Helios Towers Plc reports significant revenue and EBITDA growth, exceeding expectations

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Helios Towers plc (LON:HTWS), the independent telecommunications infrastructure company, today announces results for the year to 31 December 2023.

Tenancies, Adjusted EBITDA and ROIC ahead of expectations

+29% revenue and +31% Adjusted EBITDA year-on-year growth

+10-14% Adjusted EBITDA growth, free cash flow inflection and <4.0x net leverage targeted in FY 2024

Tom Greenwood, Chief Executive Officer, said:

“I am extremely pleased with the operational and financial performance of the business. In our first year with all recent acquisitions integrated, we exceeded expectations in customer delivery and across our KPIs. This included record organic tenancy growth that supported return on invested capital (ROIC) expansion.

Looking forward, we have conviction in a faster pace of tenancy ratio expansion than our prior medium-term guidance. As such, we have adjusted our strategic target of ‘22,000 towers by 2026’, which included meaningful inorganic site growth, to ‘2.2x tenancy ratio by 2026’, prioritising organic growth and returns expansion. Consequently, we expect FY 2024 to be our inflection year for free cash flow, and continue to grow thereafter.

We have built a compelling and unique platform in some of the world’s fastest growing mobile markets and through our focus on customer service excellence, are well placed to capture the structural growth and deliver sustainable value for our stakeholders.”

	FY 2023	FY 2022	Change	Q4 2023	Q3 2023	Change
Sites	14,097	13,553	+4%	14,097	14,024	+1%
Tenancies	26,925	24,492	+10%	26,925	26,624	+1%
Tenancy ratio	1.91x	1.81x	+0.10x	1.91x	1.90x	+0.01x
Revenue (US$m)	721.0	560.7	+29%	187.3	183.5	+2%
Adjusted EBITDA (US$m)¹	369.9	282.8	+31%	100.7	95.4	+6%
Adjusted EBITDA margin¹	51%	50%	+1ppt	54%	52%	+2ppt
Operating profit (US$m)	146.1	80.3	+82%	33.5	43.3	-23%
Portfolio free cash flow (US$m)¹	268.2	201.4	+33%	71.1	72.6	-2%
Cash generated from operations (US$m)	318.5	193.2	+65%	78.8	92.1	-14%
Net debt (US$m)¹	1,783.1	1,678.0	+6%	1,783.1	1,729.9	+3%
Net leverage^1,2	4.4x	5.1x	-0.7x	4.4x	4.5x	-0.1x

1 Alternative Performance Measures are described in our defined terms and conventions.
2 Calculated as per the Senior Notes definition of net debt divided by annualised Adjusted EBITDA.

Financial highlights

· FY 2023 revenue increased by 29% year-on-year to US$721.0m (FY 2022: US$560.7m), driven by record organic tenancy growth, complemented by acquisitions in Malawi and Oman

o Q4 2023 revenue increased by 2% quarter-on-quarter to US$187.3m (Q3 2023: US$183.5m)

· FY 2023 Adjusted EBITDA increased by 31% year-on-year to US$369.9m (FY 2022: US$282.8m), driven by tenancy growth

o Excluding acquisitions, Adjusted EBITDA increased by 17% year-on-year, representing the Company’s fastest organic growth since IPO

o Q4 2023 Adjusted EBITDA increased by 6% quarter-on-quarter to US$100.7m (Q3 2023: US$95.4m)

· FY 2023 Adjusted EBITDA margin increased 1ppt year-on-year to 51% (FY 2022: 50%) reflecting tenancy ratio expansion, partially offset by higher fuel prices

o Excluding the impact of higher fuel prices, which increase power-linked revenue and operating expenses comparably, Adjusted EBITDA margin expanded 3ppt year-on-year

o Q4 2023 Adjusted EBITDA margin increased 2ppt quarter-on-quarter to 54% (Q3 2023: 52%)

· FY 2023 operating profit increased by 82% year-on-year to US$146.1m (FY 2022: US$80.3m), driven by Adjusted EBITDA growth

o Loss before tax improved to US$112.2m (FY 2022: US$162.5m), primarily driven by a US$65.8m year-on-year increase in operating profit and US$53.6m favourable movement in non-cash fair value movements on embedded derivatives, partially offset by US$60.3m higher finance costs

o Higher finance costs reflect the non-cash impact of foreign exchange movements on the Group’s intercompany borrowings and the full year impact of increased debt, largely related to the Oman acquisition which closed in December 2022

· FY 2023 portfolio free cash flow increased by 33% year-on-year to US$268.2m (FY 2022: US$201.4m), driven by Adjusted EBITDA growth and proportionately lower increases in payments of lease liabilities and taxes paid

o FY 2023 portfolio free cash flow exceeded updated guidance of US$260m – US$265m, due to the timing of non-discretionary capex

· FY 2023 cash generated from operations increased by 65% year-on-year to US$318.5m (FY 2022: US$193.2m), driven by higher Adjusted EBITDA and improved working capital due to customer collections

· Net leverage of 4.4x decreased by 0.7x year-on-year (FY 2022: 5.1x) and by 0.1x quarter-on-quarter (Q3 2023: 4.5x)

· Business underpinned by future contracted revenues of US$5.4bn (FY 2022: US$4.7bn), of which 99% is from multinational MNOs, with an average remaining life of 7.8 years (FY 2022: 7.6 years)

Operational highlights

· Sites increased by 544 year-on-year to 14,097 sites (FY 2022: 13,553 sites) and by 73 quarter-on-quarter

· Tenancies increased by 2,433 year-on-year to 26,925 tenants (FY 2022: 24,492 tenants) and by 301 quarter-on-quarter

· Tenancy ratio increased by 0.10x year-on-year to 1.91x (FY 2022: 1.81x), reflecting expansion across all markets

o Acquisitions in Oman and Malawi, completed in 2022, saw strong tenancy ratio expansion of 0.13x to 1.33x and 0.09x to 1.70x, respectively

Strategy update

· The Group’s capital allocation policy is focused on growing portfolio free cash flow while consistently delivering ROIC above its cost of capital. Its current priorities are accretive organic investments and further deleveraging

· Combined with a faster pace of forecast tenancy ratio expansion compared to prior guidance, the Group has updated its strategic target of ‘22,000 towers by 2026’, which included approximately 5,000 inorganic sites, to ‘2.2x tenancy ratio by 2026’. This is expected to support accelerated ROIC expansion over the medium-term

FY 2024 outlook and guidance¹

· Organic tenancy additions of 1,600 – 2,100

· Adjusted EBITDA of US$405m – US$420m

· Portfolio free cash flow of US$275m – US$290m

· Capital expenditure of US$150m – US$190m

o Of which c.US$45m is anticipated to be non-discretionary capital expenditure

· Net leverage below 4.0x

· Neutral free cash flow²

1 Guidance assumes the Group continues to apply the same accounting policies.

2 Excluding potential second acquisition closing in Oman, previously announced on 8 December 2022.

Environmental, Social and Governance (ESG)

· The Group has made continued progress against many of its Sustainable Business Strategy targets in FY 2023:

o 144m population coverage footprint (FY 2022: 141m)

o 5,817 rural sites (FY 2022: 5,593)

o 99.98% power uptime (FY 2022: 99.96%)

o 0% reduction in carbon emissions per tenant (FY 2022: -2%)³

o 28% female employees (FY 2022: 28%)

o 53% employees trained in Lean Six Sigma (FY 2022: 42%)

o 96% local employees in our operating companies (FY 2022: 96%)

· The Company has been recognised by external rating agencies for its Sustainable Business Strategy and commitment to transparency

o ESG score of ‘AAA’ from MSCI, the highest score from the investment research firm, was reaffirmed

o B score from CDP was reaffirmed

o Inclusion in the FTSE4Good Index for a second consecutive year

o ESG risk rating from Sustainalytics improved from Medium risk (22.6) to Low risk (16.8)

o 80% score for WDI disclosure exceeded sector and UK company average

· In 2024, the Group expects to publish an updated carbon emissions reduction target to reflect its recent expansion into four new markets

3 Reflects change in scope 1 and 2 carbon emissions per tenant compared to 2020 baseline. Includes only the five markets that were operational in our 2020 baseline year.

Helios Towers’ management will host a conference call for analysts and institutional investors at 09.30 GMT on Thursday, 14 March 2024.

For the best user experience, please access the conference via the webcast. You can pre-register and access the event using the link below:

Registration Link – Helios Towers FY 2023 Results Conference Call

Event Name: FY2023

Password: HELIOS

If you are unable to use the webcast for the event, or if you intend to participate in Q&A during the call, please dial in using the details below: