Q4 2021 IHS Holding Ltd Earnings Call
[music].
Good day and welcome to the IHS holding Ltd results called for the three months period and full year ended December 31 2021.
Please note that today's conference is being webcast and recorded.
If you'd like to ask a question. Please press star and then one on your telephone keypad at any time.
At this time I'd like to turn the conference over to Koby sign. So please go ahead Sir.
Thank you operator, thanks also to everyone for joining the call today I'm Colby scientists all the new assay if communication you're at IHS with me today are Sam Darwish, the Jeremy you're right just hours, Adam Walker CFO , Steve Deputy.
CFO . This morning, we published our financial statements for the three months period and fiscal year ended December 31st 2021, and the Investor Relations section of our website and issued the related earnings release and presentation.
These are the consolidated results of I, just holding limited which is listed on the New York stock exchange under the ticker symbol IHS, which comprises the entirety of the group's operation.
While we discuss the results I would like to draw your attention to the disclaimer that out at the beginning of the presentation document can bite you.
Which should be read in full along with the cautionary statement regarding forward looking statements set out in our earnings release annual report on form 20-F.
In particular, the information to be discussed may contain forward looking statements, which by nature involve known and unknown risks uncertainties and other important factors some of which are beyond our control and are difficult to predict and other factors may cause actual results performance or achievements or industry results could be materially different from any.
Results future results performance or achievements or industry results expressed or implied by such forward looking statements, including those discussed in the risk factors section. Our 20-F filed with the Securities and Exchange Commission today, and our other filings with the SEC.
Well also refer to non <unk> measures that we view as important in assessing the performance of our business reconciliations of non Ifr S metrics. The nearest RF metric can be found in our earnings presentation, which is available on the Investor Relations section of our website with that I'd like to turn the call over to Sam Darwish, Chairman and CEO .
Thanks, Colby welcome everyone. Thanks for joining our Q4 and financial year 2021 earnings results for the second such call. Following our listing on the New York Something's changed off October welcome also to all of you who just joined US at the start of March today, I'm going to run through our 2021 highlight.
An amazing year for IHS and also touch on how we are building a global company.
Company that we believe will deliver long term growth and value creation for our shareholders. I will also discuss how our focus on sustainability as both of our business model our focus it hasn't been at the heart of just since I founded the company. In 2001, then I will turn things over to Adam and she used to take you through the results in greater.
After which we will open the line for Q&A.
Slide four of the presentation highlights just accomplishments in 2021.
All of which occurred during the fourth quarter, a very exciting time for us.
As the leading independent multinational company focused only on emerging market I was just.
In the 2021 was over 31000 towers spanning nine countries on three continents.
We continue to focus intently on executing our organic and inorganic growth strategy, including our objective, but further diversifying our asset base and lowered our cost of capital and we are pleased with the multiple steps we have taken recently in support of this strategy.
With our current and near term growth driven largely by the implementation of <unk> in our main markets, Nigeria in Brazil, we are very happy to see that's five G is not on the horizon.
Our recent acquisitions are all designed to position just the benefits from the coming technological transition.
In addition to our October IPO on the New York Stock exchange that brought new equity capital in public shareholders until the company <unk>.
Just executed a successful $1 billion bond offering and refinancing in November , which lowered our cost of debt and Buffalo purposes and.
In terms of entering new geographies by check.
Also undertook several important steps in Q4.
Do you find attractive market in a disciplined fashion.
Over to Egypt toy license partnership and we are in discussions with the carriers that regarding commercial opportunities.
More significantly in November we announced an agreement to acquire approximately 5000 700000 in South Africa from MTN, which would make our just the leading independent powerful in Africa's most advanced economy.
Gather Egypt, South Africa of over 160 million in total population.
The transaction or the transactions or the cement are just stature as the leading power company on the African continent, as we will now be serving the three largest economy unimportant.
He is talking to become a reality in our market now as you would have just recently started issuing spectrum and South Africa is expected to do about shortly.
Brazil, where five G supposed to them has also just been auction we closed the tin fiber transactions early in November to see it I system, a leading fiber company in Brazil. The transaction further builds upon our entry into Latam, which included the acquisitions of Sky thoughts, Daniel Brazil, and Colombia.
In 2021.
Moreover, we have continued our Brazilian growth in 2020 two.
And agreement in January to acquire the G. T. A C five portfolio of more than 2000 towers that complements our existing tower portfolio when GTS clauses imminently.
We have over 7000 towers and fiber networks in Latam and just over 20 years following our strategic entity that.
I'm also delighted with the financial performance of the group in 2020 , one in financial year 'twenty. One we delivered one 6% reported growth and 16, 1% on an organic basis versus a financial year 'twenty demand for communications continues to grow globally.
Our two principal customers in Nigeria, again announced strong results this past quarter, driven particularly by data update in 'twenty 'twenty. One I have just added 3236 net towers, including 1348, we constructed our status as one of 3550.
And 9141, new lease amendment.
Moreover, we funded our EBIDTA margin in 2021 versus 'twenty, even in the face of rising rising energy prices versus the lows of 2020.
Overall, we remain pleased regarding our financial position and the significant opportunities ahead of us.
Although as you will hear from Adam and Eve.
Focus on mitigating the impact of the increased market volatility we are seeing in our markets in the form of energy.
The upward.
Inflationary pressures rising interest rates and a supply chain disruption not to mention bank. These global political uncertainty from Russia invasion of trained before I spoke COVID-19 , while we have experienced no material financial impacts from it we remain vigilant regarding its potential impact.
On this front and beyond we continue to broaden and deepen our commitment to sustainability.
This initiative, but that was of course the.
In greater detail.
I mentioned earlier that I would discuss some of the steps you are taking to build a world class Global company in the sector.
I wanted to highlight some of the senior members of the IHS team, who have joined US recently as we work to take our company to the next level.
As you heard Colby Coenocyte joined US two weeks ago from Cowen our senior Vice President of communication.
Our Investor Relations and communications program instead of on the Executive Committee called Me was most recently the number two ranked research analysts in the communication infrastructure sector in the U S where he covered American tower C E Tron faster among other top company, we anticipate participating in more investor events.
And they've been investors to become familiar with the team our company and our strategy and we look forward to continuing to engage with investors.
Furthermore, we'll be joined just at the start of 2022, our senior Vice President and Chief strategy Officer, and a member of the Executive Committee.
It will be responsible for the group's organic and inorganic strategy, putting the M&A and commercial functions, while complementing the announced transition to CFO starting April 1st up on Adam's The department.
Bill brings over 20 years.
In the telecommunications sector and was instrumental in driving international growth throughout the emerging markets, what SBA communications during his 15 years of that.
Finally, I'd be remiss, if I didn't specifically, thank Adam Walker our CFO .
This is last earnings call before his retirement on March 31st.
And executive carrier during which he has served as group CFO for 20 years consecutively, culminating in its contribution to order just during the last five years without Adam was instrumental in building out the public company level corporate reporting and finance function on a global scale and guiding IHS.
Multiple bond issuances and the recent IPO as well as sort of being on the Executive Committee I congratulate I don't Wanna retirement of course, and welcome Steve to that all of the CFO .
Turning to slide five.
And so it's one of your first year of operations in a strong position and firmly focused on executing our strategy of becoming the worlds, leading digital infrastructure company targeting emerging market.
I mentioned, the South African and GTS acquisitions last slide.
The punch line for here I.
I am proud to say that pro forma for the anticipated closure of this transaction.
This will become the third largest independent multinational public company globally by power town based on the current market with nearly 39000 towers across 11 countries in Africa, Latam and the middle East that collectively serve over 760 million people.
Not only we are the largest multinational powerful with us all the targets emerging markets on a global level.
It will be pro forma the market, leading independent powerful in eight out of our 11 countries and then the third largest in Brazil, our commitment to Africa is as strong as ever as you can see from the South African deal, but we are also excited to be further building up on our successful 2022 and 22.
And three into Latam and Mena as demand.
Created by the Si side, Danielle I system, and GTS transactions in Latam and our entry into Egypt.
The markets in which we operate have affected population growth and rely on wireless connectivity, but at a behind the developed world in terms of wireless technology. The majority of our markets are still rolling out for G. Although five he is now out there on the horizon in several key markets for US, which is exciting news for us in terms of.
Future organic growth opportunities.
Today for example is only 41% D. G <unk> penetrated although in December the country conducted its first option of five new spectrum to enable the winning carriers to begin to develop the technology looking.
We expect to see proof of concept type rollout in 2022, which we already have orders.
With commercial rollout beginning in 2023 and onwards.
In Brazil. We also saw 50 spectrum allocation takes place in November where does the three key carrier and vivo and plateau each secured five D system.
We would have seen more recently the automobile breakup has now received regulatory and competition approval and half, hence the way or the three carriers to integrate that study of the consolidation.
We believe this will provide further momentum in the communications infrastructure landscape and visit and while we have de Minimis.
Mobile exposure, we believe the only mobile breakup will pave the way for the remaining 30 of Saudi invigorate the rollout.
Now that they know the shape of the respective networks.
These wireless technology trends drive our organic growth prospects as we provide colocation lease amendments and new sites.
Got it.
On slide six I wanted to highlight our historical growth and summarize our study.
As you can see our long term revenue targets through 2020 . One is nearly 12% in dollar terms and our EBITDA target is over 19%.
Collecting the attractive growth drivers in our markets I mentioned earlier as well as our diversification program starting in 2020.
As I have noted before our business model is very similar to the U S. Our commodity what our emerging markets footprint provides us access to attractive secular growth going forward. There are two critical elements of our strategy.
First we will continue to grow organic focusing on leasing up our existing towers through colocation and improving margins through lease amendment.
Our customers are new technologies afford their offering.
We are fundamentally as towers business, but we plan to continue to enhance our revenue from other services such as fiber data centers more says Ah lunar in other word ancillary telecom infrastructure that fits our business model and our return expectations and helps us further embedded with our customers.
Providing solution they need.
Second we continue to look to diversify our asset base, we're adding a new portfolio of ours as our diversification strategy is aimed at growth, but also lowering our group cost of capital.
We understand that investors would prefer to see Nigeria is a smaller portion of our overall business, but this won't happen overnight as Nigeria has its own very strong growth characteristics, which we love and we are and will be disciplined in executing and executing our inorganic growth strategy.
Broadly, we look to acquire towers from the carriers as they have done.
Especially in the auto.
Or to buy existing powerful as we have also done several times.
New markets by focusing on VTS for 30 years.
As we are doing in Britain and in Egypt at the moment.
Communications infrastructure is a huge landscape of opportunity and we believe that there are very very few other companies that are focusing on emerging market globally.
We are.
Finally for me on slide seven.
Mentioned that our focus is not just on financial performance, but also on sustainability, which is at the core of our business.
First and foremost we believe that our business model is inherently sustainable and that we deliver shared infrastructure solutions that promote digital connectivity and inclusion and improve the lives of the communities. We serve this encourages greater access to education, healthcare and finance and government services, while the infrastructure sharing.
<unk> reduces the environmental footprint of the <unk>.
Telecom landscape in our geography.
Imagine the potential differences in the lives of the inhabitants of a small village in Nigeria after gaining access to the internet.
That could mean for improving their wellbeing is the access code such services not to me.
Mentioned, the potential positive environmental impact from increased telecommunications.
Driving it can feel that sometimes the S. Yes, she doesn't receive as much attention from others compared to the East for example, but it is a crucial focus of ours and it benefits delivered by our business model.
In 2021 in Q4, we continued to advance our ESG efforts on multiple fronts across our markets delivering numerous initiatives devoted to education healthcare infrastructure and combating COVID-19.
<unk> been doing for many years.
We are also gratified to have been recognized on multiple occasions, where this work in our communities.
Importantly in September we launched the frontline workers initiatives the program through which we will pay for the entirety of a college education at the top school or the qualifying children of both of our employees who have worked so hard during the pandemic to maintain the towers and network performance in such a difficult period, we look at.
That effort, we already have students enrolled in the program across seven new universities at the moment and I believe that the indication is empowering and life changing and through this initiative, we are creating opportunities that simply do not exist for many children in our markets I'm very very proud about this project in particular.
The more I am pleased to highlight that in January 2022, we expanded our partnership with UNICEF The group level announcing a three year international partnership to support that Shiga.
Initiative objective to map the internet connectivity of all schools worldwide.
This three year partnership with UNICEF, which also includes a contribution of $4 $4 $5 million.
<unk> worked closely with <unk> to help them work mapping schools and their connectivity levers on an open source model using machine learning and satellite imagery.
Importantly on the environmental front, we have continued evolving the analysis of our scope, one and scope two greenhouse gas emissions.
Connection with developing a carbon emissions reduction strategies as we anticipate another thing in 2022 investing further to replace user generation, where we can with the latest renewable technologies not only makes environment. This has reduced emissions.
Emissions, but it also makes smart business sense in terms of our desire to drive Opex and Capex out of the business. We look forward to sharing our progress on this topic with you later this year.
And I believe strongly and I have said repeatedly in the emerging markets. There's no way you can become a scale unless you operate as a long term sustainable business you need to be accretive to your environment as the resources around our limited. This is another tick the box exercise for us and it's but it's something that I'm very passionate about.
I look forward to sharing our fourth annual sustainability report with you in Q2 and to future announcements in this area.
With that I will turn the presentation over to Adam and Steve will walk you through the results.
Thanks, Tom and Hello, everyone today I'll cover our key tower tenant lease Amendment kpis.
Because of our revenue EBITDA and all of that staff results for the year just ended.
Turning to slide eight as mentioned the business performed really well in 2021, and you can say all towers tenants and lease amendments have all increased versus the prior year.
Moreover, my chest delivered double digit growth in both consolidated revenue and adjusted EBITDA in 2021 versus 2020, while expanding our EBITDA margins and our recurring Levered free cash flow grew by 8% versus the prior year.
While our level of investments in Capex to grow the business organically increased by over 75% and given our high levels of trust generation. Our consolidated net leverage ratio has decreased versus the prior year. Despite the inorganic activity.
Turning to slide nine our tower count is now over 31000 up by over 3000. This was driven largely by our acquisitions in last time on the ongoing new signed programs there as well as the new songs activity in Nigeria with both Newbuild programs accounting for most of more than 1300 towers that we built during the.
At year, 597 of which in Nigeria, and 600 and lots of them.
Please note that unlike the U S markets have characteristically de minimus Chad.
Total attendance grew eight 3% year on year to 46440 with the co location rates hold one five.
Two things to remember in relation to the kind of location rate, which we define as total number of tenants divided by the total number of towers.
First lease amendments, which are a significant factor in the growth in auto insurance segment are not included.
Second when you are a significant acquirer and buildup of towers as well then you are typically adding to the denominator period on period, even as we continue to lease up the more mature part of Austin.
Portfolio.
We see no reason why we can't get to two times book rate. So on our overall portfolio over the long term as well.
Our more mature portfolios of towers currently Oh.
Lease amendments increased by over 50% year on year as our COO.
Customers added equipment to that side, particularly <unk> and <unk> right in Nigeria.
On Slide 10, you can see our consolidated revenue for both Q4 full year 2000 <unk>.
In the full year and in Q4, I just delivered both double digit reported and organic revenue growth.
Yeah, 21 reported revenue of almost $1 6 billion grew by 12, 6% and full year organic revenue growth was 16, 1%.
It has been another strong year for top line growth led by Nigeria and lifestyle.
Reminder, in the chart, we've called out with $24 million of revenue recognized in Q2, 'twenty, one, which although normal course of business as previously discussed Nevertheless, inflated the usual quarterly run rate.
Overall, we continue to grow well in line with our stated objective of seeking double digit revenue growth.
Annual basis in dollar terms.
Steve will shortly discuss our guidance on this metric and others for 2022.
Slide 11 shows the components of our revenue growth.
Organic revenue growth was driven primarily by lease amendments escalators and FX reset as well as new car locations in new sites with the escalators and FX reset together more than offsetting the negative FX impact of 6%.
Organic growth was three 4% and included the Sky Science Centennial in Tim fiber acquisitions and lots of them.
The acquisition of an additional 162 sites in Rwanda.
<unk> 93 in Kuwait pursuant to our 2020 purchased from Zain all of which we previously discussed.
The Q4 comparison would you shared in your appendix shows our organic revenue growth of 14, 5%.
Organic growth of three 2% and a negative five 6% impact from FX.
Slide 12 covers adjusted EBITDA and adjusted EBITDA margin in.
In the full year, we generated strong consolidated adjusted EBITDAR margins. Although these results were impacted by a higher power generation costs as we anticipated and have discussed previously.
Well as incremental costs associated with our transition to a public company life.
Adjusted EBITDA in the full year was 926 million a 13, 1% increase from 2020.
And adjusted EBITDA margin was 58, 6% up from 58, 4% last year.
Again, we points out but this year includes a $61 million impact in Q2 relating to the $24 million revenue I just mentioned.
$37 million bad debt reserve release, but again, we've previously disclosed.
The increase in adjusted EBITDA, primarily reflects the increase in revenue, partially offset with year on year increases in cost of sales, mainly due to higher power generation costs and increased staff costs and professional fees.
Our generation cost of sales increased by $51 million, primarily in Nigeria segment due to a 32% higher U S. Dollar denominated cost of diesel as well as a 14% year on year increase in overall consumption, resulting from increased tenants and lease amendment activity.
We continue to mitigate the pressure of the increase in oil prices.
The forward buying where possible looking at both international and local suppliers as well as prioritizing alternative sources of power solutions to reduce our overall dependency on diesel.
More to come from Steve shortly on powerful thoughts for 2022, given the recent increase in crude prices.
In terms of Q4, we generated adjusted EBITDA of $217 million, a 9% increase adjusted EBITDA margin decreased to 52, 1% from 57 nine due to the concentration in the quarter of the increased public company costs and also higher power generation.
Costs.
And on Slide 13, we review our recurring Levered free cash flow, which we report in a manner consistent with our U S peers.
We generated <unk> of $406 million in full year 2012, an increase of $31 million or eight 4%, but this does include the $61 million positive impact, but I've just called out.
While adjusted EBITDA was funded for the year as discussed this growth was partially offset by a $19 million increase in revenue with holding tax due to higher revenue growth in Nigeria.
While these payments to support growth and higher taxes due to expiring tax credits.
It also includes higher interest cost from the new bonds, we issued in Q4, and then increase in the Nigerian education tax rate.
Oh Mcf cash conversion was 43 point Jason.
In terms of Q4, our left EPS was $88 million a decrease from the prior period driven largely by the timing of maintenance Capex incurred in Q4 'twenty as.
As well as higher lease payments in the current period, resulting from the assets acquired during 2021.
Additionally, interest was impacted negatively by $10 million from our bond transaction in Q4 from early settlement of accrued interest on the prior boom on the increased interest quantum on the new bonds.
On the left you have just conversion rate decrease to 44% as a result.
And with that just as I should be relinquishing all months is definitely was formed in two weeks time, let me pass the Buffalo, Steve to take you through the rest of the presentation.
Thanks, Adam.
Slide 14, you see that Capex was 402 million in FY 'twenty, 176% increase versus last year, primarily due to us investing in the business for growth.
Driving the increase was increased augmentation and new site Capex in Nigeria in connection with lease Amendment has delivered for our customers and throw a rural solution.
Well as the increased new site Capex in Latam.
Capex was $151 million in Q4, our study 131% increase versus last year's period in light of the same drivers just mentioned.
However, as we discussed in our Q3 call we did under spend in terms of Capex during the year as a result of the global supply chain issues rippling across our market.
Similar to companies around the world, we are seeing a slowdown in the supply chain continue into 2022, which we are trying to mitigate by ordering equipment earlier in some cases, one to three months earlier.
Financially speaking this impact is small and has been factored into our guidance for FY 'twenty two.
But noting the continued uncertain macroeconomic world in which we live at the moment.
Slide 15 looks at our returns and capital allocation in FY 'twenty. One we continue to focus on driving high returns and delivered a return on invested capital of 11, 2%.
We invested significantly in both organic and inorganic growth opportunities during the year, including new site build investment in Nigeria, and let them closing and integrating the acquisitions and Latam, albeit with only partial contributions in the year from some of those acquisitions.
In terms of capital allocation you can see on the right is a significant portion of our FY 'twenty one spend of.
$401 million related to acquisition investment and this was deployed to build upon our 2020 and until that time.
As I mentioned earlier, we believe the Brazilian business, we have built through these acquisitions and the forthcoming GTS transaction is very well positioned for the upcoming rollout of five G which commenced recently.
Moreover, IHS continues to be a leading builder of new sites in the country 600 sites during the course of last year.
Our investment in Nigeria, which they constituted much of the new site in discretionary Capex last year, given our large footprint in the country and the underlying growth opportunities in the market.
Turning to the segmental review on Slide 16, we look at our Nigerian business.
In Nigeria, and macroeconomic environment in Q4 continued slight improvement with GDP growth coming in at about three 4% 2021.
Whenever inflation increased 17% for the year, the 13, 3% for 2020.
And FX currency rate ended Q4 at 475 to the dollar although it didnt normalize back to 415.
Whilst FX reserves have increased to $40 billion at the end of the year from 36, and a half billion dollars at the end of Q3 as.
As we know Brent crude oil price has been moving significantly in that stood at $77 per barrel at the end of 2021 up nearly 50% from the end of 2020, which should ultimately have a beneficial impact of the Nigerian economy.
Telecommunications remains an important part of the Nigerian economy accounting for around 11, 9% of GDP in Q3 last year.
Against this backdrop our business once again delivered strong result, trucking well on our key metrics topline growth continues to be driven by new site by Escalations by Colocation and by New lease Amendment.
A tower count at the end of FY 'twenty, one grew by 317.
Verses FY 'twenty driven in part by the delivery of our new rural solution for a major customer, although partly offset by planned decommissioning as well as de Minimis churn.
I titled tenant Count increased by three 2% for the year that Colocation rate was up 152 times.
These amendments continue to be a strong driver of growth with these increasing by 52% year on year as our customers added additional equipment to our sites, particularly three and for the upgrades.
Our improved operational performance as reflected in our Nigerian financial results FY 'twenty. One revenue of 1.15 billion increased 10, 5% year on year on a reported basis and almost 19% on an organic basis.
For 'twenty, one adjusted EBITDA was $794 million and almost 12% increase from the prior year period, and adjusted EBITDA margin was 68, 3%.
Year on year increase is primarily due to the revenue growth, including the nonrecurring items, just described before but partially offset by an increase in power generation cost of $51 million and an increase in regulatory patent cost and security services of $13 8 million, a $3 4 million respectively.
Slide 17 presents the result.
Our other segment.
In sub Saharan Africa housing tenants was 7970 813416 at the yearend.
Revenue and adjusted EBITDA was $344 million and $191 million, respectively, with an adjusted EBITDA margin of 55, 4%.
As we have mentioned that last time and Mena segments on new as of February 2020.
We completed three additional acquisitions in Latam during the course of last year.
The year on year comparison reflects meaningful inorganic growth, which we expect to continue in 2022 with the GTS acquisition.
In Brazil, our second largest market with 4630 towers macro conditions with somewhat neutral as FX rates and inflation stabilized, but we have seen interest rates rising materially in Brazil.
In our Latam segment overall housing tenants with 4909 and 5961 at year end.
And revenue and adjusted EBITDA was $6 million and $43 million, respectively, with adjusted EBITDA margin of 71, 5%.
In Minas housing tenants for 1400 to 1416.
And 2021 revenue and adjusted EBITDA was $29 million and $13 million, respectively, with an adjusted EBITDA margin of 44, 6%.
On slide 18, we look at our capital structure.
At 31 December we had approximately $3 billion of accidental death, and all that <unk> 16 liabilities up from year end 2020, following a billion dollars bond offering in November .
IHS issued $500 million of 565% senior notes due 2026, and another $500 million of 625% senior notes due 2028, and we used a portion of the proceeds to refinance our 510 million outstanding 712, 5% senior notes.
Consequently at the $3 billion of debt $194 billion of our bonds and approximately $391 million senior credit facilities at our Nigeria segments.
We increased our revolving credit facility to 278 million upon consummation of our IPO. This past October .
Cash and cash equivalents increased to $916 million at year end following the October IPO and the November bond transaction in.
In terms of where that cash is held approximately $645 million was held in dollars almost entirely at the group level.
Next up $81 million.
Dollars equivalent was held in naira outside of Nigeria business and the remaining cash was held in local currency across our other markets, primarily Cameroon in Brazil.
In terms of upstream in cash during the year, we upstream the $171 million of cash from Nigeria to group, including $121 million bond coupon payment with the total source at a weighted average rate of 479 naira to the dollar.
H two sourcing accounted for $100 million of this.
And we have seen in U S dollar availability in Nigeria tightened somewhat during the second half of the year and that's continued into 2022, although we are closely monitoring the situation and believe that the continued high oil prices together with the $4 billion in Nigeria and sovereign issue in September last year should lead to improved U S. Dollar availability later in 2022.
As U S dollar supplies reduced in recent months, we've started to look at sourcing larger amounts directly from a local bank excusing funded forwards.
We also continue to use non deliverable forwards around the bond coupon payments to hedge against naira devaluation in the interim.
Outside of Nigeria, we up streamed $45 million of Pashmina FSA segment during the year.
Our consolidated net leverage was approximately $2 1 billion with a consolidated net leverage ratio of two two times.
This is below our net leverage target range of three to four times again, indicating the strength of our balance sheet. This ratio would increase to approximately three times at the year end pro forma for the payment of site startup and GTS acquisition and the related financing we expect to utilize.
Slide 19 details the key strategic growth initiatives that we've recently announced or closed which Thomas previously highlighted so I'll just add a couple of points regarding.
Regarding the GTS deal, we expect that to close imminently.
And in terms of South Africa, we expect the closing to be Q1, or possibly Q2 pending ongoing discussions with the competition Commission.
Regarding Egypt, our integration and commercial teams are already on the ground and we have commenced discussions with the carriers and no further significant news to report at this point, but we will keep everyone updated as we progress.
On to slide 20, we introduce our guidance for FY 'twenty two.
Before discussing the specific metrics and targets I'll walk you through some of the key assumptions behind our guidance.
First off for 2020 to tell you. This includes contribution from the GTS acquisition, starting in Q2, this year, including approximately 100 million of local debt on the business.
As we previously disclosed we guided that the GTS assets should generate revenue and EBITDAR of approximately $38 million and $36 million in the first full year of operation post closing.
Guidance. However, does not include the impact of the South African transaction or expectations regarding the commercial rollout in Egypt.
Regarding South Africa. We've previously indicated we expect the asset generate revenue and EBIT dollar of approximately $220 million and $80 million again in its first full year of operation post closing however, given the precise timing of the close them. Then we will update our guidance to include these on a future earnings call.
As for Egypt, as I said the carriers are the discussions with the carriers are ongoing and we will update you as we make progress.
Other key things to highlight the incremental net $23 million of interest costs. Following the recent bond transaction as well as nonrecurring items in FY 2021 mentioned previously as you think about the comparisons this past year.
Our oil and FX will come to in a in a short moment.
Taking all of this into account, we believe that revenue for FY 'twenty to range between $1 795 billion and $1 $815 billion on a reported basis, which represents a 14% increase at the midpoint of the range from a FY 'twenty one revenue of $1 five $8 billion.
Drivers of this growth include our organic growth programs in all of our markets and particularly our projections for new site growth in Nigeria in Brazil, as you see outlined on the page as well as the full year contributions from <unk> systems, and then the GTS asset in Brazil.
In terms of adjusted EBITDA, we are projecting it range between $960 million and $980 million.
Key drivers of the EBITDA forecast, obviously, the revenue growth aspects, just mentioned as well as the negative impact of oil price at $120 per barrel for Q2 to Q4, which is our assumption.
With respect to recurring Levered free cash flow, we are projecting it to range between 310 $330 million here. The key point is that we are carrying the $23 million increased interest cost from the recent bond.
For the whole year of 2022 at the GTS only kicking in in Q2 and the guidance as we said reflects no assumptions, yet regarding South Africa, and Egypt contribution.
Clearly the oil price impacts when I have diesel spend dropped straight down into our left do you have to see.
One other thing to keep in mind about our left that metric.
From a comparability perspective, the Nigerian withholding tax comes off revenue as opposed to operating profit, which means there is an outsized impacts as we grow the top line in our largest market.
In terms of Capex, we are anticipating spending 500 $540 million of Capex in 2022, which includes new site Capex in connection with the build programs as well as discretionary and non discretionary capex.
Monitoring the ongoing supply chain precious place, which could impact this projected capex.
We will keep you updated on the subject through the course of the year.
On slide 21, we discussed the key energy costs and FX sensitivities regarding our guidance with respect to the oil price our guidance assumes an oil price of $99.
A barrel for Q1 of this year at $120 a barrel for Q2 to Q4.
The Russian invasion of Ukraine has introduced tremendous uncertainty into oil price forecasting and the spot price has been as high as 135 recently.
Consequently, we thought it prudent to employ 120 dollar assumption for the remainder of the year that things will evolve and we will update you quarterly on this metric.
From a sensitivity perspective, we believe that a $5 move in the price of crude would have a $7 million impact on EBITDA. Although as previously mentioned, we take various steps to try and mitigate this impact.
That was a FX sensitivity of 5% devaluation in the naira from a starting assumption of an average of 439 to the dollar would have about a negative $30 million impact on revenue and a negative $19 million impact on EBITDA.
On slide 22, just a bit more detail on how energy cost impact that business. As you know we provide power management services that customers principally in Africa, Nigeria. The grid has historically been nonexistent or unreliable. Therefore, the cost of fuel can cut both ways in terms of albertsons.
In a positive fashion either in a falling price environment as we saw during much of 2020 or as we implement renewable power solutions to increase efficiency and bring down the capex cost associated with power generation, whilst charging a fixed useful to our customers.
Or Conversely in a rising price environment like we are seeing David Beasley input costs can be a headwind.
One that we work to manage through smart sourcing and inventory management.
As you see on the slide the cost of diesel is reflected in our cost of goods sold and equated to 14% of revenue last year with a 5% of revenue was also linked to diesel Repower indexation clauses and hence pass through to customers as we look at our forecast our average oil input cost for Q1 is $99 in our guidance as discussed on the prior page.
The average cost reflects this $99 for Q1 at $120 per barrel for each of Q2 to Q4.
Price per barrel was around $115. This last Friday, it's come down in the last day or two and it's been moving around significantly in recent weeks.
Situation in Ukraine will continue to impact this dynamic and we will keep you updated as events impact our result and thinking.
Importantly, long term, we believe we have the opportunity to further reduce our reliance on diesel and take capex costs out by adding more renewable solutions and improving margins.
Currently examining these possibilities as part of our development to the carbon reduction plan I look forward to updating on this later this year.
This now brings us to the end of our full presentation. We thank you for your time today as well as your continued support for the business.
Please now open the line for questions.
Thank you we will now pause briefly while we register your questions in the queue a roster.
Our first question is from Jonathan Atkin of RBC capital markets.
Jonathan go ahead.
Hi, This is Lauren Lee on for John Thank you for taking the questions now on slide 22 that other key components of Skus on your cost structure include percentage mix of imports versus historically source diesel.
We buy it in the spot market or futures still a bit of a deeper dive into what that sourcing. That's currently and what are the factors that would impact the Mexican imports versus local and spot versus futures purchases.
Hey, Barbara Steve here.
A variety of different items go into that into that sourcing strategy.
Sort of disclosed minutiae detail around that but we look at what is the price at the local market. What is the price of the import market. What is your availability at the right times.
In terms of delivery for what we need.
How much of that availability can we forward purchase and all of that sort of supply together with pricing combines to give us a constantly moving.
Mix between whether we're sourcing likely or importing site, it's a complete balanced and it's dynamic it keeps moving.
That's sort of a key way, we cannot we can control supply and price.
Thanks, and can you provide some color around what you're seeing and placing of roofing activity in Nigeria and touch on deployment of spectrum following the auction.
Yeah, I mean, we've had another very significant yeah, and suddenly H two of last year 2021.
Coming from leasing activity in Nigeria, a lot of it coming through and lease amendments as you've seen through Q3 and Q4 results.
<unk>.
The revenue guide we've given you is another 14% headline growth.
Significant amount of that is organic activity being driven out of Nigeria as well as we expect to see a color.
Colocation, some new site builds as well, but also lease amendment activity continue.
Most of that lease amendment activity is still driving a four G.
We as we said we have now seen five G spectrum allocated and we have some what I would call de Minimis orders for FY 'twenty two on five G rollouts.
Great news for the industry. The carriers are just starting to think about how best to deploy that network.
I think we're going to see a huge impact of it in 2022.
But certainly we have some initial orders and it'll be a 2023 onwards item and all.
Yes.
Thanks, and if I could just squeeze one last one in.
Industry has seen Carol comes through sales of minority interest to financial sponsors and formation of Jbs S. Alternative sources of funding grants just curious what your views are on these types of funding vehicles. Thank you.
No I think I think as a business. We're always looking at the optimal way to finance ourselves I noticed that create shareholder value that we've utilized minority stakes in joint venture partnerships within certain off case around the group and we have one of those in Latam right now I would say I mean, the five business that we started.
Zane a very small element in Kuwait.
South Africa are we getting to a minority partners in that particular acquisition when it closes as well so we've looked at it.
From a broader scale.
I think that just depends on the value proposition I think we like.
Where the business is positioned.
And we feel it's a it's an incredibly well placed business site, if something like that were to come along we would consider it.
Thank you.
Our next question is from Phil Cusick of J P. Morgan.
Phil go ahead.
Okay.
Hi, Thank you.
Thanks for the detail on the oil impact margins in 'twenty, two or much better than we would've thought given that which is great to see so that's 7 million adjusted EBITDA impact for a five dollar increase in oil prices, how is that split between Nigeria and in the rest of the business.
Nearly all of it is Nigeria.
I'm sorry in terms of how people think about the oil environment around the IHS stock.
It is it is.
Almost entirely not tightly but almost entirely a nigeria facet and if people remember that I mean, a segment in our Latam segment is effectively clear of of energy, but given the power pass through mechanisms that we have in place in those particular segments.
And then as sub Saharan African business, there is some diesel and nice and that in that particular segment, but there was also a significant grid connectivity.
So really we're talking about at Nigeria, when we're talking about oil so that about $7 million.
It's almost all in Nigeria.
Thank you and then let's dig more into the repatriating cash from Nigeria, Steve I think you gave a number for <unk> portion of your cash balance what was that a quarter ago and can you dig more into sourcing dollars from banks and you talked about hedging as well. Thanks.
Yes, I, obviously at the quarter on quarter cash balance in Nigeria is dependent on where we are in the collection cycle say Q3 was a significantly higher balances more like $200 million I can get the exact number for you.
But that was because of when we had collected from our customers.
As we went through the course of Q4, we then obviously deploy capital into the business in upstream some as well.
And hence the <unk> <unk>.
$1 million cash equivalent balance in in Nigeria at the end of the year.
That's something that we've spoken about before that we continue to look to do as we collect from customers. We will ultimately look to service the needs of the business and then with excess cash flow to upstream that and get it offshore.
In terms of what we're doing and I don't think this strategy has particularly changed through the last three months.
What I would say is we are continuing to push our banking relationships and our access to banks within Nigeria.
See what different products, we can access.
And that is with the aim of trying to target larger amounts rather than smaller.
Slow and steady as sourcing site.
It's it's it's not an easy market, but there is a there is silver availability and we're working hard to continue sourcing what we want for the year of 2022.
Sorry did I get all of your points just from that and then what percent.
Yes that was good and then one for Sam if I can.
So what does the acquisition pipeline look like and can you talk to us about you've talked about Asia in the past and does your stock price impair your ability to acquire portfolios. Thanks guys.
Hi, Phil.
The strategy remains.
What we have discussed we wanted diversify we see ourselves as a global emerging market infrastructure company. That's how we see ourselves we will continue to look at it.
Beyond where our markets are now having said that we recently made moved into large markets. We made a move into Egypt, we made the move into South Africa.
Why do we continue looking outside Martin if markets are I.
I would say the focus this year would be largely on these blocks in Brazil.
Now if something comes out that is.
So transformation is so strategic for us that is outside these markets would definitely consider.
The share price is definitely not helping but again I see that.
The point in time.
Other alternative funding could be available if something needs to happen.
Quickly, but to be honest at the moment I think will largely focus on our existing market, especially given the uncertainties.
Around the globe, and where things are a bit of it.
Crane, Russia, China yesterday, now starting the massive lockdowns again et cetera et cetera. So that's how I would see our.
2022.
Thanks very much.
Thanks.
Our next question is from Greg Williams of Cowen.
Greg. Please go ahead Sir.
Great. Thanks for taking my questions just on the.
Guidance for revenue what level of organic growth is factored in.
Any other reasons you noted Nigeria has some strong leasing activity, but hoping you could provide some color on organic growth in the other regions.
Second question is just on Egypt, I realize it's not in guidance, but what's your expectations on the cadence of signing new carriers as a first half story or is it back half loaded thing.
Hey, Greg.
So in terms of the guide the revenue range. We are giving you is 14, 2%.
Total reported growth at the midpoint of the range.
That is roughly split 15% organic.
4% inorganic given the acquisition activity, we've seen and with a 5% FX headwind.
Gives you an idea of the organic element and 15% and big chunk of that is coming through Nigeria and through Latam, where we are expecting more leasing activity more build activity.
We haven't gotten into disclosing the exact breakdown of each building block of the growth components.
What we have also said is from a newbuild side perspective, we expect 250, new sites in Nigeria.
And we're forecasting around 700, new sites in Latam I think of that is Brazil.
And at around 270 in sub Saharan Africa, and approximately 110 in Mena slightly rounded.
So that's how we're thinking about the business obviously in Nigeria in Latam are a key growth factors.
The guide next year.
Okay.
Yes.
Egypt, Yeah, and then Egypt.
It's work in progress as of I can't say much until we have something to say.
Lots of conversations going on lots of discussions with carriers different projects, we're looking at and assessing.
So as I've said on the last quarter, we will endeavor to keep you update quarter on quarter and as soon as we have something significant to report to you. We'll let you know them best.
Best guess, yes, it would be second half before it starts impacting the business but.
But.
We will update you properly when we know more pleasing.
Please remember that Egypt does not have the tower industry.
At the moment I mean, we have the task of developing the business, but we also have the task of developing.
Developing that industry somehow.
They don't exist at the moment people are not used to the idea for it.
We have to do that part plus the actual part of getting the business, but we're making some strong headwinds.
Got it thank you.
Thanks, Greg.
Our next question is from Michael Rollins of Citi.
Michael Please go ahead.
Thanks, and good morning, I'm curious if you could focus a little bit more on the slide 11 can.
Can you remind us where churn is in this bridge and what you saw from churn in the fourth quarter as well as for the full year 2021.
Yes sure.
<unk> was about 1200 for the full year, but all of that 293 to be precise for the full year, but all of that 826.
Well, what we call non key customers.
Outside of all of our important customers and that was really a cleanup exercise in terms of those customers that we would not booking revenue for and so we cleaned them up at the yearend and took them out of the tenant count.
I consider that 293 chair and 75% of it I'm just not guide to revenue.
The chunk of that churn was what we've disclosed previously around the nine mobile pace say 269 of those was nine mobile which was part of our agreement earlier in 2021 to rationalize that business that we told people previously.
In terms of true genuine Chen.
Very small.
Through the course of the year.
And so where does that fit in in these boxes on slide 11, which bucket is it in.
So it would come through either new sites or new colocation, depending on on on what it is that's coming off whether it's the kind of our anchor tenants.
As I said three quarters of that was not showing a revenue impact anyway. So it would not be it would not be picked up in our revenue bridge because there wasn't revenue associated with it.
And you just in the previous question gave us.
A sense of what the total organic proceeds for 2022 can you break that out a little bit more into what the expectation should be for escalation.
That means in co location, just a sense of the drivers of internal organic growth for the business.
Yeah, So as I said on the previous call I might we havent, we havent broken that out in terms of the guidance and what I would say to help people think through it as well.
We think that Baxter is going to be pretty similar to what we've seen in FY 'twenty one at.
Lease amendments will continue to lead the way.
Our new sites in Colocation will probably be similar type percentage contributions to what you see on.
On slide 11 of the presentation.
Reasonably similar organic growth as I mentioned of about 4%. So that's a little bit higher given the acquisitions that we brought into the business during 2021.
But from a kind of percentage contribution split it will be not dissimilar to slide 11.
And in the markets that you're operating in and acquiring should we be mindful of any carrier customer consolidation that might impact your future revenues from those regions.
No not at this point, Mike I think our markets are reasonably stable from a carrier consolidation perspective.
The one that obviously jumps out as Brazil in terms of OE My ball, but we have de Minimis next is there a right way my Baltics by you.
So that one that one way would impact us.
Thanks.
Thank you Mike.
Our next question is from Simon Coles from Barclays.
Simon go ahead.
Hi, guys. Thanks for taking the question and then the extra detail in the presentation this quarter.
Last one is just on Capex. So you said that.
Some supply chain issues should we think of the guidance for 'twenty. Two is hassle of more normalized level and how should we think about the mix versus the.
Makes you provided on slide 15.
Hi, Simon.
I think that you've seen is a slightly wider range around capex and the guide and that's on purpose given the items you mentioned around the supply chain issue the Russia, Ukraine pace, just at the point, where supply chain was starting to free up again, then we obviously.
The World will hit with the Russia, Ukraine situation. So hence the slightly wider range on guide and we will keep you guys updated through the course here, we've already factored in pricing increases, which we've seen.
Around the business, which hasn't been significantly material, but enough to factor it and so that's already baked in within that range and we will we will keep you guys updated as we go through.
Of the mix.
Again, we haven't really broken it down the other thing I would say is people often ask us from maintenance capex with the non discretionary element.
That's going to be roughly 20% higher we think than FY 2021.
Are reflective of a slightly larger business around.
Around new builds across the different African portfolio, Latam, but I'd say, obviously, the introduction of full year of the fiber business as well. So we think maintenance capex about 20% roughly higher than in 2021, and then the rest is split between between new builds and fiber et cetera.
That's great. Thank you and just one that we're holding that comment you made in Nigeria.
So our recurring Levered free cash flow could you just elaborate a bit more on that just to make it clear. Thank you.
Yeah, I think we just want to make I mean, it's the same as we've been talking about since before we left it but I just wanted to continue making it clear to people that as we drive in Nigeria, We typically dying Suffolk corporate income tax which is at about 30% in Nigeria, we suffered withholding tax on revenue.
Which offsets any corporate income tax that we have given at a higher level of site and we.
We saw a 10% withholding tax on revenue in Nigeria.
And then obviously as we are growing and adding more revenue.
Taxes coming at source rather than.
Down further down the income statement, where you get operational leverage right.
Because we show are all Lf CF inclusive of cash tax paid you see that withholding tax line running through the <unk> left you have to give you a true cash metric site as we are growing we suffer that Texas source youll see the impact come through in the IR Alexia.
That's very clear thanks very much.
Thanks, Tom.
Our final question is from Brett Feldman from Goldman Sachs.
Go ahead.
Yeah. Thanks for taking the question and congratulations to Adam and Steve and Colby and some exciting career transitions for all of you I wanted to follow up a little bit around power. So on slide 22, you highlighted that 42% of your sites in your African markets had hybrid power solutions and I was wondering.
Where could that go you know could the substantial majority of your sites potentially take advantage of hybrid or maybe what percentage of your sites would you think of as being suitable and what makes them suitable. So it's really a question is.
What is your opportunity over time to maybe meaningfully.
Augment the profile of your power costs.
I'm curious what you are planning on doing this year in terms of capital investment around hybrid solutions and then.
You also when it seems like pointed out.
Basically it looks like last year about a third of your diesel costs were passed through to your tenants under their leases and I'm wondering does it literally worked that way as it is it essentially that in any given year about one third of that power cost is going to be pass through and is that what's embedded in your guidance for this year, whereas it just that's the way it worked out last year.
Hey, Brett This is Scott maybe I can take the first one and then kind of like a hand over to Steve on the next part look.
People need to remember that Nigeria is a power problem now given its scale and size geography, and population is a massive country, but it does not have an existent basically we see ourselves as kind of like the soldiers of this problem. That's why it's like it's very very complex situation that five years ago.
We did a major investment and to kind of like shifting away from diesel into solar and battery and kind of like resulted in around 40, 50% reduction in our opex.
Opex then.
This time around feels to me like this is something that we need to do we've started late.
Late last year immediately after the IPO and drive and so kind of like what can be done again.
But we definitely intend to go deeper into investing in renewables, we want to solve this problem.
More I would say.
This this is not that I seem to do well.
On a constant basis and of course on a numbers basis. So do we expect are indeed from us.
Announcements to that effect.
This year, our breadth, it's definitely something we wanted to now having said that I also want to highlight something that the guidance has oil at 120.
Our margins remain over 50% I mean, that's a message of resilient, but that's how resilient. This businesses and then having said that we will definitely invest further and hopefully drive diesel at some point completely out of the business.
And then Brent on your comment around the Pos III site.
I think we are doing is you're taking 5% of revenue and dividing that into our total cost of power said I guess you too just on it's about 29%.
That can be passed through and which is correct just keep in mind, where we do see these.
Diesel volatility, particularly in Nigeria.
We have certain elements of those pass through revenues, yes, but some of it is in Latam for example, which doesn't have any volatility in it anyway.
Yes, you are correct, it's about 29% it gets passed through to customers.
On FY 'twenty one numbers.
And that's essentially what youre, assuming in your guidance for this year or something in that range.
Yeah correct. It carries forward because these are all long term contracts.
Great Alright, thank you for taking the questions.
Thanks, Brett.
Yeah.
Great well this concludes that brings us to the end.
Got it. Thank you very much and I'll go back you guys later, thank you.
That brings us to the end of the IHS holding Ltd Q4 full year 2021 results call should you have any questions. Please contact the investor relations team via the email address Investor relations at IHS towers Dotcom the management team.
For you for your participation today and wishing you a good day.
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