Helios Towers plc

Good morning, everybody and thank you for making the time to join us for us to communicate our Q3 2021 Trading Update. I'm going to flick through the slides.

So hopefully you've got them in front of you. Joining me on Slide two.

Today the usual trio, I've got Tom Greenwood who's our Chief Operating Officer and will be our CEO once I step down in April next year and move to a non-executive deputy chair role and also Manjit Dhillon, who is our CFO that you've met before many times. If I go to Slide three, this outlines the agenda for our presentation today and as you'll note, there'll be plenty of time for Q&A at the end, which will come through our conference coordinator, Bethany.

So let me go to the highlight Slide five. Well, look, we've had a strong quarter in terms of our financial metrics.

We'll delivered a 10% revenue growth, bringing Q3 revenue just a little over $114 million for the quarter. And that's driven by the onboarding of the three Senegal Tower portfolio acquisition, as well as steady organic growth in the quarter.

Correspondingly, our EBITDA has grown by some 6% coming in just slightly shy of $61 million for the quarter. Now, margin has decreased by two percentage points year-over-year to 53%, but this is probably driven by investment in SG&A that we've made consciously to support our M&A activity in the new markets that we're bringing on board over the next few months.

In terms of our portfolio free cash flow, we've grown up portfolio free cash flow by 2%, again, just shy of $45 million for Q3. This reflects of course our EBITDA growth, but slightly offset by increase in corporate income tax, as well as some lease payments which is a norm for our business.

Moving on to operational and strategic update and KPIs well, look, it's been a really solid strong quarter. Actually, it's our strongest quarter on tenancy growth for six years.

We delivered 683 tenancies in the quarter bringing our year to date tendency count to 853 which is in line with our full-year expectation of being in the range we've articulated every quarter this year, which is between 1,000 and 1,500 tenancies. And it reflects our -- it underpins the well-invested portfolio we've nurtured over the last few years and making sure were ready to bring customers on to our asset base when they give us the order.

In terms of tenancy guidance, I've mentioned we're sticking to a 1,000 to 1,500 tenancies for this year and we're very excited about the strong, not only the strong year to date performance, but we have a robust pipeline as we communicated this morning with a further investment in CapEx to support the growth we're seeing coming through next year. In terms of acquisitions and the progress we're making on M&As, we've announced, well, look, our new markets team continue to progress well in closing and integrating the acquisitions, we've announced.

There's five new markets in Africa and the Middle East that we're still yet to close, and we're confident of closing a number of these by the year end. And in terms of CEO transition, as you know mid-August I announced my retirement and Tom Greenwood will be succeeding me as a CEO from our AGM in April 22.

That transition is going incredibly well. We're working towards our five-year strategy that will articulate in Q1 of next year.

And I'm looking forward to my non-executive role post April next year as Deputy Chair. So let me hand over now to Tom who's going to take us through the next few slides.

Thanks very much Kash and hi, everyone. Great to talk to you today.

So I'm on Slide six just looking at a few charts for tenancy and EBITDA and plenty of free cash flow. As Kash mentioned, we continue to drive tenancies upwards, both with inorganic and organic.

We've added over 2,100 tendencies year to date close to 1,300 being from the acquisition in Senegal and 853 year to date on an organic basis and as Kash mentioned, very much therefore expecting to, and the year within our stated range of 1,000 to 1,500 probably directionally somewhat towards the middle of that range. EBITDA continues to move upwards as would be expected.

We've seen 7% growth from our 2020. Full year EBITDA for our Q3 annualized being at $243 million.

It's probably worth noting here that a lot of the tenancies in Q3 came on towards the end of the quarter. So you're not seeing a full quarter of revenue and EBITDA from them.

But if they had all come on as the start of the quarter, i.e. July 1, we would've seen that EBITDA probably about $9 million increase from that $243 million taking about $252 million.

So that just gives you a sort of feel of the timing of these tendencies and what you should expect going into Q4, but also more importantly in FY '22 next year. Again, portfolio free cash flows as Kash mentioned touchdown slightly.

This was as anticipated driven by corporate income tax in some of our markets where we are now cash-paying the tax plus a bit of extra a non-discretionary CapEx in the first half of this year. Moving on now to Slide seven and again, our sustainable business strategy update, I'm pleased to say that at the end of November on the 25th, we'll be doing our core regarding carbon and I'm really looking forward to talking to everyone on that, to talk about how we are benefiting the markets that we operate in from an environmental perspective and continuing to drive down carbon whilst increasing obviously digital inclusion and all the things we do around the mobile sectors in our market.

And again, just at the bottom reminder around the same time, we produce our FY '21 and your report in March next year. They'll also be the usual sustainable business report similar to last year.

So look out for that one. And strategic updates moving now to Page nine as Kash alluded to making good progress on closing the remaining acquisitions, obviously Senegal now very much closed and part of our operational business and we're looking forward to replicate the remaining five markets as we move forward over the next few weeks and months.

So we're anticipating closing Madagascar and Malawi in the next month or so. Oman is progressing well.

We are moving forward also in couple of chat with the regulatory processes there. If we look now on Page 10, here we give a little bit more detail on some of that.

At the bottom there, you can see our managing directors of each market that we have in place now. We're really pleased to say that Corinne, Vick, Matthews and Ramsey are already driving our businesses forward in those markets.

One point to put out here for Oman, we've previously guided to closing by the end of this year. You can see that on the targeted closing line we have now puts in Q4/Q1.

Nothing really of materiality there. Just simply the timing of some of the closing processes there regarding the regulatory process.

And it's possible we will also close in Q4, but it's also possible it might seep into Q1. So we just wanted to mention that here.

And again, shutting a bond was still progressing. That was the early stages of the regulatory processes as previously mentioned, and also moving forward in and having the teams ready that to, to close.

We have MDs earmarked for those two markets as well. Not formally in place yet as a, as a list of men launch process that but overall making very good progress, I'd say across all another Sunnyville very much fully operational and driving forward as a, as a great part of our business.

We've already seen some new tendencies coming through those. You might've seen them in the numbers emergent anticipate more roll-out coming in that market in Q4, which is really exciting to see moving now onto slide 11 and here just really a reminder, I guess, of the ongoing structural growth that we have in our market mobile is a really critical service sector tool, the economies and our markets on those overseas, very compelling macro fundamentals that we see around population increase and of course, young population all of this is helping to drive our own tenancy additions and just reiterating that on the pulse of blast with the with the growth so far this year we're comfortable reiterating our guidance for being between 1000 and 1500 tenancies on an organic basis for the year.

And again, just on the bottom right-hand side just pointing out some external market research which says that it needs to be 30,000 new points of service in our markets over the next five or six years in order to meet the capacity demands from all of these numbers that you see here on the top, the population increase of 52 million across our markets, really quite staggering mobile subscriber increase of 65 million, again, quite a staggering number, as well as significant updates of the uptick in data usage and 4g connections across our markets. Quite interesting as well.

On the on the middle left, you can see plus 12%, this thing, the revenue growth forecast for MNOs in such hard Africa this year which done straight, I think very strong you know, upward trend in revenue. And you can see some of the comments from, from some of our key customers here on the page as well.

So overall you know, sentiment good, nothing really changed from, the markets over the past few years. And, we expect these trends to very much continue providing us with real structural growth now in our markets particularly given our strong positions within them.

So moving on, I will hand over to manage it now for the next section.

Thanks Tom. Hi everyone.

It's great to speak to me today. I'll be going to the financial results and starting on slide 13 and continuing on with what cash and Tom have mentioned earlier, we really have had a strong quarter of growth driven by organic roll-outs and also driven by our new market Senegal, which has really hit the ground running.

And on this slide, you'll see, we have summarized the main KPIs, which I'll, we'll be talking through in detail in the next few slides, but in general, we are seeing good growth across a number of key metrics. So jumping into the detail and moving on to slide 14, I mean, we see really robust organic tendency grades in Q3.

We've added 683 tenancy in the quarter which brings us up to 853 for the year to date and a total of 17,773 tendencies outside Q3 2021, which is an 18% increase from where we were in Q3 2020 I've mentioned in previous results. Calls, tenancy rollout are lumpy calls from quarter and following the performance year to date, which is supported by a strong tenancy pipeline.

We have, again, reiterated our tendency guidance of a thousand to 1,500 increments with tendencies for the our colleagues remain laser-focused on building out the pipeline and delivering for our customers somewhere exciting. They expect to get very busy end of the year, quick comments on tenancy ratio with the introduction of Senegal with the group tendency ratio, which used to 1.99 in each one, a 2021 with organic roll outs.

During Q3, we've seen this tick up to two point area three, excluding centerboard bay. Our tenancy ratio is 2.18, which is up at 4.9 X and year on year on a like-for-like basis.

Again, as previously mentioned, we will see tendency ratio move around as we integrate our required portfolios, which come with lower tendency ratios on day one, then our group average. However, this is a great opportunity for us with growing our asset base and the number of sites to which we can develop adding further care locations over the years.

And we'll see that the tenancy ratio and other metrics will compound over the years to come. Now, I want to start 15 and looking at our revenues and adjusted EBITDA.

We've seen growth year on year, and of course from quartz at the base with revenues up 10% year on year, 5% quarter from quarter, and EBITDAR up 6% year on year and 4% quarter over quarter. Now some of that growth is to the integration of SonicWall and whilst we've seen growth organically and tendencies, we've seen revenue and EBITDA will be flat quarter on quarter another sheet to a couple of reasons.

Firstly, the majority of our organic tenancies revolved out predominantly in the late parts of Q3 and as such, we've had limited trading impacts from these, but we'll see these coming through in Q4, Q1 and beyond. And secondly, in line with the guidance given we've continued to invest in our SGNA to support our expansionary strategy, which we'll start to see being leveraged as we close the new market shortly, but high level, we have a well invested top bull, but delivering strong organic and inorganic tenancy growth, which will be C and we'll continue to see coming through in our revenues.

NEPA dies in courses in years to come. Now, if we move on to slide 16, you'll see the usual breakdowns provided, which are broadly consistent from previous quarterly updates.

We have strong currency hedge business, which is underpinned by long-term contracts with blue chip mobile network operators. 98% of our revenues come from international mobile network operators comprising the likes of Airtel and MTN, Orange Tigo, Vodacom, and free cynical, who we purchased the descendant.

These portfolio from, we have strong long-term contracts with our customers and assets Q3 2021. We have long-term contracted revenues of 3.7 billion with an average remaining life of 7.6 years, which has increased by 200 million quarter on quarter due to the increased number of tendencies we have in Q3.

And this means exchanging new wins and roll out. We already have that revenue contracted and in the bag and provides a strong underlying earnings stream for the business.

We also have 62% of our revenues and hard currency being either USD or Euro taped. As a reminder, this will increase to 68% pro forma for the nuts acquisitions, which translates to 73%.

We're looking at it on, at an EBITDAR level. And that provides a strong, natural FX hedge broad business, which is further complimented by our annual inflation escalators, which we have with our customers, with all of our country and all of our contracts moving on to slide 17 CapEx.

And yet to date, we deployed 272 million over 1 billion of CapEx guidance for the year of the 200 of 217 million, 182 about is relates to acquisition Caltex principally the SonicWall acquisition and 70 million has been incurred in relation to great upgrade investments with the rest being 20 million for non-discretionary CapEx. As we do a cut for the rest of the year, we've increased our CapEx guidance by 30 million for our starfish markets from the range of 110 to 140 that's now increasing to 140 to 172 million.

And this is due to some board purchasing of materials for rollouts in 2022. And this is supported by our strong tenancy pipeline.

So effectively we've ordered now to effectively manage our inventory so that we can pull out and deliver quickly for our customers. Outside of that increase, all of the CapEx remains as is with the majority of the CapEx, roughly 683 relates to acquisition consideration, which we expect to be encouraged in the next couple of months as mentioned, I knew mark his team continue to progress well with the closing back positions, we do highlight that the mine acquisition could close near the Q4 or Q1.

And if this acquisition does move into next year or 2021 cap X will decrease by that consideration of 575 million finally moving on to slide 18. And here we show a summary of our financial debt and our Q3 net leverage was 3.4 and continued to be below our target range of three and a half to four and a half.

As mentioned previously, we strengthened our balance sheet table the last 12 to 18 months and continue to hold roughly around $1 billion worth of available funds, comprising cash on balance sheet and under all debt facilities and our funds in place for the announced acquisitions and are in a strong financial position to support our grade strategy. And with that, I'll pass back to Kash to wrap up.

Thanks, Manjit. So look, I'm on slide 19.

And this is the last slide and then we'll be moving on to a two and eight key takeaways from this presentation. We're seeing significant momentum in our organic inorganic and our ESG action and strategy.

We've got as we've heard, we've got a well invested portfolio. That's delivering our strongest quarter of organic tenancy additions in six years with a robust pipeline as mentioned by Tom and manage it a few minutes ago outlook for the remainder of this year and beyond is a very positive with a strong order book for being processed in terms of the acquisitions and the progress we're making.

Look again reinforcing what Tom said. We're making really good progress.

We're hiring local people. We've got now MDs in each of our markets or driving the closure process.

And once these acquisitions are closed, we will be the most diverse tower company across Africa and Middle East. And that brings its with itself robustness and stability.

And as you heard quite a high proportion of a hard currency be at 73%. So we're very excited about the momentum, the businesses currently got.

And finally we're continuing to progress on our cell visits strategy. We're going to publish our carbon roadmap on the 25th of November that you will have a detailed log on for that.

And on that note, I'm going to hand it back to Bethany to help us coordinate the Q&A. Thanks, Bethany.

Thank you. Good morning.

Can I check, can hear me? A - Kash Pandya Yeah we can, John.

Good morning. I've got three questions please.

The first one is you're spending $5 million more to hit the ground running with bolt on's. Can I just check that in next year that's five number once it annualizes won't be more than that.

Secondly, in terms of capital expenditure and the 13 million you're spending extra year, I just want to make sure that this is suspect for what the market has in in forecast. So all else being equal, of course won't be because of the bolt-ons would you expect as a consequence of what you're doing now?

The CapEx guidance for the five established market next year to be 80 to 110 million, I E 30 million, less than usual. And then lastly, Oman it's sort of three months since we last spoke.

And of course you got that in there in part because of the third player that's backed by Vodafone. Is there anything noteworthy that you can tell us that may have sort of changed since the last time we spoke about this particular third player and your interactions with them?

Thank you. Thanks Sean.

Monday. Why don't you take the first two and Tom, you take the Oman point.

Yeah, absolutely. So on both points actually SGN prospects, we will be giving our 2022 guidance as when we release our annual results next year, but in advance of that.

So with regards SGNA, we would expect there'll be an increase year on year with inflation as, as normally happens. There may be a slight check-up following the integration of chatting coupon.

But in general, we would expect that it would be normal course increases year on year. With regards to CapEx of 30 million.

Again, I wouldn't change the, the modeling for 2022 at this point until we give more updated guidance, but effectively we have brought forward some of that CapEx into this year. So we would see a slight tick down in the next year.

Sorry, if I may, I'm sorry, Manjit. I specifically asked for the 5 million, I just want to make sure that it's 5 million, because at the start of the year it was 3 million, then it became fun and we're not going to compete in a position next year.

It becomes seven or eight or nine. Can you comment about that?

Yeah, just to clarify, once again, I've mentioned the first half year, the 3 million was given on the basis of the announced markets. At that time, we updated to 5 million following the announcement.

So for markets, for outsell and eMAR. So as you would expect that should pick up as we announced more market.

So that's the reason for the three to 5 million. And that was mentioned the first half year as we go into 2022, we may see some increases related to inflation and there might be a slight tickets following the acquisitions of chatting coupon, but we bring it to seat.

You won't expect anything as large as what we've had this year. A - Kash Pandya Great.

And then I'll tell you the last one I had John, John just had a little bit of color. This is all that goes lot.

Pipeline is looking fairly strong for next year, and we want to have the stock in the warehouse on January the first ready to roll out rather than ordering it on January the first and waiting two to three months for it to come. We are typically, and this has been the case in the last 18 months, but it's through private, typically ordering inventory now probably between four to eight weeks earlier than we used to and again, this is just a precaution, right?

So there's a little bit of that in that as well, but so, yeah, it's I guess, good news cafe, because it's meant to some good pipeline we're looking up already for next year.

Just on Omar. Yeah, look, I'd say progress goods, Vodafone getting ready to launch.

We have you know, been talking to him as you would expect. We talk to all mobile operators in any new market fairly regulated between signing and signing a deal and closing a deal you know, with the aim to get ready and get rolling out with them as soon as possible.

So yeah, absolutely. With Vodafone, I've been no different to any other ammo in, in any of the market to be honest.

But yeah, the, the, I looked at that getting ready to launch, which is which is great news for the country and you know, we'll be hoping and looking to support them in the launch. So very much looking forward to that.

Thank you. I wanted to explore any upside risk related to the current run rate off POS net ads and then spending that growth CapEx now rather than the 1st of January.

And I guess really that's my question. Does the fact that you will have the engine imagery in place on the 1st of January position you should demand be strong enough to actually go ahead and spend an additional $30 million.

I don't know if some point in March such that your overall market capture or market origination or tenancy growth, whatever you want to call it is higher than perhaps what we're thinking about today. And tying into that point about the run rates on, on POS net ads, obviously the big five running at 670 in is exceptionally high.

Is that new floor or I'm just trying to probe again around upside risks to growth into 2022. A - Kash Pandya Yeah.

Thanks Giles. Outside of this one.

Thanks for the question. I think as we, as we've said it in the past that this business is lumpy quarter on quarter you know, we have a fairly reasonable idea of what we're rolled out in a given year, but it's sometimes difficult to predict exactly which quarter that comes in.

And, you know, I think this year has been a classic example of that, right. Which is you know, pretty quiet Q1 and Q2.

We've got a lot of orders in those two causes, but all of those orders are most, most of those orders are rolling up in the second half, which is what we've now seen in in Q3. So yeah, just to sort of manage expectations.

I think Q3 we've just seen is one of our highest rollout quarters ever. Certainly our highest for six years.

And the one, six years ago was actually when a new mobile operator launched one of our markets as a completely sort of fresh Greenfield rollout. So I think just to, you know, I think we are seeing good pipeline at the moment.

I think, you know, when we report Q4, you'll see another strong quarter, it won't be as high as Q3. But it will be, fairly strong.

And again, we are seeing pipeline already for next year, which is why we've bought a bunch of CapEx now are buying a bunch of CapEx now. And that really is a timing point simply down to the accounting, to be honest.

So when we ought to cut that, there's a lead time of a few months when that CapEx arrived, you recognize that your Catholics at that point or we might not immediately roll it out, so it will arrive. It'll sit in our warehouse for a few weeks or she mums and then it will be rolled out into next year.

So in buying that, now we're putting ourselves in a very strong position to roll out very quickly for customers with zero delay which is absolutely what we want to do. And we're doing it because we are seeing a strong pipeline already for next year.

So, yeah, look so high-level Q3 was very high. That's not a new run rate or a new floor.

But you know, I think generally we're seeing, you know, pretty decent pipeline at the moment for the next few quarters.

Thank you very much for taking the questions. Yeah, I feel like the two kind of questions on cap X are kind of still circling around a point.

That's just not quite clear. If you're pre-ordering and advanced, then it's just a fading, it's a working capital issue more than an increase in CapEx.

So the point, I think that probably just needs to be asked a bit more directly is, do you get the $30 million back at some point or the next year or the year after versus the original budget or original maybe street expectations, or is this just a $30 million increase to sustain the same growth that maybe we had expected? I feel like it just needs to be asked a little bit more directly.

And then I guess on the, on the revenue per tenant, there's obviously potentially, there's obviously a huge amount of volatility right now with fuel cost and I know they dropped through, so the, the doll line is the, is the truer the more honest read, I guess, but just the sort of ex the, the fuel costs. Are you managing to sustain the revenue per tenant with all of this new growth?

Is it, you know, fairly sort of typical tenancy additions with these big volumes, are you managing to sort of sustain the levels close to what you might've had in recent quarters thinking?

Yeah. Why don't you take the first part?

In terms of the CapEx to put it simply before with purchasing promote arts next year. So what we incur now we'll effectively come off what we expect next year.

David, is that clear on that point because,

Okay, so it's 30 million more this year, 30 million last next year. Okay.

Yeah, exactly, exactly.

And that's super clear. Thank you guys.

So…

Yeah, look revenue look again where we're not seeing any major change in that. So you know, I think you know, we're all seeing good sustainability of all of our pricing.

Of course, sometimes we always look at for very, very large volumes giving some volume discounts, but it's absolutely normal. That's what we do, what the industry does.

But yeah, no major differential versus our adjusting pricing. So we're very much sustaining up the normal levels and I think customers are seeing the value in what we offer a value proposition out our current levels of pricing.

Hey everyone. It's David Burns from Berenberg.

Thanks for taking my questions. Firstly, could you reminders if there's any of your existing or new markets, which have no license fees in place at the moment, and secondly, just curious to hear about your M&A pipeline, or are you seeing that recently IHS announced JV in Egypt to 6,000 towers over the next three years.

Wondering if the market has been an interest to Helios and how I am sure this new entry affects that. Thank you.

Hi David. This is Tom here.

I'll take both of those. So yeah, look in terms of new market and the license regime, most markets across our regions request some form of license not all but most.

So one of the work streams for any deal that we do is usually a regulatory work stream, which includes either a license application or a notification to the regulator or somewhere in between. So that's typically one of the key things that drive the timing of when the deal's closed as well.

So if you remember back to our Senegal deal, which we closed earlier this year that probably which we closed in May, that probably would have, well, that would have definitely closed a few months earlier. The not for the license taking a little bit longer but that's, you know, it's no surprise to be honest and in fairly sort of normal course it's quite difficult to predict exactly the timings of the license processes in each market.

But yeah, I'd say typically in most markets you have some form of license process. And then yeah, on, on the M and a pipeline level, we continue to see a strong M and a pipeline either happening now or anticipated to come on stream quite soon.

From our point of view where, completely focused right now on organic growth, organic roller and closing materials we've announced, but of course we are still very much engaged in new potential processes. We have a dedicated business development team, which, which does that 24 7 yeah, look in relation to reach it.

Yeah. We, saw that announcement, great mood chess, and every wish them very well and not absolutely.

I think agents, yeah, it looks like a strong market. It's a big market.

It's not one that we've had at a high points and all priorities list cause we've been focusing elsewhere. But yeah, I think, I'm sure it will be an exciting move for them, but now we continue to monitor a number of markets around Africa, middle east, and we are anticipating some increased pipeline coming through on the M and a side as well in the next few months.

But first and foremost, we're focused on organic roll out and closing our existing deals right now.

Well, thank you very much, everybody for joining us for our Q3 update. We look forward to talking to you in the second half of March when we give our full year results.

So thank you again and have a good day. Bye bye.