Form 6-K InterXion Holding N.V. For: Aug 03

 

 

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 3 August 2016

(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 Condensed Consolidated Interim Financial Statements as at and for the three-month and six-month periods ended 30 June 2016.

The interim report was prepared in accordance with the indenture (the “Indenture”) dated as of 3 July 2013 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. Condensed Consolidated Interim Financial Statements as at and for the three-month and six-month periods ended 30 June 2016.

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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: 3 August 2016

Exhibit 99.1

 

Interxion Holding NV

Condensed Consolidated Interim Financial Statements

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

30 June 2016

Schiphol-Rijk, 3 August 2016

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Financial Highlights

 

•

Revenue increased by 9% to €104.0 million (2Q 2015: €95.4 million).

 

•

Recurring revenue1 increased by 10% to €99.3 million (2Q 2015: €90.3 million).

 

•

Net profit was €9.2 million (2Q 2015: €21.6 million, which included net M&A transaction income of €17.0 million).

 

•

Adjusted net profit2 increased by 8% to €9.0 million (2Q 2015: €8.3 million).

 

•

Earnings per diluted share were €0.13 (2Q 2015: €0.31, which included the aforementioned net M&A transaction income).

 

•

Adjusted earnings per diluted share were €0.13 (2Q 2015: €0.12).

 

•

Adjusted EBITDA2 increased by 13% to €47.3 million (2Q 2015: €42.0 million).

 

•

Adjusted EBITDA margin increased to 45.5% (2Q 2015: 44.0%).

 

•

Capital expenditures, including intangible assets3, were €62.6 million (2Q 2015: €47.8 million).

 

•

During the second quarter, Interxion issued €150 million aggregate principal amount of 6.00% Senior Secured Notes due 2020 at an issue price of 104.50%.

Operating Highlights

 

•

Equipped Space increased by 2,600 square metres in the quarter to 104,200 square metres.

 

•

Revenue Generating Space increased by 1,200 square metres in the quarter to 81,600 square metres.

 

•

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

 

•

During the second quarter, Interxion completed expansions in Germany, opening the second phases of FRA10 in Frankfurt and DUS2 in Dusseldorf, as well as opening the first phase of its second data centre in Copenhagen (CPH2).

Quarterly Review

Revenue in the second quarter of 2016 was €104.0 million, a 9% increase over the second quarter of 2015 and a 2% increase over the first quarter of 2016. Recurring revenue was €99.3 million, a 10% increase over the second quarter of 2015 and a 2% increase over the first quarter of 2016. Recurring revenue in the second quarter was 95% of total revenue.

Cost of sales in the second quarter of 2016 was €39.7 million, a 5% increase over the second quarter of 2015 and a 1% increase over the first quarter of 2016.

Gross profit was €64.4 million in the second quarter of 2016, an 11% increase over the second quarter of 2015 and a 2% increase over the first quarter of 2016. Gross profit margin was 61.9% in the second quarter of 2016 compared to 60.5% in the second quarter of 2015 and 61.6% in the first quarter of 2016.

Sales and marketing costs in the second quarter of 2016 were €7.3 million, a 1% increase over the second quarter of 2015 and a 6% decrease from the first quarter of 2016.

Other general and administrative costs were €9.7 million in the second quarter of 2016, a 14% increase over the second quarter of 2015 and a 5% increase from the first quarter of 2016. Other general and administrative costs exclude depreciation, amortisation, impairments, share-based payments, M&A transaction costs and provision for onerous lease contracts.

Depreciation, amortisation, and impairments in the second quarter of 2016 was €22.0 million, an increase of 12% from the second quarter of 2015 and a 3% increase from the first quarter of 2016.

Operating profit in the second quarter of 2016 was €23.5 million, a decrease of 38% from the second quarter of 2015 and 3% increase from the first quarter of 2016. Quarterly results in the second quarter 2015, first quarter 2016, and second quarter 2016 were impacted by M&A transaction related items. Excluding these items, underlying operating profit increased 16% over the second quarter of 2015.

Net finance costs for the second quarter of 2016 were €10.2 million, a 28% increase over both the second quarter of 2015 and the first quarter of 2016. On 14 April 2016, Interxion issued €150 million principal amount of 6.00% Senior Secured Notes due 2020 at an issue price of 104.50%.

Income tax expense for the second quarter of 2016 was €4.2 million, a 49% decrease compared to the second quarter of 2015 and a 10% decrease from the first quarter of 2016.

Net profit was €9.2 million in the second quarter of 2016, a 58% decrease over the second quarter of 2015 and a 10% decrease from the first quarter of 2016.

Adjusted net profit was €9.0 million in the second quarter of 2016, an 8% increase over the second quarter of 2015, and a 10% decrease from the first quarter of 2016.

Adjusted EBITDA for the second quarter of 2016 was €47.3 million, a 13% increase over the second quarter of 2015 and a 3% increase over the first quarter of 2016. Adjusted EBITDA margin was 45.5% in the second quarter of 2016 compared to 44.0% in the second quarter of 2015 and 45.0% in the first quarter of 2016.

Cash generated from operations, defined as cash generated from operating activities before interest and corporate income tax payments and receipts, was €39.3 million in the second quarter of 2016, compared to €54.1 million in the second quarter of 2015, and €50.4 million in the first quarter of 2016.

Capital expenditures, including intangible assets³, were €62.6 million in the second quarter of 2016 compared to €47.8 million in the second quarter of 2015 and €50.0 million in the first quarter of 2016.

Cash and cash equivalents were €193.5 million at 30 June 2016, compared to €58.6 million at year end 2015. Total borrowings, net of deferred revolving facility financing fees, were €739.1 million at 30 June 2016 compared to €555.1 million at year end 2015. As of 30 June 2016, the Company’s revolving credit facility was undrawn. Cash balances at 30 June 2016 reflect the receipt of net proceeds of approximately €155 million related to the Senior Secured Notes issuance completed on 14 April 2016.

Equipped space at the end of the second quarter of 2016 was 104,200 square metres compared to 98,300 square metres at the end of the second quarter of 2015 and 101,600 square metres at the end of the first quarter of 2016. Utilisation rate, the ratio of revenue-generating space to equipped space, was 78% at the end of the second quarter of 2016, compared with 78% at the end of the second quarter of 2015 and 79% at the end of the first quarter of 2016.

 

1

Recurring revenue comprises revenue that is incurred monthly from colocation, connectivity and associated power charges, office space, amortized set-up fees and certain recurring managed services (but excluding any ad hoc managed services) provided by us directly or through third parties. Rents received for the sublease of unused sites are excluded.

 

2

Adjusted net profit and Adjusted EBITDA are non-IFRS figures intended to adjust for certain items and are not measures of financial performance under IFRS. Full definitions can be found in the “Non-IFRS Financial Measures” section later in this press release. Reconciliations of net profit to adjusted EBITDA and net profit to adjusted net profit can be found in the financial tables later in this press release.

 

3	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-month and six-month periods ended 30 June 2016 These Condensed Consolidated Interim Financial Statements are unaudited

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Further Information for Noteholders

These Condensed Consolidated Interim Financial Statements were prepared in accordance with IAS 34 and intended to comply with the requirements in 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 these Condensed Consolidated Interim Financial Statements 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 these Condensed Consolidated Interim Financial Statements and we assume no obligation to update any such forward-looking statements.

Non-IFRS Financial Measures

Included in these materials 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) adjusted net profit; (v) adjusted basic earnings per share and (vi) adjusted diluted earnings per share.

Other companies may present EBITDA, adjusted EBITDA, recurring revenue, adjusted net profit, adjusted basic earnings per share and adjusted diluted earnings per share 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 profit or as a measure of liquidity or an alternative to Profit for the period attributable to shareholders (“net profit”) as indicators of our operating performance or any other measure of performance implemented in accordance with IFRS.

EBITDA, Adjusted EBITDA and Recurring revenue

We define EBITDA as net profit 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 – the fair value at the date of grant to employees of share options, is 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 incurred. We exclude these effects because we believe they are not reflective of our ongoing operating performance.

 

•

Adjustments related to terminated and unused datacenter sites – these gains and losses relate to historical leases entered into for certain brownfield sites, with the intention of developing datacenters, 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 ongoing operating performance.

 

Interim Report: Three-month and six-month periods ended 30 June 2016
These Condensed Consolidated Interim Financial Statements are unaudited		3

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

Recurring revenue comprises revenue that is incurred monthly from colocation, connectivity and associated power charges, office space, amortized set-up fees and certain recurring managed services (but excluding any ad hoc managed services) provided by us directly or through third parties. Rents received for the sublease of unused sites are excluded.

We believe EBITDA and adjusted EBITDA provide 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 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 profit, 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 and 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 million revolving facility and our 6.00% Senior Secured Notes due 2020. We also present recurring revenue as we believe it assists investors understand our operating performance.

A reconciliation from net profit to EBITDA and EBITDA to adjusted EBITDA is provided in the notes to our condensed consolidated interim financial statements.

Adjusted net profit, adjusted basic earnings per share and adjusted diluted earnings per share

We define adjusted net profit as net profit 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 incurred. We exclude these effects because we believe they are not reflective of our ongoing operating performance.

 

•

Adjustments related to provisions – these adjustments are made for adjustments in provisions that are not reflective of the ongoing 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 profit. 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 gains or losses that management believes are not representative of our current ongoing performance. Examples of this would include: adjusting 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 profit to aid investors in evaluating the operating performance of our business and to aid investors compare our operating performance with other data centre operators and infrastructure companies. We believe the presentation of adjusted net profit, when combined with net profit prepared in accordance with IFRS is beneficial to a complete understanding of our performance.

 

4		Interim Report: Three-month and six-month periods ended 30 June 2016 These Condensed Consolidated Interim Financial Statements are unaudited

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Adjusted basic earnings per share and adjusted diluted earnings per share amounts are determined on adjusted net profit. A reconciliation from net profit to adjusted net profit is provided in the notes to our condensed consolidated interim financial statements.

 

		For the three months ended								For the six months ended
		30 Jun 2016				30 Jun 2015				30 Jun 2016				30 Jun 2015
Consolidated		€’000				€’000				€’000				€’000
Net profit			9,165				21,587				19,384				26,012
Income or expense related to the evaluation and execution of potential mergers or acquisitions:
M&A transaction costs			492				3,911				721				10,798
M&A transaction break fee income			—				(20,923	)			—				(20,923	)
Adjustments related to provisions:
Increase/(decrease) in provision for onerous lease contracts			—				—				—				(100	)
Adjustments related to capitalised interest:			(701	)			(700	)			(1,166	)			(1,600	)
			(209	)			(17,712	)			(445	)			(11,825	)
Tax effect of above add backs and reversals			52				4,428				111				3,000
Adjusted net profit			9,008				8,303				19,050				17,187
Reported basic EPS: (€)			0.13				0.31				0.28				0.37
Reported diluted EPS: (€)			0.13				0.31				0.27				0.37
Adjusted basic EPS: (€)			0.13				0.12				0.27				0.25
Adjusted diluted EPS: (€)			0.13				0.12				0.27				0.24

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 42 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.

 

Interim Report: Three-month and six-month periods ended 30 June 2016
These Condensed Consolidated Interim Financial Statements are unaudited		5

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Condensed Consolidated Interim Income Statements

 

						For the three months ended								For the six months ended
						30 Jun 2016				30 Jun 2015				30 Jun 2016				30 Jun 2015
		Note				€’000				€’000				€’000				€’000
Revenue			5				104,026				95,449				206,026				187,931
Cost of sales			5				(39,663	)			(37,663	)			(78,782	)			(73,945	)
Gross profit							64,363				57,786				127,244				113,986
Other income			5				33				20,997				130				21,060
Sales and marketing costs			5				(7,284	)			(7,210	)			(15,008	)			(13,889	)
General and administrative costs			5				(33,568	)			(33,824	)			(65,953	)			(69,983	)
Operating profit							23,544				37,749				46,413				51,174
Finance income			6				266				147				269				1,357
Finance expense			6				(10,436	)			(8,093	)			(18,397	)			(15,888	)
Profit before taxation							13,374				29,803				28,285				36,643
Income tax expense			7				(4,209	)			(8,216	)			(8,901	)			(10,631	)
Profit for the period attributable to shareholders							9,165				21,587				19,384				26,012
Earnings per share
Basic earnings per share: (€)							0.13				0.31				0.28				0.37
Diluted earnings per share: (€)							0.13				0.31				0.27				0.37

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

 

6		Interim Report: Three-month and six-month periods ended 30 June 2016 These Condensed Consolidated Interim Financial Statements are unaudited

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Condensed Consolidated Interim Statements of Comprehensive Income

 

		For the three months ended								For the six months ended
		30 Jun 2016				30 Jun 2015				30 Jun 2016				30 Jun 2015
		€’000				€’000				€’000				€’000
Profit for the period attributable to shareholders			9,165				21,587				19,384				26,012
Other comprehensive income
Items that are, or may be, reclassified subsequently to profit or loss:
Foreign currency translation differences			(3,277	)			2,309				(9,983	)			16,252
Effective portion of changes in fair value of cash flow hedge			(38	)			146				(135	)			110
Tax on items that are, or may be, reclassified subsequently to profit or loss			489				(292	)			1,334				(1,470	)
Other comprehensive income/(loss) for the period, net of tax			(2,826	)			2,163				(8,784	)			14,892
Total comprehensive income attributable to shareholders			6,339				23,750				10,600				40,904

The foreign currency translation differences are primarily related to exchange rate differences on equities and permanent loans in GBP.

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

 

Interim Report: Three-month and six-month periods ended 30 June 2016
These Condensed Consolidated Interim Financial Statements are unaudited		7

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Condensed Consolidated Interim Statements of Financial Position

 

As at						30 Jun 2016				31 Dec 2015
		Note				€’000				€’000
Non-current assets
Property, plant and equipment			8				1,087,585				999,072
Intangible assets							25,585				23,194
Deferred tax assets							20,895				23,024
Financial assets							947				—
Other non-current assets							7,165				6,686
							1,142,177				1,051,976
Current assets
Trade receivables and other current assets							137,448				141,534
Cash and cash equivalents							193,474				58,554
							330,922				200,088
Total assets							1,473,099				1,252,064
Shareholders’ equity
Share capital							7,048				6,992
Share premium							515,974				507,296
Foreign currency translation reserve							12,172				20,865
Hedging reserve, net of tax							(304	)			(213	)
Accumulated deficit							(8,139	)			(27,523	)
							526,751				507,417
Non-current liabilities
Trade payables and other liabilities							11,459				12,049
Deferred tax liabilities							9,224				9,951
Borrowings			10				735,455				550,812
							756,138				572,812
Current liabilites
Trade payables and other liabilities							180,910				162,629
Income tax liabilities							4,782				2,738
Provision for onerous lease contracts							260				1,517
Borrowings			10				4,258				4,951
							190,210				171,835
Total liabilities							946,348				744,647
Total liabilities and shareholders’ equity							1,473,099				1,252,064

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

 

8		Interim Report: Three-month and six-month periods ended 30 June 2016 These Condensed Consolidated Interim Financial Statements are unaudited

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Condensed Consolidated Interim Statements of Changes in Shareholders’ Equity

 

		Share capital				Share premium				Foreign currency translation reserve				Hedging reserve				Accumulated deficit				Total equity
		€’000				€’000				€’000				€’000				€’000				€’000
Balance at 1 January 2016			6,992				507,296				20,865				(213	)			(27,523	)			507,417
Profit for the period			—				—				—				—				19,384				19,384
Other comprehensive income, net of tax			—				—				(8,693	)			(91	)			—				(8,784	)
Total comprehensive income			—				—				(8,693	)			(91	)			19,384				10,600
Exercise of options			56				6,120				—				—				—				6,176
Share-based payments			—				2,558				—				—				—				2,558
Total contribution by, and distributions to, owners of the Company			56				8,678				—				—				—				8,734
Balance at 30 June 2016			7,048				515,974				12,172				(304	)			(8,139	)			526,751
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

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

 

Interim Report: Three-month and six-month periods ended 30 June 2016
These Condensed Consolidated Interim Financial Statements are unaudited		9

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Condensed Consolidated Interim Statements of Cash Flows

 

		For the three months ended								For the six months ended
		30 Jun 2016				30 Jun 2015				30 Jun 2016				30 Jun 2015
		€’000				€’000				€’000				€’000
Profit for the period			9,165				21,587				19,384				26,012
Depreciation, amortisation and impairments			22,021				19,577				43,498				37,792
Provision for onerous lease contracts			(392	)			(849	)			(1,271	)			(1,774	)
Share-based payments			1,158				1,789				2,558				4,030
Net finance expense			10,170				7,946				18,128				14,531
Income tax expense			4,209				8,216				8,901				10,631
			46,331				58,266				91,198				91,222
Movements in trade and other current assets			(3,732	)			(7,734	)			1,310				(9,365	)
Movements in trade and other liabilities			(3,264	)			3,609				(2,758	)			6,483
Cash generated from operations			39,335				54,141				89,750				88,340
Interest and fees paid (a)			(1,060	)			(1,448	)			(15,422	)			(15,022	)
Interest received			18				31				25				80
Income tax paid			(2,484	)			(2,740	)			(3,538	)			(5,060	)
Net cash flows from operating activities			35,809				49,984				70,815				68,338
Cash flows from investing activities
Purchase of property, plant and equipment			(60,729	)			(46,911	)			(108,176	)			(112,229	)
Disposals of property, plant and equipment
Purchase of intangible assets			(1,863	)			(924	)			(4,419	)			(3,176	)
Redemption of short-term investments			—				1,650				—				1,650
Net cash flows from investing activities			(62,592	)			(46,185	)			(112,595	)			(113,755	)
Cash flows from financing activities
Proceeds from exercised options			4,250				230				6,176				2,408
Proceeds from mortgages			14,625				—				14,625				—
Repayment of mortgages			(948	)			(720	)			(1,268	)			(1,040	)
Proceeds 6.00% Senior Secured Notes due 2020			155,346				—				155,346				—
Interest received at issuance Additional Notes			2,225				—				2,225				—
Net cash flows from financing activities			175,498				(490	)			177,104				1,368
Effect of exchange rate changes on cash			147				(193	)			(404	)			1,224
Net movement in cash and cash equivalents			148,862				3,116				134,920				(42,825	)
Cash and cash equivalents, beginning of period			44,612				53,982				58,554				99,923
Cash and cash equivalents, end of period			193,474				57,098				193,474				57,098

 

(a)	Interest 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.

 

10		Interim Report: Three-month and six-month periods ended 30 June 2016 These Condensed Consolidated Interim Financial Statements are unaudited

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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 six month periods ended 30 June 2016 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 2015; these are contained in the 2015 Annual Report (Form 20-F) as filed with the Securities and Exchange Commission on 31 March 2016, 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. 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 2015 in the 2015 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 2015 in the 2015 Annual Report (Form 20-F), if necessary amended to include new Standards and Interpretations effective as of 1 January 2016. Compared with the accounting principles as applied in the 2015 financial statements these new Standards and Interpretations did not have a significant impact on the financial position or performance of the Group.

 

Interim Report: Three-month and six-month periods ended 30 June 2016
These Condensed Consolidated Interim Financial Statements are unaudited		11

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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 2015 Annual Report (Form 20-F).

 

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.

 

12		Interim Report: Three-month and six-month periods ended 30 June 2016 These Condensed Consolidated Interim Financial Statements are unaudited

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The performance of the operating segments is primarily assessed 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.

 

For the three months ended 30 June 2016		FR, DE NL and UK				Rest of Europe				Subtotal				Corporate and other				Total
		€’000				€’000				€’000				€’000				€’000
Recurring revenue			63,773				35,558				99,331				—				99,331
Non-recurring revenue			2,608				2,087				4,695				—				4,695
Revenue			66,381				37,645				104,026				—				104,026
Cost of sales			(24,264	)			(12,876	)			(37,140	)			(2,523	)			(39,663	)
Gross profit/(loss)			42,117				24,769				66,886				(2,523	)			64,363
Other income			33				—				33				—				33
Sales and marketing costs			(1,993	)			(1,357	)			(3,350	)			(3,934	)			(7,284	)
General and administrative costs			(17,783	)			(8,329	)			(26,112	)			(7,456	)			(33,568	)
Operating profit			22,374				15,083				37,457				(13,913	)			23,544
Net finance expense																			(10,170	)
Profit before tax																			13,374
Total assets			954,598				340,529				1,295,127				177,972				1,473,099
Total liabilities			205,333				81,711				287,044				659,304				946,348
Capital expenditure, including intangible assets*			(43,627	)			(16,389	)			(60,016	)			(2,576	)			(62,592	)
Depreciation, amortisation, impairments			(14,543	)			(6,387	)			(20,930	)			(1,091	)			(22,021	)
Adjusted EBITDA			37,012				21,574				58,586				(11,240	)			47,346
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/(loss)			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

 

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

 

Interim Report: Three-month and six-month periods ended 30 June 2016
These Condensed Consolidated Interim Financial Statements are unaudited		13

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For the six months ended 30 June 2016		FR, DE NL and UK				Rest of Europe				Subtotal				Corporate and other				Total
		€’000				€’000				€’000				€’000				€’000
Recurring revenue			126,039				70,503				196,542				—				196,542
Non-recurring revenue			5,884				3,600				9,484				—				9,484
Revenue			131,923				74,103				206,026				—				206,026
Cost of sales			(48,908	)			(24,954	)			(73,862	)			(4,920	)			(78,782	)
Gross profit/(loss)			83,015				49,149				132,164				(4,920	)			127,244
Other income			130				—				130								130
Sales and marketing costs			(3,766	)			(2,732	)			(6,498	)			(8,510	)			(15,008	)
General and administrative costs			(35,323	)			(16,065	)			(51,388	)			(14,565	)			(65,953	)
Operating profit/(loss)			44,056				30,352				74,408				(27,995	)			46,413
Net finance expense																			(18,128	)
Profit before tax																			28,285
Total assets			954,598				340,529				1,295,127				177,972				1,473,099
Total liabilities			205,333				81,711				287,044				659,304				946,348
Capital expenditure, including intangible assets*			(80,383	)			(26,671	)			(107,054	)			(5,540	)			(112,594	)
Depreciation, amortisation, impairments			(28,835	)			(12,529	)			(41,364	)			(2,134	)			(43,498	)
Adjusted EBITDA			73,193				43,089				116,282				(23,017	)			93,265
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				493,172				729,020
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

 

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

 

14		Interim Report: Three-month and six-month periods ended 30 June 2016 These Condensed Consolidated Interim Financial Statements are unaudited

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Reconciliation to adjusted EBITDA

 

		For the three months ended								For the six months ended
		30 Jun 2016				30 Jun 2015				30 Jun 2016				30 Jun 2015
Consolidated		€’000				€’000				€’000				€’000
Profit for the period attributable to shareholders			9,165				21,587				19,384				26,012
Income tax expense			4,209				8,216				8,901				10,631
Profit before taxation			13,374				29,803				28,285				36,643
Finance income			(266	)			(147	)			(269	)			(1,357	)
Finance expense			10,436				8,093				18,397				15,888
Operating profit			23,544				37,749				46,413				51,174
Depreciation, amortisation and impairments			22,021				19,577				43,498				37,792
EBITDA(1)			45,565				57,326				89,911				88,966
Share-based payments			1,322				1,789				2,763				4,030
Income or expense related to the evaluation and execution of potential mergers or acquisitions:
M&A transaction break fee income(2)			—				(20,923	)			—				(20,923	)
M&A transaction costs(3)			492				3,911				721				10,798
Adjustments related to terminated or unused datacenter sites:
Increase/(decrease) in provision for onerous lease contracts(4)			—				—				—				(100	)
Income from sub-leases of unused data centre sites(5)			(33	)			(74	)			(130	)			(137	)
Adjusted EBITDA(1)			47,346				42,029				93,265				82,634
		For the three months ended								For the six months ended
		30 Jun 2016				30 Jun 2015				30 Jun 2016				30 Jun 2015
FR, DE, NL and UK		€’000				€’000				€’000				€’000
Operating profit			22,374				20,319				44,056				39,802
Depreciation, amortisation and impairments			14,543				12,544				28,835				24,261
EBITDA(1)			36,917				32,863				72,891				64,063
Share-based payments			128				459				432				792
Adjustments related to terminated or unused datacenter sites:
Increase/(decrease) in provision for onerous lease contracts(4)			—				—				—				(100	)
Income from sub-leases of unused data centre sites(5)			(33	)			(74	)			(130	)			(137	)
Adjusted EBITDA(1)			37,012				33,248				73,193				64,618

 

Interim Report: Three-month and six-month periods ended 30 June 2016
These Condensed Consolidated Interim Financial Statements are unaudited		15

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		For the three months ended								For the six months ended
		30 Jun 2016				30 Jun 2015				30 Jun 2016				30 Jun 2015
Rest of Europe		€’000				€’000				€’000				€’000
Operating profit			15,083				13,206				30,352				26,553
Depreciation, amortisation and impairments			6,387				5,927				12,529				11,362
EBITDA(1)			21,470				19,133				42,881				37,915
Share-based payments			104				209				208				405
Adjusted EBITDA(1)			21,574				19,342				43,089				38,320
		For the three months ended								For the six months ended
		30 Jun 2016				30 Jun 2015				30 Jun 2016				30 Jun 2015
Corporate and other		€’000				€’000				€’000				€’000
Operating profit/(loss)			(13,913	)			4,224				(27,995	)			(15,181	)
Depreciation, amortisation and impairments			1,091				1,106				2,134				2,169
EBITDA(1)			(12,822	)			5,330				(25,861	)			(13,012	)
Share-based payments			1,090				1,121				2,123				2,833
Income or expense related to the evaluation and execution of potential mergers or acquisitions:
M&A transaction break fee income(2)			—				(20,923	)			—				(20,923	)
M&A transaction costs(3)			492				3,911				721				10,798
Adjusted EBITDA(1)			(11,240	)			(10,561	)			(23,017	)			(20,304	)

 

(1)

“EBITDA” and “adjusted EBITDA” are non-IFRS financial measures within the meaning of the rules of the SEC. 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 break fee income” represents the cash break-up fee received following the termination of the Implementation Agreement in May 2015. This fee was included in “Other income”.

(3)

“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”. In the quarter ended 30 June 2015, M&A transaction costs included €3.9 million related to the abandoned merger with TelecityGroup. In the quarter ended 30 June 2016, M&A transaction costs included €0.5 million related to other activity including the evaluation of potential asset acquisitions.

(4)	“Increase/(decrease) in provision for onerous lease contracts” relates to those contracts in which we expect losses to be incurred in respect of unused data centre sites over the term of the lease contract.

(5)	“Income from sub-lease of unused data centre sites” represents income from sub-letting unused data centre sites to third parties, which is treated as “Other Income”.

 

16		Interim Report: Three-month and six-month periods ended 30 June 2016 These Condensed Consolidated Interim Financial Statements are unaudited

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6	Finance income and expense

 

		For the three months ended								For the six months ended
		30 Jun 2016				30 Jun 2015				30 Jun 2016				30 Jun 2015
		€’000				€’000				€’000				€’000
Bank and other interest			28				18				31				47
Bond premium and fees in income			238				—				238				—
Foreign currency exchange profits			—				129				—				1,310
Finance income			266				147				269				1,357
Interest expense on Senior Secured Notes, bank and other loans			(8,716	)			(6,754	)			(15,633	)			(13,334	)
Interest expense on finance leases			(830	)			(785	)			(1,657	)			(1,505	)
Interest expense on provision for onerous lease contracts			(4	)			(32	)			(15	)			(72	)
Other financial expenses			(438	)			(522	)			(786	)			(977	)
Foreign currency exchange losses			(448	)			—				(306	)			—
Finance expense			(10,436	)			(8,093	)			(18,397	)			(15,888	)
Net finance expense			(10,170	)			(7,946	)			(18,128	)			(14,531	)

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 31%, in respect of continuing operations for both the three months and six months periods ended 30 June 2016, was affected by the non-tax-deductible share-based payments. The effective tax rate for the three months and six months periods ended 30 June 2015 was impacted by the pre-tax net positive income on the terminated M&A transactions (taxable in The Netherlands at a below-average tax rate of 25%) and amounted to 28% and 29%, respectively.

 

8	Property, plant and equipment

Acquisitions

During the three and six months ended 30 June 2016, the Group acquired tangible fixed assets (primarily data-centre-related assets) at a cost of €93,540,000 and €143,000,000, respectively (three and six months ended 30 June 2015: €37,600,000 and €89,200,000, respectively).

Capitalised interest relating to borrowing costs for the three and six months ended 30 June 2016 amounted to €701,000 and €1,166,000, respectively (three and six months ended 30 June 2015: €678,000 and €1,598,000, respectively). The cash effect of the interest capitalised for the three and six months ended 30 June 2016 amounted to nil and €1,041,000, respectively, which in the Statement of Cash Flows is presented under “Purchase of property, plant and equipment” (three and six months ended 30 June 2015: nil and €1,969,000, respectively).

 

Interim Report: Three-month and six-month periods ended 30 June 2016
These Condensed Consolidated Interim Financial Statements are unaudited		17

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Capital commitments

At 30 June 2016, the Group had outstanding capital commitments of €81,900,000. These commitments are expected to be substantially settled during the remainder of 2016.

 

9	Financial Instruments

Fair values versus carrying amounts

As of 30 June 2016, the market price of the 6.00% Senior Secured Notes due 2020 was 105.146 (30 June 2015: 106.427). Using this market price, the fair value of the Senior Secured Notes due 2020 would have been approximately €657 million (30 June 2015: €506 million), compared with their nominal value of €625 million (30 June 2015: €475 million).

At 30 June 2016, 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 2016, the fair value of all mortgages were equal to their carrying amount of €57.1 million. As of 30 June 2016, the fair value of the financial lease liabilities was €67.8 million compared with the carrying amount of €52.7 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:

 

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.

 

18		Interim Report: Three-month and six-month periods ended 30 June 2016 These Condensed Consolidated Interim Financial Statements are unaudited

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The values of the instruments are:

 

		Carrying value				Fair value
						Level 1				Level 2				Level 3
30 June 2016
Senior secured notes 6.00% due 2020			(629,904	)			(657,000	)			—				—
Finance leases			(52,700	)			—				(67,782	)			—
Mortgages			(57,109	)			—				(57,109	)			—
Interest rate swap			(456	)			—				(456	)			—
Financial asset			947				—				—				947
31 December 2015
Senior secured notes 6.00% due 2020			(475,503	)			(502,000	)			—				—
Finance leases			(34,582	)			—				(41,012	)			—
Mortgages			(44,073	)			—				(44,073	)			—
Interest rate swap			(321	)			—				(321	)			—

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 USD 1.0 million part of a USD 2.0 million convertible loan given by Interxion Participation 1 B.V. This amount was paid in the first quarter of 2016, at that time as a bridge loan. 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 has a zero value per 30 June 2016.

 

10	Borrowings

As at 30 June 2016, our €100.0 million revolving facility was undrawn.

Additional notes under Indenture 3 July 2013

On 14 April 2016, the Company completed the issuance of an additional €150.0 million aggregate principal amount of its 6.00% Senior Secured Notes due 2020 (the “Additional Notes”). The net proceeds of the offering amounted to approximately €155 million, net of estimated offering fees and expenses of €2.1 million. The net proceeds contain the nominal value of the Additional Notes increased with a premium at 104.5%. The Additional Notes, which are guaranteed by certain subsidiaries of the Company, were issued under the indenture dated 3 July 2013 pursuant to which the Company has previously issued €475 million in aggregate principal amount of 6.00% Senior Secured Notes due 2020.

Mortgage

On 8 April 2016, the Group completed a €14.6 million financing. The facility is secured by a mortgage on the data centre property in Vienna (Austria), acquired by Interxion Real Estate VII GmbH in January 2015, a pledge on the lease agreement, and is guaranteed by Interxion Real Estate Holding B.V. The facility has a maturity of

 

Interim Report: Three-month and six-month periods ended 30 June 2016
These Condensed Consolidated Interim Financial Statements are unaudited		19

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fourteen years and nine months, and has a variable interest rate based on EURIBOR plus 195 basis points. The principal amount is to be repaid in 177 monthly instalments, increasing from €76,000 to €91,750. The first monthly instalment of €76,000 was due on 30 April 2016, and a final repayment of €91,750 is due on 31 December 2030.

 

11	Related party transactions

In 2016, the Board of Directors approved a conditional award of 121,849 performance shares to certain members of key management, including the Executive Director. The conditional award of 61,469 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 2017.

On 24 June 2016, 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 2016 Annual General Meeting and the 2017 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.

 

20		Interim Report: Three-month and six-month periods ended 30 June 2016 These Condensed Consolidated Interim Financial Statements are unaudited