Q4 2022 IHS Holding Ltd Earnings Call
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Thank you for holding which Congress would you like to join.
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Yeah.
And then I have your first and last name with spelling thing.
Times at the end of Q4 versus last year pulling out two acquisitions, but without slightly versus Q3 2022.
The rescheduling of our result came primarily from the Finalization of the complex <unk> 16 lease accounting in particular in relation to the South African assets, we acquired during 2022.
An important area of accounting, although not one that has impacted our key metrics of revenue adjusted EBITDA our left the ethical capex.
Turning to our revenue on a consolidated basis slide 10 shows the components about 24.2% reported consolidated revenue growth for the full year 2022.
Organic revenue growth of 19, 5% for the year was driven primarily by CPI Escalations and power related revenue as well as lease amendments FX resets, new colocation and Osage, new sites and fiber deployment.
The level of Escalations, you see reflects that contract protections in the current inflationary environment and together with FX resets offset the negative FX impact by 280 basis points, while the level of power related revenue reflects the high energy price environment throughout the year driven largely by the knock on implications of the Russia, Ukraine conflict.
While not material to revenue in 2022 Autosave nice that we now include the power pass through revenue, we receive in South Africa within power.
On the right you can see the organic growth rates of each of our segments for the full year, whereas the full year segment details are provided in the appendix.
Inorganic growth for FY 'twenty, two with nine 6% again, primarily reflecting the South African acquisition in Q2, 'twenty two G. T. S. S. P. Five in Q1, 'twenty, two and I systems in Q4 of 2021.
Slide 11 shows the components of that 26, 6% reported consolidated revenue growth in the fourth quarter.
Organic revenue growth of 23, 5% was driven primarily by power related revenue CPI escalators, FX resets lease amendments new co location as well as fiber deployment and new sites.
For the fourth quarter the level of Escalations together with FX resets offset the negative FX impact by 90 basis points in this elevated inflationary environment and the contribution from power related revenue is particularly significant given the energy price environment during the year.
The right side again shows the organic growth rates of each of our segments, but for the fourth quarter of 'twenty, two which I'll talk about shortly.
Inorganic growth for the fourth quarter was 10, 8% again, reflecting the acquisitions we've spoken about.
Okay.
On Slide 12, you can see our consolidated revenue adjusted EBITDA and adjusted EBITDA margins for the fourth quarter and the full year 'twenty two.
In fourth quarter, IHS generated $526 million in reported revenue of 27% increase versus the fourth quarter of 2021, while organic revenue growth was 23, 5% H demonstrating the continued strong topline growth trends of the businesses led by Nigeria in Latam in particular.
Aggregate inorganic revenue was $45 million equating to nearly 11% growth during the quarter, reflecting the acquisitions we've discussed.
For the full year, we delivered nearly $2 billion of revenue of 24% increase while organic revenue increased by 19, 5%.
Aggregate inorganic revenue was $151 million equating to nine 6% growth again, reflecting the acquisitions previously discussed.
Paolo related revenue also made up a larger portion this year.
Overall, we continue to grow well in line with our stated objective of seeking double digit revenue growth on an annual basis.
Regarding our adjusted EBITDA and adjusted EBITDA margins in the fourth quarter adjusted EBITDA of $273 million increased 26% versus the fourth quarter of 'twenty, one and adjusted EBITDA margin was 51, 8% down 30 basis points from the fourth quarter of 'twenty, one, but remember that fourth quarter 'twenty one was prior to the <unk>.
<unk> energy price rises we saw throughout 2022.
For the full year adjusted EBITDAR of slightly more than $1 billion increased 11% versus the prior year and adjusted EBITDA margin was 52, 6% down from 58, 6% in FY 'twenty one.
The year over year changes in adjusted EBITDA and margin for the 22, primarily reflect the increase in revenue discussed partially offset with year on year, increasing cost of sales, mainly due to higher diesel costs as well as increased SG&A associated with being a public company for a full year in 'twenty two versus two months in 2021.
And some increased maintenance and repair costs on a larger business.
The changes in adjusted EBITDA, OCI reflect $43 million higher one time net benefits in FY 'twenty one.
FY 'twenty two.
This means that adjusted EBITDA would have actually increased by 17% for FY 'twenty two if the onetime benefits in each year were eliminated.
Power generation cost of sales increased by $152 million driven by a $147 million diesel increase primarily due to a 60% increase in the diesel price and a six 4% increase in consumption and Nigeria.
The increased diesel costs in full year 'twenty, two were partially offset by a $77 million increase from diesel linked revenue year over year.
<unk> and I will discuss this later with respect to our guidance, but we have locked in pricing for a significant portion of our diesel needs through September 2023, something we've highlighted that we were going to do on our last two calls.
Finally as discussed on our recent project Green announcement in October . We're also increasingly prioritizing alternative sources of power to reduce our dependency on diesel.
On Slide 13, we first review our recurring Levered free cash flow will our FCS we generated <unk> of $97 million in the fourth quarter, and an 11% increase versus fourth quarter 2021, due to a combination of factors, including the increased revenue and adjusted EBITDA discussed already offset in part by.
And net interest paid withholding tax and maintenance capex.
Our FCS cash conversion rate was 35, 7%.
For the full year, we generated <unk> of $363 million.
11% decrease versus FY 'twenty, one and are less safe cash conversion rate was 35, 2% down from 43, 8% with one time items in each year impacting the comparison.
The year on year decrease in our left CF was driven first by the $43 million, one time higher net benefit to EBITDA in 2021 versus 2022, which drops straight through to <unk>.
Excluding that nonrecurring items in each of 2022 and 2021 IRR of FCS would have been flat year on year, despite the higher energy and interest rate environment during 2022.
Our Lf CF for 2022 was then impacted by the increased diesel cost impacting adjusted EBITDA that we've already talked about as well as our bond financings at the end of 2021, driving an increase of nearly $59 million and net interest paid for the year.
The proceeds of the bond issuance is supported our South African and Brazilian acquisitions, which only contributed partially to the ASR less safe results.
We also saw higher floating rate interest in light of the interest rate environment during 2022.
We incurred almost $43 million of additional maintenance capex in part due to owning <unk> systems now for full year versus two months in 2021, as well as nearly $30 million more in corporate income taxes, and revenue withholding tax and a $16 million of additional lease and rent payments made versus FY 2021.
Due to owning a larger business.
Turning to Capex in the fourth quarter Capex of $196 million increased 30% year on year and full year capex of $633 million increased 57% versus FY 'twenty one the.
The increase in FY 'twenty, two was primarily due to increases in Nigeria in connection with project Green on which we spent $104 million during the year increased capex in Latam. Following a full 12 months of owning ice systems, and yet and increased Capex in South Africa in connection with the refurbishment of the portfolio we acquired during 2022.
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Slide 14 looks at returns and capital allocation in FY 'twenty. Two we continue to focus on driving our returns and delivered a return on invested capital of nine 9% versus 11% in the prior year at.
2022, ROIC is held down by significant investment in both organic and inorganic growth opportunities during the year, including new site build investment in Nigeria in Latam and further building out ice systems in Brazil on the organic side.
Regarding the organic growth, we closed the MTN South Africa on SB five acquisitions, but saw any partial contributions in the year from each of these.
In terms of capital allocation, you can see that a significant portion of our spend in FY 'twenty, two or $736 million related to that acquisition investment, which as we said was deployed to enter into South Africa and to build upon our 2020 entry into Latam in each case feathering out diversification strategy.
Moreover, IHS continues to be a leading builder of new sites, new markets with more than 550, such sites built in Nigeria and more than 250 in Latam more primarily Brazil during the year.
Turning to the segment review on Slide 15, and I'll first walk through our Nigerian business.
The Nigerian macro situation remains challenging with the country's sovereign debt rating, having been downgraded further in late January .
<unk> continued to be difficult to source. So they remain available with FX reserves, having decreased to $37 1 billion at the end of 2022 from $38 3 billion in the third quarter of 2002.
And while the price of oil again slightly moderated Q on Q, it remains elevated versus a year ago.
Due to the continued increase in premium we are seeing apply to the importation of refined products like diesel into Nigeria. We continue to believe that the ice gas oil price is the most relevant indicator of diesel pricing we pay.
Looking at ice gas oil it was $948 per ton versus $1012 per ton in the prior quarter.
Moving to real GDP growth at expanded by three 5% in the fourth quarter, bringing the full year 2022 growth rate to three 1% while inflation increased to 21, 3%. This past December versus 15, 6% in December 'twenty, one, bringing the full year 2022 average CPI rate to 18.
9%.
Importantly on February 25th boiler <unk> was elected as Nigeria next president with his inauguration scheduled for May 29, and regional elections have also taken place.
Looking ahead, we remain cautiously optimistic why these developments given the statements made by Mr. <unk> regarding addressing the economic issues facing the country and we remain in close contact with our key customers two of which are again recently published healthy topline results from their businesses.
We also continue to work closely with various regulators vendors now local banking partners to continue to best position IHS.
<unk> said, we believe the business remains well positioned for continued long term success and to ensure the near term macroeconomic challenges.
And to this point on Nigerian business. Once again delivered strong results in the fourth quarter tracking well on our key metrics key for 'twenty two revenue of $355 million increased by 18, 5% year on year on a reported basis and 27% on an organic basis.
Topline growth was driven by the usual group of power related revenue Escalations FX resets lease amendments new colocation fibre in new site deployment.
The negative FX impact was $26 5 million.
Our tower count grew by <unk>, 8% versus Q4, 'twenty, one inclusive of some planned decommissioning.
Our total tenant count increased by two 3% versus the prior period and a colocation right with 154 times up from 152 times in Q4 'twenty one.
Lease amendments continue to be a strong driver of growth with these increasing by 15% year on year as our customers added additional equipment to our sites, particularly for the upgrades.
Q4 segment adjusted EBITDA in Nigeria was $206 million, a 12% increase from a year ago and segment adjusted EBITDA margin was 58%.
Let me now briefly summarize the results of our other segments.
As our sub Saharan African segment now reflects the inclusion of our South African business towers tenants increased substantially versus fourth quarter 'twenty one.
Revenue increased by 34% of which organic revenue grew nine 2% inorganic grew 33% driven by the South African acquisition.
FX was a seven 8% headwind.
Segment, adjusted EBITDA increased by 45% driven primarily by the increased revenue coming from the South Africa acquisition offset by increases in power generation costs maintenance and security costs and some administrative expenses.
Segment, adjusted EBITDA margin increased to 56, 9% from 52, 7% in Q4 2021.
In our Latam segment towers, Tennant's revenue and segment adjusted EBITDA will increase substantially in Q4 22 due to meaningful inorganic growth primarily from the <unk> acquisition as well as the ice systems five business.
In Brazil, our second largest market with 6994 towers macro conditions were relatively stable as FX rates marginally strengthened interest rates held steady and inflation decreased we oxide night. The recent election of Lulu silvers President of Brazil.
In our Latam segment overall Q4, 'twenty two organic revenue increased 32% driven by an increase from my systems, CPI Escalations, new sites and new Colocation with inorganic revenue increasing by 80% from the acquisitions.
There was also a positive seven 4% FX impact.
Segment adjusted EBITDA also more than doubled with a segment adjusted EBITDA margin of 71, 6%.
In Mena towers grew by nine 2% and tenants by the same in Q4 2002.
Revenue grew by 16%, including 15% organic revenue growth and segment adjusted EBITDA grew by nearly 20% in each of these cases, mainly as a result of new sites and the closing of the fifth tranche of the <unk> acquisition in the third quarter of 2002.
Q4, 'twenty two segment adjusted EBITDA margin was increased to 46, 3%.
On to slide 16, and briefly to highlight our Kpis as of December 31, Our tower Count was 39652 up by just over 8600 towers of almost 28% from the end of 2021, driven largely by the acquisitions mentioned above.
<unk>, new sites in Nigeria, Latam and SSA as.
As you can see in the chart on the right collectively we built nearly 1200 sites during the year below our guidance of approximately 1350, driven primarily by our decision to slow our rural builds in Nigeria, as we shift more of our Capex to project Green and some timing issues in Latam will discuss this further when we discuss our guidance, but we.
To further slow our builds in Nigeria in 2023, while we expect to triple our builds in Brazil.
Total tenants grew 26% year on year with the Colocation right at 148 times down <unk>, two times versus last year, but up slightly from the third quarter.
We continue to point out that lease amendments, which are significant factor in our Nigerian segment are not included in our Colocation right calculation.
Moreover, as a significant acquirer and builder of towers, we typically adds to the denominator period on period, even as we continue to lease up our portfolio.
We continue to see no reason why we can't get to two times or greater on our overall portfolio over the long term in a more mature portfolios of towers are at or above that rate.
Lease amendments increased by almost 17% year on year as our customers added equipment to their sites, particularly for the upgrades in Nigeria, and we're starting to see some small factory activity in Nigeria, which is early days, but very encouraging.
On slide 17, we look at our capital structure and related items at December 31, 2022, we have approximately $3 $95 billion of external debt and <unk> 16 lease liabilities.
The $3 $95 billion of debt $194 billion represents a bond financings and other indebtedness, including $370 million that we drew down from the $600 million three year bullet term line at IHS holding limited level that we entered into in October .
That $370 million drawdown was used to repay $290 million of bridge line that we have and the $76 million USD tranche of the Nigerian senior credit facilities.
You will see those Nigerian senior credit facility dropped from $298 million in Q3 to a $191 million in Q4 2022.
In the fourth quarter, we saw a small rise in <unk> 16 lease liabilities contained within other indebtedness on slide 17 from the work that we've been doing on our South African leases.
Not reflected in our indebtedness is it remains undrawn, but we also extended the maturity of about $270 million revolving credit facility out to 2025, as we announced in November .
And then additionally, and subsequent to these numbers in January 2023, we entered into an up to 165 billion naira five year term loan and in up to 55 billion and IRA three year revolving credit facility in Nigeria.
In connection, we repaid 114 billion and IRA about two Nigerian local currency facilities, removing significant 2023 amortization.
<unk> remains undrawn.
As you can imagine we are very pleased to have completed these transactions, including the October bullet timeline <unk> extension and the January 2023 in Nigeria, and refinancings, which further derisked the balance sheet and increased our financial flexibility, particularly in light of the tough financing conditions that remain across the globe.
We continue to believe that successful outcome is a testament to the strength of our cash flows our contracts and our history in the credit markets as well as our relationships with global banking partners.
Cash and cash equivalents decreased slightly to $514 million at December 31, and in terms of where that cash is held approximately 6% of the total cash was held in naira at our Nigerian business as we have been using excess cash to support project green and for upstream.
Most of the remaining cash was held in U S dollars at the group level and as I mentioned earlier in 2022, we upstream to total of $207 million from Nigeria at an average rate of approximately 550 <unk> versus $179 million at a rate of approximately $489 in 2021, and we've just upstream.
$15 million in January of this year.
One further point to make is that IHS does not have any relationship with Silicon Valley Bank any other U S regional banks or credit Suisse.
Consequently from all of these moving elements at the end of Q4 2022, our consolidated net leverage was approximately $3 4 billion with a consolidated net leverage ratio of three two times up slightly from September .
This is at the low end of our net leverage target range of three to four times and further demonstrates our strong balance sheet.
You'll see that as of December 31, 78% about that was linked to hard currencies with a fixed floating ratio of 65% to 35% and a weighted average cost of debt was eight 6%.
Moving to slide 18, we are introducing 2023 guidance that includes revenue in the range of $2, one nine to $2 2 billion.
Adjusted EBITDA in the range of one two to $1 billion to $2 billion.
Rls CF in the range of $430 million to $450 million and total capex in the range of $610 million to $650 million.
As Sam mentioned guidance includes an approximate $40 million of revenue from a onetime cash payment received in the first quarter from our smallest key customer in Nigeria.
This was for services, we previously provided to them, but had not previously recognized given our revenue recognition policy.
Even excluding this payment the mid point of our revenue guidance implies organic revenue growth of approximately 21%.
Guidance also includes approximately $25 million in power pass through revenue in South Africa compared to $2 million. This past year as we work with MTN to move various utility billing arrangements under a name I.
I do want to caution that timing of such moves is difficult to predict and could be delayed relative to what we'd assumed although this would have no impact on adjusted EBITDA or our left CF.
Total capex guidance for 2023 includes approximately $30 million that we had expected to spend in 2022, but for timing reasons has shifted into this year.
Capex also includes $90 million to $100 million project Green, which includes our initial $82 million forecast plus a $6 million carryover from 2022 and upwards of approximately $10 million to potentially pull forward Capex, we would otherwise spend in 2024 as our overall projections for Capex savings and returns.
Unchanged.
I also want to point out again that we have locked in pricing for significant portion about diesel needs in Nigeria through September 2023, which in turn will provide greater visibility to our costs.
For the year, we expect to build approximately 1200 towers, which is just slightly more than the amount we built in 2022.
As I already mentioned this includes a notable drop in Nigeria as we pulled back on new site builds as we shift our focus to project Green, but also includes a tripling of towers in Brazil.
I also want to point out that in Nigeria, we expect to rationalize approximately 750 towers. This year that are occupied by a smallest key customer. This will not have an impact on revenue, but will reduce our operating costs and hence is beneficial to IHS.
On slide 19 on top you can see revenue by reporting currency for fourth quarter and the full year, whereas on the Boston, we provide the breakout of revenue based on contract split.
The right side shows the average annual FX rate assumptions used in our 2023 guidance.
Finally on slide 20, we provided the estimated full year financial impact of theoretical 10% devaluation in the naira would have on our financials, while our 2023 guidance already assumes that devaluation from approximately 461 today to 530 by the end of 2023.
On an average 500 for the full year, we've shown here the impact of a 10% devaluation beyond what we've assumed in guidance. For example, the figures in the middle of the page, including the $47 million impact to revenue provide a sense of what the 12 month run rate impact would be using our 2023 expectations.
However, as you'll see on the right side the illustration in the middle of the page excludes an incremental approximately $20 million impact that would occur in the quarter. The devaluation actually happens assuming the devaluation was to occur on the first day of a quarter.
This represents the maximum lack that would occur between the devaluation and when most of our FX resets would start to kick in in the next quarter.
As a reminder, the vast majority of our resets are either quarterly or monthly.
Overall, we feel we are well positioned to absorb a potential devaluation and believe that in the longer run such an event would be positive for the country and for us.
This now 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 and as a reminder to those on the fines press star one to raise your hand, and we will now pause briefly while we register your questions in the Q&A roster.
Your first question comes from the line of Phil Cusick from J P. Morgan Your line is open.
Hi, guys. Thank you.
I want to follow up on some of the things you're talking about in Nigeria, maybe you can just expand.
And what you're seeing since the election.
And any feel for how things might change over the next year.
Sure.
Good morning.
Look I think the past government has been government off largely stansted the government book.
The northern region and are there things that they need to take in order to unlock the massive potential but Nigeria.
We are extremely encouraged by the cloud.
Candidates towards one has clearly indicated that he will remove the subsidies.
Which is basically eating up.
The budget the government budget, he said, but we will merge the forex rate, which we believe will substantially hindered to foreign investments.
Yes.
He is going to improve or increase the production of oil.
The oil.
So the statements the policy the Datacom, it's clear just hope.
<unk>. So we are we are we are we are cautiously optimistic about the future of Nigeria, especially in the short and medium term.
Okay.
And you talked about the $40 million in cash that you got from your small Nigeria customer.
And I think it was in January how much is still out on that and is there anything in your guidance for further payments this year.
Yes, hi, Phil So we don't typically disclose what is or isn't G by customer but consider.
Consider that as a payment against past juice, which we've now received in Q1 and our guidance does not assume for 2023 that we will receive any other lump sum payments other than what we would normally expect to receive each month.
Okay and can you talk about the <unk> launch by her talent, that's coming in Nigeria, how big an opportunity is that is there.
Any sort of inflection there you think has to study.
Okay.
Actually no.
Not only not only <unk> has started the <unk> implementation process.
Our various carriers and our various companies have.
Some kind of <unk>.
Commercial launch we think.
Over the next 40 acre Coty over March 30, or 24 to 36 months, we're going to see substantial movement.
Ramp up of objectivity in our market.
All three main markets.
Do you think the shifts.
Revenue growth or to sustain what you're punching anyway.
I'll leave that to Steve, Yes, I think I think it supports what we've been saying over the prior in a number of years and what's been really helping to drive our revenue growth.
Has been lease amendment switches, where <unk> will typically held plus.
<unk> realized some of that future growth, particularly across the key markets in Nigeria, South Africa and Brazil.
I think as we all know <unk> will bring new types of technology and new solutions.
And we're looking forward to more sustained lease amendment growth as we get deeper into that rollout cycle. As we said in a few moments ago. Early we're very early in that so I don't want to get too carried away, but now we are now starting to see operators.
<unk> equipment on site, which is really positive.
Got it and last one for me is all our major an.
All our major operator.
<unk>.
Now for the.
Operator, all our major operators have now access to five new spectrum that has been allocated.
Okay. Thank you and then last one from me is slowing Bilmes TTS loans in Nigeria is that more a function of demand flowing or your desire to build in Nigeria relative to other markets.
It's the latter Phil plus desire to build in Nigeria relative T.
Other investment opportunities like project Green.
Which were.
As you know very firmly behind and we believe that's a great use of capital.
Other markets in a bit.
Divert some capital to predict right.
Great. Thanks very much.
Sure.
Your next question comes from the line of Michael Rollins from Citi. Your line is open.
Thanks, and good morning, I'm curious in the past you've mentioned the consideration of some actions to try to improve value for shareholders. Curious if you can give us an update on what the company may be considering and how you see opportunities.
On that front and then secondly in terms of the organic revenue growth guidance for 2023 can you unpack some of the important pieces to get to that growth.
Thank you or that you described in terms of how much might be coming from.
Malaysian new Colo.
Amendment.
Some of that internal activity that contributed to the total thank you.
Sure Hi, Mike sorry in terms of your first question on shareholder value unlock.
Now it remains a topic that we continue to the debate over time on our site.
Clearly.
The markets remain volatile and we have to keep looking to see whether there are <unk> opportunities for us to do things.
We continue to discuss that with the board and that will remain and as we mentioned in the call. We have a couple of milestones this year in terms of <unk>.
Shareholder and blocks coming.
So we are continuing to monitor that and we will do so through the course of this year.
And be ready to act. If we think there is an opportunity for us to add to help unlock shareholder value. As you know we're committed to continuing to deliver the results of the business. We think this is a good performance that we're putting through here in terms of Q4.
Full year for last year on a good solid guidance as well for 2023.
So hopefully people are starting to build that track record with us over a number of quarters of performance delivery.
In terms of the organic growth for 2023, and as you know we don't we don't split out the the different building blocks of the guidance.
Other than to say, where we're putting 423% organic guidance got growth there in the guidance at the midpoint of the range is actually 21% if you back out that one time item.
That we mentioned in terms of Q1.
And the only other thing I would say is I would expect CPI to be a higher block than it has been.
In 2022 given.
The inflationary environment that we all know we're in.
And then some of the other blocks I would expect to see similar sorts of shapes other than net power I would expect to moderate slightly.
And then just one other question on that fourth tower is that power change roughly offset by the cost and your power and energy costs. Eventually come down does that go from being a tailwind to a headwind that we just should consider for the future.
Headwind in terms of revenue, but not headwind in terms of overall profitability because that block moves in tandem with our cost of sale.
Diesel or electricity as the case may be.
Yes, what we were showing in the course of FY 'twenty two.
We had $147 million of diesel spend and $77 million of diesel diesel related pass through revenue. So we were roughly 40% covered.
In terms of the costs that we incurred less pass through.
If not is that diesel costs.
Stops to drop.
The diesel revenue will drop, but so will our cost base.
That's helpful. Thanks very much.
Okay.
Your next question comes from the line of Greg Williams from TD Colin Your line is open.
Great. Thanks for taking my questions.
I know you mentioned youre not splitting organic growth out, but I was wondering if you can help us at least with organic growth by region. Just on a directional level should we expect similar trends we saw in the fourth quarter.
Jerry on the high Twenty's et cetera.
Second question is just on the M&A landscape, you've noted in the past private multiples.
Remain high and you're taking your time to focus on the balance sheet, which you've done a great job in the last few months doing so just hoping you can provide an update on the landscape.
And your expectations of the environment in 2023, I understand fluid and difficult to do so by your insights would be appreciated. Thanks.
I'll, let Tom answer the second one in terms of the first one on organic growth.
Too much more we can add I think 2022 is a reasonable shape in terms of what you'd expect to see going forward. The only one I would caution slightly as Latam.
Which in 2022 was calculated off of a small base in 2021.
So that will moderate slightly in 2023 in terms of growth.
Percentage terms.
So sorry to be a bit more.
But that's what we've disclosed.
And.
Regarding the second question.
To note again that.
Our priority for this year remain basic need to focus on the core one of course, keeping an eye on the future.
On the core double digit.
Top line growth the balance sheet, which you've rightfully mentioned, we've done a lot of measures can elect shift most of the <unk>.
Maturities further down the road the project Green.
Of course, reducing opex and Capex.
Now having said that we are in a very healthy position at the moment our leverage remains at around three two times, which is at the lower end of our indicated range and much lower than most of our.
Peers, we have roughly $1 billion or more of dry powder. So we're in a good spot to be able to.
Looking to the future that we will only consider that at the moment projects that could generate outside.
Adjusted returns.
Strategically spot on for example, you may have noticed that in Brazil. For example, we expect to triple the number of Bts Bts.
This year versus last year, but kind of thing that can be like project green.
The project presents itself.
These criteria, we will definitely comfortable with.
Great. Thank you.
Okay.
Your next question comes from the line of Brett Feldman from Goldman Sachs. Your line is open.
Thanks, and I'll start with something that Sam just mentioned you reiterated the intent to significantly accelerate the pace of new builds in Brazil. So the question is who are you building for what's driving that and I would assume you have an anchor tenant all these towers. So I guess the real question would be how much visibility do you have into lease up beyond the anchor tenants that youre.
Building four and then with regards to the upstream mean that you've been doing the naira, you've obviously been very successful there. How are you thinking about the intent or need to continue that pace of upstream this year, particularly as you ramp project Green I'm wondering if there is a.
Desire to actually keep more of the cash in the country. Thank you.
Brett I'll take the first question.
Or.
Steve.
Thanks, and second question look.
Yeah.
We continue to work with the various four operators in Brazil, we have a very good relationship with telecom need given the partnerships we have done with them and then the muscle support we're providing on fiber, but we worked with the collateral we work with.
Our Bts project in Brazil is largely driven by the best company needs to still expand.
<unk> network and its moving into <unk>.
We are extremely positive about that.
Many of the.
Actually most of what we're talking about.
And then the pipeline already for these are projected the DTA.
That will happen and you will see them coming through quarter after quarter.
Steve.
And then on the second question Bryan in terms of Nigeria in upstream I mean, just keep in mind.
The cash proceeds of use of cash if you like for project Green and we put out we spent $104 million in 2022 on project Green and that was in Nigeria.
Expecting to spend $90 million to $100 million.
In 2023, and again most of that will be in Nigeria. The Capex investment between the two years is not not dissimilar from our Nigerian perspective say why am I, saying all that and we are obviously prioritizing cash into that projects as I said before but we will look to continue up streaming from Nigeria.
$207 million last year was a it was a very good result, and it was higher than the 170 $900 million relate to the prior year.
So we will continue to keep sourcing.
Next if we think it's at an appropriate price.
Got it thank you.
May I add we also added $15 million, leaving in January with you.
Process remains.
Okay.
Okay. Thank you.
Before we will continue to our next question just a reminder to those on the phones press star one to join the queue and direct strong and your next question comes from the line of Eric <unk> from Wells Fargo. Your line is open.
Great. Thanks for taking the question.
So just curious on your Bts program or really any other investments I wanted to talk about what type of Unlevered returns you're underwriting on those site builds and have those have those hurdle rates changed at all just based on the elevated interest rate environment. We're in.
Yeah.
And I'm sure I'll say, we've historically provided some ballpark guidance in terms of Bts returns around the group and I will say this is across the entire IHS groups of these new range, a little bit from from region to region country to country.
And we've typically guided people to a 10 to 11, 5% return on a one tenant tower getting up to the low 20% returns on a two tenant tower.
In terms of how thats changed in that in the past year. They are still broadly in line with that and possibly a percent or so off given things like higher energy prices at which affect our African businesses, but not necessarily.
Other parts of the.
Geographies ikat like Latam.
So those returns are still ballpark and what we would expect to receive.
Okay, Great that's helpful and I guess just.
One last one on leverage I know you are at the low end of your leverage target and based on the strong EBITDA growth. This year I mean do you expect in this environment maybe to go below the low end or.
As you look at incremental investment opportunities M&A buybacks.
Or are you thinking about managing.
Leverage in the current environment versus.
Turns from an incremental investment.
Okay.
Yes, I am expecting to stay at the low end of the range. During the course of 2023 now that depends largely on what happens in terms of things like devaluation of currencies et cetera, Although we still remain comfortable even a nice scenario.
M&A as Sam said look we will continue to remain prudent.
We're in an environment, where access and cost of financing is not what it was and so we're very mindful of those dynamics, but.
But it depends what comes along in terms of something strategically important to help the diversification push.
But base case I would think we'll stay at the low end of the range through 2023.
Okay, great. Thank you.
Okay.
Your next question comes from the line of Stella <unk> from Barclays. Your line is open.
Hi, good afternoon. Thanks for all the updates and so there's two things I wanted to ask the questions on South Africa in general and I mean, there's clearly some major stress on the carrier network there at the moment.
Wondered if you could tell us more about what you've been working on there in terms of offering.
Paris sources to your own fleet, but also to that endpoint as well.
The second thing I wanted to ask once again and the slate when you were talking about upstream and you talked about a structured transaction for the last two and cash flow. So I just wanted to talk specifically about that and then finally just on the leases and you did talk about the lease accounting and I saw that there'll be system. This quarter on quarter. So I just wanted to touch.
To ask what the reason for that was that would be great.
Okay.
I'll take the first one and Steve can cover.
The remaining two thanks Stella.
No.
Actually noted the level of load shedding.
Africa.
Our deteriorated or kind of like a Canadian since we completed the deal last year.
Such as the need for power milestone versus.
The lack of expertise will provide.
Geordie on other company is at the moment.
We need to make sure however that whatever we do it does.
Economics, while.
Putting our knowledge and experience in Nigeria, which is unique in a way and to helping our customers.
We're in dialogue with everyone at the moment trying to see what is it that they wanted to do I mean, we will be happy to provide.
The services that are required, but it's an ongoing.
Discussions I mean, the operators need to also make a decision on the future.
For <unk> is it going to improve is it going to deteriorate further and those are major decisions that the operators will have to pick up a woman, let community remain ready to support.
And instead of in terms of your questions on the upstream side structured transaction is really just to note that the $15 million of upstream in January with part of the same 60 million.
Transaction that we effected in December six.
$6 million in December 15 went up in January as part of the same overall upstream asset.
And then on the lease accounting.
South Africa.
And we inherited many thousands of leases.
In relation to the portfolio of assets, we acquired from MTN South Africa during the course of 2022.
Those leases.
A pretty complex and pretty varying in nature.
The process of getting three days reviewing critiquing and then making sure we're recording them properly.
And at least registered natural balance sheet was the process that took some time.
That's great many thanks.
That brings us to the end of the IHS holding Ltd fourth quarter and full year 2022 earnings results call should you have any questions. Please contact the investor relations team via the E Mail address Investor relations at IHS towers Dot Com the management team. Thank you for your <unk>.
So patient today and wish you a good day.
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Yes.
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