IHS Holding Limited Ordinary Shares

Good day and welcome to the IHS Holding Limited second quarter 2024 earnings results call for the three-month period ended June 30, 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 one on your telephone keypad at any time. At this time, I'd like to turn the conference over to Naya Bermudez. Please go ahead.

Thank you, Operator. Thanks also to everyone for joining the call today. I'm Naya Bermudez, Senior Manager of Investor Relations 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 and the June 30, 2024 with the SEC, which can also be found on the investor relations section of our website. We also 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 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 the cautionary statements 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, 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 factor 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 known 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 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, Naya, and welcome everyone to our second quarter 2024 earnings results call. We're reporting solid performance on revenue, adjusted EBITDA and ALFCF, while CAPEX decreased meaningfully. This quarter, we began putting the negative impacts of the January 2024 Naira devaluation in the rearview mirror as we started to realize more of the benefits of the Forex resets in our revenue contracts and saw a significant step up in adjusted EBITDA and adjusted EBITDA margin from the first quarter. The reduction in capex reflects the actions we're taking to generate more cash and narrow our focus to projects that we believe will deliver the highest returns. Two of the main goals of our ongoing strategic review, which I will discuss in more detail shortly. We've made important progress on commercial matters in the quarter with the extension of our contract with MTN South Africa through 2034 and the renewal of contracts with MTN Rwanda also through 2034. And most notably, just last week, we announced a significant milestone in our long-term commercial relationship with MTN in Nigeria. We renewed and extended all our tower contracts with MTN in Nigeria through 2032, covering nearly 13,500 tenancies and approximately 23,800 lease amendments. This also includes 1,430 of approximately 2,500 tenancies that were due to expire in 2024 and 2025, but will now remain with IHS Nigeria. Over the last month, we have renewed or extended all 26,000 tenancies with MTN in addition to approximately 26,000 lease amendments across six countries into the next decade. With the MTN renewals completed, we can now focus on value creation and operational efficiencies. We now have approximately $12.3 billion of contracted revenues with an average remaining tenant term of more than eight years. Let me also touch on some of our financial highlights in the quarter. We saw revenue increase by 4% and adjusted EBITDA increased by 35% from Q1 2024, as we saw our contract resets kick in. Organic growth for the quarter versus Q2 2023 was 69%. Group-wide, we added net 385 tenants, 1,566 lease amendments, and built 207 towers, including 136 in Brazil. For the remainder of the year, we expect strong performance in our KPIs as the underlying trends driving our business remain healthy and the higher adjusted EBITDA margin continues after the dip of Q1 margins emanating from the January 2024 devaluation in Nigeria. During the quarter, the average Forex rate for the US dollar to the Naira was 1,392. As the Nigeria Forex market gradually stabilizes, we continue to see USD availability and more favorable conditions to source on upstream US dollars to the group. Turning to slide 7, as you can see, we are in a great position, having renewed and extended all our contracts with MTN in Nigeria and across our other African markets. In Nigeria, we renewed nearly 13,500 tenancies through 2032, which includes 1,430 out of the approximate 2,500 sites that were due to expire in 2024 and 2025, bringing our total tenant count in Nigeria to over 25,000. Please remember, we also signed a multi-year 3,950 tenant rollout agreement with Airtel Nigeria in February, which also included a three-year contract extension. The agreement with MTN in Nigeria together with the recent renewals between IHS and MTN group across all six African markets covering approximately 26,000 tenancies, Nigeria, Cameroon, Rwanda, Zambia, Cote d'Ivoire, and South Africa, where we both do business, demonstrates how the two companies are set to work collaboratively to continue delivering mobile connectivity across Africa. Building on our 20-plus year relationship as commercial partners, both companies will leverage our shared operational excellence and engineering expertise to meet the end users' increasingly sophisticated data demands. Together, IHS Towers and MTN Group have a track record of navigating complex operating environments and challenging microeconomic conditions to deliver connectivity crucial to economic growth and digital inclusion. I want to commend our Nigerian team and their commercial colleagues for their efforts to get this agreement across the line and find a solution that helps secure our long-term financial stability. The renewed contracts provide a more sustainable split between local and foreign currency and introduces a new diesel link component that better shares the risk of potential fluctuations in the value of the Naira and the cost of diesel. With the introduction of a power indexation element in Nigeria and the unwind of our power managed services in South Africa, we are now much more protected against energy price fluctuations as a company. The renewal is a testament to the valued relationship with MTN and our commitment to work together to mitigate the impacts of global macro conditions and broaden mobile connectivity through our critical infrastructure. We continue to believe in the vast opportunity in Nigeria and look forward to working with MTN to enable critical communication services and mobile connectivity as well as address increasing data demands in this fast-growing market. In addition to commercial milestones, we are making great progress across a number of our initiatives. Let's turn to slide 8 to look at some of the highlights. As it relates to our strategic review of unlocking shareholder value versus our existing suppressed valuation, we are starting to deliver on elements such as improving our governance framework as evidenced by the positive outcome of our 24 AGM and resolving our commercial matters as reflected by the comprehensive contract renewals with MTN. In addition, we continue to focus on increasing our operating profitability and substantially reducing our capex to improve cash flow generation. We are assessing group-wide costs and CAPEX structures, including how we can introduce more technology, especially artificial intelligence, into our ways of working to help us realize efficiencies. During the quarter, we also reorganized our Brazilian operations, increasing the levels of integration between our tower business and fiber business. This will provide not only cost efficiencies, but also speed to market benefits as well. We are beginning to see the impact of this overall efficiency improvements in our Q2 24 results and our 24 guidance implies continuation of higher margins versus 23. Additionally, we continue to examine our portfolio of markets to determine the right composition for IHS going forward. And as previously indicated, this will include raising proceeds with the target of 500 million to a billion dollars. The capital raised from these initiatives will primarily be allocated to reduce debt, while also considering share buybacks and or introducing a dividend policy. As a reminder, these initial targets do not rule out additional initiatives we are assessing in parallel in our pursuit of increasing shareholder value. Moving on to governance, as I just mentioned, we are pleased that the proposals to amend the company's articles of association were approved by shareholders at the AGM held in June. The voting results mark a significant achievement for IHS, better aligning our governance framework with that of mature U.S. listed companies. With MTN, we remain engaged on any outstanding governance issues and anticipate a mutually agreeable resolution in due course. Moving to our balance sheet, which remains a top priority, we continue to remain comfortable as we actively pursue initiatives to extend maturities, manage interest expense, and shift more debt into local currency. At the end of the quarter, we had $746 million of available liquidity. We continue to expect to remain within our target leverage range of 3 to 4 this year, albeit at the top end of the range. I'd now like to provide an update on Nigeria's macro. Since the end of the first quarter, the Central Bank of Nigeria further increased the policy interest rate by 200 basis points to 26.75%, initially in May and then again in July. as the CBN continues to combat inflation and remains focused on price stability in the country. We remain cautiously optimistic as the forex market in Nigeria appears to have stabilized modestly, with the Naira closing at 1597 on August 9, 2024. We continue to see U.S. dollar availability in the country, which supported our sourcing of nearly $290 million year to date, of which we have upstreamed approximately $94 million to group during and after the second quarter. Market conditions permitting, we expect to upstream more through the second half of 2024. Lastly, on LATAM, we completed the sale of our Peru subsidiary to SBA Communications on April 30th, 2024. And as noted earlier, we built 136 towers in Brazil during the quarter for a total of 294 towers year to date. We remain committed to Brazil, which is our second largest market and one of our fastest 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.