Q2 2022 IHS Holding Ltd Earnings Call
2021 acquisition of 51% controlling interest in <unk> systems.
Are resolved in an overstatement to goodwill an understatement to noncontrolling interest and an overstatement to other reserves on our balance sheet and an overstatement of exchange differences on translation of foreign operations on our income statement. Please.
Please refer to the explanatory note at the beginning of the form 20-F for further detail further we'd like to point out that the restatement has no impact on previously reported revenue.
Operating profit loss for the year adjusted EBITDA cash from operations or recurring Levered free cash flow nor does this correction effect the company's underlying business operations.
Before we discuss our results I would like to draw your attention to the disclaimers set out at the beginning of the presentation on slide two which should be read in full along with the cautionary statement regarding forward looking statements set out in our earnings release, and 6K filed as well today.
In particular, the information to be discussed may contain forward looking statements, which by their nature involve known and unknown risks uncertainties and other important factors some of which are beyond our control that are difficult to predict and other factors, which may cause actual results performance or achievements or industry results to be materially different.
From any future results performance or achievements or industry results expressed or implied by such forward looking statements, including those discussed in the risk factors section of our form 20-F filed.
The Securities and Exchange Commission and other filings with the SEC. We will also refer to non <unk> measures that we view as important in assessing the performance of our business a reconciliation of non <unk> metrics to the nearest <unk> metrics can be found in our earnings presentation, which is available on the Investor Relations section of our website and with that I'd like.
To turn the call over to Sam Darwish, our chairman and CEO .
Thanks, Colby and welcome everyone to our second quarter of 2022 earnings results.
We had a solid quarter, despite what continues to be a volatile.
The macro environment across the world.
Seeing continued double digit organic revenue growth, excluding one time items, although the higher cost of these are impacted adjusted EBITDA was ILS benefited from a favorable withholding tax impact from timing of maintenance Capex.
Demand continues to talk expectation and based on our H, one results and our expectations for the back half of the year, we are raising our 2022 guidance for revenue by $10 million at the midpoint and reiterating our guidance for adjusted EBITDA on an FCS and capital expenditures.
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 all Lf CF provide an overview of IHS following our recent acquisition of <unk>.
Africa portfolio, and lastly, provide a strategic update on other opex.
On slide four we again show our revenue adjusted EBITDA and as a.
Our results over the past five years that generated organic revenues 18, 2% adjusted EBITDA growth of 15, 1% and all Lf CF growth of 14, 1% compounded annually. During this time, given our short existence as a public company I think it's important to again highlight.
Our long established track record of generating attractive risk adjusted growth.
We believe this attractive growth is a function of the key elements of our strategy, namely the strong demand in our markets. The inherent benefits of the co location model Hartford and wouldn't be finance M&A and a broadening focus on other communication infrastructure solutions, including fiber all with a focus on driving profitability.
And ultimately for our shareholders over time.
The chart on slide five our sooner to both on slide four except they focus on the past five quarters worth of five years.
Can see we delivered double digit growth for reported revenue, while organic revenue growth of 10% was impacted by the onetime benefits you highlighted last year, but in line with the expectations. We communicated last quarter. These onetime benefits revenue last year as well as additional onetime benefits benefits to adjusted EBITDA last year.
Also impacted our adjusted EBITDA growth, which would have otherwise also growing double digits, while all Lf CF was further impacted by the timing of interest payments.
Following our bond raise late last year.
On slide six you can see that including the 5691 hours, we acquired the South Africa on May 31st ISO.
ISS owns nearly 40000 towers across 11 countries, making us the third largest independent multinational power company by power costs.
This geographical scale has further diversified our revenue stream, having initially had been founded as a nice yielding power company, but also positions us and some of the largest emerging markets and the worldwide GDP, including Nigeria, Brazil, South Africa.
Assuming a full quarter impact from South Africa, our largest market.
Now accounts for approximately 66% of total revenue versus 76% just before we entered laptop and thats. Despite what continues to be outsized growth in Nigeria.
Separately. Please note we now disclose revenue by our top customers in our appendix on page 20.
Okay.
Turning to slide seven as I. Just mentioned you have now closed the <unk> acquisition of 591 hour MTN South Africa and are now that is now the largest independent telco in the country.
South Africa Asia led by Sandy didn't see mango out of our new office could Johan.
Im not asking you for some time as he previously worked with MTN.
Strategic M&A and disposal across MTN and fiber footprints, where the company's passive infrastructure.
As Africa's most industrialized market.
Africa presents a huge opportunity for us.
Having established a strong foundation in our other African markets, the NSA into South Africa, it's timely.
The young and growing population of 60 million people, who are increasingly data driven.
In March the country's telecom regulator placer concluded the multibank option of mobile.
Which has given us greater scope to invest in their networks.
Longer term, we believe this paves the way for <unk>, which would require more towers and more sophistication.
We are we are already seeing the first use of <unk>.
South Africa, a positive population coverage, having increased from <unk>, 7% in 2020 with seven 5% in 2021.
In 2021, MTN South Africa became the first <unk> reached over a thousand five sites any punting on that continent.
And after targets, our achieved 25% Africa relation with <unk> by the end of 2022 and needs by 2026, it's estimated that 21% of South Africa would be <unk>.
These trends offer IHS, a unique commercial opportunity on the onset.
In addition, our provision of <unk> services on a post <unk>.
As for MTN is a key differentiator this solution, which today is largely focused on battery backup.
To drive attractive returns in line with our co location business.
Given the elevated levels of load shedding occurring in the country a place the need for alternative solutions to the grid are easy and we are working with MTN to help further so for their power requirements.
In due course will also broaden the service to benefit other <unk> will also face the same challenges resulting from power.
I also want to acknowledge the recent news that MTN in Telecom SA announced they have entered into discussions for MTM Farquhar.
Ah frequently followed by <unk> announcement of its interest in merging with telecom.
We will wait to see what ultimate however.
However, we stand ready to support all of our customers and believe the opportunity for IHS in South Africa remains highly attractive.
Turning to slide eight starting with M&A, we are happy with our current geographical footprint and as we noted last quarter. Our current focus on M&A is in our existing market with a particular focus on South Africa and Brazil as.
As we look to leverage our cost structures that are already in place.
As part of our M&A strategy, we have been evaluating opportunities across fiber power and data centers.
While we expect our represent the overwhelming majority of our revenue streams for the foreseeable future given the fiber and data center.
Less mature in our market.
We believe our overall value proposition will lead with a broader and more various solutions.
Regardless of the specific asset, though any transaction, we do aim to be accretive to our long term value and return thresholds only increase as part of the season. In addition, while we are willing to increase our leverage for the right opportunity, we expect to remain within our target range.
Moving onto our streaming we upstream $147 million in Nigeria.
Second quarter 'twenty, two given the outsized level of streaming we have already completed this year as of June 30, we held as of June 30, we had approximately 67 million.
In cash and 90 million of which $45 million was had the naira and the remainder in USD.
Important to note, though that despite the challenging macro environment, we have strong relationships with our local banking partners.
We do not speculate on Forex movement and that we will continue to upstream prudently when needed.
A long track record of doing so.
Shifting to our stock liquidity as you will recall in May our board exercise of its sites.
The registered offering requirements for the first block of shares subject to the lockup arrangement under our shareholder.
Which block included upwards of 78 million shares, which would effectively be available this fall and the dispersion of the holders subject to that.
Securities Book.
We will continue to evaluate options that we believe will enhance the value of the company. While at the same time, we continue to focus on delivering against our public fundamental objective and establishing a track record.
Yeah.
Lastly, I'd like to conclude my remarks.
By discussing our current project announcement this for as many of you know and many of the places we operate grid connectivity has been unavailable or unreliable and thus in order to provide connectivity a service that is increasingly being regarded as a human rights across the globe, we and our customers have had please.
On diesel generated power at our site.
While we have historically worked augment our use of diesel with alternative solutions, including the use of batteries solar with 20%, 28% of our towers in Africa designed fully on a generated as of year end 'twenty.
'twenty one we feel we can do more.
Our team and I personally have been busy the last few months analyzing the various opportunities across many of the countries. We operate in to reduce our consumption of diesel and our greenhouse gas emission by a combination of connecting more sites.
With just a few short years ago was not an option in many locations and adding more battery and solar solution.
At this point, we are finalizing our plans, but it tends to share. These with you before we report earnings next quarter.
While we are cautious as to how much I can discuss now we expect to start investing in project breeds in the second half of this year, which means at the time, we announced for the Green, we expect to be raising our 2022 capex guidance.
We expect the returns to be adaptive and to give you a sense of the opportunity in Q2 of 2022, we spent $94 million on diesel plus last year, we spent approximately $69 million on diesel generator maintenance combined this equates to nearly $450 million of annually.
And that represents the opportunity set from which we will extract savings.
<unk>.
Lastly, you'll see on page nine we published our 2021 sustainability report in May.
This was our fourth sustainability report and serves as our second communication more progress GOP for our commitment to the United Nations Global compact initiatives.
As I've said many times sustainability is core to who we are and so our business first and foremost we believe that our business model is inherently sustainable and thus we delivered showed infrastructure solutions in emerging markets that promote digital connectivity and inclusion and improve the lives of the communities.
We serve this encouraging data access to things like Asia.
Financial services was the infrastructure sharing that it uses the environmental footprint of the <unk>.
Telecom landscape in our geography.
With project Green It does more with our drive to reduce a lot of detail on our business will further improve the environment the impact of the communications infrastructure that we operate and upon which our MRO customers ended up.
Ken.
Furthermore, the initiatives you see on the slide here are but a few of the menu the ways in which.
Seeks to make a difference in our communities.
And with that I'll ask during the call over to Steve.
Thanks, Alan Hello, everyone turning to slide 10, as Sam mentioned, we are pleased with how the business performed in Q2 2022 and are excited to have entered this African market leadership position.
You will note that talis tenants and lease amendments as well as consolidated revenue have all increased by double digit percentages.
Q2 last year, driven by both organic and inorganic activity across that market.
Before we delve into the financial performance I want to remind everyone of the one time $24 million of revenue in the second quarter of 2021, and the associated onetime $61 million of adjusted EBITDAR less yet in that same second quarter 2021.
Performance last year, obviously impact our ability with performance this quarter in 2020, So we will draw out these different over the next number of slides that you can understand the true performance of the business this quarter.
So Q2 this year, we delivered 16% growth in consolidated revenue last year, a quarter last year that included 24 million of onetime revenue, whereas <unk> 2022, adjusted EBITDA and our recurring Levered free cash flow appear lower due to the onetime items in Q2 of last year as well.
I'll address them terabyte or.
Our adjusted EBITDA margin was 51, 1%.
Our level of investment in Capex.
<unk> increased by 93% in the second quarter and our consolidated net leverage ratio increased to three one times as we had message last quarter in both instances largely due to the South Africa, Brazil acquisition in recent quarters.
Turning to our revenue on a consolidated basis slide 11 shows the components last 16, 4% reported consolidated revenue growth.
<unk> revenue growth of nine 9% in Q2, 2022 was driven primarily by CPI escalation lease amendments power indexation imputed within Alba and FX resets as well as new sites and new communication.
11 of Escalations, you see reflect a contract protections in the current environment and together with FX resets offset negative FX impact by 520 basis points.
In terms of the other categories power indexation contributed $8 million.
And the Nigerian fiber business and the ice systems, together and a $5 million.
This was more than offset by the absence of the $24 million of one time revenue in Q2, 2021 that I, just mentioned and a reduction in revenue recognition from a slowdown in payments from ESMO as key customer in Nigeria.
On the right you can see the organic growth rates of each of our segments, which I will talk about in the next month.
Inorganic growth was eight 7% in Q2.
Primarily reflecting the Celesio acquisition in the quarter <unk> five in Q1 of 2000, <unk> Ni systems in Q4 last year.
Turning to the segment review on Slide 12.
Through the Nigeria business, and then highlight the other segments.
Nigeria macro environment in Q2, 'twenty chase or increased volatility quarter on quarter with real GDP growth expanding by three 4%, bringing the full year 2022 growth rates three folds.
While inflation increased to 18, 6% this past June versus 17, 8% in June last year.
FX currency rate ended the quarter at 425, an hour so it's all up.
<unk> reserves marginally decreased $9 million from 79 3 billion.
At March 31.
Credit crude oil averaged approximately $114 per barrel in Q2 up approximately two thirds from the same period last year and we have recently begun sustained increased premium applied importation of refined products light diesel into Nigeria. The weekend. The historical correlation we've seen between global price of oil and likely price of diesel.
This emanates from the reduction in global supply of refined products as a consequence of the Russia, Ukraine situation.
Telecommunications remains an important part of the Nigerian economy accounting for around 12, 6% of GDP in Q4 last year.
We continue to monitor economic conditions in Nigeria closely particularly in light of this.
Scaling effects of the Russia, Ukraine situation.
Having presidential election in Nigeria in February 2023.
And of course, we remain in close contact like key customers of which two have recently published healthy topline results.
Against this backdrop, our Nigerian business once again delivered strong results for the second quarter tracking what an extra metrics topline growth was driven primarily by CPI escalators lease amendments power indexation of FX resets.
Our count grew by one 3% increases of some planned decommissioning.
Titled Tenant accounts increased by four 4% the prior period and the Colocation right was up a 153 times.
These amendments continues to be a strong driver of growth with each increasing by 44% year on year.
Customers added additional equipment to our sites, particularly for the upgrades.
The improved operational performance as reflected in our Nigeria financial results Q2, 2022 revenue of $321 million increased eight 3% year on year on a reported basis and 10, 4% on an organic basis.
Membrane the $24 million, one time revenue in the second quarter of last year within the Nigerian segment, and therefore houlton is correct percentage down.
The revenue growth reflects increased activity through two of our key estimates.
We offset by approximately $4 million decrease in revenues from a smaller key customer which stems from a decrease in revenue recognition due to July in payments.
Q2, 2022, adjusted EBITDA in Nigeria, with $194 million and 24% decrease from a year ago adjust.
Adjusted EBITDA margin was 67, 2%, reflecting in part an increase in power generation cost of $57 million and the absence of that types of $61 million of one time benefit in Q2 of 2021.
In Q2 this year adjusted EBITDA in Nigeria was additionally impacted by the reduction in revenue recognition from as small as key customer in the market as I just mentioned.
Let me now summarize the results of the segment.
Sub Saharan African segment now reflects the initiation of our South African business, and consequently talent tenants increased substantially versus last year.
Q2, 'twenty two revenue of $95 million increased by 13% of which organic revenue grew by four 6% primarily from CPI escalators, new sites and Colocation.
Inorganic revenue contributed $7 million drew.
Driven by the one month contribution from the South African acquisition, while the negative FX impact was $3 $6 million.
Adjusted EBITDA increased by 15% driven primarily by the increased revenue included from South Africa offset by increases in maintenance is unsecured.
The adjusted EBITDA margin increased to 65, 8%.
Turning to our Latam segment towers, Tennant's revenue and adjusted EBITDA will increase substantially meaningful inorganic growth, which continued this year with the GTS acquisition.
In Brazil, our second largest market overall with 6950, <unk> pallet macro conditions were somewhat mixed with FX rates interest rates and inflation appreciated.
In our Latam segment overall salaries increased by about 50% and tenants by up to 70% due to the acquisition.
Q2 of this year revenue basically tripled with organic revenue increasing 28%.
Driven by CPI escalation escalation new sites and dedication.
Inorganic revenue increasing by 164% from the acquisitions and there was also positive 9% FX impact.
EBITDA bauxite tripled with margin of 72, 2%.
In Mena towers grew by nearly 18% and tenants by nearly 19% in the quarter and revenue grew by 24%, including 13, 5% organic revenue growth and adjusted EBITDA grew by nearly 35% and all of these cases, mainly as a result of closing the fourth tranche quite acquisition and from new.
Site construction.
Adjusted EBITDA margin increased to 47%.
Turning to slide 13, I'll discuss our Kpis as of June 30 on our.
<unk> 9062.
By nearly 9000 flights over 24 out of 29% from Q2 2021.
This was driven largely by our African and Cts is confined that positions as well as ongoing destock in Nigeria.
Got it.
Collectively these new build programs accounted for most of the 200 towards.
During the second quarter as you can see in the chart on the top right.
In addition to the new sites reported an <unk> of this year. We also have a significant number of rural new sites under development in Nigeria that we.
You're live in the second half of 2022.
Total tenants grew at 26% year on year, He said about 381.
<unk> rates at 147 times down <unk> four times invested last year.
Two things to continue to point out.
Occasion rate, which we define as total number of tenants across the portfolio divided by touch number of towers at a given time exactly.
Firstly lease amendments, which are a significant factor now Nigerians segment and again very substantially are not included.
Secondly, when you were a significant acquirer and builder of towers as we are.
And you are typically adding to the denominator period on period, even as we continue to lease up our portfolio.
For example.
Acquisitions had a one two times colocation rate, which of course is lower infection than our portfolio average.
Continue to see no reason, why we probably get two times or greater.
Overall portfolio over the long term and that more mature portfolios of towers or above that rate.
Lease amendments increased by 43% year on year, the customers added equipment upgrades.
Upgrades in Nigeria.
Yes.
On Slide 14, you can see our consolidated revenue adjusted EBITDA and adjusted EBITDA margin in.
In Q.
To IHS generated $468 million in reported revenue, 16% increase versus Q2 last year, while organic revenue growth was around 10% each demonstrating the continued strong topline growth trends of the businesses.
Led by Nigeria.
Uh huh.
Moreover, reported revenue growth of nearly 24% inorganic growth nearly 17% after excluding $24 million.
Of additional nonrecurring revenue from Q2 last year.
Overall, we continue to grow well in line with us they subjected to see double digit revenue growth on an annual basis.
Regarding our adjusted EBITDAR and adjusted EBITDA margin in Q2, 2020, adjusted EBITDA of $209 million decreased 13% the prior year, but increased almost 12% after excluding the nonrecurring items from last year.
Adjusted EBITDA margin was 61, 1% down from Q2 of last year.
The year over year changes in adjusted EBITDA, excluding the one time benefits last year, primarily reflects the increase in revenue we've discussed partially offset with year on year increase in cost of sales, mainly due to higher diesel costs as well as increased SG&A as I sit here with a public company.
Our generation cost of sales increased by $8 million, primarily not Nigeria segment as we now higher lifting cost diesel Nigeria, giving global reduction in refined products. However, these increased costs, partially offset by $8 million increase from power indexation year over year.
I'll speak more about the seasonal impact from Nigeria. Shortly if you are in that guidance.
Also try to increasingly prioritized alternative sources of power solution to reduce the dependency on diesel.
Mentioned expect to unveil the details about diesel and carbon emission reduction Plaza project Green light this year.
On Slide 15, we review our recurring Levered free cash flow, which we report in a manner consistent with that use it.
We generated <unk> $88 million in Q2 2020 to take down the Q2 touch one primarily due to a combination of factors, including a gain of $61 million of nonrecurring items from Q2 last year that make the prior peer to peer higher hopes that infusion of $30 million of interest cost in the course of this year to you too.
The change in timing about bond coupon payment is done.
November 2021 bond refinancing and docs are favorable withholding tax impacts in Nigeria.
Excluding the nonrecurring us last year and normalizing for the Q2 2022 interest costs are our FCS would have increased by approximately 5%.
Our FCS cash conversion rate was 36, 6% down on the year.
Basis points from last quarter.
As you think about your models for the second half given the positive impact from timing of maintenance Capex, we've seen <unk>.
We expect a step up in maintenance Capex spend at <unk> 22.
Additionally, there will be higher interest expense and an quiche, given new South Africa related financing and bond coupon payment.
We reduced our <unk> quarter over quarter, but all of our lives.
<unk> 'twenty two should be similar to the second quarter.
Turning to Capex in Q2, 2022, capex of $147 million decreased 93% year on year, primarily due to increased.
Although in the system that can find acquisitions increased capex in connection with South Africa acquisition, and the license renewal in covering as well as increased capex in Nigeria relating to new site Capex.
On slide 16, we look at our capital structure and related items at June 32022, we had approximately $3 $7 billion of external debt and <unk> 16 lease liabilities.
$3 $1 billion at the end of March 2022.
This change was driven in large part by increased debt from the $219 million drawdown on our bridge loan in connection with this acquisition as well as the implementation of a level credit facility in South Africa and facility drawn down in Brazil.
Of the $3 $7 billion of debt $1 $94 billion, representing half on financing and 392 million of our senior credit facility not curious segment.
Our undrawn revolving credit facility remains at $270 million.
Cash and cash equivalents increased to $567 million at the end of the <unk>.
Quarter in terms of where that cash is held approximately 80% of the total cash was held naira.
Hey business and most of the remaining cash was held in U S dollar breakdown.
In terms of upstream, while we intend to disclose the amount we upstream on our four key earnings call each year.
On our first quarter 2022 call, we disclosed that we'd already sourced and upstream is over $100 million in Nigeria, and Halloween and including the completion of that upstream we have now upstream to total $147 million from Nigeria.
End of Q2 2022.
Upstream satisfied all USD debt obligations for this year, which is one of the objectives that are upstream program as we don't speculate on the currency and we upstream as and when necessary.
The conversion rate was at a previous to current FX rates are meaningfully belies the parallel rate.
Our consolidated net leverage was approximately $3 2 billion with a consolidated net leverage ratio of three one times, which now reflects the closing of the south.
Physician and the related financing.
Is it the low end of our net leverage target range of three to four times and further demonstrates our strong balance sheet.
You'll notice that we're now highlighting that 77% about the hard currencies.
Currencies with our fixed floating ratio 63, 37% respectively.
Our weighted average cost of debt is seven 8% as of 30 June 2020.
Now moving to slide 17, you can see we are raising our FY 'twenty two revenue guidance by $10 million at the midpoint of the range and that we are maintaining our guidance for adjusted EBITDA, our electricity and Capex.
The step up in revenue largely reflects upsides from the updated FX rates, we are now assuming and greater power indexation revenue.
As announced we can play so that's correct position on May 31, and in the abbreviated quarter.
We did not see any incremental off street associated revenue on 5691 acquired towers that will come into my revenue and cost in due course, we continue to exclude it from our guidance as we did last quarter.
Speaking to adjusted EBITDA and <unk> guidance for a moment, we want to knowledge that the price of diesel in Nigeria is proving more dynamic than initially anticipated as a result of an increased premium being applied to the importation of refined products like diesel into the country.
This is wide and the effective spread between global oil prices like diesel pricing much area, although they remain approximately correlated.
Whilst we saw some impact of this in Q2 of course the issue just may continue for the rest of this year oil currently around $100 per barrel as we sit here in mid August .
Looking at whether we can looking at diesel prices for the remainder of the year.
This will supersede a previous statement that reflect a change in oil should equate to an invest $7 million annualized impact to adjusted EBITDA.
Given all of these dynamics, we feel comfortable with our adjusted EBITDA in our FCS range outlet, but continue to closely monitor the situation.
All right.
Regarding new sites, we reproduce that targets approximately $1750 from approximately 2350 towers.
Minimal impact on our financials and is due to timing delays, resulting in the current macro environment.
As noted earlier, we expect a sizable step up in the second half, particularly in Nigeria for grow new sites.
Overall, we believe the business is proving resilient given the macro headwind headwinds we are facing.
Taking all this into account we believe that revenue for FY 'twenty two will now range between $1 85 billion and $1 $95 billion on a reported basis, which represents a 20% increase at the midpoint of the range last year and approximately 15% organically.
I think just lapsed the more difficult year on year comparisons in the second quarter 2022 drive organic rates of approximately 10%. We now expect organic right to rebound back into the high teens in the second half.
We continue to believe that adjusted EBITDA will range between $1 <unk> $5 billion $1.0 billion to $5 billion. While we continue to believe that our Alexia can range between 300 tenants $330 million.
And the key point remains the carrying $23 million increased interest costs year on year from the bond that we did late last year and we are also remaining cautious on the wider interest rate environment around the world impacting our interest rates homestyle, clearly diesel price impact drops straight down to RMS yet.
We're also maintaining our capex guidance of $545 million to $595 million.
As noted expect to increase that 2022 Capex guidance later this year, when we announced project Green as we look to invest if you stop driving savings in 2023.
On slide 18, we discussed.
Our business on the top you can see revenue by reporting currency, whereas on the bottom you provide the breakout of revenues based on contracts flipped the.
For those who may be less familiar recall that while we are paid in local currency in each of the countries are pricing.
Certain situations portions of the contracts linked to hard currencies, such as the U S dollar or euro where the amount of customer paid length of currency adjust based on the exchange rate with essentially all currency.
These structures help protect against FX devaluation, the impact of which is reflected in our guidance.
Organic revenue breakout.
More information on ethics resets. Please see page 20 of the appendix oxide. Please be aware that there is not a hard currency component to our contract structure and I forget which should impact the percentages shown on slide 19, with a full quarter impact next quarter.
And that brings us to the end of that presentation, but before we get questions I wanted to take a moment to cover what call. We mentioned earlier about the restatement of our financial statements for the 2021 fiscal year and the amendment to our annual report on form 20-F filed this morning.
As we said this relates to an error on the divisional business combination accounting for the company's November 2021 acquisition of <unk>.
51% controlling interest in our systems.
While we are disappointed that this eric.
Titan restatement wed again like to emphasize that the restatement had no impact on previously reported revenue operating profit loss for the year adjusted EBITDA cash from operations recurring Levered free cash flow all leverage.
Noted this direction of the company's underlying business operations.
You will have seen from <unk> 2022 results. This morning, we have also updated the balance sheet position further as.
As planned with no cost purchase price allocation accounting for the St. Louis systems acquisition, which gets done in the quarters post completion of the deal.
With that we thank you for your time today and operator, please open the line for your questions.
Yeah.
Yeah.
So we'll now pause briefly while we weren't just a question in the Q&A roster.
Okay.
The first question comes from Phil Cusick from Jpmorgan. Please go ahead Phil.
Hi, guys. Thanks.
Steve I Wonder if you can dig more into your comments on the relative price of diesel versus oil.
Any update on the refinery in Nigeria.
And then Sam can you just give us an update on the Nigeria business in general anything shifting among your customers is currency volatility.
It's been a little tougher.
Hi, Phil Thanks for the question. So a quick one on the refinery no real update guidance if at all we think.
<unk>.
Late this year, probably more likely post the election to Nigeria in next year coming online is that sort of end of February 2023 election Doc site.
We expect that refinery to come on line.
Be well.
In terms of diesel price, yes, as you said, where we've seen a bit of fluctuation around that in the quarter in particular site.
Headline saw oil prices move from $101 to $114 Q1 Q2.
<unk> got a bit of a catch up to do with pass through revenue as well, which is reflected here.
And then we've seen sort of a quick swing up $4 million impact sort of pure costs running through this quarter site, that's why I was saying being more cautious.
The second half of this year.
In the prepared remarks, that's pretty driving strong.
An increase in costs to bring refined products in Nigeria that has a shortage in refined product globally.
Nigeria is cost a bit more than a quarter.
Hi, Phil.
In terms of.
Customers, Nigeria remains growing.
At a quick pace.
<unk> declared the results just recently and this is a 50% increase in the revenue here.
Year on year.
It.
As being similar.
Bye bye.
Good efficacy data and have more headwind because of the diesel MTN, but the trends remain.
<unk> remains the same and we expect it to continue into the foreseeable future. Despite the actions.
I think of a situation.
Yeah.
Okay, and if I can one more what is the potential to upstream cash out of Nigeria looked like now given you've already done a lot of you effectively out of that market until after the election.
We're not out of that market.
But we will continue to assess through the second half of this year when whether upstream makes sense based on the cost to do it as you say we've done a significant amount.
In Q2 of this yet.
So we're okay from that perspective, but.
That is at the right price that will that will look at it but.
I need to.
Yeah.
Yeah.
Thanks, Steve.
Thanks Kurt.
Okay.
The next question comes from Greg Williams from Cowen. Please go ahead.
Great. Thanks for taking my questions first one on the M&A landscape I'm wondering what you guys are seeing if multiples are remaining stubbornly high or softening and maybe the cadence of the deals you're seeing.
Secondly, just on the tower build guidance you lowered it in Nigeria in Brazil, you mentioned timing and general market conditions is that is that out of your hands being permitting an inflation or labor and equipment or is that something under your control because of rising cost of capital.
Yes.
Thanks, Craig.
The last one on the BCS that's really around two things firstly.
Customer demand, just squeaking, nextgen, and secondly supply chain and getting equipment in the right areas.
We expect.
Life to date volumes to catch up through the course of 2023.
And really it's the timing piece.
The reason for the reduction and as we go into the back end of the year.
And then on the M&A landscape multiples.
I think.
I will jump in as well I think we're seeing a slight cooling in multiples, but it really depends on a case by case situation.
We've completed a number of acquisitions in recent quarters, so busy kind of integrate the business, but I would say, yes, we started to see slight cooling.
<unk>.
As a buyer of essentially we'd like to see more cooling.
No I think I think we've seen some.
Processes being used to kind of like higher expectations from the sellers.
We've done the deal with GPS in Brazil that he was the MTN in South Africa both game.
At nice multiples SBA just announced recently.
Which was also which also came at lower multiples.
We don't see pressure on sellers to sell to be honest, but again that could be there could be a lagging.
For sure, we'll see some softening and Jonathan.
Yes.
Got it thank you.
Thank you your question comes from Brett Feldman from Goldman Sachs.
Please go ahead Brett.
Thanks, and sorry to follow up on the Eagle question, but if I think about the original guidance expectation that.
Average property, though it would be about 120 hours a barrel over the course of the year.
That's about a 20% premium to what was actually going for in the market. So it would seem like you've got a 20% buffer to account for the incremental cost of importing refined product and I'm curious is that essentially what the premium is now or is there actually still some conservatism baked into what youre required.
And then I know that you don't have I think we can get in your guidance I was hoping if you could get an update on where you stand with the opportunity to start building out.
Yes.
Brett as I said that there's some in terms of the number that we're expecting in Q2, and there's a movement from when I watched 114 illustrates yet less the $120 guide.
But theres also some.
Let's say volatility in terms of timing of collection of pass through revenue as well, which is not reflected.
It is not quite as simple as Jane apples to apples, but youre right. There is some additional buffer in that in terms of the premium that is costing us to get into the country.
That's what we said as I mentioned before is about three and a $4 million the real cost pressure this quarter.
Yep.
From away from diesel.
And then it says of Egypt, now you still outside of the guidance.
Our country, which obviously give a lot of work in <unk>.
Talking to the customers using different things to them.
And we'll bring it to the guide when we feel like there's something concrete.
<unk> site, and so I still very much a country of interest, but not at the stage, yet where we've got something.
So Simon in terms of rollout.
Thank you.
The next question comes from John Atkin from RBC Capital markets. Please go ahead Jim.
Thanks.
Two topics I Wonder if you could just remind us what your.
Sure.
Expectations are around multiple tenancy.
As well as to what degree in general.
Perhaps on prospective build to suit commitments do you see competition for these contracts would be <unk>.
Sure.
Hi, John as I described Sammy say different market by market I mean generally speaking.
We would expect <unk> Newbuild palace.
To get to two times between five and let's say seven years, depending on the market in which there is now a picture can be slightly money for example, the rural rollout.
<unk> in Nigeria.
That's not intended to get to chip, that's really a one plus I pod kylo as well say, it's not quite as simple as that but if you're just talking traditional macro sites.
Just get to two X in five to seven years, depending on the country, but in which we operate.
And then in terms of competition for newborn side then.
<unk>.
So I just got it.
Please go ahead.
I would say that the competition for nabors size again market by market somewhere like Brazil.
It's reasonably competitive given the amount of <unk>.
Our cases that are in the market as we will lap.
It's less site.
We still continue to get decent volume in decent market share in countries like Nigeria and across our sub Saharan African markets.
Lisa.
Pretty much yes.
The only provider of digital site.
So the competitive landscape.
Okay.
Okay.
Two more than just.
Just on the hybrid solutions, and then adding great productivity I know you could I know you are going to talk about that more.
Later, but just in general anything about the velocity.
At which you have kept those conversions, particularly the on grid portion.
But also hybrid anything different that we're seeing now compared to.
Previous periods, maybe give us a little bit of a sense of that.
100, <unk> the usage of this.
The technology is more of the efficiency of smaller than before the efficiency lithium ion you kind of size because it can generate versus cost.
All of these have evolved.
We basically have re visited our.
Our network across the various geographies and realize there are a lot of pockets, where we can.
Design, particularly towards us.
The efficiency of their usage and that is basically a desk, we'd like to do what we were trying to reduce our diesel consumption, but it is definitely you know that you opened right.
Hello, John .
Yeah.
Yeah.
And then lastly, just any any quick update on in building small cells fiber productivity some of your non macro tower solutions.
Yeah.
We remain one of the one of the.
Biggest task players in Brazil.
Our markets, we remain quite committed to small says, but I haven't seen a substantial uptick in the write off.
Usage of multiples in our market.
But we've already I mean, we feel that it will take some time given that <unk> has just been auctioned in Brazil <unk> spectrum has just been awarded in South Africa It hasn't happened.
Now to give you honest caveat on a larger scale.
We haven't seen a lot of fiber deployments happening just yet and we see it at the beginning probably be some kind of overlay layer using macro towers.
Moves into more small cells and in building coverage, but that would happen at some point and we have already given that our fiber to the home network that we have acquired <unk>, commenting 70000 kilometers of fiber.
Busy aggressively in Nigeria.
We have a land bank.
Brazil that we acquired when we acquired <unk> two years ago. So we already but we haven't seen an uptick in the use it or small cells.
No I think John we're still you've heard me talk about <unk> rollout more and I think our base case is still.
Start things happening pockets across the different markets, but real commercial rolled out we would expect probably end of next year in 2024.
And any chance you might be right now that's Houston.
Our customers in Africa, John are beginning to talk more about.
Faster deployment.
Nothing is reflected in our guidance.
They take concrete steps and made concrete moves we would stay prudent around that.
Yeah.
Thank you very much.
Thanks, John .
Okay.
As a reminder to ask a question. Please press star followed by one on your telephone keypad now.
Our next question comes from Simon Coles from Barclays. Please go ahead Simon.
Hi, guys. Thanks for taking the questions.
And then a little bit on South Africa, there's obviously lots of potential scenarios that are being talked about in the press could you just remind us of sort of the protections you have a new contract from any potential consolidation risk.
And then if we think about the growth outlook for South Africa.
Conversations between the operators may be pushed back some of the co location growth that you will have going forward given that we're in discussions about their various other things mainly going to be.
A little bit of a head for that and then maybe it's too early but I will try on project Green how should we think about the scope of this project to the targeting across the whole group or where you're probably still going market by market. So maybe starting with some of the smaller markets before maybe moving onto the larger ones like Nigeria. Thank you.
Thanks Simon.
Starting with South Africa, we have I think with protections in our contracts I mean, I'm not going to go into the details of that at the moment, but we do have I think with protection.
<unk> said that would all busy and we've kind of.
We've highlighted the fact that does comment again have already announced the discussion around the potential merger radian has kind of like one.
What about us what a potential candidate.
There are also public processes with some of these.
So their power, which we are involved in at the moment.
We will monitor the situation and see how it evolves, but to be honest I do see opportunities and things like that happening that our synergy commitment.
These opportunities that could that could be.
Improved margins with Oprah generates growth with consolidation of the future.
Our and I wasn't when we look at the last half.
M. P. Here there are other positive aspects.
That could come out of this.
I mean I would also add seven generally speaking big help their customers.
Thanks.
The site, which have a combination you look at.
MTN in south coming right.
Thank you clay.
Play out positively in feature as well, especially as we get.
Archie coming instead.
In South Africa.
And when we're at a pretty pretty helpful. I mean, I think the important dynamic also in South Africa.
Before I move on that should be kept under close watch as the luxury situation the situation with Ofcom SaaS.
It doesn't seem to be improving which means them and all of the carriers would need to come back.
Pension special Corpus for that given our expertise and our very deep expertise in mining power in Nash Udi in Ivory coast coming on and there is a hot in Africa. We feel we are at the four walls of finding solutions to that problem in South Africa.
<unk> has a have a deep already cover up to 13005 volt extend that over time. The other carriers. We hope to also extend the covenant protection.
Even further or deeper level.
If that happens hopefully not.
So a lot of opportunities in South Africa, the fiber to the home is also an opportunity for us with more of the fiber to the tower.
But again, South Africa remains underpenetrated when it comes to covering bonds, so massive opportunity that could be considered overtime.
In Brooklyn.
<unk>.
It's not only around.
Power, but there could be also other aspects power at the surface.
Or fiber or other.
Yes.
Terms of the Greens project.
Uh huh.
The focus is on Nigeria.
We have 11.
Our portfolio 760 million people covered before the Latam situation, Brazil, Colombia, Peru.
Terrific.
African situation.
It's not as critical and even within the African geographies youll find that nicely.
Given its size and given.
It's dependent on on these at 95% of our tower, Nigeria, Simon do not have the connections I mean, that's the size of the appropriate when it comes to you with.
I wanted to do many of the investment cycle.
Lost opportunity for us.
Great. Thanks, Scott.
Operator, if there is no more additional sell side questions in the queue. I think we'll conclude the call here. We thank you everyone for joining and this does conclude our call.
Okay.
[music].
Yeah.