Helios Towers plc

Welcome everyone, great to be talking to you today. I'm Tom Greenwood, the CEO and with me I have Manjit Dhillon, our CFO and Chris Baker-Sams, Head of Strategic Finance and Investor Relations. On page three you see the agenda and this morning's call is really a run-through of our Q1 release which came out a little earlier this morning. We'll talk through some highlights, we'll talk through some Financials and then of course there'll be a good time for Q&A at the end but also today we have our Capital Markets Day which is happening later kicking off at 1pm London time this afternoon and I know that a lot of you are either attending in person or planning to log in virtually. If you still want to register you're able to click on the link here on the on the page and register so look forward to talking to you all later and at that we'll be launching our new five-year sustainable business strategy and as well as the people that you have on this call there'll also be some of the wider executive team there for you to meet some of whom will also be presenting so really look forward to that later. So moving on to the Q1 highlights and now I'm on page five of the presentation So look, Q1 was a really solid quarter. We've delivered 23% in revenue growth year on year, 20% EBITDA growth, EBITDA margin in line at 52%, which of course has been slightly diluted with all the new assets that we've bought on, which we're all now ready to lease up and start driving those margins and returns, and cash flow as well, up 34% year on year. Of course, a huge amount of all of this was driven by our tenancy increases. We added over 1,500 year over year and also closed on our eighth market in Malawi in the quarter. All of this driving site count up 43% year over year and tenancy growth 29% and both of those around 9% on an organic basis. So really seeing strong tenancy rollout coming through and in fact our Q1 tenancy rollout on an organic basis was 359. So one of our strongest ever and typically quite a quiet quarter for our business due to rollout cycles with our customers. Of course late last year we told you about this and we mentioned that we were pre-ordering some capex so that we could continue the momentum in Q1 without any delays to roll out due to supply chain issues and of course we're very pleased that we did that because it has enabled us to deliver on a strong quarter. Other news, we're still continuing our processes of closing Oman and Gabon, so those are moving in the right direction and aiming to close those in Q2 and H2 respectively. And finally, our guidance is reiterated for the year, which is centered around the organic tenancy additions being 1200 to 1700, so around 8% at the midpoint. and finally a reminder that all of our revenues and earnings are very well protected against inflation and power price movements through the contractual escalators in all of our contracts. So in a sort of global environment where we're seeing quite a lot of increases or volatility in those sorts of measures our business is very well protected against those through our contracts so feeling very good about a robust earning stream going into the latter half of the year and of course into future years. Moving on now to slide six and here we just see some of the main KPIs In chart form, as you can see, tenancy showing good growth as we move into Q1. We've added about 1,500 since the end of last year, with about 1,100 coming from the Malawi acquisition and 359 organic in our other markets. So making good progress there. EBITDA as you can see has stepped up fairly significantly if you look at the quarter one annualized of 274 million that is already a 14% increase on our FY21 EBITDA which was 241 million you see there in the middle so of course what this means is if we did nothing for the rest of the year and did not sell another single tenancy then our EBITDA would continue on this level. Of course we are going to be selling more tenancies and driving more efficiencies so we're feeling good about a good base that we've got in Q1 at 274 ready to drive that further upwards as we move through the year. and finally here you can see that the cash flow metric also has stepped up as would be expected principally driven through the EBITDA increase. Moving on to slide seven and again here our sustainable business strategy is very much in full swing and in fact as I mentioned earlier later today at our capital markets day we will be launching our new five-year sustainable business strategy. She's centered around our purpose of driving the growth of mobile communication across Africa and Middle East and of course our mission which is to deliver exceptional customer service through our business excellence platform and create sustainable value for our people, environment, customers, communities and investors. So look, later on today I, Manjit and some of the other EXCO members will be taking everyone through a presentation which really looks into what we're going to be doing for the next five years where we're focused on and of course all elements of our business from business excellence to Lean Six Sigma to our customer service excellence mantra and of course our sustainability angles of which we cover all of it. First and foremost our targets are to drive returns and margin and value over the coming years through our business, through leasing up the new enlarged platform that we have and we're very confident of doing that. So look forward to speaking to everyone later on this. Next up, a quick roundup on page 8 of our acquisition activity and of course we closed Senegal and Madagascar last year. We've just closed Malawi at the end of Q1 there. That's got off to a very smooth start. We're seeing some good operational performance coming through as well as good interest for new rollout in that market. so that's very exciting for us and then Oman as I mentioned and Gabon we're now in the you know working on the final processes around closing those deals so Oman Q2 and Gabon H2 as we previously communicated so look forward to bringing those into the fold as well as we move through this year and we'll have therefore completed our Big expansion from 5 to 10 markets, 7,000 to 14,000 towers and ready to really go off that enlarged base with significant embedded lease up and growth going forward. I'll now hand over to Manjit to take us through the financial section.

Over to you, Manjit. Thanks, Tom. Hello, everyone. It's great speaking with you all today. I'll be going through the financial results and starting on slide 10. Continuing on from what Tom mentioned earlier, we've had a very strong quarter of organic growth driven by organic rollout and complemented by our new markets, Madagascar, Senegal and Malawi, all of which have really hit the ground running. And on this slide, you'll see we've summarized the main KPIs, which I will be talking through in more detail over the next few slides. But in general, we're seeing good growth across a number of these key metrics. So jumping into the detail and moving on to slide number 11, and we see really robust organic and inorganic tendency growth in Q1. From a site perspective, we saw a 43% increase year on year, primarily due to 2420 sites that were acquired across our new market, but which were also supplemented by strong organic growth of 733 sites. Year on year we've added 4,501 tenancies which is a 29% increase from where we were in Q1 2021. 1,545 tenancy additions were driven through organic rollout and 2,956 day one tenancies in our new markets of Senegal, Madagascar and Malawi. Tenancy ratio in our established markets remain constant at 2.14 and on a group basis tenancy ratio has dropped slightly by 0.22 to 1.92. and that's really due to the integration of new markets which have a combined day one tenancy ratio of 1.2 we will see the overall group tenancy ratio dilute as we continue to integrate our acquired portfolios which come with generally lower tenancy ratios on day one than the group average however as reiterated previously this is a great opportunity we're growing our asset base and the number of sites which we can develop adding further co-locations over the coming years and we'll see our tenancy ratio and other metrics compound over the coming years as well. But all in all, very pleased with site and tenancy momentum in Q1 and as Tom mentioned, we managed our supply chain effectively with forward purchasing of capex at the back end of last year, which has meant that we can roll out tenancies efficiently at the start of the year, which you can really see coming through here now. We've got a good pipeline of opportunities ahead. We're exactly where we want to be and a laser focus on delivering more built suits and colos during the rest of the year. Onto slide number 12. and looking at our revenues and adjusted EBITDA. We've seen growth with both revenue and EBITDA up 10% year on year on an organic basis and up 23% and 20% respectively when also incorporating the new markets. EBITDA margin is reduced by two percentage points in line with guidance we gave over a month ago and that again is really driven by the impact of lower margin acquisitions which have diluted the group margin on day one and also due to an investment that we made in our SG&A to ensure that the business is well set up for doubling of size and scale. But again, pleased with these results, we have a well invested platform delivering strong organic and inorganic tendency growth which we see and will continue to see coming through our revenues and EBITDA in the quarters and years to come. Now, if we move to slide 13, 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. 99% of our revenue come from international MNOs comprising mainly Airtel, MTN, Orange, Tego and Voda and Free Senegal who we purchased the Senegalese portfolio from. We have strong long-term contracts with our customers and as at Q122 we have long-term contracted revenues of 4.2 billion dollars with an average remaining life of 7.4 years. which increases to 5.3 billion dollars pro forma for Oman and Gabon which are due to close during the course of this year and this means excluding new wins and rollouts we already have that revenue contracted and in the bag providing a strong underlying earning stream to the business. We also have 64% of our revenues in hard currency being either US dollar or euro pegs and as a reminder this will increase to 68% pro forma for the announced acquisitions which translates to 72% when looking at it from an EBITDA perspective being in hard currency. This provides a strong natural FX hedge for the business which is further complemented by our annual inflation escalators which we have in all of our contracts with our customers. Moving on to SPY14 and we look at CAPEX and yet to date we've deployed $73 million with the majority of that $40 million related to acquisition CAPEX, principally the Malawi acquisition. Our capex guidance though remains unchanged at 160 to 200 million excluding any capex we'll spend on new acquisitions and we've incurred 33 million against that. We've also guided to 650 million for the full year for new acquisitions and we've incurred 40 million of that again principally related to Malawi and a search we have 610 million to deploy on acquisitions relating to Oman and Gabon. We have forward purchased 30 million of capex in Q4 for organic rollout of tenancies in Q1. Again, managing supply chain effectively has meant that we've hit the ground running this year. We continue to actively monitor and manage our supply chain so that we can efficiently roll out for our customers, something which we always look at and continue to do going forward. Moving on to slide 15, and here we show a summary of our financial debt. And as at Q1, our net leverage is 3.7x and continues to be within our range of 3.5 to 4.5. We have strong liquidity with $830 million in available funds made up of $483 million of cash on balance sheet and $345 million of unutilised debt facilities across the group. We're fully funded for our near-term organic and inorganic expansion plans with long tenured debt. We're in a great position where there is no immediate need to raise any additional capital. However, as always, we remain agile and ready should strategic opportunities arise. I'm glad to say we sit here with a very strong balance sheet. Finally on slide 16 we're tracking in line with our FY22 guidance we've had 359 organic tenancy growth in the quarter and as Tom mentioned we typically see Q1 and Q2 as being our slower periods for rollout given the budget cycles of MNOs but we're tracking well against the budget guidance we've given. Lease rate for tenancy whilst reported is 2% we're looking at the seven markets excluding Malawi Our escalators do come over the course of Q1, so in January, February and March. If we take our March position, our lease rate per tenant is actually in line with guidance. And finally, adjusted EBITDA margin is in the middle of guidance at 52%. So all in all, progressing well against our targets and remain very focused on continued delivery for the year ahead. With that, I'll pass back to Tom to wrap up.

Thanks very much, Manjit. So I'm on slide 17 for a quick wrap up. Just to remind you, you know, we've had a seasonally strong tenancy additions in Q1 with 359 tenancies come through and of course strong financial performance in line with expectations, revenue 23%, EBITDA 20% on an overall basis. We've closed our Malawi deal, which means we're now in eight markets and over 10,000 towers and we're progressing well on the final two Oman and Gabon. We've reiterated our 2022 guidance and of course later on today we'll be launching a refreshed five-year sustainable business strategy and look forward to seeing as many of you there as possible. And so with that I'll hand back to Ruby who can coordinate the Q&A.

Thank you. If you would like to ask a question please press star followed by one on your telephone keypad now. When preparing to ask your question, please ensure you are unmuted locally. If you change your mind, please press start followed by two. Our first question is from John Kaderis of Numis. Your line is now open. Please go ahead.

Hi there. Good morning. Congratulations to you and the team for a strong start for this year. Can you talk about how the second quarter looks so far, please?

Yeah, absolutely. Hey, John. Yeah, look, second quarter is, you know, again, tracking to plan. We have a, I would say, a strong pipeline of orders in hand or orders coming through shortly, which puts us in a, you know, fairly confident position, I would say, not just for the second quarter, but for the full year. So yeah, you know, all in all, happy with progress so far year to date.

Do you think tenancy growth in the quarter might be comparable to what you've seen in the first quarter? Maybe you can describe this a little bit for us, please, Tom.

Yeah, look, I won't give an exact number because, you know, tendencies can come in, you know, in fits and bursts slightly. I think we're just reiterating our previous guidance of the 25 and 75 mix for the year. And, you know, when we report our H1 in August, you know, if there is an update to give at that point for the fall year, we'll certainly give you one then. um but uh yeah no look so far so good tracking well good orders in hand and uh you know uh you know we're we're happy with progress so far fair enough thank you i had to try thanks thanks john our next question is from jerry dellis of jeffries your line is now open please go ahead

Yes, good morning. Thank you for taking my questions. Maybe a follow-up to John's question. Obviously, the 359 organic tenancy ads that you've reported in Q1 seem to put you in a very strong position to overachieve against the expectation that you set yourself for the first half. I also appreciate that tenancies come in in fits and starts. Is there any sort of the build to suit program that might make you incrementally more cautious on momentum in Q2? Or should we really think that Q2 is looking pretty strong and you're essentially sort of holding off just in case some makes a slightly unexpected decision? My second question has to do with cash conversion, which was pretty strong, 72% conversion, I think, from Ebitdaal into Portfolio Co. You know in a situation where obviously a number of assets have only just sort of come on board so how we think about the sort of the historical sort of uh guts of 65 to 70 cash conversion going forwards please thank you yeah i'll i'll take those so um i think with regard tendencies um i'd probably go for the latter part of what you mentioned there so

um we are progressing well as you rightly say the majority of our tenancies for the course of this year are built to suits so there you know can be a little bit of slippage uh sometimes quarter on quarter as is expected sometimes but in general i think is just to reiterate what tom has said we're keeping our guidance exactly where it is right now we're in a good position um and you know as as we get to august and announce the results uh we'll have to re uh reanalyze bird guidances at that time but as it stands right now i think we're sitting here in a very good and healthy position in terms of our pipeline With regards to portfolio free cash flow, yes, I think we have had good conversion at 72%. There are a few items there which are also related principally to timing. So I think we will see a bit of a ramp up in terms of maintenance and corporate capex coming through, which may slightly reduce a bit of that. And we've had, I'd say, a little bit of lighter tax payments during the first quarter. Now, whilst we look at portfolio free cash flow on a last 12 months perspective, there will be a little bit of a rise up in that in Q2. In general, I'd say our portfolio free cash flow will be around the 70% mark is where we expect it to be during the second half.

Thank you very much.

Our next question is from Alex Ronda of Bank of America. Your line is now open. Please go ahead.

Hi, guys. Thank you for taking the question. I was just wanting to come back to some of the more country specific performance. and we've seen South Africa being quite strong and so I'm just wondering if you had some comments regarding the evolution of the market there given some M&A in the country but then equally more broadly I mean you've had a really good start in Senegal following your acquisition could we expect some kind of a similar head start in Oman, Gabon or even Malawi as you acquire the portfolio and already grow your cost base to address those markets. And then perhaps that's a question for the CMD and in this case I'll ask that later today, but given the strong performance in Q1 on the back of the CAPEX Front Loading you've done last year, do you expect or do you think it will be Thank you. Yeah.

Thanks, Alex. Thanks for the questions. So I guess taking the first one, look, SA, as you point out, we've had a strong quarter there with adding fairly significant for that market number of sites and tenancies. Again, this is going back to the point that tenancies do come in fits and bursts. This is a lumpy business and therefore there can just be quarters which see a peak. Equally, there can be a quiet quarter and it's nothing really to get either too excited or too worried about it's really just you know for us how we think about it is we think about you know where's things going in the medium term what's the three to five year trajectory and you know are we roughly on track for that and of course within that time period there's going to be some quarters which do have a peak and others which you know are quiet that's just the nature of a kind of heavy infrastructure business and a reasonably long sales cycle which which our business has But look, we're very pleased to see South Africa stepping up and the team there have done a great job in doing that. Equally, Senegal, new market as of almost a year ago now actually. and you know we're very pleased to go into that market as the only independent tower co. We've been seeing some good roll out there. There's certainly more to come in that market as we move through this year. We've got some good build to suits and colos coming through and you know again I think it just goes to the point that you know the markets that we choose to enter have these sorts of dynamics fundamentally relatively low levels of mobile penetration big infrastructure gaps and you know kind of pent-up demand if you like from mobile operators particularly when there was never previously an independent tower company there you know the mobile operators were having to choose to spend their own capex to build the passive infrastructure and with us going in suddenly they've got this route of doing it without them spending the passive infrastructure so they can focus on their front-end technology and I think we're seeing that in Senegal and yeah look the other markets Oman, Gabon, Malawi again similar dynamics will be the first or at least the first independent talk of scale in all of those Three markets and you know we're already having good conversations about rollout in them so yeah look I think we'll stick with our guidance that we previously gave for these deals around tenancy rollout which was or tenancy ratio increase which was 0.05 to 0.1 x per year roughly and you know we hope that we very much deliver on that certainly the the dynamics of all the markets should mean that we can over the you know over the next few years and yeah look finally on the additional capex for last year look obviously very happy that we did take that decision and bought in capex early that really helped us to you know drive momentum through q1 You know, again, we'll keep monitoring it. You know, I think in the CapEx guidance we've given this year, you know, that does allow us for some sort of buffer, if you like, for rolling into Q1 next year, if we have a lot of orders again at sort of the end of this year. But we'll monitor that as we go. One dynamic at the moment, well, as you know, I think every company around the world is experiencing it. you know lead times for ordering has certainly gone up in the last two years since before COVID to something that used to take three months to come to market now it maybe takes six months so the capex planning cycle has extended and we've adapted to that that's one of the reasons we did the early order last year but we'll just stay nimble and and see how it goes okay very clear thank you thanks Alex

Our next question is from Jonathan Kennedy-Kurd of JP Morgan. Your line is now open. Please go ahead.

Good morning, Tom, Manjit. Thanks for the opportunity to ask questions. I noticed a slide in your deck, number 21, which talks about POS growth over the next four or five years. Presumably, that's an independent study, I think. But what did catch my eye there was you know the forecast on DRC for 12 percent cargo growth there just wanted to get your sense of you know what what would be the risk do you think to that that number it seemed to surprise me on the upside um and given you um in that market as the only independent taco would be interesting to get your take south africa seemed pretty low just wondering whether you believe You can take more market share in South Africa. We've still got four operators in ASA. Your COLO is immediately quite high. It would appear to me that ROIC would be potentially higher or amongst the top in the portfolio in South Africa. So just wondering how you plan to accelerate even further in South Africa if that's the case. Thanks.

Yeah, hey Jonathan, good to talk to you this morning. So yeah, look, first of all, these are independent numbers. So, and you know, these numbers are a market research. This is one of the inputs that we use internally. to do our own planning, do our own assessments of, you know, where we want to invest and deploy capital and, you know, do our own forecasts and budgeting, etc. So, yeah, these are independent numbers. The DRC one you pull out. Yeah, look, I mean, DRC is a fundamentally very attractive market in our view. From a mobile standpoint and therefore mobile telecoms infrastructure standpoint, it's coming from one of the lowest bases in terms of mobile penetration across the continent. So, you know, mobile penetration on the unique subscriber basis and DRC is somewhere in the 30% range. which therefore means that there is just significant runway and growth ahead for many years so that in part drives the high CAGR growth and in DRC we are seeing a lot of rollout from our mobile operator customers there you know there's four large mobile operators operating there and there's about 50 million people in DRC that today do not live in an area of mobile cell coverage. So about half the population don't even have mobile coverage where they live, which is actually way behind all of our other markets. So that's the reason for the high growth there. and Manjit why don't you take the next part?

Yeah and I think just you know for South Africa if we look at how that progression has gone historically it's always been actually from independent forecasts at least relatively low single digits for point of service growth I think it's been partially impacted by the fact that I think South Sea is kind of slightly rolling off a bit as well so that's impacting a bit in terms of where it's expecting to go but notwithstanding that I think it's still got it's coming from a higher base so whilst the lower So a vast number of potential requirements for points of service and I think we've got as we've demonstrated over the last few quarters we've been rolling out very very well and importantly leasing up very very quickly. We've got a 1.7 tenancy ratio which we've had for a number of quarters now which shows that not only are we building but when we're building we're building in the right places and getting leased up very quickly.

Thank you. Just perhaps one follow-up on South Africa. What is the tower cost in South Africa? Is it still fairly materially cheaper from a CapEx perspective than the rest of Africa?

I think it's broadly around the lower end of the range so it kind of typically is around 100,000 maybe a little bit north of that but in the grand scheme of things it's still within the range of what we normally say anywhere between for a normal tower across the group 100 to 150,000 and probably towards that lower price point. Great thank you.

We do have a further telephone question but first as a final reminder is star followed by one on your telephone keypad if you should wish to ask a question. Our next question is from Josefina Duran of Morgan Stanley. Your line is now open please go ahead.

Hi thanks for the presentation. I do have two questions. The first one is related to the VITA margin. I know this was very well flagged and You explained that it's related to expenses from the acquisitions that you're doing, but if you could give me a little bit more color on this higher SG&A that you're seeing, and do you expect this to be like one-off or recurring? And my second question is, if you can remind me your cash policy. I mean, if you usually try to repatriate cash offshore, If you have any issues sourcing dollars or reputating cash from the countries in which you operate or do you usually have it at the operating level to fund like investments and expenses that you have locally?

Yeah. Thank you for those questions. So just picking up on the SG&A part. So this is kind of structural SG&A that we've invested because we are expanding in size and scale. So it's in the region around 13 million from where we were a couple of years ago, pre doing these five market deals. but importantly that SG&A is leverageable and I'll be coming on to this in during the course of the capital markets day presentation as well but actually once this has all been once you've closed all the deals and the SG&A as a percentage or as a per site percentage is actually in the same region of where we were back in 2019 when we were you know broadly a private company so we when we do invest we invest but it then is subsequently leveraged by the group and as we lease up the sites as well you'll see further leveraging of that SG&A base going forward what have we invested in well we've invested in a regionalized structure so we can actually have the capacity to hit the ground running on day one in the new markets it also gives us the opportunity to also look at potentially new markets as well and we've also seen some increase in professional fees and just general infrastructure like IT infrastructure across the group as well so all of those have been invested but as I say it will be leveraged by the end of the year in terms of cash policy so typically our cash policies remain very identical well for the last five to ten years actually so we typically keep about Anywhere between 80 to 90% of our cash onshore that's kept up in London, Mauritius is where we keep the majority of our cash. We keep a very small float in the markets and that's typically sufficient enough for its working capital and capex requirements. And we do monthly upstreaming of US dollars from each of our markets to the UK and Mauritius and that's happened every single month. you know since I've been at the company before so no issues on that perspective. From a debt perspective we typically keep our net leverage around 3.5 to 4.5 as I mentioned earlier and we're currently sitting at about 3.7 so towards the bottom end of that range but with capacity for the new acquisitions which are due to close as well.

Thanks a lot that was very clear.

Thank you.

We have no further questions so I'll hand back to our hosts for closing remarks.

Well, thank you very much, everyone, for the call today and the questions coming in. And look, we hope to see as many of you possible later on, either physically or indeed online. So, yeah, I look forward to talking later at the Capital Markets Day and talking to you through our new five-year sustainable business strategy. Take care. Thank you.