Vantage Towers AG: FY22 Preliminary Results

Vantage Towers: strong delivery in FY22 and continued focus on driving acceleration

Düsseldorf (pta011/16.05.2022/08:00 UTC+2)

• Successful commercialisation of our tower footprint continues:
  • In FY22 we added 1,680 net new tenancies in total across our footprint with more than 840 non-committed and c. 1,670 non-VF net additions, increasing the tenancy ratio by 0.04x YoY to 1.44x
  • We increased our commercial footprint whilst expanding our value proposition as a 5G enabler in Spain and in Distributed Antennae Systems ("DAS") in Spain, the Czech Republic and Hungary
• Macro site new build ramp up further progressed with more than 190 new sites in Q4 compared to 130 in Q3, 90 in Q2 and 100 in Q1, taking the total to over 510 in FY22
• FY22 results in line with our FY22 guidance:
  • Group Revenue (ex. pass through) at €1,011m in FY22, a 4.6% year-on-year (YoY) growth driven mainly by other chargeable services to MNOs in addition to tenancy growth and inflation escalators
  • Adj. EBITDAaL at €543m (+3.6% YoY) and EBITDAaL margin of 54%, which is in line with guidance
  • RFCF increased by 8.0% YoY to €415m in FY22, which is at the top end of our guidance range and includes a recurring €15m benefit derived from optimizing cash interest costs and cash tax expenses
• We intend to propose a dividend of €0.63 per share, a total of approximately €319m in dividend payout
• We have revised the approach to our roll out plan in Germany leading to an adaptation of the built-to-suit (BTS) programme and the MSA terms, adding optionality to source up to 1,200 sites for Vodafone from third-party TowerCos
• In FY23, we will further invest in our business, incurring costs to facilitate 1&1 access on our existing sites, accelerate the ramp up of our BTS programme and build out our supporting teams, all ahead of the corresponding revenue contribution. Consequently, we announce our FY23 guidance as follows whilst reaffirming our medium-term targets: Revenue (ex. pass through) growth of 3.0-5.0% YoY; Adj. EBITDAaL €550m-€570m EUR and RFCF of €405m-€425m.

Vivek Badrinath, CEO of Vantage Towers, commented:

We look back on a successful first year as a listed company, in which we've delivered our financial targets and continued the successful commercialisation of the business. As more companies seek to benefit from access to our tower infrastructure, we have secured significant additional tenancies, won a new contract with mobile operator 1&1 in Germany and signed new partnerships with businesses in the telecoms, retail, transport and IoT sectors. For the coming year, we will focus on further investing and accelerating our business – in what remains a challenging operational environment – and leverage our high-quality grid and powerful value propositions to deliver value for our shareholders.

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Commercial update

Continued commercial momentum across the business

In FY22, Vantage Towers delivered strong commercial momentum signing new agreements and partnerships in line with our mission – "Powering Europe's digital transformation". Most prominent was the landmark agreement signed with 1&1 in December 2021. Further, in Q4 FY22 we maintained our growth by leveraging our superior grid and value propositions across our European footprint in our eight consolidated markets.

• Further commercialisation included more than 1,680 net new tenancies in FY22, taking our tenancy ratio to 1.44x. Of these, c. 1,670 were non-Vodafone and more than 840 are non-committed net additions, moving closer towards our medium-term tenancy target of >1.50x. Our results and commercial highlights underpin our confidence to deliver further growth and reach our mid-term guidance.
• Powering Europe's digital transformation: Vantage Towers' consolidated portfolio remained broadly stable at 45.7k macro sites across the eight European markets. The increase in new build sites was offset by some decommissioning of sites, in particular driven by the active sharing agreement in Spain and other European markets, which create efficiencies in our network. Whilst the new build programme accelerated in the second half of the financial year 2022 (H2FY22) and we have added over 510 new macro sites in total across our markets in FY22, the macro site build has been challenged, mainly by supply chain issues. We expect these challenges to persist into FY23 and to require continued management. Hence, we are focused on enhancing our BTS production through direct measures in a number of areas including: process and operations; supplier and sourcing; steering and control: and organisation and governance.
• Revised approach to roll-out plan in Germany: we have agreed with Vodafone to adapt the BTS programme and the MSA terms in Germany which will provide optionality to Vantage Towers, support the coverage requirements of Vodafone while protecting value for our shareholders. Vodafone's commitment to take 5,500 new sites until end of FY26 remains unchanged and Vantage Towers can now source up to 1,200 sites from third-party Tower Companies (TowerCos) in Germany as opposed to building from the ground up.
• Efficiency programme: Our programme to optimise ground leases through buyouts or renegotiations (GLBO) is showing continued progress with c. 630 signed contracts across our European footprint since inception; and another c. 450 commitments in the pipeline. The following milestones have been achieved since inception:
  • Spain: ~420 contracts signed or committed
  • Germany: ~315 contracts signed or committed
  • Other European markets: ~345 contracts signed or committed
• Accelerating Europe's transition to 5G: We are at the forefront of enabling 5G and, notably, we have signed an agreement with Telefonica in Spain for their 5G equipment upgrades in over 1,500 existing sites over the next three years. Vantage Towers will modify the infrastructure to host 5G equipment where Telefonica already uses previous technologies.
• Strengthening indoor connectivity: In the Czech Republic, we signed a new 10-year agreement to provide DAS for the Military hospital in Prague to empower better coverage of surgical halls. Furthermore, in Hungary, we signed a deal with Futureal Group to build a DAS solution for the 'Budapest One' Office building, Phase II. In Spain, we also signed agreements to provide indoor coverage solutions for a leading supermarket chain across the country and the metro line of one of the major cities.
• Empowering a sustainably connected Europe: In Hungary, we signed a 10-year agreement with the e-mobility company Elektromotive Hungaria to install electro-car chargers on Vantage Towers' sites. To maximize the impact of better connectivity, we continue to enable different technologies and critical infrastructures. In Greece, we signed a 5-year agreement with a telecommunications service provider to deploy a country-wide backbone microwave network. In Germany, we signed a fibre sales agent agreement with 1&1 Versatel by which Vantage Towers will sell 1&1 Versatel's fibre services in Vantage Towers' sites. Furthermore, in the Czech Republic, we signed a 10-year deal with the Ministry of Interior for the Public Protection Disaster Relief (PPDR) sites within the new ecosystem of vendors for government in specific safety regulations and PPDR standards.

Group Summary Financial Results

Our financial performance in FY22 was in line with our guidance. Our revenue (ex. pass-through) grew from €966m to €1,011m, an increase of €45m (+4.6%). This was driven mainly by other chargeable services to MNOs, tenancy growth and CPI escalators. Macro site revenue increased from €899m to €923m, an increase of €24m (+2.7%) with the increase primarily driven by revenue from non-Vodafone customers, which totalled €208m. Energy and other revenue grew by 71.6% from €26m to €45m, which was driven by other chargeable services to MNOs.

In the current inflationary environment over 95% of our revenue is inflation linked and we are actively managing both ground lease (GLBO) (to the extent that current contracts have inflation escalators) and maintenance costs, whilst energy consumption is recharged directly.

These increased revenues flowed through to Adjusted EBITDA, which increased from €830m to €865m (+4.2%) with the adjusted EBITDA margin slightly decreasing to 85% (FY21 PF: 86%). Our maintenance cost increased by €9m due to costs for other chargeable services to MNOs and one-off costs incurred on Neutral Host projects[4]. Staff costs increased by 13% from €40m to €45m as a result of the stand-up of the organisation. There was a €8m increase in ground lease costs compared to FY21PF primarily reflecting inflation escalators and tenancy growth, partly offset by savings from our ground lease buyout (GLBO) projects. Our adjusted EBITDAaL increased by 3.6% from €524m to €543m maintaining a stable adjusted EBITDAaL margin of 54% in line with our guidance.

Recurring OpFCF increased from €498m to €531m (+6.6%) whilst Recurring FCF increased by 8.0% YoY to €415m in FY22, which is at the top end our updated FY22 guidance range (€405m-415m). Within the overall cash result is a recurring €15m benefit derived from optimizing cash interest costs on borrowings and cash tax expenses. Net Debt decreased from €2,001m to €1,896m, resulting in a leverage ratio of 3.5x Net Financial Debt to EBITDAaL.

The Management Board aims to distribute an attractive dividend to our shareholders. Our targeted payout-ratio amounts to 60% of the sum of Recurring Free Cash Flow and dividends received from INWIT and Cornerstone. For the financial year ended 31 March 2022, the Management Board intends to propose a dividend of €0.63 per share, approximately €319m, to the 2022 Annual General Meeting.

Vantage Towers' co-controlled joint ventures

The performance of both of our co-controlled joint ventures is in line with our expectations.

INWIT added 3.1k new tenants and 380 new sites between 1 January 2021 and 31 December 2021, bringing the tenancy ratio to 2.0x with a total of 22.8k sites. The INWIT renegotiation and land acquisition programme continues with further 475 agreements.

Between 1 April 2021 and 31 March 2022, Cornerstone added 366 macro sites bringing total macro sites to 14.5k and a stable tenancy ratio of 2.0x. In addition, the renewals of the existing lease agreements under the Electronic Communication Code (ECC) are progressing as planned.

Dividends received from the Group's equity accounted joint ventures have increased by €25m, from €96m in FY21 to €121m in FY22. This includes the first interim dividend declared by Cornerstone at the end of March 2022, the Vantage Group share being €18m.

Our Group Guidance

Positive outlook for FY 2023 and medium-term targets reiterated

Our FY22 Group results are in line with FY22 guidance for adjusted EBITDAaL margin and RFCF, and we slightly exceeded our guidance for Revenue (ex. pass through). Our medium-term targets remain unchanged.

We expect to continue to drive forward the commercialisation of our business in FY23. Whilst leveraging on our strong infrastructure network, we will focus on the execution of our BTS programme and attracting incremental third-party tenants. We expect Group revenue (ex. pass-through) to increase in the range of 3.0% to 5.0% YoY and reaffirm our medium-term guidance at mid-single digit revenue growth.

In FY23, we will further invest €10-15m in our business, incurring costs to facilitate 1&1's access on our existing sites, accelerate the ramp up of our BTS programme and build out our supporting teams, all ahead of the corresponding revenue contribution from FY24.

Therefore, we expect Adjusted EBITDAaL between €550m to €570m in FY23. The Group's expectation, which is to achieve an adjusted EBITDAaL margin in the medium-term in the high fifties per cent through operating leverage and optimisation initiatives, remains unchanged.

The Group continues to generate strong cash flows with Recurring Free Cash Flow (RFCF) expected to be in the range of €405m to €425m in FY23. In the medium-term, we expect RFCF growth rate to be mid-to high-single-digit, in line with our previous medium-term guidance.

[1]. The non-IFRS measures presented in this release are defined and reconciled on pages 7-9.

[2]. The pro forma financial information has been extracted from the Annual Report for the year ended March 31 2021.

[3]. For the purposes of the Unaudited Pro Forma Financial Information in FY21, "cash cost of leases" has been calculated as the sum of depreciation on lease-related right-of-use assets and interest on lease liabilities that were incurred by the Group on a pro forma basis, excluding the 10m EUR non-cash increase for the pro forma period from the reassessment of the IFRS 16 lease liability performed during the twelve months ended 31 March 2021.

[4]. In Neutral Host projects we incur the costs of providing passive and active infrastructure in establishing a multi-operator DAS and Small Cell site.

[5]. Medium-term guidance is stated relative to FY21PF; excluding INWIT and Cornerstone.

[6]. Assuming capacity to invest in organic or inorganic opportunities up to leverage of 5.5x Net Financial Debt / Adj. EBITDAaL to maintain investment grade rating

APPENDIX

Pro forma Financial Results

The consolidated financial performance for FY21 only reflects results from the date operations were acquired by the Group during FY21. i.e. the results relating to the tower business in Germany following its hive-down on 25 May 2020 and the results of other Vantage operations from the date of their acquisition on 17 December 2020, except Vantage Greece and CTIL, which were acquired on 22 December 2020 and 14 January 2021 respectively. Management does not consider it appropriate to consolidate financial information for its operational units prior to their acquisition.

Accordingly, in this section we have presented pro forma FY21 financial information alongside the FY22 consolidated financial information in order to show a like for like comparison between the FY21 pro forma figures and our performance in FY22. The comparative proforma information is taken from the Vantage Towers Annual for the year ended 31 March 2021, where we published updated pro forma financial information that illustrated the performance of Vantage Towers as if the business combination and IPO had occurred as at 1 April 2019 for FY21.

The comparative 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 had the business combination and IPO occurred on 1 April 2019.

Alternative Performance Measures

The Group presents financial measures, ratios and adjustments that are not required by, or presented in accordance with, IFRS, German GAAP or any other generally accepted accounting principles on a consolidated basis ("Non-IFRS Measures") and on a pro forma basis ("Alternative Performance Measures" or "APMs").

These Non-IFRS Measures on a consolidated basis and Alternative Performance Measures on a pro forma basis should not be considered as an alternative to the consolidated financial results or other indicators of the Group's performance based on IFRS measures. They should not be considered as alternatives to earnings after tax or net profit as indicators of the Group's performance or profitability or as alternatives to cash flows from operating, investing, or financing activities as an indicator of the Group's liquidity. The Non-IFRS Measures on a combined basis and Alternative Performance Measures on a pro forma basis, as defined by the Group, may not be comparable to similarly titled measures as presented by other companies due to differences in the way the Group's Non-IFRS Measures on a combined basis and Alternative Performance Measures on a pro forma basis are calculated. Even though the Non-IFRS Measures on a consolidated basis and Alternative Performance Measures on a pro forma basis are used by management to assess ongoing operating performance and liquidity and these types of measures are commonly used by investors, they have important limitations as analytical tools, and they should not be considered in isolation or as substitutes for analysis of the Group's results or cash flows as reported under IFRS.

Definitions

Reconciliations of APMs

Adjusted EBITDA

The table below sets forth the reconciliation of the Group's non-IFRS metrics Adjusted EBITDA on a consolidated basis to profit before tax in the consolidated income statements for the periods indicated.

Adjusted EBITDAaL

The table below sets forth the reconciliation of the Group's non-IFRS metrics Adjusted EBITDAaL on a consolidated basis to profit before tax in the consolidated income statements for the periods indicated.

Recurring Operating Free Cash Flow and Recurring Free Cash Flow

The table below sets forth the reconciliation of the Group's non-IFRS measures Recurring Operating Free Cash Flow and Recurring Free Cash Flow to Adjusted EBITDA periods indicated.

Net Financial Debt

The table below sets forth the calculation of the Group's non-IFRS measure Net Financial Debt from the Consolidated statement of financial position as at 31 March 2021 and 31 March 2022.

Glossary

Disclaimer on forward looking statements

This announcement contains "forward-looking statements" with respect to Vantage Towers' results of operations, financial condition, liquidity, prospects, growth, and strategies. Forward-looking statements include, but are not limited to, statements regarding objectives, targets, strategies, outlook, and growth prospects, including guidance for the financial year ending March 31, 2023, medium-term targets, new site builds, tenancy targets and the tenancy pipeline; Vantage Towers' working capital, capital structure and dividend policy; future plans, events, or performance, economic outlook, and industry trends.

Forward-looking statements are sometimes, but not always, identified by their use of a date in the future or such words as "will", "could", "may", "should", "expects", "intends", "prepares" or "targets" (including in their negative form or other variations). By their nature, forward-looking statements are inherently predictive, speculative and involve risk and uncertainty because they relate to events and depend on circumstances that may or may not occur in the future. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements. All subsequent written or oral forward-looking statements attributable to Vantage Towers or any member of the Vantage Towers Group, or any persons acting on their behalf are expressly qualified in their entirety by the factors referred to above. No assurances can be given that the forward-looking statements in this document will be realised. Any forward-looking statements are made of the date of this announcement. Subject to compliance with applicable law and regulations, Vantage Towers does not intend to update these forward-looking statements and does not undertake any obligation to do so.

References to Vantage Towers are to Vantage Towers AG and references to Vantage Towers Group are to Vantage Towers AG and its subsidiaries unless otherwise stated.

Rounding

Due to rounding, numbers presented may not add up precisely to the totals provided and percentages may not precisely reflect the absolute figures.

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Emitter:	Vantage Towers AG Prinzenallee 11-13 40549 Düsseldorf Germany
Contact Person:	Lie-Tin Wu
Phone:	+49 211 61712 307
E-Mail:	ir@vantagetowers.com
Website:	www.vantagetowers.com
ISIN(s):	DE000A3H3LL2 (Share)
Stock Exchange(s):	Regulated Market in Frankfurt; Free Market in Berlin, Dusseldorf, Hamburg, Hannover, Munich, Stuttgart, Tradegate