IHS Holding Ltd. — FY2022 Form 20-F
Reporting period: Fiscal year ended December 31, 2022; this is an annual report, not a standalone Q4 filing. The company reports under IFRS as issued by the IASB. Amounts below are in U.S. dollars unless noted.
Business context
IHS owns, operates and develops shared telecommunications infrastructure, primarily towers, across 11 countries in Africa, Latin America and the Middle East. At year-end it operated 39,652 towers and supported 58,573 tenants. 2022 expansion included the acquisition of 5,691 South African towers and 2,115 Brazilian towers.
Financial performance and liquidity
| Metric | FY2022 | FY2021 | Change |
|---|---|---|---|
| Revenue | $1,961.3 million | $1,579.7 million | +24.2% |
| Operating profit | $312.4 million | $388.4 million | −19.6% |
| Net loss | $470.4 million | $26.1 million | Loss widened |
| Adjusted EBITDA | $1,031.4 million | $926.4 million | +11.3% |
| Adjusted EBITDA margin | 52.6% | 58.6% | −6.0 percentage points |
| Net cash from operating activities | $907.3 million | $750.2 million | +20.9% |
| Recurring Levered Free Cash Flow | $363.3 million | $406.2 million | −10.6% |
| Capital expenditure | $633.5 million | $402.5 million | +57.4% |
| Cash and cash equivalents | $514.1 million | $916.5 million | −$402.4 million |
Gross profit was $804.4 million, or approximately 41.0% of revenue; operating margin was approximately 15.9%. Net finance costs rose to $856.2 million from $396.5 million, including $364.2 million of net foreign-exchange losses and a $159.9 million fair-value loss on embedded bond options. Higher diesel costs also weighed on results: power-generation costs rose $152.1 million, largely due to higher diesel prices and consumption.
Borrowings were $3.344 billion, excluding $604.5 million of lease liabilities. Management reported net debt, including lease liabilities and net of cash, of $3.435 billion and a 3.3x net leverage ratio, versus 2.2x in 2021. Reported available liquidity was $1.014 billion: $514.1 million cash, $270 million undrawn revolving credit and $230 million undrawn term-loan capacity.
Material changes and unusual items
- Revenue growth included $151.5 million of inorganic growth, mainly from the South African and GTS SP5 acquisitions, partly offset by a $77.3 million adverse foreign-exchange translation impact. Organic growth was $307.4 million.
- Segment revenue rose in Nigeria 17.9%, Sub-Saharan Africa 20.0%, Latin America 168.0% and MENA 22.9%. Latin America’s increase was chiefly acquisition-driven.
- Administrative expenses increased 48.9% to $501.2 million. This included a $121.6 million goodwill impairment in the Latin American tower businesses and $52.3 million impairment of withholding-tax receivables.
- The company recorded a $73.5 million income-tax benefit, primarily reflecting deferred tax benefits; current income-tax expense was $108.8 million.
- Management restated FY2021 and Q1 2022 financial statements for errors in provisional accounting for the I-Systems acquisition. The corrections affected goodwill, non-controlling interest and other reserves.
Outlook, risks and contingencies
The filing does not provide formal FY2023 revenue or earnings guidance. Management said available liquidity and operating cash flow were expected to cover operating expenses, debt service, capital requirements and organic growth for the next 12 months. Its Carbon Reduction Roadmap targets a 50% reduction in tower-portfolio Scope 1 and 2 emissions intensity by 2030, using 2021 as the baseline; Project Green was expected to require approximately $214 million of capital expenditure over 2022–2024. The company reported $103.6 million of Project Green spending in 2022 and forecast $90–$100 million for 2023.
- Revenue is highly concentrated: Nigeria represented 69.0% of FY2022 revenue; MTN Nigeria and Airtel Nigeria contributed 50.1% and 14.3%, respectively. MTN customers accounted for 62% of group revenue.
- Foreign-exchange volatility, limited hard-currency availability, inflation, political and regulatory risk, and customer payment or renewal risk are significant exposures. Gross receivables more than 90 days overdue were $42.3 million, with a $25.4 million impairment allowance.
- Diesel and power costs, ground-lease renewals, and reliance on third-party contractors may pressure margins and service delivery. Approximately 20% of ground leases were due for renewal within 24 months.
- Management identified three material weaknesses in internal control over financial reporting and concluded controls were ineffective at year-end. The independent auditor issued an adverse opinion on internal control, while its opinion on the IFRS financial statements was unqualified. The acquired South African business was excluded from the controls assessment.
- After year-end, the company entered into Nigerian naira facilities with stated first-year interest of 20%, thereafter floating at the Nigerian policy rate plus 2.5%, subject to an 18% floor and 24% cap. As of March 28, 2023, $300.2 million equivalent had been drawn under the term loan; the revolving facility remained undrawn.
- Other post-period matters include Oi Brazil’s March 2023 judicial reorganization, which lists the GTS SP5 contract among its debts; renewal discussions for a Côte d’Ivoire customer MLA; and a planned rationalization of approximately 750 towers and tenants in 2023 with a key Nigerian customer.
- Possible contingent liabilities for litigation and claims were $3.8 million; management said loss was not considered probable and recorded no provision. Capital commitments for property, plant and equipment were $337.0 million.
Investor facts to verify
- Whether revenue growth and cash generation can offset higher power costs, capital expenditure and finance costs.
- Customer concentration, collection of overdue receivables, key contract renewals and the outcome of Oi Brazil’s restructuring.
- Progress on remediation of the three internal-control material weaknesses and integration of the South African acquisition into financial controls.
- Net leverage, debt maturities, covenant headroom, variable-rate exposure and access to U.S. dollars in operating markets.
- Assumptions behind the $121.6 million Latin America goodwill impairment and the achievability, cost and timing of Project Green targets.