Wendel : IHS Holding Limited Announces Second Quarter 2022 Financial Results

FOR IMMEDIATE RELEASE

IHS HOLDING LIMITED REPORTS SECOND QUARTER 2022 FINANCIAL RESULTS

CONSOLIDATED HIGHLIGHTS - SECOND QUARTER 2022

• Revenue increased 16.4% (or 9.9% organically) to $467.7 million
• Adjusted EBITDA was $239.1 million and Adjusted EBITDA margin was 51.1%
• Loss for the period was $177.5 million
• Cash from operations was $216.8 million
• Recurring Levered Free Cash Flow ("RLFCF") was $87.5 million
• Capital expenditures were $146.8 million
• Completed the acquisition of Mobile Telephone Networks Proprietary Limited ("MTN South Africa Acquisition") comprising 5,691 towers in South Africa on May 31, 2022
• Raise 2022 revenue guidance by $10.0 million at the mid-point and reiterate 2022 Adjusted EBITDA, RLFCF, and capital expenditures ("capex") guidance

London, United Kingdom, August 16, 2022. 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 second quarter ended June 30, 2022.

Sam Darwish, IHS Towers Chairman and Chief Executive Officer, stated, "We had a solid quarter despite what continues to be a volatile macro-economic environment across the world, seeing continued organic revenue growth in all our markets, although the higher cost of diesel impacted Adjusted EBITDA while RLFCF benefitted from a favorable withholding tax impact and some timing on maintenance capex. Demand continues to track expectations and based on first half results and our expectations for the back half of the year, we are raising our 2022 guidance for revenue by +$10 million at the mid-point and reiterate our guidance for Adjusted EBITDA, RLFCF, and capex.

Including the 5,691 towers we acquired in South Africa, IHS Towers owns 39,052 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 by GDP, including Nigeria, Brazil and South Africa.

Separately, we upstreamed $147 million from Nigeria through the second quarter of 2022 and as of June 30 we had approximately $67 million in cash in Nigeria. While macro-economic pressures continue to impact Nigeria, we believe we continue to be positioned well with a resilient and growing business in the country.

Shifting to our stock liquidity, as you will recall, in May 2022 our Board exercised its right to waive the registered offering requirement for the first block of shares (the "Block A shares") subject to the lock-up arrangements under our shareholders' agreement. The block included up to approximately 78.2 million shares which would effectively be available to be sold at the discretion of their holders, subject to applicable securities laws. We will continue to evaluate options that we believe will enhance the value of the company, while at the same time we continue to focus on delivering against our publicly stated fundamental objectives and establishing a track record with investors.

Lastly, regarding Project Green, our team, and I personally, have been busy over the last few months analyzing the various opportunities across many of the countries we operate in to reduce our consumption of diesel and reduce our greenhouse gas emissions by either connecting more sites to the grid, which just a few short years ago was not an option in many locations, or adding more battery and solar solutions. We expect to start investing in Project Green in the second half of this year and when we announce Project Green we expect to raise our 2022 capex guidance. When announced, we intend to highlight the attractiveness of the proposed investment together with longer term greenhouse gas emissions reduction

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targets. To give you a sense of the financial opportunity, in the second quarter of 2022 we spent $94 million on diesel plus last year we spent approximately $69 million on diesel generator maintenance. Combined, this equates to nearly $450 million of annualized spend and represents the opportunity set from which we will aim to extract savings."

RESULTS FOR THE SECOND QUARTER 2022

The table below sets forth select unaudited financial results for the quarters ended June 30, 2022 and June 30, 2021:

		Three months ended
	June 30,		June 30,	Y on Y
	2022	2021	Growth
	$'000		$'000	%
Revenue	467,683	401,919	16.4
Adjusted EBITDA(1)	239,113	275,006	(13.1)
(Loss)/profit for the period	(177,497)	105,659	n/a
Cash from operations	216,800	190,632	13.7
RLFCF(1)	87,537	173,905	(49.7)

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.

Results for the three months ended June 30, 2022 versus 2021

During the second quarter of 2022, revenue was $467.7 million compared to $401.9 million for the second quarter of 2021, an increase of $65.8 million, or 16.4%. Organic growth was $39.8 million, or 9.9%. Organic growth was driven primarily by escalations, lease amendments, power indexation and foreign exchange resets, as well as new sites and new colocations. Revenue for the second quarter of 2021 included $24.2 million of non-recurring items that impact the comparison between performance in the second quarter of 2021 and 2022. Aggregate inorganic revenue growth was $34.9 million or 8.7% for the second quarter of 2022. The increase in organic revenue in the period was partially offset by negative movements in foreign exchange rates of $8.9 million or 2.2%.

Adjusted EBITDA was $239.1 million for the second quarter of 2022 compared to $275.0 million for the second quarter of 2021. Adjusted EBITDA margin for the second quarter of 2022 was 51.1%. The decrease in Adjusted EBITDA primarily reflects the increase in cost of sales resulting from higher diesel costs in 2022 largely due to the current situation between Russia and Ukraine, partially offset by the increases in revenue discussed above. Adjusted EBITDA for the second quarter of 2021 also included the $24.2 million non-recurring revenue noted above as well as an additional non-recurring $36.5 million net reversal of loss allowance on trade receivables, therefore Adjusted EBITDA for the second quarter of 2021 included a total non-recurring amount of $60.7 million that impacts the comparison between performance in the second quarter of 2021 and 2022.

Loss for the period was $177.5 million for the second quarter of 2022 compared to profit of $105.7 million for the second quarter of 2021. The loss for the period reflects the impact of an increase in net finance costs mainly due to an increase in unrealized foreign exchange losses on financing and the fair value loss on embedded options within the bonds due to the rise in treasury rates since the end of 2021 and market sentiment driven by events such as the current situation between Russia and Ukraine. The loss for the period is also due to an increase in cost of sales, including higher diesel costs and increased administrative expenses associated with being a public company offset by the increase in revenue as discussed above.

Cash from operations and RLFCF for the second quarter of 2022 was $216.8 million and $87.5 million, respectively, compared to $190.6 million and $173.9 million, respectively, for the second quarter of 2021. The increase in cash from operations primarily reflects the aggregate impact of the increase in revenue discussed above partially offset by an increase in cost of sales and administrative expenses and a decrease in net working capital. The decrease in RLFCF is due to the increase in cash from operations described above, offset by the non-recurring item relating to Adjusted EBITDA for the second quarter of 2021 as described above, an increase in interest paid due to a change in timing of bond coupon payments post our November 2021 bond refinance as well as an increase in income taxes paid.

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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, for each of our reportable segments were as follows:

			Revenue						Adjusted EBITDA
		Three months ended						Three months ended
		June 30,		June 30,						June 30,		June 30,
		2022		2021			Change		2022		2021		Change
		$'000	$'000	%	$'000	$'000		%
Nigeria	321,125	296,610	8.3	183,698	240,267		(23.6)
Sub-Saharan Africa	94,902	83,940	13.1	52,927	46,048		14.9
Latam	42,780	14,227	200.7	30,904	10,406		197.1
MENA	8,876	7,142	24.3	4,170	3,095		34.7
Other	-		-			-	(32,586)	(24,810)		(31.3)
Total		467,683		401,919			16.4			239,113	275,006		(13.1)

Nigeria

Revenue for our Nigeria segment increased by $24.5 million, or 8.3%, to $321.1 million for the second quarter of 2022, compared to $296.6 million for the second quarter of 2021. Revenue increased organically by $30.9 million, or 10.4%, driven primarily by an increase in escalations, lease amendments, power indexation, and foreign exchange resets. Revenue for the second quarter of 2021 includes $24.2 million of non-recurring items that impact the comparison between performance in the second quarter of 2021 and 2022. The increase in organic revenue was partially offset by the impact of negative movements in the Naira to U.S. dollar foreign exchange rate of $6.4 million or 2.2%. Year on year, within our Nigeria segment, tenants increased by 1,083, including 511 from new sites, offset by 10 churned, while lease amendments increased by 9,062.

Segment Adjusted EBITDA for our Nigeria segment was $183.7 million for the second quarter of 2022 compared to $240.3 million for the second quarter of 2021, a decrease of $56.6 million, or 23.6%. The decrease in Adjusted EBITDA primarily reflects the increase in cost of sales resulting from higher power generation costs of $37.1 million in 2022, partially offset by the increases in revenue discussed above. Adjusted EBITDA for the second quarter of 2021 also included the $24.2 million non-recurring revenue noted above as well as an additional non-recurring $36.5 million reversal in loss allowance of trade receivables, therefore Adjusted EBITDA for the second quarter of 2021 included a total non-recurring amount of $60.7 million that impacts the comparison between performance in the second quarter of 2021 and 2022.

Sub-Saharan Africa

Revenue for our Sub-Saharan Africa segment increased by $11.0 million, or 13.1%, to $94.9 million for the second quarter of 2022, compared to $83.9 million for the second quarter of 2021. Revenue increased organically by $3.9 million, or 4.6%, driven primarily by an increase in escalations, new sites and colocation. Revenue for our Sub-Saharan Africa segment also grew inorganically in the period by $10.7 million or 12.7% from the MTN South Africa Acquisition. The increase in organic revenue in the period was partially offset by the impact of negative movements in foreign exchange rates of $3.6 million or 4.3%. Year on year, within our Sub-Saharan Africa segment, tenants increased by 6,610, including 205 from new sites and 7,017 from the MTN South Africa Acquisition in the second quarter of 2022, partially offset by 806 churned of which 803 were churned in 2021, while lease amendments increased by 130.

Segment Adjusted EBITDA for our Sub-Saharan Africa segment was $52.9 million for the second quarter of 2022 compared to $46.0 million for the second quarter of 2021, an increase of $6.9 million or 14.9%. The increase is primarily due to an increase in aggregate revenue of $11.0 million. This is offset by increases in maintenance, diesel and security costs within cost of sales of $1.4 million, $0.9 million and $1.0 million, respectively, and an increase of administrative expenses included within Segment Adjusted EBITDA of $0.4 million.

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Latam

Revenue for our Latam segment increased by $28.6 million, or 200.7%, to $42.8 million for the second quarter of 2022, compared to $14.2 million for the second quarter of 2021. Revenue increased organically by $4.0 million, or 27.9%, driven primarily by an increase in escalations, new sites and colocations. Revenue for our Latam segment also grew inorganically in the period by $23.3 million, or 163.8%, which primarily includes the impact of 2,115 Towers and 2,998 Tenants added through the GTS SP5 acquisition, which closed in first quarter of 2022, as well as revenue from our fiber business, I- Systems. The increase in organic revenue in the period further benefitted from the impact of positive movements in foreign exchange rates of $1.3 million or 9.0%. Year on year, within our Latam segment, tenants increased by 3,969, including 395 from new sites, and 2,998 from our GTS SP5 acquisition in the first quarter of 2022.

Segment Adjusted EBITDA for our Latam segment was $30.9 million for the second quarter of 2022 compared to $10.4 million for the second quarter of 2021, an increase of $20.5 million, or 197.1%. The increase is primarily due to an increase in revenue explained above, partially offset by an increase in cost of sales included within Segment Adjusted EBITDA of $4.2 million as a result of an increase in tower repairs and maintenance and site rental, and an increase in administrative expenses of $5.2 million mainly as a result of an increase in staff costs.

MENA

Revenue for our MENA segment increased by $1.7 million, or 24.3%, to $8.9 million for the second quarter of 2022, compared to $7.1 million for the second quarter of 2021. Revenue in our MENA segment for the second quarter of 2022, increased organically by $1.0 million or 13.5%, and grew inorganically in the period by $0.9 million, or 12.6%. Year on year, within our MENA segment, tenants increased by 232, including 91 from new sites, and 140 from the closing of the fourth tranche of the Kuwait acquisition.

Segment Adjusted EBITDA for our MENA segment was $4.2 million for the second quarter of 2022 compared to $3.1 million for the second quarter of 2021, an increase of $1.1 million, or 34.7%. The increase is primarily due to an increase in revenue, partially offset by an increase in cost of sales of $0.6 million and an increase in administrative expenses included within Segment Adjusted EBITDA of $0.1 million.

INVESTING ACTIVITIES

During the second quarter of 2022, capital expenditures were $146.8 million compared to $76.0 million for the second quarter of 2021. The increase is primarily driven by the Sub-Saharan Africa segment, including an $11.9 million increase in Cameroon due to a license renewal fee and an $8.8 million increase from South Africa due to refurbishment associated with the recent MTN South Africa Acquisition. The increase was also driven by the Latam and Nigeria segments, with Latam having an increase in fiber business capital expenditures of $15.4 million and an increase of $6.8 million of maintenance capital expenditures due to the acquisition of I-Systems and Nigeria having an increase of $16.2 million and $14.3 million from new site capital expenditure and other capital expenditures, respectively, partially offset by decrease in fiber capital expenditures of $3.5 million.

On November 17, 2021, the Company signed an agreement with MTN South Africa to acquire its tower portfolio, comprising of 5,691 towers and for the provision of power Managed Services to MTN South Africa for over 7,000 additional sites. The portfolio of 5,691 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 of ZAR6.4 billion (approximately $409.5 million) was on a debt-free and cash-free basis subject to customary post-closing price adjustments. The transaction was financed through a combination of cash on hand and drawing on available facilities. The transaction closed on May 31, 2022. The Group accounted for its acquisition as a business combination under IFRS 3 in the second quarter of 2022.

FINANCING ACTIVITIES AND LIQUIDITY

Below is a summary of facilities we have entered in to or amended during second quarter of 2022. 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 June 30, 2022.

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The IHS Côte d'Ivoire S.A. Facility was amended and restated on June 15, 2022 (with effect from June 16, 2022) in order to, among other amendments, extend the termination date to June 2024 and amend the applicable interest rates. The interest rate on the IHS Côte d'Ivoire S.A. euro-denominated tranche was reduced to 3.00% plus EURIBOR and the interest rate on the IHS Côte d'Ivoire S.A. XOF-denominated tranche was reduced to 5.00%.

IHS Holding Limited entered into a $500.0 million bridge facility agreement dated August 10, 2021, or the IHS Holding Bridge Facility. The IHS Holding Bridge Facility is denominated in U.S. dollars and funds borrowed under the IHS Holding Bridge Facility can be applied only toward certain acquisitions listed therein. The credit agreement governing the IHS Holding Bridge Facility contains customary information, undertakings, affirmative covenants and negative covenants (including, without limitation, a negative pledge) in each case, subject to certain agreed exceptions and materiality carve- outs. The IHS Holding Bridge Facility was set to terminate 12 months from the signing date of the IHS Holding Bridge Facility (being August 10, 2022) but in May 2022, IHS Holding Limited exercised its option to extend the termination date for a period of six months after its original termination date to February 10, 2023 and the total commitments under the facility were reduced by $38.6 million. As of June 30, 2022, $280.0 million of the IHS Holding Bridge Facility was drawn down.

On May 26, 2022, IHS Towers South Africa Proprietary Limited entered into a R3,470 million (approximately $215.1 million) facility agreement. The facility matures in May 2029 and incurs interest at a rate of 2.75% plus 3 months JIBAR. The credit agreement governing the facility contains customary information and negative covenants, as well as requirements for IHS South Africa to observe certain customary affirmative covenants (subject to certain agreed exceptions and materiality carve- outs) and maintain specified net debt to Adjusted EBITDA ratios and interest coverage ratios. As of June 30, 2022, ZAR 3,400 million (approximately $210.7 million) of this facility has been drawn.

On May 13, 2022, IHS (Nigeria) Limited entered into a credit agreement for NGN10.0 billion (approximately $23.5 million), which we refer to as the IHSN UBA Facility. The IHSN UBA Facility is guaranteed by IHS Holding Limited, INT Towers Limited and IHS Towers NG Limited. The IHSN UBA Facility was issued at a fixed interest rate of 15.0% and will expire in July 2023. As of June 30, 2022, this facility was fully available.

In March, 2022, IHS (Nigeria) Limited entered into a credit agreement for NGN16.1 billion (approximately $37.9 million), which we refer to as the IHSN RMB Facility. The IHSN RMB Facility is guaranteed by IHS Holding Limited, INT Towers Limited and IHS Towers NG Limited. The IHSN RMB Facility was issued at a fixed interest rate of 12.5% and will expire in March 2023. This facility was fully drawn down in April 2022.

On April 18, 2022, IHS Brasil - Cessão de Infraestruturas S.A. entered into a credit agreement for BRL495 million (approximately $94.3 million). It is guaranteed by Skysites Americas S.A., IHS Centennial Brasil Torres de Telecomunicacoes Ltda and IHS SP Locacao de Infraestrutura Ltda and was issued at an interest rate of CDI plus a margin. The facility was to partially fund the GTS SP5 acquisition and was fully drawn down in April 2022. The facility will mature in April 2028.

The Group ended the second quarter of 2022 with $3,741.8 million of total debt and $567.3 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 August 16, 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 includes the impact from the MTN South Africa Acquisition from May 31, 2022 onwards, excluding power pass through revenue. Guidance does not include revenue from the newly established Egypt operations.

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