IHS Holding Limited — FY2021 Form 20-F
Reporting period: Year ended December 31, 2021. Although the request identifies 2021 Q4, this is an annual report; the filing does not provide a clear standalone fourth-quarter income or cash-flow result. Financial statements are prepared under IFRS and audited by PwC, which issued an unqualified opinion.
Business context
IHS owns and operates shared telecommunications infrastructure, principally towers, serving mobile network operators across nine countries in Africa, Latin America and the Middle East. At year-end it had 31,043 owned or operated towers, 46,414 tenants and a 1.50x colocation rate. Nigeria generated 73% of FY2021 revenue.
Key financial metrics
| Metric | FY2021 | FY2020 | Change |
|---|---|---|---|
| Revenue | $1,579.7 million | $1,403.1 million | +12.6% |
| Operating profit | $388.4 million | $331.9 million | +17.0% |
| Net loss | $26.1 million | $322.7 million | Loss narrowed by $296.6 million |
| Adjusted EBITDA | $926.4 million | $819.0 million | +13.1% |
| Adjusted EBITDA margin | 58.6% | 58.4% | +0.2 percentage points |
| Net cash from operating activities | $750.2 million | $635.3 million | +$114.9 million |
| Net cash used in investing activities | $877.9 million | $758.5 million | Outflow increased $119.4 million |
| Net cash from/(used in) financing activities | $524.3 million | ($128.1 million) | Improved $652.4 million |
Cost of sales was $907.4 million, or 57.4% of revenue, versus $838.4 million, or 59.8%, in 2020. Operating margin was 24.6%, compared with 23.7%. Power-generation costs rose $51.0 million to $267.0 million, reflecting higher diesel costs and consumption.
At December 31, 2021, cash and cash equivalents were $916.5 million, total borrowings were $2.609 billion, and lease liabilities were $376.1 million. Including lease liabilities, management-defined net debt was $2.069 billion and net leverage was 2.2x Adjusted EBITDA, compared with 2.4x in 2020. Available liquidity was reported as $1.186 billion, including $270 million undrawn under the revolving credit facility.
Material changes versus FY2020
- Revenue increased through organic growth, acquisitions and customer activity; this was partly offset by an $84.0 million unfavorable foreign-exchange translation impact. Organic revenue growth was 16.2% as reported by the company.
- Net loss narrowed substantially, primarily because net foreign-exchange losses on financing fell by $244.0 million. Net finance costs declined to $396.5 million from $484.8 million.
- Administrative expenses rose 42.5% to $336.5 million, including higher withholding-tax-receivable impairment, personnel and professional costs, and public-company and financing expenses.
- Capital expenditure increased 75.6% to $402.5 million. Investing cash outflow also included $401.0 million of acquisition consideration and $103.6 million placed in short-term deposits.
- Year-end cash rose to $916.5 million from $585.4 million. Financing included the IPO, which generated $357.7 million net proceeds, and issuance of $500 million each of 5.625% notes due 2026 and 6.250% notes due 2028. Proceeds funded redemption of the $510 million 2025 notes, including premium and accrued interest.
Outlook, risks and unusual items
- Liquidity and outlook: Management said available liquidity and operating cash flow should cover operating expenses, debt service, capital needs and organic growth for the next 12 months. It also expected continued growth investment in 2022, but the filing provides no specific numerical earnings or revenue guidance.
- Growth and transactions: The company completed tower acquisitions in Brazil, Colombia, Rwanda and Kuwait, and acquired a 51% interest in Brazilian fiber business I-Systems. It signed agreements for the South African MTN tower portfolio and, after year-end, the 2,115-tower SP5 Brazil portfolio for $315 million; these transactions remained subject to closing conditions. The Egypt joint venture holds a license and has a stated commitment to a 5,800-site coverage plan over three years, subject to conditions.
- Concentration and collections: MTN Nigeria and Airtel Nigeria represented 55% and 11% of consolidated revenue, respectively. The top three mobile operators in each market collectively accounted for 98% of revenue. Gross receivables over 90 days overdue were $75.5 million, with a $51.0 million impairment allowance.
- Currency and operating costs: Currency movements generated $163.6 million of net foreign-exchange losses in 2021. Diesel and power costs, currency availability and devaluation, inflation, and political and regulatory conditions in emerging markets could affect margins, collections and debt service.
- Debt and execution: Borrowings carry refinancing, covenant and interest-rate risks; some facilities have variable-rate exposure. Ground-lease renewals, customer churn, acquisition integration, permits, contractor performance and power reliability are material operating risks.
- Controls and audit focus: Management concluded disclosure controls were not effective at year-end because of material weaknesses involving complex accounting, property and equipment accounting, and documentation of disputed or deferred revenue. Management reported remediation work, but the weaknesses were not all fully remediated. PwC identified revenue recognition and goodwill impairment testing as critical audit matters.
- Unusual accounting and contingencies: The company recorded $51.1 million of property and prepaid-land-rent impairment, primarily associated with a tower rationalization program. It reported $2.0 million of possible legal contingent liabilities for which no provision was recorded, and a $31.9 million accrual for uncertain regulatory costs in Nigeria.
Important facts for investors to verify
- Review the audited financial statements and reconciliations for Adjusted EBITDA, leverage and cash flow; these non-IFRS measures are not substitutes for IFRS results.
- Confirm the current status and funding, closing conditions and expected returns of the South Africa, Egypt and SP5 transactions, and the integration and performance of recent acquisitions, including I-Systems.
- Assess customer concentration, overdue receivables and the sustainability of the 2021 reversal of trade-receivable allowances.
- Track Naira and other currency movements, foreign-currency access, diesel costs and the extent to which contractual adjustments offset those pressures.
- Monitor debt maturities, refinancing terms, floating-rate exposure, covenant headroom and the availability of cash held in operating subsidiaries.
- Follow remediation of the reported internal-control weaknesses and developments in customer revenue estimates, goodwill valuation, permits, leases and regulatory accruals.