IHS Holding Limited Ordinary Shares

Good day, and welcome to the IHS Holding Limited 4Q and 4-Year Earnings Results Conference Call. Please note that today's conference is being webcast and recorded. If you would like to ask a question, please press star and then 1 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 EVP of Communications here at IHS. With me today are Sam Darwish, our chairman and CEO, and Steve Howden, our CFO. This morning, we filed our annual report on Form 20F for the full year ended December 31st, 2023 with the SEC, which can also be found 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 2, which should be read in full along with the cautionary statement regarding forward-looking statements set out in our earnings release and 20F file as well today. In particular, the information to be discussed may contain forward-looking statements which, by their nature, involve known and unknown risks and 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 20F, filed today 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 in assessing the performance of our business, and ALFCF, that we view as important in assessing the liquidity of our business. A reconciliation of non-IFRS metrics to the nearest IFRS metrics can be found on 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, Koldi, and welcome everyone to our fourth quarter and year-end 2023 earnings results call. We're reporting a strong quarter of performance across our key metrics with revenue, adjusted EBITDA, and ALFCF in line or ahead of our expectations. Despite the meaningful Nigerian currency devaluation that began in June, while CapEx was meaningfully below expectations, our results reflect the continued strong secular trends we are seeing across our business including growth in lease amendments, new tenants, new sites, or built-to-suit, and targeted fiber rollout. For 2023 as a whole, we are reporting 8% revenue growth, 10% adjusted EBITDA growth, 19% ALFCF growth, and an 8% reduction in CAPEX. Organic growth was 37%. Group-wide, we added 1,041 co-locations and 4,929 lease amendments, And we surpassed our expectations for new sites, having built 1,329 new towers, mostly in Brazil with 812 in the country. As we continue to prioritize organically growing our asset base in that market. These strong growth trends should continue in 2024 as evidenced by our recently announced deal with Airtel in Nigeria that extended Airtel's contract to 2031 and included a commitment to add 3,950 new tenancies over the next five years, much of it front-loaded to 2024 and 2025. Which takes me to an important point. These strong fundamental trends are occurring against a challenging backdrop. The Naira continues to devalue at levels that sadly are offsetting much of these strong secular trends. From January to December 2023, the Naira suffered a 98% unfavorable movement. And from January 2024 to date, we have seen a further 75% unfavorable movement. This means a total unfavorable movement of 246% since January 23. Most of this negative movement came as a result of positively viewed government actions of unifying multiple exchange rates, removing the expensive petrol subsidies, and trying to contain the soaring inflation, which hit 28.9% in December 2023. While these actions were generally viewed positively by market observers and us, other supporting measures are required to contain the Naira devaluation. Some of these required changes began to occur recently in Q1, as the Nigerian Monetary Policy Committee hiked the main policy interest rate by 400 basis points and are adding much needed forex to the daily market. This has helped stabilize the currency over the past few weeks. Some analysts, including Goldman Sachs, among others, are even predicting a strengthening Naira by end of this year. market observers expect the monetary policy committee to further increase the main policy interest rate throughout 2024 as they aim to lower inflation and further stabilize the forex market from a 2023 results perspective the forex protection mechanisms in our revenue contracts helps us offset the majority of this pressure in the year and was evident in our q4 23 results however We expect the additional devaluation that began in January to further impact our results in 2024. While Steve will discuss this further when he discusses guidance, to give you some context, our guidance for 2024 assumes an average rate of 1,610 naira to the dollar, whereas the average rate in 2023 was 638. and that the devaluation in the Naira will have a negative $535 million impact on revenue year on year, even after adjusting for the impact of the Forex resets. Given the macro environment we're operating in, particularly in Nigeria, which represented 63% of revenue in Q4-23, we continue to take what we believe is a more balanced approach to growth and cash generation, We also expect the significant reduction in capex that started in the second half of 2023 to continue in 2024, along with a continued focus on improving operating efficiencies through productivity enhancements and cost reductions. is excitingly this also includes an increased focus on innovation including the deepening usage of ai in how we utilize maintain and operate on our towers and it's something i'm very passionate about and personally spearheading A dedicated team has been working for a while on developing use cases that can help us improve our efficiencies using the massive amounts of data we have due to our extensive operations over decades. Skipping to slide seven, I want to discuss some of our key highlights, starting with commercial progress. As of year end 2023, we had $11 billion of revenue under contract with an average remaining tenant term of 7.5 years. I think it's important to highlight these metrics as they point to the durability we believe inherent in our business model, despite what the perception may be. We continue to make progress on the commercial front across the business as we have signed contracts with MTN in Cameroon and in Cote d'Ivoire for a further 10 years. In Nigeria, as MTN highlighted in their most recent earnings announcement earlier this month, we continue to engage constructively with them to find ways to alleviate some of the operating pressure they are under, given our key role in running the majority of their network in the country, while also maintaining appropriate economic results for ourselves. Also, as previously mentioned, we signed an extended contract with Airtel in Nigeria this past February, taking the term into the next decade in an agreement that includes a commitment by Airtel Nigeria to add 3,950 new tenancies over the next five years and is front-loaded over the next two. We are very excited about the potential of this mutually beneficial partnership. Shifting to governance progress, in January of this year, we announced a settlement agreement with Vandel in relation to the public dispute, which you are aware of, reflecting a commitment to strong corporate governance and constructive shareholder engagement. The text of the proposed amendments to the Articles of Association will be made available to shareholders before the next AGM. On stock liquidity, more progress here. we have removed all lockups on the pre-IPO shareholders. We also estimate approximately 14% of our shares are now owned by post-IPO shareholders compared to just 5% at the time of the IPO, an almost 300% improvement in float size. This is also evident in our average daily trading volume, which is now 574,000 shares, almost five times higher than what it was in May 2022. During the quarter, we continued to buy shares under our two-year buyback program with a total of $10 million worth of shares bought over the past two quarters. I'd like now to provide an update on Project Green. For 2023, we spent $103 million of capex versus our guidance of $90 to $100 million. and achieved ALFCF savings of approximately $24 million versus guidance of $22 million. Overall, the project remains on target, as you can see by our results. We will provide a more comprehensive update on the impact Project Glean and our carbon reduction roadmap is having when we publish our annual sustainability report, which we expect to be next quarter. Moving on to our balance sheet, we continue to feel comfortable with our liquidity position, but also continue to increase our focus on cash generation and continue to evaluate and execute various ways to do such. As of year end, we had $724 million of available liquidity, including our undrawn group RCF and the remaining undrawn portion of our group term loan. We continue to actively pursue initiatives to shift more debt into local currency, extend maturities, and manage interest expense. This was evident in our recent local currency $116 million equivalent facility in Cote d'Ivoire. The proceeds of this local OPCO loan will refinance U.S. dollar obligations at the holding company level. Also, as previously announced in November, we extended the maturity of our $300 million group RCF to October 2026. Leverage ended the year at 3.4 times, and as we had previously commented, was impacted by the Naira devaluation in June. We expect leverage to further increase in 2024 given the additional narrow devaluation, but expect to remain within our target three to four times and continue to have an adequate liquidity position, which Steve will cover further in his section. And finally, on shareholder return, I would like to make the following statement. Despite the currency headwinds in Nigeria, we believe in the underlying strength of our business and believe our equity is undervalued, given Africa's perceived place in the global markets. For example, Nigeria. When I moved to Nigeria 25 years ago, the country had approximately 120 million people. Today, it has approximately 225 million people. added a total population higher than Germany, France, or the UK, and is growing by 2.4% a year. That's 5 million people a year. To put into perspective, that's almost the size of Colorado a year. Nigeria also has a young energetic population with the majority of the population younger than the age of 20 as compared to aging developed markets. Hundreds of millions of people with no landlines, poor roads, poor transport infrastructure depend on their mobile phone for almost every aspect of their life. It has become as important as food or water or education. The trend in mobile phone adaptability and usage is irreversible and is showing through our growth and also through the massive growth in the underlying numbers of our key customers in Nigeria despite the forex headwinds. Macro conditions will tighten and loosen in cycles but the growth in mobile usage is one way to the sky and thus why we believe Nigeria's value is still significantly underestimated especially in our sector. The value and long-term growth prospects of the Latin America business are also very strong. When we moved to Latin during the COVID year, we had zero base. Today, we have almost 8,000 towers and one of the largest fiber networks in Brazil with a business that generated $146 million in EBITDA, in adjusted EBITDA in 2023. More than 800 new towers and 1.3 million more homes passed in 2023 alone. South Africa is growing. Sub-Saharan Africa is growing. We own and operate 40,000 towers across 11 markets covering approximately 800 million people who need their phones for almost every basic aspect of their life. And IHS sits at the heart of enabling such connectivity as a leader of its domain. It is for these reasons that we believe IHS Towers is underappreciated at our current valuation, and that we have to consider ways of unlocking value for our shareholders. Under the guidance of our board of directors, we have commenced work with our advisors, including JP Morgan, to evaluate strategic alternatives for the business across our portfolio and our capital allocation priorities. This exercise is intended to generate the best value for investors. We will provide an update on this as appropriate, including any potential actions. And with that, I will turn the call over to Steve.