IHS (IHS) - 2023 Q3 - Quarterly Report

Cautionary Statement Regarding Forward-Looking Statements This statement warns that forward-looking statements are subject to risks, and actual results may differ materially. Forward-Looking Statements Overview This section outlines forward-looking statements in the Form 6-K, noting inherent risks and potential material differences in actual results. - Forward-looking statements are covered by safe harbor provisions and include information on future results, financial position, industry trends, business strategy, market growth, and the impact of economic factors[3] - Actual results may differ materially due to known and unknown risks, including customer agreement issues, payment volatility, creditworthiness, geopolitical risks, tax law changes, foreign exchange risks, and inability to execute business strategy[4][7] - The statements are based on information available as of the Form 6-K date and are inherently uncertain; the company disclaims any obligation to publicly update or revise them[9][10] Certain Defined Terms This section defines key financial, operational, and geographical terms used throughout the report. Key Definitions This section defines key financial instruments, operational metrics, geographical segments, and customer/entity names used in the report. - Key financial instruments defined include '2026 Notes' ($500 million 5.625% Senior Notes due 2026), '2027 Notes' ($940 million 8.0% Senior Notes due 2027), and '2028 Notes' ($500 million 6.250% Senior Notes due 2028)[11] - Operational terms include 'Churn' (loss of tenancies), 'Colocation' (installing equipment for new tenants on existing towers), 'Colocation Rate' (average tenants per tower), 'New Sites' (build-to-suit towers), and 'Tenants' (distinct customers leasing space)[11][17] - Geographical segments are 'Latam' (Brazil, Colombia, Peru), 'MENA' (Egypt, Kuwait), and 'SSA' (Cameroon, Cote d'Ivoire, Rwanda, South Africa, Zambia)[14][17] PART I — FINANCIAL INFORMATION This part presents the unaudited condensed consolidated interim financial statements and their explanatory notes. Item 1. Financial Statements This section presents the unaudited condensed consolidated interim financial statements, including statements of loss, financial position, equity changes, and cash flows, with explanatory notes. Condensed Consolidated Statement of Loss and Other Comprehensive Income/(Loss) (Unaudited) This statement details the company's financial performance, including revenue, costs, operating profit, finance income/costs, and net loss for the interim periods. | Metric | 3 Months Ended Sep 30, 2023 ($'000) | 3 Months Ended Sep 30, 2022 ($'000) | 9 Months Ended Sep 30, 2023 ($'000) | 9 Months Ended Sep 30, 2022 ($'000) | | :--- | :--- | :--- | :--- | :--- | | Revenue | 467,023 | 521,317 | 1,615,755 | 1,435,132 | | Cost of sales | (365,032) | (297,598) | (949,774) | (818,797) | | Administrative expenses | (93,835) | (91,527) | (291,877) | (284,941) | | Operating profit | 7,478 | 133,859 | 369,248 | 338,998 | | Finance income | 5,823 | 6,412 | 18,233 | 11,035 | | Finance costs | (261,993) | (234,223) | (1,804,222) | (574,081) | | Loss before income tax | (248,692) | (93,952) | (1,416,741) | (224,048) | | Income tax (expense)/benefit | (16,659) | 57,304 | (89,118) | 23,945 | | Loss for the period | (265,351) | (36,648) | (1,505,859) | (200,103) | | Loss per share—basic ($) | (0.79) | (0.09) | (4.49) | (0.58) | | Loss per share—diluted ($) | (0.79) | (0.09) | (4.49) | (0.58) | - The company reported a significant increase in loss for the period, from $-36.6 million to $-265.4 million for the three months ended September 30, 2023, and from $-200.1 million to $-1.51 billion for the nine months ended September 30, 2023, primarily driven by a substantial rise in finance costs[20] - Revenue decreased by 10.4% for the three months ended September 30, 2023, but increased by 12.6% for the nine months ended September 30, 2023, compared to the respective prior periods[20] Condensed Consolidated Statement of Financial Position (Unaudited) This statement provides a snapshot of the company's assets, liabilities, and equity at specific reporting dates. | Asset/Liability Category | September 30, 2023 ($'000) | December 31, 2022 ($'000) | | :--- | :--- | :--- | | ASSETS | | | | Non-current assets | 4,401,704 | 5,067,798 | | Current assets | 1,138,576 | 1,252,935 | | Total assets | 5,540,280 | 6,320,733 | | LIABILITIES | | | | Current liabilities | 1,232,118 | 1,266,387 | | Non-current liabilities | 3,823,368 | 3,694,116 | | Total liabilities | 5,055,486 | 4,960,503 | | EQUITY | | | | Total equity | 484,794 | 1,360,230 | - Total assets decreased from $6.32 billion at December 31, 2022, to $5.54 billion at September 30, 2023, while total liabilities increased from $4.96 billion to $5.06 billion over the same period[23] - Total equity significantly decreased from $1.36 billion at December 31, 2022, to $484.8 million at September 30, 2023, primarily due to accumulated losses[23] Condensed Consolidated Statement of Changes in Equity (Unaudited) This statement details the movements in the company's equity components over the interim periods. - Total equity decreased from $1.36 billion at January 1, 2023, to $484.8 million at September 30, 2023, primarily due to a loss for the period of $-1.51 billion, partially offset by other comprehensive income of $629.8 million[25][26] - Accumulated losses increased significantly from $-3.32 billion at January 1, 2023, to $-4.81 billion at September 30, 2023[25][26] - Other reserves saw a positive change, moving from $-861.3 million to $-321.4 million, largely due to exchange differences on translation of foreign operations[25][26] Condensed Consolidated Statement of Cash Flows (Unaudited) This statement presents the cash inflows and outflows from operating, investing, and financing activities for the interim periods. | Cash Flow Activity | 3 Months Ended Sep 30, 2023 ($'000) | 3 Months Ended Sep 30, 2022 ($'000) | 9 Months Ended Sep 30, 2023 ($'000) | 9 Months Ended Sep 30, 2022 ($'000) | | :--- | :--- | :--- | :--- | :--- | | Net cash generated from operating activities | 224,777 | 286,243 | 703,547 | 625,662 | | Net cash used in investing activities | (188,129) | (239,304) | (638,282) | (1,357,000) | | Net cash (used in)/generated from financing activities | (29,115) | (25,693) | (11,806) | 463,608 | | Net increase/(decrease) in cash and cash equivalents | 7,533 | 21,246 | 53,459 | (267,730) | | Cash and cash equivalents at end of period | 425,436 | 530,468 | 425,436 | 530,468 | - Net cash generated from operating activities decreased by $61.5 million for the three months ended September 30, 2023, but increased by $77.9 million for the nine months ended September 30, 2023, compared to the prior periods[29] - Net cash used in investing activities significantly decreased by $718.7 million for the nine months ended September 30, 2023, primarily due to lower cash consideration paid for business combinations[29] Notes to the Unaudited Condensed Consolidated Interim Financial Statements These notes provide detailed explanations of the accounting policies, estimates, and specific line items within the interim financial statements. 1. General Information This section provides foundational details about the company and the scope of the financial statements. - The financial statements are unaudited condensed consolidated interim statements for IHS Holding Limited and its subsidiaries, incorporated in the Cayman Islands[31] - The reporting periods are the three and nine months ended September 30, 2023, and 2022, presented in U.S. Dollars[32] 2. Significant Accounting Policies This section outlines the key accounting principles and standards applied in preparing the interim financial statements. - The interim financial statements are prepared in accordance with IAS 34 and should be read with the annual financial statements for December 31, 2022, prepared under IFRS[33][34] - New standards adopted in 2023, including amendments to IAS 12 related to Pillar Two Global Anti-Base Erosion Rules, are not expected to have a material impact on net assets, though quantitative impact is still under investigation[39][40] - Operating segments are identified as Nigeria, Sub-Saharan Africa (SSA), Middle East and North Africa (MENA), and Latin America (Latam), based on internal reporting to the chief operating decision maker[42][44] 3. Critical Accounting Estimates and Assumptions This section details the key judgments and estimations made by management that significantly impact the financial statements. - Management's significant judgments and key sources of estimation uncertainty remain consistent with the 2022 annual financial statements, except for specific updates[45][46] - The Directors have adopted the going concern basis, assessing liquidity, financing, economic conditions, and available cash reserves, expecting adequate resources for at least 12 months[47][50] - The Central Bank of Nigeria's unification of foreign exchange markets in June 2023 led the Group to use the Bloomberg USD/NGN rate for translation, aligned with the I&E window (renamed NAFEM)[48] 4. Capital Risk Management This section describes the company's approach to managing various financial risks, including market, credit, and liquidity risks. - The Group is exposed to market risk (foreign exchange and interest rate), credit risk, and liquidity risk, with no changes in risk management policies since December 31, 2022[49][50] | Financial Instrument | September 30, 2023 ($'000) | December 31, 2022 ($'000) | | :--- | :--- | :--- | | Fair value through other comprehensive income financial assets | 10 | 10 | | Interest rate caps | 1,099 | 821 | | Embedded options within listed bonds | 790 | 5,300 | | Foreign exchange swaps | (51,887) | (1,393) | | Total | (49,988) | 4,738 | - Financial instruments are categorized into Level 1 (quoted prices in active markets) and Level 2 (valuation techniques using observable market data), with most derivatives falling into Level 2[53][54] 5. Segment Reporting This section provides financial information broken down by the company's operating segments. - The Group operates in four segments: Nigeria, SSA (Cameroon, Côte d'Ivoire, Rwanda, South Africa, Zambia), Latam (Brazil, Colombia, Peru), and MENA (Kuwait, Egypt), all engaged in leasing tower space and providing related services[57][59][60] - Segment Adjusted EBITDA is the primary measure used by the CODM to assess performance and allocate resources, excluding non-core items[60] Revenues from External Customers (9 Months Ended Sep 30) | Segment | 2023 ($'000) | 2022 ($'000) | | :--- | :--- | :--- | | Nigeria | 1,060,964 | 997,132 | | SSA | 379,034 | 295,331 | | Latam | 145,876 | 116,117 | | MENA | 29,881 | 26,552 | | Total | 1,615,755 | 1,435,132 | Segment Adjusted EBITDA (9 Months Ended Sep 30) | Segment | 2023 ($'000) | 2022 ($'000) | | :--- | :--- | :--- | | Nigeria | 668,330 | 596,756 | | SSA | 194,701 | 163,511 | | Latam | 104,665 | 83,010 | | MENA | 14,205 | 11,616 | | Other | (110,694) | (96,416) | | Total | 871,207 | 758,477 | - Revenue from two key customers represented 60% and 16% of total revenue for the nine months ended September 30, 2023, indicating high customer concentration[69] 6. Cost of Sales This section details the direct costs associated with generating revenue, including power, maintenance, and depreciation. | Cost Item | 3 Months Ended Sep 30, 2023 ($'000) | 3 Months Ended Sep 30, 2022 ($'000) | 9 Months Ended Sep 30, 2023 ($'000) | 9 Months Ended Sep 30, 2022 ($'000) | | :--- | :--- | :--- | :--- | :--- | | Tower repairs and maintenance | 20,364 | 25,134 | 77,762 | 68,391 | | Power generation | 89,883 | 113,604 | 303,815 | 305,858 | | Depreciation | 89,850 | 102,929 | 293,784 | 298,901 | | Net impairment of property, plant and equipment, intangibles fixed assets and prepaid land rent | 103,429 | 3,099 | 108,510 | 1,768 | | Other | 17,504 | 3,698 | 18,870 | 6,430 | | Total Cost of Sales | 365,032 | 297,598 | 949,774 | 818,797 | - Cost of sales increased significantly by $67.4 million (22.7%) for the three months and $131.0 million (16.0%) for the nine months ended September 30, 2023, primarily due to a substantial increase in net impairment of property, plant and equipment and prepaid land rent[70] - Power generation costs decreased for both periods, driven by lower diesel prices and consumption, partially offset by increased electricity costs due to Project Green[70] 7. Administrative Expenses This section outlines the general and administrative overheads incurred by the company. | Expense Item | 3 Months Ended Sep 30, 2023 ($'000) | 3 Months Ended Sep 30, 2022 ($'000) | 9 Months Ended Sep 30, 2023 ($'000) | 9 Months Ended Sep 30, 2022 ($'000) | | :--- | :--- | :--- | :--- | :--- | | Staff costs | 38,210 | 34,323 | 114,765 | 96,172 | | Key management compensation | 4,674 | 5,491 | 12,914 | 13,814 | | Professional fees | 14,231 | 9,628 | 43,634 | 28,240 | | Business combination transaction costs | 161 | 3,685 | 1,647 | 17,928 | | Impairment of withholding tax receivables | 10,508 | 11,422 | 35,112 | 39,141 | | Total Administrative Expenses | 93,835 | 91,527 | 291,877 | 284,941 | - Administrative expenses increased by $2.3 million (2.5%) for the three months and $6.9 million (2.4%) for the nine months ended September 30, 2023, driven by higher staff costs and professional fees[72] - Business combination transaction costs decreased significantly due to fewer acquisition activities in the current periods[72] 8. (Loss Allowance)/Reversal of Loss Allowance on Trade Receivables This section reports the changes in provisions for uncollectible trade receivables. - The Group recorded a loss allowance of $5.2 million for the nine months ended September 30, 2023, compared to a reversal of $3.4 million in the prior year, reflecting increased provisions for doubtful balances[74] 9. Other Income This section details miscellaneous income sources outside of core operations. | Income Type | 3 Months Ended Sep 30, 2023 ($'000) | 3 Months Ended Sep 30, 2022 ($'000) | 9 Months Ended Sep 30, 2023 ($'000) | 9 Months Ended Sep 30, 2022 ($'000) | | :--- | :--- | :--- | :--- | :--- | | Insurance claims | 32 | 70 | 310 | 1,686 | | Other income | 1 | — | 59 | 2,521 | | Total Other Income | 33 | 70 | 369 | 4,207 | - Other income decreased significantly for the nine months ended September 30, 2023, primarily due to a one-off tax indemnity receipt in the prior year[75] 10. Finance Income This section presents income generated from financial activities, such as interest on bank deposits and foreign exchange gains. | Income Type | 3 Months Ended Sep 30, 2023 ($'000) | 3 Months Ended Sep 30, 2022 ($'000) | 9 Months Ended Sep 30, 2023 ($'000) | 9 Months Ended Sep 30, 2022 ($'000) | | :--- | :--- | :--- | :--- | :--- | | Interest income—bank deposits | 5,761 | 3,364 | 17,338 | 10,380 | | Net foreign exchange gain on derivative instruments—realized | — | 1,785 | 420 | 655 | | Fair value gain on interest rate caps | 62 | — | 475 | — | | Total Finance Income | 5,823 | 6,412 | 18,233 | 11,035 | - Finance income increased for the nine months ended September 30, 2023, primarily due to higher interest income from bank deposits[76] 11. Finance Costs This section details expenses incurred from financial activities, including interest, loan fees, and foreign exchange losses. | Cost Item | 3 Months Ended Sep 30, 2023 ($'000) | 3 Months Ended Sep 30, 2022 ($'000) | 9 Months Ended Sep 30, 2023 ($'000) | 9 Months Ended Sep 30, 2022 ($'000) | | :--- | :--- | :--- | :--- | :--- | | Interest expenses—third party loans | 95,500 | 70,149 | 270,491 | 180,463 | | Net foreign exchange loss arising from financing—unrealized | 118,485 | 81,964 | 1,268,855 | 43,302 | | Net foreign exchange loss arising from financing—realized | 10,325 | 56,966 | 117,377 | 120,655 | | Fair value loss on embedded options | 5,260 | 620 | 4,510 | 162,950 | | Total Finance Costs | 261,993 | 234,223 | 1,804,222 | 574,081 | - Finance costs increased dramatically by $1.23 billion (214.3%) for the nine months ended September 30, 2023, primarily due to a significant increase in unrealized foreign exchange losses arising from financing, especially in Nigeria due to Naira devaluation[77] - Interest expenses on third-party loans also increased, contributing to the overall rise in finance costs[77] 12. Taxation This section reports the current and deferred income tax expenses or benefits. | Tax Type | 3 Months Ended Sep 30, 2023 ($'000) | 3 Months Ended Sep 30, 2022 ($'000) | 9 Months Ended Sep 30, 2023 ($'000) | 9 Months Ended Sep 30, 2022 ($'000) | | :--- | :--- | :--- | :--- | :--- | | Current taxes on income | 28,567 | 31,897 | 91,484 | 83,905 | | Deferred income taxes | (11,908) | (89,201) | (2,366) | (107,850) | | Total Taxes | 16,659 | (57,304) | 89,118 | (23,945) | - The Group recorded an income tax expense of $89.1 million for the nine months ended September 30, 2023, a significant shift from a benefit of $23.9 million in the prior year, mainly due to a substantial decrease in deferred income tax benefits[78] 13. Loss per Share This section presents the basic and diluted loss attributable to each common share. | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Loss attributable to IHS common shareholders ($'000) | (263,377) | (30,702) | (1,497,525) | (190,941) | | Basic weighted average shares outstanding ('000) | 334,046 | 331,688 | 333,388 | 330,913 | | Basic loss per share ($) | (0.79) | (0.09) | (4.49) | (0.58) | | Diluted loss per share ($) | (0.79) | (0.09) | (4.49) | (0.58) | - Basic and diluted loss per share increased significantly to $(0.79) for the three months and $(4.49) for the nine months ended September 30, 2023, compared to $(0.09) and $(0.58) respectively in the prior year, reflecting the increased net loss[80] - Potentially dilutive securities were anti-dilutive and did not impact diluted loss per share for the reported periods[80] 14. Property, Plant and Equipment This section provides details on the company's tangible fixed assets, including their net book value, cost, and accumulated depreciation. | Metric | September 30, 2023 ($'000) | December 31, 2022 ($'000) | | :--- | :--- | :--- | | Net book value | 1,754,367 | 2,075,441 | | Cost | 3,114,531 | 3,736,078 | | Accumulated depreciation and impairment | 1,360,164 | 1,660,637 | - Net book value of property, plant and equipment decreased from $2.08 billion at December 31, 2022, to $1.75 billion at September 30, 2023[82] - Impairment in the period ended September 30, 2023, includes $66.3 million from power equipment assets in the SSA segment classified as held for sale and remeasured at fair value less cost to sell[88] 15. Goodwill and Other Intangible Assets This section details the company's intangible assets, including goodwill, customer-related, and network-related assets. | Metric | September 30, 2023 ($'000) | December 31, 2022 ($'000) | | :--- | :--- | :--- | | Net book value | 1,547,359 | 1,812,491 | | Goodwill | 638,538 | 763,388 | | Customer-related intangible assets | 741,321 | 871,964 | | Network-related intangible assets | 133,789 | 147,714 | | Software | 14,935 | 7,913 | - Net book value of goodwill and other intangible assets decreased from $1.81 billion at December 31, 2022, to $1.55 billion at September 30, 2023[89] - An impairment of $28.9 million in the period ended September 30, 2023, relates to a revaluation of customer-related assets in the SSA segment following the classification of power equipment assets as held for sale[92] 16. Derivative Financial Instruments This section provides information on the fair value and impact of derivative financial instruments used for risk management. | Derivative Instrument | September 30, 2023 ($'000) | December 31, 2022 ($'000) | | :--- | :--- | :--- | | Foreign exchange swaps | (51,887) | (1,393) | | Interest rate caps | 1,099 | 821 | | Embedded options within listed bonds | 790 | 5,300 | | Total Fair Value | (49,998) | 4,728 | - The fair value of derivative instruments shifted from a net asset of $4.7 million at December 31, 2022, to a net liability of $-50.0 million at September 30, 2023, primarily due to foreign exchange swaps[94] - The change in fair value of derivative instruments resulted in a loss of $-69.4 million for the nine months ended September 30, 2023, compared to a loss of $-165.1 million in the prior year[94] 17. Trade and Other Receivables This section details the amounts owed to the company from trade and other sources. | Receivable Type | September 30, 2023 ($'000) | December 31, 2022 ($'000) | | :--- | :--- | :--- | | Current | | | | Net trade receivables | 177,114 | 211,025 | | Other receivables | 386,305 | 387,019 | | Total Current Receivables | 629,245 | 663,467 | | Non-current | | | | Accrued income and lease incentive | 62,989 | 35,321 | | Payment in advance for property, plant and equipment | 77,781 | 83,118 | | Total Non-current Receivables | 153,972 | 130,347 | - Current trade and other receivables decreased from $663.5 million at December 31, 2022, to $629.2 million at September 30, 2023, while non-current receivables increased[95] - The Group does not secure collateral for its trade receivables, and all current receivables are due within 12 months[97] 18. Trade and Other Payables This section outlines the amounts the company owes to suppliers and other parties. | Payable Type | September 30, 2023 ($'000) | December 31, 2022 ($'000) | | :--- | :--- | :--- | | Current | | | | Trade payables | 356,145 | 442,959 | | Deferred revenue | 63,941 | 86,363 | | VAT payables | 29,416 | 51,103 | | Total Current Payables | 569,761 | 669,149 | | Non-current | | | | Other payables | 5,493 | 1,459 | | Total Non-current Payables | 5,493 | 1,459 | - Current trade and other payables decreased from $669.1 million at December 31, 2022, to $569.8 million at September 30, 2023, mainly due to a reduction in trade payables and deferred revenue[98] 19. Borrowings This section provides a breakdown of the company's debt obligations, including Senior Notes and bank borrowings. | Borrowing Type | September 30, 2023 ($'000) | December 31, 2022 ($'000) | | :--- | :--- | :--- | | Non-current | | | | Senior Notes | 1,928,762 | 1,920,783 | | Bank borrowings | 1,155,452 | 985,505 | | Total Non-current | 3,084,214 | 2,906,288 | | Current | | | | Senior Notes | 22,692 | 27,060 | | Bank borrowings | 92,721 | 213,576 | | Letters of credit | 342,528 | 197,478 | | Total Current | 457,941 | 438,114 | | Total Borrowings | 3,542,155 | 3,344,402 | - Total borrowings increased from $3.34 billion at December 31, 2022, to $3.54 billion at September 30, 2023, with a notable increase in non-current bank borrowings and current letters of credit[99] - New facilities and drawdowns include the Nigeria 2023 Term Loan (NGN 165.0 billion drawn), I-Systems Facility (BRL 400 million drawn), and IHS Brasil Debentures (BRL 1,200.0 million issued to refinance existing debt)[101][107][117][120][124] - Repayments include the full remaining principal of IHS (Nigeria) Local Facilities (NGN 26.1 billion) and the Naira tranche of the Nigeria 2019 Facility (NGN 88.3 billion) in January 2023[112][115][119] 20. Lease Liabilities This section details the company's obligations arising from lease agreements. | Lease Liability Type | September 30, 2023 ($'000) | December 31, 2022 ($'000) | | :--- | :--- | :--- | | Current | 86,898 | 87,240 | | Non-current | 507,008 | 518,318 | | Total Lease Liabilities | 593,906 | 605,558 | - Total lease liabilities decreased slightly from $605.6 million at December 31, 2022, to $593.9 million at September 30, 2023[131] - The average remaining lease term at September 30, 2023, is 12.33 years[132] 21. Provisions for Other Liabilities and Charges This section outlines provisions made for future obligations, such as decommissioning and site restoration. | Provision Type | September 30, 2023 ($'000) | December 31, 2022 ($'000) | | :--- | :--- | :--- | | Decommissioning and site restoration provision | 85,120 | 85,016 | | Non-current | 84,811 | 84,533 | | Current | 309 | 483 | - The decommissioning and site restoration provision remained stable at approximately $85.1 million at September 30, 2023[134] - This provision covers the estimated costs to dismantle and restore leased sites, discounted using risk-free rates[134] 22. Stated Capital This section provides details on the company's share capital and share premium. | Metric | September 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Number of shares (000's) | 333,193 | 331,920 | | Share capital net of issue costs ($'000) | 99,958 | 99,576 | | Share premium net of issue costs ($'000) | 5,291,405 | 5,212,377 | - Stated capital increased due to shares issued on exercise of options, partially offset by shares repurchased and cancelled through a buyback program[135] 23. Other Reserves This section details the various reserves within equity, including fair value, share-based payment, and foreign exchange translation reserves. | Reserve Type | September 30, 2023 ($'000) | December 31, 2022 ($'000) | | :--- | :--- | :--- | | Fair value through other comprehensive income reserve | 4 | (3) | | Share-based payment reserve | 17,286 | 98,817 | | Foreign exchange translation reserve | 497,610 | (123,745) | | Total Other Reserves | (321,440) | (861,271) | - Other reserves significantly improved from a deficit of $-861.3 million at December 31, 2022, to $-321.4 million at September 30, 2023, primarily driven by a large positive movement in the foreign exchange translation reserve[136] 24. Non-Controlling Interest This section reports the portion of equity in subsidiaries not attributable to the parent company. | Metric | September 30, 2023 ($'000) | September 30, 2022 ($'000) | | :--- | :--- | :--- | | Balance at January 1 | 227,200 | 223,188 | | NCI arising on business combination | 1,922 | 831 | | Loss for the period | (8,334) | (9,162) | | Other comprehensive income | 8,393 | 5,969 | | Balance at September 30 | 229,181 | 220,826 | - Non-controlling interest increased slightly to $229.2 million at September 30, 2023, from $227.2 million at January 1, 2023[137] - I-Systems subsidiary, the only material non-controlling interest, reported revenue of $52.7 million and a loss of $-14.9 million for the nine months ended September 30, 2023[140][141] 25. Share-Based Payment Obligation This section details the expenses and obligations related to share-based compensation plans. - The total share-based payment charge to profit and loss was $9.6 million for the nine months ended September 30, 2023, slightly down from $9.8 million in the prior year[142] - In May 2023, 2,132,134 options were awarded under the Omnibus employee share-based payment plan[142] - The Omnibus options were valued at $49.9 million at issue, with a forfeiture rate of 7% assumed, resulting in an expected charge of $19.6 million over the remaining term[143] 26. Cash from Operations This section reconciles the company's loss before taxation to cash generated from operating activities. | Metric | 3 Months Ended Sep 30, 2023 ($'000) | 3 Months Ended Sep 30, 2022 ($'000) | 9 Months Ended Sep 30, 2023 ($'000) | 9 Months Ended Sep 30, 2022 ($'000) | | :--- | :--- | :--- | :--- | :--- | | Loss before taxation | (248,692) | (93,952) | (1,416,741) | (224,048) | | Operating profit before working capital changes | 232,082 | 270,976 | 874,703 | 745,494 | | Net movement in working capital | 2,355 | 23,214 | (124,275) | (67,895) | | Cash from operations | 234,437 | 294,190 | 750,428 | 677,599 | - Cash from operations decreased by $59.8 million for the three months ended September 30, 2023, but increased by $72.8 million for the nine months ended September 30, 2023, compared to the prior periods[144] - The nine-month increase was driven by higher operating profit, partially offset by increased cash outflows from working capital changes[144] 27. Business Combinations This section describes the accounting treatment and details of recent acquisitions. - The Group applies the acquisition method for business combinations, recording assets and liabilities at fair value[146] - The acquisition accounting for MTN telecom towers in South Africa (5,691 towers) was completed in May 2023, resulting in $64.4 million goodwill[148][149][150] - The acquisition of São Paulo Cinco Locação de Torres Ltda. (GTS SP5) in March 2022 resulted in $54.6 million goodwill, enhancing market presence in Brazil[152][153][154] - IHS Kuwait Limited completed the sixth stage of the acquisition from Zain Kuwait in August 2023, comprising 101 towers, with a net cash consideration of $4.5 million for the 70% controlling interest[156][159][160] 28. Capital Commitments and Contingent Liabilities This section discloses future capital expenditures and potential financial obligations from legal claims. - Capital commitments for property, plant and equipment amounted to approximately $232.1 million at September 30, 2023[161] - Contingent liabilities for legal claims totaled $13.1 million at September 30, 2023, but no provisions have been made as losses are not considered probable[162][163] 29. Events After the Reporting Period This section reports significant events that occurred after the balance sheet date but before the financial statements were authorized for issue. - In October 2023, available commitments under the IHS Holding 2022 Term Loan were voluntarily reduced by $100.0 million, and the availability period for the remaining $130.0 million was extended to April 2024[164] - The IHS Holding RCF termination date was further extended to October 30, 2026, in November 2023[165] - IHS Towers South Africa Proprietary Limited entered into a ZAR 350.0 million (approximately $18.5 million) overdraft facility in October 2023, with ZAR 117.9 million drawn as of November 13, 2023[166] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This part provides management's perspective on the company's financial condition, operational performance, and key influencing factors. Overview IHS Holding is a leading independent owner and operator of shared communications infrastructure in emerging markets, serving MNOs through colocation, lease amendments, and new site construction. - IHS Holding operates 39,739 Towers across seven countries in Africa, three in Latin America, and one in the Middle East, serving approximately 780 million people[168] - The core business involves providing shared communications infrastructure services, including Colocation, Lease Amendments, New Site construction, in-building solutions, and fiber connectivity[170] - As of September 30, 2023, the company's portfolio supported 59,196 Tenants with a Colocation Rate of 1.49x[170] Recent Developments Recent developments include MTN Nigeria's decision to transition services for 2,500 sites and the company's authorization of a $50.0 million stock repurchase program. - MTN Nigeria selected ATC Nigeria to provide services for approximately 2,500 sites currently managed by IHS Nigeria, with contracts expiring in 2024 and 2025[172] - The company's board authorized a stock repurchase program for up to $50.0 million of ordinary shares, effective August 15, 2023, through August 15, 2025[175] - During Q3 2023, 948,101 shares were repurchased and cancelled for $4.8 million under the buyback program[177] Reportable Segments The company's operations are structured into four reportable segments: Nigeria, SSA, Latam, and MENA, assessed using revenue and Segment Adjusted EBITDA. - The four operating segments are Nigeria, SSA (Cameroon, Côte d'Ivoire, Rwanda, South Africa, Zambia), Latam (Brazil, Colombia, Peru), and MENA (Kuwait, Egypt)[178] - Revenue and Segment Adjusted EBITDA are the key metrics used to assess the performance of these reportable segments[179] Our Revenue Revenue is categorized into organic, inorganic, and non-core components, reflecting growth from existing business, acquisitions, and foreign exchange translation impacts. - Revenue is measured in three categories: organic (existing business growth, new Colocation, Lease Amendments, pricing changes, New Sites), inorganic (newly acquired tower portfolios), and non-core (foreign exchange translation impacts)[180][181][182][184] - Foreign exchange resets in Master Lease Agreements (MLAs) help compensate for currency movements, but there is a delay between devaluation and contractual resets[186][187] - The Central Bank of Nigeria (CBN) unified the Nigerian foreign exchange market in mid-June 2023, leading the Group to use the Bloomberg USD/NGN rate for reporting, which was subsequently renamed NAFEM[192] Factors Affecting Our Financial Condition and Results of Operations Financial performance is influenced by colocation demand, lease escalations, new site construction, churn, currency fluctuations, operational costs, customer concentration, and macroeconomic volatility. - New Colocation and Lease Amendments are key organic revenue drivers, improving gross margins and cash flow with limited incremental costs[196][197] - Contractual lease fee escalations, typically linked to CPI, and foreign exchange resets in MLAs contribute to revenue growth[199][200] - New Site construction, a discretionary capital expenditure, drives incremental organic revenue and future Colocation opportunities, with average costs ranging from $40,000 to $110,000 per site[202][204][205] - Churn, the loss of tenancies, impacted 1,122 Tenants in the nine months ended September 30, 2023, including 730 towers from the smallest Key Customer in Nigeria[207] - The Nigerian Naira depreciated significantly in mid-June 2023, from ₦461.5 to $1.00 to ₦752.7 to $1.00, and further to ₦775.6 to $1.00 by September 30, 2023, impacting financial results[215] - Power is the largest operating expense, with diesel price volatility significantly impacting costs, though Project Green aims to reduce diesel consumption through grid connections and solar/battery solutions[229][230][225] - Customer concentration is high, with the top three MNO customers accounting for 96.9% of consolidated revenue for the nine months ended September 30, 2023[233] - Market volatility, including sovereign rating downgrades for Nigeria and macroeconomic issues like global economic conditions and interest rate increases, pose significant risks[235][238][239][241][243][244] Key Financial and Operational Performance Indicators The company assesses performance using revenue growth, Adjusted EBITDA, Adjusted EBITDA Margin, number of Towers, and Colocation Rate, with Adjusted EBITDA being a non-IFRS measure. - Key performance indicators include revenue growth, Adjusted EBITDA, Adjusted EBITDA Margin, number of Towers, and Colocation Rate[249] - Adjusted EBITDA is defined as profit/(loss) before income tax, finance costs/income, depreciation, amortization, impairments, business combination costs, net gain/loss on asset disposal, share-based payment expense, insurance claims, listing costs, and other non-core items[251] Adjusted EBITDA Reconciliation | Metric | 3 Months Ended Sep 30, 2023 ($'000) | 3 Months Ended Sep 30, 2022 ($'000) | 9 Months Ended Sep 30, 2023 ($'000) | 9 Months Ended Sep 30, 2022 ($'000) | | :--- | :--- | :--- | :--- | :--- | | Loss | (265,351) | (36,648) | (1,505,859) | (200,103) | | Adjustments (total) | 497,304 | 311,076 | 2,377,066 | 958,580 | | Adjusted EBITDA | 231,953 | 274,428 | 871,207 | 758,477 | | Total Revenue | 467,023 | 521,317 | 1,615,755 | 1,435,132 | | Adjusted EBITDA Margin | 49.7% | 52.6% | 53.9% | 52.9% | - The Colocation Rate, defined as the average number of Tenants per tower, is a key driver of Adjusted EBITDA Margin, as additional tenants increase revenue with proportionally smaller increases in power costs[257] Explanation of Key Line Items in the Historical Consolidated Statements of Income This section details the components and accounting treatment of key income statement items, including revenue, cost of sales, administrative expenses, finance costs/income, and taxation. - Revenue is generated from Colocation and ancillary managed services, with recognition based on IFRS 16 for lease components and IFRS 15 for service provision[258] - Cost of sales includes power generation (diesel costs), ground lease rental, tower repairs, depreciation, amortization, and impairment of assets[259] - Administrative expenses cover overheads such as staff costs, office rent, professional fees, and depreciation of administrative assets[260] - Finance costs include interest expense, loan fees, unwinding of discount on liabilities, and realized/unrealized foreign exchange losses, while finance income includes interest from bank deposits and FX gains[264] - Taxation comprises income tax, education tax, and deferred taxes, with deferred tax assets recognized only to the extent that future taxable profits are probable[265][266] Results of Operations The company reported a significant increase in net loss for both periods, driven by Naira devaluation and higher impairment charges, while revenue showed mixed trends due to FX impacts. Consolidated Results of Operations | Metric | 3 Months Ended Sep 30, 2023 ($'000) | 3 Months Ended Sep 30, 2022 ($'000) | 9 Months Ended Sep 30, 2023 ($'000) | 9 Months Ended Sep 30, 2022 ($'000) | | :--- | :--- | :--- | :--- | :--- | | Revenue | 467,023 | 521,317 | 1,615,755 | 1,435,132 | | Operating profit | 7,478 | 133,859 | 369,248 | 338,998 | | Loss before income tax | (248,692) | (93,952) | (1,416,741) | (224,048) | | Loss for the period | (265,351) | (36,648) | (1,505,859) | (200,103) | - The Nigerian Naira devaluation in mid-June 2023 negatively impacted Q3 2023 revenue by $180.5 million and Segment Adjusted EBITDA by $105.1 million, also leading to $76.8 million in unrealized foreign exchange losses in finance costs[271][273] - Revenue for the three months ended September 30, 2023, decreased by 10.4% YoY, primarily due to negative FX movements, despite 30.6% organic growth. For the nine months, revenue increased by 12.6% YoY, driven by organic growth and acquisitions, partially offset by FX impacts[274][276] - Cost of sales increased by 22.7% for the three months and 16.0% for the nine months ended September 30, 2023, mainly due to higher impairment costs and unrealized foreign exchange losses in Nigeria[281][288] - Gross margin declined to 21.8% for the three months and 41.2% for the nine months ended September 30, 2023, from 42.9% in the prior year periods, primarily due to increased cost of sales and negative FX impacts on revenue[295][296] - Net finance costs surged by $1.22 billion (217.2%) for the nine months ended September 30, 2023, to $1.79 billion, predominantly due to significant unrealized foreign exchange losses from Naira devaluation on USD-denominated intercompany debt[321][322] - The loss for the nine months ended September 30, 2023, increased to $1.51 billion, reflecting the substantial increase in net finance costs and higher impairment charges[332] Segment Results Segment results show varied regional performance, with Nigeria's revenue impacted by Naira devaluation, while SSA, Latam, and MENA segments demonstrated robust growth. Revenue by Segment (9 Months Ended Sep 30) | Segment | 2023 ($'000) | 2022 ($'000) | Change ($'000) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Nigeria | 1,060,964 | 997,132 | 63,832 | 6.4% | | SSA | 379,034 | 295,331 | 83,703 | 28.3% | | Latam | 145,876 | 116,117 | 29,759 | 25.6% | | MENA | 29,881 | 26,552 | 3,329 | 12.5% | | Total | 1,615,755 | 1,435,132 | 180,623 | 12.6% | Segment Adjusted EBITDA (9 Months Ended Sep 30) | Segment | 2023 ($'000) | 2022 ($'000) | Change ($'000) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Nigeria | 668,330 | 596,756 | 71,574 | 12.0% | | SSA | 194,701 | 163,511 | 31,190 | 19.1% | | Latam | 104,665 | 83,010 | 21,655 | 26.1% | | MENA | 14,205 | 11,616 | 2,589 | 22.3% | | Other | (110,694) | (96,416) | (14,278) | (14.8)% | | Total | 871,207 | 758,477 | 112,730 | 14.9% | - Nigeria's Q3 2023 revenue decreased by 23.6% due to Naira devaluation, but nine-month revenue increased by 6.4% organically, driven by FX resets, escalations, and Lease Amendments, including $48.1 million one-off revenue[335][336] - SSA revenue increased by 16.3% in Q3 2023 and 28.3% for the nine-month period, benefiting from escalations, New Sites, Colocation, and the MTN SA Acquisition[337][340] - Latam revenue grew by 23.2% in Q3 2023 and 25.6% for the nine-month period, driven by fiber growth, escalations, and the GTS SP5 Acquisition[341][342] - MENA revenue increased by 13.3% in Q3 2023 and 12.5% for the nine-month period, supported by New Sites, escalations, and the Kuwait Acquisition[343][344] Capital Expenditure Total capital expenditure showed mixed trends, decreasing in Q3 but increasing for the nine-month period, with notable shifts across Nigeria, SSA, and Latam segments. Capital Expenditure by Segment (9 Months Ended Sep 30) | Segment | 2023 ($'000) | 2022 ($'000) | Change ($'000) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Nigeria | 259,077 | 270,726 | (11,649) | (4.3)% | | SSA | 62,421 | 76,369 | (13,948) | (18.3)% | | Latam | 136,994 | 83,783 | 53,211 | 63.5% | | MENA | 4,579 | 6,160 | (1,581) | (25.7)% | | Other | 1,907 | 850 | 1,057 | 124.4% | | Total | 464,978 | 437,888 | 27,090 | 6.2% | - Nigeria's capital expenditure decreased by 67.1% in Q3 2023, mainly due to reductions in maintenance, Project Green, and New Site capital expenditure[357] - Latam's capital expenditure increased significantly by 78.2% in Q3 2023 and 63.5% for the nine-month period, driven by New Site construction, corporate capital expenditure, and fiber business investments[363][364] Liquidity and Capital Resources The company maintains liquidity through cash flow, equity, and debt, with operating cash flow increasing, investing cash flow decreasing, and financing activities shifting to a net outflow. - As of September 30, 2023, total liquidity was $1.04 billion, comprising $425.4 million in unrestricted cash and cash equivalents, and available commitments under various credit facilities[368] - Net cash generated from operating activities increased by $77.9 million for the nine months ended September 30, 2023, to $703.5 million[375] - Net cash used in investing activities decreased by $718.7 million for the nine months ended September 30, 2023, primarily due to lower cash consideration paid for business combinations[378] - Net cash used in financing activities increased by $475.4 million, resulting in a net cash outflow of $11.8 million for the nine months ended September 30, 2023, compared to a net inflow in the prior year, driven by decreased loans received and increased interest payments and share buybacks[380] - The company manages various debt facilities, including IHS Holding RCF ($300.0 million, extended to Oct 2026), IHS Holding 2022 Term Loan ($600.0 million, $370.0 million drawn), Senior Notes (2026, 2027, 2028), and numerous regional bank borrowings and letters of credit[382][389][392][399][401][404][410][419][440][443][445][447][451][456][458][462][463][464][465][466] - There are no off-balance sheet arrangements[467]