CONSOLIDATED HIGHLIGHTS – SECOND QUARTER 2023
- Revenue of $546.2 million increased 16.8% (or 29.7% organically)
- Adjusted EBITDA of $303.7 million (55.6% Adjusted EBITDA Margin) increased 27.0%
- Loss for the period was $1,248.3 million
- Cash from operations was $264.1 million
- Recurring Levered Free Cash Flow (“RLFCF”) was $91.1 million
- Total Capex was $207.0 million
- Revising 2023 guidance for revenue to $2,080-2,110 million, Adjusted EBITDA to $1,130-1,150 million, and RLFCF to $385-405 million. The $110 million revision in revenue guidance includes a $141 million foreign exchange (“FX”) headwind of which $142 million is from the Nigerian Naira (“NGN”) net of FX resets, implying an increase of $31 million had the average FX rates previously assumed in our guidance remained unchanged. Total capital expenditure (“Capex”) guidance of $610-650 million and our net leverage ratio target of 3.0x-4.0x are unchanged.
- The Company’s board of directors has authorized a stock repurchase program for up to $50 million of the Company’s ordinary shares effective as of August 15, 2023 through August 15, 2025
LONDON–(BUSINESS WIRE)–Sam Darwish, IHS Towers Chairman and Chief Executive Officer, stated, “We remain well positioned to take advantage of the strong secular growth trends across our markets, which we expect to continue for years to come. And we are encouraged by the recent policy changes implemented in Nigeria that are intended to put the country on a better economic path. In the near-term, however, these changes will cause some anticipated friction including the significant devaluation of the Nigerian Naira that occurred in mid-June. Subsequently, we are revising our 2023 guidance for revenue, Adjusted EBITDA and RLFCF while maintaining our capex guidance and our target leverage ratio. Our expectation for revenue would have otherwise increased by $31 million had the average FX rates previously assumed in our guidance remained unchanged, reflecting the strength we continue to see in our fundamental business.
For the quarter, the change in FX rates had a $21 million negative impact vs. rates previously assumed in guidance, including a $25 million negative impact from the Nigerian Naira devaluation. Excluding the FX impact, results were ahead of our expectations, driven largely by our Nigeria segment including a pull forward in revenue a quarter earlier than we had anticipated. We will see the full impact of the Nigerian Naira devaluation in our third quarter results, and the impact of our FX resets over third quarter and fourth quarter of 2023, of which 93% of resets are quarterly and 4% monthly.”
RESULTS FOR THE SECOND QUARTER 2023
The table below sets forth select unaudited financial results for the quarters ended June 30, 2023 and June 30, 2022:
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Three months ended |
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June 30, |
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June 30, |
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Y on Y |
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2023 |
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2022 |
|
Growth |
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|
|
$’000 |
|
$’000 |
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% |
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|
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|
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|
|||
|
Revenue |
|
546,204 |
|
|
467,683 |
|
|
16.8 |
|
|
Adjusted EBITDA(1) |
|
303,710 |
|
|
239,176 |
|
* |
27.0 |
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|
Loss for the period |
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(1,248,283 |
) |
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(178,574 |
) |
* |
(599.0 |
) |
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Cash from operations |
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264,132 |
|
|
216,800 |
|
|
21.8 |
|
|
RLFCF(1) |
|
91,080 |
|
|
87,537 |
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|
4.0 |
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|
(1) |
Adjusted EBITDA and RLFCF 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. |
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* |
Re-presented to reflect the remeasurement period adjustments, as required by IFRS 3, in respect of updates to the accounting for the GTS SP5 Acquisition in March 2022 and 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 foreign exchange market by replacing the old regime of multiple exchange rate segments into a single Import and Export (“I&E”) window within which foreign exchange transactions would be determined by market forces. The Group uses the USD/NGN rate published by Bloomberg, which is approximately aligned to the I&E window rate, for Group reporting purposes.
The NGN fell 59.4% between the period immediately prior to the announcement and the month end rate as at June 30, 2023 and continues to experience some volatility. Due to the NGN devaluation, Revenue and Segment Adjusted EBITDA were negatively impacted by $31.5 million and $21.4 million, respectively, within June 2023 when compared to the constant currency amounts had the NGN rate not devalued.
Due to the timing of the devaluation, the average USD/NGN rate used to consolidate the Group results was NGN508.04 for the second quarter of 2023 and NGN 599.34 for June 2023 as opposed to the closing rate of NGN 752.67. If the devaluation occurred at the beginning of the quarter, the impact on reported Revenue and Segment Adjusted EBITDA would have been more significant.
The devaluation of the NGN also resulted in a significant impact on finance costs, specifically related to unrealized foreign exchange losses, for the second quarter of 2023 of $1,154.5 million in our Nigeria segment. This is due to the USD denominated historic shareholder loans from Group entities to Nigeria and the USD denominated third party debt (such as the 2026, 2027 and 2028 Notes). As the functional currency of the Nigeria businesses is NGN, these USD balances have been revalued in NGN resulting in the significant unrealized loss on foreign exchange.
Finally, the Adjusted EBITDA used to calculate the leverage ratio for the second quarter is based on the last 12 months and, therefore, does not fully incorporate the impact from the devaluation.
Results for the three months ended June 30, 2023 versus 2022
During the second quarter of 2023, revenue was $546.2 million compared to $467.7 million for the second quarter of 2022, an increase of $78.5 million, or 16.8%. Organic growth was $139.0 million, or 29.7% driven primarily by escalations, power indexation, foreign exchange resets and Lease Amendments. Aggregate inorganic revenue growth was $18.4 million, or 3.9%, for the second quarter of 2023, driven by the MTN SA Acquisition and the fifth stage of the Kuwait Acquisition. The increase was partially offset by the non‑core impact of negative movements in foreign exchange rates of $78.9 million, or 16.9% of which $74.5 million was primarily due to the devaluation of the NGN.
Adjusted EBITDA was $303.7 million for the second quarter of 2023 compared to $239.2 million for the second quarter of 2022. Adjusted EBITDA margin for the second quarter of 2023 was 55.6% (second quarter of 2022: 51.1%). The increase in Adjusted EBITDA primarily reflects the increase in revenue discussed above, partially offset by an increase in cost of sales resulting from an increase in maintenance and repair costs alongside an increase in administrative expenses within Adjusted EBITDA, resulting from higher employee costs related to the acquisitions listed above and increases in computer and maintenance cost.
Loss for the period was $1,248.3 million for the second quarter of 2023 compared to a loss of $178.6 million for the second quarter of 2022. The increase in loss for the period reflects the significant impact of an increase in net finance costs, specifically related to the unrealized foreign exchange losses on financing the Group’s operations. This is driven by the significant devaluation of the NGN as a result of the USD denominated historic shareholder loans from Group entities to Nigeria and the USD denominated third party debt (such as the 2026, 2027 and 2028 Notes). As the functional currency of the Nigeria businesses is NGN, these USD balances have been revalued in NGN resulting in the significant unrealized loss on foreign exchange.
Cash from operations and RLFCF for the second quarter of 2023 were $264.1 million and $91.1 million, respectively, compared to $216.8 million and $87.5 million, respectively, for the second quarter of 2022. The increase in cash from operations primarily reflects the aggregate impact of the increase in revenue and decrease in administrative expenses discussed above, partially offset by an increase in cost of sales also discussed above. The increase in RLFCF is due to the increase in cash from operations, decrease in income taxes paid and decrease in business combination costs, partially offset by the increase in net interest paid, lease and rent payment made, maintenance capital expenditure and withholding tax.
Segment results
Revenue and Segment Adjusted EBITDA:
Revenue and Segment Adjusted EBITDA, our key profitability measures used to assess the performance of our reportable segments, were as follows:
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Revenue |
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Segment Adjusted EBITDA |
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Three months ended |
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Three months ended |
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June 30, |
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June 30, |
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June 30, |
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June 30, |
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2023 |
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2022 |
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Change |
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2023 |
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2022 |
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Change |
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$’000 |
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$’000 |
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% |
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$’000 |
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$’000 |
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% |
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Nigeria |
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364,592 |
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321,125 |
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13.5 |
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238,448 |
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183,698 |
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29.8 |
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SSA |
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123,393 |
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94,902 |
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30.0 |
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62,933 |
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