Calnex Solutions plc

Good morning, everyone. My name is Juan Gaitán, Sundance Director of Investor Relations, and I would like to thank you all for joining us today for our H1 2020 for Resource Conference call. Today, I'm joined by our CEO, Marco Patuano, and our CFO, Raymond Trias, who will discuss the main highlights of the period, and then we will open the line for your questions. As a reminder, if you wish to ask a question, please press star five in your keyboard. So without further ado, over to you, Marco.

Thank you. Thank you. Good morning, everyone. Thank you so much for your time today. I assume ready for vacation. So let's make the last effort. So let me start, please, updating you on our portfolio optimization and capital allocation priority. As you have seen this morning, we are in the middle of advanced negotiation after having received the binding offers for our Austrian asset. The disposal process is aligned with our objectives of achieving a simpler structure, strengthening our balance sheet and maximizing shareholder value. This agreement will add to the remarkable progress we are making in terms of the leveraging, thanks to our agreement in the Nordics, the disposal of sites in France and the exit from Ireland. This last closing process remains on track with no changes to our envisaged timeline and leverage will be reduced by €971 million when completed. In this sense, probably you read that the process moved from Phase 1 to Phase 2. It was absolutely foreseen, so it's not a surprise. So the conclusion expected base case Q125, best case Q424 is confirmed. Okay, let's continue. Now, I would like to remind you that we have recently launched our first bond as full investment grade issuer, which has been used to repay variable debt at a higher cost. Following the Austrian deal, it is our intention to assess a potential earlier shareholder distribution in the most accurate form, which today would be represented by a share buyback, subject to our leverage target and to our rating commitments. Before that, it's required to complete antitrust reviews and receive the associated proceeds, which should be happened by Q1 2025, the latest, as I said. In the meantime, we will work closely with our rating agencies in order to determine potential timing and quantum. Okay, moving now to the business performance. We are once again providing very solid results this quarter, proving the attractiveness of our business fundamentals and the alignment of our organization towards the achievement of all our public commitments. The period continues to be marked by a consistent commercial performance and by a robust operational execution. The point of presence increasing more than 9% compared to the last year in terms of equivalent POPs, which is the old metrics. In any case, it would have been more than 6%. Our main sources of co-location growth are Digi in Portugal and Plus in Poland. And in terms of BTS, we see strong progress from Iliad in France and Play in Poland. Our organic revenues, which excluded the impact from the disposal of sites in France during the period and other effects, just to mention effects, increased to 7.4%. Our organic MDA after leases increased 10.7%. Our recurring level free cash flow increased to 781 million euros from 741 million euros last year. And our free cash flow reached a 49 million euro positive, benefiting both from our cash flow generation and from 154 million euro received in the context of the remedy process. So, we are on track to meet all of our short and medium-term targets we recently established at our Capital Market Day. I can assure you, that this management team is fully committed with our promises and we are also convinced that with a consistent delivery, quarter after quarter, we will gain your trust. Finally, in a market that is seeing M&O consolidation, I would like to give you a quick update on the progress we are making with our clients in order to crystallize potential accretive agreements. In the light of the potential integration between Hutchinson and Vodafone in the UK, we have enhanced our existing contract with CTIL. The former Archiva had with the joint venture a contract which will be replaced by two separate contracts which each of the operators and its duration will be extended for initial term of 10 years followed by two 10-year renewal periods. After the announced in-market consolidation in Italy, we are in discussion with the acquiring entity, where we see no material short-term risks, but on the contrary, potential network improvement opportunities in the market. At the same time, we have ongoing dialogue with Emergeco in Spain in order to facilitate a network improvement and the expected efficiencies on the client side, and at the same time, an NPV neutral agreement and a long-term relation enhancement. We have reached an agreement with Bouygues Telecom for the deployment of around 150 co-locations to suit instead of built to suit. We see limited counterparty risk from relevant clients in France and Portugal due to the very high level of contractual protection. The fact that Celnex provides a mission-critical service, and to this point, we see clients operating as usual with no changing behavior. Finally, we have created the entity structure for our land co, which will accelerate the acquisition of land initially in our five major markets. Having said this, I now hand over to the CFO. Ramon, please, the floor is yours.

Thank you, Markov. Good morning, everyone. I will now provide a few additional remarks on the period and our financial strategy. This has been another period of consistent commercial performance, with POPs growing at 9.3% compared to the same period last year. Please remember that we are now reporting physical POPs, which in our view provides a better reflection of the addressable market and our commercial activity. Physical POPs complement our historical reporting based on equivalent POPs. Following that methodology, the growth would have been 6.3%. This 9.3% growth that I was referring to is explained by the progress made both in our build-to-shoot programs and the collocation. Build-to-shoot growth represents around 3% and was mainly deployed in France and Poland. Collocation POPs were generated mainly in Portugal and Poland, with the rest of our markets showing steady performance. POPs growth associated with the new collocations has reached 6.2%. It would be 3% if we were to measure it in terms of equivalent POPs. Revenues increased 7% compared to the same period last year. Our adjusted EBITDA 6%. and our EBITDA, after leases, 8%. Please bear in mind that year-on-year, trends are impacted by positive one-offs, mainly associated with electricity pass-through in the second quarter of 2023, as well as the change of perimeter in 2024, as a result of the disposal of the sites in France. Additionally, sequential recurrent level free cash flow performance for the second quarter 2024 versus the first quarter 24 is explained by the change in working capital, tax payments in the quarter, and the dividends paid to minorities in the Nordics. All of them timing effects which do not affect our view for the year 24. When focusing on pure organic performance, our revenues increased 7.4%. Our EBITDA, 8.9%. And our EBITDA releases 10.7%, showing the operating leverage of our business and our focus on OPEX and lease management. If we now move to slides 10 and 11, we are providing here our organic revenue bridge for the period, as well as the individual performance of our different business lines. As you can see, if we take our contribution to revenues from inflation, collocation, and bill to suit, our organic revenues grew 7.4% compared to the same period last year. And going into the specific performance of our different business lines, first, the tower segment grew 6%. 7% organically, including the positive impact from our ability to translate inflation into incremental revenues. Fiber and connectivity services grew 24%. Thus, small sales and run-as-a-service grew 17%, and finally, broadcasting services grew 3%. The strong performance of our fiber business unit reflects the return on investment done to date. Our free cash flow reached 49 million euros, around 180 million euros more than the same period last year, mainly due to our organic cash flow generation and the 154 million euros received in the context of the remedies process. Our free cash flow is expected to reach between 250 and 350 million euros in 2024, compared to the 150 million generated in 2023. Our CAPEX needs this year are distributed as follows. Maintenance CAPEX is expected to remain below 4% on the total revenues excluding pass-throughs. Expansion CAPEX should be around 500 million euros in the year 2024, a split between 60% tower expansion capex, 20% other business expansion capex, and the balance allocated to efficiency capex. Build-to-shoot capex before cashing from remedies is expected to be around 1.3 billion euros in 2024, down from the 1.6 billion euros in 2023. and we are expecting the second half 2024 to be less intense compared to the first half 2024 in terms of B2S. Going forward, our pre-cash flow generation potential will significantly increase as we get closer to the end of our B2S programs. This will underpin our rapid deleveraging and will also give us the financial flexibility required to remunerate our shareholders whilst pursuing value-accretive business opportunities. If we move to slide 12, we are illustrating here our commitment with our former efficiencies program and our willingness to continue optimizing our lease costs. Our program remains on track, and we continue to actively pursue land management measures, including the creation of our LandCo that Marco mentioned before, in order to continue absorbing contractual rent increases and the additional costs associated with a growing perimeter. We have 20 million euros of additional costs linked to additional sites which have been absorbed through land management initiatives. Finally, let's take a look at our debt maturities profile on slide 14. As you can see, there are no maturities left in 2024, and we have used proceeds from our recent bond issuance maturing in 2029 with a coupon of 3.625% in order to repay variable debt that was maturing at the end of 2025 at a circa 5% cost. Proceeds from additional disposals may be partially used to continue repaying variable debt with a high associated cost. as these instruments are linked to your iBOR. We have a robust and well-designed capital structure which prevents us from incurring higher interest expenses. Remember that 80% of our debt is fixed. Short-term debt maturities have already been managed, so our average cost of debt which today stands at 2.3%, similar as last year, will only marginally increase in the coming years. And with this, we thank you all for listening. We wish you all nice holidays, and we remain now at your disposal to answer your questions.