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 first quarter ended March 31, 2022.

Sam Darwish, IHS Towers Chairman and Chief Executive Officer, stated, “We had another strong quarter, with Revenue, Adjusted EBITDA, and RLFCF all above our own internal expectations, as well as consensus estimates, and we are now tracking towards the higher end of our initial 2022 revenue and adjusted EBITDA guidance, excluding the benefit from adding in our pending deal in South Africa that we expect to close imminently.

Including the approximately 5,700 towers subject to the imminent completion of our pending deal in South Africa, IHS will own nearly 39,000 towers across 11 countries, making us the 3rd largest independent multinational tower company by tower count. This geographic scale helps diversify our revenue stream, and also positions us in some of the largest emerging markets in the world, including the three largest countries in Africa by GDP – Nigeria, South Africa, and Egypt; and Brazil, which is the largest Latam country by GDP.

In Brazil specifically, we are now the 3rd largest tower operator in the region by tower count after entering the market just over two years ago, and we complimented our tower footprint with the acquisition of I-Systems late last year – a fiber network that we think will become of increasing strategic value with the adoption of 5G. In total, our Latam business generated $119 million of annualized Adjusted EBITDA in 1Q22 including a full quarter pro forma contribution from GTS SP5.

Separately, we have begun working on a plan that we internally refer to as “Project Green” to identify areas where we can further reduce our consumption of diesel as this is the right thing to do both from a sustainability and cost savings perspective. We are excited about the work done to date and look forward to sharing the details with you later this year in the fall.

Lastly, you may recall that our Shareholders Agreement with our pre-IPO shareholders is structured in a manner that enables shares held by these locked-up shareholders to be released from lock-up in blocks every 6 months beginning in mid-April 2022, although for the first three blocks, such sales would need to be undertaken through a registered offering. Having considered, among other things, the current market and trading conditions, including investor feedback on our low free float and trading liquidity post-IPO, our board sub-committee has, in accordance with the terms of the Shareholders Agreement, elected to exercise its right to waive the requirement for the first block of shares, including the MTN priority right shares, to be sold via a registered offering only. This includes up to approximately 78.2 million shares subject to the SHA, comprising 61.6 million Block A shares plus 16.6 million MTN priority right shares, and is effective from May 17, 2022. In theory, the waiver may increase available liquidity in our traded stock, if such shareholders chose to trade in their shares, although some may also be subject to restrictions given their affiliate status, whom we believe currently hold approximately 61 million shares of the 78.2 million shares.”

RESULTS FOR THE FIRST QUARTER 2022

The table below sets forth select unaudited financial results for the quarters ended March 31, 2022 and March 31, 2021: 

Adjusted EBITDA and RLFCF are non-IFRS financial measures. See “Use of Non-IFRS Financial Measures” for additional information and a reconciliation to the most comparable IFRS measures.

Results/comparison of three months ended March 31, 2022 versus 2021

During the first quarter of 2022, revenue was $446.1 million compared to $361.7 million for the first quarter of 2021, an increase of $84.5 million, or 23.4%. Organic growth was $77.6 million, or 21.5%. Organic growth was driven primarily by escalators, power indexation, foreign exchange resets, and lease amendments, as well as new sites and new colocations. Aggregate inorganic revenue growth was $19.3 million or 5.3% for the three month period ended March 31, 2022. The increase in organic revenue in the period was partially offset by a negative 3.4% movement in foreign exchange rates of $12.4 million.

Adjusted EBITDA was $244.9 million for the first quarter of 2022 compared to $215.0 million for the first quarter of 2021. Adjusted EBITDA margin for the first quarter of 2022 was 54.9%. The increase in Adjusted EBITDA primarily reflects the aggregate impact of the increase in revenue discussed above partially offset by increases in cost of sales including higher power generation costs and administrative expenses.

Profit for the period was $16.9 million for the first quarter of 2022 compared to loss of $29.1 million for the first quarter of 2021. The profit for the period reflects the aggregate impact of the increase in revenue discussed above partially offset by an increase in cost of sales, including higher power generation costs and increased administrative expenses. This is offset by a decrease in net finance cost.

Cash from operations and RLFCF for the first quarter of 2022 were $166.6 million and $87.1 million, respectively, compared to $201.6 million and $70.8 million, respectively, for the first quarter of 2021. The decrease in cash from operations primarily reflects the aggregate impact of the increases in cost of sales, administrative expenses and decrease in net working capital offset by increase in revenue discussed above. The increase in RLFCF is due to an increase in operating profit before working capital as a result of an increase in revenue offset with increase in cost of sales, including higher power generation costs and increased administrative expenses as well as a decrease in interest paid due to a change in timing of bond coupon payments post our November 2021 bond refinance. This positive impact however is reduced by higher maintenance capital expenditure, higher lease payments to support growth and higher taxes due to expiring tax credits.

Segment results

Revenue and Segment Adjusted EBITDA:

Revenue alongside Segment Adjusted EBITDA, our key profitability measure used to assess the performance of our reportable segments, for each of our reportable segments was as follows: 

Nigeria

Revenue for our Nigeria segment increased by $59.4 million, or 22.7%, to $320.7 million for the three month period ended March 31, 2022, compared to $261.3 million for the three month period ended March 31, 2021. Year-on-year revenue for the three month period ended March 31, 2022 increased organically by $70.5 million, or 27.0%, driven by an increase in escalations, power indexation, and foreign exchange resets. Tenants also increased by 1,062, including Tenants from 244 net new sites, while Lease Amendments increased by 8,311. Aggregate increases of $70.5 million in organic revenue were partially offset by the impact of negative movements in the Naira to U.S. dollar foreign exchange rate of $11.1 million.

Segment Adjusted EBITDA for our Nigeria segment was $203.0 million for the three month period ended March 31, 2022 compared to $179.9 million for the three month period ended March 31, 2021, an increase of $23.1 million, or 12.8%. The year-on-year increase is primarily due to an increase of $59.4 million of aggregate revenue and a $1.0 million decrease in administrative expenses included within Segment Adjusted EBITDA for the three month period ended March 31, 2022. This was offset by an increase in power generation cost of sales of $38.2 million and an increase in the cost of regulatory permits of $2.1 million.

Sub-Saharan Africa

Revenue for our Sub-Saharan Africa segment increased by $2.5 million, or 3.0%, to $85.6 million for the three month period ended March 31, 2022, compared to $83.2 million for the three month period ended March 31, 2021. Revenue increased organically by $3.0 million, or 3.6%, driven by escalations, new sites, and colocation of key customers. There has also been a net decrease in Tenants of 210, which includes the impact of net Churn of 813 Tenants not relating to Key Customers, of which 383 was churned in 3Q 2021 and 420 was churned in 4Q 2021. Revenue for our Sub-Saharan Africa segment also grew inorganically in the period by $1.4 million from the acquisition of a tower portfolio in Rwanda in April 2021 that added 162 towers and 283 Tenants. Revenue in the period was partially offset by the year-on-year negative impact of movements in foreign exchange rates of $1.9 million or 2.3%.

Segment Adjusted EBITDA for our Sub-Saharan Africa segment was $47.0 million for the three month period ended March 31, 2022 compared to $48.6 million for the three month period ended March 31, 2021, a decrease of $1.6 million. The decrease is primarily due to an increase in power generation and cost of regulatory permits of $0.9 million and $0.8 million respectively, alongside an increase of administrative expenses included within Segment Adjusted EBITDA of $1.8 million, offset by an increase in aggregate revenue of $2.5 million.

MENA

Revenue for our MENA segment increased by $1.9 million, or 28.1%, to $8.6 million for the three month period ended March 31, 2022, compared to $6.7 million for the three month period ended March 31, 2021. The number of towers in our MENA segment increased by 262, 193 of which are related to closing the third and fourth phases of the Kuwait acquisition in April and October 2021, respectively, 70 towers related to new sites constructed in the period and 1 churned in 1Q 2022. Revenue in our MENA segment for the three month period ended March 31, 2022, increased organically by $0.7 million or 10.7%, and grew inorganically in the period by $1.2 million, or 11.2%.

Segment Adjusted EBITDA for our MENA segment was $3.6 million for the three month period ended March 31, 2022 compared to $3.1 million for the three month period ended March 31, 2021, an increase of $0.6 million, or 18.3%. The increase is primarily due to an increase in revenue, partially offset by an increase in cost of sales included within Segment Adjusted EBITDA of $0.7 million, and an increase in administrative expenses included within Segment Adjusted EBITDA of $0.6 million.

Latam

Revenue for our Latam segment increased by $20.7 million, or 197.4%, to $31.2 million for the three month period ended March 31, 2022, compared to $10.5 million for the three month period ended March 31, 2021. Revenue increased organically by $3.5 million, or 33.0%, driven by a net increase in Tenants of 579 and from increases through contractual CPI reset mechanisms. Revenue for our Latam segment grew inorganically in the period by $16.7 million, or 159.4%, which primarily includes the impact of 602 Towers and 705 Tenants added through the Centennial acquisition in Brazil and 2,115 Towers and 2,998 Tenants added through the GTS SP5 acquisition, which closed on March 17, 2022, as well as revenue from our fiber business, I-Systems. Revenue also increased by $0.5 million, or 5.0% as a result of the positive impact of movements in foreign exchange rates.

Segment Adjusted EBITDA for our Latam segment was $22.1 million for the three month period ended March 31, 2022 compared to $7.5 million for the three month period ended March 31, 2021, an increase of $14.6 million, or 196%. The increase is primarily due to an increase in revenue, partially offset by an increase in cost of sales included within Segment Adjusted EBITDA of $2.8 million, and an increase in administrative expenses included within Segment Adjusted EBITDA of $3.2 million mainly as a result of an increase in tower repairs and maintenance and site rental.

INVESTING ACTIVITIES

During the first quarter of 2022, capital expenditures were $117.4 million compared to $94.2 million for the first quarter of 2021. The increase is primarily driven by the Sub-Saharan Africa segment, with an increase in New Site capital expenditures of $3.7 million and an increase in maintenance capital expenditures of $2.4 million. The increase was also driven by the Latam segment, with an increase in fiber business capital expenditure of $12.1 million due to the recent acquisition of I-Systems, offset by a decrease in build to suit expenditure of $2.9 million. This is offset by the decrease in Nigeria segment of $1.6 million.

On November 17, 2021, the Company signed an agreement with Mobile Telephone Networks Proprietary Limited (“MTN South Africa”) to acquire its tower portfolio comprising approximately 5,700 towers and for the provision of Managed Services to MTN South Africa at an additional of over 7,000 sites. The portfolio of approximately 5,700 sites currently has a colocation rate of 1.2x. Under the terms of the agreement, MTN South Africa will also provide a multi-year commitment for a portion of its new towers to be built by the Company. The consideration is ZAR6.4 billion on a debt-free and cash-free basis subject to customary post-closing price adjustments. The transaction will be financed through a combination of cash on hand and / or drawing on available facilities. The transaction is expected to close imminently subject to customary closing conditions. The Group expects to account for its acquisition as a business combination under IFRS 3.

On March 17, 2022, the Company (via its subsidiary IHS Brasil – Cessão de Infraestruturas S.A.) closed the transaction previously announced on January 21,2022 to acquire 100% of São Paulo Cinco Locação de Torres Ltda. (“SP5”), a Grupo Torresur (“GTS”) portfolio company. The SP5 portfolio included 2,115 towers across Brazil. The purchase price of the transaction, on a cash and debt free basis, was $315 million. The Company accounted for this acquisition as a business combination under IFRS 3.

FINANCING ACTIVITIES AND LIQUIDITY

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 March 31, 2022.

The Group ended the first quarter of 2022 with $3,060.3 million of total debt and $508.6 million of cash and cash equivalents.

Full Year 2022 Outlook Guidance

The following full year 2022 guidance is based on a number of assumptions that management believes to be reasonable and reflect the Company’s expectations as of May 17, 2022. Actual results may differ materially from these estimates as a result of various factors, and the Company refers you to the cautionary language regarding “forward-looking” statements included in this press release when considering this information. The Company’s outlook includes the impact of the GTS SP5 acquisition from March 17, 2022 onwards and now includes the impact from the MTN South Africa acquisition excluding power pass through revenue and assuming a June 1, 2022 close. Guidance does not include the newly established Egypt operations.

The Company’s outlook is based on the following assumptions:

• Organic revenue Y/Y growth of approximately 15%
• Average foreign currency exchange rates to 1.00 U.S. Dollar for January 1, 2022 through December 31, 2022 for key currencies: (a) 432 Nigerian Naira; (b) 5.21 Brazilian Real (c) 0.90 Euros (d) 15.95 South African Rand
• Oil assumed at $120 USD/bbl in Q2-Q4 2022
• Build-to-suit of circa 2,350 sites of which ~1,250 sites in Nigeria and ~700 sites in Brazil 

Conference Call

IHS Towers will host a conference call on May 17, 2022 at 8:30am ET to review its financial and operating results. Supplemental materials will be available on the Company’s website, www.ihstowers.com. The conference call can be accessed by calling +1 646 664 1960 (U.S./Canada) or +44 20 3936 2999 (UK/International). The call passcode is 240597.

A simultaneous webcast and replay will be available in the Investor Relations section of the Company’s website, www.ihstowers.com, on the Earnings Materials page.

Upcoming Conferences and Events

IHS Towers management is expected to participate in the upcoming conferences outlined below:

• JP Morgan 50 Annual Global TMT Conference (Boston, MA) - May 23-25, 2022
• RBC Global Communications Infrastructure Conference (Denver, CO) - May 24-25, 2022
• WIA Connect (X) (Denver, CO) - May 23-26, 2022
• Cowen 50 Annual TMT Conference (New York) - June 1-2, 2022
• Credit Suisse 24 Annual Communications Conference (New York) - June 14-15, 2022