Helios Towers plc

Hi everyone and welcome to our Q1 2025 earnings call. I'm Tom Greenwood, Group CEO and I hope you and your families are doing well and thank you very much for joining us today. We're very pleased to share our Q1 results with you today. We've had a strong start to the year and I'm particularly encouraged by the consistency of performance and the clear line of sight we continue to have on our strategic and financial objectives. Additionally, we're entering our 10th year of delivering consistent, unbroken EBITDA growth year on year, despite all the macro challenges that have been thrown at us over that period. COVID, oil price volatility, FX volatility, and then the global inflation that followed. Q125 sets us up well for another strong year of EBITDA growth and continuing to build on the surplus free cash flow generation that we saw last year. 2024 was the year we inflected from cash consumptive high investment growth to free cash flow generation and in Q1 2025 we're continuing that trend. We're operating with a model that not only delivers predictable top and bottom line growth but is also increasingly converting that into surplus free cash flow giving the strength of our business model. and that really sets the stage for the next phase of our capital allocation policy, being that of shareholder return. We're now finalizing the engagement process with our shareholders and potential new investors and look forward to communicating our updated capital allocation policy with you later this year. So moving to slide two, we've got the same usual lineup, myself, Manjit and Chris, and we'll take a look now at the agenda on slide three. We'll begin with a strategic and operational overview then Manjit will talk through the financials in more detail and we'll end with time for Q&A so look forward to hearing your thoughts and questions at the end. But before we begin I'd like to thank the entire Helios Towers team and our customers and partners who are delivering our services every day across Africa and the Middle East. Their consistent execution and dedication to excellence continue to be the driving force behind our performance. Africa and Middle East remain the fastest growing mobile markets in the world. Unique mobile subscribers growing at around 5% per year and data consumption forecast to grow by four times over the next five years, which is double the global average. This is our North Star for long-term growth. and where we will continue to deploy investment capital in a disciplined fashion in the future to drive growth and high returns. Population growth is another major driver across our footprint. Populations are growing at around 3% annually, meaning a potential doubling by 2050. So we see a long growth runway ahead. And we're still early in the network maturity curve. In most of our markets, 4G is still being rolled out and densified. In Oman and South Africa, 5G is emerging, but in many other markets, 5G is still in its nascent stages. That means that operators are actively expanding their network today and will continue doing so for years to come. And as an independent tower partner of choice in our markets, we're well positioned to capture that demand profitably and sustainably. Now onto slide four. Before we go onto the highlights, here we see the core of what we do. On our towers, we lease out space, hosting mobile operators equipment. For the investors, ours is a simple business return proposition. As we move from one tenant to our 2.2 tenants per site target in 2026, The incremental revenue drop through from adding an extra tenant on our towers is incredibly high. This is what drives our returns and cash flows higher. However, delivering this consistently across all our markets at the very high operational levels we do comes with challenges, which is why telecom operators like to outsource this operational challenge to us. Moving to slide five. Looking at our Q1 2025 highlights we're continuing to deliver against our key value drivers. Tenancy growth, EBITDA growth, cash flow growth and deleveraging. We added 668 tenancies in the quarter bringing us to around 2,400 tenancy additions in the last 12 months and on track for our full year guidance of two to two and a half thousand. This growth has increased our tenancy ratio to 2.09 up from 2.05 at the end of 2024. We're progressing strongly towards our strategic objective of reaching 2.2 by 2026 and now have it clearly within our sights which is driving the growth in ROIC you are seeing and the surplus free cash flow generation. EBITDA grew 9% year on year and Royke expanded by another percentage point to 13.8%, bringing us within touching distance of our FY25 target of 14%. Free cash flow came in at $2 million for the quarter, a strong improvement of $29 million year on year. Upside swing, meaning our last 12 months surplus free cash flow is $48 million, so already trending within our guidance for this year. and of course this follows the continuation of the positive swing we delivered in 2024 where we moved from an 81 million outflow in 2023 to a 19 million surplus in 2024. These trends are important because they signal that our capital allocation framework is working. We continue to invest in high return capital efficient growth and with the platform now scaled Incremental revenue and tenancy additions are increasingly dropping through to the bottom line. We also continue to strengthen our credit profile. Net leverage is now below four times, down 0.4x year on year. And we're pleased to see this recognised by the agencies with rating upgrades from both S&P and Fitch to BB- and a positive outlook for Moody's. And in terms of outlook for the year, We're reaffirming all of our guidance for the year with confidence, which includes tenancy addition of two to two and a half thousand, EBIT dark growth of 10%, surplus free cash flow of 40 to 60 million and deleveraging to around three and a half. So Q1 demonstrates three things. One, we're executing on the strategic operational plan. Two, we're expanding cash flow and returns. And three, We're building meaningful capacity for potential future shareholder returns as the next phase of our capital allocation policy. And now to slide six. And here shows our long-term EBITDA growth trajectory, which continues to be a standout feature of the Helios Towers story. We've now delivered 10 consecutive years of EBITDA growth and a 26% CAGR since 2015. This growth has come despite multiple macro challenges from COVID, oil price shocks, rate hikes, FX volatility and more recently global inflationary pressure. I've met a number of new fund managers over the last six months and this is quite often the standout talking point given our diverse footprint and it's a testament to our incredibly robust business model and Strong Operational Delivery, which is based off of our business excellence strategy focusing on having the most efficient processes, systems and best people in place to deliver high quality performance day in, day out. We enter 2025 and the next five years with the same level of confidence in continuing this trend and track record. What this shows is the resilience and predictability of our business model. Our core contracts are long term and inflation linked. Our customer base is made up of multinational mobile operators and our revenues are largely dollar or euro denominated. This all creates a very strong platform for sustainable and repeatable performance, even in challenging external environments. So on to page seven. Let's now revisit our business model which remains fundamentally strong and highly scalable. We're a digital infrastructure business that provides tower and power services to the largest mobile operators across Africa and the Middle East. We build or acquire tower sites with at least one committed anchor tenant from day one and then we lease additional capacity to new tenants driving capital efficiency and operating leverage. From a financial perspective, this model delivers attractive unit economics. The first tenant typically delivers a 12% ROIC, cash on cash, covering our cost of capital. A second tenant lifts ROIC to 25%, and a third brings it to over 30%. Because our costs are largely fixed, Every additional tenant drives significant incremental cash flow and margin expansion. And our contracts are long, typically 10 to 15 years minimum term with built-in CPI and power price escalators. And 70% of our EBITDA is in hard currency. This gives highly predictable and high quality revenue. As of Q1, we now have over $5.3 billion Thank you very much. Thank you very much. Thank you very much. These assets were underutilized with average tenancy ratios of around 1.2 tenants per site. Since then, we've embedded our operational model, continued to drive growth in all of our other markets, and the results are clear. Tenancy ratio has increased from 1.81 in 2022 to 2.09 today. Royke has expanded from 10.3% to 13.8% approaching our FY25 target and perhaps most notably free cash flow has improved by over 750 million in two years from a 721 million outflow in FY22 positively swinging to a 48 million last 12 months surplus in Q1 25. This performance confirms the strength of our 2.2 by 26 strategy. As we drive tenancy growth and platform efficiency, we're creating significant value, converting revenue into return on invested capital, surplus-free cash flow, and ultimately, shareholder return. So next on page nine, we'll talk about capital allocation. We continue to apply a disciplined flamework First, we prioritise organic investment into higher return opportunities such as co-locations and selected new bills. Second, we maintain a strong and improving balance sheet with net leverage now just below 4 and trending towards 3 by 2026. And third, potential shareholder distributions from 2026 onwards. With the business now in surplus-free cash flow territory and with further growth expected in 2025, we're moving with intent. We're actively engaging with investors this year on what a sustainable and value-accretive shareholder return policy should look like. And finally, M&A remains deprioritized. We have significant organic growth opportunities within our existing footprint, and our focus is squarely on execution, cash conversion, and Delivering Returns to Shareholders. Now with that I will hand over to Manjit who'll take you through the financials in more detail and then look forward to talking with everyone for Q&A at the end.

Great, thank you very much Tom and hello everyone. Great to be speaking with you all today. So starting on slide number 11 I'll be going to the financial results. As Thomas outlined, the first quarter of the year showed continued momentum across multiple metrics and really demonstrating solid progress towards our full year guidance. On the far left-hand chart, you can see we've delivered another strong quarter of tenancy growth and we're progressing well towards our 2.2x26 target with 668 tenancies added in the first quarter, the majority of which being colons, helping to increase our tenancy ratio by 0.4x in the quarter. and looking at this from a last 12 months basis we've added 2,388 tenancies which puts us in the broader range for four-year guidance. Tenancy additions continues to be the key driver of our EBITDA growth which has increased by nine percent year-on-year to 111 million for the quarter. The last quarter annualized EBITDA of 444 million dollars which you can see here. It is the combination of capital efficient growth through co-location lease-ups and leveraging operational improvements which has also driven our return on invested capital to 13.8%. I just note that Q1 can typically be a higher quarter for returns given the lower initial capex due to the timing of investments but we are progressing well and we still expect to hit our full year target of 14%. Importantly we saw an increase in our free cash flow driven by our EBITDA expansion and lowered discretionary capital additions and Q125 we saw plus $2 million which is a $29 million improvement on where we were at Q124 which had minus $27 million. So again we're seeing good progress and looking at free cash flow on the last 12 months basis we're at plus $48 million. So again trending well and we're reaffirming our full year guidance of $40 to $60 million for the full year. Now to jump into some of the detail and moving on to page number 12. On page 12, we show our site and tenancy growth. Sites increased by 251 year-on-year to 14,417, with 92 sites added in the quarter alone. New organic builds are an important source of growth for the company, given they increase the base on which we will drive Colo lease-up. However, we are very selective in our approach to new site rollout, ensuring the sites have clear potential for lease-up and strong day-one returns. Tenancies increased by 2,388 year-on-year to now being over 30,000 at 30,074, a 9% increase year-on-year, driven by Oman and Tanzania, with overall tenancies increasing by 668 in the first quarter. We saw a 0.14 tenancy ratio expansion year-on-year to now be 2.09, and again, this is really driven by all of our markets, and in particular, fast lease-ups in Oman, Malawi, and Tanzania. Moving on to slide 13, looking at our revenue growth, we've seen revenue growth of 5% year on year. This is driven by tenancy growth, however, partially offset by power price de-escalations in Tanzania and DRC that were applied in the first quarter. And I'll show the impact of this on the next slide shortly. On the top right pie chart, we demonstrate our strong hard currency profile with 67% of our revenue in hard currency, which translates to 70% of our adjusted EBITDA being in hard currency. Four of our markets are innately hard currency, including DRC and AMAN, two of three of our biggest markets being either dollarized or dollar pegged, and Senegal and Congo-Brazzaville being pegged to the euro. Importantly, what this means is that the revenues our customers receive are also hard currencies, and this is what they also pay to us. In our remaining markets, we also have a portion of revenues linked to hard currencies, adding further to the overall mix. Our earnings are further protected by contractual protections including power and CPI escalators with CPI escalators typically escalating in Q1 and power price escalators which can go up or down depending on local pricing and these escalate either quarterly or annually depending on the contract. 98% of our revenue is from large blue chip mobile network operators with no single customer accounting for more than 27% of our revenue as you can see in the second pie chart. and finally we signed to long-term agreements with our customer partners with initial duration lengths of 10 to 15 years but these are largely non-cancellable and today we have contracted revenue of 5.3 billion dollars with an average remaining life of 6.9 years in other words we've secured minimum revenues of 5.3 billion in total without pursuing any new business and this will provide a strong underlying earning stream that we complement with further growth driven by tenancy additions Now moving on to slide 14, here we present 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, partially offset by lower power prices, which decreased both power linked revenues and power operating expenses comparably. 5% revenue growth from tenancy additions overall drove revenue growth of 5%. 9% EBITDA growth through tenancy additions drove 9% overall EBITDA growth, with escalators effectively offsetting one another. In short, the key driver of growth is through our addition of tenancies and operational leverage from lease-up, and we demonstrate again that the business structure continues to be robust and resilient and operating as designed. Now, moving on to slide 15. CapEx continues to be tightly controlled and focused on capital-efficient opportunities that drive return on invested capital, in line with our capital allocation strategy that Tom just went through. For the quarter, we incurred total capex of 21 million, of which 6 million was non-discretionary. As a reminder, capex can be lumpy, and therefore while it was lower in the first quarter, our capex guidance is unchanged for the full year and we continue to guide to 150 to 180 million of full-year capex, of which 50 million is non-discretionary. And this reflects a continued reduction in our capital intensity from prior periods. Moving on to slide 16, a look at our balance sheet and credit profile. We've seen continued improvements in our credit ratings across all three agencies, with Fitch and S&P upgrading us to BB-, and Moody's updating their outlook to positive, all of which is a reflection of the work we have done to drive free cash flow and deliver the business, and is really a testament to our strong operational execution from our talented and committed teams. Our net leverage decreased by 0.4x year-on-year to four times net leverage. We have approximately $420 million in cash and undrawn debt facilities and as a reminder 92% of our debts continue to be at fixed rates following our bond refinance in 2024 and we have no near-term maturities until 2027. Given we are free cash regenerative this puts us in a very strong position and we have all the firepower we need to deliver on our targets. And that takes us to slide 17 where we reaffirm our guidance for 2025. Our target of 2,000 to 2,500 tendencies for the year remains as we continue our progress towards our 2.2 by 26 strategy. Our adjusted EBITDA target of 460 to 470 million remains, meaning we are at the midpoint of 2025. CAPEX target stays at 150 to 180 million, of which 100 to 130 is discretionary and 50 million is non-discretionary. and as mentioned earlier free cash flow we expect this to be between 40 and 60 million which is over double what we got in 2024. Finally we expect to end the year at 3.5 net leverage. We started the year well and we demonstrate the resilience of our business model and for the mobile industry which has allowed us to maintain our guidance against the backdrop of global volatility and with that I'll pass back to Tom to wrap up.

Thanks very much, Manjit. So just on page 18 before we open for Q&A. So key takeaways. We're very much on track and running towards our 2.2 tenancy ratio target by 26. And we feel very confident about the pipeline and delivering as we move through this year. We're continuing to see the growth come through. on EBITDA, on free cash flow and ROIC expansion. And of course, we're reaffirming our 2025 guidance and very confident in the delivery ability of the business. Furthermore, the financial flexibility to support investment distribution in 2026 we can continue to see coming through in the surplus free cash flow. and we look forward to talking with everyone more about that later this year. So with that I'll hand back to Lucy and we'll open for some Q&A.