IHS (IHS) - 2025 Q1 - Quarterly Report

PART I — FINANCIAL INFORMATION This section provides the interim financial statements and management's analysis of financial condition and operational results Item 1. Interim Financial Statements The interim financial statements for Q1 2025 reveal a significant financial turnaround, driven by reduced finance costs and improved operational cash flow, despite continued negative equity Condensed Consolidated Statement of Income/(Loss) and Other Comprehensive Income (Unaudited) The Q1 2025 statement shows a significant shift to net income of $30.7 million from a substantial loss in the prior year, driven by reduced finance costs Condensed Consolidated Statement of Income/(Loss) and Other Comprehensive Income | Metric | Q1 2025 ($ million) | Q1 2024 ($ million) | | :--- | :--- | :--- | | Revenue | 439.6 | 417.7 | | Operating income/(loss) | 163.0 | (7.1) | | Finance costs | (114.3) | (1,563.0) | | Income/(loss) for the period | 30.7 | (1,557.3) | | Attributable to Owners of the Company | 33.1 | (1,553.4) | | Income/(loss) per share ($) - basic | 0.10 | (4.67) | - The company experienced a significant turnaround, shifting from a substantial loss of $1.56 billion in Q1 2024 to an income of $30.7 million in Q1 2025, primarily driven by a massive reduction in finance costs, which were heavily impacted by foreign exchange losses in the prior year[12] Condensed Consolidated Statement of Financial Position (Unaudited) The statement shows total assets of $4.42 billion and total liabilities of $4.60 billion, resulting in a negative equity of $(184.4) million, an improvement from year-end 2024 Condensed Consolidated Statement of Financial Position | Metric | March 31, 2025 ($ million) | December 31, 2024 ($ million) | | :--- | :--- | :--- | | Total Non-current assets | 3,454.9 | 3,352.7 | | Total Current assets | 961.2 | 924.3 | | TOTAL ASSETS | 4,416.1 | 4,277.0 | | Total Non-current liabilities | 3,845.0 | 3,879.2 | | Total Current liabilities | 755.5 | 693.6 | | TOTAL LIABILITIES | 4,600.5 | 4,572.8 | | TOTAL EQUITY | (184.4) | (295.8) | - As of March 31, 2025, the company's total liabilities of $4.6 billion exceeded its total assets of $4.4 billion, resulting in a negative total equity of $(184.4) million, representing an improvement from the negative equity of $(295.8) million at the end of 2024[13] Condensed Consolidated Statement of Changes in Equity (Unaudited) The statement indicates an improvement in total equity, moving from a $(295.8) million deficit to $(184.4) million, primarily due to comprehensive income - Total equity improved during the first quarter of 2025, moving from a deficit of $(295.8) million at the start of the year to a deficit of $(184.4) million at March 31, 2025, driven by a total comprehensive income of $105.9 million for the period[14] Condensed Consolidated Statement of Cash Flows (Unaudited) The statement shows a significant increase in net cash from operating activities to $200.3 million, contributing to a positive net increase in cash and cash equivalents Condensed Consolidated Statement of Cash Flows | Metric | Q1 2025 ($ million) | Q1 2024 ($ million) | | :--- | :--- | :--- | | Net cash from operating activities | 200.3 | 75.8 | | Net cash (used in)/from investing activities | (39.2) | 110.5 | | Net cash used in financing activities | (108.1) | (83.3) | | Net increase in cash and cash equivalents | 53.0 | 103.0 | | Cash and cash equivalents at end of period | 629.0 | 333.2 | - Net cash from operating activities increased significantly to $200.3 million in Q1 2025 from $75.8 million in Q1 2024, demonstrating improved operational cash generation[16] Notes to the Unaudited Condensed Consolidated Interim Financial Statements The notes provide details on segment reporting changes, including the MENA segment's discontinuation, and significant post-period events like asset sales and loan prepayments - The MENA (Middle East and North Africa) segment is no longer a reportable segment from March 31, 2025, onwards, following the sale of Kuwait operations in December 2024 and the decision not to commence operations in Egypt[42] Segment Revenue and Adjusted EBITDA | Segment | Revenue Q1 2025 ($ million) | Revenue Q1 2024 ($ million) | Segment Adjusted EBITDA Q1 2025 ($ million) | Segment Adjusted EBITDA Q1 2024 ($ million) | | :--- | :--- | :--- | :--- | :--- | | Nigeria | 271.4 | 227.7 | 179.2 | 102.9 | | SSA | 120.7 | 131.3 | 71.7 | 69.7 | | Latam | 47.5 | 47.8 | 35.6 | 33.8 | | MENA | — | 10.9 | — | 6.1 | - In Q1 2024, an impairment loss of $87.9 million against goodwill was recognized in the Latam segment, mainly due to the restructuring of customer Oi S.A. in Brazil[54] - Subsequent to the reporting period, on May 20, 2025, the Group agreed to sell 100% of its subsidiary IHS Rwanda Limited for a total consideration of up to $274.5 million, and in April 2025, a Nigerian subsidiary prepaid the outstanding balance of a NGN 132 billion (approx. $85.8 million) term loan[81][82] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2025 revenue growth driven by organic performance, the shift to net income due to reduced finance costs, and strategic initiatives focused on cash flow and debt reduction Overview The overview describes the company as a leading independent shared communications infrastructure provider with a portfolio of 39,212 towers across Africa and Latin America - As of March 31, 2025, the company is one of the largest independent owners and operators of shared communications infrastructure globally, with a portfolio of 39,212 towers across eight emerging markets in Africa and Latin America[85] - The core business involves providing services like Colocation, Lease Amendments, and New Site construction to Mobile Network Operators (MNOs), supporting 59,606 tenants with a Colocation Rate of 1.52x as of Q1 2025[87] Strategic Review The company is conducting a strategic review focused on enhancing shareholder value through commercial progress, governance improvements, asset disposals, and debt reduction - The company is conducting a strategic review aimed at creating shareholder value, with key initiatives including commercial progress, governance improvement, increasing Adjusted EBITDA and cash flow, disposing of certain assets, and reducing debt[89][90] - Excess cash flow generated from these strategic initiatives is expected to be primarily used for debt reduction, though share buybacks or dividends may also be considered[90] Factors Affecting Our Financial Condition and Results of Operations This section details key factors influencing financial performance, including organic growth drivers, foreign exchange and inflation mechanisms, customer concentration, and energy cost management - Key drivers of organic revenue growth are Colocation (adding new tenants to existing towers) and Lease Amendments (adding equipment for existing tenants), which significantly improve margins due to low incremental costs[107][108] - Contracts generally include inflation-linked escalators (tied to local or U.S. CPI) and foreign exchange reset mechanisms, which help mitigate the impact of inflation and currency devaluation, albeit with a time lag[110][99][100] - The company faces significant customer concentration risk, with the top three MNO customers in each market collectively accounting for 97.7% of consolidated revenue in Q1 2025, and MTN Nigeria and Airtel Nigeria alone representing 48.5% and 11.9%, respectively[135] - Exposure to diesel price fluctuations has been significantly reduced following the unwind of a power management agreement in South Africa and the inclusion of a new diesel-linked component in renewed contracts with MTN Nigeria[133][142] Key Financial and Operational Performance Indicators This section outlines key financial and operational performance indicators, including the definition and reconciliation of Adjusted EBITDA, a crucial profitability metric Reconciliation of Income/(loss) for the period to Adjusted EBITDA | Metric | Q1 2025 ($ million) | Q1 2024 ($ million) | | :--- | :--- | :--- | | Income/(loss) for the period | 30.7 | (1,557.3) | | Adjustments (Tax, Finance, D&A, etc.) | 221.9 | 1,742.5 | | Adjusted EBITDA | 252.6 | 185.2 | | Adjusted EBITDA Margin | 57.5% | 44.3% | - Adjusted EBITDA is a key performance measure defined as income/(loss) before items such as income tax, finance costs/income, depreciation & amortization, impairment charges, and other non-core items[158] Results of Operations Q1 2025 results show a 5.2% revenue increase driven by organic growth, a 36.4% surge in Adjusted EBITDA, and a shift to net income due to significantly reduced finance costs - Q1 2025 revenue increased 5.2% YoY to $439.6 million, driven by $107.2 million in organic growth, partially offset by a $74.1 million negative impact from foreign currency translation, primarily the Nigerian Naira[169] - Adjusted EBITDA grew 36.4% YoY to $252.6 million, with the margin expanding to 57.5%, reflecting higher revenue and a $41.6 million decrease in cost of sales driven by lower net FX losses and cost-saving initiatives[172] - The company reported income of $30.7 million compared to a loss of $1,557.3 million in Q1 2024, mainly due to a $1.46 billion decrease in net finance costs as the prior year period included massive unrealized FX losses from Naira devaluation[173] Segment Results Segment results highlight Nigeria's strong revenue and EBITDA growth, SSA's EBITDA improvement despite revenue decline, and the discontinuation of the MENA segment Segment Performance Q1 2025 vs Q1 2024 | Segment | Revenue Change YoY | Adjusted EBITDA Change YoY | | :--- | :--- | :--- | | Nigeria | +19.1% | +74.1% | | SSA | -8.1% | +2.9% | | Latam | -0.5% | +5.3% | | MENA | -100.0% | -100.0% | - Nigeria's revenue grew 19.1% to $271.4 million, and its Segment Adjusted EBITDA surged 74.1% to $179.2 million, as strong organic growth from FX resets and escalations more than compensated for the negative impact of Naira devaluation[176][178] - SSA revenue declined 8.1% due to lower power pass-through revenue in South Africa (which has no impact on profit), but Segment Adjusted EBITDA still grew 2.9% due to associated cost reductions[180][182] - The MENA segment was discontinued following the disposal of the Kuwait business in December 2024, resulting in a year-over-year reduction of $10.9 million in revenue and $6.1 million in Segment Adjusted EBITDA[186] Capital Expenditure Total capital expenditure decreased by 17.8% to $43.6 million in Q1 2025, primarily due to reduced spending in Latam, aligning with the company's cash generation strategy - Total capital expenditure for Q1 2025 was $43.6 million, a decrease of 17.8% from $53.1 million in Q1 2024, primarily driven by lower spending in the Latam segment, aligning with the company's strategy to improve cash generation[188] Liquidity and Capital Resources The company maintains strong total liquidity of $964.8 million, comprising unrestricted cash and available credit facilities, supported by successful upstreaming from Nigerian operations - As of March 31, 2025, the company had total liquidity of $964.8 million, consisting of $629.0 million in unrestricted cash and cash equivalents and $335.8 million available under various credit facilities[196] - The company's Nigerian operations successfully upstreamed $71.5 million to the parent holding company during the first quarter of 2025[197]