Cordiant Digital Infrastructure Ltd (LSE:CORD) has, in the space of a few short years since its 2021 IPO, emerged as an alluring London-listed company 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% year-on-year in the period.
CRA’s result was driven by the acquisition of Cloud4com, which strengthened its cloud and data centre operations, and steady demand across its broadcast and telecom units.
The robust performance of Cordiant’s portfolio companies allowed Cordiant to increase the first-half dividend by 5% year on year 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 told Proactive. “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 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.”
Cordiant’s expertise in capital allocation also allows 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% 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% (as of 30 September).
This discount has, however, closed considerably- in March, it was closer to 47%.
One could anticipate a smaller discount to NAV if Cordiant keeps hitting the right capital allocation notes, but that’s for the markets to decide.