IHS Holding Limited (IHS) Q1 2024 Earnings Report, Transcript and Summary

Good day, and welcome to the IHS Holding Limited First Quarter 2024 Earnings Results Call for the 3-month period ended March 31, 2024. Please note that today's conference is being webcast and recorded. [Operator Instructions] At this time, I would like to turn the conference over to Colby Synesael. Please go ahead, sir.

Thank you, operator. Thanks also to everyone for joining the call today. I'm Colby Synesael, the EVP of Communications here at IHS. With me today are Sam Darwish, our Chairman and CEO; and Steve Howden, our CFO. This morning, we published our unaudited financial statements for the 3-month period ended March 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 dec. These are the consolidated results of IHS Holding Limited, which is listed on the New York Stock Exchange under the ticker symbol IHS, which 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 the cautionary statement regarding forward-looking statements set out in our earnings release and 6-K filed as well 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 other factors 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 our Risk sections -- section of our Form 20-F filed 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, that 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.

Thanks, Colby, and welcome, everyone, to our first quarter 2024 earnings results call. We're reporting solid performance across our key metrics when considering the further significant devaluation of the Nigerian currency, the naira, that took place during the second half of 2023 and continuing into the first quarter of 2024. The results were broadly in line with our expectations, while ALFCF meaningfully outperformed due to timing. We expect to see more positive momentum in the second quarter as our contract resets kick in post the devaluation in Q1 '24. As such, we are maintaining our 2024 guidance, including our ForEx assumptions. We've made strong commercial progress since the beginning of the year across our African business. Organic growth for the quarter was 35%. Group-wide, we added 270 new tenants and 523 lease amendments and built 216 towers, including 158 in Brazil. We previously announced the signing of a new 3,950 tenant multiyear rollout agreement with Airtel in Nigeria in February, which also included a 3-year contract extension. We have renewed our master lease agreement with MTN in Zambia for a further 10 years and also just extended our MLA with MTN in South Africa by another 2 years until 2034. For the remainder of the year, we expect an acceleration in our KPIs as the underlying trends driving our business remain healthy and the impact of our ForEx resets that are associated with the naira devaluation that occurred this quarter start to meaningfully benefit our adjusted EBITDA margins. During the quarter, the average ForEx rate for the U.S. dollar to the naira was NGN 1,316 and was in line with our guidance of NGN 1,315. This, however, compares to NGN 815 in Q4 '23 and NGN 461 a year ago and equates to a $133 million headwind quarter-over-quarter and $392 million headwind year-over-year. We, however, have seen the naira appreciate versus the peak rate we saw in March, which I will speak to shortly. Skipping to Slide 7, I want to discuss our highlights. I'd like to start by providing an update on our strategic review that we announced during our earnings call in March. We continue to look at all options through a value creation lens with the goal of maximizing the value of our assets, and therefore, value for shareholders over the near, medium and long term. There are number of areas of focus here: one, increasing our operating profitability and substantially reducing our CapEx to increase cash flow generation, which is reflected in our 2024 guidance and implies a notable step-up in adjusted EBITDA margins for the remainder of the year and a significant reduction in CapEx year-over-year. Two, we continue to review our portfolio of markets to determine the right composition for IHS going forward. This is expected to include the disposal of certain markets with a target of raising $500 million to $1 billion over the next 12 months. And three, capital allocation of increased cash flow and disposal proceeds raised are expected to be primarily utilized to reduce debt. However, we will also consider deploying excess proceeds through share buybacks and/or introducing a dividend policy. To be clear, these initial targets do not rule out further initiatives to continue increasing shareholder value, which we continue to assess in parallel. While it's only been 2 months, we're off to a good start with significant work already completed by us and our advisers to identify and analyze these various opportunities. We will continue providing updates as we progress. Moving on to governance. As previously disclosed in January 2024, we reached a settlement agreement with Wendel, reflecting a commitment to strong corporate governance and constructive shareholder engagement. IHS' Board of Directors are supportive of the proposals being put forward by Wendel and recommends the investors vote to approve these changes at our next AGM, which is expected to occur in June. Should shareholders support these proposals, we will have better aligned our governance policies with that of mature U.S. listed companies, which was an important goal we set at the time of our public listing. In terms of our commercial relationship with MTN, we are constantly in constructive and evolving discussions as matters keep progressing. In March, we signed a 10-year renewal with MTN in Zambia and we just extended the South Africa MLA by 2 years as we reach an agreement to unwind our power managed services arrangement with MTN in the country. This agreement reflects the escalating load shedding situation in South Africa, whereby both companies agreed for MTN to undertake the CapEx and OpEx requirements to build the resilience they desire. In Nigeria, we continue to constructively discuss and explore ways to support our largest client. Moving to our balance sheet, which is a top priority. We continue to actively pursue initiatives to extend maturities, manage interest expense and shift more debt into local currency. During the quarter, we signed a new $270 million term loan and used the proceeds to pay down U.S. dollar letters of credit in Nigeria, reducing interest costs and releasing cash collateral, which improved our liquidity position and improved our interest expense. At the end of the quarter, we had $693 million of available liquidity. As anticipated, given the devaluation during the quarter, our leverage increased further, ending the quarter at 3.8. However, we continue to expect to remain within our target range of 3 to 4 this year. I'd now like to provide an update on Nigeria's macro. In March, the Central Bank of Nigeria announced it had fully cleared the official ForEx backlog and the Monetary Policy Committee further increased the policy interest rate by 200 basis points to 24.75%, positive actions that appear to have had a positive impact on the naira, which peaked at NGN 1,625 to the dollar on March 11, but ended the quarter stronger at NGN 1,394. We've also seen a narrowing in the spread between the official rate and the parallel rate to between 0% and 5% on most days and a material improvement in U.S. dollar availability. This has enabled us to access approximately $200 million since the beginning of the year, of which we have upstreamed $61 million to group since the end of the quarter and $78 million to settle USD letters of credit in Nigeria, with the balance used for general corporate purposes. We expect to upstream more during the remainder of the year. Lastly, on Latam, we completed the sale of our Peru subsidiary to SBA Communications on April 30, 2024. And as noted earlier, we built 158 towers in Brazil during the quarter. We remain committed to Brazil, which is our second largest market and one of our fastest growing. We continue to drive strong operational results there and see significant ongoing growth opportunities. And with that, I will turn the call over to Steve.

Thanks, Sam, and hello, everyone. Turning to Slide 9. As Sam mentioned, here, we show our Q1 performance. As you see here, both towers and tenants are up approximately 3% in Q1 '24 versus Q1 '23, while lease amendments again increased by double-digit percentages. Fundamental underlying tenancy growth continues across our key markets. Clearly, the financial performance in Q1 '24 was majorly impacted by the naira devaluation in the quarter from NGN 912 to the dollar at 31 December to NGN 1,394 to the dollar at 31 March 2024. Therefore, on a reported basis, revenue and adjusted EBITDA declined in the quarter, consistent with our prior expectation that our Q1 '24 results would reflect the impact of the January devaluation of the naira. Specifically, in Q1, revenue declined by 30.7%. Adjusted EBITDA decreased by 44.8% and ALFCF fell by 72.2% in each case on a reported basis and driven largely by the impact of the devaluation more than offsetting the strong organic growth. However, it is worth noting that the period-on-period comparison is also distorted by the presence of $48 million of one-off revenue and adjusted EBITDA and $43 million of one-off ALFCF in Q1 of 2023. Our adjusted EBITDA margin decreased to 44.3%. We expect our financial results to notably improve in Q2 '24 driven in part by our FX resets. Our level of CapEx investment decreased by 65% in the quarter, largely due to lower capital expenditure for our Nigeria and SSA segments, partially offset by an increase in Latam, all of which I'll discuss shortly. As communicated last quarter, while we've increased our focus on cash generation and pulled back our capital allocation, we continue to focus on projects that we believe promised the highest returns and are the most strategic. Finally, our consolidated net leverage ratio increased to 3.8x at the end of Q1, up 0.4x versus Q4 '23. This is consistent with the expected increase we flagged last quarter due to the most recent devaluation in Nigeria and still within our target of 3 to 4x range as we had guided. Turning to our revenue. On a consolidated basis, you can see how the continued devaluation turned a quarter of strong growth into a 30.7% decline. The naira devalued 35% in Q1, as mentioned already, yet the business delivered organic revenue growth of 35.5%, driven primarily by FX resets, CPI escalations in power. Our Q1 '24 results also reflect the absence of $48 billion from a onetime cash payment from our smallest key customer in Nigeria in Q1 of last year and included a $5 million headwind as a result of the Brazilian telecom operator Oi having reached resolution on its restructuring plan. Fiber new lease amendments, new colocation and new sites also contributed to organic growth this quarter and came from countries across our portfolio. The right side shows the organic growth rates of each of our segments for the quarter, where our Nigeria segment grew approximately 46%, including a large benefit from FX resets. On Slide 11, you can see our consolidated revenue, adjusted EBITDA and adjusted EBITDA margins for Q1 '24. As discussed, the Nigeria devaluation drove a 31% decrease in reported revenue in the first quarter despite the quarterly organic revenue growth of over 35% that again demonstrated the continued strong top line growth trends of the business. Q1 '24 reported revenue includes a $133 million headwind quarter-over-quarter and a $392 million headwind year-over-year from the naira devaluation, or $219 million after adjusting for the impact of FX resets over the past year. FX was an incremental $1 million headwind during the quarter versus rates assumed in prior guidance when factoring in all currency assumptions. As we had previously noted, most of the FX resets on the U.S. dollar-denominated portion of our Nigeria contracts are calculated using the average rate of the prior quarter or the spot rate at the beginning of the current quarter. And therefore, our Q1 '24 results don't reflect the FX reset benefit from the late January devaluation, but this will start to show in our Q2 results. In addition, as we said, the comparison is also distorted due to the $48 million of one-off revenue in Q1 2023 and the $5 million headwind from Oi's restructuring plan, both of which have similar impacts on adjusted EBITDA. In Q1 '24, adjusted EBITDA of $185 million decreased 45% and adjusted EBITDA margin was 44.3%, down 1,100 basis points from the prior year. The year-over-year changes in adjusted EBITDA and margin for the first quarter primarily reflect the decrease in revenue, including the absence of the one-off items we've already discussed, as well as the higher operating costs in Nigeria versus our own expectations, albeit power generation cost of sales decreased by more than $26 million. As previously highlighted, through Project Green, we continue to prioritize the alternative sources of power to reduce our dependency on diesel. On Slide 12, we first review our adjusted leverage free cash flow, or ALFCF. And in Q1 '24, we generated ALFCF of $43 million, a 72% decrease versus Q1 '23, primarily due to a decrease in cash from operations and an increase in net interest paid, partially offset by a decrease in maintenance CapEx and withholding tax. However, the ALFCF growth rate is impacted by the $43 million of one-off impact we saw in Q1 of last year. ALFCF cash conversion rate was 23.3%. ALFCF in the quarter does benefit positively from some timing aspects related to maintenance CapEx and interest and should normalize in Q2. Turning to CapEx in Q4 -- excuse me, in Q1 of 2024, CapEx of $53 million decreased 65% year-on-year. This decrease was primarily driven by lower capital expenditure for our Nigeria and SSA segments of $77 million and $22 million, respectively, partially offset by an increase in capital expenditure of $1 million for our Latam segment. The decrease in Nigeria was primarily driven by decreases related to Project Green and to maintenance CapEx, while the decrease in the SSA is primarily driven by decreases related to refurbishment and also maintenance CapEx. As it relates to these decreases in maintenance CapEx over the past few quarters, we've challenged our operating teams to find ways to improve efficiency, and they are delivering. Thus, we believe much of the savings we see will be permanent as opposed to push out into outer years. The increase in Latam is primarily driven by increases related to new sites' capital expenditure. As we've discussed previously, we remain focused on cash generation but are still allocating some capital to projects that we believe promise the highest returns and are the most strategic. On the segment review on Slide 13, I want to add to Sam's earlier comments on what we are seeing in Nigeria. In March 2024, CBN announced having fully cleared the official backlog of FX transactions and raised interest rates by 200 basis points to 24.75%, the second rate hike in 2024. These actions appear to have had a positive impact on Nigeria's FX market with the May 10 U. S. dollars to naira Bloomberg rate at NGN 1,436 versus the peak of NGN 1,625 in March. The government, including the Ministry of Finance and Central Bank of Nigeria, have passed a number of reforms in the last 6 months, both small and large aimed at increasing dollar flow within Nigeria, increasing the attractiveness of Nigeria as a foreign direct investment destination and increasing transparency in the money markets. There is still more to do, but as a result, we've seen an increase in U.S. dollars in Nigeria and FX reserves in the country have increased to $33.8 billion at the end of March '24 from $32.9 million at the end of December '23. Since the FX rate environment adjusted in January, we were able to access $78 million to settle U.S. dollar obligations locally in Nigeria and additionally we've upstreamed $61 million to group since the end of the quarter. We expect to upstream more over the remainder of the year. Meanwhile, the price of both oil and ICE gasoil have increased recently. Looking at gasoil, it was $813 per ton in Q1 '24, up from $792 per ton in Q4 '23. And also inflation jumped to 33.2% this March versus 22% in March last year. For IHS, Q1 '24 revenue of $228 million decreased 46% year-on-year on a reported basis, reflecting the ongoing devaluation in the quarter and the one-off revenue in Q1 '23, but increased 46% organically. Organic growth was driven primarily by FX resets and escalations. The negative FX impact was $392 million or 65% due to devaluation. Our tower and tenant count increased by 0.2% and 1.9%, respectively, versus Q1 of last year. Our colocation rate consequently improved to 1.59x, up from 1.57x in Q1 last year. Lease amendments continued to be a strong driver of growth, increasing 9.3% year-on-year as our customers added additional equipment to our sites, particularly 5G upgrades. Q1 2024 segment adjusted EBITDA in Nigeria was $103 million, a 62% decrease from a year ago, and segment adjusted margin was down 1800 basis points to 45.2% in each case, largely driven by the Naira devaluation impacting revenue and the one-off item in Q1 last year, while operating costs this quarter were higher than our own expectations for things such as bad debt, diesel, albeit year-over-year, we saw an overall reduction in cost of sales primarily from diesel savings. In our Sub-Saharan African segment, towers and tenants increased by 1.4% and 2.9%, respectively, versus Q1 '23. Revenue increased by 7.5%, of which organic revenue grew 15%, driven primarily by escalations and FX resets. Segment adjusted EBITDA increased 6.4%, which primarily reflects the increased revenue, partially offset by an increase in cost of sales due to higher power generation costs. Segment adjusted EBITDA margin was stable at 53% versus 53.6% in Q1 '23. And also, as Sam mentioned, starting in Q2 of this year, we will no longer be providing backup power services to MTN South Africa and now have a more traditional steel and gross model with MNN in South Africa. This has derisked our business and will improve margins and cash flow. In our Latam segment, towers and tenants grew by 11% and 6.4%, respectively, versus Q1 '23. Revenue increased by 4.7%, of which organic revenue growth decreased 0.4%, but that as a result of the Brazilian telecom operator Oi's restructuring plan and the subsequent renegotiation of their contractual agreement with us in Brazil, leading to a $5 million reduction in revenue this quarter that we had not anticipated in guidance. Segment adjusted EBITDA increased by 9%, leading to a 70.8% segment adjusted EBITDA margin to 250 basis point increase versus Q1 of '23. In Brazil, our second lives market was 7,815 towers, macro conditions were largely positive as FX rates were essentially flat and both interest rates and inflation came down. In MENA, towers and tenants grew by 8.7% and 9.1%, respectively, while revenue increased by 12%, including a 6% organic revenue growth, driven primarily by new sites and escalations. Segment adjusted EBITDA grew by nearly 66% and the Q1 2024 segment adjusted EBITDA margin increased to 55.6%. Now skipping to Slide 15, we look at our capital structure and related items. At March 31, 2024, we had approximately $4 billion external debt and IFRS 16 lease liabilities. The $4 billion of debt, approximately $2 billion represents our bond financings and other indebtedness includes $370 million that have been drawn down from the 3-year bullet term loan facility at the IHS Holding Limited level. That facility had $130 million of undrawn capacity in Q1, of which we voluntarily reduced the undrawn amount by $70 million in the quarter. And in April, we completed a drawdown of the remaining $60 million balance since the availability of that remaining balance was expiring. As Sam mentioned, the balance sheet is an important component of our thinking as it relates to the strategic review. We have already undertaken and continue with various balance sheet initiatives to: one, extend maturities; two, manage interest rate expense, the swap dollar obligations into local currency where possible; and four, add flexibility to our capital structure. This includes in March when we signed a $270 million bilateral loan to refinance our letters of credit in Nigeria, extending the maturity of these obligations, reducing interest expense by approximately 300 basis points and released approximately $95 million equivalent of cash collateral previously held against these letters of credit. As you can imagine, we're pleased to have completed these initiatives, which further derisked the balance sheet and increased our financial flexibility. Cash and cash equivalents increased to $33 million at March 31 and excludes the $60 million of additional funds from the term loan we drew down in April. In terms of where that cash is held, approximately 34% was held in naira at our Nigeria business, given the money that was recently freed up from the collateral against the credit lines. We're in the process of upstreaming much of this and have been able to upstream $61 million following the end of the quarter at an average rate of approximately 1,279 naira to the dollar, a positive reflection of the government's recent actions to increase daily FX turnover or USD availability and bring together the diversity between the parallel and official rates. While we anticipate to upstream again in 2024, we do caution, it remains to be determined if the increased dollar availability can be sustained. Consequently, from all these moving elements, at the end of Q1 '24, our consolidated net debt had reduced to approximately $3.7 billion, and we had a consolidated net leverage ratio of 3.8x, up 0.4x versus the end of 2023. We expect leverage to remain within our current target of 3x to 4x net leverage ratio this year prior to the realization of any future disposals at which time we expect the leverage to drop. Finally, as it further relates to the devaluation, I want to point out that our Q1 results show an usually large net loss of $1.6 billion, which is driven primarily by the the finance costs, the vast majority of which is unrealized FX losses. As we saw in Q2 of last year, in particular, after the then Nigeria devaluation, these costs arise principally due to our U.S. dollar bonds. And because of the U.S. dollar intercompany shareholder loan structure we have used historically to fund the business. These costs, which are very largely non-cash can vary significantly and typically increase in the context of the devaluation of the naira, which is the primary reason why they increased dramatically in Q1. We've added back Slide 21 to the appendix of the presentation as we did in Q2 of last year to help further explain this dynamic and highlight the delta this past quarter. Moving to Slide 16. We are maintaining our 2024 guidance, including our FX assumptions, but we are now absorbing an additional $12 million in lost revenue from Oi versus our previous expectations and has 100% flow-through to adjusted EBITDA and ALFCF. Despite that, we expect to see an improvement in our financial results and margins starting in Q2 '24 as we benefit from the FX resets associated with the devaluation in Q1 '24 and based on our expectations for our KPIs. I'd also add that we've been mentioning that we've been reviewing our power managed services agreement with MTN in South Africa for some time now. And as we've discussed, this has already been completed in Q2 '24. However, this doesn't impact our guidance as this was already factored in. On Slide 17 on the left, you can see our revenue by reporting currency for Q1 whereas on the right provide a breakout of revenue based on contract split. The bottom of the slide is showing the average annual FX rate assumptions used in our 2024 guidance and are unchanged from last quarter. This now brings to the end of our formal presentation. We thank you for your time today. Operator, please now open the line for questions.

Thank you. [Operator Instruction] And your first question comes from the line of Richard Sheppard from JPMorgan.

I wanted to check and see what you're seeing in terms of the transition to 4G and 5G in Nigeria, given that the currency had been so unstable? Did you see a pullback? And now with, I guess, the rates kind of converging and having a little bit more stability, do you think you'll see an acceleration in that build for the rest of the year?

Richard, this is Sam. Look, it's unavoidable. At the moment, the carriers in Nigeria are focused on weathering basically the devaluation, the massive devaluation that has occurred. They will, in my view, slow down the transition from 4G to 5G. In any case, even as we talk 4G, they're still kind of like in the final stages of that rollout. So it's not going to be a massive delay. But my estimate is that we may see a little bit of a slowdown on the rollout of 5G until they see a little bit more clarity on where the naira will land.

Yes, Richard, it's Steve here. I would just add we factored a bunch of that into our guidance already. So if you remember, we pulled back significantly our CapEx. And a lot of that's being driven through reductions in new build sites in Nigeria as well as some other places as well. So some of that is already baked in. I would also say if you look at Airtel Africa's results on Nigeria, they still continue to be pushing pretty hard as evidenced by our agreement with them in February, around 3,009 tenants rolled out of 5 years. So there's sort of -- it's -- there's certainly a bit of slowdown given where the macro is, but we're still seeing -- particularly, people like Airtel are still key to push ahead. We did have 5G lease moments in the quarter. We had 523 lease moments total in Q1. And within that, there were some 5G, but mostly 4G.

And then regarding the oil churn, I guess, it's $12 million for the year. Is there any more after this year, or is that largely going to be it?

I mean, that impact will continue thereafter. It actually moderates a bit next year given the restructuring plan has been agreed with them. But that's effectively what we're seeing through the impact of 2024. So need to reiterate that, that $12 million was not forecast. We have forecast some already, but that $12 million is not forecast. So you can consider that almost as outperformance versus the guidance because we haven't changed guidance ranges, but we're absorbing that additional hit.

Your next question comes from the line of Michael Rollins from Citi.

A couple of questions. First, I'm curious if you -- good morning. I was curious if you could give us an update on churn? What you're seeing from customers and if there's still some churn that needs to be processed in any of your key markets that we should be mindful of? And then second, in terms of the strategic review, did you look into the question as to whether or not the public markets are the right place for IHS equity? And what did you learn on that front?

So Michael, on the churn point, there isn't anything particularly new in terms of what we see, no particular situations with carriers in any of our markets. I mean, people are obviously aware of the ongoing discussions with MTN in Nigeria and that's originally centered around 2500 sites in this year. But outside of that, we haven't changed our stance on that either. But other than that, there isn't really anything to comment on different or new trends or outsized trends and churn remains pretty low.

And -- hi, Mike, this is Sam. Look, on the second question, look, we like New York. We like public markets. We definitely like you guys. So kind of like we're happy where we are. But at the moment, we have announced a strategic review. The strategic review will look at every different aspect of where we are. We fundamentally believe that we are being undervalued by public markets. Now the whole asset class is kind of like under pressure given where cost of money is at the moment. Our peers -- our U.S. peers are 40% down, for example, over the past 2 years. So we do acknowledge this is some kind of a trough at the moment that the markets are seeing. But again, Mike, look, nothing is off the table as we conduct the strategic review, and we will kind of like make the relevant announcements as and when we progress that review.

Your next question comes from the line of Jon Atkin from RBC.

Just curious about capital allocation relative to the strategic review? And what are some of the criteria that you're evaluating when you think about potential dispositions you talked about wanting to remain in Brazil? But whether it's by asset class or relative scale or geography, but any kind of broad brush criteria that we should think about as you think about dispositions?

Yes, I think -- this is Steve. I think just broad bush, the business has always been a growth stock and we're in growth markets, we're in emerging market, a great infrastructure company. And I think that, that is the intention to remain as such. As you've seen this year that we've pulled back significantly on sort of organic CapEx spend and that -- so that we can focus on specific areas this year is Brazil. And so hopefully, that forms part of the long-term capital allocation. But what we're also being very clear on is that, that totality of capital allocation is changing from history. We looked historically to deploy significant capital in for MLA opportunities. And right now, we're thinking through what we have already. We're thinking through the balance sheet and potentially looking at paying down some debt. And we're also looking at nearer term shareholder returns, whether that be through reintegrating share buybacks or whether that be through dividends at some point in the future. So those are sort of the broad brush changes that we are working through right now and we're trying to be clear on.

And then I think you kind of gave us some of the tools to think about this, but what can you highlight just maybe to repeat or accentuate the 55% EBITDA margins for the year. So there's a step-up here? And what are the major drivers of that of your EBITDA margin expansion?

Yes. So I think a few things. First, the Q1 EBITDA margin looks a little low in comparison to the full year trend, and that's in part driven by the Oi things that we covered. But it's also in part driven by some pass-through revenue that we had in South Africa, which is coming to an end next quarter. So you'll see a step-up in margin from technicalities around pass-through, but also particularly for our contract resets, we commented clearly on how Q1 has been impacted by the naira devaluation and contracts will start resetting beginning of April in Q2. So you'll see that step back up again. So for the rest of the year, given where we are in Q1, given the implied full year margin, it's 5%, we're expecting to see 56%, 57% type margin run through the next 3 quarters of the year and the business is just facing that direction.

And lastly on the build-to-suits, can you share what the kind of the initial single tenant returns are that your underlying to for the builds that you have in your pipeline?

Yes. I mean no difference the history, to be honest. We're obviously -- we've obviously shrunk back the number of sites from last year and the majority of those main sites are from Brazil. We've always been of the view that single tenant returns should be double-digit. And then once we have second tenant on, we're hoping to see something around the 20% mark from a returns point of view. And that continues to be the way we think about things. And we'll see how this unfolds.

Your next question comes from the line of David Lopez from New Street Research.

Most of my questions have been answered, but one left on leverage. I was wondering -- leverage and shareholder remuneration. I was wondering what would be the leverage level you would like before starting to think about further share buybacks or interest in the dividend? And actually, a follow-up, apologies if it has been answered in the sub-question about a miss part of it. We have seen MTN Nigeria cutting its CapEx guidance materially a few weeks ago. I was wondering what's the risk to your guidance? And does that mean that we should maybe expect more to be to have the lower end of the revenue range or not?

We covered the -- I think we covered the MTN point already in terms of the very first question we had. So yes, we've seen MTN pull back on some CapEx. We expected that and that was sort of baked into our guidance, which is being offset by Airtel's push in the country, given the announcement we signed. So not expecting that to materially impact the guidance that we've put out really. And on the leverage before returns, that's all being worked out right now. I don't want to get ahead of that. Clearly, 3.8x where Q1 is up towards the top end of our range. In time, we'd like to be back down at the bottom end of that range. Historically we've been close to that range. But we're working through that right now as part of the broader strategic review per some real framework around the disposals, which we've spoken a little bit earlier today, but also then how we allocate that majority debt, but some may come back to share -- direct share return.

David, if you allow me to also add that, look, we are comfortable with our liquidity position at the moment. I mean, we have roughly $700 million of liquidity. Traditionally, however, we have always been conservative on our debt allocation and we've always kind of like given the range that we like to stay in with, 3 to 4 is a range that is lower than most of what our peers are, even as we are now with the massive devaluation of naira that took it from 400 to the dollar to almost 1400 or 1500 to the dollar, we're still all within our range. But again, this conservative mentality that Steve is talking about is the one that is driving us to basically say, you know what, let's further reduce our leverage. But it's not basically -- it's not something that -- it's not a danger we face at the moment. It's just something that we feel comfortable staying basically at lower levels of the range. And by the way, this is not tied to the dividend payment or this is not tied to a shareholder buyback situation. Those are more kind of like tied to concluding the strategic review that we are doing. We want to make sure that we get all the pieces somehow tied together before we kind of like commit to shareholder return.

Your next question comes from the line of Stella Cridge from Barclays.

Yes, there was a couple of other areas I wanted to ask about. So on the Sub-Saharan African contracts, were there any changes of note in the Zambia contract versus before? And I remember, I think, you also have the Rwanda contract maturing. So I just wondered what the status of that was? And secondly, I had also noticed the negative EBITDA portion of other part -- aka other cost plus Holdco cost has been $27 million versus being in the $30 million in prior quarters. So I was just wondering is that a sustainable level going forward or could this come down a little bit further. That would be great.

So on the first question, nothing particularly of note to comment on in terms of the Zambia renewal. Pluses and minuses, that's all. But a 10-year renewal with MTN Zambia. Rwanda is not quite done yet, still progressing, still constructive, but we're not quite there yet. And -- sorry, the final question -- can you just repeat the final question for me? Which costs are we talking about?

Yes, so the other -- like the negative EBITDA from other areas, so these unallocated costs. I just noted this --

Yes. So that's kind of holding company costs has been represented this quarter just to make sure that the presentation is correct. But that is our group costs. Yes, it's come down versus prior quarters, and we would expect it to remain sort of lower than it has been historically. We've been taking various cost saving initiatives at the group level. So yes, we expect that to continue.

Okay, that's super. And maybe if I could just ask also on the South Africa change of the agreement there. Is there any economic impact on the profitability of the contracts versus prior?

So that's all been already baked into our guidance, Stella. So there's sort of ups and downs sort of when we're making guidance. So there no change the way you bake [ them in ].

And that brings us to the end of the IHS Holding Limited First Quarter 2024 Earnings Results Call. Should you have any questions, please contact the Investor Relations team via the e-mail address investorrelations@ihstowers.com. The management team, thank you for your participation today and wish you a good day.