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Colby Synésael; Senior Vice President – Communications; IHS Holding Ltd.
Sam Darwish; Chairman of the Board of Directors, Chief Executive Officer of the Group; IHS Holding Ltd.
Steve Howden; Chief Financial Officer and Executive Vice President; IHS Holding Ltd.
Miguel Elias; Analyst; TD Cowen
Richard Choe; Analyst; J. Morgan
Eric Lübchow; Analyst; Wells Fargo Securities LLC
Stella Crete; Analyst; Barclays
Operator
Hello and welcome to IHS Holding Limited’s fourth quarter and full-year earnings conference call. Please note that today’s convention is webcast and recorded. (Operator Instructions) At this point, I’d like to turn the floor over to Colby Synesael. Go ahead, sir.
Colby Synesael
Thanks operator. Thank you also everyone for joining today’s call. My call is Colthrough Synesael, executive vice president of communications here at IHS. I’m joined today by Sam Darwish, our president and CEO; Steve Howden, our CFO. This morning, we filed our Annual Report on Form 20-F for the full fiscal year ended December 31, 2023 with the SEC, which can also be viewed on the Investor Relations segment of our website. Publication of the effects related to the initiative and presentation of the consolidated effects of IHS Holding Limited, a company listed on the New York Stock Exchange with the symbol IHF and which includes all the Group’s activities. Before discussing the forward-looking statements, I would like to draw your attention to the disclaimer set out at the beginning of the presentation on slide 2, which deserves to be read in its entirety, as well as the cautionary note relating to the forward-looking statements presented in our forward-looking statements. . edition and 20-F also presented today. In particular, the data discussed would possibly involve forward-looking statements that, by their nature, involve known and unknown dangers and uncertainties and other vital points, some of which are beyond our control and difficult to expect, and other points that could possibly cause adverse effects. , functionality or actual achievements would possibly cause the effects to be materially different from any long-term effects, functionality or achievements or industry effects expressed or implied by such forward-looking statements, adding those discussed in the Risk Factors segment of our submitted form. 20-F. today with the Securities and Exchange Commission and our other filings with the SEC. We will also refer to non-IFRS measures, adding Adjusted EBITDA, which is vital for assessing the functionality of our business, and ALFCF, which is vital for assessing the liquidity of our business. A reconciliation of the non-IFRS measures to the closest IFRS measures is found in our effects presentation, which is located in the Investor Relations segment of our website. And with that, I’d like to turn the call over to Sam Darwish, our president and CEO.
Sam Darwich
Thank you Colvia and welcome to each and every one of them. During our fourth quarter and year-end 2023 earnings call, we reported a strong quarter of performance across our key metrics with earnings, adjusted EBITDA and ALSCS. in line with or above our expectations, despite the significant devaluation of the Nigerian currency that began in June. Although capital expenditures were lower than expected, our effects reflect the strong secular changes we are seeing across our business, adding expansion in lease modifications, new tenants, new locations or brick-and-mortar builds, and targeted fiber rollout for all. 2023. report 8% earnings expansion, 10% adjusted EBITDA expansion, 19% FCF expansion, and 8% CapEx reduction. Organic expansion is 37%. Across the organization, we raised 1,041 shared leases and 4,929 lease modifications. And we exceeded our expectations for projects for new locations, building 1,300. 29 new towers, mainly in Brazil, adding 812 in the country, while we continue to prioritize the biological expansion of our asset base along this path. These strong expansion plans are expected to continue through 2024, as evidenced by our recently announced agreement with Airtel in Nigeria, which extends the Atos contract through 2031 and includes a commitment to charge 3,950 new leases over the next five years. yearsArray much of which is postponed until 2024-202five, which would possibly bring me to a vital point. These strong commodities remain in a challenging context, NATO continues to lower prices to degrees that unfortunately offset much of those strong secular commodities from January to December 2023, the naira has suffered an adverse movement of 98%. And since January 2024, we have noticed 75% more adverse movements. This means an overall negative move of 246% since January 23rd. Most of this negative movement is the result of positive moves by the government to unify multiple exchange rates, eliminate costly federal subsidies, and attempt to curb rising inflation, which has reached 28. 9%. in December 2023. While those moves were generally seen clearly by market observers and us, more relief measures involving devaluation of the naira are needed. Some of those mandatory adjustments began to ease recently in the first quarter, when the Nigerian Monetary Policy Committee raised the main interest rate to 400 basic issues and raised the much desired ForEx to the daily market. This has helped stabilize the currency in recent weeks. Some analysts, such as Goldman Sachs, even expect a strengthening of the naira until the end of this year. Market watchers expect the Monetary Policy Committee to further raise the main key interest rate around 2024 and aim to reduce inflation and further stabilize the ForEx market in view of the effects of 2023. The ForEx policy mechanisms in Our profit contracts helped us offset most of this construction. tension during the year and was evident in our Q4 ’23 results. However, we expect that the additional devaluation that began in January will have a further effect on our results in 2024. Although Steve will talk about this in more detail when he talks about the forecast, to give you In some context, our forecast for 2024 assumed an average exchange rate of 1,610 NGN compared to the average exchange rate. dollar, while the average exchange rate in 2023 was NGN 638 and the devaluation of the naira will have a negative effect of $535 million on year-on-year earnings, even after adjusting for the effect of the ForEx restart. Given the macro environment in which we operate, specifically in Nigeria, which accounted for 63% of profit in 4Q23. We continue to adopt what we believe is a more balanced approach to expansion and money generation. We also expect the significant relief in capital spending initiated in the second part of 2023 to continue into 2024, as we continue to focus on improving domestic power through productivity improvements and cost relief. Interestingly, this also involves a construction focus on innovation, adding deepening the use of AR and how we live, maintain and operate our towers. And this is something that I am very passionate about and, leading a committed team, I have been working for some time to find use cases that can help us improve our power using the large amount of knowledge that we have at our disposal from our completion process. Constant relationships for a decade. Let’s move on to Slide 7 to talk about some of our key strengths, starting with business progress. At the end of 2023, we had $11 billion in contracted benefits with an average tenant renewal term of 7. 5 years. I think it’s vital to highlight those metrics because they highlight the sustainability that we believe is inherent to our business model, despite what that belief may possibly be. We continue to make progress in advertising across the industry as we signed a contract with MTN in Cameroon and Cote d’Ivoire for a further 10 years in Nigeria, as MTN highlighted in its latest results announcement earlier this month, we continue to engage constructively with We help them find tactics to alleviate some of the constant national tension they face, given our key role in managing the majority of the network in the country, while maintaining adequate economic results for ourselves. Additionally, as mentioned above, we signed an expanded contract with Aspen in Nigeria last February, achieving the next decade milestone in a deal that includes a commitment from Airtel Nigeria to supply us with 3,950 new rentals over the next five years and who is in first line. charged during the next two. We are very excited about the prospects of this mutually favorable partnership. Moving towards progress in governance. In January of this year, we announced a settlement with Vanda related to public litigation, which you know reflects a commitment to strong corporate governance and constructive shareholder engagement. The text of the proposed statutory amendments will be made available to shareholders before the next General Meeting on share liquidity, further progress here, we have gotten rid of all the blockages in the TIPO. shareholder. We also estimate that approximately 14% of our shares are now owned by post-IPO shareholders, compared to just 5% at the IPO and a roughly 300% improvement in fund flows. This is also reflected in our average daily trading volume, which now stands at 5,74,000 shares, almost five times more than in May 2022. During the quarter, we continued to purchase shares under our two-year repurchase program for a total of 10 million dollars. price of shares purchased during the last two quarters. Now I would like to give you an update on the Green Project. For 2023, we spent $103 million of CapEx compared to the forecast, our forecast of $90-100 million and to achieve ALFCS. savings of approximately $24 million compared to the forecast of $22 million. In general, the task remains well underway. As you can see from our results, we will provide a more complete update on the effect of the blank slate and our high carbon relief roadmap when we release our annual sustainability report, which we plan to publish next quarter. Let’s move on to our assessment. We remain comfortable with our liquidity position, but we have also continued to increase our focus on liquidity generation and continue to compare and execute various tactics to achieve this. At the end of the year, we had $724 million of available liquidity, adding our unused organizational RCF and the remaining unused portion of our organizational term loan. We are actively carrying out our tasks to convert more debt into local currency, finalize maturities and manage interest charges. This was evident in our recent loan in local currency, equivalent to 160 million dollars in Côte d’Ivoire. Proceeds from those local OpCo loans were refinanced into US dollar bonds at the corporate holding level. Additionally, as we previously announced in November and November, we extended the maturity of our RCF organization with $300 million through October 2026. Leverage ended the year at 3. 4x. And we, as we had previously discussed, were affected by the devaluation of the naira in June, we expect debt to accumulate further in 2024 given the additional net devaluation, but we expect to continue to have sufficient liquidity at 3 to 4 times our target. position, which Steve will cover later in his section. And finally, in relation to shareholder returns, I would like to make the following statements. Despite the financial difficulties in Nigeria. We believe in the underlying strength of our business and believe our equity is undervalued, given the consistent role Africa plays in the global market. For example, Nigeria. When I moved to Nigeria five years ago, there were about 120 million people in the society. Today it has around 22. 5 million inhabitants, a total population larger than that of Germany, France or the United Kingdom, and approaching 2. 4% year-on-year. This represents five million people per year. To put it into perspective, that’s almost the length of Colorado per year. Nigeria also has a young and vibrant population, the majority of whom are under 20 years old. Compared to the aging and evolved market, many millions of people without landlines for roads and transportation infrastructure depend on their cell phones for almost each and every aspect. of their life. It has become as vital as food, water or education, the finish of mobile phones, their adaptability and their use. This is irreversible and is reflected in our expansion as well as the vast expansion of the underlying number of our key consumers in Nigeria. Despite ForEx headwinds, macroeconomic situations will tighten and loosen over cycles, but expanding mobile usage is one of Scott’s clues. And so, although we believe that the price of Nigeria is still largely underestimated, specifically in our sector, the price and the long-term expansion of the clients of the business in Latin America are also very strong when we look at Latin America during the year COVID. , today we had a base of 0, we have almost 8,000 towers and one of the largest fiber optic networks in Brazil with an activity that generated $146 million in adjusted EBITDA in 2023, more than 800 new towers and 1. 3 million additional homes followed only in 2023. South Africa is getting closer. Sub-Saharan Africa is approaching. We own and operate 40,000 towers in 11 markets covering approximately 800 million people. We want your phones for almost every basic facet of your lives and IHS is at the center of this type of connectivity as a leader in its field. It is for those reasons that we believe IHS Tower is undervalued based on our current valuation. And then we have to think about tactics to unlock the price for our shareholders. So, under the direction of our Board of Directors, we began working with our advisors, including JPMorgan, to benchmark strategic opportunities for the business across our portfolio and our capital allocation priorities. This solution aims to generate the most productive price for investors. We will provide an update on this matter as appropriate, adding any potential actions. And with that, I give way to Steve.
Steve Howden
Operator
(Operator’s Instructions) Michael Elias, TD Cowen.
Michel Élias
Ray, thank you for answering my questions. Let me start by talking about the evaluation of strategic opportunities. I’m curious, could you give us a concept of the intended scope of those opportunities and more specifically, what I mean by this is the goal of the sale of the entire business or maybe just parts of the business?And secondly, why is it a smart time to explore those opportunities?And would you explore those opportunities without the assessment we’ve noticed of the naira?So I have an additional question. But any color on those occasions would be fantastic.
Sam Darwich
Thanks. Hi Michael. I’m Sam. We, the company, have low prices. This does not directly reflect the situation of the naira because, as you have seen, the company publishes false figures. I mean, we’ve been reporting strong numbers quarter after quarter. Of course, the devaluation of the naira will have an impact. But again, it’s a manageable solution. The strategic valuation is due in large part to the fact that we feel the frustration of shareholders. We, the market, have not given the top stocks the credits they want in terms of our price and valuation. We deserve to be. It is therefore our duty, in addition to managing the company well and solidly, to leave no stone unturned in the search to generate price for shareholders. Not in detail, unfortunately, you possibly can’t go into detail. I’ll say we’re doing this, this works right now, with our advisor, adding JPMorgan, and we’ll talk as soon as it’s appropriate.
Michel Élias
Thanks for the color there. So I just have one additional question. Given the volatility of the naira we’ve seen, how would you describe the ability to generate upstream liquidity in 2024?Thank you.
Steve Howden
Believe the State and say yes, you are right. Volatility is a clever way to describe it. And 2023 has been a challenge. Definitely, the incentives and the streaming source on the networks, even if we did, gave us $55 million in 2023, I think from a 2024 perspective, and we saw more liquidity in the markets, in January, February and March so far . And that is, in fact, the positive point. I would say this is due to a number of measures taken through the Nigerian government, central bank, financial policy, etc. , related to the devaluation of the currency, but also the increase in interest rates. And I hope that’s the positive. But clearly we have to warn that we need this to continue for a while, and we have noticed that public schools and retail businesses have slowed down in the last nine or ten months in terms of reforms. So we’re back to a point where we had a positive outlook, specifically in terms of the liquidity vehicle. But let’s see. And we, yes, we need to see more moderate liquidity and then we move on to spring. Thanks for the color. THANK YOU.
Operator
Richard Choe, JPMorgan.
Richard Choe
I wanted to ask about business in Latin America. Where we expect that percentage of profits to pass until the end of this year and maybe in the long term, given the expansion that’s being seen there, what extension of business could that bring?to Irish property, says the question of the moment.
Steve Howden
I think one thing to keep in mind, obviously, in terms of the overall composition of contributions, is that now Latin America as a segment has grown between 15% and 17% year-over-year and continues to grow very well as a profit throughout the year. I’m and over $7 million. And just like that, you end up fitting into a vital component of our overall mix. And given Nigeria’s opposite direction, so to speak, on devaluation and this dovetails with an increasing percentage of Asia in favor, Nigeria’s development progression will be a little bit slower. Therefore, we have not set a target for the time being, but we are focusing on biological and short-term growth. But obviously, it’s a key component of our price mix, and it’s the business we need to keep growing biologically.
Richard Choe
It is ok. And I guess with a little more color in the combination between tower expansion and fiber expansion, it turns out that they both produce better, healthier foods.
Steve Howden
Yes, I will pay for the assistance. Therefore, we do not detail the monetary knowledge of the nautical sector in too much detail. But as you probably know from our past discussions, there’s a revelation about this buried in the year in 20 F and activity has increased up to 30% in the past year and from a renewable energy attitude and skill and just moving them less than that, but still developing, still developing strongly.
Richard Choe
Thanks.
Operator
(Operator Instructions) Eric Luebchow, Wells Fargo.
Eric Lubchow
Thank you for answering the question. I wanted to communicate about MTN’s agreement to move 2,500 sites. I know you’re stuck in court right now, but what’s the update on your initial situation and how many sites do you think will likely transfer back to your competitor?in this market?
Sam Darwich
Hi Eric, I’m Sam. Listen, we’ve made our perspectives public here and we’ll stay consistent. I think it’s a very, very, very ambitious challenge to be able to move devices that cover about 20 million users in 2500 towers. Most of which don’t exist in a country like Nigeria, where the electric power infrastructure allows it, regulation is an uphill battle. That means that the verbal exchange we had in October is now in February or March, with maybe eight, nine or ten months. approve before it expires. And no significant paintings have been done on the towers, largely because of some of the things we just mentioned. So, it’s still a very, very ambitious challenge for us. But again, I mean, MTN is one of our partners. We have been associated for more than two decades. Discussions are still ongoing.
Eric Lubchow
It is ok. I’m aware of that. And just a follow-up from your consultant this year implies an EBITDA margin of 55%, a big increase from last year. So, anything that you can explain to us in terms of spaces where you’re seeing fee savings between the decrease. diesel charge, green allocation, and then the longer-term path to achieving 60% EBITDA margins. Do you know how you see this shaping up in the coming years?
Steve Howden
I would say some things regarding costs, but you are right: the consultant is indeed referring to the margin. So a few percentages more than what we end up with in 2023 and what explains that. And a lot of that depends on the charge relief measures that we have taken and the fact that they have very different asset values, on the rise, okay, we have reduced diesel consumption and prices overall and in Nigeria, in particular. It also has leads in other markets, but basically in Nigeria. And I know that a component of that is the reaction to the macroeconomic scenario globally, the macroeconomic scenario that exists in markets like Nigeria. We look at, I mean, our load distribution and spaces where we can be more efficient, possibly we wouldn’t write. business in a more than intelligent way. And this charge. We are focusing a lot on a 2024 strategy around liquidity generation. And you can see that our lower CapEx includes particularly lower CapEx during 2024 compared to some previous years. And capital expenditures are also evident at the margins, in terms of where we’re looking to grow the power of our charge base.
Sam Darwich
I think you’ve been aware of that as well and that’s why AI and its proliferation are also central to everything we’re doing lately at Crown for the use of the operational infrastructure, which has a lot of demanding situations in terms of logistics. It’s about maintaining delivery flows, given the complex nature of what we’re operating lately, all of a sudden all the knowledge because of the top point of calculation that we have through the LL and what the big guys have created. All of a sudden, we now have this great tool with a lot of knowledge that we’ve accumulated over decades. And now we’re in the process of redefining the way we operate, employing this great availability of computing and part of what you’re seeing here is because of that, and see more of this in the coming months.
Eric Lubchow
Thank you, Sam.
Sam Darwich
Thanks.
Steve Howden
Thanks.
Operator
Stella Ridge, Barclays.
Stella Crete
Hello everyone and thank you. Then, for all updates. I would like to ask you about the prestige of the other contracts that lie ahead. So, when updating annual donations in Côte d’Ivoire, you have to give in to Zambia. And despite that, of course, this year I was just wondering if there is an update on the situation regarding a similar issue, and you also referred to the Mexican nitrogen department of the Comex, while seeking changes in the rents of the existing towers. What kind of adjustments would you be open to from a charge perspective?
Sam Darwich
Alright. But look, we don’t comment on ongoing discussions, MTN and we in particular, as I mentioned earlier, have been partners for two decades. We are committed on multiple fronts at all times. And we like to announce things that look like that and are essentially clean and dusted, and that’s why we’ve essentially announced Ivory Coast and Cameroon right now. To be honest, the only thing I would say is that everyone has noticed from the most recent announcement from our MPN consumers and the numbers in Nigeria that they are under pressure. I mean, this big negative move in the currency, which is negative about 250% at a 14-month high. It definitely takes its toll on them. And those types are companies that commonly generate profits in local currency. And right now we think that our task and our duty is only to them and we look for tactics to help increase the pressure. I mean, this is rarely our first rodeo. We have noticed this before, we get up and attack them. And at this point, that’s what we’re going to continue doing. That’s what I can say.
Stella Crete
And then you can add a quick follow-up, I’m remarkably enjoying the inquiries about this right now. And the update launches in terms of getting the existing CRD and covers any kind of what’s behind that knowledge and more is to come. some of the smaller ones too. But also simply to reiterate the DSL ad we ran in January in Nigeria, which covered rents of 39 cents over a five-year period. And a query about roommates.
Steve Howden
While this is evident at MTN, this is also the case at IHS. And we also make sure that we keep progressing and moving forward materially with other key consumers, as well as with any tax benefits.
Stella Crete
And I think if you can pay your expenses with a portion of your money inventory on this site. Could you tell us that? In terms of money back, how much does the holding company cost compared to operating companies?This monetary guarantee release of $115 million is included in the monetary balance at the end of 2023.
Steve Howden
It is interesting to note that this Ivory Coast refinancing is strictly about debt, what percentage of it was actually profits for the holding company in terms of the intercorporate finishing center, as is certain. As I said in the two-way conversation, it was a PDA phone. I note that the $115 million coin set is not included in the December 31 coin set. Therefore, it is about greater liquidity. And as we said, this will reduce the interest on those two express bonds by about 3%. So, I stated that the currencies have leverage and positive interest. So this reduces the threat of doing this on the fixed COVID network. So it was. And that’s where I know you and I have talked before and we’ve talked to a lot of other valves. Well, with a yes, we have US dollar bonds at the most reasonable level and we can use our local markets and the global currency markets to check out and bring that dollar bond back to the country level at this low level of worth. So this was just an example. And the equivalent of 116 million dollars, and they were not transferred to the COD either. So what we did was we collected these coins and Ivory Coast, and there was a little bit of COVID debt existing. As we refinance it, we are in the process of moving that capital back into the holding company where we will extinguish the US dollar bonds, as opposed to the ones that were signed just before the end of the year through upstream refinancing, drawdown, upstream refinancing . it was done. It hasn’t gone up yet, but it has gone up due to last year’s ending value and year-end currency figures. And that’s another merit of the company, as an attractive example: we were able to obtain incredibly comparative, even slightly lower, interest rates in the local market compared to US dollar bonds. Again, it’s about managing maturities and managing currency and balance, but also making sure that we take care of the interest as well. And in relation to the coin allocation of the holding company OpCo according to our apologies, we point out that it has not particularly moved during the last quarter. This therefore represents 3 billion dollars of additional liquidity for the group and a comfortable balance for a single show.
Stella Crete
Yes. Thank you.
Operator
This brings us to the end of the conference call on IHS Holding Limited’s fourth-quarter earnings and full-year earnings. If you have any questions, please contact the Investor Relations team at IHS Towers. com. The control team. Thank you for your participation today and I wish you a good day.