IHS - Earnings Call - Q4 2024

Transcript

Robert Berg (Head of Investor Relations)

Berg, Head of Investor Relations here at IHS. With me today, I have Sam Darwish, our Chairman and CEO, and Steve Howden, our CFO. This morning, we filed our annual report on Form 20F for the full year ending December 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. These are the consolidated results of IHS Holding Limited, which is listed on the New York Stock Exchange under the ticker symbol IHS, and which comprises the entirety of the group's operations. Before we discuss the results, I would like to draw your attention to the disclaimer set out at the beginning of the presentation on slide two, which should be read in full, along with the cautionary statements regarding forward-looking statements set out in our earnings release and 20F 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, which are difficult to predict, and other factors which may cause actual results, performance, or achievements, or industry results to be materially different from any future results, performance, or achievements, or industry results expressed or implied by such forward-looking statements, including those discussed in the risk factors section of our Form 20F filed today with the Securities and Exchange Commission and 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 ALSCF that we view as important in assessing the liquidity of our business.

Our reconciliation of non-IFRS metrics to the nearest IFRS metrics can be found in our earnings presentation, which is available on the Investor Relations section of our website. With that, I'd like to turn the call over to Sam Darwish, our Chairman and CEO.

Sam Darwish (Chairman and CEO)

Thanks, Robert. Welcome, everyone, to our fourth quarter and full year 2024 earnings results call. We are reporting a strong performance in 2024, ending the year on a high with a strong Q4. Our key metrics—revenue, adjusted EBITDA, and ALSCF—all coming in ahead of our guidance, while CapEx was below expectations, and we saw a drop in our consolidated net leverage ratio. Our positive momentum reflects the continued strong secular trends we are seeing across our business, a more stable macroeconomic environment, strong operational focus, as well as the significant commercial and financial progress we have made during 2024 as part of our ongoing strategic review. I will go into more details on these important drivers on the next slide.

Looking at our revenue, we saw 48% organic growth driven by 6.5% constant currency growth, as well as a significant benefit from our FX resets and power indexation, which play a vital role in helping to offset the currency devaluation we faced during the year. As you can see from the slide, this was above our guidance range and was aided by 9.2% constant currency growth in the fourth quarter of 2024 compared to the fourth quarter of 2023, driven by growth in revenue from colocation, lease amendments, and new sites. We continue to benefit from strong structural trends with growth underpinned by continued 5G deployment across our markets and, importantly, macroeconomic stabilization within our largest market, Nigeria. Turning to profitability, our adjusted EBITDA reached $928 million in 2024 with a margin of 54.3%, up 100 basis points compared to 2023.

Again, this came in ahead of our guidance on the back of strong momentum in Q4, where we achieved a 56.3% margin. This performance, against the backdrop of the macroeconomic headwinds we have been navigating, highlights the resilience of our financial model, the strength of our current structures, and our continued financial discipline. We are pleased with our ALSCF generation during the year, which at $304 million was also ahead of guidance and was driven by operational performance and ongoing CapEx optimization. As I will discuss shortly, we continue to focus on our balance sheet with our net leverage at 3.7 times at the end of 2024, falling from 3.9 times at the end of Q3 2024. We carried out a number of significant refinancings through the year, which pushed out our maturities and shifted more of our debt into local currency.

As part of our strategic review, we received disposal proceeds from the sale of our Kuwait operations in December 2024, which we sold at 14.2 adjusted EBITDA after leases, and we will look to continue to earmark excess cash for further debt repayments. We are comforted that since the Q1 2024 significant Naira devaluation in Nigeria, we have seen the Naira strengthening on good US dollar availability, enabling us to source and upstream $271 million from Nigeria alone in 2024. In addition to the solid financial performance, we have made significant progress through 2024 across a number of our strategic initiatives. Let's turn to slide six to look at some of the highlights. In May 2024, we outlined some initial objectives of our strategic review, all aimed at creating shareholder value.

These included: one, increasing our profitability and substantially reducing our CapEx to increase cash flow generation; two, continuing to review our portfolio of markets with a target of raising $500 million-$1 billion; and three, capital allocation of excess cash flow following the implementation of these strategic initiatives was expected to be primarily utilized to reduce debt, and we will also consider share buybacks and/or introducing a dividend policy. During the year, we have delivered on numerous elements of our strategic review, pushing to unlock shareholder value versus what we believe is our existing suppressed valuation. We believe we have made strong commercial progress, an important area for us in terms of improving the financial profile of the business, while also enabling us to continue to de-risk our future cash flow.

We have extended commercial contracts with key customers into the next decade, including all our MC and MLAs covering over 25,000 tenancies out to 2032 or beyond, in addition to the extension of our Airtel Nigeria MLA to 2031. This draws a line under a series of successful customer renewals. The result of this significant commercial progress is that we have recently renewed or extended 72% of our group revenue, which we believe markedly improves our financial profile and visibility. Our average tenant term now sits at 7.8 years, and we have increased our contracted revenue to $11.9 billion. We are also reassured by the improving backdrop within our largest market, Nigeria. In January, Nigeria's telecom regulator, the Nigeria Communications Commission, approved a 50% increase in tariffs for mobile network carriers, the first tariff adjustment in 12 years.

These increases will support the ability of our carrier customers to continue investing in infrastructure and innovation, ultimately benefiting consumers through improved services and connectivity, including better network quality and greater coverage. Through a number of initiatives, we have de-risked our operating model by materially reducing our exposure to power prices, with the expectation that this will result in reduced volatility of our earnings. Through our contract renewals, we have moved the significant majority of our business to either power pass-through, like in South Africa, or power indexation, like in Nigeria, closer aligning our operating model to the steel and glass model in more developed countries.

As I have already highlighted, our 2024 financial performance highlights the progress we have made towards our goal of increasing adjusted EBITDA and substantially reducing our CapEx to increase cash flow generation, with over $300 million of ALSCF generated in 2024 despite significant FX headwinds. In addition to our continued course discipline and narrowed focus on capital allocation, we will benefit from a reduction in revolving tax rates in Nigeria. Effective from January 1, 2025, amounts withheld by customers in Nigeria, which are paid to the Federal Inland Revenue Service, were reduced from 10% to 2%, and we expect this to be significantly supportive to our cash flow generation in 2025 and going forward. We also continue to assess group-wide costs, CapEx structures, and new ways to operate our networks, including how we can introduce more technology, especially artificial intelligence, into our ways of working to help us realize future efficiencies.

Steve will discuss our financial performance and 2025 guidance in more depth later in this call, but to summarize, we are pleased with the progress we have made, and our 2025 guidance implies a continuation of these trends with continued organic revenue growth and a further step-up in adjusted EBITDA margin and ALSCF generation, notwithstanding the disposal of our Kuwaiti business. Moving to our balance sheet, we continue to take a disciplined approach to capital deployment, recognizing the importance of maintaining a strong balance sheet. We made important moves during the year in line with our strategic priorities to extend our debt maturity profile and shift more of our debt into local currency. This was evidenced in Q4 when we refinanced $1.6 billion of our debt through the issuance of new senior notes and a new term loan.

We remain comfortable with our cash and liquidity position, with over $900 million of available liquidity at the end of 2024. During the year, we made significant enhancements to our governance. The proposals to amend the company's articles of association were approved by shareholders at the AGM held in June. The voting results marked a significant achievement for IHS, better aligning our governance framework with that of mature US-listed companies. As part of our strategic review, we committed to examining our portfolio of markets to determine the right composition for IHS going forward. In December, we completed the disposal of our 70% stake in IHS Kuwait to Zain Kuwait, with an enterprise value of $230 million that we believe highlights the significant value contained within the component parts of our wider portfolio. This comes on top of the sale of our Peru business earlier in the year.

Our current footprint spans eight markets across two continents can be seen on slide seven. Our disposal work remains in progress as we continue with the target of raising $500 million-$1 billion. As previously indicated, excess cash following implementation of our strategic initiatives is expected to be primarily used to reduce debt, while also considering share buybacks and/or introducing a dividend policy. To summarize on slide eight, after a strong fourth quarter performance, we ended 2024 with financial results ahead of guidance, leverage reducing, asset disposals underway, shareholder rights improved, and with a de-risked commercial and operating business model. We have made significant progress towards our strategic goals, but there is more work to do. Looking to 2025 and beyond, we remain focused on further enhancing our profitability and cash flow generation, as can be seen in our 2025 guidance.

We are committed to further strengthening our balance sheet supported by further select asset disposals, aiming to deliver increasing returns for all our shareholders. We remain excited by the strong structural growth opportunities across our footprint and believe we are well placed to leverage our market-leading positions to support growing demand for our critical communications infrastructure, with growth underpinned by continued 5G deployment across our larger markets. An improving backdrop with our largest market, Nigeria, after recent carrier tariff rate increases and an improving macroeconomic position continues to help. With that, I'll turn the call over to Steve.

Steve Howden (CFO)

Thanks, Sam, and hello, everyone. Turning to slide 10 here, we show our full year 2024 and fourth quarter 2024 performance. Our results came in better than expected against a challenging but improving macroeconomic environment in Nigeria, where we saw higher levels of stability in the latter part of the year.

As we look at the results, please note the year-over-year comparisons are in some cases impacted by the Kuwait disposal that closed in December 2024, and we've pulled these out where relevant. In terms of the results, both towers and tenants are down approximately 2% and 1% respectively year-over-year, while lease amendments increased by high single-digit percentages. Both tower and tenant figures would have grown year-on-year in the absence of the Kuwait disposal. On a reported basis, in the fourth quarter, revenue declined by approximately 14% year-on-year, impacted by the very different FX environment versus the fourth quarter of 2023 and the new financial terms with MCN Nigeria, but increased 4.2% compared to the third quarter of 2024. As a reminder, Naira average FX rate to the dollar was NGN 815 in the fourth quarter of 2023 and was NGN 1,629 in the fourth quarter of 2024.

Adjusted EBITDA was down 10% year-on-year, but adjusted EBITDA margin was up 250 basis points, reflecting our continued cost control and the resilience of our financial model. Fourth quarter 2024 adjusted EBITDA was in line with third quarter adjusted EBITDA. Meanwhile, ALSCF declined by almost 9%, impacted by similar factors affecting revenue and adjusted EBITDA, in addition to the higher interest costs following our bond refinancing in November. Fourth quarter 2024 ALSCF increased again, though, by 23% versus third quarter 2024 ALSCF. Our level of CapEx investment decreased by 37% in the quarter and 56% for the year, largely driven by the pullback in CapEx across all segments as we continue to focus on improving cash generation. Finally, our consolidated net leverage ratio increased year-on-year to 3.7 times at the end of the year.

Having peaked at 3.9 times in second quarter and third quarter of 2024, it has now de-levered 0.2 times from third quarter to the end of the year, which obviously includes the impact of the Kuwait disposal. Slide 11 shows the components of our fourth quarter 2024 revenue on a consolidated basis, where you can see how the Naira devaluation in particular turned a quarter of strong organic and constant currency growth into a 14% decline. The Naira devalued 50% in Q4 2024 versus Q4 2023, yet the business delivered organic revenue growth of 39%, driven primarily by FX resets, power, CPI escalators, and lease amendments. From a constant currency perspective, revenue grew over 9%, driven primarily by CPI escalations, new lease amendments, and new collocations. Positive signs of the fundamental underlying tenancy growth continuing across our key markets.

The right side of the page shows the organic growth rates of each of our segments for the quarter. Our Nigeria segment grew approximately 62%, obviously including a large benefit from the FX reset. Slide 12 shows the full year version of our growth bridge, highlighting the FX impact again, but also the contractual protections of CPI escalators and FX resets that help to partly mitigate the FX volatility. On slide 13, you can see our consolidated revenue, adjusted EBITDA, and adjusted EBITDA margins for the fourth quarter and full year 2024, as we've already discussed, and highlighting that our results beat our guidance across these metrics. Specifically, in the fourth quarter of 2024, adjusted EBITDA of $246 million and adjusted EBITDA margin of 56.3% continues the trend of higher margins post our first quarter dip from that Naira devaluation. Onto slide 14, an adjusted levered free cash flow.

In the fourth quarter of 2024, we generated ALSCF of $107 million. That's a 9.3% decrease versus the fourth quarter of 2023. This was primarily due to the decrease in adjusted EBITDA and an increase in interest costs following our November bond refinancing, partially offset by a decrease in revenue withholding tax. Our ALSCF cash conversion rate was 43.5%. Again, though, I'd like to note the positive progression of ALSCF and its conversion rate through the quarters of 2024. For the full year, we generated ALSCF of $304 million, and our ALSCF cash conversion rate was 32.8%. Onto CapEx. In fourth quarter 2024, CapEx of $83 million decreased 37% year-on-year, and full year CapEx of $256 million decreased by 56%, continuing the trends that we've seen over recent quarters. The decrease in the full year CapEx was driven by lower expenditure across all of our segments.

The decrease in Nigeria was primarily driven by reductions related to Project Green, given the investment in that project is largely complete. In Sub-Saharan Africa, primarily driven by a decrease in refurbishment CapEx, and the reduction in LATAM CapEx was driven by decreases related to fiber and new site CapEx, although we still retain a healthy level of new site build in Brazil. On the segment review, onto slide 15, I'll start as usual with Nigeria. In November, the Central Bank of Nigeria introduced the Payment System Vision 2025. That's a strategic roadmap for the Nigeria payment system, as the CBN aims to continue enhancing its financial transparency. In November, the Monetary Policy Committee increased interest rates by 25 basis points, bringing the MPR to 27.5%. That's a total of six rate hikes during 2024.

These actions appear to have had a positive impact again on Nigeria's FX market, with the currency appreciating in December and more recently into Q1 2025. We've seen an increase in US dollars in Nigeria, and FX reserves in the country have again increased to $40.9 billion at the end of December 2024, up from $38.4 billion at the end of September 2024. Since the FX environment adjusted in Q1, we've been able to continue upstreaming. We've upstreamed $271 million to the group during the year from Nigeria alone. Most recently, the National Bureau of Statistics rebased Nigeria's Consumer Price Index, bringing January 2025 headline inflation rates to 24.5% versus the 34.8% in December 2024.

Most recently, in February of this year, 2025, the MPC held the policy rate steady at 27.5% for the first time in six meetings and reaffirmed they remained focused on creating price stability in the country. Continued macroeconomic progress, but obviously more work still to be done. For us, specifically in Nigeria for IHS, our fourth quarter 2024 revenue of $259 million decreased 19% year-on-year on a reported basis, reflecting what we've previously discussed, the significant FX headwind year-over-year and the impact of the new financial terms with MTN Nigeria. This more than offset the 61.5% organic growth, which was driven primarily by FX resets and power indexation.

Our collocation rate was down to 1.56 times, down from 1.59 times in the fourth quarter of 2023, given we reintegrated 210 towers and we had 529 tenant churn in the third quarter of 2024 from our smallest key customer in Nigeria, which we were not recognizing revenue on at the time. Lease amendments continue to be an important driver of growth, increasing 3% year-on-year as our customers added additional equipment to our sites. The fourth quarter 2024 segment adjusted EBITDA in Nigeria was $155 million. That is a 22.5% decrease from a year ago, while segment adjusted EBITDA margin was down 250 basis points to 59.8%, given the reduction in revenue described, and a write-down of inventory in the period as well, partially offset by a reduction in tower repairs, maintenance costs, and diesel costs.

Moving to our Sub-Saharan African segment, revenue was broadly flat, and segment adjusted EBITDA increased 29.6% year-on-year. This performance was primarily due to lower revenues and lower costs being recognized in South Africa following the unwind of the Power Managed Services Agreement with MCN South Africa, which has no impact on segment adjusted EBITDA. The performance has further benefited from new collocations, lower regulatory fees, and reduced tower repairs and maintenance costs, and segment adjusted EBITDA margin increased substantially by 1,480 basis points as a result to 65.1%. In our LATAM segment, towers and tenants grew by 7.9% and 7.2%, respectively. Revenue decreased by 18% because of negative FX movements and the reduction in revenue recognition from Oi, given their judicial recovery proceeding early in 2024.

In Brazil, our second largest market with 8,326 towers, macro conditions softened this quarter as the Brazilian real continued to devalue against the dollar, and there were increases in both interest rates and inflation. In terms of LATAM profitability, while segment adjusted EBITDA decreased by 10%, segment adjusted EBITDA margin increased 750 basis points versus the fourth quarter of 2023, which mostly reflects the decrease in revenue, while savings across several cost lines were decreased for margins. Mina, as Sam discussed, we completed the disposal of our 70% interest in IHS Kuwait on December 19, 2024, resulting in 12 fee-of-day trading in both the fourth quarter of 2024 and the full year 2024 when comparing to the prior periods. Given the disposal date, as of the end of the year, the entire tower portfolio, tenants, and lease amendments have been deconsolidated.

Given our Kuwait disposal and our decision not to commence operations in Egypt, Mina will not be a reportable segment from Q1 2025. Slide 17 looks at our returns and capital allocation. In 2024, we continue to focus on driving returns and delivered a return on invested capital of 15.8% versus 14.6% the prior year. Our improved 2024 ROIC reflects our narrowed focus on capital allocation and has benefited from, amongst other things, robust free cash flow generation, the impact of the Naira devaluation, and the disposal of our Kuwaiti operations. In terms of capital allocation, you can see that a significant portion of our spend in FY24 was related to discretionary CapEx outside of new sites, followed by maintenance or non-discretionary CapEx, and new site CapEx itself, where we're a leading builder of new sites in Brazil.

The $130 million discretionary CapEx, excluding new sites, was largely spent on fiber rollout, augmentation for collocation and lease amendments, and some other cost-saving initiatives. Discretionary CapEx declined significantly from 2023, given our narrowed focus on capital allocation and given the Project Green investment is now largely complete. Moving to slide 18, we look at the capital structure and its related items. At the end of the year, the end of 2024, we had approximately $3.9 billion of external debt and IFRS 16 lease liabilities. That is a reduction of approximately $240 million versus the third quarter of 2024. Of the $3.9 billion, approximately $2.2 billion represents our bond financings, including our successful November 2024 $1.2 billion dual tranche senior notes refinancing. In the other indebtedness line is our new $439 million five-year term loan refinance that we completed in October of 2024.

As Sam mentioned, these refinancings are evidence of a desire to continue to improve the strength and flexibility of our balance sheet, which is a really important component of our strategic review. Through this new term loan and the senior notes, we have extended our 2025, partial 2026, and 2027 maturities out to 2029, 2030, and 2031. Also, with the new South African rand tranche of our term loan, it has swapped dollar obligations into local currency as we seek to more closely match our debt FX exposure to our current revenue FX profile. We believe we have managed to achieve this at manageable interest rates versus the previous debt it was replacing. Cash and cash equivalents were $578 million at the end of the year. In terms of where that cash is held, approximately 19% was held in naira at our Nigeria business.

As we mentioned earlier, we've been upstreaming from Nigeria. We upstreamed another $153 million from Nigeria in the fourth quarter, bringing the total from Nigeria to $271 million for 2024 as a whole. While we continue to upstream in 2025, we do caution it remains to be determined if the increased dollar availability will be sustained. Consequently, from all these moving elements at the end of the year, our consolidated net debt was down over $400 million to $3.3 billion. Our consolidated net leverage ratio came down 0.2 times to 3.7 times versus the end of the third quarter 2024. As communicated last quarter, we expected leverage to drop following the realization of any disposals, and our 3.7 times net leverage ratio captures the impact of our Kuwait sale in December of 2024.

We expect leverage to remain within our target three to four times net leverage ratio in 2025, but continuing to drop organically during the year, supplemented by any further disposals. Moving to slide 19, we're introducing 2025 guidance that shows further growth in our revenues when excluding the impact of the Kuwait disposals, growth in adjusted EBITDA, and also growth in ALFCS. It includes revenue in the range of $1.68 billion-$1.71 billion, implying organic growth of 12% year-on-year at the midpoint of the range. Adjusted EBITDA in the range of $960 million-$980 million, implying 4% growth at the midpoint. ALFCS in the range of $350 million-$370 million, implying 18% growth at the midpoint. Total CapEx in the range of $260 million-$290 million. A few points I'd like to make here.

Number one, although it might be obvious, our 2025 guidance excludes any contribution from Kuwait after its disposal at the end of 2024. As a reminder, the MENA segment revenue in 2024 was $45 million. Secondly, I'll speak more about FX in a moment, but we include assumptions of continuing devaluation in the Naira, albeit much more moderate than what we saw in 2024. Thirdly, our 2025 guidance includes the impact from the approximate 1,000 sites that were not renewed as part of the agreement with MCN Nigeria back in August of 2024. With regards to CapEx, we anticipate to spend between $260 million and $290 million. That is in line with our strategic priority of taking a narrower approach to capital deployment and improving our cash flow generation.

This CapEx range, which includes a reduced BTS guidance versus previous years, is broadly in line with what we spent in 2024, and we believe enables us to still uphold our goal of maintaining double-digit organic revenue growth in 2025. For the year, we expect to build approximately 500 towers, including approximately 400 in Brazil. We continue to recognize the importance of maintaining a strong balance sheet and reiterate our net leverage target of three to four times, albeit we expect to be within the bottom half of the range by year-end. That is driven by adjusted EBITDA growth and higher cash flow generation. Disposals will supplement deleveraging as and when they complete.

As I said, our guidance also reflects an expected significant increase in ALSCF in 2025, driven by adjusted EBITDA growth, narrowed capital allocation, and lower withholding tax in Nigeria after the rate was reduced from 10% to 2% effective at the start of 2025. The bottom of the slide shows the average annual FX rate assumptions we've used in our 2025 guidance. For the year, we're assuming an average rate of NGN 1,640 to the US dollar, which includes NGN 1,525 to the dollar in Q1, and then devaluation through the year to NGN 1,785 to the dollar by year-end. Finally, on slide 20, we provide the estimated full-year financial impact of a theoretical 10% devaluation or appreciation in the Naira and how that would impact our financials.

While our 2025 guidance already assumes an annual average of NGN 1,640 to the dollar for the full year, here we've shown the impact of a 10% movement beyond what we've already assumed in guidance. The figures in the middle of the page, including the approximate $35-$40 million and $20-$25 million impact to revenue and adjusted EBITDA respectively, provide a sense of what the 12-month run rate impact would be using our 2025 expectations. You'll see on the right side, the illustration in the middle of the page excludes an incremental approximately $15 million that could impact in the quarter of devaluation actually occurring, assuming the devaluation was to occur at the beginning of the quarter. That represents the maximum lag that could occur between devaluation and when most of our FX resets would start to kick in at the beginning of the next quarter.

As a reminder, the vast majority of our resets are quarterly. 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.

Operator (participant)

Thank you. We'll now begin the Q&A session. As a reminder, if you'd like to ask a question, please press star followed by one on your telephone keypad. Our first question for today comes from Richard Cho of JP Morgan. Your line is now open. Please go ahead.

Richard Cho (Analyst)

Hi. I wanted to get an update on the Airtel new tenancies in Nigeria, how that's going so far and how much of that is planned for this year.

Steve Howden (CFO)

Hi Richard. Good to hear from you. Yeah, the Airtel contract is progressing. We've got quite a bit done in the second half of 2024, and then a lot of that comes through in 2025 and 2026. We haven't kind of given specific guidance around numbers, but yeah, that contract is flowing nicely. As a reminder, most of that's collocation and 5G lease amendments. There is a little bit of BTS, handful of sites in 2025 and 2026, but most of it's collocation and lease amendments.

Richard Cho (Analyst)

Great. In talking about the potential for stock buybacks and dividend, is there a preference, and how should we think about the timing of that evolving this year?

Steve Howden (CFO)

Yeah. I mean, I think that continues to be under evaluation. What we said for a little while is that we're in the process of disposal of $500 million to $1 billion in assets that's ongoing. That's the first target.

Sam Darwish (Chairman and CEO)

We want to get that done. Kuwait disposal was obviously a first step along that path. More work to do there. Once we have got a bit further into that disposal program, we will look to reassess that option. We said that the first amount will primarily be used for reducing debt, and that remains the case. We are obviously starting to think through what a share buyback and dividend program could look like. As a reminder, we have had a small share buyback program in place. We did not utilize it for most of 2024, given we were under the strategic review. There is a history of doing that. There is no real preference at this point between those eventual capital allocation decisions between share buyback and dividend. We will evaluate that over the coming months and quarters.

Richard Cho (Analyst)

Great. Thank you.

Sam Darwish (Chairman and CEO)

Hi, this is Sam. I do want to add something on the first question that you had on Airtel Nigeria. Look, last year was a very tough year for everyone. As we're seeing now, Nigeria is firing back, helped by the fact that it is maybe not tied or affected by the U.S. tariff, new tariff policies. Its currency has increased by 7% since the November elections. It's probably the top-performing currency in the world at the moment. Stock markets in Nigeria are delivering 4% growth in dollar terms since the beginning of this year, better than many bigger markets. Inflation is subsiding. We've seen the carriers beginning to be more bullish about their CapEx plans. Both carriers, big carriers, have announced that. We are extremely bullish about Nigeria at the moment, about the rollout of both MTN and Airtel and others. You can see that in our numbers and in our guidance.

Richard Cho (Analyst)

One follow-up to that, Sam. Do you expect the carriers, because of the new tariffs, to implement network spending this year that will help IHS, or is that more of a 2026 event?

Sam Darwish (Chairman and CEO)

Sorry, the what? I did not get the question.

Richard Cho (Analyst)

The spending from the new tariffs by MTN and Airtel and other carriers, do you think that is an impact for 2025 or more for 2026?

Sam Darwish (Chairman and CEO)

I believe it will be partly in 2025. It has to be partly in 2025 because several of them have service, quality of service, and rollout, soft rollout obligations, in my view. It was not really published, but I do believe that the government would like to see better quality of service, better rollout in certain areas, especially rural areas. I do think it's not crystal clear at the moment, but I do think that we will see a positive impact this year also.

Richard Cho (Analyst)

Great. Thank you.

Operator (participant)

Thank you. Our next question comes from Jim Schneider of Goldman Sachs. Your line is now open. Please go ahead.

Jim Schneider (Senior Research Analyst)

Good morning. Thanks for taking my question. Just on the strategic review, you've obviously made very good progress on some of the portfolio optimization activities already. You're already within the high end maybe of your target leverage range. Maybe could you characterize how much more is there to go in terms of portfolio optimization? Are we more than halfway done here, or are we even closer to that, to the end of that process? Maybe you've been very clear about your desire to do either share backs and/or dividend policy.

Can you maybe talk about your appetite for incremental acquisitions of assets to maybe bolster your portfolio in areas where you already have a lot of skill?

Steve Howden (CFO)

Hi, Jim. Thanks for the question. In terms of the first part, we've been pretty public and pretty consistent since May of last year that we were targeting $500 million-$1 billion of asset disposals. We've done one around $230 million for Kuwait. That indicates we're not done yet. We've managed to get through a significant amount of work and lots of progress in other areas as well. Last week, as you heard Sam talk about earlier in the earnings call around the commercial side, the operational side. Specifically in relation to balance sheet, yes, we're now starting to see all of that cash flow generation and disposals come to fruition in reducing debt, reducing leverage.

We're down at 3.7 times now. I just make clear again, reiterate, our target range is 3-4 times leverage, but we do expect to be in the bottom half of that range by the end of 2025. That's without any further disposals. Obviously, one would assume that future disposals would supplement that positively as well. That's kind of where we are on that piece. In relation to wider capital allocation decisions, acquisitions are not on the agenda at this point in time. We're very focused on increasing cash flow generation, utilizing that cash-to-debt paydown, and more focus around potential share buybacks and dividend in due course before we think again about acquisitions. As we've said, we'll keep evaluating that through the course of the year.

We're very pleased with where things have come operationally in the business and also macroeconomically starting to look better and better in relation to the market. We'll keep that under evaluation. Yeah, M&A is probably at the end of the key at the moment.

Jim Schneider (Senior Research Analyst)

Cool. Thanks. In the answer to the prior question, Sam, I think you referenced the desire for MTN and other carriers in Nigeria maybe to start increasing CapEx spending as early as the end of this year and into next year. Can you talk about one or two other markets where you see the most positive macro indicators and specific signals from carriers outside Nigeria where they might start to increase CapEx? Thank you.

Steve Howden (CFO)

I'll say that's out of the fantasy jumping as well. We're continuing to see decent momentum across a variety of our African markets.

They don't add up to as much as a big market like Nigeria, but we're continuing to see positive momentum in the Francophone market, Cameroon, and Côte d'Ivoire with leasing activity, be it colocation and the wants for new build sites, etc. There is plenty going on in Francophone Africa. South Africa continues to sort of add incrementally. Even Brazil, Brazil's had a bit more macroeconomic softness in the last quarter or two. Even there, we're seeing some fundamental dynamics have shifted in the last 6-12 months in that market, which hopefully leads to a much more positive near-term outlook. We've been going through our workings with Oi S.A. as with some of the other tower codes as well. That is kind of coming to a conclusion now. What we're seeing is plenty of the carriers are looking at substantial 5G rollouts.

Although Brazil and that sounds a bit softer in forces, we can see where it could go, and it's a positive longer-term picture. Sam, I don't want to add anything.

Sam Darwish (Chairman and CEO)

I think just to the IHS, we really believe Africa could be a direct beneficiary of the impending tariff wars that we're seeing happening between more markets that are integrated with US economies because largely Africa is not integrated in terms of manufacturing or other large kind of economic sectors. We're seeing that. We're seeing the impact of many of these policies that have or many of the issues that we've seen, the macro issues that we've seen kind of like coming back out of it. We're extremely bullish, and we believe the carriers will indeed increase their CapEx. The recent announcement indicated they are more bullish. It's beginning to increase.We expect to see much more in the coming few months.

Jim Schneider (Senior Research Analyst)

Thank you.

Operator (participant)

Thank you. Our next question comes from Michael Rollins of Citi. Your line's now open. Please go ahead.

Michael Rollins (Managing Director)

Thanks and good morning. First, thank you for adding into the revenue bridge the constant currency presentation disclosures. I'm curious if you could share those constant currency performance metrics by region for 2024 and compare what those expectations are within the guidance by segment for 2025.

Steve Howden (CFO)

Hi Mike. You're welcome. I know it's something that you're after, so we added into our disclosures. I also know you like more and more. We haven't put it in in terms of the forward-looking guidance for the year. That's something that we can maybe think through for future periods. Hopefully, it's helpful for people to see as we break down the various components of our growth.

There's obviously quite a lot of moving parts, especially given we have FX reset and the impact of FX given our emerging market currency exposure. We try to simplify all that. It doesn't actually change the fundamental presentation of what we've shown to people before in the revenue bridges, but obviously, it just compartmentalizes elements stripping out that FX. We haven't given it to forward-looking. Let us think through that as to whether that's something we could add in future. I don't see why not.

Michael Rollins (Managing Director)

Maybe then just in the aggregate level, if you look at what's implied in that 12% at the midpoint, are there some indications that you can give us on how much is coming from colocation and lease amendments in aggregate for the portfolio versus your escalators or other components of the bridge just to center around where the growth is coming from for the business in 2025 as it would compare to full year 2024?

Steve Howden (CFO)

Yeah. If you look at the earnings presentation on slide 12, you see the FY 2024 bridge. We just use that as a guide. CPI for 2025 will be a little bit down, not too much down, but a little bit down versus that as we see inflation rates moderating. New sites roughly similar. Colocation will be up versus that.

New lease amendments and fiber similar, maybe a little bit less, but certainly new colocations up. Other is really sort of the noise in that that would be next to zero at this point in time. That is really 2023 items that are flushing out in the comparables. Yeah, not too dissimilar, but a bit more focused on colocations is what we are forecasting and seeing in the markets.

Michael Rollins (Managing Director)

Great. I apologize if I missed this in the commentary. On slide 19, the CapEx range is $260 million-$290 million. How much of that is recurring CapEx that is included in the ALSCF definition? How much of that is maintenance together with the CapEx?

Steve Howden (CFO)

Yeah. It is about a third. About a third of that CapEx is maintenance, which gets us sort of within sort of ranges midpoint about $85 million, $9 million of maintenance CapEx.

If you remember from the end of last year, we've been guiding sort of $24 million-$25 million per quarter of maintenance CapEx. We've obviously disclosed to the business and some other work we've been doing. We're trending a little bit lower than that, about $22 million-$23 million a quarter at this point in time for maintenance CapEx.

Michael Rollins (Managing Director)

Just the last question. As you think about your different markets, industry structure, possible consolidations, is there anything that you want to flag for us that's left in terms of possible churn in the business over the next few years that we all should be mindful of?

Steve Howden (CFO)

I think everybody's aware of the MTN Nigeria piece which is playing out through the course of 2025. That was well signposted last year. Other than that, no, we're not seeing anything else.

We're seeing positive leasing trends across all major markets. Yeah, more of a positive picture to go.

Sam Darwish (Chairman and CEO)

Mike, at the moment, all our contracts are renewed into the 2030s. At the moment, we've got more than $12 billion or $13 billion of contracted revenue. Our exposure to Oi in Brazil at the moment is less than 1%, if any. We feel extremely confident and comfortable with where we stand.

Michael Rollins (Managing Director)

Thanks very much.

Operator (participant)

Thank you. Our next question comes from Gustavo Campos of Jefferies. Gustavo, your line's now open. Please go ahead.

Gustavo Campos (Emerging Market Associate and Credit Analyst)

Hello. Yes. Congratulations on the results, and thank you very much for the presentation and all the details. My first question is, again, sorry to follow up on the disposals. I just wanted some confirmation if you were still going to adhere to your previous $500 million-$1 billion target for asset sales. As far as your portfolio selection for these asset sales, what will be the broader criteria? Any specific geographies or types of assets that you are targeting here? Any color on that would be very helpful. That's my first question.

Steve Howden (CFO)

Thank you. Yes, the $500 million-$1 billion range is sort of the target. That's fairly straightforward. We're working hard on that. In terms of portfolio selection or market selection, we have also said historically that it could include things like minority stakes, for example. We were not ruling out a number of different value realization opportunities. We have not been specific on markets. Clearly, we are looking to highlight the value of IHS versus its share price performance. We are looking at a number of different opportunities, and we will keep people updated.

We do not want to be negotiating these transactions in the public domain. We would appreciate it. We are not going to give too much information on live discussions. May I also make a remark on that? At the end of the day, the reason we are conducting this strategic review is that we believe that we remain undervalued. We have sold a couple of asset portfolios at almost, what, three times the multiples we are given by the public market. In Kuwait, sold for $14.2. We are at the moment at roughly 5, more or less. We believe that is an important thing that I wanted to put out there. Nigeria is coming back. Things are changing. That is why I think it is very important to stay current and keep recalibrating our view, taking into account all the new positive realities that we are seeing.

Also, if I may add, our operational performance in terms of cash flow generation has materially improved in the last year as we are introducing new ways, new operating methods, new operating procedures, many of which are using artificial intelligence in the way we distribute diesel, in the way we plan our operations on site. This has had also a very positive impact on our cash flow generation. We are comfortable where things are at the moment. Yes, to see the points, we continue with what we have promised the market.

Gustavo Campos (Emerging Market Associate and Credit Analyst)

Understood. Yes. Thank you very much. That is very clear. If you mind, if I just clarify here, is this $500 million-$1 billion target, is this enterprise value, or is this a consideration that you are targeting to receive? Thank you.

Steve Howden (CFO)

Yeah. Approaching, clearly.

Gustavo Campos (Emerging Market Associate and Credit Analyst)

Okay. Yeah. Thank you. My second question would be around you were expecting to generate more positive cash flow and potentially leverage more to the bottom half of your target, as you mentioned. Would you have, by chance, a total debt target that you are expecting to be by the end of the year? As far as is there, are you expecting to have a tender offer on your bonds? Any specific maturities or part of your capital structure that you're planning to target?

Steve Howden (CFO)

No specific debt number in mind other than making sure that the leverage is down. That will obviously depend a little bit on the activity through the course of the year, including potential future M&A disposals, as we've discussed. We have been clear we want to get the leverage down to the bottom end of our target range. That is the goal.

In terms of where excess cash gets utilized, obviously, bonds are a significant part of our capital structure. I obviously would not want to say anything to do with tender offers or anything like that. There is a number of bonds that are either in call periods or coming into call periods, which is obviously an important consideration. We also have other debt in the structure outside of the bonds, which we could consider utilizing excess cash for. We have a number of different options available to us to utilize cash as it comes through to us.

Gustavo Campos (Emerging Market Associate and Credit Analyst)

That is very clear and very helpful. Thanks a lot. My last question would be on working capital. You saw around $200 million in receivables outflows in fiscal year 2024, although there was a mature improvement in the fourth quarter. What are your expectations for 2025? Should we see similar outflow pressure, or are you expecting an improvement given your updates on your commercial agreements, etc.? That's my last question.

Steve Howden (CFO)

Thank you. Yeah. Exactly. So yeah, as you point out, there's significant improvement in Q4 with a pretty material working capital inflow in quarter four, which has reversed the trend. The outflows have been slowing through the course of 2024 and now back in positive territory in Q4. I expect some continued momentum in that early part of the year. We're not forecasting particular working capital outflows in 2025 at all. There will always be a little bit of movement between the quarters, but from a total 2025 perspective, no, no working capital outflow forecast.

Gustavo Campos (Emerging Market Associate and Credit Analyst)

Okay. Thank you. Just to clarify, your expectation is to be roughly working capital neutral in 2025?

Steve Howden (CFO)

Yeah. Plus positive. Yep.

Gustavo Campos (Emerging Market Associate and Credit Analyst)

All right. Perfect. Thank you very much. Congrats again. Thank you.

Operator (participant)

Thank you. Our next question comes from Stella Cridge of Barclays. Your line's now open. Please go ahead.

Stella Cridge (Managing Director and Head of Public Sector and Emerging Markets DCM)

Hi there, everyone. Many thanks for all the updates. I wonder if I could just ask about Rwanda. You were touching before on some of the outlook for some of your markets. After these recent developments in Democratic Republic of Congo, there's been a little bit of political pressure on Rwanda. I was just wondering if there was anything you were monitoring there in terms of risks to the business, perhaps around currency or upstreaming or anything that would be relevant for you? That looks great.

Steve Howden (CFO)

Thanks. Hey, Stella. No, nothing too untoward, to be honest. Obviously, we're monitoring that as a sort of geopolitical situation. No impact on our business, either operationally, financially, from an FX perspective, etc. No, really watching, but no, nothing untoward, no impact on the business.

Stella Cridge (Managing Director and Head of Public Sector and Emerging Markets DCM)

Thanks for clarifying. That's all.

Operator (participant)

Thank you. That brings us to the end of the IHS Holding Limited fourth quarter and full year 2024 earnings results call. Should you have any questions, please contact the investor relations team via the email address, [email protected]. The management team thank you for your participation today and wish you a good day. Thank you.