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| Name | Symbol | Market | Type |
|---|---|---|---|
| Hta Grp 25a | LSE:34YQ | London | Bond |
| Price Change | % Change | Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 0 | - |
From Dec 2019 to Dec 2024
TIDM34YQ
RNS Number : 0427W
HTA Group Ltd.
13 August 2020
HELIOS TOWERS plc
Unaudited results for the 6 and 3 months ended 30 June 2020
Guidance for 2020 remains unchanged
Business underpinned by long-term contracted revenues with blue-chip mobile network operators
Delivering on our acquisition growth strategy
London, 13 August 2020: Helios Towers plc ("Helios Towers", "the Group" or "the Company"), the independent telecommunications infrastructure company, today announces results for the 6 and 3 months to 30 June 2020.
Hot Features
Premium
H1 2020 H1 2019 Change Q2 2020 Q1 2020 Change
-------------------------------- ------- -------- ------------ ------- ------- ------
Sites 7,092 6,882 +3% 7,092 6,991 +1%
Tenancies 14,906 14,100 +6% 14,906 14,677 +2%
Tenancy ratio 2.10x 2.05x +0.05x 2.10x 2.10x -
Revenue (US$m) 204.0 190.7 +7% 102.2 101.8 +0%
Adjusted EBITDA (US$m) 1 109.1 99.0 +10% 55.1 54.0 +2%
Adjusted EBITDA margin 1 53% 52% +1ppt 54% 53% +1ppt
Operating profit for the period
(US$m) 29.3 12.7 +131% 17.2 12.1 +42%
Financial highlights
-- H1 2020 Group revenue increased by 7% year-on-year to US$204.0m (H1 2019: US$190.7m) driven by continued growth in the number of sites and tenancies across the Group.
o Q2 2020 Group revenue increased slightly quarter-on-quarter to US$102.2m (Q1 2020: US$101.8m).
-- H1 2020 Adjusted EBITDA increased by 10% year-on-year to US$109.1m (H1 2019: US$99.0m), reflecting both tenancy growth and continued improvements in operational efficiency, with H1 2020 Adjusted EBITDA margin at 53% (H1 2019: 52%), up 1ppt.
o Q2 2020 Adjusted EBITDA increased quarter-on-quarter to US$55.1m (Q1 2020: US$54.0m), with Q2 2020 Adjusted EBITDA margin at 54% (Q1 2020: 53%), up 1ppt.
-- H1 2020 operating profit increased by 131% year-on-year to US$29.3m (H1 2019: US$12.7m).
o Q2 2020 operating profit increased by 42% quarter-on-quarter to US$17.2m (Q1 2020: US$12.1m).
-- Successfully completed refinancing with the issuance of US$750m Senior Notes due 2025 with 7.00% coupon alongside raising of new US$70m revolving credit facility and new term loan of up to US$200m which will be utilised predominately on expansionary opportunities.
Operational highlights
-- On 12 August Helios Towers signed an agreement with Free Senegal, the second largest mobile operator in Senegal, to acquire its 1,220 tower portfolio for an upfront cash consideration of EUR160 million (c.$189 million). Additionally 400 build-to-suit sites have been committed to be rolled out over the next 5 years. Helios Towers have entered into a 15 year service agreement with Free Senegal for the provision of hosting and energy services on the acquired sites and the build-to-suit sites to be rolled out in the future.
-- Helios Towers continues to monitor the impact of COVID-19 on its operations and to date there has been no significant impact. The telecommunications sector has been classified as an 'essential service' in our markets, allowing us to operate at our normal high levels of service, with record power uptime in June 2020, as well as roll out of new tenancies.
-- Increase in tenancies of 806 tenants year-on-year to 14,906 tenants (H1 2019: 14,100 tenants). Q2 2020 tenancies increased by 229 quarter-on-quarter to 14,906 (Q1 2020: 14,677).
-- Increase in sites of 210 sites year-on-year to 7,092 sites (H1 2019: 6,882 sites). Q2 2020 number of sites increased by 101 quarter-on-quarter to 7,092 (Q1 2020: 6,991).
-- Tenancy ratio increased year-on-year by 0.05x to 2.10x (H1 2019: 2.05x). Q2 2020 tenancy ratio constant quarter-on-quarter at 2.10x.
-- Two in-market acquisitions were signed in Q2 2020 which is in line with the full year capex guidance.
o 29 June 2020: Helios Towers plc's South African subsidiary acquired 46 sites from Eagle Towers, with a further 19 sites expected as part of this transaction later in the year.
o 30 June 2020: Helios Towers Congo Brazzaville signed a Managed Service Agreement for 34 sites which are in the process of being acquired from Airtel Congo S.A.
(1) Refer to full definitions in the Alternative Performance Measures section in this announcement.
2020 Outlook and guidance
-- Our H1 2020 performance has been broadly in line with expectations and there has been no significant operational impact from COVID-19 to date.
-- We remain active and vigilant both to monitor and anticipate potential risks, and to identify opportunities for incremental growth.
-- Our guidance for 2020 remains unchanged.
Kash Pandya, Chief Executive Officer, said:
"The first half of 2020 saw our business deliver in line with expectations, in the face of seismic disruptions to the wider global commercial backdrop due to the COVID--19 impact. We have delivered strong top--line growth and Adjusted EBITDA performance which is testament to the resilience as well as the power and leverage of our operating model, and to the approach of our teams in central functions and in the field. We anticipate that these attributes will continue to serve the business well going forward, not least in the near--term as the challenges of the pandemic currently remain evident.
Additionally during the second quarter we have been able to optimise our funding structure and capacity in order to ensure Helios Towers is primed to execute on the right growth opportunities for our shareholders. This has been demonstrated by our recently announced entrance into Senegal, our sixth market, through the signing of an agreement to acquire over 1,200 sites from Free Senegal. We are very excited about the Senegalese opportunity which aligns perfectly with our strategic ambitions of broadening our footprint within the African telecoms infrastructure market."
For further information go to:
www.heliostowers.com
Investor Relations
Manjit Dhillon
+44 (0)776 723 7010
Media relations
Edward Bridges / Stephanie Ellis
FTI Consulting LLP
+44 (0)20 3727 1000
Helios Towers management will host a conference call for analysts and institutional investors at 09.30 BST on Thursday, 13 August 2020. Dial in details for the conference call are:
Europe & International +44 20 3936 2999 South Africa (local) 087 550 8441 USA (local) 1 646 664 1960 Passcode: 739095
About Helios Towers
-- Helios Towers is a leading independent telecommunications infrastructure company in Africa, having established one of the continent's most extensive tower portfolios with close to 7,100 towers across five countries. It builds, owns and operates telecom passive infrastructure, providing services to mobile network operators.
-- Helios Towers owns and operates more sites than any other operator in each of Tanzania, Democratic Republic of Congo ("DRC"), and Congo Brazzaville. It is also a leading operator in Ghana with a strong urban presence and established a presence in South Africa in 2019.
-- Helios Towers pioneered the model in Africa of buying towers that were held by single operators and providing services utilising the tower infrastructure to the seller and other operators. This allows wireless operators to outsource non-core tower-related activities, enabling them to focus their capital and managerial resources on providing higher quality services more cost-effectively.
Financial and Operating Review
The analysis of the Group's financial results and performance has largely been performed on a quarterly basis as the Group reports its results quarterly. A quarterly analysis is considered more appropriate and meaningful.
Condensed consolidated statement of profit or loss
For the 6 and 3 months ended 30 June
6 months ended 3 months ended
30 June 30 June
---------------- ----------------
2020 2019 2020 2019
US$m US$m US$m US$m
-------------------------------------------------- ------- ------- ------- -------
Revenue 204.0 190.7 102.2 97.0
Cost of sales (130.2) (132.7) (65.2) (67.4)
-------------------------------------------------- ------- ------- ------- -------
Gross profit 73.8 58.0 37.0 29.6
-------------------------------------------------- ------- ------- ------- -------
Administrative expenses (43.2) (40.0) (19.1) (23.6)
Loss on disposal of property, plant and equipment (1.3) (5.3) (0.7) (0.2)
-------------------------------------------------- ------- ------- ------- -------
Operating profit 29.3 12.7 17.2 5.8
-------------------------------------------------- ------- ------- ------- -------
Interest receivable 0.5 0.7 - 0.6
(Loss)/gain on financial instruments (35.0) 24.3 6.0 8.5
Finance costs (77.8) (56.4) (48.7) (24.9)
-------------------------------------------------- ------- ------- ------- -------
Loss before tax (83.0) (18.7) (25.5) (10.0)
-------------------------------------------------- ------- ------- ------- -------
Tax expenses (7.8) (3.8) (3.8) (3.1) -------------------------------------------------- ------- ------- ------- ------- Loss after tax (90.8) (22.5) (29.3) (13.1) -------------------------------------------------- ------- ------- ------- -------
Key metrics
For the 3 months ended 30 June
Group Tanzania DRC Congo Brazzaville Ghana South Africa
--------------- ------------ ------------ ------------------- ------------ --------------
2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019
US$m US$m US$m US$m US$m US$m US$m US$m US$m US$m US$m US$m
-------------------- ------- ------ ----- ----- ----- ----- --------- -------- ----- ----- ------ ------
Revenue for
the quarter $102.2 $97.0 $41.9 $41.2 $43.0 $39.3 $6.3 $6.1 $10.4 $10.0 $0.6 $0.4
Adjusted gross
margin1,2 68% 65% 67% 65% 65% 63% 69% 67% 78% 68% 67% 77%
Sites at beginning
of the quarter 6,991 6,716 3,667 3,654 1,853 1,759 384 380 964 910 123 13
Sites at quarter
end 7,092 6,882 3,668 3,650 1,867 1,817 415 381 970 933 172 101
Tenancies at
beginning of
the quarter 14,677 13,600 8,120 7,824 3,883 3,519 565 531 1,891 1,709 218 17
Tenancies at
quarter end 14,906 14,100 8,131 7,950 3,944 3,705 606 533 1,905 1,744 320 168
Tenancy ratio
at quarter end 2.10x 2.05x 2.22x 2.18x 2.11x 2.04x 1.46x 1.40x 1.96x 1.87x 1.86x 1.66x
Adjusted EBITDA
for the quarter2,3 $55.1 $50.2 $25.8 $24.0 $24.9 $21.5 $2.6 $3.0 $7.0 $5.8 - -
-------------------- ------- ------ ----- ----- ----- ----- --------- -------- ----- ----- ------ ------
Adjusted EBITDA
Margin(2) for
the quarter 54% 52% 62% 58% 58% 55% 41% 49% 67% 58% - -
-------------------- ------- ------ ----- ----- ----- ----- --------- -------- ----- ----- ------ ------
(1) Adjusted gross margin means gross profit, adding back site depreciation, divided by revenue.
(2) See Alternative Performance Measures section of this announcement for more information.
(3) Group Adjusted EBITDA for the quarter is stated including corporate costs of US$5.2 million (2019: US$4.1 million). (Please see note 3)
Total tenancies as at 30 June
Group Tanzania DRC Congo Brazzaville Ghana South Africa
--------------------- -------------- ------------ ------------ ------------------- ------------ --------------
2020 2019 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019
--------------------- ------ ------ ----- ----- ----- ----- --------- -------- ----- ----- ------ ------
Standard colocation
tenants 7,017 6,578 3,993 3,865 1,983 1,816 173 146 722 684 146 67
Amendment colocation
tenants 797 640 470 435 94 72 18 6 213 127 2 -
--------------------- ------ ------ ----- ----- ----- ----- --------- -------- ----- ----- ------ ------
Total colocation
tenants 7,814 7,218 4,463 4,300 2,077 1,888 191 152 935 811 148 67
Total sites 7,092 6,882 3,668 3,650 1,867 1,817 415 381 970 933 172 101
--------------------- ------ ------ ----- ----- ----- ----- --------- -------- ----- ----- ------ ------
Total tenancies 14,906 14,100 8,131 7,950 3,944 3,705 606 533 1,905 1,744 320 168
--------------------- ------ ------ ----- ----- ----- ----- --------- -------- ----- ----- ------ ------
Revenue
Revenue increased by 5% to US$102.2 million in the quarter ended 30 June 2020 from US$97.0 million in the quarter ended 30 June 2019. The increase was largely driven by the growth in total tenancies from 14,100 as of 30 June 2019 to 14,906 as of 30 June 2020. For the quarter ended 30 June 2020 86% of revenues were from Africa's Big-Five MNOs(1) and 59% were denominated in either USD or XAF (which is pegged to the Euro).
Cost of sales and adjusted gross margin
6 months ended 30 June 3 months ended 30 June
-------------------------------- -------------------------------
% of % of % of % of
Revenue Revenue Revenue Revenue
----- -------- ----- -------- ---- -------- ----- --------
(US$m) 2020 2020 2019 2019 2020 2020 2019 2019
------------------------ ----- -------- ----- -------- ---- -------- ----- --------
Power 42.3 20.7% 41.4 21.7% 20.7 20.3% 20.7 21.3%
Non-power 24.6 12.1% 26.8 14.0% 12.5 12.2% 13.7 14.1%
------------------------ ----- -------- ----- -------- ---- -------- ----- --------
Cost of sales excluding
site depreciation 66.9 32.8% 68.2 35.7% 33.2 32.5% 34.4 35.4%
------------------------ ----- -------- ----- -------- ---- -------- ----- --------
Site depreciation 63.3 31.0% 64.5 33.8% 32.0 31.3% 33.0 34.0%
------------------------ ----- -------- ----- -------- ---- -------- ----- --------
Total cost of sales 130.2 63.8% 132.7 69.6% 65.2 63.8% 67.4 69.5%
------------------------ ----- -------- ----- -------- ---- -------- ----- --------
Year-on-year cost of sales decreased slightly from US$67.4 million in the quarter ended 30 June 2019 to US$65.2 million in the quarter ended 30 June 2020 mainly due to reduction in non-power costs in Tanzania and DRC.
The table below shows an analysis of the cost of sales on a country-by-country basis for the 6 month period ended 30 June 2020 and 2019.
Tanzania DRC Congo Brazzaville Ghana South Africa
----------- ----------- ------------------- ----------- --------------
6 months 6 months 6 months 6 months 6 months
ended 30 ended 30 ended 30 ended 30 ended 30
June June June June June
----------- ----------- ------------------- ----------- --------------
(US$m) 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019
------------------ ----- ---- ----- ---- --------- -------- ----- ---- ------ ------
Power 15.2 14.8 21.7 20.8 1.5 1.6 3.7 4.1 0.2 0.1
Non-power 12.1 13.5 8.1 8.6 2.5 2.4 1.8 2.3 0.1 -
Site depreciation 26.5 27.4 27.3 28.0 5.0 5.2 4.1 3.8 0.4 0.1
------------------ ----- ---- ----- ---- --------- -------- ----- ---- ------ ------
Total cost of
sales 53.8 55.7 57.1 57.4 9.0 9.2 9.6 10.2 0.7 0.2
------------------ ----- ---- ----- ---- --------- -------- ----- ---- ------ ------
The table below shows an analysis of the cost of sales on a country-by-country basis for the 3 month period ended 30 June 2020 and 2019.
Tanzania DRC Congo Brazzaville Ghana South Africa
----------- ----------- ------------------- ----------- --------------
3 months 3 months 3 months 3 months 3 months
ended 30 ended 30 ended 30 ended 30 ended 30
June June June June June
----------- ----------- ------------------- ----------- --------------
(US$m) 2020 2019 2020 2019 2020 2019 2020 2019 2020 2019
------------------ ----- ---- ----- ---- --------- -------- ----- ---- ------ ------
Power 7.7 7.5 10.7 10.3 0.8 0.7 1.4 2.1 0.1 0.1
Non-power 6.2 6.9 4.1 4.4 1.2 1.3 0.9 1.1 0.1 -
Site depreciation 13.6 14.4 13.7 14.2 2.4 2.5 2.2 1.8 0.1 0.1
------------------ ----- ---- ----- ---- --------- -------- ----- ---- ------ ------
Total cost of
sales 27.5 28.8 28.5 28.9 4.4 4.5 4.5 5.0 0.3 0.2
------------------ ----- ---- ----- ---- --------- -------- ----- ---- ------ ------
Adjusted gross margin for the quarter ended 30 June 2020 is 68% as compared to 65% for the quarter ended 30 June 2019 mainly driven by the increase in revenue and reduction in cost of sales as mentioned above.
6 months ended 30 June 3 months ended 30 June
---------------------------------- ----------------------------------
% of % of % of % of
Revenue Revenue Revenue Revenue
-------- -------- -------- --------
(US$m) 2020 2020 2019 2019 2020 2020 2019 2019
------------------------ ------ -------- ------ -------- ------ -------- ------ --------
Revenue 204.0 100.0% 190.7 100.0% 102.2 100.0% 97.0 100.0%
Cost of sales excluding
site depreciation (66.9) 32.8% (68.2) 35.8% (33.2) 32.5% (34.4) 35.5%
------------------------ ------ -------- ------ -------- ------ -------- ------ --------
Adjusted gross margin 137.1 67.2% 122.5 64.2% 69.0 67.5% 62.6 64.5%
------------------------ ------ -------- ------ -------- ------ -------- ------ --------
Site depreciation (63.3) 31.0% (64.5) 33.8% (32.0) 31.3% (33.0) 34.0%
------------------------ ------ -------- ------ -------- ------ -------- ------ --------
Gross profit 73.8 36.2% 58.0 30.4% 37.0 36.2% 29.6 30.5%
------------------------ ------ -------- ------ -------- ------ -------- ------ --------
(1) Big-Five MNOs defined as: Airtel, MTN, Orange, Tigo and Vodafone/Vodacom.
Administrative expenses
Administrative expenses decreased by 19% to US$19.1 million in the quarter ended 30 June 2020 from US$23.6 million in the quarter ended 30 June 2019 due to decrease in expenses related to the listing of equity on London Stock Exchange incurred in 2019. The increase in SG&A expenses is primarily due to Helios Towers plc related expenses, South Africa introduction and Congo Brazzaville licence fee.
6 months ended 30 June 3 months ended 30 June
------------------------------- ------------------------------
% of % of % of % of
Revenue Revenue Revenue Revenue
-------- -------- -------- --------
(US$m) 2020 2020 2019 2019 2020 2020 2019 2019
---------------------------------- ---- -------- ----- -------- ---- -------- ---- --------
Sales, general and administrative
costs (SG&A) 28.0 13.7% 23.5 12.3% 13.7 13.4% 12.4 12.8%
Depreciation and amortisation 9.4 4.6% 9.3 4.9% 4.6 4.5% 5.2 5.4%
Adjusting items(1) 5.8 2.8% 7.2 3.8% 0.8 0.8% 6.0 6.1%
---------------------------------- ---- -------- ----- -------- ---- -------- ---- --------
43.2 21.1% 40.0 21.0% 19.1 18.7% 23.6 24.3%
---------------------------------- ---- -------- ----- -------- ---- -------- ---- --------
(1) Adjusting items relate to project and deal costs please see note 4.
Loss on disposal of property, plant and equipment
Loss on disposal of property, plant and equipment was US$0.7 million in the quarter ended 30 June 2020, compared to US$0.2 million during the quarter ended 30 June 2019. This increase in loss on disposal was due to an increase in the disposal of assets in the current quarter.
Gains and losses on financial instruments
The derivative financial instrument represents the fair value of the put and call options embedded within the terms of the Senior Notes. Gains and losses on revaluation of the embedded financial derivatives on the new US$750 million Senior Notes recognised in the quarter ended 30 June 2020 was a gain of US$3.4 million, compared to a gain of US$8.5 million in the quarter ended 30 June 2019 on the previous US$600 million Senior Notes. The loss on derivative financial instruments of US$37.6 million for the 6 months ended June 2020 compared to a gain of US$24.3 million in the 6 months ended 30 June 2019 is due to the change in credit spreads during the period. A gain of US$2.6 million was recognised due to the change in fair value of the contingent consideration relating to the acquisition of SA Towers in South Africa.
6 months ended 3 months ended
---------------- ----------------
30 June 30 June 30 June 30 June
2020 2020 2020 2019
US$m US$m US$m US$m
----------------------------------------------- ------- ------- ------- -------
Fair value gain/(loss) on derivative financial
instruments (see note 9) (37.6) 24.3 3.4 8.5
Fair value gain on movement in contingent
liability (see note 20) 2.6 - 2.6 -
----------------------------------------------- ------- ------- ------- -------
(35.0) 24.3 6.0 8.5
----------------------------------------------- ------- ------- ------- -------
Finance costs
Finance costs of US$48.7 million for the quarter ended 30 June 2020, mainly comprise of US$17.0 million interest on the US$600 million 9.125% Senior Notes due 2022 and the US$125 million term loan facility signed in October 2018, of which US$75 million was drawn down up to 18 June 2020. From 18 June to 30 June 2020 finance costs amounting to US$2.1 million were incurred in relation to the new US$750 million 7% Senior Notes due 2025. Included in finance costs in the quarter is a call premium and the release of transaction costs of US$13.7 million and US$10.2 million respectively, related to the early redemption of the US$600 million Senior Notes. Foreign exchange differences relate primarily to unrealised US dollar / local currency exchange movements on inter-company loans from Group to Operating Subsidiaries.
6 months ended 3 months ended
30 June 30 June
---------------- ----------------
2020 2019 2020 2019
US$m US$m US$m US$m
----------------------------------- ------- ------- ------- -------
Foreign exchange differences 6.5 8.0 1.7 0.6
Interest cost 39.3 40.6 19.1 20.3
Early redemption expenses(1) 23.9 - 23.9 -
Interest cost on lease liabilities 8.1 7.8 4.0 4.0
----------------------------------- ------- ------- ------- -------
77.8 56.4 48.7 24.9
----------------------------------- ------- ------- ------- -------
(1) Includes call premium and release of transaction costs of US$13.7 million and US$10.2 million respectively, related to the early redemption of the $600 million Senior Notes.
Tax expense
Tax expense was US$3.8 million in the quarter ended 30 June 2020 as compared to US$3.1 million in the quarter ended 30 June 2019. Although entities in Congo Brazzaville and DRC have continued to be loss making, minimum income tax has been levied based on revenue as stipulated by law in these jurisdictions. Ghana, Tanzania and two subsidiaries in South Africa are profit making and subject to income tax on taxable profits.
Adjusted EBITDA
Adjusted EBITDA was US$55.1 million in the quarter ended 30 June 2020 compared to US$50.2 million in the quarter ended 30 June 2019. The increase in Adjusted EBITDA between periods is primarily attributable to the increased revenue and reduction in cost of sales as mentioned above. See Alternative Performance Measures section for more details and note 4 for a reconciliation of aggregate segment Adjusted EBITDA to loss before tax.
Contracted revenue
The following table provides our total undiscounted contracted revenue by country as of 30 June 2020 for each of the periods from 2020 to 2024, with local currency amounts converted at the applicable average rate for US dollars for the period ended 30 June 2020 held constant. Our contracted revenue calculation for each year presented assumes: (i) no escalation in fee rates, (ii) no increases in sites or tenancies other than our committed tenancies, (iii) our customers do not utilise any cancellation allowances set forth in their MLAs, (iv) our customers do not terminate MLAs early for any reason and (v) no automatic renewal.
Year ended 31 December
----------------------------
6 months
to
31 December
2020 2021 2022 2023 2024
US$m US$m US$m US$m US$m
------------------ ------------ ------ ------ ----- -----
Tanzania 83.6 166.8 163.9 156.8 136.6
DRC 84.1 168.1 168.1 168.0 166.5
Congo Brazzaville 12.4 24.7 23.9 23.1 22.4
South Africa 1.2 2.8 3.1 3.3 3.4
Ghana 17.2 34.4 32.9 31.8 31.3
------------------ ------------ ------ ------ ----- -----
198.5 396.8 391.9 383.0 360.2
------------------ ------------ ------ ------ ----- -----
The following table provides our total undiscounted contracted revenue by key customers as of 30 June 2020 over the life of the contracts with local currency amounts converted at the applicable average rate for US dollars for the period ended 30 June 2020 held constant. Our calculation uses the same assumptions as above.
Percentage
Total of Total
Committed Committed
(US$m) Revenues Revenues
----------------------- ---------- ----------
Africa's Big-Five MNOs 2,280.6 82%
Other 495.2 18%
----------------------- ---------- ----------
2,775.8 100%
----------------------- ---------- ----------
Management cash flow
6 months ended 3 months ended
30 June 30 June
---------------- ----------------
2020 2019 2020 2019
US$m US$m US$m US$m
--------------------------------------------- ------- ------- ------- -------
Adjusted EBITDA 109.1 99.0 55.1 50.2
Less:
Maintenance and corporate capital additions (7.4) (7.8) (4.8) (3.4)
Payments of lease liabilities1 (11.3) (10.2) (6.3) (6.5)
Tax paid(2) (1.3) (1.2) (0.8) (0.9)
--------------------------------------------- ------- ------- ------- -------
Portfolio free cash flow 3 89.1 79.8 43.2 39.4
------- ------- ------- -------
Cash conversion %4 82% 81% 78% 79%
------- ------- ------- -------
Net payment of interest5 (51.3) (32.5) (20.2) (2.5)
--------------------------------------------- ------- ------- ------- -------
Levered portfolio free cash flow 37.8 47.3 23.0 36.9
Discretionary capital additions6 (30.6) (47.5) (22.0) (36.1)
--------------------------------------------- ------- ------- ------- -------
Adjusted free cash flow 7.2 (0.2) 1.0 0.8
Net change in working capital7 (21.5) (35.5) 13.2 (8.7)
Cash paid for adjusting and EBITDA adjusting
items8 (8.7) (13.2) (1.0) (12.1)
Cash paid in relation to Change of Control
Tax(9) (37.7) - - -
Proceeds on disposal of assets 0.6 0.1 0.3 0.1
--------------------------------------------- ------- ------- ------- -------
Free cash flow (60.1) (48.8) 13.5 (19.9)
Net cash flow from financing activities(10) 52.8 50.0 52.8 -
--------------------------------------------- ------- ------- ------- -------
Net cash flow (7.3) 1.2 66.3 (19.9)
Opening cash balance(8) 221.1 89.0 146.4 109.5
Foreign exchange movement (1.3) (0.4) (0.2) 0.2
--------------------------------------------- ------- ------- ------- -------
Closing cash balance 212.5 89.8 212.5 89.8
--------------------------------------------- ------- ------- ------- -------
(1) Payment of lease liabilities includes interest and principal repayments of lease liabilities.
(2) Tax paid excludes Change of Control Taxes which are classified separately below.
(3) Please refer to reconciliation of cash generated from operating activities to portfolio free cash flow in the Alternative Performance Measures section.
(4) Cash conversion % is calculated as portfolio free cash flow divided by Adjusted EBITDA.
(5) Net payment of interest corresponds to the net of "Interest paid" (including withholding tax) and "Interest received" in the condensed consolidated statement of cash flows, excluding interest payments on lease liabilities.
(6) Discretionary capital additions includes acquisition, growth and upgrade capital additions.
(7) Net change in working capital corresponds to movements in working capital, excluding cash paid for EBITDA adjusting items and including movements in capital expenditure related working capital.
(8) Cash paid for EBITDA adjusting items corresponds to cash paid in respect of items per note 4 of the condensed consolidated interim financial statements - project costs in relation to the IPO and fees for the preparation of the debt refinancing.
(9) Opening cash balance for the period ended 30 June 2020 included US$37.7 million restricted cash which had been funded at the time of IPO by Helios Tower's pre-IPO shareholders. This was paid to the relevant tax authority in Q1 2020.
(10) Net cash flow from financing activities includes borrowing drawdowns, loan issue costs and repayment of loan in the condensed consolidated statement of cash flows.
Cash conversion has decreased to 78% for the quarter ended 30 June 2020 from 79% from the quarter ended 30 June 2019 driven by an increase in maintenance and corporate capital additions. For the 6 month period ended 30 June 2020 cash conversion was 82% and increased from 81% for the 6 month period ended 30 June 2019 driven by an increase in Adjusted EBITDA and a decrease in maintenance and corporate capital additions.
Capital expenditure
The following table shows capital expenditure additions by category during the 6 months ended 30 June:
2020 2019
------------ ------------
% of % of
Total Total
US$m Capex US$m Capex
------------ ---- ------ ---- ------
Acquisition 10.2 26.8% 12.8 23.1%
Growth 15.1 39.7% 27.1 49.1%
Upgrade 5.3 13.9% 7.6 13.7%
Maintenance 6.9 18.2% 6.9 12.5%
Corporate 0.5 1.4% 0.9 1.6%
------------ ---- ------ ---- ------
38.0 100.0% 55.3 100.0%
------------ ---- ------ ---- ------
Off-Balance Sheet arrangements
The Group does not have any off-balance sheet arrangements.
Indebtedness
On the 10 June 2020 HTA Group, Ltd. (the "HTA Group"), an indirect wholly owned subsidiary of Helios Towers plc (the "Company"), announced the successful pricing of its offering of 7.00% US$750 million Senior Notes due 2025 (the "Notes"), guaranteed on a senior basis by the Company and certain of its direct and indirect subsidiaries (the "Offering"). The Notes were issued on 18 June 2020 at an issue price of 99.439% of principal amount. The proceeds of the Notes were used (i) to redeem US$600 million of HTA Group's outstanding Senior Notes due 2022 (the "Existing Notes") (plus accrued interest), (ii) to repay all amounts outstanding under its US$125 million term facility (of which US$75 million was outstanding), (iii) to pay certain fees and expenses in relation to the Offering and (iv) with excess funds available for general corporate purposes.
HTA Group also entered into a US$135 million term facility (with a 5-year tenor, and which may increase in accordance with its terms up to an aggregate amount of US$200 million) with borrowing availability in U.S. dollars for the general corporate purposes (including acquisitions) of the Company and certain of its subsidiaries. This new term facility replaced the existing US$125 million term facility, which was cancelled upon completion of the Offering on 19 June 2020.
Additionally, HTA Group entered into a revolving credit facility (with a 4.5-year tenor) with borrowing availability in US dollars for the purpose of financing or refinancing the general corporate and working capital needs of the Company and certain of its subsidiaries. Commitments under the new revolving credit facility amount to US$70 million and replaced the previous US$60 million revolving credit facility, which was also cancelled on 19 June 2020.
As of 30 June 2020 and 31 December 2019, the Group's outstanding loans and borrowings net of issue costs and excluding lease liabilities, were US$740.9 million and US$684.3 million respectively. The Group's net debt as of 30 June 2020 and 31 December 2019 was US$655.7 million and US$626.5 million with net leverage of 3.0x and 2.9x respectively. Indebtedness and leverage as at 30 June 2020 reflect the $750 million Senior Notes refinance which was completed during Q2 2020. Further details of the refinance are provided in note 13 and net debt and net leverage details are provided in Alternative Performance Measure section.
Risk management
The risk management and governance process has not changed since the 2019 Annual report was published and is set out on page 46 of the 2019 Annual report (available on the Group's website at www.heliostowers.com) and summarised as follows.
The creation and maintenance of the Group risk register involves the whole business - with operating company and functional head input being consolidated by Group Compliance into a register for discussion and agreement at Executive level prior to submission to the Audit Committee and the Board. The risk register is updated twice a year after these discussions and a review of the external environment for any emerging risks.
All risks are classified into six broad risk types: Strategic, Reputational, Compliance (including legal), Finance, Operational and People. All risks are assessed according to the probability and consequence of being realised and a determination made to accept, avoid, or control and mitigate, in which case mitigating controls are clearly defined. A risk owner for all risks is identified.
During bi-annual discussions with Executive Management and functional heads of department, potential emerging risks are also discussed. These may result from internal developments, changes in organisational structure/personnel, potential new products or markets being considered or changes in the external environment such as regulatory changes, socio-economic, political or health and safety matters.
During the quarter a new risk in relation to Covid-19 has been added, please refer to principal risks and uncertainties below.
Emerging risks related to sustainability, climate change, evolving legal requirements concerning modern slavery and human rights abuses have been identified as part of the risk management process and continue to be monitored. Due to the nature of the operations, Brexit is not considered to be a principal risk.
Principal risks and uncertainties
The nature of the principal risks and uncertainties faced by the Group have been updated since the 2019 Annual report was published to include one new risk for Covid-19. There has been no change in the nature, probability or potential impact of previously identified risks as set out on pages 47 to 48 of the 2019 Annual report (available on the Group's website at www.heliostowers.com ). The risks are summarised as follows:
- Operational resilience
- Major quality failure or breach of contract
- Non-compliance with various laws and regulations
- Economic and political instability
- Significant exchange rate movements
- Non-compliance with licence requirements
- Loss of key personnel
- Technology risk
- Failure to remain competitive
- Failure to integrate new lines of business in new markets
- Tax disputes
- Covid-19 (new risk)
An additional principal risk has been added to reflect the potentially material and adverse effects associated with the ongoing Covid-19 pandemic and related uncertainties as it evolves.
A summary table outlining key Covid-19 risk areas and associated impact assessments is included below:
RISK RISK RISK
STATUS DESCRIPTION IMPACTS MITIGATION
------- ------------------------------ ----------- ----------------------------------------------------------------
New 1. COVID-19 Operational
In addition to the risk to the Financial * Health and safety protocols established and
health and safety of our implemented
employees and contractors, the
ongoing
impact of the Covid-19 * Business continuity plans implemented with ongoing
pandemic could materially and monitoring
adversely affect the financial
and operational
performance of the Group * Financial modelling, scenario building and stress
across all of its activities. testing
The effects of the pandemic
may also
disrupt the achievement of the * Continuous scanning of the external environment
Group's strategic plans and
growth objectives and place
additional * Increased fuel and capex purchases
strain on its technology
infrastructure. There is also
an increased risk of * Review of contractual terms and conditions
litigation due
to the potential effects of
the pandemic on fulfilment of * Review and adaptation of our control environment for
contractual obligations. remote working
------- ------------------------------ ----------- ----------------------------------------------------------------
Control environment
The effectiveness of the Group's system of internal control is regularly reviewed by the Board with specific consideration given to material financial, operational and sustainable risks and controls, with appropriate steps taken to address any issues identified. As a result of Covid-19 management, internal audit and the audit committee have reviewed the internal control framework to ensure that the controls continue to operate or have been adequately amended to operate effectively in a remote working environment.
Impact of COVID-19
The Group's business and operations are inherently resilient against the implications of the COVID-19 pandemic and associated lockdowns, due to operating in the telecoms sector, which sees continued strong demand, and through having long-term revenue contracts with large blue-chip MNOs. The Group therefore maintains its current FY 20 guidance. The table below provides a summary of the impact across key areas of the Group's operations:
Commentary Impact Assessment
------------ ----------------------------------------------------------------- -------------------------------------------------------
Workforce
& * Office staff are working from home across all markets * Minimal disruption to-date
Operations
* Field operations are in dispersed locations and * Business continuity maintained
outdoor environments with personnel classified as
essential workers
* Return to work protocols are being discussed with
employee wellbeing at the core
------------ ----------------------------------------------------------------- -------------------------------------------------------
Existing
Revenue / * US$2.8 billion contracted revenues with 7 years * Minimal impact to existing revenue expected
Liquidity contract duration across five countries and 82% with
Africa's Big-Five MNOs
* Sufficient liquidity
* Following refinancing the cash balance is US$212.5
million with undrawn debt facilities of up to US$270
million at Group and ZAR 351 million at Helios Towers
South Africa
------------ ----------------------------------------------------------------- -------------------------------------------------------
Customer
roll-out * Implications for rate of roll out if equipment supply * Mobile services are critical and in high demand
chains are disrupted
* Robust pipeline
------------ ----------------------------------------------------------------- -------------------------------------------------------
Supply
Chain * Minimal supply chain delays have been experienced to * Accelerated equipment orders provide sufficient
date inventory to support our growth through 2020
* Forward purchased FY 20 materials in late Q1 / early * High quality operational performance ensured
Q2
* Forward purchasing of capex
* Additional fuel purchases to ensure adequate supplies
------------ ----------------------------------------------------------------- -------------------------------------------------------
Situation
management * Regular monitoring and communications with Board, * Minimal disruption expected
executive management and employees
* Cloud-based systems and group-wide video-conferencing
for smooth remote-working transition
Going concern
The Directors also considered it appropriate to prepare the condensed consolidated interim financial statements on a going concern basis, as explained in note 1.
Alternative Performance Measures
The Group has presented a number of Alternative Performance Measures ("APMs"), which are used in addition to IFRS statutory performance measures.
The Group believes that these APMs, which are not considered to be a substitute for or superior to IFRS measures, provide stakeholders with additional helpful information on the performance of the business. These APMs are consistent with how the business performance is planned and reported within the internal management reporting to the Board. Some of these measures are also used for the purposes of setting remuneration targets.
Adjusted EBITDA and Adjusted EBITDA margin
Definition - Management de nes Adjusted EBITDA as loss before tax for the period, adjusted for nance costs, gains or loss on financial instruments, interest receivable, loss on disposal of property, plant and equipment, amortisation of intangible assets, depreciation and impairment of property, plant and equipment, depreciation of right-of-use assets, deal costs for aborted acquisitions, deal costs not capitalised, share-based payments and long-term incentive plan charges, and other adjusting items. Adjusting items are material items that are considered one-off by management by virtue of their size and/or incidence. Adjusted EBITDA margin is calculated as Adjusted EBITDA divided by revenue.
Purpose - The Group believes that Adjusted EBITDA and Adjusted EBITDA margin facilitates comparisons of operating performance from period to period and company to company by eliminating potential differences caused by variations in capital structures (affecting interest and finance charges), tax positions (such as the impact of changes in effective tax rates or net operating losses) and the age and booked depreciation on assets. The Group excludes certain items from Adjusted EBITDA, such as loss on disposal of property, plant and equipment and other adjusting items because it believes they are not indicative of its underlying trading performance.
Adjusted EBITDA is reconciled to loss before tax as follows:
6 months ended 3 months ended
30 June June
---------------- ----------------
2020 2019 2020 2019
US$m US$m US$m US$m
---------------------------------------------- ------- ------- ------- -------
Adjusted EBITDA 109.1 99.0 55.1 50.2
Adjustments applied in arriving at Adjusted
EBITDA:
Adjusting items:
Project costs1 (4.6) (3.1) (0.3) (3.1)
Deal costs2 (0.8) (2.4) (0.1) (1.2)
Share-based payments and long term incentive
plans3 (0.4) (1.7) (0.2) (1.7)
Loss on disposals of assets (1.3) (5.3) (0.7) (0.2)
Gain or loss on financial instruments (note
16) (35.0) 24.3 6.0 8.5
Depreciation of property, plant and equipment (63.7) (65.2) (32.1) (33.4)
Depreciation of right-of-use assets (4.8) (3.9) (2.5) (2.0)
Amortisation of intangibles (4.2) (4.7) (2.0) (2.8)
Interest receivable 0.5 0.7 - 0.6
Finance costs (77.8) (56.4) (48.7) (24.9)
---------------------------------------------- ------- ------- ------- -------
Loss before tax (83.0) (18.7) (25.5) (10.0)
---------------------------------------------- ------- ------- ------- -------
(1) Project costs in 2020 relate to the preparation for a debt refinancing and listing of equity on London Stock Exchange in 2019.
(2) Deal costs comprise deal costs for aborted acquisitions, which mainly comprise professional fees and travel costs incurred while investigating potential site acquisitions that are expensed when the potential site acquisition does not proceed, and deal costs not capitalized, which relate to the exploration of investment opportunities across Africa.
(3) Share-based payments and long-term incentive plan charges and associated costs.
6 months ended 3 months ended
30 June 30 June
---------------- ----------------
2020 2019 2020 2019
US$m US$m US$m US$m
----------------------- ------- ------- ------- -------
Adjusted EBITDA 109.1 99.0 55.1 50.2
----------------------- ------- ------- ------- -------
Revenue 204.0 190.7 102.2 97.0
Adjusted EBITDA margin 53% 52% 54% 52%
----------------------- ------- ------- ------- -------
Adjusted gross profit and adjusted gross margin
Definition - Adjusted gross profit is defined as gross profit, adding back site depreciation. Adjusted gross margin is defined as adjusted gross profit divided by revenue.
Purpose - These measures are used to evaluate the underlying level of gross profitability of the operations of the business, excluding depreciation, which is the major non-cash measure reflected in cost of sales. The Group believes that adjusted gross profit facilitates comparisons of operating performance from period to period and company to company by eliminating potential differences caused by the age and booked depreciation on assets. It is also a proxy for the gross cash generation of its operations.
6 months ended 3 months ended
30 June 30 June
---------------- ----------------
2020 2019 2020 2019
US$m US$m US$m US$m
---------------------------- ------- ------- ------- -------
Gross profit 73.8 58.0 37.0 29.6
Add back: site depreciation 63.3 64.5 32.0 33.0
---------------------------- ------- ------- ------- -------
Adjusted gross profit 137.1 122.5 69.0 62.6
---------------------------- ------- ------- ------- -------
Revenue 204.0 190.7 102.2 97.0
Adjusted gross margin 67% 64% 68% 65%
---------------------------- ------- ------- ------- -------
Portfolio free cash flow and adjusted free cash flow
Definition - Portfolio free cash flow is defined as Adjusted EBITDA less maintenance and corporate capital expenditure, payments of lease liabilities (including interest and principal repayments of lease liabilities) and tax paid. Adjusted free cash flow is defined as portfolio free cash flow less net payment of interest and discretionary capital additions.
Purpose - Portfolio free cash flow is used to evaluate the cash flow generated by the business operations after expenditure incurred on maintaining capital assets, including lease liabilities, and taxes. It is a measure of the unlevered cash generation of the Group's current tower estate. Adjusted free cash flow is used to evaluate free cash flow from period to period by eliminating potential differences caused by working capital movements and cash paid for EBITDA adjusting items.
6 months ended 3 months ended
30 June 30 June
---------------- ----------------
2020 2019 2020 2019
US$m US$m US$m US$m
-------------------------------------------------- ------- ------- ------- -------
Cash generated from operating activities 88.3 43.6 62.9 19.1
Movement in working capital 15.4 38.2 (8.2) 15.1
Adjusting items:
Project costs(1) 4.6 3.1 0.3 3.1
Deal costs(2) 0.8 2.4 0.1 1.2
Share-based payments and long term incentive
plans - 1.7 - 1.7
Retention award(3) - 10.0 - 10.0
Adjusted EBITDA 109.1 99.0 55.1 50.2
-------------------------------------------------- ------- ------- ------- -------
Less: Maintenance and corporate capital additions (7.4) (7.8) (4.8) (3.4)
Less: Payments of lease liabilities4 (11.3) (10.2) (6.3) (6.5)
Less: Tax paid(5) (1.3) (1.2) (0.8) (0.9)
-------------------------------------------------- ------- ------- ------- -------
Portfolio free cash flow 89.1 79.8 43.2 39.4
-------------------------------------------------- ------- ------- ------- -------
Net payment of interest (51.3) (32.5) (20.2) (2.5)
-------------------------------------------------- ------- ------- ------- -------
Levered portfolio free cash flow 37.8 47.3 23.0 36.9
Discretionary capital additions (30.6) (47.5) (22.0) (36.1)
-------------------------------------------------- ------- ------- ------- -------
Adjusted free cash flow 7.2 (0.2) 1.0 0.8
-------------------------------------------------- ------- ------- ------- -------
(1) Project costs in 2020 relate to the preparation for a debt refinancing and listing of equity on London Stock Exchange in 2019.
(2) Deal costs comprise deal costs for aborted acquisitions, which mainly comprise professional fees and travel costs incurred while investigating potential site acquisitions that are expensed when the potential site acquisition does not proceed, and deal costs not capitalized, which relate to the exploration of investment opportunities across Africa.
(3) Retention award made to senior management in respect of future services as part of the management incentive plan ("MIP").
(4) Payment of lease liabilities includes interest and principal repayments of lease liabilities.
(5) Excludes US$37.7 million restricted cash which had been funded at the time of IPO by Helios Towers' pre-IPO shareholders and paid to the relevant tax authority in Q1 2020.
Adjusted operating profit
Definition - Adjusted operating profit means reported operating profit adjusted for loss on disposal of property, plant and equipment, deal costs, share-based payments and long-term incentive plan charges, and adjusting items. Adjusting items are material items that are considered one-off by management by virtue of their size and/or incidence.
Purpose - This measure is used to evaluate the underlying level of operating profitability of the Group. By including adjustments mentioned in the definition the Group believes that adjusted operating profit facilitates a more meaningful comparison of Group operating performance trends from period to period.
6 months ended 3 months ended
30 June 30 June
---------------- ----------------
2020 2019 2020 2019
US$m US$m US$m US$m
-------------------------------------------------- ------- ------- ------- -------
Operating profit 29.3 12.7 17.2 5.8
Adjusting items:
Project costs 4.6 3.1 0.3 3.1
Deal costs(1) 0.8 2.4 0.1 1.2
Share-based payments and long term incentive
plans(2) 0.4 1.7 0.2 1.7
Loss on disposal of property, plant and equipment 1.3 5.3 0.7 0.2
-------------------------------------------------- ------- ------- ------- -------
Adjusted operating profit 36.4 25.2 18.5 12.0
-------------------------------------------------- ------- ------- ------- -------
1 Deal costs comprise deal costs for aborted acquisitions, which mainly comprise professional fees and travel costs incurred while investigating potential site acquisitions that are expensed when the potential site acquisition does not proceed, and deal costs not capitalized, which relate to the exploration of investment opportunities across Africa.
2 Share-based payments and long-term incentive plan charges and associated costs.
Return on invested capital
Definition - Return on invested capital is defined as portfolio free cash flow divided by invested capital. Invested capital is defined as gross plant, property and equipment and gross intangibles, less accumulated maintenance and corporate capital expenditure.
Purpose - This measure is used to evaluate asset efficiency and the effectiveness of the Group's capital allocation.
30 June 31 December
2020 2019
US$m US$m
---------------------------------------------------------- ------- -----------
Property, plant and equipment 600.3 631.9
Accumulated depreciation 656.3 597.2
Accumulated maintenance and corporate capital expenditure (171.3) (163.9)
---------------------------------------------------------- ------- -----------
Gross property, plant and equipment excluding maintenance
and corporate capital expenditure 1,085.3 1,065.2
---------------------------------------------------------- ------- -----------
Intangible assets 21.3 28.4
Accumulated amortisation 84.5 80.7
---------------------------------------------------------- ------- -----------
Gross intangibles 105.8 109.1
---------------------------------------------------------- ------- -----------
Total invested capital 1,191.1 1,174.3
---------------------------------------------------------- ------- -----------
Portfolio free cash flow(1) 172.8 168.9
---------------------------------------------------------- ------- -----------
Return on invested capital 14.5% 14.4%
---------------------------------------------------------- ------- -----------
(1) A s at 30 June, portfolio free cash flow is annualised by multiplying Q2 portfolio free cash flow by 4.
Gross debt, net debt, net leverage and adjusted cash & cash equivalents
Definition - Gross debt is calculated as non-current loans, current loans, and long-term and short-term lease liabilities. Net debt is calculated as gross debt less adjusted cash and cash equivalents. Adjusted cash and cash equivalents comprises cash and cash equivalents excluding US$nil million (31 December 2019 US$37.7 million) of restricted cash for the potential payment of Change of Control Tax related to our initial public offering in 2019 funded by a capital contribution from our pre-IPO shareholders immediately prior to the initial public offering.
Purpose - Net debt is a measure of the Group's net indebtedness that provides an indicator of overall balance sheet strength. It is also a single measure that can be used to assess both the Group's cash position and its indebtedness. The use of the term 'net debt' does not necessarily mean that the cash included in the net debt calculation is available to settle the liabilities included in this measure.
30 June 31 December
2020 2019
US$m US$m
----------------------------------- ------- -----------
External debt(1) 740.9 684.3
Lease liabilities 127.3 125.6
----------------------------------- ------- -----------
Gross debt 868.2 809.9
Cash and cash equivalents 212.5 221.1
Less: restricted cash - (37.7)
----------------------------------- ------- -----------
Adjusted cash and cash equivalents 212.5 183.4
----------------------------------- ------- -----------
Net debt 655.7 626.5
----------------------------------- ------- -----------
LQA annualised Adjusted EBITDA(2) 220.4 214.8
----------------------------------- ------- -----------
Net leverage (3) 3.0 2.9
----------------------------------- ------- -----------
(1) External debt is presented in line with the balance sheet at amortised cost. External debt is the total loans owed to commercial banks and institutional investors.
(2) LQA annualised Adjusted EBITDA calculated as per the Senior Notes definition as the most recent fiscal quarter multiplied by 4. This is not a forecast of future results.
(3) Net leverage is calculated as net debt divided by last quarter annualised Adjusted EBITDA.
Material recent developments
Appointment of Non-Executive Directors
On 13 August 2020 Carole Wamuyu Wainaina was appointed as a Non-Executive Director. This follows the appointment of Sally Ashford as a Non-Executive Director on 15 June 2020.
Refinancing
On the 10 June 2020 HTA Group, Ltd. (the "HTA Group"), an indirect wholly owned subsidiary of Helios Towers plc (the "Company"), announced the successful pricing of its offering of 7.00% US$750 million Senior Notes due 2025 (the "Notes"), guaranteed on a senior basis by the Company and certain of its direct and indirect subsidiaries (the "Offering"). The Notes were issued on 18 June 2020 at an issue price of 99.439% of principal amount. The proceeds of the Notes were used (i) to redeem US$600 million of HTA Group's outstanding Senior Notes due 2022 (the "Existing Notes") (plus accrued interest), (ii) to repay all amounts outstanding under its US$125 million term facility (of which US$75 million was outstanding), (iii) to pay certain fees and expenses in relation to the Offering and (iv) with excess funds available for general corporate purposes.
HTA Group also entered into a US$135 million term facility (with a 5-year tenor, and which may increase in accordance with its terms up to an aggregate amount of US$200 million) with borrowing availability in U.S. dollars for the general corporate purposes (including acquisitions) of the Company and certain of its subsidiaries. This new term facility replaced the existing US$125 million term facility, which was cancelled upon completion of the Offering on 19 June 2020.
Additionally, HTA Group entered into a revolving credit facility (with a 4.5-year tenor) with borrowing availability in US dollars for the purpose of financing or refinancing the general corporate and working capital needs of the Company and certain of its subsidiaries. Commitments under the new revolving credit facility amount to US$70 million and replace the previous US$60 million revolving credit facility, which was also cancelled on 19 June 2020.
Acquisition of over 1,200 sites from Free Senegal
Subsequent to period end, on 12 August 2020, the Group signed an agreement to acquire 1,220 sites with from Free Senegal - the second largest mobile operator in Senegal backed by a consortium of investors including NJJ, the founder of the Iliad S.A. group Xavier Niel's private holding company, Teyliom Group and Axian Group - to acquire its passive infrastructure assets, for an upfront cash consideration of EUR160 million (c.$189 million). This represents an enterprise value of EUR178m (c.$210m) including an estimated EUR18m (c.$21m) of taxes and capitalised ground leases. In addition, deferred consideration and growth capex of EUR40m ($47m) and c.EUR30m ($35m) respectively are expected to be invested over the next 5 years in relation to the rollout of 400 committed new build-to-suit sites. This acquisition is in line with the Group's expansion strategy. For further information please refer to our website ( www.heliostowers.com/investors/investor-news/ ).
Tanzania local listing
Effective 1 July 2020 the 25% local listing requirements no longer includes companies who hold "network facility licences for leases of towers" (Finance Act 2000). As a consequence Helios Towers Tanzania is no longer required to list on the Dar es Salaam Stock Exchange.
Condensed consolidated financial statements
Independent review report to Helios Towers plc
We have been engaged by the company to review the condensed set of financial statements in the quarterly financial report for the six and three months ended 30 June 2020, which comprises the condensed consolidated statement of profit or loss and other comprehensive income, condensed consolidated statement of financial position, condensed consolidated statement of changes in equity, condensed consolidated statement of cash flows and related notes 1 to 23. We have read the other information contained in the quarterly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the company in accordance with the International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Financial Reporting Council. Our work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusions we have formed.
Directors' responsibilities
The quarterly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the quarterly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.
As disclosed in note 2, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this quarterly financial report has been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the quarterly financial report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Financial Reporting Council for use in the United Kingdom. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the quarterly financial report for the six and three months ended 30 June 2020 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.
Deloitte LLP
Statutory Auditor
Birmingham, United Kingdom
13 August 2020
Condensed consolidated statement of profit or loss and other comprehensive income (unaudited)
For the 6 and 3 months ended 30 June 2020
6 months ended 3 months ended
30 June 30 June
---------------- ----------------
2020 2019 2020 2019
Note US$m US$m US$m US$m
--------------------------------------------- ---- ------- ------- ------- -------
Revenue 204.0 190.7 102.2 97.0
Cost of sales (130.2) (132.7) (65.2) (67.4)
--------------------------------------------- ---- ------- ------- ------- -------
Gross profit 73.8 58.0 37.0 29.6
--------------------------------------------- ---- ------- ------- ------- -------
Administrative expenses (43.2) (40.0) (19.1) (23.6)
Loss on disposal of property, plant
and equipment (1.3) (5.3) (0.7) (0.2)
--------------------------------------------- ---- ------- ------- ------- -------
Operating profit 29.3 12.7 17.2 5.8
--------------------------------------------- ---- ------- ------- ------- -------
Interest receivable 0.5 0.7 - 0.6
(Loss)/gain on financial instruments 16 (35.0) 24.3 6.0 8.5
Finance costs 5 (77.8) (56.4) (48.7) (24.9)
--------------------------------------------- ---- ------- ------- ------- -------
Loss before tax (83.0) (18.7) (25.5) (10.0)
--------------------------------------------- ---- ------- ------- ------- -------
Tax expense 6 (7.8) (3.8) (3.8) (3.1)
--------------------------------------------- ---- ------- ------- ------- -------
Loss for the period (90.8) (22.5) (29.3) (13.1)
--------------------------------------------- ---- ------- ------- ------- -------
Other comprehensive (expense)/income:
Items that may be reclassified subsequently
to profit and loss:
Exchange differences on translation
of foreign operations (3.9) 1.2 (1.7) 3.6
--------------------------------------------- ---- ------- ------- ------- -------
(94.7) (21.3) (31.0) (9.5)
--------------------------------------------- ---- ------- ------- ------- -------
Loss attributable to:
Owners of the Company (91.1) (22.3) (29.8) (12.9)
--------------------------------------------- ---- ------- ------- ------- -------
Non-controlling interests 0.3 (0.2) 0.5 (0.2)
--------------------------------------------- ---- ------- ------- ------- -------
Loss for the period (90.8) (22.5) (29.3) (13.1)
--------------------------------------------- ---- ------- ------- ------- -------
Total comprehensive loss attributable
to:
Owners of the Company (94.9) (21.1) (31.4) (9.3)
--------------------------------------------- ---- ------- ------- ------- -------
Non-controlling interests 0.2 (0.2) 0.4 (0.2)
--------------------------------------------- ---- ------- ------- ------- -------
Total comprehensive loss for the period (94.7) (21.3) (31.0) (9.5)
--------------------------------------------- ---- ------- ------- ------- -------
Earnings per share
Net loss attributable to shareholders Basic and diluted loss per share (cents) 21 (9) (2) (3) (1) ----------------------------------------- --------- --- --- --- ---
Condensed consolidated statement of financial position (unaudited)
As at 30 June 2020
30 June 31 December
2020 2019
Notes US$m US$m
------------------------------ ----- ------- -----------
Non-current assets
Intangible assets 7 21.3 28.4
Property, plant and equipment 8a 600.3 631.9
Right-of-use assets 8b 109.4 108.2
Derivative financial assets 9 5.3 41.0
------------------------------ ----- ------- -----------
736.3 809.5
------------------------------ ----- ------- -----------
Current assets
Inventories 9.1 9.3
Trade and other receivables 10 164.8 166.5
Prepayments 31.1 14.1
Cash and cash equivalents 11 212.5 221.1
------------------------------ ----- ------- -----------
417.5 411.0
------------------------------ ----- ------- -----------
Total assets 1,153.8 1,220.5
------------------------------ ----- ------- -----------
Equity
Issued capital and reserves
Share capital 12 12.8 12.8
Stated capital 12.8 12.8
Other reserves (87.0) (87.0)
Translation reserve (86.5) (82.7)
Share based payment reserve 18.4 19.6
Treasury shares (2.8) (4.4)
Retained earnings 226.5 317.6
------------------------------ ----- ------- -----------
Equity attributable to owners 81.4 175.9
------------------------------ ----- ------- -----------
Non-controlling interest (0.4) (0.6)
------------------------------ ----- ------- -----------
Total equity 81.0 175.3
------------------------------ ----- ------- -----------
Non-current liabilities
Loans 13 738.9 665.1
Long-term lease liabilities 15 106.2 104.2
Contingent consideration 20 - 5.9
Deferred tax liabilities 3.3 3.1
------------------------------ ----- ------- -----------
848.4 778.3
------------------------------ ----- ------- -----------
Current liabilities
Trade and other payables 14 194.9 222.7
Contingent consideration 20 6.4 3.6
Loans 13 2.0 19.2
Short-term lease liabilities 15 21.1 21.4
------------------------------ ----- ------- -----------
224.4 266.9
------------------------------ ----- ------- -----------
Total liabilities 1,072.8 1,045.2
------------------------------ ----- ------- -----------
Total equity and liabilities 1,153.8 1,220.5
------------------------------ ----- ------- -----------
Condensed consolidated statement of changes in equity (unaudited)
For the 6 months ended 30 June 2020
Available
Share to the
based owners
Share Share payments Treasury Other Translation Accumulated of the Non-controlling Total
capital premium reserve shares reserves reserves (losses)/profits Company interest equity
US$m US$m US$m US$m US$m US$m US$m US$m US$m US$m
-------------- ------- ------- -------- -------- -------- ----------- ---------------- --------- --------------- ------
Balance at 1
January
2019 909.2 187.0 - - (12.8) (81.7) (880.0) 121.7 - 121.7
-------------- ------- ------- -------- -------- -------- ----------- ---------------- --------- --------------- ------
Loss for the
period - - - - - - (22.3) (22.3) (0.2) (22.5)
Other
comprehensive
income - - - - - 1.2 - 1.2 - 1.2
-------------- ------- ------- -------- -------- -------- ----------- ---------------- --------- --------------- ------
Total
comprehensive
income/(loss)
for
the period - - - - - 1.2 (22.3) (21.1) (0.2) (21.3)
-------------- ------- ------- -------- -------- -------- ----------- ---------------- --------- --------------- ------
Balance at 30
June
2019 909.2 187.0 - - (12.8) (80.5) (902.3) 100.6 (0.2) 100.4
-------------- ------- ------- -------- -------- -------- ----------- ---------------- --------- --------------- ------
Balance at 1
January
2020 12.8 - 19.6 (4.4) (87.0) (82.7) 317.6 175.9 (0.6) 175.3
-------------- ------- ------- -------- -------- -------- ----------- ---------------- --------- --------------- ------
Loss for the
period - - - - - - (91.1) (91.1) 0.3 (90.8)
Other
comprehensive
expense - - - - - (3.8) - (3.8) (0.1) (3.9)
-------------- ------- ------- -------- -------- -------- ----------- ---------------- --------- --------------- ------
Total
comprehensive
(loss)/income
for
the period - - - - - (3.8) (91.1) (94.9) 0.2 (94.7)
-------------- ------- ------- -------- -------- -------- ----------- ---------------- --------- --------------- ------
Share based
payments - - 0.4 - - - - 0.4 - 0.4
-------------- ------- ------- -------- -------- -------- ----------- ---------------- --------- --------------- ------
Transfer - - (1.6) 1.6 - - - - - -
Balance at 30
June
2020 12.8 - 18.4 (2.8) (87.0) (86.5) 226.5 81.4 (0.4) 81.0
-------------- ------- ------- -------- -------- -------- ----------- ---------------- --------- --------------- ------
Condensed consolidated statement of cash flows (unaudited)
For the 6 and 3 months ended 30 June 2020
6 months ended 3 months ended
30 June 30 June
------------------------------- -------------------------------------------
2020 2019 2020 2019
Note US$m US$m US$m US$m
------------------------------------------------------------------------------------ ------- ---------------------- --------------------- --------------------
Cash flows generated from operating activities
Loss for the period before taxation (83.0) (18.7) (25.5) (10.0)
Adjustments for:
(Loss)/gain on financial instruments 35.0 (24.3) (6.0) (8.5)
Finance costs 77.8 56.4 48.7 24.9
Interest receivable (0.5) (0.7) - (0.6)
Share-based payments and long-term incentive
plans 0.4 - 0.2 -
Depreciation and amortisation on property,
plant and equipment 72.7 73.8 36.6 38.2
Loss on disposal of property, plant and
equipment 1.3 5.3 0.7 0.2
Movement in working capital:
Decrease in inventories 0.4 0.5 0.3 -
Decrease/(increase) in trade and other
receivables 1.9 (25.7) 5.7 (4.5)
Increase in prepayments (2.8) (13.1) (3.5) (10.9)
(Decrease)/increase in trade and other
payables (14.9) (9.9) 5.7 (9.7)
------------------------------------------------------------------------------------ ------- ---------------------- --------------------- --------------------
Cash generated from operations 88.3 43.6 62.9 19.1
Interest paid (56.0) (36.3) (23.3) (5.8)
Tax paid 6 (39.0) (1.2) (0.8) (0.9)
------------------------------------------------------------------------------------ ------- ---------------------- --------------------- --------------------
Net cash (used in)/generated from operating
activities (6.7) 6.1 38.8 12.4
------------------------------------------------------------------------------------ ------- ---------------------- --------------------- --------------------
Cash flows from investing activities
Payments to acquire property, plant and
equipment (51.6) (42.0) (24.5) (20.2)
Payments to acquire intangible assets - (0.5) - (0.5) Acquisition of subsidiary - (10.6) - (10.6) Proceeds on disposal on assets 0.6 0.1 0.6 0.1 Interest received 0.5 0.7 - 0.6 ------------------------------------------------------------------------------------ ------- ---------------------- --------------------- -------------------- Net cash used in investing activities (50.5) (52.3) (23.9) (30.6) ------------------------------------------------------------------------------------ ------- ---------------------- --------------------- -------------------- Cash flows from financing activities Borrowing drawdowns 756.5 50.0 756.5 - Loan issue costs (15.0) - (15.0) - Repayment of loan (688.7) - (688.7) - Repayment of lease liabilities (2.9) (2.6) (1.4) (1.7) Net cash generated/(used in) from financing activities 49.9 47.4 51.4 (1.7) ------------------------------------------------------------------------------------ ------- ---------------------- --------------------- -------------------- Foreign exchange on translation movement (1.3) (0.4) (0.2) 0.2 Net (decrease)/increase in cash and cash equivalents (7.3) 1.2 66.3 (19.9) Cash and cash equivalents at the beginning of period 221.1 89.0 146.4 109.5 ------------------------------------------------------------------------------------ ------- ---------------------- --------------------- -------------------- Cash and cash equivalents at end of period 212.5 89.8 212.5 89.8 ------------------------------------------------------------------------------------ ------- ---------------------- --------------------- --------------------
Notes to the condensed consolidated financial statements (unaudited)
For the 6 months ended 30 June 2020
1. General Information
Helios Towers plc is a public company incorporated in the UK.
Going concern
The Directors believe that the Group is well placed to manage its business risks successfully, despite the current uncertain economic outlook in the wider economy. The Group's forecasts and projections, taking account of possible changes in trading performance, show that the Group should remain adequately liquid and should operate within the covenant levels of its current debt facilities. The Directors consider it appropriate to adopt the going concern basis of preparation for the condensed consolidated financial statements.
As part of their regular assessment of the Group's working capital and financing position, the Directors have prepared a detailed trading and cash flow forecast for a period which covers at least 12 months after the date of approval of the interim financial statements. In assessing the forecast, the Directors have considered:
-- trading risks presented by the current economic conditions in the operating markets; -- the impact of macroeconomic factors, particularly interest rates and foreign exchange rates; -- the status of the Group's financial arrangements;
-- progress made in developing and implementing cost reduction programmes and operational improvements; and
-- mitigating actions available should business activities fall behind current expectations, including the deferral of discretionary overheads and restricting cash outflows.
In particular, the Directors have considered the impact of COVID-19 on the Group's operations. The Directors have acknowledged the latest guidance on going concern as issued by the Financial Reporting Council in May 2020 and the thematic review published in July 2020. Management have considered the latest forecasts available to them and additional sensitivity analysis has been prepared to consider any reduction in anticipated levels of Adjusted EBITDA and operating profit arising from various scenarios.
The Directors continue to consider it appropriate to adopt the going concern basis of accounting in preparing the interim financial information. Forecast liquidity has been assessed under a number of stressed scenarios and a reverse stress test was performed to support this assertion.
2. Accounting Policies
Basis of preparation
The interim financial statements of Helios Towers plc and its subsidiaries are prepared using accounting policies consistent with International Financial Reporting Standards ("IFRS") as adopted by the European Union, taking into account IFRS Interpretations Committee (IFRS IC) interpretations.
The condensed set of financial statements included in this interim financial report has been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting', as issued by the International Accounting Standards Board. The information as of and for the period ended 30 June 2019 corresponds to Helios Towers Ltd, the predecessor parent company of the Group before the initial public offering. Please refer to note 1 in audited financial statements of Helios Towers plc for the year ended 31 December 2019 for further information.
Accounting policies are consistent with those adopted in the last statutory financial statements of Helios Towers plc and the audit opinion was unmodified. The information as of 31 December 2019 has been extracted from the audited financial statements of Helios Towers plc for the year ended 31 December 2019. These condensed financial statements do not constitute statutory financial statements under the Companies Act 2006.
The preparation of financial statements in conformity with IFRS requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates.
Judgements and estimates
Judgements and estimates are consistent with those adopted in the last statutory financial statements of Helios Towers plc and the audit opinion was unmodified. The Directors have considered the impact of COVID-19 on these judgements and estimates and still consider them appropriate.
New Accounting Pronouncement
New and revised IFRS Standards that are effective during the current
period
At the date of authorisation of these financial statements, there
has not been any new IFRS Standards issued by the International
Accounting Standards Board that are effective during the period.
The Group has applied the following revised IFRS Standards that
are effective during the period:
Revised IFRS Standard Effective date Amendments
Conceptual Framework 1 January 2020 Amendments to references to
the Conceptual Framework in
IFRS Standards
Amendments to IFRS 3 1 January 2020 Definition of a Business
Amendments to IAS 1 and 1 January 2020 Definition of Material
IAS 8
Amendments to IFRS 9, 1 January 2020 Interest rate benchmark reform
IAS 39 and IFRS 7
The adoption of the revised IFRS Standards listed above did not
have a material impact on the financial statements of the Group.
3. Segmental reporting
The following segmental information is presented in a consistent format with management information considered by the CEO of each operating segment, and the CEO and COO of the Group, who are considered to be the chief operating decision makers (CODMs). Operating segments are determined based on geographical location. All operating segments have the same business of operating and maintaining telecoms towers and providing space, power and ancillary services on such towers. Accounting policies are applied consistently for all operating segments. The segment operating result used by CODM is Adjusted EBITDA, defined in note 4.
Total
Congo South operating Group
6 months ended Tanzania DRC Brazzaville Ghana Africa companies Corporate Total
30 June 2020 US$m US$m US$m US$m US$m US$m US$m US$m
------------------- -------- ------ ------------ ----- ------- ---------- --------- ------
Revenue 83.2 85.4 12.5 21.6 1.3 204.0 - 204.0
Adjusted gross
margin(1) 67% 65% 69% 74% 76% 67% - 67% Adjusted EBITDA(2) 51.0 49.0 5.7 13.7 0.1 119.5 (10.4) 109.1 Adjusted EBITDA margin(3) 61% 57% 46% 63% 8% 59% - 53% Financing costs: Interest costs (17.6) (24.6) (4.6) (3.9) (3.0) (53.7) 6.3 (47.4) Early redemption expenses(1) - - - - - - (23.9) (23.9) Foreign exchange differences (1.1) 0.1 (0.1) (1.2) (2.8) (5.1) (1.4) (6.5) ------------------- -------- ------ ------------ ----- ------- ---------- --------- ------ Total financing costs (18.7) (24.5) (4.7) (5.1) (5.8) (58.8) (19.0) (77.8) ------------------- -------- ------ ------------ ----- ------- ---------- --------- ------
(1) Includes call premium and release of transaction costs of US$13.7 million and US$10.2 million respectively, related to the early redemption of the US$600 million Senior Notes.
Total
Congo South operating Group
6 months ended Tanzania DRC Brazzaville Ghana Africa companies Corporate Total
30 June 2019 US$m US$m US$m US$m US$m US$m US$m US$m
------------------- -------- ------ ------------ ----- ------- ---------- --------- ------
Revenue 80.5 77.8 12.3 19.7 0.4 190.7 - 190.7
Adjusted Gross
margin(1) 65% 62% 68% 68% 77% 64% - 64%
Adjusted EBITDA(2) 46.9 42.4 6.5 11.4 - 107.2 (8.2) 99.0
Adjusted EBITDA
margin(3) 58% 55% 52% 58% - 56% - 52%
Financing costs:
Interest costs (29.1) (24.0) (4.4) (3.4) - (60.9) 12.5 (48.4)
Foreign exchange
differences (2.6) (0.6) (0.4) (4.2) - (7.8) (0.2) (8.0)
------------------- -------- ------ ------------ ----- ------- ---------- --------- ------
Total financing
costs (31.7) (24.6) (4.8) (7.6) - (68.7) 12.3 (56.4)
------------------- -------- ------ ------------ ----- ------- ---------- --------- ------
Total
Congo South operating Group
3 months ended Tanzania DRC Brazzaville Ghana Africa companies Corporate Total
30 June 2020 US$m US$m US$m US$m US$m US$m US$m US$m
------------------- -------- ------ ------------ ----- ------- ---------- --------- ------
Revenue 41.9 43.0 6.3 10.4 0.6 102.2 - 102.2
Adjusted gross
margin1 67% 65% 69% 78% 67% 68% - 68%
Adjusted EBITDA(2) 25.8 24.9 2.6 7.0 - 60.3 (5.2) 55.1
Adjusted EBITDA
margin(3) 62% 58% 41% 67% 0% 59% - 54%
Financing costs:
Interest costs (9.0) (12.3) (2.4) (1.8) (2.1) (27.6) 4.5 (23.1)
Early redemption
expenses(1) - - - - - - (23.9) (23.9)
Foreign exchange
differences (1.2) - 1.6 (2.0) (0.1) (1.7) - (1.7)
------------------- -------- ------ ------------ ----- ------- ---------- --------- ------
Total financing
costs (10.2) (12.3) (0.8) (3.8) (2.2) (29.3) (19.4) (48.7)
------------------- -------- ------ ------------ ----- ------- ---------- --------- ------
(1) Includes call premium and release of transaction costs of US$13.7 million and US$10.2 million respectively, related to the early redemption of the US$600 million Senior Notes.
Total
Congo South operating Group
3 months ended Tanzania DRC Brazzaville Ghana Africa companies Corporate Total
30 June 2019 US$m US$m US$m US$m US$m US$m US$m US$m
------------------- -------- ------ ------------ ----- ------- ---------- --------- ------
Revenue 41.2 39.3 6.1 10.0 0.4 97.0 - 97.0
Adjusted Gross
margin1 65% 63% 67% 68% 77% 65% - 65%
Adjusted EBITDA(2) 24.0 21.5 3.0 5.8 - 54.3 (4.1) 50.2
Adjusted EBITDA
margin(3) 58% 55% 49% 58% - 56% - 52%
Financing costs:
Interest costs (16.8) (13.2) (2.3) (1.6) - (33.9) 9.6 (24.3)
Foreign exchange
differences (0.1) (0.6) 0.9 (1.6) - (1.4) 0.8 (0.6)
------------------- -------- ------ ------------ ----- ------- ---------- --------- ------
Total financing
costs (16.9) (13.8) (1.4) (3.2) - (35.3) 10.4 (24.9)
------------------- -------- ------ ------------ ----- ------- ---------- --------- ------
(1) Adjusted gross margin means gross profit, adding back site depreciation, divided by revenue.
(2) Adjusted EBITDA is loss after tax for the period, adjusted for, nance costs, gains or loss on financial instruments, interest receivable, loss on disposal of property, plant and equipment, amortisation of intangible assets, depreciation and impairment of property, plant and equipment, depreciation of right-of-use assets, recharged depreciation, deal costs for aborted acquisitions, deal costs not capitalised, share-based payments and long-term incentive plan charges, and other adjusting items.
(3) Adjusted EBITDA margin is Adjusted EBITDA divided by revenue.
4. Reconciliation of aggregate segment Adjusted EBITDA to loss before tax
The key segment operating result used by chief operating decision makers (CODMs) is Adjusted EBITDA.
Management de nes Adjusted EBITDA as loss before tax for the period, adjusted for nance costs, gains or loss on financial instruments, interest receivable, loss on disposal of property, plant and equipment, amortisation of intangible assets, depreciation and impairment of property, plant and equipment, depreciation of right-of-use assets, deal costs for aborted acquisitions, deal costs not capitalised, share-based payments and long-term incentive plan charges, and other adjusting items. Adjusting items are material items that are considered one-off by management by virtue of their size and/or incidence.
The Group believes that Adjusted EBITDA facilitates comparisons of operating performance from period to period and company to company by eliminating potential differences caused by variations in capital structures (affecting interest and finance charges), tax positions (such as the impact of changes in effective tax rates or net operating losses) and the age and booked depreciation on assets. The Group excludes certain items from Adjusted EBITDA, such as loss on disposal of property, plant and equipment, and adjusting items because it believes they are not indicative of its underlying trading performance.
Adjusted EBITDA is reconciled to loss before tax as follows:
6 months ended 3 months ended
30 June 30 June
---------------- ----------------
2020 2019 2020 2019
US$m US$m US$m US$m
---------------------------------------------- ------- ------- ------- -------
Adjusted EBITDA 109.1 99.0 55.1 50.2
Adjustments applied in arriving at Adjusted
EBITDA:
Adjusting items:
Project costs1 (4.6) (3.1) (0.3) (3.1)
Deal costs2 (0.8) (2.4) (0.1) (1.2)
Share-based payments and long-term incentive
plans3 (0.4) (1.7) (0.2) (1.7)
Loss on disposals of assets (1.3) (5.3) (0.7) (0.2)
Gain or loss on financial instruments (note
16) (35.0) 24.3 6.0 8.5
Depreciation of property, plant and equipment (63.7) (65.2) (32.1) (33.4)
Depreciation of right-of-use assets (4.8) (3.9) (2.5) (2.0)
Amortisation of intangibles (4.2) (4.7) (2.0) (2.8)
Interest receivable 0.5 0.7 - 0.6
Finance costs (77.8) (56.4) (48.7) (24.9)
---------------------------------------------- ------- ------- ------- -------
Loss before tax (83.0) (18.7) (25.5) (10.0)
---------------------------------------------- ------- ------- ------- -------
(1) Project costs in 2020 relate to the preparation for a debt refinancing and listing of equity on London Stock Exchange in 2019.
(2) Deal costs comprise deal costs for aborted acquisitions, which mainly comprise professional fees and travel costs incurred while investigating potential site acquisitions that are expensed when the potential site acquisition does not proceed, and deal costs not capitalized, which relate to the exploration of investment opportunities across Africa.
(3) Share-based payments and long-term incentive plan charges and associated costs.
5. Finance costs
Finance costs of US$48.7 million for the quarter ended 30 June 2020, comprise of US$17.0 million interest on the US$600 million 9.125% Senior Notes and the US$125 million term loan facility signed in October 2018, of which US$75 million was drawn up to 18 June 2020. From 18 June to 30 June 2020 finance costs amounting to US$2.1 million were incurred in relation to the new US$750 million 7% Senior Notes and the US$200m term loan facility. Included in finance costs in the quarter is a call premium and the release of transaction costs of US$13.7 million and US$10.2 million respectively, related to the early redemption of the US$600 million Senior Notes.
6 months ended 3 months ended
30 June 30 June
---------------- ----------------
2020 2019 2020 2019
US$m US$m US$m US$m
----------------------------------- ------- ------- ------- -------
Foreign exchange differences 6.5 8.0 1.7 0.6
Interest cost 39.3 40.6 19.1 20.3
Early redemption expenses(1) 23.9 - 23.9 -
Interest cost on lease liabilities 8.1 7.8 4.0 4.0
----------------------------------- ------- ------- ------- -------
77.8 56.4 48.7 24.9
----------------------------------- ------- ------- ------- -------
(1) Includes call premium and release of transaction costs of US$13.7 million and US$10.2 million respectively, related to the early redemption of the US$600 million Senior Notes.
6. Tax expense, tax paid and deferred tax
Although entities in Congo Brazzaville and DRC have continued to be loss making, minimum income tax has been levied based on revenue as stipulated by law in these jurisdictions. Ghana, Tanzania and two subsidiaries in South Africa are profit making and subject to income tax on taxable profits.
The tax expense for the period is calculated by reference to the forecast full year tax rate and applied to profits for the period, adjusted for actual tax on adjusting items. The Group's weighted average tax rate, calculated by reference to the statutory tax rates which are applicable to the Group's operating subsidiaries is in the range of 20% to 30%.
6 months ended 3 months ended
30 June 30 June
---------------- ----------------
2020 2019 2020 2019
Tax expense US$m US$m US$m US$m
--------------------- ------- ------- ------- -------
Total current tax 6.9 3.8 3.8 3.1
Deferred tax expense 0.9 - - -
--------------------- ------- ------- ------- -------
7.8 3.8 3.8 3.1
--------------------- ------- ------- ------- -------
6 months ended 3 months ended
30 June 30 June
---------------- ----------------
2020 2019 2020 2019
Tax paid US$m US$m US$m US$m
--------------------------------------- ------- ------- ------- -------
Change of Control tax funded by escrow
restricted cash(1) 37.7 - - -
Income tax 1.3 1.2 0.8 0.9
--------------------------------------- ------- ------- ------- -------
39.0 1.2 0.8 0.9
--------------------------------------- ------- ------- ------- -------
(1) For more information relating to change of control tax see note 11.
7. Intangible assets
Right Computer
Customer Customer Colocation of first Non-compete software
contracts relationships Goodwill rights refusal agreement and licences Total
US$m US$m US$m US$m US$m US$m US$m US$m
------------------- ---------- -------------- -------- ---------- --------- ----------- ------------- ------
Cost
At 1 January 2020 3.5 7.1 4.2 8.8 35.0 31.1 19.4 109.1
Reclassification
during the period - - - - 1.1 (1.1) - -
Foreign exchange (0.7) (1.4) (0.8) - (0.2) - (0.2) (3.3)
------------------- ---------- -------------- -------- ---------- --------- ----------- ------------- ------
At 30 June 2020 2.8 5.7 3.4 8.8 35.9 30.0 19.2 105.8
------------------- ---------- -------------- -------- ---------- --------- ----------- ------------- ------
Amortisation
At 1 January 2020 (0.2) (0.3) - (0.3) (32.7) (30.0) (17.2) (80.7)
Charge for period - (0.2) - (0.4) (2.6) - (1.0) (4.2)
Foreign exchange - 0.1 - - 0.1 - 0.2 0.4
------------------- ---------- -------------- -------- ---------- --------- ----------- ------------- ------
At 30 June 2020 (0.2) (0.4) - (0.7) (35.2) (30.0) (18.0) (84.5)
------------------- ---------- -------------- -------- ---------- --------- ----------- ------------- ------
Net book value
------------------- ---------- -------------- -------- ---------- --------- ----------- ------------- ------
At 30 June 2020 2.6 5.3 3.4 8.1 0.7 - 1.2 21.3
------------------- ---------- -------------- -------- ---------- --------- ----------- ------------- ------
At 31 December
2019 3.3 6.8 4.2 8.5 2.3 1.1 2.2 28.4
------------------- ---------- -------------- -------- ---------- --------- ----------- ------------- ------
Impairment
Goodwill acquired in a business combination is allocated, at acquisition, to the cash generating units (CGUs) that are expected to benefit from that business combination. The Group tests goodwill annually for impairment or more frequently if there are indications that goodwill might be impaired. The Group's CGUs are aligned to its operating segments. No impairment indicators were identified during the quarter.
The recoverable amount of each cash generating unit has been determined based on a value in use calculation using cash flow projections for the next ten years from financial budgets approved by senior management, as this period matches the typical customer contract period for tower management.
8a. Property, plant and equipment
Fixtures Motor Leasehold
IT equipment and fittings vehicles Site assets Land improvements Total
US$m US$m US$m US$m US$m US$m US$m
--------------------- ------------ ------------- --------- ----------- ----- ------------- -------
Cost
At 1 January 2020 18.5 1.4 4.5 1,192.7 8.9 3.1 1,229.1
Additions during the
period 1.5 - 0.4 36.4 (0.3) - 38.0
Disposals during the
period - - - (3.2) - - (3.2)
Foreign exchange (0.1) - - (4.7) (2.4) (0.1) (7.3)
--------------------- ------------ ------------- --------- ----------- ----- ------------- -------
At 30 June 2020 19.9 1.4 4.9 1,221.2 6.2 3.0 1,256.6
--------------------- ------------ ------------- --------- ----------- ----- ------------- -------
Depreciation
At 1 January 2020 (10.6) (1.3) (3.2) (579.6) - (2.5) (597.2)
Charge for period (2.3) - (0.3) (61.0) - (0.1) (63.7)
Disposals during the
period - - - 1.3 - - 1.3
Foreign exchange - - - 3.2 - 0.1 3.3
--------------------- ------------ ------------- --------- ----------- ----- ------------- -------
At 30 June 2020 (12.9) (1.3) (3.5) (636.1) - (2.5) (656.3)
--------------------- ------------ ------------- --------- ----------- ----- ------------- -------
Net book value
--------------------- ------------ ------------- --------- ----------- ----- ------------- -------
At 30 June 2020 7.0 0.1 1.4 585.1 6.2 0.5 600.3 --------------------- ------------ ------------- --------- ----------- ----- ------------- ------- At 31 December 2019 7.9 0.1 1.3 613.1 8.9 0.6 631.9 --------------------- ------------ ------------- --------- ----------- ----- ------------- -------
8b. Right-of-use assets
30 June 31 December
2020 2019
US$m US$m
----------------------------------------------------------- ------- -----------
Right-of-use assets by class of underlying assets carrying
value
Land 105.6 104.0
Buildings 3.8 4.2
----------------------------------------------------------- ------- -----------
109.4 108.2
----------------------------------------------------------- ------- -----------
Depreciation charge for right-of-use assets
Land 3.8 7.2
Buildings 1.0 1.3
----------------------------------------------------------- ------- -----------
4.8 8.5
----------------------------------------------------------- ------- -----------
9. Derivative financial instruments
The amounts recognised in the statement of financial position are as follows:
30 June 31 December
2020 2019
US$m US$m
--------------------------------------------------------- ------- -----------
Balance brought forward 41.0 7.1
Put and call options on the listed US$750 million Senior
Notes 5.3 -
Put and call options on the listed US$600 million Senior
Notes (41.0) 33.9
--------------------------------------------------------- ------- -----------
Balance carried forward 5.3 41.0
--------------------------------------------------------- ------- -----------
The derivatives represent the fair value of the put and call options embedded within the terms of the Senior Notes. The call options give the Group the right to redeem the Senior Notes instruments at a date prior to the maturity date (18 December 2025), in certain circumstances and at a premium over the initial notional amount.
The put option provides the holders with the right (and the Group with an obligation) to settle the Senior Notes before their redemption date in the event of a change in control resulting in a rating downgrade (as defined in the terms of the Senior Notes, which also includes a major asset sale), and at a premium over the initial notional amount. The options are fair valued using an option pricing model that is commonly used by market participants to value such options and makes the maximum use of market inputs, relying as little as possible on the entity's specific inputs and making reference to the fair value of similar instruments in the market. The options are considered a Level 3 financial instrument in the fair value hierarchy of IFRS 13, owing to the presence of unobservable inputs. Where Level 1 (market observable) inputs are not available, the Helios Group engages a third party qualified valuer to perform the valuation. Management works closely with the qualified external valuer to establish the appropriate valuation techniques and inputs to the model. The Senior Notes are quoted and it has an embedded derivative. The fair value of the embedded derivative is the difference between the quoted price of the Senior Notes and the fair value of the host contract (the Senior Notes excluding the embedded derivative). The fair value of the Senior Notes as at the Valuation Date has been sourced from an independent third party data vendor. The fair value of the host contract is calculated by discounting the Senior Notes' future cash flows (coupons and principal payment) at USD 3-month LIBOR plus Helios Towers' credit spread. For valuation date of 30 June 2020, a relative 1% increase in credit spread would result in an approximate US$0.4 million decrease in the valuation of the embedded derivatives.
As at the reporting date, the call option had a fair value of US$5.3 million (31 December 2019: US$41.0 million on the US$600 million 9.125% Senior Notes 2022), while the put option had a fair value of US$0 million (31 December 2019: US$0 million).
10. Trade and other receivables
30 June 31 December
2020 2019
US$m US$m
-------------------------------------- ------- -----------
Trade receivables 89.3 105.7
Loss allowance (6.0) (6.4)
-------------------------------------- ------- -----------
83.3 99.3
Trade receivable from related parties 31.3 23.4
-------------------------------------- ------- -----------
114.6 122.7
Other receivables 44.0 37.1
VAT & Withholding tax receivable 6.2 6.7
-------------------------------------- ------- -----------
164.8 166.5
-------------------------------------- ------- -----------
The Group measures the loss allowance for trade receivables and trade receivables from related parties at an amount equal to lifetime expected credit losses ("ECL"). The expected credit losses on trade receivables are estimated using a provision matrix by reference to past default experience of the debtor and an analysis of the debtor's current financial position, adjusted for factors that are specific to the debtors, general economic conditions of the industry in which the debtors operate and an assessment of both the current as well as the forecast direction of conditions at the reporting date.
There has been no change in the estimation techniques or significant assumptions made during the current reporting period. Interest can be charged on past due debtors. The normal credit period of services is 30 days.
Of the trade receivables balance at 30 June 2020, 83% (31 December 2019: 73%) is due from the Group's largest five customers. The Group does not hold any collateral or other credit enhancements over these balances nor does it have a legal right of offset against any amounts owed by the Group to the counterparty.
The carrying value of trade and other receivables approximates their fair values due to their short-term nature.
Debtor days
The Group calculates debtor days as set out in the table below. It considers its most relevant customer receivables exposure on a given reporting date to be the amount of receivables due in relation to the revenue that has been reported up to that date. It therefore defines its net receivables as the total trade receivables and accrued revenue, less deferred income.
30 June 31 December
2020 2019
US$m US$m
---------------------- ------- -----------
Trade receivables1 120.6 129.1
Accrued Revenue2 6.5 2.2
Less: Loss allowance (6.0) (6.4)
Less: Deferred income (70.4) (64.4)
---------------------- ------- -----------
Net Receivables 50.7 60.5
---------------------- ------- -----------
Revenue 204.0 387.8
---------------------- ------- -----------
Debtor days 45 57
---------------------- ------- -----------
(1) Trade receivables, including related parties.
(2) Reported within other receivables.
11. Cash and cash equivalents
30 June 31 December
2020 2019
US$m US$m
------------------------------------------ ------- -----------
Bank balances (excluding restricted cash) 176.2 179.1
Bank balances (restricted cash)(1) - 37.7
Short-term deposits 36.3 4.3
------------------------------------------ ------- -----------
212.5 221.1
------------------------------------------ ------- -----------
(1) The bank balances as at 31 December 2019 included restricted cash of US$37.7 million, drawn-down from the escrow funded by the Group's pre-IPO shareholders relating to Change of Control Taxes. This was paid to the relevant tax authority in Q1 2020.
12. Share capital
30 June 2020 31 December 2019
------------------- -------------------
Number Number of
of shares US$m shares US$m
------------------------------------------ ------------- ---- ------------- ----
Authorised, issued and fully paid
Ordinary share capital class A of GBP0.01 1,000,000,000 12.8 1,000,000,000 12.8
1,000,000,000 12.8 1,000,000,000 12.8
------------------------------------------ ------------- ---- ------------- ----
13. Loans
30 June 31 December
2020 2019
US$m US$m
Loans(1) 729.1 -
US$600 million 9.125% Senior Notes 2022 - 607.3
US$125 million term loan facility 2022 - 75.5
ZAR535 million term loan facility A and B 10.6 -
SA Towers Proprietary Limited 1.2 1.5
------------------------------------------ ------- -----------
Total borrowings 740.9 684.3
------------------------------------------ ------- -----------
Current 2.0 19.2
Non-current 738.9 665.1
------------------------------------------ ------- -----------
740.9 684.3
------------------------------------------ ------- -----------
(1) Included in loans is the US$750 million 7.00% Senior Notes due 2025 and transaction costs of US$2.3 million in relation to the US$135 million term facility and US$0.9 million in relation to the US$70 million revolving credit facility.
On 10 June 2020 HTA Group, Ltd. (the "HTA Group"), an indirect wholly owned subsidiary of Helios Towers plc (the "Company"), announced the successful pricing of its offering of 7.00% US$750 million Senior Notes due 2025 (the "Notes"), guaranteed on a senior basis by the Company and certain of its direct and indirect subsidiaries (the "Offering"). The Notes were issued on 18 June 2020 at an issue price of 99.439% of principal amount. The proceeds of the Notes were used (i) to redeem US$600 million of HTA Group's outstanding Senior Notes due 2022 (the "Existing Notes") (plus accrued interest), (ii) to repay all amounts outstanding under its US$125 million term facility (of which US$75 million was outstanding), (iii) to pay certain fees and expenses in relation to the Offering and (iv) with excess funds available for general corporate purposes.
HTA Group also entered into a US$135 million term facility (with a 5-year tenor, and which may increase in accordance with its terms up to an aggregate amount of US$200 million) with borrowing availability in U.S. dollars for the general corporate purposes (including acquisitions) of the Company and certain of its subsidiaries. This new term facility replaced the existing US$125 million term facility, which was cancelled upon completion of the Offering on 19 June 2020.
Additionally, HTA Group entered into a revolving credit facility (with a 4.5-year tenor) with borrowing availability in US dollars for the purpose of financing or refinancing the general corporate and working capital needs of the Company and certain of its subsidiaries. Commitments under the new revolving credit facility amount to US$70 million and replaced the previous US$60 million revolving credit facility, which was also cancelled on 19 June 2020.
On 18 December 2019, HTSA Towers (Pty) Ltd, entered into secured term loan with total commitment of ZAR 535 million and comprises two facilities: Facility A, with a term of 78 months, and Facility B, with a term of 84 months. The annual interest rate is JIBAR plus 4% per year on loans under Facility A and JIBAR plus 4.5% per year on loans under Facility B. As of 30 June 2020, ZAR 184 million (Facility A ZAR 92 million and Facility B ZAR 92 million) of the South African facilities were drawn.
14. Trade and other payables
30 June 31 December
2020 2019
US$m US$m
--------------------------------------- ------- -----------
Trade payables 14.9 17.9
Amounts payable to related parties 0.1 0.1
Deferred income 70.4 64.4
Deferred consideration 8.1 8.0
Other payables and accruals 62.8 63.6
VAT, Withholding and other tax payable 38.6 68.7
--------------------------------------- ------- -----------
194.9 222.7
--------------------------------------- ------- -----------
Trade creditors and accruals principally comprise of amounts outstanding for trade purchases and ongoing costs. The average credit period taken for trade purchases is 31 days (2019: 31 days). No interest is charged on the trade payables. The Group has financial risk management policies in place to ensure that all payables are paid within the pre-agreed credit terms. Amounts payable to related parties are unsecured, interest free and repayable on demand. VAT, Withholding and other tax payable balance at 31 December 2019 includes Change of Control Taxes amounting to US$37.7 million which was paid to the relevant tax authority in Q1 2020 (please refer to note 11).
The carrying value of trade and other payables approximates their fair values due to their short-term nature.
15. Lease liabilities
30 June 31 December
2020 2019
US$m US$m
----------------------------- ------- -----------
Short-term lease liabilities
Land 20.0 19.6
Buildings 1.1 1.8
----------------------------- ------- -----------
21.1 21.4
----------------------------- ------- -----------
30 June 31 December
2020 2019
US$m US$m
---------------------------- ------- -----------
Long-term lease liabilities
Land 103.4 101.4
Buildings 2.8 2.8
---------------------------- ------- -----------
106.2 104.2
---------------------------- ------- -----------
The below undiscounted cash flows do not include escalations based on CPI or other indexes which change over time. Renewal options are considered on a case by case basis with judgements around the lease term being based on management's contractual rights and their current intentions.
The total cash paid on leases in the 6 months ended 30 June 2020 was US$11.3 million (6 months ended 30 June 2019: US$10.2 million). The total cash paid on leases during the quarter ended 30 June 2020 was US$6.3 million (quarter ended 30 June 2019: US$6.5 million).
The profile of the outstanding undiscounted contractual payments fall due as follows:
Within
1 year 1-5 years 5+ years Total
US$m US$m US$m US$m
----------------- ------- --------- -------- -----
30 June 2020 21.2 77.7 475.6 574.5
----------------- ------- --------- -------- -----
31 December 2019 21.5 76.1 459.8 557.4
----------------- ------- --------- -------- -----
16. Gains and losses on financial instruments
6 months ended 3 months ended
---------------- ----------------
30 June 30 June 30 June 30 June
2020 2019 2020 2019
US$m US$m US$m US$m
------------------------------------------------- ------- ------- ------- -------
Fair value (loss) / gain on derivative financial
instruments (37.6) 24.3 3.4 8.5
Fair value gain on movement in contingent
liability (see note 20) 2.6 - 2.6 -
------------------------------------------------- ------- ------- ------- -------
(35.0) 24.3 6.0 8.5
------------------------------------------------- ------- ------- ------- -------
17. Uncompleted performance obligations
The table below represents undiscounted uncompleted performance obligations at the end of the reporting period. This is total revenue which is contractually due to the Group, subject to the performance of the obligation of the Group related to these revenues.
30 June 31 December
2020 2019
US$m US$m
------------------------- ------- -----------
Total contracted revenue 2,775.8 2,871.7
------------------------- ------- -----------
Contracted revenue
The following table provides our total undiscounted contracted revenue by country as of 30 June 2020 for each of the periods from 2020 to 2024, with local currency amounts converted at the applicable average rate for US dollars for the period ended 30 June 2020 held constant. Our contracted revenue calculation for each year presented assumes: (i) no escalation in fee rates, (ii) no increases in sites or tenancies other than our committed colocations, (iii) our customers do not utilise any cancellation allowances set forth in their MLAs, (iv) our customers do not terminate MLAs early for any reason and (v) no automatic renewal.
Year ended 31 December
----------------------------
6 months
to
31 December
2020 2021 2022 2023 2024
US$m US$m US$m US$m US$m
------------------ ------------ ------ ------ ----- -----
Tanzania 83.6 166.8 163.9 156.8 136.6
DRC 84.1 168.1 168.1 168.0 166.5
Congo Brazzaville 12.4 24.7 23.9 23.1 22.4
South Africa 1.2 2.8 3.1 3.3 3.4
Ghana 17.2 34.4 32.9 31.8 31.3
------------------ ------------ ------ ------ ----- -----
198.5 396.8 391.9 383.0 360.2
------------------ ------------ ------ ------ ----- -----
18. Related party transactions
Balances and transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.
During the period, the Group companies entered into the following commercial transactions with related parties.
6 months ended 6 months ended
30 June 2020 30 June 2019
-------------------- --------------------
Income Income
from from
tower Purchase tower Purchase
services of goods services of goods
US$m US$m US$m US$m
--------------------------------------- --------- --------- --------- ---------
Millicom Holding B.V. and subsidiaries 35.9 - 35.8 -
Ecost Building Management (Pty) Ltd - - - 0.7
Nepic (Pty) Ltd 0.2 - - -
Vulatel (Pty) Ltd - 0.1 - 0.1
--------------------------------------- --------- --------- --------- ---------
36.1 0.1 35.8 0.8
--------------------------------------- --------- --------- --------- ---------
The following amounts were outstanding at the reporting date:
As at 30 June As at 31 December
2020 2019
--------------- -------------------
Amount Amount Amount Amount
owed owed owed owed
by to by to
US$m US$m US$m US$m
--------------------------------------- ------- ------ ---------- -------
Millicom Holding B.V. and subsidiaries 31.1 - 22.9 -
Vulatel (Pty) Ltd 0.1 0.1 0.2 -
SA Towers Proprietary Limited - 1.2 - 1.5
Nepic (Pty) Ltd 0.1 - 0.3 0.1
--------------------------------------- ------- ------ ---------- -------
31.3 1.3 23.4 1.6
--------------------------------------- ------- ------ ---------- -------
Millicom Holding B.V. is a shareholder of Helios Towers plc.
The amounts outstanding are unsecured and will be settled in cash. No guarantees have been given or received. No provisions have been made for doubtful debts in respect of the amounts owed by related parties.
Amounts receivable from the related parties related to other group companies are short-term and carry interest varying from 0% to 10% per annum charged on the outstanding trade and other receivable balances (note 10).
19. Contingencies
In the year ended 31 December 2019, the Ghana Revenue Authority issued an initial assessment on Transfer Pricing for years 2012 to 2017 and a revised assessment was issued in May 2020 for the years 2012 to 2018 of approximately US$32.0 million. The Directors have appealed against this assessment. The Directors are working with their advisers and are in discussion with the tax authorities to bring the matters to conclusion based on the facts. The Directors believe that the potential future cash outflows are not considered probable and cannot be measured reliably.
Following the quarter ended 30 June 2020, the Congo Brazzaville tax authority issued an initial assessment including VAT and corporate income tax for the years 2016 and 2017 of approximately US$39.1 million. The Directors intend to lodge an appeal against this assessment. This assessment is under review with local tax experts and as such the impact, if any, is unknown at this time.
Other tax, and regulatory proceedings, claims and unresolved disputes are pending against Helios Towers in respect of which the timing of resolution and potential outcome (including any future financial obligations) are uncertain and no provisions have been recognised in relation to these matters.
20. Contingent consideration
Contingent consideration balance of ZAR 132.7 million primarily relates to the acquisition of the South African subsidiary undertakings in April 2019. As at balance sheet date this was US$6.4 million. During the quarter, a fair value gain of US$2.6 million was recognised due to the movement in the fair value of the contingent consideration. The contingent consideration is for a two year period ending April 2021.
The contingent consideration balance is dependent on the timing of sites under construction being fully completed in accordance with technical specifications. The potential undiscounted amount of all future payments that the Group could be required to make under the contingent consideration arrangement is between US$nil and US$12 million.
The fair value of the contingent consideration arrangement on 30 April 2019 was based on management's knowledge of the market outlook and the future pipeline. The contingent consideration liability is categorised as Level 3 in the fair value hierarchy of IFRS 13. The calculation of the fair value of the contingent consideration balance is most sensitive to changes in the following assumptions:
-- Number of sites coming on-air between 310 and 500;
-- Timing of sites coming on-air for a period of two years; and
-- Discount rate ranging from 15% to 20%.
21. Earnings per share
Basic earnings per share has been calculated by dividing the total loss for the year by the weighted average number of shares in issue during the year after adjusting for shares held in employee benefit trusts.
To calculate diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential shares. Share options granted to employees where the exercise price is less than the average market price of the Company's ordinary shares during the year are considered to be dilutive potential shares. Where share options are exercisable based on performance criteria and those performance criteria have been met during the year, these options are included in the calculation of dilutive potential shares.
The Directors believe that Adjusted EBITDA per share is representative of the operations of the business, refer to Note 4.
Earnings per share is based on:
2020 2019 2020 2019
US$m US$m US$m US$m
----------------------------------------- ------ ------ ------ ------
Loss after tax for the year attributable
to owners of the Company (91.1) (22.3) (29.8) (12.9)
Adjusted EBITDA (Note 4) 109.1 99.0 55.1 50.2
----------------------------------------- ------ ------ ------ ------
30 June 30 June 30 June 30 June
2020 2019 2020 2019
Number Number Number Number
---------------------------------------------- ------------- ----------- ------------- -----------
Weighted average number of ordinary shares
used to calculate basic earnings per share 996,953,727 909,124,714 996,953,727 909,124,714
Weighted average number of dilutive potential
shares 6,961,795 - 6,961,795 -
Weighted average number of ordinary shares
used to calculate diluted earnings per
share 1,003,915,522 909,124,714 1,003,915,522 909,124,714
---------------------------------------------- ------------- ----------- ------------- -----------
Loss per share
2020 2019 2020 2019
cents cents Cents cents
-------- -------- ------- ------- -------
Basic (9) (2) (3) (1)
Diluted (9) (2) (3) (1)
-------- -------- ------- ------- -------
Adjusted EBITDA per share
2020 2019 2020 2019
cents cents cents cents
-------- --------------- ------- ------- -------
Basic 11 11 6 6
Diluted 11 11 5 6
-------- --------------- ------- ------- -------
The calculation of basic and diluted earnings per share is based on the net loss attributable to equity holders of the Company entity for the period US$91.1 million (2019: US$22.3million). Basic and diluted earnings per share amounts are calculated by dividing the net loss attributable to equity shareholders of the Company entity by the weighted average number of shares outstanding during the year. Dilutive potential shares are anti-dilutive due to the loss after tax attributable to ordinary shareholders reported.
The calculation of Adjusted EBITDA per share and diluted EBITDA per share are based on the Adjusted EBITDA earnings for the period of US$109.1 million (2019: US$99.0 million). Refer to Note 4 for a reconciliation of Adjusted EBITDA to net loss before tax.
22. Subsequent events
Subsequent to period end, on 12 August 2020, the Group signed an agreement to acquire 1,220 sites with from Free Senegal - the second largest mobile operator in Senegal backed by a consortium of investors including NJJ, the founder of the Iliad S.A. group Xavier Niel's private holding company, Teyliom Group and Axian Group - to acquire its passive infrastructure assets, for an upfront cash consideration of EUR160 million (c.$189 million). This represents an enterprise value of EUR178m (c.$210m) including an estimated EUR18m (c.$21m) of taxes and capitalised ground leases. In addition, deferred consideration and growth capex of EUR40m ($47m) and c.EUR30m ($35m) respectively are expected to be invested over the next 5 years in relation to the rollout of 400 committed new build-to-suit sites. This acquisition is in line with the Group's expansion strategy. For further information please refer to our website ( www.heliostowers.com/investors/investor-news/ ).
23. Directors' responsibility statement
The Directors confirm that, to the best of their knowledge this condensed set of financial statements has been prepared in accordance with IAS 34 and that this Interim Report includes a fair review of the information required by content of the Interim Management section in the Disclosure Guidance and Transparency Rules 4.2.7R and Disclosure Guidance and Transparency Rules 4.2.8R.
The interim financial statements for the period ended 30 June 2020 have been authorised for issue on 13 August 2020.
Kash Pandya Tom Greenwood
Chief Executive Officer Chief Operating Officer
Certain defined terms and conventions
We have prepared the interim report using a number of conventions, which you should consider when reading information contained herein as follows:
All references to "we", "us", "our", "HT Group", our "Group" and the "Group" are references to Helios Towers plc and its subsidiaries taken as a whole.
"Adjusted EBITDA" Management de nes Adjusted EBITDA as loss before tax for the period, adjusted nance costs, gains or loss on financial instruments, interest receivable, loss on disposal of property, plant and equipment, amortisation of intangible assets, depreciation and impairment of property, plant and equipment, depreciation of right-of-use assets, deal costs for aborted acquisitions, deal costs not capitalised, share-based payments and long-term incentive plan charges, and other adjusting items. Adjusting items are material items that are considered one-off by management by virtue of their size and/or incidence. A Reconciliation of aggregate segment Adjusted EBITDA to loss before tax is on note 4 to the interim financial statements.
"Adjusted EBITDA margin" means Adjusted EBITDA divided by revenue.
"Adjusted free cash flow" means portfolio free cash flow less net payment of interest and discretionary capital additions.
"Africa's Big-Five MNO's" means Airtel, MTN, Orange, Tigo and Vodacom/Vodafone.
"Airtel" means Airtel Africa plc.
"Build-to-suit/BTS" means sites constructed by our Group on order by a MNO.
"CODM" means Chief Operating Decision Maker.
"Colocation" means the sharing of tower space by multiple customers or technologies on the same tower, equal to the sum of standard colocation tenants and amendment colocation tenants.
"Company" means Helios Towers plc.
"Committed colocation" means contractual commitments relating to prospective colocation tenancies with customers
"Congo Brazzaville" means the Republic of Congo, Congo Brazzaville or Congo.
"Contracted revenue" means revenue contracted under our site agreements under all total tenancies and assumes (i) no escalation in fee rates, (ii) no increases in sites or tenancies other than our committed tenancies, (iii) our customers do not utilise any cancellation allowances set forth in their MLAs, (iv) our customers do not terminate MLAs early for any reason and (v) no automatic renewal.
"Corporate capital expenditure" is primarily for furniture, fixtures and equipment.
"DRC" means Democratic Republic of Congo.
"Edge data centre" secure temperature-controlled technical facilities which are smaller than a standard core network data centre and positioned on the edge of a telecommunications network. They are used by operators to regenerate fibre signal, deliver cloud computing resources or cache streaming content for local users.
"Ghana" means the Republic of Ghana.
"Gross debt" as our total borrowings (non-current loans and current loans) excluding unamortised loan issue costs.
"Adjusted gross margin" means gross profit, adding site depreciation, divided by revenue.
"Growth capex" relates to: (i) construction of build-to-suit sites (ii) installation of colocation tenants and (ii) and investments in power management solutions.
"Group" means Helios Towers, Ltd and its subsidiaries prior to 18 October 2019, and Helios Towers plc and its subsidiaries on or after 18 October 2019.
"Helios Towers Ghana" means Helios Towers Ghana Limited.
"Helios Towers Tanzania" means Helios Towers Tanzania Limited.
"Helios Towers Congo Brazzaville" means HT Congo Brazzaville Holdco Limited.
"Helios Towers plc" means the ultimate parent of the Group, post IPO.
"IBS" means in-building cellular enhancement.
"IFRS" means International Financial Reporting Standards.
"Invested capital" means gross plant, property and equipment and gross intangibles, less accumulated maintenance and corporate capital expenditure.
"ISA" means individual site agreement.
"Levered portfolio free cash flow" defined as portfolio free cash flow less net finance costs paid.
"Maintenance capital expenditures" as capital expenditures for periodic refurbishments and replacement of parts and equipment to keep existing sites in service.
"Maintained sites" refers to sites that are maintained by the Group on behalf of a telecommunications operator but which are not marketed by the Group to other telecommunications operators for colocation (and in respect of which the Company has no right to market).
"Managed sites" refers to sites that the Group currently manages but does not own due to either: (i) certain conditions for transfer under the relevant acquisition documentation, ground lease and/or law not yet being satisfied; or (ii) the site being subject to an agreement with the relevant MNO under which the MNO retains ownership and outsources management and marketing to the Company.
"Mauritius" means the Republic of Mauritius.
"Millicom" means Millicom International Cellular SA.
"MLA" means master lease agreement.
"MNO" means mobile network operator.
"MTN" means MTN Group Ltd.
"Net debtor days" means net receivables divided by revenue reported in the period multiplied by number of days in the period.
"Net debt" means gross debt less cash and cash equivalents (excluding restricted cash).
"Net receivables" means total trade receivables (including related parties) and accrued revenue, less deferred income.
"Orange" means Orange S.A.
"Portfolio free cash flow" defined as Adjusted EBITDA less maintenance and corporate capital expenditure, payments of lease liabilities (including interest and principal repayments of lease liabilities) and tax paid.
"Return on invested capital" means portfolio free cash flow divided by invested capital.
"Site agreement" means the MLA and ISA executed by us with our customers, whereby the ISA acts as an appendix to the relevant MLA and includes certain site-specific information (for example, location and any grandfathered equipment).
"SLA" means service-level agreement.
"Tanzania" means the United Republic of Tanzania.
"Telecommunications operator" means a company licensed by the government to provide voice and data communications services in the countries in which we operate.
"Tenancy" means a space leased for installation of a base transmission site and associated antennae.
"Tenancy ratio" means the total number of tenancies divided by the total number of our towers as of a given date
and represents the average number of tenants per site within a portfolio.
"Tenant" means an MNO that leases vertical space on the tower and portions of the land underneath on which it installs its equipment.
"Tigo" refers to one or more subsidiaries of Millicom that operate under the commercial brand "Tigo".
"Total colocations" means standard colocations plus amendment colocations as of a given date.
"Total sites" means total towers, IBS sites, edge data centres or sites with customer equipment installed on third-party infrastructure that are owned and/or managed by the Company with each reported site having at least one active customer tenancy as of a given date.
Tenant categories
-- "Anchor tenant" means the primary customer occupying a site.
-- "Colocation tenant" each additional tenant on a site in addition to the anchor tenant and are classified as either a standard or amendment colocation tenant.
o "Standard colocation tenant" is defined as a customer occupying site space under a standard tenancy lease rate and configuration with defined limits in terms of the vertical space occupied, the wind load and power consumption.
o "Amendment colocation tenant" is a tenant that adds or modifies equipment, taking up additional space, wind load capacity and/or power consumption under an existing lease agreement. The Group calculates amendment colocation tenants on a weighted basis as compared to the market average lease rate for a standard tenancy lease in the month the amendment is added.
-- "Total tenancies" means total anchor, standard and amendment colocation tenants as of a given date.
"Tower sites" means ground-based towers and rooftop towers and installations constructed and owned by us on real property (including a rooftop) that is generally owned or leased by us.
"Upgrade capex" comprises structural, refurbishment and consolidation activities carried out on selected sites.
"US dollars" or "$" refers to the lawful currency of the United States of America.
"United States" or "US" means the United States of America.
"Vodacom" means Vodacom Group Limited.
"Vodafone" means Vodafone Group Plc.
Disclaimer:
This document does not constitute an offering of securities or otherwise constitute an invitation or inducement to any person to underwrite, subscribe for or otherwise acquire or dispose of securities in Helios Towers plc (the "Company") or any other member of the Helios Towers group (the "Group"), nor should it be construed as legal, tax, financial, investment or accounting advice. This document contains forward-looking statements which are subject to known and unknown risks and uncertainties because they relate to future events, many of which are beyond the Group's control. These forward-looking statements include, without limitation, statements in relation to the Company's financial outlook and future performance. No assurance can be given that future results will be achieved; actual events or results may differ materially as a result of risks and uncertainties facing the Group, including, without limitation, risks and uncertainties arising from the impact of the COVID-19 pandemic. You are cautioned not to rely on these forward-looking statements, which speak only as of the date of this announcement. The Company undertakes no obligation to update or revise any forward-looking statement to reflect any change in its expectations or any change in events, conditions or circumstances. Nothing in this document is or should be relied upon as a warranty, promise or representation, express or implied, as to the future performance of the Company or the Group or their business.
This document also contains non-GAAP financial information which the Directors believe is valuable in understanding the performance of the Group. However, non-GAAP information is not uniformly defined by all companies and therefore it may not be comparable with similarly titled measures disclosed by other companies, including those in the Group's industry. Although these measures are important in the assessment and management of the Group's business, they should not be viewed in isolation or as replacements for, but rather as complementary to, the comparable GAAP measures.
This announcement has been issued through the Companies Announcement Service of Euronext Dublin.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
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