IHS - Earnings Call - Q4 2021
March 15, 2022
Transcript
Speaker 0
Good day, and welcome to the IHS Holding Limited Results Call for the Three Month Period and Full Year Ended 12/31/2021. Please note that today's conference is being webcast and recorded. At this time, I'd like to turn the conference over to Colby Seinsel. Please go ahead, sir.
Speaker 1
Thank you, operator. Thanks also to everyone for joining the call today. I'm Colby Seinacel, new SVP of Communications here at IHS. With me today are Sam Darwish, the chairman and CEO of IHS Towers, Adam Walker, CFO, and Steve Houdin, deputy CFO. This morning, we published our financial statements for the three month period and fiscal year ended 12/31/2021 on the investor relations section of our website and issued a related earnings release and presentation.
These are the consolidated results of IHS Holding Limited, which is listed on the New York Stock Exchange under the ticker symbol IHS, which comprises the entirety of the group's operations. Before we discuss the results, I would like to draw your attention to the disclaimer set out at the beginning of the presentation documents on slide two, which should be read in full along with the cautionary statement regarding forward looking statements set out in our earnings release and annual report on form 20 f. In particular, the information to be discussed may contain forward looking statements, which by nature involve known and unknown risks, uncertainties, and other important factors, some of which are beyond our control that are difficult to predict, and other factors which may cause actual results, performance, or achievements, or industry results to be materially different from any results, future results, performance, or achievements, or industry results expressed or implied by such forward looking statements, including those discussed in the risk factors section or 20 f filed with the Securities and Exchange Commission today and our other filings with the SEC. We'll also refer to non IFRS measures that we view as important in assessing the performance of our business.
Reconciliation of non IFRS metrics to the nearest IFRS metric can be found in our earnings presentation, which is available on the investor relations section of our website. And with that, I'd like to turn the call over to Sam Darwish, our chairman and CEO.
Speaker 2
Thanks, Colby. Welcome, everyone. Thanks for joining our q four and the financial year twenty twenty one earnings results call, the second such call following our listing on the New York Stock Exchange last October. Welcome also to Colby who just joined us at the March. Today, I'm going to run through our 2021 highlights, an amazing year for IHS, and also touch on how we are building a global digital infrastructure company that we believe will deliver long term growth and value creation for our shareholders.
I will also discuss how our focus on sustainability is core to our business model, a focus that has been at the heart of IHS since I founded the company in 02/2001. Then I will turn things over to Adam and Steve to take you through the results in greater details, after which we will open the line for q and a. Slide four of the presentation highlights IHS key accomplishments in 2021, many of which occurred during the fourth quarter, a very exciting time for us. As the leading independent multinational tower company focused solely on emerging markets, IHS ended 2021 with over 31,000 towers spanning nine countries on three continents. We continue to focus intently on executing our organic and inorganic growth strategy, including our objectives to further diversify our asset base and lower our cost of capital, and we are pleased with the multiple steps we have taken recently in support of this strategy.
With our current and near term growth driven largely by the implementation of four g in our main markets of Nigeria and Brazil, we are very happy to see that five g is now on the horizon as well, and our recent acquisitions are all designed to position IHS to benefit from the coming technological transition. In addition to our October IPO on the New York Stock Exchange that brought new equity capital and public shareholders into the company, IHS executed a successful $1,000,000,000 bond offering and refinancing in November, which lowered our cost of debt and cost of capital. In terms of entering new geographies, IHS also undertook several important steps in q four to diversify into attractive markets in a disciplined fashion. In October, we entered Egypt through a licensed partnership, and we are in discussions with the carriers there regarding commercial opportunities. More significantly, in November, we announced an agreement to acquire approximately 5,700 towers in South Africa from MTN, which will make IHS the leading independent tower core in Africa's most advanced economy.
Together, Egypt and South Africa have over 160,000,000 in total population. These two transaction further the transactions further cement IHS stature as the leading tower company on the African continent as we will now be serving the three largest economies. And importantly, five g is starting to become a reality in our markets. Nigeria just recently started issuing spectrum, and South Africa is expected to do that shortly. In Brazil, where five g spectrum has also, just been auctioned, we closed the TIM fiber transaction early in November to create iSystems, a leading fiber company in Brazil.
The transaction further builds upon our entry into LatAm, which included the acquisitions of Skyside and Centennial Brazil and Colombia earlier in 2021. Moreover, we have continued our Brazilian growth in 2022 as we announced an agreement in January to acquire the GTS SP five portfolio of more than 2,000 towers that complements our existing tower portfolio. When GTS closes imminently, IHS will have over 7,000 towers and a fiber network in LatAm in just over two years following our strategic entry there. I'm also delighted with the financial performance of the group in 2021. In financial year twenty one, we delivered 12.6% reported growth and 16.1% on an organic basis versus, financial year twenty.
Demand for communications continue to grow globally, and our two principal customers in Nigeria again announced strong results this past quarter, driven particularly by data uptake. In 2021, IHS added 3,236 net towers, including 1,348 we constructed ourselves as well as 3,550 tenants and 9,141 new lease amendments. Moreover, we expanded our EBITDA margin in 2021 versus '20 even in the face of rising rising energy prices versus the lows of 2020. Overall, we remain pleased regarding our financial position and the significant opportunities ahead of us. Although, as you will hear from Adam and Steve, we are focused on mitigating the impact of the increased macro volatility we are seeing in our markets in the form of higher energy prices, upward inflationary pressures, rising interest rates, and supply chain disruptions, not to mention the increased global political uncertainty from Russia's invasion of Ukraine, of course.
As for COVID, while we have experienced no material financial impact from it, we remain vigilant regarding its potential impact. On this front and beyond, we continue to broaden and deepen our commitment to sustainability through numerous initiatives that I will discuss shortly in greater details. I mentioned earlier that I would discuss some of the steps we are taking to build a world class global company in the digital infrastructure. So I wanted to highlight some of the senior members of the IHS team who have joined us recently as we work to take our company to the next level. As you heard, Colby Synesael joined us two weeks ago from Cohen as senior vice president of communications to direct our investor relations and communications program and serve on the executive committee.
Colby was most recently the number two ranked research analyst in the communications infrastructure sector in The US, where he covered American Tower, SBA, Crown Castle, among other top companies. We anticipate participating in more investor events to enable investors to become familiar with the team, our company, and our strategy, and we look forward to continuing to engage with investors. Furthermore, Bill Bates joined IHS at the start of 2022 as senior vice president and chief strategy officer and a member of the executive committee. Bill will be responsible for the group's organic and inorganic strategy, running the m and a and commercial functions while complementing Steve's previously announced transition to CFO starting April 1 upon Adam's retirement. Bill brings over twenty years experience in the telecommunications sector and was instrumental in driving international growth throughout emerging markets for SBA communications during his fifteen years there.
Finally, I'll be remiss if I didn't specifically thank Adam Walker, our CFO, on this, his last earnings call before his retirement on March 31, ending an executive career during which he has served as group CFO for twenty years consecutively, culminating in his contribution to IHS during the last five years with us. Adam was instrumental in building out a public company level corporate reporting and finance function on a global scale and guiding IHS through our multiple bond issuances and recent IPO as well as serving on the executive committee. I congratulate Adam on his retirement, of course, and welcome Steve to the role of the CFO. Turning to slide five, IHS enters its twenty first year of operations in a strong position and firmly focused on executing its strategy of becoming the world's leading digital infrastructure company targeting emerging markets. I mentioned the South African and GTS acquisitions last slide, but saved the punchline for here.
I am proud to say that pro form a for the anticipated closure of these transactions, IHS will become the third largest independent multinational tower company globally by tower count based on the current market with nearly 39,000 towers across 11 countries in Africa, LatAm, and The Middle East that collectively serve over 760,000,000 people. Not only we are the largest multinational power code that solely targets emerging markets on a global level, IHS will be pro form a the market leading independent power code in eight out of our 11 countries and then the third largest in Brazil. Our commitment to Africa is as strong as ever, as you can see from the South African deal, but we are also excited to be further building upon our successful 2022 entry 2020 entry into LatAm and MENA as demonstrated by the Skyside, Centennial, iSystems, and GTS transactions in LatAm and our entry into Egypt, of course. The markets in which we operate have attractive population growth and rely on wireless for connectivity but are behind the developed world in terms of wireless technology. The majority of our markets are still rolling out four g, although five g is now out there on the horizon in several key markets for us, which is exciting news for us in terms of future organic growth opportunities.
Nigeria today, for example, is only forty one percent three g, four g penetrated. Although in December, the country conducted its first option of five g spectrum to enable the winning carriers to begin to develop the the technology locally. We expect to see proof of concept type rollouts in 2022 for which we already have orders, with commercial rollouts beginning in 2023 and onwards. In Brazil, we also saw five g spectrum allocation takes place in November, where the three key carriers, TIM, Vivo, and Claro, each secured five g spectrum. As people will have seen more recently, the old mobile breakup has now received regulatory and competition approval and hence hence clears the way for the three carriers to integrate that carrier consolidation.
We believe this will provide further momentum in the communications infrastructure landscape in Brazil. And while we have de minimis o mobile exposure, we believe the o mobile breakup will pave the way for the remaining carriers to reinvigorate the rollout plans, now that they know the shape of their respective networks. These wireless technology trends drive our organic growth prospects as we provide collocation, lease amendments, and new sites to carriers. On slide six, I wanted to highlight our historical growth and summarize our strategy. As you can see, our long term revenue CAGR through 2021 is nearly 12% in dollar terms, and our EBITDA CAGR is over 19%, reflecting the attractive growth drivers in our markets I mentioned earlier as well as our diversification program starting in 2020.
As I have noted before, our business model is very similar to The US, our co model, while our emerging market footprint provides us access to attractive secular growth going forward. There are two critical elements of our strategy. First, we will continue to grow organically, focusing on leasing up our existing towers through collocation and improving margins through lease amendments as our customers add new technologies to support their offerings. We are fundamentally a tower's business, but we plan to continue to enhance our revenue through other service such as fiber, data centers, small cells, DAS, rural. In other words, ancillary telecom infrastructure that fits our business model and our return expectations and helps us further embed with the customers by providing solutions they need.
Second, we continue to look to diversify our asset base through adding new portfolios of towers as our diversification strategy is aimed at growth. We're also lowering our group cost of capital. We understand that investors would prefer to see Nigeria as a smaller portion of our overall business, but this won't happen overnight as Nigeria has its own very strong growth characteristics, which we love. And we are and will be disciplined in executing in executing our inorganic growth strategy. Broadly, we look to acquire towers from the carriers as we have done successfully in the past or to buy existing tower codes as we have also done several times or to enter new markets by focusing on BTS for carriers as we have as we are doing in in Egypt at the moment.
Communications infrastructure is a huge landscape of opportunity, and we believe that there are very, very few other companies that are focused on emerging markets globally like we are. Finally, for me on slide seven, I mentioned that our focus is not just on financial performance, but also on sustainability, which is at the core of our business. First and foremost, we believe that our business model is inherently sustainable and that we deliver shared infrastructure solutions that promote digital connectivity and inclusion and improve the lives of the communities we serve. This encourages greater access to education, health care, and financial and government services, while the infrastructure sharing reduces the environmental footprint of the telecom landscape in our geographies. Imagine the potential differences in the lives of the inhabitants of a small village in Nigeria after gaining access to the Internet and what that could mean for improving their well-being as they access such service such services.
Not to mention the potential positive environmental impact from increased telecommunications and less driving. It can feel that sometimes the s in ESG doesn't receive as much attention from others compared to the e, for example, but is a crucial focus of ours and a benefit delivered by our business model. In 2021 and q four, we continue to advance our ESG efforts on multiple fronts across our markets, delivering numerous initiatives devoted to education, health care infrastructure, and combating COVID nineteen as we have been doing for many years. We are also gratified to have been recognized on multiple occasions for this work in our communities. Importantly, in September, we launched the frontline workers initiative, a program through which we will pay for the entirety of a college education at the top school for the qualifying children of those of our employees who have worked so hard during the pandemic to maintain the towers and network performance in such a difficult period.
We recognize their efforts. We already have students enrolled in the program across seven U universities at the moment, and I believe that education is empowering and life changing. And through this initiative, we are creating opportunities that simply do not exist for many children in our markets. I'm very, very proud about this project in particular. Furthermore, I am pleased to highlight that in January 2022, we expanded our partnership with UNICEF to the group level, announcing a three year international partnership to support the Jiga initiative's objective to map the Internet connectivity of all schools worldwide.
Through this three year partnership with UNICEF, which also includes a contribution of $4.4500000.0 dollars, the IHS team will work closely with GIGA to help strengthen its work mapping schools and their connectivity levels on an open source map using machine learning and satellite imagery. Importantly, on the environmental front, we have continued evolving the analysis of our scope one and scope two greenhouse gas emissions in connection with developing a carbon emissions reduction strategy that we anticipate announcing in 2022. Investing further to replace diesel generation where we can with the latest renewable technology not only makes environmental sense to reduce direct c o two emissions, but it also makes smart business sense in terms of our desire to drive OpEx and CapEx out of the business. We look forward to sharing our progress on this topic with you later this year. As I believe strongly and I have said repeatedly, in emerging markets, there is no way you can become of scale unless you operate as a long term sustainable business.
You need to be accretive to your environment as the resources around are limited. This is not a tick the box exercise for us, and it's it's but it's something that that I'm very passionate about. I look forward to sharing our fourth annual annual sustainability report with you in q two and to future announcements in this area. And with that, I will turn the presentation over to Adam and Steve to walk you through the results.
Speaker 3
Thanks, Sam, and hello, everyone. Today, I will cover our key tower, tenant, and lease amendment KPIs and discuss our revenue, EBITDA, and RLFCF results for the year just ended. Turning to slide eight. As mentioned, the business performed really well in 2021, and you can see our towers, tenants, and lease amendments have all increased versus the prior year. Moreover, IHS delivered double digit growth in both consolidated revenue and adjusted EBITDA in 2021 versus 2020, whilst expanding our EBITDA margins, and our recurring leverage free cash flow grew by 8% versus the prior year.
Our level of investment in CapEx to grow the business organically increased by over 75%, and given our high levels of cash generation, our consolidated net leverage ratio has decreased versus the prior year despite the inorganic activity. Turning to slide nine. Our tower count is now over 31,000, up by over 3,000. This was driven largely by our acquisitions in LatAm and the ongoing new site programs there as well as the new site activity in Nigeria, with both new build programs accounting for most of more than 1,300 towers that we built during the year, 597 of which in Nigeria and 600 in LatAm. Please note that unlike The US, our markets have characteristically de minimis churn.
Total tenants grew 8.3% year on year to 46,414 with the colocation rates at 1.5. Two things to remember in relation to the colocation rate, which we define as total number of tenants divided by total number of towers. First, lease amendments, which are a significant factor in the growth in our Nigerian segment, are not included. Second, when you are a significant acquirer and builder of towers as we are, then you are typically adding to the denominator period on period even as we continue to lease up the more mature parts of our portfolio. We see no reason why we can't get to two times or greater on our overall portfolio over the long term as our more mature portfolios of towers currently are.
Lease amendments increased by over 50% year on year as our customers added equipment to their sites, particularly three g and four g upgrades in Nigeria. On slide 10, you can see our consolidated revenue for both q four and full year '21. In the full year and in q four, IHS delivered both double digit reported and organic revenue growth. Full year '21 reported revenue of almost 1,600,000,000.0 grew by 12.6%, and full year organic revenue growth was 16.1%. It has been another strong year for top line growth led by Nigeria and LATAM.
As a reminder, in the chart, we've called out the 24,000,000 of revenue recognized in q two twenty one, which, although normal course of business as previously discussed, nevertheless inflated the usual quarterly run rate. Overall, we continue to grow well in line with our stated objective of seeking double digit revenue growth on an annual basis in dollar terms, and Steve will shortly discuss our guidance on this metric and others for 2022. Slide 11 has the components of our revenue growth. Organic revenue growth was driven primarily by lease amendments, escalators, and FX resets as well as new colocations and new sites, with the escalators and FX resets together more than offsetting the negative FX impact of 6%. Inorganic growth was 2.4% and included the SkySide, Centennial, and TIM fiber acquisitions in LatAm and the acquisition of an additional a 162 sites in Rwanda and a 193 in Kuwait pursuant to our 2020 purchase from Zane, all of which we've previously discussed.
The q four comparison, which is shown in your appendix, shows our organic revenue growth at 14.5%, inorganic growth of 3.2%, and a negative 5.6% impact from FX. Slide 12 covers adjusted EBITDA and adjusted EBITDA margins. In the full year, we generated strong consolidated adjusted EBITDA and margins, although these results were impacted by higher power generation costs as we anticipated and have discussed previously as well as incremental costs associated with our transition to public company life. Adjusted EBITDA in the full year was 926,000,000, a 13.1% increase on 2020, and adjusted EBITDA margin was 58.6%, up from 58.4% last year. Again, we point out that this year includes a $61,000,000 impact in q two relating to the 24,000,000 revenue I just mentioned and a $37,000,000 bad debt reserve release that, again, we previously disclosed.
The increase in adjusted EBITDA primarily reflects the increase in revenue, partially offset with year on year increases in cost of sales mainly due to higher power generation costs and increased staff costs and professional fees. Power generation cost of sales increased by $51,000,000 primarily in our Nigeria segment due to a 32% higher US dollar denominated cost of diesel as well as a 14% year on year increase in overall consumption resulting from increased tenant and lease amendment activity. We continue to mitigate the pressure of the increase in oil prices by forward buying where possible, looking at both international and local suppliers, as well as prioritizing alternative sources of power solutions to reduce our overall dependency on diesel. More to come from Steve shortly on power costs and thoughts for 2022 given the recent increase in crude prices. In terms of q four, we generated adjusted EBITDA of 217,000,000, a naught point 9% increase.
Adjusted EBITDA margin decreased to 52.1% from 57.9 due to the concentration in the quarter of the increased public company costs and also higher power generation costs. And on slide 13, we review our recurring levered free cash flow, which we report in a manner consistent with our US peers. We generated RLFCF of $4.00 6,000,000 in full year '21, an increase of 31,000,000 or 8.4%, but this does include the $61,000,000 positive impact that I've just called out. While adjusted EBITDA was higher for the year as discussed, this growth was partially offset by a 19,000,000 increase in revenue withholding tax due to higher revenue growth in Nigeria, higher lease payments to support growth, and higher taxes due to expiring tax credits. It also includes higher interest costs from the new bond we issued in q four and an increase in the Nigerian education tax rate.
Our RLFCF cash conversion was 43.8%. In terms of q four, RLFCF was $88,000,000, a decrease from the prior period driven largely by the timing of maintenance CapEx incurred in q four twenty as well as higher lease payments in the current period resulting from the assets acquired during 2021. Additionally, interest was impacted negatively by 10,000,000 from our bond transaction in q four from early settlement of accrued interest on the prior bonds and the increased interest quantum on the new bonds. Our RLFCF cash conversion rate decreased to 40.4% as a result. And with that, just as I should be relinquishing all matters CFO wise formally in two weeks' time, let me pass the baton to Steve to take you through the rest of the presentation.
Speaker 4
Thanks, Adam. On to slide 14, you see that CapEx was 402,000,000 in for FY '21, a seventy six percent increase versus last year, primarily due to us investing in the business for growth. Driving the increase was increased augmentation and new site CapEx in Nigeria in connection with lease amendments delivered for our customers and for our rural solution as well as the increased new site CapEx in LatAm. CapEx was a $151,000,000 in q four, a 31 a 131% increase versus last year's period in light of the same drivers just mentioned. However, as we discussed on our q three call, we did underspend in terms of CapEx during the year as a result of the global supply chain issues rippling across our markets.
Similar to companies around the world, we are seeing a slowdown in the supply chain continue into 2022, which we are trying to mitigate by ordering equipment earlier, in some cases, one to three months earlier. Financially speaking, this impact is small and has been factored into our guidance for FY '22, but noting the continued uncertain macroeconomic world in which we live at the moment. Slide 15 looks at our returns and capital allocation. In FY 'twenty one, we continued to focus on driving our returns and delivered a return on invested capital of 11.2%. We invested significantly in both organic and inorganic growth opportunities during the year, including new site build investment in Nigeria and LatAm, closing and integrating the acquisitions in LatAm, albeit with only partial contributions in the year from some of those acquisitions.
In terms of capital allocation, you can see on the right that a significant portion of our FY twenty twenty one spend of $4.00 $1,000,000 related to acquisition investment, and this was deployed to build upon our 2020 entry into LatAm. As Sam mentioned earlier, we believe the Brazilian business we have built through these acquisitions and the forthcoming GTS transaction is very well positioned for the upcoming rollout of five g, which commenced recently. Moreover, IHS continues to be a leading builder of new sites in the country with 600 such sites built during the course of last year. Our investment in Nigeria also constituted much of the new site and discretionary CapEx last year given our large footprint in the country and the underlying growth opportunities in the market. Turning to the segmental review on slide 16, we look at our Nigerian business.
The Nigerian macroeconomic environment in q four continued slight improvement with GDP growth coming in at around 3.4% for 2021. However, inflation increased 17% for the year versus 13.3% for 2020. The NAFEX currency rate ended q four at four thirty five to the dollar, although it did normalize back to 415¢. Whilst FX reserves have increased to $40,000,000,000 at the end of the year from 36 and a half billion dollars at the '3. As we know, Brent crude oil price has been moving significantly, and that stood at $77 per barrel at the 2021, up nearly 50% from the 2020, which should ultimately have a beneficial impact for the Nigerian economy.
Telecommunications remains an important part of the Nigerian economy, accounting for around 11.9% of GDP in q three last year. Against this backdrop, our business once again delivered strong results, tracking well on our key metrics. Top line growth continues to be driven by new sites, by escalations, by collocation, and by new lease amendments. Our tower count at the end of FY '21 grew by 03/2017 versus FY '20, driven in part by the delivery of our new rural solution for a major customer, although partly offset by planned decommissioning as well as de minimis churn. Our total tenant count increased by 3.2% for the year, and our colocation rate was up 1.52 times.
Lease amendments continue to be a strong driver of growth with these increasing by 52% year on year as our customers added additional equipment to our sites, particularly three and four gs upgrades. Our improved operational performance is reflected in our Nigerian financial results. FY 'twenty one revenue of $1,150,000,000 increased 10.5% year on year on a reported basis and almost 19% on an organic basis. FY 2021 adjusted EBITDA was $784,000,000 an almost 12% increase from the prior year period, and adjusted EBITDA margin was 68.3%. This year on year increase is primarily due to the revenue growth, including the nonrecurring items as described before, but partially offset by an increase in power generation costs of $51,000,000 and an increase in regulatory permit costs and security services of $13,800,000 and $3,400,000 respectively.
Slide 17 presents the results of our other segments. In Sub Saharan Africa, towers and tenants were seven thousand eight hundred and seventy eight and thirteen thousand four hundred and sixteen at the year end. Revenue and adjusted EBITDA were $344,000,000 and $191,000,000 respectively, with an adjusted EBITDA margin of 55.4%. As we have mentioned, our LATAM and MENA segments are new as of February 2020, and we completed the three additional acquisitions in LATAM during the course of last year. As such, the year on year comparison reflects meaningful inorganic growth, which we expect to continue in 2022 with the GTS acquisition.
In Brazil, our second largest market with 4,630 towers, macro conditions were somewhat neutral as FX rates and inflation stabilized, but we have seen interest rates rising materially in Brazil. In our LatAm segment overall, towers and tenants were four thousand nine hundred and nine and five thousand nine hundred and sixty one at year end, and revenue and adjusted EBITDA was $60,000,000 and $43,000,000 respectively, with adjusted EBITDA margin of 71.5%. In MENA, towers and tenants were $14.00 2 and $14.16, and twenty twenty one revenue and adjusted EBITDA were $29,000,000 and $13,000,000 respectively, with an adjusted EBITDA margin of 44.6%. On Slide 18, we look at our capital structure. At thirty one December, we had approximately $3,000,000,000 of external debt and IFRS 16 liabilities, up from year end 2020 following our billion dollar bond offering in November.
The offering, IHS issued $500,000,000 of 5.65 senior notes due 2026 and another $500,000,000 of 6.25% senior notes due 2028, and we used a portion of the proceeds to refinance our $510,000,000 outstanding 7.125% senior notes. Consequently, of the $3,000,000,000 of debt, dollars 1,940,000,000.00 are our bonds and approximately $381,000,000 of senior credit facilities at our Nigeria segment. We increased our group revolving credit facility to $278,000,000 upon consummation of our IPO this past October. Cash and cash equivalents increased to $916,000,000 at year end following the October IPO and the November bond transaction. In terms of where that cash is held, approximately $645,000,000 was held in dollars almost entirely at the group level.
Next up, $81,000,000 of of of dollars equivalent was held in naira at our Nigeria business, and the remaining cash was held in local currency across our other markets, primarily Cameroon and Brazil. In terms of upstreaming cash, during the year, we upstreamed $171,000,000 of cash from Nigeria to group, including $121,000,000 for bond coupon payments, with the total sourced at a weighted average rate of $4.79 naira to the dollar. H2 sourcing accounted for $100,000,000 of this, and we have seen U. Dollar availability in Nigeria tighten somewhat during the second half of the year, and that's continued into 2022, although we are closely monitoring the situation and believe that the continued high oil price together with the $4,000,000,000 Nigerian sovereign issue in September should lead to improved US dollar availability later in 2022. As US dollar supply has reduced in recent months, we've started to look at sourcing larger amounts directly from our local banks using funded forwards.
We also continue to use non deliverable forwards around the bond coupon payments to hedge against naira devaluation in the interim. Outside of Nigeria, we upstreamed $45,000,000 cash from our SSA segment during the year. Our consolidated net leverage was approximately $2,100,000,000 with a consolidated net leverage ratio of 2.2 times. While this is below our net leverage target range of three to four times, again indicating the strength of our balance sheet, this ratio would increase to approximately three times at the year end pro form a for the payment of both South African and GTS acquisitions and the related financing we expect to utilize. Slide 19, this details the key strategic growth initiatives that we've recently announced or closed, which Sam has previously highlighted.
So I'll just add a couple of points. Regarding the GTS deal, we expect that to close imminently. And in terms of South Africa, we expect the closing to be Q1 or possibly Q2, pending ongoing discussions with the competition commission. Regarding Egypt, our integration and commercial teams are already on the ground, and we have commenced discussions with the carriers. No further significant news to report at this point, but we will keep everyone updated as we progress.
On to Slide 20, we introduced our guidance for FY 2022. Before discussing the specific metrics and targets, I'll walk you through some of the key assumptions behind our guidance. First off, for 2022, this includes contribution from the GTS acquisition starting in Q2 of this year, including approximately $100,000,000 of local debt on the business. As we previously disclosed, we guided that the GTS assets should generate revenue and EBITDA of approximately $38,000,000 and $36,000,000 in the first full year of operation post closing. Guidance, however, does not include the impact of the South Africa transaction or expectations regarding the commercial rollout in Egypt.
Regarding South Africa, we previously indicated we expect the assets to generate revenue and EBITDA of approximately $220,000,000 and $80,000,000 again in its first full year of operation post closing. However, given the precise timing of the close uncertain, we will update our guidance to include these on our future earnings call. As for Egypt, as I said, the carriers the discussions with the carriers are ongoing, and we will update you as we make progress. Other key things to highlight are the incremental net $23,000,000 of interest costs following the recent bond transaction as well as nonrecurring items in FY 2021 mentioned previously as you think about the comparisons this past year. Oil and FX will come to in a short moment.
Taking all of this into account, we believe that revenue for FY twenty twenty two will range between $1,795,000,000 and $1,815,000,000 on a reported basis, which represents a 14% increase at the midpoint of the range from our FY twenty twenty one revenue of $1,580,000,000 Key drivers of this growth include our organic growth programs in all of our markets and particularly our projections for new site growth in Nigeria and Brazil, as you see outlined on the page, as well as the full year contributions from iSystems and then the GTS assets in Brazil. In terms of adjusted EBITDA, we are projecting it range between $960,000,000 and $980,000,000 Key drivers of the EBITDA forecast are obviously the revenue growth aspects just mentioned as well as the negative impact of oil price at $120 per barrel for Q2 to Q4, which is our assumption. With respect to recurring levered free cash flow, we are projecting it to range between $310,000,000 and $330,000,000 Here, the key point is that we are carrying the $23,000,000 increased interest costs from the recent bond for the whole year of 2022, but GTS only kicking in in Q2. And the guidance, as we said, reflects no assumptions yet regarding South Africa and Egypt contribution.
Clearly, the oil price impact on our diesel spend dropped straight down into our RFCF too. One other thing to keep in mind about our RLFCF metric from a comparability perspective is that the Nigerian withholding tax comes off revenue as opposed to operating profit, which means there is an outsized impact as we grow the top line in our largest market. In terms of CapEx, we are anticipating spending $500,000,000 to $540,000,000 of CapEx in 2022, which includes new site CapEx in connection with the build programs as well as discretionary and nondiscretionary CapEx. We are monitoring the ongoing supply chain pressures closely, which could impact this projected CapEx, and we will keep you updated on the subject through the course of the year. On Slide 21, we discuss the key energy costs and FX sensitivities regarding our guidance.
With respect to the oil price, our guidance assumes an oil price of $99 per barrel for Q1 of this year and $120 a barrel for Q2 to Q4. The Russian invasion of Ukraine has introduced tremendous uncertainty into oil price forecasting, and the spot price has been as high as 135 recently. Consequently, we thought it prudent to employ $120 assumption for the remainder of the year, but things will evolve, and we will update you closely on this metric. From a sensitivity perspective, we believe that a $5 move in the price of crude would have a $7,000,000 impact on EBITDA. Although, as previously mentioned, we take various steps to try and mitigate this impact.
In terms of FX sensitivity, a 5% devaluation in the naira from our starting assumption of an average of $4.39 to the dollar would have about a negative $30,000,000 impact on revenue and a negative $19,000,000 impact on EBITDA. On Slide 22, just a bit more detail on how energy costs impact our business. As you know, we provide power management services to our customers principally in Africa. And in Nigeria, the grid has historically been nonexistent or unreliable. Therefore, the cost of fuel can cut both ways in terms of our returns.
First, in a positive fashion, either in a falling price environment as we saw during much of 2020 or as we implement renewable power solutions to increase efficiency and bring down the CapEx costs associated with power generation whilst charging a fixed use fee to our customers. Or conversely, in a rising price environment like we are seeing today, the diesel input costs can be a headwind, albeit one that we work to manage through smart sourcing and inventory management. As you see on the slide, the cost of diesel is reflected in our cost of goods sold and equated to 14% of revenue last year, although 5% of revenue was also linked to diesel through power indexation clauses and was hence passed through to customers. As we look at our forecast, our average oil input cost for Q1 is $99 In our guidance, as discussed in the prior page, the average cost reflects this $99 for Q1 and $120 per barrel for each of Q2 to Q4. The price per barrel was around a $115 this last Friday.
It's come down in the last day or two, and it's been moving around significantly in recent weeks. The situation in Ukraine will continue to impact this dynamic, and we will keep you updated as events impact our results and thinking. Importantly, long term, we believe we have the opportunity to further reduce our reliance on diesel and take CapEx costs out by adding more renewable solutions and thus improving margins. We are currently examining these possibilities as part of our development of the carbon reduction plan and look forward to updating on this later this year. This now brings us to the end of our formal presentation.
We thank you for your time today as well as your continued support for the business. Operator, please now open the line for questions.
Speaker 0
Our first question is from Jonathan Atkin of RBC Capital Markets. Jonathan, go ahead.
Speaker 5
Hi, this is Laura Lee on for John. Thank you for taking the questions. You note on Slide 22 that other key components of diesel in your cost structure include percentage mix of imports versus locally sourced diesel and if you buy it in the spot market or futures. Should you do a bit of a deeper dive into what that sourcing mix is currently and what are the factors that would impact the mix of imports versus local and spot versus futures purchases?
Speaker 6
Hi, Bora. It's Steve here. So a variety of different items go into that sourcing strategy. We don't sort of disclose minutia detail around that, but but we look at what is the price of the local market, what is the price of the import market, what is the availability at the right times in terms of delivery for what we need and how much of that availability can we forward purchase. And all of that sort of supply together with pricing combined do give us a constantly moving mix between whether we're sourcing locally or or importing.
So it's a complete balance and it's dynamic. It keeps moving. That that's sort of a key way we can we can control supply and price.
Speaker 5
Thanks. And can you also provide some color around what you're seeing in pacing of leasing activity in Nigeria and touch on deployment of spectrum following the auction?
Speaker 6
Yeah. I mean, we've had another, very significant year, and certainly h two of last 2021, coming from leasing activity in Nigeria. A lot of it coming through in lease amendment as you've seen through Q3 and Q4 results. The revenue guide we've given you is another 14% headline growth and a significant amount of that's organic activity being driven out of Nigeria as well as we expect to see collocation, some new site builds as well, but also lease amendment activity continue. Most of that lease amendment activity is still driving off four g.
We as we said, we have now seen five g spectrum allocated. We have some, what I would call, de minimis orders for FY twenty two on five g rollouts. So great news for the industry. The carriers are just starting to think about how best to deploy that network. I don't think we're going to see a huge impact of it in 2022, but certainly, we have some initial orders and it'll be a 2023 onwards item in our view.
Speaker 5
Thanks. And if I could sorry, just squeeze one last one in. The industry has seen Tarikos use sales of minority interest to financial sponsors and formation of JVs as alternative sources of funding growth. Just curious what your views are on these types of funding vehicles? Thank you.
Speaker 6
Look, I think as a business, we're always looking at the optimal way finance ourselves and also create shareholder value. We've utilized minority stakes and joint venture partnerships within certain opcos around the group. We have one of those in LatAm right now with Tim in the fiber business that we started. Zane, a very small element in Kuwait. And in South Africa, we're going to have minority partners in that particular acquisition when it closed as well.
So so we've looked at it. From a broader scale, I I think that just depends on the value proposition. I think we we we like where the business is positioned, and, you know, we feel it's it's it's an incredibly well placed business. So if something like that were to come along, we'd consider it.
Speaker 5
Thank you.
Speaker 0
Our next question is from Phil Cusick of JPMorgan. Phil, go ahead.
Speaker 7
Hi, Hi, thank you. Thanks for the detail on the oil impact. Margins in 2022 are much better than we would have thought given that, which is great to see. For that $7,000,000 adjusted EBITDA impact for a $5 increase in oil prices, how is that split between Nigeria and the rest of the business?
Speaker 6
Nearly all of it is Nigeria, So so in terms of how people think about the the oil environment around IHS stock, it is it is almost entirely not not totally, but almost entirely a a Nigeria facet. If people remember that our MENA segment and our LATAM segment is effectively clear of energy given the power pass through mechanisms that we have in place in those particular segments. And then our sub Saharan African business, there is some diesel in those in that particular segment, but there is also significant grid connectivity. So really, we're talking about Nigeria when we're talking about oil. So that $7,000,000 is almost all Nigeria.
Speaker 7
Thank you. And then let's dig more into the repatriating cash from Nigeria. Steve, think you gave a number for naira as a portion of your cash balance. What was that a quarter ago? And can you dig more into sourcing dollars from banks?
And you talked about hedging as well.
Speaker 6
Yes. So obviously, the quarter on quarter cash balance in Nigeria is dependent on where we are in the collection cycle. So Q3 was a significantly higher balance. It's more like $200,000,000 I can get the exact number for you. But that was because of when we had collected from our customers.
As we went through the course of q four, we then obviously deployed capital into the business and upstream some as well. And hence, the $1,000,000 cash equivalent balance in in Nigeria at the end of the year. And that's something that, you know, we spoke about before that we continue to look to do. As we collect from customers, we will, you know, ultimately look to service the needs of the business. And then with excess cash, look to upstream that and get it offshore.
In terms of what we're doing, I don't think the strategy has particularly changed through the last three months. What I would say is we are continuing to push our banking relationships and access to banks within Nigeria to see what different products we can access. And that is with the aim of trying to target larger amount rather than smaller, slow and steady sourcing. So it's it's it's not an easy market, but there is there is dollar availability and we're working hard to continue sourcing what what we want for the year of 2022. Sorry, did I get all of your points?
Thanks.
Speaker 8
A remark.
Speaker 6
And then
Speaker 9
one Sam,
Speaker 7
if I can. Sam, what does the acquisition pipeline look like? And can you talk to us about you talked about Asia in the past? And does your stock price impair your ability to acquire portfolios? Thanks, Gus.
Speaker 10
Hi, Phil. Look, the strategy remains what we've discussed. We wanna diversify. We see ourselves as a as a global emerging market infrastructure company. That's how we see ourselves.
We will continue to look beyond where our markets are. Having said that, we recently made moves into large markets. We made a move into Egypt. We made a move into South Africa. While we continue looking outside mark these markets, I would say the focus this year would be largely on these, plus Brazil, of course.
Now if something comes out that is so transformational, so strategic for us, that is outside these markets, we'll we'll definitely consider. The share price is definitely not helping. But, again, I see that as as as just a point in time. Other alternative funding could be available if something needs to happen quickly. But to be honest, at the moment, I think we're largely focused on our existing market, especially given the uncertainties around the globe and where things are, Phil.
Ukraine, Russia, China yesterday now starting the massive lockdowns again, etcetera, etcetera. So that's how we see 2022.
Speaker 7
Thanks very much.
Speaker 0
Our next question is from Greg Williams of Cowen. Greg, please go Great.
Speaker 9
Thanks for taking my questions. Just on the guidance for revenue, what level of organic growth is factored in the other regions? You noted Nigeria had some strong leasing activity, but hoping you could provide some color on organic growth in the other regions. Second question is just on Egypt. I realize it's not in guidance, but what's your expectations on the cadence of signing new carriers?
Is this a first half story or is this back half loaded? Thanks.
Speaker 6
Hi, Greg. So in terms of the guide, the revenue range we've given you is 14.2% total reported growth at the midpoint of the range. That is roughly split 15% organic, 4% inorganic given the acquisition activity we've seen and with a 5% FX headwind. So that gives you an idea of the organic element 15%. And big chunk of that's coming through Nigeria and through LatAm where we are expecting more leasing activity, more build activity.
We haven't gone into disclosing the exact breakdown of each building block of the growth component. But what we have also said is from a new build site perspective, we expect twelve fifty new sites in Nigeria, and we're forecasting around 700 new sites in LatAm, think of that as Brazil, and then around two seventy in Sub Saharan Africa and approximately 110 in MENA. Those numbers are slightly rounded. So that's how we're thinking about the business. So obviously, Nigeria and LatAm are our key growth factors for the guide next year.
Yeah. Sorry. And then Egypt yeah. And then Egypt. No.
I think it's work in progress as ever. I can't can't say much until we have something to say. There's lots of conversations going on, lots of discussions with carriers, different projects we're looking at and assessing. So as I've said on the last quarter, we will endeavor to keep you update quarter on quarter. And as soon as we have something significant to report to you, we'll let you know.
Best guess, yes, it would be second half before it starts impacting the business. But, you know, we will update you properly when we know more.
Speaker 10
I mean, please remember that Egypt does not have a tower industry at at the moment. I mean, we have the task of of of developing the business, but we also have the task of developing that industry somehow. MLAs don't exist at the moment. People are not used to the idea. So it's it's it's it's we we have to do that part plus the actual part of of of getting the business.
But we're making some, strong headway. Got it. Thank you.
Speaker 5
Our
Speaker 0
next question is from Michael Rollins of Citi. Michael, please go ahead.
Speaker 9
Thanks and good morning. Curious if you could focus a little bit more on the Slide 11. Can you remind us where churn is in this bridge and what you saw from churn in the fourth quarter as well as for the full year 2021?
Speaker 6
Yeah. So churn was about 1,200 for the full year. But of that 1,283 to be precise for the full year, but of that 826 were what we call non key customers. So outside of our of our important customers, and that was really a cleanup exercise in terms of those customers that we were not booking revenue for. And so we cleaned them up at the year end and took them out of the tenant count.
So consider that twelve eighty three churn, 75% of it does not go to revenue. Another chunk of that churn was what we've disclosed previously around the nine mobile piece. So two sixty nine of those was nine mobile, which was part of our agreement earlier in 2021 to to rationalize that business that that we talked people through previously. But actually, in terms of true genuine churn, very, very small through the course of the year.
Speaker 9
And so where does that fit in in these boxes on slide 11? Which bucket is it in?
Speaker 6
So it would it would come through either new sites or new collocation depending on on on what it is that's coming up, whether it's a colo or or anchor tenant. But as I said, three quarters of that was not showing a revenue impact anyway. So it would not be it would not be picked up in a in a revenue bridge because there wasn't revenue associated with it.
Speaker 9
And just in the previous question, gave us a sense of what the total organic growth is for 2022. Can you break that out a little bit more into what the expectation should for escalation, amendments and colocation, just a sense of the drivers of internal organic growth for the business?
Speaker 6
Yeah. As I said on the previous comment, Mike, we haven't broken that out in terms of the guidance. What I would say to help people think through it is we think the vector is going to be pretty similar to what we've seen in FY 2021. Lease amendments will continue to lead the way And new sites and collocation will probably be similar type percentage contributions to what you see on Slide 11 of the presentation. So reasonably similar.
Organic growth, as I mentioned, will about 4%. So that's a little bit higher given acquisitions that we brought into the business during 2021. But from a kind of percentage contribution split, it will be not dissimilar to Slide 11.
Speaker 9
And in the markets that you're operating in and acquiring, should we be mindful of any carrier customer consolidation that might impact your future revenues from those regions?
Speaker 6
No. Not at this point, Mike. I think, you know, our markets are reasonably stable from a carrier consolidation perspective. The the one that obviously jumps out is Brazil in terms of Oi mobile, but we have de minimis next to zero Oi mobile exposure. So that one that one won't impact us.
Speaker 9
Thanks.
Speaker 6
Thanks, Mike.
Speaker 0
Our next question is from Simon Cowles from Barclays. Simon, go ahead.
Speaker 8
Hi, guys. Thanks for taking the questions and the extra detail in the presentation this quarter. And first one is just on CapEx. So you said that you've already seen some supply chain issues. Should we think of the guidance for 2022 as a sort of more normalized level?
And how should we think about the mix versus the mix you provided on Slide 15?
Speaker 6
Hi, Simon. So I think, look, you'll have seen there's slightly wider range around CapEx in the guide, and that's on purpose given the items you mentioned around supply chain issue, the Russia Ukraine piece, just to the point where supply chain was starting to free up again, then we obviously, as a world were hit with the Russia Ukraine situation. So hence, the slightly wider range on guide. We will keep you guys updated because here we've already factored in pricing increases, which we've seen around the business, which haven't been significantly material, but, you know, enough to factor in. So that's already baked in within that range, and we will we will keep you guys updated as we go through.
In terms of the mix, again, we haven't really broken it down. Only thing I would say is, you know, people often ask us for our maintenance CapEx or the nondiscretionary element. That's going to be roughly 20% higher, we think, than FY 2021, reflective of a slightly larger business around new builds across different African portfolio, LatAm, but also obviously the introduction of full year of the fiber business as well. So we think maintenance CapEx about 20% roughly higher than 2021. And then the rest is split between newbuilds and fiber, etcetera.
Speaker 8
That's great. Thank you. And just on that withholding tax comment you made in Nigeria and what that means for recurring leverage free cash flow. Could you just elaborate a bit more on that just to make it clear? Thank you.
Speaker 6
Yes. I think we just want to make I mean, the same as we've been talking about you know, since before we listed. We just wanted to continue making it clear to people that as we grow in Nigeria, we we typically don't suffer corporate income tax, which is about 30% in Nigeria. We suffer withholding tax on revenue, which offsets any corporate income tax that we have given it's a higher level. So we we suffer 10% withholding tax on revenue in Nigeria.
And then, obviously, as we're growing and adding more revenue, that tax is coming at source rather than further down the income statement where you get operational leverage. So because we show our LFCF inclusive of cash tax paid, you see that withholding tax line running through the RLFCF to give you a true cash metric. So as we're growing, we suffer that tax source. You'll see the impact come through in the RLFCF.
Speaker 8
That's very clear. Thanks so much.
Speaker 5
Our
Speaker 0
final question is from Brett Feldman from Goldman Sachs. Brett, go ahead.
Speaker 9
Yes. Thanks for taking the question and congratulations to Adam and Steve and Colby and some exciting career transitions for all of you. I wanted to follow-up a little bit around power. So on Slide 22, you highlighted that 42% of your sites in your African markets, had hybrid power solutions. And I was wondering, you know, where where could that go?
You know, could the substantial majority of your sites potentially take advantage of hybrid or maybe what percentage of your sites would you think of as being suitable and and and what makes them suitable? So it's really a question is, you know, what is your opportunity over time to maybe meaningfully, augment the the the profile of your power cost? And I'm curious what you're planning on doing this year in terms of capital investment around hybrid solutions. And then, you also, on the same slide, pointed out, that it basically looks like last year, about a third of your diesel costs were passed through to your tenants under the leases. And I'm wondering, is it worked through at what's in your here, or is it just that's the way it worked out last year?
Speaker 10
Hey, Brett. This is, maybe I can take the first one and then kinda, like, hand over to Steve on on the next part. Look, people need to remember that Nigeria has has a power problem. Nigeria, given its scale and size, geography, and and population, it's it's a massive country but does not have electricity, basically. We see ourselves as kinda like the solvers of this problem.
That's why it's like a very, very complex situation there. Five years ago, we did a major investment into kinda like shifting away from diesel into solar and into battery and kinda, like, resulted in around 50% reduction in our OpEx then. This time around, it seems to me like this is something that we we need to do. We we started late last year, immediately after the IPO, a drive into kinda like what can be done again. We definitely intend to go deeper into investing into renewables.
We wanna solve this problem more, I would say, by litigating these this this is not that I think to do whether on on on on a conscience basis and, of course, on a numbers basis. So do expect, indeed, from us some announcements to that effect this year, Brett. It's definitely something we wanna do. Now having said that, Brett, I also wanna highlight something. The guidance has oil at one twenty.
Still, our margins remain over 50%. I mean, that's a message of resilience. That that's how resilient this business is. And then having said that, we will definitely invest further and hopefully drive diesel at some point completely out of the business.
Speaker 6
And then, Brett, on your your comment around the past three. So, yeah, I think what you're doing is you're taking 5% of revenue and and and dividing that into our total cost of power. So that gets you to just done. There's about 29%, that can be passed through which is correct. Just keep in mind where we do see diesel volatility, it's particularly in Nigeria where we have some certain elements of those pass through revenues.
Yes. But some of it is in LatAm, for example, which doesn't have any volatility in it anyway. So, yeah, you're correct. It's about 29% gets passed through to customers on on FY '21 numbers.
Speaker 9
And and that's essentially what you're assuming your guidance for this year or something in that range?
Speaker 6
Yeah. Correct. It carries forward because those are all long term contracts.
Speaker 9
Alright. Thank you for taking the questions.
Speaker 10
Thanks, Brad. Well, this concludes
Speaker 0
our conference. To the end.
Speaker 9
Thank you very much, and we'll talk to you guys later. Thank