Cordiant Digital Infrastructure (CORD)
27/06/2024
Results analysis from Kepler Trust
Intelligence
Cordiant Digital
Infrastructure (CORD) has released its financial results for the
year ending 31/03/2024. Over the year, CORD saw its NAV per share
increase by 7.8%, and a total return of 9.3% based on the
ex-dividend opening NAV. CORD has no formal
benchmark.
Over the course of the year,
the trust completed purchases of Speed Fibre and Norkring Belgie
taking the total number of portfolio companies from three to five,
split across a mix of asset classes.
The biggest contributor to
performance was Emitel. This was primarily a result of new contract
wins and growth in cash flow though Emitel also benefitted from
currency translation, a change in net debt and a change in the
discount rate. Speed Fibre also contributed positively to
performance.
CRA was a slight detractor
as, while revenues grew this was offset by an increase in the
discount rate and forex headwinds. Hudson Interxchange narrowed
losses, though still detracted.
CORD announced an increase in
the dividend of 5% to 4.2p per share. Dividend cover, as measured
by the managers' adjusted funds from operations figure (AFFO),
increased to 1.6x.
The discount widened to 48%
at year end, despite strong operational performance The board has
allocated £20m to a share buyback programme. In the year to
31/03/2024, £5.4m had been spent.
Gearing is c. 39% of gross
assets (64% of NAV) on a look through (i.e. consolidated)
basis.
Chairman Shonaid Jemmett-Page
stated "The underlying strengths of [CORD] and our portfolio, the
growth in the sector and the attractiveness of our core markets
together lead the Board to look forward to the year ahead with
confidence".
Kepler
View
We believe these results
demonstrate another encouraging year for Cordiant Digital
Infrastructure (CORD). The managers have delivered strong
performance, aided by good operational revenue and contract wins
from the portfolio's two largest holdings. This was somewhat offset
by unfavourable foreign exchange movements, though this is arguably
temporary.
The portfolio has grown to
five companies. This, in our opinion, has helped to diversify some
of the concentration risk of the portfolio and supports income
generation. One new holding also supported performance after an
increase in its value due to a rise in revenues and
profits.
The increase in operational
revenue has contributed to an improved dividend outlook. Underlying
revenues grew over 50% from the previous year, and whilst there
were increased costs for capex and financing, AFFO still increased
by 13%. This has allowed the managers to announce a 5% increase in
the dividend. This is the second time the dividend has been
increased in the trust's short history.
The trust had liquidity of c.
£167.7m at the year end. Total net debt increased from £552.9m the
interim statement on 30/09/2023 therefore gearing has increased
slightly to 38.9% on a GAV basis though this remains below the
maximum level of 50% of GAV. The managers argue their gearing
positioning and interest cover is substantially stronger than their
competitors.
Despite the encouraging
performance, the discount on the shares widened to 48% We believe
this could represent an attractive entry point for long-term
investors with rate cuts a potential catalyst. The board began
share buybacks in the year which have been accretive to
NAV.
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