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Integrated Diag Hdgs (IDHC)

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Thursday 16 August, 2018

Integrated Diag Hdgs

Half-year Report

RNS Number : 9537X
Integrated Diagnostics Holdings PLC
16 August 2018
 

Integrated Diagnostics Holdings Plc

Half-Year Results

Thursday, 16 August 2018

 

Integrated Diagnostics Holdings Plc results for the six-month period ended 30 June 2018

(London) Integrated Diagnostics Holdings ("IDH," "the Group," or "the Company"), IDHC on the London Stock Exchange, a leading consumer healthcare company with operations in Egypt, Jordan, Sudan and Nigeria, announced today its results for the six-month period ended 30 June 2018.

 

 

Results

 

 

 

 

 

1H2018

1H2017

 change

Revenues

866

     685

26%

Cost of Sales

447

367

22%

Gross Profit

419

318

32%

Gross Profit Margin

48%

46%

2 pts

Operating Profit

295

     224

31%

EBITDA

329

     255

29%

EBITDA Margin

38%

37%

1 pts

Net Profit

214

     160

34%

Net Profit Margin

25%

23%

2 pts

           

1 EBITDA is calculated as operating profit plus depreciation and amortization.

 

 

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

 

"IDH has reported another strong set of financial results backed by real, organic growth across our growing four-country footprint. Particularly notable is the solid growth and strong contribution from our high-margin walk-in segment, driven by a sharp focus on marketing. IDH operated 405 branches at the end of this reporting period, and I am very pleased to be able to report that we are on plan with the integration of our new Nigerian operation into our platform. Also during the first half of 2018, we won accreditation from the College of American Pathologists (CAP) for our state-of-the-art Mega Lab in Egypt, our largest market. Going forward, we are on track to deliver consolidated revenue growth of more than 20% and an EBITDA margin of c. 40% from our established businesses in Egypt, Jordan and Sudan - all whilst integrating our operation in Nigeria which is going through a value-building phase.

 

 

 

 

Financial & Operational Highlights

·     Revenues increased 26% to EGP 866 million in 1H2018 from EGP 685 million in the same period last year, driven primarily by improved pricing as the Group capitalised on the inflationary environment it operates within and successfully targeted a larger number of higher-margin walk-in patients. The Group's strong revenue performance came despite the holy month of Ramadan - a traditional slow period for consumer healthcare companies - falling during the reporting period.

·     Cost of sales recorded EGP 447 million in 1H2018, up 22% y-o-y, increasing at a slower rate than revenue growth thanks to management's focus on cost-control initiatives. Consequently, raw materials costs as a percentage of sales declined to 19% in 1H2018 compared to 22% in the same period last year.

 

·     Gross profit increased at a rate faster than revenues, closing at EGP 419 million in 1H2018 or 32% higher than the same period the previous year. Gross profit improved thanks to a higher contribution from higher-margin walk-in patients, a favourable test mix and management's success in controlling costs amidst an inflationary environment and upward pressure on raw material prices. Gross profit margin rose two percentage points to 48% versus 46% recorded in 1H2017.

·     Operating profit rose 31% in 1H2018 to EGP 295 million compared to EGP 224 million in 1H2017. This comes despite an increase in SG&A expenses driven by higher salary and wage costs as well as increased marketing spend to drive volume growth.

·     EBITDA grew 29% to EGP 329 million in 1H2018 compared to EGP 255 million in the same period last year. The Group's EBITDA margin improved to 38% compared to 37% in 1H2017. Notably, the Group's financial results now include its new Nigerian operation, which is still in the value-building phase and contributed a negative EBITDA of EGP 7 million. Excluding the Nigerian operation, EBITDA growth would have been 32% in 1H2018 with an EBITDA margin of 40%, consistent with previously stated guidance.

·     Net interest income was EGP 22 million in 1H2018, up a strong 83% over the 1H2017 figure of EGP 12 million thanks to IDH's effective cash management and ability to capitalise on favourable interest rates, particularly during the first quarter of the year.

·     Net foreign exchange loss of EGP 12 million in 1H2018 was up 47% compared to EGP 8 million in 1H2017, owing primarily to devaluation of the Sudanese pound as well as FX transactions related to dividend distributions.

·     Net profit increased 34% to EGP 214 million in 1H2018 versus EGP 160 million in 1H2017, buoyed by strong revenue and gross profit growth as well as higher interest income.

·     Total tests performed stood at 12.6 million in 1H2018, up 5% year-on-year, while total patients served increased 10% to 3.2 million on the back of continued successful marketing campaigns targeting walk-in patients.

·     IDH's key metrics of average revenue per test climbed 21% in 1H2018 while average revenue per patient rose 15% during the same period. These increases underscore the Group's ability to pass-on inflationary pressures thanks to patient loyalty and the strength of its brands.

·     Management affirms its guidance for the full year 2018. IDH continues to target combined revenue growth of over 20% and an EBITDA margin of c. 40% at from its established businesses in Egypt, Jordan and Sudan and excluding Nigeria.

Outlook

 

IDH's forward-looking strategy rests on leveraging its established business model to achieve four key strategic goals, namely: (1) continue to expand customer reach; (2) increase the number of tests per patient; (3) expand into new geographic markets through selective, value-accretive acquisitions; and (4) introduce new medical services by leveraging the Group's network and reputable brand position.

 

 

About Integrated Diagnostics Holdings (IDH)

IDH is a leading consumer healthcare company in the Middle East and Africa with operations in Egypt, Jordan, Sudan and Nigeria. The Group'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 Echo-Scan (Nigeria). A long track record for quality and safety has earned the Company a trusted reputation, as well as internationally recognised accreditations for its portfolio of over 1,400 diagnostics tests. From its base of 405 branches as of 30 June 2018, IDH will continue to add laboratories through a Hub, Spoke and Spike business model that provides a scalable platform for efficient expansion. Beyond organic growth, the Group's expansion plans include acquisitions in new Middle Eastern and African markets where its model is well-suited to capitalise on similar healthcare and consumer trends and capture a significant share of fragmented markets. IDH has been a Jersey-registered entity with a Standard Listing on the Main Market of the London Stock Exchange (ticker: IDHC) since May 2015.

 

IDH's forward-looking strategy rests on leveraging its established business model to achieve four key strategic goals, namely: (1) continue to expand customer reach; (2) increase the number of tests per patient; (3) expand into new geographic markets through selective, value-accretive acquisitions; and (4) introduce new medical services by leveraging the Group's network and reputable brand position. 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 orp.com

 

 

Forward-Looking Statements

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.
 

 

Chief Executive Officer's Report

I'm very pleased to report yet another strong set of financial results. Throughout the first half of 2018, our strong operational performance allowed us to deliver 26% growth in our top-line thanks to a combination of better pricing and mix as well as sustained growth in volumes.

The performance of our walk-in segment is particularly notable: A sharp focus on consumer marketing of our superior value proposition delivered strong revenue growth in this high-margin segment. Our walk-in patient numbers rose 24% in 1H2018, well-above the Group's average growth of 10% in total patient volumes. Walk-in patients paid for 13% more tests, leading to a 35% increase in revenues from that segment. While walk-ins account for a smaller share of our total revenues than contract patients, the combination of higher volumes and better pricing saw it contribute the lion's share of total growth at 52% for the period.

Our 26% growth in total revenues was largely organic, coming in 2 percentage points higher than the same period of 2017, at which time we benefitted from foreign currency translations of our results in Jordan and Sudan, which contributed favourably to our top-line. What's more, 1H2018 saw the devaluation of the Sudanese pound which brought a negative impact on our top line, underscoring the substantial growth of the business.

Across our geographies, IDH operated 405 branches as at 1H2018, up nearly 6% compared to the 383 branches at the close of 2017. Over the past six months, we launched 11 new branches in Egypt, 1 in Jordan and expanded our reach to Nigeria with the acquisition of Echo-Scan and its 10 operating branches. Against that background, I'm pleased to report that the integration of our new Nigerian operation is well underway and operating according to our business plan. We are revamping existing branches, expanding the operation's national reach, hiring new talent, and working to ensure our newest operation is fully compliant with IDH's high quality standards.

Also, during the first half of this year, our Mega Lab in Egypt was awarded the College of American Pathologists (CAP) accreditation, widely considered the leader in laboratory quality assurance globally. Consequently we are the only CAP-accredited facility in Egypt, our largest market.

While we continue to strengthen our position in the pathology market across our geographies, we are also expanding into the high-value, adjacent radiology segment. In August 2018, we announced the launch or our radiology business in Egypt, Al Borg Scan, which will leverage the strong relationship between our brands and our millions of customers, and will capitalise on favourable market dynamics. More than 75% of customers surveyed by a third-party research provider indicate a preference for consolidated service offerings that feature both pathology and radiology - and there is significant existing demand for us to capture.     

As we deliver operational and top-line growth, we have also been successful in expanding profitability margins, thanks again to increasing contribution from the high-margin walk-in segment as well as improved test mix and a sharp eye on cost-control initiatives to help offset inflationary pressure, particularly on our raw material prices. The results speak for themselves, with gross profit margin expanding two percentage points to 48% and EBITDA margin increasing from 37% to 38% in 1H2018. This comes despite downward pressure from our operations in Sudan following the devaluation of the Sudanese pound and includes a negative contribution to EBITDA from Nigeria as the operation is still in the value-building phase. Excluding our Nigerian operation, EBITDA margin for the period would have recorded 40% in 1H2018.

We are pleased to reaffirm our full-year 2018 guidance for revenue growth of over 20% and an EBITDA margin of c. 40% at our established businesses in Egypt, Sudan and Jordan. This performance will be bolstered by the strength of our brand names, which have become synonymous with quality and safety. We see a continued improvement in both volume and pricing heading into the second half of the year and believe we are ideally positioned to leverage our supplier relationships and asset-light business model to drive operational efficiency and maximize value for our shareholders.

Dr. Hend El Sherbini, Chief Executive Officer

 

Operational & Financial Review

 

IDH delivered a strong operational and financial performance in 1H2018, recording a 26% year-on-year increase in revenues on the back of both better pricing (supported by increased contribution from the walk-in segment) as well as higher patient and test volumes. With consumer spending eroded by high inflation, management successfully rolled out tactical marketing campaigns, particularly in Egypt, allowing the Group to pass-on price increases while simultaneously drive volume growth across contract and walk-in clients. The success of this drive in a challenging operating environment underscores the strong market position of our portfolio of brands.

 

It is also worth noting that robust revenue growth came despite the holy month of Ramadan falling in the second quarter: The month sees substantial changes in consumer behaviour in most of the countries in which the Company operates. Moreover, the Group saw a lower top-line contribution from operations in Sudan, where the devaluation of the Sudanese pound saw local-currency revenue gains lost to currency translation in IDH's consolidated financials.

 

Top-line growth for the period reflects positively as we move down the income statement thanks to management's ability to rein in costs despite operating in a high-inflation environment. IDH delivered a 32% y-o-y increase in gross profit for 1H2018 and a 29% y-o-y growth in EBITDA for the same period, with both metrics showing margin expansion over 1H2017. Meanwhile, prudent cash management saw the company record net interest income of EGP 22 million, further bolstering IDH's bottom line. Net profit for the six-month period recorded a solid 34% y-o-y increase to EGP 214 million.

 

IDH continued to expand its geographic footprint in 1H2018, adding 22 new branches during the six-month period to reach a total 405 branches, up c. 6% compared to year-end 2017. Branch additions included 10 in Nigeria through acquisition, IDH's newest market, 11 in Egypt and one new branch in Jordan. The Group's expansion drive is supported by its state-of-the-art Mega Lab which allows IDH to deploy its Hub, Spoke and Spike business model in Egypt to roll out capital-efficient "C" labs more rapidly. In February 2018, the Mega Lab was awarded accreditation from the College of American Pathologists (CAP), widely considered the leader in laboratory quality assurance globally.

 

Branches by Country

 

 

30 June 2018

31 December 2017

Change

Egypt

351

340

3.2%

Jordan

19

18

5.6%

Sudan

25

25

-

Nigeria

10

-

NA

Total Branches

405

383

5.7%

 

 

Our Customers

 

IDH serves two principal types of clients: contract (corporate) and walk-in (individuals). Within each of these categories, the Group also offers a house call service, and within the contract segment, a lab-to-lab service.

 

 

Contract Clients

 

IDH's contract clients, who in 1H2018 represented 58% of total revenues, include institutions such as unions, private insurance companies and corporations who enter into one-year renewable contracts at agreed rates per-test and on a per-client basis. During 1H2018, the Company served 2.3 million patients under these contracts and performed a total of 9.5 million tests, with no single contract client accounting for more than 1.5% of revenues.

 

Walk-in Clients

 

The Group derived 42% of its revenues in 1H2018 from walk-in clients. The segment regained its growth momentum where total walk-in clients numbered 0.9 million in 1H2018, up a strong 24% y-o-y, and received 3.1 million tests.

 

The ratio of contract to walk-in patients during 1H2018 was 71:29 compared with 74:26 in 1H2017, reflecting IDH's sustained marketing effort to target walk-in patients. That said, we expect the ratio to remain skewed in favour of contract patients; this is in step with the general market-wide shift in patient mix in recent years and is a natural outgrowth of market dynamics in Egypt, as companies are extending additional benefits to their staffs. The trend has been encouraged by continued high inflation, which is eroding consumer spending power and thus putting incremental pressure on corporations to provide either health insurance or corporate plans.

 

Key Performance Indicators

 

 

                1H2018

1H2017

% change

 

Walk-In

Contract

Total

Walk-In

Contract

Total

Walk-In

Contract

Total

Revenue (EGP '000)

359,832

506,021

865,853

265,788

419,345

685,133

35%

21%

26%

% of Revenue

42%

58%

100%

39%

61%

100%

 

 

 

Patients ('000)

932

2,292

3,225

755

2,183

2,938

24%

5%

10%

% of Patients

29%

71%

100%

26%

74%

100%

 

 

 

Revenue per Patient (EGP)

386

221

269

352

192

233

10%

15%

15%

Tests ('000)

3,083

9,502

12,585

2,731

9,287

12,018

13%

2%

5%

% of Tests

24%

76%

100%

23%

77%

100%

 

 

 

Revenue per Test (EGP)

117

53

69

97

45

57

20%

18%

21%

Test per Patient

3.3

4.1

3.9

3.6

4.3

4.1

-9%

-3%

-5%

 

 

 

 

 

 

 

 

 

 

 

Revenue Analysis: Contribution by Patient Segment

 

Consolidated revenues increased 26% y-o-y in 1H2018 to EGP 866 million, driven by both the corporate and walk-in segments. Total patients served rose 10% and total tests performed grew 5% during our reporting period. Selective price increases and better sales mix also made important contributions to revenue growth. This is clearly reflected in IDH's two key revenue metrics of average revenue per patient (up 15% in 1H2018) and average revenue per test (up 21%).

 

Revenues from contract clients grew 21% to EGP 506 million in 1H2018, supported by an overall trend toward corporate health insurance coverage, especially in IDH's home market of Egypt. Better pricing mix saw the contract segment record a 15% increase in average revenue per contract patient and an 18% increase in average revenue per contract test; surpassing volume growth of 5% in number of contract patients and a 2% increase in associated tests.

 

Meanwhile, the walk-in segment recorded strong gains in 1H2018 with revenues growing 35% y-o-y to EGP 360 million. Segment growth was driven by both improved pricing and a continued turnaround in walk-in patient trends. In Egypt, inflationary pressure is gradually easing (coming off a high base) and consumers are increasingly adapting to new price levels following the late 2016 devaluation of the Egyptian pound. Additionally, IDH's successful efforts to target walk-in patients with tactical marketing campaigns - including attractive features such as discounts on chronic disease tests and partnerships with banks for affordable payment programs - helped drive patient and test volumes in the segment, which increased 24% and 13%, respectively, in 1H2018. In parallel, the company was also able to extract higher value from the segment, with average revenue per walk-in patient recording a 10% increase and average revenue per walk-in test increasing 20% in 1H2018. Whilst the segment contributes the smaller share to total revenues (1H2018: 42%), the dual effect of strong volume growth and better pricing saw walk-in patients contribute 52% to total revenue growth for the period.

 

Revenue Analysis: Contribution by Geography

 

On a geographic basis, Egypt contributed 83% of total revenues in 1H2018 (1H2017: 82%), followed by Jordan at 13% (1H2017: 15%) and Sudan and Nigeria each contributing 2% to total revenues (Sudan 1H2017: 3%).

 

Revenues by Country

(EGP million)

1H2018

1H2017

% change

Egypt

 715

 560

28%

Jordan

 114

 102

12%

Sudan

 19

 23

(16%)

Nigeria

 17

 -  

NA

Total

866

685

26%

 

In IDH's home market of Egypt, revenues recorded the fastest growth at 28% y-o-y to EGP 715 million in 1H2018. This saw it contribute the lion's share to the Group's total revenue growth at 86% in absolute terms. Patient volumes were up 8% in Egypt, whilst tests performed rose 4%. On a segment basis, patient volumes were strong in both the contract business (+5%) and walk-in patients (+18%). Test volumes also increased across both segments in 1H2018, with total contract tests rising 1% and walk-in tests increasing 19%.

 

To drive both the acquisition of new patients and expanded test volumes, the Group offered payment plans and packages for selected tests; launched tactical advertising campaigns to raise awareness of chronic diseases; and implemented a new customer relationship management (CRM) program that reached out to patients with marketing messages via SMS.

 

Revenues from Jordan recorded EGP 114 million in 1H2018, up 12% compared to the same period last year and contributing c.7% to IDH's total revenue growth in absolute terms. IDH's Jordan-based subsidiary Biolab delivered a strong operational performance, with 19% increase in number of patients served and 15% gain in number of tests performed.

 

In Sudan, revenues rose 44% in SDG terms, but were negatively impacted by the devaluation of the Sudanese pound during the period when translated into EGP for the Group's consolidated financial statements. The average SDG:EGP exchange rate was 0.65 in 1H2018 versus 1.12 in 1H2017, with the result being a 17% decline in Sudan revenues in EGP terms to EGP 19 million. Had the SDG:EGP exchange rate remained stable at 1.12, revenues consolidated from Sudan would have grown 29% y-o-y

 

Nigeria, IDH's newest market, contributed revenues of EGP 17 million in 1H2018 with key metrics surpassing budgets despite the operation still being the value-building phase. The country's contribution to total consolidated growth stood at 2% during the period.

 

Cost of Sales

 

Cost of sales stood at EGP 447 million in 1H2018, up 22% y-o-y, increasing at a slower rate than revenue growth thanks to management's focus on cost-control initiatives. The Group consequently delivered a c. two percentage-point expansion in gross profit margin to 48% in 1H2018 versus 46% in 1H2017. Gross profit for the period recorded EGP 419 million or 32% higher than 1H2017.

 

Raw material costs, the largest contributor to COGS at 37%, grew 12% y-o-y to EGP 167 million in 1H2018, including the cost of tests sent abroad. However, raw materials costs as a percentage of sales declined to 19% in 1H2018 compared to 22% in the same period last year.

 

Salaries and wages, the second-largest component of COGS at 34%, recorded a sharp 32% y-o-y increase in 1H2018 to EGP 150 million, driven by both annual merit raises and higher incentive compensation. Still, management maintained salaries and wages at c.17% of revenues during the period.

 

Other expenses, which include branch utilities and rent, recorded a 29% y-o-y increase to EGP 97 million in 1H2018. Growth in the expense item was driven by a hike in utilities prices in Egypt implemented in July 2017, with a second round of increases passed in July 2018.

 

EBITDA

 

EBITDA grew 29% y-o-y in 1H2018 to EGP 329 million versus EGP 255 in the same period last year. The associated EBITDA margin expanded c.70 bps to 38.0% compared to 37.3% in 1H2017 on the back of higher revenues and a tight rein on raw materials, salaries and marketing costs. SG&A expenses as a percentage of revenues were effectively unchanged at c.14%.

 

Egypt contributed 96% of consolidated EBITDA in 1H2018, up from 90% in the same period last year supported by the local operation's own momentum as well as a stable contribution from Jordan and a decline in Sudan. Lower raw material costs as well as favourable operating leverage saw EBITDA margin in Egypt expand to 44% in 1H2018 compared to 41% in the same period last year. On the other hand, the devaluation of the Sudanese pound led to Sudan's EBITDA margin declining to 2.5% (1H2017: 31%) on account of substantially higher salaries paid in US$ to Egyptian expatriates. IDH has thus outlined a plan to replace the majority of expatriate employees in Sudan with local hires. EBITDA from Group's Jordanian operation contributed 6% to consolidated EBITDA and delivered a stable EBITDA margin of 17%.

 

The Group's new Nigerian operation, which is still in the value-building phase, contributed a negative EBITDA of EGP 6.7 million in 1H2018. Excluding the Nigerian operation, EBITDA growth would have been 32% in 1H2018 with an EBITDA margin of 40%.

 

 

 

Interest Income / Expense

 

IDH recorded interest income of EGP 29 million in 1H2018, up from EGP 18 million in the same period last year. Higher interest rates along with prudent cash management saw the Group maximise return on its accumulated time deposits and treasury bills balances.

 

Interest expense, which is primarily related to the Company's finance lease contracts, increased by approximately EGP 0.4 million to reach EGP 6.6 million in 1H2018. The increase was driven by a supplier's US$-denominated finance lease contract. 

 

Foreign Exchange

 

IDH recorded a net foreign exchange loss of EGP  12 million in 1H2018, up 47% compared to EGP 8 million in 1H2017, owing primarily to devaluation of the Sudanese pound as well as FX transactions related to dividend distributions.

 

Taxation

 

In 1H2018, IDH recorded a tax expense of EGP 86 million compared to EGP 51 million in 1H2017, with an effective tax rate of 28% versus 23% a year ago. There is no tax payable for IDH's two companies at the holding level. All tax is paid on profits generated by operating companies in Egypt, Jordan and Sudan.

 

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. Deferred tax expense in 1H2018 was EGP 4.1 million versus an expense of EGP 15 million in the same period a year earlier.

 

Net Profit

 

Net profit recorded EGP 214 million in 1H2018, up 34% compared to EGP 160 million in 1H2017. Net profit margin expanded two percentage points to 25% for the period compared to 23% in 1H2017. Bottom-line improvement came as the company translated top-line gains into higher profitability and was also supported by increased interest income.

 

Balance Sheet

 

On the Assets side of the balance sheet, net property, plant and equipment (PPE) rose to EGP 540 million at 30 June 2018 from EGP 474 million at 31 December 2017, primarily due to the consolidation of Echo-Scan's fixed assets amounting to EGP 43.3 million. Other investments included CAPEX outlays for the Group's new corporate headquarters, slated for completion in 2018, as well as branch network expansion and renovations.

 

Accounts receivable stood at EGP 152 million at the end of 1H2018 compared with EGP 140 million at year-end 2017. IDH continued to benefit from its collection strategy with accounts receivables days-on-hand (DOH) decreasing to 113 days at 30 June 2018 from 123 days at 31 December 2017.

 

The Group's "days inventory outstanding" increased slightly increased to 86 days as at 30 June 2018 from 83 days at 31 December 2017.

 

On the liabilities side, accounts payable stood at EGP 118 million versus EGP 126 million at year end 2017. The Group's days payable outstanding (DPO) increased to 139 days at 30 June 2018 from 129 days at 31 December 2017. 

 

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 risks in Egypt, the Middle East and Nigeria, foreign currency exchange rate variability 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 2018 are available on the Group's website at www.idhcorp.com.

 

 

 

Statement of Directors' Responsibilities

 

Responsibility statement of the directors in respect of the half-yearly financial report

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;

 

·     The interim management report includes a fair review of the information required by:

 

(a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first six months 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 Guidance 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.

 

For and on behalf of the Board of Directors:

 

Dr. Hend El Sherbini

Executive Director

 

15 August 2018

 

 

Independent Review Report to Integrated Diagnostics Holdings plc

 

Conclusion

We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2018 which comprises condensed consolidated interim statement of financial position, condensed consolidated interim income statements, 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.

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 months ended 30 June 2018 is not prepared, in all material respects, in accordance with IAS 34 Interim Financial Reporting as adopted by the EU and the Disclosure Guidance and Transparency Rules ("the DTR") of the UK's Financial Conduct Authority ("the UK FCA").

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.  We read the other information contained in the half-yearly financial report and consider whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) 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.   

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 International Financial Reporting Standards as adopted by the EU.  The directors are responsible for preparing the condensed set of financial statements included in the half-yearly financial report in accordance with IAS 34 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.

The purpose of our review work and to whom we owe our responsibilities

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 DTR of 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. 

 

David Neale

for and on behalf of KPMG LLP 

Chartered Accountants 

15 Canada Square

London

E14 5GL

 

15 August 2018

 

 

 

 

INTEGRATED DIAGNOSTICS HOLDINGS plc - "IDH"

AND ITS SUBSIDIARIES

 

 

 

 

 

 

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

 

FOR THE SIX MONTHS ENDED

30 JUNE 2018

 

 
 

Condensed Consolidated Interim Statement of Financial Position as of

 

 

 

 

30 June

 

31 December

 

 

Note

 

2018

 

2017

 

 

 

 

EGP'000

 

EGP'000

 

 

 

 

(Unaudited)

 

(Audited)

 

ASSETS

 

 

 

 

 

 

Non-current assets

 

 

 

 

 

 

Property, plant and equipment

4

 

539,873

 

473,786

 

Intangible assets and goodwill

5

 

1,672,483

 

1,658,252

 

Total non-current assets

 

 

2,212,356

 

2,132,038

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Inventories

 

 

80,200

 

69,935

 

Trade and other receivables

6

 

257,620

 

202,255

 

Restricted cash

9

 

11,739

 

13,226

 

Other investment

7

 

125,273

 

9,149

 

Cash and cash equivalents

8

 

226,643

 

685,211

 

Total current assets

 

 

701,475

 

979,776

 

Total assets

 

 

2,913,831

 

3,111,814

 

 

 

 

 

 

 

 

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

 

 

35,195

 

33,383

 

Put option reserve

 

 

(88,677)

 

(93,256)

 

Translation reserve

 

 

206,280

 

203,709

 

Retained earnings

 

 

106,074

 

315,856

 

Equity attributed to the owners of the Company

 

 

2,044,768

 

2,245,588

 

Non-controlling interest

 

 

135,483

 

68,502

 

Total equity

 

 

2,180,251

 

2,314,090

 

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

 

Deferred tax liabilities

15-C

 

152,700

 

158,712

 

Provisions

 

 

15,404

 

14,699

 

Loans and borrowings

11

 

50,518

 

38,425

 

Long-term financial obligations

12

 

83,910

 

100,478

 

Total non-current liabilities

 

 

302,532

 

312,314

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Trade and other payables

10

 

315,267

 

333,432

 

Loans and borrowings

11

 

16,603

 

14,575

 

Current tax liabilities

 

 

99,178

 

137,403

 

Total current liabilities

 

 

431,048

 

485,410

 

Total liabilities

 

 

733,580

 

797,724

 

Total equity and liabilities

 

 

2,913,831

 

3,111,814

 

 

 

 

 

 

 

 

These condensed consolidated interim financial statements were approved and authorised for issue by the Board of Directors and signed on their behalf on 15 Aug 2018 by:

 
 

 

 

 

 

 

 

 

    ____________________

 

 

 

 

 

     Dr. Hend El Sherbini

 

 

 

James Nolan

 

     Chief Executive Officer

 

 

Chairman of the audit committee

 

 

 

 

 

 

 

 

The accompanying notes on pages 19 - 30 form an integral part of these condensed consolidated interim financial statements.

 

 

 

 

Condensed Consolidated Interim Income Statement for the Six Months Ended

 

 

 

 

 

 

Note

 

30 June 2018

 

30 June 2017

 

 

 

EGP'000

 

EGP'000

 

 

 

(Unaudited)

 

(Unaudited)

 

 

 

 

 

 

Revenue

 

 

865,853

 

685,133

Cost of sales

 

 

(446,660)

 

(366,867)

Gross profit

 

 

419,193

 

318,266

 

 

 

 

 

 

Marketing and advertising expenses

 

 

(41,442)

 

(29,568)

Administrative expenses

 

 

(78,372)

 

(60,154)

Other expenses

 

 

(5,995)

 

(4,301)

Operating profit

 

 

293,384

 

224,243

 

 

 

 

 

 

Finance income

14

 

28,819

 

18,121

Finance cost

14

 

(18,168)

 

(16,316)

Net finance income

14

 

10,651

 

1,805

Profit before tax

 

 

304,035

 

226,048

 

 

 

 

 

 

Income tax expense

 

 

(89,675)

 

(66,048)

Profit for the period

 

 

214,360

 

160,000

 

 

 

 

 

 

Profit attributed to:

 

 

 

 

 

Owners of the Company

 

 

216,462

 

155,344

Non-controlling interest

 

 

(2,102)

 

4,656

 

 

 

214,360

 

160,000

 

 

 

 

 

 

Earnings per share (expressed in EGP):

 

 

 

 

 

Basic and diluted earnings per share

20

 

1.44

 

1.04

 

 

 

 

 

 

The accompanying notes on pages 19 - 30 form an integral part of these condensed consolidated interim financial statements.

 

 

 

Condensed Consolidated Interim Statement of Profit and Loss and Other Comprehensive Income for the Six Months Ended

 

 

 

 

 

 

 

 

 

 

 

 

30 June 2018

 

30 June 2017

 

 

EGP'000

 

EGP'000

 

 

(Unaudited)

 

(Unaudited)

 

 

 

 

 

Net profit

 

214,360

 

160,000

 

 

 

 

 

Other comprehensive income

 

 

 

 

Items that may be subsequently reclassified to profit or loss:

 

 

 

 

Currency translation differences

 

12,618

 

(15,499)

Other comprehensive income for the period net of tax

 

12,618

 

(15,499)

Total comprehensive income for the period

 

226,978

 

144,501

 

 

 

 

 

Attributed to:

 

 

 

 

Owners of the company

 

4,673

 

(14,453)

Non-controlling interests

 

7,945

 

(1,046)

 

 

12,618

 

(15,499)

 

 

 

 

 

The accompanying notes on pages 19 - 30 form an integral part of these condensed consolidated interim financial statements.

 

 

 

 

Condensed Consolidated Interim Statement of Cash Flows for the Six Months Ended

 

 

 

 

 

 

 

 

 

Note

30 June 2018

 

30 June 2017

 

 

EGP'000

 

EGP'000

 

 

(Unaudited)

 

(Unaudited)

Cash flows from operating activities

 

 

 

 

Profit for the period before tax

 

304,035

 

226,048

Adjustments

 

 

 

 

Depreciation

4

31,485

 

28,865

Amortisation

5

3,053

 

2,235

Loss on disposal of  Property, plant and equipment

 

(194)

 

76

Impairment in trade and other receivables

 

6,658

 

4,143

Provisions made

 

73

 

1,679

Reversal of impairment in trade and other receivables

 

(699)

 

(1,694)

Provisions reversed

 

(429)

 

(580)

Interest expense

 

4,949

 

7,608

Interest income

 

(28,819)

 

(18,121)

Unrealised foreign currency exchange loss

 

11,539

 

7,827

Net cash from operating activities before changes in working capital

 

331,651

 

258,086

 

 

 

 

 

Provision used

 

(184)

 

-

Change in inventory

 

(8,912)

 

(25,749)

Change in trade and other receivables

 

(71,579)

 

(15,982)

Change in trade and other payables

 

38,659

 

20,027

Cash generated from operating activities before income tax payment

 

289,635

 

236,382

 

 

 

 

 

Income tax paid during period

 

(129,425)

 

(106,771)

Net cash from operating activities

 

160,210

 

129,611

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

Interest received

 

41,006

 

17,723

Change in restricted Cash

 

1,487

 

-

Change in other investment

 

(116,124)

 

(24,750)

Acquisition of Property, plant and equipment

 

(106,190)

 

(103,228)

Proceeds from sale of Property, plant and equipment

 

786

 

102

Net cash flows used in investing activities

 

(179,035)

 

(110,153)

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

Proceeds from borrowings

 

21,926

 

53,000

Repayments of borrowings

 

(7,806)

 

 

Interest paid

 

(4,675)

 

(5,224)

Dividends paid

 

(427,968)

 

(376,744)

Financial lease

 

(18,555)

 

(8,030)

Net cash flows used in financing activities

 

(437,078)

 

(336,998)

 

 

 

 

 

Net decrease in cash and cash equivalent

 

(455,903)

 

(317,540)

 

 

 

 

 

Cash and cash equivalent at the beginning of the period

 

685,211

 

683,721

Effect of exchange rate fluctuations on cash held

 

(2,665)

 

(16,164)

Cash and cash equivalent at the end of the period

8

226,643

 

350,017

 

 

 

 

 

The accompanying notes on pages 19 - 30 form an integral part of these condensed consolidated interim financial statements.

 

 

 

 

 

Condensed Consolidated Interim Statement of Changes in Equity for the Six Months Ended

 

 

 

Attributable to owners of the Company

 

 

(All amounts in Egyptian Pounds "EGP'000")

Note

Share
capital

Share
premium

Capital
reserve

Legal
reserve*

Put option reserve

Translation
reserve

Retained earnings

Total attributed to the owners of the Company

Non-controlling interests

Total equity

 

 

 

 

 

 

 

 

 

 

 

 

At 1 January 2018

 

1,072,500

1,027,706

(314,310)

33,383

(93,256)

          203,709

315,856

         2,245,588

          68,502

2,314,090

Profit for the period

 

 

 

 

 

 

 

216,462

216,462

 (2,102)

214,360

Other comprehensive income for the period

 

 

 

 

 

 

2,571

 

                2,571

           10,047

12,618

Total comprehensive income

 

-  

-  

-  

                 -  

-  

              2,571

216,462

            219,033

            7,945

226,978

Transactions with owners of the Company

 

 

 

 

 

 

 

 

 

 

 

Contributions and distributions

 

 

 

 

 

 

 

 

 

 

 

Dividends

 

 

 

 

 

 

 

(423,560)

           (423,560)

(11,371)

(434,931)

Legal reserve formed during the period

 

 

 

 

1,812

 

 

(1,812)

                      -  

 

                      -  

Movement in put option liability

 

 

 

 

 

4,579

 

 

                4,579

 

4,579

Non-controlling interests resulting from consoliatidating subsidiaries
during the year

 

 

 

 

 

 

 

 

                      -  

           70,988

70,988

Total contributions and distributions

 

 -  

-  

-  

1,812

4,579

-  

(425,372)

(418,981)

59,617

(359,364)

Total transactions with owners of the Company

 

-  

-  

-  

1,812

4,579

 -  

(425,372)

           (418,981)

          59,617

(359,364)

Adjustment

 

 

 

 

 

 

 

(872)

                  (872)

             (581)

(1,453)

Balance at 30 June 2018 (Unaudited)

 

1,072,500

1,027,706

 (314,310)

35,195

 (88,677)

          206,280

106,074

         2,044,768

        135,483

2,180,251

At 1 January 2017

 

1,072,500

1,027,706

 (314,310)

30,251

 (102,082)

          207,720

315,518

         2,237,303

          62,161

2,299,464

Profit for the period

 

-  

-  

-  

                 -  

                 -  

                    -  

155,344

            155,344

             4,656

160,000

Other comprehensive income for the period

 

-  

-  

-  

                 -  

                 -  

              (9,797)

-  

               (9,797)

 (5,702)

 (15,499)

Total comprehensive income

 

-  

-  

-  

                 -  

                 -  

            (9,797)

155,344

            145,547

          (1,046)

144,501

Transactions with owners of the Company

 

 

 

 

 

 

 

 

 

 

 

Contributions and distributions

 

 

 

 

 

 

 

 

 

 

 

Dividends

 

-  

-  

-  

                 -  

                 -  

                    -  

(371,874)

(371,874)

(4,870)

(376,744)

Movement in put option liability

 

-  

-  

-  

 -  

14,620

-  

-  

14,620

 -  

14,620

Total contributions and distributions

 

-  

-  

-  

 -  

14,620

-  

(371,874)

 (357,254)

(4,870)

(362,124)

Total transactions with owners of the Company

 

-  

-  

-  

-  

14,620

-  

(371,874)

 (357,254)

 (4,870)

(362,124)

Balance at 30 June 2017 (Unaudited)

 

1,072,500

1,027,706

 (314,310)

30,251

 (87,462)

          197,923

98,988

         2,025,596

          56,245

2,081,841

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes on pages 19 - 30 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.

 

 

 

 

 

 

Notes to the Condensed Consolidated Interim Financial Statements - For the Six Months Ended 30 June 2018

 

(In the notes all amounts are shown in Egyptian Pounds "EGP'000" unless otherwise stated)

 

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 2018 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 15 August 2018.

 

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 2017 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 2018, the Group had net assets amounting to EGP 2,180,251K.

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.

 

The Group also operates in Jordan, Sudan and Nigeria and the functional currencies of those foreign operations are the local currencies of those respective territories, however due to the size of these operations there is no significant impact on the functional currency of the Group, which is the Egyptian Pound (EGP).

 

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 2018 from those applied in the audited consolidated financial statements published as at and for the year ended 31 December 2017.

 

3. Significant accounting policies

 

Except as described below, 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 2017.

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

Changes in significant accounting policies

 

A. IFRS 15 Revenue from Contracts with Customers

 

IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised, replacing IAS 18 Revenue. The Group has adopted IFRS 15 with the effect of initially applying this standard recognised at the date of initial application (i.e. 1 January 2018). Accordingly, the information presented for 2017 has not been restated - i.e. it is presented, as previously reported, under IAS 18.

 

The Group considers the current basis of revenue recognition to remain appropriate as the only performance obligation, being completion of a test, reflects the current policy. Therefore the Group considers that the initial application IFRS 15 has no significant change or impact on the Group's accounting policies applied on its consolidated financial statements.

 

 

B. IFRS 9 Financial Instruments

 

The Group do not consider the adoption of IFRS 9 to have a significant effect on the classification and measurement of financial assets and financial liabilities or hedge accounting. The Group have, however, assessed the impact that the initial application of IFRS 9 will have in relation to the impairment of financial assets.

 

The financial impact of this assessment is the recognition of an additional impairment charge (net of tax) of EGP 2.8m in the period for the expected credit loss of trade receivables in excess of the Group's existing provisioning policy. The Group do not deem the impact of transition as at 1 January 2018 to be significant therefore have not retrospectively adjusted opening equity balances.

 

4. Property, plant and equipment

 

Land & Buildings

Medical, electric
 & information
 system equipment

Leasehold
improvements

Fixtures, fittings &vehicles

Building & Leasehold
Assets in the course of construction

 

Total

Cost

 

 

 

 

 

 

At 1 January 2018

211,774

                237,608

147,351

45,050

43,130

               684,913

Additions*

         32,407

         25,128

       15,603

         3,006

       20,114

         96,258

Disposals

                -  

          (3,563)

          (566)

          (247)

          (604)

         (4,980)

Translation differences

           1,401

           1,238

          (151)

            968

            591

           4,047

Transfers

                -  

                -  

         4,804

              -  

        (4,804)

                -  

At 30 June 2018 (unaudited)

                 245,582

                 260,411

             167,041

                48,777

                58,427

                 780,238

 

 

 

 

 

 

 

Depreciation

 

 

 

 

 

 

At 1 January 2018

                    25,022  

                105,996

61,606

18,503

-

               211,127

Charge for the period

           1,452

         17,618

       10,309

         2,106

              -  

         31,485

On disposals

                -  

          (3,180)

          (464)

          (141)

              -  

         (3,785)

Translation differences

               74

              766

          (344)

         1,042

              -  

           1,538

At 30 June 2018 (unaudited)

                   26,548

                 121,200

              71,107

                21,510

                        -  

                 240,365

 

 

 

 

 

 

 

Net book value

               219,034

               139,211

              95,934

              27,267

 58,427

               539,873

At 30 June 2018 (unaudited)

At 31 December 2017

186,752  

131,612

85,745

26,547

43,130

473,786

 

*Additions include EGP 11.6m related to the Group's new Headquarter improvement. Included in this amount are capitalised borrowing costs related to the improvement of the building of EGP 2.9m. Calculated using capitlisation rate of 18.75% (note 11).

 

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 12 for further details. At 30 June 2018, the net carrying amount of leased equipment was EGP 41m (31 Dec 2017: EGP 47m).

 

 

 

5.  Intangible assets and goodwill

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

 

 Goodwill

 Brand Name

 Software

 Total

 

 EGP'000

 EGP'000

 EGP'000

 EGP'000

 Cost

 

 

 

 

 Balance at 1 January 2018

      1,260,453

               387,287

          44,569

      1,692,309

 Additions

                      -  

                         -  

            8,012

            8,012

Effect of movements in exchange rates

              (2,297)

                    (224)

                 25

           (2,496)

 Acquisition through business combination (note 17)

              11,773

                         -  

                 -  

           11,773

 Balance at 30 June 2018 (unaudited)

      1,269,929

           387,063

       52,601

      1,709,598

 

 

 

 

 

 Amortisation and impairment

 

 

 

 

 Balance at 1 January 2018

             1,849

-

          32,208

           34,057

 Amortisation 

-

-

            3,053

            3,053

Effect of movements in exchange rates

-

-

                   5

5

 Balance at 30 June 2018 (unaudited)

            1,849

                    -  

       35,266

           37,115

 

 

 

 

 

 Carrying amount

 

 

 

             -   

 Balance at 1 January 2018

      1,258,604

           387,287

       12,361

      1,658,252

 Balance at 30 June 2018 (unaudited)

      1,268,080

           387,063

       17,335

      1,672,483

 

Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. No indicators of impairment have been identified during the six months ended 30 June 2018.

 

6. Trade and other receivables

 

30-June-18

 

31-Dec-17

 
 

EGP'000

EGP'000

 

 

(unaudited)

 

 

 

Trade receivables

           152,395

 

      139,885

 

Prepaid expenses

             38,417

 

       27,353

 

Receivables due from related parties

              6,018

 

         6,441

 

Other receivables

             55,400

 

       11,000

 

Accrued revenue

              5,390

 

       17,576

 

 

           257,620

 

      202,255

 

 

 

 

 

7. Other investment

 

 

30-June-18

   

31-Dec-17

 

 

 

EGP'000

 

EGP'000

 

(unaudited)

 

 

Fixed term deposits

                70,000

 

9,149

Treasury bill

                55,273

 

-

 

             125,273

 

9,149

 

The maturity date of the fixed term deposit between 9-12 months and the average effective interest rate on the deposit is 14.92%. The maturity date of the treasury bills is between 3-6 months and have settled average interest rate of 17.5%. Fixed term deposits and treasury bills are classified as held to maturity.

 

8. Cash and cash equivalents

 

30-June-18

 

31-Dec-17

 

 

EGP'000

EGP'000

 

(unaudited)

 

 

Short-term deposits*

85,962

 

545,237

Cash at banks and on hand

140,681

 

139,974

Cash and cash equivalents

226,643

 

685,211

 

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

 

9. Restricted cash

 

30-June-18

 

31-Dec-17

 

EGP'000

 

EGP'000

 

(unaudited)

 

 

Restricted cash

11,739

 

13,226

 

11,739

 

13,226

 

The restricted cash balance relate to the "Molecular Diagnostic Center" and is not available for use by the Group because the entity was put in voluntary liquidation in May 2016 and control has been transferred to the liquidator. The process of liquidation is expected to end during current the year 2018, and once completed the total cash remaining is expected to be returned to IDH.

 

10. Trade and other payables

 

30-June-18

 

31-Dec-17

 

EGP'000

 

EGP'000

 

(unaudited)

 

 

118,232

 

126,140

58,064

 

73,821

31,136

 

15,215

88,677

 

93,256

2,884

 

7,763

Finance lease liabilities

16,274

 

17,237

 

315,267

 

333,4322

 

The accounting policy for put options after initial recognition is to recognise all changes in the carrying value of the put liability within equity. Through the historic acquisitions of Makhbariyoun Al Arab the Group entered into separate put option arrangements to purchase the remaining equity interests from the vendors at a subsequent date. At acquisition a put option liability has been recognised for the net present value for the exercise price of the option.

 

The options are exercisable in whole from the fifth anniversary of completion of the original purchase agreement, which fell due in June 2017. The vendor has not exercised this right at 30 June 2018.

 

11. Loan and borrowings

In April 2017 AL-Mokhtabar for medical lab, one of the group's subsidiaries, was granted a medium term loan (MTL) amounting to EGP 110m from Commercial International Bank "CIB Egypt" to finance the purchase of the new administrative building for the group. As at 30 June 2018 the group had utilized EGP 75m (2017: EGP 53m) and repaid an installment of EGP 7.8m, leaving the MTL balance at EGP 67.1m at the end of the period. The loan contains the following financial covenants which if breached will mean the loan is repayable on demand: 

1-   The financial leverage shall not exceed the following percentages  
 

Year

2017

2018

2019

2020

2021

2022

%

2.33

1.71

1.32

1.04

0.85

0.73

            

"Financial leverage": total liabilities divided by net equity

 

2-   The debt service ratios (DSR) shall not be less than 1.

"Debt service ratios": cash operating profit after tax plus Depreciation for the financial year less annual maintenance on machinery and equipment divided by total distributions plus accrued interest and loan instalments.

 

3-   The current ratios shall not be less than 1.

"Current ratios": Current assets divided current liabilities.

4-   The capital expansions in AL Mokhtabar company shall not exceed EGP 20m per year, other than year 2017which includes in addition the value of the building financed by EGP 110m loan facility. This condition is valid throughout the term of the loan.

 

The agreement includes other non-financial covenants which relate to the impact of material events on the Company and the consequential ability to repay the loan.

 

 

 

The terms and conditions of outstanding loans are as follows:

                         

 

currency

Nominal

interest rate

Maturity

30-June-18 

 

30-June-17 

CIB - BANK

EGP

CBE corridor rate+1%

Apr-22

               

                67,121

 

                53,000

 

 

 

 

               

                67,121

 

                53,000

Amount held as:

 

 

 

 

 

 

Current liability

 

 

 

                16,603

 

14,575

Non- current liability

 

 

 

                50,518

 

38,425

 

 

 

 

               

                67,121

 

                53,000

 

 

12. Long term financial obligation

 

 

30-June-18

EGP'000

30-Dec-17

EGP'000

 

(unaudited)

 

Finance lease liabilities (see note 12)

82,684

98,690

Finance lease liability - other

1,226

1,788

 

83,910

100,478

Finance lease 

 

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 are payable as follows:

 

 

Minimum

lease payments

Interest

Principal

 

30-June-18

30-June-18

30-June-18

 

EGP'000

EGP'000

EGP'000

 

(unaudited)

(unaudited)

(unaudited)

Less than one year

36,536

21,888

14,648

Between one and five years

104,525

21,841

82,684

 

141,061

43,729

97,332

 

 

Minimum lease payments

Interest

Principal

 

31-Dec-17

31-Dec-17

31-Dec-17

 

EGP'000

EGP'000

EGP'000

 

 

 

 

Less than one year

35,549

19,512

16,037

Between one and five years

126,938

28,248

98,690

 

162,487

47,760

114,727

 

 

 

 

13. Related party transactions

The significant transactions with related parties, their nature volumes and balance during the period 30 June 2018 are as follows:

 

 

 

 

 

30-June-18

Related Party

Nature of transaction

 

Nature of relationship

 

Transaction amount of the year

EGP'000

 

Amount due from

EGP'000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

International Fertility (IVF)*

Refund of expenses

 

Affiliate*

 

(204)

 

5,796

 

 

 

 

 

 

 

 

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

Rental income

Medical Test analysis

 

 

Entity owned by Company's CEO

 

52

59

 

222

Total

 

 

 

 

 

 

6,018

 

* International Fertility (IVF) is a company whose shareholders include Dr. Moamena Kamel (founder of IDH subsidiary Al-Mokhtabar Labs).

.

14. Net finance income

 

30-June-18

 

30-June-17

 
 

EGP'000

EGP'000

 

Finance income

(unaudited)

 

(unaudited)

 

Interest income on bank and time deposits

         28,819

 

18,121

 

Total finance income

28,819

 

18,121

 

 

 

 

 

 

Finance cost

 

 

 

 

Bank charges

        (1,680)

 

          (881)

 

Interest expense

        (4,949)

 

       (7,608)

 

Net foreign exchange loss 

        (11,539)

 

         (7,827)

 

Total finance cost

(18,169)

 

       (16,316)

 

Net finance income

10,651

 

          1,805

 

 

 

15. 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 2017 to 30 June 2018.

 

 

 

B)  Income tax

 

Amounts recognised in profit or loss as follow:

 

30-June-18

 

30-June-17

 

 

 

EGP'000

 

EGP'000

 

Current tax:

 

 

 

 

 

Current period

              (85,580)

 

           (51,005)

 

 

Deferred tax:

 

 

 

 

Deferred tax arising on undistributed reserves in subsidiaries

              (11,021)

 

           (10,069)

 

 

Relating to origination and reversal of temporary differences

                  6,926

 

            (4,974)

 

 

Total Deferred tax expense

           (4,095)

 

           (15,043)

 

 

 

 

 

 

 

 

 Tax expense recognised in profit or loss

(89,675)          

 

           (66,048)

 

 
               

 

 

C)  Deferred tax liabilities

 

Deferred tax relates to the following:

 

30-June-18

 

31-Dec-17

 

Assets

Liabilities

 

Assets

Liabilities

EGP'000

EGP'000

 

EGP'000

EGP'000

Property, plant and equipment

-

(10,928)

 

-

(17,159)

Intangible assets

-

(112,692)

 

-

(106,651)

Undistributed reserves from group subsidiaries

-

(32,215)

 

-

(37,532)

Provisions and finance lease liabilities

3,135

 

 

2,630

-

Deferred tax assets (liabilities) before set-off

3,135

(155,835)

 

2,630

(161,342)

Net deferred tax assets (liabilities)

-

(152,700)

 

-

(158,712)

 

 

16. Financial Instruments

The Group has reviewed the financial assets and liabilities held at 30 June 2018 and 31 December 2017. 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 2.

 

17. Acquisition of subsidiaries

On 15 January 2018, Dynasty Group Holdings Limited ("Dynasty") acquired 73.59% of Eagle Eye Company ("Eagle Eye"), a holding company which holds 99.99% of Echo-Scan Services Limited ("Echo-Scan"), through a capital increase amounting to 80 MEGP. An additional 67,216 shares were issued, bringing to the total number of shares to 73,071. Dynasty acquired 53,773 shares, entitling them to a beneficial ownership of 73.59% and obtaining control of Eagle-Eye. IDH Cayman owns 51% of Dynasty. The remaining 49% is owned by Man Health (Cayman) LLP.

Dynasty have partnered with the International Finance Corporation ("IFC"), a member of the World Bank Group, to invest in Echo-Scan, a leading medical diagnostics business based in Nigeria. Dynasty and the IFC will invest USD 20 million and USD 5 million respectively to expand Echo-Scan's nationwide service offering, footprint, and quality standards. Over the coming year, Echo-Scan will refurbish and upgrade existing locations as well as significantly augment its number of branches.

In the period from acquisition to 30 June 2018, Eagle-Eye and its subsidiary contributed revenue of EGP 17m and loss of EGP 10.1m to the Group's results. Due to the scale of Nigerian operations, management do not estimate there to be a significant impact on consolidated revenue and consolidated profit for the period if the acquisition had occurred on 1 January 2018.

Consideration is deemed provisional at the interim reporting date subject to finalisation of the accounting for the business combination at the end of the measurement period.

 

Acquisition-related costs

The Group incurred acquisition-related cost of EGP 4m relating to external legal fees and due diligence costs. These costs have been included in 'administrative expenses' in the condensed consolidated statement of profit and loss.

 

Identifiable assets acquired and liabilities assumed                                                                 

The following table summarises the provisionally recognised amounts of assets acquired and liabilities assumed at the date of acquisition.

 

 

Book value

Provisional movement

Provisional value

 

EGP'000

EGP'000

EGP'000

Tangible fixed assets

18,368

27,773

46,141

Trade and other receivable

2,240

-

2,240

Cash and cash equivalent

100,038

-

100,038

Trade and other payable

(49,049)

-

(49,049)

Deferred tax

-

(6,249)

(6,249)

Net assets acquired

71,597

21,524

93,121

 

Fair values measured on a provisional basis

The purchase price allocation exercise as at 30 June 2018 is incomplete, however indicative fair values have been set out above with a provisional goodwill amount arising from the acquisition below. The fair value of Eagle-Eye's tangible assets has been measured provisionally, pending completion of an independent valuation. The accounting is provisional pending further identification of intangibles, such as brand name, customer list and suppliers list. Additionally, as part of the transaction, a put option was issued to the non-controlling party to put their shares to the company. The put trigger period commences on the earlier of the 7th anniversary of the IFC first subscription or 31st December 2024 and will be based on the fair market value at that time. The value of this put option is not considered to be significant and has not yet been included in the provisional calculation of goodwill. There is also a long term incentive plan in place with one of the shareholders of 'Eagle Eye Echo Scan' which is not significant and has not yet been included in the provisional calculation. The exercise to identify and include these items will be concluded in 2H2018 and figures will be included within the 2018 Annual Report.

 

Provisional goodwill

Provisional goodwill arising from the acquisition by Dynasty Group Holdings Limited has been provisionally recognised as follows:

 

 

30-June-18

 

EGP'000

 

 

Consideration transferred

          79,519

Non-controlling interest

          25,375

Provisional fair value of identifiable net assets

        (93,121)

Provisional goodwill

          11,773

 

 

18. Contingent liabilities

 

There are no contingent liabilities relating to the group's transactions and commitment with banks.

 

 

19. Dividends

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

 

30-June-18

 

30-June-17

 
 

 

EGP'000

EGP'000

 

 

(unaudited)

 

(unaudited)

 

 

 

 

 

 

US$ 0.16 per qualifying ordinary share (2017: US$ 0.14)

423,560

 

371,874

 

 

423,560

 

371,874

 

 

20. Earnings per share

 

EGP'000

EGP'000

 

 

(unaudited)

 

(unaudited)

 

Profit attributed to owners of the parent

        216,462

 

155,344

 

Weighted average number of ordinary shares in issue

        150,000

 

150,000

 

Basic and diluted earnings per share

1.44

 

1.04

 

 

The Company has no potential diluted shares as of the 30 June 2018 and 30 June 2017 therefore the earning per diluted share are equivalent to basic earnings per share.

 

21. 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, Jordan and Nigeria. 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.

 

 

 

Revenue by geographic location

 

 

(unaudited)

For the six-month period ended

Egypt region

 

Sudan region

 

Jordan region

 

Nigeria region

 

Total

 

EGP'000

 

EGP'000

 

EGP'000

 

EGP'000

 

EGP'000

 

 

 

 

 

 

 

 

 

 

30-June-18

714,983

 

19,309

 

114,492

 

17,069

 

865,853

30-June-17

560,047

 

23,265

 

101,821

 

-

 

685,133

 

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

 

30 -Jun-2018

 

30 -Jun-2017

EGP'000

 

EGP'000

 

(unaudited)

 

(unaudited)

Profit from operations

          293,384

 

         224,243

Property, plant and equipment depreciation

            31,484

 

           28,865

Amortisation

             3,053

 

             2,235

EBITDA

          327,921

 

         255,343

 

 

 

 

Non recurring provision

                1,245

 

                      -  

 

 

 

 

Normalized EBITDA

            329,166

 

           255,343

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.

22. Subsequent events

DH Board approved the new Radiology project in AL- Borg company with a total investment cost amounting to MEGP 186.4, which will be financed with a debt to equity ratio of 70/30.

On 17th of July 2018, The Medium Term Loan agreement was signed with Ahly united bank with a total amount of MEGP 130.5. The loan has a tenor of 8 years with 3.5year grace period on principal. The withdrawal period is extended over a period of 3 years.


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