Q1 2022 IHS Holding Ltd Earnings Call
Steve will take you through the results in greater detail, but before doing so I'm going to discuss our growth strategy, including a focus on revenue adjusted EBITDA and Rls, yes provide an overview of IHS. Following our recent acquisition of the GTS S&P five portfolio in Brazil, and depending MTN portfolio in South Africa.
Erica address how we are working to improve our LOE free float and trading liquidity, which many investors have highlighted as an issue.
The strategic update on our Latam business.
And lastly update you on certain sustainability or ESG initiatives.
On slide four.
<unk> show, our revenue adjusted EBITDA, and all Lf CF results over the past five years that generated organic revenue growth of 18, 2% adjusted EBITDA growth of 15, 1% and RF Scf growth of nine 9% compounded annually. During this time.
This is meant to reflect our long and established track record of generating attractive risk adjusted growth, including top line organic growth of 16% in 2021.
We believe this attractive growth is a function of the key elements of our strategy, mainly the strong demand trends in our markets. The inherent benefits of Colocation model thoughtful and prudently finance M&A and a broadening focus on other communications infrastructure solutions, including fiber all with a focus on driving attractive profitable.
And ultimately the ROIC for our shareholders over time.
The charts on slide five are similar to those on slide four.
The focus on the past five quarters as opposed to five years.
You can see we delivered strong double digit growth for reported and organic revenue adjusted EBITDA and our scf year on year. This past quarter, Steve will discuss our results in greater detail, but I'm very proud of our performance as it symbolizes the resilience of our business and contract structures in a turbulent macro environment across.
The globe.
On slide six you can see that including the approximately 5700 powers subject to the imminent completion of our pending here in South Africa of course, IHS will own nearly 39000 towers across 11 countries, making us the third largest independent multinational power company by tower.
Count in the World. This geographical scale has both further diversify our revenue stream, having initially been funded at a nice hearing tower company, but also positions us in some of the largest emerging markets in the world, including the three largest countries in Africa by GDP, Nigeria, South Africa, and Egypt and of course, Brazil.
Which is the largest latam country by GDP in fact, assuming a full quarter impact from GTS SB five NMC in South Africa, our largest markets, Nigeria now accounts for approximately 64% of total revenue versus 72% a year ago and 76% just before.
We entered the latter and Thats. Despite what continues to be an outsized growth in Nigeria.
Turning to slide seven as I just mentioned, we have now closed the acquisition of 2000, and 116 towers from GPS known as SP fiber in Brazil, and expect to close MTN South Africa soon and Egypt, numerous commercial opportunities are continuing to be discussed, but we are taking longer.
The macro environment to evaluate them not that for the GTS S&P five portfolio. We closed the deal in mid March and that this was already factored into guidance, assuming an April one close and that our 2022 guidance also now reflects the MTM portfolio in South Africa, assuming a June one close as Steve will discuss.
Shortly.
We are happy with our current geographic footprint and as we noted last quarter. Our current focus on M&A is in our existing markets with a particular focus on South Africa, Brazil, and Egypt, as we look to leverage our cost structures that are already in place. Even then we intend to remain disciplined as we search.
For deals that we expect will create value for our shareholders.
Also with additional projects ongoing including our carbon reduction plan that I will touch on later there are other things you are working on to further complement our already strong topline organic growth and we do not feel any pressure to chase M&A, but rather we will continue to look for the right at the right value.
Before moving on to talk about our Latam business I want to address investor feedback regarding our lawfully float and trading liquidity post IPO.
You may recall that our shareholder agreement with our pre IPO shareholders is structured in a matter that enables shares held by these locked up shareholders to be released from lockup in block every six months beginning in mid April 2022, although for the first three blocks any sales by such shareholders wouldn't.
To be undertaken through a registered offering.
While no shareholders have asked us to execute a registered offering at this time given the current market and trading conditions. Our Board Committee Subcommittee has elected to exercise its right in the shareholder agreement to waive the requirement for the first block of shares including the MTN priority life shares to be sold via a registered offering.
This waivers uplift this waiver applies to up to approximately 78 million shares subject to the shareholder agreement of course, comprising 6900 62 million block a shares plus $17 million MTN priority Rideshare and is effective from May 17, 2022 and.
In theory, the waiver may increase available liquidity and our trade stock if such shareholders choose to trade. The ships of course, although some shareholders, whom we believe currently hold approximately 61 million shares of the 78 million shares are also subject to stay a restriction given that affiliate stasis.
Turning to slide eight.
I'd like to spend some time now providing an overview of our Latam business, where today, we are the third largest operator in Brazil by power Com behind American tower in SBA.
Our Latam team is led by <unk>, who officially joined US as head of Latam in February 2020. After our first acquisition that <unk> has run other successful companies in Latam and so Dave manages a team of over 300 employees in the region from our new office in Sao Paolo which I pointed out we just move into given.
The growing size of the team.
As I alluded, we entered Latam just over two years ago in February 2020 through the acquisition of cell site solutions, which not only provided us with what we believe is a high quality portfolio of towers, but equally important was its strong pipeline of new sites or build to suit towers. Since then we have acquired three other color.
Portfolio, including Sky site, which brought us expertise basins and thousands of locations for urban.
Deployments, which will be critical for <unk> and our most recent acquisition of GTS SP five of course.
While the first three portfolio will largely focus on urban market in Brazil, including Sao Paulo, Rio and Brasilia. The <unk> five towers are located across a broader geography and helped round out our portfolio.
In addition, we acquired a 51% controlling interest in Tim Brazil, 70000 kilometers of residential fiber business in November 2021, which we have since renamed <unk> systems I systems now pass a $6 6 million homes and operates under an open network model, where Tim serves as the anchor tenant.
Under both long term master lease agreements and a constructive expansion plan. The network is located in several markets across Brazil included including Miniaturize, the Sao Paolo and Rio and Tim pays I assistance for each home pass as well as for each home connected with returns similar to that of the tower model.
The network can also be extended to connect other locations, we consider to be of value. We believe fiber will increasingly play a critical role in enabling wireless <unk> services, given the need for fiber provisions front haul and backhaul to the tower as well as the growing reliance on small cells at that which also rely heavily on fiber.
And that our broader neutral solution set relative to our competitors with definitely differentiate us with our MRO customers.
Further we believe there is synergy between our Latam and African business.
For example, we apply some of our lessons learned regarding fiber in Brazil, Our African markets and as we apply some of our lessons learned regarding hybrid power solutions power management in Africa, our Latam markets.
In total we have invested $1 $3 billion of capital for what now equates to roughly $119 million of annualized quarter. One 2022, adjusted EBITA, assuming we had received a full quarter contributions from the GTS SB five portfolio or <unk>.
<unk> times adjusted EBITDA after adjusting for <unk> 16.
While we leave it to the analysts and investors to determine what is the right multiple for our Latam business today using the implied value in other publicly traded companies would suggest that we have generated a high teens IRR on our investment thus far in a period of slightly over two years.
Lastly.
I'd like to conclude my remarks on page nine with our sustainability strategy or what others may refer to as the ESG strategy sustainability is core to who we are our business first and foremost we believe that our business model is inherently sustainable and that we delivered shared infrastructure solutions.
In emerging markets.
Promote data connectivity and inclusion and improve the lives of the communities. We serve this encourages greater access to education healthcare financial services, while the infrastructure sharing reduces the environmental footprint of the telecom landscape in our geography.
There are four pillars to our sustainability strategy, including one ethics and governance to environment and climate change three indications on economic growth and fourth our people and communities.
While all four are equally important I want to briefly spend the next two minutes talking about something we are working on with the environment and climate change pillar.
It's no secret that in our in several of our markets, particularly Nigeria. The power grid is highly unreliable or unavailable and therefore part of the service that we have elected to provide our immuno customers' power given our expertise and the upside that has historically provided us.
Historically this has been done primarily by the use of diesel generators, including the sourcing and delivery of diesel and the operation and maintenance of the generators.
Now over the time, we've added hybrid solutions, including the use of solar and battery solution with 42% of our sites in Africa. For example, cutting on hybrid at the moment, while 7% fuel grid solar combination, 28% use only the generator and the remaining 24% primarily use the grid with a backup generators.
As of year end 2021.
And as we discussed last quarter in Nigeria, with one of our key customers specifically, we do own the cost of Houston, which is different than the other markets. We operate in where we have more power indexation clauses.
While we are proud of the improvements that we have made to reduce our diesel use it over time, we can do more and it's.
With that I think to do from a sustainability perspective, but also that I think to do from a cost savings perspective with that said we have begun working on a plan that we internally refer to as project green to identify areas, where we can further reduce our consumption of EBIT.
Later this year in the fall we expect to present this plan to you, which we expect to include thoughts around how we feel we might be able to reduce the amount of diesel over what period of time the size of the required investment and of course. The implied return. We believe this can generate meaningful savings and to give you a sense of the opportunity set.
In 2021, we spent $225 million on diesel and another $69 million on maintaining our diesel generators.
That is a spend would be higher in 2022 as we all know global oil prices have increased significantly.
Lastly, I want to highlight that we will be publishing our 2021 sustainability report this week our fourth sustainability report. The report aims to describe how we support the complex 10 principal in areas such as a human rights labor standard environment and anti corruption.
It also demonstrates how we map our sustainability initiatives to the United Nations sustainable development goals.
During 2021, we focused on quantifying our scope, one and two emissions and plan to disclose this information as part of our project Green announcement. This fall while during 2022, we are focusing on scope three with a view to publish our admissions data in our 2022 sustainability report.
And with that I will turn the call over to Steve.
Thank you Sam annualized to everyone turning to slide 10, as Sam mentioned business performed well in Q1 2022.
You can say that our top kpis have all increased versus Q1, 2021 driven by both organic and inorganic growth across the markets.
In Q1 versus last year, we delivered double digit growth in consolidated revenue adjusted EBITDA and recurring Levered free cash flow and our adjusted EBITDA margin was 54, 9%.
As I will discuss shortly our level of investment in Capex to grow the business increased by 24% in the first quarter and our consolidated net leverage ratio increased only slightly versus the prior year.
Quite a significant inorganic activity and not really given our high levels of cash generation.
Slide 11 shows the components of our 23, 4% reported consolidated revenue growth.
Organic revenue growth of 21, 5% in Q1 was driven primarily by escalators power indexation contained within <unk>.
<unk> resets and lease amendments for the most part with the escalators and FX research to get a more than offsetting the negative FX impact of three 4%.
Inorganic growth was five 3% in the quarter, primarily reflecting the sky sites with Centennial, Colombia acquisitions in Q1 last year Centennial Brazilian Q2, <unk> systems in Q4 all of last year.
Turning to the segment review on Slide 12, our first get through our Nigeria business and then the other segments.
<unk> macro environment in Q4 last year, so a slight improvement Q on Q with real GDP growth expanding by just under 4%, bringing the full year 2021 growth rate to three 4%.
Inflation decreased to 15, 9% this past March versus 18, 2% in March last year.
The net ex currency rate ended the quarter at 417 to the dollar was FX reserve margin decreased to $39 billion from $40 billion.
December 31.
The Brent crude oil price stood at approximately $101 per barrel at the end of Q1 'twenty two.
Up from $61 in the same period last year.
Telecommunications remains an important part of the Nigerian economy accounting for around 12, 6% of GDP in the last quarter of last year.
Against this backdrop our business once again delivered strong results in the first quarter tracking well on our key metrics top line growth continues to be driven by those escalations. The FX resets lease amendments colocation, new sites and with power indexation in fiber growing factors as well.
Our tower count grew by over 200 sites, a one 5% inclusive of some planned decommissioning and we suffered de minimus Chen.
At titled Tenant Count increased by four 3% and our Colocation rate was up 152 times.
Lease amendments continue to be a strong driver of growth for those increasing nearly 43% year on year as our customers continued to add additional equipment to our sites.
<unk> upgrades.
This improved operational performance as reflected in our Nigerian financial results Q1, 'twenty two revenue of $321 million increased nearly 23% year on year and 27% on an organic basis.
Q1, 'twenty two adjusted EBITDAR in Nigeria, with $203 million and almost 13% increase from a year ago and.
And adjusted EBITDA margin was 63, 3%.
The year on year increase is primarily due to the revenue growth, but partially offset by an increase in power generation costs of $38 million on an increase in regulatory planning cost of $2 million.
Of this $38 million power generation cost increased $32 million related to diesel price with the balance related to growing consumption for more tenants in house.
Let me now summarize the results of our other segments in.
In SSA towers were up almost 4% in the quarter, while tenants' decreased one 5% due to churn of non revenue generating sites during 2021 that we previously disclosed.
Q1, 'twenty two revenue increased 3%, while adjusted EBITDA decreased by 3% driven by increased power generation regulatory permits and administrative costs that offset the increased revenue.
The adjusted EBITDA margin was 54, 9%.
As Tom mentioned, a few moments ago, our Latam segment reflects meaningful inorganic growth, which continued this quarter with the <unk> acquisition in.
In Brazil, our second largest market of 6786 towers macro conditions were somewhat mixed as FX rates appreciated and inflation stabilized. So we have seen interest rates rising materially in Brazil.
In our Latam segment overall towers tenants almost doubled due to the acquisitions and Q1 revenue and adjusted EBITDA, each essentially tripled with an adjusted EBITDA margin of 78%.
Note that these results include a full quarter from ice systems, which closed in November but only a two two week.
<unk> contribution from the GTS SP five assets, which we acquired in the third week of March this year.
In Mena towers grew by nearly 23% tenants by nearly 24% in the quarter and revenues by 28% with adjusted EBITDA growing by 18%.
In all of these cases, mainly as a result of clothing further tranches of the Kuwait acquisition as well as some new site construction.
The quarter adjusted EBITDA margin was 42%.
Turning to slide 13, I'll dig a little deeper into the Kpis that drove the revenue gains I just mentioned.
At the end of the quarter, our tower count was over 33000 up almost 14% from this time last year or an increase of 4000 towers.
This was driven largely by the acquisitions in Latam 60, the GTS deal, which added 2115 towers in Brazil, as well as the ongoing new site construction programs that and the new start activity in Nigeria and SSA.
Collectively these neighborhood programs accounted for most of the over 200 towers built during the first quarter, including 100, Nigeria 41 in Latam and 39 in SSA.
The types of tenants grew just over 12% year on year to 49643 with the co location right at 149 times down by no no two times versus last year.
Two things, we continue to point out related to the Colocation rate, which we define as title tenants across the portfolio divided by types of towers.
Firstly lease amendments, which we now are a significant factor in our Nigerian segment. These are not included in our Colocation rates.
And secondly, when you are significant acquirer and builder of towers. As we are then you were typically adding to the denominator period on period, even as we continue to lease up our portfolio.
For example, our recent GTS acquisition in Brazil, other colocation rate of one four times, therefore, lower at inception that our overall portfolio average.
We continue to see no reason why we can't get to two times or greater on our overall portfolio.
The long term on a more mature portfolios of towers are at or above that rate already.
These amendments increased by approximately 40% year on year as our customers added equipment to their sites as we mentioned, particularly <unk>.
On Slide 14, you can see our consolidated revenue adjusted EBITDA and adjusted EBITDA margins.
In the quarter IHS delivered 20% plus reported inorganic growth from a revenue perspective.
Q1 reported revenue of $446 million grew by 23% and organic revenue growth with nearly 22%.
It was another strong quarter with top line growth led by Nigeria in Latam.
Overall, we continued to grow well in line with our stated objectives of seeking double digit revenue growth on an annual basis.
In addition, as we have shown the quarterly revenue trend here I would point out the $24 million of additional nonrecurring revenue from Q2 in last year in 2021, both as it relates to what the quarterly growth trend would look like without that revenues and with respect to the comparison that we'll be reporting next quarter.
On our Q2 call.
Regarding our adjusted EBITDA and adjusted EBITDA margin. This quarter, we were pleased with our double digit growth on a reported basis.
Adjusted EBITDA in the quarter, a $245 million, 14% increase in adjusted EBITDA margin was 54, 9% down from 59, 5% last year.
As we had forecast.
The increase in adjusted EBITDA, primarily reflects the increase in the revenue, we've discussed and partially offset with year on year increases in power generation costs as well as SG&A associated with being a public company.
Power generation costs increased by 39 million across the group, primarily non law Geron segment due to 86% higher U S. Dollar denominated cost of diesel as well as a 17% year on year increase in overall consumption, resulting from increased tenant and lease amendment activity.
However, these increased costs were partially offset by a $12 million increase from power indexation revenue year over year.
We continue to mitigate the pressure of increasing oil prices by forward buying where possible looking at both international and local suppliers as well as prioritizing alternative sources of power to reduce the dependency on diesel as.
As a reminder, tool we've previously guided to an increase in the assumption on oil per barrel costs in Q2, 2022 rising to $120 per barrel.
So this may well flow through into our adjusted EBITA margin next quarter and Youll see those when we report in the summer.
On Slide 15, we review our recurring Levered free cash flow, which we report in a manner consistent with our U S peers.
We generated <unk> of $87 million in the quarter, an increase of $16 million or 23% versus last year, primarily due to a combination of factors.
The increase in revenue and EBITDA as well as decrease in interest paid due to a change in timing of bond coupon payments post on November 21 bond refinance.
Other factors include slightly higher maintenance Capex Q on Q and higher taxes due to expiring tax credits.
There are less debt conversion rate was 35, 6% up by more than 250 basis points year on year.
In terms of Capex in Q1, Capex of $117 million increased 24% year on year, primarily due to increases in connection with the systems business that we acquired in November as well as increased new site Capex in SSA and a bit of offset from a decreased amount of capex in Nigeria relating to.
Our fiber business and new site Capex.
As discussed on our two most recent earnings calls we are slightly under spent in terms of capex during the quarter as a result of the global supply chain issues rippling across our markets.
Similar to companies around the world, we've seen a slowdown in the supply chain continue into this year, which we're trying to mitigate by ordering equipment earlier in some cases, one to three months earlier.
As previously mentioned financially speaking this impact is small at the moment that has been factored into our guidance for FY 'twenty two noting the continued uncertain macroeconomic world in which we live at the mine.
On slide 16, we look at our capital structure and related items and at the end of the quarter, we had approximately $3 $1 billion of external debt <unk> 16 lease liabilities up slightly from the year end 2021.
Of the $3 1 billion of debt $1 94 billion represents a bond financings, which include the new 500 million, 565% senior notes and 500 million, 625% Senior notes. In addition to our original 2027 bonds that remain outstanding.
Also approximately $365 million, our senior credit facilities that on Nigeria segments.
Our Undrawn group revolving credit facility remains at $370 million.
Cash and cash equivalents decreased to $509 million at the end of the quarter, primarily due to the close of the GTS SP five acquisition.
In terms of where that cash is held approximately 35% of that total was held in naira and I'm Nigerian business and most of the remaining cash was held in U S dollars at group level.
In terms of upstream cash, we do intend to disclose the amount we upstream each year on our <unk> earnings call. However, given the magnitude of what we've done to date. So far this year. We are disclosing that we have already sourced and upstream to over $100 billion in Nigeria, including post the quarter end.
This upstream once complete will satisfy all U S dollar debt obligations for 2022.
The conversion rate was at a premium to the current FX rate.
Moving on at the end of Q1 'twenty two our consolidated net leverage was approximately $2 5 billion with consolidated net leverage ratio of two five tons. However on a pro forma basis, assuming the closing of the MTN South Africa acquisition and related financings that ratio would increase to approximately three times.
Still at the low end of our net leverage target range of three to four times and further demonstrating the strength of our balance sheet.
Moving to slide 17, and guidance you can see that we're raising our FY 'twenty two guidance to reflect the transaction South Africa.
When we exclude it we are now tracking towards the higher end of our initial revenue and EBITDA guidance, driven principally by continued solid execution and FX gains.
Specifically guidance now includes approximately $80 million of revenue $45 million of adjusted EBITDA and $45 million of Capex for the pending South African transaction, assuming a June one close E. A seven month contribution in 2022.
This includes the acquisition of approximately 5700 towers as well as the provision of managed services to an additional 7000 sites that are located on <unk> by third parties.
Note. However that we have adjusted the financial impacts relative to the biggest highlighted when we first announced the deal in November to now exclude any revenue from grid pass through on the over 7000 managed service sites and this is staying with MTN and any revenue from grid pass through on the approximately five.
700 towers being acquired given the difficulty in predicting the timing in which those utility contracts will be transferred to IHS.
Be clear the pass through of associated revenue on this latter 5700 acquired sites will indeed come into our revenue and cost.
We will update you on progress through the quarters. However, it's important to note that given these factors relate to power class III that have zero impact on EBITDA the adjusted.
<unk> EBITDA guidance, we've given for South Africa is not expected to change for these items, whereas revenue could be adjusted upwards later this year.
Finally on South Africa. The guidance also reflects current FX rates.
In terms of Latam and the guidance reflects March 17 flows at the GTS portfolio, which contributed $1 $7 million of revenue and $1 6 million of adjusted EBITDA in the first quarter this year.
As previous guidance had assumed an April one close.
Moreover guidance continues to exclude any contributions regarding a commercial rollout in Egypt.
Other items to highlight as it relates to guidance for the incremental $23 million of interest costs in 'twenty. Two following last year bond transaction as well as the nonrecurring items from FY 'twenty, one mentioned a few moments ago as youre thinking about the comparisons this year.
This will be particularly evident next quarter Q2, when looking at year on year comparisons. For example, we expect organic revenue growth to be close to two approximately 10% next quarter given the one offs. We reported in Q1 of last year Q1 of 2021, but to rebound back again into the high teens the second half.
This year.
Taking all of this into account we believe revenue for the current financial year will now range between $1 875 billion and $1 $895 billion on a reported basis, which represents a 19% increase at the midpoint of the range versus last year and approximately 15% organic growth.
Key drivers of this 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 of course, the contribution from my systems GTS in Brazil, and MTN assets in South Africa.
In terms of adjusted EBITDA, we're now projecting to range between $1 <unk> 5 billion.
$1.0 billion to $5 billion and again just to remember that the EBITDA forecast and we will continue to include an oil price assumption of $120 per barrel for Q2 through Q4.
With respect to <unk>, we continue to projected to range between $310 million to $330 million.
Here are the key points for members with carrying that $23 million of increased interest costs and we are cautious on the water interest rate environment around the world impacting our interest rates.
The South African transaction does have a positive impact on our FCS notwithstanding additional interest from debt financing, but we're cautiously retaining at our Alexia guide and want to assess its performance over the coming quarters.
<unk> clearly oil price impact drops all the way through into our Fcs.
Finally on Capex, we're not expecting to spend $545 $585 million on total capex. This year the difference being now the inclusion of discretionary and non discretionary capex associated with that setup can transaction.
We continue to monitor the young and supply chain pressures closely which could impact projected capex. This year and we'll provide relevant updates as appropriate.
And finally in terms of sensitivities at Slide 18, we discussed the key energy cost and FX sensitivities regarding the guide and with respect to oil or the guidance continues to assume that oil price assumption of $120 per barrel for Q3, Q4 and to remind you the price of oil averaged $101 in Q1.
And has subsequently increased in Q2 2022.
Consequently, we believe it prudent to continue the $120 assumption for the remainder of the year that clearly things will evolve and we'll update you quarterly on that metrics.
On slide 19, we discuss how FX impacts our business on the top you can see revenue by reporting currency, whereas on the Boston, we provide the breakout of revenues based on contracts split.
For those who may be less familiar recall that while we are paid in local currency in each of our countries in which we operate in certain situations portions of the contracts linked to hard currencies, such as the U S dollar or euro with the amount of customer pay this in local currency adjust based on the exchange rate with the associated hard currency.
These structures help protect against FX devaluation, the impact of which is reflected in our FX reset component in our organic revenue breakout.
Also please be aware that youll see those percentages change next quarter as there is not a hard currency component to our contract structures in South Africa.
And then lastly on slide 20 to highlight the cost of diesel is reflected in our cost of goods sold and equate to $76 million in the first quarter. This year, whereas $27 million of revenue was linked to diesel through power indexation clauses that was passed through to customers. Importantly believe we believe we have an opportunity to further reduce our <unk>.
From diesel and take costs out by adding more renewable solutions and therefore improving margins.
We are currently examining these possibilities as part of our development to the carbon reduction plan, which Tom spoke about earlier names project Green and we're looking forward to updating you on this front later this fall.
And that brings us to the end of our formal presentation. We thank you for your time today and operator. Please now open the line for questions.
Thank you if you'd like to ask a question. Please press star followed by one unencumbered from key pad.
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We will now pause briefly while we register your questions in the Q&A roster.
Our first question is with John Atkin from RBC.
John Your line is open.
Thanks, very much so two questions first in the context of your current leverage and what's been going on in terms of financing costs.
And so forth I, just wondered if you could recap for us M&A.
<unk>.
For larger than usual transactions to the extent that you're considering any.
What would kind of be the desired or targeted source.
The funds and then if you could then.
Maybe just clarify on page 11 to seven 7% growth.
How much of that is specifically power related.
You have a follow up thanks.
Thanks, John do you want to take that.
Yes, sure I think leverage John as we flagged on that on that slide presentations that were about $2 five.
Three times with Africa, and all of that financing et cetera already tens of future acquisitions to the extent any come through and I think we've said historically, we're comfortable pricing the three to four times range clearly given where markets are today in terms of credit market and interest rate.
We'd expect to see it operating in the lower half of that range.
There's still various financing sources available to us by local currency facilities, which we like to do to match the cash flows and with our balance sheet, if we move into any any different markets.
We even further I would like to cardiac conditions that exist.
And then international debt turbine market uncertainty still available to us.
The bond markets, obviously, a little more tricky at the moment, but we'll watch the bond markets as we go through the course there.
And then your question on Slide 11, with the seven 7% that was the other category that Roger.
Yes.
So that breaks down to be about $12 million of the 28.
All power indexation clauses.
About $4 million of that comes from fiber growth.
Through Nigeria in Brazil.
That's about another $4 million.
Of additional revenue recognized for one of our customers, which we carry a lower revs.
Our revenue recognition policy.
And then there's a few other bits and pieces in there, but those are the key buckets.
And then lastly, I wonder if you can just sort of review for us.
Brazil, South Africa and Nigeria.
<unk> lease up prospects that youre kind of seen in the market in those three markets, specifically any kind of particular drivers to call out.
As we look through the rest of the year.
Yes, I think.
So across those three markets, Nigeria, South Africa, Brazil.
I'll start with Nigeria suddenly got a four G growth still continuing the great that we did around 1400 lease amendment.
Q1 in Nigeria, which has continued the revenue growth in that part of part of our footprint not coming basically through <unk>.
In Nigeria, <unk> spectrum allocation has happened now.
I think we mentioned this a couple of months in the last call, we're not expecting a big impact from that this year and but we are starting to see small incremental five geos right requests from some of our customers.
More want to look out for in 2023 and onwards, so that is starting to happen.
Likewise in Brazil, <unk> spectrum allocated in the OE.
We buy about copper and have been effectively implemented now and the carriers are clear on what's happening with that transaction, which means that they know what they're getting they can re plumb the network and they will set up <unk> spectrum allocated to them as well now so the Brazilian market should free up we're expecting to see continued growth in <unk>.
Market later this year and then certainly in 2023 is it gets to rollout.
And then South Africa, Asics that Africa for US, we think is going to be a high single digit low double digit revenue growth market.
The medium term.
Again driven by.
Really.
New technology <unk> been FRG spectrum allocated now the carriers that pay the license data last month.
And that continues to be a big focus for MTN vodacom.
And telecom in that market.
This is really the name of the game is not going to see huge impact of it probably in this year and thats not necessarily factored into our guidance this year and but we are starting to see all the component parts now in place for <unk>.
Start happening.
Slowly, but surely in a market in the next couple of years.
Thank you very much.
Thanks, John .
Our next question is with Phil Cusick from Jpmorgan.
Phil Your line is open.
Hi, a few small ones. Please first I heard the $100 million of repatriation out of Nigeria. That's helpful. How much cash were you holding an IRA at I guess at the end of the quarter.
So at the end of the call, Joe we had $185 million equivalent.
In Nigeria.
And that was principally all held in naira and then subsequent to that we have upstream the amounts you just mentioned.
But that again too.
More.
Hello.
Got it and can you expand on what you expect from investors selling shares into the market. It sounds like mid teens millions unaffiliated are eligible and other shares permanently eligible.
Yes, Thanks Bill.
I think a few things to mention.
<unk> disclosed the entirety of the pool of shares, but yet we're going to call. It unblocked.
Out of the way that the.
Agreement up to $78 million, although when you. Subsequently then carve out the affiliated shareholders and that actually equates to about $61 6 million.
The amount of non affiliate.
Shareholders is much much smaller than what being shown here.
In terms of totality of what we think coming to the market. We diagnosed ultimately driven by shareholder desires, but if you go back and look at who's spoken publicly about that marry that up with affiliate sites. This restriction.
We're thinking that a similar number to what you mentioned, possibly even slightly less than what you mentioned.
Okay, and the affiliated shareholders, what's the structure for them selling from here because they are they still inside the every six months.
Organized offer requirement.
Yes, so the affiliated shareholders.
Can sell limited volumes, we understand this one.
Every 90 days they can some limited volumes in relation to the sunblock going forward.
Helps cap that the numbers I just mentioned.
Sure.
Unblocking by our Unblocked forever at this point in time.
So thats important element to note as well.
But then for the rest of the 80% of pre IPO shares that were held they still remain part of our shareholder agreement.
Who's next.
Next few blocks of sales will acquire registered offerings.
Okay.
Then finally.
You mentioned, removing the pass through from the third party South Africa towers any change to your power obligations on the non grid side.
No it's purely a classification of food.
Who gets built and therefore, whether or not that cost gets cost III site no change Diego seven.
That was purely a.
And the sites. So therefore, we cant transfer their utility bills in 2019, so they stay with MTN. So they stay out of our revenue.
Got it thanks guys.
Thanks Kurt.
Our next question is from Greg Williams from Cowen.
Greg Your line is open.
Great. Thanks for taking my questions I just had two if I may just wondering the EBIT guide.
Youre guiding up about $45 million the mid point.
I do include seven months of MTN.
It looks like it could be getting a touch higher but what youre not.
And you did mention that you are tracking towards the high end of guidance. So is there conservatism in here or are there other factors or the guidance solely from MTN.
Second question is on Egypt, just wondering if there is any.
Any update on timing for establishing operations there. Thanks.
Thanks, Greg, Yes look I think certainly when we roll in the new acquisition in terms of guidance. We do include an element of caution around that especially when it is not a company. So GTS piece, we mentioned in prior quarters equity company, and we know where that's going to be obviously with South Africa being in.
Asset transaction with creating that business say, yes, youre right. There is an element of caution in that.
But I think thats the right thing to do at this point in time, we havent closed business yet.
So, yes, there's a little bit of caution that for sure, but as we said in the core business outside of South Africa.
We're tracking towards the upper end of the range anyway site.
We'll look at that again in a couple of months time, when we report our Q2 earnings to see if there's anything to be done.
And on Egypt, Greg I mean, Egypt is a slow burn I've always said, it's a slow burn is the only country that we've entered through a large build to suit program build to suit program, meaning you have to kind of like finalize MLA dropdown from scratch convince customers that this is the right solution. So we are in the process of.
That we are still looking at various hours to purchase the global macro conditions of course did not help over the past few months things have kind of like further slowed down despite it being a slow burn in any case. So we're still bullish and we expect things to happen, but in terms of timing we are.
We are doing whatever we can do to good things.
And so not specific not specifics at the moment, but we expect the MLS to be signed at some point start to be built.
But then it should be powered to be acquired this is all in the works at the moment, but nothing new.
Got it thank you.
Okay.
Our next question is with Brett Feldman from Goldman Sachs.
Your line is open.
Yes. Thanks.
And of a multi part question around M&A and capital allocation. So you had mentioned.
In your remarks that you are now positioned in the largest economy in the different regions of the World where you currently operate in so as you think about M&A from here.
What are you prioritizing and what do you think of as the sweet spot or are you seeing this as a great opportunity to continue to acquire assets in these markets become even bigger or is it a little bit more focus on pain now that we have the beachhead and we've got our overhead established in these regions, we really should be starting to look at.
Mid and smaller tier markets that are in the periphery. So that would be kind of the first question. The second is historically, we've seen that when the macro backdrop quickly becomes challenging the <unk>.
Pivot market for deal can kind of drive quickly it takes a private sellers a little bit longer to sort of adjust to the new valuation contract. So I'm just kind of curious how active the M&A funnel look like and then the third piece would be if it turns out that it's not very active maybe you have to be patient and wait for the market to kind of come back to you. How do you think about what to do with the cash you're going to be.
<unk> between now and then or is it prudent in this environment is to accumulate it and have a war chest or are you thinking maybe you would want to start paying down some of the floating rate debt and mitigate some of the interest expense pressure you might be there. Thank you.
Great question Brett.
Look let's start by saying our balance sheet is very strong we have the cash we have the low leverage but we have the dry powder.
Any deal we platform is a deal that we feel is not appropriate for us. So there is no pressure on us to make a deal or not make a deal at the moment, where we see our focus is on safety market as I said earlier now having said that if a transformational deal that can be interesting to us outside of our countries. We will look at it and we do look.
But we feel there is enough now in Brazil, and Latam enough in South Africa, and Egypt for us to kind of like a focus there for the time being and we are focusing there we are looking at.
Power opportunities in South Africa has more than than one power portfolio.
<unk> captive in the hands of <unk>.
In Egypt for example, all the tower portfolio is remains captive in the hands of iron ore in Brazil, we still have pockets of consolidations here and there. In addition to our building capabilities. So we are focused on our existing market and we feel very good about the prospects of M&A in both market over the next let's say 18 months.
At the same time, we are looking at.
Our supporting our self for the <unk> for the impending RG.
Our potential.
Growth and for that to happen, we do believe that.
Capillary fiber or access for a couple of hybrid network is going to be critical.
Done that in Brazil, we continue to grow that we are looking at ways in another market on how do we kind of like to bring that component.
Our our mix. So yes. We are we are active we are very active we are looking at things we feel now that the general macro conditions. The global macro conditions have helped someone like us in defense.
Valuations are kind of like mellow down a little bit.
Specialty in some of our targets.
Market and.
We have the capacity and we have.
The general mandate.
Does that answer the question Brett.
No that was helpful. And then just in terms of if you are not able to find deals in the near to medium term, how do you think about managing cash.
Steve I think that's one for once were going to stick.
So that's a good transaction to complete and we've just.
Pushed cash LNG, Jeff well site.
We've got the Si business.
Cash outflow in front of us for that will that will come.
And then replenish cash stocks, if we're not able we're not keen to do M&A.
And then we will look to replenish the cash stocks and see what's the best way to do it and Youre right were keeping an eye on the debt side of things, we're keeping an eye on the interest costs, given how interest rates have been moving.
The modest why we didnt that contract increase Rls GAAP guidance at this point in time.
We're going to we'll manage that through the course of the year and maybe there might be some positive news there at some point.
So, we'll take stock, but first and foremost and we've got cash outflow from genocide.
Thank you.
So we are in a long term business.
This is a dip things happen, we see we see definitely buying opportunities, but again there is no pressure on us to buy anything we'll just decide as and when and if the opportunity makes sense.
Great. Thank you.
Our next question is with Simon Coles from Barclays.
Please go ahead.
Hi, guys. Thanks for taking the question.
Just on sort of your discussions with the operators on deployments. This year you said you are tracking.
Towards the upper end of guidance, obviously, there is a changing macro environment going on if we look at the old prices reported they tend to be reporting strong from wherever you guys. So I was just wondering if you've seen any change in sort of conversations or willingness to deploy in any of your markets for the rest of this year.
And then.
Quick follow up on that.
I mean, no change from a customer perspective at this point in time, Tom and I would just say nims in Nigeria is 26% revenue growth, 25% EBITDA right.
El Nigeria was even slightly better than that.
Customers in a big market in Nigeria, and well <unk> well in Brazil key customer down there.
Not quiet customer yet, but about their customer owned centers for us because we are doing reasonably well in the context of that market.
No we haven't seen anything in terms of.
Slow down.
Effective and watching some of the smaller customers as always and make sure that that can I continue I am continuing to strongly competitive, but certainly the big customers.
Performing well from what we see.
That's great. Thanks, and then one quick one.
One thing to add to that assignment is that the government has recently awarded.
Two of our main clients in Nigeria, with a fintech with a full fledged feedback license that is going to also manifest itself in terms of the growth in the number over the next couple of years as they rollout very heavily into that.
Yes finally.
Off note.
On the oil cost in Nigeria, you said it was 101 and one two pretty.
Pretty much halfway through the quarter, how is that tracking so far this quarter. Please.
And we'll update you on how we're tracking.
Paul but in global oil prices.
Higher than 101 during the average deposits this quarter.
More like 110 at the moment, but we'll.
We will round that out when we get into the quarter in the Q2 earnings.
Okay sure thanks, very much guys.
Our next question is with Michael Rollins from Citi.
Michael Your line is open.
Thanks, and good morning.
Just one follow up and then one question on the follow up with respect to organic growth.
The contribution from Colo and amendment was about 410 basis points from your slide in the first quarter, what's the expectation for that for the full year 'twenty two.
In terms of organic internal growth.
At the midpoint.
Your guidance and then secondly, just taking a step back and you mentioned earlier that you received.
Some investors curious if you've received additional feedback from investors.
And the company is looking or considering other pro app.
To address.
Any of their interest.
Hi, Mike.
First part of the question.
As you know, we don't split out the different component bucket in terms of the guide for the year.
But we have guided people to 15, one five than organic growth.
For the whole year.
And just keep in mind that although we posted 21% organic growth this quarter.
And again as we highlighted in the presentation.
Earlier, we have a more like expectation around 10% into Q2, not because anything is changing this quarter in our business. He would tell you that because of the one offs. We had in Q1 2021. So Q1 2021 had additional revenue one off and that didn't recur.
Look more like 10%.
There or thereabouts in Q2, and so when you blend all of that out back up to normal growth rates in the second half of the year, we're guiding to about 16% organic growth in totality.
And.
Yeah.
Due to the question Michael.
But this company I believe has a great asset. This company has is demonstrating solid performance quarter after quarter after quarter, whether on the private lives are now in the public.
Life, we're growing in double digits.
We have now within two years setup, the sizeable business in Latam, which I think many people may not appreciate how big it has become we are roughly now 7000 powered 120 million.
<unk>.
EBITDA.
And the growth prospects remain there I mean that alone is definitely worth something yet our share price remains.
It keeps keeps being suppressed will remain being depressed in terms of where it is at the moment I mean, we have an alliance or we have been looking at the various reasons is why is that happening we've been getting investor feedback. We have now all disconnect style amongst among the us we've been providing extreme extreme knowledge and kind.
Like.
Helping guide us.
This process.
The most pertinent feedback we have received at the moment is the fluid side I mean for a company that aspires to be multi $10 billion market cap you cannot have daily trading of $1 million to $3 million I mean that daily trading needs to be much larger than that and for that to happen. It needs the float needs to be bigger and then once we and.
<unk>.
Duration, hopefully we can unlock has gone on over time.
Then the other remaining issues or the other potential issues that we've got any feedback whether it is the compensation in Nigeria or whether its something as all these things can be addressed.
As we progress does that answer the question.
Yes. Thank you.
Thanks, Michael.
I don't know if you want to add anything to this.
Thank you.
Our next question is with Alex <unk> from Bank of America.
Alex Your line is open.
Hi, guys. Thanks for taking the question two if I may the first one in Brazil with our system.
If you could just come back a little bit more on the on the economics of the deal. If you are expecting the mobile subscriber beside Tim lives.
And if you had a meaningful step up in pricing on wholesale.
<unk>.
PTC.
Mental and commitment et cetera, but then secondly on this.
Are you thinking are you thinking about leveraging this asset in these fiber assets actually starting maybe proactively offering fiber backhaul I know you know obviously at that time, we were not yes, it's about <unk> five year rollout because you said it's been allocated the operators are thinking about it. So maybe you can already start to tool for some backbone capacity for those.
Services, it will be interesting to see <unk> first.
Conversation with your pictures over there.
Other of your market.
And then the second question was really on MTN in South Africa, what is really the point for you to tool for managed services on power 40 extra site that you don't own I would assume there's a bit of limited synergies or is that just because you're allowing all enabling MTN to fully flowed site management and within that question does that mean.
You're also providing active equipment maintenance <unk> seen you can probably.
Increased the portfolio or the range of your contract with them or even that you were just looking at acquiring those sites that you're just providing power management too.
And overall just wanted to ask maybe a third one whats really investor feedback youre receiving on those two deals as I've seen on older tower crews doing them and extending into the range of product, they're offering might have some change in operational risks and.
Returns so any color on that would be super helpful. Thank you.
Thanks, Alex Thanks, Alex look, let's start with the fiber.
Going back to basics.
And we moved into the fiber adjacency is just because we wanted to be ready for <unk> and we believe as positive proliferate. The connections the location is going to be at the end.
As the locations given the proximity given the.
The size et cetera, et cetera, that's why we moved to the fiber we remain at power we love the power of our model, we believe in the model and then.
The fiber move is essential as we shift into.
Now, having said that we did buy a fiber to the home network, but we did not buy the home, but we are we remain a business to business structure, we've structured that acquisition in a way.
For us <unk> kind of like our power model for long term leased from and they pay a certain amount per home passed that number become.
Our banks really highest for home connected there is an element of business.
An element and it is an open network for its somewhat kind of like that but I don't like them I want to change that.
Can move somewhat and we can use that thing basically affordable now. This is why we went that.
As we now have taken over that network. We have now tested our ability to use those links for fiber to the tower and there is a G bond now connection active and working in live as we speak to that solution is now available for US we have immediate work technically and we're going to use it as <unk> progresses.
In a moment comment about the economics and whether if we can do it we can do anything more than what we have said, but thats kind of like to put things into perspective, do we want to do back hauling.
If you mean long distance or city to city or things like that no. We're not interested or we anticipate in building self sufficient fiber network that can provide services to homes and corporate that's not the goal. The goal again is <unk> five G. As we rollout <unk> and Thats, what we are.
Doing that on Anja.
Just to go ahead, just to clarify one point.
On your answers so we're talking about fiber to the tower right when you're talking about <unk>.
Basically well when our clients are fiber backhaul fiber backhaul to the tower.
<unk> been taiji.
Tobias objected to the towers.
Definitely definitely so that is definitely the goal and that is that is the plan and that is what we have cost of marketing and a little bit further Alex by saying that the <unk>.
At work, we have is a fiber to the home network.
Of course, the fiber exists on the street, but we needed to make sure that it's worked for fiber to the.
Power and now with the technology that is called Dupont onsite, we have tested that and it's working and we will be able now to use our fiber to the home network to serve a fiber to the tower and that is the goal yes.
Fear.
Okay very clear. Thank you and then if you have like you had some about the numbers on that will be interesting, but on the wearables contracting fairly confidential.
Yeah.
Yes, yes.
We havent, we havent disclose discrete numbers around it but we get paid on a disconnect.
Disconnect basis.
Bye Bye Tim timber.
Tim retained in the subscriber base and the economics that relates to that platform in light Brown.
But we get we get.
Paid when we when we rollout new.
Fiber connections as well as the existing.
Our highest cost lines connected that we acquired as part of the original transaction and then in terms of future volumes, we have future rollout contract with Tim over the next five years and that was part of part of what we bought into.
We made that rollout for them, but its contracts from that perspective as well.
And then separately.
Go ahead go ahead Alex.
No no. It was just a again.
Super clear.
Good.
Now on South Africa.
And Alex maybe a little bit of perspective again.
Please remember we've been operating in Nigeria for 2020 years, Nigeria is a market of <unk>.
Market of fast growth next year is a market of opportunity, but suddenly Nigeria has this unique place in the world whereby grid is very unmet unreliable I mean, 95% of our site.
They are not easy.
<unk>.
When I hopefully change over time, but this is the size of the problem book when that what that means is that of course, it's a challenge, but it's also an opportunity for people like us we have learned over time, how to become expert in managing that aspect of the business. The power setting up the system dimension in managing it and we know what to.
Bias from hub accurate harsco operated our Corona is how the supply the diesel and now as we move into countries like South Africa.
Example, the grid has historically been very reliable, but certainly over the past few years, it's become less reliable due to the growth of the population as <unk> has not grown its own generation capabilities etcetera, etcetera load shedding is starting to happen in South Africa grid is not reliable anymore as it used to be carriers like <unk>.
<unk> are worried that the trend could become worth for the foreseeable future before it starts getting fixed hopefully in the medium to long term thoughts or declining.
An expert empowered as a partner is becoming more and more important in countries like potash.
Africa and of course MTN as a carrier does believe and of course, we can talk to them about the debt that they should they should be more focused on the marketing offerings in the content offering et cetera.
Versus managing this aspect of the network, which is the difficult.
Part of it which is which is what what is for operational people like us and that is why it makes sense for both us and them to take over that aspect of the network and Thats why we are taking the power service from them because we are the expert in doing it because the grids is becoming worse over time and of course, they would rather focus on.
The core offering.
And we've seen this trend by the way in other countries and other places.
I mean, God forbid situation of grid become worse and worse in some of our other markets, but the solution become using people like us.
Okay. That's very clear guys. Thank you very much for the answer on the corner.
Thank you Ali.
Steve.
Our final question will be with Guyana Duran from Morgan Stanley .
Your line is open.
Hi, Hello can you hear me.
Yes, we can yes.
Yes, a couple of follow up questions on your cash.
Are you finding more DC current R&D supply chain concerns going back in Nigeria, and what great deal used to upstream the cash this quarter.
So I think the dollar sourcing environment is similar to what we've discussed on previous calls.
It continues to be.
Hard work.
Available with some good hard work. So I don't think anything has changed too much not perspective, we would like it to be easier for sure.
And we think that it will continue to be.
Challenging going through the year.
But no no real change to what we've seen in the last couple of months in the quarter.
So we have seen that will get into that on the next quarter call. We haven't completed the upstream yet.
Going into that.
On the next quarter call.
Okay makes sense.
I guess I am trying to understand I think you mentioned you have $188 million, Nigeria is that a level you feel comfortable.
Have you come to a position that will interrupt tomorrow, but I mean, there's a lesser and not there to source at the pace that you would like.
$195 million.
And the Nigeria at the end of the quarter and to be honest, it's a factor of when.
When we receive from our bigger customers as well and we billed quarterly in advance get paid during the quarter and <unk>.
Depending on those large cash amounts come in will dictate in our cash balance is at any given time and then there's a process to go through to upstream site I view. This as timing perspective, do we want to keep $195 million and IRA and I are equivalent.
In Nigeria, not particularly.
But as we said we since the quarter end, we've navy to upstream.
I'll let level.
And my last question.
I think you mentioned in the call you have some cash outflows to bowl.
Uh huh.
How much after that you seem to win and retain made us a preference geocaching Atlanta.
Uh huh.
Our cash is sitting offshore.
Because I guess those cash flows.
Come from.
Share counts.
Yeah, we're looking at utilizing some of the facilitate credit facilities available to us.
So I would still.
Anticipate that post that we've probably got something like 50%.
Possibly even 60% of our cash sitting offshore.
Post this transaction.
Great. Thanks, a lot.
Thank you.
There are no further questions I would like to pass the conference back to the management team for any closing remarks.
This concludes our call I want to thank everyone for joining and we look forward to seeing many of you on the road over the next several weeks and will be presenting at several investor conferences. During that time. Thank you. This concludes our call.
Okay.