Airtel Africa Plc (Nigeria) H1 2022 Earnings conference call transcript

By Published On: June 7th, 2022Categories: Corporate announcement, Transcripts

Good afternoon ladies and gentlemen and welcome to the Airtel Africa Plc H1 results. All participants are currently in listen only mode and there will be an opportunity to ask questions later during the conference. Participants on the webcast may submit their questions in the text box at the bottom of the page. If you should need assistance with the conference call, please signal an operator by pressing * and then 0. Please note that this event is being recorded. I would now like to turn the conference over to the CEO, Mr Segun Ogunsanya. Please go ahead, sir.

Segun Ogunsanya
Thank you. Good afternoon everyone, and thank you for joining us on today’s presentation and conference call. This is my first set of results as Chief Executive Officer of Airtel Africa and the very first time I am meeting with many of you, although virtually. Let me say what an honour and a privilege it is for me to take up this position, and I look forward to engaging with you over the months and coming years. I’m here today with Jaideep Paul, our CFO, and Pier, our Deputy CFO and Head of Investor Relations. I’m going to take you through the first part of our presentation covering our business strategy and our headline performance, and Jaideep will then take you through the results in more detail, after which I’ll be happy to open the floor for questions.

If we turn to slide number three I thought it would be very helpful to highlight my initial observations of the group and my first thoughts on our focus for the next few years. In terms of key observations what do I see? For a number of years now the business has been focussed on the expansion and strengthening of physical network infrastructure and our distribution capabilities. These have been key enablers of our growth. This strategy has proven to be quite successful, yielding increasingly strong sets of results. This, when combined with a very strong corporate culture across the group with universal backing for our purpose of transforming lives, has driven a very strong can-do attitude among all of our employees.

Looking at the markets where we operate, the population and industry dynamics of our markets continue to provide us with a tremendous opportunity with some of the strongest population growth rates in the world and the most youthful populations with many young people continuing to be key drivers of digitisation. Most of these young people are digital first and digital only. They consume data only on mobile devices. Historically our markets have very low rates of customer penetration on both mobile voice and mobile data services compared with more developed markets. The same goes for bank account penetration, which is very low in our adult population. We continue to use our mobile money offerings to bridge the financial gap in our various communities.

Our strategy is working. The figures testify. Given my past involvement in the business you should not expect any major shift in strategy, but the strategy will naturally evolve over time as we look to build upon our strong market positions. Although one area I’m very passionate about driving is our digitisation programmes. I’ll be working with my colleagues with the aim of identifying and maximising the opportunities with our customers from expanding our digital content and service capabilities. I look forward to discussing more about this with you in future results announcements. Let me now go back to our financial and operational goals. Our focus continues to be on driving growth, expansion of our profit margins, increasing mobile money penetration and further strengthening our balance sheet. And we’re going to do this with sustainability at the heart of our agenda. Today I’m very pleased and also excited to announce that we have launched a detailed sustainability strategy with a separate announcement made to the market early this morning. And I will talk a bit more on this on the coming slides.

If you turn to slide number four I will take you through a few of the highlights, the key headlines of our first half results. First, let me emphasise our corporate purpose. It’s about transforming lives, which we achieve through providing affordable mobile communication services and mobile money services. The key word is affordable, given the level of affordability in our various communities in Africa. As we do this we are bridging the digital divide and banking the unbanked as well. We bring in very strong digital capability to the population through expansion of our network and by rolling out our distribution capabilities and then by making our digital content and services affordable and easily accessible for the people of Africa. This key purpose lies at the core of our sustainability credentials, and I have a specific slide on our sustainability strategy later in the presentation.

Financially we had a very strong half. This should be viewed in context. While our business has generally experienced only minimal impacts from COVID, the effects were felt most acutely in the earliest phase of the pandemic, the first quarter of last year when governments and populations were first reacting and adapting to the virus. This led to a weakened performance in our Q1 first quarter of last year and correspondingly this has been reflected in stronger year on year growth metrics for both our first quarter in the current financial year and first half performance this year, with much less of an effect on our second quarter year on year growth metrics.

In constant currency terms group revenue and underlying EBITDA for the half year grew by 27.6% and 38.5% year on year respectively. Our EPS has more than doubled to 7.5 cents. I will take a look at some more high level financial performance metrics in a moment before Jaideep, our CFO, takes you through the details. My confidence and our confidence in the sustainability of this financial strength combined with our successful deleveraging these last few years has led the board to determine that the time is right to upgrade our dividend policy, and today we have announced that we are targeting a new base of 5 cents for the dividend for the year FY2022. This is an increase of 25% on the 4 cents of dividend for last financial year. And we are giving guidance for annual growth of a mid to high single digit percentage. The board has also declared an interim dividend of 2 cents per share in line with this updated dividend policy.

Operationally, our strong revenue and EBITDA growth rates have been driven by good customer growth and ARPU growth across all our three regions, and all of our key services, voice, data and mobile money.Our total customer base now stands at over 122 million at 122.7 million people, with growth in the base strengthening to 5.4%. We have seen steady improvements in the customer trends in Nigeria with the resumption of new customer acquisitions in the country since the month of April.

In Q2 net customer churn was 500,000, down from 1 million in Q2 and 2.5 million in the final quarter of last year, when we took the main brunt of the changes in the way we register customers. ARPU, a key metric in our industry – average revenue per user – has grown 18.5% to $3.1, with data ARPU a key component of the growth, up a similar 19.2%. Mobile money continues to be a key driver of our growth with transaction values rising 47% to $30.5 billion for the half year.

Our final operational highlight regards our cash upstreaming capability. We have plenty of scope for upstreaming with some resilience built in from having a diversified business across 14 different countries in Africa. Over the last 18 months we have upstreamed $570 million to HQ from the various OpCos.

In terms of our key strategic highlights we have concluded the addition of another minority investor in our mobile money business, Qatar Investment Authority, bringing a further $200 million investment to the $300 million already committed by TPG’s Rise Fund and MasterCard. And with