IHS Holding Limited (IHS Towers) — FY2023 Form 20-F
Reporting period: Fiscal year ended December 31, 2023. This is an annual report, not a standalone fourth-quarter filing. Financial statements are prepared under IFRS as issued by the IASB; Adjusted EBITDA is a non-IFRS measure.
Business context
IHS owns and operates shared telecommunications infrastructure, principally towers, across 11 countries in Africa, Latin America and the Middle East. At year-end, it operated 40,075 towers, supported 59,727 tenants and reported a 1.49x colocation rate. Nigeria generated 65.0% of revenue.
Key financial and operating metrics
| Metric | FY2023 | FY2022 |
|---|---|---|
| Revenue | $2.126 billion | $1.961 billion |
| Operating profit | $530.7 million | $312.2 million |
| Adjusted EBITDA | $1.133 billion | $1.031 billion |
| Adjusted EBITDA margin | 53.3% | 52.6% |
| Net loss | $1.988 billion | $469.0 million |
| Cash from operating activities | $853.5 million | $907.3 million |
| Cash and cash equivalents at year-end | $293.8 million | $514.1 million |
- Revenue rose 8.4% in reported dollars. Management attributed $723.1 million of growth to organic factors and $56.8 million to acquisitions, partly offset by a $615.7 million adverse foreign-exchange translation impact.
- Operating margin was approximately 25.0%; cost of sales was $1.183 billion. Power generation costs were $396.7 million, down from $419.2 million.
- Finance costs reached $2.437 billion, versus $872.0 million in 2022. The main driver was $1.713 billion of unrealized financing-related foreign-exchange losses, principally from the Naira’s depreciation against the U.S. dollar.
- Net cash used in investing activities was $722.2 million, compared with $1.517 billion in 2022; net cash used in financing was $162.3 million. Exchange-rate movements reduced cash by $189.2 million.
- Capital expenditure was $586.0 million, down 7.5% year over year. Project Green spending was $103.4 million in 2023.
- Total borrowings, excluding lease liabilities, were $3.511 billion; lease liabilities were $602.0 million. Net debt, including lease liabilities, was $3.819 billion, and management’s net leverage ratio was 3.4x, versus 3.3x in 2022.
- Reported liquidity was $816.3 million: $293.8 million of unrestricted cash and available commitments under group and local facilities. The company said this was sufficient for at least 12 months from issuance of the results.
Changes, outlook and material items
- Despite higher revenue and Adjusted EBITDA, the net loss widened substantially, primarily because of Naira-driven foreign-exchange losses on U.S.-dollar-denominated financing. The Naira reporting rate moved from ₦461.5 per dollar at the start of 2023 to ₦911.7 at year-end; reported revenue and segment Adjusted EBITDA were also negatively affected by the devaluation, partly offset by contract resets.
- FY2023 revenue included $48.1 million of non-recurring revenue from 9mobile for previously provided services not previously recognized. The filing says 9mobile continued to have payment issues. Separately, 9mobile represented 5% of revenue including this one-off item.
- Tenants churned totaled 1,334, including 731 associated with a customer rationalization program. MTN Nigeria selected a competitor to serve approximately 2,500 sites whose IHS lease agreements expire in 2024 and 2025.
- Management described a greater emphasis on balancing revenue growth with cash generation, including operational efficiencies, cost and capital-expenditure reductions, and reviewing the portfolio of markets and assets. The filing does not provide formal quantified FY2024 financial guidance.
- After year-end, Airtel Nigeria committed to take approximately 3,950 tenancies over five years and extended approximately 6,000 existing tenancies through December 2031. IHS also agreed to sell its Peru subsidiary, subject to customary closing conditions.
- Management targets a 50% reduction by 2030 in tower-portfolio Scope 1 and 2 emissions intensity, using 2021 as the baseline. Project Green updated 2,750 sites in 2023; the company said further efforts will be needed to meet the 2030 goal.
- PwC gave an unqualified opinion on the IFRS financial statements, but an adverse opinion on internal control over financial reporting. Management identified a material weakness involving insufficient accounting personnel with expertise in complex matters, including foreign exchange, business combinations and goodwill impairment. Previously identified weaknesses in fixed-asset accounting and disputed or deferred revenue processes were reported as remediated.
- Other notable exposures include customer concentration, foreign-exchange and hard-currency availability, variable-rate debt, diesel and ground-lease costs, customer and ground-lease renewals, regulatory and tax disputes, and political and operating risks in emerging markets. Gross receivables over 90 days overdue were $40.4 million; the impairment allowance was $21.2 million. Possible litigation and claims were $11.9 million, for which no provision was recorded because a loss was not considered probable.
Most important facts for investors to verify
- Whether reported revenue and cash generation can withstand continued Naira depreciation, and how quickly contractual FX resets offset translation and collection pressures.
- The actual revenue exposure to Airtel Nigeria and the extent and timing of any MTN Nigeria site transfers. The filing gives different Airtel Nigeria concentration figures in different sections (16.7% in the results discussion versus 14% in the risk discussion).
- The amount and collectability of overdue receivables, particularly from 9mobile, and whether new customer arrangements result in cash collection.
- The refinancing, repayment and covenant position of debt, including near-term facilities and letters of credit, floating-rate exposure, and the capacity to access U.S. dollars in operating markets.
- Progress in remediating the remaining material weakness, and whether the accounting controls operate effectively for a sufficient period to support a clean future audit opinion on internal controls.
- Whether the Peru sale closes, and the expected effect of any portfolio review, further disposals or reductions in capital spending on cash flow and growth.