Digital 9 Infrastructure H2 Earnings Call Highlights

Key Points

• Digital 9 progressed its managed wind‑down in 2025 with three major disposals (plus a fourth post year‑end) that fully repaid and led to cancellation of the revolving credit facility, materially reducing refinancing and financial risk and enabling capital returns.
• The company reported a NAV of £80.2 million (£0.093 per share) at 31 Dec 2025, including £33 million cash from divestments and a retained portfolio valued at £47.2 million, while Arqiva was marked to nil net of its vendor loan note.
• Elio posted revenue and earnings growth in 2025 and will be retained for a buy‑and‑build strategy backed by a newly signed €30 million debt facility, with the first incremental acquisition targeted in mid‑2026.

Digital 9 Infrastructure LON: DGI9 said it made “difficult but necessary decisions” during 2025 to simplify its portfolio, stabilize the balance sheet, and reset valuation assumptions, marking what management described as a transition into the next phase of a managed wind-down.

Presenting results for the year ended 31 December 2025, James O’Halloran said the company’s focus during 2025 was “stabilization and delivery” while managing multiple priorities including holding-company leverage, ongoing realization processes, and “a significant valuation change.” O’Halloran said the Board and investment manager InfraRed prioritized reducing financial risk, executing the realization plan put in place in late 2024, and updating valuations to reflect current assumptions and market evidence.

Managed wind-down advances as disposals repay revolving credit facility

O’Halloran said three major disposals were completed in 2025, with a fourth added after year-end, which he said provided “meaningful progress on the realization plan” and improved liquidity and certainty. A key milestone was the elimination of the revolving credit facility (RCF). O’Halloran said the RCF was “fully repaid” from disposal proceeds and then canceled, which he said removed refinancing risk from the fund and materially reduced financial risk.

He contrasted the situation with year-end 2024, when the RCF was expiring and, according to O’Halloran, the company lacked “a credible pathway to repayment or refinancing,” had restricted liquidity, and faced stalled or uncertain sale processes. He said the position at year-end 2025 reflected material change: the RCF had been repaid and canceled, divestments had been completed, and the company had begun returning capital to shareholders.

O’Halloran said the wind-down is now concentrated on two remaining core positions—Elio and Arqiva—with the company shifting from near-term execution of realizations into “active management of the remaining portfolio” to maximize value and return capital in an orderly way.

NAV at £80.2 million; Arqiva marked to nil

Mark Durker presented financial highlights, reporting a net asset value (NAV) of £80.2 million at 31 December 2025, equivalent to £0.093 per share. Durker noted that at this stage of the wind-down, NAV reflects both cash available for distribution and the value of retained assets, adding that Arqiva has been marked to nil “despite its potential future value.”

Post-divestments, Durker said the remaining portfolio value at December 2025 was £47.2 million, comprising Elio and Verne at the time. He said signed and completed divestments executed by the Board and InfraRed represented a total of £86 million. The cash component of NAV included £33 million of net remaining proceeds from completed divestments, after working capital requirements and deleveraging steps aimed at expediting shareholder returns.

Durker also walked through the valuation bridge, pointing to positive movements in Elio and Verne, but highlighting Arqiva’s revaluation to nil net of its Vendor Loan Note (VLN) from CPPIB. He said Elio delivered a £0.008 per share uplift due to growth, improved trading performance, and management incentives, and emphasized that Elio’s valuation “remains an organic growth case,” with no uplift yet assumed from M&A strategy or debt. He added that the settlement of the Verne earn-out contributed a £0.007 per share uplift, reflecting a realized £10 million outcome versus a £4 million valuation at the prior year-end.

On Arqiva, Durker said D9’s position is highly leveraged and “highly sensitive” due to the VLN. He linked the valuation movement to minority transactions involving Macquarie and IFM selling stakes at a valuation “well below the VLN.”

Verne earn-out settled for £10 million after due diligence

O’Halloran detailed the company’s decision to settle the Verne contingent earn-out for £10 million in cash after year-end, describing it as an example of reducing complexity and uncertainty while balancing outcomes. He said the earn-out, agreed as part of Verne’s 2024 sale, carried a headline potential future payout of up to $135 million but was “very binary,” tied to a narrow contractual perimeter and “strictly defined performance test mechanics.”

He said the earn-out had been marked at roughly £4 million at year-end 2024 and written down to nil at the June 2025 interims due to uncertainty and limited information rights. O’Halloran said the company negotiated access to additional information within the defined perimeter, enabling it to assess the earn-out similarly to the rights it would have had at the end of the earn-out period.

According to O’Halloran, a months-long commercial, legal, technical, and financial due diligence process—conducted alongside data center experts—concluded the earn-out was “highly unlikely to pay out” under the contractual mechanism. He attributed this assessment to the narrow perimeter, a carve-out excluding greenfield development projects, operating constraints including power availability in Iceland, and the buyer’s broad discretion over operational and investment decisions.

He said the £10 million settlement accelerated and crystallized value, removed residual complexity and execution risk, and would be distributed via the company’s compulsory redemption mechanism.

Elio posts revenue growth and pursues buy-and-build strategy

Durker said Elio delivered a “strong performance” in 2025, with headline revenue growth of 7% and earnings growth of 3% despite price pressure in Ireland. He attributed earnings resilience to operating cost discipline, Elio’s ownership of its network, and a focus on higher-margin enterprise-grade products, which he said brought in new institutional customers. Durker said the performance compared favorably to peers that saw earnings compression from cost increases and price competition.

Durker also provided an update on Elio’s M&A strategy, noting that InfraRed and the Board chose not to proceed with a prior sale process in favor of retaining the business to optimize value ahead of an eventual exit. He said Elio had been “subscale” to attract the greatest investor appetite, and that inorganic growth aligned with D9’s initial investment thesis.

As part of implementation, Durker said repayment of the fund-level RCF was a critical milestone because it enabled debt to be raised at the Elio level. He said Elio has now signed a €30 million debt package with AIB, structured as a €15 million committed facility and a €15 million uncommitted “accordion” facility. In the Q&A, Durker said the facility was raised “entirely on the basis of Elio’s current balance sheet capacity,” without relying on earnings from future acquisitions. He added that the interest margin was “around 200 basis points,” and said the company had not yet been forced to draw it, aiming to align any drawdown with deployment into acquisitions.

Durker said several live discussions with potential acquisition targets were underway, with a first incremental acquisition targeted for the second or third quarter of 2026. He described the strategy as acquiring businesses with similar B2B connectivity customer books, then “overlaying Elio’s best-in-cost operating model” to drive earnings accretion.

Arqiva: stable revenue, nil equity valuation driven by VLN and policy uncertainty

Mike Osborne said Arqiva’s business performance in 2025 was broadly in line with expectations, with stable revenue. He said EBITDA declined as anticipated due to a gradual mix shift from broadcast to lower-margin metering revenue, though he described margins as still positive. Osborne also cited smooth operations and strong delivery on the current AMP smart meter installation.

However, Osborne said Arqiva’s equity valuation at year-end was nil net of the VLN, driven primarily by market data points from the Macquarie and IFM stake sales, along with D9 adopting a more conservative view of future cash flows—particularly around broadcast policy outcomes and commercial business margins. He said the Board and investment manager believed this was an appropriately prudent position. Osborne stressed that Arqiva itself is “cash flow positive,” with performance on track and the ability to service its debt at the Arqiva level.

Osborne said InfraRed and the Board still believe Arqiva has potential for “material value realization” for D9, with value sensitive to a small number of levers including broadcast policy outcomes and commercial pricing. He said “only marginal improvements” in key drivers could restore value above the VLN level, and added that InfraRed is exploring additional routes to value enhancement, though these are not reflected in valuation.

In response to a shareholder question, O’Halloran said the company is engaged with the government process on future broadcast policy, which affects the longevity of core broadcast cash flows. He also said the company is working with management on commercial pricing, focusing more on costs to support margins, and undertaking a strategic review of Arqiva’s capital structure.

O’Halloran closed by saying the first phase of the reset is “largely done,” with the balance sheet stabilized, key realizations completed, and cash soon to be returned to shareholders. He said the company is now focused on disciplined execution, structural simplification, value enhancement at Elio and Arqiva, and further orderly capital returns.

About Digital 9 Infrastructure LON: DGI9

As announced on 29 January 2024, following the completion of a Strategic Review, the Board has determined that it would be in the best interests of shareholders as a whole to put forward a proposal for a managed wind-down of the Company. The proposal was approved by the shareholders on 25 March 2024 (99.89% of votes in favour). As announced on 11 October 2024, InfraRed has been appointed as the Company's investment manager and AIFM.

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