IHS Holding Limited Ordinary Shares

Good day and welcome to the IHS Holding Limited Earnings Results Call for the three-month period ending June 30th, 2022. Please note that today's conference is being webcast and recorded. If you would like to ask a question, please press star and then one on your telephone keypad at any time. At this time, I'd like to turn the conference over to Colby Sinasel. Please go ahead, sir.

Thank you, Operator. Thanks also to everyone for joining the call today. I'm Colby Sinasel, the SVP of Communications here at IHS. With me today are Sam Darwish, the Chairman and CEO of IHS, and Steve Howden, CFO. This morning we published our financial statements for the three-month and six-month periods ended June 30th, 2022 on the investor relations section of our website and issued a related earnings release and presentation. These are the consolidated results of IHS Holding Limited. which is listed on the New York Stock Exchange under the ticker symbol IHS, and which comprises the entirety of the group's operation. I'd also like to note that this morning we have filed with the SEC an amendment annual report on Form 20FA, which includes a restatement of the company's consolidated financial statements and related notes for the year ended December 31st, 2021, which update the financial statements for an error in the provisional business combination accounting for the company's November 2021 acquisition of 51% controlling interest in iSystems. The error resulted in an overstatement to goodwill, an understatement to non-controlling interest, and an overstatement to other reserves on our balance sheet, and an overstatement of exchange differences on translation of foreign operations on our income statement. Please refer to the explanatory note at the beginning of this form 20FA for further detail. Further, we'd like to point out that the restatement has no impact on previously reported revenue operating profit, loss for the year, adjusted EBITDA, cash from operations, or recurring leveraged free cash flow, nor does this correction affect the company's underlying business operations. Before we discuss the results, I would like to draw your attention to the disclaimer set out at the beginning of the presentation on slide two, which should be read in full along with the cautionary statement regarding forward-looking statements set out in our earnings release and 6-K filed as well today. In particular, the information to be discussed may contain forward-looking statements which, by their nature, involve known and unknown risks, uncertainties, and other important factors, some of which are beyond our control, that are difficult to predict, and other factors which may cause actual results, performance, or achievements, or industry results to be materially different from any future results, performance, or achievements, or industry results expressed or implied by such forward-looking statements, including those discussed in the risk factors section for Form 20-FA filed with the Securities and Exchange Commission and other filings with the SEC. We'll also refer to non-IFRS measures that we view as important in assessing the performance of our business. Reconciliation of non-IFRS metrics to the nearest IFRS metrics can be found in our earnings presentation, which is available on the investor relations section of our website. And with that, I'd like to turn the call over to Sam Darwish, our chairman and CEO.

Thanks, Colby, and welcome everyone to our second quarter 2022 earnings results poll. By the first quarter, despite what continues to be a volatile macro environment across the world, seeing continued double-digit organic revenue growth excluding one-time items, although the higher cost of diesel impacted adjusted EBITDA, while RLFCF benefited from a favorable withholding tax impact and some timing on maintenance capex. Demand continues to track expectations, and based on our H-1 results and our expectations for the back half of the year, we are raising our 2022 guidance for revenue by $10 million at the midpoint and reiterating our guidance for adjusted EBITDA, RLFCF, and capital expenditures. Steve will take you through the results in greater detail, but before doing so, I'm going to discuss our growth strategy, including a focus on revenue, adjusted EBITDA, and RLFCF, provide an overview of IHS following our recent acquisition of the MTN South Africa portfolio, and lastly, provide a strategic update on other key topics. On slide four, we again show our revenue, adjusted EBITDA, and RLFCF results over the past five years, that generated organic revenue growth of 18.2%, adjusted EBITDA growth of 15.1%, and all LSGF growth of 14.1% compounded annually during this time. Given our short existence as a public company, I think it's important to again highlight our long and established track record of generating attractive risk-adjusted growth. We believe this attractive growth is a function of the key elements of our strategy, namely the strong demand trends in our market, the inherent benefits of the collocation model, thoughtful and prudently financed M&A, and a broadening focus on other communication infrastructure solutions, including fiber, or with a focus on driving attractive profitability and ultimately ROI for our shareholders over time. The charts on slide five are similar to those on slide four, except they focus on the past five quarters as opposed to five years. You can see we delivered double-digit growth for reported revenue, while organic revenue growth of 10% was impacted by the one-time benefits we highlighted last year, but in line with the expectations we communicated last quarter. These one-time benefits to revenue last year, as well as additional one-time benefits to adjusted EBITDA last year, also impacted our adjusted EBITDA growth, which would have otherwise also grown double digits, while RLFCF was further impacted by the timing of interest payments following our bond raise late last year. On slide six, you can see that including the 5,691 towers we acquired in South Africa on May 31st, ISS owns nearly 40,000 towers across 11 countries, making us the third largest independent multinational tower company by tower count in the world. This geographical scale has both further diversified our revenue stream, having initially been founded as a Nigerian power company, but also positions us in some of the largest emerging markets in the world by GDP, including Nigeria, Brazil, and South Africa. In fact, assuming a full quarter impact from South Africa, our largest market, Nigeria, now accounts and that's despite what continues to be outside growth in nigeria separately please note we now disclose revenue by our top customers in our appendix on page 22nd turning to slide 7 as i just mentioned we have now closed the additional acquisition of 5691 towers from mtn south africa and are now the now the largest independent taco in the country Our South Africa team is led by Sandeer Msimango, part of our new office in Johannesburg. I've known Sandeer for some time, as he previously worked with MTN, where he led the strategic M&A and disposal across MTN's entire footprint for the company's passive infrastructure. As Africa's most industrialized market, South Africa represents a huge opportunity for iCHEPS. Having established a strong foundation in our other African markets, the entry into South Africa is timely. South Africa has a young and growing population of 60 million people who are increasingly data-driven. In March, the country's telecom regulator, ICASA, concluded their multi-bank option of mobile spectrum, which has given MNOs greater scope to invest in their network. Longer term, we believe this paves the way for 5G, which will require more towers and technological innovations. We are already seeing the first seeds of this with South Africa's 5G population coverage having increased from 0.7% in 2020 to 7.5% in 2021. In 2021, MTN South Africa became the first MNO to reach over 1,000 5G sites in any country on the African continent and announced their target to cover at least 25% of South Africa's population with 5G by the end of 2022. Indeed, by 2026, it's estimated that 21% of South Africa's SIMs will be 5G. These trends offer IHS a unique commercial opportunity from the onset. In addition, our provision of power managed services on approximately 13,000 sites for MTN is a key differentiator. This solution, which today is largely focused on battery backup, is expected to drive attractive returns in line with our co-location business. Given the elevated levels of flood shedding occurring in the country of LACE, the need for alternative solutions to the grid are increasing, and we are working with MTN to help further solve for their power requirements. In due course, we hope to broaden this service to benefit other MNOs who also face the same challenges resulting from power cuts. I also want to acknowledge recent news that MTN and Telecom SA have announced they have entered into discussions for MTN to acquire Telecom, subsequently followed by Rain's announcement of its interest in merging with Telecom. We await to see what ultimately occurs. However, we stand ready to support all of our customers and believe the opportunity for IHS in South Africa remains highly attractive.