NYSE:IHS (IHS) Q1 2024 Earnings Report Earnings HistoryForecast (IHS) EPS ResultsActual EPS-$0.07Consensus EPS $0.04Beat/MissMissed by -$0.11One Year Ago EPSN/A(IHS) Revenue ResultsActual Revenue$417.74 millionExpected Revenue$389.52 millionBeat/MissBeat by +$28.22 millionYoY Revenue GrowthN/A(IHS) Announcement DetailsQuarterQ1 2024Date5/14/2024TimeN/AConference Call DateTuesday, May 14, 2024Conference Call Time8:30AM ETConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by (IHS) Q1 2024 Earnings Call TranscriptProvided by QuartrMay 14, 2024 ShareLink copied to clipboard.There are 12 speakers on the call. Operator00:00:00At this time, I'd like to turn the conference over to Colby Sinosell. Please go ahead, sir. Speaker 100:00:06Thank you, operator. Thanks also to everyone for joining the call today. I'm Colby Sinocell, the EVP of Communications here at IHS. With me today are Sam Darwish, our Chairman and CEO and Steve Howdick, our CFO. This morning, we published our unaudited financial statements for the 3 month period ended March 31, 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. Speaker 100:00:34These 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 2, which should be read in full along with the cautionary statement regarding forward looking statements set out in our earnings release and 6 ks 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 sections 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 in assessing the performance of our business and ALFCF we view as important in assessing the liquidity of our business. Speaker 100:01:47Reconciliation 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. Speaker 200:02:03Thanks, Colby, and welcome everyone to our Q1 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 twenty twenty three and continued into the Q1 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 Q2 as our contract resets kick in post the devaluation in Q1 'twenty four. As such, we are maintaining our 2024 guidance, including our ForEx assumptions. Speaker 200:02:48We'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 2 70 tenants and 5 23 lease amendments and built 2 16 towers, including 158 in Brazil. We previously announced the signing of a new 3,950 tenant multiyear rollout agreement with Airtel in Nigeria in February, which also included a 3 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 2 years until 2,034. Speaker 200:03:35For 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 NARA devaluation that occurred this quarter start to meaningfully benefit our adjusted EBITDA margins. During the quarter, the average ForEx rate for the U. S. Dollar to the naira was 13.16 and was in line with our guidance of 13.15. This, however, compares to 8.15 $15,000,000 in Q4 'twenty three and $461,000,000 a year ago and equates to a 100 and $33,000,000 headwind quarter over quarter and a $392,000,000 headwind year over year. Speaker 200:04:23We, however, have seen the naira appreciate versus the peak rates we saw in March, which I will speak to shortly. Skipping to Slide 7, 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 a 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. Speaker 200:04:581, 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. 2, we continue to review our portfolio of markets determine the right composition for IHS going forward. This is expected to include the disposal of certain markets with a target of raising $500,000,000 to $1,000,000,000 over the next 12 months. And 3, 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. Speaker 200:05:53To 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 2 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. Speaker 200:06:22As 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'll have better aligned our governance policies with that of a mature U. S. Listed companies, which was an important goal we set at the time of our public listing. Speaker 200:07:00In 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 2 years as we reached an agreement to unwind our power managed services arrangement with MTN in the country. This agreement reflects escalating road 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. Speaker 200:07:48We 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 $270,000,000 term loan and used the proceeds to pay down U. S. Dollar letters of credit in Nigeria, reducing interest cost and releasing cash collateral, which improved our liquidity position and improved our interest expense. At the end of the quarter, we had $693,000,000 of available liquidity. Speaker 200:08:19As 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 macro. 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 to the dollar on March 11, but ended the quarter stronger at $13.94 We've also seen a narrowing in the spread between the official rate and the parare rate to between 0 5% on most days and in material improvement in U. Speaker 200:09:18S. Dollar availability. This has enabled us to access approximately $200,000,000 since the beginning of the year, of which we have upstreamed $61,000,000 to Gru since the end of the quarter $78,000,000 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 LatAm, we completed the sale of our Peru subsidiary to SBA Communications on April 30, 2024. Speaker 200:09:53And as noted earlier, we built 158 towers in Brazil during the quarter. We remain committed to Brazil, which is our 2nd 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. Speaker 300:10:16Thanks, Sam, and hello, everyone. Turning to slide 9, as Sam mentioned, here we show our Q1 performance. As you see here, both towers and tenants are up approximately 3% in Q1 2024 versus Q1 2023, while lease amendments again increased by double digit percentages. Fundamental underlying tenancy growth continues across our key markets. Clearly, the financial performance in Q1 was majorly impacted by the naira devaluation in the quarter from N912 to the dollar at 31 December to N1,394 to the dollar at 31 March 2024. Speaker 300:10:52Therefore, on a reported basis, revenue and adjusted EBITDA declined in the quarter consistent with our prior expectation that our Q1 'twenty four results would reflect the impact of the January devaluation of the naira. Specifically in Q1, revenue declined by 30.7%, adjusted EBITDA decreased by 44.8% and ALFC fell by 72.2% in each case on a reported basis and driven largely by the impact of the devaluation more than offsetting the strong organic growth. However, it is worth noting that the period on period comparison is also distorted by the presence of $48,000,000 of 1 off revenue and adjusted EBITDA and $43,000,000 of 1 off ALFCF in Q1 of 2023. Our adjusted EBITDA margin decreased to 44.3%. We expect our financial results to notably improve in Q2, twenty twenty four, driven in part by our FX resets. Speaker 300:11:50Our level of capex investment decreased by 65% in the quarter, largely due to lower capital expenditure for our Nigeria and SSA segments, partially offset by an increase in LatAm, all of which I'll discuss shortly. As communicated last quarter, while we've increased our focus on cash generation and pulled back our capital allocation, we continue to focus on projects that we believe promise the highest returns and are the most strategic. Finally, our consolidated net leverage ratio increased to 3.8 times at the end of Q1, up 0.4 times versus Q4 'twenty three. This is consistent with the expected increase we flagged last quarter due to the most recent devaluation in Nigeria and still within our target 3 to 4 times range as we have guided. Turning to our revenue on a consolidated basis, you can see how the continued devaluation turned the course of strong net growth into a 30.7% decline. Speaker 300:12:45The naira devalued 35% in Q1 as mentioned already, yet the business delivered organic revenue growth of 35.5 percent driven primarily by FX resets, CPI escalations and power. Our Q1 'twenty four results also reflect the absence of $48,000,000,000 from a one time cash payment from our smallest key customer in Nigeria in Q1 of last year and includes a $5,000,000 headwind as a result of the Brazilian telecom operator Oi having reached resolution on its restructuring plan. Fibre, new lease amendments, new colocation and new sites also contributed to organic growth this quarter and came from countries across our portfolio. The right side shows the organic growth rates of each of our segments for the quarter, where our Nigeria segment grew approximately 46%, including a large benefit from FX resets. On Slide 11, you can see our consolidated revenue, adjusted EBITDA and adjusted EBITDA margins for Q1 'twenty four. Speaker 300:13:43As discussed, the Nigeria devaluation drove 31% decrease in reported revenue in the Q1, despite the quarterly organic revenue growth of over 35% that again demonstrated the continued strong top line growth trends of the business. Q1 'twenty four reported revenue includes $133,000,000 headwind quarter over quarter and a $392,000,000 headwind year over year from the Nara devaluation or $219,000,000 after adjusting for the impact of FX resets over the past year. FX was an incremental $1,000,000 headwind during the quarter versus rates assumed in prior guidance when factoring in all currency assumptions. As we have previously noted, most of the FX resets on the US dollar denominated portion of our Nigeria contracts are calculated using the average rate of the prior quarter or the spot rate at the beginning of the current quarter. And therefore, our Q1 'twenty four results don't reflect the FX reset benefit from the late January devaluation, but this will start to show in our Q2 results. Speaker 300:14:45In addition, as we said, the comparison is also distorted due to the $48,000,000,000 of 1 off revenue in Q1 2023 and the $5,000,000 headwind from Oi's restructuring plan, both of which have similar impacts on adjusted EBITDA. In Q1 'twenty four, adjusted EBITDA of $185,000,000,000 decreased 45% and adjusted EBITDA margin was 44.3%, down 1100 basis points from the prior year. The year over year changes in adjusted EBITDA and margin for the Q1 primarily reflect decrease in revenue, including the absence of the one off items we've already discussed, as well as the higher operating costs in Nigeria versus certain expectations, albeit power generation cost of sales decreased by more than $26,000,000 As previously highlighted, through Project Green, we continue to prioritize the alternative sources of power to reduce our dependency on diesel. On slide 12, we first review our adjusted levered free cash flow or ALFCF and in Q1 'twenty four we generated ALFCF of $43,000,000 72% decrease versus Q1 'twenty 3, primarily due to a decrease in cash from operations and an increase in net interest paid, partially offset by a decrease in maintenance CapEx and withholding tax. However, the ALFCF growth rate is impacted by the $43,000,000 of one off impact we saw in Q1 of last year. Speaker 300:16:08ALFCF cash conversion rate was 23.3%. ALFCF in the quarter does benefit positively from some timing aspects related to maintenance CapEx and interest and should normalize in Q2. Turning to CapEx, in Q4 excuse me, in Q1 2024, CapEx of $53,000,000 decreased 65% year on year. This decrease was primarily driven by lower capital expenditure for our Nigeria and SSA segments of $77,000,000 $22,000,000 respectively, partially offset by an increase in capital expenditure of $1,000,000 for our LatAm segment. The decrease in Nigeria was primarily driven by decreases related to Project Green and to maintenance CapEx, while the decrease in the SSA is primarily driven by decreases related to refurbishment and also maintenance CapEx. Speaker 300:16:58As it relates to these decreases in maintenance CapEx over the past few quarters, we've challenged our operating teams to find ways to improve efficiency and they are delivering. Thus, we believe much of the savings we see will be permanent as opposed to push out into outer years. The increase in LatAm is primarily driven by increases related to new sites capital expenditure. As we've discussed previously, we remain focused on cash generation, but are still allocating some capital to projects that we believe promise the highest returns and are the most strategic. On the segment review on slide 13, I want to add to Sam's earlier comments on what we are seeing in Nigeria. Speaker 300:17:35In March 2024, the CBN announced having fully cleared the official backlog of FX transactions and raised interest rates by 200 basis points to 24.75 percent, the 2nd rate hike in 2024. These actions appear to have had a positive impact on Nigeria's FX market with the May 10th US dollar to naira Bloomberg rate at 1436 versus a peak of 1625 in March. The government, including the Ministry of Finance and Central Bank of Nigeria, passed a number of reforms in the last 6 months, both small and large, aimed at increasing dollar flow within Nigeria, increasing the attractiveness of Nigeria as a foreign direct investment destination and increasing transparency in the money markets. There is still more to do, but as a result, we've seen an increase in US dollars in Nigeria and FX reserves in the country have increased to $33,800,000,000 at the end of March 'twenty four from $32,900,000,000 at the end of December 23. Since the FX rate environment adjusted in January, we were able to access $78,000,000 settle US dollar obligations locally in Nigeria. Speaker 300:18:42And additionally, we've upstreamed $61,000,000 to group since the end of the quarter. We expect to upstream more over the remainder Speaker 200:18:50of the year. Meanwhile, the Speaker 300:18:52price of both oil and ice gas oil have increased recently. Looking at gas oil, it was $8.13 per tonne in Q1 'twenty four, up from $7.92 per tonne in Q4 'twenty three. And also inflation jumped to 33.2% this March versus 22% in March last year. For IHS, Q1 'twenty four revenue of GBP228,000,000 decreased 46% year on year on a reported basis, reflecting that ongoing devaluation in the quarter and the one off revenue in Q1 'twenty three, but increased 46% organically. Organic growth was driven primarily by FX resets and escalations. Speaker 300:19:32The negative FX impact was $392,000,000 or 65% due to devaluation. Our tower and tenant count increased by 0.2% and 1.9% respectively versus Q1 of last year. Our co location rate consequently improved to 1 point 59 times, up from 1.57 times in Q1 last year. These amendments continue to be a strong driver of growth, increasing 9.3% year on year as our customers added additional equipment to our sites, particularly 5 gs upgrades. Q1 2024 segment adjusted EBITDA in Nigeria was 103,000,000, a 62% decrease from a year ago and segment adjusted margin was down 1800 basis points to 45.2%, in each case largely driven by the Naira devaluation impacting revenue and the 1 of item in Q1 last year. Speaker 300:20:20While operating costs this quarter were higher than our own expectations for things such as bad debt, diesel, albeit year over year, we saw an overall reduction in cost of sales, primarily from diesel savings. In our Sub Saharan African segment, towers and tenants increased by 1.4% and 2.9% respectively versus Q1 'twenty three. Revenue increased by 7.5%, which organic revenue grew 15%, driven primarily by escalations and FX resets. Segment adjusted EBITDA increased 6.4%, which primarily reflects the increased revenue, partially offset by an increase in cost of sales due to higher power generation costs. Segment adjusted EBITDA margin was stable at 53% versus 53.6% in Q1 'twenty three. Speaker 300:21:05And also, as Sam mentioned, starting in Q2 of this year, we will no longer be providing backup power services to MTN South Africa and now have a more traditional steel and grass model with MTN in South Africa. This has derisked our business and will improve margins and cash flow. In our LatAm segment, towers and tenants grew by 11% and 6.4% respectively versus Q1 'twenty three. Revenue increased by 4.7 percent of which organic revenue growth decreased 0.4%, but that as a result of the Brazilian Telecom Operator OEIS restructuring plan and the subsequent contractual agreement with us in Brazil, leading to a GBP 5,000,000 reduction in revenue this quarter that we had not anticipated in guidance. Segment adjusted EBITDA increased by 9%, leading to a 70.8% segment adjusted EBITDA margin, a 2 50 basis point increase versus Q1 of 'twenty 3. Speaker 300:21:58In Brazil, our 2nd largest market with 7,815 towers, macro conditions were largely positive as FX rates were essentially flat and both interest rates and inflation came down. In MENA, towers and tenants grew by 8.7% and 9.1% respectively, while revenue increased by 12%, including a 6% organic revenue growth driven primarily by new sites and escalations. Segment adjusted EBITDA grew by nearly 66% and the Q1, 2024 segment adjusted EBITDA margin increased to 55.6%. Now skipping to Slide 15, we look at our capital structure related items. At March 31, 2024, we had approximately $4,000,000,000 of external debt and IFRS 16 lease liabilities. Speaker 300:22:45The $4,000,000,000 of debt, approximately $2,000,000,000 represents our bond financings and other indebtedness includes $370,000,000 that have been drawn down from the 3 year bullet term loan facility at the IHS Holding Limited level. That facility had $130,000,000 of undrawn capacity in Q1, of which we voluntarily reduced the undrawn amount by $70,000,000 in the quarter. And in April, we completed a drawdown of the remaining $60,000,000 balance since the availability of that remaining balance was expiring. As Sam mentioned, the balance sheet is an important component of our thinking as it relates to the strategic review. We have already undertaken and continue with various balance sheet initiatives to 1, extend maturities 2, manage interest rate expense 3, swap dollar obligations into local currency where possible and 4, add flexibility to our capital structure. Speaker 300:23:37This includes in March when we signed a $270,000,000 bilateral loan to refinance our letters of credit in Nigeria, extending the maturity of these obligations, reducing interest expense by approximately 300 basis points and releasing approximately $95,000,000 equivalent of cash collateral previously held against these letters of credit. As you can imagine, we're pleased to have completed these initiatives, which further derisked the balance sheet and increased our financial flexibility. Cash and cash equivalents increased to $33,000,000 at March 31 and excludes the $60,000,000 of additional funds from the term loan we drew down in April. In terms of where that cash is held, approximately 34% was held in naira at our Nigeria business, given the money that was recently freed up from the collateral against the credit lines. We're in the process of upstreaming much of this and have been able to upstream $61,000,000 following the end of the quarter at an average rate approximately NAR12.79 to the dollar, a positive reflection of the government's recent actions to increase daily FX turnover or USD availability and bring together the divergence between the parallel and official rates. Speaker 300:24:43While we anticipate to up stream again in 2024, we do caution it remains to be determined if the increased dollar availability can be sustained. Consequently, from all these moving elements, at the end of Q1 'twenty four, our consolidated net debt had reduced to approximately $3,700,000,000 and we had consolidated net leverage ratio of 3.8x, up 0.4x versus the end of 2023. We expect leverage to remain within our current target of 3 to 4x net leverage ratio this year prior to the realization of any future disposals, at which time we expect the leverage to drop. Finally, as it further relates to the devaluation, I want to point out that our Q1 results showed unusually large net loss of $1,600,000,000 which is driven primarily by the finance costs, the vast majority of which is unrealized FX losses. As we saw in Q2 of last year, in particular after the then Nigeria devaluation, these costs arise principally due to our US dollar bonds and because of the U. Speaker 300:25:43S. Dollar intercompany shareholder loan structure we have used historically to fund the business. These costs, which are very large of non cash, can vary significantly and typically increase in the context of a devaluation of the NIO, which is the primary reason why they increased dramatically in Q1. We've added back Slide 21 to the appendix of the presentation as we did in Q2 of last year to help further explain this dynamic and highlight the delta this past quarter. Moving to slide 16, we are maintaining our 2024 guidance, including our FX assumptions, but we are now absorbing an additional $12,000,000 in lost revenue from Oi versus our previous expectations and has 100% flow through to adjusted EBITDA and ALFCF. Speaker 300:26:26Despite that, we expect to see an improvement in our financial results and margin starting in Q2 'twenty four we benefit from the FX resets associated with the devaluation in Q1 'twenty four and based on our expectations for our KPIs. I'd also add that we've been mentioning that we've been reviewing our power managed services agreement with MTN in South Africa for some time now. And as we've discussed, this has already been completed in Q2 'twenty four. However, this doesn't impact our guidance as this was already factored in. On slide 17 on the left, you can see our revenue by reporting currency for Q1, whereas on the right, we provide the breakout of revenue based on contract split. Speaker 300:27:04The bottom of the slide shows the average annual FX rate assumptions used in our 2024 guidance and our unchanged from last quarter. This now brings us to the end of our formal presentation. We thank you for your time today. Operator, please now open the line for questions. Speaker 400:27:37And your first question comes from the line of Richard Choe from JPMorgan. Please go ahead. Speaker 500:27:44Hi. I wanted to Speaker 600:27:45check and see what you're seeing in terms of the transition to 4 gs and 5 gs. Nigeria, given that the currency had been so unstable, did you see a pullback? And now with, I guess, the rates kind of converging and having a little bit more stability, do you think you'll see an acceleration in that build for the rest of the year? Speaker 700:28:12Good morning, Richard. This is Sam. Look, it's unavoidable. At the moment, the carriers in Nigeria are focused on weathering basically the devaluation, the mass devaluation that has occurred. They will in my view slow down the transition from 4 gs to 5 gs. Speaker 700:28:36In any case, even as we talk 4 gs, they're still kind of like in the final stages of that rollout. So it's not going to be a massive delay. But my estimate is that we may see a little bit of a slowdown on the rollout of 5 gs until they see a little bit more clarity on where the naira will land. Speaker 800:28:58Richard, it's Peter. I would say that we factored a bunch of that into our guidance already. So if you remember, we pulled back significantly on CapEx along that's being driven through reductions in noodle sites in Nigeria as well as small things as well. So some of that is already baked in. I would also say if you look at Airtel Africa's results on Nigeria, they still continue to be pushing pretty hard as evidenced by our agreement with them in February around 3,950 tenant rollout over 5 years. Speaker 800:29:31So there's sort of there's certainly a bit of slowdown given where the macro is, but we're still seeing, particularly people like ASL is still keen to push ahead. We did have some 5 gs lease amendments in the quarter. We had 5 23 lease amendments total in Q1. And within that, there was some 5 gs a bit, mostly 4 gs. Speaker 600:29:51And then regarding the Oi, churn, I guess, it's $12,000,000 for the year. Is there any more after this year or is that largely going to be it? Speaker 800:30:05I mean that impact will continue thereafter. It actually moderates a bit next year given that restructuring plan has been agreed with them. But that's effectively what we're seeing through the impact of 2024. So just to reiterate that, that 12 was not forecast. We had forecast them already, and that 12 was not forecast. Speaker 800:30:26So you can consider that almost as outperformance versus the guidance because we haven't changed guidance ranges, but we're absorbing that additional hit. Speaker 600:30:35Great. Thank you. Speaker 400:30:39Your next question comes from the line of Michael Rollins from Citi. Please go ahead. Speaker 500:30:47Thanks and good morning. Couple of questions. Hi, Michael. 1st, I'm curious if you good morning. I was curious if you could give us an update on churn, what you're seeing from customers and if there's still some churn that needs to be processed in any of your key markets that we should be mindful of? Speaker 500:31:07And then second, in terms of the strategic review, did you look into the question as to whether or not the public markets are the right place for IHS equity? And what did you learn on that front? Thanks. Speaker 800:31:24So Mike, on the churn point, there isn't anything particularly new in terms of what we're seeing. No particular situation with carriers in any of our markets. I mean, people are obviously aware of the ongoing discussions with MTN in Nigeria, and that originally centered around 2,500 sites at the end of this year. But outside of that, we haven't changed our stance on that either. But other than that, there isn't really anything to comment on different or new trends or outsized trends in churn remains pretty low. Speaker 700:32:00And hi, Mario, this is Sam. So look, on the second question, look, we like New York, we like public markets, we definitely like you guys. So it's kind of like we're happy where we are. But at the moment, we have announced a strategic review. The strategic review will look at every different aspect of where we are. Speaker 700:32:24We fundamentally believe that we are being undervalued by public markets. Now the whole asset class is kind of like under pressure given where cost of money is at the moment. Our peers, our U. S. Peers are 40% down for example over the past 2 years. Speaker 700:32:42So we do acknowledge this is some kind of a trough at the moment that the markets are seeing. But again, Michael, look, nothing nothing is off the table as we conduct the strategic review and we will kind of like make the relevant announcement as and when we progress that review. Thank you. Speaker 400:33:04Your next question comes from the line of Jon Atkin from RBC. Please go ahead. Speaker 900:33:10Thanks. Just curious about capital allocation relative to the strategic review and what are some of the criteria that you're evaluating when you think about potential dispositions? You talked about wanting remain in Brazil, but whether it's by asset class or relative scale or geography, but any kind of broad brush criteria that we should be thinking about as you think about dispositions? Speaker 800:33:41Yes. I think I'm going to Steve. I think just for the brush, the business has always been a growth stock and we're in growth markets. We're an emerging market, growth infrastructure company and I think that is the intention to remain as such. You've seen this year that we've pulled back significantly on sort of organic CapEx spend. Speaker 800:34:01And that's so that we can focus on specific areas. This year is Brazil. And so hopefully that forms part of the long term capital allocation. But what we're also being very clear on is that, that totality of capital allocation is changing from history. We looked historically to deploy significant capital into M and A opportunities. Speaker 800:34:24And right now, we're thinking through what we have already. We're thinking through the balance sheet and potentially looking at paying down some debt. And we're also looking at nearer term shareholder returns and whether that be through reinvigorating share buybacks or whether that be through dividends at some point in the future. So those are sort of the broad brush changes that we are working through right now and that we're trying to be clear on. Speaker 900:34:53Thanks. Again, I think you kind of gave us some of the tools to think about this, but what can you highlight just to maybe to repeat or accentuate the 55% EBITDA margins for the year. So there's a step up here and what are the major drivers of that of your EBITDA margin expansion? Speaker 800:35:13Yes. So I think a few things. First, the Q1 EBITDA margin looks a little low in comparison to the full year trend, and that's in part driven by the Oasis that we covered, but it's also in part driven by some pass through revenue that we have in South Africa, which is coming to an end next quarter. So you'll see step up in margin from technicalities around pass through, but also particularly for our contract resets. We commented clearly on how Q1 has been impacted by the NREIT evaluation and contracts will start. Speaker 800:35:45In fact, we have started resetting beginning of April in Q2. So you'll see that step back up again. So for the rest of the year, given where we are in Q1, given the implied full year margin, 65%, we're expecting to see a 56%, 57% type margin run through the next 3 quarters of the year and the business is taking that direction. Speaker 900:36:13And lastly, on the build to suits, can you share what the kind of the single tenant or initial tenant returns are that you're underwriting to for the builds you have in your pipeline? Speaker 800:36:28Yes. I mean, no difference in history, to be honest. We're obviously we've obviously shrunk back the number of sites from last year and the majority of those remaining sites are in Brazil. We've always been a view that single tenant returns should be double digit. And then once we get a second tenant on, we're hoping to see something around the 20% mark from a return point of view. Speaker 800:36:52That continues to be the way we think about things. And we'll see how that unfolds. Speaker 900:37:01Thank you. Speaker 400:37:04Your next question comes from the line of David Lopez from New Street Research. Please go ahead. Speaker 1000:37:11Hi, good morning. Most of my questions have been answered, but one left on leverage. I was wondering leverage and shareholder remuneration. I was wondering what would be the leverage level you would like before starting to think about further share buybacks or interest in the dividend? And actually, a follow-up, apologies if it has been answered in the third question, but I missed part of it. Speaker 1000:37:40We have seen MTN Nigeria cutting its CapEx guidance materially a few weeks ago. I was wondering what's the risk to your guidance? And does that mean that we should maybe expect more to be to have the lower end of the revenue range or not? Thank you. Speaker 800:38:01Hi. We covered the I think we covered the MTN point earlier in terms of the very first question we have. So yes, we've seen MTN pull back on some CapEx. We expected that. And that was sort of baked into our guidance, but being offset by Airtel's push in the country given the announcement we signed. Speaker 800:38:21So I'm not expecting that to materially impact the guidance that we put out already. And on the leverage before returns, that's all being worked out right now. I don't want to get ahead of that. Clearly, 3.8 times where we are in Q1 is up towards the top end of our range. In time, we'd like to be back down at the bottom end of that range. Speaker 800:38:43Historically, we've been at the bottom of that range, but we're working through that right now as part of the broader strategic review for some real framework around the disposals, which we spoke about a little bit earlier today, but also then how we allocate that majority debt, but some may come back to a direct share with us. Speaker 700:39:07Thank you. David, if you allow me to also add that look, we are comfortable with our liquidity position at the moment. I mean, we have roughly $700,000,000 of liquidity. Traditionally, however, we have always been conservative on our debt allocation and we've always like given the range that we like to stay with, say, 3% to 4% is a range that is lower than most of what our peers are. Even as we are now with a massive devaluation of naira that took it from $400 to the dollar to almost $1400 or $1500 to the dollar, We're still all within our range. Speaker 700:39:46But again, this conservative mentality that Steve is talking about is the one that is driving us to basically say, you know what, let's further reduce our leverage. But it's not basically it's not something that it's not a danger we face at the moment. It's just something that we feel comfortable staying basically at lower levels of the range. And by the way, this is not tied to the dividend payment or this is not tied to a shareholder buyback situation. Those are more kind of like tied to concluding the share the strategic review that we are doing. Speaker 700:40:21We want to make sure that we get all the pieces somehow tied together before we kind of like commit to shareholder return. Okay, very clear. Thank you. Speaker 400:40:37Your next question comes from the line of Stella Creeps from Barclays. Please go ahead. Speaker 1100:40:43Hi, there. Good morning all. Many thanks for all of the updates. Yes, there was just a couple of other areas I wanted to ask about. And so on the sub Saharan African contracts, were there any changes of note in the Zambia contract versus before? Speaker 1100:40:58And I remember, I think you also had the Rwanda contract maturing. So I just wondered what the status of that was. And secondly, I had also noticed that the negative EBITDA portion, the other part, a. K. A. Speaker 1100:41:12Other costs, perhaps HOKO costs was down at $27,000,000 versus being in the 30s in prior quarters. So I was just wondering is that kind of sustainable level going forward or could this come down a little bit further? That would Speaker 800:41:26be great. So on the first question, nothing particularly of note to comment on in terms of the Zambia renewal, plus the minus as ever, but a 10 year renewal with MTS Zambia. Rwanda is not quite done yet, still progressing, still constructive, but not quite there yet. And sorry, the final question, can you just repeat the final question for me? Speaker 700:41:50Which item are you talking about? Speaker 1100:41:52Yes. So the other like the negative EBITDA from other areas, so these unallocated costs. I just noticed it's coming quite a bit. Speaker 800:42:01Yes. So that's kind of holding company costs that's been represented this quarter just to make sure that the presentation is correct. But that is our average cost. Yes, it's come down versus prior quarters. We do expect it to remain sort of lower than it has been historically. Speaker 800:42:18We've been taking various cost saving initiatives at the group level. And so yes, we expect that to continue. Speaker 1100:42:25Okay. That's super. And maybe if I could just ask also on the South Africa change of the agreement there. Is there any economic impact on the profitability of the contracts versus prior? Speaker 800:42:42That's all been already baked into our guidance, Stella. So there's sort of ups and downs that sort of we're making guidance. So no change to what you've been presented with. Speaker 400:42:58And that brings us to the end of the IHS Holding Limited First Quarter 2024 Earnings Results Call. Should you have any questions, please contact the Investor Relations team via the e mail address investorrelationsihstowers.com. The management team thank you for your participation today and wish you a good day.Read morePowered by Conference Call Audio Live Call not available Earnings Conference Call(IHS) Q1 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K) (IHS) Earnings HeadlinesHonolulu shipping container shelter to transition outMay 1 at 6:51 AM | msn.comIHS Outperforms the Industry, S&P 500 & PeersMay 1 at 1:50 AM | finance.yahoo.comGold Hits New Highs as Global Markets SpiralWhen Trump took office in 2017, gold was just $1,100 an ounce. By the time he left, it had soared to $1,839. Now… as new tariffs take effect, gold is breaking records again. You've hopefully already seen this in action… but gold is surpassing $3,000 per ounce for the first time EVER.May 4, 2025 | Premier Gold Co (Ad)Why IHS Holding Ltd (IHS) is Surging in 2025April 29, 2025 | msn.comS&P Global: An Impressive Information PowerhouseApril 22, 2025 | seekingalpha.comElijah Arroyo looks to make history at NFL Draft by being 1st pick from Frisco (Texas) Independence High SchoolApril 20, 2025 | msn.comSee More (IHS) Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like (IHS)? Sign up for Earnings360's daily newsletter to receive timely earnings updates on (IHS) and other key companies, straight to your email. Email Address About (IHS)IHS Inc. develops source of information, insight and analytics in different areas of business. The Company's segments include Resources, Transportation and Consolidated Markets & Solutions. The Company's Resources segment includes its Energy and Chemicals product offerings. Its Transportation segment includes its Automotive; Maritime & Trade, and Aerospace, Defense & Security product offerings. Its Consolidated Markets & Solutions segment includes its Product Design; Technology, Media & Telecom, and Economics & Country Risk product offerings. It provides authoritative analysis and forecasts of sales and production for light vehicles, medium and heavy commercial vehicles, powertrain, components and technology systems across various markets. 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There are 12 speakers on the call. Operator00:00:00At this time, I'd like to turn the conference over to Colby Sinosell. Please go ahead, sir. Speaker 100:00:06Thank you, operator. Thanks also to everyone for joining the call today. I'm Colby Sinocell, the EVP of Communications here at IHS. With me today are Sam Darwish, our Chairman and CEO and Steve Howdick, our CFO. This morning, we published our unaudited financial statements for the 3 month period ended March 31, 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. Speaker 100:00:34These 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 2, which should be read in full along with the cautionary statement regarding forward looking statements set out in our earnings release and 6 ks 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 sections 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 in assessing the performance of our business and ALFCF we view as important in assessing the liquidity of our business. Speaker 100:01:47Reconciliation 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. Speaker 200:02:03Thanks, Colby, and welcome everyone to our Q1 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 twenty twenty three and continued into the Q1 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 Q2 as our contract resets kick in post the devaluation in Q1 'twenty four. As such, we are maintaining our 2024 guidance, including our ForEx assumptions. Speaker 200:02:48We'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 2 70 tenants and 5 23 lease amendments and built 2 16 towers, including 158 in Brazil. We previously announced the signing of a new 3,950 tenant multiyear rollout agreement with Airtel in Nigeria in February, which also included a 3 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 2 years until 2,034. Speaker 200:03:35For 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 NARA devaluation that occurred this quarter start to meaningfully benefit our adjusted EBITDA margins. During the quarter, the average ForEx rate for the U. S. Dollar to the naira was 13.16 and was in line with our guidance of 13.15. This, however, compares to 8.15 $15,000,000 in Q4 'twenty three and $461,000,000 a year ago and equates to a 100 and $33,000,000 headwind quarter over quarter and a $392,000,000 headwind year over year. Speaker 200:04:23We, however, have seen the naira appreciate versus the peak rates we saw in March, which I will speak to shortly. Skipping to Slide 7, 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 a 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. Speaker 200:04:581, 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. 2, we continue to review our portfolio of markets determine the right composition for IHS going forward. This is expected to include the disposal of certain markets with a target of raising $500,000,000 to $1,000,000,000 over the next 12 months. And 3, 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. Speaker 200:05:53To 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 2 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. Speaker 200:06:22As 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'll have better aligned our governance policies with that of a mature U. S. Listed companies, which was an important goal we set at the time of our public listing. Speaker 200:07:00In 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 2 years as we reached an agreement to unwind our power managed services arrangement with MTN in the country. This agreement reflects escalating road 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. Speaker 200:07:48We 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 $270,000,000 term loan and used the proceeds to pay down U. S. Dollar letters of credit in Nigeria, reducing interest cost and releasing cash collateral, which improved our liquidity position and improved our interest expense. At the end of the quarter, we had $693,000,000 of available liquidity. Speaker 200:08:19As 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 macro. 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 to the dollar on March 11, but ended the quarter stronger at $13.94 We've also seen a narrowing in the spread between the official rate and the parare rate to between 0 5% on most days and in material improvement in U. Speaker 200:09:18S. Dollar availability. This has enabled us to access approximately $200,000,000 since the beginning of the year, of which we have upstreamed $61,000,000 to Gru since the end of the quarter $78,000,000 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 LatAm, we completed the sale of our Peru subsidiary to SBA Communications on April 30, 2024. Speaker 200:09:53And as noted earlier, we built 158 towers in Brazil during the quarter. We remain committed to Brazil, which is our 2nd 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. Speaker 300:10:16Thanks, Sam, and hello, everyone. Turning to slide 9, as Sam mentioned, here we show our Q1 performance. As you see here, both towers and tenants are up approximately 3% in Q1 2024 versus Q1 2023, while lease amendments again increased by double digit percentages. Fundamental underlying tenancy growth continues across our key markets. Clearly, the financial performance in Q1 was majorly impacted by the naira devaluation in the quarter from N912 to the dollar at 31 December to N1,394 to the dollar at 31 March 2024. Speaker 300:10:52Therefore, on a reported basis, revenue and adjusted EBITDA declined in the quarter consistent with our prior expectation that our Q1 'twenty four results would reflect the impact of the January devaluation of the naira. Specifically in Q1, revenue declined by 30.7%, adjusted EBITDA decreased by 44.8% and ALFC fell by 72.2% in each case on a reported basis and driven largely by the impact of the devaluation more than offsetting the strong organic growth. However, it is worth noting that the period on period comparison is also distorted by the presence of $48,000,000 of 1 off revenue and adjusted EBITDA and $43,000,000 of 1 off ALFCF in Q1 of 2023. Our adjusted EBITDA margin decreased to 44.3%. We expect our financial results to notably improve in Q2, twenty twenty four, driven in part by our FX resets. Speaker 300:11:50Our level of capex investment decreased by 65% in the quarter, largely due to lower capital expenditure for our Nigeria and SSA segments, partially offset by an increase in LatAm, all of which I'll discuss shortly. As communicated last quarter, while we've increased our focus on cash generation and pulled back our capital allocation, we continue to focus on projects that we believe promise the highest returns and are the most strategic. Finally, our consolidated net leverage ratio increased to 3.8 times at the end of Q1, up 0.4 times versus Q4 'twenty three. This is consistent with the expected increase we flagged last quarter due to the most recent devaluation in Nigeria and still within our target 3 to 4 times range as we have guided. Turning to our revenue on a consolidated basis, you can see how the continued devaluation turned the course of strong net growth into a 30.7% decline. Speaker 300:12:45The naira devalued 35% in Q1 as mentioned already, yet the business delivered organic revenue growth of 35.5 percent driven primarily by FX resets, CPI escalations and power. Our Q1 'twenty four results also reflect the absence of $48,000,000,000 from a one time cash payment from our smallest key customer in Nigeria in Q1 of last year and includes a $5,000,000 headwind as a result of the Brazilian telecom operator Oi having reached resolution on its restructuring plan. Fibre, new lease amendments, new colocation and new sites also contributed to organic growth this quarter and came from countries across our portfolio. The right side shows the organic growth rates of each of our segments for the quarter, where our Nigeria segment grew approximately 46%, including a large benefit from FX resets. On Slide 11, you can see our consolidated revenue, adjusted EBITDA and adjusted EBITDA margins for Q1 'twenty four. Speaker 300:13:43As discussed, the Nigeria devaluation drove 31% decrease in reported revenue in the Q1, despite the quarterly organic revenue growth of over 35% that again demonstrated the continued strong top line growth trends of the business. Q1 'twenty four reported revenue includes $133,000,000 headwind quarter over quarter and a $392,000,000 headwind year over year from the Nara devaluation or $219,000,000 after adjusting for the impact of FX resets over the past year. FX was an incremental $1,000,000 headwind during the quarter versus rates assumed in prior guidance when factoring in all currency assumptions. As we have previously noted, most of the FX resets on the US dollar denominated portion of our Nigeria contracts are calculated using the average rate of the prior quarter or the spot rate at the beginning of the current quarter. And therefore, our Q1 'twenty four results don't reflect the FX reset benefit from the late January devaluation, but this will start to show in our Q2 results. Speaker 300:14:45In addition, as we said, the comparison is also distorted due to the $48,000,000,000 of 1 off revenue in Q1 2023 and the $5,000,000 headwind from Oi's restructuring plan, both of which have similar impacts on adjusted EBITDA. In Q1 'twenty four, adjusted EBITDA of $185,000,000,000 decreased 45% and adjusted EBITDA margin was 44.3%, down 1100 basis points from the prior year. The year over year changes in adjusted EBITDA and margin for the Q1 primarily reflect decrease in revenue, including the absence of the one off items we've already discussed, as well as the higher operating costs in Nigeria versus certain expectations, albeit power generation cost of sales decreased by more than $26,000,000 As previously highlighted, through Project Green, we continue to prioritize the alternative sources of power to reduce our dependency on diesel. On slide 12, we first review our adjusted levered free cash flow or ALFCF and in Q1 'twenty four we generated ALFCF of $43,000,000 72% decrease versus Q1 'twenty 3, primarily due to a decrease in cash from operations and an increase in net interest paid, partially offset by a decrease in maintenance CapEx and withholding tax. However, the ALFCF growth rate is impacted by the $43,000,000 of one off impact we saw in Q1 of last year. Speaker 300:16:08ALFCF cash conversion rate was 23.3%. ALFCF in the quarter does benefit positively from some timing aspects related to maintenance CapEx and interest and should normalize in Q2. Turning to CapEx, in Q4 excuse me, in Q1 2024, CapEx of $53,000,000 decreased 65% year on year. This decrease was primarily driven by lower capital expenditure for our Nigeria and SSA segments of $77,000,000 $22,000,000 respectively, partially offset by an increase in capital expenditure of $1,000,000 for our LatAm segment. The decrease in Nigeria was primarily driven by decreases related to Project Green and to maintenance CapEx, while the decrease in the SSA is primarily driven by decreases related to refurbishment and also maintenance CapEx. Speaker 300:16:58As it relates to these decreases in maintenance CapEx over the past few quarters, we've challenged our operating teams to find ways to improve efficiency and they are delivering. Thus, we believe much of the savings we see will be permanent as opposed to push out into outer years. The increase in LatAm is primarily driven by increases related to new sites capital expenditure. As we've discussed previously, we remain focused on cash generation, but are still allocating some capital to projects that we believe promise the highest returns and are the most strategic. On the segment review on slide 13, I want to add to Sam's earlier comments on what we are seeing in Nigeria. Speaker 300:17:35In March 2024, the CBN announced having fully cleared the official backlog of FX transactions and raised interest rates by 200 basis points to 24.75 percent, the 2nd rate hike in 2024. These actions appear to have had a positive impact on Nigeria's FX market with the May 10th US dollar to naira Bloomberg rate at 1436 versus a peak of 1625 in March. The government, including the Ministry of Finance and Central Bank of Nigeria, passed a number of reforms in the last 6 months, both small and large, aimed at increasing dollar flow within Nigeria, increasing the attractiveness of Nigeria as a foreign direct investment destination and increasing transparency in the money markets. There is still more to do, but as a result, we've seen an increase in US dollars in Nigeria and FX reserves in the country have increased to $33,800,000,000 at the end of March 'twenty four from $32,900,000,000 at the end of December 23. Since the FX rate environment adjusted in January, we were able to access $78,000,000 settle US dollar obligations locally in Nigeria. Speaker 300:18:42And additionally, we've upstreamed $61,000,000 to group since the end of the quarter. We expect to upstream more over the remainder Speaker 200:18:50of the year. Meanwhile, the Speaker 300:18:52price of both oil and ice gas oil have increased recently. Looking at gas oil, it was $8.13 per tonne in Q1 'twenty four, up from $7.92 per tonne in Q4 'twenty three. And also inflation jumped to 33.2% this March versus 22% in March last year. For IHS, Q1 'twenty four revenue of GBP228,000,000 decreased 46% year on year on a reported basis, reflecting that ongoing devaluation in the quarter and the one off revenue in Q1 'twenty three, but increased 46% organically. Organic growth was driven primarily by FX resets and escalations. Speaker 300:19:32The negative FX impact was $392,000,000 or 65% due to devaluation. Our tower and tenant count increased by 0.2% and 1.9% respectively versus Q1 of last year. Our co location rate consequently improved to 1 point 59 times, up from 1.57 times in Q1 last year. These amendments continue to be a strong driver of growth, increasing 9.3% year on year as our customers added additional equipment to our sites, particularly 5 gs upgrades. Q1 2024 segment adjusted EBITDA in Nigeria was 103,000,000, a 62% decrease from a year ago and segment adjusted margin was down 1800 basis points to 45.2%, in each case largely driven by the Naira devaluation impacting revenue and the 1 of item in Q1 last year. Speaker 300:20:20While operating costs this quarter were higher than our own expectations for things such as bad debt, diesel, albeit year over year, we saw an overall reduction in cost of sales, primarily from diesel savings. In our Sub Saharan African segment, towers and tenants increased by 1.4% and 2.9% respectively versus Q1 'twenty three. Revenue increased by 7.5%, which organic revenue grew 15%, driven primarily by escalations and FX resets. Segment adjusted EBITDA increased 6.4%, which primarily reflects the increased revenue, partially offset by an increase in cost of sales due to higher power generation costs. Segment adjusted EBITDA margin was stable at 53% versus 53.6% in Q1 'twenty three. Speaker 300:21:05And also, as Sam mentioned, starting in Q2 of this year, we will no longer be providing backup power services to MTN South Africa and now have a more traditional steel and grass model with MTN in South Africa. This has derisked our business and will improve margins and cash flow. In our LatAm segment, towers and tenants grew by 11% and 6.4% respectively versus Q1 'twenty three. Revenue increased by 4.7 percent of which organic revenue growth decreased 0.4%, but that as a result of the Brazilian Telecom Operator OEIS restructuring plan and the subsequent contractual agreement with us in Brazil, leading to a GBP 5,000,000 reduction in revenue this quarter that we had not anticipated in guidance. Segment adjusted EBITDA increased by 9%, leading to a 70.8% segment adjusted EBITDA margin, a 2 50 basis point increase versus Q1 of 'twenty 3. Speaker 300:21:58In Brazil, our 2nd largest market with 7,815 towers, macro conditions were largely positive as FX rates were essentially flat and both interest rates and inflation came down. In MENA, towers and tenants grew by 8.7% and 9.1% respectively, while revenue increased by 12%, including a 6% organic revenue growth driven primarily by new sites and escalations. Segment adjusted EBITDA grew by nearly 66% and the Q1, 2024 segment adjusted EBITDA margin increased to 55.6%. Now skipping to Slide 15, we look at our capital structure related items. At March 31, 2024, we had approximately $4,000,000,000 of external debt and IFRS 16 lease liabilities. Speaker 300:22:45The $4,000,000,000 of debt, approximately $2,000,000,000 represents our bond financings and other indebtedness includes $370,000,000 that have been drawn down from the 3 year bullet term loan facility at the IHS Holding Limited level. That facility had $130,000,000 of undrawn capacity in Q1, of which we voluntarily reduced the undrawn amount by $70,000,000 in the quarter. And in April, we completed a drawdown of the remaining $60,000,000 balance since the availability of that remaining balance was expiring. As Sam mentioned, the balance sheet is an important component of our thinking as it relates to the strategic review. We have already undertaken and continue with various balance sheet initiatives to 1, extend maturities 2, manage interest rate expense 3, swap dollar obligations into local currency where possible and 4, add flexibility to our capital structure. Speaker 300:23:37This includes in March when we signed a $270,000,000 bilateral loan to refinance our letters of credit in Nigeria, extending the maturity of these obligations, reducing interest expense by approximately 300 basis points and releasing approximately $95,000,000 equivalent of cash collateral previously held against these letters of credit. As you can imagine, we're pleased to have completed these initiatives, which further derisked the balance sheet and increased our financial flexibility. Cash and cash equivalents increased to $33,000,000 at March 31 and excludes the $60,000,000 of additional funds from the term loan we drew down in April. In terms of where that cash is held, approximately 34% was held in naira at our Nigeria business, given the money that was recently freed up from the collateral against the credit lines. We're in the process of upstreaming much of this and have been able to upstream $61,000,000 following the end of the quarter at an average rate approximately NAR12.79 to the dollar, a positive reflection of the government's recent actions to increase daily FX turnover or USD availability and bring together the divergence between the parallel and official rates. Speaker 300:24:43While we anticipate to up stream again in 2024, we do caution it remains to be determined if the increased dollar availability can be sustained. Consequently, from all these moving elements, at the end of Q1 'twenty four, our consolidated net debt had reduced to approximately $3,700,000,000 and we had consolidated net leverage ratio of 3.8x, up 0.4x versus the end of 2023. We expect leverage to remain within our current target of 3 to 4x net leverage ratio this year prior to the realization of any future disposals, at which time we expect the leverage to drop. Finally, as it further relates to the devaluation, I want to point out that our Q1 results showed unusually large net loss of $1,600,000,000 which is driven primarily by the finance costs, the vast majority of which is unrealized FX losses. As we saw in Q2 of last year, in particular after the then Nigeria devaluation, these costs arise principally due to our US dollar bonds and because of the U. Speaker 300:25:43S. Dollar intercompany shareholder loan structure we have used historically to fund the business. These costs, which are very large of non cash, can vary significantly and typically increase in the context of a devaluation of the NIO, which is the primary reason why they increased dramatically in Q1. We've added back Slide 21 to the appendix of the presentation as we did in Q2 of last year to help further explain this dynamic and highlight the delta this past quarter. Moving to slide 16, we are maintaining our 2024 guidance, including our FX assumptions, but we are now absorbing an additional $12,000,000 in lost revenue from Oi versus our previous expectations and has 100% flow through to adjusted EBITDA and ALFCF. Speaker 300:26:26Despite that, we expect to see an improvement in our financial results and margin starting in Q2 'twenty four we benefit from the FX resets associated with the devaluation in Q1 'twenty four and based on our expectations for our KPIs. I'd also add that we've been mentioning that we've been reviewing our power managed services agreement with MTN in South Africa for some time now. And as we've discussed, this has already been completed in Q2 'twenty four. However, this doesn't impact our guidance as this was already factored in. On slide 17 on the left, you can see our revenue by reporting currency for Q1, whereas on the right, we provide the breakout of revenue based on contract split. Speaker 300:27:04The bottom of the slide shows the average annual FX rate assumptions used in our 2024 guidance and our unchanged from last quarter. This now brings us to the end of our formal presentation. We thank you for your time today. Operator, please now open the line for questions. Speaker 400:27:37And your first question comes from the line of Richard Choe from JPMorgan. Please go ahead. Speaker 500:27:44Hi. I wanted to Speaker 600:27:45check and see what you're seeing in terms of the transition to 4 gs and 5 gs. Nigeria, given that the currency had been so unstable, did you see a pullback? And now with, I guess, the rates kind of converging and having a little bit more stability, do you think you'll see an acceleration in that build for the rest of the year? Speaker 700:28:12Good morning, Richard. This is Sam. Look, it's unavoidable. At the moment, the carriers in Nigeria are focused on weathering basically the devaluation, the mass devaluation that has occurred. They will in my view slow down the transition from 4 gs to 5 gs. Speaker 700:28:36In any case, even as we talk 4 gs, they're still kind of like in the final stages of that rollout. So it's not going to be a massive delay. But my estimate is that we may see a little bit of a slowdown on the rollout of 5 gs until they see a little bit more clarity on where the naira will land. Speaker 800:28:58Richard, it's Peter. I would say that we factored a bunch of that into our guidance already. So if you remember, we pulled back significantly on CapEx along that's being driven through reductions in noodle sites in Nigeria as well as small things as well. So some of that is already baked in. I would also say if you look at Airtel Africa's results on Nigeria, they still continue to be pushing pretty hard as evidenced by our agreement with them in February around 3,950 tenant rollout over 5 years. Speaker 800:29:31So there's sort of there's certainly a bit of slowdown given where the macro is, but we're still seeing, particularly people like ASL is still keen to push ahead. We did have some 5 gs lease amendments in the quarter. We had 5 23 lease amendments total in Q1. And within that, there was some 5 gs a bit, mostly 4 gs. Speaker 600:29:51And then regarding the Oi, churn, I guess, it's $12,000,000 for the year. Is there any more after this year or is that largely going to be it? Speaker 800:30:05I mean that impact will continue thereafter. It actually moderates a bit next year given that restructuring plan has been agreed with them. But that's effectively what we're seeing through the impact of 2024. So just to reiterate that, that 12 was not forecast. We had forecast them already, and that 12 was not forecast. Speaker 800:30:26So you can consider that almost as outperformance versus the guidance because we haven't changed guidance ranges, but we're absorbing that additional hit. Speaker 600:30:35Great. Thank you. Speaker 400:30:39Your next question comes from the line of Michael Rollins from Citi. Please go ahead. Speaker 500:30:47Thanks and good morning. Couple of questions. Hi, Michael. 1st, I'm curious if you good morning. I was curious if you could give us an update on churn, what you're seeing from customers and if there's still some churn that needs to be processed in any of your key markets that we should be mindful of? Speaker 500:31:07And then second, in terms of the strategic review, did you look into the question as to whether or not the public markets are the right place for IHS equity? And what did you learn on that front? Thanks. Speaker 800:31:24So Mike, on the churn point, there isn't anything particularly new in terms of what we're seeing. No particular situation with carriers in any of our markets. I mean, people are obviously aware of the ongoing discussions with MTN in Nigeria, and that originally centered around 2,500 sites at the end of this year. But outside of that, we haven't changed our stance on that either. But other than that, there isn't really anything to comment on different or new trends or outsized trends in churn remains pretty low. Speaker 700:32:00And hi, Mario, this is Sam. So look, on the second question, look, we like New York, we like public markets, we definitely like you guys. So it's kind of like we're happy where we are. But at the moment, we have announced a strategic review. The strategic review will look at every different aspect of where we are. Speaker 700:32:24We fundamentally believe that we are being undervalued by public markets. Now the whole asset class is kind of like under pressure given where cost of money is at the moment. Our peers, our U. S. Peers are 40% down for example over the past 2 years. Speaker 700:32:42So we do acknowledge this is some kind of a trough at the moment that the markets are seeing. But again, Michael, look, nothing nothing is off the table as we conduct the strategic review and we will kind of like make the relevant announcement as and when we progress that review. Thank you. Speaker 400:33:04Your next question comes from the line of Jon Atkin from RBC. Please go ahead. Speaker 900:33:10Thanks. Just curious about capital allocation relative to the strategic review and what are some of the criteria that you're evaluating when you think about potential dispositions? You talked about wanting remain in Brazil, but whether it's by asset class or relative scale or geography, but any kind of broad brush criteria that we should be thinking about as you think about dispositions? Speaker 800:33:41Yes. I think I'm going to Steve. I think just for the brush, the business has always been a growth stock and we're in growth markets. We're an emerging market, growth infrastructure company and I think that is the intention to remain as such. You've seen this year that we've pulled back significantly on sort of organic CapEx spend. Speaker 800:34:01And that's so that we can focus on specific areas. This year is Brazil. And so hopefully that forms part of the long term capital allocation. But what we're also being very clear on is that, that totality of capital allocation is changing from history. We looked historically to deploy significant capital into M and A opportunities. Speaker 800:34:24And right now, we're thinking through what we have already. We're thinking through the balance sheet and potentially looking at paying down some debt. And we're also looking at nearer term shareholder returns and whether that be through reinvigorating share buybacks or whether that be through dividends at some point in the future. So those are sort of the broad brush changes that we are working through right now and that we're trying to be clear on. Speaker 900:34:53Thanks. Again, I think you kind of gave us some of the tools to think about this, but what can you highlight just to maybe to repeat or accentuate the 55% EBITDA margins for the year. So there's a step up here and what are the major drivers of that of your EBITDA margin expansion? Speaker 800:35:13Yes. So I think a few things. First, the Q1 EBITDA margin looks a little low in comparison to the full year trend, and that's in part driven by the Oasis that we covered, but it's also in part driven by some pass through revenue that we have in South Africa, which is coming to an end next quarter. So you'll see step up in margin from technicalities around pass through, but also particularly for our contract resets. We commented clearly on how Q1 has been impacted by the NREIT evaluation and contracts will start. Speaker 800:35:45In fact, we have started resetting beginning of April in Q2. So you'll see that step back up again. So for the rest of the year, given where we are in Q1, given the implied full year margin, 65%, we're expecting to see a 56%, 57% type margin run through the next 3 quarters of the year and the business is taking that direction. Speaker 900:36:13And lastly, on the build to suits, can you share what the kind of the single tenant or initial tenant returns are that you're underwriting to for the builds you have in your pipeline? Speaker 800:36:28Yes. I mean, no difference in history, to be honest. We're obviously we've obviously shrunk back the number of sites from last year and the majority of those remaining sites are in Brazil. We've always been a view that single tenant returns should be double digit. And then once we get a second tenant on, we're hoping to see something around the 20% mark from a return point of view. Speaker 800:36:52That continues to be the way we think about things. And we'll see how that unfolds. Speaker 900:37:01Thank you. Speaker 400:37:04Your next question comes from the line of David Lopez from New Street Research. Please go ahead. Speaker 1000:37:11Hi, good morning. Most of my questions have been answered, but one left on leverage. I was wondering leverage and shareholder remuneration. I was wondering what would be the leverage level you would like before starting to think about further share buybacks or interest in the dividend? And actually, a follow-up, apologies if it has been answered in the third question, but I missed part of it. Speaker 1000:37:40We have seen MTN Nigeria cutting its CapEx guidance materially a few weeks ago. I was wondering what's the risk to your guidance? And does that mean that we should maybe expect more to be to have the lower end of the revenue range or not? Thank you. Speaker 800:38:01Hi. We covered the I think we covered the MTN point earlier in terms of the very first question we have. So yes, we've seen MTN pull back on some CapEx. We expected that. And that was sort of baked into our guidance, but being offset by Airtel's push in the country given the announcement we signed. Speaker 800:38:21So I'm not expecting that to materially impact the guidance that we put out already. And on the leverage before returns, that's all being worked out right now. I don't want to get ahead of that. Clearly, 3.8 times where we are in Q1 is up towards the top end of our range. In time, we'd like to be back down at the bottom end of that range. Speaker 800:38:43Historically, we've been at the bottom of that range, but we're working through that right now as part of the broader strategic review for some real framework around the disposals, which we spoke about a little bit earlier today, but also then how we allocate that majority debt, but some may come back to a direct share with us. Speaker 700:39:07Thank you. David, if you allow me to also add that look, we are comfortable with our liquidity position at the moment. I mean, we have roughly $700,000,000 of liquidity. Traditionally, however, we have always been conservative on our debt allocation and we've always like given the range that we like to stay with, say, 3% to 4% is a range that is lower than most of what our peers are. Even as we are now with a massive devaluation of naira that took it from $400 to the dollar to almost $1400 or $1500 to the dollar, We're still all within our range. Speaker 700:39:46But again, this conservative mentality that Steve is talking about is the one that is driving us to basically say, you know what, let's further reduce our leverage. But it's not basically it's not something that it's not a danger we face at the moment. It's just something that we feel comfortable staying basically at lower levels of the range. And by the way, this is not tied to the dividend payment or this is not tied to a shareholder buyback situation. Those are more kind of like tied to concluding the share the strategic review that we are doing. Speaker 700:40:21We want to make sure that we get all the pieces somehow tied together before we kind of like commit to shareholder return. Okay, very clear. Thank you. Speaker 400:40:37Your next question comes from the line of Stella Creeps from Barclays. Please go ahead. Speaker 1100:40:43Hi, there. Good morning all. Many thanks for all of the updates. Yes, there was just a couple of other areas I wanted to ask about. And so on the sub Saharan African contracts, were there any changes of note in the Zambia contract versus before? Speaker 1100:40:58And I remember, I think you also had the Rwanda contract maturing. So I just wondered what the status of that was. And secondly, I had also noticed that the negative EBITDA portion, the other part, a. K. A. Speaker 1100:41:12Other costs, perhaps HOKO costs was down at $27,000,000 versus being in the 30s in prior quarters. So I was just wondering is that kind of sustainable level going forward or could this come down a little bit further? That would Speaker 800:41:26be great. So on the first question, nothing particularly of note to comment on in terms of the Zambia renewal, plus the minus as ever, but a 10 year renewal with MTS Zambia. Rwanda is not quite done yet, still progressing, still constructive, but not quite there yet. And sorry, the final question, can you just repeat the final question for me? Speaker 700:41:50Which item are you talking about? Speaker 1100:41:52Yes. So the other like the negative EBITDA from other areas, so these unallocated costs. I just noticed it's coming quite a bit. Speaker 800:42:01Yes. So that's kind of holding company costs that's been represented this quarter just to make sure that the presentation is correct. But that is our average cost. Yes, it's come down versus prior quarters. We do expect it to remain sort of lower than it has been historically. Speaker 800:42:18We've been taking various cost saving initiatives at the group level. And so yes, we expect that to continue. Speaker 1100:42:25Okay. That's super. And maybe if I could just ask also on the South Africa change of the agreement there. Is there any economic impact on the profitability of the contracts versus prior? Speaker 800:42:42That's all been already baked into our guidance, Stella. So there's sort of ups and downs that sort of we're making guidance. So no change to what you've been presented with. Speaker 400:42:58And that brings us to the end of the IHS Holding Limited First Quarter 2024 Earnings Results Call. Should you have any questions, please contact the Investor Relations team via the e mail address investorrelationsihstowers.com. The management team thank you for your participation today and wish you a good day.Read morePowered by