INXN InterXion Holding NV

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 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 5 August 2015

(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  x                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.

 

 

 

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This report contains Interxion Holding N.V.’s Interim report as at and for the three-month and six-month periods ended 30 June 2015.

The interim 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 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) and into 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).

 

Exhibit
99.1		The Interxion Holding N.V. Interim report as at and for the three-month and six- month periods ended 30 June 2015.

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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.

 

Date: 5 August 2015

Exhibit 99.1

 

Interxion Holding NV

Interim report

as at and for the three-month and the six-month periods

ended

30 June 2015

Schiphol-Rijk, 5 August 2015

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Financial Highlights

 

•

Revenue increased by 14% to €95.4 million (2Q 2014: €83.6 million).

 

•

Adjusted EBITDA1 increased by 17% to €42.0 million (2Q 2014: €35.9 million).

 

•

Adjusted EBITDA margin increased to 44.0% (2Q 2014: 42.9%).

 

•

Net profit increased to €21.6 million (2Q 2014: €8.3 million).

 

•

Adjusted net profit1 increased to €8.3 million (2Q 2014: €7.6 million).

 

•

Earnings per diluted share were €0.31 (2Q 2014: €0.12).

 

•

Adjusted earnings per diluted share1 were €0.12 (2Q 2014: €0.11).

 

•

Capital Expenditures, including intangible assets2, were €47.8 million (2Q 2014: €54.4 million).

Operating Highlights

 

•

Equipped Space increased by 3,500 square metres to 98,300 square metres.

 

•

Revenue Generating Space increased by 3,100 square metres to 77,100 square metres.

 

•

Utilisation Rate at the end of the quarter was 78%.

 

•

Opened new data centre in Stockholm; completed expansion projects in Amsterdam, Dusseldorf and Vienna during the quarter. Completed Marseille expansion early in the third quarter.

 

•

Announced today the build of a new data centre in Dusseldorf (DUS2).

Quarterly Review

Revenue in the second quarter of 2015 was €95.4 million, a 14% increase over the second quarter of 2014 and a 3% increase over the first quarter of 2015. Recurring revenue was €90.3 million, a 15% increase over the second quarter of 2014 and a 4% increase over the first quarter of 2015. Recurring revenue in the quarter was 95% of total revenue.

 

 

1

Adjusted EBITDA, Adjusted net profit, and Adjusted earnings per diluted share are non-IFRS figures intended to adjust for unusual items. Full definitions can be found in the “Use of non-IFRS information” section later in this press release. Reconciliations of Adjusted EBITDA and Adjusted net profit to Net profit can be found in the financial tables later in this press release.

2	Capital expenditures, including intangible assets, represent 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.

 

2		Interim Report: Three and Six-month periods ended 30 June 2015
		This Interim Report is unaudited

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Cost of sales in the second quarter of 2015 was €37.7 million, an 11% increase over the second quarter of 2014 and a 4% increase over the first quarter of 2015.

Gross profit was €57.8 million in the second quarter of 2015, a 16% increase over the second quarter of 2014 and a 3% increase over the first quarter of 2015. Gross profit margin was 60.5% in the second quarter of 2015, compared to 59.4% in the second quarter of 2014 and 60.8% in the first quarter of 2015.

Sales and marketing costs in the second quarter of 2015 were €7.2 million, a 16% increase over the second quarter of 2014 and an 8% increase over the first quarter of 2015.

Other general and administrative costs were €8.5 million in the second quarter of 2015, a 13% increase over the second quarter of 2014 and a 4% decrease from the first quarter of 2015. Other general and administrative costs exclude depreciation, amortisation, impairments, share based payments, M&A transaction related costs and increase/decrease in provision for onerous lease contracts.

Adjusted EBITDA for the second quarter of 2015 was €42.0 million, a 17% increase over the second quarter of 2014 and a 4% increase over the first quarter of 2015. Adjusted EBITDA margin was 44.0% in the second quarter of 2015 compared to 42.9% in the second quarter of 2014 and 43.9% in the first quarter of 2015.

Depreciation, amortisation, and impairments in the second quarter of 2015 was €19.6 million, an increase of 32% over the second quarter of 2014 and a 7% increase over the first quarter of 2015.

Operating profit in the second quarter of 2015 was €37.7 million, compared to €19.7 million in the second quarter of 2014 and €13.4 million in the first quarter of 2015. Interxion received a £15 million (€20.9 million) payment in the second quarter of 2015 relating to the termination of Interxion’s implementation agreement with TelecityGroup. M&A transaction costs in the second quarter of 2015 relating to this transaction were €3.9 million. Excluding transaction related items, operating profit was €20.7 million in the second quarter of 2015, an increase of 5% over the second quarter of 2014 and an increase of 2% over the first quarter of 2015.

Net finance costs for the second quarter of 2015 were €7.9 million, a 6% increase over the second quarter of 2014, and a 21% increase over the first quarter of 2015.

Income tax expense for the second quarter of 2015 was €8.2 million, compared to €3.9 million in the second quarter of 2014, and €2.4 million in the first quarter of 2015.

 

Interim Report: Three and Six-month periods ended 30 June 2015		3
This Interim Report is unaudited

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Net profit was €21.6 million in the second quarter of 2015, compared to €8.3 million in the second quarter of 2014, and €4.4 million in the first quarter of 2015.

Adjusted net profit was €8.3 million in the second quarter of 2015, a 9% increase over the second quarter of 2014, and a 6% decrease from the first quarter of 2015.

Cash generated from operations, defined as cash generated from operating activities before interest and corporate income tax payments and receipts, was €54.1 million in the second quarter of 2015, compared to €26.9 million in the second quarter of 2014, and €34.2 million in the first quarter of 2015. The cash generated from operations in the second quarter of 2015 included the receipt of the £15 million (€20.9 million) payment related to the termination of the implementation agreement.

Capital expenditures, including intangible assets, were €47.8 million in the second quarter of 2015, compared to €54.4 million in the second quarter of 2014 and €67.6 million in the first quarter of 2015.

Cash and cash equivalents were €57.1 million at 30 June 2015, compared to €99.9 million at year end 2014. Total borrowings, net of deferred revolving facility financing fees, were €541.2 million at 30 June 2015 compared to €560.6 million at year end 2014. As of 30 June 2015, the company’s revolving credit facility was undrawn.

Equipped space at the end of the second quarter of 2015 was 98,300 square metres compared to 86,000 square metres at the end of the second quarter of 2014 and 94,800 square metres at the end of the first quarter of 2015. Utilisation rate, the ratio of revenue-generating space to equipped space, was 78% at the end of the second quarter of 2015, compared with 75% at the end of the second quarter of 2014 and 78% at the end of the first quarter of 2015.

 

4		Interim Report: Three and Six-month periods ended 30 June 2015
		This Interim Report is unaudited

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Further Information for Noteholders

This Interim Report was prepared in accordance with the indenture (the “Indenture”) dated as of 3 July 2013 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.

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.

Use of Non-IFRS Information

EBITDA is defined as operating profit plus depreciation, amortisation and impairment of assets. We define Adjusted EBITDA as EBITDA adjusted to exclude share-based payments, increase/decrease in provision for onerous lease contracts, M&A transaction related costs and break fee income, and income from sub-leases on unused data centre sites. Adjusted EBITDA margin is defined as Adjusted EBITDA as a percentage of revenue. We present EBITDA, Adjusted EBITDA and Adjusted EBITDA margin as additional information because we understand that they are measures used by certain investors and because they are used in our financial covenants in the €100 million revolving facility and €475 million 6.00% Senior Secured Notes due 2020. A reconciliation from Net profit to EBITDA and EBITDA to Adjusted EBITDA is provided in the notes to our consolidated interim income statement included elsewhere in this interim report.

Adjusted net profit is defined as Net profit excluding the impact of refinancing charges, M&A transaction related costs and break fee income, adjustments to onerous lease, interest capitalised, and the related corporate income tax effect

Other companies may, however, present EBITDA, Adjusted EBITDA, Adjusted EBITDA margin and Adjusted net profit differently than we do. EBITDA, Adjusted EBITDA, Adjusted EBITDA margin and Adjusted net profit are not measures of financial performance under IFRS and should not be considered as an alternative to operating profit or as a measure of liquidity or an alternative to net income as indicators of our operating performance or any other measure of performance derived in accordance with IFRS.

 

Interim Report: Three and Six-month periods ended 30 June 2015		5
This Interim Report is unaudited

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Adjusted diluted earnings per share amounts are determined on Adjusted net profit. A reconciliation from reported Net profit to Adjusted net profit is provided below.

 

		Three Months Ended								Six Months Ended
		30 Jun				30 Jun				30 Jun				30 Jun
		2015				2014				2015				2014
		(€ in millions - except per share data)
Net profit - as reported			21.6				8.3				26.0				18.7
Add back
+ Refinancing charges			—				0.6				—				0.6
+ M&A transaction costs			3.9				—				10.8				—
			3.9				0.6				10.8				0.6
Reverse
- M&A transaction break fee income			(20.9	)			—				(20.9	)			—
- Adjustments to onerous lease			—				(0.8	)			(0.1	)			(0.8	)
- Interest capitalised			(0.7	)			(0.8	)			(1.6	)			(1.6	)
			(21.6	)			(1.6	)			(22.6	)			(2.4	)
Tax effect of above add backs & reversals			4.4				0.3				3.0				0.5
Adjusted net profit			8.3				7.6				17.2				17.4
Reported basic EPS: (€)			0.31				0.12				0.37				0.27
Reported diluted EPS: (€)			0.31				0.12				0.37				0.27
Adjusted basic EPS: (€)			0.12				0.11				0.25				0.25
Adjusted diluted EPS: (€)			0.12				0.11				0.24				0.25

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 40 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 500 connectivity providers, 20 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.

 

6		Interim Report: Three and Six-month periods ended 30 June 2015
		This Interim Report is unaudited

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Consolidated Interim Income Statement

 

						For the three months ended								For the six months ended
						30 Jun 2015				30 Jun 2014				30 Jun 2015				30 Jun 2014
		Note				€’000				€’000				€’000				€’000
Revenue			5				95,449				83,646				187,931				164,256
Cost of sales			5				(37,663	)			(33,998	)			(73,945	)			(66,576	)
Gross profit							57,786				49,648				113,986				97,680
Other income			5				20,997				50				21,060				110
Sales and marketing costs			5				(7,210	)			(6,215	)			(13,889	)			(12,095	)
General and administrative costs			5				(33,824	)			(23,757	)			(69,983	)			(45,988	)
Operating profit							37,749				19,726				51,174				39,707
Finance income			6				147				252				1,357				319
Finance expense			6				(8,093	)			(7,740	)			(15,888	)			(13,208	)
Profit before taxation							29,803				12,238				36,643				26,818
Income tax expense			7				(8,216	)			(3,916	)			(10,631	)			(8,137	)
Profit for the period attributable to shareholders							21,587				8,322				26,012				18,681
Earnings per share
Basic earnings per share: (€)							0.31				0.12				0.37				0.27
Diluted earnings per share: (€)							0.31				0.12				0.37				0.27

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

 

Interim Report: Three and Six-month periods ended 30 June 2015		7
This Interim Report is unaudited

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Consolidated Interim Statement of Comprehensive Income

 

		For the three months ended								For the six months ended
		30 Jun 2015				30 Jun 2014				30 Jun 2015				30 Jun 2014
		€’000				€’000				€’000				€’000
Profit for the period attributable to shareholders			21,587				8,322				26,012				18,681
Other comprehensive income
Items that are, or may be, reclassified subsequently to profit or loss:
Foreign currency translation differences			2,309				1,507				16,252				1,888
Effective portion of changes in fair value of cash flow hedge			146				(135	)			110				(276	)
Tax on items that are, or may be, reclassified subsequently to profit or loss			(292	)			(153	)			(1,470	)			(125	)
Other comprehensive income/(loss) for the period, net of tax			2,163				1,219				14,892				1,487
Total comprehensive income attributable to shareholders			23,750				9,541				40,904				20,168

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

 

8		Interim Report: Three and Six-month periods ended 30 June 2015
		This Interim Report is unaudited

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Consolidated Interim Statement of Financial Position

 

As at						30 Jun 2015				31 Dec 2014
		Note				€’000				€’000
Non-current assets
Property, plant and equipment			8				965,674				895,184
Intangible assets							21,390				18,996
Deferred tax assets							25,670				30,064
Financial assets							774				774
Other non-current assets							10,074				5,750
							1,023,582				950,768
Current assets
Trade and other current assets							131,288				120,762
Short term investments							—				1,650
Cash and cash equivalents							57,098				99,923
							188,386				222,335
Total assets							1,211,968				1,173,103
Shareholders’ equity
Share capital							6,957				6,932
Share premium							500,984				495,109
Foreign currency translation reserve							25,259				10,440
Hedging reserve, net of tax							(174	)			(247	)
Accumulated deficit							(50,077	)			(76,089	)
							482,949				436,145
Non-current liabilities
Trade payables and other liabilities							13,365				12,211
Deferred tax liabilities							9,742				7,029
Provision for onerous lease contracts							251				1,491
Borrowings			10				539,707				540,530
							563,065				561,261
Current liabilites
Trade payables and other liabilities							155,409				146,502
Income tax liabilities							5,219				4,690
Provision for onerous lease contracts							2,980				3,443
Borrowings			10				2,346				21,062
							165,954				175,697
Total liabilities							729,019				736,958
Total liabilities and shareholders’ equity							1,211,968				1,173,103

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

 

Interim Report: Three and Six-month periods ended 30 June 2015		9
This Interim Report is unaudited

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Consolidated Interim Statement of Changes in Shareholders’ Equity

 

		Share capital				Share premium				Foreign currency translation reserve				Hedging reserve				Accumu- lated deficit				Total equity
		€’000				€’000				€’000				€’000				€’000				€’000
Balance at 1 January 2015			6,932				495,109				10,440				(247	)			(76,089	)			436,145
Profit for the period			—				—				—				—				26,012				26,012
Other comprehensive income, net of tax			—				—				14,819				73				—				14,892
Total comprehensive income			—				—				14,819				73				26,012				40,904
Exercise of options			25				2,383				—				—				—				2,408
Share-based payments			—				3,492				—				—				—				3,492
Total contribution by, and distributions to, owners of the Company			25				5,875				—				—				—				5,900
Balance at 30 June 2015			6,957				500,984				25,259				(174	)			(50,077	)			482,949
Balance at 1 January 2014			6,887				485,347				6,757				60				(111,149	)			387,902
Profit for the period			—				—				—				—				18,681				18,681
Other comprehensive income/(loss), net of tax			—				—				1,672				(185	)			—				1,487
Total comprehensive income			—				—				1,672				(185	)			18,681				20,168
Exercise of options			16				1,386				—				—				—				1,402
Share-based payments			—				2,505				—				—				—				2,505
Total contribution by, and distributions to, owners of the Company			16				3,891				—				—				—				3,907
Balance at 30 June 2014			6,903				489,238				8,429				(125	)			(92,468	)			411,977

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

 

10		Interim Report: Three and Six-month periods ended 30 June 2015
		This Interim Report is unaudited

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Consolidated Interim Statement of Cash Flows

 

		For the three months ended								For the six months ended
		30 Jun 2015				30 Jun 2014				30 Jun 2015				30 Jun 2014
		€’000				€’000				€’000				€’000
Profit for the period			21,587				8,322				26,012				18,681
Depreciation, amortisation and impairments			19,577				14,864				37,792				28,845
Provision for onerous lease contracts			(849	)			(1,635	)			(1,774	)			(2,454	)
Share-based payments			1,789				2,131				4,030				2,774
Net finance expense			7,946				7,488				14,531				12,889
Income tax expense			8,216				3,916				10,631				8,137
			58,266				35,086				91,222				68,872
Movements in trade and other current assets			(7,734	)			(10,429	)			(9,365	)			(11,229	)
Movements in trade and other liabilities			3,609				2,289				6,483				3,595
Cash generated from operations			54,141				26,946				88,340				61,238
Interest and fees paid			(1,448	)			(1,235	)			(15,022	)			(12,061	)
Interest received			31				57				80				124
Income tax paid			(2,740	)			(1,843	)			(5,060	)			(2,201	)
Net cash flows from operating activities			49,984				23,925				68,338				47,100
Cash flows from investing activities
Purchase of property, plant and equipment			(46,911	)			(53,634	)			(112,229	)			(110,025	)
Purchase of intangible assets			(924	)			(776	)			(3,176	)			(1,390	)
Redemption of short-term investments			1,650				—				1,650				—
Net cash flows from investing activities			(46,185	)			(54,410	)			(113,755	)			(111,415	)
Cash flows from financing activities
Proceeds from exercised options			230				1,146				2,408				1,402
Proceeds from mortgages			—				9,185				—				9,185
Repayment of mortgages			(720	)			(567	)			(1,040	)			(734	)
Proceeds Revolving Facility			—				—				—				30,000
Repayments Revolving Facility			—				(30,000	)			—				(30,000	)
Proceeds 6.00% Senior Secured Notes due 2020			—				158,382				—				158,382
Interest received at issuance Additional Notes			—				2,600				—				2,600
Transaction costs Senior Secured Facility			—				(371	)			—				(371	)
Repayment of other borrowings			—				(12	)			—				(23	)
Net cash flows from financing activities			(490	)			140,363				1,368				170,441
Effect of exchange rate changes on cash			(193	)			63				1,224				64
Net movement in cash and cash equivalents			3,116				109,941				(42,825	)			106,190
Cash and cash equivalents, beginning of period			53,982				41,939				99,923				45,690
Cash and cash equivalents, end of period			57,098				151,880				57,098				151,880

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

 

Interim Report: Three and Six-month periods ended 30 June 2015		11
This Interim Report is unaudited

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Notes to the 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 Consolidated Interim Financial Statements of the Company as at and for the three and six month periods ended 30 June 2015 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 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 2014; these are contained in the 2014 Annual Report (Form 20-F) as filed with the Securities and Exchange Commission on 28 April 2015, 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 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. 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 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 2014 in the 2014 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 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 2014 in the 2014 Annual Report (Form 20-F), and amended to include new Standards and Interpretations effective as of 1 January 2015. These new Standards and Interpretations did not have a significant impact on the financial position or performance of the Group compared with the accounting principles in the 2014 financial statements,

 

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 2014 Annual Report (Form 20-F).

 

12		Interim Report: Three and Six-month periods ended 30 June 2015
		This Interim Report is unaudited

---

 

 

5	Information by segment

Operating segments are 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. Management monitors the operating results of its business units separately for the purpose of making decisions about performance assessments.

The performance of the operating segments is primarily based on the measures of revenue (including recurring and non-recurring revenue components), EBITDA 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.

 

Interim Report: Three and Six-month periods ended 30 June 2015		13
This Interim Report is unaudited

---

 

 

For the three months ended 30 June 2015		FR, DE NL and UK				Rest of Europe				Subtotal				Corporate and other				Total
		€’000				€’000				€’000				€’000				€’000
Recurring revenue			57,321				32,976				90,297				—				90,297
Non-recurring revenue			2,995				2,157				5,152				—				5,152
Revenue			60,316				35,133				95,449				—				95,449
Cost of sales			(22,551	)			(12,804	)			(35,355	)			(2,308	)			(37,663	)
Gross profit/(loss)			37,765				22,329				60,094				(2,308	)			57,786
Other income			74				—				74				20,923				20,997
Sales and marketing costs			(1,918	)			(1,368	)			(3,286	)			(3,924	)			(7,210	)
General and administrative costs			(15,602	)			(7,755	)			(23,357	)			(10,467	)			(33,824	)
Operating profit			20,319				13,206				33,525				4,224				37,749
Net finance expense																			(7,946	)
Profit before tax																			29,803
Total assets			836,429				314,422				1,150,851				61,117				1,211,968
Total liabilities			177,916				57,932				235,848				493,171				729,019
Capital expenditure, including intangible assets*			(36,545	)			(10,289	)			(46,834	)			(1,001	)			(47,835	)
Depreciation, amortisation, impairments			(12,544	)			(5,927	)			(18,471	)			(1,106	)			(19,577	)
Adjusted EBITDA			33,248				19,342				52,590				(10,561	)			42,029
For the three months ended 30 June 2014		FR, DE NL and UK				Rest of Europe				Subtotal				Corporate and other				Total
		€’000				€’000				€’000				€’000				€’000
Recurring revenue			49,339				29,393				78,732				—				78,732
Non-recurring revenue			2,871				2,043				4,914				—				4,914
Revenue			52,210				31,436				83,646				—				83,646
Cost of sales			(20,254	)			(11,867	)			(32,121	)			(1,877	)			(33,998	)
Gross profit/(loss)			31,956				19,569				51,525				(1,877	)			49,648
Other income			50				—				50				—				50
Sales and marketing costs			(1,897	)			(1,387	)			(3,284	)			(2,931	)			(6,215	)
General and administrative costs			(11,361	)			(6,349	)			(17,710	)			(6,047	)			(23,757	)
Operating profit/(loss)			18,748				11,833				30,581				(10,855	)			19,726
Net finance expense																			(7,488	)
Profit before tax																			12,238
Total assets			701,196				248,112				949,308				156,207				1,105,515
Total liabilities			144,040				50,891				194,931				498,607				693,538
Capital expenditure, including intangible assets*			(35,581	)			(17,269	)			(52,850	)			(1,560	)			(54,410	)
Depreciation, amortisation, impairments			(9,521	)			(4,496	)			(14,017	)			(847	)			(14,864	)
Adjusted EBITDA			27,888				16,633				44,521				(8,655	)			35,866

 

*	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.

 

14		Interim Report: Three and Six-month periods ended 30 June 2015
		This Interim Report is unaudited

---

 

 

For the six months ended 30 June 2015		FR, DE NL and UK				Rest of Europe				Subtotal				Corporate and other				Total
		€’000				€’000				€’000				€’000				€’000
Recurring revenue			112,304				65,044				177,348				—				177,348
Non-recurring revenue			6,622				3,961				10,583				—				10,583
Revenue			118,926				69,005				187,931				—				187,931
Cost of sales			(44,845	)			(24,793	)			(69,638	)			(4,307	)			(73,945	)
Gross profit/(loss)			74,081				44,212				118,293				(4,307	)			113,986
Other income			137				—				137				20,923				21,060
Sales and marketing costs			(3,724	)			(2,725	)			(6,449	)			(7,440	)			(13,889	)
General and administrative costs			(30,692	)			(14,934	)			(45,626	)			(24,357	)			(69,983	)
Operating profit/(loss)			39,802				26,553				66,355				(15,181	)			51,174
Net finance expense																			(14,531	)
Profit before tax																			36,643
Total assets			836,429				314,422				1,150,851				61,117				1,211,968
Total liabilities			177,916				57,932				235,848				493,171				729,019
Capital expenditure, including intangible assets*			(70,311	)			(43,414	)			(113,725	)			(1,680	)			(115,405	)
Depreciation, amortisation, impairments			(24,261	)			(11,362	)			(35,623	)			(2,169	)			(37,792	)
Adjusted EBITDA			64,618				38,320				102,938				(20,304	)			82,634
For the six months ended 30 June 2014		FR, DE NL and UK				Rest of Europe				Subtotal				Corporate and other				Total
		€’000				€’000				€’000				€’000				€’000
Recurring revenue			96,979				57,624				154,603				—				154,603
Non-recurring revenue			6,003				3,650				9,653				—				9,653
Revenue			102,982				61,274				164,256				—				164,256
Cost of sales			(39,671	)			(23,144	)			(62,815	)			(3,761	)			(66,576	)
Gross profit/(loss)			63,311				38,130				101,441				(3,761	)			97,680
Other income			110				—				110				—				110
Sales and marketing costs			(3,597	)			(2,655	)			(6,252	)			(5,843	)			(12,095	)
General and administrative costs			(22,792	)			(12,174	)			(34,966	)			(11,022	)			(45,988	)
Operating profit/(loss)			37,032				23,301				60,333				(20,626	)			39,707
Net finance expense																			(12,889	)
Profit before tax																			26,818
Total assets			701,196				248,112				949,308				156,207				1,105,515
Total liabilities			144,040				50,891				194,931				498,607				693,538
Capital expenditure, including intangible assets*			(79,173	)			(29,952	)			(109,125	)			(2,290	)			(111,415	)
Depreciation, amortisation, impairments			(18,440	)			(8,776	)			(27,216	)			(1,629	)			(28,845	)
Adjusted EBITDA			55,182				32,431				87,613				(17,202	)			70,411

 

*	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.

 

Interim Report: Three and Six-month periods ended 30 June 2015		15
This Interim Report is unaudited

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Reconciliation to adjusted EBITDA

 

		For the three months ended								For the six months ended
		30 Jun 2015				30 Jun 2014				30 Jun 2015				30 Jun 2014
		€’000				€’000				€’000				€’000
Consolidated
Profit for the period attributable to shareholders			21,587				8,322				26,012				18,681
Income tax expense			8,216				3,916				10,631				8,137
Profit before taxation			29,803				12,238				36,643				26,818
Finance income			(147	)			(252	)			(1,357	)			(319	)
Finance expense			8,093				7,740				15,888				13,208
Operating profit			37,749				19,726				51,174				39,707
Depreciation, amortisation and impairments			19,577				14,864				37,792				28,845
EBITDA(1)			57,326				34,590				88,966				68,552
Share-based payments			1,789				2,131				4,030				2,774
M&A transaction costs			3,911				—				10,798				—
Increase/(decrease) in provision for onerous lease contracts			—				(805	)			(100	)			(805	)
M&A transaction break fee income			(20,923	)			—				(20,923	)			—
Income from sub-leases of unused data centre sites			(74	)			(50	)			(137	)			(110	)
Adjusted EBITDA(1)			42,029				35,866				82,634				70,411
		For the three months ended								For the six months ended
		30 Jun 2015				30 Jun 2014				30 Jun 2015				30 Jun 2014
		€’000				€’000				€’000				€’000
FR, DE, NL and UK
Operating profit			20,319				18,748				39,802				37,032
Depreciation, amortisation and impairments			12,544				9,521				24,261				18,440
EBITDA(1)			32,863				28,269				64,063				55,472
Share-based payments			459				474				792				625
Increase/(decrease) in provision for onerous lease contracts			—				(805	)			(100	)			(805	)
Income from sub-leases of unused data centre sites			(74	)			(50	)			(137	)			(110	)
Adjusted EBITDA(1)			33,248				27,888				64,618				55,182

 

16		Interim Report: Three and Six-month periods ended 30 June 2015
		This Interim Report is unaudited

---

 

 

		For the three months ended								For the six months ended
		30 Jun 2015				30 Jun 2014				30 Jun 2015				30 Jun 2014
		€’000				€’000				€’000				€’000
Rest of Europe
Operating profit			13,206				11,833				26,553				23,301
Depreciation, amortisation and impairments			5,927				4,496				11,362				8,776
EBITDA(1)			19,133				16,329				37,915				32,077
Share-based payments			209				304				405				354
Adjusted EBITDA(1)			19,342				16,633				38,320				32,431
		For the three months ended								For the six months ended
		30 Jun 2015				30 Jun 2014				30 Jun 2015				30 Jun 2014
		€’000				€’000				€’000				€’000
Corporate and other
Operating profit/(loss)			4,224				(10,855	)			(15,181	)			(20,626	)
Depreciation, amortisation and impairments			1,106				847				2,169				1,629
EBITDA(1)			5,330				(10,008	)			(13,012	)			(18,997	)
Share-based payments			1,121				1,353				2,833				1,795
M&A transaction break fee income(2)			(20,923	)			—				(20,923	)			—
M&A transaction costs(3)			3,911				—				10,798				—
Adjusted EBITDA(1)			(10,561	)			(8,655	)			(20,304	)			(17,202	)

 

(1)

EBITDA is defined as operating profit plus depreciation, amortisation and impairment of assets. We define Adjusted EBITDA as EBITDA adjusted to exclude share-based payments, increase/decrease in provision for onerous lease contracts, M&A transaction related costs and break fee income, and income from sub-leases on unused data centre sites. Adjusted EBITDA margin is defined as Adjusted EBITDA as a percentage of revenue. We present EBITDA and Adjusted EBITDA as additional information because we understand that they are measures used by certain investors and because they are used in our financial covenants in our €100 million revolving facility and €475 million 6.00% Senior Secured Notes due 2020. Other companies may, however, present EBITDA and Adjusted EBITDA differently.

EBITDA and Adjusted EBITDA are not measures of financial performance under IFRS and should not be considered as an alternative to operating profit or as a measure of liquidity, or an alternative to net income as indicators of our operating performance or any other measure of performance implemented in accordance with IFRS.

(2)

On 9 March 2015 the Company signed the definitive agreement on an all-share merger with TelecityGroup plc (“Implementation Agreement”) on the terms as announced on 11 February 2015. Following termination on 29 May 2015 of the Implementation Agreement, the Company received a cash break-up fee of £15 million from TelecityGroup which is reported as “Other income”.

(3)	M&A transaction costs represent expenses associated with the Implementation Agreement and its subsequent partial termination on 29 May 2015.

 

Interim Report: Three and Six-month periods ended 30 June 2015		17
This Interim Report is unaudited

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6	Finance income and expense

 

		For the three months ended								For the six months ended
		30 Jun 2015				30 Jun 2014				30 Jun 2015				30 Jun 2014
		€’000				€’000				€’000				€’000
Bank and other interest			18				81				47				148
Foreign currency exchange profits			129				171				1,310				171
Finance income			147				252				1,357				319
Interest expense on Senior Secured Notes, bank and other loans			(6,754	)			(6,138	)			(13,334	)			(10,671	)
Interest expense on finance leases			(785	)			(457	)			(1,505	)			(914	)
Interest expense on provision for onerous lease contracts			(32	)			(62	)			(72	)			(130	)
Other financial expenses			(522	)			(1,083	)			(977	)			(1,477	)
Foreign currency exchange losses			—				—				—				(16	)
Finance expense			(8,093	)			(7,740	)			(15,888	)			(13,208	)
Net finance expense			(7,946	)			(7,488	)			(14,531	)			(12,889	)

The “Interest expense on provision for onerous lease contracts” relates to the unwinding of the discount rate used to calculate the “Provision for onerous lease contracts”.

 

7	Income tax expense

The Group’s consolidated effective tax rate of 28% and 29%, in respect of continuing operations for the three and six months ended 30 June 2015, respectively, was positively affected by the pre-tax net positive income on the terminated M&A transaction of €17.0 million and €10.1 million (taxable in The Netherlands at a below-average tax rate of 25%), respectively (the effective tax rate for the three and six months ended 30 June 2014: 32% and 30%, respectively). Excluding the pre-tax net positive income on the terminated M&A transaction, the effective tax rate for the three and six months ended 30 June 2015 was 31%.

 

8	Property, plant and equipment

Acquisitions

During the three and six months ended 30 June 2015, the Group acquired tangible fixed assets (primarily data-centre-related assets) at a cost of €37,600,000 and €89,200,000, respectively (three and six months ended 30 June 2014: €56,100,000 and €116,100,000, respectively).

Capitalized interest relating to borrowing costs for the three and six months ended 30 June 2015 amounted to €678,000 and €1,598,000, respectively (three and six months ended 30 June 2014: €818,000 and €1,635,000, respectively). The cash effect of the interest capitalised for the three and six month period ended 30 June 2015 amounted to nil and €1,969,000, respectively, which in the Statement of Cash Flows is presented under “Purchase of property, plant and equipment” (three and six months ended 30 June 2014: nil and €750,000, respectively).

 

18		Interim Report: Three and Six-month periods ended 30 June 2015
		This Interim Report is unaudited

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Capital commitments

At 30 June 2015, the Group had outstanding capital commitments of €53.7 million. These commitments are expected to be substantially settled during the remainder of 2015.

 

9	Financial Instruments

Fair values versus carrying amounts

As of 30 June 2015, the market price of the 6.00% Senior Secured Notes due 2020 was 106.427 (30 June 2014: 106.750). Using this market price, the fair value of the Senior Secured Notes due 2020 would have been approximately €506 million (30 June 2014: €507 million), compared with their nominal value of €475 million (30 June 2014: €475 million).

At 30 June 2015, the Group had a financial asset carried at fair value, its investment in iStreamPlanet Inc. Furthermore, 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 June 2015, the fair value of all mortgages were equal to their carrying amount of €30.5 million. As of 30 June 2015, the fair value of the financial lease liabilities were €41.3 million compared with the carrying amount of €34.4 million.

The carrying amounts of other financial assets and liabilities approximate 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. Significant valuation issues are reported to the Company’s Audit Committee.

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:

 

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.

 

Interim Report: Three and Six-month periods ended 30 June 2015		19
This Interim Report is unaudited

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The values of the instruments are:

 

		Carrying value				Level 1				Fair value Level 2				Level 3
30 June 2015
Senior secured notes 6.00% due 2020			(475,573	)			(506,000	)			—				—
Finance leases			(34,388	)			—				(41,271	)			—
Mortgages			(30,487	)			—				(30,487	)			—
Interest rate swap			(260	)			—				(260	)			—
Financial asset			774				—				—				774
31 December 2014
Senior secured notes 6.00% due 2020			(475,643	)			(499,000	)			—				—
Finance leases			(52,857	)			—				(60,200	)			—
Mortgages			(31,487	)			—				(31,487	)			—
Interest rate swap			(368	)			—				(368	)			—
Financial asset			774				—				—				774

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.

 

10	Borrowings

As at 30 June 2015, our €100.0 million revolving facility was undrawn.

 

11	Related party transactions

Share distribution by Baker Capital

On 2 June 2015, Lamont Finance N.V. and Baker Communications Fund II, L.P. requested that Interxion instruct its Transfer Agent, American Stock Transfer & Trust Company, to remove the restrictive legend on all of the 18,657,592 Interxion shares held by Lamont Finance N.V. and Baker Communications Fund II, L.P.

Baker Capital (“Baker”) made a pro rata distribution-in-kind of these shares immediately to the partners of Baker Communications Fund II (Cayman) L.P. and Baker Communications Fund II L.P., which funds had made their initial acquisition of Interxion shares in 2000. Under the terms of the undertaking executed by Baker in support of the proposed transaction between Interxion and Telecity Group plc, it was contemplated that Baker would make a full distribution of its shares to its partners upon the closing of the transaction. The distribution was made following the termination of the proposed transaction with Telecity Group plc and the related undertaking executed by Baker. Following the distribution, Baker owns shares constituting less than 1% of the outstanding ordinary shares of Interxion.

 

20		Interim Report: Three and Six-month periods ended 30 June 2015
		This Interim Report is unaudited

---

 

This distribution did not have any effect upon the total number of shares outstanding.

As a result of the 18.6 million share distribution by funds affiliated with Baker, Mr. John Baker (on June 5th) and Mr. Rob Manning (on June 7th), as representatives of Baker on the Board of Directors (the “Board”), tendered their resignations as members of the Board, effective immediately. Mr. Jean F.H.P. Mandeville has been appointed as the new Chairman of the Board replacing Mr. Baker, effective 8 June 2015. Mr. Mandeville has been a member of the Board since January 2011. Interxion will seek to fill the vacant board positions in a timely fashion.

On 8 June 2015, the Board of Directors of the Company adopted amendments to the Company’s Bylaws to eliminate references to the Shareholders’ Agreement and related provisions.

Compensation of Non-executive Directors (FY 2015)

On 30 June 2015, the Annual General Meeting of Shareholders approved to award restricted shares equivalent to a value of €40,000 under the terms and conditions of the Company’s 2013 Amended International Equity Based Incentive Plan to each of our Non-executive Directors for their services to be provided for the period between the 2015 Annual General Meeting and the 2016 Annual General Meeting.

All of these restricted shares will vest on the day of the next Annual General Meeting subject to the Non-executive Director having served for the entire period and will be locked up for a period that will end three years from the date of award or on the date the Non-executive Director ceases to be a director of the Company, whichever is sooner. Upon change of control, these restricted shares will vest immediately and any lock up provisions will expire.

Performance share award to the Executive Director (FY 2014)

Under the Company’s Long Term Incentive plan and actual achievements in 2014, the Executive Director is entitled to an initial award of 94,485 performance shares.

On 30 June 2015, the Annual General Meeting of Shareholders approved to award to the Executive Director 47,243 performance shares of which, 23,621 performance shares vested upon award but are locked up until 31 December 2015 and 23,622 performance shares which will vest on 1 January 2016.

The remaining 50% of the initial award is subject to the Company’s relative share performance over the period 1 January 2014 to 31 December 2015 and is subject to approval by the shareholders at the 2016 Annual General Meeting. Upon a change of control, the performance shares will vest immediately and any lock up provisions will expire.

Conditional performance share award to members of key management (FY 2015)

In the first six months of 2015, for the contribution to the Company in the fiscal year 2015, the Board of Directors approved a conditional award of 134,098 performance shares to certain members of key management, including the Executive Director, under the terms and conditions of the Company’s 2013 Amended International Equity Based Incentive Plan. The Company started recognizing the related share-based payment charges in the second quarter of 2015. The conditional award of 68,639 performance shares to the Executive Director is subject to the approval of the Annual General Meeting of Shareholders, which is anticipated to be held in June 2016. Upon change of control, the performance shares will vest immediately and any lock up provisions will expire.

 

Interim Report: Three and Six-month periods ended 30 June 2015		21
This Interim Report is unaudited

---

 

 

12	Implementation Agreement with TelecityGroup

On 9 March 2015, the Company and Telecity Group plc. announced that they had entered into a definitive agreement on an all share merger (“Implementation Agreement”) on the terms as announced on 11 February 2015. The Implementation Agreement was subsequently terminated on 29 May 2015 and the related restrictions under the agreement, such as limitations on capital expenditures are no longer in effect. Expenses associated with the Implementation Agreement include costs associated with the preparation of documents for filing as part of the U.S. registration and listing process, consultations on the proposed transaction with relevant works councils, trade unions and other employee organisations and certain termination fees with the Company’s advisers.

Under the terms of the Implementation Agreement, the Company was entitled to a ‘break fee’ of £15 million in the event the Agreement was terminated. The Company received the break fee from Telecity Group in June 2015.

 

22		Interim Report: Three and Six-month periods ended 30 June 2015
		This Interim Report is unaudited