IHS Holding Limited Reports First Quarter 2023 Financial Results
CONSOLIDATED HIGHLIGHTS – FIRST QUARTER 2023
- Revenue of $602.5 million increased 35.1% (or 38.0% organically)
- Adjusted EBITDA of $335.4 million (55.7% Adjusted EBITDA Margin) increased 37.0%
- Profit for the period was $7.7 million
- Cash from operations was $251.9 million
- Recurring Levered Free Cash Flow (“RLFCF”) was $149.7 million
- Total Capex was $152.6 million
- During the quarter, certain of our Nigerian subsidiaries entered into an up to NGN 165.0 billion (approximately $357.9 million) five-year term loan and an up to NGN 55.0 billion (approximately $119.3 million) three-year revolving credit facility
- Reiterating 2023 guidance for revenue of $2,190-2,220 million, Adjusted EBITDA of $1,200-1,220 million, RLFCF of $430-450 million, Total Capex of $610-650 million and net leverage ratio target remains 3.0x-4.0x
LONDON–(BUSINESS WIRE)–IHS Holding Limited (NYSE: IHS) (“IHS Towers” or the “Company”), one of the largest independent owners, operators, and developers of shared communications infrastructure in the world by tower count, today reported financial results for the first quarter ended March 31, 2023.
Sam Darwish, IHS Towers Chairman and Chief Executive Officer, stated, “We had another strong quarter with growth primarily driven by a sequential step-up from new Lease Amendments, escalations, and FX resets, while growth from power moderated – all as expected. Results also included a $48 million one-time benefit to revenue and Adjusted EBITDA from our smallest Key Customer in Nigeria, inclusive of $5 million additional withholding tax gross up, and a $43 million one-time benefit to RLFCF. Lastly, Q1 results included a $9 million FX tailwind vs. rates previously assumed in guidance.
We are reiterating our 2023 guidance for all our key metrics including revenue, Adjusted EBITDA, RLFCF, and capex that we issued in March. While we recognize the modest upside from the $5 million withholding tax benefit in Q1, and that our updated FX rates now assumed in guidance imply $14 million upside vs. rates previously assumed in guidance, given FX rates in emerging markets can be volatile, and that a notable risk of Naira devaluation this year exists, we think it’s important we remain prudent in our approach and not increase our guidance. Overall, we remain on track to achieve our goals for 2023.”
RESULTS FOR THE FIRST QUARTER 2023
The table below sets forth select unaudited financial results for the quarters ended March 31, 2023 and March 31, 2022:
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| Three months ended |
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| March 31, |
| March 31, |
| Y on Y | |
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| 2023 |
| 2022 |
| Growth | |
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| $’000 |
| $’000 |
| % | |
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| Revenue |
| 602,528 |
| 446,132 |
| 35.1 |
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| Adjusted EBITDA(1) |
| 335,382 |
| 244,872 |
| 37.0 |
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| Profit for the period |
| 7,662 |
| 15,120 |
| (49.3 | ) |
| Cash from operations |
| 251,859 |
| 166,607 |
| 51.2 |
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| RLFCF(1) |
| 149,657 |
| 87,060 |
| 71.9 |
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| (1) | Adjusted EBITDA and RLFCF are non-IFRS financial measures. See “Use of Non-IFRS Financial Measures” for additional information, definitions and a reconciliation to the most comparable IFRS measures. |
Results for the three months ended March 31, 2023 versus 2022
During the first quarter of 2023, revenue was $602.5 million compared to $446.1 million for the first quarter of 2022, an increase of $156.4 million, or 35.1%. Organic growth was $169.6 million, or 38.0%, driven primarily by escalations, foreign exchange resets, Lease Amendments and power indexation. Revenue for the first quarter of 2023 included $48.1 million of non-recurring revenue as adjusted for withholding tax from our smallest Key Customer in Nigeria for services previously provided but for which revenue had not been recognized. Aggregate inorganic revenue growth was $37.2 million, or 8.3%, for the first quarter of 2023 driven by the MTN SA Acquisition, GTS SP5 Acquisition and the fifth stage of the Kuwait Acquisition. The increase in the period was partially offset by the non-core impact of negative movements in foreign exchange rates of $50.4 million, or 11.3%.
Adjusted EBITDA was $335.4 million for the first quarter of 2023 compared to $244.9 million for the first quarter of 2022. Adjusted EBITDA margin for the first quarter of 2023 was 55.7% (first quarter of 2022: 54.9%). The increase in Adjusted EBITDA primarily reflects the increase in revenue discussed above including the non-recurring revenue, partially offset by an increase in cost of sales resulting from higher diesel costs in 2023 largely due to the current conflict between Russia and Ukraine, and an increase in maintenance and repair costs alongside an increase in administrative expenses, resulting from employee costs related to the acquisitions listed above and increases in loss allowance on trade receivables, computer and maintenance cost and professional fees.
Profit for the period was $7.7 million for the first quarter of 2023 compared to a profit of $15.1 million for the first quarter of 2022. The decrease in profit for the period reflects the impact of an increase in cost of sales including higher power generation cost, which includes diesel costs, and increased administrative expenses associated with the acquisitions listed above. In addition, the decrease is due to the increase in net finance costs mainly due to an increase in realized and unrealized foreign exchange losses on financing and an increase in interest expense. These unfavorable movements were partially offset by an increase in revenue including the non-recurring revenue discussed above and a decrease in the fair value loss on embedded options.
Cash from operations and RLFCF for the first quarter of 2023 were $251.9 million and $149.7 million, respectively, compared to $166.6 million and $87.1 million, respectively, for the first quarter of 2022. The increase in cash from operations primarily reflects the aggregate impact of the increase in revenue discussed above including the non-recurring revenue as adjusted for withholding tax, partially offset by an increase in cost of sales and administrative expenses. The increase in RLFCF is due to the increase in cash from operations, partially offset by the increase in net interest paid, lease and rent payment made, loss allowance on trade receivables and withholding tax.
Segment results
(i) Revenue and Segment Adjusted EBITDA:
Revenue and Segment Adjusted EBITDA, our key profitability measures used to assess the performance of our reportable segments, were as follows:
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| March 31, |
| March 31, |
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| March 31, |
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| 2023 |
| 2022 |
| Change |
| 2023 |
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| 2022 |
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| Change | |
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| $’000 |
| $’000 |
| % |
| $’000 |
| $’000 |
| % | |||
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| Nigeria | 424,978 |
| 320,656 |
| 32.5 |
| 271,879 |
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| 203,019 |
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| 33.9 |
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| SSA | 122,160 |
| 85,628 |
| 42.7 |
| 65,319 |
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| 46,999 |
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| 39.0 |
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| Latam | 45,649 |
| 31,233 |
| 46.2 |
| 31,172 |
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| 22,113 |
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| 41.0 |
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| MENA | 9,741 |
| 8,615 |
| 13.1 |
| 3,666 |
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| 3,618 |
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| 1.3 |
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| Other | — |
| — |
| — |
| (36,654 | ) |
| (30,877 | ) |
| (18.7 | ) |
| Total | 602,528 |
| 446,132 |
| 35.1 |
| 335,382 |
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| 244,872 |
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| 37.0 | |
Nigeria
Revenue for our Nigeria segment increased by $104.3 million, or 32.5%, to $425.0 million for the first quarter of 2023, compared to $320.7 million for the first quarter of 2022. Revenue increased organically by $149.5 million, or 46.6%, driven primarily by an increase in power indexation and escalations, as well as foreign exchange resets and Lease Amendments. Revenue for the first quarter of 2023 included $48.1 million of non-recurring revenue as adjusted for withholding tax from our smallest Key Customer for services previously provided but for which revenue had not been recognized. The increase in revenue was partially offset by the non-core impact of negative movements in the Naira to U.S. dollar foreign exchange rate of $45.2 million, or 14.1%. Year-on-year, within our Nigeria segment, Tenants decreased by 40, including 1,152 Churned (which includes, for the first quarter of 2023, 727 towers occupied by our smallest Key Customer on which we were not recognizing revenue), partially offset by 576 from New Sites and 536 from Colocation, while Lease Amendments increased by 3,717.
Segment Adjusted EBITDA for our Nigeria segment was $271.9 million for the first quarter of 2023 compared to $203.0 million for the first quarter of 2022, an increase of $68.9 million, or 33.9%. The increase in Segment Adjusted EBITDA primarily reflects the increase in revenue discussed above, partially offset by an increase in cost of sales resulting from higher power generation cost of $21.3 million and increase in administrative expenses of $9.3 million, of which $4.4 million is due to an increase in computer maintenance and software and $3.1 million due to an increase in allowance of bad debt provision.
SSA
Revenue for our SSA segment increased by $36.5 million, or 42.7%, to $122.2 million for the first quarter of 2023, compared to $85.6 million for the first quarter of 2022. Revenue increased organically by $13.4 million, or 15.6%, driven primarily by escalations and New Sites. Revenue for our SSA segment also grew inorganically in the period by $28.5 million, or 33.3%, due to the impact of the MTN SA Acquisition. The increase in revenue was partially offset by the non-core impact of negative movements in foreign exchange rates of $5.3 million, or 6.2%. Year-on-year, within our SSA segment, Tenants increased by 7,613 including 293 from New Sites, 443 from Colocation and 7,017 from the MTN SA Acquisition in the second quarter of 2022, partially offset by 140 Churned, while Lease Amendments increased by 749.
Segment Adjusted EBITDA for our SSA segment was $65.3 million for the first quarter of 2023 compared to $47.0 million for the first quarter of 2022, an increase of $18.3 million, or 39.0%. The increase in Segment Adjusted EBITDA primarily reflects the increase in revenue discussed above, partially offset by an increase in cost of sales resulting from higher power generation cost, maintenance and security costs of $5.9 million, $4.0 million and $3.7 million respectively, due to the increase in asset base and an increase in administrative expenses of $1.9 million, of which $1.2 million are staff costs.
Latam
Revenue for our Latam segment increased by $14.4 million, or 46.2%, to $45.6 million for the first quarter of 2023, compared to $31.2 million for the first quarter of 2022. Revenue increased organically by $5.7 million, or 18.4%, driven primarily by an increase in growth from fiber and escalations. Revenue for our Latam segment also grew inorganically in the period by $8.5 million, or 27.2%, due to the impact of the GTS SP5 Acquisition. Revenue also increased by $0.2 million, or 0.6%, due to the non-core impact of positive movements in foreign exchange rates. Year-on-year, within our Latam segment, Tenants increased by 815, including 240 from New Sites and 109 from Colocation.
Segment Adjusted EBITDA for our Latam segment was $31.2 million for the first quarter of 2023 compared to $22.1 million for the first quarter of 2022, an increase of $9.1 million, or 41.0%. The increase in Segment Adjusted EBITDA primarily reflects the increase in revenue discussed above, partially offset by an increase in administrative expenses of $5.7 million, of which $2.2 million is staff costs and $2.7 million is increase of allowance of bad debt provision.
MENA
Revenue for our MENA segment increased by $1.1 million, or 13.1%, to $9.7 million for the first quarter of 2023, compared to $8.6 million for the first quarter of 2022. Revenue increased organically by $1.0 million, or 11.2%, and grew inorganically in the period by $0.3 million, or 3.0%. Year-on-year, within our MENA segment, Tenants increased by 115, including 70 from New Sites, and 43 from the closings of the fifth stage of the Kuwait Acquisition.
Segment Adjusted EBITDA for our MENA segment was $3.7 million for the first quarter of 2023 compared to $3.6 million for the first quarter of 2022, an increase of $0.1 million, or 1.3%. The increase in Segment Adjusted EBITDA primarily reflects the increase in revenue discussed above, partially offset by an increase in cost of sales of $0.2 million and an increase in administrative expenses of $0.9 million, of which $0.6 million is due to loss in foreign exchange within Segment Adjusted EBITDA.
INVESTING ACTIVITIES
During the first quarter of 2023, capital expenditures (“Total Capex”) were $152.6 million compared to $117.0 million for the first quarter of 2022. The increase is primarily driven by increases in capital expenditures for our SSA, Latam and Nigeria segments of $16.1 million, $12.2 million and $8.2 million, respectively. The increase in SSA was primarily driven by an increase of $16.0 million from South Africa due to refurbishment capital expenditures associated with the MTN SA Acquisition and a $1.2 million increase in maintenance capital expenditures. The increase in Latam is primarily driven by increases of $6.3 million related to fiber capital expenditures and $3.5 million from corporate capital expenditures. The increase in Nigeria was primarily driven by increases of $28.7 million related to Project Green and $1.6 million from maintenance capital expenditures, partially offset by a decrease of $13.4 million in other capital expenditures and fiber capital expenditures of $9.1 million. Our spending for Project Green was $33.8 million during the first quarter of 2023 and total spend to March 31, 2023 was $137.4 million.
FINANCING ACTIVITIES AND LIQUIDITY
Below is a summary of facilities we have entered into, repaid or amended during the first quarter of 2023. Approximate U.S. dollar equivalent values for non-USD denominated facilities stated below are translated from the currency of the debt at the relevant exchange rates on March 31, 2023.
Nigeria (2023) Term Loan
IHS Netherlands Holdco B.V., IHS Nigeria, IHS Towers NG Limited, INT Towers and IHS Holding Limited entered into an up to NGN 165.0 billion (approximately $357.9 million) term loan agreement on January 3, 2023 (as amended and/or restated from time to time the “Nigeria 2023 Term Loan”), and between, amongst others, IHS Netherlands Holdco B.V. as holdco and guarantor; IHS Nigeria, IHS Towers NG Limited and INT Towers as borrowers and guarantors; each of IHS Holding Limited, IHS Netherlands NG1 B.V., IHS Nigeria, IHS Netherlands NG2 B.V., IHS Towers NG Limited, Nigeria Tower Interco B.V. and INT Towers as guarantors; Ecobank Nigeria Limited as agent and certain financial institutions listed therein as original lenders.
The interest rate per annum is equal to 20% in the first year moving to a floating rate for the remainder of the term. This floating rate is defined by the Nigerian MPR plus a margin of 2.5% and is subject to a cap of 24% and floor of 18%. IHS Netherlands Holdco B.V. also pays certain other fees and costs, including agent fees.
The Nigeria 2023 Term Loan was drawn down for an original principal amount of NGN 124.5 billion (approximately $270.1 million), and funds borrowed under the loan were applied towards, inter alia, refinancing certain indebtedness of INT Towers, IHS Nigeria, and general corporate and working capital purposes.
As of January 3, 2023, the total commitments available under the Nigeria 2023 Term Loan were NGN 124.5 billion (approximately $270.1 million), which were further increased on February 9, 2023, by NGN 29.0 billion (approximately $62.8 million) pursuant to the facility increase clause contained within the loan agreement.
As of March 31, 2023, NGN 138.5 billion (approximately $300.4 million) had been drawn down under this facility. The proceeds from the drawdown were applied towards, inter alia, refinancing certain indebtedness of INT Towers, IHS Nigeria, general corporate and working capital purposes.
The Nigeria 2023 Term Loan is denominated in Naira and is governed by English law.
Nigeria (2023) Revolving Credit Facility
IHS Netherlands Holdco B.V., IHS Nigeria, IHS Towers NG Limited, INT Towers and IHS Holding Limited entered into an up to NGN 55.0 billion (approximately $119.3 million) revolving credit facility agreement on January 3, 2023 (as amended and/or restated from time to time the “Nigeria 2023 RCF”), and between, amongst others, IHS Netherlands Holdco B.V. as holdco and guarantor; IHS Nigeria, IHS Towers NG Limited and INT Towers as borrowers and guarantors; each of IHS Holding Limited, IHS Netherlands NG1 B.V., IHS Nigeria, IHS Netherlands NG2 B.V., IHS Towers NG Limited, Nigeria Tower Interco B.V. and INT Towers as guarantors; Ecobank Nigeria Limited as agent and certain financial institutions listed therein as original lenders.
The interest rate per annum is equal to 20% in the first year moving to a floating rate for the remainder of the term. This floating rate is defined by the Nigerian MPR plus a margin of 2.5% and is subject to a cap of 24% and floor of 18%. IHS Netherlands Holdco B.V. also pays certain other fees and costs, including agent fees.
As of January 3, 2023, the total commitments available under the Nigeria 2023 RCF were NGN 44.0 billion (approximately $95.3 million), which were further increased on February 9, 2023, by NGN 11.0 billion (approximately $23.9 million) to NGN 55.0 billion (approximately $119.3 million), pursuant to the facility increase clause contained within the loan agreement.
As of March 31, 2023, there are no amounts drawn and outstanding under the Nigeria 2023 RCF.
The Nigeria 2023 RCF is denominated in Naira and is governed by English law.
Repayment of the Nigeria (2019) term loan
On January 11, 2023, the full remaining principal amount of the Naira tranche of the Nigeria 2019 Facility of NGN 88.3 billion (approximately $191.6 million) (plus accrued interest) was repaid.
IHS (Nigeria) Local Facilities
On January 11, 2023, the following IHS (Nigeria) Limited Facilities were fully repaid,
(i) IHSN NG1, for NGN 16.1 billion (approximately $34.9 million) entered into in March 2022
(ii) IHSN NG2, for NGN 10.0 billion (approximately $21.7 million) entered into in May 2022
I-Systems Facility drawdown
On February 3, 2023, I-Systems Soluções de Infraestrutura S.A. drew down a tranche of BRL 80.0 million (approximately $15.7 million) pursuant to the I-Systems Facility. The interest rate applicable on this tranche is CDI plus 2.45% (assuming a 252-day calculation basis).
On March 31, 2023, I-Systems Soluções de Infraestrutura S.A. drew down a tranche of BRL 120.0 million (approximately $23.6 million) pursuant to the I-Systems Facility. The interest rate applicable on this tranche is CDI plus 2.50% (assuming a 252-day calculation basis).
IHS Kuwait Facility drawdown
On February 22, 2023, IHS Kuwait Limited drew down a further KWD 0.3 million (approximately $1.0 million) under the facility.
FINANCING ACTIVITIES AND LIQUIDITY AFTER REPORTING PERIOD
Below is a summary of facilities we have entered into, repaid or amended after the first quarter of 2023.
Nigeria (2023) Term Loan
On April 4, 2023 an additional NGN 15.0 billion (approximately $33.0 million) was drawn down under the Nigeria 2023 Term Loan. The total commitments available under the Nigeria 2023 Term Loan were further increased on May 18, 2023, by NGN 11.5 billion (approximately $24.9 million) pursuant to the facility increase clause contained within the loan agreement.
As of May 22, 2023, NGN 153.5 billion (approximately $333.0 million) has been drawn down under this facility.
IHS South Africa Facility
On May 4, 2023 an additional ZAR 70.0 million (approximately $3.9 million) was drawn under the IHS SA Facility. As of May 22, 2023, ZAR 3,470.0 million (approximately $194.7 million) has been drawn down under this facility.
Full Year 2023 Outlook Guidance
The following full year 2023 guidance is based on a number of assumptions that management believes to be reasonable and reflect the Company’s expectations as of May 23, 2023. Actual results may differ materially from these estimates as a result of various factors, and the Company refers you to the cautionary language regarding “forward-looking” statements included in this press release when considering this information. The Company’s outlook includes 1) $48.1 million of non-recurring revenue as adjusted for withholding tax in 1Q23 from our smallest Key Customer in Nigeria for services previously provided but for which revenue had not been recognized, and 2) approximately $25.0 million of power pass through revenue versus $2.0 million in 2022 in South Africa. Guidance does not include revenue from the Egypt operations.
The Company’s outlook is based on the following assumptions:
- Organic revenue Y/Y growth of approximately 23% (approximately 21% excluding the $48.1 million non-recurring cash receipt)
- Average foreign currency exchange rates to 1.00 U.S. Dollar for January 1, 2023 through December 31, 2023 for key currencies: (a) 497.0 Nigerian Naira; (b) 5.27 Brazilian Real (c) 0.92 Euros (d) 17.56 South African Rand
- Project Green capex $90.0-100.0 million
- Build-to-suit of circa 1,200 sites of which ~150 sites in Nigeria and ~750 sites in Brazil (triple what we built in Brazil in 2022)
- Net leverage ratio target of 3.0x-4.0x
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| Metric |
| Current Range |
| Revenue |
| $2,190M – $2,220M |
| Adjusted EBITDA (1) |
| $1,200M – $1,220M |
| Recurring Levered Free Cash Flow (1) |
| $430M – $450M |
| Total Capex |
| $610M – $650M
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| (1) Adjusted EBITDA and RLFCF are non-IFRS financial measures. See “Use of Non-IFRS Financial Measures” for additional information and a reconciliation to the most comparable IFRS measures. We are unable to provide a reconciliation of Adjusted EBITDA and RLFCF to (loss)/profit and cash from operations, respectively, for the periods presented above without an unreasonable effort, due to the uncertainty regarding, and the potential variability, of these costs and expenses that may be incurred in the future, including, in the case of Adjusted EBITDA, share-based payment expense, finance costs, and insurance claims, and in the case of RLFCF net movement in working capital, other non-operating expenses, and impairment of inventory, each of which adjustments may have a significant impact on these non-IFRS measures. |
Conference Call
IHS Towers will host a conference call on May 23, 2023 at 8:30am ET to review its financial and operating results. Supplemental materials will be available on the Company’s website, www.ihstowers.com. The conference call can be accessed by calling +1 646 307 1963 (U.S./Canada) or +44 20 3481 4247 (UK/International). The call passcode is 8940410.
A simultaneous webcast and replay will be available in the Investor Relations section of the Company’s website, www.ihstowers.com, on the Earnings Materials page.
Upcoming Conferences and Events
IHS Towers management is expected to participate in the upcoming conferences outlined below:
- J.P. Morgan 51st Annual Global Technology, Media and Communications Conference (Boston) – May 24, 2023
- Cowen 51st Annual TMT Conference (New York) – May 31, 2023
- GS Digital Infrastructure Conference (London) – June 1, 2023
- 6th Avior Corporate Summit 2023 (Johannesburg) – June 14, 2023
- Barclays Emerging Markets ESG Corporate Days (Virtual) – June 21, 2023
About IHS Towers
IHS Towers is one of the largest independent owners, operators and developers of shared communications infrastructure in the world by tower count and is one of the largest independent multinational towerco solely focused on emerging markets. The Company has nearly 40,000 towers across its 11 markets, including Brazil, Cameroon, Colombia, Côte d’Ivoire, Egypt, Kuwait, Nigeria, Peru, Rwanda, South Africa and Zambia. For more information, please email: [email protected] or visit: www.ihstowers.com
Cautionary statement regarding forward-looking Information
This press release contains forward-looking statements. We intend such forward-looking statements to be covered by relevant safe harbor provisions for forward-looking statements (or their equivalent) of any applicable jurisdiction, including those contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Contacts
Media:
Giles Bethule/ Akash Lodh
FGS Global
[email protected] / [email protected]
+44 207 251 38 01
