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Vantage Towers AG: Vantage Towers well positioned to capture future growth opportunities
Düsseldorf (pta006/17.05.2021/08:00 UTC+2)
- Sustained commercial momentum continues across the business:
- Delivered c.1,800 new tenancies in FY21 with a tenancy ratio of 1.40x, ahead of FY21 pro forma guidance
- Deployed c.600 sites against our target of 550
- Two framework extension agreements signed in Q4, in addition to the new agreements announced at Q3
- Successful listing on the Prime Standard segment of the Frankfurt Stock Exchange completed in March 2021 with a valuation currently implying a market capitalisation of over €13bn
- €2.2bn debut bond offering completed with very strong investor support
- Financial results in line with FY21 pro forma guidance
- Intention to propose a dividend of approximately €280m, in line with guidance
- FY22 guidance announced: revenue €995-€1,010m, EBITDAaL margin broadly stable and recurring free cash flow of €390-€400m. Medium-term targets reaffirmed
|Consolidated financial results summary (€m)
|Group Operating Profit
|Profit Before Tax
|Cash generated by operations
Based on the timing and nature of the carve-out of the European tower infrastructure and formation of the Group assets, two key facts are relevant to consider when reviewing the above results of the Group:
|Consolidated pro forma highlights, ,  (€m)
|Revenue (ex. pass through)
|Recurring free cash flow (RFCF)
"After the biggest milestone in our company’s history to date - listing on the Frankfurt Stock Exchange - these are our first annual results as a stand-alone company. I am pleased that we have fully delivered on our FY21 operational and financial targets and we remain focused on commercialising our business and delivering our medium-term targets.
Europe's digital transformation is accelerating, and we are central to its growth. As a 5G super host we are a key enabler for the 5G roll-out. Mobile operators are expanding their networks to manage increasing data traffic, and they value the quality of our grid. This underscores our confidence in the future. We are working to grow our revenues and deliver our efficiency programmes to provide attractive returns for our shareholders and make a significant contribution to better connectivity and the sustainable digitisation of Europe."
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Summary Financial Results
Strong reported financial performance and intention to propose a dividend of ~€280m
During FY21, we generated revenues of €545m, which is comprised of €514m (94.3%) macro site revenue, €16m (2.9%) Energy and other revenue, €12m (2.1%) other rental revenue and €3m (0.6%) of recharged capital expenditure. Macro site revenue is primarily driven by new tenancies and Macro sites. In FY21 c.1,300 new non-Vodafone tenancies have been added, of which approximately 860 were tenancies from the Active Sharing Arrangement in Spain. Revenue from customers other than Vodafone principally comprised Macro Site revenue. During FY21 we generated revenue of €58m from customers other than Vodafone.
Ground leases are our single largest cost and comprise the rents that we pay to landlords to locate telecommunications infrastructure on their property. For FY21, depreciation on lease-related right of use assets amounted to €120m and the interest on lease liabilities amounted to €28m. Total lease liabilities as at 31 March 2021 were c.€2.0bn.
We incurred other operating expenses of €37m and these were primarily made up of energy costs, transitional services agreements, long-term services agreements and our support agreements. As outlined during our Capital Markets Day and in our IPO Prospectus, we are implementing a number of efficiencies to lower energy consumption and costs including upgrading energy technology using energy-efficient rectifiers, free cooling systems and green solutions such as solar power installations at our sites whilst also migrating our energy model onto a fully remote monitoring and metering system.
The share of profit from equity accounted joint ventures was €10m, with INWIT (Vantage Towers share of profit €15m) and Cornerstone (Vantage Towers share of profit €4m) offset by the amortisation of €9m relating to the associated intangible assets. INWIT added 1k new tenants & 200 new small cell sites during Q4. The INWIT renegotiation and land acquisition programme is underway with 600 agreements executed. The guidance provided on the INWIT dividend was delivered with CY20 dividend of €0.30 per share, with a Vantage Towers share of €96m. Cornerstone performance was in line with expectation with good operational performance.
Thomas Reisten, CFO of Vantage Towers AG, commented:
"Vantage Towers is well on track to drive ongoing incremental value for our shareholders and balance our targets of growth, investments and returns with a 60% RFCF dividend payout ratio. We are pleased to re-iterate our medium-term targets and today announce our FY22 guidance: Revenue €995-€1,010m with EBITDAaL margin broadly stable and recurring free cash flow €390-€400m."
The Management Board aims to distribute an attractive dividend to our shareholders. The targeted payout-ratio amounts to 60% of the sum of the Recurring Free Cash Flow (of the consolidated group) and dividends received from INWIT and Cornerstone. For the financial year ending 31 March 2021, the Management Board intends to propose a dividend of approximately €280m to the 2021 Annual General Meeting.
Balance Sheet, Financing & Liquidity
We successfully issued a €2.2bn inaugural bond offering consisting of €750m 0.000% notes due 2025, €750m 0.375% notes due 2027 and €700m 0.750% notes due 2030. The bonds settled on 31 March 2021 and are rated Baa3 by Moody’s and BBB- by S&P.
Following our bond issuance and as at 31 March 2021 our Net Financial Debt was €2bn and our Net Financial Debt to Adjusted EBITDAaL ratio was 3.8x, which was better than our guidance of 4.0x. Our net debt position benefitted from favourable working capital effects from capex payables mainly through our accelerated growth capex programme and an improved operating working capital position as we delivered a better outcome from the stabilisation of our balance sheet during Q4. We expect to maintain an improved working capital position into the medium-term and that net operating working capital will be at 6-8% of revenues at future March year end dates with our current contractual frameworks.
Our capital allocation policy will focus on organic growth and value accretive inorganic investments in order to generate attractive returns for shareholders.
Sustained commercial momentum across the business
|Consolidated operational KPIs
We continue to make good progress across our operational and commercial objectives:
- Powering Europe’s digital transformation: Vantage Towers' consolidated portfolio increased to 45.7k Macro sites within the 8 consolidated European markets and to 82.2k sites in 10 European markets when also including our co-controlled operations: Cornerstone (UK) and INWIT (Italy)
- Sustained commercial momentum: Wedelivered c.1,800 new tenancies in FY21. Of these, c.1,300 are non-Vodafone customers and c.660 tenancies are non-committed additions, representing a third of tenancies required to deliver our medium-term tenancy ratio of >1.50x
- Operational targets have been achieved: We deployed c.600 sites against our target of 550. We have successfully begun to capitalise on our lease-up potential with a FY21 tenancy ratio of 1.40x, exceeding FY21 guidance of ~1.38x
- New agreements signed: Contracts signed with Eir and Three in Ireland and with AOTEC in Spain, the industry body representing over 150 local operators. An IoT contract has been signed with Sigfox in Germany and two extension framework agreements were signed in Hungary and Romania
- Margin uplift through efficiencies: Our programme to optimise ground leases through buyouts or renegotiations is showing encouraging results:
- ~200 contracts commercially agreed or signed in Spain
- GLBO process is underway in Germany with first contracts agreed
- Pilots underway in 4 other countries
Our growth agenda continues at pace. We announced at Q3 that we had signed MNO agreements with Eir and Three in Ireland. These are 10 year initial term contracts, expected to deliver in excess of 250 and 200 incremental tenancies respectively. Our collaboration agreement with AOTEC covers 5 years with an industry body of over 150 local and regional operators in lower density and rural areas.
During Q4 we delivered 140 tenancies to Orange Spain, in Romania we have signed a five year framework contract with STS (Special Telecommunication Services) covering the extension of c.170 tenancies and in Hungary we have signed an inflation-linked framework extension contract with Antenna Hungária, demonstrating our sustainable growth model. Looking forward, the ongoing spectrum auctions in Portugal and the Czech Republic are growth opportunities; we are well placed to capture additional tenancies from potential new entrants and existing MNOs as a result of these auctions.
IoT networks and applications are expanding fast across Europe. We have a strong focus on this area to support our customers and capture the growth of the IoT ecosystem. Our partnership with Sigfox in Germany is a 10 year framework agreement expected to deliver at least 350 tenancies in FY22 and at least further 150 tenancies by December 2023. We are pursuing further IoT opportunities in Greece, Hungary, and Romania. These are excellent examples of our successful collaboration with our customers and partners to enable "Digital Europe" together.
We remain focused on our goal of becoming Europe’s 5G super host and intend to be at the forefront of enabling future-proof 5G indoor coverage solutions. During Q4, we have signed a new partnership agreement with Delta in Hungary(a system integrator company) focussing on DAS and 5G private networks (Industry 4.0).
Our Strategy and Purpose
We have laid out full details of our strategy, purpose, ESG policy and future plans in our recent IPO Prospectus and related Capital Markets Day presentation, available at http://www.vantagetowers.com/investors/. Please refer to these materials for further information on Vantage Towers strategy and ESG policy.
Positive outlook for FY 2022 and medium-term targets reiterated
The below FY21PF results are in line with our FY21PF guidance for Revenue, Adjusted EBITDAaL and RFCF as set out in the Vantage Towers prospectus section 14 dated 8 March 2021 and available at www.vantagetowers.com/ipo. Our medium-term targets remain unchanged.
|Tenancy Ratio for Consolidated Vantage Towers
|Revenue (ex. pass through)
|Mid-single digit CAGR
|€524m / 54%
|EBITDAaL margin broadly stable
|High 50s percentage margin (based on Revenue (ex. pass through)
|Recurring free cash flow (RFCF)
|Mid to high single digit CAGR
|Net Financial Debt to Adjusted EBITDAaL
|4.0x Net Debt / Adj. EBITDAal
Flexibility to exceed for growthinvestment
€1bn leverage capacity
|Net Financial Debt
For FY22, Vantage Towers will continue to build on the successes of FY21 by driving growth in accordance with our business plan. We will leverage our strong infrastructure network and our programmes to execute the BTS strategy and attract incremental third party tenants. This will translate into continued growth opportunities and expected revenue (exc. pass-through revenues) of €995 to 1,010 million in FY22. This positive trend is expected to deliver mid-single digit revenue growth in line with our previous medium-term guidance.
Our FY22 revenue growth is expected to generate a broadly stable EBITDAaL margin with FY21PF. The Group’s expectation to achieve an adjusted EBITDAaL margin in the medium-term in high fifties per cent through operating leverage and optimisation initiatives remains unchanged. As previously stated in our Q3 Results, these initiatives are expected to have an increasing effect over time, but limited impact in FY22.
Furthermore, the Group’s ability to generate strong cash flows is expected to improve, with Recurring Free Cash Flow (RFCF) expected to be in the range of €390 to 400 million in FY22. In the medium-term, we expect that the Group’s RFCF growth rate will be a mid-to high-single-digit, in line with our previous medium-term guidance.
Pro Forma Group Financial Performance
In the IPO prospectus released on 8 March 2021 we published pro forma financial information that illustrated the performance of Vantage Towers as if the reorganisation of the Group had occurred as at 1 April 2019. In this section we have presented comparable pro forma financial information to illustrate the Groups performance as if Vantage Towers had been carved-out from the Vodafone Group for the whole of FY20 and FY21 in order to show a like for like comparison between the FY20 figures published in the prospectus and our performance in FY21.
The Unaudited Pro Forma Financial Information has been prepared for illustrative purposes only and does not purport to be indicative of the results of the Company, its consolidated subsidiaries and its equity accounted investments in INWIT and Cornerstone.
A basis of preparation can be found on page 7. The Alternative performance measures presented in the table below are defined and reconciled on pages 8-12.
|Consolidated Vantage Towers Pro Forma (€m)
|Revenue (ex. pass through)
|Capex recharge revenue
|Administrative & Other
|Capex recharge revenue
|Ground lease expense
|Reversal of non-cash lease adjustment
|Cash conversion (%)
|(-) Tax paid
|Recurring free cash flow (RFCF)
|Net Financial Debt to Adjusted EBITDAaL
Strong like for like pro forma financial performance
We are pleased to announce that our financial performance is in line with the guidance we previously shared. Our pro forma revenue (excl. pass through) grew from €945m to €966m, an increase of €21m (+2.2%). This was driven by the build to suit program in Germany, the active sharing agreement with Orange in Spain and the contractually agreed inflation escalator in our MSAs. Maintenance cost increases (+5.7%) were driven by a backlog of activities in our footprint which was executed in the second half of the year whilst staff costs (+5.3%) as well as administrative & other cost increases (+8.6%) relate to the one off setup of the group. This translated into pro forma adjusted EBITDAaL increasing from €513m to €524m, an increase of €11m (+2.1%), whilst maintaining a stable EBITDAaL margin of 54%.
Our pro forma recurring free cash flow increased from €375m to €384m, an increase of €9m (+2.4%) which is in line with the guidance we previously shared. Whilst our maintenance capex in FY21 has increased from €29m to €36m, €7m (+24%) driven by a catch up effect, this is offset by a lower tax charge which fell from €103m to €98m, a decrease of €5m (-4.9%).
As referenced in our Q3 press release, the finalisation of the carve out of Vantage Towers and completion of the planned IFRS 16 lease reassessment exercise triggered by the new MSAs with Vodafone has resulted in some minor technical restatements to our pro forma financial performance as presented. The impact of the IFRS 16 lease reassessment is an accounting-based increase in our ground lease expense of approximately €10m on an annualised basis. The adjustment is non-cash, and therefore has no impact on our RFCF.
Our financial performance for FY21 sets a solid foundation from which we will continue to build momentum in our commercial operations and efficiency programs. We are confident in delivering our medium-term targets and executing all aspects of our wider strategy.
. Sites/ tenancies added from 1 April 2020 to 31 March 2021
. See basis of preparation on page 7 for further information on pro forma adjustments.
. The non-IFRS measures presented in the table are defined and reconciled on pages 8-12.
. During the twelve months ended March 31, 2021, the Group performed a reassessment of its lease portfolio in line with the requirements of IFRS 16. The Company has calculated the impact of the lease reassessment and recognized a EUR 10 million non-cash increase in the sum of pro forma interest on leases and depreciation on right of use assets for the twelve months ended March 31, 2021. The Company has not performed such a reassessment for the twelve months ended March 31, 2020. If the lease reassessment was backdated to April 1, 2019, the Company estimates the corresponding non-cash increase would have been EUR 10 million for the twelve months ended March 31, 2020 on a pro forma basis, which would have resulted in an estimated EUR 10 million decrease in the Group’s Adjusted EBITDAaL on a pro forma basis. This adjustment is included in the results for the twelve months ended March 31, 2020 on a pro forma basis.
. Based on the timing and nature of the carve-out of the European tower infrastructure and formation of the Group assets, two key facts are relevant to consider when reviewing the reported results of the Group:
- The consolidated financial performance of the Group reflects the inclusion of a) the Company from May 25, 2020, and as such the results of the German operations; b) the Spain, Portugal, the Czech Republic, Hungary, Romania and Ireland markets, and the 33.2% interest in INWIT from December 17, 2020 following the acquisition of CTHC; c) Vantage Towers Greece from December 22, 2020; and d) the 50% holding in Cornerstone from January 14, 2021.
- In accordance with IFRS 10 Vantage Towers has not included the financial information of the tower assets prior to the date it obtained control. Accordingly, the financials do not contain any comparisons to prior periods.
. Medium-term guidance on actuals; excluding the UK and Italy.
. For the purposes of RFCF in the twelve months ended March 31, 2021 on a pro forma basis, no pro forma cash flow statement has been produced and therefore cash cost of leases, tax paid and interest paid have been calculated based on the respective income statement amounts. From FY22 onwards, actual cash paid amounts will be available and used for the calculation of RFCF.
. For the purposes of the pro forma reconciliation, net tax paid on a pro forma basis is calculated taking into account current taxes as well as prepayments to tax authorities in Germany, on a pro forma basis as no pro forma cash flow statement has been produced. Accordingly, amounts disclosed for this measure in future periods will not be strictly comparable to the amounts stated herein, which are being provided for illustrative purposes.
. For the purposes of the pro forma reconciliation, the pro forma interest paid, excluding interest paid on lease liabilities has been used as a proxy for cash paid as no pro forma cash flow statement has been produced. Accordingly, amounts disclosed for this measure in future periods will not be strictly comparable to the amounts stated herein, which are being provided for illustrative purposes.