Helios Towers plc

Good morning everybody and thank you for making the time to join us for us to communicate our Q3 2021 trading update. I'm going to flick through the slides so hopefully you've got them in front of you. Joining me on slide two today is the usual trio. I've got Tom Greenwood who's our Chief Operating Officer and will be our CEO once I step down in April next year and move to a non-executive deputy chair role and also Manjit Dhillon who is our CFO that you've met before many times. If I go to slide three this outlines the agenda for our presentation today and as you'll note there will be plenty of time for Q&A at the end which will come through our conference coordinator Bethany. So let me go to the highlights, slide five. Well, look, we've had a strong quarter in terms of our financial metrics. We've delivered a 10% revenue growth, bringing Q3 revenue just a little over $114 million for the quarter. And that's driven by the onboarding of the free Senegal Tower portfolio acquisition, as well as steady organic growth in the quarter. Correspondingly, our EBITDA has grown by some 6% coming in Just slightly shy of $61 million for the quarter. Now, our margin has decreased by two percentage points year over year to 53%, but this is primarily driven by investment in SG&A that we've made consciously to support our M&A activity and the new markets that we're bringing on board over the next few months. In terms of our portfolio free cash flow, We've grown our portfolio free cash flow by 2%, again, just shy of $45 million for Q3. This reflects, of course, EBITDA growth, but slightly offset by increasing corporate income tax, as well as some lease payments, which is a norm for our business. Moving on to operational and strategic update and KPIs. Well, look, it's been a really solid, strong quarter. Actually, it's our strongest quarter on tenancy growth for six years. We delivered 683 tenancies in the quarter, bringing our year-to-date tenancy count to 853, which is in line with our full year expectation. of being in the range we've articulated every quarter this year, which is between 1,000 and 1,500 tenancies. And it reflects and underpins the well-invested portfolio we've nurtured over the last few years in making sure we're ready to bring customers on to our asset base when they give us the order. In terms of tenancy guidance, I've mentioned We're sticking to 1,000 to 1,500 tenancies for this year, and we're very excited about not only the strong year-to-date performance, but we have a robust pipeline, as we've communicated this morning, with a further investment in CapEx to support the growth we're seeing coming through next year. In terms of acquisitions and the progress we're making on M&As we've announced, well, look, our new markets team continue to progress Well, in closing and integrating the acquisitions we've announced, there's five new markets in Africa and Middle East that we're still yet to close and we're confident of closing a number of these by the year end. And in terms of CEO transition, As you know, mid-August, I announced my retirement and Tom Greenwood will be succeeding me as CEO from our AGM in April 22. That transition is going incredibly well. We're working towards our five-year strategy that we'll articulate in Q1 of next year. And I'm looking forward to my non-executive role post-April next year as Deputy Chair. So let me hand over now to Tom, who's going to take us through the next few slides.

Thanks very much, Cash, and hi, everyone. Great to talk to you today. So I'm on slide six, just looking at a few charts here for tenancies, EBITDA, and portfolio-free cash flow. As Cash mentioned, we continue to drive tenancies upwards, both with inorganic and organic. We've added over 2,100 Tenancies year to date close to 1,300 being from the acquisition in Senegal and 853 year to date on an organic basis and as Cash mentioned very much therefore expecting to end the year within our stated range of 1,500 probably directionally somewhere towards the middle of that range. EBITDA continues to move upwards as would be expected. We've seen 7% growth from our 2020 four-year EBITDA for our Q3 annualized being at 243 million. It's probably worth noting here that a lot of the tenancies in Q3 came on towards the end of the quarter. So you're not seeing a full quarter of revenue on EBITDA from them. But if they had all come on at the start of the quarter, i.e. July 1st, we would have seen that EBITDA probably about a $9 million increase from that $2.43 thing at about $2.52. So that just gives you a sort of feel of the timing of these tendencies and what you should expect going into Q4, but also more importantly into FY22 next year.

Again, Portfolio Free Cashless, as Cash mentioned, touched down slightly.

This was as anticipated, driven by corporate income tax in some of our markets where we're now cash paying for tax, plus a bit of extra non-discretionary capex in the first part of this year. Moving on now to slide seven and again our sustainable business strategy update. I'm pleased to say that at the end of November on the 25th we'll be doing our core regarding carbon and I'm really looking forward to talking to everyone on that to talk about how we are benefiting the markets that we operate in from an environmental perspective and continuing to drive down carbon whilst increasing obviously digital inclusion and all the things we do around the mobile sectors in our market and again just at the bottom a reminder around the same time we produce our FY21 annual report in March next year that'll also be the usual sustainable business report similar to last year so look out for that one. In strategic updates, moving now to page nine, as Cash alluded to, making good progress on closing the remaining acquisitions. Obviously, Senegal now very much closed part of our operational business, and we're looking forward to replicate that in the remaining five markets as we move forward over the next few weeks and months. We're anticipating closing Madagascar and Malawi in the next month or so. Oman is progressing well. We are moving forward also in Gabon and Chad with the regulatory processes there. If we look now on page 10, here we give a little bit more detail on some of that. At the bottom there you can see are managing directors of each market that we have in place now and I'm really pleased to say that Kareem, Vic, Matthews and Ramsay are all really driving our businesses forward in those markets. One point to pull out here for Oman, we previously guided to closing by the end of this year You can see there on the targeted closing line we have now put in Q4 stroke, Q1. Nothing really of materiality there, just simply the timing of some of the closing processes there regarding the regulatory process and it's possible we will still close in Q4 but it's also possible it might seep into Q1 so we just wanted to mention that here. and again Jan and Gabon were still progressing there with the early stages of the regulatory processes as previously mentioned and also moving forward in having the teams ready there to close. We have MD earmarked for those two markets as well although not formally in place yet as we're still in the launch process there but overall making very good progress I'd say. and as I said Senegal now very much fully operational and driving forward as a great part of our business. We've already seen some new tenancies coming through there as you may have seen in the numbers and we anticipate more rollout coming in that market in Q4 which is really exciting to see. Moving now on to slide 11 and here's just really a reminder I guess of the ongoing structural growth that we have in our market. Mobile is a really critical service sector to all the economies in our markets and there's obviously very compelling macro fundamentals that we see around population increase, urbanization and of course young population. All of this is helping to drive our own tenancy additions and just reiterating there on the bottom left with the growth so far this year, we're comfortable reiterating our guidance for being between 1,000 to 1,500 tenancies on an organic basis for the year. And again, just on the bottom right-hand side there, just pointing out some external market research which says there needs to be 30,000 new points of service Thank you very much. Again, quite a staggering number as well as significant uptick in data usage and 4G connections across our markets. Quite interestingly as well, on the middle left you can see plus 12% listing the revenue growth forecast for MNOs in Sub-Saharan Africa. This year, which again demonstrates, I think, very strong upward trend in revenue. And you can see some of the comments from some of our key customers here on the page as well. So overall, sentiment's good. Nothing really changed from the markets over the past few years. And we expect these trends to very much continue providing us with real structural growth. Manjit Singh Dhillon

and on this slide you'll see we have summarized and then KPIs which I'll be talking through in detail in the next few slides but in general we are seeing good growth across a number of key metrics so jumping into the detail and moving on to slide 14 and we see really robust organic tenancy growth in Q3 we've added 683 tenancies in the quarter which brings us up to 853 for the year to date and a total of 17,773 tenancies as at Q3 2021 which is an 18% increase from where we were in Q3 2020. As mentioned in previous results calls, tenancy rollouts are lumpy quarter on quarter and following the performance year to date which is supported by a strong tenancy pipeline we have again reiterated our tenancy guidance of 1,000 to 1,500 incremental tenancies for the year. Our colleagues remain laser focused on rolling out the pipeline and delivering for our customers and we're excitingly expecting a very busy end of the year. A quick comment on tenancy ratio with the introduction of Senegal the group tenancy ratio reduced to 1.99 in H1 2021 and with organic rollouts during Q3 we've seen this tick up to 2.03. Excluding Senegal though our tenancy ratio is 2.18 which is up 0.09x year on year on a like-for-like basis. Again, as previously mentioned, we will see tenancy ratio move around as we integrate our acquired portfolios, which come with lower tenancy ratios on day one than our group average. However, this is a great opportunity for us. We're growing our asset base and the number of sites to which we can develop, adding further co-locations over the years. And we'll see that the tenancy ratio and other metrics will compound over the years to come. Now on to slide 15 and looking at our revenues from adjusted EBITDA. We've seen growth year on year and quarter on quarter for both. with revenues up 10% year-on-year, 5% quarter-and-quarter and EBITDA up 6% year-on-year and 4% quarter-and-quarter. Now, some of that growth is attributable to the integration of Senegal and whilst we've seen growth organically in tenancies, we've seen revenue in EBITDA broadly flat quarter-and-quarter and that is due to a couple of reasons. Firstly, the majority of our organic tenancies were rolled out predominantly in the late part of Q3 and as such we've had limited trading impact from these but we'll see these coming through in Q4, Q1 and beyond. and secondly in line with the guidance given we've continued to invest in our SG&A to support our expansionary strategy which you'll start to see being leveraged as we close the new market shortly. But high level we have a well-invested platform with delivering strong organic and inorganic tenancy growth which we see and will continue to see coming through in our revenues and EBITDAs in courses in years to come. Now if you move on to slide 16 you'll see the usual breakdowns provided which are broadly consistent from previous quarterly updates We have strong currency hedge business which is underpinned by long-term contracts with blue chip mobile network operators. 98% of our revenues come from international mobile network operators comprising the likes of Airtel, MTN, Orange, Tigo, Vodacom and Free Senegal who we purchased the Senegalese portfolio from. We have strong long-term contracts with our customers and as at Q3 2021 we had long-term contracted revenues of 3.7 billion with an average remaining life of 7.6 years which has increased by 200 million quarter on quarter due to the increased number of tenancies we have in Q3 and this means excluding new wins and rollouts we already have that revenue contracted and in the bag and provided a strong underlying earning stream for the business. We also have 62% of our revenues in hard currency being either USD or Euro pay As a reminder, this will increase to 68% pro forma for the announced acquisitions, which translates to 73% when looking at it at an EBITDA level. And that provides a strong natural FX hedge for our business, which is further complemented by our annual inflation escalators, which we have with our customers in all of our contracts. Moving on to slide 17, we look at capex. And year to date, we've deployed 272 million of the 1 billion of capex guided for the year. Of the $272 million, 182 of that is related to acquisition capex, principally the Senegal acquisition, and $70 million has been incurred in relation to growth and upgrade investments, with the rest being $20 million for non-discretionary capex. As we look out for the rest of the year, we've increased our capex guidance by $30 million for our established markets. From the range of $110 to $140, that's now increasing to $140 to $170 million. and this is due to some forward purchasing of materials for rollouts in 2022 and this is supported by our strong tenancy pipeline so effectively we've ordered now to effectively manage our inventory so that we can roll out and deliver quickly for our customers outside of that increase all other capex remains as is with the majority of the capex roughly 683 related to acquisition consideration which we expect to be incurred in the next couple of months as mentioned earlier our new markets team continue to progress well with the closing of acquisitions We do highlight that a mine acquisition could close in either Q4 or Q1 and if this acquisition does move into next year our 2021 capex will decrease by that consideration of 575 million. Finally moving on to slide 18 and here we show a summary of our financial debt and our Q3 net leverage was 3.4 and continued to be below our target range of three and a half to four and a half. As mentioned previously we strengthened our balance sheet over the last 12 to 18 months and continue to hold roughly around $1 billion worth of available funds comprising cash on balance sheet and under debt facilities and have funds in place for the announced acquisitions and are in a strong financial position to support our great strategy. And with that, I'll pass back to Kash to wrap up.

Thanks, Manjit. So look, I'm on slide 19 and this is the last slide and then we'll be moving on to Q&A. Key takeaways from this presentation, we're seeing significant momentum in our organic, inorganic and our ESG action and strategy. As we've heard, we've got a well-invested portfolio that's delivering our strongest quarter of organic tenancy additions in six years with a robust pipeline as mentioned by Tom and Manjit a few minutes ago. Our outlook for the remainder of this year and beyond is very positive with a strong order book being processed. In terms of the acquisitions and the progress we're making, look again, reinforcing what Tom said, we're making really good progress. We're hiring local people. We've got now MDs in each of our markets who are driving the closure process. And once these acquisitions are closed, we will be the most diverse tower company across Africa and Middle East. And that brings with itself robustness and stability. And as you've heard, quite a high proportion of hard currency EBITDA at 73%. So we're very excited about the momentum the business has currently got. and finally we're continuing to progress on our sustainable business strategy. We're going to publish our carbon roadmap on the 25th of November that you will have details to log on for that and on that note I'm going to hand back to Bethany to help us coordinate the Q&A. Thanks Bethany.

Thank you Kash. If you would like to ask a question please press star followed by one on your telephone keypad. Our first question comes from John Corridis of Numis. John, your line is open.

Thank you. Good morning. Can I check that you can hear me? Yeah, we can, John. OK, thank you. Good morning. I've got three questions, please. The first one is you're spending five million more to hit the ground run with bolt-ons. Can I just check that in next year, that five number, once it annualizes, won't be more than that? Secondly, in terms of capital expenditure and the $13 million you're spending extra this year, I just want to make sure that this isn't extra spent for what the market has in forecast already. All else being equal, which of course won't be because of the bolt-ons, would you expect as a consequence of what you're doing now, the CapEx guidance for the five established markets next year to be 80 to 110 million, i.e. 30 million less than usual? And then lastly, Oman, it's three months since we last spoke and of course you got in there in part because of the third player that's backed by Vodafone. Is there anything noteworthy that you can tell us that may have changed since the last time we spoke about this particular third player and your interactions with him? Thank you. Thanks, Sean.

Manjit, why don't you take the first two and Tom, you take the Oman point.

Yeah, absolutely. So on both points, actually SG&A and CAPEX, we will be giving our 2022 guidance when we release our annual results next year. But in advance of that, so with regard to SG&A, We would expect there to be an increase year on year with inflation as normally happens. There may be a slight tick up following the integration of Challenger Bond but in general we would expect that it would be normal course increases year on year. With regards to capex of 30 million, again I wouldn't change the modeling for 2022 at this point until we give more updated guidance but effectively we have brought forward some of that capex into this year so we would see a slight tick down in the next year. Right, sorry.

If I may, I'm sorry, Manjit. I specifically asked for the 5 million. I just want to make sure that 5 million, because at the start of the year it was 3 million, then it became 5. We're not going to be in a position that next year it becomes 7 or 8 or 9. Can you comment about that, please?

Yeah, just to clarify, once again, as mentioned in the first half of the year, The $3 million was given on the basis of the announced markets at that time. We updated to $5 million following the announcement of four markets for Airtel and Oman. So as you would expect, that should tick up as we announce more markets. So that's the reason for the $3 to $5 million, and that was mentioned at the first half year. As we go into 2022, we may see some increases related to inflation, and there might be a slight tick up following the acquisitions of Chad and Gabon, but we won't expect anything as large as what we've had this year.

Okay, thank you.

Great and then I'll take the last one and John just had a little bit of color on the 30 million spend. This is all because our pipeline is looking fairly strong for next year and we want to have the stock in the warehouse on January the 1st ready to roll out rather than ordering it on January the 1st and waiting two or three months for it to We are typically, and this has been the case for the last 18 months really through COVID, we're typically ordering inventory now probably between four to eight weeks earlier than we used to. And again, this is just precautionary. So there's a little bit of that in there as well. But yeah, it's I guess good news CapEx because it's linked to some good pipeline we're looking at already for next year. Just on Oman, yeah, look, I'd say progress, goods, Vodafone, getting ready to launch. We have, you know, been talking to, as you would expect, we talk to all mobile operators in any new market fairly regularly between signing the deal and closing the deal, you know, with the aim to Thank you all very much.

The next question comes from Giles Thorne at Jefferies. Giles, your line is open.

Thank you. I wanted to explore any upside risk related to the current run rate of POS net ads and then spending that growth capex now rather than the 1st of January. And I guess really that's my question. Does the fact that you'll have the inventory in place on the 1st of January position you should demand be strong enough to actually then go ahead and spend an additional 30 million, I don't know, at some point in March such that your overall market capture or market origination or tenancy growth, whatever you want to call it, is higher than perhaps what we're thinking about today. And tying into that point about the run rate on POS Net Ads, obviously the big five running at 670 in the quarter is exceptionally high. Is that a new floor or I'm just trying to probe again around upside risk to growth into 2022.

Go ahead, Tom. Yeah, thanks, John. I'll take this one and thanks for the question. Yeah, look, I think, look, as we've said in the past, this business is lumpy quarter on quarter. You know, we have a fairly reasonable idea of what we'll roll out in a given year, but it's sometimes difficult to predict exactly which quarter that comes in. And, you know, I think this year has been a classic example of that, right, which is, you know, pretty quiet Q1 and Q2. We've got a lot of orders in those two quarters, but all of those orders, most of those orders are rolling out Thank you very much for joining us. I think we are seeing good pipeline at the moment. I think when we report Q4, you'll see another strong quarter. It won't be as high as Q3, but it will be fairly strong. And again, we aren't seeing pipeline already for next year, which is why we've bought a bunch of CapEx now or are buying a bunch of CapEx now. That really is a timing point, simply down to the accounting, to be honest. So when we order CapEx, there's usually a lead time of a few months. When that CapEx arrives, you recognize it in CapEx at that point, albeit we might not immediately roll it out. So it will arrive, it'll sit in our warehouse. for a few weeks or a few months, and then it will be rolled out into next year. So in buying that now, we're putting ourselves in a very strong position to roll out very quickly for customers with zero delay, which is absolutely what we want to do. And, you know, we're doing it because we are seeing a strong pipeline already for next year. So, yeah, look, high-level customers, Q3 was very high, not a new run rate or a new floor, but I think generally we're seeing a pretty decent pipeline at the moment for the next few quarters.

Understood, thanks Tom.

Thanks John.

Our next question comes from David Wright at Bank of America. David, your line is open.

Thank you very much for taking the questions. Yeah, I feel like the two first questions on CapEx are kind of still circling around a point that's just not quite clear. If you're pre-ordering in advance, then it's just a phasing, it's a working capital issue more than an increase in CapEx. So the point I think that probably just needs to be asked a bit more directly is, Do you get the 30 million back at some point either next year or the year after versus the original budget or original maybe street expectations or is this just a 30 million increase to sustain the same growth that maybe we had expected? I feel like it just needs to be asked a little bit more directly and then I guess on the revenue per tenant there's obviously a huge amount of volatility right now with fuel costs and I know they drop through so David Darlan is the truer, the more honest read I guess but just to sort of extra the fuel costs are you managing to sustain the revenue per tenant with all of this new growth is it you know fairly sort of typical tenancy additions with these big volumes are you managing to sort of sustain the levels close to what you might have had in recent quarters thank you

Yeah. Sure, yeah. Manjit, why don't you take the first, I'll take the second.

Yeah, sure. So in terms of the capex, to put it simply, we're forward purchasing for rollouts next year. So what we incur now will effectively come off what we expect next year.

David, is that clear on that point? Okay.

30 million more this year, 30 million less next year. Fair?

Correct. Exactly.

They're not super clear. Thank you, guys. Yeah.

And then, yeah, look, revenue per tenant.

Look, again, we're not seeing any major change in that.

So, you know, I think, you know, we are seeing good sustainability of our pricing. You know, of course, Sometimes we always look at for very, very large volumes, giving some volume discounts, but it's absolutely normal. It's what we do, what the industry does. But yeah, no major differential versus our existing pricing. So we're very much sustaining at the normal levels. And I think customers are seeing the value in what we offer in terms of our value proposition at our current levels of pricing. Yeah.

Okay, good news, thank you.

Another reminder to participants to press star followed by one on your telephone keypad if you'd like to register a question. Our next question comes from David Burns at Berenberg. David, your line is open.

Hey everyone, it's David Burns from Berenberg. Thanks for taking my questions, good two keys. Firstly, could you remind us if there's any of your existing or new markets which have no license fees in place at the moment? And secondly, just curious to hear about your M&A pipeline. What are you seeing there? Recently, IHS announced JV in Egypt to build 6,000 towers over the next three years. Wondering if the market has been of interest to you and how IHS's new entry affects that? Thank you.

Hey David, Tom here, I'll take both of these. So yeah look in terms of new markets and the license regime, most markets across our regions require some form of license, not all but most and so one of the Workstreams for any deal that we do is usually a regulatory workstream which includes either a license application or a notification to the regulator or somewhere in between. So that's typically one of the key things that drives the timing of when the deals close as well. So if you remember back to our Senegal deal which we closed earlier this year, That probably would have definitely closed a few months earlier, be it or not for the license taking a little bit longer. But that's, you know, it's no surprise to be honest and fairly sort of normal course. It's quite difficult to predict exact timings of the license processes in each market. But yeah, typically in most markets you have some form of license process. and then yeah on the M&A pipeline like we continue to see a strong M&A pipeline either happening now or anticipated to come on stream quite soon. From our point of view we're you know completely focused right now on organic growth, organic rollout and closing the deals we've announced but of course we are still very much engaged in new potential processes We have a dedicated business development team which does that 24-7. In relation to Egypt, we saw that announcement, great move for IHS and we wish them very well in that, absolutely. I think Egypt looks like a strong market, it's a big market. It's not one that we've had at a high point in our priorities list. because we've been focusing elsewhere. I'm sure it will be an exciting move for them. But now we continue to monitor a number of markets around Africa and the Middle East and we are anticipating some increased pipeline coming through on the M&A side as well in the next few months. But first and foremost, we're focused on

A final reminder to participants to press star 1 if you'd like to register a question. We'll just pause to see if there are any further questions coming through. We have no further questions on the line, so I'll hand it back to Kash to conclude the call.

Thanks Bethany. Well look, thank you very much everybody for joining us for our Q3 update. We look forward to talking to you in the second half of March when we give our full year results. So thank you again and have a good day. Bye bye.