Helios Towers PLC (HTWSF) (H1 2024) Earnings Call Highlights: Strong Financial Performance Amid ...

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  • Revenue Growth: Up 11% year-on-year.

  • EBITDA Growth: Increased by 19% year-on-year.

  • Portfolio Free Cash Flow Growth: Up 14% year-on-year.

  • Return on Invested Capital (ROIC): Increased by 2 percentage points.

  • Leverage Reduction: Decreased by 0.2 times in the quarter and 0.6 times year-on-year.

  • Tenancy Additions: 1,600 additions in H1 2024.

  • Tenancy Ratio: Expanded by 0.14 times to over two tenants per tower.

  • EBITDA Margin: Increased by 3 percentage points to 53%.

  • Free Cash Flow: Improved to an outflow of $10 million compared to a negative $40 million outflow in the same period last year.

  • CapEx: Total of $80 million in H1 2024, with $38 million in growth CapEx.

  • Debt Refinancing: Raised an $850 million five-year bond at a 7.5% coupon.

  • Net Leverage: Decreased to 4.2 times, a reduction of 0.6 times year-on-year.

  • Adjusted EBITDA Guidance: $410 million to $420 million for the full year.

  • Portfolio Free Cash Flow Guidance: $280 million to $290 million for the full year.

Release Date: August 08, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Helios Towers PLC (HTWSF) reported a record number of over 1,600 tenancy additions in H1 2024, contributing to a tenancy ratio expansion to over two tenants per tower.

  • Revenue increased by 11%, with EBITDA and portfolio free cash flow up by 19% and 14% respectively, demonstrating strong financial performance.

  • The company successfully reduced leverage by 0.2 times in the quarter and 0.6 times year-on-year, with debt secured at fixed rates for the next five years.

  • Helios Towers PLC (HTWSF) received credit rating upgrades from Moody's, S&P, and Fitch, reflecting improved creditworthiness.

  • The company is on track to achieve its full-year guidance, with tightened guidance for tenancies and EBITDA, indicating confidence in continued growth.

Negative Points

  • Despite strong H1 performance, the guidance for H2 suggests a significant slowdown in tenancy additions, raising concerns about growth momentum.

  • There is cautious optimism regarding the full-year outlook, with no significant upward revision in the higher end of EBITDA guidance.

  • The company faces challenges in maintaining consistent site additions, with a focus on colocation rather than new site builds.

  • FX impacts and tax payments were higher than expected, affecting financial results and cash flow.

  • The investment environment remains uncertain, with no immediate plans for large M&A expansion despite potential opportunities if bond yields decrease.

Q & A Highlights

Q: With a strong H1 in tenancy additions, why does the guidance imply a slowdown in H2? Is there a quality of tenancy adds effect here? A: Tom Greenwood, CEO: The timing of tenancy additions affects financials as they are recorded at the end of the quarter. The strong Q2 performance was an outperformance by the team, and we are cautiously optimistic. We expect more updates in Q3, with potential upward pressure on guidance.

Q: Can you provide more details on the investment environment and any potential M&A opportunities if bond yields decrease? A: Tom Greenwood, CEO: We are focused on in-market organic growth and deleveraging. Even if rates decrease, we are not looking at large M&A expansion plans. Our focus remains on accreting ROIC and driving shareholder returns.

Q: Can you provide assurance that mobile operators are not pulling back from capital expenditure, especially in your top markets? A: Tom Greenwood, CEO: In our major markets like Tanzania, DRC, and Oman, we continue to see strong demand for coverage and capacity. We are the leading tower operator in these markets and continue to work closely with our customers on rollouts.

Q: Is there any update on the Oman bolt-on opportunity? A: Tom Greenwood, CEO: There is no confirmed timing yet for the Oman bolt-on opportunity. The potential investment is a little over $50 million, with Helios Towers providing 70% of the funding.

Q: Are you seeing any pressure from customers to change contract structures to include more local FX elements? A: Tom Greenwood, CEO: We are not experiencing unusual pricing pressures. Our contracts are well-structured with a mix of hard and local currencies, and we continue business as usual with our customers.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.