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

Good afternoon, everyone. Thank you very much indeed for joining this D9 presentation. My name is Ben Beaton, and I'm the Fund Manager for D9. I'm also the co-managing partner of Triple Point. And I'm joined by my colleagues today. Diego Massidda, Arnaud Jaguin and Chris Flowers. Now in terms of format for this presentation, I'll cover off some key areas before passing to Arnaud to talk through the portfolio performance and then on to Chris to talk through the interim results. We've got for about 60 minutes, and we'll certainly try to do some space at the end for any questions that might come in. And we've received some questions in advance as well. I would just like by -- I'd like to start by saying a few words. Throughout this year we've been executing against a very clear plan with the overarching goal of closing the discount to net asset value. And of course, we have to acknowledge that the exact opposite has happened and our shareholders are impacted by a very material share price loss. And for that, I'm extremely sorry. I know that having spoken to several investors over this last week, there has been an erosion of trust particularly around the dividend, having reaffirmed it in July, and I'll come on and comment more about that shortly. So fully acknowledging that, I'll provide some additional context around the dividend and the Verne syndication and liquidity before then handing back to Chris and Arnaud to talk through the performance of the portfolio and the results before then coming back on to Q&A. Now key part of the plan that we have been working on through the course of this year was, of course, hiring a new head of digital infrastructure, and that is in the form of Diego. We're absolutely delighted that he's joined. I obviously wish you were meeting him and being introduced to him under better circumstances, but I would just ask Diego to say a few words about himself before we kick off properly.

Thank you, Ben. Good afternoon, everyone. As Ben said, I'm Diego Massidda , the new Head of Digital Infrastructure for D9, which I just joined over a month ago, 5 weeks really. Before we get into the details of this call, I wanted to take the time to briefly introduce myself, give you some background about my experience and some initial thoughts on D9. In the last 20 years, I have led wireless and wireline telecoms businesses across B2C, B2B, wholesale and from Internet access to subsea cables, video content distribution. All digital infrastructure business is exactly the same industry that D9 invests in, working in 6 different countries. Combined with my multiyear tenure on the Board of large telecom companies listed like TPG Telecom in Australia, Vodafone Idea in India, I believe all these experiences really will be very, very useful in my new role. Coming to D9, specifically, what I found impressive is the quality of the portfolio companies we have acquired and the strength of their management teams. While Verne Global and Aqua Comms are exciting growth companies, Arqiva has a very solid and resilient infrastructure business with significant opportunities also to growth in new digital businesses. Of course, I'm fully aware of the significant short-term challenges, which require decisive action. In my opinion, the #1 priority to address the challenges facing D9 right now is to accelerate its deleveraging. It can only be achieved by executing a restructuring of our portfolio to free up that require resources. This would also provide much needed funds to fuel the growth of our portfolio companies, while the markets clearly remained closed to new fund raises. I would like to close this short introduction by highlighting that despite the challenges D9 is facing. I believe we have robust plans to turn the business around and bring it back to a much more comfortable position for you, our shareholders. And now over to Ben again.

Thank you very much, Diego. So I'll just first come to talk about the dividend. Through this year, we have reported on operating cash flow dividend cover, which is a figure that nets off the cost of the vendor loan note within Arqiva, Arqiva's accretion payments due to the inflation swaps, the cost of our revolving credit facility and fund OpEx. And in our year-end accounts that were published in March, we provided a table that did a bridge from EBITDA to net adjusted operating cash flow. Now importantly, this OCF figure is after the payment of maintenance CapEx and interest costs but it's before any loan amortizations and growth CapEx. And I'll come back on to that in a moment. And as at 31st of December, cover -- dividend cover was 0.4x against a 6p dividend. Now through the year, we've reported on having a very clear pathway through to full dividend OCF cover. And that clear pathway still exists. It's underpinned by the ramp-up of operations in Verne EMIC-1 cable running from Europe to India and Arqiva. And I'll just briefly touch on each of these. So Verne, which, of course, is our data center business has continued to ramp up in line with expectations and have signed additional contracts during the year. We had forecast circa 4.2 megawatts of ramped up capacity by the end of December. And that figure now stands at 6.6 megawatts and for next year, we had forecast an additional 8.6 megawatts, which now stands at 11.5 megawatts overall a 41% increase, all driven by customer demand and commercial success. Now the cable running from Europe to India, as I just mentioned, EMIC-1. That was forecast to deliver us first year operating cash flows of $25 million to $30 million. We think that will still be the case, albeit it's now 6 months delayed. We had expected it to land in half 2 next year 2024, and we now expect that in the first part of 2025. And then finally on Arqiva, Arqiva paid a very significant GBP 147 million accretion payment this past year. The year runs from July to June. So it was finished just a few months ago. And it was GBP 147 million because RPI in March of this year was at 13.5%. However, looking forward, the Arqiva operating cash flow will be materially improved because of the color that we put in place on the swaps back in June of this year as part of our plan. So all that said, we would still expect OCF dividend cover to be substantially achieved by the end of next year, by 31st of December 2024 at the 6p level. And indeed, the portfolio has performed strongly during the first half of this year, with revenue up circa 10% and EBITDA up 5%. But the important point at the moment is that OCF does not currently translate into cash for D9 and that's for 2 principal reasons. So in the case of Verne and Aqua Comms, we have taken the decision to leave cash flows in the businesses for reinvestment into growth CapEx. And in the case of Arqiva, a lot of its free cash flow goes towards debt amortization. And if a dividend could be paid, it would need to be used first to repay the accrued interest on the vendor loan note which we took out as part of the acquisition. Now clearly, capital allocation and how we balance deleveraging with shareholder returns in the form of growth and income, it's vitally important. And therefore, the decision was taken not to declare a Q2 dividend and instead to embark on a consultation to seek feedback on the future dividend policy and capital allocation priorities. And as part of this, we'd like to thank shareholders for the feedback you have provided to us, which has been passed on to the Board. I'll now turn to the Verne syndication. So back at the very start of January, we put a trading update out noting the vast CapEx requirements of some of the portfolio companies. And of course, the challenge being that D9 was fully invested and couldn't raise fresh equity. So in that statement, we said that we were going to explore raising complementary forms of capital to help support the portfolio company CapEx requirements and to support the deleveraging of D9. Now our team ran a successful competitive success earlier this year, which saw a $100 million green loan raised into Verne that closed in June. But the more substantial pillar of that capital raising strategy for Verne was the syndication of a minority stake in the business with the aim of validating the NAV providing some cash to D9 and introducing a strategic capital partner to share the CapEx requirements for the company. I just want to take a moment to touch on the rationale for why we moved from a minority sale to a majority sale. Our minority sale proved challenging, set against the ever-growing CapEx pipeline for Verne. So between January and June, the pipeline increased a further circa 25% from GBP 490 million to GBP 610 million. And although we had a lot of investor interest, convincing someone to buy a minority stake at the value we wanted, it was challenging because there was no confidence in D9's ability to fund a majority of the CapEx. So therefore, we recommended and the Board agreed to pivot and to assess and progress a majority sale, and it's that change in approach, which the primary cause for the delay into Q4. As we disclosed the week before last, D9 has received several nonbinding offers at or around the dollar net asset value for Verne Global as at the 31st of December 2022. And selling majority stake, we think there's 3 things. It helps maximize shareholder value versus a minority stake, it allows for a very significant paydown of the revolving credit facility. And importantly, it reduces the CapEx burden on D9 while still allowing shareholders to continue to benefit from the future growth and returns offered by the Verne platform. I'll finally come on to speak about liquidity and the going concern position before then handing over to Arnaud. So material uncertainty wording was included in the results due to the timing and value of the Verne transaction remaining outside of management's control. And, to a lesser extent, the RCF being repayable in 18 months' time. I thought it would be helpful just to touch on liquidity. So the company, as that -- a week ago on Thursday, the date of the interims had a cash balance of GBP 60 million, GBP 30 million of which was unrestricted and GBP 30 million was restricted. The majority of that restricted money was set in an RCF interest reserve account. Now closing any of the Verne transactions represented by the MBOs will materially repay the RCF and result of this material uncertainty position. And we have a high degree of confidence in that process. However, in the event the Verne transaction were to fall through, the company would have a range of options to address its liquidity, including extracting cash from the portfolio of companies rather than reinvesting for growth, as I just referenced a moment ago, extending the RCF or refinancing it or selling other portfolio assets. I'd now just like to hand over to Arnaud to take you through a review of the portfolio companies.

Thank you, Ben, and good afternoon, everyone. Now I will take you through the portfolio's operational and financial performance, starting with our Subsea platform. The big news here is the start of the new CEO, Jim Fagan. He started in May and has really hit the ground running, bringing energy on strengthening Aqua Comms' solid operational and commercial momentum. During the period, Aqua Comms announced its first 400G Ethernet service across the Atlantic and had a few significant customer wins. It was also the launch of AEC-3 this summer, which is a collaboration with Meta, Microsoft and Vodafone and Aqua Comms' third transatlantic cable. Unfortunately, that cable was ready for service later than expected, which had an adverse impact on revenue. Revenue was still up 3% versus the same period last year. However, EBITDA was down 36% as the company continued to scale for growth despite the delayed revenue. That deep in margin should be temporary, though as the company starts generating revenue from AEC-3 on new projects that will be announced in coming months. Otherwise, as Ben alluded to it earlier, we also expect revenue from EMIC-1 to be delayed from late '24 to the first half of 2025. And overall, the combined valuation of Aqua Comms and EMIC-1 has increased by 12% in the last 12 months, reaching GBP 253 million. Moving on to data centers on Verne Global. Here, there has been very good progress in terms of integrating our data center portfolio into 1 platform. All our assets are now branded Verne Global and managed by the same team led by Dominic Ward. As disclosed earlier in the year, the Verne platform benefits from a very strong growth CapEx pipeline, underpinned by major themes, the energy crisis, sustainability and the rise of artificial intelligence. The execution of the CapEx program and customer ramp-up are going well and very much in line with the expected ramp-up disclosed in our full year 2022 results, as Ben alluded to it and obviously, significant funding activity with the successful raise of 100 million debt facility in June on the ongoing syndication process. All of this translated into strong financial performance with revenue up 13% on EBITDA doubling compared to last year. And finally, you will also note that Verne's combined NAV has increased by 8% over the last 12 months, testament to the strong growth, strong performance and outlook for the platform. Now I will move to wireless assets, starting with Elio Networks. For Elio, it is all about executing the strategy set in place last year. During the first half of the year, the company has gone through a successful rebranding exercise, geographic network expansion and launched new products. As a reminder, the company was previously known as Host Ireland. The company is performing well with a 6% revenue growth year-on-year and 11% EBITDA growth year-on-year. And again, a strong NAV improvement of 14% over the last 12 months. Finally, Arqiva, there is quite a bit of positive news flow around Arqiva. First, I would like to highlight the fantastic work that Shuja, the CEO has done on the recruitment front, in order to address some of the challenges facing Arqiva, he's beefed up the team with 4 new execs in the first half of the year. I will list them now, Gaurav Jandwani, who is leading the Media and Broadcast business unit, Mike Smith, who is leading the smart utilities business unit, Dom Wedgwood as the new CTO and Nicola Phillips as the new General Counsel. There were also important news around the balance sheet with a successful debt refinancing announced in June as well as the implementation of a callout to mitigate the impact of the inflation-linked swaps. On the other hand, inflation had a really positive impact on Arqiva's revenue with 11% growth year-on-year. EBITDA was also up 4% compared to the same period last year. That has supportive an NAV increase of 15% since the acquisition in October last year. To conclude, I would like to highlight the overall good performance of the portfolio with 10% pro forma revenue growth on 5% EBITDA growth compared to the same period last year. In addition, I would also like to remind you of the portfolio's intrinsic quality and uniqueness, long-term recurring contracts with strong counterparties mostly inflation protected revenues on 99.7% of those revenues denominated in major currencies. And now I will hand over to Chris who will deliver the finance section.

Thanks, Arnaud. Good afternoon, everybody. I'm just going to run you all through the key financials and the interim results for the period to June. So if you could just flip to the next slide, please, Helen, thank you. So as of the end of June, our NAV was GBP 866 million. Now this corresponds to a net asset value per share of 100.13p. Now this is an 8.8% decline since the results that we put out in December. But there are 3 main drivers for this reduction in NAV. Now what are those drivers? So firstly, and this is the largest contributor. This was adverse FX movements across the portfolio. Now this was a result of the strengthening of the pound. Now I think it's really worth drawing this out that of the 8.8% decrease the movement in foreign exchange actually represented about 4% of that fall. So the second key driver was higher financing costs, and this was attributable to the RCF and this was due to an increase in interest rates, in particular, in SONIA. And then lastly, the final driver was the fall of an uncovered was -- sorry, was the payment of an uncovered 3p per share dividend during the period as well. Now collectively, this has resulted in the company generating a negative 11.2% annualized total return. From a P&L perspective, this has led to a loss of 6.6p per share, and this represents the decrease in the company's valuations, which have reduced from GBP 1.21 billion as at December to GBP 1.15 billion that we've published at June. So I'll talk through the drivers and the movements in the portfolio valuation a little later. And what we'll also do is I'll show you how those valuations then bridge to the GBP 839.5 million valuation, which is held on the company's balance sheet. But before we get to that, I think it's worth a reminder to just provide a little bit more detail on how we actually derive our valuations. So our valuations, they're all based on cash flow forecast and those forecasts come from portfolio company management projections, and we reset those annually. So basically, the businesses go through an annual 5-year planning cycle, and it's those forecasts that underpin our valuations. The most recent update to these projections was actually done in December, with the exception of Arqiva. And Arqiva have recently just finalized updating their long-term plan. And it's this plan that underpins the valuation for Arqiva and it's those that weren't used in these results. So other than Arqiva, there's been no material revisions to any of the forecasts that we use, and as Ben and Arnaud said earlier, the portfolio has continued to perform in the 6 months. So in terms of Adjusted Gross Asset Value, that stood at GBP 1.2 billion as at June. But I think it's just worth quickly explaining how that number is arrived at. So the GBP 1.2 billion, it comprises the total assets of the company, and it includes both drawn and undrawn debt facilities of the group. So just to be clear, it doesn't include any leverage at the investee company level. So it doesn't include our share of leverage held Arqiva and it also doesn't include any of the Verne Iceland debt that was put in place back in Q1 or Q2. And then finally, just looking at our ongoing charges ratio. For the period, it was an annualized figure of 1.2%, and that is a small increase from the 1.1%, which we published in December. Now this was largely due to an increase in management fees, which were as a result of an increased NAV over the last 12 months. Now that's because the company has substantially deployed all its proceeds from previous equity raises. Now just to round off on the OCR. We do expect this to stabilize and hover around the 1.1% to 1.2%. And this will gradually stabilize as economies of scale and operating efficiencies are achieved. Now just before I turn to the P&L and the balance sheet for the 6 months, I just wanted to briefly touch on the company's leverage position as well because leverage has been a key focus for investors. So this starts from when we agreed to acquire in Arqiva and that was originally in June 2022. So when we agreed to acquire Arqiva, we did that with part of the funding through a vendor loan note or a VLN. Now one thing to draw out is that we've always said that the VLN, which we believe is attractive paper, it's got very attractive interest rates. We would need to be refinanced or repaid by 2026. So looking at that from a leverage perspective, the combined RCF and VLN represented 44% of our adjusted GAAP as at the end of June. Now what that does mean is that means our aggregate levels of borrowings remained below the 50% maximum that we're permitted by the company's investment policy. Now as you've heard from Ben and one thing I would like to reiterate is it is absolutely our intention to pay down [ and part Council ], a significant portion of the group's RCF. Now we will do this following a successful syndication, as Ben alluded to earlier. And then post that transaction, deleveraging will continue to remain a key focus going forward. Now alongside the Verne syndication, we are also continuing to evaluate other strategic portfolio management initiatives. Now that includes potential part disposals, which could be used to deleverage the group further. And we're looking to try and free up as much operating cash flow as possible. Now all these initiatives will obviously take account of the need to repay the VLN as well. Now just quickly focusing on cash. Now I know Ben covered this earlier, but I'll just retrace that. As of the reporting date, we had GBP 78.4 million of total cash. Now that included GBP 29.5 million on the company's balance sheet and it also included GBP 48.9 million, which was held in the company's unconsolidated subsidiaries. So again, as Ben mentioned, GBP 30 million of that is restricted. So that's not available for the company to use. Now what are those restricted funds? Firstly, it's an interest reserve account, and that is part of the terms of our RCF. And then the second part is an escrow account that we have separated to fund some of the remaining CapEx that's required for EMIC-1. Now I think just one thing I would like to bring out is that just so we're all clear, the company could have declared the Q2 dividend. Now from a cash perspective, that would have represented an outflow of around GBP 12 million but I think the key thing to highlight here is the Board's decision to not declare this dividend, what was not one of cash considerations. It was one driven by capital allocation priorities and sustainable balance sheet management. Now again, just quickly turning back to liquidity to give you the position as of today. Since the period end, we've paid some additional money to our portfolio companies for capital expenditure. So we've paid an additional GBP 16 million. Now that's seen the final payments for Aqua Comms AEC-3 cable. So that's fully paid off now. And it's also enabled Verne London to continue its expansion to full capacity, which is around 6 megawatts. Now just on Verne London, this is great news. It's great news for both Verne and it's great news for D9. Verne London is now self-funding. And what that means is it doesn't require any further commitments from D9, and that's really positive news. So as a result of this additional expenditure, we now have around total cash of GBP 60 million with the same GBP 30 million remaining restricted. Now I'll just quickly run everybody through the profit and loss for the period. Thank you, Helen. So the main thing to draw out on this slide is the GBP 82 million loss, which is the unrealized gain in -- unrealized loss in our investments. Now that's the key driver for the 6.6p earnings per share that you can see at the bottom of the table. I'll run through the drivers in a little bit more detail shortly. The other key numbers to highlight on this slide is the distributions from investments. Now of that figure, this includes dividends from Elio Networks. It includes lease income from our investments in Seaedge and it also receives cash that was paid out to the company as a result of a shareholder loan repayment made by Verne Global. Now just to give a breakdown of that figure -- those figures, GBP 700,000 relates to Elio, GBP 500,000 relates to Seaedge and then the remainder, so around GBP 28 million was resulting from the shareholder loan repayment made by Verne. Now just looking at the balance sheet. So if you could just flip to the next slide, please. Thank you. So investments held at fair value. Now this number of GBP 839.5 million, that is the company's investment in its main subsidiary, Digital 9 Holdco. Now that was valued at GBP 839.5 million as at the end of June. That is down 8.8% from GBP 921 million, which we reported at December. I'm going to come on to the drivers for that reduction shortly on the next couple of slides. But the other key thing which I've covered in quite last detail is there was also cash of GBP 29.5 million on the balance sheet. And that left us with a closing net asset value of GBP 866.3 million as at June. Now the next couple of slides are our NAV bridges. So what I'm going to do is I'll just quickly walk you through these. So what you can see here is you can see the change in the portfolio valuation since December. And what we've also done, just to provide a bit of additional clarity is we've shown you how that reconciles to the number that is held on the company's balance sheet of GBP 839.5 million. So if we start on the left, during the period, the 6 months to June, we reinvested GBP 12.8 million into our portfolio. Now that included payments to EMIC-1 and also included payments to Verne London as well. The company extracted cash from its portfolio of GBP 35.8 million. And again, as I mentioned, the largest contributor to that figure was Verne Iceland. So adjusting for those ins and outs, this has led to a rebased portfolio valuation of GBP 1.19 billion. Now just moving further to the right. As I mentioned earlier, you can see the largest contributor to the negative movement in valuation is down to foreign exchange. Now that's due to the strengthening of the pound against the dollar and the euro as we've got a couple of investments denominated in those currencies. And that contributed to a GBP 33.9 million decrease in valuation. Discount rate adjustments and value movements in the portfolio added a small GBP 0.7 million and the movements these resulted in a total closing valuation of GBP 1.15 billion. Now this then reconciles to the valuation on the balance sheet. You need to add the GBP 48.9 million of cash, which is held across the group's subsidiaries. So just so everyone is clear, that doesn't include the cash held on the PLC balance sheet. We then need to make a deduction for the GBP 355 million of the RCF, which was -- that was the figure that was drawn at the period end. And then there's also a minor adjustment for other current liabilities that sit across the groups or the unconsolidated subsidiaries. So that's how that gets you back to the GBP 839.5 million. Now on the next slide. We've got this -- it's very similar. But what we've done here is we've shown the decrease in NAV on a pence per share basis just to make it a little bit clearer for you. So as I've already mentioned, the key drivers in the fall in NAV are 3.9p per share as a result of FX. The financing costs of both the VLN and the RCF are the second driver and then as I mentioned right at the beginning, we also paid during the 6 months, 3p per share of dividends, and that is another large contributor to the reduction in NAV. So all in all, that leaves us with a closing net asset value per share of 100.13p. Just one final point to round out my slides. If we consider the FX rates as of today, that 3.9p per share fall would actually reduce to around 1p. So if you consider that, that would leave us with a NAV per share of around 103p. So that wraps up my slides, and I'll just pass back to Ben for the Q&A. Thank you, everybody.

Thank you very much, Chris. So there was a closing remark slide, but we're not going to dwell on that because it's probably more important to spend a bit of time on questions. We had quite a lot of questions e-mailed in advance and a number of questions have come in just whilst we've been talking, and I'm just trying to order them into categories so we can address some of the questions with a single answer. I would just say that if we don't get to your question, we will endeavor to follow up with you in an e-mail afterwards. And we will try our best to answer questions, but we can only provide information that is already in the public domain. So I'll just come to the first question. And this has been asked a couple of different ways so far in the chat box here and also previous, which is why did you cut the dividend now having reaffirmed the target just 2 months ago? And this is obviously a really important question. We've been asked this a lot over the past week or so. So I'll unpack it. At the time of giving guidance in July, the judgment was based on the expected timing and impact of the Verne's indication, which was expected to close in Q3. Mix messages were received from shareholders at the time about maintaining the 6p dividend target when uncovered and with a heavily drawn RCF and obviously, quite significant growth CapEx requirements and opportunities. At the time, we discussed with shareholders that just cutting the dividend in isolation would not resolve the broader D9 balance sheet challenges, notably that the fund was fully invested and can access additional equity. And if you were to consider the dividend policy, you would want to do that once we had a fuller understanding of the impact of the syndication. It was strongly felt by the Board that reducing the dividend at this -- at that stage without any guidance around the syndication with potential. So with the delay in the Verne process and the fact that dividends continue to be uncovered, the Board elected not to declare this Q2 dividend and instead to embark on a shareholder consultation to discuss the future dividend policy and capital allocation priorities, which they have been doing over this past week. There are quite a number of other questions just around future dividend policy and capital allocation decisions and share buybacks and so on. And I will try and get to those at the end of this Q&A session. I'll just move on to the next question. Can Verne not just be run for cash rather than reinvesting for growth? And that's -- that's a good question. That's a question that we have been asked more than a couple of times this last week. In theory, yes, you could run Verne for cash just for the yield rather than taking that capital allocation decision to reinvest for growth. The Verne revenues are -- continue to ramp up in line with forecast. And as I noted, we've had additional customer contract wins during the period. However, there are 3 reasons why we haven't taken that decision to extract the cash from the company. And that is, number one, there's very significant demand from our customers, underpinned by energy market volatility greater focus on sustainability and in particular, growing demand from AI. And that means it would be detrimental to the business if we couldn't follow through on that demand and satisfy what customers are asking for, particularly over the next 1 to 2 years. The second is that we've got a world-class management team in Verne, absolutely world class, but they are in a business that is -- that they join that business because of its fast growth. I think if you suddenly throttle back the growth prospects of the business, it would put some serious questions around the management team. And then the most important thing is value really. When you buy a data center, for 20, 25x multiple, you are making an assumption about future growth and future CapEx and future revenue, and that is baked into the valuation of the business, and not following through on that growth would ultimately be detrimental to value. And that's why we've had such a focus since the start of the year on exploring these complementary forms of capital to bring in both debt and equity or syndication finance to help fund that CapEx. Just give me one moment to work through these. Diego, question for you. Why did you decide to join D9 considering, in particular, the challenges which were publicly disclosed over to you?

Yes, why did I decide to join. Well, when I looked at D9 from the outside during the process of being interviewed, I really like the underlying assets that D9 has invested in. It's an industry I know extremely well. I've been working in for over 20 years and I really like the focus on the strategic position of the assets and their growth potential for the 2 big growth assets, but also Arqiva being really a nice cash generation asset with still some potential to grow through IoT and other opportunities they have. So added to that, clearly, I appreciated the good quality of the management and the opportunity to work with the world-class management teams we have in place to make these assets grow. It's really what attracted me. Obviously, I was not blind to the challenges that even from the outside were apparent just in the share price, but also in terms of the position of the balance sheet of the company. But I'm not really scared of the challenging situation. I find myself in a number of them, different ones in the past. And I always believe that the job of the professional manager is to do the best out of the hand that is dealt. And that's -- if you keep calm and you look at different options, sometimes interesting solutions come up, which can drive the -- some good results despite challenges. So I would like the type of challenges, and I'm ready to put my weight to drive as much as I can D9 out of the current difficult spot, I guess, clearly is, and back into calmer waters, if you like.

Thank you, Diego. So there's a few related questions here. So I'll just read them out actually. Why did you not decide to sell Arqiva? And use the proceeds to finance Verne? There's another question. Does this mean we're going to lose a significant part of the Verne Global ownership and repurpose that capital to reduce the debt on the Arqiva business? So let me just try and give some context around that. We did back in January, we thought about lots of different things we could do with the portfolio to help support the high CapEx demands of the Verne business. We thought about lots of different ways in which you might go about raising funding. And of course, one of them that was suggested was a disposal of Arqiva. I think that would have been challenging on a number of fronts. The first is that we had only just completed on the acquisition. The acquisition of Arqiva completed in October and it was then just in January that we put that trading update out about the CapEx requirements. If you could have sold Arqiva in a relatively short space of time, the initial proceeds from a sale would first have to go down to a repayment of the vendor loan note that was referenced earlier in this talk. And the remaining proceeds or the excess proceeds from the sale would have to go towards a repayment of the revolving credit facility as per the terms of the RCF. Now we could have redrawn some of those repayments to fund growth CapEx. However, the challenge with Verne, and in particular, I'm talking about Verne Iceland here, is -- in January, it was already quite a significant part of our portfolio. It accounted for about 24%. And under our investment policy, we have a 25% investment concentration limit. So what that means is you can't technically put much more capital down into the Verne business even if we had raised a lot of cash by selling other portfolio assets. It's why the syndication is -- wasn't -- is such an important step because it allows for D9 to sell down a portion of its ownership reducing its exposure, which then allows for additional capital to come back into the company, both from D9 and from a strategic capital partner. So I hope that explains why we didn't pursue an Arqiva or other portfolio asset sale to support the Verne business. Chris, I have a question here for you probably. So has the cost of debt increased with higher rates? And what is your cost of debt?

Yes, sure. So I think in short, the answer is yes, it has increased. The cost of our RCF is currently -- it's based on SONIA, which is the sterling overnight index average, and it includes a margin which is currently at 3.5%.

Thank you, Chris. Okay. So given the performance of the underlying investments, has there been any discussion on slowly winding up the trust and returning the net asset value to shareholders? I think the short answer is yes. As we've maintained throughout the year, we think -- we think D9 has got a really high-quality portfolio of assets and the discount to NAV is not reflective of that quality. I think the discount to NAV is reflective of the balance sheet concerns. And as part of the shareholder consultation, the Board are considering various options that would maximize shareholder value. Okay. So that's a related question actually. Given where the share price is, why are you not considering selling the entire ownership of Verne to achieve better value as a partial sale will not achieve the same valuation? Okay. So the [ NBOs ] that we've received and that I referenced earlier, they comprise proposed transaction structures for both co-controlling and various levels of majority stake sale. There's not a -- we haven't seen a pricing differential for a 100% sale. We have been working on the basis that a majority sale of Verne will allow D9 of continued exposure to the business whilst significantly paying down the RCF. However, I would say that as part of the consultation, the Board will consider if that is indeed the optimal approach for the business. And then sorry, finally, another question actually related to that. Can you give an approximate guidance of when the Verne Global syndication should be announced? All I can say is what we have said publicly, which is that we expect the announcement of the terms to be in Q4, i.e., in the quarter that we are in at the moment. Diego, I wonder if you might take this one. So if Verne services are in such high demand why the company is still not cash generative? Why is the company still not cash generative?

I guess it's a very good question. I think obviously, data centers and infrastructure in general are different stages of development. In this case, both Verne Global, Iceland and Finland. The 2 large elements of the platforms are obviously operational with customers, with generating EBITDA and potentially cash generative costs, as Ben said earlier, we decided to reinvest that cash into developers because the full capacity, they still have very significant capacity that can be developed. In particular, the Iceland site currently has 40 megawatts in operation or development with plans to build out to 94 megawatts by 2027, which is the current plan of CapEx we have put in the plan. Finland, on the other hand, has got 7 megawatts at the moment that will grow to 17 over the 3 sites also by 2027 and potentially could do even more. This is positive, it obviously means that as customers like our proposition of being in really good countries from the point of view of energy, point of view of environmental impact, et cetera. And we can provide very high-density computing solutions. Customers want our services, and we are able to provide those services. But obviously, the customer signed a contract for a specific level of capacity, and they will only start paying once that capacity is available to them. And as they ramp up their contracts, they start paying more and more in line with what they are using. So in order to accommodate the customer first, you need to invest, sometimes to even develop a completely new area of the campus, sometimes within that new area, you need, in any case, to invest in the facilities that you need to accommodate the new customers. And these are very significant investments, which, however, at the core of the value of these businesses. So in other words, if we stopped, as Ben said earlier, we started investing into these companies, they would generate some cash, but there will be really a fraction of the cash we could generate in the future once the campuses are fully developed, and we have many more customers on them generating the cash flows and using our facilities.

Thank you, Diego. Arnaud, I come to you with this one. So why has EBITDA Aqua Comms decline since its acquisition?

Yes. Thank you, Ben. That's also a good question. So Aqua Comms a growth platform like Verne, and it's been ramping up both CapEx and OpEx to fuel and support that growth. Unfortunately, as explained earlier, some of the revenue growth has been delayed. That includes the AEC-3 only launching this summer, 1 year later than expected. And there are other value-accretive projects expected to launch in coming months. So this has led to OpEx growing faster than revenue in recent months and quarters. However, this is very much a temporary situation and revenue is really expected to outpace OpEx in coming quarters.

Okay. So I got a few questions on the Arqiva inflation in swaps here. Someone just reiterating obviously, the level of swap payments over the last 2 years. Now that you've implemented an inflation collar, which restricts the size of the payments? What's the maximum payment for this coming year? And then please explain the basis for calculating the accretion payments. What was the cost when were the swaps taken out? So let me just try and answer all of those questions in the round. So the swaps were taken out between 10 and 15 years ago. So they've been around for a while. They were not part of the transaction that we executed a year ago, they were already on the balance sheet or part of their financing package. The swaps expire in 2027. The way they work is that in June of each year or at the end of the financial year, a cash payment is due from Arqiva to the swap provider and the size of that payment is calculated by reference to March RPI. And as I mentioned, there was GBP 147 million payment for last year because RPI was 13.5%. I would just note that, that GBP 147 million payment was split between 2 installments. There was a GBP 34 million payment in December, GBP 131 million payment in June. And of course, that was the payment for the company as a whole. Arqiva entered into the color that we mentioned back in June, which limits the effective accretion payments going forward, and therefore, limits the downside cash flow exposure to inflation. And the color has an RPI floor of 2.5% and a cap of 6%. The cost of that is embedded within the cap. So there is no additional charge to Arqiva for it. In terms of forward-looking, so next year, the -- roughly the maximum accretion payment for the 2024 year will be about GBP 75 million. If you think of dividend cover, or the sort of the notional share for D9 is always roughly half of that because we've got a 52% economic interest. And final point I would say is that although there is a cash flow impact from these swaps. There's also a benefit from just periods of high inflation. And we're seeing that benefit flow through into the revenue contracts and is the primary reason for revenue being up sort of circa 10% and EBITDA being up 4% -- that's 5% as both Arnaud and Chris referenced. So let me just -- so I've obviously referenced a couple of times the shareholder consultation. There's a question here about how someone can feed their comments to the Board as part of that consultation. So we'd be very grateful if you could please send an e-mail to [email protected]. That e-mail was also included in the RNS announcing this webinar. And if you could send in your feedback, we'll ensure that, that is passed on to the Board. There's a question here. So given the apparent urgent requirement for additional capital for the business, did your advisers suggest or did you consider holding a proper rights issue to raise the required funds? Again, I would say that we and Board and advisers considered a lot of different options, back in January and through the course of the year. In relation to a rights issue, a rights issue would require the approval of shareholders and would be at a significant discount to both the share price and the net asset value. And it was therefore expected to be unlikely to be palatable with the majority of the institutional shareholders. So we haven't gone that route. I think they're quite uncommon for investment trust generally, but yes, that's a bit of a better background on that. There's a question here. In fact, there's a couple of questions just around this. So have the Board asked Triple Point to reduce their fees? And then separately, why has Triple Point not bought more shares as it only holds 0.3%? So I'll just provide a brief comment on this. earlier in the year, the Board requested an independent review of the IMA. And it was agreed that any amendments to the terms would be considered after the closing of the syndication. In relation to share purchases, in order to comply with ongoing regulatory requirements with currently not currently in a position to deal in the company's securities and have been prohibited since May. Our last purchase was in April, and Triple Point collectively hold about 2.2 million shares. So at circa 2.2 million shares. Chris, maybe this can be a question for you. So does the company use any kind of currency hedging in order to reduce the impact of FX? I wonder if it's worth just -- obviously, there's a big swing in the NAV because of FX, maybe it's worth just touching again on why that's the case?

Yes. So at present, then, we don't imply any FX hedging. I think it's worth just noting that of our portfolio, we have 4 assets that are exposed to foreign currency. So that's in Iceland, which is U.S. dollar and Aqua Comms, which is U.S. dollar, then Verne, Finland and Elio networks, which are euro-denominated. In terms of our debt, that is all GBP. So we have no FX exposure to any fluctuations on our debt. But no, in short, and we don't currently hedge any of our FX that.

We don't hedge. I think the reason why FX rate is so important is that the Verne transaction will be in dollars. So D9 when it closes, that will be in receipt of a lot of dollars. And obviously, the exchange rate at the time is relevant. And that's why Chris threw out just the difference between the NAV fall in June and what it would be today because the pound has subsequently weakened. Just trying to go through some of these final questions. There's a lot of questions, as I mentioned sort of surrounding capital allocation dividends. So I'll just read a couple of them out and then I'll try and answer them all in the round. This will probably be the last set of questions and then we'll draw to a close. So I remain unclear around OCF cash flow allocation once Verne syndicated, there's a choice between reinvestment in the business versus dividends versus share buybacks. Another comment that there seems to be a mismatch between DGI9 being a high-growth business, but also paying out high levels of dividends. Can you provide clarification on future intentions? And if you're unable to provide this, could you be clear as the reasons why? And then another question at the current discount to NAV and if that gap remains with respect to the share price by the time leverage is reduced, what are the company's views upon share buybacks as opposed to reinstating the dividend? Are you considering -- is there a dividend policy to maximize NAV growth for the long term, if not, why? So as you can see, there's a range of questions there, very understandably all around the sort of the same topic. It's definitely challenging balancing high-growth CapEx-hungry businesses, with the requirement to income in an investment trust repo. I think that, obviously, when the markets are open and you can go and raise additional levels of equity relatively easily, then the investment trust repo works very well. But where we are at the moment with particularly Verne and Aqua Comms being such capital-hungry businesses, it clearly poses a challenge. And that is what we're really stopping to think about with the Board and through this consultation. I would add that all of the offers that we have received via the syndication, the MBOs include CapEx funding facilities. So the sort of the most important thing for the incoming investors is certainty that the business plan for Verne can executed on. And whilst D9 will have the ability to fund a share of that CapEx going forward, if it's got the money, if it doesn't, then the CapEx would be funded by the incoming partner. As for what the future capital allocation priorities might look like or the dividend policy or indeed the direction of the company. That's very much a topic that the Board are taking a lot of feedback on at the moment through these shareholder consultations, balancing out the fact that, as I said at the top, OCF at the moment, although is showing healthy growth that isn't translating into cash, and that is because we've taken the decision to reinvest cash into Verne and into Aqua Comms. And then we touched on the position with Arqiva and the swaps and the vendor loan notes. So all I can really say on the future direction is that the Board are listening far and wide to shareholders on the future priorities and are clearly weighing up the best capital allocation decisions going forward. I will bring this to an end now because we're 1 minute from the hour. But I would just say thank you ever so much for your time and for your questions. I believe that we'll have a copy of the questions that went unanswered and we will endeavor to get a response back to you by email. But thank you all very much.