CONSOLIDATED HIGHLIGHTS – FOURTH QUARTER 2023
- Revenue of $509.8 million decreased 3.1% (or increased 48.4% organically) reflecting a $271.8 million year-on-year foreign exchange (“FX”) headwind largely as a result of the 75.3% devaluation of the Nigerian Naira (“NGN”) when comparing the fourth quarter, 2023 to the fourth quarter, 2022 average FX rate
- Adjusted EBITDA of $274.2 million (53.8% Adjusted EBITDA Margin) increased 0.6%
- Loss for the period was $456.8 million
- Cash from operations was $162.1 million
- Adjusted Levered Free Cash Flow (“ALFCF”) was $118.2 million
- Total Capex was $130.6 million
- Introducing 2024 guidance for revenue of $1,700-1,730 million, Adjusted EBITDA of $935-955 million, ALFCF guidance of $285-305 million, Capital expenditure (“Total Capex”) of $330-370 million and net leverage ratio target remains 3.0x-4.0x
CONSOLIDATED HIGHLIGHTS – FULL YEAR 2023
- Revenue of $2,125.5 million increased 8.4% (or 36.9% organically) reflecting a $615.7 million year-on-year FX headwind largely as a result of the 44.4% devaluation of the NGN when comparing 2023 to 2022 average FX rate
- Adjusted EBITDA of $1,132.5 million (53.3% Adjusted EBITDA Margin) increased 9.9%
- Loss for the period was $1,988.2 million
- Cash from operations was $902.9 million
- ALFCF was $432.8 million
- Total Capex was $586.0 million
LONDON–(BUSINESS WIRE)–IHS Holding Limited (NYSE: IHS) (“IHS Towers” or the “Company”), one of the largest independent owners, operators, and developers of shared communications infrastructure in the world by tower count, today reported financial results for the fourth quarter and full year ended December 31, 2023.
Sam Darwish, IHS Towers Chairman and Chief Executive Officer, stated, “We’re reporting a strong quarter of performance across our key metrics with revenue, Adjusted EBITDA and ALFCF in line or ahead of our expectations, despite the meaningful Nigerian currency devaluation that began in June, while capex was meaningfully below expectations. Our results reflect the continued strong secular trends we are seeing across our business, including growth in lease amendments, new tenants, new sites or build-to-suits and targeted fiber roll-out. These strong growth trends should continue in 2024 as evidenced by our recently announced deal with Airtel in Nigeria, that extended Airtel’s contract to 2031 and includes a commitment to add 3,950 new tenancies over the next five years – much of it front-loaded to 2024 and 2025.
The Nigerian currency, the Naira, however, continues to devalue at levels that sadly are offsetting much of these strong secular trends. From January to December 2023, the Naira suffered a 98% unfavorable movement, and from January 2024 to date, we have seen a further 75% unfavorable movement. This means a total unfavorable movement of 246% since January 2023. The FX protection mechanisms in our revenue contracts helped us offset the majority of this pressure in the year and was evident in our 4Q23 results; however, we expect the additional devaluation that began in January to further impact our results in 2024. Our guidance for 2024 assumes an average rate of NGN 1,610, whereas the average rate in 2023 was NGN 638, and that the devaluation in the Naira will have a negative $535 million impact on revenue year-on-year even after adjusting for the impact of FX resets.
Given the macro environment we’re operating in – particularly in Nigeria which represented 63% of revenue in 4Q23 – we continue to take what we believe is a more balanced approach to growth and cash generation. We expect the significant reduction in capex that started in the second half of 2023 will continue in 2024, along with a continued focus on improving operating efficiencies through productivity enhancements and cost reductions. Excitingly, this also includes an increased focus on innovation including the deepening usage of AI in how we utilize, maintain and operate our towers, and is something I’m very passionate about and personally spearheading. A dedicated team has been working for a while on developing use cases that can help us improve our efficiencies using the massive amounts of data we have due to our extensive operations over decades.
Despite the currency headwinds in Nigeria, we believe in the underlying strength of our business and believe our equity is undervalued given Africa’s perceived place in the global markets. The value and long-term growth prospects of the Latin American business are also strong. We own and operate 40K towers across 11 markets covering approximately 800 million people who need their phone for almost every basic aspect of their life. Notwithstanding our strengths, we have to consider ways of unlocking value for our shareholders. So, under the guidance of our Board of Directors, we are working with our advisors, including JP Morgan, to evaluate strategic alternatives for the business across our portfolio and our capital allocation priorities. This exercise is intended to generate the best value for investors. We will provide an update on this as appropriate.”
RESULTS FOR THE FOURTH QUARTER AND FULL YEAR 2023
The table below sets forth select financial results for the quarters ended December 31, 2023 and December 31, 2022:
|
|
Three months ended |
|
|
Twelve months ended |
|
||||||||||||
|
|
December 31, |
|
|
December 31, |
|
|
Y on Y |
|
|
December 31, |
|
|
December 31, |
|
|
Y on Y |
|
|
|
2023 |
|
|
2022 |
|
|
Growth |
|
|
2023 |
|
|
2022 |
|
|
Growth |
|
|
|
$’000 |
|
|
$’000 |
|
|
% |
|
|
$’000 |
|
|
$’000 |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Revenue |
|
509,784 |
|
|
526,167 |
|
|
(3.1 |
) |
|
2,125,539 |
|
|
1,961,299 |
|
|
8.4 |
|
Adjusted EBITDA(1) |
|
274,182 |
|
|
272,453 |
|
* |
0.6 |
|
|
1,132,535 |
|
|
1,030,931 |
|
* |
9.9 |
|
Loss for the period |
|
(456,823 |
) |
|
(268,863 |
) |
* |
(69.9 |
) |
|
(1,988,178 |
) |
|
(468,966 |
) |
* |
(323.9 |
) |
Cash from operations |
|
162,054 |
|
|
289,277 |
|
|
(44.0 |
) |
|
902,923 |
|
|
966,874 |
|
|
(6.6 |
) |
ALFCF(1) |
|
118,165 |
|
|
96,889 |
|
|
22.0 |
|
|
432,782 |
|
|
363,083 |
|
|
19.2 |
|
(1) |
|
Adjusted EBITDA and ALFCF are non-IFRS financial measures. See “Use of Non-IFRS Financial Measures” for additional information, definitions and a reconciliation to the most comparable IFRS measures. |
* |
|
Re-presented to reflect the remeasurement period adjustments, as required by IFRS 3, in respect of updates to the accounting for the MTN SA Acquisition in May 2022. |
Impact of Nigerian Naira devaluation in mid-June 2023
In mid-June 2023, the Central Bank of Nigeria implemented steps to unify the Nigerian FX market by replacing the old regime of multiple exchange rate segments into a single Investors and Exporters (“I&E”) window within which FX transactions would be determined by market forces and which was subsequently renamed NAFEM (Nigeria Autonomous Foreign Exchange Market) in October 2023. The Group uses the USD (U.S. dollar)/NGN rate published by Bloomberg, which is approximately aligned to the NAFEM window rate, for Group reporting purposes.
The NGN fell 59.4% between the period immediately prior to the announcement (June 14, 2023) and the month end rate as at June 30, 2023 and continues to experience volatility, having devalued further by 21.1% as at December 31, 2023. Due to the NGN devaluation, Revenue and segment Adjusted EBITDA were negatively impacted by $427.5 million and $264.7 million, respectively, in the second half year of 2023 when compared to the USD/NGN rate on June 1, 2023. This negative impact on Revenue and segment Adjusted EBITDA was partially offset by $191.4 million in contract resets during the same period.
Due to the timing of the devaluation, the average of the USD/NGN rate used to consolidate the Group results was NGN 815.0 for the fourth quarter of 2023 and NGN 638.0 for the twelve months ended December 31, 2023, as opposed to the closing rate of NGN 911.7 on December 31, 2023. As a result, fourth quarter of 2023 revenue includes a $16.6 million headwind vs. the 775.0 USD/NGN FX rate and $16.0 million when including all FX assumptions previously assumed in guidance.
The continued devaluation of the NGN in the fourth quarter of 2023 also resulted in an impact on finance costs, specifically related to unrealized FX losses of $409.2 million in our Nigeria segment. This is due to the USD denominated historical internal shareholder loans from Group entities to Nigeria and USD denominated third party debt. As the functional currency of the Nigeria businesses is NGN, these USD balances have been revalued in NGN using the rate as of quarter-end resulting in an increase in unrealized loss on FX.
Results for the three months ended December 31, 2023 versus 2022
During the fourth quarter of 2023, revenue was $509.8 million compared to $526.2 million for the fourth quarter of 2022, a decrease of $16.4 million, or 3.1%. Organic revenue increased by $254.8 million, or 48.4%, driven primarily by FX resets and escalations. Aggregate inorganic revenue growth was $0.7 million, or 0.1%, for the fourth quarter of 2023, which related to the sixth stage of the Kuwait Acquisition. The increase in organic growth was more than offset by the non-core impact of negative movements in FX rates of $271.8 million, or 51.7% of which $267.4 million was due to the devaluation of the NGN.
Adjusted EBITDA was $274.2 million for the fourth quarter of 2023, compared to $272.5 million for the fourth quarter of 2022. Adjusted EBITDA margin for the fourth quarter of 2023 was 53.8% (fourth quarter of 2022: 51.8%). The increase in Adjusted EBITDA partially reflects the decrease in cost of sales of $26.9 million primarily due to the $25.7 million decrease in diesel expense partially offset by a decrease in revenue discussed above as well as an increase in admin expenses and professional fees of $4.4 million and $1.2 million, respectively.
Loss for the period was $456.8 million for the fourth quarter of 2023, compared to a loss of $268.9 million for the fourth quarter of 2022. The increase in loss for the period reflects the decrease in revenue due to negative movements in FX rates discussed above and an increase in net finance costs, specifically related to unrealized FX losses.
Cash from operations and ALFCF for the fourth quarter of 2023 were $162.1 million and $118.2 million, respectively, compared to $289.3 million and $96.9 million, respectively, for the fourth quarter of 2022. The decrease in cash from operations primarily reflects the decrease in working capital of $125.7 million. The increase in ALFCF was primarily due to a reduction in maintenance capital expenditure, withholding tax and lease and rent payments made. This was partially offset by the increase in net interest paid.
Segment results
Revenue and segment Adjusted EBITDA:
Revenue and segment Adjusted EBITDA, our key profitability measures used to assess the performance of our reportable segments, were as follows:
|
|
Revenue |
|
Segment Adjusted EBITDA |
||||||||||||
|
|
Three months ended |
|
Three months ended |
||||||||||||
|
|
December 31, |
|
December 31, |
|
|
|
|
December 31, |
|
|
December 31, |
|
|
|
|
|
|
2023 |
|
2022 |
|
Change |
|
|
2023 |
|
|
2022 |
|
|
Change |
|
|
|
$’000 |
|
$’000 |
|
% |
|
|
$’000 |
|
|
$’000 |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Nigeria |
|
320,662 |
|
355,270 |
|
(9.7 |
) |
|
199,841 |
|
|
206,065 |
|
|
(3.0 |
) |
SSA |
|
124,016 |
|
117,492 |
|
5.6 |
|
|
62,373 |
|
|
66,555 |
|
* |
(6.3 |
) |
Latam |
|
54,331 |
|
43,891 |
|
23.8 |
|
|
41,089 |
|
|
31,425 |
|
|
30.8 |
|
MENA |
|
10,775 |
|
9,514 |
|
13.3 |
|
|
7,916 |
|
|
4,405 |
|
|
79.7 |
|
Other |
|
— |
|
— |
|
— |
|
|
(37,037 |
) |
|
(35,997 |
) |
|
(2.9 |
) |
Total |
|
509,784 |
|
526,167 |
|
(3.1 |
) |
|
274,182 |
|
|
272,453 |
|
* |
0.6 |
|
* Re-presented to reflect the remeasurement period adjustments, as required by IFRS 3, in respect of updates to the accounting for the MTN SA Acquisition in May 2022.
Nigeria
Revenue for our Nigeria segment decreased by $34.6 million, or 9.7%, to $320.7 million for the fourth quarter of 2023, compared to $355.3 million for the fourth quarter of 2022. Organic revenue increased by $232.8 million, or 65.5%, driven primarily by an increase in FX resets and escalations. The decrease in revenue was primarily driven by the non-core impact of negative movements in FX rates of $267.4 million, or 75.3%. Year-on-year, within our Nigeria segment, Tenants decreased by 201, including 942 Churned (which includes, from the first quarter of 2023, 727 towers occupied by our smallest Key Customer on which we were not recognizing revenue), partially offset by 504 from Colocation and 237 from New Sites, while Lease Amendments increased by 3,781.
Segment Adjusted EBITDA for our Nigeria segment was $199.8 million for the fourth quarter of 2023, compared to $206.1 million for the fourth quarter of 2022, a decrease of $6.2 million, or 3.0%. The decrease in segment Adjusted EBITDA primarily reflects the decrease in revenue driven by negative movements in the FX discussed above, partially offset by an overall reduction in cost of sales of $33.8 million. This reduction in cost of sales was primarily driven by lower pricing and consumption of diesel of $27.2 million, alongside a decrease in maintenance cost and security cost of $5.5 million and $3.1 million, respectively, coupled with an increased FX loss of $4.4 million included within other cost of sales.
SSA
Revenue for our SSA segment increased by $6.5 million, or 5.6%, to $124.0 million for the fourth quarter of 2023, compared to $117.5 million for the fourth quarter of 2022. Organic revenue increased by $14.1 million, or 12.0%, driven primarily by an increase in escalations and FX resets. The increase in revenue was partially offset by the non-core impact of negative movements in FX rates of $7.5 million, or 6.4%. Year-on-year, within our SSA segment, Tenants increased by 557, including 330 from Colocation and 226 from New Sites, while Lease Amendments increased by 1,030.
Segment Adjusted EBITDA for our SSA segment was $62.4 million for the fourth quarter of 2023, compared to $66.6 million for the fourth quarter of 2022, a decrease of $4.2 million, or 6.3%. The decrease in segment Adjusted EBITDA primarily reflects the increase in cost of sales of $9.0 million and loss allowance on trade receivables of $2.9 million, partially offset by an increase in revenue discussed above. The increase in cost of sales was primarily driven by higher power generation, permits and fees and diesel costs of $4.8 million, $1.6 million and $1.5 million, respectively.
Latam
Revenue for our Latam segment increased by $10.4 million, or 23.8%, to $54.3 million for the fourth quarter of 2023, compared to $43.9 million for the fourth quarter of 2022. Organic revenue increased by $7.3 million, or 16.6%, driven primarily by an increase in fiber, escalations and New Sites. The increase in revenue was also driven by the non-core impact of positive movements in FX rates of $3.1 million, or 7.1%. Year-on-year, within our Latam segment, Tenants increased by 648, including 828 from New Sites and 206 from Colocation, partially offset by 386 Churned, while Lease Amendments increased by 118.
Segment Adjusted EBITDA for our Latam segment was $41.1 million for the fourth quarter of 2023, compared to $31.4 million for the fourth quarter of 2022, an increase of $9.7 million, or 30.8%. The increase in segment Adjusted EBITDA primarily reflects the increase in revenue discussed above.
MENA
Revenue for our MENA segment increased by $1.3 million, or 13.3%, to $10.8 million for the fourth quarter of 2023, compared to $9.5 million for the fourth quarter of 2022. Organic revenue increased by $0.6 million, or 6.4%, driven primarily by New Sites and escalations and grew inorganically in the period by $0.6 million, or 6.6%. Year-on-year, within our MENA segment, Tenants increased by 150, including 109 from the closing of the sixth stage of the Kuwait Acquisition in the third quarter of 2023 and 47 from New Sites.
Segment Adjusted EBITDA for our MENA segment was $7.9 million for the fourth quarter of 2023, compared to $4.4 million for the fourth quarter of 2022, an increase of $3.5 million, or 79.7%. The increase in segment Adjusted EBITDA primarily reflects the increase in revenue discussed above and a decrease in cost of sales of $2.0 million.
Results for the twelve months ended December 31, 2023 versus 2022
During the twelve months ended December 31, 2023, revenue was $2,125.5 million, compared to $1,961.3 million for the twelve months ended December 31, 2022, an increase of $164.2 million, or 8.4%. Organic revenue increased by $723.1 million, or 36.9%, driven primarily by FX resets and escalations. Revenue for the twelve months ended December 31, 2023, included $48.1 million of non-recurring revenue as adjusted for withholding tax from our smallest Key Customer in Nigeria for services previously provided but for which revenue had not been recognized. During the twelve months ended December 31, 2022, non-recurring revenue of $18.0 million was recognized from reaching agreement on certain contractual terms with a Key Customer in Nigeria. Aggregate inorganic revenue growth was $56.8 million, or 2.9%, for the twelve months ended December 31, 2023, driven by the MTN SA Acquisition in May 2022, the GTS SP5 Acquisition in March 2022 and the fifth and sixth stages of the Kuwait Acquisition in September 2022 and August 2023, respectively. The increase in the period was partially offset by the non-core impact of negative movement in FX rates of $615.7 million, or 31.4%.
Adjusted EBITDA was $1,132.5 million for the twelve months ended December 31, 2023, compared to $1,030.9 million for the twelve months ended December 31, 2022. Adjusted EBITDA margin for the twelve months ended December 31, 2023 was 53.3% (twelve months ended December 31, 2022: 52.6%). The increase in Adjusted EBITDA primarily reflects the increase in revenue partially offset by an increase in cost of sales.
Loss for the period was $1,988.2 million for the twelve months ended December 31, 2023, compared to a loss of $469.0 million for the twelve months ended December 31, 2022. The increase in loss for the period reflects the significant impact of an increase in net finance costs, specifically related to the unrealized FX losses on financing of $1,555.4 million. This is driven by the significant devaluation of the NGN as a result of the USD denominated historical internal shareholder loans from Group entities to Nigeria and USD denominated third party debt. As the functional currency of our Nigeria businesses is NGN, these USD balances have been revalued in NGN, resulting in the significant unrealized loss on FX.
Cash from operations and ALFCF for the twelve months ended December 31, 2023 were $902.9 million and $432.8 million, respectively, compared to $966.9 million and $363.1 million, respectively, for the twelve months ended December 31, 2022. The decrease in cash from operations primarily reflects an increase in cash outflows related to working capital changes, mainly driven by a decrease in trade and other payables and an increase in trade and other receivables, partially offset by a decrease in inventories. The increase in cash outflows related to working capital changes was partially offset by an increase in operating profit. The increase in ALFCF is primarily due to the movement in cash from operations explained above and a reduction in maintenance capital expenditure, partially offset by an increase in net interest paid, business combination transaction costs and lease and rent payments made.
INVESTING ACTIVITIES
During the fourth quarter of 2023, capital expenditure (“Total Capex”) was $130.6 million, compared to $195.6 million for the fourth quarter of 2022. The decrease is primarily driven by lower capital expenditure for our Nigeria and SSA segments of $67.2 million and $10.0 million, respectively, partially offset by an increase in capital expenditure of $13.4 million for our Latam segment. The decrease in Nigeria was primarily driven by decreases of $42.0 million related to Project Green, $20.6 million related to maintenance capital expenditure, $6.7 million from New Site capital expenditure and $3.3 million for fiber capital expenditure, partially offset by an increase of $5.6 million in other capital expenditure and $3.9 million in augmentation capital expenditure. The decrease in SSA is primarily driven by decreases of $5.9 million in other capital expenditure and $2.7 million related to refurbishment capital expenditure. The increase in Latam is primarily driven by increases of $17.4 million related to New Sites capital expenditure, $1.7 million related to augmentation capital expenditure and $1.5 million related to maintenance capital expenditure, partially offset by a decrease of $5.0 million related to fiber capital expenditure. Our spending for Project Green was $19.9 million during the fourth quarter of 2023 and spend for the full year 2023 was $103.4 million. Total spend since we began Project Green in October 2022 through December 31, 2023 was $207.0 million. In 2023, we invested $103.4 million of capex on Project Green (vs. guidance of $90-$100 million) and achieved ALFCF savings of approximately $24 million (vs. guidance of $22 million).
FINANCING ACTIVITIES AND LIQUIDITY
Below is a summary of key facilities we have entered into, repaid or amended during the fourth quarter of 2023. Approximate U.S. dollar equivalent values for non-USD denominated facilities stated below are translated from the currency of the debt at the relevant exchange rates on December 31, 2023.
IHS Holding (2020) Revolving Credit Facility
In November 2023, the IHS Holding RCF was further amended and restated to, among other things, extend the termination date to October 2026.
IHS Holding (2022) Bullet Term Loan Facility
In October 2023, the available commitments under the IHS Holding 2022 Term Loan were voluntarily reduced by $100.0 million and the availability period on the remaining balance of $130.0 million in available commitments was extended to April 2024 from October 2023.
As of December 31, 2023, $370.0 million of the IHS Holding 2022 Term Loan was drawn. The majority of the drawn proceeds have been applied toward the prepayment of the IHS Holding Bridge Facility and the U.S. dollar tranche of the Nigeria 2019 Facility. The undrawn portion can be applied toward general corporate purposes.
IHS South Africa Overdraft
IHS SA entered into a ZAR 350.0 million (approximately $19.1 million) overdraft facility agreement in October 2023 (the “IHS SA Overdraft”). The IHS SA Overdraft is governed by South African law and funds borrowed under the facility will be applied towards general corporate purposes. The IHS SA Overdraft will terminate in October 2024.
As of December 31, 2023, ZAR 11.3 million (approximately $0.6 million) of this facility was drawn.
CIV (2023) Term Loan
IHS Côte d’Ivoire S.A. entered into a facility agreement originally in December 2023 with, amongst others, certain financial institutions listed therein as original lenders, split into one tranche with a total commitment of €88.0 million (approximately $97.1 million) (the “CIV 2023 Euro Tranche”), and another tranche with a total commitment of XOF 11.2 billion (approximately $18.8 million) (the “CIV 2023 XOF Tranche” and, together with the CIV 2023 Euro Tranche, the “CIV 2023 Term Loan”). The CIV 2023 Term Loan is governed by French law. Funds under the facility are to be applied towards, inter alia, refinancing certain indebtedness of IHS Côte d’Ivoire S.A. (including the IHS Côte d’Ivoire S.A. Facility) general corporate and working capital purposes, and funding a settlement of intercompany loans.
The CIV 2023 Term Loan has an interest rate of 3.50% plus 3 Month EURIBOR on the CIV 2023 Euro Tranche and 6.50% on the CIV 2023 XOF Tranche, and contains customary information and negative covenants, as well as requirements for IHS Côte d’Ivoire S.A. to observe certain customary affirmative covenants (subject to certain agreed exceptions and materiality carve-outs) and maintain specified net debt to Adjusted EBITDA ratios and interest coverage ratios.
The CIV 2023 Term Loan will terminate in December 2028.
Contacts