Helios Towers plc

Thank you, Candice.

Hi everyone and welcome to the Helios Towers Q1 2024 global investor call. I hope everyone's doing well. Thank you very much as always for your time today and we're looking forward to providing you with our first quarter trading update of 2024. So on page two we've got the usual lineup of me, Tom, Manjit and Chris. We'll cover the usual business, strategic and financial highlights and then look forward to the Q&A at the end. So moving to page five, this quarter one effectively marked 15 months since we closed our last large acquisition of Oman in December 22. And we've been laser focused on organic growth, asset utilization and operational efficiency to drive value creation since then. We continue to see significant demand for our services and infrastructure as mobile telephony usage accelerates across our markets. in terms of subscriber numbers, usage behavior, and incremental technology demand. Voice and data demand is growing as people use mobile more and more for everything from phone calls to banking, health, education, social media, payments, AI, and streaming. As the leading digital infrastructure platform across our market, we focus 24-7 on our customer service excellence strategic pillar to ensure our customers are getting what they need from us and we're surpassing their expectations. As part of this, we have an open, transparent learning culture and are always keen to hear feedback on how we can improve further. I'm very pleased to report a strong start to 2024, continuing where we left off in 2023. We've had our busiest Q1 for new tenancy additions in company history and year on year, our tenancy ratio is up 0.11x to 1.95 tenants per site, which brings good momentum towards our 2026 target of 2.2 tenants per site. Financial performance continues to be strong with double digit year on year growth, organic revenue growth of 14%, largely driven by tenancy additions, flowing through to 21% growth on EBITDA and portfolio free cash flow, showing a strong operational leverage of our platform. With our organic focus strategy being of lower capex intensity, we also see a strong increase in the returns year-on-year of a three percentage point increase to 13%. Driving ROIC higher and increasing its surplus above our cost of capital is a key focus for us in creating real long-term investor value. Our strategy continues to be focused on ROIC enhancing investment opportunities driving up enterprise value and cash flows, reducing leverage, thereby accelerating equity value creation. We were also pleased to receive upgrades from Moody, an S&P in the quarter, which clearly demonstrates the increased strength of our business in terms of diversification, performance and cash flow generation. And lastly, on this page, we reiterate our guidance for FY24, which as well as strong tenancy and EBITDA growth, also focuses on leverage of below 4x and cash flow neutrality, this being our inflection year. At this point, we feel very much on plan to achieve these targets and will continue to provide you with updates on progress through the year in the normal way. Now turning to page 6, where you can see this in graphical format. with Q1 tendencies of 761 being a strong start in achieving our 1600 to 2100 guidance range. Additionally, EBITDA and portfolio free cash flows Q1 annualized or last 12 months figures are both in the lower end of our range for the full year. Our focus now is to continue driving the growth and efficiencies of these metrics further up through the year. And now on to page seven, where we take a closer look at the ROIC and tenancy evolution through our recent scale expansion and show the trajectory to further equity value creation. As a reminder of our journey over the past few years, in 2020, we were a five market business with 7,000 sites with a strategy to geographically expand. In 2021 and 22, we completed four large acquisitions which doubled the business to 14,000 sites in nine markets. Here we were acquiring underutilized power portfolios from mobile operators, which inherently come with low tenancy ratio and ROIC on day one, but with embedded demand in the markets to drive up utilization in the following years. This consequently diluted our group tenancy ratio and ROIC KPIs in the short term and meant negative free cash flow with around $1 billion invested in the acquisitions. And from the start of 2023, We've been focused very much on high returning organic growth, leasing up our sites and driving ROIC upwards. In 2023, we increased tenancy ratio from 1.81 to 1.91 and ROIC from 10.3 to 12%. And you can see in Q1, 24, we're continuing the upward trend of these metrics and we focus on doing more of this as we move forward. And of course, At the same time, being free cash flow neutral this year and stepping up this bottom line free cash flow thereafter. And as a reminder of our capital allocation policy, as we communicated in March, first priority is high returning organic investment. Second, being leverage reduction to below four this year and around three by 2026. Third is investor distribution and fourth is accretive M&A. Just as a reminder, as signposted earlier in the year, we might have a small second closing of around 220 in-building sites from our Oman acquisition, which remains subject to regulatory approval, on which progress is being made, but timing remains unclear for now. Now moving to page 8, we further highlight the dynamics of ROIC in early and later stages of portfolio evolution, and see our new markets on the right, ticking upwards on tenancy ratio and ROIC in a similar trend to the markets in which we've been operating for much longer. All our markets are contributing to our upwards return trend, and we aim to deliver 100 bps or more on average per year for the next three years, creating a material surplus between ROIC and WAC, and in turn creating sustainable value for investors. Finally, on page nine, We reiterate our commitment to sustainability and the fact that our business and the way we manage it inherently drives digital inclusion, carbon efficiency, female empowerment amongst others all underpinned by our core services ensuring reliable infrastructure and power provisioning to maximize quality of the mobile network for end users. We continue to retain our AAA MSCI rating and the others which you can see on the top right and continue to progress on our strategic initiatives to drive our business and its environment and communities to a better place and a better quality of life. And with that, I'll hand over to Manjit and look forward to talking to everyone at the end for Q&A.

Thanks, Tom. Hello, everyone. Great to speak with you all again. And starting on slide 11, I'll be going through the financial results Following on from what Tom spoke to earlier, we remain focused and committed to driving organic growth and lease up on our existing portfolio, which in turn drives capital efficient returns for the group. And the key one, we continue the momentum from last year and have seen strong operational and financial performance. On this slide, as usual, you see we've summarized our performance and the main KPIs, which I will go through in more detail over the next few slides. Moving on to slide 12, our site and tenancy growth. From a site perspective we saw organic growth of 4% increase year on year equating to an incremental 482 sites. We are very selective in our approach to new site rollouts and we are confident in our ability to lease these sites up over the coming years which is evident in our strong lease up rates on new build portfolios which we presented in previous results presentations. From a tenancy perspective we had near record organic tenancy additions of 2,566 tenancies year on year, a 10% increase resulting in a 0.1x expansion in our tenancy ratio to close to 2x, tracking well in line with our 2.2 tenancy ratio target by 2026. We're also particularly pleased to see tenancy ratio expansion driven by both our existing and new markets, in particular Oman DRC in Tanzania. And on to slide 13, a focus on our revenue in EBITDA. We've seen 14% revenue growth and 21% EBITDA growth year on year, and we've seen revenue growth and EBITDA growth in all three of our reporting segments predominantly driven by tenancy growth which I've just spoken about with Central and Southern Africa and Middle East and North Africa both delivering more than 30% EBITDA growth year on year. Our EBITDA margin increased by three percentage points to 53% and again that's been predominantly driven by co-location lease up and operational improvements. Moving on to slide 14. The usual analysis showing the key drivers of revenue and EBITDA growth in a bit more detail. As with previous results presentations, the key driver of growth has been tenancy additions, with the escalators effectively working to offset macro movements to protect our EBITDA on a dollar basis. Now this is clearly shown on both charts. If you look at the left-hand bar of both bridges, tenancy growth drives 13% growth in revenue year-on-year out of 14% overall revenue growth. and 20% growth out of 21% total EBITDA growth year on year. As a tower company this is exactly what we want to have the growth driven by tenancies which comes down to identifying attractive markets entering them through buy and build opportunities and then proactively selling and rolling out and operationally performing for our customers. This is exactly what we do and what we focus on. The escalators are present in all of our customer contracts in one form or another For example, for power, roughly 50% of our contracts have quarterly power escalators and 50% have annual escalators. And these, as a reminder, escalate in relation to the local pricing for fuel and electricity. So if local prices go up, then the escalators go up, and if the prices go down, then the escalators go down. For CPI, we have annual CPI escalators, and they typically kick in between December and February. Our power escalators increase revenues by $3 million, and despite the power price increases in some of our markets, This falls through to flat EBITDA, again demonstrating that our business model has effectively offset any increased OPEX due to higher power prices to protect our EBITDA on a dollar basis. Whilst we also continue to explore areas to save on fuel costs through our investments in power initiatives and reducing reliance on fuel where possible. And just to focus on CPI and FX, local CPI is over 5% at the moment with the majority of our CPI escalators having kicked in earlier in the year and contributes a 4% increase in revenue year on year. The CPI escalators, as you can see in the dotted box, have effectively offset the FX movements on EBITDA. So standing back, there's little impact to FX or power prices, and we continue to be well protected from macro volatility. Again, with a key driver being the great and tenancy additions, both organically and previously inorganically, and operational improvements. Again, all of which are within our control and how we want the business to operate. Moving on to slide 15. CapEx has and continues to be tightly controlled. and focus on opportunities that drive return on invested capital including co-locations, opex efficiency projects and highly selected build pursuits and this is in line with the capital allocation strategy we set out earlier in the year at our full year results. Looking at what we've incurred in the first quarter of 2024 we incurred total capex of 45 million which is mainly made up of growth capex reflecting the strong tenancy growth we've seen so far. and in terms of guidance there is no change to our 2024 expectation. The capex range for 2024 will be between 150 to 190 million which consists of 105 to 145 million of discretionary capex and 45 million of non-discretionary capex. Moving on to slide 16 and looking at our leverage and debt. Our net leverage at the end of Q1 has decreased by 0.7x to 4.4 year on year but remaining the same quarter on quarter. Typically we do see that Q1 leverage stays consistent from Q4. We saw that last year for example where it stayed at 5.1x and this is principally due to seasonal cash outflows in Q1. However we have a clear pathway to deliver the business at about 0.5x per annum on the basis of organic EBITDA growth and keeping gross debt broadly flat and we continue to target below 4x net leverage in 2024. As previously mentioned We have approximately $380 million of undrawn debt facilities and together with $90 million of cash on balance sheets this means we have $470 million of available funds. About 50% of our cash on balance sheet is held at group with the remainder spread amongst the opcos for capex and working capital purposes. Our debt remains largely fixed with more than 80% of drawn debt at fixed rates and we have three years of weighted average life remaining on our drawn debts. Over the course of it, we were very pleased to see Moody's and S&P upgraded our credit ratings to B-plus equivalent. We're particularly pleased that our strong financial track record, market diversification, our focus on organic growth towards deleveraging and cash flow generation have been recognised by the rating agencies. With regards to the outstanding bonds, we continue to monitor our options and will aim to adjust the notes during the course of the year and remain prepared to move quickly should market conditions are contractive. and finally moving on to slide 17 we reiterate our guidance for 2024 we continue to expect 1600 to 2100 organic tenancies in the year and we made a great start to this so far on adjusted EBITDA we expect to be in the range of 405 to 420 million and portfolio cash flow to be in the range of 275 to 290 million dollars due to a favorable mix of co-locations versus sites We expect to deliver lower capex in the range of 150 to 190 million. Combined, we expect these metrics to support reducing our net leverage to below 4x and to support neutral free cash flow for the first time in the company's history. And as Tom mentioned, this does exclude the impact of a small second potential closing in Oman, although timing is uncertain on that closing. But all in all, we've had a very strong start to the year and we're tracking well towards our full year guidance. And with that, I'll pass back to Tom to wrap up.