Cordiant Digital: FTSE 250 move, Q3 update & growth outlook

Hello, you're watching Proact of Joining me in the studio today are Cordy and Digital Infrastructure Management

Chairman, that's Stephen Marshall, also Cordy and Digital CFO Andrew Yu.

Steve, Andrew, thank you for coming in.

So Steve, one of the biggest announcements was the plan to migrate the listing

to the official list. Why is that strategically important?

Steve, this has been something a long time coming.

We're just sitting at a five-year anniversary now and we've been trying to build

obviously a diversification of investments and now we're at a stage where we have such a

track record. We've delivered very, very good growth over the last five years and I think that

the regulatory bodies are somewhat predisposed to moving up to the official list.

And when we get on to the official list, the FTSE 250, obviously it makes it a lot more,

it makes our stock a lot more accessible, particularly to the retail trade.

When you're on the specialist fund section of the market, you've got to go through a small

sort of sophisticated investor test, which obviously puts some people off.

You don't have to do that when you're on the FTSE 250.

And when you're in the 250, you've got to, there's an obligation, I guess, from the number

of the index trackers to invest in all of the stocks that make up that index.

So that should drive some additional demand for the shares.

Yes, there's a lot more visible as well. Andrew, can you take us through some of the other

highlights of your trading updates? Yes, we're very pleased with the performance so far

yet to date. So in the nine months to December, Portfolio revenue was up to 8.9%,

Portfolio either dealt up 7.1%, so the business has been benefiting from new contracts,

inflation, good cost control, as well as the recent acquisitions that we made.

dividend coverage again remains healthy, sort of measured on adjusted funds from operation,

steady at 1.8 times. And Sierra has had a particularly busy year so far. So in December,

it completed the acquisition of an Android TV. That's a company in the IPTV, in the OTT

streaming space, so further strengthening a serious position in that growing market and

complementing it, existing digital broadcast capabilities, a serious flagship, 26 megawatt

data center development, that completed the ground works very recently, and we're just in

advanced negotiations with potential contractors for the main construction base of that project.

Furthermore, Sierra has been doing a good job in optimizing its real estate portfolio.

So this financial year to March 26, we expect Sierra to generate about 12 million pounds in cash,

and we expect to see that reinvested in growth projects such as Croquetway.

Finally, there's about 241 million pounds in liquidity across the group. That's cash and

drawn debt, so that the portfolio is well-funded to continue investing in growth CAPEX and

bottleneck positions. And also the implications of the conflicts in the Middle East on your portfolio,

and how are you positioning the business to respond? Yeah, so as we expect to see or really

seeing height and volatility in the financial and commodity markets, so basically oil and gas,

I would say that the good news is about two thirds of our revenue is linked to inflation.

That's either fully indexed or capped, so with healthy but our margins, we should expect

inflation to be net beneficiary. The portfolio is being net beneficiary of inflation.

On the energy side, so power is one of the larger costs in our cost profile. So the good news

is that the talent theory have hedged nearly all of that in its requirements for this calendar,

and about 50% for next year. Generally, electricity is a path to cost for data centers,

so the customer has ended up paying for that. So again, we don't see any material exposure

to rising power prices in that respect. More generally, we see digital infrastructure as a defensive

asset class, so the demand for data keeps growing, whether it's through the generative AI,

cloud computing, online video content, we should still see that demand coming to regardless

of geopolitics. Finally, we do see opportunities as well. So in four of the five countries we operate

in, we do work with the government, the government is our client. Increasingly governments are

looking at seeing how they can build further redundancy and visibility and then networks,

as we are looking at opportunities and areas such as emergency response systems,

expanding cyber security capabilities, and generally strengthening the resilience of

communications and networks. So overall, we do see opportunities and we can diversify this

as well as it shouldn't. Steve, what's the main growth catalyst that investors should be

watching out for over the next year or two? Well, first of all, as Anders just said, we are in

a sector which is almost intuitively quite high growth. There's more demand for capacity for

mobile telecommunications and more demand from people working from home as they connect to either

copper or more recently, increasingly to fiber optics. And obviously, there's more demand in the

data center space for the traditional sort of service to house that data. But then on top of all that,

I guess most people have read in the press, this massive overlay of additional demand

as the new product of AI comes to marketplace. And there's an opportunity now, not just to

ask for information from the internet, but actually ask the internet to compute something that you

actually want to know about. And indeed, from there on as well, actually using the AI software to

actually complete various forms, whether they be tax return forms or other things of that nature.

So all of that gives an acceleration to that underlying growth across the digital infrastructure

in which we invest in. We're in the plumbing of the internet. We provide the mobile telecommunications

towers which provide the support for the antennas that utilize that support the mobile forms.

We're on with number two in fiber optic networks in Ireland with a speed fiber group.

We're number one in broadcast and mobile telecommunication towers in Poland and the Czech Republic.

So great sector to be in with good growth. And then on top of that, of course, we've talked about

it before, Stephen, we're looking to build out a 26 megawatt data center facility and the sub-lives

of Prague, which is probably just about to get to the stage where we will approve the construction

contracts for that. And also, we're looking again this year to see reap the synergies from our

recent acquisition of BT Island that's been merged with our speed fiber group and there will be

very very significant synergies in bringing those two businesses together and making us

by far a much bigger, much more powerful number two to the incumbent air.

Well, hope you continue to keep us updated with your progress. Thank you very much.

You're coming in today. Thank you, Stephen. I guess Stephen Marshall and Andrew Yu from

Cordial Digital Infrastructure.