Cordiant Digital Infrastructure has, in the space of a few short years since its 2021 IPO, emerged as a London-listed vehicle for investors seeking exposure to the plumbing that underpins European internet and telecoms.
A niche appeal, perhaps, but a raft of savvy acquisitions in Poland, the Czech Republic and Ireland has paved the way for a strong share price accretion and a progressive dividend policy over the past 12 months.
Take Cordiant’s investment in Polish network Emitel. Emitel distributed £11.3 million in cash to Cordiant in the first half, driven by new broadcast contracts and inflation-indexed revenue adjustments that led to strong cash generation.
Then there’s Czech provider České Radiokomunikace (CRA), which recorded double-digit growth in both revenue and EBITDA, with both metrics increasing by 16.5 per cent year-on-year in the period.
CRA’s performance was driven by the acquisition of Cloud4com, which strengthened its cloud and data centre operations, and steady demand across its broadcast and telecom units.
For external analysts at Kepler Trust Intelligence, these results represented ‘another step forward’ for Cordiant.
Not only has the underlying portfolio continued to develop, in line with the managers’ ‘buy, build, grow’ approach, but the trust’s liquidity profile has been significantly improved through the refinancing of the debt facilities.
Emitel’s Piątkowo Radio Line Station
That has removed the near-term refinancing risk with nothing due for repayment until 2029, as well as increasing the managers’ liquidity sources and providing a strong base for the trust, said Kepler.
The robust performance of its portfolio companies allowed Cordiant to increase the first-half dividend by 5 per cent year on year to 2.1p per share, consistent with its annual target of 4.2p per share with EBITDA coverage at 4.7 times.
These results highlight Cordiant’s sensible approach to capital allocation, which balances investment in growth with enough dividends to keep income investors sated.
‘We need to be extremely careful with capital allocation policy,’ co-managing director Seven Marshall said.
‘We’ve done that from the get go and respect of recognising that interest rates were really quite low in the early days and they would more than likely increase over a period of time.
‘So we wanted a good cash flow and good growth assets in our investment portfolio.’
While Cordiant has allocated some cash flows to buying back shares, Marshall acknowledged that shareholders ‘also want a good progressive dividend’.
As such, ‘We have been extremely careful to try to grow the dividend at a faster rate than we set out at the IPO’, he added.
‘The dividend that we provided that last year and we continue to offer this year is ahead of what we were projecting in the IPO at the time of the launch.’
Marshall gave a prime example of putting one’s money where one’s mouth is when he purchased one million shares in the group at an average price of 90.7p in mid December.
It was the second significant share purchase this month by Marshall after buying 170,000 shares at 88.1p on 3 December.
Cordiant’s expertise in capital allocation has allowed Marshall and the team to pass knowledge on to the group’s investees.
As co-managing director Benn Mikula explained: ‘With this balanced team and the deep operating expertise, we are able to help companies become better, conduct bolt on acquisitions, operate within capital discipline and, import best company practice from the largest names in the industry.’
Despite Cordiant’s 22 per cent year-on-year share price rally and eye-catching £663 million valuation, the shares still have a sizable discount to net asset value (NAV) of 30.5 per cent (as of 30 September).
This discount has, however, closed considerably- in March, it was closer to 47 per cent.
One could anticipate a better discount to NAV if Cordiant keeps hitting the right capital-allocation notes, but that’s for the markets to decide.
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