Calnex Solutions plc

Good afternoon, everyone. My name is Juan Gaitán, Director of Investor Relations, and I would like to thank you for joining us today for our full-year resource conference call. Today, I'm joined by our CEO, Marco Patuano, and our CFO, Raymond Trias, who will go through the key highlights of the period, and then we will open the line for your questions. So, reminder, if you wish to ask a question, please press star five on your keyboard. So, without further ado, over to you, Marco.

Thank you, Juanjo. Good morning, and thank you all of you for participating to our conference call. It is now almost two years since this new management team is in charge, and on slide three, we summarized the many initiatives implemented during this new stage of Selenex equity story. Please allow me to group them in some categories. The first is the long-term value protection. We've been able to reach excellent agreements with our clients, which are allowing us to protect our top-class backlog and improve the return on capex. Among the most relevant events are the mutually beneficial contract renegotiation with Vodafone and VMO2 in the UK, with Mass Origin in Spain. Thanks to these agreements, we removed any M&O consolidation risk in two of our most important markets, securing the current business and extending our strategic partnership. Similarly, we renewed our non-anchor POP also in France with Iliad, extending our collaboration and increasing our portfolio duration. In terms of capital efficiency, our co-location to suit programs with SFR and Bouygues in France are gaining momentum and they involve now around 1,000 BTS to CTS transformations. The second is the operational excellence. We completely redesigned our operation. We reviewed our organization and our management team. We refocused our strategy. We sold non-core activities. We created SENDland in order to improve our available land acquisition activities. As a result, we are meeting all our targets for the seventh quarter in a row, and we continue to build market credibility. The third is the asset rotation. Our assessment differentiating between core and non-core markets was made very quickly, as well as between profitable and less profitable assets, and we implemented a very focused strategy of asset rotation. Our M&A team, brilliant when acquiring assets, proved to be excellent also when executing disposals. Nordics minority sale, Ireland sale, Austria sale, France remedies are testament to this strong execution. And with pleasure, I can anticipate you that the closing of the Irish disposal is going to take place next Friday on February the 28th. The fourth is the management of our capital structure. We have achieved our investment grade rating by S&P nine months before the original schedule, and we continue managing our balance sheet in a disciplined way. We bought back a very diluted convertible bond due to convert at €29, and we substituted it with a new instrument converting at €71.66. We issued two bonds, optimizing our balance sheet and reducing short-term maturities. We are reducing our leverage, consistently going in the direction of the target capital structure announced at our Capital Market Day back in March 2024. We finished 2024 with a leverage ratio of 6.4%, down from 7.7 only 24 months ago. And finally, shareholder remuneration. As promised, we accelerated our shareholder remuneration, announcing 800 million euro share buyback program earlier and larger than initially expected and fully approved by our credit rating agencies. In order to benefit from our very favorable market conditions, we completed a new 400 million equity swap averaging the share price of our share buyback and ensuring an average price of €32 per share on the covered amount. As we always said, we consider sustainable the shareholder return policy that we are starting in 2025, and therefore it can be seen as a floor for the future. Let's now move to slides four and five. On slide four, you can see the many initiatives that we are putting in place in order to improve our operational excellence. It will take too long to describe each of them, but we want to convey the message that we are committed to constantly strengthen our industrial profile and to maximize the value of the assets we acquired during the expansion stage. Our industrial proposal is currently based on operational excellence and efficiency, implementing initiatives to improve customer satisfaction and optimizing the use of our infrastructure from a revenue and cost perspective. Improve organic revenue and boost the growth. We're deploying a more proactive commercial approach thanks to a better understanding of our clients' needs and anticipating the market demand. Innovation, we are testing new multi-operator technologies and embracing new partnership agreements with potential new players. And finally, the digital enhancement. We have been able to complete in only 18 months the full integration of our IT systems across all of our operational chain, increasing the level of automation and productivity in all our processes. We are moving to a truly data-driven organization, boosting our human factor with the deployment of new business tools based on artificial intelligence. The tangible results of these initiatives is not only driving efficiency in our operations. By the way, we increased our EBITDA margin from 59% to 61% also through those initiatives, but possibly even more importantly, increasing the quality delivered to our customers. On slide five, you can see the results of a vast recent customer survey. Our quality indexes are all-time record high. Customer satisfaction, net promoter score, and customer effort score are materially higher than in 2023. Further improvement programs have been discussed with our clients. Trust is the foundation for expanding our business relationship. Moving to slide six. We met our financial target for the year. Revenues and EBITDA were at the upper end of the range, translating the operational and excellence into economics. Recurrent level free cash flow is well above our target and free cash flow is at the upper range. Constant financial discipline has been applied, ensuring that capital allocation follows strict governance rules. The operational leverage is de facto demonstrated in the progression of our organic financial indicators. Revenues plus 7.3 EBITDA plus 8.8 EBITDA plus 9.9 recurring level free cash flow plus 16.2 and free cash flow two times higher one year ago. I will leave to Raymond to give you the details of this very solid performance, but let me only add only one concept. Towers are a highly resilient business and a strong exit from 2024 means a strong entering in 2025. One year ago, some analysts looked at our 2025 targets a bit doubtfully, and this possibly explained our next 12 months valuation ratio. I think that our 2024 results clear any doubt. The attractiveness of our business model and the visibility it provides allow us to reiterate our 2025 and medium-term objectives. If we move to slide number seven, we delivered also on our promise to accelerate shareholder remuneration. On February 28th, as I said before, we will close the island sale. On March the 3rd, we will start the 800 million share buyback. As you know, we are benefiting from our recent positive conversation with the rating agencies and we are starting to give materiality to our commitment to return value to our shareholders. The current very attractive share price has guided us to start with the share buyback program. If, on the one hand, we maintain our commitment to distribute dividends for a minimum amount of 500 million from 2026 onwards, On the other end, we reinforce the message that this amount will be only a part of our total shareholder return. Our potential for incremental capital allocation strategy is every day more evident. Our cumulative cut generation will exceed 7 billion from 26 to 30. At today's price, it represents 30% of our market cut. This initial share buyback we contribute to increase our recurring level free cash flow per share by 16% by 2024, between 2024 and 2025, adding to our SALT operational performance, a material first wave of reduction in the number of shares. At current price levels, this is a highly accretive capital allocation with an implied IRR above 15%. On slide eight, I wanted to guide you through the rationale that moved us to pursue a shared buyback at current stock price levels. Several indicators show us that our stock price is trading low. Our stock trades at substantial discount versus an average target price of 45 euro per share, which still would imply an attractive 16-time recurring level free cash flow multiple. The valuation gap between public and private markets is too material, not only compared to our own disposal, but also looking at another recent transaction in the tower sector. Finally, our recurring level free cash flow yield is the highest in the sector without any particular factor that justifies such a delta. Selinex stocks continue showing a very high correlation with the U.S. 10-year bond, whilst the Celnex bond perfectly matched the Euro rate. This decoupling has no industrial rationale since we exclusively run operations in Europe and our debt structure has no exposure to the U.S. dollar. Therefore, we are convinced that it's a good moment for buying our shares. And moving to slide nine, where a leading tower company, with strong and secured growth respected by the largest backlog in the industry and with the largest contracts with the client. Starting our buyback, we're moving a step forward in the reposition and value equity story. We can now provide a shareholder remuneration yield aligned with the industry standards, and we will increase it in the coming years. We maintain our strong commitment with the material deleveraging, which will further accelerate as we reach the end of our built-to-suit programs and will allow us to reach our medium-turk target leverage. I hand over now to our CFO, Raimon, which will give you more details over the period.

Thank you, Marco. Good afternoon to everyone. Please allow me to provide a few additional remarks on our strong performance for 2024. Whereas Marco explained, we met or exceeded our standards. Revenue increased almost 8% compared to last year. Adjusted EBITDA, 8%. EBITDA after leases, almost 11%, increasing, as Marco explained, margin from 59% on revenues to 61% on revenues. Recurrent level free cash flow, 16% up with a significant contribution from EBITDA, but also working capital management. Finally, our free cash flow more than doubled in the period. It has been a year with a strong focus on execution, both in the commercial activity and in the cost and efficiencies, as we will explain later. Please bear in mind that year-on-year trends are impacted by the change of perimeter linked to the remedies process in France. Austria, as you know, has been divested, but it has contributed to the numbers until the end of the year, so it's not affecting comparability. Our organic performance would be revenues, 7.3% growth, EBITDA, almost 9% growth, and EBITDA after leases, 10%. Since the end of the expansion stage, for more than seven consecutive quarters, we have managed to maintain this level of organic growth. Regarding our operational metrics, our physical POPs increased more than 11,000, driving our tenancy ratio from 1.54 to 1.60, including build-to-serve. It is worth highlighting the acceleration in the site actions to improve efficiencies. reaching close to 3,800 actions backed by the creation of our technical settlement and the continued focus on CapEx optimization, having reduced 200 million CapEx versus the prior year. As we explained at our Capital Markets Day, we were at the peak of CapEx commitments, and after the execution year after year, we will see a decrease of CapEx deployments and a higher conversion of EBITDA into cash. Going now to the next slide, 2024 has been another year of consistent commercial performance, with POPs growing at 6.5% compared to the same period last year. We are growing more than our peers, and we are doing so on a profitable and accretive basis. This is explained by the progress made on our Build to Shoot programs, which represent 2.7% of the growth, and comes primarily from France and Poland. Collocation grew 3.8%, generated mainly in Italy, thanks to the branching activity in Portugal, France, and Poland, with the rest of our markets showing a steady performance. Moving to the following slides, we are providing here our organic revenues bridge for the period, as well as the performance of our different business lines. Our 7.3% organic revenue growth can be split into 2.1 coming from the escalators of the contracts, 1.8 from colocation, and 3.4 from build-to-suit. All of our business lines show a robust and consistent performance during the year. Towers grow 6.8 organically. Fiber and connectivity is up 21%, mainly due to the projects with WIC Telecom in France. As you know, we have been deploying fiber, and revenues do arrive a bit in arrears, and that is why in 24 we have already seen a significant improvement. In terms of dust and the active equipment, we expanded 16%, with run-as-a-service in Poland growing steadily at 13%, and Italy and the UK leading the dust growth. Last but not least, broadcasting grew 3% in Spain and Netherlands. As part of the strategy set out at our recent Capital Markets Day and our continuous focus on industrial excellence, we have the objective to become operationally more efficient, rationalizing assets, optimizing our cost base, and improving the group's overall productivity. The consequence of this effort is that our efficiency measures in place have effectively absorbed the impact from inflation, with visible progress on staff costs, maintenance, and grant leases, where we have been able to offset contractual rent increases and the incremental costs associated with growing perimetre. Headcount decreased 7% in the year, while staff costs have reduced 2%. Please note that the business has grown 7% in revenues, including new sites. This means that on a cost per tower basis, savings are even higher. As you can see, although we have increased the number of towers and the number of kilometers of fiber, we have kept the maintenance expenses flat, meaning that we have reduced 3% on a per site basis. In the case of the risk cash out, the situation is the same. We have done more than 3,700 actions that have taken us to save more than 20 million on the year and decrease the cost per tower almost 2%. All these efficiencies have helped us improve the vital margin from 59% to 61%. We will keep working to achieve further efficiencies as we already committed. On slide 16, you can see our CapEx split for the year with a 200 million reduction compared to the prior year. Build-to-shoot CAPEX programs continue to decrease, and this will be the trend that will boost our free cash flow generation as we get near to the end of the programs. Decreasing maintenance CAPEX, evidencing the optimization of our operations. Increase in other business expansion CAPEX, underpinning our non-tower revenues growth, as we have seen with the DAS and RAN service. And finally, acceleration of efficiency capex and land acquisition activity with highly attractive associated returns, and as explained by Marco, showing the results of the focus with Vellum. Finally, on slide 17, we reiterate our guidance for both 25 and 27, and we simply update our targets, removing the contribution from Ireland and Austria after closing both transactions. and including the impact from our recently announced share buyback on the interest expenses for the year 25. And with this, we now remain at your disposal to answer your questions.