Earnings Call: Q1 2020

May 14, 2020

Good morning, everybody. Thank you for joining our Q1 results update for 2020. First of all, I hope everybody is well, safe and healthy during this difficult time. Joining me on the call today, I'm on slide two of our deck, is Tom Greenwood, our CFO and Manjit Dillon, who's the head of our investor relations and corporate finance. Today, we're going to cover on Slide three, we're going to cover highlights that I'm going to take you all through and then hand over to Tom to take us through the financial results. And as Jordan has said, there's plenty of time at the end for Q and A, So we'll go through those right at the end. Moving on to Slide five. Well, look, Q1 is business as usual as far as we're concerned. Our quarter is on track to what we expected, and we are maintaining our full year 2020 outlook. We've had a strong revenue growth of 9% in the quarter against 2019 coming in at $102,000,000 And correspondingly, our EBITDA has grown by 11% coming in at $54,000,000 Our margin improved quarter over quarter by one percentage point to 53%. And we delivered another quarter of growth that now equates to 21 consecutive quarters of growth for our business and demonstrates the robustness of the business model, but also the robustness of the markets we operate in. The business has delivered in the quarter portfolio free cash flow of $46,000,000 some 14% increase year over year. Regarding our operational dynamics in terms of tenancy growth and site growth, 4% year over year site growth, shy end of 7,000 towers in total and a 8% year over year tenancy growth coming in at a short a little under 14,700 tenancies. This gives us a tenancy ratio of 2.1 and maintains our trajectory in the sort of medium to long term horizon, three to five year horizon of achieving 2.3 to 2.5 tenancy ratio for our business. In terms of our resilience towards particularly the pandemic, we've got a couple of slides coming on during this deck. But look, it's as I said, it's business as usual. We're maintaining our performance and serving our customers as we've done in the past years, and we'll talk a little bit more detail on how we're doing that. M and A, our strategy continues to focus on expansion in our markets, but also into new markets. We're pursuing multi deals currently, and it's in line with our strategy, and we'll touch on that in a slide later on as well. Moving on to Slide six. Well, just reinforcing twenty one consecutive quarters of EBITDA growth. This slide demonstrates the robustness that we've been operating under, and we believe we'll continue to operate under this. Margin slightly decreased. This is just purely driven by some additional costs coming through as we're now a PLC. It was something we expected, but it does represent 39% CAGR growth in our EBITDA margin and EBITDA since 2015, more than doubling our margin over that time. Moving on to Slide seven. Look, I've got a couple of slides on how we're operating under the COVID environment. And and our business is robust, and we've had minimal impact. First of all, looking at our staff and colleagues, we executed working from home offices very early prior to lock downs in the markets and and took the right steps. And and and this has meant that we've not seen any misses in our operational capability. And and the nature of our field operations is an isolated model. You know, typical field engineer is operates on his own. He has his car, his his four wheel drive truck. He has spares that he carries and equipment he carries, and he goes out to site on his own. So it's a very isolated model. What's important is that all the governments in our markets have classified telecoms communication as an essential service. And so we've got the ability to move around the markets we operate in very easily, and we are one of the essential service categories that allow us to move freely. In terms of our revenue and existing liquidity, we still have close to 3,000,000,000 worth of contracted revenue at around seven years of contract life remaining. And in our industry, signed typically ten to fifteen year contracts. So still a long way to go on our contract life. We serve Africa's large MNOs, the big five as we call them, over 80 of our revenues with these guys, and they're robust and and have healthy balance sheets and are continuing to operate. And, actually, their demands have gone up, which I'll touch on shortly. And overall, in terms of cash and debt capacity, we have $230,000,000 of financial resource to continue to pursue our M and A strategy and continue to drive the performance of our business. Customer rollouts under the current environment. Well, look, we've seen Q1 is in line with the tenancy growth that we've seen in the last three years. And that actually, could argue, is fractionally better than what we've delivered in the in 2018 and 02/2019. The only sort of potential challenge is supply chains for our customers, but we believe they're they're managing this well in terms of availability of equipment to put on the new towers active equipment. From our side, our supply chain, we've been proactive in mobilizing the supply chain to make sure that we've bought early and ahead. And during the course of 02/2020, we see no issues in making sure we can maintain our towers, but more importantly, facilitate building new towers for our customers when and as they need them. And and to the extent of fuel consumables, etcetera, we've been proactively purchasing fuel in our markets, and then we have up to three months of fuel across our markets on an ongoing basis to ensure that we don't have any uplift in servicing our business. And in terms of the organization and our staff and the communication, look. One of the benefits of investing in digitized solutions that we have done over the last few years is that it's coming into its own play now. We've been able to have our staff work from home because we've got cloud based solutions that we can monitor and communicate, video conferencing, day to day, you know, monitoring of our assets hasn't changed, and we've been able to enact our business continuity plans that were already in place prior to this challenge, and they've worked well for us. Slide eight, really just going on further. If you look at our PowerTime performance, it's business as usual. We've been operating at close to 100%, well above the SLAs we have service level agreements we have with our customer. And and it's pleasing to see actually that during April, we've seen a slight improvement in our performance in power delivery and and uptime of our sites to our customers. Rollouts for our customers, as you'll see in the comments from Vodafone Orange on this slide, there is increased investment from some of our customers. It's driven by more volume of traffic that we're seeing from our customers. Some of the full year trading updates from Vodafone, Orange, Airtel, this week, for example, have all talked about increase in data volume and voice traffic. And this is all putting positive strain on the infrastructure, which means more equipment for us, which means in time more revenue and growth for us. And and regarding operational safety, we've, enacted the normal PPE. You'd expect a business like ours to put in the field to ensure we carry on protecting our staff. Moving on to Slide nine, touching on our progress on ESG. Look. We've talked about our values. They've been ingrained in our business now since 02/2015. We are one of the only few companies. It's the only company in Africa that's got four international ISO standards when it comes to behaving with integrity, focused on quality, and and protecting the environment and our people. We've invested in capital to introduce green solutions into our portfolio. And and part of our ESG focus is that we carried out a bench benchmarking exercise during the the first few months of this year, and it's to compare ourselves to what the FTSE two fifty companies are doing. It was pleasing to know, and the outcome of that benchmarking was that we are actually in the midpoint of what FTSE two fifty companies are doing. We're not satisfied with that. We set ourselves an objective to be in the top quartile over the next three to five year as part of our strategy, and we will be communicating our strategy on ESG in the next few weeks. And we've invested in resource into the business who can support us, knowledgeable resource to bring an understanding of ESG and sustainability and integrate that to our business strategy. So watch this space as we communicate that roadmap in the next few weeks. On Slide 10, I'm moving on to really our focus on M and A and growth through acquisitions. This slide you've seen, just reiterating that the 65,000 towers in Africa that are still owned by MNOs and the gray countries that you see on the continent are countries with no independent tower codes operating in them today. So we're still very active. And in some ways, I feel that the business development tracker has improved. We've got more opportunities on there than we we had a few months ago, and and we continue to pursue multiple transactions and and and are hopeful and, you know, positive about bringing them to full fruition over the next few months. Obviously, the COVID nineteen issue has had a slight slowdown in our ability to travel and the ability to communicate with counterparties just because of the upheaval that the world's going through, but no change to our outlook on the opportunities to expand, etcetera. And our target and our objective still remains is to enter, you know, additional one, two, three countries over the next five years and add significant amount of towers through M and A into our portfolio. On that, I'm going to hand over to Tom, who's going to take us through the financials. Tom? Thanks very much, Kash, and hello, everyone. Hope everyone is well. So I'm on Page 12. This really just summarizes some of the main KPIs, which I'll talk through on the next few pages. So if we move on to Page 13, to look at our revenue and EBITDA. We've had solid and steady growth continuing with revenue growth of 9% year on year and 2% quarter on quarter, and likewise, growth 111%, respectively, through those periods. Our margin year on year has stepped up slightly one percentage point and slightly down quarter on quarter from Q4 from 54% to 53%. In fact, that's a 0.5% movement. That's predominantly because of some additional PLC related costs coming through to our business. But still very much reiterating guidance for the full year 2020, which was to be between the 55 to 60% range that we've set ourselves for the medium term and just coming into the bottom of that range. If we move on to Page 14, again, a page that is very consistent with previous quarterly updates. Our customer base FX mix and OpCo split is largely unchanged from 2019, with 86% of our Q1 revenue coming from Africa's big sized mobile operators, 59% of our revenue being in our currency, which translates to about 65% at EBITDA level. Moving on now to Slide 15. And we see the continued upward growth on our tenancies. Year over year, last twelve months, we've added ten seventy seven tenancies across our portfolio, which is in the range of our 1,500 guidance for Emmanuel, and that, of course, is our guidance for FY 'twenty, which we're reiterating today. In Q1, we added 86 tenancies. Traditionally, Q1 is our quietest quarter for tenancy increase, and that's because the big mobile operators typically are finishing or just starting their budget cycles at this point. And if you compare the Q1 to the last few years, it's very much in line, in fact, slightly ahead. In 2019, we had 51%, and in 2018, 76%. So we do usually see an uptick in the tenancy growth for the year, which is our expectation again now based on a pretty robust pipeline that we have ahead of us. Moving on to Slide 16 and a look at our gross profit per tower and our OpEx. Gross profit per tower has stepped up 10% year on year, this demonstrating the continued operational leverage of our platform, essentially adding new tenancy to our platform, which delivers significant bottom line flow through. The OpEx is up slightly in the quarter as we've seen a slight increase in sites and a slight increase in power costs. That was still 33% of revenue being maintained there. If we look at Slide 17 now, our CapEx. Again, CapEx we're reiterating our CapEx guidance for the year, which is €110,000,000 on an organic basis, with the €30,000,000 earmarked for some smaller market acquisitions, which are near term, one of which actually is very imminent potentially in the next few days. Our CapEx as of Q1 was 11,000,000 so relatively low compared to the full year guidance, but that's simply timing on quarter on quarter. So again, no change to the CapEx guidance for the full year. And in fact, we've accelerated repurchasing of CapEx items at the end of Q1 and early Q2 so that our CapEx is ready and in market, ready for deployment based on the pipeline that we've seen from us today from our customers. Moving on now to Slide 18. Again, our debt position, not much has changed here since our last update for FY 'nineteen. Our leverage continues to be below our target range. Our leverage is at three point zero on a net leverage basis at the moment. Our target range continues to be 3.5 to to 4.5. So we do have funds available for the expansion path that described. We'd expect to deploy some of that in the coming months. If we look now at Slide 19, again, I look at our cash flow, cash conversion portfolio free cash flow continues to be very strong and then demonstrate growth, reaching 85% in Q1. And that's almost a 30% increase since 2017, so a significant increase in cash conversion. Our net working capital, which we have a call out on this page, is minus thirty five percent €35,000,000 for the quarter. But this principally represents investment in CapEx and OpEx for our business, as described in terms of the business resilience earlier. This is a forward purchasing investment for growth that we've done to ensure our business is resilient through this year and also ready for growth as it comes through the pipeline. Our net customer receivables have gone up a bit in the month, 9,000,000. As you can see on the chart there, this was solely some of the large big five MMOs paying us after March 31 date, which, of course, for some of them was their year end. And it's that that has turned around through April. So if we were to show this chart today, it would be a €17,000,000 reduction on this position. So all the cash coming in effectively. And with that, I will pass back to Kash for the summary on Page 23. Thanks, Tom. This is the last slide Q and A. So look, summarize, Q1 is in line with our expectations. The business is operating robustly during the COVID crisis and business as usual as far as we're concerned. Organic and inorganic pipeline continues to be robust for us and we are on track to deliver between 2,500 tenancies this year, which is the guidance we've given, and we're maintaining twenty twenty guidance. So on that note, I'm going to hand back to our conference coordinator, Jordan, who can help with the questions. Jordan, over to you. Thank you. Our first question comes from Giles Thorne of Jefferies. Giles, please go ahead. Thank you. My first question is coming back to the matter of how the coronavirus has impacted wireless traffic. There is yes, so to your point, Kash, yes, some of your customers have evidently benefited from a massive pickup in traffic. But I wanted to explore how that could or couldn't come through in accelerated network investments this year or early into next year. And in particular, I was surprised to see that Airtel Africa, an example, actually kept their March 2021 CapEx guidance unchanged, I. E, there's no ostensible pickup in network investment by Airtel Africa. So it would be useful to hear exactly what your customers are telling you at this point in time when you speak to them about any changes to immediate investment plans. Hopefully, that all sense. Yeah. No. Related to that sorry. Let me get the three out, and then and then I'll hand back if that's alright, Kash. Yeah. And related to that, Airtel Tanzania was awarded some more 1,800 megahertz in February. Do you think that is something they're about to imminently deploy? And actually, could this be a catalyst for them to maybe finally sell their towers in that market? And then the final question was on Milicom, again, under the same kind of umbrella theme. Milicom Tanzania or Tanzania is Milicom's last African market, my reading of the body language from Milicom remains that they are pretty ambivalent to the region. Is this going to be a structural impediment to growth for your Tanzanian business? Are they just going to sit in their hands and not invest in that particular operation? Thanks, Charles. So first of all, what we're hearing from the customers, certainly, our pipeline for tenancies, colocations, etcetera, seems robust over the last few months. And we've had inquiries about, you know, additional equipment, etcetera. I want I cannot go into specifics. And at this stage, we're not saying anything about being above our guidance. We still you know, our range of adding tenancies between a 1,500 is fairly large, and and that and we'll absorb whatever additional capacity increases they need within that range as far as we're concerned. So we're actively working with our customers. The good thing from our side is we're ready to do what they need across all our markets. We've got the capacity in terms of equipment to build towers, but also to add more tenancies on existing towers. But, you know, customers' plans change. It's the beginning of the new budget cycle for some of our customers from the April 1, and we'll hear more during the next three months on their rollout plans for the next for their next twelve months, which is slightly out of sync to our budget year effectively. On Airtel Tanzania, yeah, no. They've look. First of all, they own their own portfolio as you quite rightly pointed out. They've got more spectrum that they've got. It is an entity with the government there in Tanzania. And, you know, as they upgrade their network, we should see some improvement in our equipment on our towers where they already have tenancies on, and and and we're watchful. On the towers that they're selling, we know of those portfolio very well. We've looked at it before. Currently, you know, our view is that while the towers equate to some 1,300 towers owned by Airtel, for us, they're about 700 towers that are unique because we are a close proximity to those towers. So we'll see what happens with that asset sale. It has been in the public domain. So alright. And I won't comment anymore on on on that point. Regarding Millicom, look. It's not a secret that they've been looking at marketing those that business. It's their last hold effectively in in Africa as a as a wholly owned entity. And I think this crisis may have slowed down that sale process potentially for for a few months, but they were preparing to to sell their assets. And, yes, they may not invest as much as they should if it was a long term commitment. But, certainly, we are still getting inquiries from TIGO in Tanzania, that's the brand name, on tenancies and expansion, etcetera, because they need to maintain their market share. What's good from our perspective is that we don't believe it will be a merger because the market share would be unfair whoever buys from within, I. E. Airtel or Vodacom or Virtel in that market. So we believe that there'll be a new player that will come in, whether it's MTN, Orange, or someone else to take that MNO, and that will encourage more investment when that happens. So we've learned from acquisitions or takeovers as well as mergers in other markets over the last few years that there's growth when that happens in the markets. And just as a follow-up, the coronavirus, obviously, you've spoken to stimulating network investment. It would be interesting to see if it's stimulating any kind of addition to the top of the M and A funnel, if that makes sense. So are MNOs in the region being prompted by the virus to change industrial policy and outsource and sell a leaseback? What's kind of happening at the top of the M and A funnel in response to the virus? Yes. Look, we do think that and this is not just for the virus, but we think that there will be pressure on CapEx, etcetera, which will ultimately continue to feed the the pipeline for tower sales in our view. So for example, MTN, I think this morning or yesterday, announced that they're they've got a CapEx constraint, and and that all leads to releasing value from the balance sheet in our view, which will happen over the coming years. You know, there is a 165,000 towers still owned by MNOs in in the continent as they outsource that aspect of their business. And and it's proven that independent power companies do the job better than MNOs in running passive infrastructure. We've certainly experienced that when we've taken on tower portfolios, and I think there'll be more and more of this that will occur in the continent. Our next question comes from Cesar Tiron of Bank of America. Cesar, please go ahead. Yes, hi. Thanks for the call and thanks for the opportunity to ask questions. The first one, can you please discuss about your confidence that tendencies will gradually increase throughout the year? That's the first thing. Second question would be on the scope for the refinancing of your bond. And the third one, if you can give probably a little bit more insights on M and A plans for this year. Yes. Well, let me take the first part and then I'll let Tom talk about the bond and we'll come back to also M and A. So look, as we've said, we're pretty robust in continuing to grow our grow our tenancies. Our pipeline in terms of inquiries for tenancies on existing towers, build to suits, etcetera, is healthy and and positive at this time of the year. And so, you know, our guidance is will be within that range of a thousand to 1,500 tenancies added this year. And look, if you look back, we've if you just look at the last twelve months, we've added 0.07 tenancy growth to our portfolio, and And we don't see any change to that. And our guidance has always been that we will add between 0.05 to 0.1 tenancies per year. That takes us to our target of around 2.3 to 2.5 in the five year horizon, we're on track for that. And if you look at our history, we've been within that range and confident of delivering on that. Tom, refi? Yes. No, absolutely. So we're monitoring the market for refi. We're ready to do it should a window occur. I think people have seen the bond the EM bond market has moved quite a lot in the past couple of months. Our bond is currently trading at around par. We believe that based on our business strength, that we should refi at better than that level. We are monitoring. We're in no super rush to do so, but, you know, we're we're doing what we can control, which is be ready this end should a window occur. So, you know, I guess, watch this space and we'll be monitoring the market for any opportunity. Then on the M and A, Kash, do you want to do the M and A? Yes. Yes. On the M and A, as I said, again, you know, we've got a number of different opportunities with from small to medium size and and large, you know, opportunities we're tracking. And and, actually, there has been a slight up take on the opportunities. We've had a few more things we were engaged with that we had in January, for example. So we're still confident of the acquisition pipeline. But, you know, in the short term, as you'd expect with the the virus pandemic, that there's been a slight slowdown. And if I if I said anything different, you will believe me. So there has been. It's quite simple because people are not able to travel. People are working from home. Some of the government bodies that we engaged with in some of the markets, obviously, are not as available, etcetera. So it's a slowdown, but nothing's changed in the opportunity tracker that we're working hard on. It's not detracted our team that we have internally. Our biz we've got a dedicated business development team under the leadership of Alex Lee, that continues to be the focus of that team. Thanks, Cesar. Our next question comes from Simon Coles of Barclays. Simon, please go ahead. Good morning, guys. Simon from Barclays. Thanks for taking the question. I was just wondering, with COVID-nineteen and obviously the increasing importance of connectivity, are you seeing any increased pressure or discussions from governments and regulators to sort of force operators to increase their coverage? And then linked to that, I guess, there's going to be areas where operators will see it as uneconomical for them to do that, but the government will still want coverage. Is that an opportunity for you guys? And are you maybe even potentially in discussion to build towers in some of these areas already? I think we've seen similar situations happen in other markets in Africa. So I'm just wondering if you're seeing anything there. Thank you. Thanks, Simon. Appreciate your question. Well, yes, absolutely. Regarding the current situation of the virus, as I mentioned, the telecoms is essential services in our markets because there's no other fixed line infrastructure that people can rely on. And, you know, the the regulators are focused today on quality of service and availability of service and and and expansion. But but let me just on the expansion for for example, rural company rural locations, a lot of our governments and regulators have funds that encourage the facilitation of antennas and services from our customers into these small communities, and we're part of that solution. So for example, in Tanzania, we build rural sites. We have a rural solution that's a lower cost solution designed for one tenant services, maybe two, but less equipment, etcetera. And and and and in our view and what we hear on the ground is that this this pandemic is gonna accelerate the rollout over time because these communities need connectivity during these difficult times to access medical services through the Internet, for example, etcetera. So perversely, this is going to increase the focus of coverage, which means more activity for independent tower companies as well as our customers. Great. Thanks very much. Our next question comes from John Caridis of Numis. John, please go ahead. Thank you. Good morning to you. Just a good order first. Can I just check that it's still the case that about 65 percent of EBITDA during the quarter was in hard currency? And then secondly, last year, revenue growth accelerated during the course of 2019. Should we expect the same to happen this year? Tom, I'll let you take some questions from me. Yeah. Short answer. Yeah. 65% half currency. There's there's been no major change there and, you know, 59% of revenue level as well. So, yeah, very consistent with previous years. And, you know, on the on the revenue one, yeah, you know, there's usually q one is the quieter quarter when it comes to adding tenant fees. The mobile operators are either just getting their budget framed up or just starting their budget season. And so that's typically what we see very similar to previous years with ramp up expected in the following quarters. That's certainly what the pipeline tells us today. Okay. Thank you, Tom. If I may, given that consensus is forecasting 10% revenue growth in the year and you delivered 9% in the first quarter, do you think that the risk to consensus estimates, therefore, is quite clearly on the upside? I wouldn't want to go and start talking about upside. I think the clearly, Q1 is very close to the full year consensus, and we know that Q1 is generally a slower quarter. So I think we feel fairly good about the full year, but I wouldn't want to stop talking about upside. Our next question comes from Simran Sandhu of SEB. Couple of questions from me, please, regarding liquidity. So I noticed the CapEx guidance is unchanged from your prior call, but just curious as to how you're thinking about prioritizing cash conservation and maybe keeping a liquidity buffer on the books versus executing on your growth plans in light of the fairly uncertain broader macro environment we're in. Maybe if you could also comment on how much of the $110,000,000 in CapEx is committed? And then secondly, on the cash, could you please tell us how much of the cash balance is contained in USD versus local currency? And also whether there have been any recent issues in extracting cash from your subsidiaries? Yes. No, absolutely. Thanks for the question. So look, first of all, on the CapEx, we are reiterating our guidance on the CapEx, and that is based on seeing the pipeline ahead of us. A large amount of our CapEx is linked to customer rollouts, of course, and some of the three bmR for the smaller market acquisitions, which are near term, some of which are actually pretty imminent. So while not all of that is effectively committed today as such, it's very much within our sight in terms of pipeline. And so as we mentioned earlier, we have been forward purchasing CapEx at the end of Q1 and into Q2 for the remainder of the year to ensure that we have all the equipment required in country, you know, in the event that there could be supply chain delayed later in the the year, which which, by the way, we haven't seen really at all yet in any material way whatsoever, but we're doing that for a prudent point of view. And from a funding point of view, our organic business plan is self funding. So the earnings of the business through the rest of the year is effectively pays for that CapEx. In terms of our cash balance and available debt to draw, we have, at the end of Q1, 146,000,000 of cash in the bank and over 100,000,000 worth of debt lines available to draw. So we are liquid. We do have good amount of available funding should that be required for expansion plans. From a leverage point of view, as I mentioned, we're at 3.0x leverage, which is below our stated target levels of 3.5% to 4.5%. And this is effectively because we have a high cash balance on the balance sheet today, some of which will be deployed on these short near term acquisitions that we have in the pipeline. In terms of cash, though, we do always look to keep a healthy balance of cash across the group. Nearly all of our cash is in US dollar at group treasury level. So of the 146 at at at q one end, something in the region of 80% to 90% would be in U. S. Dollar with effectively small floats in each opco, and that's how we operate. We do monthly streaming of cash and dollars through our shareholder loan structure across the group. So each month, our offco spend up U. S. Dollars from the market to our group treasury in Mauritius, and that continues. And that's partly leading to us being able to keep small stakes in our upgrades, which is our ongoing strategy around cash management and derisking the business. Does that cover your questions? Great. Thank you. That's very helpful. Our next question comes from James Congdon of Quest. James, please go ahead. Hi, there. Thank you, guys. My first question about the bond refi. Tom, you've already covered off. My second question is around your cash flow statements. I see that there's a €37,000,000 outflow due to change of control taxes from around the IPO time. I just wondered if there's any more of these kind of similar transactions to come out or kind of adjustments to make going forward. Yes. No, absolutely. So that's very much in line with the structure that we set out at IPO, and that was funded through an escrow account from shareholders, which had been drawn at year end. So if you look on our December 31 balance sheet, there's $220,000,000 or so of cash, but $37,000,000 of that was restricted cash. That was the cash that had just been drawn from the escrow pre year end, and then settlement of that to the tax authority was post year end. So it's slightly confusing the fact that it straddled at at period end, which is why we had the restricted cash on balance sheet at year end, and then that's come out of our bank accounts this quarter, which is why you see it coming out of the cash flow statement this quarter. So if that has happened within a quarter and not at a period end, then obviously, you wouldn't have seen any of that, so that wouldn't that, I guess, would have been less confusing, but that's what's happened there. And we have as per the IPO disclosure, there are certain change of control taxes due in our markets and the pre IPO shareholders funding that through escrow account. So to the extent there is more of that to pay, then that would be drawn from the escrow account that is currently sitting there and come through the company and then out of the tax authorities. So if that happens again, straddling a period end, then you would see that. You would see some restricted cash on balance sheet at the period end, and then that would come out the following quarter. But we can't exactly predict the filing of that. So that's all that is, effectively. Our next from Alexander Vengranovich of Renaissance Capital. Alexander, please go ahead. Morning. Two questions from my side. So the first one, I'm trying to get some of the local color on the need of the coronavirus. Looks like there's a lot of the, like, misleading information that involves the actual as of inspection. And do do you see any potential risks to your business going forward there if the and the president if this product infection was really viral and affects more of your more of the normal population of the people. Far as I understand, there is no actual lockdown in the country right now. That's my first question. And the second question Sorry, Tom. Are you are you able to hear the question clearly? Because I I couldn't get all of that. Can you hear me now? Maybe it's better to confirm. Yeah. Yeah. Much That that's much better. Much better. Yeah. Thanks. Sorry. My my mic was, like, probably low volume. So I'm gonna yeah. Yeah. I'm gonna repeat. So my first question is on Tanzania and the actual spread of the coronavirus infection there. So I'm just trying to get some local color from your side because it looks like there is a lot of the misleading information about about the virus in the country. As far as I understand, there is no official lockdown, but looks like the the the infection goes, like, really viral there. You know, like, more and more people being infected unofficially. So just trying to understand where you see any significant risks there if this spread goes faster than it was initially expected by the government Yeah. Yeah. Let me take that before we go into the second question. Look. Tanzania has been one of the countries who basically hasn't had a lockdown, and, you know, people have been encouraged to operate as normal there. However, our customers and ourselves enacted a lockdown for our staff. So working from home, working remotely, etcetera, etcetera. And and we've taken all the standard precautions we've taken across the continent where we operate to protect our staff community, etcetera. And and it's business as usual for us in Tanzania. In terms of the, and I can only quote official figures. My job is not to speculate. You know, the the official figures say there's a low infection rate and and low death rate, the fatality rate there in Tanzania. But it's not affected our ability to deliver service and carry on running and growing our business in Tanzania. Yeah. That's all I can really say about that if regarding Tanzania. Okay. And then the second question is about the Just just to give you a flavor, though, of of our staff. Over the across the whole of our business, we've only had two individuals who have been affected by the virus, did go to a hospital for a couple of weeks. That was in DRC. Both staff are both members of our call staff are out of hospital and recovering well back. So so, again, low impact on our business so far. You know? Good. And the second question to Tom on working capital, let's say again. So in the first quarter, it was around $35,000,000 and that change like a negative change in the working capital mainly driven by again like the increase on the big five MNO payments timings. So just trying to understand what sort of volatility should we expect for net receivable days this year? Should we expect the number of the receivable days to grow further? Or you think that the current level of the first quarter is more or less sustainable? Yes. Thanks, Alex. Yes, if you look at our capital on Page 19, so the majority of the 35,000,000 is actually us investing in early CapEx and OpEx, so 16,000,000 on CapEx and 11,000,000 on OpEx. And that's for the reason I described earlier. In terms of the net customer receivables, yes, increased billion euros That was solely due to some of the big customers paying us later, some of whom had year end on March 31. If we were to show these numbers at the April, though, then it would be 17,000,000 lower. So the payments that were dragged out towards, you know, around a year end, very much of course up and and more so through April. So, you know, I think from a modeling perspective, would, you know, just just leave it flat through the year. That's probably, you know, the best the best effort at this point. But yes, essentially, the money is coming in the door just after the March 31 reporting date. Our next question comes from Jonathan Kennedy Goode of Standard Bank. Apologies if this might have been covered. I had joined the call a little late. The 1,000 to 2,500 tower tenancy growth for the year, is it possible to give us a little bit of color into where you see the majority of that growth coming from by regions? It looks to me like there's a bit of a head start for DRC so far this year. I'm just wondering whether that continue for the rest of the year and then where you see kind of highest ROIC and most attractive kind of return profile within the various operating regions? And then just finally on Ghana, MTN seems to be showing very, very strong growth. They're still just wondering how the whole ATC Eaton deal played out, how that's affected the markets and what you see the pipeline looking like there given what looks to be very strong M and A growth and now the deal completed. Tom, do you want to take the first part and then I'll talk about Ghana? Yes. Yes, absolutely. Jonathan, thanks for the questions. Yes, so the tenancy, we are very much affecting them across the group. I think as we look at the pipeline today, there's no sort of one country that stands out particularly ahead of the rest or particularly below the rest. So we would anticipate the broad country split to be maintained through this year on an organic basis. So I think that's that's that's what to assume there. From a ROIC point of view, again, the numbers that we've shown previously in terms of build to suit yields and things like that, know, are are maintained. And and, you know, to to remind you of that single tenant, nine percent two tenant, 19% and and 32%, which is what we've shown in previous and and pre IPO materials. So no major change there. There's not huge differences either between the markets on that. So again, we wouldn't guide to model any particular big variance there in terms of yield or or So, you know, I guess, very much do you wanna take that one? Yeah. Yeah. So look, you know, MTN is the the lead dominant player in Ghana. And and over the past two, three years, we've been building towers. MTN have had a strategy to continue increasing coverage, and and I think now they're probably up to 95 plus percent coverage of the geographies. Vodafone and Vodafone and Airtel Tigo, obviously, are the challenges there, but still solid market share for those two operators. And we with that one, we can't go into detail, but we certainly have a good pipeline from all our customers in in Ghana regarding upgrades and and expansion. And so it clearly, you know, Airtel Tigo are focused on their strength or stronger position as a merged entity and a and a bigger market share to carry on investing and and growing their market share there. And we are obviously one of two telcos in in that market other than American Towers. And, you know, we're active working with with Airtel, Seago, Voto, and MTN, all our customers in Ghana. Great. And and no material change in kind of what ATC is doing in in Ghana given the the Eaton No. I I mean, they're still obviously integrating that asset and and and doing what they need to do, but no change at all. No. In some ways, you know, what we've in our view is that the the the erratic behavior of the Eton has disappeared. There's more structure as far as we're concerned, and our agility, we believe, will put us in a good place now in that market. Our next question comes from Charles Cartlidge of Sloane Robinson. Charles, please go ahead. Our next question comes from Alex Ayyubah of Waha Capital. Alex, please go ahead. Hey, thank you very much. Thanks for the call and for these great results. I have a few questions actually. One is on I the oil thought that lower oil prices would have an impact on your EBITDA. I think when we went through the road show, I think like a 10% decrease would have a 2.5% decrease in EBITDA. Can you just tell us whether that's still the case or not and why? Chop. Hi, there. Yes. So the oil impact, so the movement of prices locally in our market is really the key factor here for our own P and L. The prices in the markets are not one to one elastic with global oil prices. So when global oil prices move as much as they have can, that is by no means reflected in the pricing in local markets. So we've seen some reduction of some fuel prices in the past few weeks as the global oil supply chain has arriving at ports in our countries. And I'd say there's been, depending on the region, anywhere between 0% to 10% or 15% reduction in the price currently, and that's just starting to feed in. I don't think we anticipate any major change to our business either from an OpEx saving perspective or an overall P and L perspective as we move through the year. So we wouldn't guide to make any changes based on these movements that we've seen or are seeing sort of over the last few weeks. We'd just recommend leaving that out of modeling. Okay. Got it. But just to understand how that works, I mean, ultimately, if this fuel price decreased by 10%, is your revenues are going to be impacted on a quarterly you would review your revenue on a quarterly basis with your clients or is it on a monthly basis? How does this impact the price with your clients? Is it monthly, quarterly? Price resets? It's either quarterly or annually. Most of our power process lasers are quarterly. So there's a little time lag before that feeds in. So we get a a little bit of OpEx benefit, you know, obviously, for a few weeks. And then, you know, some of that feeds through to our customers at the next next escalation date, which for the contracts which are quarterly escalating now would be from the July. Perfect. But again, the impact is minimal. Perfect. And just so I have just two more questions. On the FX, is are like you say 65% is in hard currency, does it mean that you receive it in dollar in this country or you receive it in local currency and you have to convert it? I'm just wondering how much are you exposed to convertibility risk on that 65? Yes, absolutely. So of the 65, 40 on the 65 roughly comes from DRC, and DRC is a dollarized economy. So everything there is in dollars. We get paid physical dollars in DRC. And then the balance of the the remaining 25 comes from a spread across all of our other markets. In those markets, the contract allows either for settlement in dollars or at low in local currency at spot rate. And and so in those markets where we do receive local currency, we sometimes, you know, do dollar swaps with the banks there if we need dollars. But yes, 40 out of the 60 comes from DLC, which is all dollars. Perfect. And just next question is on the tax. Like how much tax should we expect going forward? I know it was a one off, the €38,000,000 which was supposed to be paid at the end of the year related to your change of control with the IPO. But is there like still a significant amount pending or is not much? Then aside from that, how much tax roughly should we factor in for 2020 and going forward? Yes. No, absolutely. So from a corporate corporation tax perspective, so ignoring the change of control tax for a minute, that's all funded through escrow accounts and the pre IPO shareholder. So just from a normal corporate income tax perspective, the blended rates across our market is around 30%. However, as you know, we're in a tax loss position in most of our markets at the moment, meaning that we just pay de minimis amount of tax in those markets. That will change over the next few years. And as we guided at the IPO and reiterate today, we would see a gradual step up of tax to normalized levels of 30% of profit before tax over the next four year or so period. I think at IPO, we guided to in the next five years, we would gradually step up to a normalized level of 30% profit before tax. So that's what to put in the model. From a change of control tax point of view, I can't really comment on the exact timing of future amounts, but it's funded by the pre IPO shareholders in an escrow account. So it's not a plus it comes through our bank accounts and obviously, you see it on the cash flow statement as the money goes out the door. It's not a cost to the company company as such. Actually money in from the escrow and then money out immediately. It just so happens that when we did it around the year end, it straddled the year end period. And so you saw the inflow in one period and the outflow in the next period. That's just the final thing. Very clear. Sorry, last question is on the M and A. Just trying to understand about the liquidity. So you have around €150,000,000 of cash on balance sheet. What's the minimum amount you'd be comfortable with keeping on balance sheet? Like would you be comfortable with like $3,050,000,000 million euros of cash on balance sheet and using the remainder for acquisitions? Or you think you need more or much less? Yes. I think around 50,000,000 or so is reasonable. Obviously, we've got a fair amount of surplus at the moment. But yes, I think something around that level. Got it. So still on the M and A, we're wondering like could it maybe make sense to do the refi first and then the M and A? Because M and A, you're likely to have a higher leverage, maybe the cost of debt would be higher or it would be cheaper. I guess it really depends on you don't want to just want to I was wondering whether you have some thoughts around that, timing of M and A before refi or vice versa. Yes. I mean, I think to some extent, we've got to be flexible on both those options, partly because of the window of the bond market we don't control, but also the M and A is reliant on third parties as well, so we don't exactly control timing of that. So I think we've got to be as flexible as we can on it. The the refi is principally to refinance existing debt. So I'd say the acquisitions that we have in our very near term, which are the ones we've called out in our CapEx guidance, they're not reliant on the refrices to happen before they do. So I think we'll just have to play that one by year and be ready for both M and A or the bond market depending on when the window opens. Our next question comes from Maurice Lang of DEG. Maurice, go ahead. Hello? Maurice, your line is open. Hi, Maurice. Yeah. Hello? Can you hear me? Can you hear me? Yeah. Yes. We can hear you. Yes. Hello? We can hear you clearly. Our next question comes from Peter Bartlett of GML Capital. Peter, please go ahead. Hello. Yes. Thank you. Can you hear me okay? I'm interested to know, following on from the previous question about the refi. I mean, your bonds recovered to par. They did fall down quite sharply. I think they got into around 90 ish. Surely, the right time to be refinancing is right now. I mean, given the global uncertainties, particularly in terms of what's happening in emerging markets, surely, if you're talking about the opportunity to refinance, it is now. Yes. I mean, I think we're monitoring it. We're closely watching what the market does, both our bonds, but also the wider market. I think that other EM bonds traded down more sharply than ours, but that also has recovered somewhat. You know? So, you know, I think we're we're monitoring it weekly and, you know, we'll we'll we'll go at the right time for us. You know, we're not in a a a super rush to do it, but we do want to take the window when it comes. So I think we'll monitor it for now and see how that goes. But to give you assurance, we are ready to do it off of our Q1 numbers when the right window occurs for us. Can I just understand one thing? I mean, does that mean? If the bonds are trading at par, surely that is the right wind. Well, mean, we believe that our true cost of debt should be lower than that. That's what it means. And the business is a resilient business, which is being demonstrated at this time. And we will be watching developments to see where the market is moving to. But I think we believe that it would be premature to just to refi now at par given we're not in a rush to do it. I think that's our view at the moment. We have a question from Maurice Lang of Maurits, your Yes. Line is Can you hear me now? I had some My question relates to the regulatory low regulatory developed environment of your host countries. And I was wondering, with the heat maps rising in those countries and the budgetary deficits widening, do you expect any risks that both your clients and yourselves will be facing any claims from state authorities to cover up state deficits? Well, first of all, we've been operating in these environments for a long time, and we're used to being very rigorous around our tax management and and so on. So and the regulators are very professional in the markets we operate in regarding telecoms. We pay fees. Our customers pay license fees, etcetera, etcetera. So for our from our perspective, the business will continue as normal. We're used to rigorous tax audits, and we've never had a problem in our ten years of existing in these markets. So we're confident that it'll be normal behavior. Tom, I don't know if you want to add something more to that. No, thank you. That's very helpful. Have no further questions on the line, so I'll hand back. That's great. Jordan. Well, look, thank you very much, everybody, for your time and great questions, and we look forward to giving you our half year trading update sometime Thank you. Bye bye. And gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your lines.