolio. We think this view of adjusting operating cash flow provides a good sense of the underlying robustness of the portfolio companies whilst accounting for the additional costs like the VLN, the RCF and the PLC running costs. However, it's important to note that OCF does not necessarily translate into cash up to the PLC as the company may choose to use the operational cash flow to support accretive growth CapEx. That leaves you quite nicely on to the next slide, please. So as reported in January, our portfolio companies have seen very significant increases in customer demand for their products and services which has led to a significant increase in the potential CapEx opportunity for D9 and the portfolio companies. As a consequence of D9 being fully invested and subject to a 25% investment concentration limit, we announced that we were exploring complementary sources of capital, including portfolio company-level debt and a potential syndication of a minority stake. I'm pleased to report that significant progress has been made on both fronts. In relation to the syndication, we're working with various external advisers, including a leading investment bank to run a competitive indication process. This indication would support the growth CapEx pipeline at the time that D9 cannot support all of this, but importantly, it continues to allow D9 to participate in the capital growing opportunity whilst aiding near-term liquidity. In relation to the debt, term sheet for [indiscernible] million facility has been agreed with a lender for one of our hybrid businesses. The proceeds of this facility will be used to finance accretive growth opportunities and up to 50% will be used to repay a company's shareholder loan and the latter can be used by D9 to partially reduce the drawings of the company RCF. Both of these work streams have commercial sensitivities, so we won't be providing much more detail at this point, safe to say a few points. We said at the trading update that what guides our capital management approach is growth, financial leverage and total return, we believe that these 2 processes will support and ultimately strengthen this disciplined approach. We've also recognized that there will be demand for clarity on these 2 processes, including tight lines and terms and as soon as additional disclosure is commercially appropriate, we're committed to updating the market. And thirdly, the progress we've made with the commitments on the trading update are all focused on strengthening our ability to generate growing and sustainable capital growth and net income to shareholders. Finally, on this slide, with regard to equipment we've met with a number of high-quality candidates, and we expect to make an appointment in Q2. I would like to stress though that as we said before, there remains an experienced team within Triple Point, the operating partners, the Board and the portfolio of companies, who are focused on the delivery of the D9 strategy and the objectives. I'll now just round off with some key takeaways. As I said in my intro, the portfolio has performed strongly in 2022 and that allowed us to deliver annual returns of 10.4%, including a 6p dividend as promised. As mentioned back in January, we had a strong growth pipeline ahead as reflected by our company's GBP 223 million CapEx requirements for 2023, which adds to the CapEx requirements of more than GBP 600 million for the period to '24 to '27. To capture such growth opportunity, we've drawn GBP 25 million of the RCF post period end to fund additional CapEx of Verne London and Aqua Comms. And as I've just said, we bought 2 financing initiatives. As discussed in the previous slide, and we're committed to providing further updates as soon as possible. With that in mind, we have reaffirmed the 6p dividend per share for 2023, in line with 2022. And as I discussed a moment ago, we have a clear pathway for the dividend cover to improve, in line with the increase in operating cash flows and lower accretion payments of Arqiva and further capacity ramp-ups. That brings us to the end of the formal presentation. We'd be delighted to now open up to questions.

Thanks, Ben. We will now open the Q&A session. As a reminder, questions can be asked by the webcast platform. Please make sure your name and company name clearly status. If some questions remain unanswered at the end of this call, it will follow up [indiscernible] individuals where we can. You just bear with us while we received the questions. Okay. So first question, how are the valuations arrived and ultimately signed up?

Thank you very much. Chris, are you happy to say that?

Yes, sure. So firstly, our valuation to prepare a free cash flow to equity basis, and this is the same approach [indiscernible] for the interim results in June '22. The valuation is compared internally by Triple Point, and we source the majority of our inputs from external sources. So that's things like the size of premiums, the risk-free rates, equity risk premiums, et cetera. We then take those valuations, and we present at the Triple Point's internal valuation committee, and they sign off, they are happy. It's worth noting as well that this is all done in conjunction with our typical year-end audit process. This year, we also appointed an independent valuation adviser from a top-tier firm who also reviewed the impost of those valuations. And then ultimately, this go to the Board for final .

Thanks, Chris. Why has the valuation of [indiscernible] by 18%?

Thank you. I'll take that one. So I guess there's a few different points to unpack on this. The first thing to note is that we agreed the price for our key one signed the transaction back in May. We didn't complete until October, but the pricing for that business was agreed back in May. We've said before that inflation is a good thing for the Arqiva business in the long run. And that is because a large proportion of this high-quality revenue base is linked to inflation but, of course, it has a negative impact in the short run, as we've just discussed relating to the inflation-based swaps. The inflation through the course of this year was higher than what we thought it would have been at the time of the exchange, at the time of the pricing back in May, as we have previously discussed. And that has resulted in a higher level of accretive payments that we've obviously had to talk about which shareholders. But the counterpoint to that is also had a material benefit to the Arqiva business. So their revenues, their profitability as well has inflated at a higher rate than what we anticipated. I think within the annual report, we included a better sensitivity analysis along the lines of a 1% increase in inflation above our assumption results in a circa GBP 20 million investment value gain on Arqiva. And that's what we're seeing play through here is that the high inflationary environment is playing through to an increase in the valuation. And the final point I would just make is the valuation gain, the 18% is obviously set against the GBP 300 million equity check that we wrote for that acquisition. Of course, we actually have, in total of GBP 460 million investment by virtue of the circa GBP 160 million standalone notes that Chris discussed. So we have a levered return from Arqiva because of that vendor loan note and that is why the 18% looked higher than it would otherwise be if you were measuring it was against the investment as a whole.

Thanks Ben. So continuing valuations, do the provided valuations from the invested companies make any assumptions on CapEx deployment?

Okay. Chris, you good for that one?

Yes, sure. So in the valuations, we do assume that the capital expenditure is funded by the portfolio companies. However, we have made some assumptions to push to look this back while we see from our [indiscernible].

Thank you. How the other portfolio companies contribute to OCF in the future?

Thanks. I'll take that one. I was reflecting on this presentation just before we started and thinking that the dividend cover slide, we sold ourselves short on slightly. So trying to keep the message very clearly focused on Arqiva and on the Verne platform. But of course, there are other assets within the portfolio that in due course will contribute towards OCF, probably one of the most notable ones to pull out is EMIC-1. So EMIC-1 is a Subsea cable that runs from Europe to India. We fully committed to the CapEx required to build that cable, that CapEx has been satisfied. We're expecting that cable to complete the middle of next year. And following the completion, we'll expect to start receiving revenue operating cash flow, initially through these sale IRUs and then following that the sale of lease [indiscernible]. In Q4 of next year, our forecast is that EMIC-1 will contribute circa $25 million to our OCF. That figure is quite inflated because of an upfront IRU sale following that first year of $25 million of OCF earnings. We expect it to fall back to about $10 million but then over time as more leases have risen to increase back up to circa $20 million. But I would have thought that, that's probably the most noticeable items pull out. But I want to make the point at the table, the OCF table, the dividend cover table we included in the results is just looking at the portfolio as it is today. And then we're trying to highlight, obviously, the inflation falling and the ramp-up of the Verne platform.

Can you provide detail on the timing of the syndication process and other options that are considered and further, whether you expect it to be accretive to dividend cover.

That's a good question. So okay, I will take that question. The first point to note is, as we highlighted in the trading update, various options were being explored and considered. And we highlighted, too, the portfolio company-level debt and the syndication but other options have also been considered. We're not prepared at this stage to provide detail around the timing of the syndication, but positive commercial sensitivity around it. What I would say is that the investment bank that we're working with was selected because of their track record in achieving best value through a competitive process for the type of assets that we're looking to syndicate. The question as to would it be accretive to dividend cover. So I can say a couple of things. It will certainly be accretive to D9 shareholder value, there is quite a material benefit to D9 for these portfolio companies having access to growth capital as time and D9 can't provide it. We would expect a slight pushout of OCF earnings from the assets that syndication in the short term because obviously, if you sell down a minority stake, then you are selling down part of that future income stream. But modeling out the anticipated growth of the business is net-net that is accretive to dividend cover.

And can you provide more color on the $100 million facility and which company secured on? And then a follow-on to that, how much leverage would you add in beyond the $100 million [indiscernible]?

Well, frustratingly, I'm sorry to say, I can't name the company today because of the commercial sensitivities but we are absolutely committed to providing a full update to the market in due course when we can. So I'm sorry, I can't make that. At this point, we are only considering the $100 million facility as it stands.

When will dividend cover be fully ramped?

I probably take that question. So I love to commit to date right now. What I am prepared to do is to talk about the drivers behind getting to a full dividend cover. So we can see at 0.4x at the moment. We've set out how a fall in inflation would contribute to OCF. I don't want to predict when inflation will fall back to 4%. But I feel that, that's something that our investors and analysts and other stakeholders everyone can form their own view on that and do a pretty simple calculation to see how the Arqiva OCF will contribute more meaningfully to dividend cover in the next couple of years. I think on Verne, we have been pretty explicit in this document in this presentation that circa 32% of their outstanding ramp-up capacity will be taken up by the end of the year. And then almost all of the balance will be done by the end of next year. I can probably, in due course, we might provide greater guidance on the additional OCF we might expect to receive from the other underlying portfolio companies as I just mentioned with EMIC-1, but I would prefer investors to draw their conclusions from the information we've presented today as to when the dividend would be fully covered.

The margins from emerging markets Subsea cables [indiscernible] business impact?

Okay. Thank you. I would quite like to pass that question to Arnaud.

Sure. Thank you Ben. Well, this -- I think this was already touched upon by Ben earlier with -- when we discussed EMIC-1. currently, Aqua Comms is very focused on the North Atlantic Basin, which is the most competitive subsea market in the world and is doing pretty well, and it has a strong market share in the region. However, it's true that in terms of pricing, this is the most competitive with the lowest pricing per gigabyte and moving eastwards, it's perceived as not only the right move, but necessary move for the platforms. This is starting with EMIC-1, which is, as mentioned earlier, going from Europe to India. And we have to keep assessing other opportunities further east in order to benefit from more favorable market conditions, including much more favorable pricing.

Thanks, Arnaud. Would you lose the proceeds of syndication to pay down VLN?

I'll answer that because I've asked that before actually. So the answer is no. The first point to note, as Chris mentioned, the VLN is attractive paper. So it's nonrecourse, it's repayable without penalty. The interest is currently 6% and wrapped up pretty slowly. And the -- even at its peak, it's still at a lower cost than the anticipated IRR from the investment. So it is an accretive piece of paper number one. But I guess, more importantly, I think the question comes from a point of would paying down the VLN reduced our exposure to Arqiva, which is something that we talk about quite regularly with investors and the answer is no, that paying down the VLN doesn't change the exposure. What would change the exposure is that we sold down part of our equity stake and then use that to pay down dividend, so the short answer is we're not in any way expecting to use the proceeds of the syndication to pay down for VLN.

Thank you. Are they big prospects to Verne Global Iceland to access potential capacity above the 100 megawatts potentially disclosed?

Good question. We've spent quite a lot of time in Iceland over the last few months on their campus. They have an existing large campus in [indiscernible] that can accommodate the 100 megawatts. In fact, as density starts to increase, you can probably go up a bit higher than the 100 megawatts. But there is a finite capacity that we can build on that site up in [indiscernible]. But that's not to say that we're restricted because of that. We are -- as you can see, as always touched on, we are looking to build out the Verne Global platform as we've done earlier this year with the integration of Finland and the integration of London. So yes, the short answer restricted by the site have been Iceland, but I don't think that restricts us going above GBP 100 billion in due course.

Could you give some specific examples of the accretive growth CapEx that you have planned?

Yes. I wonder if this is a good one to unpack the dynamics of buying a DC platform on the market versus organic growth and sort of the different to the arbitrage between those 2.

So I mean the data center market has been in terms of M&A very competitive in recent years. On average, we've been looking at multiples over EBITDA around 25x. In the Nordic region, we've invest in multiples over 30x. As a reminder, we've made a 20x [indiscernible]. But if we invest in CapEx expansion in the Verne countries or in other locations, at the moment, this equates to a multiple, which is roughly around 6x or 7x EBITDA, which is 3x lower than what we paid for them, but also 4x, 5x lower than the acquisitions available in the market in terms of revenue. So that is a major difference and it show that any organic CapEx we invest in this massively accretive to the platform [indiscernible].

Thanks Arnaud. In a similar vein, can you please provide some specifics on how synergies are leveraged across platforms?

Sure, I can. So there are several types of synergies. We are pushing for. First, there is a strategic synergy between our different platforms. In particular, our subsea platform provides us with an incredible insight into where data flows and help us identify opportunities to fund new projects. For example, it would be new data centers, landing stations or even terrestrial fiber opportunities. Second, we're also very keen on driving commercial synergies within our platform and between our different platforms. So in terms of the reaching our platform, for example, we are using a Verne Global London as a way to identify U.K.-based customer on educating them about the power of our Nordic platform and helping them move some of our workloads up north where electricity is much cheaper, especially workloads, which are non-latency-sensitive which is the vast majority of workload anyway. On between platforms, we are also making sure we -- I mean, a lot of the customer base are the overlap because most of our platforms are B2B, and we are making sure we exploit those cross-selling opportunities between them by putting the different sales teams in Dutch. Finally, there is also some OpEx synergies we are pushing for and typically, this is the platform play basically for our data center platform. It's the same management team that's taking care of all our data centers.

Thank you. How much did FX represent after the 14.66p revaluation gain per share?

Sure, I can tell that one. So of the 14.6p, it was around 6.5p, which was from favorable FX movements with the balance being attributable to the [indiscernible] our portfolio.

Our smart utilities business seems to be ramping up nicely. Does it have any major competitors here?

Arnaud, are you happy to take that one?

Sure. I mean, so if we look at this smart utilities business, there are 2 components to it. One, the first one is the electricity and gas meters, here, there is one sole customer, which is called [ DCC, ] which addresses all the electricity and gas meters in the country, and Arqiva has covers half of the country. So basically, the U.K. divided in 2, another provider covers that southern half, Arqiva has the northern half of the country. So no real competition here for the time being, it's a very long-term contract. On the water side, Arqiva currently operate, delivers connectivity for 97% of smart meters. It's a market which is less mature, and there will be some -- a lot of commercial activity in coming months, but Arqiva is ideally positioned to benefit from all those standards on [indiscernible] by far the most -- the largest player in the market.

Thanks Arnaud. Can you provide any look through to list the multiple trends so far this year on transactions?

Yes, I can. So the 2022, I'm assuming we are talking about 2022, not [indiscernible] 2023, but I cover both. 2022 was a challenging year, therefore digital infrastructure valuation, especially the first half where we saw listed peers and here, we're talking about large data centers such as Equinix and Digital Reality and also large tower companies, including Cellnex on U.S. peers. Then when valuations went down, a few notches are still very healthy. We are still talking about valuations that are upwards of 20x EBITDA. In terms of transactions, valuations have remained even higher. We are more seeing 25x both in the data center, fiber and wireless space. What has changed is the market has slowed down quite significantly, especially in the second half of the year. So a lot of processes have been delayed or slowed down. But clearly, investors are being quite a bit more careful than previous years, but valuations are still very healthy.

Can you provide an update on the recruitment of your head of digital infrastructure and the desired credentials that are candidates you've been considering?

I'm very happy to take that, just give a moment to kind of my thoughts. So the first thing to say is, as shareholders know, we engaged an executive search firm to help us with this equipment. We've met a lot of very high-quality candidates, really high-quality candidates. In terms of, I guess, qualification and experience and what we're looking for, we're most definitely looking for someone with industry experience. And that is because of course, we are fully invested now across a brilliant certain portfolio companies. And we think that someone with industry experience will be more benefits and drive greater value for the portfolio than, say, an M&A person. So that would be one point I would make. In terms of timing of the appointment, we've said in the annual report that we're looking to make the appointment in Q2. I can say that we're well progressed and Q2 was obviously quite a big window, and it's very intensively to give a bit of [indiscernible] but we're well progressed to meeting candidates, high-quality candidates. And we'll update in due course. And I just, I feel I have to mention once again that there's a highly experienced team at Triple Point working on the portfolio day in day out, supported by our operating partners by the Board of D9, by the Boards of the investee companies and the management teams of the investee companies. I wouldn't want anyone to think that we are sitting on our hands and not driving the company forward in this interim period.

Thank you. Following the interest of time, I'll draw the Q&A session to a close. Thank you all for your questions. I'll now hand back to Ben for any final remarks.

Well, let me just to say thank you ever so much all for your time for joining, for listening in today. As ever, we are more than happy to sit down with each of you on a one-on-one basis and get into a greater level of detail. We won't be able to cover all of the questions today in this forum, and we look forward to engaging with you over this coming month. Thank you very much for your time.