IHS Holding Limited Ordinary Shares

Good day and welcome to the IHS Holding Limited earnings results call for the three-month period ended September 30, 2023. 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 Sinusel. Please go ahead, sir.

Thank you, Operator. Thanks also to everyone for joining the call today. I'm Colby Sinosalvi, EVP of Communications here at IHS. With me today are Sam Darwish, our chairman and CEO, and Steve Howden, our CFO. This morning, we published our unaudited financial statements for the three-month and nine-month periods ended September 30th, 2023 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 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 in 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 of our Form 20-F filed with the Securities and Exchange Commission and our other filings with the SEC. We'll also refer to non-IFRS measures, including adjusted EBITDA, that we view as important to assessing the performance of our business, and ALFCF, that we view as important in assessing the liquidity 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. With that, I'd like to turn the call over to Sam Darwish, our chairman and CEO.

Thanks, Colby, and welcome everyone to our third quarter 2023 earnings results call. We are reporting a solid quarter of performance across our KPIs with revenue and adjusted EBITDA in line or ahead of our expectations, notwithstanding the recent current devaluation, while CapEx was meaningfully below. As everyone should know from our prior earnings call, these Q3 results are the first full quarter of results post the significant devaluation in the Nigerian currency, the Naira. As a reminder, the Naira devalued by 59%, from 472 in mid-June to 753 at the end of Q2. And in Q3, average 768 versus 431 last year is 78% devaluation that drove a 10.4% reduction in our reported dollar revenue. The Forex protection mechanism in our revenue contracts have begun to reset, and we will see more evidence of this resetting in our Q4 results. Overall, the business continues to perform well, driven by solid organic growth of 30.6%, with contributions across each of our segments that reflects robust secular demand and the quality of our contract structures. The reduction in capex reflects an increasingly more balanced approach we are taking to growth and cash generation in light of what remains a challenging macroeconomic environment across the world, but particularly in Nigeria. and we now expect to be towards the low end of our CapEx guidance range for the year. On a quarter-over-quarter basis, the Naira represented a negative $139 million impact to revenue, driven by the devaluation that began in mid-June. Positively, we expect to see a notable sequential setup in revenue in Q4, as we see the full benefit of our contractual Forex resets kick in. As a reminder, 53% of our revenue is tied to hard currency, of which really all USD contracted revenue resets quarterly or sooner, and nearly all of our revenue has an annual contractual escalator, of which most occur in January. Given these expectations, we are maintaining our 2023 guidance for revenue, adjusted EBITDA and CAPEX. I'd also like to point out that we've stopped reporting RLFCF, or Recurring Leveraged Free Cash Flow, and have replaced it with ALFCF or adjusted levered free cash flow, which better reflects our liquidity position. We maintain the same range for ALFCF that we had for RLFCF, but Steve will outline the slight change in definition between these two metrics later on. We expect our heightened focus on cash generation to be even more evident in 2024 as we pursue operational efficiencies through productivity enhancements, cost reductions, and slowing of CapEx versus recent years. In addition, we are constantly reviewing our portfolio of markets and assets and will continue to focus our capital allocation on what we believe to be high growth core markets. We believe these initiatives will help enable IHS to sustain healthy double digit organic growth while delivering the meaningful cash generation inherent in our business model. We look forward to sharing our 2024 guidance next quarter. Keeping to slide seven, I want to discuss some of our key highlights for the quarter. Starting with Nigeria, as I mentioned earlier, the significant devaluation that began in mid-June, in addition to access to forex, remain a challenge. We are, however, encouraged by the appointment of a new governor of the CBN in September, and more recently reported efforts to clear approximately $1 billion of the forex backlog. These represent positive developments, but there is still much more for the government to do. We have not upstreamed from Nigeria since the $65 million completed in H1 2023, but we will continue to assess opportunities for upstreaming as they arise in the remainder of 2023. I would like to remind our audience that we have operated in Nigeria in particular for over 22 years, and over that period we've gone through other outsized devaluations, including most recently in 2016. And each time, our business continued to grow thereafter, and we have confidence we will do so again this time. For example, the Naira devalued from approximately $197 to $305 in 2016, a devaluation of 55%. Back then, we saw a similar next quarter negative impact to revenue and profitability, as we are seeing now. But then we saw revenue and profitability build back over the next few quarters as our Forex reset and escalation mechanisms kicked in. leading to the Nigeria business delivering revenue growth of 22% in dollar terms the year after 2017, an indication of how resilient our business was to devaluation as contract resets and escalations kicked in. Moving on, first to Brazil and then to South Africa. In Brazil, we remain focused on our sizeable B2S program, and during the quarter we built 294 towers in LATAM and remain on target to achieve our goal of 750 or more builds for the year. We also refinanced our existing tower co-term loans via the issuance of local debentures as we continue our focus on raising more debt in local currency to better align our debt profile with our revenue profile. The Brazilian Central Bank again reduced interest rates by 50 basis points in early November the third consecutive time over the past few months. Now to South Africa, while we are encouraged by the improvement we have seen in the level of load shedding since last quarter, we continue to evaluate our power managed service business with MTN and others. We will update you as appropriate and if necessary. On stock liquidity, on October 16th, we freed up another 180 million shares, and therefore, all of the shares that had been subject to lockup under our shareholder agreement are now freely tradable, albeit certain holders remain subject to Rule 144 requirements. The expiration of the lockups over the past 18 months appears to have had a positive impact on our trading liquidity. which has more than tripled from 122,000 to over 400,000 shares per day on average. During the third quarter, we also repurchased nearly 950,000 shares and spent $4.8 million as part of our up to $50 million share buyback program that expires in August 2025. Shifting to our balance sheet, we have over $850 million of available liquidity between cash and undrawn facilities, plus various undrawn facilities at the OPCO level. This reduction by $100 million from last quarter is because we have reduced the undrawn portion of our 2022 term loan by $100 million to $130 million, but extended the availability period of the undrawn balance from October 2023 to April 2024. Additionally, de-risking our capital structure remains a focus of ours, and we have successfully extended the maturity of our 300 million group revolver from March 2025 to October 2026. With net leverage of 3.2 times, we are still comfortably within our target range of 3 to 4. And please remember that we have no meaningful debt maturities until Q4 2025. We feel good about our balance sheet position, but we continue to monitor the market and evaluate ways to further strengthen our position as we have again recently done. Lastly, regarding shareholder considerations, we continue to engage in constructive dialogue with Vandel and are making progress towards our mutual goals. We also continue to engage with MTN group to better align on various commercial and governance matters, and will provide additional updates at the appropriate time. With that, I will turn the call over to Steve.