Form 6-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

FORM 6-K

 

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

Report on Form 6-K dated 1 November 2017

(Commission File No. 001-35053)

 

 

INTERXION HOLDING N.V.

(Translation of Registrant’s Name into English)

 

 

Tupolevlaan 24, 1119 NX Schiphol-Rijk, The Netherlands, +31 20 880 7600

(Address of Principal Executive Office)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F  ☒             Form 40-F  ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):  ☐

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7) ):  ☐

Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.

 

 

 


This report contains Interxion Holding N.V.’s interim report as at and for the three-month and nine-month periods ended 30 September 2017 (the “Interim Report”).

This report was prepared in accordance with the indenture (the “Indenture”) dated as of 3 July 2013, as amended and / or supplemented from time to time, among Interxion Holding N.V., as Issuer, the guarantors named therein, The Bank of New York Mellon, London Branch, as trustee, principal paying agent and transfer agent, The Bank of New York Mellon (Luxembourg) S.A., as Luxembourg paying agent and registrar, and Barclays Bank PLC, as security trustee.

This Report on Form 6-K is incorporated by reference into (i) the Registration Statement on Form S-8 of the Registrant originally filed with the Securities and Exchange Commission on 23 June 2011 (File No. 333-175099), (ii) the Registration Statement on Form S-8 of the Registrant originally filed with the Securities and Exchange Commission on 2 June 2014 (File No. 333-196447) and (iii) the Registration Statement on Form S-8 of the Registrant originally filed with the Securities and Exchange Commission on 31 May 2017 (File No. 333-218364).

 

Exhibit

    
99.1    The Interxion Holding N.V. Interim Report as at and for the three-month and nine-month periods ended 30 September 2017.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  INTERXION HOLDING N.V.
By:  

/s/ David C. Ruberg

Name:   David C. Ruberg
Title:   Chief Executive Officer

Date: 1 November 2017

EX-99.1

Exhibit 99.1

 

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Interxion Holding NV

Interim Report

as at and for the three month and the nine month periods

ended

30 September 2017

Schiphol-Rijk, 1 November 2017


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Financial Highlights

 

    Revenue increased by 18% to €124.6 million (3Q 2016: €105.3 million).

 

    Recurring revenue1 increased by 17% to €117.4 million (3Q 2016: €100.0 million).

 

    Net income decreased by 4% to €10.1 million (3Q 2016: €10.5 million).

 

    Adjusted net income2 increased by 24% to €10.7 million (3Q 2016: €8.6 million).

 

    Earnings per diluted share decreased to €0.14 (3Q 2016: €0.15).

 

    Adjusted earnings2 per diluted share increased to €0.15 (3Q 2016: €0.12).

 

    Adjusted EBITDA2 increased by 16% to €56.2 million (3Q 2016: €48.3 million).

 

    Adjusted EBITDA margin decreased to 45.1% (3Q 2016: 45.9%).

 

    Capital expenditures, including intangible assets3, were €75.2 million (3Q 2016: €64.5 million).

Operating Highlights

 

    Equipped space4 increased by 1,900 square metres in the quarter to 118,900 square metres.

 

    Revenue generating space4 increased by 2,100 square metres in the quarter to 97,100 square metres.

 

    Utilisation rate at the end of the quarter was 82%.

 

    During the third quarter, Interxion completed the following major expansions:

 

    1,100 sqm expansion in Frankfurt,

 

    300 sqm expansion in Stockholm, and

 

    400 sqm expansion in Zurich.

Quarterly Review

Revenue in the third quarter of 2017 was €124.6 million, an 18% increase over the third quarter of 2016 and a 3% increase over the second quarter of 2017. Recurring revenue was €117.4 million, a 17% increase over the third quarter of 2016 and a 3% increase over the second quarter of 2017. Recurring revenue in the third quarter represented 94% of total revenue. On an organic constant currency5 basis, revenue in the third quarter of 2017 was 17% higher than in the third quarter of 2016 and 4% higher than in the second quarter of 2017.

Cost of sales in the third quarter of 2017 was €49.6 million, a 22% increase over the third quarter of 2016 and a 4% increase over the second quarter of 2017.

Gross profit was €75.0 million in the third quarter of 2017, a 16% increase over the third quarter of 2016 and a 3% increase over the second quarter of 2017. Gross profit margin was 60.2% in the third quarter of 2017, compared with 61.3% in the third quarter of 2016 and 60.3% in the second quarter of 2017.

Sales and marketing costs in the third quarter of 2017 were €8.2 million, a 13% increase over the third quarter of 2016 and flat compared to the second quarter of 2017.

Other general and administrative costs, which exclude depreciation, amortisation, impairments, share-based payments and M&A transaction costs were €10.6 million in the third quarter of 2017, a 19% increase over the third quarter of 2016 and a 3% increase from the second quarter of 2017.

Depreciation, amortisation, and impairments in the third quarter of 2017 was €27.8 million, a 26% increase from the third quarter of 2016 and a 2% increase from the second quarter of 2017.

Operating income in the third quarter of 2017 was €25.0 million, an increase of 6% from the third quarter of 2016 and flat compared to the second quarter of 2017.

Net finance expense for the third quarter of 2017 was €10.8 million, a 26% increase over the third quarter of 2016 and a 1% decrease over the second quarter of 2017.

Income tax expense for the third quarter of 2017 was €4.1 million, a 9% decrease compared with the third quarter of 2016 and an 11% increase from the second quarter of 2017.

 

   2    Interim Report: Three-month and nine-month periods ended 30 September 2017
      These Condensed Consolidated Interim Financial Statements are unaudited


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Net income was €10.1 million in the third quarter of 2017, a 4% decrease over the third quarter of 2016 and a 3% decrease from the second quarter of 2017.

Adjusted net income was €10.7 million in the third quarter of 2017, a 24% increase over the third quarter of 2016 and a 5% increase from the second quarter of 2017.

Adjusted EBITDA for the third quarter of 2017 was €56.2 million, a 16% increase over the third quarter of 2016 and a 3% increase over the second quarter of 2017.

Adjusted EBITDA margin was 45.1% in the third quarter of 2017, compared with 45.9% in the third quarter of 2016 and 45.0% in the second quarter of 2017.

Net cash flows from operating activities were €32.5 million in the third quarter of 2017, compared with €23.2 million in the third quarter of 2016 and €35.7 million in the second quarter of 2017.

Cash generated from operations6, was €55.2 million in the third quarter of 2017, compared with €43.5 million in the third quarter of 2016 and €40.6 million in the second quarter of 2017.

Capital expenditures, including intangible assets, were €75.2 million in the third quarter of 2017, compared with €64.5 million in the third quarter of 2016 and €56.4 million in the second quarter of 2017.

Cash and cash equivalents were €38.2 million at 30 September 2017, compared with €115.9 million at year end 2016.

Total borrowings, net of deferred revolving facility financing fees, were €806.8 million at 30 September 2017, compared with €735.0 million at year end 2016.

All of the capacity metrics below do not include Interxion Science Park.

Equipped space at the end of the third quarter of 2017 was 118,900 square metres, compared with 107,800 square metres at the end of the third quarter of 2016 and 117,000 square metres at the end of the second quarter of 2017.

Revenue generating space at the end of the third quarter of 2017 was 97,100 square metres, compared with 84,100 square metres at the end of the third quarter of 2016 and 95,000 square metres at the end of the second quarter of 2017.

Utilisation rate, the ratio of revenue-generating space to equipped space, was 82% at the end of the third quarter of 2017, compared with 78% at the end of the third quarter of 2016 and 81% at the end of the second quarter of 2017.

 

   3    Interim Report: Three-month and nine-month periods ended 30 September 2017
      These Condensed Consolidated Interim Financial Statements are unaudited


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1  Recurring revenue is revenue incurred from colocation and associated power charges, office space, amortised set-up fees, cross-connects and certain recurring managed services (but excluding any ad hoc managed services) provided by us directly or through third parties, excluding rents received for the sublease of unused sites.
2  Adjusted net income (or ‘Adjusted earnings’) and Adjusted EBITDA are non-IFRS figures intended to adjust for certain items and are not measures of financial performance under IFRS. Complete definitions can be found in the “Non-IFRS Financial Measures” section in this Interim Report. Reconciliations of net income to Adjusted EBITDA and net income to Adjusted net income can be found in the financial tables later in this Interim Report.
3  Capital expenditures, including intangible assets, represent payments to acquire property, plant, equipment and intangible assets, as recorded in the consolidated statement of cash flows as “Purchase of property, plant and equipment” and “Purchase of intangible assets”, respectively.
4  Equipped space and Revenue generating space (and other metrics derived from these measures) exclude Interxion Science Park, which was acquired on 24 February 2017.
5  We present organic constant currency information to provide a framework for assessing how our underlying businesses performed excluding the effect of acquisitions and foreign currency rate fluctuations. For purposes of calculating Revenue on an organic constant currency basis, results from entities acquired during the current and comparison period are excluded. Also, current and comparative prior period results for entities reporting in currencies other than Euro are converted into Euro using the average exchange rates from the prior period rather than the actual exchange rates in effect during the current period. The reconciliation of total revenue growth to total revenue growth on an organic constant currency basis, is as follows:

 

Three Months Ended 30 September 2017

   Year-on-year     Sequential  

Reported total revenue growth

     18.4     3.2

Add back: impact of foreign currency translation

     0.8     0.6

Reverse: impact of acquired ISP business

     -1.8     0.0
  

 

 

   

 

 

 

Total revenue growth on an organic constant currency basis

     17.4     3.7
  

 

 

   

 

 

 
Percentages may not add due to rounding     

 

6 We define Cash generated from operations as net cash flows from operating activities, excluding interest and corporate income tax payments and receipts.

 

   4    Interim Report: Three-month and nine-month periods ended 30 September 2017
      These Condensed Consolidated Interim Financial Statements are unaudited


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Further Information for Noteholders

This Interim Report is intended to comply with the requirements in the indenture (the “Indenture”) dated as of 3 July 2013, as amended and/or supplemented from time to time, among Interxion Holding NV, as Issuer, the guarantors named therein, The Bank of New York Mellon, London Branch, as trustee, principal paying agent and transfer agent, The Bank of New York Mellon (Luxembourg) S.A., as Luxembourg paying agent and registrar, and Barclays Bank PLC, as security trustee, and the Condensed Consolidated Interim Financial Statements included herein were prepared in accordance with IAS 34.

The information in this Interim Report may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements are based on current expectations that involve risks and uncertainties. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. For example, the words “believes”, “anticipates”, “plans”, “expects”, “intends”, and similar expressions are intended to identify forward-looking statements. Our actual results and the timing of certain events may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are not limited to, the difficulty of reducing operating expenses in the short term, inability to utilise the capacity of newly planned data centres and data centre expansions, significant competition, the cost and supply of electrical power, data centre industry over-capacity, performance under service-level agreements, and other risks described from time to time in Interxion’s filings with the Securities and Exchange Commission. All forward-looking statements in this document are based on information available to us as of the date of this Interim Report and we assume no obligation to update any such forward-looking statements.

Non-IFRS Financial Measures

Included in this Interim Report are certain non-IFRS financial measures, which are measures of our financial performance that are not calculated and presented in accordance with IFRS, within the meaning of applicable SEC rules. These measures are as follows: (i) EBITDA; (ii) Adjusted EBITDA; (iii) Recurring revenue; (iv) Revenue on an organic constant currency basis; (v) Adjusted net income; (vi) Adjusted basic earnings per share, (vii) Adjusted diluted earnings per share and (viii) Cash generated from operations.

Other companies may present EBITDA, Adjusted EBITDA, Recurring revenue, Revenue on an organic constant currency basis, Adjusted net income, Adjusted basic earnings per share, Adjusted diluted earnings per share and Cash generated from operations differently than we do. Each of these measures are not measures of financial performance under IFRS and should not be considered as an alternative to operating income or as a measure of liquidity or an alternative to Profit for the period attributable to shareholders (“net income”) as indicators of our operating performance or any other measure of performance implemented in accordance with IFRS.

EBITDA, Adjusted EBITDA, Recurring revenue and Revenue on an organic constant currency basis

We define EBITDA as net income plus income tax expense, net finance expense, depreciation, amortisation and impairment of assets.

We define Adjusted EBITDA as EBITDA adjusted for the following items, which may occur in any period, and which management believes are not representative of our operating performance:

 

    Share-based payments – primarily the fair value at the date of grant to employees of equity awards, are recognised as an employee expense over the vesting period. We believe that this expense does not represent our operating performance.

 

    Income or expense related to the evaluation and execution of potential mergers or acquisitions (“M&A”) – under IFRS, gains and losses associated with M&A activity are recognised in the period in which such gains or losses are incurred. We exclude these effects because we believe they are not reflective of our ongoing operating performance.

 

   5    Interim Report: Three-month and nine-month periods ended 30 September 2017
      These Condensed Consolidated Interim Financial Statements are unaudited


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    Adjustments related to terminated and unused data centre sites – these gains and losses relate to historical leases entered into for certain brownfield sites, with the intention of developing data centres, which were never developed and for which management has no intention of developing into data centres. We believe the impact of gains and losses related to unused data centres are not reflective of our business activities and our on-going operating performance.

In certain circumstances, we may also adjust for other items that management believes are not representative of our current on-going performance. Examples include: adjustments for the cumulative effect of a change in accounting principle or estimate, impairment losses, litigation gains and losses or windfall gains and losses.

We define Recurring revenue as revenue incurred from colocation and associated power charges, office space, amortised set-up fees, cross-connects and certain recurring managed services (but excluding any ad hoc managed services) provided by us directly or through third parties, excluding rents received for the sublease of unused sites.

We believe EBITDA and Adjusted EBITDA and Recurring revenue provide useful supplemental information to investors regarding our on-going operational performance. These measures help us and our investors evaluate the on-going operating performance of the business after removing the impact of our capital structure (primarily interest expense) and our asset base (primarily depreciation and amortisation). Management believes that the presentation of Adjusted EBITDA, when combined with the primary IFRS presentation of net income, provides a more complete analysis of our operating performance. Management also believes the use of EBITDA and Adjusted EBITDA facilitates comparisons between us and other data centre operators (including other data centre operators that are REITs) and other infrastructure based businesses. EBITDA and Adjusted EBITDA are also relevant measures used in the financial covenants of our €100.0 million revolving credit facility, our €100.0 million senior secured revolving facility and our 6.00% Senior Secured Notes due 2020.

A reconciliation from net income to EBITDA and from EBITDA to Adjusted EBITDA is provided in the notes to the Condensed Consolidated Interim Financial Statements. EBITDA, Adjusted EBITDA and other key performance indicators may not be indicative of our historical results of operations, nor are they meant to be predictive of future results.

We believe that revenue growth is a key indicator of how a company is progressing from period to period and presenting organic constant currency information for revenue provides useful supplemental information to investors regarding our ongoing operational performance because it helps us and our investors evaluate the ongoing operating performance of the business after removing the impact of acquisitions and of currency exchange rates.

 

   6    Interim Report: Three-month and nine-month periods ended 30 September 2017
      These Condensed Consolidated Interim Financial Statements are unaudited


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Adjusted net income, Adjusted basic earnings per share and Adjusted diluted earnings per share

We define Adjusted net income as net income adjusted for the following items and the related income tax effect, which may occur in any period, and which management believes are not reflective of our operating performance:

 

    Income or expense related to the evaluation and execution of potential mergers or acquisitions (“M&A”) – under IFRS, gains and losses associated with M&A activity are recognised in the period in which such gains or losses are incurred. We exclude these effects because we believe they are not reflective of our on-going operating performance.

 

    Adjustments related to provisions – these adjustments are made for adjustments in provisions that are not reflective of the on-going operating performance of Interxion. These adjustments may include changes in provisions for onerous lease contracts.

 

    Adjustments related to capitalised interest – under IFRS, we are required to calculate and capitalise interest allocated to the investment in data centres and exclude it from net income. We believe that reversing the impact of capitalised interest provides information about the impact of the total interest costs and facilitates comparisons with other data centre operators.

In certain circumstances, we may also adjust for items that management believes are not representative of our current on-going performance. Examples include: adjustments for the cumulative effect of a change in accounting principle or estimate, impairment losses, litigation gains and losses or windfall gains and losses.

Management believe that the exclusion of certain items listed above, provides useful supplemental information to net income to aid investors in evaluating the operating performance of our business and comparing our operating performance with other data centre operators and infrastructure companies. We believe the presentation of Adjusted net income, when combined with net income (loss) prepared in accordance with IFRS is beneficial to a complete understanding of our performance. A reconciliation from reported net income to Adjusted net income is provided in the tables attached to this Interim Report.

Adjusted basic earnings per share and Adjusted diluted earnings per share amounts are determined on Adjusted net income. A reconciliation from reported Net income to Adjusted net income is provided herein.

Cash generated from operations

Cash generated from operations is defined as net cash flows from operating activities, excluding interest and corporate income tax payments and receipts. Management believe that the exclusion of these items, provides useful supplemental information to net cash flows from operating activities to aid investors in evaluating the cash generating performance of our business.

 

   7    Interim Report: Three-month and nine-month periods ended 30 September 2017
      These Condensed Consolidated Interim Financial Statements are unaudited


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Adjusted net income reconciliation

 

Amounts x €’000

   Three Months Ended      Nine Months ended  
     30 Sep
2017
     30 Sep
2016
     30 Sep
2017
     30 Sep
2016
 

Consolidated

           

Net income

     10,062        10,461        31,216        29,845  

Income or expense related to the evaluation and execution of potential mergers or acquisitions:

           

M&A transaction costs

     1,633        887        2,961        1,608  

Profit on sale of financial asset

     —          (281      —          (281

Adjustment of financial lease obligation

     —          (1,410      —          (1,410

Adjustments related to capitalised interest

     (840      (1,255      (2,605      (2,421
  

 

 

    

 

 

    

 

 

    

 

 

 
     793        (2,059      356        (2,504

Tax effect of above add backs and reversals

     (198      162        (89      274  
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted net income

     10,657        8,564        31,483        27,615  
  

 

 

    

 

 

    

 

 

    

 

 

 

Reported basic EPS: (€)

     0.14        0.15        0.44        0.42  

Reported diluted EPS: (€)

     0.14        0.15        0.44        0.42  

Adjusted basic EPS: (€)

     0.15        0.12        0.44        0.39  

Adjusted diluted EPS: (€)

     0.15        0.12        0.44        0.39  

About Interxion

Interxion (NYSE: INXN) is a leading provider of carrier and cloud-neutral colocation data centre services in Europe, serving a wide range of customers through 48 data centres in 11 European countries. Interxion’s uniformly designed, energy efficient data centres offer customers extensive security and uptime for their mission-critical applications.

With over 600 connectivity providers, 21 European Internet exchanges, and most leading cloud and digital media platforms across its footprint, Interxion has created connectivity, cloud, content and finance hubs that foster growing customer communities of interest. For more information, please visit www.interxion.com.

 

   8    Interim Report: Three-month and nine-month periods ended 30 September 2017
      These Condensed Consolidated Interim Financial Statements are unaudited


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Condensed Consolidated Interim Income Statements

 

Amounts x €’000

          Three Months Ended     Nine Months ended  
     Note      30 Sep 2017     30 Sep 2016     30 Sep 2017     30 Sep 2016  

Revenue

     5        124,647       105,275       359,420       311,301  

Cost of sales

     5        (49,608     (40,765     (141,628     (119,547
     

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

        75,039       64,510       217,792       191,754  

Other income

     5        —         12       27       142  

Sales and marketing costs

     5        (8,247     (7,293     (24,458     (22,301

General and administrative costs

     5        (41,766     (33,619     (118,947     (99,572
     

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

        25,026       23,610       74,414       70,023  

Finance income

     6        367       606       1,050       875  

Finance expense

     6        (11,200     (9,234     (33,090     (27,631
     

 

 

   

 

 

   

 

 

   

 

 

 

Profit before taxation

        14,193       14,982       42,374       43,267  

Income tax expense

     7        (4,131     (4,521     (11,158     (13,422
     

 

 

   

 

 

   

 

 

   

 

 

 

Net income

        10,062       10,461       31,216       29,845  
     

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share

           

Basic earnings per share: (€)

        0.14       0.15       0.44       0.42  

Diluted earnings per share: (€)

        0.14       0.15       0.44       0.42  

The accompanying notes form an integral part of these condensed consolidated interim financial statements.

 

   9    Interim Report: Three-month and nine-month periods ended 30 September 2017
      These Condensed Consolidated Interim Financial Statements are unaudited


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Condensed Consolidated Interim Statements of Comprehensive Income

 

Amounts x €’000

   Three Months Ended     Nine Months ended  
     30 Sep 2017     30 Sep 2016     30 Sep 2017     30 Sep 2016  

Net income

     10,062       10,461       31,216       29,845  

Other comprehensive income

        

Items that are, or may be, reclassified subsequently to profit or loss:

        

Foreign currency translation differences(a)

     (2,186     (3,889     (4,855     (13,872

Effective portion of changes in fair value of cash flow hedge

     9       4       74       (131

Tax on items that are, or may be, reclassified subsequently to profit or loss:

 

     

Foreign currency translation differences

     (124     571       30       1,861  

Effective portion of changes in fair value of cash flow hedge

     (2     (1     (18     43  
  

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income/(loss) for the period, net of tax

     (2,303     (3,315     (4,769     (12,099
  

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income attributable to shareholders

     7,759       7,146       26,447       17,746  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(a) The foreign currency translation differences are primarily related to exchange rate differences on equities an loans in GBP that form part of the Company`s net investment in foreign operation.

The accompanying notes form an integral part of these condensed consolidated interim financial statements.

 

   10    Interim Report: Three-month and nine-month periods ended 30 September 2017
      These Condensed Consolidated Interim Financial Statements are unaudited


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Condensed Consolidated Interim Statements of Financial Position

 

            30 Sep 2017     31 Dec 2016  
As at                    
All amounts in €’000    Note               

Non-current assets

       

Property, plant and equipment

     8        1,277,166       1,156,031  

Intangible assets

     12        59,448       28,694  

Goodwill

     12        38,900       —    

Deferred tax assets

        25,751       20,370  

Other investments

        3,246       1,942  

Other non-current assets

        14,461       11,914  
     

 

 

   

 

 

 
        1,418,972       1,218,951  

Current assets

       

Trade receivables and other current assets

        162,860       147,821  

Cash and cash equivalents

        38,204       115,893  
     

 

 

   

 

 

 
            201,064     263,714  
     

 

 

   

 

 

 

Total assets

        1,620,036       1,482,665  
     

 

 

   

 

 

 

Shareholders’ equity

       

Share capital

        7,132       7,060  

Share premium

        530,315       519,604  

Foreign currency translation reserve

 

     5,163       9,988  

Hedging reserve, net of tax

        (187     (243

Accumulated profit

        43,576       12,360  
     

 

 

   

 

 

 
            585,999     548,769  

Non-current liabilities

       

Other non-current liabilities

        14,659       11,718  

Deferred tax liabilities

        21,985       9,628  

Borrowings

     10        716,749       723,975  
     

 

 

   

 

 

 
            753,393     745,321  

Current liabilites

       

Trade payables and other current liabilities

 

     183,170       171,399  

Income tax liabilities

        7,165       5,694  

Borrowings

     10        90,309       11,482  
     

 

 

   

 

 

 
            280,644     188,575  
     

 

 

   

 

 

 

Total liabilities

        1,034,037       933,896  
     

 

 

   

 

 

 

Total liabilities and shareholders’ equity

 

     1,620,036       1,482,665  
     

 

 

   

 

 

 

The accompanying notes form an integral part of these condensed consolidated interim financial statements.

 

   11    Interim Report: Three-month and nine-month periods ended 30 September 2017
      These Condensed Consolidated Interim Financial Statements are unaudited


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Condensed Consolidated Interim Statements of Changes in Shareholders’ Equity

 

Amounts x €’000

   Share
capital
     Share
premium
     Foreign
currency
translation
reserve
    Hedging
reserve, net
of tax
    Accumulated
income /
(deficit)
    Total
equity
 

Balance at 1 January 2017

     7,060        519,604        9,988       (243     12,360       548,769  

Net income

     —          —          —         —         31,216       31,216  

Other comprehensive income, net of tax

     —          —          (4,825     56       —         (4,769
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income

     —          —          (4,825     56       31,216       26,447  

Exercise of options

     72        6,699        —         —         —         6,771  

Share-based payments

     —          4,012        —         —         —         4,012  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total contribution by, and distributions to, owners of the Company

     72        10,711        —         —         —         10,783  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Balance at 30 September 2017

     7,132        530,315        5,163       (187     43,576       585,999  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Balance at 1 January 2016

     6,992        507,296        20,865       (213     (27,523     507,417  

Profit for the period

     —          —          —         —         29,845       29,845  

Other comprehensive income, net of tax

     —          —          (12,011     (88     —         (12,099
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income

     —          —          (12,011     (88     29,845       17,746  

Exercise of options

     61        6,159        —         —         —         6,220  

Share-based payments

     —          4,403        —         —         —         4,403  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Total contribution by, and distributions to, owners of the Company

     61        10,562        —         —         —         10,623  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

Balance at 30 September 2016

     7,053        517,858        8,854       (301     2,322       535,786  
  

 

 

    

 

 

    

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes form an integral part of these condensed consolidated interim financial statements.

 

   12    Interim Report: Three-month and nine-month periods ended 30 September 2017
      These Condensed Consolidated Interim Financial Statements are unaudited


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Condensed Consolidated Interim Statements of Cash Flows

 

Amounts x €’000

   Three Months Ended     Nine Months ended  
     30 Sep 2017     30 Sep
2016(a)
    30 Sep 2017     30 Sep
2016(a)
 

Net income

     10,062       10,461       31,216       29,845  

Depreciation, amortisation and impairments

     27,790       22,094       79,183       65,592  

Provision for onerous lease contracts

     —         (261     —         (1,532

Share-based payments

     1,443       1,845       4,012       4,403  

Net finance expense

     10,833       8,628       32,040       26,756  

Income tax expense

     4,131       4,521       11,158       13,422  
  

 

 

   

 

 

   

 

 

   

 

 

 
     54,259     47,288     157,609     138,486  
  

 

 

   

 

 

   

 

 

   

 

 

 

Movements in trade receivables and other assets

     (266     (4,956     (13,654     (3,646

Movements in trade payables and other liabilities

     1,212       1,135       14,793       (1,623
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash generated from / (used in) operations

     55,205       43,467       158,748       133,217  
  

 

 

   

 

 

   

 

 

   

 

 

 

Interest and fees paid(b)

     (19,476     (18,357     (40,389     (33,779

Interest received

     193       44       140       69  

Income tax paid

     (3,439     (1,948     (8,744     (5,486
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash flows from / (used in) operating activities

     32,483       23,206       109,755       94,021  
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from / (used in) investing activities

        

Purchase of property, plant and equipment

     (73,708     (61,041     (180,030     (169,217

Financial investments - deposits

     30       416       (336     1,164  

Acquisition Interxion Science Park B.V.

     —         —         (77,517     —    

Purchase of intangible assets

     (1,450     (3,485     (6,326     (7,903

Loans provided

     —         (1,942     (1,341     (1,942

Proceeds from sale of financial asset

     —         281       —         281  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash flows from / (used in) investing activities

     (75,128     (65,771     (265,550     (177,617
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from / (used in) financing activities

        

Proceeds from exercised options

     2,682       44       6,771       6,220  

Proceeds from mortgages

     —         —         —         14,625  

Repayment of mortgages

     (624     (548     (2,045     (1,816

Proceeds from revolving credit facilities

     30,000       —         104,775       —    

Repayments revolving facilities

     —         —         (30,000     —    

Proceeds 6.00% Senior Secured Notes due 2020

     —         —         —         155,346  

Interest received at issuance Additional Notes

     —         —         —         2,225  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash flows from / (used in) financing activities

     32,058       (504     79,501       176,600  

Effect of exchange rate changes on cash

     (452     (187     (1,395     (592
  

 

 

   

 

 

   

 

 

   

 

 

 

Net movement in cash and cash equivalents

     (11,039     (43,256     (77,689     92,412  

Cash and cash equivalents, beginning of period

     49,243       189,354       115,893       53,686  
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents, end of period

     38,204       146,098       38,204       146,098  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(a) Collaterised cash has been reclassified from “Cash and cash equivalents” to “Other current assets” and “Other non-current assets”. The impact on the consolidated statement of cash flows has been presented in investing cash flows. Comparative figures have been adjusted accordingly.
(b) Interest and fees paid is reported net of cash interest capitalised, which is reported as part of “Purchase of property, plant and equipment”.

The accompanying notes form an integral part of these Condensed Consolidated Interim Financial Statements.

 

   13    Interim Report: Three-month and nine-month periods ended 30 September 2017
      These Condensed Consolidated Interim Financial Statements are unaudited


LOGO

 

Notes to the Condensed Consolidated Interim Financial Statements

 

1 The Company

Interxion Holding NV (the “Company”) is domiciled in The Netherlands. The address of the Company’s registered office is Tupolevlaan 24, 1119 NX, Schiphol-Rijk, The Netherlands. The Condensed Consolidated Interim Financial Statements of the Company as at and for the three month and nine month periods ended 30 September 2017 comprise the Company and its subsidiaries (together referred to as the “Group”). The Group is a leading pan-European operator of carrier neutral Internet data centres.

 

2 Basis of preparation

a) Statement of compliance

The Condensed Consolidated Interim Financial Statements have been prepared in accordance with International Financial Reporting Standards (IFRS) IAS 34 Interim Financial Reporting. They do not include all the information required for full annual financial statements, and should be read in conjunction with the audited Consolidated Financial Statements of the Group as at and for the year ended 31 December 2016; these are contained in the 2016 Annual Report (Form 20-F) as filed with the Securities and Exchange Commission on 30 March 2017, which is publicly available on the company’s website – www.interxion.com, or from the SEC website – www.sec.gov.

b) Estimates, judgment and seasonality

The preparation of Condensed Consolidated Interim Financial Statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

In preparing these Condensed Consolidated Interim Financial Statements, the significant judgments made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those applied to the Consolidated Financial Statements as at and for the year ended 31 December 2016 in the 2016 Annual Report (Form 20-F).

The Group’s operations are not significantly exposed to seasonality.

 

3 Significant accounting policies

The accounting policies applied by the Group in these Condensed Consolidated Interim Financial Statements are the same as those applied by the Group in its Consolidated Financial Statements as at and for the year ended 31 December 2016 in the 2016 Annual Report (Form 20-F), if necessary amended to include new Standards and Interpretations effective as of 1 January 2017.

 

4 Financial risk management

The Group’s financial risk management objectives and policies are consistent with those disclosed in the audited Consolidated Financial Statements in the 2016 Annual Report (Form 20-F).

 

   14    Interim Report: Three-month and nine-month periods ended 30 September 2017
      These Condensed Consolidated Interim Financial Statements are unaudited


LOGO

 

5 Information by segment

Operating segments are to be identified on the basis of internal reports about components of the Group that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segments and to assess their performance.

There are two segments: the first is the Big4 which comprises France, Germany, The Netherlands and the United Kingdom; the second is Rest of Europe, which comprises Austria, Belgium, Denmark, Ireland, Spain, Sweden and Switzerland. Shared expenses, such as corporate management, general and administrative expenses, loans and borrowings, and related expenses and income tax assets and liabilities, are stated in Corporate and other.

The performance of the operating segments is primarily assessed based on the measures of revenue and Adjusted EBITDA. Other information provided, except as noted below, to the Board of Directors is measured in a manner consistent with that in the financial statements.

 

   15    Interim Report: Three-month and nine-month periods ended 30 September 2017
      These Condensed Consolidated Interim Financial Statements are unaudited


LOGO

 

Amounts x €’000

   FR, DE
NL and UK
    Rest of
Europe
    Subtotal     Corporate
and other
    Total  

For the three months ended 30 September 2017

          

Recurring revenue

     76,554       40,838       117,392       —         117,392  

Non-recurring revenue

     4,279       2,976       7,255       —         7,255  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Revenue

     80,833       43,814       124,647       —         124,647  

Cost of sales

     (31,494     (14,996     (46,490     (3,118     (49,608
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     49,339       28,818       78,157       (3,118     75,039  

Sales and marketing costs

     (2,518     (1,391     (3,909     (4,338     (8,247

General and administrative costs

     (22,635     (9,112     (31,747     (10,019     (41,766
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     24,186       18,315       42,501       (17,475     25,026  

Net finance expense

             (10,833
          

 

 

 

Profit before tax

             14,193  
          

 

 

 

Total assets

     1,156,329       388,447       1,544,776       75,260       1,620,036  

Total liabilities

     242,646       79,875       322,521       711,516       1,034,037  

Capital expenditure, including intangible assets*

     (51,593     (21,243     (72,836     (2,322     (75,158

Depreciation, amortisation, impairments

     (18,788     (7,475     (26,263     (1,527     (27,790

Adjusted EBITDA

     43,414       25,914       69,328       (13,128     56,200  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Amounts x €’000

   FR, DE
NL and UK
    Rest of
Europe
    Subtotal     Corporate
and other
    Total  

For the three months ended 30 September 2016

          

Recurring revenue

     63,809       36,178       99,987       —         99,987  

Non-recurring revenue

     3,073       2,215       5,288       —         5,288  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Revenue

     66,882       38,393       105,275       —         105,275  

Cost of sales

     (25,043     (13,358     (38,401     (2,364     (40,765
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     41,839       25,035       66,874       (2,364     64,510  

Other income

     12       —         12       —         12  

Sales and marketing costs

     (2,185     (1,126     (3,311     (3,982     (7,293

General and administrative costs

     (17,729     (7,935     (25,664     (7,955     (33,619
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     21,937       15,974       37,911       (14,301     23,610  

Net finance expense

             (8,628
          

 

 

 

Profit before tax

             14,982  
          

 

 

 

Total assets

     949,085       348,314       1,297,399       159,656       1,457,055  

Total liabilities

     194,390       77,799       272,189       649,080       921,269  

Capital expenditure, including intangible assets*

     (43,489     (18,514     (62,003     (2,523     (64,526

Depreciation, amortisation, impairments

     (14,782     (6,288     (21,070     (1,024     (22,094

Adjusted EBITDA

     36,776       22,366       59,142       (10,811     48,331  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

* Capital expenditure, including intangible assets, represents payments to acquire property, plant and equipment and intangible assets, as recorded in the consolidated statement of cash flows as “Purchase of property, plant and equipment” and “Purchase of intangible assets”, respectively.

 

   16    Interim Report: Three-month and nine-month periods ended 30 September 2017
      These Condensed Consolidated Interim Financial Statements are unaudited


LOGO

 

Amounts x €’000

   FR, DE
NL and UK
    Rest of
Europe
    Subtotal     Corporate
and other
    Total  

For the nine months ended 30 September 2017

          

Recurring revenue

     220,736       118,358       339,094       —         339,094  

Non-recurring revenue

     12,348       7,978       20,326       —         20,326  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Revenue

     233,084       126,336       359,420       —         359,420  

Cost of sales

     (89,445     (43,065     (132,510     (9,118     (141,628
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     143,639       83,271       226,910       (9,118     217,792  

Other income

     27       —         27       —         27  

Sales and marketing costs

     (6,988     (4,347     (11,335     (13,123     (24,458

General and administrative costs

     (63,722     (27,457     (91,179     (27,768     (118,947
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     72,956       51,467       124,423       (50,009     74,414  

Net finance expense

             (32,040
          

 

 

 

Profit before tax

             42,374  
          

 

 

 

Total assets

     1,156,329       388,447       1,544,776       75,260       1,620,036  

Total liabilities

     242,646       79,875       322,521       711,516       1,034,037  

Capital expenditure, including intangible assets*

     (127,412     (51,095     (178,507     (7,849     (186,356

Depreciation, amortisation, impairments

     (52,783     (21,819     (74,602     (4,581     (79,183

Adjusted EBITDA

     126,697       73,610       200,307       (38,457     161,850  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Amounts x €’000

   FR, DE
NL and UK
    Rest of
Europe
    Subtotal     Corporate
and other
    Total  

For the nine months ended 30 September 2016

          

Recurring revenue

     189,847       106,681       296,528       —         296,528  

Non-recurring revenue

     8,958       5,815       14,773       —         14,773  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Revenue

     198,805       112,496       311,301       —         311,301  

Cost of sales

     (73,952     (38,313     (112,265     (7,282     (119,547
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     124,853       74,183       199,036       (7,282     191,754  

Other income

     142       —         142       —         142  

Sales and marketing costs

     (5,950     (3,859     (9,809     (12,492     (22,301

General and administrative costs

     (53,052     (23,999     (77,051     (22,521     (99,572
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     65,993       46,325       112,318       (42,295     70,023  

Net finance expense

             (26,756
          

 

 

 

Profit before tax

             43,267  
          

 

 

 

Total assets

     949,085       348,314       1,297,399       159,656       1,457,055  

Total liabilities

     194,390       77,799       272,189       649,080       921,269  

Capital expenditure, including intangible assets*

     (123,873     (45,185     (169,058     (8,062     (177,120

Depreciation, amortisation, impairments

     (43,617     (18,818     (62,435     (3,157     (65,592

Adjusted EBITDA

     109,969       65,455       175,424       (33,828     141,596  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

* Capital expenditure, including intangible assets, represents payments to acquire property, plant and equipment and intangible assets, as recorded in the consolidated statement of cash flows as “Purchase of property, plant and equipment” and “Purchase of intangible assets”, respectively.

 

   17    Interim Report: Three-month and nine-month periods ended 30 September 2017
      These Condensed Consolidated Interim Financial Statements are unaudited


LOGO

 

Reconciliation to adjusted EBITDA

 

Amounts x €’000

   Three Months Ended     Nine Months ended  
     30 Sep
2017
    30 Sep
2016
    30 Sep
2017
    30 Sep
2016
 

Consolidated

        

Net income

     10,062       10,461       31,216       29,845  

Income tax expense

     4,131       4,521       11,158       13,422  
  

 

 

   

 

 

   

 

 

   

 

 

 

Profit before taxation

     14,193       14,982       42,374       43,267  

Finance income

     (367     (606     (1,050     (875

Finance expense

     11,200       9,234       33,090       27,631  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     25,026       23,610       74,414       70,023  

Depreciation, amortisation and impairments

     27,790       22,094       79,183       65,592  
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA(1)

     52,816       45,704       153,597       135,615  

Share-based payments

     1,751       1,752       5,319       4,515  

Income or expense related to the evaluation and execution of potential mergers or acquisitions:

        

M&A transaction costs(2)

     1,633       887       2,961       1,608  

Adjustments related to terminated or unused datacenter sites:

        

Income from sub-leases of unused data centre sites(3)

     —         (12     (27     (142
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA(1)

     56,200       48,331       161,850       141,596  
  

 

 

   

 

 

   

 

 

   

 

 

 

Amounts x €’000

   Three Months Ended     Nine Months ended  
    

30 Sep

2017

   

30 Sep

2016

   

30 Sep

2017

   

30 Sep

2016

 

FR, DE, NL and UK

        

Operating income

     24,186       21,937       72,956       65,993  

Depreciation, amortisation and impairments

     18,788       14,782       52,783       43,617  
  

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA(1)

     42,974       36,719       125,739       109,610  

Share-based payments

     440       69       985       501  

Adjustments related to terminated or unused datacenter sites:

        

Income from sub-leases of unused data centre sites(3)

     —         (12     (27     (142
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted EBITDA(1)

     43,414       36,776       126,697       109,969  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) “EBITDA” and “Adjusted EBITDA” are non-IFRS financial measures. See “Non-IFRS Financial Measures” for more information on these measures, including why we believe that these supplemental measures are useful, and the limitations on the use of these supplemental measures.
(2) “M&A transaction costs” are costs associated with the evaluation, diligence and conclusion or termination of merger or acquisition activity. These costs are included in “General and administrative costs”.
(3) “Income from sub-leases of unused data centre sites” represents the income on sub-lease of portions of unused data centre sites to third parties. This income is treated as ‘Other income’.

 

   18    Interim Report: Three-month and nine-month periods ended 30 September 2017
      These Condensed Consolidated Interim Financial Statements are unaudited


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Amounts x €’000

   Three Months Ended      Nine Months ended  
     30 Sep
2017
     30 Sep
2016
     30 Sep
2017
     30 Sep
2016
 

Rest of Europe

           

Operating income

     18,315        15,974        51,467        46,325  

Depreciation, amortisation and impairments

     7,475        6,288        21,819        18,818  
  

 

 

    

 

 

    

 

 

    

 

 

 

EBITDA(1)

     25,790        22,262        73,286        65,143  

Share-based payments

     124        104        324        312  
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted EBITDA(1)

     25,914        22,366        73,610        65,455  
  

 

 

    

 

 

    

 

 

    

 

 

 

Amounts x €’000

   Three Months Ended      Nine Months Ended  
     30 Sep
2017
     30 Sep
2016
     30 Sep
2017
     30 Sep
2016
 

Corporate and other

           

Operating income

     (17,475      (14,301      (50,009      (42,295

Depreciation, amortisation and impairments

     1,527        1,024        4,581        3,157  
  

 

 

    

 

 

    

 

 

    

 

 

 

EBITDA(1)

     (15,948      (13,277      (45,428      (39,138

Share-based payments

     1,187        1,579        4,010        3,702  

Income or expense related to the evaluation and execution of potential mergers or acquisitions:

           

M&A transaction costs(2)

     1,633        887        2,961        1,608  
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted EBITDA(1)

     (13,128      (10,811      (38,457      (33,828
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) “EBITDA” and “Adjusted EBITDA” are non-IFRS financial measures. See “Non-IFRS Financial Measures” for more information on these measures, including why we believe that these supplemental measures are useful, and the limitations on the use of these supplemental measures.
(2) “M&A transaction costs” are costs associated with the evaluation, diligence and conclusion or termination of merger or acquisition activity. These costs are included in “General and administrative costs”.
(3) “Income from sub-leases of unused data centre sites” represents the income on sub-lease of portions of unused data centre sites to third parties. This income is treated as ‘Other income’.

 

   19    Interim Report: Three-month and nine-month periods ended 30 September 2017
      These Condensed Consolidated Interim Financial Statements are unaudited


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6 Finance income and expense

 

Amounts x €’000

   Three Months Ended      Nine Months ended  
     30 Sep 2017      30 Sep 2016      30 Sep 2017      30 Sep 2016  

Bank and other interest

     72        47        160        78  

Bond premium and fees in income

     295        278        890        516  

Profit from sale of financial asset (a)

     —          281        —          281  
  

 

 

    

 

 

    

 

 

    

 

 

 

Finance income

     367        606        1,050        875  
  

 

 

    

 

 

    

 

 

    

 

 

 

Interest expense on Senior Secured Notes, bank and other loans

     (9,482      (8,568      (27,652      (24,201

Interest expense on finance leases (b)

     (796      657        (2,379      (1,000

Interest expense on provision for onerous lease contracts

     —          (1      —          (16

Other financial expenses

     (623      (493      (1,833      (1,279

Foreign currency exchange losses

     (299      (829      (1,226      (1,135
  

 

 

    

 

 

    

 

 

    

 

 

 

Finance expense

     (11,200      (9,234      (33,090      (27,631
  

 

 

    

 

 

    

 

 

    

 

 

 

Net finance expense

     (10,833      (8,628      (32,040      (26,756
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(a) The “Profit from sale of financial asset” reflects the profit realised on the sale of the Group’s shares in iStreamPlanet Co. The second payment related to this sale was received during the third quarter of 2016.
(b) The “Interest expense on finance leases” in the third quarter of 2016 includes EUR 1.3 million adjustment reducing the finance lease obligations.

 

7 Income tax expense

The Group’s consolidated effective tax rate in respect of continuing operations was 29% and 26% for the three month and nine month periods ended 30 September 2017, respectively. These rates include the effect of non-deductible share-based payments (both during the three-month and nine-month periods) and an energy tax credit received in The Netherlands (only the nine month period).

 

8 Property, plant and equipment

During the three and nine month periods ended 30 September 2017, the Group purchased tangible fixed assets (primarily data-centre-related assets) at a cost of €69.5 million and €186.9 million, respectively, (three and nine month periods ended 30 September 2016: €49.1 million and €192.1 million, respectively). By acquiring Interxion Science Park, the Group added €16.8 million of property, plant and equipment in the first quarter of 2017. See note 12 for detailed information about this acquisition.

Capitalised interest relating to borrowing costs for the three and nine month periods ended 30 September 2017 amounted to €0.8 million and €2.6 million, respectively (three and nine month periods ended 30 September 2016: €1.3 million and €2.4 million, respectively). The cash effect of the interest capitalised for the three and nine month periods ended 30 September 2017 amounted to €1.7 million and €3.9 million, respectively, which in the Consolidated Statements of Cash Flows is presented under “Purchase of property, plant and equipment” (three and nine month periods ended 30 September 2016: €1.2 million and €2.2 million, respectively).

At 30 September 2017, the Group had outstanding capital commitments of €126.5 million.

 

   20    Interim Report: Three-month and nine-month periods ended 30 September 2017
      These Condensed Consolidated Interim Financial Statements are unaudited


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9 Financial Instruments

Fair values versus carrying amounts

As of 30 September 2017, the market price of the 6.00% Senior Secured Notes due 2020 was 103.497 (30 September 2016: 105.142). Using this market price, the fair value of the Senior Secured Notes due 2020 would have been approximately €647 million (30 September 2016: €657 million), compared with their nominal value of €625 million (30 September 2016: €625 million).

At 30 September 2017, the Group had a cash flow hedge carried at a negative fair value, to hedge the interest rate risk of part of two mortgages.

As of 30 September 2017, the fair value of all mortgages approximated to their carrying amount of €52.5 million (30 September 2016: €56.6 million). As of 30 September 2017, the fair value of the financial lease liabilities was €54.0 million (30 September 2016: €55.3 million) compared with the carrying amount of €51.3 million (30 September 2016: €51.5 million).

The carrying amounts of other financial assets and liabilities approximate to their fair value.

Fair values and hierarchy

The Company regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then the Company assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of IFRS, including the level in the fair value hierarchy in which such valuations should be classified.

When measuring the fair value of an asset or a liability, the Company uses observable market data to the extent possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:

 

Level 1:    quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2:    inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices).
Level 3:    inputs for the asset or liability that are not based on observable market data (unobservable inputs).

If the inputs used to measure the fair value of an asset or a liability fall into different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement. The Company recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.

 

   21    Interim Report: Three-month and nine-month periods ended 30 September 2017
      These Condensed Consolidated Interim Financial Statements are unaudited


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The values of the instruments are:

 

Amounts in €’000    Carrying      Fair value  
     value      Level 1      Level 2      Level 3  

30 September 2017

           

Senior secured notes 6.00% due 2020

     (628,437      (647,000      —          —    

Senior secured revolving facility

     (74,800      —          (74,800      —    

Finance leases

     (51,280      —          (54,028      —    

Mortgages

     (52,541      —          (52,541      —    

Convertible loan

     2,967        —          2,967        —    

Interest rate swap

     (282      —          (282      —    

Conversion option

     0        —          —          0  

31 December 2016

           

Senior secured notes 6.00% due 2020

     (629,327      (657,000      —          —    

Finance leases

     (51,718      —          (55,625      —    

Mortgages

     (54,412      —          (54,412      —    

Convertible loan

     1,895        —          1,895        —    

Interest rate swap

     (367      —          (367      —    

Conversion option

     0        —          —          0  

No changes in levels of hierarchy, or transfers between levels, occurred in the reporting period. Fair values were obtained from quoted market prices in active markets or, where no active market exists, by using valuation techniques. Valuation techniques include discounted cash flow models using inputs as market interest rates and cash flows.

The Level 3 financial asset represents the conversion option embedded in a USD 3.5 million convertible loan provided by Interxion Participation 1 B.V. Interxion has the option to convert the loan into equity on the maturity date or upon occurrence of an enforcement event. The embedded conversion option had a zero value as at 30 September 2017.

 

10 Borrowings

Senior Multicurrency Revolving Facility

On 31 July 2017, we extended the maturity of our €100.0 million senior multicurrency revolving facility dated 17 June 2013 from 3 July 2018 to 31 December 2018.

As at 30 September 2017, this facility was undrawn.

Senior Secured Revolving Facility

On March 9, 2017, we entered into a €75.0 million senior secured revolving facility agreement (the “New Facility”) by and among InterXion Holding N.V., the guarantors thereunder, ABN AMRO Bank N.V., Bank of America Merrill Lynch International Limited and Citigroup Global Markets Limited as lenders thereunder, ABN AMRO Bank N.V., as agent and Barclays Bank PLC as security trustee.

 

   22    Interim Report: Three-month and nine-month periods ended 30 September 2017
      These Condensed Consolidated Interim Financial Statements are unaudited


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The New Facility has an initial maturity date of 12 months from the date of the New Facility with the Company having the option to extend the maturity date by a further six-month period in accordance with the terms of the New Facility. The New Facility initially bears interest at a rate per annum equal to EURIBOR plus a margin of 2.25% per annum, subject to a margin ratchet, pursuant to which the margin may be increased to a maximum of 3.25% per annum if the New Facility is extended up to an additional six months after its initial maturity date.

On 28 July 2017, we amended the terms of the New Facility to increase the amount available under the facility to €100.0 million and to add a second extension option enabling us to extend the maturity of this credit facility to 31 December 2018.

As at 30 September 2017, €75.0 million was drawn under the New Facility.

 

11 Related party transactions

In the first quarter of 2017, the Board of Directors approved the actual initial award of 76,456 performance shares to certain members of key management, excluding the Executive Director, and the proposed actual initial award of 63,805 performance shares to the Executive Director, based on the level of the actual Company and individual performance from January 1, 2016 to December 31, 2016. On 30 June 2017, the Annual General Meeting of Shareholders approved the award to the Executive Director.

 

12 Acquisition Interxion Science Park

On February 24, 2017, the Group completed the acquisition of 100% of the share capital of Vancis B.V. (“Vancis”). Vancis operates colocation services from a data centre at Science Park, Amsterdam, The Netherlands, and a satellite facility in Almere, The Netherlands. After the acquisition, Vancis B.V. was renamed Interxion Science Park B.V. (“IXSP”). Total consideration was €77.5 million of cash, which was paid immediately upon completion. The transaction was accounted for as a business combination, which requires that assets acquired and liabilities assumed be recognized at their respective fair values at the acquisition date.

The table below summarizes the preliminary purchase price allocation for the acquisition of IXSP:

 

     €’000  

Property, plant and equipment

     16,821  

Trade receivables(1)

     1,165  

Other current assets

     959  

Trade payables and other liabilities

     (1,249

Provisions

     (280

Goodwill

     38,900  

Customer portfolio

     28,005  

Deferred taxes

     (6,804
  

 

 

 

Total purchase price

     77,517  

 

(1) Trade and other receivables represent contractual gross amounts less €30 thousand, which was determined to be uncollectible at the date of acquisition.

Since the identified assets and liabilities are still being reviewed, the estimates used as of September 30, 2017, are subject to change, including the amounts allocated to the acquired property, plant and equipment, intangible assets, including goodwill and deferred taxes. Since the second quarter of 2017, changes in allocation of the purchase price resulted in an €0.5 million decrease of previously reported goodwill.

 

   23    Interim Report: Three-month and nine-month periods ended 30 September 2017
      These Condensed Consolidated Interim Financial Statements are unaudited


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Goodwill is the excess consideration remaining after allocating the fair value of the other acquired assets and liabilities and represents expected future economic benefits, to be achieved by operating a data centre in close proximity to the virtual connectivity hub at Science Park, and is not expected to be deductible for tax purposes.

In connection with this acquisition, the Company recorded M&A transaction costs of approximately €1.2 million, which have been included in General and administrative costs as incurred.    

Since the acquisition date, IXSP contributed €4.5 million to total revenues and €0.1 million to the Group’s net income. If the acquisition had occurred on January 1, 2017, management estimates that consolidated revenue would have been €360.7 million, and net income for the period would have been €31.3 million. IXSP is included in the Big4 segment.

 

   24    Interim Report: Three-month and nine-month periods ended 30 September 2017
      These Condensed Consolidated Interim Financial Statements are unaudited