Helios Towers plc

Welcome to today's Helios Towers full year results for 2021 conference call. My name is Jordan and I'll be coordinating your call today. If you'd like to register a question, you may do so by pressing star followed by one on your telephone keypad. I'm now going to hand over to Kash Pandya to begin. Kash, please go ahead.

Thanks, Jordan. Good morning, everybody, and thank you for joining Helios Towers full year 2021 results. We, during the course of 2021, have significantly expanded our portfolio and invested in quality growth and returns that we're going to take you through the detail of.

Moving on to slide two.

Joining me today, as always, is Tom Greenwood, who will be taking over from me as CEO in a little over a month's time on the 28th of April. And Manjit Dhillon, our CFO, who's actually now Reigned as CFO during the whole of 2021 at its first full year as our Chief Financial Officer. To make a point here regarding our talent development program, Tom and Manjit are great examples of the board's focus on developing internally talent to reach the highest levels of our organization. We have many other individuals of and so on. But let me now move on to what we're going to cover today. I will shortly take you through the full year 21 highlights and then hand over to Tom to take us through the business updates and Manjit of course will go through the financial results. Noting that there's plenty of time at the end for questions and answers which will be coordinated through our conference coordinator. I will move straight to slide five and take you through the highlights of 2021. It's been a transformational year through our expansion on entering new markets. We've strengthened our balance sheet and achieved and delivered record operational performance in terms of customer service. Taking the first point on this slide, consistent and strong organic growth in terms of tenancy growth was delivered 1262 year-over-year additional tenancies, some eight percentage adds to our portfolio and hitting the midpoint of our guidance which was a thousand to fifteen hundred and that guidance was consistent for the last few years. You will note that we've increased our guidance for 2021, sorry 2022, which I'll come on to. As I've mentioned, it's been a transformational year for M&A, for our business. During the course of 2021, we closed two acquisitions that we'd announced in the year, adding some 1700 sites, close to 1700 sites, and a little over 1800 tenancies. In addition, during 2021, we've also signed deals to enter Oman, Malawi, and Gabon, which are well on their way in terms of progressing and we expect to close these during the course of 2022. We've delivered robust financial performance, 8% revenue growth, 6% adjusted EBITDA growth. We've seen a slight deterioration on margin And as you know we acquire towers that typically have low levels of tenancies and then we build tenancies and add margin, add IRR and return on invested capital through additional tenancy growth which is the model we operate in. And an example, the dilution in our margin is driven by Senegal which came in at a a tenancy of approximately one tenant per tower and Madagascar around 1.2 tenant per tower. In addition, we've added some SG&As ahead of the markets coming on stream and this is quite typical. We like to hit the ground running in our markets when we close markets and we want to make sure our customers see an improvement in the service levels we deliver. and this SG&A allows us to get ahead of the curve. For example in Malawi we've got an operational team up and running and this market should close soon. In Oman we've got people that were recruited and hired that are working the organization ready for that market to be closed. So this is the reason for a slight deterioration in our margin. In terms of continuous reduction in our capital costs, well, Manjit and the team have really worked hard in making our borrowing costs more efficient. Now we're at 5.9% blended cost of debt. We of course also went through a convertible bond issuance of 300 million during the course of last year and put in some local facilities in Senegal. We are now fully funded for our acquisitions that we are pending to close with naming namely Oman, Malawi and Gabon and of course our organic growth is fully funded through our cash flow lines that we deliver. Outlook 0.5 on this slide well as I've mentioned we've now upped our guidance to 1200 to 1700 tenancies organic ads during the course of this year that's from eight percentage points if you take the midpoint of that range and our contracted revenue stream Just a little under $4 billion, again, demonstrating the strength of our contracts and the revenue we've got ahead of us. Of course, all with the embedded CPI and power escalators that protect us against any volatility in inflation, as well as cost of power and cost of oil, diesel, etc. Moving on to slide six. A little bit of a scorecard first of all on our Sustainable Business Strategy. We're delivering value for all our stakeholders. Regarding our customers, we've continued to drive improvement. We delivered record power uptime to our customers in the form of 99.99% and in some markets even higher than that to our customers in terms of service proposition. Our people, we've continued to develop and strengthen our local organization and localization is part of our business excellence strategy and we have some 97% of our colleagues from the markets we operate in and we'll continue to invest locally to strengthen our organization as time goes on. Our partners and suppliers, again, we believe in spending money locally, investing in our supplier base and contractors base by not only spending hard dollars with them but also Working hard to invest in their capabilities and training Lean Six Sigma execution for example into our maintenance partners etc is an ongoing methodology in our organization. We are communities where we serve with our infrastructure close to 140 million people and as we expand our markets and the footprint in the existing market We are hoping and focusing on bringing more connectivity to more people in the market and expect to grow this 139 million served population to a higher number. And in terms of the environment, I'm pleased to say that during 2021, we managed to reduce our carbon impact per tenant, per customer on our towers by some 7%. And that's an ongoing strategy. and finally in terms of last year's scorecard, we did our first CDP scoring assessment and we scored B-. This was ahead of the expectation that we were led to believe before the process started so we were encouraged by a validation of our strategy and actions that we're taking to drive the environmental impact that our business has in the communities we operate in. 2022, well, our continued commitment to sustainable business strategy and transparency. We're working closely with our customers to engage with them on the carbon reduction program. And to some certain degree, our customers are coming to us for guidance on what we've done and they're stealing shamelessly. Well, we're proud of that from us in terms of what we've put forward as a roadmap for our business. Our sustainable business report, we're about to issue a second report that will be published next week outlining the progress we're making on sustainability. Regarding our supply chain, we're now launching our assessment program for our suppliers to understand what their sustainable practices are. More importantly, we will work with our partners in each of our markets to help them go up the learning curve in how they drive the sustainable approach that we are taking. Communities, we're very much engaged in our communities and as an example we've launched the rollout of a school for engineers internship program across all our markets that helps young engineers get qualified that can then be deployed into our business but also our partners businesses that help us deliver the service and the rollout of our portfolio in each of our markets. and finally on this slide you know we are committed to our project 100 and project 100 in summary is a hundred million dollars over the next 10 years as we approach 2030 in investing in hard dollars to help reduce carbon impact and we've got initiatives planned for this year that equates to 10 million dollars to drive our target of 46% carbon reduction per tenant by 2030. And that's the ongoing work that we'll be rolling out over the next eight to nine years. So on that note, I would like to hand over to Tom, who's going to talk through our business update.

Thank you very much, Cash. And hi, everyone. Great to be talking to you today. Hope everyone's well. So I'm on the next section, the business update section starting off on page 8 and I'll talk you through some of the implementation of our strategies both around organic, inorganic and then just a reminder of some of the key fundamentals of our markets which drive our business. So first up on page 8 and here we show how we're delivering on our portfolio expansion, our organic growth and our diversification. and essentially delivering what we said we would when we IPO'd and that very much continues. So first of all on the left hand side here we see our organic tenancy growth year on year and of course we've delivered fairly consistently over the past three years obviously with a bit of an uptick in 2021 which is good to see. and you know tenancies have started fairly strongly in 2022 as well which you should see when we report our Q1s in the not too distant future. This is obviously all driven through the fundamental drivers in our markets from low levels of penetration and just simply the need for more connectivity, more infrastructure, more densification of the networks and I'll come on to that a little bit in a few slides time. Next up when we did our IPO a key part of our strategy was scale growth and diversification geographically and as you may remember we articulated at the time the focus to drive from five markets to eight markets and from 7,000 Towers to 12,000 Towers and of course with the acquisitions that we've announced plus some fairly strong organic growth we'll Well on the way to beating those pending closing the acquisitions. We will be in 10 markets with close to 14,000 towers in the next few months. Of course, the next question is what comes next? Well, I think as everyone has been invited to our Capital Markets Day on May 5th in London, which is also available for dialing, we will at that point be articulating our news. Five years strategy going forward. I'm very excited about that and hope to see many of you there.

Moving on to the next slide, slide nine.

This is a quick update on our acquisitions that we've announced. And here we see the five markets, Senegal, Madagascar, Malawi, Oman and Gabon. As some of you may have seen a few weeks ago, we decided to put pens down on Chad, which was the sixth market. just due to simply delays and moving forward on the regulatory process there so we agreed with Airtel that we would put pens down on that but I'm pleased to say all the other markets are firing on all cylinders and moving very much towards closing so with Malar we anticipate closing that fairly imminently probably in the next two weeks Oman, we're moving forward there well with the regulatory process we expect to close that before the end of Q2 and Gabon which is always the one which we expected to take the longest so we expect to close that in the second half of this year Senegal and Madagascar as you know are now fully part of the business from an operational standpoint Having closed Senegal in Q2 last year and Madagascar in Q4 and I'm very pleased to say we've got great teams in both markets led by Karim in Senegal and Jerome in Madagascar and of course we have great teams that are being built in the other markets as well Malawi, Oman and Gabon so very much looking forward to closing those and then becoming fully operational as we move forward Just a note on here, Ramzi Kulad, Managing Director of OMAD, he's been with the business for many years as well and just another example of our internal development program. Ramzi was originally within our group operations team, worked in a number of different markets as well within the operational and IT capacity and then became our Managing Director of Tanzania. for a few years and did an excellent job there and has now been promoted to launch Oman and is also now a regional director covering Tanzania and Malawi as well. So just another example of our internal development program which we place a huge amount of focus on. Moving on to slide 10 and here we just wanted to highlight and to show everyone What these acquisitions mean, particularly in the short term, because typically, as Cash mentioned earlier, when we're doing these acquisitions of new tower portfolios in new markets, typically we're buying portfolios with low tenancy ratios. So, you know, it could be anywhere from between, you know, 1.0, maybe up to 1.3, 1.4 at the top there.

Now, as a reminder, our more established markets are, of course,

have a tenancy ratio of well over two tenants per tower, which drives margin and return on capital. So when we buy these new networks with a lower tenancy ratio, typically we're buying networks which have, on day one, a slightly lower margin, a slightly lower ROIC than the rest of our more established network, but of course we're buying them to then utilize them fully and lease up the towers up to similar levels Thank you very much. Networks which are underutilized which we will now begin to lease up with the incremental demand that we see in our markets and as you can see looking back to 2016 here in our business which was after a period of large acquisitions at that time we took the business from for example a margin of 37% up to 55% and a lot of that was driven through the increased co-location ratio over that time. So what we see here now, and we're right in the midst of it, is the movement from five markets to ten markets, so growing substantially in scale, diversifying from a geographic perspective and from a customer's perspective. You see a short-term immediate dilution in tenancy ratio margin and ROIC, but of course we're then primed for lease up and growth over the coming years and of course the demand that we're seeing in all of our markets is still very much substantial and there for the long haul. Moving on now to slide 11 and this is again a reminder of some of the sorts of unit economic returns that we see on our key product of built suit. and you know why this business just produces such long compounding cash flow returns so on the left hand side here you see some illustrative figures for ROIC on an individual site basis so you can see on a on a single tenant site we're getting sort of low double digit sort of returns or and then as we lease up and put a second and third tenant on the site of course the OPEX and the operating costs for the site stay broadly flat with only a small increase but the revenue increases substantially thereby increasing the ROIC of the site quite exponentially and on the right hand side here what you see is the typical cash flows across a 40-year period for one of these towers and so on. The cash flows far exceed the initial investment in the assets. and as you can see there was roughly a five-year on average payback for building a new site. Moving on now to slide 12 again this is a reminder of some of the key fundamentals driving the organic side of our business and you know the continued delivery of well over a thousand tenancies each year and of course we've upped our guidance for this year which Manjit will come on to But again, our markets are really engines of growth, particularly in the telecom sector. The dynamics of our markets across Africa and the Middle East are significantly rising population, significant urbanization, a very young population, which of course drives incremental demand for mobile services particularly data and of course large GDP growth going along with all of that and you combine that with low mobile penetration you know so huge growth in terms of mobile connections forecast 63 million new mobile connections forecast in over five years across our markets you know an increase in penetration of course which comes with that and then 4G and data growing significantly as well. So all of this drives the need for more mobile antennas, for more dense networks of mobile antennas as more data networks become prevalent and of course as we use more data in the networks the space between antennas needs to reduce, i.e. the density needs to increase of the network. So all of this drives the need for points of service Manjit Singh Dhillon, Lara Coady, Fritz Dzeklo, Colard Nkole Tshiyoyo Manjit Singh Dhillon, Lara Coady, Fritz Dzeklo, Colard Nkole Tshiyoyo

Thanks Tom. Hi everyone, it's great to be speaking with you today. I'll be going through the financial results and starting on slide 14 where we show our robust financial performance over the last few years since 2019. We've seen continued year-on-year EBITDA growth driven by organic and inorganic tenancy additions partially offset by some SG&A growth investments which are required as we double in scale. Portfolio free cash flow and Whilst remaining fairly robust to decline slightly year on year for portfolio free cash flow whilst we've seen increasing EBITDA growth we've had some higher cash taxes transitioning from loss making to profit making in our established market and increasing expenditure related to ground leases and non-discretionary capex due to the increased asset base but over time these costs will be leveraged as we lease up the portfolios. As Tom mentioned, given our increasing scale and given the nature of the assets that we buy, i.e. portfolios, towers, which have compelling opportunities for lease-up and compounding growth, but with low initial tenancy ratios, we'll see some dilution in a few metrics, including return on invested capital, but excluding acquisitions, we're at 13.2%. Again, this has come down slightly from prior year due to the fact we've had higher tax payments, as mentioned a moment ago, and with acquisitions, we're at 11.7%. With integration of the other announced deals, the three markets that we expect to close during the course of this year, we should see work diluted a bit further in the short term. But again, just to reiterate the point that Tom made, we have a strong track record of entering new markets, growing successfully, organically expanding the portfolio and easing up and driving strong returns. And it's this experience and track record which we take into these new markets. And the exciting point is that we've expanded the base and platform to which we can deliver a creative, sustainable growth into the medium and long term. and we will see WOIC growing in the coming years. Moving on to slide 15. As mentioned earlier, we've had one of our best years of tenancy growth, both organically and inorganically. Organically, we added 1,262 tenancies, with the bulk of these coming in the second half of the year and hitting just above our midpoint of tenancy guidance. Inorganically, we added close to 1,900 tenancies through the combination of Senegal and Madagascar. Tenancy ratio has dropped slightly on a group basis due to the lower tenancy ratio tiles we've acquired, but on an organic basis, i.e. excluding the new acquisitions, we've continued to build our tenancy ratio to 2.15x. And again, that's a testament to the growth potential of our established markets and our ability to reset portfolios in our markets over time. On to slide 16. And we've continued, and we've seen continued growth in revenue in EBITDA, 8% revenue growth, 6% EBITDA growth year on year, Again, a number of tenancies came in later in the year, so we don't have much in-year revenue impact of these, but we'll see these come through during the course of 2022. EBITDA are greater than 6% year-on-year, with growth in the top line being offset somewhat by the investment we've made in our SG&A as we increase our scale, and also in part due to some of the increased license fees seen come in DRC during 2021 of 3% of revenues, which is broadly aligned with license fee regimes in other markets. Final point on EBITDA margin, slight decline again principally due to the impact of lower margin new markets. We'll see this dilute further with the closing of other announced new market deals, but then we'll see this rebound in the short to medium term. Overall, I think our tenancy pipeline is looking strong for 2022 and I'll come on to guidance and outlook in a few slides time. So moving on to slide 17. You'll see the usual breakdowns provided which are very consistent from previous updates. We have a robust business model underpinned by long-term contracts with a diverse quality customer base with strong hard currency earnings. 98% of our revenues come from large blue chip mobile network operators with a diversified mix with maximum single customer exposure at 26%. we have strong long-term contracts for our customers and at the end of 2021 we have long-term contracted revenues of 3.9 billion dollars with an average remaining life of 7.6 years and this is up from 2.8 billion at the end of 2020 and this means excluding new wins and rollouts we already have that revenue contracted in the bag and provides a strong underlying earning stream for the business importantly given the mix of our established markets and new markets We have 63% of our revenue in hard currency being either US dollar or euro pegs which translates to 65% of our EBITDA being in hard currency and this provides a fantastic natural FX hedge for the business which is further complemented by our annual inflation escalators which we have in our contracts with our customers pro forma for the new markets that is due to actually being further strengthened to 72% of EBITDA in hard currencies and it's this combination of FX protection long-term contracts with blue chip operators which provide a robust business model to capture the growth which Tom spoke about earlier. Finally, I think to mention this slide, with the new market expansion we're seeing a more diversified split of revenue per market and performer for the acquisitions, no single market accounts for more than 30% of revenues. Moving on to slide 18. I wanted to take a moment to quickly recap the contractual protections We have in all of our customer contracts, particularly as we go into a period where we've seen some elevated levels of inflation of fuel prices, at least on more of a macro level. As a business, we're very well hedged against movements in FX, power prices and inflation. And as discussed on the prior slide, we have innate FX protections due to operating in some hard currency markets. But importantly, we also have escalators in our contract, which escalates in relation to both inflation and power prices. For inflation, these are annual escalators, which typically escalate in December and January, with the escalation linked to the revenue that we receive, i.e. if we're receiving US dollars, then it's US CPI. If it's local currency, it's local currency CPI. We also have power price escalators with a rough split being 50-50 between annual escalator and quarterly escalator. And these go both up or down depending on the local power prices. So if there is falling prices, the escalator reduces. And if there is an increase in prices, then there is an increase in the escalator. But over time, and we've seen this, this provides a good hedge to the business. I think one thing to flag is that whilst you may have seen some Brent crude volatility, it does actually take time to see this translate from screen to actually what we experienced in the local markets and local prices. And we've seen some analysis of this on the graph at the bottom of the page. And typically we see a lag between anywhere between three months to even a year to really have an impact locally. And typically the movements in the markets are far more muted without so many peaks and troughs compared to Brent crude. and it's these local prices which we experience with regards to reference prices for contract escalations and also for our procurement of fuel. Given the timing of escalators we may experience a short-term lag between the dates that we have an F-Stater kick in and when we actually may experience cost movements. So in terms in times of rising costs we may see a temporary negative P&L impact but there again in times of falling costs you also see the convert. In general though despite this lag effect the structural mechanisms we have in place have been and continue to be a very effective risk mitigation tool and I think structurally we are robust and well positioned but as always we remain vigilant and proactive in management of potential movement and prices. Moving on to slide 19 and a look at capex and for 2021 we incurred a total capex of 395 million of which 242 million was in relation to the acquisitions of Senegal and Madagascar with 153 million for the established markets which was in line with the guidance we gave last year. Looking at 2022 we're guiding between a range of 800 to 840 million with the majority of that 650 being related to OMA, Malawi and Gabon closings with a range of 160 to 200 million being for our seven markets which are currently operating today. Of that between roughly 30 million will be non-discretionary i.e. for maintenance and corporate capex and the remainder 130 to 170 million being discretionary capex. Roughly 30 million of that will be for upgrade work we'll be completing on some of the new sites we've recently acquired. 10 million will be linked to project 100 and as Kash mentioned earlier this is our commitment to roll out carbon and opex reducing initiatives and we'll make our first 10 million investment of that this year on items like solar, hybrid and other initiatives. Most of these will come in the second half of the year so we should start to see some impact of these later in the year slash next year. and the remainder 90 to 130 million is on growth and that's related to the rollout of tenancies for the year and I'll come on to more detailed guidance shortly but we're expecting to roll out organically between 1,200 to 1,700 tenancies for the year of which 60% will be new sites and as a reminder the additional 30 million we incurred in Q4 last year to ensure speedy rollouts of our exciting pipeline this year has already been factored into these numbers. Moving on to slide 20 and a look at our cash flow. As mentioned earlier, we've seen solid portfolio free cash flow of 168 million, which declined slightly over the last few years. And if you look at the table, you can really see that this has been driven by the increases in taxes being paid as we've become profitable in our established markets. Receivable status reduced, although still remaining in the broad range of 45 to 55 days, which we've seen be relatively consistent over the past few years, although a slight decline period on period, which is great. and really we've reinvested the cashways we've generated into portfolio expansion as well as taking on additional capital to support our transformational growth which actually takes us to page 21 which shows our summary of financial debt. Our net leverage at the year end was 3.6x and continues to be at the low end of our target range of 3.5 to 4.5. We expect this to tick up towards 4.5 as we pose the other markets during the course of the year but really there's ample headroom and with leverage very much under continued tight control. As it stands today we currently have circa 900 million of available funds which is more than sufficient for our announced acquisitions which are due to close and our organic growth which for most of our established markets is actually self-financing. In terms of cost of debt I'm really proud that we've been able to take the momentum of 2020 and continue to do great work in reducing our cost of debt in 2021 with our various financing for example with our inaugural convertible bond issuance and we currently have a blended cost of debt of 5.9% which is 3% less than what it was a couple of years ago when we listed. We sit on a very strong balance sheet with long tenured debt with very limited floating exposure and I think it's good to say that we're in a great position that if we do choose to do any financings or refinancings, we'll be doing this for strategic reasons and where possible looking to continue our trend of reducing our cost of debt. And finally onto slide 22 and here I'll outline our guidance And for 2022, as a result of the portfolio and new market expansion in 2021, the group is now targeting organic tenancy additions of 1,200 to 1,700 in 2022. Previously, we used to guide towards 1,000 to 1,500. And this reflects the continued momentum in our established markets and organic growth targeted in our new markets of Madagascar and Senegal. 60% of the tenancy additions are expected to be new sites. Previously, we had guided to 45% new sites. However, given the network expansion plans of the MNOs, we are finding the mix has slightly shifted, but it's indicating the medium term target in the dotted box. We expect that mix to shift to majority payloads over the coming years. In line with prior periods, we anticipate the majority of our tenancy rollout to occur in the second half of the year. And as such, the group is targeting 25% of new tenancies in the first half of 2022, with the remainder 75% in the second half. And we expect this kind of cadence of rollout timing to continue into the medium term. Subject to the closing of the announced acquisitions in Oman and Malawi, the group targets medium-term annual tenancy additions of 1,600 to 2,100. Just between 2022, we anticipate lease rate per tenant to increase in the range of 3% to 5% during the year, and that's going to be really driven by our CPI and power price escalator movements embedded in our contracts kicking in, which I spoke about earlier. and in terms of adjusted EBITDA margin we're targeting between 51 to 53 percent in 2022 compared to 54 in 2021 and that largely reflects the full year impact of portfolio acquisitions in Senegal and Madagascar with both having lower tenancy ratios but being very much primed for growth and the incremental group SG&A required for diversification and growth from five to ten markets. In addition there's a little bit of short-term volatility we may see as a result of global inflation and energy prices and the lag effect which I mentioned earlier. We've added Oman and Malawi in Oman with their run rates EBITDAs underneath and depending on closing we'll see their pro rata impact on our numbers for 2022. I've covered most of the points in the medium term guidance but just to recap we expect 1600 to 2100 new tenancies including the broader portfolio of Oman and Malawi. I expect the proportion of new tenancies from site rollouts to reduce to 30% over the period. Expect the same tenancy seasonality entry year and we guide to lease rates for tenants increasing by US inflation after this year and expect EBITDA margin enhancements of 1-2% per annum going forward as we grow the portfolios and lease up. And with that, I'll pass back to Kash to wrap up.

Thanks, Manjit. I'm on slide 23 and look, this is the last slide before we go to Q&A. So as you've heard, key takeaways, driving sustainable value for our stakeholders. We've significantly invested during the course of last year and will do so during the course of this year to build a broader, stronger platform across 10 markets with 14,000 plus sites once we've completed the announced acquisitions that we will close during the course of 2022. Strong growth opportunities supports high quality growth and returns and we will accelerate this growth during the course of 2022 and we will be making continuous progress against our sustainable business strategy which will report on during the course of this year during our quarterly and half-year announcements. On that note I'm going to hand over to our conference coordinator Jordan to Help with the Q&A. Jordan, over to you.

Thank you. As a reminder, if you'd like to register a question, please press star followed by one on your telephone keypad. If you change your mind, please press star followed by two, and please ensure you're unmuted when speaking. Again, that's star followed by one to register a question. Our first question comes from John Caradis of Numis. John, the line is yours.

Thank you very much. Can you say a little bit more please to help me reconcile on the one hand the guidance you've given for the phasing of the tenancy growth during 2022 and on the other hand the fact that Tom just said that tenancy growth in the first quarter is likely to be pretty good and also that three months ago you said that you were forward purchasing CapEx because you were expecting a strong start to 2022. That's my first question and then my second of two is could you please remind me of the incremental investment you've made in SG&A and how that sort of changed and many more. Thank you. The guidance we have given is 2575 as you know for this year.

If you look at last year it was actually more skewed so last year it was 13% in H1 and 87% in H2 so we are guiding towards a stronger weighting to H1 already. The other element is the The number of tenancies has also actually increased, so 1,200 to 1,700. So in terms of an absolute number of tenancies for H1, that obviously means a higher number than what it would have been a year ago when we were at 1,500. So the pre-ordering of CapEx is something that actually is very key for H1. Our business, and actually a lot of businesses around the world at the moment, just simply because supply chains have increased in lead time in general. And this has been the same for the last 18 months to two years, quite frankly, in so much as things that used to take, say, three months from order to delivery into our warehouse and market you know now take five months maybe even six months in some circumstances so you do have to order capex earlier and we and that's what we do in general now but specifically for last year when we were ordering some additional capex and this was predominantly we were referring to some capex or some tenancies all that build the suits etc In Q1, that is very much the case. Whereas in Q1 last year and even the year before, I think we rolled out something like 70 tenancies, maybe 80 tenancies in the quarter. You'll see several hundred come through in this Q1. So there has been a change in the volume quantum and you'll see that come through and you know just generally on supply chain we'll be continuing to you know be proactive and the kind of cadence that we have now for our supply chain is to order things you know more like five or six months in advance rather than three months which was the case before Covid and I think that that sentiment very much continues given some of the other challenges going on globally today as well. Manjit Singh Dhillon, Lara Coady, Fritz Dzeklo, Colard Nkole Tshiyoyo Manjit Singh Dhillon, Lara Coady, Fritz Dzeklo, Colard Nkole Tshiyoyo

In 2020, following the acquisition of Senegal, we then gave guidance that we'll be adding 2 million. Now, at that point, we only had Senegal announced and were in competitive processes on the others. Then in the middle of last year, we upped that to incremental 5 million. Again, that's due to the fact that we had such a substantial growth that's coming through. And for this year, which will be the final piece of really the investments that's coming through, we'll get our estate up to the Thank you very much for joining us.

Thank you both and if I may say to Kash, huge congratulations for everything you've achieved at Helios and the very best of luck going forward.

Thank you very much John, I appreciate the kind words, thank you.

Our next question comes from Alex Roncia with Bank of America. Alex, the line is yours.

Hi guys, thank you for taking the question. The first one, I would just like to come back on CapEx because it feels it's a little bit of a step up versus 2021. If I remember correctly, in 2021, we already had some front-loading of CapEx. And I know non-discretionary is increasing a bit this year. I know we've got bigger growth. But I'm just trying to figure out if you could maybe give us a little bit more color on the different buckets, you know, how much is it going to be from the BTS, how much is it going to be from, you know, new installation, or how much is it really, you know, related to those energy supply installations. And maybe a larger question, actually, that was my follow-up, was your strategy regarding diversification of power supplies. and I know you've mentioned in your introductory remarks about some investment or start of investment into solar and things like that and we've seen for instance in Europe some of the operators and power coal even investing in mini wine turbines so how are you thinking about diversification of energy supply? What's really the split today that you're having? Is it 90-100% on diesel generators or Thank you very much for the great questions. Manjit, why don't you take the first one on capex and then I'll take the second one on the powerful.

Yeah, absolutely. So on the CapEx point, I mean, really, this is a consequence of two things. One, the increased number of tenancies we've got year on year. So if you're comparing versus 2021, we're now guiding to more tenancies than what we had during that course of that year, but also the splits being different. So now that we're moving from what was previously guided as being about 45% of the new tenancies being new sites to 60%, the impact of that is really north of about 250 sites, if you look at the midpoint of where that guidance is coming out. so that has a material impact in terms of looking at it period on period and that's really one of the key drivers that we have here also included within what is termed as discretionary capex is also some of the upgrade capex we'll be doing on the new portfolios that we purchased as well so if you strip out some of the upgrade items which is about 30 million then you're kind of looking broadly you know consistently period on period then you're kind of getting broadly battered to the numbers that we've had year on year I think those are the main movements. Tom, on the other one.

Yes, thanks Manjit. Look, power strategy is absolutely key for us. As a tower company operating across Africa and to some extent Middle East, we are also a power company. provide all of our customers with very reliable power on each and every site which means that to the extent the grid does not work 24 7 which it mostly does not or to the extent the grid is not prevalent in the location of some of our towers which again is true in some cases we need to find other ways of providing power to our customers and because that's what they look for us to do and that's what we're contractually required to do so If you look at our portfolio today we get in every 24 hours we get about 16 hours blended average of grid power which means that there's eight hours a day roughly that we need to find other ways of delivering power.

We do that today roughly half of that so four or so hours is done from

battery solutions or solar solutions and the other four is from you know generators and it's the generated area that we've got the most focus on in terms of reducing we published our carbon emission strategy a few months ago in November and in that we one of our key targets was to through to 2030 reduce our carbon emission intensity per tenant by 46%. And as Kash mentioned on one of the earlier pages, we're very pleased actually that the first year reporting of that we've shown a 7% reduction. So we're actually very much on plan to hit that 46% by the end of this decade and hopefully exceed it. and you know in doing that some of the things that you mentioned there solar mini wind turbine you know they're very much in our thinking obviously we do already use solar today we to date have not used mini wind turbines although I have actually been seeing some very interesting new products coming to the market along those lines and we will be looking at those more as well as other forms of new energy generation and there's a huge amount of exciting stuff going on in that space right now both from battery development point of view but also things like cells and wind turbines as you mentioned so we are continually assessing and continue looking at what is new on the market. We have a very clear plan of what we're doing over the next few years in terms of connecting more sites to the grid that don't currently have a grid connection, plus rolling out more hybrid battery technology, particularly focusing on the lithium batteries at the moment and also some solar where it makes sense. and you know we have dedicated internal teams both at group level and in each operating company which focuses on this they focus on optimizing the energy setup of every single one of our sites depending on the number of tenants we have on the site depending on the kilowatt load of that site depending on the proximity to the nearest grid line and depending on the you know the hours of sunlight and the quality of the sunlight for example because you know some places are good for solar and some places are not so good so there's a whole host of factors that feed into our internal algorithms that our energy teams run and you know this is very much what we you know what we do day in day out so you know in terms of forward looking you know We will be reporting on this as we said in November when we launched our carbon strategy. We'll be reporting on this going forward and of course we've set very clear targets on this around the 46% reduction. So yeah look watch this space for us reporting on that going forward and we'll be utilizing all of those forms of technology I'm sure to deliver that

Okay and maybe one very interesting and maybe one follow-up if I may on those topics because obviously you know all those new technology also require I would assume you know a little bit you know more maintenance because obviously I mean you had maintenance before with diesel generators and you know some of the you know on-site batteries etc but you know if you've got solar panels in the middle of the desert like you need to clean them up I suppose you know relatively frequently so Is there also like a strategy going alongside, you know, the energy power supply strategy to perhaps starting having more of a discussion with operators regarding active equipment maintenance and maybe, you know, bringing that within the fold of the power curve as we're seeing now, you know, maybe evolving in, I suppose, the more developed market MSA agreements?

Yeah, it's a great point. and look absolutely the first part of your question you mentioned around some maintenance required absolutely I mean you know solar panels require maintenance so they require cleaning obviously they get a lot of dust on them in certain locations for example so we have site maintenance across all of our sites and you know that involves field engineers going to each site at some point either maybe once a month or in some cases once a quarter where we can reduce it to that. Our long-term target is to get down to one site visit every six months you know across our entire portfolio but that's something we're sort of pushing for but that will take time. The So yes, there was a maintenance plan really for every form of new technology. It should not increase the amount of visits we need to do to the site. So for example, on the solar, it will just simply be or it is simply part of the normal maintenance to the site each month or each quarter. to clean those panels so we shouldn't see any increase of manpower cost in terms of maintenance which is good and then similar for hybrid batteries and such like in fact you can see reduced amount because typically it's the generator that requires the most TLC type maintenance so you can reduce the number of hours a generator is running then you're probably going to be able to reduce the amount of times you have to go and visit that site which is good. You make a very interesting point on the active visits to the sites and of course on all of these sites active maintenance engineers are visiting to do their maintenance and the active equipment.

We have on the small occasions in our history

also folded in active maintenance into the passive maintenance but typically to date the preference of our mobile operator customers has typically been to split it partly that's because active maintenance is always a key part of the offering from the equipment vendors and it's sometimes too complicated to disentangle that but you know one thing that we are looking for in the future potentially and you alluded to it is the possibility of you know us as a power co owning part of the active equipment on the site which is you know perhaps the natural extension of today owning the power and the power you know owning the base station and perhaps some antennas as well is perhaps the Natural Evolution of that and of course that is happening in some markets around the world already. There's a number of regulatory complications on that in most of our markets in so much as regulators are quite clear on which companies are allowed to own and operate active equipment and which companies are not and so there's some regulatory hurdles to jump over in terms of us provisioning that but It is certainly something on the topic of conversation with some of our customers and something that we are definitely looking at from an internal perspective. So yeah, watch this space for that as well and it could be something that comes in over the next few years for us.

Okay, perfect. Thank you so much for the insight and the lengthy answer. Thank you.

Thank you.

Our next question comes from Jerry Delis of Jefferies. Jerry, please go ahead.

Yes, good morning. Thank you for the presentation. I've got two questions, please. The first one is just building on some of the points you made about power price sensitivity on slide 18. So the question is, would you be able to specify for us, please, what power price assumption is implicit in your 2022 guidance? and then also help us understand how higher prices play through margins as we progress through 2022. Obviously we're mindful of the sort of potential sort of timing differentials between the higher costs hitting and the contractual escalators balancing up. And my second question has to do with your build to suit guidance. Obviously now guiding that 60% So the questions here, please, are does that higher build-to-suit activity relate to any specific markets or is it fairly broadly based? And then as we look forward, you talked about build-to-suit mix declining towards sort of 50%, but I wondered if you could sort of help us understand to perhaps a slightly higher level of granularity What is the sort of appropriate build to suit proportion to be modeling two to three years out on the enlarged group perimeter? Thank you. Thanks, Jerry.

I'll pick up some of these. So in terms of the contracts and what we went through on site 18, there's a cost across all of the markets when it comes to power prices, and we don't kind of provide that. But effectively, we're looking at what the prices are right now with a small, I'd say, and many others. The fundamental point here is that with regard to power prices and our escalations, half of the contracts escalate annually, half of them escalate quarterly. With the annual escalations, some of those broadly kick in around February. So if there is an intervening increase up until that point you will see a bit of margin dilution from the fact that you're not able to pass that on to the customer up until the following February. Now that's slightly counteracted by the fact that the other half a quarter is where you will get kind of your catch-ups coming through. Now all things being equal over a medium term period we're actually slightly over hedged on power so if there is increasing power prices we actually get a little bit of a margin on that and that's principally because Thank you very much. being slightly counteracted by your quarterly and that's what we're effectively baking in in our numbers at the moment. With regards to your other question on built-to-suit and the split, effectively it seems that these will be pro-rata versus the operations which we have at the moment. So Tanzania and DRT really being taking the lion's share of a lot of the built-to-suits. but also having a good rollout in Senegal and Madagascar and our other established markets as well and that's very similar to what we've seen historically and during the course of this year or sorry I should say 2021 where typically you know used to be find about 40 percent each of our rollouts happening in Tanzania and DRC and then the rest of the markets picking up the balance and I think that's something that we'll see again during the course of this year um and I sorry I missed the last part of your question um

I think during your discussion you mentioned that the built-to-suit proportion should decline back to 50% or below 50% but I just wondered whether we should be modeling going back towards 40% on the three-year view or whether we can sort of get a little bit more detail about these?

Yes, so what we actually say in our medium term guidance which is towards the back end of the presentation on page 22 is that actually that will reduce on a straight line basis to actually 30% over a three to five year time horizon so we will expect the majority of the new tenancies all things being equal to actually be more skewed towards co-locations now on a year-on-year basis you can find peaks and troughs like we're finding in 2022 and actually for 2021 we've had a bit of an elevated level of new sites

but you know over the long the medium to long term you'll actually find that the majority will be co-locations so the way to model that is uh reducing down to 30 percent uh thank you and then just to just to return very quickly on the power point the the power price point um so so i mean long story short would be that there's no particular reason why we should be expecting power prices to cause some sort of temporary margin squeeze in the first quarter

Not in the first quarter, but you should potentially see it coming through the back end of the year.

Thank you very much.

Cheers. Our next question comes from Simon Coles of Barclays. Simon, please go ahead.

Hi guys, thanks for taking the questions. Just to follow up on the power price one, so you don't want to give too much colour but just to understand from our side, are you basically assuming that the prices don't really change from here for the rest of the year and that's the impact that you're baking into the guidance because I guess we might expect them and many others. The second one is on M&A. You've obviously had a very successful Thank you.

I'll take the power point and then Tom can take the M&A one. So on power, we are assuming an increase in power prices. We've made a relatively conservative assumption and the reason why we're doing that, if we were to assume power prices remain stable during the course of the year, then you won't see too much of an impact on the margin. But assuming that there is some volatility that's going through, then we would expect a short lag effect in our P&L and that's why we're expecting a little bit of a and many others. But I think as we look at the EBITDA margins more generally and the guidance that we're given just to kind of be very clear about this that the majority of that is really driven by the fact that we've got full year impact of the new acquisitions coming through of Madagascar and Senegal which are diluted to the EBITDA margin adding on top of that the SG&A investments that we're making to increase the platform and those are really the key moves to with a little bit of an additional buffer that's put in for some of this lag effect that's coming through. Tom, on the M&A?

Yeah, thanks Manjit. Hey Simon, thanks for your question. Yeah, so look, on the M&A, the focus this year is really on integration, as you mentioned. We're really looking to and so on. We're going to close obviously the remaining three deals, Malawi, Oman and Gabon and really get those integrated as well as finalising the full integration of the new deals that we closed last year, Senegal and Madagascar which are both very much on track on that perspective. And of course focusing on the organic worth of our existing business and all of our markets including the new ones. So that's really the and others. In terms of other M&A or future M&A, there are deals that we're monitoring, there are potential opportunities that we're monitoring. but I'd say that most of them are next year's business or beyond so we will be very much focused this year on organic growth and integration and really driving the existing business forward and we'll obviously take stock and look at any new opportunities that rear their head but right now we're looking at M&A more for New M&A, sorry, more for next year's business and beyond.

Sounds good, thanks guys.

Thanks Simon.

As a reminder for questions, it's star followed by one on your telephone keypad. Our next question comes from Abhilash Mahapatra of Berenberg. Abhilash, please go ahead.

Yes, hi, good morning, and thank you for taking my questions. I've got two, please. Firstly, just on co-location growth, and I'm sort of thinking more specifically about standard co-location growth. Here, I guess, you've sort of seen in 2021 that with the exception of DRC, you know, the growth was actually lower this year than it was in 2020 in most of your other markets like Tanzania, sort of, you know, and Congo and Ghana. So in the context of your guidance as well, where you're saying that you expect nearly 60% of the tenancy growth to come from new sites, just wanted to get some color on how you see the prospects for actually leasing up your sites and driving standard co-location tenancies up in the sort of near to medium term. And then secondly, just maybe somewhat related to that on slides, 10 where you show the return on invested capital for your business and you show that pro forma for acquisitions is around 9% whereas it's been obviously a much more impressive figure in the past. Do you expect to be able to drive that number back to that sort of 13-14% mark and if yes, over what kind of time horizon would you expect that to come through? Thank you.

Yeah, thanks Abhilash, Tom here, I'll take these ones.

So yeah, look, I mean, on the co-location growth, you know, you mentioned that we're driving to a higher percentage of builder suits this year of 60%.

Yeah, no, look, it's very much driven really by the strategies of some of our key customers and what they're looking at in terms of their own marketing strategies and customer Acquisition Strategies. Interestingly, what we're seeing right now, something that we saw a bit of last year as well in some markets, was a real renewed push for new coverage in areas which previously had either little self-coverage or no self-coverage in some cases. and we're seeing that continue into this year which is why we've guided to 60% filled pursuits this year. We have quite a few orders on hand right now which are building new sites and new locations. I think this is just a natural cycle. Some years mobile operators will focus on upgrading and densifying and maybe upgrading technologies on their existing sites and creating more infill, creating more capacity in areas which they currently cover and other years they might look at new subscriber acquisition in areas which have previously had little or no coverage and we're in that space now which is great to be honest both from a sustainability perspective and building up more sites in rural locations, providing connectivity to communities which previously did not have connectivity or did not have much connectivity. We're very, very pleased to be doing that. But as you allude to, of course, a builder suit creates more capacity for future co-location. And for every single builder suit that we build, we always do a very deep assessment of the geomarketing of that location. Checking the viability for future lease up and future demand. So we'll look at things like local population density, local amenities, and all of that will feed into our proprietary algorithms in our geo marketing tool to predict how many and how quickly we'll get more allocations on these sites. Yes, absolutely, we expect to drive more co-location in the future from these new build pursuits. So as we do from our acquisitions, you know, of course, we're acquiring sites which typically have a tenancy ratio close to one tenant per tower. So it's the same concept of buying more scale on day one to then really drive the lease up going forward, which of course is the number one driver for margin growth and for ROIC. So just finishing off then on the You mentioned on the slide 10 and the ROIC being diluted from 13 to 9, which is just simply the natural thing that happens when you buy an underutilized network with a low tenancy ratio. The answer is yes, absolutely. We will be driving forward the lease up, driving forward the growth, and also some operational efficiencies over time. to really get that right back up to the levels that we've been seeing and I think the chart on the right actually shows that very well I think because prior to 2016 we'd been on a large acquisition initiative and sort of established a new platform you can see then that the margins were pretty low in fact way lower than they are today even with the dilution you know over the last few years we've driven that up significantly based on just simply having a much larger platform to sell to our customers and to drive operational improvements and you know we're absolutely primed and ready to do that now on the newly enlarged portfolio that we now have so yeah I think that you know you can expect All of that to be happening in the next few years.

Great, thank you. Thanks for the answers.

Our next question comes from Nikita Meherali of Emirates MBD. Nikita, please go ahead.

Hi, thank you for the presentation and I apologize if my questions have already been asked before. Could you please elaborate on the acquisition plan beyond 2022? And I think since you are close to achieving the 2025 target pretty soon, would you be looking at new markets or would you wait to improve tenancy ratio and maximize return on the acquired assets? And in case you look at new markets or further acquisitions, how do you think about funding given the higher costs now? My second question is regarding cash. So what sort of cash level are you generally comfortable with? As in how much would you like to maintain? And lastly, if you could give some color on leverage and what are the medium-term targets here? Thank you.

Thanks very much, Nikki. Yeah, look, Rana and I take the first couple there on the Manjit Singh Dhillon, Lara Coady, Fritz Dzeklo, Colard Nkole Tshiyoyo Motoring forward with our organic growth, organic performance and overall business excellence strategy across the group and making sure that's embedded in all of our markets including the new ones. That's really our big focus for this year. As I mentioned briefly earlier, we obviously continue to monitor the market for acquisitions. We have a business development team Thank you very much. We are, as you mentioned, we are focused on existing assets, maximizing those returns, getting the lease up going on those assets, really driving the performance and getting the operations going in front of the new markets. And that's our big focus right now. And over the next few years, I'm sure there will be acquisition opportunities that arise and we'll look at them in the normal way. We certainly have Manjit, just on the funding, cash levels and leverage, do you want to say a few words on that?

Yeah, absolutely. So in terms of our leverage levels, we've always communicated that we like to operate broadly within a range of three and a half to four and a half times net leverage. As we're at 3.6 now, pro forma for the acquisitions will be towards the top end of that leverage range. But as Tom said, we don't see potentially any acquisitions really coming through during the course of the year that's probably going to be for next year and beyond. by which point and the beauty of this business model is that it de-levels very very quickly so we should have the debt capacity that we require should we need it for future acquisitions but effectively the way we always think about acquisitions will the water falls always if possible cash on balance sheet debt capacity and then other forms of financing there afterwards and that's the way that we'll look at it when the time arises but you know one thing that we've done during the course of the year is we've been to diversify our sources of funding so we've got not only our convertible bonds which we really like as an instrument We've also got our high yield bonds which we've had for a long period of time and we've also got in-market debt financing as well. So the combination of all three of those really act quite well and provide us some diversification in terms of how we look for funding as we go forward. In terms of cash level, we like to keep broadly in the reach of around $100 to $150 million on the balance sheet. So the majority of that will be broadly held up a group, and we keep a small balance in the local opcos, and we always do regular upstreaming of funds to our group facilities. So we keep enough in the opcos for working capital and CapEx purposes, but the vast majority of our funding is always held offshore.

Thank you.

Thanks, Nikita.

We have no further questions on the phone line, so I'll hand back to Cash.

Thanks, Jordan. Well, look, thank you very much, everybody, for joining our call. And we look forward to talking to you during our Q1 numbers presentation in May. Thank you. Bye-bye.

This concludes today's call. Thank you for joining. You may now disconnect your lines.