Earnings Call Transcript - IHS Q4 2024

Operator, Operator

Good day. And welcome to the IHS Holding Limited Fourth Quarter and Full Year 2024 Earnings Results Call for the three-month and full year periods ended December 31, 2024. Please note that today’s conference is being webcast and recorded. At this time, I’d like to turn the conference over to Robert Berg. Please go ahead, sir.

Robert Berg, Head of Investor Relations

Thank you, Operator. Thanks to everyone for joining the call today. I'm Robert Berg, Head of Investor Relations here at IHS. With me today are Sam Darwish, our Chairman and CEO; and Steve Howden, our CFO. This morning, we filed our annual report and Form 20-F for the full year ended 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 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 2, which should be read in full along with a cautionary statement regarding forward-looking statements set out in our earnings release and 20-F filed 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 that are difficult to predict and others 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 20-F filed today with the Securities and Exchange Commission and our 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 ALFCF, which we view as important in assessing the liquidity of our business. A 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. And with that, I'd like to turn the call over to Sam Darwish, our Chairman and CEO.

Sam Darwish, Chairman and CEO

Thanks, Robert. And welcome everyone to our fourth quarter and full year 2024 earnings results call. We're reporting a strong performance in 2024, ending the year on a high note with a strong Q4. Our key metrics, revenue, adjusted EBITDA, and ALFCF, all coming in ahead of our guidance while CapEx was below expectations. 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, a 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'll 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 Forex 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 co-location, 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 ALFCF 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 times 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 6 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 to $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 derisk our future cash flows. We have extended commercial contracts with key customers into the next decade, including all our MTN MLAs covering over 25,000 tenancies, up 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 NCC 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 derisked our operating model by materially reducing our exposure to power prices with the expectation that this would 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 grass 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 ALFCF generated in 2024 despite significant Forex headwinds. In addition to our continued cost discipline and narrowed focus on capital allocation, we will benefit from a reduction in withholding tax rates in Nigeria. Effective from January 01, 2025, amounts withheld by customers in Nigeria, which are paid to the tax authorities, 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 ALFCF 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've 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 7. Our disposal work remains in progress, as we continue with the target of raising $500 million to $1 billion. As previously indicated, excess cash following the 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. So to summarize on Slide 8, 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 derisk 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. And with that, I'll turn the call over to Steve.

Steve Howden, CFO

Thanks, Sam. Hello, everyone. On Slide 10, we present our full year 2024 and fourth quarter 2024 performance. Our results exceeded expectations despite a challenging yet improving macroeconomic environment in Nigeria, where we experienced higher stability in the latter part of the year. As you review the results, keep in mind that year-over-year comparisons may be influenced by the Kuwait disposal that closed in December 2024, and we've highlighted these instances. In terms of results, both towers and tenants decreased by about 2% and 1% respectively year-over-year, while lease amendments saw a high single-digit percentage increase. Without the Kuwait disposal, both tower and tenant numbers would have shown year-on-year growth. On a reported basis for the fourth quarter, revenue dropped by approximately 14% year-on-year, affected by a very different foreign exchange environment compared to the fourth quarter of 2023 and new financial terms with MTN Nigeria, although there was a 4.2% increase compared to the third quarter of 2024. To remind you, the naira's average FX rate against the dollar was NGN815 in the fourth quarter of 2023 and NGN1,629 in the fourth quarter of 2024. Adjusted EBITDA decreased by 10% from the previous year, but the adjusted EBITDA margin increased by 250 basis points, reflecting our ongoing cost control and the resilience of our financial model. The fourth quarter 2024 adjusted EBITDA aligned with that of the third quarter. Meanwhile, ALFCF fell by nearly 9%, influenced by factors impacting revenue and adjusted EBITDA, along with higher interest costs following our bond refinancing in November. However, the fourth quarter 2024 ALFCF grew by 23% compared to the third quarter 2024 ALFCF. Our level of CapEx investment decreased by 37% in the quarter and by 56% for the year, mainly due to a reduction in CapEx across all segments as we prioritize improving cash generation. Lastly, our consolidated net leverage ratio rose year-on-year to 3.7 times at year-end. After peaking at 3.9 times during the second and third quarters of 2024, it has now improved by 0.2 times from the third quarter to year-end, which includes the effects of the Kuwait disposal. Slide 11 illustrates the components of our fourth quarter 2024 revenue on a consolidated basis, highlighting how the naira's devaluation turned strong organic and constant currency growth into a 14% decline. The naira depreciated by 50% in Q4 2024 compared to Q4 2023, yet the business achieved organic revenue growth of 39%, primarily driven by FX resets, power, CPI escalators, and lease amendments. From a constant currency perspective, revenue increased over 9%, primarily due to CPI escalations, new lease amendments, and new colocations, showing positive indications of ongoing underlying tenancy growth in our key markets. The right side of the page presents the organic growth rates for each of our segments for the quarter, where the Nigeria segment grew by about 62%, benefitting significantly from the FX resets. Slide 12 depicts the full year growth bridge, reiterating the FX impact while also showcasing the contractual protections from CPI escalators and FX resets that help to mitigate 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 previously discussed, indicating that our results surpassed our guidance across these metrics. Specifically, in the fourth quarter of 2024, we achieved adjusted EBITDA of $246 million and an adjusted EBITDA margin of 56.3%, maintaining the trend of higher margins following the initial dip from naira devaluation. Moving to Slide 14, during the fourth quarter of 2024, we generated ALFCF of around $107 million, reflecting a 9.3% decline compared to Q4 2023. This was primarily due to reduced adjusted EBITDA and increased interest costs following the bond refinancing in November, although it was partially offset by a decrease in revenue withholding tax. Our ALFCF cash conversion rate stood at 43.5%. I would like to highlight the positive improvement in ALFCF and its conversion rate throughout 2024. For the full year, we reported ALFCF of $304 million with a cash conversion rate of 32.8%. Discussing CapEx, the fourth quarter 2024 CapEx of $83 million represents a 37% decrease year-on-year, while the full year CapEx of $256 million decreased by 56%, continuing recent trends. The reduction in full year CapEx was driven by lower investment across all segments, especially in Nigeria, where reductions related to Project Green were significant as investment in that project is largely complete; in Sub-Saharan Africa, mainly lower refurbishment CapEx; and in LatAm, due to decreases related to fiber and new site CapEx, although we still maintained a healthy level of new site development in Brazil. On Slide 15, I will start with Nigeria. In November, the Central Bank of Nigeria introduced a strategic roadmap called the payment system vision 2025 to enhance financial transparency in the country. The Monetary Policy Committee raised interest rates by 25 basis points in November, raising the NPR to 27.5%, marking six rate hikes throughout 2024. These measures appear to have positively influenced Nigeria's FX market, with the currency appreciating in December and additionally into Q1 2025. We've observed an increase in U.S. dollars in Nigeria, with FX reserves climbing to $40.9 billion by December 2024, up from $38.4 billion at the end of September 2024. Since the FX environment adjusted in Q1, we've successfully upstreamed $271 million to the Group throughout the year from Nigeria alone. Recently, the National Bureau of Statistics rebased Nigeria's Consumer Price Index, bringing January 2025's headline inflation rate to 24.5%, down from 34.8% in December 2024. In February 2025, the NPC maintained the policy rate at 27.5% for the first time across six meetings, reaffirming their commitment to creating price stability in the country. While we see continued macroeconomic improvement, there is still work ahead. Specifically for IHS in Nigeria, our fourth quarter 2024 revenue of $259 million was down 19% year-on-year on a reported basis, due to the substantial FX headwind and new financial terms with MTN Nigeria. This decline outweighed the 61.5% organic growth, mainly driven by FX resets and power indexation. Our colocation rate declined to 1.56 times, down from 1.59 times in the fourth quarter of 2023, as we reintegrated 210 towers and faced 529 tenant churn from our smallest key customer in Nigeria in the third quarter of 2024, for which we were not recognizing revenue at that time. Lease amendments have been a key growth driver, increasing 3% year-on-year as customers added additional equipment to our sites. The fourth quarter 2024 adjusted EBITDA in Nigeria was $155 million, reflecting a 22.5% decrease from the previous year, while the segment adjusted EBITDA margin fell by 250 basis points to 59.8%, due to the revenue decline and inventory write-down during this period, partially offset by reduced tower repairs, maintenance costs, and diesel expenses. In our Sub-Saharan African segment, revenue was generally flat, while adjusted EBITDA experienced a 29.6% increase year-on-year. This performance was largely attributed to lower revenues and costs recognized in South Africa following the wind-down of the power managed services agreement with MTN South Africa, which did not impact segment adjusted EBITDA. The results were further strengthened by new colocations, lower regulatory fees, and reduced tower repair and maintenance costs, resulting in the segment adjusted EBITDA margin significantly increasing by 1,480 basis points to 65.1%. In our LatAm segment, towers and tenants rose by 7.9% and 7.2% respectively. Revenue decreased by 18% due to negative FX movements and reduced revenue recognition from Oi during their judicial recovery proceedings early in 2024. In Brazil, our second-largest market with 8,326 towers, macro conditions softened this past quarter with the Brazilian real continuing to lose value against the dollar, alongside rising interest rates and inflation. Despite a 10% decrease in adjusted EBITDA for LatAm, the adjusted EBITDA margin improved by 750 basis points compared to Q4 2023, mainly due to revenue declines and cost savings contributing positively to margins. Regarding MENA, as previously mentioned, we finalized the disposal of our 70% interest in IHS Kuwait on December 19, 2024, which resulted in 12 fewer days of trading in both the fourth quarter of 2024 and the full year. Given the disposal date, by year-end, the entire tower portfolio, tenants, and lease amendments have been removed from our financials. Consequently, MENA will no longer be a reportable segment starting Q1 2025. On Slide 17, we examine our returns and capital allocation. In 2024, we maintained our focus on driving returns and achieved a return on invested capital of 15.8%, up from 14.6% the previous year. This improved ROIC in 2024 is attributed to our focused capital allocation strategy and bolstered by robust free cash flow generation, the effects of the naira devaluation, and the disposal of our Kuwaiti operations. Looking at capital allocation, a substantial portion of our spending in FY24 was directed towards discretionary CapEx outside of new sites, followed by maintenance or non-discretionary CapEx, along with new site CapEx where we continue to lead in new site development in Brazil. The $130 million in discretionary CapEx, excluding new sites, was primarily allocated for fiber rollout, enhancements for colocation and lease amendments, and various cost-saving initiatives. Discretionary CapEx saw a significant reduction from 2023 due to our focused capital allocation and because the investment in Project Green is now largely complete. Transitioning to Slide 18, we assess the capital structure and related items. By the end of 2024, we held around $3.9 billion in external debt, including IFRS 16 lease liabilities, which is a decrease of approximately $240 million compared to the third quarter of 2024. Of the $3.9 billion, approximately $2.2 billion consists of our bond financings, including the successful $1.2 billion dual-tranche senior notes refinancing in November 2024. The other indebtedness category includes our new $439 million five-year term loan refinance completed in October 2024. As Sam noted, these refinancings exemplify our goal to enhance the strength and flexibility of our balance sheet, a critical aspect of our strategic review. Through this new term loan and the senior notes, we have extended our maturities into 2029, 2030, and 2031. Additionally, with the South African rand tranche of our term loan, it shifts dollar obligations into local currency, helping better align our debt FX exposure with our current revenue FX profile. We believe this has been accomplished at manageable interest rates compared to the previous debt it replaces. We ended the year with cash and cash equivalents totaling $578 million. In terms of cash positioning, about 19% was held in naira at our Nigeria operations. As indicated earlier, we've been upstreaming from Nigeria, contributing an additional $153 million in the fourth quarter, bringing the total upstreamed amount from Nigeria to $271 million for the full year. While we will continue this trend in 2025, we caution that the stability of increased dollar availability remains uncertain. Consequently, considering all these factors, our consolidated net debt decreased by over $400 million to $3.3 billion by year-end. Our consolidated net leverage ratio reduced by 0.2 times to 3.7 times when compared to the end of the third quarter 2024. As mentioned last quarter, we anticipated leverage would decline with the realization of disposals, and our 3.7 times ratio reflects the impact of the Kuwait sale in December 2024. We foresee leverage maintaining within our target range of 3 to 4 times in 2025, as we expect it to decrease organically throughout the year, supplemented by further disposals. Moving to Slide 19, we are presenting our 2025 guidance, which indicates further revenue growth when excluding the impact of the Kuwait disposal; growth in adjusted EBITDA; and growth in ALFCF. We expect revenue between $1.68 billion and $1.71 billion, suggesting organic growth of 12% year-on-year at the midpoint; adjusted EBITDA in the range of $960 million to $980 million, indicating 4% growth at the midpoint; ALFCF between $350 million and $370 million, which represents 18% growth at the midpoint; and total CapEx between $260 million and $290 million. I would like to note a few points here. Firstly, our 2025 guidance excludes any contributions from Kuwait following its disposal at the end of 2024, with MENA segment revenue in 2024 was $45 million. Secondly, I will address FX shortly, but the guidance includes assumptions of ongoing naira devaluation, albeit at a moderated pace compared to 2024. Finally, our 2025 guidance factors in the impact of approximately 1,000 sites not renewed as part of the MTN Nigeria agreement from August 2024. For CapEx, we project spending between $260 million and $290 million, aligning with our strategic priority of a focused capital deployment approach and enhancing cash flow generation. This CapEx range, which suggests a reduced BTS guidance compared to previous years, is generally in line with our 2024 spending, maintaining our goal for double-digit organic revenue growth in 2025. We expect to build around 500 towers for the year, with approximately 400 in Brazil. We emphasize the importance of preserving a strong balance sheet, reiterating our net leverage target between 3 to 4 times, and expecting to remain in the lower half of the range by year-end, driven by adjusted EBITDA growth and enhanced cash flow generation. Disposals will assist in this deleveraging as they are completed. Our guidance also indicates an anticipated significant increase in ALFCF in 2025, propelled by adjusted EBITDA growth, focused capital allocation, and reduced withholding tax in Nigeria, which decreased from 10% to 2% effective at the start of 2025. At the bottom of the slide, we outline the average annual FX rate assumptions incorporated into our 2025 guidance. We are assuming an average rate of NGN1,640 to the U.S. dollar over the year, which includes NGN1,525 in Q1 and projecting devaluation through the year to NGN1,785 to the dollar by year-end. On Slide 20, we estimate the financial implications of a hypothetical 10% devaluation or appreciation in the naira and its potential impact on our finances. Even though our 2025 guidance already assumes an annual average of NGN1,640 to the dollar, we present the implications of a further 10% variation beyond our guidance. The figures illustrated, including approximately $35 million to $40 million and $20 million to $25 million impacts on revenue and adjusted EBITDA respectively, reflect the potential 12-month run-rate effects based on our 2025 forecasts. The right-hand side of the illustration shows additional potential impacts of about $15 million in the quarter if devaluation occurs at the beginning of the quarter, indicating a lag between devaluation and when most FX resets begin, which typically occurs at the start of the following quarter. The vast majority of our resets are quarterly. This concludes our formal presentation. Thank you for your time today. Operator, please open the line for questions.

Operator, Operator

We now begin the Q&A session. Our first question for today comes from Richard Choe of JPMorgan.

Richard Choe, Analyst

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?

Sam Darwish, Chairman and CEO

So yes, the Airtel contract is progressing. We've got quite a bit done in the second half of 2024 and that never got that comes through in 2025 and into 2026. So we haven't given specific guidance around numbers but that contract is flowing nicely. And as a reminder, most of that's colocation and 5G lease amendments. There is a little bit of BTS, a handful of sites in 2025 and 2026 but most of it's colocation lease amendments.

Richard Choe, Analyst

And then 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

I think that situation is still being evaluated. We have mentioned that we are in the process of disposing of between $500 million to $1 billion in assets, and that work is ongoing. Our first priority is to complete this process, with the Kuwait disposal being an initial step. Once we progress further in our disposal program, we will reassess our options. Initially, we plan to use the proceeds to pay down debt, which remains our focus. However, we are also beginning to consider what a share buyback or dividend program may look like. We previously had a small share buyback program, which was not utilized for much of 2024 due to a strategic review. There is a history of executing buybacks, but at this point, we have no strong preference between share buybacks and dividends. We will evaluate these decisions in the coming months and quarters.

Sam Darwish, Chairman and CEO

I do want to add something on the first question that you had on Airtel in Nigeria. Look, last year was a very tough year for everyone. But as we're seeing now, Nigeria fighting back helped by the fact that it was maybe not tied or affected by the US 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. So we've seen the carriers beginning to be more bullish about their CapEx plans; both carriers have announced that. So we are extremely bullish about Nigeria at the moment, about the rollouts of both MTN and Airtel and others, and you can see that in our numbers and in our guidance.

Richard Choe, Analyst

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

Sam Darwish, Chairman and CEO

I believe some of it will occur in 2025, as there are certain obligations related to service quality and rollout that need to be met. While this hasn't been widely discussed, I think the government is interested in improvements in service quality and rollouts, particularly in rural areas. It's not entirely clear at this time, but I expect that we will see a positive impact this year as well.

Operator, Operator

Our next question comes from Jim Schneider of Goldman Sachs.

Jim Schneider, Analyst

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. So 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? And then, maybe you've been very clear about your desire to do either sharebacks and/or dividend policy. But 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 scale?

Steve Howden, CFO

So 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 to $1 billion of asset disposals. We've done one around $230 million for Kuwait. So 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. And I'll just make clear again, reiterate, our target range is 3 times to 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. So obviously, one would assume that future disposals would supplement that positively as well. So that's kind of where we are on that piece. In relation to wider capital allocation decisions, look, acquisitions are not on the agenda at this point in time. We're very focused on increasing cash flow generation, utilizing that cash for debt paydown and more focused around potential share buybacks and dividends in due course before we think again about acquisitions. But as we've said, we 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 a variety of markets. So we'll keep that under evaluation. But yes, M&A is probably at the end of the queue at the moment.

Jim Schneider, Analyst

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

Steve Howden, CFO

I'll take that, and Sam, you can jump in 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 markets, Cameroon and Côte D'Ivoire, with leasing activity, be it colocation and the want for new build sites, etc. So there's plenty going on in Francophone Africa. South Africa continues to sort of add incrementally. And even Brazil, Brazil's had a bit more macroeconomic softness in the last quarter or two. But even there, we're seeing some fundamental dynamics have shifted in the last six to twelve months in that market, which hopefully lead to a much more positive near-term outlook. We've been going through our workings with Oi and some of the other telcos as well and that's kind of coming to a conclusion now. And what we're seeing is plenty of the carriers are looking at substantial 5G rollout. So although Brazil and LatAm has been a bit softer in quarters, we can see where it could go and it's a positive longer-term picture. Sam, I don't know if you want to add anything.

Sam Darwish, Chairman and CEO

I want to emphasize that we truly believe Africa stands to benefit directly from the upcoming tariff conflicts occurring among markets more connected to the US economy, as Africa is largely not integrated in terms of manufacturing or significant economic sectors. We're observing the effects of various policies and macroeconomic issues beginning to surface. Therefore, we are very optimistic and expect carriers to increase their capital expenditures. The recent announcement suggests they are becoming more positive and starting to ramp up investments. We anticipate seeing much more in the coming months.

Operator, Operator

Our next question comes from Michael Rollins of Citi.

Michael Rollins, Analyst

So 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?

Sam Darwish, Chairman and CEO

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. But 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 resets and the impact of FX given our emerging market currency exposure. So we tried 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. So we haven't given it for forward-looking. Let us think through that as to whether that's something we could add in the future. I don't see why not.

Michael Rollins, Analyst

And maybe then just in the aggregate level. So if you look at what's implied in that 12% at the midpoint, are there some indications that you can give us on like 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 '25 as it would compare to full year '24?

Sam Darwish, Chairman and CEO

If you examine our earnings presentation on Slide 12, you'll find the FY24 bridge, which we are using as a reference. We expect CPI for 2025 to be slightly lower, but just a little, as inflation rates are moderating. New sites will remain about the same. Colocation will increase compared to that. New lease amendments and fiber are expected to be roughly similar, potentially a little less, but definitely with more new colocations. Other factors will be minimal at this time, mainly reflecting 2023 items that are being accounted for in the comparisons. So, while it isn't drastically different, we are particularly focusing on colocations in our forecasts based on market observations.

Michael Rollins, Analyst

And I apologize if I missed this in the commentary. On Slide 19, the CapEx range of $260 million to $290 million. How much of that is recurring CapEx that's included in the ALFCF definition and how much of that is related to CapEx?

Steve Howden, CFO

It's about a third, about a third of that CapEx is maintenance, which gets you to sort of within sort of ranges midpoint is about $85 million, $90 million of maintenance CapEx. And if you remember from the end of last year, we've been guiding sort of $24 million to $25 million per quarter of maintenance CapEx. We've obviously disposed of the business and some other work we've been doing, so 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, Analyst

And 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

So I think everybody is aware of the MTN Nigeria piece, which is playing out through the course of 2025; that was well signposted last year. But other than that, no, we're not seeing anything else. We're seeing positive leasing trend across all major markets. So yes, more of a positive picture, to be honest.

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 deals of contracted revenue. But our exposure to Oi in Brazil at the moment is less than 1%, if any. So we feel extremely confident and comfortable with where we stand.

Operator, Operator

Our next question comes from Gustavo Campos of Jefferies.

Gustavo Campos, Analyst

Yes, congratulations on the results and thank you very much for the presentation and all the details. My first question is, again, to follow-up on disposals. I just wanted some confirmation if you are still going to adhere to your previous $0.5 billion to $1 billion target for asset sales? And 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.

Steve Howden, CFO

The $500 million to $1 billion range is still the target. So that's fairly straightforward. We're working hard on that. And in terms of portfolio selection or market selection, we've also said historically that it could include things like minority stakes, for example. So we weren't ruling out a number of different value realization opportunities. We haven't been specific on market. Clearly, we're looking to highlight the value of IHS versus its share price performance. So we are looking at a number of different opportunities and we'll keep people updated. We don't want to be negotiating these transactions in the public domain. So you'd appreciate that we're not going to give too much information on live discussions.

Sam Darwish, Chairman and CEO

I may add also, although, at the end of the day, the reason we are conducting the strategic review is that we believe that we remain undervalued. We have sold a couple of asset portfolios at almost 3 times the multiples we are given by the public markets. I mean, Kuwait sold for 14.2 times. We're at the moment at roughly 5 more or less. So we believe that is an important thing that I want to talk about there. Nigeria is coming back. Things are changing, and that's why I think it's very important to stay current and keep recalibrating our view, taking into account all the new positive reality that we are seeing. Also, if I may add, our trade 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 and in the way we plan our operations on-site. And this has had also a very positive impact on our cash flow generation. So we're comfortable with where things are at the moment. But, yes, to Steve's point, we have continued with what we have promised the market.

Gustavo Campos, Analyst

Could you please clarify whether the target of $0.5 billion to $1 billion refers to enterprise value or if it's the amount you aim to receive?

Steve Howden, CFO

Yes, proceeds to receive.

Gustavo Campos, Analyst

My second question is about your expectations regarding positive free cash flow and whether you plan to reduce debt to the lower end of your target. Do you have a total debt target you expect to reach by the end of the year? Additionally, are you planning to make a tender offer on your bonds, and are there specific maturities or parts of your capital structure that you are targeting?

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. But we've been clear we want to get the leverage down to the bottom end of our target range. So that's the goal. In terms of where excess cash gets utilized, obviously, bonds are a significant part of our capital structure. I obviously wouldn't want to say anything to do with tender offers or anything like that. But there's 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. So we have a number of different options available to us to utilize cash as it comes through to us.

Gustavo Campos, Analyst

My final question pertains to working capital. We observed approximately $200 million in receivables outflows during fiscal year 2024, although there was notable improvement in the fourth quarter. What are your expectations for 2025? Should we anticipate similar outflow pressures, or do you foresee an improvement based on your updates regarding commercial agreements? That concludes my questions.

Steve Howden, CFO

So as you pointed out, so there's significant improvement in Q4 with a pretty material work capital inflow in quarter four, which has reversed the trend. So the outflows have been slowing through the course of 2024 and then now back in positive territory in Q4. So I expect some continued momentum in that early part of the year and 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 working capital outflow forecast.

Gustavo Campos, Analyst

So to clarify, you expect to be roughly working capital neutral in 2025?

Steve Howden, CFO

Flat to positive, yes.

Operator, Operator

Our next question comes from Stella Cridge of Barclays.

Stella Cridge, Analyst

I wonder if I could just ask about Rwanda. So you were touching before on some of the outlook for some of your markets. I mean, after these recent developments in DRC, there's been a little bit of political pressure on Rwanda. I was just wondering if there's anything you were monitoring there in terms of risk to the business, perhaps around currency, or upstreaming or anything that would be relevant for you, that would be great?

Sam Darwish, Chairman and CEO

No, nothing too untoward, to be honest. Obviously, we're monitoring that as the geopolitical situation. But no impact on our business, either operationally, financially, from an FX perspective, etc. So no, really watching. But no, nothing untoward, no impact on the business.

Operator, Operator

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 by the email address, investorrelations@ihstowers.com. The management team thanks you for your participation today and wish you a good day. Thank you.