Helios Towers plc

Hello everyone and thank you for joining the Helios Towers H1 2025 results call. My name is Sammy and I'll be coordinating your call today. During the presentation you can register a question by pressing star followed by 1 on your telephone keypad. If you change your mind please press star followed by 2 on your telephone keypad to remove yourself from the question queue. I'll now hand over to your host Tom Greenwood, CEO to begin. Please go ahead Tom.

Thanks very much Sammy. Hi everyone and welcome to our H1 2025 earnings call. I'm Tom Greenwood, Helios Towers CEO. Thanks very much for joining us today and I hope you and your families are doing really well. So we're pleased to report a strong set of results for the first half of the year. The business is performing very well across all of our key strategic and financial metrics. We've delivered strong tenancy growth, P&L expansion and a further step forward in free cash flow and return on invested capital. As we reflect on yet another quarter of unbroken growth over the last 10 years, and as we lead up to our capital markets day in November, it's important to remind ourselves of priority one in our strict capital allocation policy. Our first priority is always high returning organic growth and investing capital expenditure to capture the unique growth in the telecom towers industry in our regions. As I enter my 16th year with this company, what I can say with absolute confidence is that the runway of growth we see ahead is as strong today looking into the future as the growth we have seen over the last decade. Furthermore, following our free cash flow inflection last year and the continued growth of cash generation already in the first half of this year, we're getting to the point of being able to balance and sustain both significant organic growth with continued deleveraging and potential shareholder return. Most importantly for today, we're firmly on track to meet our FY25 guidance and we're executing with consistency and discipline. positioning the company well for long-term value creation as we move into our next five-year strategic cycle which will be launching on November the 6th at our London office in Bishopsgate at our Capital Markets Day which we have announced today and would love for you to attend. The big focuses here will be our enhanced capital allocation policy focusing on investor return and value creation what we are seeing and targeting in terms of high returning growth for the next five years and deeper insights from some of our wider leadership team on how we drive excellence and resilience for our customers experience and our business so moving to slide two today i'm joined by Manjit our CFO and Chris our head of IR on to slide three as always We'll begin with strategy, move to the financial results and close with Q&A. But first, I want to recognize the entire Helios Towers team and our partners across Africa and Middle East. Every day, our team delivers critical infrastructure and services for mobile connectivity, often in remote and complex environments, with high professionalism and global quality. It's this execution and our relentless focus on customer experience excellence that enables our consistent delivery and ensures that the 156 million people covered by our Towers today have their daily connectivity needs met, enabling their voice communication, banking, payments, health, education, AI and everything else essential for daily life in today's world. and that delivery is happening against the backdrop of strong industry fundamentals which are mega trends not just for years ahead but for decades ahead. Unique mobile subscribers are forecasted to grow by almost 30% by 2030. There's a forecasted increase of four times in data usage by 2030 and of course there's a population boom across our footprint. These are powerful long-term drivers that underpin our growth strategy, which means the top-line growth and compounding cash flows have a trajectory ahead for many, many years. Moving to slide 4, this image is a simple but powerful summary of our model. We build or acquire towers, lease space to mobile operators, and then drive revenue and cash flow return by increasing the number of tenancies on those towers. Going from one tenant to two and then three, as you see here, is incredibly value accretive with small marginal incremental costs each time a new tenant is added, leading to the majority of new tenant revenue flowing through to the bottom line. Strategic cycle objective of 2.2 tenants per site by 2026 goes to exactly this point. And we're proving this model out at scale with clear and consistent focus on operational delivery. And now to slide five, our highlights. Looking at the highlights, the performance at half year shows we're very much on track for our full year guidance. We've added over 1200 tenancy additions year-to-date, including 190 new sites. Tenancy ratio we've expanded now to 2.11, up 0.1x year-on-year and with very strong momentum towards our 2.2 by 2026 objective. EBITDA is up 9% year-on-year. ROIC rose another percentage point to 14%. and free cash flow of 30 million, which represents an upward swing of 40 million year on year. This reflects record H1 surplus free cash flow generation for our business. Net leverage continues to trend downwards, now at 3.8, which reflects a reduction of 0.4 year on year. We also strengthened our financial position further. Moody's affirmed our B1 rating and moved us to a positive outlook. Fitch has upgraded us to double B minus. And recently, we've also reduced our cost of debt from 7.2% to 6.9% through some refinancing of term loans. Our full year guidance is reaffirmed across the board with two to two and a half thousand tenancy ads, 460 to 470 million of EBITDA, 40 to 60 million in free cash flow that's the doubling or tripling of our free cash flow from last year and leverage trending towards three and a half these results are a testament to our team and our business model the growth is visible the cash conversion is accelerating and we're increasingly well positioned to deliver shareholder returns in the next phase of our capital allocation strategy now moving to slide six We've now achieved 10 consecutive years of double-digit adjusted EBITDA growth at around 25% average annual growth rate since 2015. Of course, this includes some very challenging periods, COVID, oil price shocks, rate hikes, and inflation. Yet through it all, we've delivered consistent, predictable, and resilient EBITDA growth. This is a major differentiator for Helios Bowers. and is thanks to the strength of our operating model, long-term inflation-linked contracts and high-quality customer base. Of course, this is all underpinned by the structural growth of the region and the sector, with population, mobile subscribers and data consumption all trending steeply upwards for decades, not just years, and all driving the demand for mobile infrastructure. Our thesis is simple. By operating the business at global quality levels with the best people and disciplined capital allocation, we will continue to deliver P&L growth and the consequential compounding cash flow to create significant value for our investors, customers, partners, communities and people. Our strategy of 2.2 by 26 is working. Since 2022 we've increased tenancy ratios from 1.81 to 2.11, ROIC has expanded from 10.3 to 13.6% and free cash flow has flipped from a 721 million outflow for high investment in 2022 to a 30 million surplus so far this year in H1. This is exactly the trajectory we targeted Improving efficiency, improving capital returns, and unlocking growing cash generation from our now scaled platform. If we move to slide eight, here we see our long history of tenancy expansion, which continues to be a key driver of value. The more tenants per site, the higher returns, rising from 12% cash on cash ROIC for one tenant to 25% for two and up to 34% for three. And because both CAPEX and OPEX are largely fixed, this margin expansion flows straight through to cash flow. Our operational teams are delivering this model day in, day out across nine markets and this underpins our strategy of tenancy ratio increase through co-location and highly attractive build to suit. Combining high quality platform expansion with accelerating power utilization. And onto slide nine, looking forward, the opportunity is substantial, not just for years, but for decades ahead. And if we zone in on our next five-year strategic cycle from 2025 to 30, we see 34,000 new market tenancies expected, 29% unique mobile connections growth and a four times increase in data consumption. All of this being underpinned by 3% population growth per year with our nine markets almost doubling in population in the next 25 years. You will see here that the total addressable organic market from 25 to 30 of 34,000 new tenancies is close to the 31,000 tenancies we have as a group today. So the total addressable organic market is essentially the equivalent of doubling Helios Towers today. And our tenancy additions for the past couple of years have been around 2,500 each year, which is consistent with the high point of our guidance for this year. So what this all means is that we can be confident of the demand drivers ahead creating this addressable market new volume and be confident about our ability to deliver strong growth each year going forward. This means more volume, stronger returns from the asset base and growing compounding cash flow for years ahead. And with leading positions in seven out of our nine markets, and trusted operational execution capabilities, we're extremely well positioned to capture that demand as the mobile network proliferate and densify to satisfy the tidal wave of demand for mobile services for the decades ahead. So on to slide 10. I'm really, really excited to announce we'll be hosting our Capital Markets Day in London on November the 6th. At this event we'll be presenting our updated five-year strategic plan our enhanced capital allocation framework with focus on high returning organic growth cash flow generation and potential shareholder return and we'll be hosting interactive sessions with the executive team explaining how we achieve customer experience excellence and are taking the business to the next level in terms of performance. We look forward to seeing many of you there and sharing more about the next phase of growth and value creation for Helios Towers. So with that, I'll now hand over to Manjit who'll take you through the financials in more detail. Then we'll be back at the end for Q&A.

Thanks, Tom. And hello, everyone. Great to be speaking with you all today. Starting on slide 12, I'll be going through the financial results. As Thomas outlined the first half of 2025 shows continued momentum and delivery and we are on track to deliver on our full year guidance across all metrics. We are exactly where we want to be in terms of tenancy growth with tenancies increasing by 1,211 year to date and that's a 7% year-on-year improvement and we're progressing really well towards our 2.2 by 26 target with our tenancy ratio increasing to 2.11 at the end of the half year. This tenancy growth continues to be the key driver of our EBITDA, which has increased by 9% year-on-year to £226 million for H1 2025, with the last quarter annualised EBITDA of £458 million, which is the bar you see in the middle bar chart. Our combination of capital efficient growth through Colo lease-up and leveraging operational improvements has also driven our return on invested capital, and that's driven up to 13.6%, up from 12.9% a year of growth, and tracking really well towards our full year target of 14%. Importantly, we continue to see our free cash flow generation accelerate, driven by EBITDA expansion and timing of discretionary capital additions. And we've delivered a 40 million increase in free cash flow year on year to 30 million. And we are confident of reaching our full year guidance of 40 to 60 million. Now let's jump into some of the detail and moving on to page 13. Here we set out the growth we're seeing in number of sites and tenancies. The number of sites increased by 330 year-on-year to 14,515 and that's an increase of 190 year-to-date. New organic builds are an important element of our strategy and ultimately adds the hopper to which we can then drive further colo lease-up. We're very selective in our approach to new site rollouts, utilising analytics from our proprietary GIS platform to conduct analysis to ensure that the sites we build have a clear potential for lease up and strong day one returns. Tenancies increased by 2043 to 30,617 and that's a 7% year on year increase with 1,211 added year to date. We're seeing growth across all markets with particularly large increases across DRC, Tanzania and Oman. and as I mentioned earlier we saw a 0.1 tenancy ratio expansion year-on-year to 2.11 and again we're making very good progress towards our 2.2 target. As we continue to engage and partner with our customers on new opportunities we are clear that we always have and will continue to deploy capital on accretive opportunities that will drive returns and as Tom went through earlier the growth dynamics of our markets combined with our execution capabilities of our fantastic teams mean we will continue to see and deliver on these opportunities over the coming years. Moving on to slide 14, our revenue growth. We've seen revenue growth of 10% year on year to 215 million, driven predominantly by our strong tenancy growth. Our hard currency profile remains unchanged at 67% of our revenue in hard currency, which translates to 71% of our adjusted EBITDA being in hard currency. As a reminder, four of our markets are innately hard currency, including DRC and Oman, two of our three biggest markets, being dollarized or dollar pegged, and Senegal and Congo-Brasil being pegged to the euro. Importantly, this means that the revenues our customers receive are also hard currency, and this is also what they pay to us. In our Romanian markets, we also have portions of our revenue linked to hard currencies, adding further to the overall mix, and our earnings are further protected by contractual escalators including CPI escalators and annual slash power annual slash costly power escalators and de-escalators 99% 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 sign into long-term agreements with our customers with initial terms of 10 to 15 years and are largely non-cancelable Today, our contracted revenue of $5.3 billion has an average remaining life of just shy of seven years. In other words, we've secured minimum revenue of $5.3 billion in total without pursuing any new business, providing a strong underlying earning stream that we complement the further growth driven by tenancy rollout. And moving on to slide 15, we present the usual analysis showing the key drivers of revenue and EBITDA greater more detail. As with previous results presentations, the key driver of growth has been organic tenancy growth. You'll see a decrease in power-related revenues this quarter, and that's largely due to lower fuel prices in DRC and Tanzania, which we pass on to our customers, while also seeing a corresponding decrease in our power operating expenses, hedging us well from an overall dollar perspective. Overall, the escalator movements for power and CPI have washed through to negligible EBITDA impact, despite lower power prices and inflation slash FX moves. In short, The key driver of growth is through organic tenancy growth and operational leverage from lease up and we demonstrated again that the business structure continues to be robust and resilient and operating as designed. Moving on to slide 16. For the first half we incurred total capex of 54 million of which 16 million was non-discretionary. Now capex can be lumpy and we continue to guide for the full year of 150 to 180 million. We have our orders out for the remaining capex and consequently we'll see a higher level of capex in H2 but this is all good capital investments going into strong returning new builds, co-locations and opex initiatives and we have a busy rest of the year which is very very positive. On to slide 17, looking at our balance sheet and credit profile. We've seen continued improvements in our credit ratings with Fitch and S&P upgrading us to BB- and Moody's upgrading their outlook to positive. All of this reflects the work we've done to drive free cash flow which is now past the inflection point and accelerating as well as deleveraging our business. Our net leverage decreased by 0.4x year-on-year to 3.8x and we have approximately 425 million in available cash and undrawn debt facilities. This morning we were also delighted to make further improvements to our balance sheet finalising an update to some of our loans a few hours ago which resulted in our cost of debt reducing to 6.9% from 7.2%, which is fantastic. As a reminder, 92% of our debt continues to be at fixed rates following our bond refinance in 2024. We have no near-term maturities until 2027. And given we are free cash regenerative, this all puts us in a strong position and we have the firepower we need to deliver on all of our targets. On to slide 18, looking at our recurring and bottom line free cash flow. Our 2.2 strategy supports high fall-through from adjusted EBITDA to recurring free cash flow, with $19 million year-on-year increase in our H1 EBITDA going directly to an increase of $20 million to our recurring free cash flow. This resulted in recurring free cash flow increasing by 40% year-on-year to $70 million. Recurring free cash flow is akin to AFFO and is the cash generated from operations that management can allocate towards discretionary capex, debt paydowns, and Shareholder Distributions. Bottom line free cash flow for H1 increased by 40 million year on year to 30 million, principally driven by just the EBITDA expansion and the timing of discretionary capex. Following the inflection of free cash flow last year, we're really seeing now this kick on and we expect to hit our target of 40 to 60 million by year end. And this takes us to slide 19, where we reaffirm our guidance for 2025. Our target of 2,000 to 2,500 tenancies for the year remains as we continue to progress towards our 2.2 strategy. For adjusted EBITDA, we reaffirm our target range of $460 to $470 million. CAPEX target remains between $150 to $180 million, of which $100 to $130 million is discretionary and $50 million is non-discretionary. And as I said, free cash flow we expect to be between $40 and $60 million, which as a reminder is more than double our 224 levels. Finally, we expect to end 2025 at circa 3.5 net leverage. In summary, we've delivered a strong first half performance. We are exactly where we want to be heading into a busy second half of year. And with that, I'll pass back to Tom to wrap up.