IHS Holding Limited Ordinary Shares

Good day and welcome to the IHS Holding Limited First Quarter 2024 Earnings Results Call for the three-month period ended March 31st, 2024. Please note that today's conference is being webcast and recorded. If you would like to ask a question, please press star and then the number 1 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 Sinusel, 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 published our unaudited financial statements for the three-month period ended March 31st, 2024 with the SEC, which can also be found on the Investor Relations section of our website, and issued a related earnings release, presentation, and supplemental deck. These are the consolidated results of IHS Holding Limited, which is listed on the New York Stock Exchange under the ticker symbol IHS, 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 and 6K 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 our risk section of our Form 20F, followed by 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. 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 first quarter 2024 earnings results call. We're reporting solid performance across our key metrics when considering the further significant devaluation of the Nigerian currency, the Naira, that took place during the second half of 2023 and continued into the first quarter of 2024. Results were broadly in line with our expectations, while ALFCF meaningfully outperformed due to timing. We expect to see more positive momentum in the second quarter as our contract resets, Kiken, post the devaluation in Q1 24. As such, we are maintaining our 2024 guidance, including our Forex assumptions. We've made strong commercial progress since the beginning of the year across our African business. Organic growth for the quarter was 35%. Group-wide, we added 270 tenants and 523 lease amendments and built 216 towers, including 158 in Brazil. We previously announced the signing of a new 3,950 tenant multi-year rollout agreement with Airtel in Nigeria in February, which also included a three-year contract extension. We have renewed our master lease agreement with MTN in Zambia for a further 10 years and also just extended our MLA with MTN South Africa by another two years until 2034. For the remainder of the year, we expect an acceleration in our KPIs as the underlying trends driving our business remain healthy and the impact of our Forex resets that are associated with the narrow devaluation that occurred this quarter start to meaningfully benefit our adjusted EBITDA margins. During the quarter, The average forex rate for the US dollar to the Naira was 1,316 and was in line with our guidance of 1,315. This, however, compares to 815 in Q4 23 and 461 a year ago and equates to a $133 million headwind quarter over quarter and a $392 million headwind year over year. We, however, have seen the Naira appreciate versus the peak rates we saw in March, which I will speak to shortly. Skipping to slide seven, I want to discuss our highlights. I'd like to start by providing an update on our strategic review that we announced during our earnings call in March. We continue to look at all options through a value creation lens with the goal of maximizing the value of our assets and therefore value for shareholders over the near, medium and long term. There are a number of areas of focus here. One, increasing our operating profitability and substantially reducing our capex to increase cash flow generation. which is reflected in our 2024 guidance and implies a notable step up in adjusted EBITDA margins for the remainder of the year and a significant reduction in CAPEX year over year. Two, we continue to review our portfolio of markets to determine the right composition for IHS going forward. This is expected to include the disposal of certain markets with a target of raising $500 million to $1 billion over the next 12 months. And three, capital allocation of increased cash flow and disposal proceeds raised are expected to be primarily utilized to reduce debt. However, we will also consider deploying excess proceeds through share buybacks and or introducing a dividend policy. To be clear, these initial targets do not rule out further initiatives to continue increasing shareholder value, which we continue to assess in parallel. While it's only been two months, we're off to a good start, with significant work already completed by us and our advisors to identify and analyze these various opportunities. We will continue providing updates as we progress. Moving on to governance, as previously disclosed in January 2024, we reached a settlement agreement with Vandel, reflecting a commitment to strong corporate governance and constructive shareholder engagement. IHS's board of directors are supportive of the proposals being put forward by Vandell and recommends investors vote to approve these changes at our next AGM, which is expected to occur in June. Should shareholders support these proposals, we will have better aligned our governance policies with that of mature U.S. listed companies, which was an important goal we set at the time of our public listing. In terms of our commercial relationship with MTN, We are constantly in constructive and evolving discussions as matters keep progressing. In March, we signed a 10-year renewal with MTN in Zambia, and we just extended the South Africa MLA by two years as we reached an agreement to unwind our power managed services arrangement with MTN in the country. This agreement reflects the escalating load shedding situation in South Africa, whereby both companies agreed for MTN to undertake the CAPEX and OPEX requirements to build the resilience they desire. In Nigeria, we continue to constructively discuss and explore ways to support our largest client. Moving to our balance sheet, which is a top priority, we continue to actively pursue initiatives to extend maturities, manage interest expense, and shift more debt into local currency. During the quarter, we signed a new $270 million term loan and used the proceeds to pay down US dollar letters of credit in Nigeria, reducing interest costs and releasing cash collateral, which improved our liquidity position and improved our interest expense. At the end of the quarter, we had $693 million of available liquidity. As anticipated, given the devaluation during the quarter, our leverage increased further, ending the quarter at 3.8. However, we continue to expect to remain within our target range of 3 to 4 this year. I'd now like to provide an update on Nigeria's macros. In March, the Central Bank of Nigeria announced it had fully cleared the official forex backlog, and the Monetary Policy Committee further increased the policy interest rate by 200 basis points to 24.75%. Positive actions that appear to have had a positive impact on the Naira, which peaked at $16.25 on March 11th, but ended the quarter stronger at $1,394. We've also seen a narrowing in the spread between the official rate and the parallel rate to between 0% and 5% on most days, and a material improvement in U.S. dollar availability. This has enabled us to access approximately $200 million since the beginning of the year, of which we have upstreamed $61 million to grow. since the end of the quarter and 78 million dollars to settle usd letters of credit in nigeria with the balance used for general corporate purposes we expect to upstream more during the remainder of the year lastly on latin we completed the sale of our peru subsidiary to sba communications on april 30th 2024 and as noted earlier we built 158 towers in brazil during the quarter We remain committed to Brazil, which is our second largest market, and one of our factors growing. We continue to drive strong operational results there and see significant ongoing growth opportunities. And with that, I will turn the call over to Steve.