IHS NETHERLANDS HOLDCO B.V. - IHS Towers

IHS NETHERLANDS HOLDCO B.V.

CONSOLIDATED AND COMPANY FINANCIAL STATEMENTS FOR THE YEAR ENDED 31

DECEMBER 2019

IHS NETHERLANDS HOLDCO B.V. INDEX TO THE CONSOLIDATED AND COMPANY FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

2

CONTENTS

CORPORATE INFORMATION .................................................................................................................................................... 3 MANAGEMENT BOARD REPORT ............................................................................................................................................. 4 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME ....................................... 12 CONSOLIDATED STATEMENT OF FINANCIAL POSITION ..................................................................................................... 13 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY ..................................................................................................... 14 CONSOLIDATED STATEMENT OF CASH FLOWS ................................................................................................................. 15 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ............................................................................................... 16

1. General information ........................................................................................................................... 16 2. Summary of significant accounting policies .................................................................................... 16 3. Critical accounting estimates and judgements ............................................................................... 30 4. Financial risk management ............................................................................................................... 32 5. Revenue ............................................................................................................................................. 40 6. Cost of sales ...................................................................................................................................... 41 7. Administrative expenses ................................................................................................................... 41 8. Other income ..................................................................................................................................... 42 9. Finance income and costs ................................................................................................................ 42 10. Non-IFRS measures ........................................................................................................................... 43 11. Taxation .............................................................................................................................................. 43 12. Property, plant and equipment ......................................................................................................... 44 13. Intangible assets ................................................................................................................................ 45 14. Investments ........................................................................................................................................ 48 15. Derivative financial instruments ....................................................................................................... 48 16. Trade and other receivables ............................................................................................................. 49 17. Inventories ......................................................................................................................................... 49 18. Cash and cash equivalents ............................................................................................................... 50 19. Trade and other payables .................................................................................................................. 50 20. Borrowings ......................................................................................................................................... 50 21. Lease liabilities .................................................................................................................................. 53 22. Provisions for liabilities and other charges ..................................................................................... 53 23. Deferred taxation ............................................................................................................................... 54 24. Share capital ...................................................................................................................................... 55 25. Other reserves ................................................................................................................................... 55 26. Accumulated deficit ........................................................................................................................... 56 27. Cash generated from operations ...................................................................................................... 56 28. Business combinations ..................................................................................................................... 57 29. Related parties ................................................................................................................................... 57 30. Contingent liabilities and capital commitments............................................................................... 60 31. Events after the reporting period ...................................................................................................... 61

COMPANY STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME ................................................. 62 COMPANY STATEMENT OF FINANCIAL POSITION ............................................................................................................... 63 COMPANY STATEMENT OF CHANGES IN EQUITY ............................................................................................................... 64 COMPANY STATEMENT OF CASH FLOWS ........................................................................................................................... 65 NOTES TO THE COMPANY FINANCIAL STATEMENTS ......................................................................................................... 66 OTHER INFORMATION ............................................................................................................................................................ 79 INDEPENDENT AUDITOR’S REPORT ..................................................................................................................................... 80

IHS NETHERLANDS HOLDCO B.V. CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

3

CORPORATE INFORMATION

Commercial Register No. 66017912 Registered Office Haagsche Hof

Parkstraat 83, 2514 JG The Hague The Netherlands

Management Board Mr. DARWISH Mohamad Mr. VAN DIJK Bart (resigned 15 February 2019) Mr VAN SPALL Gerard Jan (appointed 15 February 2019) Mr. KLEIN Laurentius Ireneus Winfridus Mr. ORDMAN David Andrew

Independent Auditors PricewaterhouseCoopers Accountants N.V.

Bankers Citibank Europe Plc


4

MANAGEMENT BOARD REPORT

1. General Information

The Directors present the management board report on the affairs of IHS Netherlands Holdco B.V. (the "Company") and its subsidiaries (together hereafter referred to as the “Group”), for the year ended 31 December 2019. This report discloses the state of the Company and the Group. IHS Netherlands Holdco B.V. was incorporated in The Netherlands under Dutch Corporate Law as a private limited liability company.

The Company was incorporated on 12 May 2016 and is a fully owned subsidiary of IHS Netherlands (Interco) Coöperatief U.A. a Dutch Cooperative incorporated in The Netherlands. The ultimate parent is IHS Holding Limited, a company incorporated in Mauritius, the shares of which are held by several companies and individuals.

At 1 January 2019 the Group was comprised of the following: IHS Netherlands Holdco B.V. (Parent), IHS Netherlands NG1 B.V. (100% interest), IHS Netherlands NG2 B.V. (100% interest), IHS Nigeria Limited (100% interest1), IHS Towers NG Limited (100% interest1), Tower Infrastructure Company Limited (100% interest) and IHS Towers Netherlands FinCo NG B.V (100% interest).

On 18 September 2019 IHS Netherlands (Interco) Coöperatief U.A. transferred the shares it held (representing 100% ownership) in Nigeria Tower Interco B.V. to IHS Netherlands Holdco B.V., including its subsidiary, INT Towers Limited. INT Towers Limited is a fully owned subsidiary (100% interest1) of Nigeria Tower Interco B.V. This restructuring took place as part of a refinancing under which the $800m, 9.5% Senior Notes due 2021 (the “2021 Notes”) were fully redeemed and are no longer outstanding and IHS Netherlands Holdco B.V. issued $500 million 7.125% Senior Notes due 2025 (the “2025 Notes”) and $800 million 8.0% Senior Notes due 2027 (the “2027 Notes”) which are listed on The International Stock Exchange (TISE).

The significant subsidiaries, being IHS Nigeria Limited, IHS Towers NG Limited and, from 18 September 2019, INT Towers Limited are incorporated in Nigeria and are principally involved in providing shared telecommunications infrastructure services to Mobile Network Operators (MNOs) and other communications service providers, who in turn provide wireless voice and data services to their end users. These subsidiaries provide customers with opportunities to install active equipment on existing towers alongside current tenants, known as colocation, and provide opportunities for customers to commission the construction of new sites to their specifications. In certain strategic instances, they may also provide managed services, such as maintenance, security and power supply for towers owned by third parties. These subsidiaries provide all their services in Nigeria.

The Company is the “issuer” of the $500 million 7.125% Senior Notes due 2025 (the “2025 Notes”) and $800 million 8.0% Senior Notes due 2027 (the “2027 Notes”) (together “the Notes”) which are listed on The International Stock Exchange (TISE).

IHS Towers Netherlands FinCo NG B.V., a wholly owned subsidiary of the Company, is the “issuer” of the $250m 8.375%. Guaranteed Senior Notes due 2019 (the “FinCo Notes” and, together with the 2021 Notes, the “IHS Notes”), issued on 15 July 2014 and which have all been fully repaid at maturity on 15 July 2019 and are no longer outstanding.

The Company has no employees.

Performance

The summarized results for the year ended 31 December 2019 and the year ended 31 December 2018 are presented below:

Year ended 2019

Year ended 2018

Group $’000 Company $’000 Group $’000 Company $’000 Revenue 580,571 - 392,477 - Gross profit 226,034 - 161,528 - Total comprehensive (loss)/profit for the period (64,282) 91,378 (107,618) (87,333)

The Group had an operating profit of US$130.0 million for the year (2018: US$104.5 million). The total comprehensive loss results from net finance costs of US$207.0 million (2018: US$190.7 million) which includes unrealized foreign exchange losses of US$9.3 million (2018: US$26.9 million) primarily related to the translation of foreign currency loans. The directors do not recommend the payment of a dividend. The Group has total net liabilities of US$467.4 million (2018: US$592.7 million) and the Company has total net assets of US$1.8 billion (2018: US$18.7 million).

1 Less one share in each of IHS Nigeria Limited, IHS Towers NG Limited and INT Towers Limited which are held by a nominee shareholder, for local legal reasons.


5

MANAGEMENT BOARD REPORT (CONTINUED)

2. Description of risks and uncertainties to which the Group is exposed

The Group is exposed to the following important risks:

A significant portion of our revenue is derived from a small number of Mobile Network Operators (MNOs). The Group derived over 90% of its revenue from three key customers in the period. These customers control the majority of the market share of the mobile network market in Nigeria and, in the absence of a more diverse mobile network market in Nigeria, if any of our major customers are unwilling or unable to perform their obligations under their tower lease agreements, our revenues, financial condition and or results of operations could be adversely affected. Conversely, as the major tower infrastructure provider in Nigeria, we have limited competition and strong barriers to entry.

The Group may experience volatility in terms of timing of invoice settlement or may be unable to collect amounts due. This is a risk which is present for most companies and is mitigated by the Group through active management of outstanding debtors and engagement with MNOs who pay late to understand the difficulties they are facing and implement payment plans. Management provides for debtors where there is a perceived increased risk of non-collectability.

The Group’s current and future markets involve additional risks compared to more developed markets. These risks relate specifically to the availability of infrastructure to facilitate growth and other microeconomic risks associated with a developing market like Nigeria.

The Group and our customers face foreign exchange risks, which may be material. This risk is described in more detail in section 6 below.

The Group relies on third-party contractors for various services, and any disruption in or non-performance of those services would hinder our ability to maintain our tower infrastructure effectively. Management actively monitors the performance of third-party contractors against the contracted levels of service in service level agreements. The risk is further mitigated through the selection of reliable vendors with a proven track record for providing management services.

Any increase in operating expenses, particularly increased costs for diesel or an inability to pass through increased diesel costs, could erode our operating margins. Diesel cost makes up just over 50% (2018: over 50%) of the cost of sales of the group (excluding depreciation, amortization and impairments) and diesel price fluctuations therefore have the biggest effect on operating results. To ensure that a portion of the increase in these costs is passed through to our customers, the Group’s contracts include clauses which increase a portion of the use fees annually, with the movement in the Nigeria CPI which is affected by the local diesel cost. Such resets do not however mitigate the short-term risk of price fluctuations.

Inability to renew and/or extend our ground leases or protect our rights to the land under our towers could lead to lost revenue and increased costs as towers would need to be taken down, customer equipment may need to be moved to new sites or larger rental costs may need to be paid to secure access to the site. Management mitigates these risks by entering into long-term lease agreements with landlords (usually 10-15 years) and renewing these leases with good time left before expiry, with the renewal process usually beginning three to nine months prior to expiry of the lease term.

The Group’s exposure to financial reporting risk is deemed to be medium given complexity in some transactions as noted in note 3. This is mitigated as the operational entities within the Group share common management and financial control staff and therefore apply consistently the same process and review procedures. All entities within the Group also apply the same accounting policies and there is therefore little risk of divergence in accounting treatment.

The potential impact of Coronavirus (COVID-19) on our business:

As explained in note 2.1.1 Going concern and note 31 Events after the reporting period, in the financial statements, the COVID-19 outbreak and resulting measures taken by the Nigerian federal and various state governments to contain the virus have required some changes in how we operate (for example travel restrictions, increased working from home, practicing social distancing, increased hygiene measures and enhanced risk and contingency planning). Thus far, however, we believe that the impact on our business is limited with no immediate adverse operational impacts on our business, particularly because the telecommunications industry has been designated an essential service by the Nigerian government.

However, in addition to the already known effects, the macroeconomic uncertainty causes disruption to economic activity and it is unknown what the longer term impact on our business may be. The scale and duration of this pandemic remain uncertain but are expected to further impact our business. We believe that the main risks arising from the current uncertain situation regarding COVID-19 are as discussed below.

Revenues and profitability – Our revenues, or more specifically, our ability to collect our revenues from our customers may be compromised should our customers and/or their end customers no longer be able to meet their obligations. However, the Group has long-term revenue contracts with its customers, who we are in regular and frequent dialogue with to see how we can provide support in the operation of their network. Keeping people connected is now even more important given the current circumstances, and the telecommunications industry has been designated an essential service by the Nigerian government. Thus far in 2020, we have continued to meet our customers’ expectations on service levels and our Network Operating Centre (NOC) has maintained normal service levels. We continue to review and develop our internal contingency plans should the need arise to manage the NOC remotely.

A significant reduction in profitability may lead to impairments in our intangible assets, PPE and receivables. See note 13 for further information on intangible impairment sensitivities and note 4(c) for details of our credit risk.


6


2. Description of risks and uncertainties to which the Group is exposed (continued)

The potential impact of Coronavirus (COVID-19) on our business: (continued)

Revenues and profitability (continued) – The Group is reviewing measures for cost savings whilst maintaining its ability to operate effectively. Capex investments are likely to be limited generally to necessary replacements of assets until greater certainty on timing of macroeconomic improvement is available.

Supply chain – our sites require supplies of diesel and regular maintenance to continue to operate and, while we maintain a level of inventory, there is a risk that supplies may not be able to be delivered to our sites or that supplies may not be available, particularly when inventories need to be replenished. The Group is working closely with its suppliers on their supply chain and the health and safety of their employees.

Internal controls – the need to have more staff working from home may impact the security of their internet connections which could increase the risk of fraud, data or security breaches, loss of data and the potential for other cyber-related attacks. Our IT team utilise security measures to mitigate such risks but certainty over security cannot be assured.

Financing and liquidity - Following the reduction in the oil price subsequent to the year end, as well as concerns over COVID-19, there has been pressure on foreign exchange reserves in Nigeria. The Nigerian government has taken measures to protect these reserves through devaluing the CBN rate, which has had a similar, but thus far more limited devaluation impact on the NAFEX rate. Such devaluation and reductions in US dollar liquidity in the Nigerian market may reduce our revenues until such time as our contract resets are applied (unless a divergence in the official CBN rate, as used in our contracts, and the NAFEX rate continues, which would continue to impact us) and impact our ability to make our interest payments on our US dollar denominated obligations, including debt facilities.

The Nigerian CBN and NAFEX Naira rates have both devalued against the US dollar since 31 December 2019 from a NAFEX rate of Naira365:US$1 to Naira387:US$1 at 31 March 2020 (CBN Naira307:US$1 to Naira361:US$1), as the Nigerian Government looks to stabilise the economy and also protect current foreign exchange reserves. While there has been a reduction in US dollar liquidity in the Nigerian market, we were still able to source US$ dollars locally to pay our semi-annual coupon in March 2020. Our current aggregate balance of cash and cash equivalents and margins for non-deliverable forward instruments, remains at a similar level to the 2019 year-end position, even after this coupon payment.

3. Expected business developments

The Group’s primary strategy is to expand our revenue-generating asset base and improve utilization on new and existing towers. We have multiple organic and inorganic paths to increase revenue, subject to continued compliance with the Group’s debt covenants. We aim to drive organic revenue through colocation, lease amendments, contractual lease fee escalations and new site construction. In addition, we believe strong operating leverage and initiatives, such as decommissioning and site consolidations, will help us drive margins and increase free cash flows.

We pursue investments in Nigeria and have a strong track record of value-enhancing incremental investments that have helped grow our asset base, secure our market leading position and provide the scale and market share necessary to sustain our growth. We see the potential for new and related services that will help enhance our value proposition to our customers, reduce their operating costs and help improve their quality of service.

While the Group does not plan to effect any substantial changes to the number of staff or to the current financing structure, the Group regularly reviews financing structures. Management have drafted and analyzed the Group business plan and noted that according to currently forecast expectations there is no need to obtain further financing for normal operations or for the implementation of growth strategies. The results of the forecast, in combination with group treasury forecasts, also indicates sufficient funds to meet debt service obligations.

As explained in note 2.1.1 Going concern and note 31 Events after the reporting period, in the financial statements, the COVID-19 outbreak and resulting measures taken by the Nigerian federal and various state governments to contain the virus have required some changes in how we operate our business in the first 3 months of 2020, but we believe that this has had no immediate adverse operational impacts on our business.

Based on the actions taken to date by the Nigerian government and the nature of our long-term contracts we do not expect to see a material impact on our operational performance in 2020. However, the situation is changing rapidly and we will continue to review closely and take action if necessary. As a cash generative operation, with a substantial current cash balance and extended debt maturities we expect to meet our covenant obligations for the remainder of the year. Ultimately, whether this situation will continue to be maintained, in the remainder of 2020 and into 2021 is dependent on the period during which the regions in which we operate are exposed to COVID-19 and the extent to which government measures may be prolonged, expanded or scaled down and impact the economies we operate in.

The Group is reviewing measures for cost savings whilst maintaining its ability to operate effectively. Capex investments are likely to be limited generally to necessary replacements of assets until greater certainty on timing of macroeconomic improvement is available.

The current year performance, adjusted for the impact of INT Towers, is in line with the expectations of the prior year.


7


4. Research and development activities

The Group explores the potential for new products and services that will help enhance our value proposition to our customers, reduce their operating costs and help improve their quality of service. It is however not actively involved in the research and development of new technologies or products.

5. Subsequent events

Coronavirus (COVID-19)

The existence of novel coronavirus (COVID-19) was confirmed in early 2020 and has spread rapidly from mainland China across the globe, causing disruptions to businesses and economic activity. Many governments across the world have imposed travel restrictions, lock downs and social distancing with a view to reducing the spread of the virus and hopefully minimising the number of fatalities. The Group considers this outbreak to be a non-adjusting post balance sheet event.

Our main priority has been the health and safety of our employees and our dedicated supply chain. We have adhered to instructions issued by the Nigerian and/or state authorities, including travel restrictions and enforced working from home. Our secondary focus has been around business continuity planning and maintenance of the supply chain. The telecommunications industry has been designated by the Nigerian government as an essential service and, as the largest independent owner and maintainer of towers (towerco) in Nigeria, we have sought relevant permits to allow us to continue to access, fuel and maintain our tower portfolio. Consequently, we believe that the impact on our business is currently limited with no immediate material adverse operational impact. We intend to continue to follow the various national and/or state authorities’ policies and, in parallel, intend to do our utmost to continue our operations as the situation evolves.

Having refinanced our business in 2019, we have also extended our debt maturities, some of which extend well beyond 2021.

However, as the situation is fluid, rapidly evolving, and uncertainties remain, we do not consider it practicable to provide a quantitative estimate of the potential impact of this outbreak on the Group.

The impact of this outbreak on macroeconomic forecasts and our markets are expected to be incorporated into the Group’s estimates of expected credit loss provisions and other impairments assessments in 2020.

Please also see disclosures in note 2.1.1 Going Concern.

Devaluation in Naira to US dollar rate.

Following the reduction in the oil price subsequent to the year end, there has been pressure on foreign exchange reserves in Nigeria, which decreased from US$42 billion a year ago, to around US$35 billion presently. The Nigerian government has taken measures to protect these reserves through devaluing the CBN rate, which has had a similar, but thus far more limited devaluation impact on the NAFEX rate.

The Nigerian CBN and NAFEX Naira rates have both devalued against the US dollar since 31 December 2019 from a NAFEX rate of Naira365:US$1 to Naira387:US$1 at 31 March 2020 (CBN Naira307:US$1 to Naira361:US$1), as the Nigerian Government looks to stabilize the economy and also protect current foreign exchange reserves.

There are no other events after the reporting date that need to be disclosed in accordance with IAS 10 Events after the reporting period.

6. Exposure to and management of price risk, credit risk and liquidity and cash flow risk

The Group's activities expose it to a variety of financial risks including market risk (foreign exchange risk and interest rate risk), credit risk and liquidity risk. The Management Board has overall responsibility for the establishment and oversight of the Group’s risk management framework. The company has risk management oversight via the Executive Risk Management Committee at the level of the ultimate parent company (IHS Holding Limited), who is responsible for developing and monitoring the IHS Group’s risk management policies.

The Group’s risk management policies are established to identify and analyze the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly by the executive management to reflect changes in market conditions and the Group’s activities. The Group, through its training and management standards and procedures, aims to develop and maintain a disciplined and constructive control environment in which all employees understand their roles and obligations.


8


6. Exposure to and management of price risk, credit risk and liquidity and cash flow risk (continued)

The Board oversees how management monitors compliance with the Group’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. The Board is supported by various management functions that check and undertake both regular and ad hoc reviews of compliance with established controls and procedures.

It is the policy of the Group to develop controls and procedures to mitigate risks as far as possible within a reasonable cost/benefit range. Management accepts any low residual risks remaining after the implementation of appropriate mitigating controls.

Where appropriate we use derivative financial instruments solely for the purposes of hedging the currency risks arising from our operations and sources of financing. We do not enter into derivative financial instruments for speculative purposes. Foreign exchange risk The Group operates in Nigeria and is exposed to foreign exchange risk arising from exposures to currencies other than the Naira, in the books of the Nigerian subsidiaries, and to currencies other than the US Dollar upon consolidating the results and financial position of the Nigerian subsidiaries. Foreign exchange risk arises from future commercial transactions, recognized assets and liabilities and net investments in foreign operations.

The Group is exposed to risks resulting from fluctuations in foreign currency exchange rates. A material change in the value of any such foreign currency could result in a material adverse effect on the Group’s cash flow and future profits. The Group is exposed to exchange rate risk to the extent that balances and transactions are denominated in a currency other than the functional currency in which they are measured.

In managing foreign exchange risk, the Group aims to reduce the impact of short-term fluctuations on earnings. The Group has no export sales, but it has customers that are partly contracted using fees quoted in US Dollars, but with foreign exchange indexation. The Group’s significant exposure to currency risk relates to its loan facilities held by its subsidiaries that are mainly US Dollar denominated. The Group manages foreign exchange risk through the use of derivative financial instruments such as currency swaps and forward contracts. The Group monitors the movement in the currency rates on an ongoing basis.

Interest rate risk

The Group’s main interest rate risk arises from long term borrowings with variable rates, which expose the Group to cash flow interest rate risk. The Group’s borrowings at variable rate represent the senior facilities and are denominated in Naira and USD.

Most of the Group’s borrowings are at fixed rates of interest. The Group’s fixed rate borrowings and receivables are carried at amortized cost. They are therefore not subject to interest rate risk as defined in IFRS 7, since neither the carrying amount nor the future cash flows will fluctuate because of a change in market interest rates. The Group manages interest rate risk by issuing fixed rate debt.

Counterparty credit risk

Counterparty credit risk relates to the risk of loss resulting from non-performance or non-payment by counterparties pursuant to the terms of their contractual obligations. We utilize data and market knowledge to determine the concentration of risk by reference to independent and internal ratings of customers. Risks surrounding counterparty performance could ultimately impact the amount and timing of our cash flow and future profits. We seek to mitigate counterparty credit risk by having a diversified portfolio of counterparties. Counterparty credit risk is managed on a Group basis.

For banks and financial institutions, only independently rated parties with a minimum rating of “B” are accepted. The credit control department assesses the credit quality of a customer, taking into account its financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings. The compliance with credit limits by customers is regularly monitored by management.

Liquidity and cash flow risk

Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.

The Group has a clear focus on ensuring sufficient access to capital to finance growth and to refinance maturing debt obligations. As part of the liquidity management process, the Group has various credit arrangements with some banks which can be utilized to meet its liquidity requirements. Typically, the credit terms with customers are more favorable compared to payment terms to its vendors in order to help provide sufficient cash on demand to meet expected operational expenses, including the servicing of financial obligations. This excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters.


9


7. Laws and regulations

Our business is subject to national, state and local regulations governing telecommunications, as well as the construction and operation of towers. In addition, the Group is required to comply with anti-bribery or anti-corruption laws and regulations such as the Foreign Corrupt Practices Act or similar international or local anti-bribery or anti-corruption laws, or Office of Foreign Assets Control requirements.

Environmental Regulation

Our operations are subject to various national, state and local environmental laws and regulations, including those relating to the management, use, storage, disposal, emission and remediation of, and exposure to, hazardous and non-hazardous substances, materials and wastes and the siting of our towers. We may be required to obtain permits, pay additional property taxes, comply with regulatory requirements and make certain informational filings related to hazardous substances or devices used to provide power such as batteries, generators and diesel at our sites. In Nigeria, environmental authorizations are required at two stages, the Federal Ministry of Environment requires an Environmental Impact Assessment to be issued prior to the construction of a site and every three years after a site is built an Environmental Audit Certificate needs to be issued or renewed by the National Environmental Standards and Regulations Enforcement Agency in respect of such site.

Local tax laws

The Group is required to comply with local tax laws in Nigeria and The Netherlands. Compliance is monitored by management, in some cases with the assistance of professional advisors.

8. Going concern

The directors have reasonable expectations that the Group has adequate resources to continue in operational existence for the foreseeable future. The results of management review of the Group’s market, operations and financials in the past year and a forecast for at least twelve months after the date of signing of the financial statements provides a sound basis for the appropriateness of using the going concern assumption in the preparation of the Group’s financial statements for the year ended 31 December 2019, though the existence of Coronavirus (COVID-19) means there is generally a level of uncertainty in the wider macro market.

Coronavirus



Revenues and profitability – The Group has long-term revenue contracts with its customers who we are in regular and frequent dialogue with to see how we can provide support in the operation of their network. Telecoms, and specifically telecoms infrastructure, is an important, stable and durable industry and keeping people connected is now even more important given the current circumstances, and the telecommunications industry has been designated an essential service by the Nigerian government. Thus far in 2020, we have continue to meet our customers’ expectations on service levels and our Network Operating Centre (NOC) has maintained normal service levels. We continue to review and develop our internal contingency plans should the need arise to manage the NOC remotely.


Supply chain – our sites require supplies of diesel and regular maintenance to continue to operate. IHS presently has diesel inventory to hand and is continually looking to increase its supply and stock to avoid disruption. The Group is working closely with our suppliers on their supply chain in this regard.


10


8. Going Concern (continued)



Whilst inherently uncertain, and we expect some impact to our operations and performance, we currently do not believe that the the COVID-19 outbreak will directly have a material adverse effect on our financial condition or liquidity for the foreseeable future such that it is not appropriate to apply the going concern principal to these financial statements.

The following further forms the basis of management's use of going concern:

The market is growing, and the business has grown its share of the overall market.

The business has grown its revenues, gross profit margins, EBITDA margins and operating cash flows over the year, when compared to the prior period on an annualized basis.

The business has a strong cash and short-term deposits balance at 31 December 2019 of US$140.3 million (2018: US$183.5 million) of which US$20.8 million is held in US Dollars (2018: US$132.2 million).

The business maintains a high level of business ethics and regulatory compliance and there is no indication of any foreseeable material adverse change in the regulatory landscape.

The Group is in compliance with the debt covenants related to the listed bonds and the financial covenants related to the senior credit facilities as at 31 December 2019 and expects to remain compliant with these covenants over the duration of the forecast period (being for at least twelve months after the date of signing of the financial statements). Refer to note 20 for further details of the covenants.

The Group expects to have sufficient cash reserves and cash generated for the forecast period to meet its financing obligations, which during the current year saw a decrease in financing cost as a percentage of borrowings following the refinancing in September 2019 which resulted in lower interest rates being achieved on outstanding loans and bonds.

9. Donations and gifts

The Group made charitable donations of US$547,000 (2018: US$212,000) during the period and the Company did not make any donations or charitable gifts during the year. The charitable donations made by the Group were not to political institutions.

10. Management board

As at 31 December 2019 the management board was comprised of the following individuals:

Mr. DARWISH Mohamad Mr. VAN SPALL Gerard Jan (appointed on 15 February 2019) Mr. KLEIN Laurentius Ireneus Winfridus Mr. ORDMAN David Andrew Mr. VAN DIJK Bart resigned on 15 February 2019


11


11. Uneven board seat allocation between men and women

On 1 January 2013, a new law on management on supervision (Wet Bestuur en Toezicht) came into effect in the Netherlands. The purpose of this law is to attain a balance (at least 30% of each gender) between men and women in the management board of large entities (as defined in the said law); the Group is not currently compliant with this regulation. After taking cognizance of the current nature and activities of the Group and the knowledge and expertise of the current management board members, the existing composition of the management board is considered to be appropriate. However, the new law will be taken into account while appointing the future members of the management board.

Mohamad Darwish David Ordman

Mr. Mohamad Darwish Mr. David Andrew Ordman

Gerard van Spall Laurentius Klein

Mr. Gerard Jan van Spall Mr. Laurentius Ireneus Winfridus Klein

6 April 2020


12

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

2019 2018

Note $'000 $'000

Revenue 5 580,571 392,477 Cost of sales 6 (354,537) (230,949) Gross profit

226,034 161,528

Administrative expenses 7 (89,164) (34,428) Loss allowance on trade receivables 4(c) (20,955) (35,868) Other income 8 11,299 13,259 Operating profit

127,214 104,491

Finance income 9.1 22,059 15,256 Finance costs 9.2 (229,105) (205,945) Loss before income tax

(79,832) (86,198)

Income tax benefit /(expense) 11 15,550 (28,338) Loss for the period

(64,282) (114,536)

Attributable to:

Owners of the Group 26 (64,282) (114,536) Loss for the period

(64,282) (114,536)

Other comprehensive income Items that may be reclassified to profit or loss: Fair value gain/(loss) through other comprehensive income 25 1 (2) Exchange differences on translation of foreign operations 25 644 6,920 Other comprehensive income for the period net of taxes

645 6,918

Attributable to:

Owners of the Group 25 645 6,918 Other comprehensive income for the period net of taxes

645 6,918

Attributable to:

Owners of the Group

(63,637) (107,618)

Total comprehensive loss for the period

(63,637) (107,618)

The accompanying notes are an integral part of these consolidated financial statements.


13

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

31 December

2019 31 December

2018 Note $'000 $'000

Assets Non-current assets Property, plant and equipment 12 1,054,220 473,059 Right of use assets 12 215,965 - Intangible assets 13 714,489 281,755 Investments 14 11 9 Derivative financial instruments 15 42,604 6,920 Trade and other receivables 16 12,992 89,918

2,040,281 851,661 Current assets Derivative financial instruments 15 53 - Inventories 17 43,317 4,585 Trade and other receivables 16 130,092 77,839 Amounts due from related parties 29 2,204 3,763 Cash and cash equivalents 18 140,250 183,513

315,916 269,700 TOTAL ASSETS 2,356,197 1,121,361

Liabilities Current liabilities Trade and other payables 19 280,888 106,866 Income tax payable 11 5,576 6,106 Borrowings 20 31,272 51,821 Lease liabilities 21 6,050 - Provisions for liabilities and other charges 22 3,768 3,334 Amounts due to related parties 29 4,194 6,942 Derivative financial instruments 15 - 310

331,748 175,379 Non-current liabilities Borrowings 20 1,770,989 844,349 Lease liabilities 21 27,172 - Amounts due to related parties 29 688,095 693,113 Provisions for liabilities and other charges 22 5,586 1,222

2,491,842 1,538,684 TOTAL LIABILITIES 2,823,590 1,714,063 Equity attributable to owners of the Group Share capital 24 10 10 Accumulated deficit 26 (96,926) (355,806) Other reserves 25 (370,477) (236,906) Total equity (467,393) (592,702) TOTAL EQUITY AND LIABILITIES 2,356,197 1,121,361



14

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Share capital

(note 24)

Accumulated deficit

(note 26)

Fair value through other

comprehensive income reserve

(note 25)

Foreign exchange

translation reserve

(note 25)

Loss on transaction

between owners

(Note 25) Total

equity $'000 $'000 $'000 $'000 $'000 $'000

Balance at 1 January 2018 10 (241,270) 12 (243,836) (485,084) Loss for the period - (114,536) - - - (114,536) Other comprehensive (loss)/income - - (2) 6,920 - 6,918 Total comprehensive (loss)/income - (114,536) (2) 6,920 - (107,618) Balance at 31 December 2018 10 (355,806) 10 (236,916) - (592,702)

Balance at 1 January 2019 10 (355,806) 10 (236,916) - (592,702) Reserves acquired through group restructuring - 323,162 - (48,694) - 274,468 Related party fair value adjustment - - - - (85,522) (85,522) Total transactions with owners of the Company - 323,162 - (48,694) (85,522) 188,946 Loss for the period - (64,282) - - - (64,282) Other comprehensive income - - 1 644 - 645 Total comprehensive (loss)/income - (64,282) 1 644 - (63,637) Balance at 31 December 2019 10 (96,926) 11 (284,966) (85,522) (467,393) All reserves are attributable to the owners of the Group. The accompanying notes are an integral part of these consolidated financial statements.


15

CONSOLIDATED STATEMENT OF CASH FLOWS

2019 2018 Note $'000 $'000

Cash flows from operating activities Cash generated from operations 27 336,920 238,618 Income taxes paid 11 (4,078) (4,783) Net cash from operating activities 332,842 233,835 Cash flows from investing activities Purchase of property, plant and equipment - capital work in progress 12 (ii)

(49,953) (29,128)

Purchase of property, plant and equipment - others 12 (ii) (8,393) (1,542) Payment in advance for property, plant and equipment (69,611) (75,955) Purchase of software 13 (970) (350) Proceeds from sale of property, plant and equipment 507 1,089 Payment for rent* 16.1 (4,376) (24,082) Insurance claim received 8 1,379 686 Interest income received 9.1 4,811 4,858 Cash acquired as part of business combination/restructuring 28 112,425 - Restricted cash transferred from other receivables - 34,618 Net cash used in investing activities (14,181) (89,806) Cash flows from financing activities Payment for the principal of lease liabilities (30,270) - Interest paid for lease liabilities (922) - Bonds issued 1,300,000 - Loans received from third parties 500,098 - Loans received from related parties 35,000 - Bank loans repaid 20.3 (1,534,687) (10,896) Principal repayment to related parties 20.3 (435,293) - Premium paid on early settlement of bonds 9.2 (22,153) - Fees on loans and financial derivatives in the period (48,088) (641) (Payment)/receipt of derivative (loss)/gain (1,763) 16,530 Net refund of NDF margins 931 4,738 Interest paid 20.3 (125,831) (95,589) Net cash used in financing activities (362,978) (85,858) Net (decrease)/increase in cash and cash equivalents (44,317) 58,171 Cash and cash equivalents at beginning of period 183,513 125,086 Effect of movements in exchange rates on cash 1,054 256 Cash and cash equivalents at end of period 18 140,250 183,513

* In 2019, following the implementation of IFRS 16, payment for rent represents amounts paid on short-term leases. In 2018, it represents rental paid on all leases.



16

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. General information

This financial information is the consolidated financial statements of IHS Netherlands Holdco B.V. (the "Company") and its subsidiaries (together hereafter referred to as the “Group”). IHS Netherlands Holdco B.V. was incorporated in The Netherlands under Dutch Corporate Law as a private limited liability company having the commercial register number 66017912. The Company is domiciled in The Netherlands and the address of its registered office is:

Haagsche Hof Parkstraat 83, 2514 JG The Hague The Netherlands The Company was incorporated on 12 May 2016 and is a fully owned subsidiary of IHS Netherlands (Interco) Coöperatief U.A. a Dutch Cooperative incorporated in The Netherlands. The ultimate parent is IHS Holding Limited, a company incorporated in Mauritius, the shares of which are held by several companies and individuals.

At 1 January 2019 the Group is comprised of the following: IHS Netherlands Holdco B.V. (Parent), IHS Netherlands NG1 B.V. (100% interest), IHS Netherlands NG2 B.V. (100% interest), IHS Nigeria Limited (100% interest1), IHS Towers NG Limited (100% interest1), Tower Infrastructure Company Limited (100% interest) and IHS Towers Netherlands FinCo NG B.V (100% interest).

On 18 September 2019 IHS Netherlands (Interco) Coöperatief U.A. transferred the shares it held (representing 100% ownership) in Nigeria Tower Interco B.V. to IHS Netherlands Holdco B.V., including its subsidiary, INT Towers Limited. INT Towers Limited is a fully owned subsidiary (100% interest1) of Nigeria Tower Interco B.V. This restructuring took place as part of a refinancing under which the $800m, 9.5% Senior Notes due 2021 (the “2021 Notes”) were fully redeemed and are no longer outstanding and IHS Netherlands Holdco B.V. issued $500 million 7.125% Senior Notes due 2025 (the “2025 Notes”) and $800 million 8.0% Senior Notes due 2027 (the “2027 Notes”) which are listed on The International Stock Exchange (TISE).

The significant subsidiaries, being IHS Nigeria Limited, IHS Towers NG Limited and, from 18 September 2019, INT Towers Limited are incorporated in Nigeria and are principally involved in providing shared telecommunications infrastructure services to Mobile Network Operators (MNOs) and other communications service providers, who in turn provide wireless voice and data services to their end users. These subsidiaries provide customers with opportunities to install active equipment on existing towers alongside current tenants, known as colocation, and provide opportunities for customers to commission the construction of new sites to their specifications. In certain strategic instances, they may also provide managed services, such as maintenance, security and power supply for towers owned by third parties. These subsidiaries provide all their services in Nigeria.

The Company is the “issuer” of the $500 million 7.125% Senior Notes due 2025 (the “2025 Notes”) and $800 million 8.0% Senior Notes due 2027 (the “2027 Notes”)(Together ”the Notes”) which are listed on The International Stock Exchange (TISE).

IHS Towers Netherlands FinCo NG B.V., a wholly owned subsidiary of the Company, is the “issuer” of the $250m 8.375%. Guaranteed Senior Notes due 2019 (the “FinCo Notes” and, together with the 2021 Notes, the “IHS Notes”), issued on 15 July 2014 and which have all been fully repaid at maturity on 15 July 2019 and are no longer outstanding.

2. Summary of significant accounting policies

The principal accounting policies applied in the preparation of the financial statements are set out below.

2.1 Basis of preparation

The financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (“IFRS”), including interpretations issued by the IFRS Interpretations Committee (IFRS IC) applicable to companies reporting under IFRS and the statutory provisions of the Dutch Civil Code Book 2, Part 9. The consolidated statements have been prepared under the historical cost convention, as modified by the revaluation of financial assets and liabilities at fair value through other comprehensive income and other financial assets and liabilities (including derivative financial instruments) at fair value through profit or loss.

The consolidated financial statements comprise the consolidated statement of profit or loss and other comprehensive income for the year ended 31 December 2019 (comparative: year ended 31 December 2018), the consolidated statement of financial position as at 31 December 2019 (comparative: 31 December 2018), the consolidated statement of changes in equity for the year ended 31 December 2019 (comparative: year ended 31 December 2018), the consolidated statement of cash flows for the year ended 31 December 2019 (comparative: year ended 31 December 2018), and the notes, comprising a summary of significant accounting policies and other explanatory notes.

The financial information is presented in the functional currency of the parent, US Dollars (US$), rounded to the nearest thousand.

1 Less one share in each of IHS Nigeria Limited, IHS Towers NG Limited and INT Towers Limited which are held by a nominee shareholder, for local legal reasons.


17

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. Summary of significant accounting policies (continued)

2.1 Basis of preparation (continued)

The financial statements were approved on 6 April 2020 by the Management Board.

The preparation of these financial statements requires the use of certain critical accounting estimates. It also requires the Directors to exercise judgement in the process of applying the Group’s accounting policies. Changes in assumptions may have a significant impact on the financial information in the period the assumptions changed. The Directors believe that the underlying assumptions are appropriate and that the Group’s financial information therefore present the financial position and results fairly. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial information, are disclosed in note 3.

2.1.1 Going concern

The directors have reasonable expectations that the Group has adequate resources to continue in operational existence for the foreseeable future. The results of management review of the Group’s market, operations and financials in the past year and a forecast for at least twelve months after the date of signing of the financial statements provides a sound basis for the appropriateness of using the going concern assumption in the preparation of the Group’s financial statements for the year ended 31 December 2019, though the existence of Coronavirus (COVID-19) means there is generally a level of uncertainty in the wider macro market.

Coronavirus



Revenues and profitability – The Group has long-term revenue contracts with its customers who we are in regular and frequent dialogue with to see how we can provide support in the operation of their network. Telecoms, and specifically telecoms infrastructure, is an important, stable and durable industry and keeping people connected is now even more important given the current circumstances, and the telecommunications industry has been designated an essential service by the Nigerian government. Thus far in 2020, we have continue to meet our customers’ expectations on service levels and our Network Operating Centre (NOC) has maintained normal service levels. We continue to review and develop our internal contingency plans should the need arise to manage the NOC remotely.


Supply chain – our sites require supplies of diesel and regular maintenance to continue to operate. IHS presently has diesel inventory to hand and is continually looking to increase its supply and stock to avoid disruption. The Group is working closely with our suppliers on their supply chain in this regard.



Whilst inherently uncertain, and we expect some impact to our operations and performance, we currently do not believe that the the COVID-19 outbreak will directly have a material adverse effect on our financial condition or liquidity for the foreseeable future such that it is not appropriate to apply the going concern principal to these financial statements.


18



2.1 Basis of preparation (continued)

2.1.1 Going Concern (continued)

The following further forms the basis of management's use of going concern:

The market is growing, and the business has grown its share of the overall market.

The business has grown its revenues, gross profit margins, EBITDA margins and operating cash flows over the year, when compared to the prior period on an annualized basis.

The business has a strong cash and short-term deposits balance at 31 December 2019 of US$140.3 million (2018: US$183.5 million) of which US$20.8 million is held in US Dollars (2018: US$132.2 million).

The business maintains a high level of business ethics and regulatory compliance and there is no indication of any foreseeable material adverse change in the regulatory landscape.

The Group is in compliance with the covenants related to the listed bonds and senior credit facilities as at 31 December 2019 and expects to remain compliant with these covenants over the duration of the forecast period (being for at least twelve months after the date of signing of the financial statements). Refer to note 20 for further details of the covenants.

The Group expects to have sufficient cash reserves and cash generated for the forecast period to meet its financing obligations, which during the current year saw a decrease in financing cost as a percentage of borrowings following the refinancing in September 2019 which resulted in lower interest rates being achieved on outstanding loans and bonds.

2.1.2 Changes in accounting policies and disclosures

(a) New standards, amendments and interpretations adopted by the Group

The Group has applied the following standards and amendments for the first time for its annual reporting period commencing January 1, 2019:

IFRS 16 “Leases” refer to further information below. IFRIC 23 “Uncertainty over Income Tax Treatments” refer to further information below.

IFRS 16 “Leases”

IFRS 16 was issued in January 2016 and it replaces IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases-Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. Under IFRS 16, lessors continue to classify leases as operating or finance, with IFRS 16’s approach to lessor accounting substantially unchanged from IAS 17. For lessees however, the standard provides a single lessee accounting model requiring lessees to recognise assets and liabilities for all leases which will result in a ‘right of use’ asset for the leased item and a financial liability to pay related rentals. The only allowable exceptions are short-term and low-value leases. As a lessor, the Group has revenue contracts with customers that contain an operating lease component for colocation revenues. Given that lessor accounting under IFRS 16 is largely unchanged, the Group did not have any accounting impact on its revenue from contracts with customers on implementing IFRS 16. The revenue recognition policy for such colocation revenue is described in note 2.4. As a lessee, the Group’s leases primarily comprise real estate leases. The significant majority of these are site land leases for our tower sites but the Group also holds a small number of office space leases and warehouse leases. These leases were classified as operating leases under IAS 17. The Group adopted IFRS 16 from 1 January 2019 using the modified retrospective approach which requires the recognition of the cumulative effect of initially applying IFRS 16, as of 1 January 2019, to the accumulated deficit and not to restate prior years. The Group applied the practical expedient to grandfather the definition of a lease on transition. This means that it will apply IFRS 16 to all contracts entered into before 1 January 2019 and identified as leases in accordance with IAS 17 and IFRIC 4. In applying IFRS 16, the group has used the following practical expedients permitted by the standard:

The Group has elected not to recognize right-of-use assets and lease liabilities for short-term leases (i.e. < 12 months) and leases of low-value assets (i.e. < US$5,000).

The lease liability is initially measured at the present value of the lease payments that are not paid at the adoption date, discounted using a relevant incremental borrowing rate (based on the related risks of each country and the lease term) at the adoption date. The weighted average incremental borrowing rate across all leases was 14.55%.


19



2.1.2 Changes in accounting policies and disclosures (continued)

(a) New standards, amendments and interpretations adopted by the Group (continued)

IFRS 16 “Leases” (continued)

In addition:

Options (extension/termination) on lease contracts were considered on a case by case basis in order to determine the term of the lease for accounting purposes. Past experience was used as a practical expedient for leases in place at 1 January 2019.

In determining the economic incentives to renew, or not to terminate a lease, the Group considers any termination costs under terms of the lease, and the remaining useful life of tower structure located on the leased land. Where the Group has the right to terminate or renew a lease and the tower structure has remaining estimated useful life, it is assumed that such lease will not be terminated or will be renewed as there is an economic incentive to continue operating that site.

Refer to note 2.6 for the accounting policy applicable to leases.

Impact of adopting IFRS 16: Impact on Consolidated Statement of Financial Position line items at the date of adoption, 1January 2019

As reported 31 December 2018

Impact of IFRS 16

At adoption 1 January 2019

Note $’000 $’000 $’000 Non-current assets Right of use assets (i) - 82,965 82,965 Prepaid land rent (ii) 43,572 (43,572) - Current assets Prepaid land rent (ii) 8,626 (6,177) 2,449 Current liabilities Lease liabilities (iii) - (9,326) (9,326) Non-current liabilities Lease liabilities (iii) - (23,890) (23,890)

i. Right of use assets: Non-current assets have increased due to recognition of right-of-use assets on 1 January 2019. The right-of-use assets are initially measured at cost, which comprises the initial amount of the lease liability adjusted for any prepaid lease payments made at or before the adoption date (refer to prepaid land rent below) less any lease incentive received at or before the adoption date.

ii. Prepaid land rent: The balance of prepaid land rent at 31 December 2018 is capitalized to the right of use asset insofar as it relates to leases accounted under IFRS 16. The prepaid land rent in respect of short term or low value leases, which are exempt from being capitalized for under IFRS 16, continues to be accounted for as short-term prepayments.

iii. Lease liabilities: Financial liabilities have increased due to the recognition of lease liabilities. This liability is initially measured at the present value of the lease payments that are not paid at the adoption date, discounted using the relevant incremental borrowing rate. The lease liabilities have been classified between current and non-current.

iv. Discount rate: When measuring lease liabilities for leases that were classified as operating leases, the Group discounted lease payments using its incremental borrowing rate at 1 January 2019. The weighted-average rate applied is 14.55%.

There are no related deferred tax assets and there is no net asset impact. Net current assets are US$15.5 million lower due to the presentation of a portion of the liability as a current liability and the capitalization of the short-term portion of prepaid rent against the right of use asset. Right of use assets exceed the value of lease liabilities by US$49.7 million due to the inclusion of prepaid lease rentals. There is no impact on retained earnings.


20



2.1.2 Changes in accounting policies and disclosures (continued)

(a) New standards, amendments and interpretations adopted by the Group (continued)

IFRS 16 “Leases” (continued)

Reconciliation of the 31 December 2018 operating lease commitments to the IFRS 16 lease liability recognised on adoption:

At 31 December 2018, the Group had non-cancellable operating lease commitments of US$24.6 million, see note 30.2. Under IFRS 16, at 1 January 2019, the Group has recognised lease liabilities which differ from this commitment due to differences in the assessment of the lease term, and the impact of discounting.

2019 $'000

Operating lease commitments as 31 December 2018 as disclosed under IAS 17 24,561 Additional payment cycles* 50,844 Discounted using the incremental borrowing rate at 1 January 2019 (42,599) Other differences 410 Lease liabilities as at 1 January 2019 33,216

* These are payment cycles which were not considered under IAS 17 as they were not contractually committed. Under IFRS 16, the Group considers whether we are more likely than not to exercise renewals as opposed to whether the renewals are automatic and compulsory. This increases the future expected payments for lease renewals where previously not assumed.

IFRIC 23 “Uncertainty over Income Tax Treatments”

IFRIC 23 (effective 1 January 2019) provides guidance on the accounting for current and deferred tax liabilities and assets in circumstances in which there is uncertainty that affect the application of IAS 12 Income Taxes. The Interpretation requires:

The Group to contemplate whether uncertain tax treatments should be considered separately, or together as a group, based on which approach provides better predictions of the resolution;

The Group to determine if it is probable that the tax authorities will accept the uncertain tax treatment; and If it is not probable that the uncertain tax treatment will be accepted, measure the tax uncertainty based on the most likely

amount or expected value, depending on whichever method better predicts the resolution of the uncertainty.

The Group has applied IFRIC 23 Uncertainty over Income Tax Treatment as 1 January 2019 and elected to apply it retrospectively with any cumulative effect recorded in retained earnings as at the date of initial application.

The adoption of IFRIC 23 has no impact on the Group’s financial statements.

(b) New standards, amendments and interpretations not yet adopted by the Group

Certain new accounting standards, interpretations and amendments have been published that are not effective for 31 December 2019 reporting period and have not been early adopted by the Group. They are:

Definition of a Business (Amendments to IFRS 3) Definition of Material (Amendments to IAS 1 and IAS 8) Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39 and IFRS 7)

The above amendments to standards are not expected to have a material effect on the Group’s financial statements.

2.2 Consolidation

(a) Subsidiaries

The consolidated financial statements include the financial information and results of the Company and those entities in which it has a controlling interest. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are all entities (including structured entities) over which the Group has control. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date the control ceases. All intercompany balances and transactions have been eliminated.


21



2.2 Consolidation (continued)

(b) Business combinations

The consideration transferred for the acquisition comprises the fair value of the assets transferred, liabilities incurred, equity interests issued by the Group and any contingent consideration. Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.

The Group has elected to use predecessor accounting for transfers of interest in subsidiaries between entities under common control (from the holding company to another subsidiary or between commonly controlled subsidiaries). The assets and liabilities of the transferred entities are incorporated into the consolidated financial statements at their carrying values on the date of the transfer, being the date that control was obtained. The Group will continue to apply this elected accounting policy for all future transfers of interest in subsidiaries between entities under common control. These financial statements only include the results of IHS Nigeria Limited, IHS Towers NG Limited and INT Towers Limited from their respective restructuring dates (15 September 2016, 15 September 2016 and 18 September 2019 respectively).

If the Group gains control in a business combination achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date; any gains or losses arising from such remeasurement are recognized in the consolidated statement of profit or loss and other comprehensive income.

The Group has considered whether any of its business combinations represent a sale and leaseback transaction from a lessor perspective and determined that since towers are able to be leased to multiple tenants without restriction, that no such arrangement exists.

2.3 Foreign currency translation

(a) Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The consolidated financial statements are presented in US Dollars (US$).

(b) Existence of multiple official exchange rates

During the year ended 31 December 2017, the Central Bank of Nigeria introduced a new foreign exchange window, which includes the NAFEX (Nigerian Autonomous Foreign Exchange Rate Fixing). This resulted in a situation where there are several different official exchange rates in the market, thereby requiring the Company to monitor and evaluate which exchange rate is most appropriate to apply in translating foreign currency transactions in its Nigeria businesses and in translating Naira amounts for group reporting purposes.

Where multiple official exchange rates exist, the Group assesses the appropriate rate to use and takes into account relevant factors. In the case of translating foreign operations or foreign transactions, such factors include access to those rates in the future to meet payments or dividends. In determining whether it is appropriate to move from one official rate to another, the Group considers the available rates in official markets for settlement of transactions. Refer to note 3 for further information.

(c) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the consolidated statement of profit or loss and other comprehensive income. Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the consolidated statement of profit or loss and other comprehensive income within “finance income” or “finance cost.” Foreign exchange gains and losses that relate to other monetary items are presented in the consolidated statement of profit or loss and other comprehensive income within “cost of sales,” “administrative expense” and “other income” as appropriate.

Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss. For example, translation differences on non-monetary assets and liabilities such as equities designated as fair value through other comprehensive income are recognised in other comprehensive income.

The subsidiaries based in Nigeria translated their foreign currency transactions into the functional currency, Nigerian Naira, at the Nigerian Autonomous Foreign Exchange Fixing (“NAFEX”) prevailing rate at the date of the transaction for the current and comparative reporting periods. Monetary items and liabilities denominated in foreign currencies were translated at the NAFEX rate at 31 December 2019 and 31 December 2018.


22



2.3 Foreign currency translation (continued)

(c) Transactions and balances (continued)

The NAFEX rate was between 360.4 and 364.7 during 2019 (2018: 360.3 and 364.7) and at 31 December 2019 was 364.7 (31 December 2018: 364.5). Refer to note 3 for further information on foreign exchange rate assessment.

The results and financial position of all the Group entities (none of which has the currency of a hyper inflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position;

income and expenses for each statement of profit or loss and other comprehensive income are translated at the monthly average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and

all resulting exchange differences are recognized in other comprehensive income.

On consolidation, exchange differences arising from the translation of the net investment in foreign operations are taken to other comprehensive income. When a foreign operation is partially disposed of or sold, exchange differences that were recorded in equity are recognized in the consolidated statement of profit or loss and other comprehensive income as part of the gain or loss on sale.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. Exchange differences arising are recognized in other comprehensive income. The results of the subsidiaries based in Nigeria were translated into US Dollars at the NAFEX (2018: NAFEX) monthly average exchange rate for income and expenses and the assets and liabilities at the NAFEX closing rate at the date of the consolidated statement of financial position with rates as noted above. Refer to note 3 for further information.

2.4 Revenue recognition

Our revenue is derived from fees paid by our customers for services from our colocation business and its ancillary managed services.

The colocation business involves the lease of space on IHS owned and leased towers, which are shared by various operators and data service providers. Revenue is generated on towers either from anchor tenants (original tenants on towers) or colocation tenants (subsequent tenants) when they install equipment on towers. A portion of colocation arrangements for the rental of space on the towers and other assets on tower sites, on which the use of space is dependent, is within the scope of IFRS 16 ‘Leases’. A portion of colocation arrangements for the provision of services and energy charges is within the scope of IFRS 15 ‘Revenue from contracts with customers’ as a provision of service.

In determining the amounts of revenue from our contracts with customers that fall within the scope of IFRS 15, the Group considers whether there are separate performance obligations to which a portion of the transaction price needs to be allocated and revenue recognized separately. Two separate performance obligations have typically been identified, one in respect of the operation of tower infrastructure and one in respect of the provision of maintenance services and power, with each being a series performance obligation to stand ready to deliver the required services.

The identification of these two performance obligations does not change the timing of revenue recognition of the non-lease component as both are typically satisfied over the same time period. Where multiple goods and services are provided to customers, the allocation of the transaction price is based on the stand-alone selling price and does not significantly affect the timing of revenues as the components (performance obligations) are typically performed and recognized over the same service period. In limited cases, contracts may provide the customer with a right to purchase additional services at a significant discount. In these cases, the material right is also identified as a performance obligation.

The Group determines the transaction price at contract inception and considers the effects of:

Variable consideration - The contractual price may be subject to service credits, price indexation, discounts provided on site consolidation and discounts associated with site occupancy. All of these items of variable consideration are considered to relate to individual service periods of series performance obligations, or represent contingent rentals, and are therefore recognized in the future periods in which they arise rather than when estimating the transaction price at contract inception.

The existence of significant financing components - Financing components are not expected to be significant as services and payments are generally in line over the period of the contract.

Consideration payable to the customer (if any) - Payments to customers (such as rebates and discounts refunded to the customer and payments for exit fees) are deducted from transaction price unless they are payments for a distinct good or service supplied to the Group in return for the payments.


23



2.4 Revenue recognition (continued)

At the date of contract inception, the Group determines the stand-alone selling prices of the performance obligations using a combination of data on observable prices from comparable managed service arrangements, supplemented by the cost plus a margin approach. The Group allocates the transaction price to these performance obligations on the basis of relative stand-alone selling price.

(a) Colocation services revenue for which the Group is a lessor

The portion of colocation revenue, for which IHS is the lessor, is treated as lease revenue. Revenue from leasing arrangements, including fixed escalation clauses present in non-cancellable lease agreements is recognized on a straight-line basis over the current lease term of the related lease agreements, when collectability is reasonably assured. The duration of these lease arrangements is typically between 5 and 10 years. Escalation clauses tied to the Consumer Price Index (“CPI”) or other inflation- based indices, are excluded from the straight-line calculation, however, any fixed increases are included.

Revenue is recognized in the accounting period in which the rental income is earned and services are rendered. Amounts billed or received for services prior to being earned are deferred and reflected in deferred revenue until the criteria for recognition have been met.

(b) Colocation services revenue and other managed services revenue

Revenue from contracts with customers is recognized when control of the services is transferred to the customer at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those services.

The Group offers ancillary services to manage tenant operations of existing customers on a limited basis. Revenue is recognized in the accounting period in which the services are rendered by reference to the stage of completion based on the terms of each contract. Services revenues are derived under contracts or arrangements with customers that provide for billings either on a fixed price basis or a variable price basis, which includes factors such as time and expenses. Revenues are recognized as services are performed and include estimates for percentage completed. Amounts billed or received for services prior to being earned are deferred and reflected in deferred revenue in the accompanying consolidated statement of financial position until the criteria for recognition have been met.

2.5 Embedded derivatives

Certain revenue contracts in Nigeria include fees that are priced in US Dollar but are invoiced and settled in Nigerian Naira respectively using foreign exchange rates calculated in accordance with the contractual terms. The contractual foreign exchange rates are reset at regular intervals in arrears. Management evaluated and determined at the date of inception or material modification of the contracts that the reset features were closely related to the host contracts, considering that the US Dollar is a commonly used currency in Nigeria, and that the reset interval was sufficiently frequent to approximate the US$/Naira spot exchange rate given economic conditions at that time.

2.6 Leases

Operating leases for which the Group is the lessee, applicable from 1 January 2018 to 31 December 2018

Leases in which a significant portion of the risks and rewards of ownership are retained by another party, are classified as operating leases. Payments, including prepayments, made under operating leases (net of any incentives received from the lessor) are charged to the consolidated statement of profit or loss and other comprehensive income on a straight-line basis over the period of the lease. When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognized as an expense in the period in which termination takes place. The Group has various leasehold land under operating lease agreements with lease terms ranging from 5 to 15 years.

Operating leases for which the Group is the lessee, applicable from 1 January 2019 on adoption of IFRS 16

The Group leases various assets, comprising land and building, towers, equipment and motor vehicles. The determination whether an arrangement is, or contains, a lease is based on whether the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration. The following sets out the Group’s lease accounting policy for all leases with the exception of leases with low-value (i.e. < US$5,000) and short term of less than 12 months for which the Group has taken the exemption under the standard and are expensed to profit or loss as incurred.


24



2.6 Leases (continued) (a) Lease assets

The Group recognizes right of use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use under the contract). Right of use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right of use assets includes the amount of lease liabilities recognized, initial direct costs incurred, and lease payments made at or before the commencement date (which do not form part of the lease liability value at the commencement date). Right of use assets are depreciated on a straight-line basis over the shorter of their estimated useful life and the lease term. The right-of-use assets will be tested for impairment in accordance with IAS 36 “Impairment of Assets”. (b) Lease liabilities At the commencement date of the lease, the Group recognizes lease liabilities measured at the present value of all remaining lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments where the contracts specify fixed or minimum uplifts) and variable lease payments that depend on an index or a rate. The variable lease payments that do not depend on an index or a rate are recognized as an expense in the period in which the event or condition that triggers the payment occurs. Due to the nature of our leased assets the interest rate implicit in the lease is usually not readily determinable, the Group therefore uses the incremental borrowing rate in calculating the present value of lease payments at the lease commencement date. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term or a change in the in-substance fixed lease payments. The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, less any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised. The Group has the option under some of its leases to lease the assets for additional periods of up to 10 years. The Group applies judgement in evaluating whether it has a unilateral option to renew the lease for a further period and is reasonably certain to exercise the option to renew. That is, it considers all relevant factors that create an economic incentive for it to exercise the renewal. After the commencement date, the Group reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise (or not to exercise) the option to renew.

2.7 Cost of sales

Cost of sales is mainly comprised of power generation costs, depreciation, tower repairs and maintenance costs and site rental costs.

2.8 Administrative expenses

Administrative expenses are costs not directly related to provision of services to customers, but which support our business as a whole. These overhead expenses primarily consist of administrative staff costs (including key management compensation), office rent and related property expenses, insurance, travel costs, professional fees, depreciation and amortization of administrative assets, loss from sale of assets, net impairment losses on financial (and contract) assets and other sundry costs. The net Impairment losses on financial (and contract) assets is shown separately on the face of the consolidated statement of profit or loss and other comprehensive income as required by IFRS 9.

2.9 Other income

Other income includes one-off termination fees received from customers, gains from the sale of assets and proceeds from insurance claims.

2.10 Interest income

Interest income is recognized in the consolidated statement of profit or loss and other comprehensive income and is calculated using the effective interest method as set out in IFRS 9.


25



2.11 Property, plant and equipment

These are mainly freehold land, base stations, office complexes, office equipment and other equipment that are used directly by the Group in the provision of services to customers, or for administrative purposes. The assets are carried at historical cost less accumulated depreciation and accumulated impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition of the assets including amounts related to the cost of future decommissioning and site restoration obligations.

Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the asset will flow to the Group and the cost can be measured reliably. The carrying amount of the replaced asset is derecognized. All other repairs and maintenance are charged to the consolidated statement of profit or loss and other comprehensive income during the financial period in which they are incurred.

Freehold land is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate their cost to their residual values over their estimated useful lives, as follows:

Base station towers (including civil costs and overheads) ................................................ 20 years Base station equipment (other equipment)....................................................................... 15 years Base station equipment (rectifier and solar power) 10 years Base station equipment (alarms and batteries) ................................................................ 5 years Base station equipment (generators) ............................................................................... 3 years Office complex ................................................................................................................. 40 years Furniture and fittings and office equipment ...................................................................... 3 years Motor vehicles ................................................................................................................. 4 years

Asset residual values and useful lives are reviewed and adjusted if appropriate, at the end of each reporting period.

Where an indication of impairment exists, an asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in the consolidated statement of profit or loss and other comprehensive income for the period.

2.12 Intangible assets and goodwill

(a) Goodwill

Goodwill arises on the acquisition of businesses and represents the excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired. If the total of consideration transferred, non-controlling interest recognized and previously held interest measured at fair value is less than the fair value of the net assets of the subsidiary acquired, in the case of a bargain purchase, the difference is recognized directly in the consolidated statement of profit or loss and other comprehensive income.

For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash-generating units (“CGUs”), or groups of CGUs, that is expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level.

Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of the CGU containing the goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value less costs of disposal. Any impairment is recognized immediately as an expense and is not subsequently reversed.

(b) Network and customer-related intangible assets

Network-related intangible assets represent future income from leasing excess tower capacity to new tenants. Customer-related intangible assets represent customer contracts and relationships. Network and customer-related intangible assets acquired in a business combination are recognized at fair value at the acquisition date. Network and customer-related intangible assets have a finite useful life and are carried at cost less accumulated amortization. Amortization is calculated using the straight-line method to allocate the cost of network and customer-related intangible assets over their estimated useful lives of 14-20 years and 5-30 years respectively. The remaining amortization period for network and customer-related assets are between 8-11 years (2018: 9-12 years), and 2-26 years (2018: 3-27 years) respectively.


26



2.12 Intangible assets and goodwill (continued)

(c) Licenses

Separately acquired licenses are shown at historical cost. Licenses acquired in a business combination are recognized at fair value at the acquisition date. Licenses have a finite useful life and are carried at cost less accumulated amortization. Amortization is calculated using the straight-line method over their estimated useful lives of 3-15 years.

(d) Computer software

Costs associated with maintaining computer software programs are recognized as expenses as incurred. Acquired computer software licenses are capitalized at the cost incurred to acquire and bring into use the software. Amortization is calculated using the straight-line method over their estimated useful lives of 3- 5 years.

2.13 Impairment of non-financial assets

Goodwill and intangible assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period.

2.14 Long-term prepayment

For the year ended 31 December 2018, amounts paid in respect of long-term rent are capitalized and amortized over the period of the rent. From 1 January 2019 such payments are included in the right of use assets in accordance with our IFRS 16 accounting policy (note 2.6). Subsequent costs in enhancing the performance of the rented complexes and building are capitalized and amortized over the period of the rent.

2.15 Inventories

Inventories are stated at the lower of cost and estimated net realizable value. Cost comprises direct materials costs and where applicable, direct labor costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Cost is calculated using the first-in, first-out method. Net realizable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution. If the carrying value exceeds the net realizable amount, a write down is recognized. The write-down may be reversed in a subsequent period if the circumstances which caused it no longer to exist. In other instances, where the net realizable value of an inventory item is not readily determinable, management assesses the age and the risk of obsolescence of such items in determining net realizable value of such item using an appropriate age/obsolescence factor model.

2.16 Financial assets

2.16.1 Classification

The Group classifies its financial assets in the following measurement categories:

those to be measured subsequently at fair value (either through OCI or through profit or loss), and

those to be measured at amortized cost.

The classification depends on the entity’s business model for managing the financial assets and the contractual terms of the cash flows. The Group reclassifies debt investments when and only when its business model for managing those assets changes.

For assets measured at fair value, gains and losses will either be recorded in the consolidated statement of profit or loss or in other comprehensive income. For investments in equity instruments that are not held for trading, this will depend on whether the Group has made the irrevocable decision at the time of initial recognition to account for the equity investment at fair value through other comprehensive income (FVOCI).

For the purpose of presentation in the consolidated statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are reflected within borrowings in current liabilities in the consolidated statement of financial position.


27



2.16 Financial assets

2.16.2 Recognition and derecognition

Regular way purchases and sales of financial assets are recognized on trade-date, the date on which the Group commits to purchase or sell the asset. Financial assets are derecognized when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.

2.16.3 Measurement

At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in profit or loss.

Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely of principal and interest.

a) Debt instruments

Subsequent measurement of debt instruments depends on the group’s business model for managing the asset and the cash flow characteristics of the asset. The Group measures its debt instruments at amortized cost as assets are held for collection of contractual cash flows where those cash flows represent solely payments of principal and interest. Interest income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising on derecognition is recognized directly in profit or loss and presented in other gains/(losses) together with foreign exchange gains and losses. Impairment losses are presented as separate line item in the consolidated statement of profit or loss and other comprehensive income.

b) Equity instruments

The Group subsequently measures all equity investments at fair value. The Group has elected to present fair value gains and losses on equity investments in other comprehensive income (OCI), there is no subsequent reclassification of fair value gains and losses to profit or loss following the derecognition of the investment.

2.16.4 Impairment

The Group evaluates each customer individually for the purpose of estimating the impairment at the reporting date rather than using a portfolio approach. The Group has low history of losses and given the short duration of receivables; the Group uses the experienced credit judgement (ECJ) approach to estimate the impairment of trade receivables in accordance with the ECL of IFRS 9.

The ECJ approach assesses the credit risk of the customer at the reporting date to evaluate the customer’s capacity to meet its contractual cash flow obligations in the near term and combines this with an evaluation of the impact of changes in economic and business conditions on the customer’s ability to pay.

2.17 Financial liabilities

2.17.1 Classification

The Group's financial liabilities, excluding derivatives, are classified at amortized cost. Financial liabilities are recognized initially at fair value and inclusive of directly attributable transaction costs. The Group's financial liabilities, excluding derivatives, are borrowings, trade and other payables and amounts due to related parties.

(a) Borrowings

Borrowings are initially recognized at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortized cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognized in the consolidated statement of profit or loss and comprehensive income over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognized as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalized as a prepayment for liquidity services and amortized over the period of the facility to which it relates.

A day one gain or loss on a related party loan at a non-market interest rate is included in investments.

The fair value of the liability portion of a convertible bond is determined using a market interest rate for an equivalent non-convertible bond. This amount is recorded as a liability on an amortized cost basis until extinguished on conversion or maturity of the bonds. The remainder of the proceeds is allocated to the conversion option. This is recognized and included in shareholders’ equity, net of income tax effects.


28



2.17 Financial liabilities (continued)

2.17.1 Classification (continued)

(a) Borrowings (continued)

Borrowings are removed from the consolidated statement of financial position when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred, or liabilities assumed, is recognized in the consolidated statement of profit or loss and other comprehensive income as other income or finance costs.

Where the terms of a financial liability are renegotiated and the entity issues equity instruments to a creditor to extinguish all or part of the liability (debt for equity swap), a gain or loss is recognized in the consolidated statement of profit or loss and comprehensive income, which is measured as the difference between the carrying amount of the financial liability and the fair value of the equity instruments issued.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period.

(b) Trade payables, other payables and amounts due to related parties

Trade payables, other payables and amounts due to related parties are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers or related parties. Accounts payables are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade payables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method.

2.18 Offsetting financial instruments

Financial assets and liabilities are offset, and the net amount reported in the consolidated statement of financial position when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or realize the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the company or the counterparty.

All financial instruments are initially measured at fair value. Financial assets and liabilities are derecognized when the rights to receive cash flows from the investments or settle obligations have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership.

2.19 Derivative financial instruments

Derivatives are financial instruments that derive their value from an underlying price or index. A derivative instrument gives one party a contractual right to exchange financial assets and financial liabilities with another party under conditions that are potentially favorable or financial liabilities with another party under conditions that are potentially unfavorable. Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at the end of each reporting period.

2.20 Embedded derivatives

An embedded derivative is a component of a hybrid (combined) instrument that also includes a non-derivative host contract. An embedded derivative causes some or all of the cash flows that otherwise would be required by the contract to be modified according to a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates or other variable (provided in the case of a non-financial variable that the variable is not specific to a party to the contract).

An embedded derivative is only separated and reported at fair value with gains and losses being recognized in the consolidated statement of profit or loss and other comprehensive income when the following requirements are met:

where the economic characteristics and risks of the embedded derivative are not clearly and closely related to those of the host contract;

the terms of the embedded derivative are the same as those of a stand-alone derivative; and

the combined contract is not held for trading or designated at fair value through profit or loss.

A significant portion of the Group’s contracted revenue pricing is denominated in US Dollars and the amount of local currency due is determined by reference to the US Dollar amount invoiced at the spot rate or an average rate. This represents an embedded foreign currency derivative in a host contract.

Management’s judgement is that derivatives are not bifurcated as at the time the contracts were entered into they were considered closely related to the host contract since they are denominated in a currency that is commonly used in the regions that the Group operates in (US Dollar being a relatively stable and liquid currency that is commonly used for pricing in local business transactions and trade).


29



2.21 Current and deferred income tax

(a) Deferred income tax

Deferred income tax is recognized in full, using the liability method, on all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.

Deferred income tax liabilities are not recognized if they arise from initial recognition of goodwill and deferred income tax is not accounted for if it arises from initial recognition of an asset or liability, in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis. Deferred income tax assets are recognized only to the extent that it is probable that future taxation profit will be available against which the temporary differences can be utilized.

(b) Current income tax

Current income tax is recognized in the consolidated statement of profit or loss and other comprehensive income, except to the extent that it relates to items recognized in other comprehensive income or directly in equity. In this case, the tax is also recognized in other comprehensive income or directly in equity, respectively.

The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted by the end of the reporting period in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

2.22 Employee benefits

(a) Defined contribution scheme

The Group operates a number of defined contribution plans which are funded by contributions from the Group and the employees based on the law ruling in each country. The amount contributed by the Group is recognized as employee benefit expenses and are charged to the consolidated statement of profit and loss and other comprehensive income in the period to which the contributions relate. The Group has no further payment obligation once the contributions have been paid. Prepaid contributions are recognized as an asset to the extent that a cash refund or a reduction in the future payment is available.

(b) Short-term employee benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognized for the amount expected to be paid if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably.

2.23 Decommissioning and site restoration obligations

The Group makes provision for the future cost of decommissioning of its telecommunication towers on the leasehold land. These costs are expected to be incurred within a period of up to 20 years depending on the term of the leasehold. The Group estimates this provision using existing technology at current prices as quoted by decommissioning experts, escalated at the relevant inflation factor. The inflated decommissioning provision is subsequently discounted to present value using the Group’s incremental borrowing rate for borrowings over the expected term of the leasehold. The timing of each decommissioning will depend on the term of the lease and whether the lessor intends to renew the rental contract.

A corresponding amount is recognized as part of property, plant and equipment. This is subsequently depreciated as part of the tower. Other than the unwinding discount on the provision, any change in the present value of the estimated expenditure is reflected as an adjustment to the provision and the corresponding item of property, plant and equipment.


30



2.24 Non-IFRS measures

We define Adjusted EBITDA as profit/(loss) for the period, excluding the impact of finance income, finance cost, fair value through profit or loss, depreciation and amortization, impairments of fixed assets and land rent, profit or loss on disposal of assets, impairment of withholding taxes, share-based payment expense, and provision for or benefit from income taxes, less other income plus other expenditures that management considers sufficiently large and unusual as to distort comparisons from one period to the next. Adjusted EBITDA is a component of the calculation that has been used by our lenders to determine compliance with certain covenants under our debt facilities. Adjusted EBITDA is not intended to be an alternative measure of operating income or gross profit margin as determined in accordance with IFRS. Exceptional items are disclosed separately in the consolidated financial statements where it is necessary to provide further understanding of the financial performance of the Group. They are items of income or expense that have been shown separately due to the significance of their nature, size or incidence of occurrence. In determining whether an event or transaction is exceptional, management considers quantitative as well as qualitative factors such as the frequency or predictability of occurrence. This is consistent with the way that financial performance is measured by management and reported to the Group’s Management Board and assists in providing a meaningful analysis of the trading results of the Group.

2.25 Segment reporting

Operating segments are components of the Group’s business activities about which separate financial information is available and reported internally to the chief operating decision maker. The Group’s Executive Committee, excluding the Director of Audit and Risk, has been identified as the chief operating decision maker, responsible for allocating resources and assessing performance of the operating segments.

The operating results presented in these financial statements represent the results of one operating segment of the group being the consolidated operating results of IHS Nigeria Limited, IHS Towers NG Limited, Tower Infrastructure Company Limited and INT Towers Limited. These four operating entities are subject to the same regulatory and operational environment, geographical location and client base and are therefore considered by management as one operating segment, subject to the same operational risks; no separate segmental reporting is therefore deemed necessary as the operational results in this financial information provides the necessary information.

3. Critical accounting estimates and judgements

The preparation of financial statements requires management to make certain judgements, accounting estimates and assumptions that affect the amounts reported to the assets and liabilities as at the end of the reporting period and the amounts reported for revenues and expenses during the year. The nature of the estimation means that actual outcomes could differ from those estimates. The key sources of estimation uncertainty that have a significant risk of causing material adjustments to the carrying amounts of assets and liabilities are discussed below.

3.1 Assessment of appropriate foreign exchange rate

The Group had been using the relevant central bank rate, being the relevant official rate in each jurisdiction for foreign currency translation. On 24 April 2017, the Central Bank of Nigeria (CBN) introduced a special foreign exchange window for investors and exporters, known as the NAFEX market.

By introducing the NAFEX window, the CBN created a situation where there are multiple differing official rates in the market. This resulted in a need for the Group to reach a judgement regarding the appropriate exchange rates for translating foreign denominated transactions and balances for Nigerian subsidiaries and for the translation of Nigerian results on consolidation. The Group considered the requirements of IAS 21 ‘The Effects of Changes in Foreign Exchange Rates’ and performed an assessment of the availability of the NAFEX rate in that market. The Group concluded that access to US Dollar in Nigeria in the future to meet payments or dividends is expected to be obtained via the more liquid NAFEX market.

From 1 January 2018, the NAFEX rate has been used for the translation of USD transactions and denominated balances in the Nigerian subsidiaries and also for consolidation purposes.


31


3. Critical accounting estimates and judgements (continued)

3.2 Acquisitions

For those acquisitions that meet the definition of a business combination, we apply the acquisition method of accounting where assets acquired, and liabilities assumed are recorded at fair value at the date of each acquisition, and the results of operations are included with our results from the dates of the respective acquisitions. Any excess of the purchase price paid over the amounts recognized for assets acquired and liabilities assumed is recorded as goodwill.

The fair value of the assets acquired, and liabilities assumed is typically determined by using either:

Estimates of replacement costs (for tangible fixed assets such as towers) or

Discounted cash flow valuation methods (for estimating identifiable intangibles such as site rental contracts and customer relationships and above market and below market leases).

The purchase price allocation requires subjective estimates that, if incorrectly estimated, could be material to our consolidated financial statements, including the amount of depreciation, amortization, and accretion expense. The most important estimates for measurement of tangible fixed assets are (1) the cost to replace the asset with a new asset and (2) the economic useful life after giving effect to age, quality, and condition. The most important estimates for measurement of intangible assets are (1) discount rates and (2) timing and amount of cash flows including estimates regarding customer renewals and cancellations. Refer to note 28 for business combinations.

If there are rapid changes in technology of the existing telecommunication infrastructure, the Group may need to recognize significant impairment charges and the remaining amortization period may need to be reduced.

The assessment for impairment entails comparing the carrying value of the cash-generating unit with its recoverable amount, that is, the higher of the value in use and fair value less costs of disposal. Value in use is determined on the basis of discounted estimated future net cash flows. Determination as to whether and how much an asset is impaired involves management estimates on highly uncertain matters such as future prices of telecommunication towers equipment, the effects of inflation on operating expenses, discount rates, etc.

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. Such estimates and assumptions are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in note 2.13. The assumptions adopted in the computation of the value in use are considered reasonable to the circumstance of each CGU.

Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows. Refer to note 13 for goodwill and intangible assets impairment considerations.

3.3 Recognition of deferred tax assets

A certain level of judgement is required for recognition of the deferred tax assets. Management is required to assess the ability of the Group to generate future taxable economic earnings that will utilize the deferred tax assets. Assumptions over the generation of future taxable profits depends on management's estimates of future cash flows. The estimates are based on the future cash flow from operations taking into consideration the rental income for colocation, growth in tenancy rates, maintenance income and likely diesel variations.

3.4 Valuation of options embedded in IHS Netherlands Holdco B.V. listed bond

The Group has analyzed the 2021 Notes issued in October 2016 and the 2025 Notes and 2027 Notes issued in September 2019 and has identified free standing call and put options embedded in the listed bond that required separate valuation.

The Group employed valuation techniques commonly used by market participants to evaluate bonds with embedded options, including discounted cash flow and option pricing models, and makes maximum reference to market inputs. The techniques adopted include the major factors that market participants would consider in setting a price and are consistent with accepted economic methodologies for pricing financial instruments. The options are priced using an interest-rate option pricing model such as the Hull-White model.


32


3. Critical accounting estimates and judgements (continued)

3.5 Regulatory accruals

The Group requires a variety of regulatory approvals and permits related to its license to operate and compliance requirements in respect of individual tower sites. These charges are levied by various national and state authorities. There is uncertainty over the level of charges where rates (e.g. percentage of revenue) remain under negotiation with the relevant authorities and also over the period for which charges will apply where demands have not yet been received from authorities on a site by site basis.

The Group recognizes an accrual for unbilled regulatory costs based on management estimates of the rates per permit/approval type, periods for which permits/approvals potentially relate and the probability of charges being raised resulting in a cash outflow. The amount accrued is $43.8 million (2018: $24.7 million). The accrual is based both on permits where rates are known amounts and those where amounts are based on management estimate.

A 10 percentage point change in management’s estimate of the amount of the potential liability that will eventually be demanded and paid to the relevant authorities would alter the accrual at 31 December 2019 by approximately $3.5 million (December 2018 $2.0 million). Management has only considered items in the sensitivity analysis that are subject to management’s rates estimate in the total amount accrued.

3.6 Determining the lease term of contracts with renewal options

The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, less any periods covered by an option to terminate the lease, if it is reasonably certain be exercised.

The Group has the option under some of its leases to lease the assets for additional periods of up to 10 years. The Group applies judgement in evaluating whether it has a unilateral option to renew the lease for a further period or is otherwise provided that option under the laws governing the lease agreement, and is reasonably certain to exercise the option to renew. That is, it considers all relevant factors that create an economic incentive for it to exercise the renewal. After the commencement date, the Group reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise (or not to exercise) the option to renew.

3.7 Loss allowance on trade receivables

The Group accounts for its trade receivables credit risk by appropriately providing for expected credit losses on a timely basis. In calculating the expected credit loss for each customer, the Group considers historical loss rates, and adjusts for forward looking macroeconomic data. The Group also considers the specific trading circumstances and credit quality of each significant trade receivable. Assessing the impact of forward-looking macroeconomic data and the current trading condition of the customer involves a degree of judgement and forecasting. As a result, actual credit loss allowances may differ from estimates.

The Group regularly monitors these inputs and their impact on the loss allowance estimate.

4. Financial risk management

The Group's activities expose it to a variety of financial risks including market risk (foreign exchange risk and interest rate risk), credit risk and liquidity risk. The Management Board has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Board has established the Executive Risk Management Committee at the level of the ultimate parent company (IHS Holding Limited), who is responsible for developing and monitoring the Group’s risk management policies. The committee reports regularly to the Management Board on its activities.

The Group’s risk management policies are established to identify and analyze the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly by the executive management to reflect changes in market conditions and the Group’s activities. The Group, through its training and management standards and procedures, aims to develop and maintain a disciplined and constructive control environment in which all employees understand their roles and obligations.

The Board oversees how management monitors compliance with the Group’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. The Board is supported by various management functions that check and undertake both regular and ad hoc reviews of compliance with established controls and procedures.


33


4. Financial risk management (continued)

(a) Derivative financial instruments

Derivatives are only used for economic hedging purposes and not as speculative investments. Derivatives do not meet the criteria for hedge accounting and are therefore classified as financial instruments at fair value through profit or loss for accounting purposes.

Non deliverable forwards (NDFs) — The calculation of the NDF fair value is based on the difference between the contracted exchange rate and the anticipated spot exchange rate at the relevant period. The rate applied to represent the anticipated spot exchange rate requires judgement given the limited market liquidity in Nigeria. As at 31 December 2019, the Group has determined that the spot NAFEX exchange rate obtained from FMDQ OTC securities exchange is the most appropriate rate. The gain or loss at the settlement date is calculated by taking the difference between the agreed upon contract exchange rate (NGN/USD) and the spot rate at the time of settlement, for an agreed upon notional amount of funds.

Cross currency swaps — An agreement to buy back the amount of an earlier exchanged USD in NGN at a future agreed date and at a fixed contractual rate, which may or may not equal the prevailing exchange rate at that future agreed date. The swaps are accounted for as derivatives at fair value through the consolidated statement of profit or loss and other comprehensive income. The Group has determined that the spot NAFEX exchange rate obtained from FMDQ OTC securities exchange is the most appropriate rate.

Embedded options — The bond 2021 Notes issued in October 2016 and the 2025 Notes and 2027 Notes issued in September 2019 have embedded options which allow early redemption at the option of the issuer and holder upon the occurrence of specified events. These are accounted for as derivatives at fair value through profit or loss.

(b) Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.

The Group manages market risks by keeping costs low through various cost optimization programs. Moreover, market developments are monitored and discussed regularly, and mitigating actions are taken where necessary.

(i) Foreign exchange risk

The Group operates in Nigeria and is exposed to foreign exchange risk arising from exposures to currencies other than the Naira, in the books of the Nigerian subsidiaries, and to currencies other than the US Dollar upon consolidating the results and financial position of the Nigerian subsidiaries. Foreign exchange risk arises from future commercial transactions, recognized assets and liabilities and net investments in foreign operations.

The Group is exposed to risks resulting from fluctuations in foreign currency exchange rates. A material change in the value of any such foreign currency could result in a material adverse effect on the Group’s cash flow and future profits. The Group is exposed to foreign exchange risk to the extent that balances and transactions are denominated in a currency other than the functional currency in which they are measured.

In managing foreign exchange risk, the Group aims to reduce the impact of short-term fluctuations on earnings. The Group has no export sales, but it has customers that are either contracted using fees quoted in US Dollars or Nigerian Naira, but with foreign exchange indexation. The Group’s significant exposure to currency risk relates to its loan facilities that are mainly in foreign currencies. The Group manages foreign exchange risk through the use of derivative financial instruments such as currency swaps and forward contracts. The Group monitors the movement in the currency rates on an ongoing basis.

Currency exposure arising from assets and liabilities denominated in foreign currencies is managed primarily by setting limits on the percentage of net assets that may be invested in such deposits.

Sensitivity analysis

The table below shows the impact on the Group’s loss (in US$’000) if the exchange rate between the Nigerian Naira to US Dollar had increased or decreased, with all other variables held constant. The rate of change was determined by an assessment of a reasonable or probable change in the exchange rate being applied as at 31 December 2019 and 31 December 2018. (Decrease)/ increase in loss 2019 2018 $'000 $'000 Effect on total comprehensive loss for period

Effect of 1% (2018: 1%) strengthening on loss (20,079) (13,141) Effect of 1% (2018: 1%) weakening on loss 20,079 13,141


34



(b) Market risk (continued)

(i) Foreign exchange risk (continued)

Increase/ (decrease) in equity 2019 2018 Effect on equity at the end of the period $'000 $'000 Effect of 1% strengthening on equity (2018: 1%) 29,472 6,478 Effect of 1% weakening on equity (2018: 1%) (28,316) (6,224)

The impact is based on related party balances, borrowings, derivatives, trade and other payables, trade and other receivables and cash. This analysis excludes the natural hedging arising from contracts with customers in the Nigeria operations, which are either wholly or partly linked to the US Dollar exchange rate. It is impracticable to incorporate the impact of this US Dollar component in the above analysis due to the complexity of the contracts and the timing of any devaluation event.

The Group is mainly exposed to foreign exchange exposure that arises on intercompany loans denominated in US Dollars at a subsidiary level as a result of loan revaluations in local functional currency at period ends. The balances, as translated into US$, of the foreign denominated balances in the local books of the subsidiaries are:

2019 2018 $'000 $'000 Cash at bank 33,749 59,772 Trade and other receivables 12,090 79,516 Borrowings (104,722) (13,543) Trade and other payables (14,695) (2,810) NDF underlying positions 100,795 70,434 Amounts due to related parties (2,035,082) (1,507,482) (2,007,865) (1,314,113)

(ii) Interest rate risk

The Group’s main interest rate risk arises from long term borrowings with variable rates, which expose the Group to cash flow interest rate risk. The Group’s borrowings at variable rate were denominated in Naira and US Dollars (2018: Only Naira).

The Group’s fixed rate borrowings and receivables are carried at amortized cost. They are therefore not subject to interest rate risk as defined in IFRS 7, since neither the carrying amount nor the future cash flows will fluctuate because of a change in market interest rates. The Group manages interest rate risk through issuing fixed rate debt.

The table below shows the impact on the Group’s post tax loss if the interest rates increased or decreased by 1%.

Increase/ (decrease) in loss 2019 2018

$'000 $'000 Effect of 1% increase on post tax loss 1,647 1,026 Effect of 1% decrease on post tax loss (1,288) (1,026)

(c) Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures to customers, including outstanding receivables and committed transactions. Credit risk is managed on a Group basis. The Group accounts for the write-off of a trade receivable when a specific customer is assessed to be uncollectible, based on review of their specific trading circumstances, credit quality and continuing poor payment performance of the specific customer.

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the end of the reporting period was: 2019 2018 $'000 $'000 Other receivables and margin deposits (note 16) 38,913 11,223 Trade receivables (net of provisions for impairment) (note 16) 76,293 44,896 Amounts due from related parties (note 29) 2,204 3,763 Derivative financial instruments (note 15) 42,657 6,920 Cash at bank and short-term investments (note 18) 140,050 183,347

300,117 250,149


35



(c) Credit risk (continued)

The Group utilizes data analysis and market knowledge to determine the concentration of its risks by reference to independent and internal ratings of customers. The assessment of the concentration risk is consistent with the overall risk appetite as established by the Group. The Group’s credit concentration is based on internal ratings from the finance department. The finance department classifies customers as first tier and second tier customers based on sales revenue from each customer during the period. First tier customers are the two to five customers that contributed 80% and above of total revenue and represent major mobile network operators our markets while second tier customers are the customers that contributed 20% and below of total revenue.

For banks and financial institutions, only independently rated parties with a minimum rating of “B” are accepted. The risk control department assesses the credit quality of a customer, taking into account its financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the Board. The compliance with credit limits by customers is regularly monitored by line management.

Refer to note 18 for the credit ratings cash and cash equivalents respectively. The credit ratings of the Group’s other receivables at 31 December 2019 and 2018 are based on publicly reported Fitch ratings:

Other receivables, derivative assets and amounts due from related parties 2019 2018 $'000 $'000 A (F1) - 2,381 B (B) 2,526 2,571 B+ (B) 2,512 - Not rated 78,736 16,954 83,774 21,906

Other receivables not rated includes short term advances and the embedded derivative on the bond. No impairment allowance is recorded at 31 December 2019 in respect of cash and cash equivalents and other receivables (31 December 2018: $nil). Amounts due from related parties and other receivables and margin deposits were not impaired during the current year or in the prior period.

Trade receivables are analyzed between first and second tier customers. No external credit ratings are available for these customers. Management adopted lifetime expected credit loss model for both first tier and second tier customers.

Internal classification 2019 First tier Second tier Total

$'000 $'000 $'000

Not due 9,481 375 9,856 0-30 days 21,594 184 21,778 31-60 days 7,463 909 8,372 61-90 days 8,191 6,224 14,415 Over 90 days 113,533 28,144 141,677 Gross trade receivables 160,262 35,836 196,098 Impairment allowance (94,061) (25,744) (119,805) Net trade receivables 66,201 10,092 76,293 2018 $'000 $'000 $'000

Not due 8 167 175 0-30 days 13,925 937 14,862 31-60 days 17,578 120 17,698 61-90 days 12,018 2,421 14,439 Over 90 days 50,965 11,854 62,819 Gross trade receivables 94,494 15,499 109,993 Impairment allowance (55,150) (9,947) (65,097) Net trade receivables 39,344 5,552 44,896 Over the term of trade receivables, the Group accounts for its credit risk by appropriately providing for expected credit losses on a timely basis on a customer by customer basis. In calculating the expected credit loss for each customer, the Group considers historical loss rates, available information on the customer’s financial position and adjusts for forward looking macroeconomic data.


36



(c) Credit risk (continued) Impairment allowances derived in accordance with the policy described in note 2.16.4 predominantly relate provisions representing a significant proportion of the aged balances due from a small number of customers with poor payment history. In 2018 an element of the increase in provisions is classified as exceptional (see note 7.1) where the charge relates to expected credit losses arising as a result of circumstances impacting payment performance by a first-tier customer. The movement in the allowance for impairment in respect of trade receivables during the period was as follows:

2019 2018 $’000 $’000

Opening balance 65,097 29,633 Additions through group restructuring 39,536 - Additions during the period (note 7.1)* 15,465 35,868 Impairment reversed during the period - (624) Foreign exchange movement (293) 220 Balance at 31 December 119,805 65,097

* The additions during the period are presented net of US$5.5 million included in the loss allowance on trade receivables which represents the write-off of accrued revenue and not an increase in the provision of loss allowance on trade receivables.

(d) Liquidity risk

Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.

The Group has a clear focus on ensuring sufficient access to capital to finance growth and to refinance maturing debt obligations. As part of the liquidity management process, the Group has various credit arrangements with some banks which can be utilized to meet its liquidity requirements. At the end of the reporting period, the Group had $500.0m (2018: $79.4 million) utilized of $500.0m (2018: $79.4 million) credit facilities with its financiers.

Typically, the credit terms with clients are more favorable compared to payment terms to its vendors in order to help provide sufficient cash on demand to meet expected operational expenses, including the servicing of financial obligations. This excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters.

The table below analyses the Group's financial liabilities including estimated interest payments and excluding the impact of netting agreements into relevant maturity groupings based on the remaining period from the end of the reporting period to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

Total contractual cash flows

Within 1 year

2 – 3 years

4 – 5 years

6 - 10 years

2019 $’000 $'000 $'000 $'000 $'000 Trade payables (note 19) 246,673 246,673 - - - Other payables (note 19) 19,530 19,530 - - - Borrowings (note 20) 2,738,430 165,336 502,446 560,835 1,509,813 Amounts due to related parties (note 29.3) 1,432,395 - - - 1,432,395 4,437,028 431,539 502,446 560,835 2,942,208

2018 $’000 $'000 $'000 $'000 $'000 Trade payables (note 19) 81,926 81,926 - - - Other payables (note 19) 2,412 2,412 - - - Non-deliverable forward instruments (note 15) 310 310 - - - Borrowings (note 20) 1,138,114 123,415 1,014,699 - - Amounts due to related parties (note 29.3) 910,852 - 118,579 756,323 35,950 2,133,614 208,063 1,133,278 756,323 35,950


37



(e) Capital risk management

The Group’s objectives when managing capital are to safeguard its ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders, and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

The Group monitors capital on the basis of the leverage ratio to optimize market pricing, such that Net Debt (borrowings less cash and cash equivalents) to Adjusted Earnings Before Interest, Tax, Depreciation and Amortization (Adjusted EBITDA) would be within a long term target leverage of 2.75x and 3.25x, subject to various factors such as the availability and cost of capital and the potential long term return on our discretionary investments. We may fall outside of the target range in the shorter term to accommodate acquisitions or other restructurings. Adjusted EBITDA is defined as profit/(loss) for the period before income tax expense/(benefit), finance costs and income, depreciation and amortization, impairment of property, plant and equipment and prepaid land rent, net (profit)/loss on disposal of property, plant and equipment, impairment of withholding taxes, insurance claims, exceptional income and expense items and other non-operating income and expenses. Adjusted EBITDA and net debt are not comparable year on year due to the adoption of IFRS 16. For 2019, net debt includes lease liabilities under IFRS 16 whereas in the prior year no such liabilities were required to be accounted for on balance sheet. Adjusted EBITDA for 2019 does not include the rental expenses for land leases that are accounted for under IFRS 16, as such charges are now accounted for as amortization of right of use assets and the respective financing element in finance costs.

The Group is in compliance with the restrictive debt covenants related to the listed bonds and the financial covenants related to the senior credit facilities as at 31 December 2019 and 31 December 2018.

The Group’s net leverage ratios are shown in the table below:

2019 2018 $'000 $'000 Total borrowings (note 20) 1,802,261 896,170 Lease liabilities (note 21) 33,222 - Less: cash and cash equivalents (note 18) (140,050) (183,347) Net debt 1,695,433 712,823 Adjusted EBITDA (note 10) 343,877 242,113 Net leverage ratio* 4.93 2.94 *The net leverage ratio is higher than our target range because the Adjusted EBITDA of INT Towers Limited and Nigeria Tower Interco B.V. are only incorporated within the results of the Group from 18 September 2019 and does not represent an annualized number. Were the EBITDA of INT Towers Limited and Nigeria Tower Interco B.V. to be consolidated for the entire year to 31 December 2019 the resulting net leverage ratio would be within our target range. (f) Fair value hierarchy

The tables below analyze financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:

Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).

Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2).

Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).


38


4. Financial risk management (continued) (f) Fair value hierarchy (continued)

The following table presents the Group’s financial assets that are measured at fair value at 31 December 2019 and 31 December 2018.

Level 1 Level 2 Level 3 Total 2019 $'000 $'000 $'000 $'000

Financial assets at fair value through other comprehensive income (note 14) 11 - - 11 Derivative financial instruments (note 15) - 42,657 - 42,657 11 42,657 - 42,668

2018 $'000 $'000 $'000 $'000

Available-for-sale financial assets (note 14) 9 - - 9 Derivative financial instruments (note 15) - 6,920 - 6,920 9 6,920 - 6,929

As at the end of the reporting period, the Group had both level 1 and level 2 financial instruments. There were no transfers between levels of financial assets that are measured at fair value during the current or prior period.

Financial assets in level 1

The fair value of financial instruments traded in active markets is based on quoted market prices at the reporting date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis. The quoted market price used for financial assets held by the Group is the current bid price. These instruments are included in level 1. Instruments included in level 1 comprise investment in marketable securities and classified as financial assets at fair value through other comprehensive income financial assets.


The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined by using valuation techniques. These valuation techniques maximize the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2. Instruments included in level 2 comprise primarily of non-deliverable forward (NDF), cross-currency swaps and options embedded in the bond. Their fair values are determined based on mark-to-market values provided by the counterparty financial institutions or valuation techniques using observable market data.

Fair value estimation

Carrying

value Total fair

value Carrying

value Total fair

value 2019 2019 2018 2018 $'000 $'000 $'000 $'000 Financial liabilities Non-deliverable forward instruments (note 15) - - 310 310 Bank borrowings (note 20) 486,251 502,648 80,375 82,547 Bonds (note 20) 1,316,010 1,405,238 815,795 832,910 Loans from related parties (note 29.3) 688,095 688,095 693,113 697,873 2,490,356 2,595,981 1,589,593 1,613,640

The fair values of bank borrowings and loans from related parties are based on discounted cash flows using a current borrowing rate (determined as the market rate on the listed bonds), these are categorized as level 3. The fair value of the bonds is determined by reference to the market value and are categorized as level 1.

The non-deliverable forward instruments are carried at fair value at the year end. The key valuation inputs and basis of their valuation is described in note 15. These instruments are categorized as level 2.

The carrying values of all other current assets and current liabilities are not materially different from their fair values.


39



Financial instruments by category

The Group's financial assets are categorized as follows:

Amortized cost


comprehensive income

Fair value through profit

or loss Total 2019 $'000 $'000 $'000 $'000 Financial assets Trade receivables (note 16) 76,293 - - 76,293 Other receivables (note 16) 38,913 - - 38,913 Amounts due from related parties (note 29.3) 2,204 - - 2,204 Cash and cash equivalents (note 18) 140,050 - - 140,050 Derivative financial instruments (note 15) - - 42,657 42,657 Fair value through other comprehensive income financial assets (note 14) - 11 - 11 257,460 11 42,657 300,128

2018 $'000 $'000 $'000 $'000 Financial assets Trade receivables (note 16) 44,896 - - 44,896 Other receivables (note 16) 11,223 - - 11,223 Amounts due from related parties (note 29.3) 3,763 - - 3,763 Cash and cash equivalents (note 18) 183,347 - - 183,347 Derivative financial instruments (note 15) - - 6,920 6,920 Fair value through other comprehensive income financial assets (note 14) - 9 - 9 243,229 9 6,920 250,158

Fair value through other comprehensive income financial assets (IFRS 9) are marketable securities in various financial institutions in Nigeria.

The Senior Credit Facilities (refer to note 20) are secured by a negative pledge over the Group’s assets and the terms thereof do not permit any subsidiary in the Group to pledge its assets as security for the purposes of raising further financial indebtedness. The carrying value of all financial assets is pledged in this manner.

The Group's financial liabilities are categorized as follows:

Amortized cost


or loss Total 2019 $'000 $'000 $'000 Financial liabilities Bank borrowings (note 20) 486,251 - 486,251 Bonds (note 20) 1,316,010 - 1,316,010 Lease liabilities (note 21) 33,222 - 33,222 Loans from related parties (note 29.3) 688,095 - 688,095 Other amounts due to related parties (note 29.3) 4,194 - 4,194 Trade payables (note 19) 246,673 - 246,673 Other payables (note 19) 19,530 - 19,530 2,793,975 - 2,793,975


40



Amortized cost


or loss Total 2018 $'000 $'000 $'000 Financial liabilities Bank borrowings (note 20) 80,375 - 80,375 Bonds (note 20) 815,795 - 815,795 Loans from related parties (note 29.3) 693,113 - 693,113 Other amounts due to related parties (note 29.3) 6,942 - 6,942 Trade payables (note 19) 81,926 - 81,926 Other payables (note 19) 2,412 - 2,412 Non-deliverable forward instruments (note 15) - 310 310 1,680,563 310 1,680,873

The fair values of non-current liabilities are based on discounted cash flows using a current borrowing rate. The fair values of trade payable and other current liabilities are not materially different from carrying values.

5. Revenue

The Group’s revenue accrues from providing telecommunications support services. The Group provides infrastructure sharing and leasing known as colocation (which includes colocation rental revenue and colocation services) and to a limited extent, managed services.

2019 2018

$’000 $'000 Lease component 416,758 258,953 Services component 163,813 133,524 Total 580,571 392,477

The following table shows unsatisfied performance obligation which represents the services component of future minimum receipts expected from customer under non-cancellable agreements, as follows:

2019 2018

$’000 $'000 Within one year 216,631 86,097 Between two to three years 374,719 164,215 Between four to five years 326,606 145,326 More than five years 794,751 148,544 1,712,707 544,182

The Group leases space on its towers under leases over periods ranging between 5 and 15 years. The lease component of future minimum rental receipts expected from tenants under non-cancellable colocation operating lease agreements in effect at 31 December, were as follows:

2019 2018 $’000 $’000 Within one year 590,043 220,338 Between two to three years 999,403 425,572 Between four to five years 885,091 358,268 More than five years 1,882,775 278,946 4,357,312 1,283,124

Certain customer contracts allow for the cancellation of a proportion of sites during the contract term without payment of termination penalties. The minimum service and lease revenue in the tables above assumes that each customer will fully utilize this churn available to them under the contract. Where rentals are denominated in US Dollar, which is not the functional currency of the subsidiary, they have been included in the above table at the exchange rate at the end of the reporting period.


41


6. Cost of sales

2019 2018 $’000 $’000

Tower repairs and maintenance 35,906 23,975 Power generation 109,835 68,257 Regulatory fees and permits 5,004 17,916 Site and other rental* 2,398 9,432 Vehicle maintenance and repairs 611 154 Security services 13,970 10,391 Insurance 2,901 1,426 Staff costs (note 7.3) 8,333 3,961 Travel costs 2,891 29 Professional fees 122 253 Depreciation (note 12) 132,515 79,814 Depreciation of right of use assets (note 12) 13,158 - Amortization (note 13) 12,634 10,040 Impairment of property, plant and equipment (note 12) 9,197 3,514 Impairment of land rent (note 16) - 121 Other 5,062 1,666 354,537 230,949

* In 2019, site and other rental relates to short term leases and low value leases only (note 21). ** In 2019, depreciation includes right of use assets depreciation following the implementation of IFRS 16.

Foreign exchange gains and losses on cost of sales are included in other.

7. Administrative expenses

2019 2018 $’000 $’000 Repairs and maintenance 2,466 2,380 Advertising 480 145 Depreciation (note 12) 397 217 Depreciation right of use assets (note 12) 60 - Amortization (note 13) 211 188 Audit fee 961 709 Staff costs (note 7.3) 16,414 13,390 Directors’ emoluments (note 29.2) 237 19 Travel costs 2,683 1,226 Professional fees 2,125 1,638 Loss from sale of property, plant and equipment† 1,089 210 Rent 1,255 609 Impairment of withholding tax* 47,402 12,873 Other‡ 13,384 824 89,164 34,428 †Included within loss from sale of property, plant and equipment is an amount of US$76,000 related to loss or gain on termination of finance lease liabilities. *Withholding tax receivables were impaired following the Group’s assessment of the recoverability of withholding tax assets based on a five-year profitability projection and an analysis of the utilization of withholding tax balances against future income tax liabilities. ‡Included within other administrative expenses is an amount of US$9.0 million representing a one-off penalty for the termination of a supplier contract.

Foreign exchange gains and losses on administrative expenses are included in other.

7.1 Loss allowance on trade receivables:

The loss allowance on trade receivables related primarily to an increase in the impairment provision for overdue trade accounts receivables that are assessed as doubtful in recovery and thus are impaired. Included in this amount is an amount of US$ nil (2018: US$30.6 million) which relates to exceptional items.


42


7. Administrative expenses (continued)

7.2 Staff costs are analyzed as follows:

2019 2018 $’000 $’000 Salaries and wages 20,154 14,379 Pension contribution – employer 724 512 Other benefits 3,869 2,460 24,747 17,351

Other benefits are comprised of employee related insurances, employee training costs, staff entertainment and redundancy costs.

7.3 Staff costs were classified as:

2019 2018 $’000 $’000 Cost of sales 8,333 3,961 Administrative expenses 16,414 13,390 24,747 17,351

8. Other income

2019 2018 $’000 $’000 Insurance claims 1,379 686 Management charges 9,771 12,572 Other income 149 1 11,299 13,259

Management charges in the current year represent charges to INT Towers Limited for management services provided by IHS Nigeria Limited to INT Towers Limited for the period 1 January 2019 to 17 September 2019, being the period prior to INT Towers Limited becoming a part of the Group.

9. Finance income and costs

9.1 Finance income

2019 2018 $’000 $’000 Interest income - bank deposits 4,811 4,858 Gain on revaluation of derivative financial instruments 17,248 - Net foreign exchange gain arising from foreign exchange forwards – realized - 10,243 Gain on maturity of foreign exchange forwards – realized - 155 22,059 15,256

9.2 Finance costs

2019 2018 $’000 $’000 Interest expense - third party loans 118,859 98,171 Interest expense - related party loans 61,278 47,724 Interest on lease liabilities 4,060 - Unwinding of discount on decommissioning liability 167 6 Net foreign exchange loss arising from financing - unrealized 9,254 26,895 Write off of unamortized loan facility fees on settlement of bonds 10,481 - Loss on valuation of foreign exchange swap instruments – realized - 433 Net foreign exchange gain arising from foreign exchange forwards – realized 1,349 - Fees on loans and financial derivatives 1,504 609 Premium paid on early settlement of bonds 22,153 - Loss on revaluation of derivative financial instruments - 32,107 229,105 205,945

Net foreign exchange loss arising from financing (unrealized) is primarily due to significant fluctuations in exchange rates predominantly between the Naira and the US Dollar. This arises on related party loans denominated in US Dollars at subsidiary level as a result of loan revaluations in local functional currency at period ends. Refer to note 4(b) for further information.


43


10. Non-IFRS measures

2019 2018 $’000 $’000

Loss for the period (64,282) (114,536) Add back: Income tax (benefit)/charge (note 11) (15,550) 28,338 Finance costs (note 9.2) 229,105 205,945 Finance income (note 9.1) (22,059) (15,256) Depreciation and amortization (notes 12 and 13) 158,975 90,259 Impairment of property, plant and equipment and land rent (note 6) 9,197 3,635 Net loss on sale of asset (note 7) 1,089 210 Impairment of withholding tax (note 7) 47,402 12,873 Other exceptional items (note 7.1) - 30,645 Adjusted EBITDA 343,877 242,113 For the year ended 31 December 2018, loss allowance on trade receivables totaling US$30.6 million was considered to be exceptional. None of the loss allowance on trade receivables for the year ended 31 December 2019 was considered to be exceptional.

11. Taxation

2019 2018 $’000 $’000

Companies income tax (14,684) 23,191 Capital gains tax 8 - Education tax (874) 5,147 Total current taxes on income (15,550) 28,338 Deferred taxes (note 23) - - Total tax (benefit)/expense (15,550) 28,338

Reconciliation of effective tax rate

Loss before income tax (79,832) (86,198)

Tax calculated at domestic tax rates applicable to profits in respective countries (Nigeria 32%, Netherlands 25%)

(22,865) (25,950)

Tax effects of: Income not subject to tax (8,831) (2) Expenses not deductible for tax purposes 26,293 17,120 Tax losses and deductible temporary differences for which no deferred tax asset was recognized

120,816 (39,674)

Prior year (over)/under provision (44,287) 115,728 Utilization of previously unrecognized deferred tax assets (89,452) (38,527) Other 2,776 (357) Total tax (benefit)/expense (15,550) 28,338

Current income tax liabilities (5,576) (6,106) Total income tax liabilities (5,576) (6,106) The movement in the current income tax is as follows: Opening balance (6,106) (4,579) Acquired as part of group restructuring (2,262) - Charged to profit or loss 15,550 (28,338) Paid during the period 4,078 4,783 Withholding tax applied in settlement of tax liabilities - 5,320 Withholding tax disclosure net off (16,658) 16,658 Foreign exchange (178) 50 At 31 December (5,576) (6,106) Deferred income tax assets are recognized for deductible temporary differences and tax losses carried forward only to the extent that the realization of the related tax benefits is expected to be met through the reversal of taxable temporary differences and future taxable profits. For those jurisdictions which have operating losses that are not expected to be utilized against future taxable profits, any deferred tax assets recognized are only to the extent of deferred tax liabilities. Refer to note 23 for deferred income tax.


44


12. Property, plant and equipment

Tower

equipment Land and buildings

Right- of-use asset

Furniture and office

equipment Motor

vehicles

Capital work in

progress Total Cost $’000 $’000 $’000 $’000 $’000 $’000 $’000 At 1 January 2018 691,081 28,467 - 6,832 4,625 14,934 745,939 Additions in the period 53,159 1,928 - 229 300 31,113 86,729 Disposals (36,001) (252) - (25) (24) - (36,302) Reclassifications 10,658 7,431 - 548 - (18,637) - Exchange difference (8,935) (428) - (91) (57) (172) (9,683) At 31 December 2018 709,962 37,146 - 7,493 4,844 27,238 786,683 Impact of adoption of IFRS 16 on 1 January 2019 - - 82,965 - - - 82,965 At 1 January 2019 709,962 37,146 82,965 7,493 4,844 27,238 869,648 Additions through group restructuring 956,873 9,616 136,497 2,004 4,685 32,455 1,142,130 Additions in the period 113,210 1,279 26,184 1,915 1,644 48,705 192,937 Disposals (92,061) - - (15) (409) - (92,485) Remeasurement or termination of lease* - - (3,255) - - - (3,255) Reclassifications 49,079 885 - - - (49,964) - Exchange difference (5,204) (74) (971) (22) (32) (299) (6,602) At 31 December 2019 1,731,859 48,852 241,420 11,375 10,732 58,135 2,102,373

Accumulated depreciation

At 1 January 2018 253,971 818 - 5,561 4,053 - 264,403

Depreciation charge for the period 78,038 245 - 1,337 411 - 80,031

Disposals (30,192) (252) - (23) (22) - (30,489)

Impairment 3,501 13 - - - - 3,514

Exchange difference (3,693) (10) - (79) (53) - (3,835) At 31 December 2018 301,625 814 - 6,796 4,389 - 313,624

At 1 January 2019 301,625 814 - 6,796 4,389 - 313,624 Additions through group restructuring 439,716 10 12,732 970 3,788 - 457,216 Depreciation charge for the period 131,337 272 13,217 812 492 - 146,130 Disposals (90,541) - - (15) (409) - (90,965) Remeasurement or termination of lease* - - (350) - - - (350) Impairment 9,197 - - - - - 9,197 Exchange difference (2,485) (2) (144) (12) (21) - (2,664) At 31 December 2019 788,849 1,094 25,455 8,551 8,239 - 832,188

Net book value

At 31 December 2018 408,337 36,332 - 697 455 27,238 473,059

At 31 December 2019 943,010 47,758 215,965 2,824 2,493 58,135 1,270,185

*The disposals value of right-of-use assets represents disposals due to terminated leases and the impact of remeasurement of lease assets as a result of changes in lease terms.

Capital work in progress comprises mainly tower and tower equipment still under construction and not yet available for use. The Group transfers such assets to the appropriate class once they are available for use. There were no qualifying borrowing costs capitalized during the year.

The impairment in the years ended 31 December 2018 and 31 December 2019 relates to towers on certain sites which were made dormant following the consolidation of customer equipment between sites. As a result, the towers are no longer in use and have no installed customer equipment. It was determined that the recoverable amount was nil and therefore the carrying amount was written down to the recoverable amount. The impairment loss has been recognized in cost of sales in the consolidated statement of profit and loss and other comprehensive income.


45


12. Property, plant and equipment (continued)

The carrying value of right of use assets at 31 December 2019 is comprised entirely of land and building assets, the majority being leased land on which our towers are situated.

The carrying value of the “Tower equipment” asset category includes assets amounting to $2.0m related to asset retirement obligations arising from legislative requirements and the terms of leases agreements included in note 21 – “Lease liabilities”.

(i) Depreciation expense has been included in cost of sales and administrative expenses in the consolidated statement of profit or loss and other comprehensive income as follows:

2019 2018 $’000 $’000 Cost of sales (note 6) 145,673 79,814 Administrative expenses (note 7) 457 217 146,130 80,031

(ii) Analysis of additions to property, plant and equipment

Additions through cash - capital work in progress 49,953 29,128 Impact of (decrease)/increase in decommissioning provision estimates (1,527) 439 Additions through cash - others 8,393 1,542 Additions through re-classifications of advance payments 109,934 55,620 Additions through group restructuring 1,142,130 - Additions of IFRS 16 leases against lease liabilities and prepaid rent assets 26,184 - 1,335,067 86,729

13. Intangible assets

Goodwill

Customer related

intangible assets

Network related

intangible assets License Software Total

$’000 $’000 $’000 $’000 $’000 $’000 Cost At 1 January 2018 124,346 170,942 20,989 7 1,569 317,853 Additions in the period - - - - 350 350 Exchange difference (1,536) (1,916) (259) - (22) (3,733) At 31 December 2018 122,810 169,026 20,730 7 1,897 314,470

At January 2019 122,810 169,026 20,730 7 1,897 314,470 Additions through group restructuring

257,086 210,162 14,146 - 5,616 487,010

Additions during the period - - - - 970 970 Exchange difference (991) (1,071) (77) - (30) (2,169) At 31 December 2019 378,905 378,117 34,799 7 8,453 800,281

Accumulated amortization

At 1 January 2018 - 17,202 4,447 6 990 22,645 Amortization charge for the period - 8,342 1,450 - 436 10,228 Exchange difference - (77) (65) - (16) (158) At 31 December 2018 - 25,467 5,832 6 1,410 32,715

At January 2019 - 25,467 5,832 6 1,410 32,715 Additions through group restructuring

- 30,703 4,319 - 5,506 40,528

Amortization charge for the period - 10,679 1,687 - 479 12,845 Exchange difference - (231) (35) - (30) (296) At 31 December 2019 - 66,618 11,803 6 7,365 85,792

Net book value

At 31 December 2018 122,810 143,559 14,898 1 487 281,755

At 31 December 2019 378,905 311,499 22,996 1 1,088 714,489


46


13 Intangible assets (continued)

Network-related intangible assets represent future income from leasing excess tower capacity to new tenants. Customer-related intangible assets represent customer contracts and relationships. The largest component of customer related intangible assets represents the value of customer contracts and relationships acquired as part of the acquisition by IHS Holding Limited of IHS Towers NG Limited and INT Towers Limited on 10 June 2016 and 1 December 2014 respectively. The contracts have a remaining expected life of 18 years and 14 years from the date of acquisition respectively.

As at the period end, these specific contracts and relationships had a carrying value of US$91.5 million and US$70.0 million respectively (2018: US$98.1 million) and a remaining amortization period of 14.5 years and 13.5 years respectively (2018: 15.5 years). The December 2018 numbers do not include the value of INT Towers Limited contracts and relationships as INT Towers Limited was not a part of the Group at that date.

Amortization expense has been included in cost of sales and administrative expenses in the consolidated statement of profit or loss and other comprehensive income below:

31 Dec 2019 31 Dec 2018 $’000 $’000 Cost of sales (note 6) 12,634 10,040 Administrative expense (note 7) 211 188 12,845 10,228

13.1 Allocation of goodwill

Management reviews the business performance based on the geographical location of business. It has identified IHS Nigeria Limited, IHS Towers NG Limited and INT Towers Limited as the main cash generating units (CGU). Goodwill is monitored by management at CGU level. The following is a summary of goodwill allocation for each CGU.

Opening balance

Additions through group

restructuring Exchange difference

Closing balance

2019 $’000 $’000 $’000 $’000 IHS Nigeria Limited 71,327 - (31) 71,296 IHS Towers NG Limited 51,483 - (23) 51,460 INT Towers Limited (Note 28) - 257,086 (937) 256,149 122,810 257,086 (991) 378,905

2018 $’000 $’000 $’000 $’000 IHS Nigeria Limited 72,219 - (892) 71,327 IHS Towers NG Limited 52,127 - (644) 51,483 124,346 - (1,536) 122,810

The recoverable amount of the CGU was determined based on value in use calculations. These calculations used pre-tax cash flow projections based on the financial budgets approved by management covering a five-year period. Within the five-year period, revenue growth rates are based on past experience and expected future developments in the Group’s CGUs. The weighted average growth rates used are consistent with the forecasts included in industry reports. Cash flows beyond the five-year period were valued using the estimated terminal growth rates stated below. The terminal growth rates did not exceed the long-term average growth rate for the infrastructure business in which each CGU operates.


47


13 Intangible assets (continued)

13.1 Allocation of goodwill (continued)

The key assumptions to which the value-in-use calculations are most sensitive are:

revenue assumptions (taking into account tenancy rates) and the direct effect these have on gross profit margins; discount rates; and terminal growth rates.

2019 2018

IHS Nigeria Limited

IHS Towers NG

Limited INT Towers

Limited IHS Nigeria

Limited

IHS Towers NG

Limited INT Towers

Limited Discount rate 15.8% 16.2% 16.5% 16.3% 16.1% n.a Terminal growth rate 3.2% 3.2% 3.2% 3.2% 3.2% n.a Tenancy ratio* 2.35x-3.90x 3.29x-3.80x 2.46x-3.90x 2.13x-3.70x 3.06x-3.47x n.a Gross margins (excluding depreciation and amortization)

69.8%-77.1%

60.9%-65.4%

60.8%-71.9%

68.1%-77.4%

58.1%-66.2% n.a

*The tenancy ratio is calculated by dividing the total number of tenancies (initial and technology upgrades), by the number of owned towers in our portfolio.

Sensitivity analysis

Management have considered and assessed reasonably possible changes for key assumptions and have identified these instances that could cause the carrying amount to exceed the recoverable amount resulting in impairment.

The following changes in key assumptions would result in an impairment as at 31 December 2019:

IHS Nigeria Limited

IHS Towers NG Limited

INT Towers Limited

Rise in discount rate Increase by 43.0% Increase by 9.4% Increase by 27.2% Tenancy ratio Decrease by an average of

1.84x throughout 4 years Decrease by an average of

0.86x throughout 4 years Decrease by an average of

1.47x throughout 4 years Gross margin (excluding depreciation and amortization)

Decrease by an average of 15.4pp throughout 4 years



The following changes in key assumptions would result in an impairment as at 31 December 2018:

IHS Nigeria Limited

IHS Towers NG Limited

Rise in discount rate Increase by 39.6% Increase by 6.6% Tenancy ratio Decrease by an average of 1.73x throughout

4 years Decrease by an average of 0.56x throughout

4 years Gross margin (excluding depreciation and amortization)




48


14. Investments Financial assets at fair value through other comprehensive income are listed marketable equity securities in various financial institutions in Nigeria. Below is an analysis of the balances of investments and the movement for the period:

Marketable Securities 2019 2018 $’000 $’000 Opening balance 9 12 Fair value net gain - other comprehensive income (note 25) 1 (2) Exchange difference 1 (1) At 31 December 11 9

Analysis of marketable securities: 2019 2018 $’000 $’000 Access Bank Nigeria Plc. 10 7 First Bank Plc. 1 2

11 9

15. Derivative financial instruments

The derivative instruments have been classified as fair value through profit or loss. The instruments are measured at fair value with the resultant gains or losses recognized in the consolidated statement of profit or loss and other comprehensive income. The related net foreign exchange gain/(loss) is included in finance income and costs in note 9.

The value of the derivative instruments and the underlying contractual notional amount for the derivative instruments is as follows, as of 31 December, of each of the following years:

2019 Underlying notional amount

Carrying value

$'000 $'000 Call and put options on listed bond 1,300,000 42,604 Non-deliverable forward instruments 100,795 53 1,400,795 42,657

2018

Underlying notional amount

Carrying value

$'000 $'000 Call and put options on listed bond 800,000 6,920 Non-deliverable forward instruments 70,434 (310) 870,434 6,610

The derivatives represent the fair value of the put and call options embedded within the terms of the 2025 Notes and 2027 Notes, and for 2018, within the terms of the redeemed 2021 Notes. The call options give the Company the right to redeem the bond instruments at a date prior to the maturity date (17 March 2025 and 17 September 2027 respectively), in certain circumstances and at a premium over the initial notional amount. The put option provides the holders with the right (and the Company with an obligation) to settle the 2025 Notes and 2027 Notes before their redemption date in the event of a change in control (as defined in the terms of the 2025 Notes and 2027 Notes, which also includes a major asset sale), and at a premium over the initial notional amount. The options are fair valued using an option pricing model that is commonly used by market participants to value such options and makes maximum use of market inputs, relying as little as possible on the entity’s specific inputs and making reference to the fair value of similar instruments in the market. Thus, it is considered a level 2 financial instrument in the fair valuation hierarchy of IFRS 13. The key assumptions in determining the fair value are, the initial fair value of the bond (assumed to be priced at 100% on issue date), the credit spread (derived using Bloomberg analytics at issuance and based on credit market data thereafter) and the yield curve.

The fair value of the NDFs is based on the difference between the contracted exchange rate and the anticipated spot exchange rate at the relevant period. The rate applied to represent the anticipated spot exchange rate requires judgement given the limited market liquidity in Nigeria. For December 2019 and December 2018, the Group has determined that the spot NAFEX exchange rate obtained from FMDQ OTC securities exchange is the most appropriate rate. The gain or loss at the settlement date is calculated by taking the difference between the agreed upon contract exchange rate (NGN/USD) and the spot rate at the time of settlement, for an agreed upon notional amount of funds.


49


16. Trade and other receivables

2019 2018 $’000 $’000 Non-current Prepaid land rent - 43,572 Payment in advance for property, plant and equipment 12,992 46,346 12,992 89,918

Current Trade receivables* 196,098 109,993 Less: impairment provisions (note 4.c) (119,805) (65,097) Net trade receivables 76,293 44,896 Other receivables 33,875 6,271 Prepaid land rent 7,785 8,626 Other prepaid expense 2,523 2,371 Deferred expenses and advance payments 2,253 10,723 Margin deposits on NDFs 5,038 4,952 Withholding tax 2,325 - 130,092 77,839

*The fair value approximates their carrying amount. Included in trade receivables is US$23.3 million (2018: US$17.1 million) relating to accrued revenue of which US$6.6 million (2018: US$5.0 million) relates to contract assets.

Payment in advance for property, plant and equipment relates to future supply of tower and tower equipment.

All non-current receivables are due within eight years from the end of the reporting period. All current trade and other receivables are due within the twelve months from the end of the reporting period.

The Group does not secure any collateral for its trade receivables. Refer to note 4 (c) for further information on trade and other receivables.

16.1 Prepaid rent

Prepaid rent relates to short term leasehold property rental (2018: mostly leasehold land rental) and is analyzed as follows:

2019 2018 $’000 $’000

Opening balance 52,198 32,252 Reclassification to IFRS 16 right of use asset (49,749) - Non-IFRS 16 prepaid rent additions 4,376 24,082 Transfer from advance payments and capital work in progress 2,088 3,748 Additions through group restructuring 2,869 - Amortization (3,162) (9,242) Impairment of land rent (note 6) - (121) Exchange translation (835) 1,479 At 31 December 7,785 52,198

Current portion - prepaid rent 7,785 8,626 Non-current portion - prepaid rent - 43,572 7,785 52,198

17. Inventories

2019 2018

$’000 $’000 Stock of materials 43,317 4,585 Inventories held for resale are measured at the lower of cost and net realizable value. Inventory consumables are held at cost less provision for impairment. A write down of inventory amounting to US$ nil (2018:US$0.3 million) was recognized as an expense during the year. The value of inventory recognized as an expense during the year is US$106.9 million (2018: US$69.8 million).


50


18. Cash and cash equivalents

2019 2018 $’000 $’000 Cash at bank 131,775 155,633 Short-term investments 8,275 27,714 Cash in hand 200 166 140,250 183,513 There are no bank overdrafts as at the period end. The fair value of cash and cash equivalents approximates their carrying amount. The credit ratings of the Group’s principal banking partners are based on publicly reported Fitch ratings. The Group regularly monitors its credit risk with banking partners and did not incur any losses during the period as a result of bank failures.

There are no significant cash balances as at 31 December 2019 which are not available for use by the Group.

2019 2018 $’000 $’000 Cash at bank and short-term investments AAA (F1+) 13,146 5,884 A+ (F1/F1+) 16,411 - A (F1) 11,937 92,533 B+ (B) 29,351 - B (B) 52,796 84,930 Not rated* 16,409 -

140,050 183,347

*This balance is held with a financial institution not rated by Fitch for the year ended 31 December 2019 and which has been given a rating of “Aa-“ by another agency.

19. Trade and other payables

2019 2018 $’000 $’000 Trade payables 246,673 81,926 Deferred revenue* 1,826 16,380 WHT payable 2,966 1,477 VAT payables 9,893 4,671 Other payables 19,530 2,412

280,888 106,866

*Included in deferred revenue is US$0.5 million (2018: US$4.8 million, all of which was recognised in 2019) which relates to contract liabilities. The carrying value of trade and other payables approximates their fair value.

20. Borrowings

2019 2018 $’000 $’000 Current Bank borrowings 2,534 24,744 Bonds 28,738 27,077 31,272 51,821 Non-current Bank borrowings 483,717 55,631 Bonds 1,287,272 788,718 1,770,989 844,349 Total borrowings 1,802,261 896,170


51


20. Borrowings (continued) In September 2019, the Group undertook a refinancing of its 2021 Notes and Nigerian loan facilities as detailed below.

20.1 Bank borrowings and Senior facilities

Bank borrowings is made up of the following:

IHS Nigeria Limited

On 18 September 2019, the NGN credit facility previously held by IHS Nigeria Limited which had an outstanding balance of ₦29.0 billion at 31 December 2018, was fully repaid with the proceeds of the Senior Credit Facilities. Prior to repayment, the facility accrued interest at an annual interest rate of NIBOR plus a 2.5% payable quarterly in arrear and was due to be repaid in full by October 2021.

INT Towers Limited

On 18 September 2019, the US$800 million loan facility previously held by INT Towers Limited was fully repaid with the proceeds of the Senior Credit Facilities.

IHS Netherlands Holdco B.V. senior facilities

IHS Netherlands Holdco B.V., IHS Nigeria Limited, IHS Towers NG Limited and INT Towers Limited entered into a facilities agreement dated 3 September 2019, or the ‘Senior Credit Facilities’, between, among others, IHS Netherlands Holdco B.V. as the parent of the Group and guarantor, IHS Nigeria Limited, IHS Towers NG Limited and INT Towers Limited as borrowers and guarantors and each of IHS Netherlands NG1 B.V., IHS Nigeria Limited, IHS Netherlands NG2 B.V., IHS Towers NG Limited, Nigeria Tower Interco B.V. and INT Towers Limited as guarantors. The Senior Credit Facilities were entered into as part of a wider refinancing exercise (that also included the issuance of the 2025 Notes and 2027 Notes, as described below) of our Nigeria group debt. The Senior Credit Facilities are governed by English law. The Senior Credit Facilities also include customary negative and affirmative covenants (subject to certain agreed exemptions and materiality carve-outs) and financial covenants as described below (all terms are defined in the Senior Facilities):

Interest Coverage Ratio: the ratio of EBITDA for the relevant twelve-month testing period to Net Cash Finance Interest Adjusted For Leases in respect of that twelve-month testing period, shall be no less than 2.5:1.

Leverage Ratio: the ratio of Net Financial Indebtedness on the last day of the relevant last twelve-month testing period to EBITDA for that twelve-month testing period shall be no greater than:

(a) 4.0x in respect of the test periods from 31 December 2019 to and ending on 30 September 2020 and

(b) 3.75x in respect of the test periods from December 31, 2020 onwards.

These financial covenants are tested on each quarter date (being each of 31 March, 30 June, 30 September and 31 December of each financial year of the Group) from 31 December 2019 onwards (except where compliance is required at any time and where testing is required upon incurrence) in arrear based on the previous 12 months, by reference to the financial statements delivered and/or each compliance certificate delivered. The financial covenants remain subject to the ability of IHS Netherlands Holdco B.V. to cure the breach up to a maximum of four times.

The interest rate per annum applicable to loans made under the Senior Credit Facilities is equal to: (a) in relation to the U.S. dollar facility, LIBOR (subject to a zero floor) plus a margin of 4.25% per annum (subject to a margin ratchet where the level of margin may be increased (up to a maximum of 4.50%) or decreased subject to certain tests, including the relevant leverage ratio of our group) and had an original principal amount of $110.0 million; and (b) in relation to the Naira facility, NIBOR (subject to a zero floor) plus a margin of 2.50% per annum and had an original principal amount of ₦141.3 billion (approximately $390 million).

Each facility under the Senior Credit Facilities will terminate on the date falling 60 months after the date of the first utilization of that facility. The Senior Credit Facilities will be repayable in instalments. In addition to voluntary prepayments, the Senior Credit Facilities requires mandatory cancellation, and if applicable, prepayment in full or in part in certain circumstances.

20.2 Listed borrowings

IHS Netherlands Holdco B.V. senior facilities

IHS Netherlands Holdco B.V. issued $800 million 9.5% Senior Notes due 2021 (the “2021 Notes”) under a Senior Notes Indenture dated 27 October 2016 between, inter alios, the Issuer (IHS Netherlands Holdco B.V.), the Guarantors (each of IHS Netherlands NG1 B.V., IHS Nigeria Limited, IHS Netherlands NG2 B.V., IHS Towers NG Limited, Tower Infrastructure Company Limited and IHS Towers Netherlands FinCo NG B.V.) and the Trustee (Citibank N.A., London branch). The 2021 Notes were fully redeemed at a premium on 28 October 2019 and are no longer outstanding.


52


20. Borrowings (continued)

20.2 Listed borrowings (continued)

IHS Netherlands Holdco B.V. senior facilities (continued)

IHS Netherlands Holdco B.V. issued $500 million 7.125% Senior Notes due 2025 (the “2025 Notes”) and $800 million 8.0% Senior Notes due 2027 (the “2027 Notes”) pursuant to a Senior Notes Indenture dated 18 September 2019 between, inter alios, the Issuer (IHS Netherlands Holdco B.V.), the Guarantors (each of IHS Netherlands NG1 B.V., IHS Nigeria Limited, IHS Netherlands NG2 B.V., IHS Towers NG Limited, INT Towers Limited and Nigeria Tower Interco B.V.) and the Trustee (Citibank N.A., London branch). The 2025 Notes and 2027 Notes are listed on The International Stock Exchange (TISE). Tower Infrastructure Company Limited and IHS Towers Netherlands Finco NG B.V., which are immaterial subsidiaries, are not a Guarantor to these notes.

The 2025 Notes and 2027 Notes are the senior obligations of the Issuer and rank equal in right of payment with all of the issuer’s existing and future indebtedness that is not subordinated in right of payment to the Notes.

The 2025 Notes and 2027 Notes have a tenor of five and a half years and eight years respectively, from the relevant date of issue, interest is payable semi-annually in arrear on 18 March and 18 September of each year, beginning on 18 March 2020 and the principal is repayable in full on maturity.

Negative covenants of the Notes, among other things, restrict the ability of IHS Netherlands Holdco B.V. and its subsidiaries to:

incur or guarantee additional indebtedness and issue certain preferred stock; make certain restricted payments and investments, including dividends or other distributions; create or incur certain liens; enter into agreements that restrict the ability of restricted subsidiaries to pay dividends; transfer or sell certain assets; merge or consolidate with other entities; and enter into certain transactions with affiliates.

In addition, IHS Netherlands Holdco B.V. must provide to the Trustee, and to holders of the 2025 Notes and 2027 Notes, certain annual and quarterly reports.

The 2025 Notes and 2027 Notes have early redemption features whereby IHS Netherlands Holdco B.V. has the right to redeem the relevant notes before the maturity date, and the holders hold a right to request the early settlement of the Notes, in certain circumstances. The values of the respective call and put options are disclosed in note 15.

IHS Towers Netherlands FinCo NG B.V.

On 27 October 2016, $236.9 million in aggregate principal amount of the $250 million 8.375% Guaranteed Senior Notes due 2019 (the “FinCo Notes”) issued in July 2014 by IHS Towers Netherlands FinCo NG B.V. (formerly Helios Towers Finance Netherlands B.V.), a wholly owned subsidiary of the Company, were redeemed pursuant to a tender offer made to the holders of the FinCo Notes. The remaining $13.065 million in aggregate principal amount of the FinCo Notes was fully repaid at maturity on 15 July 2019. Prior to repayment, during the current and comparative periods covered by these financial statements, an aggregate principal amount of $13.065 million remained outstanding and accrued interest at an annual interest rate of 8.375% payable semi-annually in arrears on 15 January and 15 July.

20.3 Movement in borrowings

The reconciliation of the movement in the Group’s borrowings (including related party borrowings) is shown below:

2019 2018 $’000 $’000

Opening balance 1,589,283 1,550,865 Additions through group restructuring 921,295 - Interest expense 180,471 145,895 Interest paid (125,831) (95,589) Loans received 500,098 - Bonds issued 1,300,000 - Loans received from related parties 35,000 - Loans repaid (1,156,915) (10,896) Bonds repaid (813,065) - Transaction costs (46,526) (325) Initial recognition of embedded derivative 18,436 - Initial fair value adjustment for related party loans (note 25) 85,522 - Foreign exchange 2,588 (667) At 31 December 2,490,356 1,589,283


53


21. Lease liabilities

See accounting policy in note 2.6 Leases

2019 $’000

2018 $’000

Current 6,050 -

Non-current 27,172 -

Total lease liabilities 33,222 -

Lease liabilities represent the net present value of future payments due under long term land leases for leasehold land on which our towers are located and for other leasehold assets such as warehouses and offices. During the period, payments to the value of US$31.2 million (2018: nil) were made in respect of recognized lease liabilities. These lease liabilities are unwound using incremental borrowing rates which represent the credit risk of the lessee entity and the length of the lease agreement. The movement in lease liabilities for the year is as follows:

2019 $’000

2018 $’000

At 1 January - -

Initial balance on adoption of IFRS 16 on 1 January 2019 33,216 -

Additions through business combinations 5,102 -

Additions through new leases or upward remeasurements 26,184 -

Interest accrued on lease liabilities 4,060 -

Lease payments made (31,192) -

Remeasurements or terminations (4,079) -

Foreign exchange (69) - At 31 December 33,222 -

As at 31 December 2019, the contractual maturities of the lease liabilities were as follows:

Carrying

value


Within 1 year

2 - 3 years

4 - 5 years

Over 5 years

$'000 $'000 $'000 $'000 $'000 $'000 2019 Lease liabilities 33,222 84,371 6,416 5,420 9,577 62,958

Lease obligation contractual cash flows are disclosed with the same renewal expectation assumption assessed for lease accounting under IFRS 16. The average remaining lease term remaining at 31 December 2019 is 19 years.

Amounts recognized in profit or loss

2019 2019 – Leases under IFRS 16 $’000 Interest on lease liabilities (note 9.2) 4,060 Depreciation of right of use assets (note 12) 13,217 Expenses relating to short term leases 3,653

22. Provisions for liabilities and other charges

Provisions for liabilities and charges relate to decommissioning provisions.

2019 2018 $’000 $’000 Opening balance 4,556 9,046 Additions through group restructuring 6,521 - New provisions and provision remeasurements in period (1,527) 439 Provisions utilized in period - (4,823) Unwinding of discount (167) (6) Exchange translation (29) (100) At 31 December 9,354 4,556


54


22. Provisions for liabilities and charges (continued)

Analysis of total decommissioning and site restoration provisions: 2019 2018 $’000 $’000 Non-current 5,586 1,222 Current 3,768 3,334 9,354 4,556

Decommissioning and site restoration obligation This relates to the probable obligation that the Group may incur on the leased land in which its towers are sited. The amount recognized initially is the present value of the estimated amount that will be required to decommission and restore the leased sites to their original states, discounted using the current borrowing rates of individual operations within the Group. The amount provided for each site has been discounted based on the respective lease terms attached to each site.

The provisions have been created based on the decommissioning experts’ estimates and management’s experience of the specific situations. Assumptions have been made based on the current economic environment current construction requirements, technology, price levels and expected plans for remediation. Management believes that these assumptions are a reasonable basis upon which to estimate the future liability. These estimates are reviewed regularly to take into account any material changes to the assumptions. Actual decommissioning costs will, however, ultimately depend upon future market prices for the necessary decommissioning works required that will reflect market conditions at the relevant time. Furthermore, the timing of decommissioning is likely to depend on when the lease term is terminated without renewal. This, in turn, will depend upon technological changes in the local and international telecommunication industries which are inherently uncertain.

The discount rate of 17% (2018:17%) applied was in line with the weighted average borrowing rate for the respective operating entities in the periods the assets were constructed/acquired.

Based on the simulation performed, the impact on post tax loss of a 5% shift in discount rate is given below:

Increase/(decrease) in post tax loss 2019 $’000

2018 $’000

Effect of 5% increase on post tax loss 291 410 Effect of 5% decrease on post tax loss (337) (368)

23. Deferred taxation

2019 $’000

2018 $’000

Deferred tax assets - - Deferred tax liabilities - - Net deferred tax - -

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred income taxes related to the same fiscal authority and are classified on a net basis within either deferred tax assets or deferred tax liabilities. These net country amounts are aggregated according to their asset or liability position and presented as then aggregated in the consolidated statement of financial position:

2019 $’000

2018 $’000

Deferred tax liabilities Property, plant and equipment (84,369) (97,335) Intangible assets (82,204) (35,533) Timing differences on loans and derivatives (11,703) (2,115) Unrealized exchange differences - (36) Total (178,276) (135,019) Deferred tax assets Provisions 7,420 - Unrealized exchange differences 52,935 - Unutilized capital allowances and assessed losses 117,921 135,019 Total 178,276 135,019 Net deferred tax - -


55


23. Deferred taxation (continued)

2019 2018 $’000 $’000 Deferred tax - to be recovered after 12 months 7,420 2,115 - to be recovered within 12 months (7,420) (2,115) - -

The Group has recognized deferred income tax assets based on a five-year cash flow projection in which the Group is expected to make a taxable profit in the foreseeable future, based upon an analysis of the utilization of tax losses according to a five-year projection of future cash flows. The amount of deferred income tax assets (including tax losses) not recognized in the consolidated statement of financial position was US$403.8 million (2018: US$238.3 million).

Property, plant and

equipment

Provisions

Intangible assets

Fair value adjustments

on loans

Unrealized exchange

differences/unutilized

losses

Total Deferred tax $’000 $’000 $’000 $’000 $’000 $’000 At 1 Jan 2018 (79,431) 3,963 (37,063) (9,639) 122,170 - To profit or loss (17,904) (3,963) 1,530 7,489 12,848 - At 31 December 2018 (97,335) - (35,533) (2,150) 135,018 - At Jan 2019 (97,335) - (35,533) (2,150) 135,018 - Acquired through business combination

(9,519) 23,670 (56,620) 15 42,454 -

To profit or loss 22,479 (16,091) 9,529 (9,592) (6,325) - Foreign exchange 7 (159) 420 24 (292) - At 31 December 2019 (84,368) 7,420 (82,204) (11,703) 170,855 - The Group has US$1,262.7 million (2018: US$744.6 million) in deductible temporary differences for which no deferred tax is recognized, none of which will expire. At the balance sheet date, there were no temporary differences associated with undistributed earnings of subsidiaries, and accordingly no deferred tax liabilities have been recognized.

24. Share capital

Number of shares

$’000

At 31 December 2018 and 31 December 2019 10,000 10 IHS Netherlands Holdco B.V. issued all its 10,000 authorized shares at a value of US$10,000 on incorporation. The shares have a par value of US$1 each. As at year end, the share capital remains unpaid and, although payment can be called up at any time, also remains not called up. There were no shares issued during the period (2018: nil).

25. Other reserves


comprehensive income reserve

Foreign exchange

translation reserve

Loss on transaction

between owners Total

$’000 $’000 $’000 $’000 At 1 January 2018 12 (243,836) - (243,824) Other comprehensive (loss)/ gain (2) 6,920 - 6,918 At 31 December 2018 10 (236,916) - (236,906)

At 1 January 2019 10 (236,916) - (236,906) Reserves acquired through group restructuring (note 27) (48,694) (48,694) Other comprehensive gain 1 644 - 645 Transactions with owners - - (85,522) (85,522) At 31 December 2019 11 (284,966) (85,522) (370,477)


56


25. Other reserves (continued) Fair value through other comprehensive income reserve

This reserve is the accumulated gains and losses on the fair valuation of financial assets carried at profit and loss through other comprehensive income. It is a non-distributable reserve.

Foreign exchange translation reserve

This reserve is the accumulated exchange gains and losses arising from the translation of foreign operations from those operations’ functional currencies to the Group’s reporting currency. It is a non-distributable reserve.

(Loss) / gain on transaction between owners

Transactions with owners of US$85.5 million represents the reversal of remaining, unwound fair valuation adjustments on initial recognition of the mostly interest free loans from IHS Holding Limited and IHS Netherlands (Interco) Cöoperatief U.A. following the maturity of the initial loan terms and replacement with revised loan terms from both lenders during the year.

26. Accumulated deficit

2019 2018 $’000 $’000 Opening balance (355,806) (241,270) Reserves acquired through group restructuring (note 28) 323,162 - Transactions with owners of the company 323,162 - Loss for the period (64,282) (114,536) At 31 December (96,926) (355,806)

The directors proposed that the loss for the period be added to the accumulated deficit; the financial statements have been prepared including this proposal.

27. Cash generated from operations

2019 2018 $’000 $’000 Loss before income tax (79,832) (86,198) Adjustments: Depreciation of property, plant and equipment (note 12) 146,130 80,031 Impairment of property, plant and equipment (note 12) 9,197 3,514 Impairment of land rent (note 16.1) - 121 Amortization of intangible assets (note 13) 12,845 10,228 Amortization of prepaid rent (note 16.1) 3,162 9,242 Loss on disposal of property, plant and equipment (Note 7) 1,089 210 Insurance income (note 8) (1,379) (686) Finance costs (note 9.2) 229,105 205,945 Finance income (note 9.1) (22,059) (15,256) Impairment of inventory (note 17) - 292 Loss allowance on receivables (note 7) 20,955 35,868 Impairment of withholding taxes (note 7) 47,402 12,873 Cash generated from operations before working capital changes 366,615 256,184 Changes in working capital (Increase) in inventories (12,367) (1,301) Decrease/(Increase) in trade and other receivables (excluding prepaid rent) 14,006 (57,237) (Decrease)/Increase in trade and other payables (53,747) 32,757 Increase/(decrease) in amounts due from related parties 263,536 (54,249) (Increase)/decrease in amounts due to related parties (241,123) 62,464 Net movement in working capital (29,695) (17,566)

Cash generated from operations 336,920 238,618

†Included within loss from disposal of property, plant and equipment is an amount of US$76,000 related to loss or gain on termination of finance lease liabilities.


57


28. Business combinations

On 18 September 2019, the group underwent a restructuring in anticipation of the 2025 Notes and 2027 Notes issue. The entire share capital of Nigeria Tower Interco B.V. (the immediate parent company of INT Towers Limited) previously held by IHS Netherlands (Interco) Coöperatief U.A. was transferred to IHS Netherlands Holdco B.V.

At the time of the restructuring, all entities were either directly or indirectly owned by IHS Holding Limited and the restructuring was therefore considered to be a transfer of an interest in subsidiaries between parties under common control. The Group elected to apply predecessor accounting to the transaction which involves accounting for the carrying amounts of assets and liabilities of the acquired entities from the consolidated financial statements of the highest entity that has common control for which consolidated financial statements are prepared. These amounts include any goodwill (and other fair value adjustments) recorded at the consolidated level for the acquired entities. The results of this approach were that:

the acquired assets and liabilities were recorded at their existing carrying values rather than at fair value;

no new goodwill was recorded as a result of the group restructuring;

upon consolidation, the difference between the net asset value of the transferred businesses and the carrying value of the investments held by IHS Netherlands (Interco) Coöperatief U.A. is recorded through accumulated deficit and foreign currency translation reserve.

The relevant balances at 18 September 2019 are as follows: Nigeria Tower INT Towers Interco B.V. Limited $’000 $’000 Property, plant & equipment - 561,149 Right of use asset - 123,765 Intangible assets - 446,482 Due from related parties - 143,932 Trade and other receivables - 121,671 Inventories - 26,619 Cash at bank - 112,425 Financial derivatives - (46) Trade and other payables (14,296) (216,789) Income tax payable (30) (2,232) Provisions for other liabilities and charges - (6,521) Lease liabilities - (5,102) Borrowings - (645,537) Amounts due to related parties (18) (371,004) (14,344) 288,812

Share capital - 60 Share premium 200,076 171,381 Retained earnings (214,420) 272,953 Currency translation reserve - (48,694) Other reserves - (106,888) Total equity (14,344) 288,812

29. Related parties

29.1 Subsidiaries

IHS Netherlands Holdco B.V. ('the Parent') is the parent of the following related parties at the year-end

Subsidiary Country of incorporation % equity held (directly or indirectly*)

IHS Netherlands NG1 B.V. Netherlands 100% IHS Netherlands NG2 B.V. Netherlands 100% IHS Nigeria Limited† Nigeria 100%* IHS Towers NG Limited† Nigeria 100%* Tower Infrastructure Company Limited† Nigeria 100%* IHS Towers Netherlands FinCo NG B.V. Netherlands 100%* Nigeria Tower Interco B.V. Netherlands 100% INT Towers Limited† Nigeria 100%* †All operating subsidiaries provide telecommunication support services as their principal activity.


58


29. Related parties (continued)

29.1 Subsidiaries (continued)

IHS Holding Limited is the ultimate parent and controlling party of IHS Netherlands Holdco B.V. IHS Holding Limited is the ultimate parent of the following related parties with which the Group has transacted: Subsidiary Country of incorporation % equity held by IHS

Holding Limited indirectly Global Independent Connect Limited Nigeria 100% IHS Netherlands (Interco) Cöoperatief U. A. Netherlands 100%

29.2 Key management personnel

Key management includes the Management Board. The compensation paid or payable to key management for employee services is shown below:

2019 2018 Key management compensation $'000 $'000

Salaries and other short-term employee benefits 2,369 1,757 Directors’ emoluments 237 19 Post-employment benefits 37 35 Amounts paid to management entity

5 5

2,648 1,816

29.3 Loans and balances with related parties

Balances due to and from related parties are trade balances and non-interest-bearing loans. These are recognized at amortized cost. Below are the year end balances of loans to and from related parties at end of the reporting period. The short-term trade balances can be called upon at any time; the settlement terms related to the long-term loans are described below the tables.

Current 2019 2018 $’000 $’000 Balances resulting from amounts paid by IHS Nigeria Limited to related parties IHS Netherlands (Interco) Cöoperatief U.A. 327 326

Balances resulting from amounts paid by IHS Nigeria Limited on behalf of related parties

IHS Holding Limited - 3,432 Balances resulting from amounts paid by IHS Towers NG Limited on behalf of related parties

IHS Holding Limited 238 - Balances resulting from amounts paid by IHS Netherlands Holdco B.V. on behalf of related parties

IHS Netherlands (Interco) Coöperatief U.A. 4 5 Balances resulting from amounts paid by INT Towers Limited on behalf of related parties

IHS Holding Limited 264 - Global Independent Connect Limited 1,371 - 1,635 - Total amounts due from related parties 2,204 3,763 Current Balances resulting from amounts paid by related parties on behalf of IHS Towers NG Limited

INT Towers Limited - 3,590 IHS Netherlands (Interco) Coöperatief U.A. 49 49 IHS Holding Limited 248 10 297 3,649 Balances resulting from amounts paid by related parties on behalf of IHS Netherlands Holdco B.V.

IHS Netherlands (Interco) Coöperatief U.A. 1,534 1,279


59


29. Related parties (continued) 29.3 Loans and balances with related parties (continued)

Current 2019 2018 $’000 $’000 Balances resulting from amounts paid by related parties on behalf of IHS Nigeria Limited

INT Towers Limited - 2,014 IHS Holding Limited 2,261 - 2,261 2,014 Balances resulting from amounts paid by related parties on behalf of Nigeria Tower Interco B.V.

IHS Netherlands (Interco) Coöperatief U.A. 8 - IHS Holding Limited 94 - 102 - Total current amounts due to related parties 4,194 6,942 Non-current Loans from related parties owing by IHS Nigeria Limited

IHS Holding Limited 494,625 684,527 Loans from related parties owing by IHS Towers NG Limited IHS Holding Limited 45,063 8,586 Loans from related parties owing by INT Towers Limited IHS Netherlands (Interco) Coöperatief U.A. 80,624 - IHS Holding Limited 67,783 - 148,407 - Total non-current amounts due to related parties 688,095 693,113

The loans from the ultimate parent company (IHS Holding Limited) and IHS Netherlands (Interco) Coöperatief U.A. are recognized at amortized cost. The loans from IHS Holding are US Dollar denominated loans, accruing interest at a rate of 9.5% (2018: Interest free loans accruing interest at a rate of 5% to 7% only in the year of maturity). The loans have been recognized at fair value on initial recognition with no difference between the nominal and fair value being recognized in other capital reserves. In 2018 the loans were discounted to their fair value on the date of issue, using the fair value market rate of interest at the time of issue; these rates range between 6.7% and 9.0%. Each tranche drawn down against the intercompany loan is due to the lender 10 years after the date of the drawdown. The loans are due for repayment starting in October 2029, with interest being payable quarterly in arrear only in the final two years of the loan term. The loans are unsecured.

29.4 Transactions with related parties

2019 2018 $’000 $’000 IHS Nigeria Limited had the following transactions with related parties: Operational transactions Net recharges from IHS Holding Limited for group costs (7,436) (3,569) Management fee recharges to INT Towers Limited under the technical service agreement

10,790 5,836

Recharges of capital expenditure from INT Towers Limited (53,587) (23,735) Net recharges to INT Towers Limited for operational costs1 9,047 9,116 Transactions under financing arrangements Principal and interest repayments to IHS Holding Limited2 (369,186) - Effective interest on loans from IHS Holding Limited2 54,157 47,724


60



29.4 Transactions with related parties (continued)

2019 2018 IHS Towers NG Limited had the following transactions with related parties: $’000 $’000 Operational transactions Capital expenditure recharges from INT Towers Limited (824) (77) Net purchases from INT Towers Limited for operational costs1 2,004 (423) Transactions under financing arrangements Loan received from IHS Holding Limited 35,000 - Principal and interest repayments to IHS Holding Limited2 (8,883) - Effective interest on loans from IHS Holding Limited2 2,108 745 INT Towers Limited had the following transactions with related parties: Principal and interest repayment to IHS Holding Limited2 (45,748) - Principal and interest repayment to IHS Netherlands (Interco) Coöperatief U.A2 (28,530) - Effective interest on loans from IHS Holding Limited2 2,500 - Effective interest on loans from IHS Netherlands (Interco) Coöperatief U.A. 2 2,513 745 IHS Netherlands Holdco B.V. had the following transactions with related parties: Net costs paid on behalf of the company by: IHS Netherlands (Interco) Coöperatief U.A. - - IHS Holding Limited 255 1,279

1These are costs such as diesel, insurance and transport that are procured for the operations of all Nigerian group entities and recharged to the relevant related parties at the cost incurred. The Group procures these costs in one entity in order to take advantage of bulk discounts which are then passed the cost down to individual related parties in the group. All amounts relating to INT Towers Limited represent recharges up to 17 September 2019, after which INT Towers Limited became a part of the Group.

2The IHS Holding Limited and IHS Netherlands (Interco) Coöperatief U.A. loans accrue interest at a rate of 9.5%.

30. Contingent liabilities and capital commitments

30.1 Capital commitments

The Group was committed to the supply of property, plant and equipment of about US$83.2 million as at 31 December 2019 (2018: US$75.2 million).

30.2 Operating lease commitments

Commitments disclosed as non-cancellable operating leases under IAS 17 have been recorded as lease liabilities from 1 January 2019, with the exception of short-term and low-value leases. The aggregate amounts of minimum lease payments under non-cancellable operating leases as at 31 December 2018, prepared and reported under IAS 17 were as follows:

2018 $’000

Not later than 1 year 7,398 Later than 1 year but no later than 5 years 9,814 Later than 5 years 7,349

24,561

All leases make provisions for renewals at the option of the Group after the initial 5 or 10 year term.

Leases are paid in advance with payment cycles ranging between 5 and 10 years in advance. The terms of the operating leases make provisions for rental escalations of between 10% to 40% in each renewal period; this also depends on whether the payment is for the first or second renewal cycle.

There are no purchase options in the lease agreements.


61


30. Contingent liabilities and capital commitments (continued)

30.3 Contingent liabilities

The Group has contingent liabilities in respect of legal claims arising in the ordinary course of business. The Group reviews these matters in consultation with internal and external legal counsel to make a determination on a case by case basis whether a loss from each of these matters is probable, possible or remote.

The Group’s contingent liabilities in respect of litigations and claims amounted to US$2.0 million (2018: US$2.6 million) at the end of the reporting period.

31. Events after the reporting period

Coronavirus (COVID-19)






Please also see disclosures in note 2.1.1 Going Concern.



The Nigerian CBN and NAFEX Naira rates have both devalued against the US dollar since 31 December 2019 from a NAFEX rate of Naira365:US$1 to Naira387:US$1 at 31 March 2020 (CBN Naira307:US$1 to Naira361:US$1), as the Nigerian Government looks to stabilise the economy and also protect current foreign exchange reserves.


The financial statements were authorized and approved on 6 April 2020 by the Management Board.





IHS NETHERLANDS HOLDCO B.V. COMPANY FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

62

COMPANY STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

2019 2018 Note $'000 $'000

Revenue - - Cost of sales - - Gross profit

- -

Administrative expenses 3 (720) (575) Other income 5 - Operating loss

(715) (575)

Finance income 4.1 179,283 78,235 Finance costs 4.2 (86,783) (164,806) Profit/(loss) before income tax

91,785 (87,146)

Income tax expense 5 (407) (187) Profit/(loss) for the period

91,378 (87,333)

Attributable to:

Owners of the Company 13 91,378 (87,333) Profit/(loss) for the period

91,378 (87,333)

Other comprehensive income Items that may be reclassified to profit or loss: Exchange differences on translation of foreign operations

- -

Other comprehensive income for the period net of taxes

- -

Attributable to:

Owners of the Company

- -

Other comprehensive income for the period net of taxes

- -

Attributable to:

Owners of the Company

91,378 (87,333)

Total comprehensive income/(loss) for the period

91,378 (87,333)

The accompanying notes are an integral part of these financial statements.


63

COMPANY STATEMENT OF FINANCIAL POSITION


31 Dec 2019 31 Dec 2018 Note $'000 $'000

Assets Non-current assets Investments 6 1,691,709 20 Derivative financial instruments 7 42,604 6,920 Loans due from related parties 16.3 1,382,979 808,727

3,117,292 815,667 Current assets Other receivables 8 588 169 Loans due from related parties 16.3 29,075 13,787 Amounts due from related parties 16.3 5,648 663 Cash and cash equivalents 9 5,160 72,388

40,471 87,007 TOTAL ASSETS 3,157,763 902,674

Liabilities Current liabilities Trade and other payables 10 1,828 295 Income tax payable 5 450 177 Borrowings 11 28,738 13,534 Amounts due to related parties 16.3 6,955 71,268

37,971 85,274 Non-current liabilities Borrowings 11 1,318,043 798,718

1,318,043 798,718 TOTAL LIABILITIES 1,356,014 883,992 Equity attributable to owners of the Company Share capital 12 10 10 Accumulated retained earnings reserve 13 110,050 18,672 Other reserves 14 1,691,689 - Total equity 1,801,749 18,682 TOTAL EQUITY AND LIABILITIES 3,157,763 902,674


64

COMPANY STATEMENT OF CHANGES IN EQUITY

Share capital

(note 12)

Accumulated retained

earnings reserve (note 13)

Other reserves (note 14)

Total equity

$'000 $'000 $'000 $'000 Balance at 1 January 2018 10 106,005 - 106,015 Loss for the period - (87,333) - (87,333) Other comprehensive income - - - - Total comprehensive loss - (87,333) - (87,333) Balance at 31 December 2018 10 18,672 - 18,682

Balance at 1 January 2019 10 18,672 - 18,682 Receipt of investment in subsidiaries - - 1,691,689 1,691,689 Total transactions with owners of the Company - - 1,691,689 1,691,689 Profit for the period - 91,378 - 91,378 Other comprehensive income - - - - Total comprehensive income - 91,378 - 91,378 Balance at 31 December 2019 10 110,050 1,691,689 1,801,749 All reserves are attributable to the owners of the Company. The accompanying notes are an integral part of these financial statements.


65

COMPANY STATEMENT OF CASH FLOWS

2019 2018 Note $'000 $'000

Cash flows from operating activities Cash utilized in operations 15 (68,933) (247) Income taxes (paid)/refunded 5 (134) 10 Net cash used in operating activities (69,067) (237) Cash flows from investing activities Interest income received 4.1 796 1,034 Loans granted to related parties (1,300,000) - Loans repaid by related parties 800,000 - Interest received from related party loans 71,699 77,200 Net cash (used in) / generated from investing activities (427,505) 78,234 Cash flows from financing activities Bonds received 1,300,000 - Bonds repaid (800,000) - Interest paid 11 (70,656) (76,000) Net cash generated from / (used in) financing activities 429,344 (76,000) Net (decrease)/increase in cash and cash equivalents (67,228) 1,997 Cash and cash equivalents at beginning of period 72,388 70,391 Effect of movements in exchange rates on cash - - Cash and cash equivalents at end of period 9 5,160 72,388



66

NOTES TO THE COMPANY FINANCIAL STATEMENTS

1. General information and basis of preparation

IHS Netherlands Holdco B.V. (the ‘Company’) is a company domiciled in the Netherlands. The address of the Company’s registered office is Haagsche Hof, Parkstraat 83, 2541 JG, The Hague, The Netherlands. The Company is registered in the Commercial Register No. 66017912. The financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (“IFRS”) and with Part 9 of Book 2 of the Dutch Civil Code, including interpretations issued by the IFRS Interpretations Committee (IFRS IC) applicable to companies reporting under IFRS.

Where required, equivalent disclosures are given in the financial statements. The financial statements have been prepared on the historical cost basis except for the re-measurement of certain financial instruments that are measured at fair values at the end of each reporting period.

Summary of significant accounting policies

The principal accounting policies adopted are the same as those set out in note 2 to the consolidated financial statements except as noted below.

Investments in subsidiaries and associates are stated at cost less, where appropriate, provisions for impairment.

Proceeds bonds have been recognized at fair value on initial recognition. These proceeds bonds are classified as financial assets measured at fair value through profit and loss. They do not meet the criteria for classification at amortised cost, because their cash flows do not represent solely payments of principal and interest due to the embedded derivatives described in note 7.

For assets measured at fair value, gains and losses will either be recorded in the statement of profit or loss or in other comprehensive income.

The only critical accounting judgement that would have a significant effect on the amounts recognized in the parent company financial statements at the balance sheet date is related to the valuation of the options embedded in the IHS Netherlands Holdco B.V. listed bond; please refer to note 3.4 of the consolidated financial statements for the details.

2. Financial risk management

The Company's activities expose it to a variety of financial risks including market risk (foreign exchange risk and interest rate risk), credit risk and liquidity risk. The Management Board has overall responsibility for the establishment and oversight of the Company’s risk management framework. The Board has established the Executive Risk Management Committee, who is responsible for developing and monitoring the Company’s risk management policies. The committee reports regularly to the Management Board on its activities.

The Company’s risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly by the executive management to reflect changes in market conditions and the Company’s activities. The Company, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.

The Board oversees how management monitors compliance with the Company’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Company. The Board is supported by various management functions that check and undertake both regular and ad hoc reviews of compliance with established controls and procedures.

Derivatives are only used for economic hedging purposes and not as speculative investments. Derivatives do not meet the criteria for hedge accounting and are therefore classified as held at fair value through profit and loss for accounting purposes.

The Company is exposed to very limited foreign exchange risk in respect of purchases of services denominated in currencies other than US Dollar. The Company also has no exposure to interest rate risk as the listed bonds and loans receivable from subsidiaries are both at fixed interest rates until maturity. These two risks are therefore not described in more detail below.

(a) Derivative financial instruments

Embedded options — The 2021 Notes issued in October 2016 and the 2025 Notes and 2027 Notes issued in September 2019 have embedded put and call options which are accounted for as derivatives at fair value through profit and loss. The call options allow early redemption at the option of the issuer, and the put options allow early redemption at the option of the holder upon the occurrence of specified events.


67

NOTES TO THE COMPANY FINANCIAL STATEMENTS (CONTINUED)


(b) Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations. Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures to customers, including outstanding receivables and committed transactions. Credit risk is managed on a Company basis.

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the end of the reporting period was:

2019 2018 $'000 $'000 Cash at bank (note 9) 5,160 72,388 Other receivables (note 8) 318 153 Amounts/loans due from related parties (note 16.3) 1,417,702 823,177 Derivative financial instruments (note 7) 42,604 6,920

1,465,784 902,638

(i) Credit quality of financial assets

For banks and financial institutions, only independently rated parties with a minimum rating of “B” are accepted. The risk control department assesses the credit quality of a customer, taking into account its financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the Board. The compliance with credit limits by customers is regularly monitored by line management.

The financial assets are further broken down into:

Other

receivables

Derivative

financial instruments

Amounts / Loans due

from related parties

Cash at

bank

Total 2019 $'000 $’000 $’000 $'000 $'000 Neither past due nor impaired 318 42,604 1,417,702 5,160 1,465,784 318 42,604 1,417,702 5,160 1,465,784

2018 Neither past due nor impaired 153 6,920 823,177 72,388 902,638 153 6,920 823,177 72,388 902,638

An analysis of the credit quality of financial assets that are neither past due nor impaired is presented as follows: 2019 2018 $’000 $’000 Cash at bank A 5,160 72,388 Other receivables and amounts due from related parties (including the embedded derivative liabilities)

Not rated

1,460,624

830,250

(c) Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.

The Company has a clear focus on ensuring sufficient access to capital to finance growth and to refinance maturing debt obligations. The Company sources funds for the settlement and servicing of debt obligations from the proceeds bonds issued to the subsidiaries, it is therefore dependent on the liquidity risk approach of the subsidiaries. Typically, the credit terms with clients at the subsidiary level are more favorable compared to payment terms to its vendors in order to help provide sufficient cash on demand to meet expected operational expenses, including the servicing of financial obligations. This excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters.


68



(c) Liquidity risk (continued)

The table below analyses the Company’s financial liabilities including estimated interest payments and excluding the impact of netting agreements into relevant maturity groupings based on the remaining period from the end of the reporting period to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.


Within 1 year

2 - 3 years

4 – 5 years

6 - 10 years

2019 $’000 $'000 $'000 $'000 $'000 Other payables (note 10) 1,828 1,828 - - - Borrowings (note 11) 2,007,938 99,625 199,250 199,250 1,509,813 Amounts due to related parties (note 16.3) 6,955 6,955 - - - 2,016,721 108,408 199,250 199,250 1,509,813 2018 $’000 $'000 $'000 $'000 $'000 Other payables (note 10) 295 295 - - - Borrowings (note 11) 1,021,667 76,000 945,667 - - Amounts due to related parties (note 16.3) 71,268 71,268 - - - 1,093,230 147,563 945,667 - -

(d) Capital risk management

The Company’s objectives when managing capital are to safeguard its ability to continue as a going concern in order to provide returns for noteholders. The ability of the Company to continue as a going concern is dependent on the way the subsidiaries operate and manage their capital risk. Capital risk management is therefore assessed on a group basis; this is described in detail in Note 4 to the consolidated financial statements.

The Group is in compliance with the restrictive debt covenants related to the listed bonds and the covenants related to the senior credit facilities as at 31 December 2019.

(e) Fair value estimation

Carrying

value Total fair

value Carrying

value Total fair

value 2019 2019 2018 2018 $'000 $'000 $'000 $'000 Financial assets Loans due from related parties (note 16.3) 1,412,054 1,412,054 822,514 822,514 Amounts due from related parties (note 16.3) 5,648 5,648 663 663 1,417,702 1,417,702 823,177 823,177

Financial liabilities Bonds (note 11) 1,346,781 1,405,238 812,252 819,134 Other payables (note 10) 1,828 1,828 295 295 Amounts due to related parties (note 16.3) 6,955 6,955 71,268 71,268 1,355,564 1,414,021 883,815 890,697

The fair value of the bonds is determined by reference to the market value and are categorized as level 1. The derivative financial instruments, being the only financial liabilities carried at fair value, are categorized as level 2 and are measured using an option pricing model; refer to note 7 for more information.

The carrying values of all other current assets and current liabilities are not materially different from their fair values.


69



(e) Fair value estimation (continued)

Financial instruments by category

The Company's financial assets are categorized as follows:

Loans and receivables

At fair value through profit

or loss Total 2019 $'000 $’000 $'000 Financial assets Other receivables (note 8) 318 - 318 Loans due from related parties (note 16) - 1,412,054 1,412,054 Amounts due from related parties (note 16) 5,648 - 5,648 Cash and cash equivalents (note 9) 5,160 - 5,160 Derivative financial instruments (note 7) - 42,604 42,604 11,126 1,454,658 1,465,784

2018 $'000 $’000 $'000 Financial assets Other receivables (note 8) 153 - 153 Loans due from related parties (note 16) - 822,514 822,514 Amounts due from related parties (note 16) 663 - 663 Cash and cash equivalents (note 9) 72,388 - 72,388 Derivative financial instruments (note 7) - 6,920 6,920 73,204 829,434 902,638


The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined by using valuation techniques. These valuation techniques maximize the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2. The loans due from related parties and the options embedded in the bond are included in level 2. Their fair values are determined based on mark-to-market values provided by the counterparty financial institutions or valuation techniques using observable market data. The loans due from related parties are a level 2 instrument because they contain an interest margin component which is not included in the referenced market value.

The Company's financial liabilities are categorized as follows:

Amortized Cost

At fair value through profit

or loss

Total

2019 $'000 $’000 $’000 Financial liabilities Bonds (note 11) 1,346,781 - 1,346,781 Amounts due to related parties (note 16) 6,955 - 6,955 Other payables (note 10) 1,828 - 1,828

1,355,564 - 1,355,564

2018 $'000 $’000 $’000 Financial liabilities Bonds (note 11) 812,252 - 812,252 Amounts due to related parties (note 16) 71,268 - 71,268 Trade payables (note 10) 295 - 295

883,815 - 883,815


70


3. Administrative expenses

2019 2018 $’000 $’000

Audit fee 344 348 Professional fees 326 217 Staff costs 1 - Others 49 10 720 575

Audit fees breakdown for the consolidated group: 2019

PwC Netherlands

(Company auditor) Other PwC Network Total PwC

$’000 $’000 $’000

Audit of the financial statements 344 617 961

Tax advisory services 9 - 9

Other non-audit services* 825 702 1,527

1,178 1,319 2,497

*Other non-audit services are primarily as reporting accountants in relation to the Notes offering.

Audit fees breakdown for the consolidated group: 2018

PwC Netherlands

(Company auditor) Other PwC Network Total PwC

$’000 $’000 $’000

Audit of the financial statements 348 361 709

Tax advisory services 0 1 1

Other non-audit services 2 1 3

350 363 713

The above table shows the amounts incurred by the Group and paid or payable to PwC for audit and non-audit services. Of the total fees of US$1,490,000 (2018: US$713,000), only US$620,000 (2018: US$350,000) was incurred by the Company while the remainder was incurred by other companies in the Group.

4. Finance income and costs

4.1 Finance income

2019 2018 $’000 $’000 Interest income - bank deposits 796 1,034 Interest income - related party loans 84,053 77,200 Foreign exchange gain 5 1 Gain on revaluation of loans receivable from related parties 77,181 - Gain on revaluation of derivative financial assets 17,248 - 179,283 78,235 4.2 Finance costs

2019 2018 $’000 $’000 Interest expense - third party borrowings 86,746 76,309 Loss on revaluation of derivative financial liabilities - 32,110 Foreign exchange loss 37 9 Fair valuation of loans due from related parties - 56,378 86,783 164,806


71


5. Taxation

2019 2018 $’000 $’000 Companies income tax 407 187 Total taxes 407 187

Reconciliation of effective tax rate

2019 2018 $’000 $’000 Profit/(loss) before income tax 91,785 (87,146)

Tax calculated at domestic tax rates applicable to profits/(loss) in respective countries (Netherlands 20% to 25%) 22,293 (21,192) Tax effects of: Income not subject to tax (21,672) (217) Expenses not deductible for tax purposes 2 21,596 Prior year over provision (216) - Total taxes 407 187

Current income tax assets - - Current income tax liabilities (450) (177) (450) (177)

The movement in the current income tax is as follows: Opening balance (177) 20 Charged to profit or loss (407) (187) Paid/(refunded) during the period 134 (10) At 31 December (450) (177)

*Deferred income tax assets are recognized for deductible temporary differences and tax losses carried forward only to the extent that the realization of the related tax benefits are expected to be met through the reversal of taxable temporary differences and future taxable profits. 6. Investments

The investments in subsidiaries are as follows:

Type of investment

Country of Incorporation

2019 Company % of interest held $'000 IHS Netherlands NG1 B.V. Direct The Netherlands 100% 10 IHS Netherlands NG2 B.V. Direct The Netherlands 100% 10 IHS Nigeria Limited Indirect Nigeria 100% - IHS Towers NG Limited Indirect Nigeria 100% - IHS Towers Netherlands FinCo NG B.V.

Indirect The Netherlands 100% -

Tower Infrastructure Company Limited Indirect Nigeria 100% - Nigeria Tower Interco B.V.* Direct The Netherlands 100% 1,691,689 INT Towers Limited* Indirect Nigeria 100% - 1,691,709

*On 18 September 2019 IHS Netherlands (Interco) Coöperatief U.A. transferred the shares it held (representing 100% ownership) in Nigeria Tower Interco B.V. to IHS Netherlands Holdco B.V. INT Towers Limited is a fully owned subsidiary of Nigeria Tower Interco B.V. Refer to note 14 for more information.

Type of investment

Country of Incorporation

2018 Company % of interest held $'000 IHS Netherlands NG1 B.V. Direct The Netherlands 100% 10 IHS Netherlands NG2 B.V. Direct The Netherlands 100% 10 IHS Nigeria Limited Indirect Nigeria 100% - IHS Towers NG Limited Indirect Nigeria 100% - IHS Towers Netherlands FinCo NG B.V. Indirect The Netherlands 100% - Tower Infrastructure Company Limited Indirect Nigeria 100% - 20


72


7. Derivative financial instruments

The amounts recognized in the statement of financial position are as follows: 2019 2018 $'000 $'000 Call and put options on listed bond 42,604 6,920

The derivatives represent the fair value of the put and call options embedded within the terms of the 2025 Notes and 2027 Notes, and for 2018, within the terms of the redeemed 2021 Notes. The call options give the Company the right to redeem the bond instruments at a date prior to the maturity date (17 March 2025 and 17 September 2027 respectively), in certain circumstances and at a premium over the initial notional amount. The put option provides the holders with the right (and the Company with an obligation) to settle the 2025 Notes and 2027 Notes before their redemption date in the event of a change in control (as defined in the terms of the 2025 Notes and 2027 Notes, which also includes a major asset sale), and at a premium over the initial notional amount. The options are fair valued using an option pricing model that is commonly used by market participants to value such options and makes maximum use of market inputs, relying as little as possible on the entity’s specific inputs and making reference to the fair value of similar instruments in the market. Thus, it is considered a level 2 financial instrument in the fair valuation hierarchy of IFRS 13. The key assumptions in determining the fair value are, the initial fair value of the bond (assumed to be priced at 100% on issue date), the credit spread (derived using Bloomberg analytics at issuance and based on credit market data thereafter) and the yield curve.

8. Other receivables

2019 2018 $’000 $’000

Other receivables 318 153 VAT Receivable 270 16 588 169

The fair values of trade and other receivables approximates their carrying amounts.

9. Cash and cash equivalents

2019 2018 $’000 $’000

Cash at bank 5,160 72,388 5,160 72,388

There are no bank overdrafts or restricted cash reserves as at the period end. The fair value of cash and cash equivalents approximates their carrying amount.

10. Trade and other payables

2019 2018 $’000 $’000

Trade payables - 15 Other payables 1,828 280 1,828 295

The fair values of trade and other payables approximates their carrying amounts.


73


11. Borrowings

2019 2018 $’000 $’000 Current Bonds 28,738 13,534 28,738 13,534

Non-current Bonds 1,318,043 798,718 1,318,043 798,718

Total borrowings 1,346,781 812,252 The reconciliation of the movement in the Company’s borrowings is shown below:

2019 2018 $’000 $’000 Opening balance 812,252 811,943 Interest expense 86,746 76,309 Interest paid (70,656) (76,000) Bonds issued 1,300,000 - Bonds repaid (800,000) - Initial recognition of embedded derivative 18,439 - At 31 December 1,346,781 812,252

Borrowings is made up of the following:

IHS Netherlands Holdco B.V. senior facilities – bank borrowings

IHS Netherlands Holdco B.V. is a joint guarantor to the facilities agreement dated 3 September 2019, or the ‘Senior Credit Facilities’. Refer to note 20.1 of the consolidated accounts for further details.

IHS Netherlands Holdco B.V. senior facilities – listed borrowings

IHS Netherlands Holdco B.V. issued $800 million 9.5% Senior Notes due 2021 (the “2021 Notes”) under a Senior Notes Indenture dated 27 October 2016 between, inter alios, the Issuer (IHS Netherlands Holdco B.V.), the Guarantors (each of IHS Netherlands NG1 B.V., IHS Nigeria Limited, IHS Netherlands NG2 B.V., IHS Towers NG Limited, Tower Infrastructure Company Limited and IHS Towers Netherlands FinCo NG B.V.) and the Trustee (Citibank N.A., London branch). The 2021 Notes were fully redeemed at a premium on 28 October 2019 and are no longer outstanding.

IHS Netherlands Holdco B.V. issued $500 million 7.125% Senior Notes due 2025 (the “2025 Notes”) and $800 million 8.0% Senior Notes due 2027 (the “2027 Notes”) pursuant to a Senior Notes Indenture dated 18 September 2019 between, inter alios, the Issuer (IHS Netherlands Holdco B.V.), the Guarantors (each of IHS Netherlands NG1 B.V., IHS Nigeria Limited, IHS Netherlands NG2 B.V., IHS Towers NG Limited, INT Towers Limited and Nigeria Tower Interco B.V.) and the Trustee (Citibank N.A., London branch). The 2025 Notes and 2027 Notes are listed on The International Stock Exchange (TISE).

The 2025 Notes and 2027 Notes are the senior obligations of the Issuer and rank equal in right of payment with all of the issuer’s existing and future indebtedness that is not subordinated in right of payment to the Notes.

The 2025 Notes and 2027 Notes have a tenor of five and a half years and eight years respectively, from the relevant date of issue, interest is payable semi-annually in arrear on 18 March and 18 September of each year, beginning on 18 March 2020 and the principal is repayable in full on maturity.

Negative covenants of the Notes, among other things, restrict the ability of IHS Netherlands Holdco B.V. and its subsidiaries to:

incur or guarantee additional indebtedness and issue certain preferred stock; make certain restricted payments and investments, including dividends or other distributions; create or incur certain liens; enter into agreements that restrict the ability of restricted subsidiaries to pay dividends; transfer or sell certain assets; merge or consolidate with other entities; and enter into certain transactions with affiliates.


74


11. Borrowings (continued)

In addition, IHS Netherlands Holdco B.V. must provide to the Trustee, and to holders of the 2025 Notes and 2027 Notes, certain annual and quarterly reports.

The 2025 Notes and 2027 Notes have early redemption features whereby IHS Netherlands Holdco B.V. has the right to redeem the relevant notes before the maturity date, and the holders hold a right to request the early settlement of the Notes, in certain circumstances. The values of the respective call and put options are disclosed in note 7.

12. Share capital

Number of shares

$’000

Number of shares

$’000

2019 2019 2018 2018 Opening and closing balance 10,000 10 10,000 10

As at the year end, IHS Netherlands Holdco B.V. had issued all its 10,000 authorized shares at a value of US$10,000 on incorporation. The shares have a par value of US$1 each. As at the year end, the share capital remains unpaid and, although payment can be called up at any time, also remain not called up.

13. Accumulated retained earnings reserve

2019 2018 $’000 $’000 Opening balance as previously reported 18,672 242 Impact of IFRS 9 - 105,763 Revised opening balance 18,672 106,005 Profit/(loss) for the period 91,378 (87,333) At 31 December 110,050 18,672

The directors proposed that the profit for the year be added to the accumulated retained earnings reserve; the financial statements have been prepared including this proposal.

14. Other reserves

2019 2018 $’000 $’000 Opening balance - - Receipt of investment in subsidiary 1,691,689 - At 31 December 1,691,689 -

On 18 September 2019 IHS Netherlands (Interco) Coöperatief U.A. transferred the shares it held (representing 100% ownership) in Nigeria Tower Interco B.V. to IHS Netherlands Holdco B.V. INT Towers Limited is a fully owned subsidiary of Nigeria Tower Interco B.V. The Group has elected to use predecessor accounting for transfers of interest in subsidiaries between entities under common control (from the holding company to another subsidiary or between commonly controlled subsidiaries). The assets and liabilities of the transferred entities are incorporated into the consolidated financial statements at their carrying values on the date of the transfer, being the date that control was obtained. Appropriately, the investment in Nigeria Tower Interco B.V. is recognised initially at the difference carrying value of the investment in the accounts of IHS Netherlands (Interco) Coöperatief U.A. and the payments made for the investment by IHS Netherlands Holdco B.V. (nil).


75

NOTES TO THE COMPANY FINANCIAL STATEMENTS (CONTINUED) 15. Cash utilized in operations

2019 2018 $’000 $’000 Profit/(loss) before income tax as per statement of profit or loss and other comprehensive income

91,785 (87,146)

Adjustments: Finance costs (note 4.2) 86,783 164,806 Finance income (note 4.1) (179,283) (78,235) Operating profit before working capital changes (715) (575) Changes in working capital Increase in other receivables (2,652) (69) Increase/(decrease) in trade and other payables 3,731 (74) Increase in net amounts due from related parties (6,871) (163) (Decrease)/increase in net amounts due to related parties (62,426) 634 Net movement in working capital (68,218) 328 Cash utilized in operations (68,933) (247)

16. Related parties

16.1 Related party relationships

IHS Netherlands Holdco B.V. ('the Parent') is the parent of the following related parties at the year-end

Subsidiary Country of incorporation % equity held (directly or indirectly*)

IHS Netherlands NG1 B.V. Netherlands 100% IHS Netherlands NG2 B.V. Netherlands 100% IHS Nigeria Limited Nigeria 100%* IHS Towers NG Limited Nigeria 100%* Tower Infrastructure Company Limited Nigeria 100%* IHS Towers Netherlands FinCo NG B.V. Netherlands 100%* Nigeria Tower Interco B.V. Netherlands 100% INT Towers Limited Nigeria 100%*

The list above is a complete list of the entities in which the Company has a shareholding of 20% or more.

IHS Holding Limited is the ultimate parent and controlling party of IHS Netherlands Holdco B.V., IHS Netherlands (Interco) Cöoperatief U.A. is the intermediate parent of IHS Netherlands Holdco B.V.. IHS Holding Limited is the ultimate parent of the following related parties with which the Company has transacted:

Subsidiary Country of incorporation % equity held by IHS Holding Limited indirectly

IHS Netherlands (Interco) Cöoperatief U. A. Netherlands 100%

16.2 Key management personnel and directors

The compensation paid or payable to active directors by the company or its subsidiaries for employee services is shown below:

2019 2018 Key management compensation $'000 $'000

Salaries and other short-term employee benefits 1,260 796 Post-employment benefits 16 22 Amounts paid to management entity

5 5

1,281 823 None of the amounts above were paid to former directors or supervisory directors and there were no other transactions with or benefits provided to directors.


76



16.3 Loans and balances with related parties

There were no loans or advances and guarantees provided to directors as of 31 December 2019 or 31 December 2018. Current balances due to and from related parties are trade balances which are recognized at amortized cost. The short-term trade balances can be called upon at any time. The settlement terms related to the long-term loans are described below the tables.

2019 2018 $’000 $’000 Non-current assets Loans due from related parties:

IHS Nigeria Limited 961,617 569,207 IHS Towers NG Limited 250,486 239,520 INT Towers Limited 170,876 - Total non-current amounts due from related parties 1,382,979 808,727 Current assets Loans due from related parties: IHS Nigeria Limited 20,410 9,703 IHS Towers NG Limited 4,931 4,084 INT Towers Limited 3,734 - Total current portion of loans due from related parties 29,075 13,787 Balances resulting from amounts paid by IHS Netherlands Holdco B.V. on behalf of related parties

IHS Towers Netherlands FinCo NG B.V. 260 659 IHS Netherlands (Interco) Coöperatief U.A. 4 4 IHS Towers NG Limited 5,384 - Total current amounts due from related parties 34,723 14,450 Total amounts due from related parties 1,417,702 823,177 Current liabilities Cash owing to subsidiaries:

IHS Nigeria Limited - 69,969 IHS Netherlands NG1 B.V. 10 10 IHS Netherlands NG 2 B.V. 10 10

Balances resulting from amounts paid by related parties on behalf of IHS Netherlands Holdco B.V.:

IHS Nigeria Limited 5,073 - INT Towers Limited 328 - IHS Holding Limited 1,534 1,279 Total current amounts due to related parties 6,955 71,268

The loans to IHS Nigeria Limited, IHS Towers NG Limited and INT Towers Limited are US Dollar denominated proceeds bonds, in an aggregate principal amount of US$1.3 billion, divided between two tranches of US$500 million and US$800 million. The proceeds bonds accrue interest at a rate of 7.215% and 8.09% per annum respectively and have been recognized at fair value on initial and subsequent recognition. The proceeds bonds pay interest semi-annually in arrears on a date not later than 18 March and 18 September in each year and are due for repayment in full on 18 March 2025 and 18 September 2027 respectively. The proceeds bonds are unsecured, unsubordinated and unguaranteed obligations of each of IHS Nigeria Limited, IHS Towers NG Limited and INT Towers Limited

Embedded within the loans due from the subsidiaries are in-substance derivatives which reflect the potential future cash flow impacts of the embedded derivatives described in note 7. Because the proceeds bonds are financial assets, the fair values of these options are included within the fair value of the proceeds bonds. The carrying values of other related party receivable and payable balances approximate their fair values; these amounts are receivable or payable on demand.


77



16.4 Transactions with related parties

2019 2018 $'000 $'000 Interest charged on proceeds bonds issued to:

IHS Nigeria Limited 59,105 54,336 IHS Towers NG Limited 21,214 22,864 INT Towers Limited 3,734 -

Interest paid on behalf of:

IHS Towers Netherlands FinCo NG B.V. - 659

Net costs paid on behalf of the company by:

IHS Holding Limited 255 1,279

Cash refunded:

IHS Nigeria Limited (69,969) -

Excess/(shortfall) of bond costs paid on behalf of subsidiaries, net of costs repaid:

IHS Nigeria Limited (5,073) - IHS Towers NG Limited 5,328 - INT Towers Limited (328) -

17. Personnel

The average number of employees of the Company during the period, converted to full-time equivalents and broken down by activity, was nil.

The average number of employees working abroad amounted to nil.

18. Explanation of differences between group equity in the consolidated financial statements and shareholder’s equity in the company financial statements

The difference between the equity in the consolidated financial statements and company financial statements can be explained by:

2019 2018 $'000 $'000 Equity in consolidated financial statements

(467,393) (592,702)

Cumulative impact reconciled in the prior period 611,384 485,336 Impact of IFRS 9 - 105,763 Reserves value of restructured subsidiaries at 18 September 2019 (274,468) - Carrying value of received investment in subsidiary 1,691,689 - Profit/(Loss) of the Company eliminated upon consolidation 94,429 (88,488) Net loss of the subsidiaries for the period 61,231 115,691 Other comprehensive income of the subsidiaries (645) (6,918) Transactions with owners reflected in the equity of the subsidiaries 85,522 - Shareholders equity in company financial statements 1,801,749 18,682

The difference between the result in the consolidated financial statements and company financial statements for the period ended can be explained by:

2019 2018 $'000 $'000 Loss in consolidated financial statements

(63,637) (107,618)

Profit/(Loss) of the Company eliminated upon consolidation 94,429 (88,488) Net loss of the subsidiaries for the period 61,231 115,691 Other comprehensive income of the subsidiaries for the year/period (645) (6,918) Profit/(loss) in company financial statements 91,378 (87,333)


78


19. Contingencies and commitments

The Company had no contingent liabilities in respect of legal claims arising in the ordinary course of business or commitments for capital expenditure as at the period end (2018: nil).

20. Events after the reporting period

Coronavirus






Please also see disclosures in note 2.1.1 Going concern, of the consolidated financial statements.



The Nigerian CBN and NAFEX Naira rates have both devalued against the US dollar since 31 December 2019 from a Nafex rate of NGN365/US$1 to NGN387/US$1 at 31 March 2020 (CBN NGN307/US$1 to NGN361/US$1), as the Nigerian Government looks to stabilise the economy and also protect current foreign exchange reserves.


The financial statements were authorized and approved on 6 April 2020 by the Management Board.






79

OTHER INFORMATION

(a) Appropriation of profits

The articles of association of the Company contain no provisions regarding the appropriation or distribution of profits.

(b) Special rights holders

The articles of association of the Company contain no clauses for the provision of special rights to any shareholders.

JSJKX7MXCWQ2-209388568-23

PricewaterhouseCoopers Accountants N.V., Thomas R. Malthusstraat 5, 1066 JR Amsterdam, P.O. Box 90357,

1006 BJ Amsterdam, the Netherlands T: +31 (0) 88 792 00 20, F: +31 (0) 88 792 96 40, www.pwc.nl

‘PwC’ is the brand under which PricewaterhouseCoopers Accountants N.V. (Chamber of Commerce 34180285), PricewaterhouseCoopers Belastingadviseurs N.V.

(Chamber of Commerce 34180284), PricewaterhouseCoopers Advisory N.V. (Chamber of Commerce 34180287), PricewaterhouseCoopers Compliance Services B.V. (Chamber of Commerce 51414406), PricewaterhouseCoopers Pensions, Actuarial & Insurance Services B.V. (Chamber of Commerce 54226368), PricewaterhouseCoopers B.V. (Chamber of Commerce 34180289) and other companies operate and provide services. These services are governed by General Terms

and Conditions (‘algemene voorwaarden’), which include provisions regarding our liability. Purchases by these companies are governed by General Terms and Conditions of Purchase (‘algemene inkoopvoorwaarden’). At www.pwc.nl more detailed information on these companies is available, including these General Terms and Conditions and the General Terms and Conditions of Purchase, which have also been filed at the Amsterdam Chamber of Commerce.

Independent auditor’s report Financi al Statements

31 December 2019 1 Januar y 2019

IHS N etherl ands H ol dco B.V. Control e

Goedkeurend 31043693A004

KVK

Kvk N ummer uit DB ( nog te doen) Create SBR Extensi on

1.0 Amsterdam

28 Februar y 2020

To: the general meeting of IHS Netherlands Holdco B.V.

Report on the financial statements 2019

Our opinion In our opinion, the financial statements of IHS Netherlands Holdco B.V. (‘the Company’) give a true and fair view of the financial position of the Company and the Group (the Company together with its subsidiaries) as at 31 December 2019, and of its result and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union (EU-IFRS) and with Part 9 of Book 2 of the Dutch Civil Code.

What we have audited We have audited the accompanying 2019 financial statements of IHS Netherlands Holdco B.V., The Hague (‘the Company’). The financial statements include the consolidated financial statements of the Group and the Company financial statements.

The financial statements comprise:

• the consolidated and company statements of financial position as at 31 December 2019;

• the following statements for 2019: the consolidated and company statements of profit or lossand other comprehensive income, changes in equity and cash flows; and

• the notes, comprising the significant accounting policies and other explanatory information.

The financial reporting framework applied in the preparation of the financial statements is EU-IFRS and the relevant provisions of Part 9 of Book 2 of the Dutch Civil Code.

The basis for our opinion We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. We have further described our responsibilities under those standards in the section ‘Our responsibilities for the audit of the financial statements’ of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

IHS Netherlands Holdco B.V. - JSJKX7MXCWQ2-209388568-23

Page 2 of 14

Independence We are independent of IHS Netherlands Holdco B.V. in accordance with the ‘Wet toezicht accountantsorganisaties’ (Wta, Audit firms supervision act), the ‘Verordening inzake de onafhankelijkheid van accountants bij assuranceopdrachten’ (ViO, Code of Ethics for Professional Accountants, a regulation with respect to independence) and other relevant independence requirements in the Netherlands. Furthermore, we have complied with the ‘Verordening gedrags- en beroepsregels accountants’ (VGBA, Dutch Code of Ethics).

Our audit approach

Overview and context IHS Netherlands Holdco B.V. is a telecommunications infrastructure owner and operator in Nigeria. The Group is comprised of several components and therefore we considered our group audit scope and approach as set out in the section ‘The scope of our group audit’. We paid specific attention to the areas of focus driven by the operations of the Group, as set out below.

The early redemption on 28 October 2019 of the Senior Notes listed on the Irish Stock Exchange due 2021 issued on 27 October 2016, the group restructuring and issuance of the Senior Notes listed on The International Stock Exchange (TISE) due 2025 and 2027 issued on 18 September 2019 were significant individual transactions during 2019. This restructuring affected our materiality as EBITDA significantly increased and resulted in an increase in the scope of our group and company audits, as an additional component from 18 September 2019 has been subject to our audit and added to our audit scoping. We performed specific audit procedures relating to the settlement of the previous Senior Notes and issuance of the Senior Notes as described in the key audit matter ‘Refinancing and restructuring of the Group’.

As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. In particular, we considered where the management board made important judgements, for example, in respect of significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain. From the estimates and judgements disclosed in the financial statements in note 3 ‘Critical accounting estimates and judgements’, we considered goodwill impairment, the loss allowance on trade receivables and regulatory accruals as being most significant to our audit given the significant estimation uncertainty and the related higher inherent risks of material misstatement. Therefore, we considered these items as key audit matters as set out in the section ‘Key audit matters’ of this report.

Furthermore, we identified revenue recognition as a key audit matter because of the potential risk of fraud and error.

Going concern was another area of focus, including addressing the COVID-19 impact and the consequences for the Group as reflected in ‘Emphasis of matter - uncertainty related to the effects of the corona virus (COVID-19)’ paragraph below. Other areas of focus, that were not considered as key audit matters, were the implementation of IFRS 16 ‘Leases’ which is effective from 1 January 2019 and the provision for uncertain tax positions.

We ensured that the audit team included the appropriate skills and competencies which are needed for the audit of a telecommunications infrastructure owner and operator. We included experts and specialists in the areas of IT, taxes and valuations amongst others in our team.


Page 3 of 14

The outline of our audit approach was as follows:

Materiality

• Overall materiality: $ 8,570 thousand.

Audit scope

• We conducted audit work and site visits in the Netherlands, the UK

and Nigeria on the entities within the group: IHS Netherlands Holdco

B.V., IHS Nigeria Limited, IHS Towers NG Limited and INT Towers

Limited.

• Audit coverage: 100% of consolidated revenue, 100% of consolidated

total assets and 100% of consolidated loss before tax.

Key audit matters

• Goodwill impairment testing

• Loss allowance on trade receivables

• Regulatory accruals

• Revenue recognition – risk of fraud and error

• Refinancing and restructuring of the Group

Materiality The scope of our audit is influenced by the application of materiality, which is further explained in the section ‘Our responsibilities for the audit of the financial statements’.

Based on our professional judgement we determined certain quantitative thresholds for materiality, including the overall materiality for the financial statements as a whole as set out in the table below. These, together with qualitative considerations, helped us to determine the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and to evaluate the effect of identified misstatements, both individually and in aggregate, on the financial statements as a whole and on our opinion.

Overall group

materiality

$ 8,570 thousand (2018: $ 5,280 thousand).

Basis for determining

materiality

We used our professional judgement to determine overall materiality. As a basis for

our judgement we used 2.5% of earnings before interest, taxation, depreciation,

amortisation and impairments (‘EBITDA’).

Rationale for

benchmark applied

We used EBITDA as the primary benchmark based on our analysis of the common

information needs of users of the financial statements, the fact that it is a

commonly used measure of financial performance in the telecommunications

sector and is used by management in its appraisal of the Group’s results. EBITDA

2019 was also impacted by the application of IFRS 16 ‘Leases’. We believe that

EBITDA-levels after implementation of IFRS 16 are an important metric for the

financial performance of the Group and thus still being appropriate for our

determination of materiality.

Component

materiality

To each component in our audit scope, we, based on our judgement, allocate

materiality that is less than our overall group materiality.


Page 4 of 14

The range of materiality allocated across components was between $ 8,000

thousand and $ 4,500 thousand.

We also take misstatements and/or possible misstatements into account that, in our judgement, are material for qualitative reasons.

We agreed with the management board that we would report to them misstatements identified during our audit above $ 429 thousand (2018: $ 264 thousand) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.

The scope of our group audit IHS Netherlands Holdco B.V. is the parent company of a group of entities. The financial information of this group is included in note 1 ‘General information’ to the financial statements.

We tailored the scope of our audit to ensure that we, in aggregate, provide sufficient coverage of the financial statements for us to be able to give an opinion on the financial statements as a whole, taking into account the management structure of the Group, the nature of operations of its components, the accounting processes and controls and the markets in which the components of the Group operate. In establishing the overall group audit strategy and plan, we determined the type of work required to be performed by the engagement team.

The group audit primarily focussed on the significant components: IHS Netherlands Holdco B.V., IHS Nigeria Limited, IHS Towers NG Limited and INT Towers Limited. We subjected these four components to audits of their complete financial information, as those components are individually financially significant to the Group.

In total, in performing these procedures, we achieved the following rounded coverage on the financial line items:

Revenue 100%

Total assets 100%

Loss before tax 100%

None of the remaining components represented more than 0,1% of total group revenue, total group loss before tax or total group assets. For those remaining components we performed, among other things, analytical procedures to corroborate our assessment that there were no significant risks of material misstatements within those components.

Our audit team included auditors who are familiar with the local laws and regulations to perform the audit work. Through site visits by the engagement leader and engagement manager in Nigeria and the UK as well as conference calls, we assessed and discussed the significant accounting and audit issues, the findings of the procedures performed and other matters, which could be of relevance for the financial statements.

Our focus on the risk of fraud and non-compliance with laws and regulations The primary responsibility for the prevention and detection of fraud and non-compliance with laws and regulations lies with the management and those in charge with governance.


Page 5 of 14

Our objectives in respect of fraud are to identify and assess the risks of material misstatement of the financial statements due to fraud; to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud, through designing and implementing appropriate audit responses; and to respond appropriately to fraud or suspected fraud identified during the audit.

Our objectives in respect of non-compliance with laws and regulations are to identify and assess the risk of material misstatement of the financial statements due to non-compliance with laws and regulations; and to obtain reasonable assurance that the financial statements, taken as a whole, are free from material misstatement, whether due to fraud or error when considering the applicable legal and regulatory framework.

As part of our process of identifying fraud risks, we evaluated fraud risk factors with respect to financial reporting fraud, misappropriation of assets and bribery and corruption. We evaluated the fraud risk factors to consider whether those factors indicated a risk of material misstatement due to fraud.

As in all of our audits, we addressed the risk of management override of internal controls, including evaluating whether there was evidence of bias by management that may represent a risk of material misstatement due to fraud. We evaluated the design and the implementation of internal controls that mitigate fraud risks, performed data analysis of unexpected journal entries and evaluated key estimates and judgements for bias, including retrospective reviews of prior year’s estimates. Where we identified instances of unexpected journal entries or other risks through our data analytics, we performed additional audit procedures to address each identified risk. These procedures also included testing of transactions back to source information. We incorporated elements of unpredictability in our audit and with respect to the risk of misappropriation of assets, we performed physical verification for selected items of assets, including inventory and property, plant and equipment. We considered the outcome of our other audit procedures and evaluated whether any findings or misstatements were indicative of fraud. We assessed matters reported to the management board and those in charge of governance through the whistleblowing and complaints procedures within the entity and the results of management’s investigation of such matters.

We refer to the key audit matters goodwill impairment testing, the loss allowance on trade receivables and regulatory accruals, which are examples of our approach related to areas of higher risk due to management making significant accounting estimates. For the fraud risk in revenue recognition, we refer to the key audit matter revenue recognition – risk of fraud and error.

In addition, we performed procedures to obtain an understanding of the legal and regulatory frameworks that are applicable to the Group. We identified provisions of those laws and regulations, generally recognized to have a direct effect on the determination of material amounts and disclosures in the financial statements such as the financial reporting framework, tax and other specific telecommunications infrastructure operator laws and regulations. We obtained audit evidence regarding compliance with the provisions of those laws and regulations through reconciliation to supporting documents, inspection of correspondence with authorities and representation from the management board regarding compliance with such laws and regulations. As to the other laws and regulations we inquired with the management board and those in charge of governance as to whether the entity is in compliance with such laws and regulations and inspected correspondence where relevant.


Page 6 of 14

Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial statements. We have communicated the key audit matters to the management board. The key audit matters are not a comprehensive reflection of all matters identified by our audit and that we discussed. In this section, we described the key audit matters and included a summary of the audit procedures we performed on those matters.

We addressed the key audit matters in the context of our audit of the financial statements as a whole, and in forming our opinion thereon. We do not provide separate opinions on these matters or on specific elements of the financial statements. Any comment or observation we made on the results of our procedures should be read in this context.

In addition to the matters described in the section ‘Emphasis of matter - uncertainty related to the effects of the corona virus (COVID-19)’ we have determined the matters described below as the key audit matters to be communicated in our report.

The following key audit matters identified in our auditor’s report of 2018 are still relevant to the group and are included as key audit matters in 2019:

• goodwill impairment testing;

• loss allowance on trade receivables; and

• revenue recognition.

The key audit matter identified in 2018 related to the ‘post no debit’ instructions placed on certain bank accounts in Nigeria was resolved and therefore not considered to remain a key audit matter.

The following key audit matters are new in 2019, as explained in the overview and context section of our report:

• regulatory accruals; and

• refinancing and restructuring of the Group.

Key audit matter Our audit work and observations

Goodwill impairment testing

Note 13.1 ‘Allocation of goodwill’ to the financial

statements

Goodwill is subject to an annual impairment test.

Impairments are recognised when the carrying value is

higher than the recoverable amounts. The recoverable

amounts of the cash-generating units (CGUs) have been

determined based on value-in-use calculations based on

expected future cash flows from those CGUs.

We focused on this area, due to the size of the goodwill

balance and because management’s assessment of the

‘value in use’ of the Group’s CGU’s included a variety of

internal and external factors, which represent

significant estimates. Those estimates required the use

of valuation models and a significant level of

The three main topics underlying our audit approach to

goodwill impairment testing were (a) the impairment

model; (b) key assumptions underpinning the 5-year

forecast cash flows and (c) other key assumptions

including terminal growth and discount rate.

(a) Impairment model

We obtained the impairment model, assessed the

appropriateness of the model and re-performed

management’s mathematical calculations underlying

the goodwill impairment testing to verify the

mathematical accuracy of these calculations.


Page 7 of 14


management judgement, particularly with respect to

the future results of the business and the discount rates

applied to the forecasted cash flows. Any change in

these assumptions, based on their sensitivity could have

a significant effect on the financial statements.

As disclosed in note 13.1 ‘Allocation of goodwill’ to the

financial statements, the key assumptions to which the

value-in-use calculations are most sensitive are:

• revenue assumptions (taking into account

tenancy rates) and the direct effect these have on

gross profit margins; • discount rates; and • terminal growth rates.

Although, the financial statement disclosures show

there is sufficient headroom between the value in use

and the carrying value of the CGUs, this remained a key

audit matter for us due to the sensitivity of the

underlying assumptions.

(b) Key assumptions underpinning the 5-year forecast

We obtained and assessed the assumptions and

methodologies used in the annual impairment test

prepared by management.

We compared the current year actual results with the

figures included in the prior year forecast to consider

whether any forecasts included assumptions that, with

hindsight, had been too optimistic.

We evaluated the process in place by the Group to

prepare these forecasts and we compared the forecasts

and related assumptions to the budget approved by the

management board and those in charge of governance.

We challenged management’s cash flow forecasts and

related assumptions against various factors, including

performing sensitivity tests using 2019 actual

performance, elimination of non-contracted revenues,

reversal of forecasted improvement in gross margin

percentage and adjustment of any forecast

improvement in change in working capital and non-

discretionary capital expenditures.

(c) Terminal growth rate and discount rate

We further challenged management’s assumptions

surrounding the terminal growth rate and discount rate

used through independently determining a point

estimate. These assumptions were determined by our

audit valuation experts and included an assessment of

various factors including the terminal growth rates

compared to economic and industry forecasts and the

discount rates, assessing the cost of capital

for the CGU and comparable organisations as

well as considering territory specific factors.

We challenged management on the adequacy of their

sensitivity calculations, recalculated the sensitivities

and discussed the likelihood of such a movement with

management, concluding that management’s assertion

that any such movement was unlikely is reasonable.

Loss allowance on trade receivables

Note 4 (c) ‘Credit Risk’ to the financial statements

Trade receivables were important to our audit due to

their magnitude and challenges faced by certain

customers which increases the risk associated with the

Due to the concentration of trading with a small

number of customers we focused on outstanding

positions with major customers. We noted that the


Page 8 of 14


collectability of receivables in the assessment of the

expected credit loss model.

Due to this increased risk, the Group has to make

estimates regarding the future collection and which

receivables should be impaired. These estimates lead to

a higher risk of overstatement of trade receivables.

Therefore, we considered this area as a key audit

matter.

overdue trade receivables increased compared to last

year.

Our audit procedures included direct confirmation of

balances and substantive testing of payments received

and credit notes issued after year-end.

We further tested the calculation of the aged positions

and management’s assessment of expected credit loss

by reviewing management’s assessment of the liquidity

of these clients, combined with any publicly available

information regarding the macroeconomic

environment and ownership/funding of large

customers. We noted no material findings.

Regulatory accruals

Note 3.5 ‘Regulatory accruals’ to the financial

statements

The Group requires a variety of regulatory approvals

and permits related to its license to operate and meet

its compliance requirements in respect of individual

tower sites. These charges are levied by various national

and state authorities.

There is uncertainty over the level of charges and also

over the period for which charges will apply where

demands have not yet been received from authorities

on a site by site basis. The Group recognizes an accrual

for unbilled regulatory costs based on a model which

includes management’s estimates of the rates per

permit/approval type, periods for which

permits/approvals potentially relate and the probability

of charges being raised resulting in a cash outflow.

Those estimates are subjective particularly with respect

to the periods for which charges will be raised resulting

in a cash outflow.

Any change in the important assumptions, based on

their sensitivity could have a significant effect on the

consolidated financial statements. Therefore, we

considered this area as a key audit matter for our audit.

We obtained management’s model and re-performed

management’s mathematical calculations of the

required accruals to verify the mathematical accuracy of

these calculations.

We obtained and assessed the assumptions and

methodologies used in the calculation prepared by

management including:

• testing the accuracy of site volume and in-

service date data through reconciliation to

supporting evidence;

• recalculation of the average historical costs per

permit/approval type based on historic payment

data tested;

• understanding and testing estimates relating to

unsettled demands from authorities to the

relevant supporting evidence; and

• performing testing over the estimates of the

probability of cash outflows arising from future

demands relating to periods up to

31 December 2019 taking into account the above

inputs.

We determined that the estimates made by

management were consistent with the available

evidence.


Page 9 of 14


Revenue recognition – risk of fraud and error

Note 5 ‘Revenue’ to the financial statements

The Group generates revenue from providing

telecommunications support services. The Group

provides infrastructure sharing and leasing (colocation)

and managed services.

We considered the occurrence of revenue recognition as

a risk of fraud based on the potential for deliberate

manipulation within the recognition and recording of

revenue transactions with an increased risk of

overstatement of revenue. The Group has a limited

number of customers with a large number of towers

used by each customer, resulting in the individual

amounts per invoice to be significant.

We further considered the accuracy of revenue

recognition as a risk of error, as a result of the

complexity of pricing for individual sites and services.

We therefore considered revenue recognition as a key

audit matter.

Our audit response to the matter consisted of the

following:

• Performed an end-to-end walkthrough in order to

obtain an understanding of controls in the revenue

and receivables cycle, including testing of the

revenue recognition policies with consideration of

the classification of revenue between revenue

related to the provision of services and lease

income;

• Inspected contracts with customers to confirm the

existence of the arrangements and the existence

and treatment of any unusual or unexpected terms;

• Agreed a selection of transactions to both cash and

other supporting documentation, including where

relevant customer acknowledged invoices and

purchase orders, to test occurrence of the

transaction;

• Agreed a selection of transactions relating to prices

to the approved price list; and

• Obtained accounts receivable confirmations.

We found the policies to be consistently applied and in

line with the applicable accounting framework and we

noted no exceptions from our testing.

We further analysed manual journals and performed

risk-based testing on unexpected journal entries.

We did not identify any items that could not be

substantiated.

Refinancing and restructuring of the Group

Note 20 ‘Borrowings’ and note 28 ‘Business

combinations’ to the financial statements

On 18 September 2019, IHS Netherlands Holdco B.V.

issued $ 500 million 7.125% Senior Notes due 2025 and

$ 800 million 8.0% Senior Notes due 2027, listed on

The International Stock Exchange (TISE). Senior Notes

due 2025 and 2027 include put and call options

embedded within their terms.

On the same date, the group underwent a restructuring

in anticipation of the issuance of the Senior Notes due

2025 and 2027. The entire share capital of Nigeria

Tower Interco B.V. previously held by IHS Netherlands

Holdco B.V.’s parent, IHS Netherlands (Interco)

Our audit procedures included the review of underlying

agreements of the newly issued and redeemed Senior

Notes. We tested the initial recognition of the Senior

Notes due 2025 and 2027, including testing of

transaction costs and the related amortisation and

interest calculations to supporting evidence such as

invoices, testing of calculation schedules and cash

transactions and testing of the valuation of the

bifurcated embedded derivative by our audit valuation

experts. The derecognition of the Senior Notes due

2021, including the related premium and redemption


Page 10 of 14


Coöperatief U.A., was transferred to IHS Netherlands

Holdco B.V. Management determined this transfer to

be classified as a business combination under common

control.

The opening balance sheet position related to the

Company and its investment as at 18 September 2019 is

significant for the Group’s financial statements.

On 28 October 2019, the previously issued $ 800

million 9.5% 2021 Senior Notes due 2021 dated

27 October 2016 were fully redeemed at a premium.

These series of transactions represent a significant

development in the group with complex and material

accounting consequences and we therefore determined

this to be a key audit matter.

fees, have been reconciled to supporting evidence

including the relevant cash transactions.

Relating to the restructuring, our audit procedures

included the review of underlying agreements,

assessment of the facts and circumstances to challenge

the accounting treatment adopted by management to

account for the transaction, being predecessor

accounting applied prospectively. We have determined

compliance with the relevant EU-IFRS standards for

business combinations under common control.

In addition, we tested the opening balance sheet

positions of the companies transferred into the Group

as of 18 September 2019.

We determined that the disclosures in note 20 and 28

to the financial statements concerning the refinancing

and restructuring transactions are adequate.

t

Emphasis of matter - uncertainty related to the effects of the corona virus (COVID-19) We draw attention to 2.1.1 ‘Going concern’ in the financial statements in which management has described the possible impact and consequences of the corona virus (COVID-19) on the Company and the environment in which the Company operates as well as the measures taken and planned to deal with these events or circumstances. This note also indicates that uncertainties remain and that currently it is not reasonably possible to estimate the future impact. Our opinion is not modified in respect of this matter.

Report on the other information included in the annual report

In addition to the financial statements and our auditor’s report thereon, the annual report contains other information that consists of:

• the corporate information;

• the management board report; and

• the other information pursuant to Part 9 of Book 2 of the Dutch Civil Code.

Based on the procedures performed as set out below, we conclude that the other information:

• is consistent with the financial statements and does not contain material misstatements;

• contains the information that is required by Part 9 of Book 2 of the Dutch Civil Code.

We have read the other information. Based on our knowledge and understanding obtained in our audit of the financial statements or otherwise, we have considered whether the other information contains material misstatements.


Page 11 of 14

By performing our procedures, we comply with the requirements of Part 9 of Book 2 of the Dutch Civil Code and the Dutch Standard 720. The scope of such procedures was substantially less than the scope of those performed in our audit of the financial statements.

The management board is responsible for the preparation of the other information, including the corporate information, the management board report and the other information in accordance with Part 9 of Book 2 of the Dutch Civil Code.

Report on other legal and regulatory requirements

Our appointment We were appointed as auditors of IHS Netherlands Holdco B.V. following the passing of a resolution by the shareholders at the annual meeting held on 21 December 2016. Our appointment has been renewed annually by shareholders representing a total period of uninterrupted engagement appointment of 3 years.

Responsibilities for the financial statements and the audit

Responsibilities of the management board The management board is responsible for:

• the preparation and fair presentation of the financial statements in accordance with EU-IFRS and with Part 9 of Book 2 of the Dutch Civil Code; and for

• such internal control as the management board determines is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error.

As part of the preparation of the financial statements, the management board is responsible for assessing the Company’s ability to continue as a going concern. Based on the financial reporting frameworks mentioned, the management board should prepare the financial statements using the going-concern basis of accounting unless the management board either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. The management board should disclose events and circumstances that may cast significant doubt on the Company’s ability to continue as a going concern in the financial statements.

Our responsibilities for the audit of the financial statements Our responsibility is to plan and perform an audit engagement in a manner that allows us to obtain sufficient and appropriate audit evidence to provide a basis for our opinion. Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high but not absolute level of assurance, which makes it possible that we may not detect all material misstatements. Misstatements may arise due to fraud or error. They are considered to be material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

Materiality affects the nature, timing and extent of our audit procedures and the evaluation of the effect of identified misstatements on our opinion.


Page 12 of 14

A more detailed description of our responsibilities is set out in the appendix to our report.

Amsterdam, 7 April 2020 PricewaterhouseCoopers Accountants N.V. Original has been signed by R.M. van Tongeren RA


Page 13 of 14

Appendix to our auditor’s report on the 2019 financial statements of IHS Netherlands Holdco B.V.

In addition to what is included in our auditor’s report, we have further set out in this appendix our responsibilities for the audit of the financial statements and explained what an audit involves.

The auditor’s responsibilities for the audit of the financial statements We have exercised professional judgement and have maintained professional scepticism throughout the audit in accordance with Dutch Standards on Auditing, ethical requirements and independence requirements. Our audit consisted, among other things of the following:

• Identifying and assessing the risks of material misstatement of the financial statements, whetherdue to fraud or error, designing and performing audit procedures responsive to those risks, andobtaining audit evidence that is sufficient and appropriate to provide a basis for our opinion.The risk of not detecting a material misstatement resulting from fraud is higher than for oneresulting from error, as fraud may involve collusion, forgery, intentional omissions,misrepresentations, or the intentional override of internal control.

• Obtaining an understanding of internal control relevant to the audit in order to design auditprocedures that are appropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the Company’s internal control.

• Evaluating the appropriateness of accounting policies used and the reasonableness ofaccounting estimates and related disclosures made by the management board.

• Concluding on the appropriateness of the management board’s use of the going-concern basis ofaccounting, and based on the audit evidence obtained, concluding whether a materialuncertainty exists related to events and/or conditions that may cast significant doubt on theCompany’s ability to continue as a going concern. If we conclude that a material uncertaintyexists, we are required to draw attention in our auditor’s report to the related disclosures in thefinancial statements or, if such disclosures are inadequate, to modify our opinion. Ourconclusions are based on the audit evidence obtained up to the date of our auditor’s report andare made in the context of our opinion on the financial statements as a whole. However, futureevents or conditions may cause the Company to cease to continue as a going concern.

• Evaluating the overall presentation, structure and content of the financial statements, includingthe disclosures, and evaluating whether the financial statements represent the underlyingtransactions and events in a manner that achieves fair presentation.

Considering our ultimate responsibility for the opinion on the consolidated financial statements, we are responsible for the direction, supervision and performance of the group audit. In this context, we have determined the nature and extent of the audit procedures for components of the Group to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole. Determining factors are the geographic structure of the Group, the significance and/or risk profile of group entities or activities, the accounting processes and controls, and the industry in which the Group operates. On this basis, we selected group entities for which an audit or review of financial information or specific balances was considered necessary.

We communicate with the management board regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.


Page 14 of 14

We provide the management board with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with the management board, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, not communicating the matter is in the public interest.

IHS NETHERLANDS HOLDCO B.V. - IHS Towers

Documents

Transcript of IHS NETHERLANDS HOLDCO B.V. - IHS Towers