Half-year Report

RNS Number : 8385H
Integrated Diagnostics Holdings PLC
23 August 2016
 

For the purpose of the Transparency Directive the Home Member state of the issuer is the United Kingdom.

Integrated Diagnostics Holdings Plc

Final Results

Monday, 22 August 2016

Integrated Diagnostics Holdings Plc results for the
six-month period ending 30 June 2016

(Jersey) Integrated Diagnostics Holdings ("IDH" or "the Group"), IDHC on the London Stock Exchange,  Egypt's largest fully integrated private-sector provider of medical diagnostics services, announced today its results for the six-month period ending 30 June 2016.

Commenting on the half-year performance and the company's outlook, IDH Chairman Lord St John of Bletso said:

 

"I am pleased to report that your Company has continued to perform up to market expectations despite challenges regarding the availability of foreign exchange in Egypt that, compounded by rising inflation, have had a knock-on impact on consumer spending. Egypt has recently arrived at a staff-level agreement for a three-year, USD 12 billion extended fund facility with the International Monetary Fund. Provided this is approved by the IMF's executive board, we anticipate that the implementation of the reform package it requires will bring some stability to the Egyptian Pound. We continue to invest in expanding our business in Egypt and are also exploring opportunities to expand the business into other high-growth markets."

IDH Chief Executive Officer Dr. Hend El-Sherbini added: 

"Despite challenges in Egypt, our largest market, we have been successful in growing the business and maintaining our margins. In the second half of the year, we will continue to target revenue growth of 15% while maintaining EBITDA margins in our historical range of 43-45%. We have negotiated moderate price increases with key suppliers that will take effect in 2H2016 and invested after Ramadan in a targeted marketing campaign to drive recurring test revenue. We also continue to invest in expanding our branch network to reach new patients as we explore growth opportunities outside Egypt."

 

Results (EGP million, unless otherwise stated)



 

1H2016

1H2015

% change

Revenue

552.5

493.2

12%

Operating Profit

224.0

87.5

156%

EBITDA1

244.9

224.7

9%

EBITDA Margin

44.3%

45.5%


Net Profit

126.5

22.1

472%

Net Profit Margin

22.9

4.5


Earnings per Share (in EGP)

0.82

0.11

645%

 

1 EBITDA is calculated as Operating Profit adding back depreciation of property, plant and equipment of EGP 20.9 million (1H2015: EGP

13.9 million), amortisation of intangible assets of EGP nil (1H2015: EGP 0.4 million), and non-recurring expenses. No expenses of this nature occurred in 1H2016 (1H2015: EGP 122.9 million of non-recurring expenses related to the company's IPO on the London Stock Exchange). All references to EBITDA in this document are defined as above.

Financial & Operational Highlights

·     Revenues rose 12% over 1H2015 to EGP 552.5 million as a 4% rise in tests per patient and a combination of price rises and better test mix offset a 3.7% decrease in number of patients served.

·     Gross profit rose 11% to EGP 300.1 million. Expressed as a percentage of revenues, cost of sales inched up only fractionally to 45.7% in 1H2016 (1H2015: 45.0%) despite a high-inflation environment in the Group's principal market of Egypt.

·     EBITDA of EGP 244.9 million represents a 9% increase from EGP 224.7 million in 1H2015.

·     Net profit of EGP 126.5 million in 1H2016 includes the impact of EGP 30.9 million in foreign exchange losses. For the comparative period: Net profit of EGP 22.1 million in 1H2015 includes expenses of EGP 122.9 million related to the Group's IPO on the London Stock Exchange.

·     Total tests were stable period-on-period at 11.7 million. Total patients served fell 3.7% to 2.8 million, whilst the number of tests per patient increased by 4.0%.

·     Average revenue per patient rose 16.3% period-on-period to EGP 195.70, while average revenue per test increased 11.9% to EGP 47.10.

About Integrated Diagnostics Holdings (IDH)

IDH is the largest fully integrated private-sector medical diagnostics services provider in Egypt, comprehensively offering pathology and molecular diagnostics, genetics testing and basic radiology. IDH's core brands include Al Borg and Al Mokhtabar in Egypt, as well as Biolab (Jordan), Ultralab and Al Mokhtabar Sudan (both in Sudan) and the Medical Genetics Center, which operates in Egypt. IDH is listed on the London Stock Exchange (ticker: IDHC) and was founded in 2012 by the merger of Al Borg and Al Mokhtabar, the most established diagnostics services brands in Egypt.

 

IDH's forward looking strategy rests on leveraging its established business model to achieve five key strategic goals, namely: (1) continue to expand customer reach; (2) increase the number of tests per patient; (3) use the Mega Lab's enlarged capacity to provide services to third party labs and hospitals; (4) introduce new medical services by leveraging the Group's network and reputable brand position; and (5) expand into new geographic markets through selective, value accretive acquisitions. Learn more at idhcorp.com.

Shareholder Information

LSE: IDHC.L

Bloomberg: IDHC:LN

Listed: May 2015

Shares Outstanding: 150 million

Contact

Mr. Sherif El-Ghamrawi

Investor Relations Director

T: +20 (0)2 3345 5530 | M: +20 (0)10 0447 8699 class="aqc">Cautionary Statement

These Interim Results have been prepared solely to provide additional information to shareholders to assess the group's performance in relation to its operations and growth potential. These Interim Results should not be relied upon by any other party or for any other reason. This communication contains certain forward-looking statements. A forward-looking statement is any statement that does not relate to historical facts and events, and can be identified by the use of such words and phrases as "according to estimates", "aims", "anticipates", "assumes", "believes", "could", "estimates", "expects", "forecasts", "intends", "is of the opinion", "may", "plans", "potential", "predicts", "projects", "should", "to the knowledge of", "will", "would" or, in each case their negatives or other similar expressions, which are intended to identify a statement as forward-looking. This applies, in particular, to statements containing information on future financial results, plans, or expectations regarding business and management, future growth or profitability and general economic and regulatory conditions and other matters affecting the Group.

Forward-looking statements reflect the current views of the Group's management ("Management") on future events, which are based on the assumptions of the Management and involve known and unknown risks, uncertainties and other factors that may cause the Group's actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. The occurrence or non-occurrence of an assumption could cause the Group's actual financial condition and results of operations to differ materially from, or fail to meet expectations expressed or implied by, such forward-looking statements.

The Group's business is subject to a number of risks and uncertainties that could also cause a forward-looking statement, estimate or prediction to differ materially from those expressed or implied by the forward-looking statements contained in this communication. The information, opinions and forward-looking statements contained in this communication speak only as at its date and are subject to change without notice. The Group does not undertake any obligation to review, update, confirm or to release publicly any revisions to any forward-looking statements to reflect events that occur or circumstances that arise in relation to the content of this communication.

 

Chairman's Statement

 

I am pleased to report that your Company has continued to perform up to market expectations.

 

Since Integrated Diagnostic Holdings was listed on the London Stock Exchange in May last year, our new Mega Lab facility in Cairo has been an enormous success and is one of the cornerstones of our Egyptian growth story.

 

One of our major challenges, which is unfortunately beyond our control, has been the shortage of foreign exchange in Egypt. This, compounded by rising inflation, has had a knock-on impact on consumer spending.

 

We have thankfully been able to source USD 15.9 million in foreign exchange during the first half of 2016, which have provided the necessary US dollar reserves for us to make our dividend payments and to support potential additional acquisitions.

 

The Egyptian Pound has been very weak, particularly over the past six months. Egypt has recently arrived at a staff-level agreement for a three-year, USD 12 billion extended fund facility with the International Monetary Fund (IMF). Provided this is approved by the IMF's executive board, we anticipate that the implementation of the reform package it requires will bring some stability to the domestic currency.

 

We have an extremely stable operational platform in Egypt and are constantly exploring options for the next phase of our growth story. To this end we shall continue to invest in expanding our business in Egypt, while broadening our value-added services, including radiology. We are also continuing to expand our laboratory facilities.

 

With our proven track record and resilient business model, we are also exploring opportunities to expand the business into other high-growth markets in Africa and the Middle East. Cognisant of foreign exchange restrictions, we are seeking to expand into markets with more stable currencies.

 

My Board and our Management Team are committed to meeting shareholders' expectations as well as our responsibilities of accountability, transparency and good governance. To this end, we are in the process of expanding our sub-committees to focus on each core sector of the business, including international business development.

 

In conclusion, our mission is to continue to deliver sustainable growth with additional value-added services in Egypt while maximising the Company's full potential as a sustainable, resilient, cash-generative regional-growth success story.

 

Lord St John of Bletso, Chairman



 

Chief Executive Officer's Report

 

We believe deeply in Egypt's growth prospects: Our home market has a consumer base of more than 90 million, blending the large, fast-growing population of an emerging market with a rising incidence of lifestyle-related diseases more characteristic of developed economies. IDH's brands are strong and our people, infrastructure and quality-control system unparalleled. Egypt will continue to be a core component of our growth story for years to come. We continue to target and deliver revenue growth with an EBITDA margin for FY2016 expected to be within our historical norm of 43-45%.

 

Still, there is no denying our home market presently faces headwinds. The macroeconomic backdrop is challenging, and inflation is running at a seven-year high. So far this year, the Egyptian Pound has lost nearly 13% of its value on the official market, and inflation has seen companies in industries ranging from food and FMCG to the automotive industry report new or rising price-sensitivity in their markets throughout the first half. While our industry is fundamentally counter-cyclical, we are still not immune to the erosion of consumer spending.

 

Despite these challenges, we have grown revenues 12% to more than EGP 552 million in the first half. Moreover, we have proactively engaged with our key suppliers to insulate the business as much as possible from the impact of further devaluation of the Egyptian Pound. So far, we have limited price increases to 10% with two key suppliers. These prices will come into effect in 2H2016, and our view on costs of goods remains in line with our financial plan for the year. Our ability to keep costs of materials in check reflects both the strength of our supplier relationships and the volumes we regularly purchase from them. 

 

To meet the inflationary cost increases, we are pleased that we have successfully agreed to improved pricing with our corporate contracts and continue to enhance pricing power for walk-in patients. We are confident this will stand us in good stead in what remains a high-inflation environment.

 

With this in mind, we are focused in Egypt on delivering revenue growth through a combination of measures. In the near term, these including a significant post-Ramadan marketing campaign, the continued opening of new branches to expand our reach to new patients, and the engagement of a new commercial director. We continue to provide outsourced services and management to third-party labs and hospitals and are actively seeking acquisition opportunities in Egypt and abroad.

I am honoured to lead our company, and look forward to reporting our progress in both our interim 3Q2016 statement and our full-year 2016 results.

Dr. Hend El Sherbini, Chief Executive Officer

 

Operational & Financial Review

 

Key Performance Indicators


1H2016

1H2015

% movement


                 Walk -                        in                 Clients

Corporate Clients

Total

 Walk-in Clients

Corporate Clients

Total

 Walk-in Clients

Corporate Clients

Total

Revenue (EGP million)

218.6

333.9

552.5

203.8

      289.4

             493.2

7%

15%

12%

% revenue

40%

60%

100%

41%

59%

              100%

-

-

 -

Patients ('000)

793

2,031

2,824

889

2,043

             2,931

-11%

-1%

-4%

% of patients

28%

72%

100%

30%

70%

              100%

-

-

 -

Revenue per Patient (EGP)

275.7

164.4

195.7

229.4

141.7

              168.3

20%

16%

16%

Tests ('000)

2,631

9,106

11,737

2,967

8,755

            11,721

-11%

4%

0%

% of tests

             22%

78%

100%

25%

75%

              100%

-

-

-

Revenue per Test (EGP)

             83.1

36.7

47.1

68.7

33.1

               42.1

21%

11%

12%

Test per patient

             3.3

4.5

4.2

3.3

4.3

                4.0

-1%

5%

4%

 

Total Branches by Geography


Dec. 2015 Actual

June 2016 Actual




June 2015 Actual

 

Egypt

265

278

291

 

Jordan

11

11

13

 

Sudan

24

25

23

 

Total IDH Branches

300

314

327

 

 

 

Operational review

 

IDH delivered a solid operational performance in the six months ended 30 June 2016, at which time the Group had 327 branches (291 in Egypt, 23 in Sudan and 13 in Jordan). During 1H2016, the Group added 15 branches to its footprint (including 13 new locations in Egypt and 2 in Jordan) and closed two in Sudan, for a net addition of 13 branches. For comparative purposes, the Group had 300 branches at the end of June 2015: 265 in Egypt, 11 in Jordan and 24 in Sudan.

Average revenue per patient rose 16.3% to EGP 195.70 in 1H2016 compared with the same period last year, while average revenue per test climbed 11.9% to EGP 47.10. Total tests completed were largely stable period-on-period at 11.7 million.

 

Across the Group's footprint, IDH served 2.8 million clients in the first half, down 3.7% from 2.9 million in the same period last year, due primarily to a 10.8% drop in walk-in patients. Group-wide, corporate clients served in 1H2016 stood at 2.0 million patients (essentially on par with the same period last year).

The ratio of corporate to walk-in clients served during 1H2016 was largely unchanged from FY2015 at 72:28; in 1H2015, the same ratio stood at 70:30. The shift in patient mix in favour of those served on corporate contracts reflects natural market dynamics in Egypt as corporations extend additional benefits to staff. The trend has been encouraged by continued high inflation, which is eroding consumer spending power and putting additional pressure on corporations to deliver either health insurance or corporate plans.

 

Financial Review

 

Revenue

 

Total revenue improved 12% in 1H2016 to EGP 552.5 million (1H2015: EGP 493.2 million). Existing branches accounted for 76% of revenue growth, while new branches accounted for 24%. Average revenue per patient rose 16.3% period-on-period; revenue per test was up 11.9%; and tests per patient climbed 4%, underscoring the resilience of the medical diagnostics segment to both macro headwinds and the impact of high inflation on consumer spending. Careful attention to price increases together with better mix compensated for the decline in number of patients served, which stood at 2.8 million in the first half, down 3.7% from 2.9 million in the same period last year.

Corporate clients

IDH's corporate clients (also referred to as contract clients), who in 1H2016 represented 60% of the Group's revenues (1H2015: 59%), include institutions such as unions, private insurance companies and corporations who typically enter into one year, renewable contracts at agreed rates per test and on a per client basis. During 1H2016, IDH served approximately 2.0 million patients under those contracts, performing a total of 9.1 million tests.

Corporate client revenue grew 15.4% compared with the same period last year on the back of 4% growth in corporate tests performed and an 11.1% increase in corporate revenue per test.

Within the corporate clients, IDH also provides lab to lab services for hospitals and other laboratories that are not able to process certain tests in house. IDH continues to view the lab to lab business as a potential growth area going forward.

 

Walk-in Clients

 

IDH derived 40% of its revenue in 1H2016 from walk-in clients (1H2015: 41%). The Group carried out 2.6 million tests for 792,874 walk-ins during the half year. The number of walk-in clients declined in 1H2016, most notably in Egypt, where patient volumes fell 11.1%. Total tests performed for walk-in patients in Egypt dropped 13.0% in the same period. This is in line with the trend first reported in the second half of last year.

 

Revenues grew at 7.3% period-on-period, driven by a 21% increase in average revenue per test, which offset an 11.1% decline in Egyptian walk-in patients and the 13.0% drop in total tests performed for Egyptian walk-in patients.

 

The Group continues to target walk-in clients through marketing campaigns focused on IDH's brands as well as educational campaigns aimed at increasing awareness of the importance of medical testing and preventive medicine. Additionally, the Group also offers a number of check-up packages and promotions aimed at increasing the number of tests per patient and encouraging repeat visits. These include offers targeting patients with liver and cardiovascular diseases, among others.

 

Cost of Sales

 

Expressed as a percentage of revenues, cost of sales increased only fractionally in 1H2016 to 45.7% compared with 45.0% in 1H 2015 despite significant inflation in Egypt, the Group's primary market. In absolute terms, cost of sales rose 13.6% period-on-period to EGP 252.5 million, driven primarily by increased spending on wages and salaries.

 

Wages and salaries accounted for 39% of total Group cost of sales, overtaking chemicals and supplies in 1H2016 to become the single largest contributor to COS (1H2015: 35%). This reflects the impact of new hiring (including new headquarters staff and staff for new branches opened in 1H2016), annual staff salary raises, and higher employee profit share entitlement for Egyptian operations in the period.

 

EBITDA

 

EBITDA for 1H2016 (defined in footnote 1) stood at EGP 244.9 million (1H2015: EGP 224.7 million), up 9% period-on-period. EBITDA growth was constrained in part by the rising cost of wages and salaries (as noted above) as well as an uptick in advertising and marketing costs on the back of a comprehensive marketing campaign.

 

Net Finance Cost

 

The Group recorded net finance costs of EGP 25.4 million in 1H2016 against a net finance income of EGP 5.0 million in the same period last year. Net finance costs include both finance income of EGP 9.6 million (1H2015: 6.3 million) and finance costs of EGP 35.0 million (1H2015: 1.3 million).

 

IDH was successful in converting Egyptian Pounds into US dollars during the period. These transactions have been entered into to provide the necessary US dollar reserves for IDH to make the dividend payment in the period, and meet other US dollar denominated financial liabilities. A foreign exchange loss has arisen due to the difference between the official exchange rate and the less favourable unofficial parallel exchange rate received by IDH when entering into these transactions. In the period IDH purchased a total of US$ 15.9 million through currency swap transactions (1H2015: US$ 3.9 million) which resulted in a total foreign exchange loss recognised of EGP 27.2 million (1H2015: EGP 0.7 million).

 

Taxation

 

Income tax expenses recorded on the income statement in 1H2016 totalled EGP 72.1 million compared to EGP 70.4 million in 1H2015. There is no tax payable in the two IDH holding companies (Jersey and Cayman). All tax is paid within the operating companies in Egypt, Jordan and Sudan. Corporate income tax rates in Egypt were 22.5% in 1H2016 (down from 30% in 1H2015), while rates were unchanged period-on-period in Jordan (20%) and Sudan (15%). 

 

The Group's dividend policy is to distribute any excess cash after taking into consideration all business cash requirements and potential acquisition considerations. As a result, a deferred tax liability is recognised for the 5% tax on dividends for the future expected distribution payable by Egyptian entities under Egyptian tax legislation. A deferred tax expense of EGP 10.6 million has accordingly been recognised for profits generated in the period.

 

Net Earnings

Net profit for the six-month period ending 30 June 2016 was EGP 126.5 million, up sharply from EGP 22.1 million recorded in 1H2015. Results for the first half of this year reflect the impact of EGP 30.9 million in foreign exchange losses (discussed above) against a net finance gain of EGP 5.0 million in the comparative period.

 

Management also notes that net profit of EGP 22.1 million in 1H2015 includes expenses of EGP 122.9 million related to the Group's IPO on the London Stock Exchange.

 

Balance Sheet

 

Through the historic acquisitions of Makhbariyoun Al Arab and Golden Care Medical Services the Group entered into 2 separate put option arrangements to purchase the remaining equity interests from the vendors at a subsequent date. The options are exercisable in whole from the fifth anniversary of completion of the original purchase agreement falling due in June 2016. At acquisition a put option liability has been recognised for the net present value for the exercise price of the option. In July 2016 the Group was notified by the vendors of Golden Care Medical Services the put option had been exercised. The purchase of the remaining shares is expected to complete during H2 2016.

 

Principal Risks and Uncertainties

 

As in any corporation, IDH has exposure to risks and uncertainties that may adversely affect its performance. The Board and senior management agree that the principal risks and uncertainties facing the Group include political and economic situation in Egypt and the Middle East, foreign currency supply and associated risks, changes in regulation and regulatory actions, damage to the Group's reputation, failure to maintain the Group's high quality standards and accreditations, failure to maintain good relationships with health care professionals and end-users, pricing pressures and business interruption of the Group's testing facilities, among others.

Going Concern

 

The directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of this report. Accordingly, the directors continue to adopt the going concern basis in preparing the condensed financial statements. The Group's Financial Statements for the half year ended 30 June 2016 are available on the Group's website at www.idhcorp.com



 

Statement of Directors' Responsibilities

 

The Interim Report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the Interim Report in accordance with the Disclosure and Transparency Rules ("DTR") of the United Kingdom's Financial Conduct Authority. The DTR require that the accounting policies and presentation applied to the half yearly figures must be consistent with those applied in the latest published annual accounts, except where the accounting policies and presentation are to be changed in the subsequent annual accounts, in which case the new accounting policies and presentation should be followed, and the changes and the reasons for the changes should be disclosed in the Interim Report, unless the United Kingdom Financial Conduct Authority agrees otherwise.

 

We confirm that to the best of our knowledge:

 

The condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU; and

 

The Interim Report includes a fair review of the information required by:

 

a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six month of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

 

b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

 

A list of current directors of the Group is maintained on the Group's website at www.idhcorp.com.

 

For and on behalf of the Board of Directors:

 

Dr. Hend El Sherbini

Executive Director

 



 

Independent Review Report to Integrated Diagnostics Holdings plc

 

Introduction

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six month ended 30 June 2016 which comprises Condensed consolidated interim statement of financial position, Condensed consolidated interim income statement, Condensed consolidated interim statement of profit or loss and other comprehensive income, Condensed consolidated interim statement of changes in equity, Condensed consolidated interim statement of cash flows and the related explanatory notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

 

This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the requirements of the Disclosure and Transparency Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK FCA"). Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached.

 

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FCA.

 

As disclosed in note 2, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the EU. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.

 

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

 

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six month ended 30 June 2016 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FCA.

 

Adrian Wilcox, for and on behalf of KPMG LLP

Chartered Accountants

15 Canada Square

London

E14 5GL

                                                                                                            22 August 2016



 

Consolidated Statement of Financial Position

 




30 June


31 December


Note


2016


2015




EGP'000


EGP'000




(Unaudited)


(Audited)

ASSETS






Non-current assets






Property, plant and equipment

4


                 343,249


                     337,877

Intangible assets and goodwill

5


               1,609,626


                  1,606,225

Total non-current assets



            1,952,875


                1,944,102







Current assets






Inventories

6


                   40,947


                      34,326

Trade and other receivables

7


                 120,363


                     117,155

Cash and cash equivalents

8


                 406,590


                     387,716

Total current assets



               567,900


                   539,197

Total assets



            2,520,775


                2,483,299







Equity






Share Capital



               1,072,500


                  1,072,500

Share premium reserve



               1,027,706


                  1,027,706

Capital reserve



                (314,310)


                   (314,310)

Legal reserve



                   28,834


                      28,834

Put option reserve



                 (68,476)


                     (64,069)

Translation reserve



                   25,040


                        1,193

Retained earnings



                 186,561


                     142,712

Share based payment reserve



                         -  


                        1,034

Equity attributed to the owners of the Company



            1,957,855


                1,895,600

Non-controlling interest



                   46,110


                      46,873

Total equity



            2,003,965


                1,942,473







Non-current liabilities






Deferred tax liabilities

13-C


                 132,756


                     128,427

Other provisions



                   10,919


                      10,962

Long-term financial obligations

10


                   57,341


                      60,327

Total non-current liabilities



               201,016


                   199,716







Current liabilities






Trade and other payables

9


                 240,579


                     229,631

Current tax liabilities

13-B


                   75,215


                     111,479

Total current liabilities



               315,794


                   341,110

Total liabilities



               516,810


                   540,826

Total equity and liabilities



            2,520,775


                2,483,299







These condensed consolidated interim financial statements were approved and authorised for issue by the Board of Directors and signed on their behalf on 22 Aug 2016 by:







    ____________________





     Dr. Hend El Sherbini




James Nolan

     Chief Executive Officer



Head of Audit Committee

 

 

 



 

 

Consolidated Income Statement

 


Note


30 June 2016


30 June 2015




EGP'000


EGP'000




(Unaudited)


(Unaudited)







Revenue



                   552,540


                  493,232

Cost of sales



                  (252,453)


                 (222,145)

Gross profit



                 300,087


                 271,087







Marketing and advertising expenses



                   (27,999)


                   (22,465)

Administrative expenses



                   (46,367)


                 (158,410)

Other expenses



                     (1,691)


                    (2,750)

Operating profit



                 224,030


                   87,462







Finance income

12


                       9,583


                      6,424

Finance cost

12


                   (35,001)


                    (1,382)

Net finance (cost) / income

12


                   (25,418)


                      5,042

Profit before tax



                 198,612


                   92,504







Income tax expense



                   (72,110)


                   (70,376)

Profit for the period



                 126,502


                   22,128







Profit attributed to:






Owners of the Company



                   123,319


                    16,901

Non-controlling interest



                       3,183


                      5,227




             126,502


              22,128







Earnings per share (expressed in EGP):






Basic and diluted earnings per share

17


                    0.82


                   0.11







The accompanying notes on pages 16 - 25 form an integral part of these condensed consolidated interim financial statements.

 

 

 

 

 

 



 

Consolidated Statement of Profit or Loss and Other Comprehensive Income

 



30 June 2016


30 June 2015



EGP'000


EGP'000



(Unaudited)


(Unaudited)






Net profit


                126,502


                  22,128






Other comprehensive income





Items that may be subsequently reclassified to profit or loss:





Currency translation differences


                   26,478


                     1,980

Other comprehensive income for the period net of tax


                  26,478


                    1,980

Total comprehensive income for the period


                152,980


                  24,108






Attributed to:





Owners of the company


                   20,664


                    (4,044)

Non-controlling interests


                     5,814


                     6,024



                  26,478


                    1,980

 

 

 

 

 


Changes in Shareholder Equity


Attributable to owners of the Company




Share
capital

Share
premium

Capital
reserve

Legal
reserve*

Put option reserve

Translation
reserve

Retained earnings

Share based payment reserve

Total attributed to the owners of the Company

Non-controlling interests

Total equity

 













 

At 1 January 2016

1,072,500

1,027,706

(314,310)

28,834

(64,069)

1,193

142,712

1,034

1,895,600

46,873

1,942,473

 

Profit for the period

-

-

-

-

-

-

123,319

-

123,319

3,183

126,502

 

Other comprehensive income for the period

-

-

-

-

-

23,847

-

-

23,847

2,631

26,478

 

Total comprehensive income

-

-

-

-

-

23,847

123,319

-

147,166

5,814

152,980

 

Transactions with owners of the Company












 

Contributions and distributions












 

Dividends

-

-

-

-

-

-

(79,470)

-

(79,470)

(6,577)

(86,047)

 

Put option during the year

-

-

-

-

(4,407)

-

-

-

(4,407)

-

(4,407)

 

Reverse share-based payment

-

-

-

-

-

-

-

(1,034)

(1,034)

-

(1,034)

 

Legal reserve formed during the period

-

-

-

-

-

-

-

-

-

-

-

 

Total contributions and distributions

-

-

-

-

(4,407)

-

(79,470)

(1,034)

(84,911)

(6,577)

(91,488)

 

Total transactions with owners of the Company

-

-

-

-

(4,407)

-

(79,470)

(1,034)

(84,911)

(6,577)

(91,488)

 

Balance at 30 June 2016 (Unaudited)

1,072,500

1,027,706

(314,310)

28,834

(68,476)

25,040

186,561

-

1,957,855

46,110

2,003,965

 













 

At 1 January 2015**

1,072,500

1,027,706

(314,310)

26,945

(50,420)

1,204.00

-

-

1,763,625

41,523

1,805,148

 

Profit for the period

-

-

-

-

-

16,901

-

-

16,901

5,227

22,128

 

Other comprehensive income for the period

-

-

-

-

-

1,183

-

-

1,183

797

1,980

 

Total comprehensive income

-

-

-

-

-

18,084

-

-

18,084

6,024

24,108

 

Transactions with owners of the Company












 

Contributions and distributions












 

Dividends

-

-

-

-

-

-

-

-

-

(3,582)

(3,582)

 

Legal reserve formed during the period

-

-

-

186

-

-

(186)

-

-

-

-

 

Total contributions and distributions

-

-

-

186

-

-

(186)

-

-

(3,582)

(3,582)

 

Total transactions with owners of the Company

-

-

-

186

-

-

(186)

-

-

(3,582)

(3,582)

 

Balance at 30 June 2015 (Unaudited)

1,072,500

1,027,706

(314,310)

27,131

(50,420)

19,288

(186)

-

1,781,709

43,965

1,825,674

 

The accompanying notes on pages 15 - 26 form an integral part of these condensed consolidated interim financial statements.

* Under Egyptian Law each subsidiary must set aside at least 5% of its annual net profit into a legal reserve until such time that this represents 50% of each subsidiary's issued capital. This reserve is not distributable to the owners of the Company.

**These individual amounts within equity as at 1 January 2015 have been restated for the same reasons as those disclosed in note 2.2 of the audited consolidated financial statements published as at and for the year ended 31 December 2015.

 

.


Consolidated Statement of Cash Flows


Note

30 June 2016


30 June 2015



EGP'000


EGP'000



(Unaudited)


(Unaudited)

Cash flows from operating activities





Profit for the period before tax


                 198,612


                 92,504

Adjustments





Depreciation

4

                  20,902


                 13,941

Amortization


                         -  


                      352

Loss on disposal of  Property, plant and equipment


                        66


                       81

Impairment of goodwill


                    1,849


                        -  

Impairment in trade and other receivables


                       986


                   2,478

Provisions made


                    1,173


                   1,010

Reversal of impairment in trade and other receivables


                     (458)


                      (85)

Provisions reversed


                   (1,160)


                        (6)

Interest expense


                    3,657


                   1,268

Interest income


                   (9,583)


                  (3,752)

Unrealised foreign currency exchange loss / (gain)


                    3,709


                  (2,672)

Net cash from operating activities before changes in working capital


               219,753


              105,119






Provision used


                       (55)


                    (891)

Change in inventory


                   (6,622)


                   2,983

Change in trade and other receivables


                   (2,878)


                (31,355)

Change in trade and other payables


                    4,832


                 16,386

Cash generated from operating activities before income tax payment


               215,030


                92,242






Income tax paid during period


               (102,983)


              (101,417)

Net cash from operating activities


               112,047


                (9,175)






Cash flows from investing activities





Interest received


                    9,372


                   3,550

Acquisition of purchase of Property, plant and equipment


                 (21,742)


                (33,750)

Proceeds from sale of Property, plant and equipment


                        50


                      267

Net cash flows used in investing activities


               (12,320)


              (29,933)






Cash flows from financing activities





Repayments of borrowings


                         -  


                      (35)

Interest paid


                   (2,695)


                  (1,268)

Dividends paid


                 (86,047)


                  (3,582)

Financial lease


                   (3,885)


                    (429)

Net cash flows used in financing activities


               (92,627)


                (5,314)






Net decrease in cash and cash equivalent


                   7,100


              (44,422)






Cash and cash equivalent at the beginning of the period


                 387,716


                252,110

Effect of exchange rate fluctuations on cash held


                  11,774


                   1,914

Cash and cash equivalent at the end of the period

8

               406,590


              209,602


1. Reporting entity 

Integrated Diagnostics Holdings plc "IDH" or "the Company" is a Company which was incorporated in Jersey on 4 December 2015 and established according to the provisions of the Companies (Jersey) Law 1991 under Registered No. 117257.  These condensed consolidated interim financial statements as at and for the six months ended 30 June 2016 comprise the Company and its subsidiaries (together referred as the 'Group').

The Group's main activity is concentrated in the field of medical diagnostics.

The Group's financial year starts on 1 January and ends on 31 December each year.

These condensed consolidated interim financial statements were approved for issue by the Directors of the Company on 22 August 2016.

 

2. Basis of preparation

A.   Statement of compliance

 

These condensed consolidated interim financial statements have been prepared in accordance with IAS 34 'Interim Financial Reporting' (as adopted by the EU).

They do not include all the information required for a complete set of IFRS financial statements as adopted by European Union ("IFRS-EU"), and should be read in conjunction with the financial statements published as at and for the year ended 31 December 2015 which is available at www.idhcorp.com 

 

B.  Going concern

 

These condensed consolidated interim financial statements have been prepared on the going concern basis. At 30 June 2016, the Group had net assets amounting to EGP 2,003,965K.

 The Group is profitable and cash generative and the Directors have considered the Group's cash forecasts for a period of 12 months from the signing of the balance sheet.

The Directors have a reasonable expectation that the Group has adequate resources to meet its liabilities as they fall due for at least 12 months from the date of approval of these condensed consolidated interim financial statements.

Thus, they continue to adopt the going concern basis in preparing the financial information.

 

C.  Basis of measurement

 

The condensed consolidated interim financial statements have been prepared on the historical cost basis except where adopted IFRS mandates that fair value accounting is required.

 

D.  Functional and presentation currency

 

These condensed consolidated interim financial statements and financial information are presented in Egyptian Pounds (EGP'000).

The functional currency of the majority of the Group's entities is the Egyptian Pound (EGP) and is the currency of the primary economic environment in which the Group operates.

 

 

 

E.   Use of estimates and judgements

 

The preparation of interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense.

Actual results may differ from these estimates.

There are no material changes in management judgments, estimates and assumptions during the six months' period ended 30 June 2016 from those applied in the audited consolidated financial statements published as at and for the year ended 31 December 2015.

 

3. Significant accounting policies

 

The accounting policies applied by the Group in these condensed consolidated interim financial statements are consistent with those applied in the audited consolidated financial statements published as at and for the year ended 31 December 2015.

These audited consolidated financial statements were prepared in accordance with IFRS as adopted by the European Union.

 

New standards and interpretations not yet adopted

 

New standards, amendments to standards and interpretations that are not yet effective for the half year ended 30 June 2016 have not been applied in preparing these condensed consolidated interim financial statements. None of these is expected to have a significant effect on these condensed consolidated interim financial statements of the Group.

 

 

4. Property, plant and equipment

 

 

 

 

Land & Buildings

Medical, electric
 & information
 system equipment

Leasehold

Fixtures,

Building &

Total

improvements

fittings &

Leasehold

vehicles

improvements

in construction

Cost







At 1 January 2016

                   167,612

                    196,753

                 76,272

                  31,949

                    3,576

                   476,162

Additions

                             -  

                        8,742

                   6,794

                    1,217

                    4,990

                     21,743

Disposals

                             -  

                      (1,383)

                    (312)

                      (278)

                          -

                      (1,973)

Assets transfer to held for sale

                         (649)

                              -  

                        -  

                 -  

                          -

                         (649)

Translation differences

                          674

                        2,193

                   2,338

                       823

                       268

                       6,296

Transfers

                             -  

                        2,935

                        -  

                          -  

                  (2,935)

                             -  

At 30 June 2016

                 167,637

                  209,240

               85,092

                 33,711

                   5,899

                 501,579








Depreciation







At 1 January 2016

                     19,331

                      75,403

                 31,088

                  12,463

                          -

                   138,285

Charge for the period

                       1,372

                      12,188

                   6,190

                    1,152

-

                     20,902

On disposals

                             -  

                         (906)

                    (303)

                      (199)

-

                      (1,408)

Translation differences

                              2

                           287

                      148

                       114

-

                          551

At 30 June 2016

                     20,705

                      86,972

                 37,123

                  13,530

                          -

                   158,330








Net book value

           146,926

           122,239

         47,961

           20,222

            5,901

           343,249

At 30 June 2016

At 31 December 2015

           148,281

           121,350

         45,184

           19,486

            3,576

           337,877

 

Leased equipment

 

The Group leases medical and electric equipment under finance lease arrangements. This equipment is supplied to service the Group's new state-of-the-art Mega Lab. The equipment secures lease obligations, see note 10 for further details. At 30 June 2016, the net carrying amount of leased equipment was EGP 63,385K (31 Dec 2015: EGP 68,115K).

 

 

5.  Intangible assets and goodwill

Intangible assets represent goodwill acquired through business combinations and brand names.


30-Jun-16


31-Dec-15

EGP'000

EGP'000


(unaudited)



Goodwill

     1,233,056


1,231,198

Brand names

        376,570


375,027


     1,609,626


1,606,225

 

Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment.

During the period goodwill of EGP 1,849K allocated to the Molecular Diagnostics Centre CGU has been fully impaired due to the liquidation of this legal entity in May 2016.

No other indicators of impairment have been identified at 30 June 2016.

 

6.  Inventories


30-Jun-16


31-Dec-15

 

 

EGP'000

EGP'000

 


(unaudited)



 

Chemicals and operating supplies

40,947

34,326


40,947


34,326

 

 

 

7. Trade and other receivables


30-Jun-16


31-Dec-15

EGP'000

EGP'000


(unaudited)



Trade receivables

       112,485


117,063

Other receivables

           4,465


2,143

Prepayments

         15,227


13,467

Due from related parties (Note 11)

           3,837


465

Fixed assets held for sale

              649



Accrued revenue

           1,258


1,047


       137,921


     134,185

Less:




Impairment of trade receivables

        (17,558)


      (17,030)


       120,363


     117,155

8. Cash and cash equivalents



30-Jun-16

   

31-Dec-15





EGP'000

EGP'000



(unaudited)



Short-term deposits*


214,135


      263,384

Cash at banks and on hand


192,455


      124,332

Cash and cash equivalents


406,590


    387,716

 

 

 

*The maturity date of these time deposits is less than or equal to 3 months.

EGP 16,597K (31 Dec 2015: 16,166K) of total cash and cash equivalents are held in subsidiaries operating in Sudan. Prior approval from the Central Bank of Sudan is required to transfer these funds abroad.

 

 

 

9. Trade and other payables

 


                                                                              30-Jun-16


31-Dec-15

 

 

EGP'000

EGP'000

 


(unaudited)



 

Trade payable  

       94,079


70,743

 

Accrued expenses

       53,804


       73,747

 

Other payables

       10,110


         6,830

 

Put option liability

       68,476


       64,069

 

Finance lease liabilities

       14,110


       14,242

 


240,579


229,631

 

 

Through the historic acquisitions of Makhbariyoun Al Arab and Golden Care Medical Services the Group entered into 2 separate put option arrangements to purchase the remaining equity interests from the vendors at a subsequent date. The options are exercisable in whole from the fifth anniversary of completion of the original purchase agreement falling due in June 2016. At acquisition a put option liability has been recognised for the net present value for the exercise price of the option.

 

In July 2016 the Group was notified by the vendors of Golden Care Medical Services the put option had been exercised. The purchase of the remaining shares is expected to complete during H2 2016.

 

 

10. Long term financial obligation

 

The long-term financial obligations represent the finance lease liabilities due over 1 year for agreements entered into by the Group.

 

The total finance lease liabilities for the laboratory equipment to service the Group's Mega Lab are payable as follows:

 

 

 


Minimum lease

payments

Interest

Principal


30 June 2016

30-Jun-16

30-Jun-16


EGP'000

EGP'000

EGP'000


(unaudited)

(unaudited)

(unaudited)

Less than one year

21,669

7,559

14,110

Between one and five years

60,145

18,109

42,036

More than five years

18,000

2,695

15,305


99,814

28,363

71,451

 

 

 

11. Related party transactions

 

The significant transactions with related parties, their nature volumes and balance during the period 30 June 2016 and 2015 are as follows:






30-Jun-16






EGP'000

Related Party

Nature of transaction


Nature of relationship


Amount of transaction


Balance






(unaudited)


(unaudited)

Health-care Tech Company

Expenses paid on behalf


Affiliate


16


204

Life Scan (S.A.E)

Expenses paid on behalf   


Affiliate


-


277

Integrated Treatment for Kidney Diseases (S.A.E)

Rental income


Entity owned by Company's CEO


21


21

International Fertility (IVF)

Expenses paid on behalf


Affiliate


3,335


3,335

Total







        3,837 

 

 

 

 













31-Dec-15






EGP'000

Related Party

Nature of transaction


Nature of relationship


Amount of transaction


Balance









Health-care Tech Company

Expenses paid on behalf


Affiliate


              75


             188

Life Scan (S.A.E)

Expenses paid on behalf   


Affiliate


             277


             277

Integrated Treatment for Kidney Diseases (S.A.E)

Rental income


Entity owned by Company's CEO


274


-

Total







            465

 

The transactions with the related parties are made on terms equivalent to those that prevail in arm's length transactions.

 

 

12. Net finance income


30-Jun-16


30-Jun-15

EGP'000

EGP'000

Finance income

(unaudited)


(unaudited)

Interest income on bank and time deposits

          9,583


            3,752

Net foreign exchange gain

-


            2,672

Total finance income

          9,583


            6,424





Finance cost




Bank charges

          (435)


             (114)

Interest expense

       (3,657)


           (1,268)

Net foreign exchange loss* 

       (30,909)


 -

Total finance cost

       (35,001)


           (1,382)

Net finance (cost)/income

       (25,418)


            5,042

 

* IDH has entered into a number of currency swap transactions during the period to convert Egyptian Pounds into US Dollars. There is a difference between the official exchange rate and an unofficial parallel exchange rate for the Egyptian Pound against the US Dollar. A foreign exchange loss has arisen due to the difference between the official exchange rate and the less favorable unofficial parallel exchange rate received by IDH when entering into these transactions. In the period IDH purchased a total of US$ 15,890K (June 2015: $ 3,930K) which resulted in a total foreign exchange loss recognised of EGP 27,200K (June 2015: EGP 731K).

 

 

13. Tax

 

A)   Tax expense

 

Tax expense is recognised based on management's best estimate of the weighted-average annual income tax rate expected for the full financial year multiplied by the pre-tax income of the interim reporting period. There were no significant changes in Group's effective tax rate for the six months ended 30 June 2015 to 30 June 2016.

 

B)   Income tax liabilities

 


30-Jun-16


31-Dec-15

EGP'000

EGP'000


(unaudited)



Balance b/f

              111,479


              123,683

Net withholding tax (debit - credit)

                (1,061)


                (5,518)

Tax provision

                 3,221


                    348

Income tax for the year

               59,312


              108,128

Tax paid

              (97,736)


            (115,162)

Balance c/f

               75,215


              111,479

 

 

 

 

C)  Deferred tax liabilities

 

Deferred tax relates to the following:

 


30-Jun-16


31-Dec-15



EGP'000


EGP'000



Assets

Liabilities


Assets

Liabilities



              (unaudited)




Property, plant and equipment

                      -  

                (4,962)


 -

         (5,668)


Intangible assets

                      -  

            (101,883)


 -

     (102,113)


Undistributed reserves from group subsidiaries

                      -  

              (28,017)


 -

       (22,614)


Provisions

                 2,106

                      -  


           1,968

 - 


Net deferred tax liability


  (132,756)



 (128,427)









 

14. Financial Instruments

 

The Group has reviewed the financial assets and liabilities held at 30 June 2016 and 31 December 2015. It has been deemed that the carrying amounts for all financial instruments are a reasonable approximation of fair value. All financial instruments are deemed Level 3.

 

15. Contingent liabilities

 

There are no contingent liabilities relating to the group's transactions and commitment with banks, this has been assessed and not deemed to have a material effect on the group's future financial position.

 

 

16. Dividends

 

The following dividends were declared and paid by the company for the period.

 


30-Jun-16


30-Jun-15


EGP'000

EGP'000


(unaudited)


(unaudited)





US$ 0.06 per qualifying ordinary share (2015: nil)

             79,470


                   -  


             79,470


                   -  

 

17. Earnings per share


30-Jun-16


30-Jun-15

EGP'000


(unaudited)


(unaudited)

Profit attributed to owners of the parent

123,319


         16,901

Weighted average number of ordinary shares in issue

150,000 


        150,000

Basic and diluted earnings per share

0.82


            0.11

 

 

The Company has no potential diluted shares as of the 30 June 2016 and 30 June 2015 therefore the earning per diluted share are equivalent to basic earnings per share.

 

 

18. Segment reporting

 

The group is viewed as a single operating segment, as the Group's Chief Operating Decision Maker (CODM) reviews the internal management reports and KPIs of the group as whole and not at a further aggregated level.

The group operates in three geographic areas, Egypt, Sudan and Jordan. Each area offers similar services and the KPIs of each are viewed to be the same and they are not viewed as individual operating segments. The revenue split between the three regions is set out below, the combined Sudan and Jordan operations make up less than 11% of the Group's total revenue.

 


Revenue by geographic location


(unaudited)

For the six-month period ended

Egypt region


Sudan region


Jordan region


Total


EGP'000


EGP'000


EGP'000


EGP'000









30-Jun-16

490,552


17,828


44,160


552,540

30-Jun-15

            445,688


            14,484


            33,060


            493,232

 



 

The operating segment profit measure reported to the CODM is Normalised EBITDA, as follows:


30 -Jun-2016


30-Jun-15

EGP'000


EGP'000


(unaudited)


(unaudited)

Profit from operations

      224,030


       87,462





Property, plant and equipment depreciation

        20,902


       13,941

Amortization of Intangible assets

               -  


            352

EBITDA

      244,932


     101,755

Non Recurring Items




IPO Expenses

               -  


     122,912





Normalised EBITDA

      244,932


     224,667

 

The operating segment assets and liabilities measure reported to the CODM is in accordance with IFRS as shown in the Group's Consolidated Statement of Financial Position.

 

 

 

 

 


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