REG - Integrated Diag Hdgs - Final Results
28/03/2024 07:15
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RNS Number : 6093I Integrated Diagnostics Holdings PLC 28 March 2024
Integrated Diagnostics Holdings Plc
FY 2023 Results
Thursday, 28 March 2024
Integrated Diagnostics Holdings plc reports double digit revenue growth in FY 2023 supported by record-high test volumes
(Cairo and London) - Integrated Diagnostics Holdings ("IDH," "the Group," or
"the Company"), a leading provider of diagnostic services with operations in
Egypt, Jordan, Nigeria, Sudan, and Saudi Arabia, announced today its audited
financial statements and operational performance for the year ended 31
December 2023, booking consolidated revenue of EGP 4.1 billion, a 14%
year-on-year increase on the back of expanding test volumes and average
revenue per test. This is a particularly impressive result when considering
that Covid-19-related testing in the previous year (FY 2022) had contributed
19% of the Company's top-line. When excluding(1) Covid-19-related
contributions from FY 2022 results, conventional revenues expanded an
impressive 42% year-on-year. Further down the income statement, the Company
booked net profit of EGP 468 million in FY 2023, down 11% year-on-year and
yielding a net profit margin (NPM) of 11%.
On a quarterly basis, IDH posted consolidated revenue growth of 33%, reaching
EGP 1.1 billion. Meanwhile the Company recorded conventional revenue growth of
37% year-on-year, boosted by 17% increases in both test volumes and average
revenue per conventional test. Net profit recorded EGP 81 million, down 34%
year-on-year and yielding an NPM of 8%.
Financial Results (IFRS)
EGP mn Q4 2022 Q4 2023 Change FY 2022 FY 2023 Change
Revenues 805 1,069 33% 3,605 4,123 14%
Conventional Revenues 780 1,069 37% 2,903 4,123 42%
Covid-19-related Revenues 24 - -100% 702 - -100%
Cost of Sales (524) (682) 30% (2,143) (2,598) 21%
Gross Profit 281 387 38% 1,462 1,524 4%
Gross Profit Margin 35% 36% 1 pts 41% 37% -4 pts
Operating Profit 83 184 121% 832 738 -11%
Adjusted EBITDA(2) 197 319 62% 1,172 1,192 2%
Adjusted EBITDA Margin 25% 30% 5 pts 33% 29% -4 pts
Net Profit 123 81 -34% 527 468 -11%
Net Profit Margin 15% 8% -8 pts 15% 11% -3 pts
Cash Balance(3) 816 835 2% 816 835 2%
Note: Throughout the document, percentage changes are calculated using the
exact value (as per the Consolidated Financials) and not the corresponding
rounded figure.
Key Operational Indicators(4)
EGP mn FY 2022 FY 2023 Change
Branches 552 601(5) 49
Patients ('000) 8,721 8,512 -2%
Revenue per Patient (EGP) 413 484 17%
Tests ('000) 32,685 36,102 10%
Conventional Tests ('000) 30,985 36,102 17%
Covid-19-related Tests ('000) 1,700 - -100%
Revenue per Test 110 114 4%
Revenue per Conventional Test (EGP) 94 114 22%
Revenue per Covid-19-related Test (EGP) 413 - -100%
Test per Patient 3.7 4.2 13%
(1) Starting Q1 2023, IDH has opted to stop reporting on its Covid-19-related
revenues and test volumes due to their material insignificance to the
consolidated figures and to Egypt's and Jordan's country-level results. During
last year (FY 2022), IDH had recorded EGP 702 million in Covid-19-related
revenues and had performed 1.7 million Covid-19-related tests.
(2) Adjusted EBITDA is calculated as operating profit plus depreciation and
amortization, excluding non-recurring expenses, specifically an EGP 11.9
million one-off expense owed to the Egyptian government for vocational
training, EGP 18.2 million in pre-operating expenses in Saudi Arabia, EGP 5.0
million impairment expense in Sudan due to the ongoing situation in the
country, an EGP 18.0 million impairment expense in goodwill and assets in
Nigeria.
(3) Cash balance includes time deposits, treasury bills, current accounts, and
cash on hand
(4) Key operational indicators are calculated based on revenues for the
periods of EGP 4,123 million and EGP 3,605 million for FY 2023 and FY 2022,
respectively.
(5) IDH's branch network includes 17 branches in Sudan which have been closed
due to ongoing conflict in the country
( )
Introduction
i. Financial Highlights
· Consolidated revenue of EGP 4,123 million was
recorded in FY 2023, representing a 14% year-on-year increase. This is a
particularly noteworthy result when considering the large contribution that
Covid-19-related testing(6,7) had made to last year's consolidated top-line.
Total revenue growth was driven primarily by higher test volumes, which rose
10% year-on-year, and secondarily by increased average revenue per test, which
rose by 4% year-on-year. On a three-month basis, IDH's consolidated revenues
came in at EGP 1,069 million in Q4 2023, up 33% year-on-year.
· Excluding Covid-19-related contributions from
last year's figure (which amounted to EGP 702 million, or 19% of consolidated
revenues in FY 2022), IDH booked an impressive 42% year-on-year increase in
conventional revenue(8) during FY 2023. Conventional revenue growth during the
year was dual driven by 17% and 22% year-on-year increases in test volumes and
average revenue per conventional test, respectively. In Q4 2023, the Company
posted a conventional revenue year-on-year increase of 37% to reach EGP 1,069
million, on the back of 17% increases in both conventional test volumes and
average revenue per conventional test.
· Gross Profit of EGP 1,524 million was recorded in
FY 2023, up 4% from EGP 1,462 million in 2022. Gross profit margin (GPM) stood
at 37% in FY 2023, down from 41% one year prior. Lower gross profitability
primarily reflected increased costs of sales for the year which rose 21%
versus FY 2022 driven principally by higher raw material costs as test kit
prices continued to be impacted by rising inflation and a weakening Egyptian
Pound (EGP). The Company also booked higher direct salary and wage expenses as
it opted to implement greater-than-usual compensation adjustments for existing
staff to support them during the ongoing period of high inflation. On a
quarterly basis, gross profit came in at EGP 387 million, up 38% year-on-year
as the initial effects of the multiple devaluations of the EGP continued to
fade and operations normalised during the second half of the year. IDH
recorded a gross profit margin (GPM) of 36% during Q4 2023, up from 35% one
year prior.
· Adjusted EBITDA(9) of EGP 1,192 million was
recorded in FY 2023, up 2% year-on-year. Adjusted EBITDA margin for the year
recorded 29%, versus 33% in FY 2022. Lower adjusted EBITDA profitability in FY
2023 was due to a decline in gross profitability coupled with higher SG&A
expenses, which were driven by higher indirect wages and salaries, as well as
higher consulting and accounting fees due to a weakened EGP. On a three-month
basis, adjusted EBITDA stood at EGP 319 million in Q4 2023, representing a 62%
year-on-year increase, and with an associated margin of 30%, up from 25% in Q4
2022.
· Net Profit of EGP 468 million was recorded in FY
2023, down 11% from the EGP 527 million net profit recorded in the previous
twelve months. Net profit margin (NPM) stood at 11%, down from 15% in FY 2022.
Lower net profitability was driven by lower EBITDA profitability coupled with
higher interest expenses due to additions of new radiology equipment to
support the expansion of Group operations. During the fourth quarter of the
year, net profit recorded EGP 81 million, down 34% year-on-year, and yielding
an associated margin of 8% in Q4 2023.
(6) Covid-19-related tests include both core Covid-19 tests (Polymerase Chain
Reaction (PCR), Antigen, and Antibody) as well as other routine inflammatory
and clotting markers including, but not limited to, Complete Blood Picture,
Erythrocyte Sedimentation Rate (ESR), D-Dimer, Ferritin and C-reactive Protein
(CRP), which the Company opted to include in the classification as "other
Covid-19-related tests" due to the strong rise in demand for these tests
witnessed following the outbreak of Covid-19.
(7) Covid-19-related revenue in FY 2022 includes EGP 63 million in concession
fees paid by Biolab to Queen Alia International Airport and Aqaba Port as part
of its revenue sharing agreement.
(8) Conventional (non-Covid) tests include IDH's full service offering
excluding Covid-19 related tests.
(9) Adjusted EBITDA is calculated as operating profit plus depreciation and
amortization, excluding non-recurring expenses, specifically an EGP 11.9
million one-off expense owed to the Egyptian government for vocational
training, EGP 18.2 million in pre-operating expenses in Saudi Arabia, EGP 5.0
million impairment expense in Sudan due to the ongoing situation in the
country, an EGP 18.0 million impairment expense in goodwill and assets in
Nigeria.
( )
ii. Operational Highlights
· As of year-end 2023, IDH operated a total branch
network of 601 branches (of which 17 in Sudan are currently closed), spread
across four markets. This represents a 49-branch increase over the previous
year. During Q4 2023, IDH launched seven additional branches in its home and
largest market of Egypt, bringing the country's total branch network to 544
branches. IDH continues to operate the largest network of private diagnostic
labs in the country, helping the Company to capture a growing number of
patients and capitalise on the important growth opportunities offered by
Egypt's favourable demographic profile.
· Consolidated test volumes for the year reached a
record-high 36.1 million test in FY 2023, up a solid 10% year-on-year on the
back of strong growth in Egypt. Conventional tests volumes (which exclude
contributions from Covid-19-related testing in FY 2022) came in 17% above last
year's figure, continuing to highlight the strong and growing demand for IDH's
traditional offering. On a quarterly basis, total test volumes expanded 16%
year-on-year to record 9.6 million, with conventional test volumes up 17%
year-on-year. It is worth mentioning that consolidated test volumes in the
second half of the year stood 19% above test volumes recorded in the first six
months of FY 2023, showcasing the strong pick up in traffic recorded by the
Company starting in May 2023.
· Average revenue per test recorded EGP 114 in FY
2023, a 4% increase from last year's figure. Meanwhile, conventional revenue
per test expanded 22% year-on-year. Rising average revenue per test reflects
the multiple direct and indirect price adjustments implemented by the Company
in both Egypt and Nigeria in response to the fast-rising inflation witnessed
across both geographies. It is important to note that this figure was
partially boosted by an 18% contribution from the translation effect, due to
the devaluation of the Egyptian Pound over the past twelve months.
· During FY 2023, IDH served a total of 8.5 million
patients, a marginal 2% decline compared to the previous year. This decline
primarily reflects the high base of FY 2022, when patient volumes were boosted
by Covid-19-related contributions. In parallel, the Company booked a
record-high 4.2 average tests per patient during the year, up significantly
from the 3.7 tests recorded in FY 2022. The steady rise in average tests per
patient directly reflects the continued effectiveness of the Company's loyalty
programme, which was rolled out in FY 2021 as part of the Group's
post-pandemic growth strategy.
iii. Updates by Geography
· In Egypt (82.7% of total revenues in FY 2023),
IDH continued to post strong results, with consolidated revenue reaching EGP
3,411 million, an impressive 18% year-on-year rise on the back of 13% and 4%
increases in test volumes and average revenues per test, respectively. This is
a particularly notable result when considering the significant contributions
made by Covid-19-related testing to the previous year's figure. When excluding
this contribution (16% of Egypt's revenue in FY 2022), conventional revenue
recorded a 40% year-on-year expansion in FY 2023 supported by an 18% increase
in both test volumes and average revenue per conventional test during the
year. On a quarterly basis, IDH's Egyptian operations recorded consolidated
revenue of EGP 911 million in Q4 2023, an increase of 38% year-on-year.
Similarly, conventional revenue year-on-year growth in the final quarter of
the year stood at 42%.
· Biolab, IDH's Jordanian subsidiary (14.7% of
total revenues in FY 2023), posted consolidated revenue of JOD 14.0 million in
FY 2023, down 42% year-on-year (a 1% year-on-year decline in EGP terms)
reflecting the high base effect resulting from large contributions made by
Covid-19-related testing in FY 2022. Meanwhile, conventional revenue in local
currency terms for the year (which excludes Covid-19-related contributions
made in FY 2022) stood a solid 8% above last year's figure signalling strong
underlying demand for Biolab's test offering with conventional test volumes
rising 8% year-on-year in FY 2023. On a quarterly basis, consolidated revenues
recorded JOD 3.2 million, down 5% year-on-year (up 20% year-on-year in EGP
terms due to translation effect). On the other hand, conventional revenues
came in marginally above last year's figure in the final quarter on the year.
· In Nigeria (2.3% of total revenues in FY 2023),
Echo-Lab recorded a 15% year-on-year increase in revenues in local currency
terms (up 22% in EGP terms), reaching NGN 2.0 billion in FY 2023 driven by a
32% year-on-year growth in average revenue per test. This reflects Echo-Lab's
test mix optimisation efforts as well as the strategic price hikes implemented
throughout the year to keep up with rising inflation. Meanwhile, inflationary
pressures and an expanded cost base in Nigeria weighed down on EBITDA
profitability, expanding adjusted EBITDA losses to NGN 498 million in FY 2023,
down from NGN 337 million one year prior. On a three-month basis, revenue
increased 15% year-on-year in NGN, on the back of higher average revenue per
test.
· IDH's Sudanese operations (0.3% of total revenues
in FY 2023) booked total revenues for the year of SDG 220 million, down 60%
year-on-year (in EGP terms revenue declined 44% versus FY 2022) as the
country's operations continue to be heavily affected by the ongoing conflict,
which has led to the closure of 17 of the country's 18 branches since April
2023. In Q4 2023, revenue was down 90% year-on-year in SDG terms.
· IDH launched its first two Saudi Arabian branches
in 2024, one in January and another in March. The two branches are located in
Riyadh allowing the Company to capitalise on the city's attractive growth
profile. The new venture was jointly funded by IDH (30%), Biolab (21%) and
Fawaz Alhokair's healthcare subsidiary, Izhoor (49%). In the long run, the
venture aims to establish itself as a fully-fledged clinical pathology
diagnostic services provider boasting a branch network covering the entire
Kingdom. The new venture will be fully consolidated on IDH's accounts starting
in Q1 2024.
iv. Management Commentary
Commenting on the Group's performance, IDH Chief Executive Officer Dr. Hend
El-Sherbini said: "2023 was a year characterised by growth and execution as
the Company delivered robust revenue growth despite a challenging operating
environment. After months of preparation, in January 2024 we added a fifth
market to our portfolio with the official launch of Biolab KSA in Saudi
Arabia. At the same time, we continued to capitalise on the important growth
opportunities offered by our existing markets to drive strong year-on-year
consolidated revenue growth and continue expanding our reach in the process.
As a business operating in this part of the world, we are no strangers to
macroeconomic volatility. 2023 was no different, as our markets of operation
were confronted with devaluation, record-high inflation, tightening monetary
policies, and fluctuating energy prices. Despite all this, our two largest
markets, Egypt and Jordan, remained resilient supported by attractive
fundamentals which are set to drive their long-term growth over the coming
decade.
Throughout 2023, IDH continued delivering on its promise of caring for its
patients, providing unparalleled quality and accuracy in its testing, and
building long-term relationships across its communities. At the same time, in
line with our commitment to shareholders, we continued to drive growth and
profitability across the business, recording remarkable results throughout the
year. As a result, we ended the year with total revenues in excess of EGP
4,100 million, up a solid 14% from last year's figure which had included
significant contributions from Covid-19-related testing. Excluding
Covid-19-related contributions from the comparable period, revenue growth at
our conventional business was even more notable, coming in at 42% for the
year, and sitting 89% above pre-pandemic revenues of EGP 2,179 million in
2019. Across our geographies, we were particularly pleased with the
performance delivered by our home market of Egypt, which recorded strong
consolidated and conventional growth for the year. Jordan also posted solid
underlying revenue growth, continuing to highlight its potential going
forward.
We started 2024 on an exciting note, as we launched the first two branches of
Biolab KSA in partnership with our Jordanian subsidiary, Biolab, and Izhoor, a
company owned by Fawaz Alhokair, chairman of the renowned Saudi retail group,
Fawaz Alhokair Group. The inauguration of Biolab KSA's first two locations
marked our entrance into the Saudi Arabian market, one of the fastest growing
and most attractive markets in the region. Once fully ramped up, Biolab KSA
aims to become a fully-fledged diagnostic services provider capable of
capturing the vast opportunities offered by the currently underserved and
highly fragmented Saudi market. This latest expansion falls perfectly in line
with our long-term growth strategy which sees us target potential
opportunities for greenfield and brownfield investment in markets where our
business model is best fit to capitalise on prevailing demographic factors and
industry dynamics. In the coming years, we expect Biolab KSA to contribute an
increasing share to the Group's top-line, helping us to further diversify our
revenue base and guarantee the business' long-term sustainability.
Despite the significant macroeconomic hurdles we have had to overcome over the
past two-year period, IDH has continued to prove its resilience, relying on
its proven strategies and expertise to achieve notable operational and
financial success throughout the entire period. Our impressive results in 2023
specifically, have underscored the success of our long-term growth strategies
to expand our conventional business and usher in a new era of sustained
success following the end of the Covid-19 pandemic. I remain confident in
IDH's abilities to navigate macroeconomic pressures and deliver yet another
year of sustained growth and expansion in 2024."
- End -
Analyst and Investor Call Details
An analyst and investor call will be hosted at 1pm (UK) | 3pm (Egypt) on
Thursday, 28 March 2024. You can learn more details and register for the call
by clicking on this link
(https://s3.amazonaws.com/resources.inktankir.com/idh/IDH-FY-2023-results-conference-call-2-.pdf)
.
For more information about the event, please contact: amoataz@EFG-HERMES.com
(mailto:amoataz@EFG-HERMES.com)
About Integrated Diagnostics Holdings (IDH)
IDH is a leading diagnostics services provider in the Middle East and Africa
offering a broad range of clinical pathology and radiology tests to patients
in Egypt, Jordan, Nigeria, Sudan, and Saudi Arabia. The Group's core brands
include Al Borg, Al Borg Scan and Al Mokhtabar in Egypt, as well as Biolab
(Jordan), Echo-Lab (Nigeria), Ultralab and Al Mokhtabar Sudan (both in Sudan),
and Biolab KSA (Saudi Arabia). With over 40 years of experience, 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
3,000 diagnostics tests. From its base of 601 branches as of 31 December 2023,
IDH served over 8.5 million patients and performed more than 36.1 million
tests in 2023. 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 targets expansion in appealing
markets, including acquisitions in the Middle Eastern, African, and East Asian
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 with a secondary
listing on the EGX since May 2021 (ticker: IDHC.CA).
Shareholder Information
LSE: IDHC.L
EGX: IDHC.CA
Bloomberg: IDHC:LN
Listed on LSE: May 2015
Listed on EGX: May 2021
Shares Outstanding: 600 million
Contact
Tarek Yehia
Investor Relations Director
T: +20 (0)2 3332 1126 | M: +20 10 6882 6678 | tarek.yehia@idhcorp.com
(mailto:tarek.yehia@idhcorp.com)
Forward-Looking Statements
These results for the year ended 31 December 2023 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 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.
Market abuse regulation information
The information contained in this announcement is deemed by the Company to
constitute inside information as stipulated under the UK version of the Market
Abuse Regulation (EU) No. 596/2014 as it forms part of UK law by virtue of the
European Union (Withdrawal) Act 2018. Upon the publication of this
announcement, this inside information is now considered to be in the public
domain. Company Matters, IDH's Company Secretary is responsible for the
release of this announcement for the purposes of such regulation.
Chairman's Message
Despite a challenging year for the healthcare sector, I am pleased to report
that 2023 was a year of sustained growth and solid progress for your
Company. IDH's management team was effective in delivering on the Board's
agreed strategic objectives and remains committed to diversifying into other
jurisdictions to deliver and drive further growth.
Navigating Challenges
We continued to face a challenging operating environment across both Egypt and
Nigeria where currency devaluations, persistent inflation and foreign exchange
restrictions were a major impediment to our operational successes.
In Sudan, we decided following the continued civil war, to halt our operations
in the country, cutting all operating expenditure while retaining the
business.
Despite these ongoing challenges we are proud to have recorded strong
double-digit revenue growth in 2023 supported by record-high test volumes.
We also achieved 42% year-on-year growth in our conventional revenue, which
counter balances the contribution of Covid-19-related testing in the previous
year's results and reflects the resilience of the business.
Our core focus remains delivering excellence of care to our loyal patients and
communities. We are cognisant of the socio-economic challenges of our patients
and ensured that our tests remained accessible to as many people as possible.
In response to the ongoing economic challenges, management took proactive
measures to shield the business as much as possible from exchange-rate
fluctuations and ongoing uncertainty.
Our management team leveraged the Company's solid and long-established
relationships with our strategic suppliers to secure long-term contracts with
semi-fixed rates.
Heading into 2024, the recent developments in Egypt leave us cautiously
optimistic that the country's economy is in recovery mode with increasing
foreign direct investment and a floating exchange rate policy .
New Beginnings
We are also pleased to report that the Group expanded its operations in Saudi
Arabia, with the inauguration of two branches in Riyadh, one in January and
another in March 2024.
The Kingdom has an impressive record of rapid economic growth, a growing
population and a fragmented diagnostic market that is complimentary with your
Company's integrated and value-added business model.
Driving Change
We are exploring the opportunities to embrace generative artificial
intelligence (AI) and drive additional revenue leveraging the vast data base
which we control with stringent security and privacy.
We are enthusiastic about the potential enhancements in the diagnostics field
as AI solutions are being incorporated in to traditional testing protocols.
Management is also exploring cost reduction measures and economies of scale
embracing new disruptive technologies.
Environmental, Social, and Governance (ESG)
We are committed to maintaining transparent and sustainable operations across
our markets. Accordingly, we published our second Sustainability Report in
January 2024, addressing our ESG practices and the initiatives we take to
increase our stakeholder impact.
Risk Matrix
Our Audit Committee consistently monitors our risk matrix ensuring that we
have the right policies in place to ensure business continuity, while
promoting a productive work environment for our team.
We are enormously grateful and proud of our dedicated and loyal workforce, led
by our highly experienced management team. Having most of the staff based out
of our Smart Village headquarters in Cairo has enhanced staff morale and team
building.
Over the past year, we continued to attract and retain the highest calibre of
medical and non-medical talent.
In January 2024, we welcomed aboard Sherif El Zeiny as Vice President, Group
Chief Financial Officer, and Board Member.
Sherif brings a wealth of experience in financial management and corporate
strategy and will play a pivotal role in ensuring our future success.
Our thanks to our Shareholders
Finally, we would like to extend our thanks to our shareholders and reiterate
our commitment that we shall do everything possible to drive maximum
value. Despite the challenges we continue to face across our markets, we are
confident that our resilient business model and value-creation strategies will
assist in this aspiration going forward.
Since our initial public offering back in 2015, your Company has been
committed to paying a regular dividend. Foreign exchange restrictions in Egypt
meant we were unable to distribute dividends for the year ended 31 December
2022 and have also been unable to distribute dividends for the year that just
ended.
Despite this decision, our dividend policy has not changed. As part of our
asset-light strategy, our dividend policy is to return to shareholders the
maximum amount of excess cash after taking into account the capital needed to
support operations, capital expenditure plans, and potential acquisitions.
We enter 2024 eager to build on the foundation laid in 2023 so that we may
continue to deliver sustainable value for our shareholders while offering our
patients world-class quality and superior experience.
Lord St John of Bletso
Chairman
Chief Executive's Review
2023 was a year characterised by growth and execution as the Company delivered
robust revenue growth despite a challenging operating environment and took
important steps forward on our long-term growth and value creation strategy.
After months of preparation, in January 2024 we added a fifth market to our
portfolio with the official launch of Biolab KSA in Saudi Arabia. At the same
time, we continued to capitalise on the important growth opportunities offered
by our existing markets to drive strong year-on-year consolidated revenue
growth and continue expanding our reach in the process. We ended the year on
very solid footing, having once more demonstrated the resilience of our
business model, the potential of our chosen markets, and the effectiveness of
our growth strategies.
A Year of Macroeconomic Turbulence
As a business operating in this part of the world, we are no strangers to
macroeconomic volatility. 2023 was no different, as our markets of operation
were confronted with devaluation, record-high inflation, tightening monetary
policies, and fluctuating energy prices. Over the last two years, our home and
largest market of Egypt has been particularly impacted by global economic
headwinds stemming from the post-Covid-19 recovery, the Russia-Ukraine
conflict, and the most recent escalation in the Israeli-Palestinian conflict.
Meanwhile, inflation has remained at record-highs throughout 2023, continuing
to put increasing pressure on consumers and businesses alike. On a similar
note, following a devaluation of the Nigerian Naira (NGN) in early 2023,
Nigerians have been confronted with rising inflation and soaring diesel
prices. Finally, the eruption of a civil war in one of our oldest geographies,
Sudan, resulted in the near complete halt of IDH's operations in the country,
with the majority of our branches indefinitely shut down.
Despite all this, our two largest markets, Egypt and Jordan, remained
resilient supported by attractive fundamentals which are set to drive their
long-term growth over the coming decade. Leveraging our established brand name
and strong market positioning, we are ideally positioned to capitalise on
these fundamentals, drive future growth, and generate sustainable value for
all stakeholders.
A Year of Sustainable Growth and Value Creation
Throughout 2023, IDH continued delivering on its promise of caring for its
patients, providing unparalleled quality and accuracy in its testing, and
building long-term relationships across its communities. At the same time, in
line with our commitment to shareholders, we continued to drive growth and
profitability across the business, recording remarkable results throughout the
year.
Looking at our results in more detail, in the twelve months ended 31 December
2023, we recorded total revenues in excess of EGP 4,100 million, up a solid
14% from last year's figure which had included significant contributions from
Covid-19-related testing. Excluding Covid-19-related contributions from the
comparable period, revenue growth at our conventional business was even more
notable coming in at 42% for the year, and sitting 89% above pre-pandemic
revenues of EGP 2,179(10) million in 2019. Conventional revenue growth was
supported by steady rises in test volumes, increased contributions from our
house call services, which sit comfortably above pre-pandemic averages at 14%,
as well as increased growth momentum from our fast-growing radiology venture,
Al-Borg Scan, which saw the launch of a seventh branch in 2023. More
specifically, in 2023 we performed 17% more conventional tests compared to the
previous twelve months. Conventional revenue growth was also supported by our
strategic price increases which saw average revenue per conventional test
increase to EGP 114 versus EGP 94 last year. These increases, which remain
below market averages, not only ensured that our tests continued to be
affordable for as many people as possible, but also enabled us to build
stronger relationships with our patients, boosting long-term retention. As a
result of these efforts, one of our most important operational metrics,
average tests per patient, reported its highest figure on record, coming in at
4.2 tests in 2023 up from 3.7 in 2022.
On a geographic basis, we recently launched operations in our fifth geography,
Saudi Arabia, expanding our geographic reach in one of the region's
fastest-growing economies characterized by favourable demographics. Meanwhile,
Egypt, our largest market, continued to represent the lion share of
consolidated revenues, contributing 82.7% in 2023. Total revenues in our home
market rose by 18% for the year to record EGP 3.4 billion supported by higher
volumes and prices. Similar to trends seen at the consolidated level,
conventional revenues in Egypt rose by an impressive 40% versus 2022.
Throughout the year, we performed 33.4 million tests, a robust 13%
year-on-year increase, testament to the growing attractiveness of our
offering. We also recorded the highest ever number of tests per patient at
4.2, as the revamped loyalty programs introduced as part of our post-Covid-19
strategy delivered the desired results. Higher test and patient volumes were
also supported by an expanded branch network which saw the addition of 44 new
branches in 2023, as well as by our house call services which remain a
preferred method to access our services for a significant segment of our
patient base. Meanwhile, the Company booked an 18% increase in average revenue
per conventional test on the back of strategic price hikes introduced at the
start of the year. Revenues in Egypt were further boosted by an increasing
contribution from our fast-growing radiology venture, Al-Borg Scan. The
venture recorded revenues of EGP 155 million for the year, up 82% from 2022.
To build on this momentum, in September 2023 we rolled out a seventh Al Borg
Scan location with our radiology network now spanning the entire Greater Cairo
area and ensuring that we rapidly capture a growing share of this
high-fragmented and quickly expanding market segment.
Meanwhile, in Jordan we recorded similar trends, with conventional revenues
reporting a year-on-year increase of 68%. Conventional growth was also evident
in local currency terms, reaching JOD 14 million, and representing an 8% rise
compared to 2022. Conventional revenue growth in Jordan was wholly driven by
higher test volumes, which grew to 2.4 million tests during the year, as the
Company continued to focus on driving volumes in the highly price-regulated
geography. Meanwhile, consolidated revenues in Jordan were down 34% compared
to 2022, due to significant contributions from Covid-19 testing in the
previous year (constituting 41% of Jordan revenues). Due to its material
insignificance in 2023, we have opted not to report on Covid-19-related
revenues since the start of the year. In Nigeria, our operations posted a 15%
rise in revenues in NGN terms, on the back of higher test prices as Echo-Lab
continued to adjust its mix in favour of its higher-priced offerings. Top-line
growth in Nigeria came despite a 12% year-on-year decline in test volumes. It
is important to mention that the devaluations of the Naira seen between
February 2023 and February 2024, along with an expanding cost base, has led to
widened EBITDA losses, reaching NGN 498 million during the year. Finally, in
Sudan, our operations remain highly affected by the ongoing conflict which has
seen the temporary closure of 17 out of 18 branches starting in April 2023.
Since the start of the conflict, we have continued to closely monitor the
situation, prioritizing as always the health and safety of our staff and
patients.
Throughout the year, we continued to employ a proactive cost management
strategy to mitigate the impacts on our cost base of rising inflation and a
weakening EGP. As part of our staff retention strategy, during the year we
introduced higher-than-usual salary hikes to support our people during the
ongoing period on high inflation. Meanwhile, we were once again happy to note
that our long-term supplier relationship and the sheer scale of our operations
enabled us to negotiate and secure very competitive prices for test kits,
helping to limit the rise of our raw materials bill over the twelve-month
period. Moreover, as the year progressed, the anticipated seasonal slowdowns
during the first half of the year began to fade, and the effects of our
strategic price hikes across Egypt and Nigeria began to take effect, we saw a
steady normalisation of our margins during the second half of the year,
compared to 1H 2023. As a result, we ended the full year with an adjusted
EBITDA margin of 29%, in line with the guidance communicated to investors at
the start of the year.
(10) Excluding contributions from the 100 million lives campaign in 2019
Expanded Footprint
We started 2024 on an exciting note, with the launch of the first two branches
of Biolab KSA in partnership with our Jordanian subsidiary, Biolab, and
Izhoor, a company owned by Fawaz Alhokair, chairman of the renowned Saudi
retail group, Fawaz Alhokair Group. The two branches are located in the
Kingdom's capital city of Riyadh, with their day-to-day management under the
supervision of Biolab's founder and CEO, Dr. Amid Abdelnour, and his team. The
inauguration of Biolab KSA's first two locations marked our entrance into the
Saudi Arabian market, one of the fastest growing and most attractive markets
in the region. Once fully ramped up, Biolab KSA aims to become a fully-fledged
diagnostic services provider capable of capturing the vast opportunities
offered by the currently underserved and highly fragmented Saudi market. Over
the coming years, the Saudi Arabian market is expected to witness rapid growth
supported by both a growing and increasingly health-conscious population, as
well as a large elderly population afflicted by a high prevalence of
non-communicable diseases.
This latest expansion falls perfectly in line with our long-term growth
strategy which sees us target potential opportunities for greenfield and
brownfield investment in markets where our business model is best fit to
capitalise on prevailing demographic factors and industry dynamics. In the
coming years, we expect our current and potential expansions in the GCC to
contribute an increasing share to the Group's top-line, helping us to further
diversify our revenue base and guarantee the business' long-term
sustainability.
Our Sustainability Journey
As our footprint, operations, and patient base continue to grow, we remain as
committed as ever to developing our sustainability frameworks and adhering to
global environmental, social, and governance (ESG) best practices. Across all
our operations, ESG monitoring and compliance play a pivotal role, ensuring we
give back to the communities we serve and leave a lasting impact on our people
beyond our traditional diagnostics services. This commitment has been largely
reflected in the ambitious steps taken over the past three years to set
defined goals and strategies for our ESG initiatives and increase our
accountability towards investors and stakeholders. In 2022, we worked closely
with a leading ESG consultant to design and implement an encompassing strategy
for our business, setting clear long-term goals and guiding our efforts for
the coming years. In 2023, we remained on track, delivering the desired
progress set forth by our defined sustainability strategy and targets, under
the guidance and supervision of a specialized ESG committee on our Board of
Directors. To this end, in January 2024, we published our second
sustainability report, with an enhanced focus on sustainability data
management, delivering on our commitment to maintain transparent and
sustainable operations across our geographies. Moreover, starting last year we
have been including the Task Force on Climate-related Financial Disclosures
(TCFD) in the Company's annual report in line with listing requirements. We
have remained committed to increasing our transparency in sustainability
disclosures.
Our experienced and highly competent Board of Directors continues to provide
the support and guidance necessary for the uninterrupted growth of our
business. Our Board brings together a host of established professionals
boasting varied and extensive experience in their respective fields. IDH's
Board of Directors is comprised mainly of non-executive directors and is
further strengthened by robust and constantly refined governance framework. On
this note, I am happy to announce that in January 2024 we welcomed Sherif El
Zeiny on board, filling the role of Group Chief Financial Officer, Vice
President, and Executive Director on IDH's Board of Directors. Sherif's
extensive experience in financial management and corporate strategy is sure to
prove invaluable to the Company as we continue to identify new areas through
which to expand our presence and cement our foothold across the region. In the
period prior to Sherif joining the Company, our finance team, relying on their
specialized training and knowledge of both LSE and EGX reporting requirements,
worked tirelessly to ensure the Company's efficient operation during this
transitional phase. I want to extend my gratitude to all the members of our
staff and management team who contributed to our success during the second
half of the year and ensured a smooth handover to Sherif when he officially
joined in January.
Our Outlook for 2024
Despite the significant macroeconomic hurdles we have had to overcome over the
past two-year period, IDH has continued to prove its resilience, relying on
its proven strategies and expertise to achieve notable operational and
financial success throughout the entire period. Our impressive results in 2023
specifically, have underscored the success of our long-term growth strategies
to expand our conventional business and usher in a new era of sustained
success following the end of the Covid-19 pandemic. I remain confident in
IDH's abilities to navigate macroeconomic pressures and deliver yet another
year of sustained growth and expansion in 2024.
Across our more established markets of Egypt, Jordan and Nigeria, our
priorities remain unchanged. Throughout these markets, we will continue to
target double-digit revenue growth supported by a combination of higher
volumes and prices. Meanwhile, in Egypt, we will continue to grow our branch
network to widen our reach and expand our patient base across the country. We
will also continue to ramp up our radiology venture in Egypt, Al Borg Scan,
growing its contribution to the country's revenues and providing an
all-encompassing test offering for our patients. On the pricing front, across
both Egypt and Nigeria regularly scheduled price increases were introduced at
the start of the year. In the coming months, we will evaluate the available
room to implement further price hikes with our primary goal remaining the
retention and support of our patients during these difficult times.
In terms of our profitability, we expect continued margin normalisation
throughout 2024, as businesses and consumers adapt to the initial effects of
the devaluation. Throughout the year, IDH will continue to leverage its
standing as a leader in the industry to negotiate favourable terms with our
test kit suppliers and ensure we maintain our costs ratios and margins in line
with historical averages. In parallel, we are constantly studying avenues for
cost optimization throughout our operations, maintaining adequate stocks and
streamlining our operations where possible to eliminate all unnecessary
expenses.
In parallel, we are excited to continue ramping up our new Saudi venture in
partnership with Biolab and Izhoor. In the coming year we will look to
establish the Biolab KSA brand in the Riyadh market through targeted marketing
campaigns as well as through the delivery of exceptional quality to patients.
Meanwhile, we will also look to rapidly expand our branch network and
operations, cementing our position as a full-fledged diagnostics provider in
the Saudi Arabian market.
Dividend Policy and Proposed Dividend
While our long-term dividend policy that sees us return to shareholders the
maximum amount of excess cash after taking careful account of the cash needed
to support operations and expansions remains unchanged, the continued economic
headwinds and foreign currency shortages in Egypt have led the Board of
Directors to opt not to distribute dividends for the year ended 31 December
2023.
Dr. Hend El-Sherbini
Chief Executive Officer
Group Operational & Financial Review
Consolidated Revenue
IDH closed off the year maintaining similar trends as seen throughout FY 2023,
recording consolidated revenues of EGP 4,123 million, up 14% year-on-year.
Total revenue growth was supported primarily by higher test volumes, which
rose 10% year-on-year, as well as by increased average revenue per test, which
booked a 4% year-on-year increase. The year-on-year growth is especially
notable when considering the contribution of EGP 702(11) million made by
Covid-19-related(12) testing during FY 2022. Excluding Covid-19 contributions,
IDH booked conventional revenue growth of 42% year-on-year, up from EGP 2,903
million in FY 2022. IDH's FY 2023 conventional results were boosted by an
impressive performance in the second half of the year, as business across its
two largest markets of Egypt and Jordan recorded a strong acceleration
beginning in May 2023.
In the final quarter of the year, IDH booked consolidated revenues of EGP
1,069 million, an increase of 33% versus the comparable three-month period of
FY 2022. Meanwhile, conventional(13) revenues were up 37% versus Q4 2022.
Conventional revenues during the quarter were buoyed by a simultaneous
increase in test volumes and average revenues per conventional test, which
both grew 17% year-on-year.
(11) Covid-19-related revenue in FY 2022 includes EGP 63 million in concession
fees paid by Biolab to Queen Alia International Airport and Aqaba Port as part
of its revenue sharing agreement.
(12) Covid-19-related tests include both core Covid-19 tests (Polymerase Chain
Reaction (PCR), Antigen, and Antibody) as well as other routine inflammatory
and clotting markers including, but not limited to, Complete Blood Picture,
Erythrocyte Sedimentation Rate (ESR), D-Dimer, Ferritin and C-reactive Protein
(CRP), which the Company opted to include in the classification as "other
Covid-19-related tests" due to the strong rise in demand for these tests
witnessed following the outbreak of Covid-19.
(13) Conventional (non-Covid) tests include IDH's full service offering
excluding the Covid-19 related tests outlined below.
i. Revenue and Cost Analysis
Revenue Analysis
Q1 Q1 2023 Q2 2022 Q2 2023 Q3 2022 Q3 2023 Q4 2022 Q4 2023 % FY 2022 FY 2023 %
2022
Total revenue (EGP mn) 1,180 915 774 957 846 1,182 804 1,069 33% 3,605 4,123 14%
Conventional revenue (EGP mn) 640 915 699 957 784 1,182 780 1,069 37% 2,903 4,123 42%
Covid-19-related revenue (EGP mn) 540 - 75 - 63 - 24 - -100% 702 - -100%
Contribution to Consolidated Results
Conventional revenue 54% 100% 90% 100% 93% 100% 97% 100% 81% 100%
Covid-19-related revenue 46% - 10% - 7% - 3% - 19% -
Test Volume Analysis
Total tests (mn) 8.4 8.0 7.6 8.5 8.4 10.0 8.3 9.6 16% 32.7 36.1 10%
Conventional tests performed (mn) 7.1 8.0 7.4 8.5 8.2 10.0 8.3 9.6 17% 31.0 36.1 17%
Total Covid-19-related tests performed (mn) 1.3 - 0.2 - 0.2 - 0.07 - -100% 1.7 - -100%
Contribution to Consolidated Results
Conventional tests performed 85% 100% 97% 100% 98% 100% 99% 100% 95% 100%
Total Covid-19-related tests performed 15% - 3% - 2% - 1% - 5% -
Revenue per Test Analysis
Total revenue per test (EGP) 140 114 102 113 101 118 97 111 15% 110 114 4%
Conventional revenue per test (EGP) 90 114 94 113 96 118 94 111 17% 94 114 22%
Covid-19-related revenue per test (EGP) 431 - 367 - 361 - 354 - -100% 413 - -100%
Revenue Analysis: Contribution by Patient Segment
Contract Segment (64% of Group revenue in FY 2023)
At the Contract segment, consolidated revenues grew 26% year-on-year driven by
higher test volumes and average revenue per test. During the year, the
contract segment's average number of tests per patient posted a record high
4.4, a result of both the normalisation of patient mix following the Covid-19
pandemic, as well as the continued success of IDH's loyalty programme, which
was introduced in FY 2021.
Meanwhile, conventional revenues at IDH's contract segment booked EGP 2,627
million in FY 2023, a robust 47% year-on-year growth driven by 21% growth in
test volumes and a 22% increase in average revenues per conventional test at
the segment, respectively.
Walk-in Segment (36% of Group revenue in FY 2023)
In parallel, at the walk-in segment, consolidated revenues declined a marginal
2% during FY 2023, to record EGP 1,495 million down from EGP 1,519 million in
the previous year when Covid-19-related testing had boosted results. Similar
to the contract segment, average tests per patient grew 28% year-on-year to
book 3.6 tests during FY 2023, setting another record high for the Company.
Conventional revenue at the walk-in segment recorded EGP 1,495 million in FY
2023, increasing 34% year-on-year. Conventional revenue growth at the segment
was supported by a 33% year-on-year increase in average revenue per test,
while test volumes remained unchanged compared to the previous year.
Detailed Segment Performance Breakdown
Walk-in Segment Contract Segment Total
FY22 FY23 Change FY22 FY23 Change FY22 FY23 Change
Revenue (EGP mn) 1,519 1,495 -1% 2,086 2,627 26% 3,605 4,123 14%
Conventional Revenue (EGP mn) 1,119 1,495 34% 1,784 2,627 47% 2,903 4,123 42%
Total Covid-19-related revenue (EGP mn) 400 - -100% 302 - -100% 702 - -100%
Patients ('000) 2,592 1,788 -31% 6,129 6,724 10% 8,721 8,512 -2%
% of Patients 30% 21% 70% 79%
Revenue per Patient (EGP) 586 836 43% 340 391 15% 413 484 17%
Tests ('000) 7,313 6,473 -11% 25,372 29,629 17% 32,685 36,102 10%
% of Tests 22% 18% 78% 82%
Conventional tests ('000) 6,462 6,473 0.2% 24,523 29,629 21% 30,985 36,102 17%
Total Covid-19-related tests ('000) 851 - -100% 849 - -100% 1,700 - -100%
Revenue per Test (EGP) 208 231 11% 82 89 8% 110 114 4%
Conventional Revenue per Test (EGP) 173 231 33% 73 89 22% 94 114 22%
Test per Patient 2.8 3.6 28% 4.1 4.4 6% 3.7 4.2 13%
Revenue Analysis: Contribution by Geography
Egypt (82.7% of Group revenue)
IDH's home and largest market, Egypt, maintained the robust performance seen
starting in May 2023, recording sustained top-line growth in the fourth
quarter of the year to close out FY 2023 with consolidated revenue of EGP
3,411 million, up 18% year-on-year. Excluding the significant contributions
made by Covid-19-related testing in FY 2022 (16% of Egypt's revenue in FY
2022), conventional revenue growth was even more impressive at 40% for the
year, boosted by 18% increases both in test volumes and average revenue per
conventional test.
In Q4 2023, IDH's Egyptian operations recorded consolidated revenue of EGP 911
million, up 38% year-on-year driven by 18% and 17% increases in tests and
average revenue per test, respectively. Similarly, conventional revenue (which
excludes Covid-19-related contributions in Q4 2022) stood 42% higher than in
the comparable quarter of last year.
Al-Borg Scan
IDH's fast-growing radiology venture continued to post impressive results
throughout the second half of the year, with revenues reaching EGP 155 million
in FY 2023, representing an 82% year-on-year increase. Top-line expansion
during the year was primarily due to higher scan volumes, which rose 43%
year-on-year in FY 2023, partially due to the ramp up of operations at the
venture's newest branches. Additionally, average revenue per scan increased
27% year-on-year, reaching EGP 717, and further contributing to revenue
expansion.
In September 2023, Al-Borg Scan inaugurated its seventh branch, located in
Cairo's Nasr City neighbourhood. The launch of this latest branch is directly
in line with the Company's long-term strategy of expanding its presence in
Greater Cairo and cementing its position as a leader in the country's highly
fragmented radiology market.
House Calls
In the year ended 31 December 2023, IDH's house call service in Egypt
continued to make a robust contribution of 16% to total revenues in the
country. This remains significantly ahead of the service's pre-pandemic
contribution, highlighting not only the segment's growth potential but also
the effectiveness of IDH's investment and ramp up strategy specifically
throughout the Covid-19 pandemic.
Wayak
IDH's Egypt-based subsidiary, Wayak, which utilises the Company's vast patient
database to create electronic medical records and offer customized services
for our patients, completed 177 thousand orders in FY 2023, representing a 33%
year-on-year increase. On the profitability front, the venture's EBITDA losses
continued to narrow steadily, recording EGP 28 thousand in FY 2023 versus the
EGP 3.8 million in EBITDA losses booked in FY 2022.
Detailed Egypt Performance Breakdown
Revenue Analysis
EGP mn Q1 2022 Q1 2023 Q2 2022 Q2 2023 Q3 2022 Q3 2023 Q4 2022 Q4 2023 % FY 2022 FY 2023 %
Total Revenue 879 731 645 783 711 986 659 911 38% 2,894 3,411 18%
Conventional Revenue 549 731 591 783 662 986 642 911 42% 2,444 3,411 40%
Pathology Revenue 532 703 573 748 639 941 614 864 41% 2,358 3,256 38%
Radiology Revenue 17 28 19 35 23 45 27 47 73% 86 155 82%
Total Covid-19-related Revenue 330 - 53 - 49 - 17 - -100% 450 - -100%
Contribution to Egypt Results
Conventional revenue 62% 100% 92% 100% 93% 100% 97% 100% 84% 100%
Pathology Revenue 61% 96% 89% 96% 90% 95% 93% 95% 82% 95%
Radiology Revenue 1.9% 3.8% 2.9% 4.5% 3% 5% 4% 5% 3% 5%
Total Covid-19-related revenue 38% - 8% - 7% 3% 16%
Test Volume Analysis
Total Tests 7.3 7.3 6.9 7.8 7.6 9.3 7.6 9.0 18% 29.5 33.4 13%
Conventional Tests 6.5 7.3 6.7 7.8 7.5 9.3 7.6 9.0 19% 28.3 33.4 18%
Total Covid-19-related Tests 0.8 - 0.2 - 0.2 - 0.01 - -100% 1.2 - -100%
Contribution to Egypt Results
Conventional tests performed 89% 100% 97% 100% 98% 100% 99% 100% 96% 100%
Total Covid-19-related tests performed 11% - 3% - 2% - 1% - 4% -
Revenue per Test Analysis
Total Revenue per Test 120 99 94 101 93 107 86 101 17% 98 102 4%
Revenue per Conventional Test 84 99 88 101 89 107 85 101 20% 86 102 18%
Jordan (14.7% of Group revenue in FY 2023)
In IDH's second largest market, Jordan, IDH booked consolidated revenue of JOD
14 million in FY 2023, 42% below last year's figure (down 1% year-on-year in
EGP terms). The significant year-on-year decline is wholly attributable to the
high base effect resulting from Covid-19-related testing in FY 2022 which had
significantly boosted last year's consolidated top-line. Excluding this
contribution, conventional revenues recorded an 8% year-on-year expansion
supported by an 8% rise in conventional test volumes. In EGP terms,
conventional revenues grew 68%, reaching EGP 604 million in FY 2023. Jordanian
growth in EGP terms includes the significant impact from the translation
effect, due to multiple devaluations of the Egyptian Pound between comparable
periods.
In Q4 2023, consolidated revenues in Jordan recorded JOD 3.2 million, down 5%
year-on-year (up 20% year-on-year in EGP terms due to translation effect).
Controlling for the contributions of Covid-19-related testing in the final
quarter of FY 2022, conventional revenue would record a 1% year-on-year
expansion in Q4 2023 (up 28% in EGP terms, again reflecting the impact of a
weaker EGP).
Detailed Jordan Performance Breakdown
Revenue Analysis
EGP mn Q1 2022 Q1 2023 Q2 2022 Q2 2023 Q3 2022 Q3 2023 Q4 2022 Q4 2023 % FY 2022 FY 2023 %
Total Revenue 281 144 106 146 109 174 116 140 20% 612 604 -1%
Conventional Revenue 70 144 84 146 95 174 109 140 28% 359 604 68%
Total Covid-19-related Revenue (PCR and Antibody) 210 - 21 - 14 - 7 - -100% 253 - -100%
Contribution to Jordan Results
Conventional Revenue 25% 100% 80% 100% 87% 100% 94% 100% 59% 100%
Total Covid-19-related Revenue (PCR and Antibody) 75% - 20% - 13% - 6% - 41% -
Test Volume Analysis
Total tests (k) 991 582 603 598 627 678 568 566 -1% 2,789 2,424 -13%
Conventional tests performed (k) 519 582 572 598 599 678 553 566 2% 2,243 2,424 8%
Total Covid-19-related tests performed (k) 472 - 30 - 28 - 16 - -100% 546 - -100%
Contribution to Jordan Results
Conventional tests performed 52% 100% 95% 100% 96% 100% 97% 100% 80% 100%
Total Covid-19-related tests performed 48% - 5% - 4% - 3% - 20% -
Revenue per Test Analysis
Total Revenue per Test 283 248 175 244 174 257 205 247 21% 219 249 14%
Revenue per Conventional Test 136 248 147 244 159 257 198 247 25% 160 249 56%
Nigeria (2.3% of Group revenue in FY 2023)
IDH's Nigerian subsidiary, Echo-Lab, maintained the growth momentum seen
throughout the year, reporting revenue growth of 15% in local currency terms,
and reaching NGN 1,961 million in FY 2023. In EGP terms, Nigerian operations
booked top-line growth of 22% year-on-year, with revenues coming in at EGP 96
million. Revenue growth for the period was driven by 32% and 39% year-on-year
increases in average revenue per test in NGN and EGP terms, respectively, as
the Company continued to implement strategic price hikes in response to
inflationary pressures in the country. It is also worth mentioning that
average revenue per test increases in EGP terms also partially reflected the
translation effect due to a weakened EGP. Revenue growth for the year came
despite a 12% year-on-year decrease in test volumes, which stood at 266
thousand tests during FY 2023.
On a quarterly basis, IDH's Nigerian operations reported revenue of NGN 504
million, up 15% year-on-year, on the back of higher average revenue per test.
In EGP terms, revenue declined 27% year-on-year in Q4 2023, reflecting a
weaker EGP.
Sudan (0.3% of Group revenue in FY 2023)
Ongoing conflict in Sudan has significantly affected IDH's operations in the
country, leading to the closure of 17 of the Company's 18 branches in the
country since April 2023. During FY 2023, Sudanese operations booked revenues
of SDG 220 million, down 60% year-on-year compared to FY 2022. In EGP terms,
revenues stood at EGP 11 million, a 44% year-on-year decrease. IDH continues
to closely monitor the evolving situation, updating the market with material
developments as necessary.
Revenue Contribution by Country
Q1 2022 Q1 2023 Q2 2022 Q2 2023 Q3 2022 Q3 2023 Q4 2022 Q4 2023 % FY 2022 FY 2023 %
Egypt Revenue (EGP mn) 879 731 645 783 711 986 659 911 38% 2,894 3,411 18%
Conventional (EGP mn) 549 731 591 783 662 986 642 911 42% 2,444 3,411 40%
Pathology Revenue (EGP mn) 532 703 573 748 639 941 614 864 41% 2,358 3,256 38%
Radiology Revenue (EGP mn) 17 28 19 35 23 45 27 47 73% 86 155 82%
Covid-19-related (EGP mn) 330 - 53 - 49 - 17 - -100% 450 - -100%
Egypt Contribution to IDH Revenue 74.5% 79.9% 83.2% 81.8% 84.0% 83.5% 81.9% 85.2% 80.3% 82.7%
Jordan Revenue (EGP mn) 281 144 106 146 109 174 116 140 20% 612 604 -1%
Conventional (EGP mn) 70 144 84 146 95 174 109 140 28% 359 604 68%
Covid-19-related (EGP mn) 210 - 21 - 14 - 7 - -100% 253 - -100%
Jordan Revenues (JOD mn) 12.5 3.4 4.0 3.4 4.1 4.0 3.4 3.2 -5% 23.9 14.0 -42%
Conventional (JOD mn) 3.0 3.4 3.2 3.4 3.5 4.0 3.2 3.2 1% 12.9 14.0 8%
Jordan Revenue Contribution to IDH Revenue 23.7% 15.7% 13.7% 15.2% 12.9% 14.7% 14.4% 13.1% 17.0% 14.7%
Nigeria Revenue (EGP mn) 15 31 19 27 21 21 24 18 -27% 79 96 22%
Nigeria Revenue (NGN mn) 371 468 416 469 473 520 438 504 15% 1,698 1,961 15%
Nigeria Contribution to IDH Revenue 1.3% 3.4% 2.5% 2.8% 2.5% 1.8% 3.0% 1.6% 2.2% 2.3%
Sudan Revenue (EGP mn) 5.7 8.8 4.8 1.4 4.3 0.5 5.5 0.6 -88% 20.3 11.4 -44%
Sudan Revenue (SDG mn) 152 169 137 27 128 10 130 13 -90% 547 220 -60%
Sudan Contribution to IDH Revenue 0.5% 1.0% 0.6% 0.1% 0.5% 0.05% 0.7% 0.06% 0.6% 0.3%
Average Exchange Rate
FY 2022 FY 2023 Change
USD/EGP 19.7 30.8 56.3%
JOD/EGP 27.7 43.1 55.6%
NGN/EGP 0.05 0.05 8.1%
SDG/EGP 0.04 0.05 38.7%
Patients Served and Tests Performed by Country
FY 2022 FY 2023 Change
Egypt Patients Served (mn) 7.6 8.0 5%
Egypt Tests Performed (mn) 29.5 33.4 13%
Conventional tests (mn) 28.3 33.4 18%
Covid-19-related tests (mn) 1.2 - -100%
Jordan Patients Served (k) 890 372 -58%
Jordan Tests Performed (k) 2,789 2,424 -13%
Conventional tests (k) 2,243 2,424 8%
Covid-19-related tests (k) 546 - -100%
Nigeria Patients Served (k) 149 132 -11%
Nigeria Tests Performed (k) 303 266 -12%
Sudan Patients Served (k) 70 14 -80%
Sudan Tests Performed (k) 139 40 -71%
Total Patients Served (mn) 8.7 8.5 -2%
Total Tests Performed (mn) 32.7 36.1 10%
Branches by Country
31 December 2022 31 December 2023 Change
Egypt 500 544 44
Jordan 23 27 4
Nigeria 12 12 -
Sudan 17 18(14) 1
Total Branches 552 601 49
(14) 17 of IDH's branches in Sudan have been closed due to ongoing conflict in
the country
( )
Cost of Goods Sold
IDH reported cost of goods sold amounting to EGP 2,598 million during FY 2023,
a 21% year-on-year increase compared to the previous year. As a share of
revenue, cost of goods sold recorded 63% during the year, up from 59% one year
prior. The increase in cost of goods sold during the period was primarily
driven by higher raw material costs, increased direct salaries and wages, as
well as higher depreciation expenses.
Cost of Goods sold Breakdown as a Percentage of Revenue
FY 2022 FY 2023
Raw Materials 20.4% 22.2%
Wages & Salaries 17.0% 18.8%
Depreciation & Amortisation 7.9% 8.8%
Other Expenses 14.2% 13.3%
Total 59.4% 63.0%
Raw material costs (35% of consolidated cost of goods sold in FY 2023)
continued to be the largest contributor to cost of goods sold throughout FY
2023, recording EGP 914 million and expanding 24% year-on-year. During the
year, raw materials constituted 22% of revenues, up from 20% in FY 2022.
Additionally, the Company recorded a one-off expense of EGP 17.4 million
related to the expiry of Covid-19-related test kits, which also served to
increase raw material costs during the year.
Wages and salaries including employee share of profits (30% share of
consolidated cost of goods sold) remained the second largest contributor to
cost of goods sold during the year, increasing 26% year-on-year to reach EGP
774 million. Higher wages and salaries continued to reflect higher than usual
salary adjustments to compensate for unprecedented inflation at the Group's
largest market, Egypt. Additionally, direct wages and salaries were further
inflated due to the hiring of new staff across IDH's network to support the
rollout of new branches, 49 of which were launched during FY 2023. Finally, it
is important to highlight that the translation effect from salaries in both
Jordan and Nigeria continued to expand direct wage and salaries expenses,
reflecting the weakening of the EGP throughout the year.
Direct Wages and Salaries by Region
FY 2022 FY 2023 Change
Egypt (EGP mn) 475 589 24%
Jordan (EGP mn) 116 155 33%
Jordan (JOD mn) 4.3 3.6 -16%
Nigeria (EGP mn) 18 27 49%
Nigeria (NGN mn) 392 576 47%
Sudan (EGP mn) 4 3 -33%
Sudan (SDG mn) 111 53 -52%
Direct depreciation and amortization costs (14% of consolidated cost of goods
sold) grew 27% year-on-year in FY 2023, booking EGP 362 million. Increased
depreciation and amortization costs during the year primarily reflect the
rollout of 49 additional branches to IDH's network, including the launch of
Al-Borg Scan's seventh radiology branch in September.
Other expenses (21% of consolidated cost of goods sold) reached EGP 548
million during the year, increasing 23% year-on-year and constituting 13% of
consolidated revenues for the year. It is worth noting that the increase in
other expenses excludes EGP 63 million paid in concession fees as part of
Biolab's agreement with Queen Alia International Airport and Aqaba Port to
provide Covid-19 testing to passengers in January and February of 2022. When
including these fees, IDH recorded an increase in other expenses amounting to
7% year-on-year. The increase in other expenses is mainly attributable to
higher repair and maintenance costs, cleaning expenses, transportation
expenses, and consulting fees which continue to reflect both the effects of
the devaluated Egyptian Pound and higher costs associated with the expansion
of Al-Borg Scan's operations. Additionally, increased gasoline prices as well
as repair and maintenance costs in Nigeria, coupled with a persistent
inflationary environment and a weaker Naira (versus the US Dollar) continued
to push up total costs in the country.
Gross Profit
IDH recorded a gross profit of EGP 1,524 million in FY 2023, an increase of 4%
year-on-year. The Company's gross profit margin stood at 37%, four percentage
points below the previous year due to the aforementioned increases in cost of
goods sold during the year.
On a three-month basis, IDH's gross profit grew 38% year-on-year in Q4 2023,
reaching EGP 387 million. GPM came in at 36%, up one percentage point from Q4
2022 and continuing to highlight a normalisation of profitability following
multiple devaluations of the EGP between the end of 2022 and early 2023.
Selling, General and Administrative (SG&A) Expenses
SG&A outlays during FY 2023 stood at EGP 787 million, growing 25%
year-on-year. As a share of revenues, SG&A outlays constituted 19% in FY
2023, up from 17% one year prior. Higher SG&A expenses are mainly
attributable to:
· Increased indirect wages and salaries, which came in at EGP
273 million, a 38% year-on-year increase. During FY 2023 indirect wages and
salaries constituted 7% of revenues, up from 5% on year prior. This increase
was driven by USD-denominated directors' compensations, the addition of a new
board member during the first quarter of the previous year (who received
compensation starting March 2022), higher salaries in Jordan due to the
translation effect, as well as an increase in social security expenses.
Increased social security expenses (up by EGP 15.5 million year-on-year) also
weighed on indirect wages and salaries for FY 2023.
· Higher other expenses, which increased 26% year-on-year. The
increase in other expenses was mainly driven by higher USD-denominated
consulting and accounting fees at the holding level.
· Non-recurring expenses, including a non-recurring expense
paid for the government's vocational training fund, pre-operating expenses in
Saudi Arabia, a one-off expense in Sudan, and an impairment in goodwill and
assets in Nigeria, which amounted to EGP 53 million in FY 2023.
Selling, General and Administrative Expenses
FY 2022 FY 2023 Change
Wages & Salaries 197 282 43%
Accounting and Professional Services Fees 130 134 3%
Market - Advertisement expenses 123 98 -21%
Other Expenses - operation 112 143 28%
Depreciation & Amortisation 33 39 20%
Impairment loss on trade and other receivable 30 51 71%
Travelling and transportation expenses 17 27 62%
Impairment in assets 2 7 266%
Impairment in goodwill - 11 -
Provision for end of service - - -
Provision for legal claims 4 3 -11%
Provision for Egyptian government training fund for employees - 12 -
Other income (18) (20) 16%
Total 630 787 25%
Adjusted EBITDA
Due to the nature of several non-recurring expenses affecting IDH's
EBITDA-level profitability, the Company has elected to present an adjusted
EBITDA figure, along with its associated margin. Adjusted EBITDA excludes
several one-off expenses which weigh down profitability. Namely, these
expenses are an EGP 11.9 million one-off expense owed to the Egyptian
government for vocational training (covering the past five-year period),
pre-operating expenses in preparation for the launch of operations in Saudi
Arabia amounting to EGP 18.2 million, EGP 5.0 million in impairment expenses
in Sudan due to the ongoing conflict in the country, and EGP 18.0 million in
impairment expenses in goodwill and assets in Nigeria.
In FY 2023, the Company booked an adjusted EBITDA(15) of EGP 1,192 million,
increasing 2% year-on-year and reflecting cost normalisation compared to the
previous year. Meanwhile, EBITDA margin recorded 29%, four points below FY
2022 due to higher SG&A outlays as discussed previously. On a quarterly
basis, adjusted EBITDA stood at EGP 319 million in Q4 2023, representing a
robust 62% year-on-year increase compared to the same period of the previous
year. IDH's EBITDA margin during the quarter stood at 30%, up from 25% in Q4
2022. Increased EBITDA profitability in the final three months of the year
primarily reflects the normalisation of the Company's cost base as the initial
effects of the devaluation begin to fade.
It is worth mentioning that adjusted EBITDA is adjusted for several
non-recurring expenses, including an EGP 12 million non-recurring expense for
a provision of 1% of Egyptian profits, in accordance with article 134 of
labour law on Vocational Guidance and Training issued by the Egyptian
Government in 2003. In accordance with the law, IDH's Egyptian operations are
required to provide 1% of net profits each year into a training fund.
Integrated Diagnostics Holdings plc has taken legal advice and considered
market practices in Egypt relating to the law, and more specifically whether
vocational training courses undertaken by the Company's Egyptian subsidiaries
suggest that obligations have been satisfied by in-house training programmes
provided by those entities. Since the issuance of the law, IDH's Egyptian
subsidiaries have not been requested by the government to pay, nor have they
voluntarily paid, any amounts into the external training fund.
(15) Adjusted EBITDA is calculated as operating profit plus depreciation and
amortization, excluding non-recurring expenses, specifically an EGP 11.9
million one-off expense owed to the Egyptian government for vocational
training, EGP 18.2 million in pre-operating expenses in Saudi Arabia, EGP 5.0
million impairment expense in Sudan due to the ongoing situation in the
country, an EGP 18.0 million impairment expense in goodwill and assets in
Nigeria.
Adjusted EBITDA by Country
In Egypt, IDH booked an adjusted EBITDA of EGP 1,058 million, a 1%
year-on-year increase compared to FY 2022. Adjusted EBITDA margin recorded
31%, a five-point year-on-year decrease. Lower adjusted EBITDA profitability
reflects higher SG&A outlays, which increased 18% year-on-year and weighed
down on profitability during the year. On a three-month basis, Egypt's
adjusted EBITDA recorded EGP 292 million for Q4 2023, increasing 69%
year-on-year and with an adjusted EBITDA margin of 32%.
IDH's Jordanian subsidiary, Biolab, posted an adjusted EBITDA of JOD 3.6
million, down 34% year-on-year in FY 2023 and yielding an adjusted EBITDA
margin of 26% (versus 23% in FY 2022). In EGP terms, adjusted EBITDA came to
EGP 157 million, up 16% from FY 2022. The increase in adjusted EBITDA in EGP
terms is due to the translation effect following the devaluation of the EGP in
late FY 2022 and early FY 2023. In Q4 2023, adjusted EBITDA recorded JOD 0.8
million in Q4 2023, nearly doubling the JOD 0.4 million booked in the
comparable period of last year. The Company's adjusted EBITDA margin came in
at 25%, up from 12% in Q4 2022. In EGP terms, Biolab booked adjusted EBITDA of
EGP 34 million, up from EGP 14 million in Q4 2022.
In Nigeria, increasing inflationary pressures and an expanded cost base
resulted in widening adjusted EBITDA losses, despite revenue growth throughout
the year. More specifically, adjusted EBITDA losses expanded to NGN 498
million in FY 2023, from NGN 337 million in the previous year. During Q4 2023,
the Company booked an adjusted EBITDA loss of NGN 204 million, down from NGN
215 million during Q4 2022. In EGP terms, adjusted EBITDA losses narrowed to
EGP 7 million in Q4 2023, from EGP 12 million in the same period of the
previous year, partially reflecting the translation effect following the
weakening of the EGP.
In Sudan, adjusted EBITDA came in at SDG 21 million, up from an EBITDA loss of
SDG 2 million in FY 2022.
Regional EBITDA in Local Currency
Mn FY 2022 FY 2023 Change
Egypt EBITDA EGP 1,031 1,046 1%
Margin 36% 31%
Egypt Adjusted EBITDA EGP 1,053 1,058 1%
Margin 36% 31%
Jordan EBITDA JOD 5.5 3.6 -34%
Margin 23% 26%
Nigeria EBITDA NGN (337) (1,023) 203%
Margin -20% -52%
Nigeria Adjusted EBITDA NGN (337) (498) 48%
Margin -20% -25%
Sudan EBITDA SDG (2) (76) -
Margin -0.3% -35%
Sudan Adjusted EBITDA SDG (2) 21 n/a
Margin -0.3% 10%
Interest Income / Expense
IDH's interest income reached EGP 73 million during FY 2023, down from EGP 95
million during the previous year. Lower interest income for the year was
primarily a result of lower cash balances due to the distribution of a record
cash dividend during last year.
Interest expense(16) stood at EGP 161 million, up 19% year-on-year in FY 2023.
Increasing interest expenses are mainly due to:
· Higher interest on lease liabilities related to IFRS 16 due
to the addition of new branches to IDH's network.
· Higher interest expenses following the CBE decision to increase
rates by 1,100 bps since March 2022. It is important to note that IDH's
interest bearing debt balance decreased to EGP 111 million as at 31 December
2023, from EGP 116 million at year-end 2022. Earlier in the year, as part of
IDH's strategy to reduce foreign currency risk, the Company agreed with
General Electric (GE) for the early repayment of its contractual obligation of
USD 5.7 million. To finance the settlement, IDH utilized a bridge loan
facility, with half the amount being funded internally, while the other half
(amounting to EGP 55 million) was provided through a bridge loan by Ahly
United Bank- Egypt (AUBE). Interest expenses related to the AUBE facility
recorded EGP 23 million in FY 2023. The bridge loan was fully settled in Q2
2023.
· Fast track payments worth EGP 7.1 million, which encompass
discounts provided for the rapid payment of receivables in FY 2023.
(16) Interest expenses on medium-term loans include EGP 23 million related to
the Group's facility with Ahli United Bank Egypt (AUBE).
Interest Expense Breakdown
EGP mn FY 2022 FY 2023 Change
Interest on Lease Liabilities (IFRS 16) 73.4 93.3 27%
Interest Expenses on Leases 21.4 25.5 19%
Interest Expenses on Borrowings(17) 11.9 22.9 92%
Bank Charges 12.9 12.2 -6%
Loan-related Expenses on IFC facility(18) 12.5 - -100%
Shareholder Dividend Deferral Agreement(19) 3.4 - -100%
Fast Track Payment - 7.1 -
Total Interest Expense 135.6 161.0 19%
(17) Interest expenses on medium-term loans include EGP 23 million related to
the Group's facility with Ahli United Bank Egypt (AUBE). Meanwhile, the
Group's facility with the Commercial International Bank (CIB) was fully repaid
as of 5 April 2022.
(18) Loan-related expenses on IFC facility represents commitment fees on the
facility granted by IFC and Mashreq with a total value of USD 60 million. The
facility was cancelled in May 2023.
(19) As announced on 27 July 2022, as part of IDH's agreement with Hena
Holdings Ltd and Actis IDH Limited (its two largest shareholders) in
consideration for the two shareholders agreeing to defer their right to
receive their pro rata share of the Dividend Payment, IDH agreed to pay to
each interest on the outstanding amounts due at the rate of 10% per annum
(with interest accruing on a daily basis) for a two-month period starting 27
July 2022. Payment to both shareholders was successfully completed on 18
August 2022.
( )
Foreign Exchange
IDH booked an EGP 88 million foreign exchange gain in FY 2023, down 53%
year-on-year and partially reflecting intercompany balances revaluation.
Taxation
Tax expenses, which include both income and deferred tax, recorded EGP 269
million in FY 2023, down 18% year-on-year from FY 2022. IDH's effective tax
rate stood at 36%, two points below that of the previous year. It is important
to highlight that there is no tax payable for IDH's two holding-level
companies. Meanwhile, tax was paid from the Group's operating subsidiaries
(Egypt 32%, Jordan 34%, Nigeria 0.2%).
Taxation Breakdown by Region
EGP Mn FY 2022 FY 2023 Change
Egypt 274.3 251.6 -8%
Jordan 21.8 17.1 -22%
Nigeria 30.6 -0.1 -100.3%
Sudan 0.4 0.5 24%
Total Tax Expenses 327.1 269.0 -18%
Net Profit
IDH reported a net profit of EGP 468 million during FY 2023, down 11%
year-on-year and yielding a net profit margin of 11%. Lower net profitability
for the year came as a result of lower EBITDA profitability, coupled with
previously discussed decreases in interest income, higher interest expenses,
as well as several non-recurring expenses. In Q4 2023, IDH posted a net profit
of EGP 81 million, down 34% year-on-year, and with an associated margin of 8%
compared to 15% in Q4 2022.
Non-Recurring Expenses
IDH recorded several one-off expenses during the year, namely:
· EGP 11.9 million for provision of 1% of
Egyptian profits towards the Government Training Fund.
· EGP 18.2 million due to pre-operating expenses
in Saudi Arabia.
· EGP 5.0 million in impairment expenses due to
the ongoing conflict in Sudan.
· EGP 18.0 million in impairment expenses in
goodwill and assets for operations in Nigeria.
Raw material costs (35% of consolidated cost of goods sold in FY 2023)
continued to be the largest contributor to cost of goods sold throughout FY
2023, recording EGP 914 million and expanding 24% year-on-year. During the
year, raw materials constituted 22% of revenues, up from 20% in FY 2022.
Additionally, the Company recorded a one-off expense of EGP 17.4 million
related to the expiry of Covid-19-related test kits, which also served to
increase raw material costs during the year.
Wages and salaries including employee share of profits (30% share of
consolidated cost of goods sold) remained the second largest contributor to
cost of goods sold during the year, increasing 26% year-on-year to reach EGP
774 million. Higher wages and salaries continued to reflect higher than usual
salary adjustments to compensate for unprecedented inflation at the Group's
largest market, Egypt. Additionally, direct wages and salaries were further
inflated due to the hiring of new staff across IDH's network to support the
rollout of new branches, 49 of which were launched during FY 2023. Finally, it
is important to highlight that the translation effect from salaries in both
Jordan and Nigeria continued to expand direct wage and salaries expenses,
reflecting the weakening of the EGP throughout the year.
Direct Wages and Salaries by Region
FY 2022 FY 2023 Change
Egypt (EGP mn) 475 589 24%
Jordan (EGP mn) 116 155 33%
Jordan (JOD mn) 4.3 3.6 -16%
Nigeria (EGP mn) 18 27 49%
Nigeria (NGN mn) 392 576 47%
Sudan (EGP mn) 4 3 -33%
Sudan (SDG mn) 111 53 -52%
Direct depreciation and amortization costs (14% of consolidated cost of goods
sold) grew 27% year-on-year in FY 2023, booking EGP 362 million. Increased
depreciation and amortization costs during the year primarily reflect the
rollout of 49 additional branches to IDH's network, including the launch of
Al-Borg Scan's seventh radiology branch in September.
Other expenses (21% of consolidated cost of goods sold) reached EGP 548
million during the year, increasing 23% year-on-year and constituting 13% of
consolidated revenues for the year. It is worth noting that the increase in
other expenses excludes EGP 63 million paid in concession fees as part of
Biolab's agreement with Queen Alia International Airport and Aqaba Port to
provide Covid-19 testing to passengers in January and February of 2022. When
including these fees, IDH recorded an increase in other expenses amounting to
7% year-on-year. The increase in other expenses is mainly attributable to
higher repair and maintenance costs, cleaning expenses, transportation
expenses, and consulting fees which continue to reflect both the effects of
the devaluated Egyptian Pound and higher costs associated with the expansion
of Al-Borg Scan's operations. Additionally, increased gasoline prices as well
as repair and maintenance costs in Nigeria, coupled with a persistent
inflationary environment and a weaker Naira (versus the US Dollar) continued
to push up total costs in the country.
Gross Profit
IDH recorded a gross profit of EGP 1,524 million in FY 2023, an increase of 4%
year-on-year. The Company's gross profit margin stood at 37%, four percentage
points below the previous year due to the aforementioned increases in cost of
goods sold during the year.
On a three-month basis, IDH's gross profit grew 38% year-on-year in Q4 2023,
reaching EGP 387 million. GPM came in at 36%, up one percentage point from Q4
2022 and continuing to highlight a normalisation of profitability following
multiple devaluations of the EGP between the end of 2022 and early 2023.
Selling, General and Administrative (SG&A) Expenses
SG&A outlays during FY 2023 stood at EGP 787 million, growing 25%
year-on-year. As a share of revenues, SG&A outlays constituted 19% in FY
2023, up from 17% one year prior. Higher SG&A expenses are mainly
attributable to:
· Increased indirect wages and salaries, which came in at EGP
273 million, a 38% year-on-year increase. During FY 2023 indirect wages and
salaries constituted 7% of revenues, up from 5% on year prior. This increase
was driven by USD-denominated directors' compensations, the addition of a new
board member during the first quarter of the previous year (who received
compensation starting March 2022), higher salaries in Jordan due to the
translation effect, as well as an increase in social security expenses.
Increased social security expenses (up by EGP 15.5 million year-on-year) also
weighed on indirect wages and salaries for FY 2023.
· Higher other expenses, which increased 26% year-on-year. The
increase in other expenses was mainly driven by higher USD-denominated
consulting and accounting fees at the holding level.
· Non-recurring expenses, including a non-recurring expense
paid for the government's vocational training fund, pre-operating expenses in
Saudi Arabia, a one-off expense in Sudan, and an impairment in goodwill and
assets in Nigeria, which amounted to EGP 53 million in FY 2023.
Selling, General and Administrative Expenses
FY 2022 FY 2023 Change
Wages & Salaries 197 282 43%
Accounting and Professional Services Fees 130 134 3%
Market - Advertisement expenses 123 98 -21%
Other Expenses - operation 112 143 28%
Depreciation & Amortisation 33 39 20%
Impairment loss on trade and other receivable 30 51 71%
Travelling and transportation expenses 17 27 62%
Impairment in assets 2 7 266%
Impairment in goodwill - 11 -
Provision for end of service - - -
Provision for legal claims 4 3 -11%
Provision for Egyptian government training fund for employees - 12 -
Other income (18) (20) 16%
Total 630 787 25%
Adjusted EBITDA
Due to the nature of several non-recurring expenses affecting IDH's
EBITDA-level profitability, the Company has elected to present an adjusted
EBITDA figure, along with its associated margin. Adjusted EBITDA excludes
several one-off expenses which weigh down profitability. Namely, these
expenses are an EGP 11.9 million one-off expense owed to the Egyptian
government for vocational training (covering the past five-year period),
pre-operating expenses in preparation for the launch of operations in Saudi
Arabia amounting to EGP 18.2 million, EGP 5.0 million in impairment expenses
in Sudan due to the ongoing conflict in the country, and EGP 18.0 million in
impairment expenses in goodwill and assets in Nigeria.
In FY 2023, the Company booked an adjusted EBITDA(15) of EGP 1,192 million,
increasing 2% year-on-year and reflecting cost normalisation compared to the
previous year. Meanwhile, EBITDA margin recorded 29%, four points below FY
2022 due to higher SG&A outlays as discussed previously. On a quarterly
basis, adjusted EBITDA stood at EGP 319 million in Q4 2023, representing a
robust 62% year-on-year increase compared to the same period of the previous
year. IDH's EBITDA margin during the quarter stood at 30%, up from 25% in Q4
2022. Increased EBITDA profitability in the final three months of the year
primarily reflects the normalisation of the Company's cost base as the initial
effects of the devaluation begin to fade.
It is worth mentioning that adjusted EBITDA is adjusted for several
non-recurring expenses, including an EGP 12 million non-recurring expense for
a provision of 1% of Egyptian profits, in accordance with article 134 of
labour law on Vocational Guidance and Training issued by the Egyptian
Government in 2003. In accordance with the law, IDH's Egyptian operations are
required to provide 1% of net profits each year into a training fund.
Integrated Diagnostics Holdings plc has taken legal advice and considered
market practices in Egypt relating to the law, and more specifically whether
vocational training courses undertaken by the Company's Egyptian subsidiaries
suggest that obligations have been satisfied by in-house training programmes
provided by those entities. Since the issuance of the law, IDH's Egyptian
subsidiaries have not been requested by the government to pay, nor have they
voluntarily paid, any amounts into the external training fund.
(15) Adjusted EBITDA is calculated as operating profit plus depreciation and
amortization, excluding non-recurring expenses, specifically an EGP 11.9
million one-off expense owed to the Egyptian government for vocational
training, EGP 18.2 million in pre-operating expenses in Saudi Arabia, EGP 5.0
million impairment expense in Sudan due to the ongoing situation in the
country, an EGP 18.0 million impairment expense in goodwill and assets in
Nigeria.
Adjusted EBITDA by Country
In Egypt, IDH booked an adjusted EBITDA of EGP 1,058 million, a 1%
year-on-year increase compared to FY 2022. Adjusted EBITDA margin recorded
31%, a five-point year-on-year decrease. Lower adjusted EBITDA profitability
reflects higher SG&A outlays, which increased 18% year-on-year and weighed
down on profitability during the year. On a three-month basis, Egypt's
adjusted EBITDA recorded EGP 292 million for Q4 2023, increasing 69%
year-on-year and with an adjusted EBITDA margin of 32%.
IDH's Jordanian subsidiary, Biolab, posted an adjusted EBITDA of JOD 3.6
million, down 34% year-on-year in FY 2023 and yielding an adjusted EBITDA
margin of 26% (versus 23% in FY 2022). In EGP terms, adjusted EBITDA came to
EGP 157 million, up 16% from FY 2022. The increase in adjusted EBITDA in EGP
terms is due to the translation effect following the devaluation of the EGP in
late FY 2022 and early FY 2023. In Q4 2023, adjusted EBITDA recorded JOD 0.8
million in Q4 2023, nearly doubling the JOD 0.4 million booked in the
comparable period of last year. The Company's adjusted EBITDA margin came in
at 25%, up from 12% in Q4 2022. In EGP terms, Biolab booked adjusted EBITDA of
EGP 34 million, up from EGP 14 million in Q4 2022.
In Nigeria, increasing inflationary pressures and an expanded cost base
resulted in widening adjusted EBITDA losses, despite revenue growth throughout
the year. More specifically, adjusted EBITDA losses expanded to NGN 498
million in FY 2023, from NGN 337 million in the previous year. During Q4 2023,
the Company booked an adjusted EBITDA loss of NGN 204 million, down from NGN
215 million during Q4 2022. In EGP terms, adjusted EBITDA losses narrowed to
EGP 7 million in Q4 2023, from EGP 12 million in the same period of the
previous year, partially reflecting the translation effect following the
weakening of the EGP.
In Sudan, adjusted EBITDA came in at SDG 21 million, up from an EBITDA loss of
SDG 2 million in FY 2022.
Regional EBITDA in Local Currency
Mn FY 2022 FY 2023 Change
Egypt EBITDA EGP 1,031 1,046 1%
Margin 36% 31%
Egypt Adjusted EBITDA EGP 1,053 1,058 1%
Margin 36% 31%
Jordan EBITDA JOD 5.5 3.6 -34%
Margin 23% 26%
Nigeria EBITDA NGN (337) (1,023) 203%
Margin -20% -52%
Nigeria Adjusted EBITDA NGN (337) (498) 48%
Margin -20% -25%
Sudan EBITDA SDG (2) (76) -
Margin -0.3% -35%
Sudan Adjusted EBITDA SDG (2) 21 n/a
Margin -0.3% 10%
Interest Income / Expense
IDH's interest income reached EGP 73 million during FY 2023, down from EGP 95
million during the previous year. Lower interest income for the year was
primarily a result of lower cash balances due to the distribution of a record
cash dividend during last year.
Interest expense(16) stood at EGP 161 million, up 19% year-on-year in FY 2023.
Increasing interest expenses are mainly due to:
· Higher interest on lease liabilities related to IFRS 16 due
to the addition of new branches to IDH's network.
· Higher interest expenses following the CBE decision to increase
rates by 1,100 bps since March 2022. It is important to note that IDH's
interest bearing debt balance decreased to EGP 111 million as at 31 December
2023, from EGP 116 million at year-end 2022. Earlier in the year, as part of
IDH's strategy to reduce foreign currency risk, the Company agreed with
General Electric (GE) for the early repayment of its contractual obligation of
USD 5.7 million. To finance the settlement, IDH utilized a bridge loan
facility, with half the amount being funded internally, while the other half
(amounting to EGP 55 million) was provided through a bridge loan by Ahly
United Bank- Egypt (AUBE). Interest expenses related to the AUBE facility
recorded EGP 23 million in FY 2023. The bridge loan was fully settled in Q2
2023.
· Fast track payments worth EGP 7.1 million, which encompass
discounts provided for the rapid payment of receivables in FY 2023.
(16) Interest expenses on medium-term loans include EGP 23 million related to
the Group's facility with Ahli United Bank Egypt (AUBE).
Interest Expense Breakdown
EGP mn FY 2022 FY 2023 Change
Interest on Lease Liabilities (IFRS 16) 73.4 93.3 27%
Interest Expenses on Leases 21.4 25.5 19%
Interest Expenses on Borrowings(17) 11.9 22.9 92%
Bank Charges 12.9 12.2 -6%
Loan-related Expenses on IFC facility(18) 12.5 - -100%
Shareholder Dividend Deferral Agreement(19) 3.4 - -100%
Fast Track Payment - 7.1 -
Total Interest Expense 135.6 161.0 19%
(17) Interest expenses on medium-term loans include EGP 23 million related to
the Group's facility with Ahli United Bank Egypt (AUBE). Meanwhile, the
Group's facility with the Commercial International Bank (CIB) was fully repaid
as of 5 April 2022.
(18) Loan-related expenses on IFC facility represents commitment fees on the
facility granted by IFC and Mashreq with a total value of USD 60 million. The
facility was cancelled in May 2023.
(19) As announced on 27 July 2022, as part of IDH's agreement with Hena
Holdings Ltd and Actis IDH Limited (its two largest shareholders) in
consideration for the two shareholders agreeing to defer their right to
receive their pro rata share of the Dividend Payment, IDH agreed to pay to
each interest on the outstanding amounts due at the rate of 10% per annum
(with interest accruing on a daily basis) for a two-month period starting 27
July 2022. Payment to both shareholders was successfully completed on 18
August 2022.
( )
Foreign Exchange
IDH booked an EGP 88 million foreign exchange gain in FY 2023, down 53%
year-on-year and partially reflecting intercompany balances revaluation.
Taxation
Tax expenses, which include both income and deferred tax, recorded EGP 269
million in FY 2023, down 18% year-on-year from FY 2022. IDH's effective tax
rate stood at 36%, two points below that of the previous year. It is important
to highlight that there is no tax payable for IDH's two holding-level
companies. Meanwhile, tax was paid from the Group's operating subsidiaries
(Egypt 32%, Jordan 34%, Nigeria 0.2%).
Taxation Breakdown by Region
EGP Mn FY 2022 FY 2023 Change
Egypt 274.3 251.6 -8%
Jordan 21.8 17.1 -22%
Nigeria 30.6 -0.1 -100.3%
Sudan 0.4 0.5 24%
Total Tax Expenses 327.1 269.0 -18%
Net Profit
IDH reported a net profit of EGP 468 million during FY 2023, down 11%
year-on-year and yielding a net profit margin of 11%. Lower net profitability
for the year came as a result of lower EBITDA profitability, coupled with
previously discussed decreases in interest income, higher interest expenses,
as well as several non-recurring expenses. In Q4 2023, IDH posted a net profit
of EGP 81 million, down 34% year-on-year, and with an associated margin of 8%
compared to 15% in Q4 2022.
Non-Recurring Expenses
IDH recorded several one-off expenses during the year, namely:
· EGP 11.9 million for provision of 1% of
Egyptian profits towards the Government Training Fund.
· EGP 18.2 million due to pre-operating expenses
in Saudi Arabia.
· EGP 5.0 million in impairment expenses due to
the ongoing conflict in Sudan.
· EGP 18.0 million in impairment expenses in
goodwill and assets for operations in Nigeria.
ii. Balance Sheet Analysis
Assets
Property, Plant and Equipment
As of year-end 2023, IDH recorded property, plant and equipment (PPE) cost of
EGP 2,554 million, increasing from EGP 2,208 million at 31 December 2022. The
increase in CAPEX as a share of revenues during FY 2023 was primarily driven
by the addition of new branches, renovations of existing branches, and
headquarter improvements (constituting 7.1% of revenues), and the translation
effect related to Jordan, Sudan, and Nigeria (constituting 0.3% of revenues).
Total CAPEX Addition Breakdown - FY 2023
EGP mn % of Revenue
Leasehold Improvements/new branches 202.7 4.9%
Al-Borg Scan Expansion 92.0 2.2%
Total CAPEX Additions Excluding Translation 294.7 7.1%
Translation Effect 13.5 0.3%
Total CAPEX Additions 308.2 7.5%
Accounts Receivable and Provisions
Accounts receivable as at year-end 2023 came in at EGP 570 million, a
year-on-year increase of 44%. In parallel, IDH's receivables' Days on Hand
(DoH) recorded 134 days, up from 124 days as at 31 December 2022.
Provision for doubtful accounts recorded EGP 51 million in FY 2023, up 71%
year-on-year. Increased provisions for doubtful accounts reflect slower
collection rates due to increasing economic headwinds and persistent inflation
throughout IDH's markets, in particular its home and largest market, Egypt.
Inventory
IDH booked an inventory balance of EGP 375 million as of the end of FY 2023,
increasing from EGP 265 million one year prior. Meanwhile, Days Inventory
Outstanding (DIO) increased to 133 days, from 127 days at year-end 2022.
Increased DIO is attributable to management's strategy of accumulating
inventory to hedge against inflation during the past year.
Cash and Net Debt
Cash balances and financial assets at amortised cost at the end of FY 2023
reached EGP 835 million, up from EGP 816 million at year-end 2022.
EGP million 31 Dec 2022 31 Dec 2023
Treasury Bills 293 133
Time Deposits 123 289
Current Accounts 382 392
Cash on Hand 18 21
Total 816 835
IDH's net debt(20) balance came in at EGP 358 million as of the end of FY
2023, down 4% from EGP 373 million as at year-end 2022.
(20) The net debt balance is calculated as cash and cash equivalent balances
including financial assets at amortised cost, less interest-bearing debt
(medium term loans), finance lease and Right-of-use liabilities.
EGP million 31 Dec 2022 31 Dec 2023 31 Dec 2021
Cash and Financial Assets at Amortised Cost(21) 816 835 2,350
Lease Liabilities Property (727) (828) 106
Total Financial Liabilities (Short-term and Long-term) (335) (240)
Interest Bearing Debt ("Medium Term Loans") (127) (125)
Net Debt Balance (373) (358) 1,483
Note: Interest Bearing Debt includes accrued interest for each period.
(21) As outlined in Note 18 of IDH's Consolidated Financial Statements, some
term deposits and treasury bills cannot be accessed for over 3 months and are
therefore not treated as cash. Term deposits which cannot be accessed for over
3 months stood at EGP 49 million at December 2023 (2022: EGP 60 million).
Meanwhile, treasury bills not accessible for over 3 months stood at EGP 112
million (2022: EGP 107 million).
Lease liabilities and financial obligations on property came in at EGP 828
million at year-end 2023, with the increase primarily driven by the rollout of
an additional 49 branches over the past year.
Meanwhile, financial obligations related to equipment stood at EGP 240 million
as at the end of 2023, with the decline attributable to IDH's early repayment
of its obligations with General Electric (GE) in line with the Company's
efforts to hedge against foreign currency risk. Half of this settlement was
financed internally, while the remainder was financed through a bridge loan
facility from AUBE.
Finally, interest bearing debt(22) (excluding accrued interest) reached EGP
111 million at year-end 2023, down from EGP 116 million one year prior.
(22) IDH's interest bearing debt as at 31 March 2023 included EGP 172 million
to its facility with Ahli United Bank Egypt (AUBE) (outstanding loan balances
are excluding accrued interest for the period). It is worth noting that in
order to finance the early repayment settlement with General Electric, the
Company utilized a bridge loan facility of EGP 55 million. The facility was
withdrawn in Q1 2023 and settled in Q2 2023.
( )
Liabilities
Accounts Payable(23)
Accounts payable as at 31 December 2023 stood at EGP 272 million, up from EGP
270 as at year-end 2022. Meanwhile, Days Payable Outstanding (DPO) came in at
113 days, down from 151 days one year earlier.
(23) Accounts payable is calculated based on average payables at the end of
each period.
Put Option
The put option current liability stood at EGP 314 million as at year-end 2023,
down from EGP 440 million at 31 December 2022, and is related to both:
· The option granted in 2011 to Dr. Amid, Biolab's
CEO, to sell his stake (40%) to IDH. The put option is in the money and
exercisable since 2016 and is calculated as 7 times Biolab's LTM EBITDA minus
net debt. Biolab's put option liability decreased following the significant
decline in the venture's EBITDA for the period.
· The option granted in 2018 to the International
Finance Corporation from Dynasty - shareholders in Echo Lab - and it is
exercisable in 2024. The put option is calculated based on fair market value
(FMV).
The put option non-current liability amounted to EGP 43 million at the end of
FY 2023, down from EGP 51 million at the same time last year, and is related
to the option granted in 2022 to Izhoor, IDH, and Biolab as part of their JV
agreement in Saudi Arabia. The option allows the non-defaulting party, at its
sole and absolute discretion, to serve one or more written notices to the
defaulting party. The notices enable the non-defaulting party to buy the
defaulting party's shares at the fair price, sell its shares to the defaulting
party at the fair price, or request the dissolution and liquidation of the JV
company. It is important to note that the put option, which grants these
rights to the non-defaulting party, does not have a specified expiration date.
Accounts Receivable and Provisions
Accounts receivable as at year-end 2023 came in at EGP 570 million, a
year-on-year increase of 44%. In parallel, IDH's receivables' Days on Hand
(DoH) recorded 134 days, up from 124 days as at 31 December 2022.
Provision for doubtful accounts recorded EGP 51 million in FY 2023, up 71%
year-on-year. Increased provisions for doubtful accounts reflect slower
collection rates due to increasing economic headwinds and persistent inflation
throughout IDH's markets, in particular its home and largest market, Egypt.
Inventory
IDH booked an inventory balance of EGP 375 million as of the end of FY 2023,
increasing from EGP 265 million one year prior. Meanwhile, Days Inventory
Outstanding (DIO) increased to 133 days, from 127 days at year-end 2022.
Increased DIO is attributable to management's strategy of accumulating
inventory to hedge against inflation during the past year.
Cash and Net Debt
Cash balances and financial assets at amortised cost at the end of FY 2023
reached EGP 835 million, up from EGP 816 million at year-end 2022.
EGP million 31 Dec 2022 31 Dec 2023
Treasury Bills 293 133
Time Deposits 123 289
Current Accounts 382 392
Cash on Hand 18 21
Total 816 835
IDH's net debt(20) balance came in at EGP 358 million as of the end of FY
2023, down 4% from EGP 373 million as at year-end 2022.
(20) The net debt balance is calculated as cash and cash equivalent balances
including financial assets at amortised cost, less interest-bearing debt
(medium term loans), finance lease and Right-of-use liabilities.
EGP million 31 Dec 2022 31 Dec 2023 31 Dec 2021
Cash and Financial Assets at Amortised Cost(21) 816 835 2,350
Lease Liabilities Property (727) (828) 106
Total Financial Liabilities (Short-term and Long-term) (335) (240)
Interest Bearing Debt ("Medium Term Loans") (127) (125)
Net Debt Balance (373) (358) 1,483
Note: Interest Bearing Debt includes accrued interest for each period.
(21) As outlined in Note 18 of IDH's Consolidated Financial Statements, some
term deposits and treasury bills cannot be accessed for over 3 months and are
therefore not treated as cash. Term deposits which cannot be accessed for over
3 months stood at EGP 49 million at December 2023 (2022: EGP 60 million).
Meanwhile, treasury bills not accessible for over 3 months stood at EGP 112
million (2022: EGP 107 million).
Lease liabilities and financial obligations on property came in at EGP 828
million at year-end 2023, with the increase primarily driven by the rollout of
an additional 49 branches over the past year.
Meanwhile, financial obligations related to equipment stood at EGP 240 million
as at the end of 2023, with the decline attributable to IDH's early repayment
of its obligations with General Electric (GE) in line with the Company's
efforts to hedge against foreign currency risk. Half of this settlement was
financed internally, while the remainder was financed through a bridge loan
facility from AUBE.
Finally, interest bearing debt(22) (excluding accrued interest) reached EGP
111 million at year-end 2023, down from EGP 116 million one year prior.
(22) IDH's interest bearing debt as at 31 March 2023 included EGP 172 million
to its facility with Ahli United Bank Egypt (AUBE) (outstanding loan balances
are excluding accrued interest for the period). It is worth noting that in
order to finance the early repayment settlement with General Electric, the
Company utilized a bridge loan facility of EGP 55 million. The facility was
withdrawn in Q1 2023 and settled in Q2 2023.
( )
Liabilities
Accounts Payable(23)
Accounts payable as at 31 December 2023 stood at EGP 272 million, up from EGP
270 as at year-end 2022. Meanwhile, Days Payable Outstanding (DPO) came in at
113 days, down from 151 days one year earlier.
(23) Accounts payable is calculated based on average payables at the end of
each period.
Put Option
The put option current liability stood at EGP 314 million as at year-end 2023,
down from EGP 440 million at 31 December 2022, and is related to both:
· The option granted in 2011 to Dr. Amid, Biolab's
CEO, to sell his stake (40%) to IDH. The put option is in the money and
exercisable since 2016 and is calculated as 7 times Biolab's LTM EBITDA minus
net debt. Biolab's put option liability decreased following the significant
decline in the venture's EBITDA for the period.
· The option granted in 2018 to the International
Finance Corporation from Dynasty - shareholders in Echo Lab - and it is
exercisable in 2024. The put option is calculated based on fair market value
(FMV).
The put option non-current liability amounted to EGP 43 million at the end of
FY 2023, down from EGP 51 million at the same time last year, and is related
to the option granted in 2022 to Izhoor, IDH, and Biolab as part of their JV
agreement in Saudi Arabia. The option allows the non-defaulting party, at its
sole and absolute discretion, to serve one or more written notices to the
defaulting party. The notices enable the non-defaulting party to buy the
defaulting party's shares at the fair price, sell its shares to the defaulting
party at the fair price, or request the dissolution and liquidation of the JV
company. It is important to note that the put option, which grants these
rights to the non-defaulting party, does not have a specified expiration date.
Principal Risks, Uncertainties, & Their Mitigation
As is typical with any corporation, IDH is exposed to certain risks and
uncertainties which may yield adverse effects on the Company's performance.
IDH's Chairman, Lord St John of Bletso, continually emphasises the importance
of the risk matrix as an integral driver of the Group's long-term success, and
one which must be equally shared by the Board of Directors and senior
management.
While no system is capable of mitigating every risk, and while some risks, as
at the country level, are largely without potential mitigants, the Group has
placed complex processes, procedures, and baseline assumptions which provide
mitigation. The Board and senior management agree that the principal risks and
uncertainties facing the Group include:
Specific Risk Mitigation
Country/regional risk - Economic & Forex
Egypt: IDH is directly impacted by the economic conditions of its largest Overall, management reiterates that IDH employs a robust and resilient
market, Egypt, and, to a lesser extent, those of its other operating business model which has helped the Company navigate several economic and
geographies. Egypt accounted for c. 83% of consolidated revenues in 2023 (80% political downturns, including two revolutions, while allowing the business to
in 2022) and 89% of adjusted EBITDA (90% in 2022). expand its offering and record positive growth. Moreover, as part of IDH's
long-term growth strategy, the Company is working to diversify its geographic
exposure decreasing its exposure to any single country. To this end in
December 2023, the Company launched its Saudi Arabic venture under the name
Egypt's most recent economic headwinds began in early 2022 with the start of Biolab KSA. Once fully ramped up, the venture will offer a full suite of
the Russia-Ukraine war. The country has been particularly impacted by the diagnostic testing services and by 2026 constitute over 10% of IDH's revenues.
conflict due to its significant dependency on both countries for both wheat
imports and tourism revenues. This was further exacerbated by a global
tightening of monetary conditions to combat record-high inflation during the
post-Covid-19 recovery and widespread outflow of capital from emerging IDH has maintained an active approach in shielding the business from exchange
markets. Finally, the most recent escalation in Gaza has had significant rate fluctuations in its markets. As part of its mitigation strategy, IDH
impacts on the Egyptian economy with inflows of foreign currency weighed down secures contracts with tenures ranging from 5 to 7 years (with semi-fixed FX
by lower tourism and Suez Canal revenues. Moreover, due to Egypt's reliance on rates) and purchases laboratory test kits on contract with volume-linked
Israeli natural gas imports, the conflict led to a worsening of an already prices. Moreover, thanks to its sheer operational volume and longstanding
ongoing electricity crisis, which saw the government impose multi-hour supplier relationships, the Company is able to negotiate favourable test kit
blackouts throughout the summer and fall months of 2023. These blackouts are prices with all its major suppliers. Additionally, the Company takes proactive
expected to be reintroduced once temperatures begin to rise again in spring steps to hedge against foreign currency risks on a case-by-case basis when
2024. applicable. Most recently, in 2023, the Company negotiated for the early
repayment of its contractual obligation of USD 5.7 million with General
Electric. IDH utilised a bridge loan facility, with half the amount funded
internally, while the other half (amounting to EGP 55 million) was provided
To tackle the shortage of foreign reserves (FX), the government introduced through a bridge loan by Ahly United Bank - Egypt. The bridge loan was fully
plans to boost FX reserves and maintain investor confidence. In February 2024, settled in Q2 2023.
the country finalized a USD 35 billion investment deal with Abu Dhabi's
sovereign fund, ADQ. The agreement marks a major step towards reducing the
short- and medium-term pressures on the country.
Following the announcement, on 6 March 2024, the Central Bank devalued the
Egyptian Pound, settling at nearly EGP 49.5 to the US Dollar at official bank
rates. This is the fourth devaluation since March 2022, with the EGP having
lost more than 68% of its value. The EGP is expected to settle between 45 and
50 to the USD in the second half of 2024. The convergence between the official
and black-market rates, and an exchange rate that more accurately reflects the
true market value of the EGP, are expected to attract increased FDI and
remittances, as well as boost tourism and exports in line with the
government's ambitious targets.
Headline inflation reached 35.7% in February 2024. Meanwhile, the Egyptian
Central Bank's (CBE) main operations and discount rates stood at 27.75% in
early March 2024, up 800 basis points from January 2023 and from 9.75% in
March 2022 before the start of the latest economic crisis.
Egypt held presidential elections in December 2023, which saw President
Abdelfattah El Sisi win a new six-year mandate.
Foreign currency risk: IDH is exposed to foreign currency risk, placing
potential pressure on the cost side of the business. While the majority of the
Company's suppliers receive payments in EGP, due to the fact that materials
are imported, prices vary based on the exchange rate between EGP and foreign
currencies. Additionally, a small portion of suppliers are priced in foreign
currency and paid in EGP based on the prevalent exchange rate at the time of
purchase.
Starting in January 2023, IDH has renegotiated the terms of its contracts with
its major suppliers to pay for its supplies in EGP. Some contracts with major
suppliers, however, are fixed at USD prices, with payments made in EGP at the
official exchange rate at the time of payment. As such, there have been no USD
payments for supplies since the beginning of 2023. Furthermore, the Company
was able to conclude several agreements with suppliers to set prices at rates
lower than devaluation rates, resulting in an overall increase of raw material
proportion to sales to 22.2% in 2023, versus 20.4% in 2022. The Company plans
to continue leveraging its established reputation and position as a leading
diagnostic services provider in the region to negotiate favourable prices and
mitigate the effects of foreign currency fluctuations whenever possible.
Nigeria: with the election of Bola Ahmed Tinubu as the winner of the Nigerian
elections in February 2023, the Nigerian Naira was allowed to float. Within
the first day, the Naira lost approximately 29% of its value, with its
long-term value expected to stabilise at NGN 650-700 to the US Dollar
(currently at 1,025 in the parallel market). Despite this being a necessary
and positive move, analysts believe that more policy reforms are required to
affect tangible economic change in the country, most of which the president
has not yet addressed. As a result of the devaluation and foreign currency
shortages, Nigerian inflation has maintained an upward trend, with inflation
rates reaching 31.7% in February 2024 and diesel prices continuing to soar.
Diesel prices stood at NGN 1,270 per litre in February 2024, up from NGN 800
per litre in February 2023. In response to the high inflationary pressures in Nigeria, management is
carefully studying avenues of cost reduction at its operations, while
implementing strategic price increases. In 2023, average revenue per test in
Nigeria rose 32% year-on-year, highlighting the success of management's
mitigation strategy.
It is worth mentioning that Nigerian operations are naturally shielded from
foreign currency risk and inflation, due to IDH's asset base in the country
which can be sold in US Dollars.
Country risk - Political & Security
Sudan: Sudan's economic progress continues to be affected by economic and It is worth highlighting that in FY 2023 Sudan only constituted 0.3% of
political turmoil, starting with the secession of South Sudan in 2011 and the consolidated revenues. With regards to the ongoing conflict, management
associated loss of the majority of the country's oil production. This unrest continues to actively monitor the evolving situation in the country, taking
continued throughout the remainder of the decade, eventually culminating in necessary steps and prioritising the safety of its personnel on the ground as
the removal of the country's president, President Al-Bashir, in 2019 via a well as its laboratories. This included the temporary suspension of all
military coup. Despite a significant easing of tensions in 2022, a violent commercial activities at the start of the conflict at 17 of its 18 branches.
conflict erupted in April 2023 between two rival groups; the Sudanese Armed IDH is also taking steps to keep its stakeholders updated on the developing
Forces (SAF) and the Rapid Support Forces (RSF). The conflict is currently situation.
ongoing and has resulted in the death of more than 13 thousand people, injury
of an additional 33 thousand, as well as the displacement of 10.7 million as
of the end of 2023. The conflict has resulted in the indefinite closure of 17
of IDH's branches in the country, with currently only one operational branch
remaining.
Nigeria: the country faces security challenges on several fronts, including
re-emerging ethnic tensions and resurgent attacks by Islamist militants in the
northeast. Political instability is further magnified by economic pressures,
with several currency devaluations, the emergence of a parallel foreign
currency market, increased inflation, and spiking diesel prices following
subsidy removal. Economic pressures culminated in a Nigerian Union strike in
September 2023 to protest subsidy removal and its subsequent effects, with
several critics blaming newly appointed president, Tinubu, of not taking quick
enough actions to cushion the effects of his policies.
In FY 2023 Nigeria comprised just 2.3% of IDH's consolidated revenues.
Additionally, while security and political challenges do affect operations in
the country, IDH's industry remains largely inelastic, with developments
dealing minimal effects to patient and test volumes. This is particularly
apparent given the consistent growth in operational KPIs, with test and
patient volumes recording a compound annual growth rate of 15% and 5%,
respectively, between 2018 and 2023. It is important to mention, however, that
recent economic downturns in Nigeria have hindered financial and operational
growth, with IDH recording a 12% year-on-year decline in test volumes in 2023
while booking expanded adjusted EBITDA losses, reaching NGN 498 million during
the year.
While these political challenges are particularly difficult to mitigate, IDH
takes the necessary steps to safeguard its employees and operations. The Group
employs rigorous standards to evaluate the country's political climate,
ensuring it is well-equipped to deal with any developments as they unfold.
Israel-Palestine War
The latest escalation of the Israeli-Palestinian conflict erupted on 7 October While this specific conflict has no direct mitigations from the Company's
2023 following an attack by Gaza-based group, Hamas. Israel has since launched side, IDH continues to actively monitor the situation, placing an emphasis on
a retaliation campaign on Gaza, enacting a total siege on the territory. As of remaining updated on the effects of the war on IDH's markets of operation and
the end of February 2024, the conflict has resulted in the death of 30,000 the subsequent repercussions on IDH's business. However, it is worth noting
people and the injury of an additional 70,000. that IDH's business in inherently resilient to macroeconomic and political
difficulties, due to its inelastic nature of healthcare and diagnostics
demand. While the Company does not expect any major direct impact from this
war on its operations, it will continue monitoring events and update the
With the Gaza Strip bordering IDH's home and largest market, Egypt, and with market as necessary.
several other of the Company's geographies situated within the region, namely
Jordan and Saudi Arabia, the continued conflict between Israel and Palestine
creates the potential for significant economic and political headwinds. The
conflict has the potential to affect tourism revenues in neighbouring
countries, while shaking investor confidence and potentially leading to an
outflow of foreign investment.
Since the beginning of the conflict, Egypt has been adversely affected due to
natural gas import cuts from Israel, resulting in shortages and necessitating
the introduction of scheduled electricity cuts nationwide to cope for the lack
of supply. Meanwhile, tourism has remained resilient with the country
recording record-high volumes in 2023 with the expectation of further growth
in 2024. Finally, due to ongoing attacks by Houthi rebels on ships transiting
through the Red Sea, Egypt recorded a decline of 47% year-on-year in revenues
from the Suez Canal in January 2024 on the back of a 37% decline in ship
volumes.
Global Supply Chain Disruptions
While disruptions to global supply chains, which negatively impacted IDH's management team continually monitors the evolving situation and have
businesses and consumers all over the world during the post-Covid-19 recovery taken proactive steps to build up its inventory to shield the Group from any
have partially eased, they remain well below optimal levels of efficiency. potential future disruptions. IDH is in continual dialogue with key suppliers
Despite this, global supply chain disruptions have had limited impacts on to gauge the risk associated with a shortage of materials and is yet to
IDH's operations throughout 2022 and 2023. identify a weakness. Throughout 2023, thanks to IDH's proactive inventory
build-up and sourcing strategy, the Group continued to face no problems
acquiring raw materials.
Supplier Risk
IDH faces the risk of suppliers re-opening price negotiations in the face of IDH enjoys strong, longstanding relationships with its key suppliers, to whom
increased inflationary pressures and/or a possible, albeit limited, IDH remains a large regional client as a leader in its geographies. Due to the
devaluation risk. sheer volume of kits the Group purchases on a regular basis, the Company is
able to successfully negotiate favourable pricing conditions and mitigate the
effects of inflationary pressures to maintain relatively stable raw material
costs as a percentage of revenues.
IDH's supplier risk is concentrated amongst its three largest suppliers -
Siemens, Roche, and Sysmex - who provide the Company with kits constituting
46% of the total value of raw materials in FY 2023 (31% in FY 2022).
Total raw material costs as a percentage of sales stood at 22.2% in FY 2023,
compared to 20.4% one year prior. This is also up from 18.9% in 2021.
Remittance of dividend regulations and repatriation of profit risk
The Group's ability to remit dividends abroad may be adversely affected by the
imposition of remittance restrictions. Specifically, under Egyptian law,
companies seeking to transfer dividends overseas are required to obtain As a foreign investor in Egypt, IDH did not face issues in the repatriation of
necessary government clearance and are subject to higher taxation on payment dividends. However, with the onset of foreign currency scarcity in early 2022,
of dividends. Moreover, following the recent devaluation of the EGP, lack of the Company faced significant hurdles in sourcing the USD balance needed to
foreign currency supply in Egyptian banks has resulted in increased difficulty fulfil its dividend obligations. The Company continues to closely monitor the
in sourcing foreign currency under strict regulation. evolving economic situation to shield the business from potential challenges.
Legal and regulatory risk to the business
The Group's business is subject to, and thus affected by, extensive, rigid, The Group's general counsel and the quality assurance team work together to
and constantly evolving laws and regulations, in addition to changing keep IDH fully informed, and in compliance with, both legislative and
enforcement regimes in each of its operating geographies. Further, the Group's regulatory updates.
position as a major player in the Egyptian private clinical laboratory market
subjects it to antitrust and competition-related restrictions, as well as the
chance of investigation by the Egyptian Competition Authority.
On the antitrust front, the private laboratory segment (of which IDH is part)
accounts for only a small proportion of the total market, which consists of
small private labs, private chain labs, and large governmental and
quasigovernmental institutions.
Pricing pressure in a competitive, regulated environment
The Group may face pricing pressures from several third-party payers,
including national health insurance, syndicates, other governmental bodies,
which are potentially capable of adversely affecting Group revenue. Pricing This is an external risk for which there exist few mitigants.
may also be restricted in cases by recommended or mandatory fees set by
government ministries and other authorities.
In the case of price competition escalation between market players, the Group
relies on its wide national footprint as a mitigant; c. 64% of the Company's
The risk may be more apparent in cases of increased inflationary pressures, revenues in FY 2023 were generated through IDH's contract segment who prefer
particularly following the devaluation of the Egyptian Pound and its IDH's national network and established position over patchworks of local
subsequent effects. players.
The Group may face pricing pressure from existing competitors and new market IDH enjoys limited ability to influence changes to mandatory pricing policies
entrants. set forth by government agencies, as with those in Jordan, where basis tests
account for the majority of IDH's business in that nation are subject to price
controls. Instead, IDH's operations in Jordan are focused on driving volume
growth as a catalyst for expanding revenues.
IDH banks on its strong brand equity in its markets of operation to enjoy a
solid positioning. As such, IDH is a price maker, especially in Egypt where
the Group currently controls the largest network of branches amongst all
private sector players. Further, the Group faces no potential risk of
governmental price regulations in its home and largest market, Egypt, which
constituted 83% of revenues in 2023.
Cybersecurity risks
IDH controls a vast and growing database of confidential data for its patient The Company places top priority on its data security, regularly conducting
records; to this end, there is a cybersecurity risk for both data stress tests of its IT infrastructure to confirm the effectiveness of its
confidentiality and security. internal controls. Additionally, its cybersecurity controls and protocols are
regularly updated to address potential shortcomings and remain up-to-date and
in full adherence with data security regulations in its markets.
In response to the reported breach, immediate steps were taken to evaluate and
contain the incident, launch an incident response plan, and engage specialist
support services. While the incident did not involve patient data nor directly
impact IDH's operations, all appropriate regulatory authorities were informed
In July 2023, the Company reported a cybersecurity incident after detecting of the incident, and the Company continues to conducting regular tests of its
unauthorised activity on its servers. systems to ensure their security, prioritizing the security of its patients'
data.
Business continuity risks
Management concentration risk: IDH is dependent on a highly experienced IDH comprehends the importance of strengthening its human capital to support
management team boasting decades of experience in their respective fields. The its future growth plans. The Company is therefore committed to expanding its
loss of key members of IDH's team could materially affect the Company's senior management team, under the experienced leadership of its CEO, Dr. Hend
operations and business. El Sherbini, to add and maintain the talent needed for the expansion of its
footprint. The Group has constituted an Executive Committee, led by Dr. El
Sherbini, and composed of head of departments. The Executive Committee meets
every second week.
Following the departure of Mr. Bedewy, IDH's Regional Financial Controller
stepped in as Interim CFO until Mr. El Zeiny took on the role on a permanent
basis. During the transitionary period, IDH's management team led by Dr. Hend
El Sherbini prioritized the smooth continuation of all business operations and
ensured an effective handover to the new CFO.
Effective 30 June 2023 Omar Bedewy stepped down as IDH's CFO. The position of
CFO was filled on an interim basis by the Financial Controller for six months
until the appointment of Sherif El Zeiny in January 2024.
The Group has in place a full disaster recovery plan, with procedures and
provisions for spares, redundant power systems, and the use of mobile data
systems as alternatives to landlines, among multiple other factors. To ensure
its readiness, IDH performs disaster recovery plan tests on a regular basis,
with updates as well as internal and external audits.
Business interruption: virtually all aspects of the Group's business use IT
systems extensively. This includes test and exam results reporting, billing, In Egypt and Jordan, to mitigate the impact of potential branch closures on
customer service, logistics, and management of medical data. Similarly, operations, the Group has been ramping up its house call services. Moreover,
business interruption at one of the Group's larger facilities could result in the Group's important role in conducting PCR testing for Covid-19 in both
significant material losses and reputational damage to IDH's business. This Egypt and Jordan makes it unlikely that branches would be closed even if new
could be a result of natural disasters, fire, riots, or extended power restrictive measures were introduced.
failures. The Group, therefore, depends on the continued and uninterrupted
performance of its systems.
Climate-related risks
IDH's operations currently face low physical and transitional risks related to In 2022, the Company decided to begin reporting based on the Task Force on
climate change. Climate-Related Financial Disclosures (TCFD) programme to provide stakeholders
with a clear framework to access its climate-related risks and opportunities.
Despite this, overall risks and opportunities related to climate change are
considered immaterial, specifically in the short to medium term.
INTEGRATED DIAGNOSTICS HOLDINGS plc - "IDH"
AND ITS SUBSIDIARIES
Consolidated Financial Statements
for the year ended 31 December 2023
Consolidated statement of financial position as at 31 December 2023
Notes 2023 2022
EGP'000 EGP'000
Assets
Non-current assets
Property, plant and equipment 11 1,414,725 1,326,262
Intangible assets and goodwill 12 1,710,183 1,703,636
Right of use assets 25 683,025 622,975
Financial assets at fair value through profit and loss 14 - 18,064
Total non-current assets 3,807,933 3,670,937
Current assets
Inventories 15 374,650 265,459
Trade and other receivables 16 727,235 543,887
Financial assets at fair value through profit and loss 14 25,157 -
Financial assets at amortized cost 18 161,098 167,404
Cash and cash equivalents 17 674,253 648,512
Total current assets 1,962,393 1,625,262
Total assets 5,770,326 5,296,199
Equity
Share capital 19 1,072,500 1,072,500
Share premium reserve 19 1,027,706 1,027,706
Capital reserves 19 (314,310) (314,310)
Legal reserve 19 51,641 51,641
Put option reserve 19 (356,583) (490,695)
Translation reserve 19 (82,341) 24,173
Retained earnings 1,280,287 783,081
Equity attributable to the owners of the Company 2,678,900 2,154,096
Non-controlling interests 2 421,888 292,885
Total equity 3,100,788 2,446,981
Non-current liabilities
Provisions 21 17,758 3,519
Borrowings 24 67,465 93,751
Other financial obligations 25 891,350 914,191
Non-current put option liability 23 42,786 51,000
Deferred tax liabilities 9 374,729 321,732
Total non-current liabilities 1,394,088 1,384,193
Current liabilities
Trade and other payables 22 637,761 701,095
Other financial obligations 25 176,704 148,705
Current put option liability 23 313,796 439,695
Borrowings 24 43,680 22,675
Current tax liabilities 28 103,509 152,855
Total current liabilities 1,275,450 1,465,025
Total liabilities 2,669,538 2,849,218
Total equity and liabilities 5,770,326 5,296,199
The accompanying notes form an integral part of these consolidated financial
statements.
These consolidated financial statements were approved and authorised for issue
by the Board of Directors and signed on their behalf on 27 March 2024 by:
Dr. Hend El Sherbini Hussein Choucri
Chief Executive Officer Independent Non-Executive Director
Consolidated income statement for the year ended 31 December 2023
Notes 2023 2022
EGP'000 EGP'000
Revenue 6 4,122,506 3,605,047
Cost of sales 8.1 (2,598,159) (2,142,984)
Gross profit 1,524,347 1,462,063
Marketing and advertising expenses 8.2 (211,623) (213,151)
Administrative expenses 8.3 (510,393) (398,533)
Impairment loss on trade and other receivable 16 (51,255) (29,914)
Other (expenses)/income 8.4 (13,314) 11,726
Operating profit 737,762 832,191
Net fair value losses on financial assets at fair value through profit or loss 8.9 - (142,950)
Finance costs 8.7 (160,983) (135,586)
Finance income 8.7 160,577 299,992
Net finance (costs)/income 8.7 (406) 164,406
Profit before income tax 737,356 853,647
Income tax expense 9 (268,993) (327,064)
Profit for the year 468,363 526,583
Profit attributed to:
Owners of the Company 510,304 541,110
Non-controlling interests (41,941) (14,527)
468,363 526,583
Earnings per share 10
Basic and diluted 0.85 0.90
The accompanying notes form an integral part of these consolidated financial
statements.
Consolidated statement of comprehensive income for the year ended 31 December
2023
2023 2022
EGP'000 EGP'000
Net profit for the year 468,363 526,583
Other comprehensive income:
Items that may be reclassified to profit or loss:
Exchange difference on translation of foreign operations (7,206) 69,081
Other comprehensive income for the year, net of tax (7,206) 69,081
Total comprehensive income for the year 461,157 595,664
Attributable to:
Owners of the Company 403,790 414,553
Non-controlling interests 57,367 181,111
461,157 595,664
The accompanying notes form an integral part of these consolidated financial
statements.
Consolidated statement of cash flows for the year ended 31 December 2023
Note 2023 2022
EGP'000 EGP'000
Cash flows from operating activities
Profit before tax 737,356 853,647
Adjustments for:
Depreciation of property, plant and equipment 11 259,455 206,993
Depreciation of right of use assets 25 134,033 103,099
Amortisation of intangible assets 12 7,750 7,251
Unrealised foreign exchange gains and losses 8.7 (87,798) (188,442)
Fair value losses on financial assets at FV through profit or loss - 142,950
Finance income 8.7 (72,779) (95,371)
Finance Expense 8.7 160,983 135,586
Loss/(gain) on disposal of PPE (734) 200
Impairment in trade and other receivables 16 51,255 29,914
Impairment in goodwill 11,265 1,755
Impairment in assets 6,705 -
Equity settled financial assets at fair value (7,093) (7,594)
ROU Asset/Lease Termination (512) 305
Hyperinflation - (16,179)
Change in Provisions 21 14,238 (569)
Change in Inventories (104,909) (30,159)
Change in Trade and other receivables (198,078) (53,445)
Change in Trade and other payables (99,191) (166,130)
Cash generated from operating activities before income tax payment 811,946 923,811
Taxes paid (268,283) (715,082)
Net cash generated from operating activities 543,663 208,729
Cash flows from investing activities
Proceeds from sale of property, plant and equipment 2,366 10,212
Interest received on financial asset at amortised cost 73,316 95,897
Payments for acquisition of property, plant and equipment (323,439) (299,762)
Payments for acquisition of intangible assets (2,490) (9,076)
Payments for the purchase of financial assets at amortised cost (243,563) (267,819)
Proceeds from the sale of financial assets at amortized cost 249,868 1,603,611
Payment for purchase of global depository receipts (short-term investment) 8.9 - (1,011,376)
Proceeds from sale of global depository receipts (short-term investments) 8.9 - 868,426
Net cash (used in)/generated from investing activities (243,942) 990,113
Cash flows from financing activities
Proceeds from borrowings 27 71,630 40,081
Repayment of borrowings 27 (76,911) (21,721)
Proceeds loan received from related party 26 - 17,025
Repayment loan paid to related party 26 - (17,025)
Payments of lease liabilities 27 (94,854) (71,635)
Payment of financial obligations 27 (144,278) (29,206)
Dividends paid - (1,411,752)
Interest paid 27 (138,390) (119,308)
Bank charge paid (19,294) (12,909)
Cash injection by owner of non-controlling interest 74,748 8,763
Paid cash to non-controlling interest (3,112) -
Net cash flows used in financing activities (330,461) (1,617,687)
Net (decrease) increase in cash and cash equivalents (30,740) (418,845)
Cash and cash equivalents at the beginning of the year 648,512 891,451
Effect of exchange rate 56,481 175,906
Cash and cash equivalents at the end of the year 17 674,253 648,512
Non-cash investing and financing activities disclosed in other notes are:
· acquisition of right-of-use assets - note 25
· Put option liability - note 23
The accompanying notes form an integral part of these consolidated financial
statements.
Consolidated statement of changes in equity for the year ended 31 December
2023
EGP'000 Share Capital Share premium reserve Capital reserves Legal reserve* Put option reserve Translation reserve Retained earnings Total attributed to Non-Controlling interests Total Equity
the owners of the
Company
1,072,500 1,027,706 (314,310) 51,641 (490,695) 24,173 783,081 2,154,096 292,885 2,446,981
As at 1 January 2023
Profit / (loss) for the year - - - - - - 510,304 510,304 (41,941) 468,363
Other comprehensive (expense)/ income for the year - - - - - (106,514) - (106,514) 99,308 (7,206)
Total comprehensive income - - - - - (106,514) 510,304 403,790 57,367 461,157
Transactions with owners in their capacity as owners
Impact of hyperinflation - - - - - - (13,098) (13,098) - (13,098)
Movement in put option liabilities for the year - - - - 134,112 - - 134,112 - 134,112
Paid share from non-controlling interests - - - - - - - - (3,112) (3,112)
Acquisition of non-controlling interests without change in control - - - - - - - - 74,748 74,748
Total - - - - 134,112 - (13,098) 121,014 71,636 192,650
At 31 December 2023 1,072,500 1,027,706 (314,310) 51,641 (356,583) (82,341) 1,280,287 2,678,900 421,888 3,100,788
As at 1 January 2022 1,072,500 1,027,706 (314,310) 51,641 (956,397) 150,730 1,550,976 2,582,846 211,513 2,794,359
Profit for the year - - - - - - 541,110 541,110 (14,527) 526,583
Other comprehensive income for the year - - - - - (126,557) - (126,557) 195,638 69,081
Total comprehensive income - - - - - (126,557) 541,110 414,553 181,111 595,664
Transactions with owners in their capacity as owners
Dividends - - - - - - (1,304,805) (1,304,805) (106,947) (1,411,752)
Impact of hyperinflation - - - - - - (4,200) (4,200) (1,555) (5,755)
Movement in put option liabilities for the year - - - - 465,702 - - 465,702 - 465,702
Acquisition of non-controlling interests without change in control - - - - - - - - 8,763 8,763
Total - - - - 465,702 - (1,309,005) (843,303) (99,739) (943,042)
At 31 December 2022 1,072,500 1,027,706 (314,310) 51,641 (490,695) 24,173 783,081 2,154,096 292,885 2,446,981
* 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
.
(In the notes all amounts are shown in Egyptian Pounds "EGP'000" unless
otherwise stated)
1.
Corporate information
The consolidated financial statements of Integrated Diagnostics Holdings plc
and its subsidiaries (collectively, "the Group") for the year ended 31
December 2023 were authorised for issue in accordance with a resolution of the
directors on 27 March 2024. Integrated Diagnostics Holdings plc "IDH" or "the
company" is a public company incorporated in Jersey. Has been established
according to the provisions of the Companies (Jersey) law 1991 under No.
117257. The registered office address of the Company is IFC 5, St. Helier,
Jersey, JE1 1(ST), Channel Islands. The Company is a dually listed entity, in
both London stock exchange (since 2015) and in the Egyptian stock exchange (in
May 2021).
The principal activity of the group is investments in all types of the
healthcare field of medical diagnostics (the key activities are pathology and
Radiology related tests), either through acquisitions of related business in
different jurisdictions or through expanding the acquired investments IDH has.
The key jurisdictions that the group operates are in Egypt, Jordan, Nigeria,
Sudan and Saudi Arabia.
The Group's financial year starts on 1 January and ends on 31 December each
year.
2.
Group information
Information about subsidiaries
The consolidated financial statements of the Group include:
Principal Country of % Equity interest Non-Controlling interest
activities Incorporation
2023 2022 2023 2022
Al Borg Laboratory Company ("Al-Borg") Medical diagnostics service Egypt 99.3% 99.3% 0.7% 0.7%
Al Mokhtabar Company for Medical Labs ("Al Mokhtabar") Medical diagnostics service Egypt 99.9% 99.9% 0.1% 0.1%
Medical Genetic Center Medical diagnostics service Egypt 55.0% 55.0% 45.0% 45.0%
Al Makhbariyoun Al Arab Group Medical diagnostics service Jordan 60.0% 60.0% 40.0% 40.0%
Golden Care for Medical Services Holding company of SAMA Egypt 100.0% 100.0% 0.0% 0.0%
Integrated Medical Analysis Company (S.A.E)* Medical diagnostics service Egypt 100.0% 99.6% 0.0% 0.4%
SAMA Medical Laboratories Co. ("Ultralab medical laboratory ") Medical diagnostics service Sudan 80.0% 80.0% 20.0% 20.0%
AL-Mokhtabar Sudanese Egyptian Co. Medical diagnostics service Sudan 65.0% 65.0% 35.0% 35.0%
Integrated Diagnostics Holdings Limited Intermediary holding company Caymans Island 100.0% 100.0% 0.0% 0.0%
Dynasty Group Holdings Limited Intermediary holding company England and Wales 51.0% 51.0% 49.0% 49.0%
Eagle Eye-Echo Scan Limited Intermediary holding company Mauritius 77.18% 77.18% 22.82% 22.82%
Echo-Scan** Medical diagnostics service Nigeria 100.0% 100.0% 0.0% 0.0%
WAYAK Pharma Medical services Egypt 99.99% 99.99% 0.01% 0.01%
Medical Health Development*** Medical services Saudi Arabia 51% - 49% -
*In the financial period of 23, Al Mokhtabar, a medical laboratory, acquired a
0.4% ownership share in Integrated Medical Analysis (S.A.E). In connection
with this acquisition, Al Mokhtabar made a payment of 3,112K to
non-controlling interest. This transaction resulted in Al Mokhtabar becoming
the full owner of the stake by the end of the year 2023.
** The group consolidate "Echo scan" a subsidiary based in Nigeria despite of
39.4% indirect ownership.
for more details refer to note 4.1.
*** On March 8, 2023, the Group completed the establishment of Medical Health
Development, a limited liability company based in Saudi Arabia with a total
stake of 51% directly and indirectly through one of the Group's subsidiaries,
where Integrated Diagnostics Holdings (IDH) owns 30% and Al Makhbariyoun Al
Arab Group ("Biolab")-Jordan a subsidiary owns 21%., The group consolidate
"Medical Health Development" a subsidiary based in Saudi Arabia
despite of 42.51% indirect ownership for more details refer to note 4.1
Non-Controlling interest
Non-Controlling Interest is measured at the proportionate share basis.
Financial information of subsidiaries that have material non-controlling
interests is provided below:
Proportion of equity interest held by non-controlling interests:
Country of incorporation 2023 2022
Medical Genetic Center Egypt 45.0% 45.0%
Al Makhbariyoun Al Arab Group Jordan 40.0% 40.0%
SAMA Medical Laboratories Co. " Ultra lab medical laboratory " Sudan 20.0% 20.0%
AL-Mokhtabar Sudanese Egyptian Co. Sudan 35.0% 35.0%
Al Borg Laboratory Company Egypt 0.7% 0.7%
Dynasty Group Holdings Limited England and Wales 49% 49%
Eagle Eye-Echo Scan Limited Mauritius 22.82% 22.82%
Medical Health Development Saudi Arabia 49% -
The summarised financial information of these subsidiaries is provided below.
This information is based on amounts before inter-company eliminations.
Medical Genetic Center Al Makhbariyoun Al Arab Group (Hashemite Kingdom of Jordan) Alborg Laboratory Company Other individually Dynasty Group Total
EGP'000
EGP'000
EGP'000
immaterial subsidiaries
EGP'000
EGP'000
EGP'000
Summarised statement of Income for 2023:
Revenue - 604,025 1,449,344 2,065,051 96,394 4,214,814
(loss)/Profit (107) 32,811 183,045 387,628 (54,740) 548,637
Other comprehensive (expense)/income - 65,142 - (3,606) 131,234 192,770
Total comprehensive (expense)/income (107) 97,953 183,045 384,022 76,494 741,407
(loss)/Profit allocated to non-controlling interest (48) 13,124 1,296 (9,597) (12,514) (7,739)
Other comprehensive income/(expense) allocated to non-controlling interest - 26,333 - (847) 71,847 97,333
Summarised statement of financial position as at 31 December 2023:
Non-current assets 670 494,904 751,597 681,583 51,913 1,980,667
Current assets 1,801 254,412 405,125 830,799 (6,623) 1,485,514
Non-current liabilities (27) (202,510) (406,229) (302,827) (3,189) (914,782)
Current liabilities (15,409) (187,663) (224,305) (316,886) (24,911) (769,174)
Net (liabilities)/assets (12,965) 359,143 526,188 892,669 17,190 1,782,225
Net (liabilities)/assets attributable to non-controlling interest (5,837) 143,657 3,724 39,780 4,579 185,903
Medical Genetic Center Al Makhbariyoun Al Arab Group Alborg Laboratory Company Other Dynasty Group Total
EGP'000
EGP'000
EGP'000
subsidiaries with immaterial NCI
EGP'000
EGP'000 EGP'000
Summarised statement of Income for 2022:
Revenue 383 611,840 1,210,716 2,348,371 78,864 4,250,174
(loss)/Profit (10,339) 57,917 266,201 470,492 (54,602) 729,669
Other comprehensive (expense)/income - 134,909 - (3,796) 248,726 379,839
Total comprehensive (expense)/income (10,339) 192,826 266,201 466,696 194,124 1,109,508
(loss)/Profit allocated to non-controlling interest (4,655) 23,167 1,884 555 (11,913) 9,038
Other comprehensive income/(expense) allocated to non-controlling interest - 53,964 - (876) 140,041 193,129
Summarised statement of financial position as at 31 December 2022:
Non-current assets 670 367,404 710,836 775,581 121,770 1,976,261
Current assets 1,909 247,636 428,668 1,212,429 14,130 1,904,772
Non-current liabilities (27) (164,478) (516,784) (351,111) (11,286) (1,043,686)
Current liabilities (15,409) (189,371) (244,970) (449,373) (33,181) (932,304)
Net (liabilities)/assets (12,857) 261,191 377,750 1,187,526 91,433 1,905,043
Net (liabilities)/assets attributable to non-controlling interest (5,788) 104,476 2,674 (993) 16,608 116,977
3. Basis of preparation
Statement of compliance
Integrated Diagnostics Holdings plc "IDH" or "the company" has been
established according to the provisions of the Companies (Jersey) law 1991
under No. 117257. The Company is a dually listed entity, in both London stock
exchange and in the Egyptian stock exchange. The consolidated financial
statements of the Group have been prepared in accordance with International
Financial Reporting Standards as adopted by the European Union and the
Companies (Jersey) Law 1991.
Basis of measurement
The consolidated financial statements have been prepared on a historical cost
basis, except where adopted IFRS mandates that fair value accounting is
required which is related to financial assets and liabilities measured at fair
value.
New standards and interpretations adopted
The Group has applied the following amendments for the first time for their
annual reporting period commencing 1 January 2023:
· Insurance Contracts IFRS 17
· Definition of Accounting Estimates - Amendments to IAS 8
· Deferred Tax related to Assets and Liabilities arising from a
Single Transaction - Amendments to IAS 12
· Disclosure of Accounting Policies - Amendments to IAS 1 and IFRS
Practice Statement 2
The amendments listed above did not have any impact on current and prior years
and not expected to affect future years.
There has been one amendment that has been applied for the first time in the
current year that has had an impact on the financial statement disclosures.
The amendments to IAS 1 and IFRS Practice Statement 2 Making Materiality
Judgements provide guidance and examples to help entities apply materiality
judgements to accounting policy disclosures. The amendments aim to help
entities provide accounting policy disclosures that are more useful by
replacing the requirement for entities to disclose their 'significant'
accounting policies with a requirement ti disclose their 'material' accounting
policies and adding guidance on how entities apply the concept of materiality
in making decisions about accounting policy disclosures. The amendments have
had an impact on the Group's disclosures of accounting policies, but not on
the measurement, recognition or presentation of any items in the Group's
consolidated financial statements.
New standards and interpretations not yet adopted
Certain new accounting standards, amendments to accounting standards and
interpretations have been published that are not mandatory for 31 December
2023 reporting period and have not been early adopted by the company. These
standards, amendments or interpretations are not expected to have a material
impact on the group in the current or future reporting periods and on
foreseeable future transactions.
Going concern
These consolidated financial statements have been prepared on the going
concern basis. On 31 December 2023, the Group had (cash and cash equivalent
balance plus treasury bills / deposits minus borrowing) amounting to KEGP
724,206. The Directors have considered a number of downside scenarios,
including the most severe but plausible scenario, for a period of 16 months
from the signing of the financial statements. We have conducted multiple
sensitivity analyses to assess the impact of inflationary pressures and
potential currency evaluation for the next 16 months. We did not consider the
Biolab put option since it is improbable that the option will be exercised
refer to (note 23). We assume no dividends are expected to be paid during the
period for which going concern is being assessed or those in respect of merger
and acquisition 'M&A' activity. Under all of these scenarios, there
remains significant headroom from a liquidity and covenant perspective.
Therefore, the Directors believe the Group has the ability to meet its
liabilities as they fall due and the use of the going concern basis in
preparing the financial statements is appropriate.
3.1. Basis of consolidation
The consolidated financial statements comprise the financial statements of the
Group and its subsidiaries as at 31 December 2023. Control is achieved when
the Group is exposed, or has rights, to variable returns from its involvement
with the investee and has the ability to affect those returns through its
power over the investee.
i. Subsidiaries
Subsidiaries are all entities over which the group has control. The group
controls an entity where the group is exposed to, or has rights to, variable
returns from its involvement with the entity and has the ability to affect
those returns through its power to direct the activities of the entity.
Subsidiaries are fully consolidated from the date on which control is
transferred to the group. They are deconsolidated from the date that control
ceases.
Inter-company transactions, balances and unrealised gains on transactions
between group companies are eliminated. Unrealised losses are also eliminated
unless the transaction provides evidence of an impairment of the transferred
asset. Accounting policies of subsidiaries have been changed where necessary
to ensure consistency with the policies adopted by the group.
Non-controlling interests in the results and equity of subsidiaries are shown
separately in the consolidated statement of income statement of comprehensive
income, statement of changes in equity and statement of financial position
respectively.
ii. Changes in ownership interests
The group treats transactions with non-controlling interests that do not
result in a loss of control as transactions with equity owners of the group. A
change in ownership interest results in an adjustment between the carrying
amounts of the controlling and non-controlling interests to reflect their
relative interests in the subsidiary. Any difference between the amount of the
adjustment to non-controlling interests and any consideration paid or received
is recognised in a separate reserve within equity attributable to owners of
the group.
When the group ceases to consolidate or equity account for an investment
because of a loss of control, joint control or significant influence, any
retained interest in the entity is remeasured to its fair value, with the
change in carrying amount recognised in profit or loss. This fair value
becomes the initial carrying amount for the purposes of subsequently
accounting for the retained interest as an associate, joint venture or
financial asset. In addition, any amounts previously recognised in other
comprehensive income in respect of that entity are accounted for as if the
group had directly disposed of the related assets or liabilities. This may
mean that amounts previously recognised in other comprehensive income are
reclassified to profit or loss.
If the ownership interest in a joint venture or an associate is reduced but
joint control or significant influence is retained, only a proportionate share
of the amounts previously recognised in other comprehensive income are
reclassified to profit or loss where appropriate.
3.2. Material accounting policy information and
other explanatory information
The accounting policies set out below have been consistently applied to all
the years presented in these consolidated financial statements.
a) Business combinations
The acquisition method of accounting is used to account for all business
combinations, regardless of whether equity instruments or other assets are
acquired. The consideration transferred for the acquisition of a subsidiary
comprises the:
• fair values of the assets transferred
• liabilities incurred to the former owners of the acquired business
• equity interests issued by the group
• fair value of any asset or liability resulting from a contingent
consideration arrangement, and
• fair value of any pre-existing equity interest in the subsidiary.
Identifiable assets acquired and liabilities and contingent liabilities
assumed in a business combination are, with limited exceptions, measured
initially at their fair values at the acquisition date. The group recognises
any non-controlling interest in the acquired entity on an
acquisition-by-acquisition basis either at fair value or at the
non-controlling interest's proportionate share of the acquired entity's net
identifiable assets.
Acquisition-related costs are expensed as incurred.
The excess of the:
• consideration transferred,
• amount of any non-controlling interest in the acquired entity, and
• acquisition-date fair value of any previous equity interest in the
acquired entity over the fair value of the net identifiable assets acquired is
recorded as goodwill. If those amounts are less than the fair value of the net
identifiable assets of the business acquired, the difference is recognised
directly in profit or loss as a bargain purchase.
Where settlement of any part of cash consideration is deferred, the amounts
payable in the future are discounted to their present value as at the date of
exchange. The discount rate used is the entity's incremental borrowing rate,
being the rate at which a similar borrowing could be obtained from an
independent financier under comparable terms and conditions.
Contingent consideration is classified either as equity or a financial
liability. Amounts classified as a financial liability are subsequently
remeasured to fair value, with changes in fair value recognised in profit or
loss.
If the business combination is achieved in stages, the acquisition date
carrying value of the acquirer's previously held equity interest in the
acquiree is remeasured to fair value at the acquisition date. Any gains or
losses arising from such remeasurement are recognised in profit or loss.
b) Impairment of assets
Goodwill and intangible assets that have an indefinite useful life are not
subject to amortisation and are tested annually for impairment, or more
frequently if events or changes in circumstances indicate that they might be
impaired. Other assets are tested for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. An
impairment loss is recognised for the amount by which the asset's carrying
amount exceeds its recoverable amount. The recoverable amount is the higher of
an asset's fair value less costs of disposal and value in use. For the
purposes of assessing impairment, assets are grouped at the lowest levels for
which there are separately identifiable cash inflows which are largely
independent of the cash inflows from other assets or groups of assets
(cash-generating units). Non-financial assets other than goodwill that
suffered an
impairment are reviewed for possible reversal of the impairment at the end of
each reporting period.
c) Fair value measurement
The Group measures financial instruments such as non-derivative financial
instruments and contingent consideration assumed in a business combination at
fair value at each balance sheet date.
When measuring the fair value of an asset or a liability, the Group uses
observable market data as far as possible. Fair value is categorised into
different levels in a fair value hierarchy based on the inputs used in the
valuation techniques as follows:
ØLevel 1 - Quoted (unadjusted) market prices in active markets for identical
assets or liabilities.
ØLevel 2 - Valuation techniques for which the lowest level input that is
significant to the fair value measurement is directly or indirectly
observable.
ØLevel 3 - Valuation techniques for which the lowest level input that is
significant to the fair value measurement is unobservable.
For assets and liabilities that are recognised in the financial statements at
fair value on a recurring basis, the Group determines whether transfers have
occurred between levels in the hierarchy by re-assessing categorisation (based
on the lowest level input that is significant to the fair value measurement as
a whole) at the end of each reporting period.
For the purpose of fair value disclosures, the Group has determined classes of
assets and liabilities on the basis of the nature, characteristics and risks
of the asset or liability and the level of the fair value hierarchy, as
explained above.
The fair value less any estimated credit adjustments for financial assets and
liabilities with maturity dates less than one year is assumed to approximate
their carrying value. The fair value of financial liabilities for
disclosure purposes is estimated by discounting the future contracted cash
flows at the current market interest rate that is available to the Group for
similar transactions.
d) Revenue recognition:
Revenue represents the value of medical diagnostic services rendered in the
year and is stated net of discounts. The Group has two types of customers:
Walk-in patients and patients served under contracts. For patients under
contracts, rates are agreed in advance on a per-test, client-by-client basis
based on the pricelists agreed within these contracts.
The following steps are considered for all types of patients:
1. Identification of the Contracts: written contracts
are agreed between IDH and customers. The contracts stipulate the duration,
price per test and credit period.
2. Determining performance obligations are the
diagnostics tests within the pathology and radiology services. The performance
obligation is achieved when the customer receives their test results, and so
are recognised at point in time.
3. Transaction price: Services provided by the Group
are distinct in the contract, as the contract stipulates the series of tests'
names/types to be conducted along with its distinct prices.
4. Allocation of price to performance obligations:
Stand-alone selling price per test is stipulated in the contract. In case of
discounts, it is allocated proportionally to all of tests prices in the
contract.
5. Revenue is being recorded after the satisfaction of
the above mentioned conditions.
The group considers whether it is the principal or the agent in each of its
contractual arrangements. In line with IFRS 15 "Revenue from contracts" in
assessing the appropriate treatment of each contract, factors that are
considered include which party is controlling the service being performed for
the customer and bears the inventory risk. Where the group is largely
controlling the service and bearing the inventory risk it is deemed to be the
principal and the full consideration received from the customer is recognised
as revenue, with any amounts paid to third parties treated as cost of sales.
Customer loyalty program:
The group operates a loyalty program where customers accumulate points for
purchases made which entitle them to a discount on future purchases. The
points are valid for 12 months from the time they are awarded. The value of
points to be provided is based on the expectation of what level will be
redeemed in the future before their expiration date. This amount is netted
against revenue earned and included as a contract liability and only
recognised as revenue when the points are then redeemed or have expired.
e) Income Taxes
Tax on the profit or loss for the year comprises current and deferred tax. Tax
is recognised in the income statement except to the extent that it relates to
items recognised directly in equity, in which case it is recognised in equity.
i. Current tax
Current tax is the expected tax payable or receivable on the taxable income or
loss for the year, using tax rates enacted or substantively enacted at the
balance sheet date, and any adjustment to tax payable in respect of previous
years.
ii. Deferred tax
Deferred tax is provided using the liability method on temporary differences
between the tax bases of assets and liabilities and their carrying amounts for
financial reporting purposes at the reporting date.
Deferred tax is recognised on temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts in the consolidated
financial statements.
However, deferred tax liabilities are not recognised if they arise from the
initial recognition of goodwill; deferred income tax is not accounted for if
it arises from initial recognition of an asset or liability in a transaction
other than a business combination and differences relating to investments in
subsidiaries to the extent that they will probably not reverse in the
foreseeable future.
Deferred tax assets are recognised for all deductible temporary differences,
the carry forward of unused tax credits and any unused tax losses. Deferred
tax assets are recognised to the extent that it is probable that taxable
profit will be available against which the deductible temporary differences,
and the carry forward of unused tax credits and unused tax losses can be
utilised. Deferred tax is determined using tax rates (and laws) that have been
enacted or substantively enacted by the reporting date and are expected to
apply when the related deferred income tax asset is realized, or the deferred
income tax liability is settled.
f) Foreign currency translation
i) Functional and presentation currency
Each of the Group's entities is using the currency of the primary economic
environment in which the entity operates ('the functional currency'). The
Group's consolidated financial statements are presented in Egyptian Pounds,
being the reporting currency of the main Egyptian trading subsidiaries within
the Group and the primary economic environment in which the Group operates.
ii) Transactions and balances
Foreign currency transactions are translated into the functional currency
using the exchange rates at the dates of the transactions. Foreign exchange
gains and losses resulting from the settlement of such transactions, and from
the translation of monetary assets and liabilities denominated in foreign
currencies at year end exchange rates, are generally recognised in profit or
loss. They are deferred in equity if they relate to qualifying cash flow
hedges and qualifying net investment hedges or are attributable to part of the
net investment in a foreign operation.
Foreign exchange gains and losses that relate to borrowings are presented in
the statement of profit or loss, within finance costs. All other foreign
exchange gains and losses are presented in the statement of profit or loss on
a net basis within other gains/(losses).
Non-monetary items that are measured at fair value in a foreign currency are
translated using the exchange rates at the date when the fair value was
determined. Translation differences on assets and liabilities carried at fair
value are reported as part of the fair value gain or loss. For example,
translation differences on non-monetary assets and liabilities such as
equities held at fair value through profit or loss are recognised in profit or
loss as part of the fair value gain or loss, and translation differences on
non-monetary assets such as equities classified as at fair value through other
comprehensive income are recognised in other comprehensive income.
g) Hyperinflationary Economies
The financial statements of "SAMA Medical Laboratories Co. and AL-Mokhtabar
Sudanese Egyptian Co." report their financial statements in the currency of
a hyperinflationary economy. In accordance with IAS 29 financial reporting in
Hyperinflationary Economies, the financial statements of those subsidiaries
were restated by applying the consumer price index at closing rates in
December 2023 Nil (2022 December, 65,137) before they were included in the
consolidated financial statements.
h) Property, plant and equipment
All property and equipment are stated at historical cost or fair value at
acquisition, less accumulated depreciation. Historical cost includes
expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset's carrying amount or recognised as
a separate asset, as appropriate, only when it is probable that future
economic benefits associated with the item will flow to the group and the cost
of the item can be measured reliably. The carrying amount of the replaced part
is derecognised. All other repairs and maintenance are charged to the
consolidated statement of income during the financial period in which they are
incurred. Land is not depreciated.
Depreciation expense is calculated using the straight-line method to allocate
the cost or to their residual value over their estimated useful lives, as
follows:
Buildings
50 years
Medical, electric and information systems equipment
4-10 years
Leasehold
improvements
4-5 years
Fixtures, fittings &
vehicles
4-16 years
The assets useful lives are reviewed, and adjusted if appropriate, at the end
of each reporting period.
An asset's carrying amount is written down immediately to its recoverable
amount if the asset's carrying amount is greater than its estimated
recoverable amount. Gains and losses on disposals are determined by comparing
the proceeds with the carrying amount and are recognised within 'Other
(losses)/gains - net' in the consolidated statement of income.
i) Intangible assets
Intangible assets acquired separately are measured on initial recognition at
cost. The cost of intangible assets acquired in a business combination is
their fair value at the date of acquisition. Following initial recognition,
intangible assets are carried at cost less any accumulated amortisation and
accumulated impairment losses.
Internally generated intangibles, excluding capitalised development costs, are
not capitalised and the related expenditure is reflected in profit or loss in
the period in which the expenditure is incurred.
The useful lives of intangible assets are assessed as either finite or
indefinite.
Intangible assets with finite lives are amortised over the useful economic
life and assessed for impairment whenever there is an indication that the
intangible asset may be impaired. The amortisation period and the amortisation
method for an intangible asset with a finite useful life are reviewed at least
at the end of each reporting period. Changes in the expected useful life or
the expected pattern of consumption of future economic benefits embodied in
the asset are considered to modify the amortisation period or method, as
appropriate, and are treated as changes in accounting estimates. The
amortisation expense on intangible assets with finite lives is recognised in
the statement of income in the expense category that is consistent with the
function of the intangible assets. The Group amortises intangible assets with
finite lives using the straight-line method over the following periods:
- IT development and software 4-5 years
Intangible assets with indefinite useful lives are not amortised, but are
tested for impairment annually, either individually or at the cash-generating
unit level. The assessment of indefinite life is reviewed annually to
determine whether the indefinite life continues to be supportable. If not, the
change in useful life from indefinite to finite is made on a prospective
basis.
Goodwill
Goodwill arises on the acquisition of subsidiaries and represents the excess
of the consideration transferred over interest in net fair value of the net
identifiable assets, liabilities and contingent liabilities of the acquiree
and the fair value of the non-controlling interest in the acquire.
Goodwill is stated at cost less any accumulated impairment losses. For the
purpose of impairment testing, goodwill acquired in a business combination is
allocated to each of the cash-generating units (CGUs), or groups of CGUs, that
is expected to benefit from the synergies of the combination. Each unit or
group of units to which the goodwill is allocated represents the lowest level
within the entity at which the goodwill is monitored for internal management
purposes. the impairment assessment is done on an annual basis.
Brand
Brand names acquired in a business combination are recognised at fair value at
the acquisition date and have an indefinite useful life.
The Group brand names are considered to have indefinite useful life as the
Egyptian brands have been established in the market for more than 40 years and
the health care industry is very stable and continues to grow.
The brands are not expected to become obsolete and can expand into different
countries and adjacent businesses, in addition, there is a sufficient ongoing
marketing efforts to support the brands and this level of marketing effort is
economically reasonable and maintainable for the foreseeable future.
Impairment of intangible assets
The Group tests annually whether goodwill and other intangibles with
indefinite lives have suffered any impairment. Impairment exists when the
carrying value of an asset or cash generating unit exceeds its recoverable
amount, which is the higher of its fair value less costs of disposal and its
value in use.
The recoverable amounts of cash generating units have been determined based on
value in use or realisable value. The value
in use calculation is based on a discounted cash flow ("DCF") model.
Realisable value is based on the market value of the CGU or their underlying
assets.
The cash flows are derived from the budget for the next five years and do not
include restructuring activities that the Group is not yet committed to or
significant future investments that will enhance the asset's performance of
the CGU being tested.
We test for impairment at the smallest grouping of CGUs at which a material
impairment could arise or at the lowest level at which goodwill is monitored.
References to testing being performed at a CGU level throughout the rest of
the financial statements is referring to the grouping of CGUs at which at the
test is performed. The grouping of CGUs is shown in note 13 where the
assumptions for the impairment assessment are disclosed.
I) Financial instruments - initial recognition and subsequent measurement
A financial instrument is any contract that gives rise to a financial asset of
one entity and a financial liability or equity instrument of another entity.
i. Financial assets
Classification
The group reclassifies debt investments when and only when its business model
for managing those assets changes.
The group classifies its investments in debt Instruments in the following
measurement categories:
• those to be measured subsequently at fair value (either through OCI or
through income statement), and
• those to be measured at amortised cost.
The classification depends on the entity's business model for managing the
financial assets and the contractual terms of the cash flows.
For investment is equity instrument measured at fair value, gains and losses
will either be recorded in income statement or OCI.
For investments in equity instruments that are not held for trading, this will
depend on whether the group has made an irrevocable election at the time of
initial recognition to account for the equity investment at fair value through
other comprehensive income (FVOCI).
Recognition and derecognition
According to the standard purchases and sales of financial assets are
recognised on trade date, being the date on which the group commits to
purchase or sell the asset. Financial assets are derecognised when the rights
to receive cash flows from the financial assets have expired or have been
transferred and the group has transferred substantially all the risks and
rewards of ownership.
Measurement
At initial recognition, the group measures a financial asset at its fair value
plus, in the case of a financial asset not at fair value through profit or
loss (FVPL), transaction costs that are directly attributable to the
acquisition of the financial asset. Transaction costs of financial assets
carried at FVPL are expensed in profit or loss.
Financial assets with embedded derivatives are considered in their entirety
when determining whether their cash flows are solely payment of principal and
interest.
Debt instruments
Subsequent measurement of debt instruments depends on the group's business
model for managing the asset and the cash flow characteristics of the asset.
There are three measurement categories into which the group classifies its
debt instruments:
• Amortised cost: Assets that are held for collection of contractual cash
flows, where those cash flows represent solely payments of principal and
interest, are measured at amortised cost. Interest income from these financial
assets is included in finance income using the effective interest rate method.
Any gain or loss arising on derecognition is recognised directly in profit or
loss and presented in other gains/(losses) together with foreign exchange
gains and losses. Impairment losses are presented as a separate line item in
the consolidated income statement.
• FVOCI: Assets that are held for collection of contractual cash flows and
for selling the financial assets, where the assets' cash flows represent
solely payments of principal and interest, are measured at FVOCI. Movements in
the carrying amount are taken through OCI, except for the recognition of
impairment losses, interest income and foreign exchange gains and losses,
which are recognised in profit or loss. When the financial asset is
derecognised, the cumulative gain or loss previously recognised in OCI is
reclassified from equity to profit or loss and recognised in other
gains/(losses). Interest income from these financial assets is included in
finance income using the effective interest rate method. Foreign exchange
gains and losses are presented in other gains/(losses), and impairment
expenses are presented as separate line item in the consolidated income
statement.
• FVPL: Assets that do not meet the criteria for amortised cost or FVOCI are
measured at FVPL. A gain or loss on a debt investment that is subsequently
measured at FVPL is recognised in profit or loss and presented net within
other gains/(losses) in the period in which it arises. Management has assessed
the underlying nature of the investments and designated upon investment that
this should be treated as an investment held at fair value with movements
going through the income statement on the basis of the size of the investment
and the reasons for making the investment.
Equity instruments
The group subsequently measures all equity investments at fair value. Where
the group's management has elected to present fair value gains and losses on
equity investments in OCI, there is no subsequent reclassification of fair
value gains and losses to profit or loss following the derecognition of the
investment. Dividends from such investments continue to be recognised in
profit or loss as other income when the group's right to receive payments is
established.
Changes in the fair value of financial assets at FVPL are recognised in other
gains/(losses) in the statement of income as applicable. Impairment losses
(and reversal of impairment losses) on equity investments measured at FVOCI
are not reported separately from other changes in fair value.
Impairment
The group assesses on a forward-looking basis the expected credit losses
associated with its debt instruments carried at amortised cost and FVOCI. The
impairment methodology applied depends on whether there has been a significant
increase in credit risk. For trade receivables, the group applies the
simplified approach permitted by IFRS 9, which requires expected lifetime
losses to be recognised from initial recognition of the receivables.
Further disclosures relating to impairment of financial assets are also
provided in the following notes:
Ø Disclosures for significant estimates and assumptions
Note 4.2
Ø Financial assets
Note 5
Ø Trade
receivables
Note 16
The Group uses an allowance matrix to measure the ECLs of trade receivables
from individual customers, which comprise a very large number of small
balances.
Loss rates are calculated using a 'roll rate' method based on the probability
of a receivable progressing through successive stages of delinquency to
write-off. Roll rates are calculated separately for exposures in different
segments based on credit risk characteristics, age of customer relationship.
Loss rates are based on actual credit loss experience over the past three
years. These rates are multiplied by scalar factors to reflect differences
between economic conditions during the period over which the historical data
has been collected, current conditions and the Groups view of economic
conditions over the expected lives of the receivables.
ii. Financial liabilities
Initial recognition and measurement
Financial liabilities are classified as measured at amortised cost or FVTPL. A
financial liability is classified at FVTPL if it is classified as held for
trading, financial liabilities at FVTPL are measured at fair value and net
gains and losses including any interest expenses are recognised in profit or
loss.
Put options included in put option liabilities are carried at the present
value of the redemption amount in accordance with IAS 32 in regard to the
guidance on put option on an entity's own equity shares. The group has written
put options over the equity of its (Bio Lab,Echo Scan and Medical Health
Development) subsidiaries. The option on exercise is initially recognised at
the present value of the redemption amount with a corresponding charge
directly to equity. The charge to equity is recognised separately within the
put option reserve and this is in line with paragraph 23 of IFRS 10.
All of the Group's financial liabilities are classified as financial
liabilities carried at amortised cost using the effective interest method. The
Group does not use derivative financial instruments or hedge account for any
transactions. Unless otherwise indicated, the carrying amounts of the Group's
financial liabilities are a reasonable approximation of their fair values.
The Group's financial liabilities include trade and other payables, put option
liabilities, borrowings, and other financial obligations.
Derecognition
A financial liability is derecognised when the obligation under the liability
is discharged or cancelled or expires. When an existing financial liability is
replaced by another from the same lender on substantially different terms, or
the terms of an existing liability are substantially modified, such an
exchange or modification is treated as the derecognition of the original
liability and the recognition of a new liability. The difference in the
respective carrying amounts is recognised in the statement of income.
iii. Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is
reported in the consolidated statement of financial position if there is a
currently enforceable legal right to offset the recognised amounts and there
is an intention to settle on a net basis, to realise the assets and settle the
liabilities simultaneously.
j) Impairment of non-financial assets
Further disclosures relating to impairment of non-financial assets are also
provided in the following notes:
Ø Disclosures for significant assumptions and estimates
Note 4.2
Ø Goodwill and intangible
assets
Note 13
The Group assesses at each reporting date, whether there is an indication that
an asset may be impaired. If any indication exists, or when annual impairment
testing for an asset is required, the Group estimates the asset's recoverable
amount. An asset's recoverable amount is the higher of an asset's or CGU's
fair value less costs of disposal and its value in use. The recoverable amount
is determined for an individual asset, unless the asset does not generate cash
inflows that are largely independent of those from other assets or groups of
assets. When the carrying amount of an asset or CGU exceeds its recoverable
amount, the asset is considered impaired and is written down to its
recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to
their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset. In
determining fair value less costs of disposal, recent market transactions are
taken into account. If no such transactions can be identified, an appropriate
valuation model is used. These calculations are corroborated by valuation
multiples, quoted share prices for publicly traded companies or other
available fair value indicators.
The Group bases its impairment calculation on detailed budgets and forecast
calculations, which are prepared separately for each of the Group's CGUs to
which the individual assets are allocated. These budgets and forecast
calculations generally cover a period of five years. A long-term growth rate
is calculated and applied to project future cash flows after the fifth year.
Impairment losses of continuing operations are recognised in the statement of
profit or loss in expense categories consistent with the function of the
impaired asset.
For assets excluding goodwill and indefinite lived intangible assets, an
assessment is made at each reporting date to determine whether there is an
indication that previously recognised impairment losses no longer exist or
have decreased.
If such indication exists, the Group estimates the asset's or CGU's
recoverable amount. A previously recognised impairment loss is reversed only
if there has been a change in the assumptions used to determine the asset's
recoverable amount since the last impairment loss was recognised. The reversal
is limited so that the carrying amount of the asset does not exceed its
recoverable amount, nor exceed the carrying amount that would have been
determined, net of depreciation, had no impairment loss been recognised for
the asset in prior years. Such reversal is recognised in the consolidated
income statement.
Goodwill is tested for impairment annually and when circumstances indicate
that the carrying value may be impaired. Management takes into consideration
any changes that occur and have impacts between the impairment report date of
31 October and date of end year of 31 December.
Impairment is determined for goodwill by assessing the recoverable amount of
each CGU (or group of CGUs) to which the goodwill relates. When the
recoverable amount of the CGU is less than its carrying amount, an impairment
loss is recognised. Impairment losses relating to goodwill cannot be reversed
in future periods.
Intangible assets with indefinite useful lives are tested for impairment
annually as at 31 October at the CGU level, as appropriate, and when
circumstances indicate that the carrying value may be impaired.
Assets that are subject to amortisation are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount may not
be recoverable. An impairment loss is recognized for the amount by which the
asset's carrying amount exceeds its recoverable amount. The recoverable amount
is the higher of an asset's fair value less costs of disposal and value in
use. For the purposes of assessing impairment, assets are grouped at the
lowest levels for which there are largely independent cash inflows (CGU).
Prior impairments of non-financial assets (other than goodwill) are reviewed
for possible reversal at each reporting date.
k) Inventories
Raw materials are stated at the lower of cost and net realisable value. Cost
comprises direct materials, direct labour and an appropriate proportion of
variable and fixed overhead expenditure, the latter being allocated on the
basis of normal operating capacity. Costs are assigned to individual items of
inventory on the basis of weighted average costs. Costs of purchased inventory
are determined after deducting rebates and discounts. Net realisable value is
the estimated selling price in the ordinary course of business less the
estimated costs of completion and the estimated costs necessary to make the
sale.
l) Cash and short-term deposits
Cash and short-term deposits in the statement of financial position comprise
cash at banks and on hand and short-term deposits with original maturities of
three months or less, which are subject to an insignificant risk of changes in
value.
For the purpose of the consolidated statement of cash flows, cash and cash
equivalents consist of cash and short-term deposits, as defined above, net of
outstanding bank overdrafts as they are considered an integral part of the
Group's cash management.
m) Borrowings
Borrowings are initially recognised at fair value, net of transaction costs
incurred. Borrowings are subsequently measured at amortised cost. Any
difference between the proceeds (net of transaction costs) and the redemption
amount is recognised in profit or loss over the period of the borrowings using
the effective interest method. Fees paid on the establishment of loan
facilities are recognised as transaction costs of the loan to the extent that
it is probable that some or all of the facility will be drawn down. In this
case, the fee is deferred until the draw-down occurs. To the extent there is
no evidence that it is probable that some or all of the facility will be drawn
down, the fee is capitalised as a prepayment for liquidity services and
amortised over the period of the facility to which it relates.
Borrowings are removed from the statement of financial position when the
obligation specified in the contract is discharged, cancelled or expired. The
difference between the carrying amount of a financial liability that has been
extinguished or transferred to another party and the consideration paid,
including any non-cash assets transferred or liabilities assumed, is
recognised in profit or loss as other income or finance costs.
Borrowings are classified as current liabilities unless the group has an
unconditional right to defer settlement of the liability for at least 12
months after the reporting period.
n) Borrowing costs
General and specific borrowing costs that are directly attributable to the
acquisition, construction or production of a qualifying asset are capitalised
during the period of time that is required to complete and prepare the asset
for its intended use or sale. Qualifying assets are assets that necessarily
take a substantial period of time to get ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings,
pending their expenditure on qualifying assets, is deducted from the borrowing
costs eligible for capitalisation. Other borrowing costs are expensed in the
period in which they are incurred.
o) Provisions
Provisions are recognised when the Group has a present obligation (legal or
constructive) as a result of a past event, it is probable that an outflow of
resources embodying economic benefits will be required to settle the
obligation and a reliable estimate can be made of the amount of the
obligation. When the Group expects some or all of a provision to be
reimbursed, for example, under an insurance contract, the reimbursement is
recognised as a separate asset, but only when the reimbursement is virtually
certain. The expense relating to a provision is presented in the statement of
profit or loss net of any reimbursement.
If the effect of the time value of money is material, provisions are
discounted using a current pre-tax rate that reflects, when appropriate, the
risks specific to the liability. When discounting is used, the increase in the
provision due to the passage of time is recognised as a finance cost.
Provisions are measured at the present value of the expenditures expected to
be required to settle the obligation using a pre-tax rate that reflects
current market assessments of the time value of money and the risks specific
to the obligation. The increase in the provision due to passage of time is
recognised as a finance cost.
p) Pensions and other post-employment benefits
A defined contribution plan is a pension plan under which the Group pays fixed
contributions into a separate entity. The Group has no legal or constructive
obligations to pay further contributions if the fund does not hold sufficient
assets to pay all employees the benefits relating to employee service in the
current and prior periods. Obligations for contributions to defined
contribution pension plans are recognized as an expense in the income
statement in the periods during which services are rendered by employees.
q) Segmentation
The Group has five operating segments based on geographical location rather
than two operating segments based on service provided and considered as one
reportable segment due to having similar characteristics.
r) Leases as lessee (IFRS 16)
At the inception of a contract, the Group assesses whether a contract is, or
contains, a lease. A contract is, or contains, a lease if the contract conveys
the right to control the use of an identified asset for a period of time in
exchange for consideration.
As a lessee
At commencement or on modification of a contract that contains a lease
component, along with one or more other lease or non-lease components, the
Group accounts for each lease component separately from the non-lease
components. However, for the non-leases element of the underlying asset, the
Group has elected not to separate non-lease components and account for the
lease and non-lease components as a single lease component. The Group
allocates the consideration in the contract to each lease component on the
basis of its relative stand-alone price and the aggregate stand-alone price of
the non-lease components.
The Group recognises a right-of-use asset and a lease liability at the lease
commencement date. The right-of-use asset is initially measured at cost, which
comprises the initial amount of the lease liability adjusted for any lease
payments made at or before the commencement date, plus any initial direct
costs incurred and an estimate of costs to dismantle and remove the underlying
asset or to restore the underlying asset or the site on which it is located,
less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line
method from the commencement date to the end of the lease term, unless the
lease transfers ownership of the underlying asset to the Group by the end of
the lease term or the cost of the right-of-use asset reflects that the Group
will exercise a purchase option. In that case the right-of-use asset will be
depreciated over the useful life of the underlying asset, which is determined
on the same basis as those of property and equipment. In addition, the
right-of-use asset is periodically reduced by impairment losses, if any, and
adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease
payments that are not paid at the commencement date, discounted using the
incremental borrowing rate for the IFRS 16 calculations. This is set based
upon the interest rate attached to the groups financing and adjusted, where
appropriate, for specific factors such as asset or company risk premiums.
Lease payments included in the measurement of the lease liability comprise the
following:
- fixed payments, including in-substance fixed payments;
- variable lease payments that depend on an index or a rate, initially
measured using the index or rate as at the commencement date.
- amounts expected to be payable under a residual value guarantee,
- the exercise price under a purchase option that the Group is
reasonably certain to exercise,
- lease payments in an optional renewal period if the Group is
reasonably certain to exercise an extension option, and
- penalties for early termination of a lease unless the Group is
reasonably certain not to terminate early.
The lease liability is measured at amortised cost using the effective interest
method. It is remeasured when there is a change in future lease payments
arising from a change in an index or rate, there is a change in the Group's
estimate of the amount expected to be payable under a residual value
guarantee, if the Group changes its assessment of whether it will exercise a
purchase, extension or termination option or if there is a revised
in-substance fixed lease payment.
When the lease liability is remeasured in this way, a corresponding adjustment
is made to the carrying amount of the right-of-use asset, to the extent that
the right-of-use asset is reduced to nil, with any further adjustment required
from the remeasurement being recorded in profit or loss.
Short-term leases and leases of low-value assets
The Group has elected not to recognise right-of-use assets and lease
liabilities for lease of low-value assets and short-term leases. The Group
recognises the lease payments associated with these leases as an expense on a
straight-line basis over the lease term.
4. Key judgments and critical accounting estimates
4.1. Judgement
Useful economic lives of Brands
Management have assessed that the brands within the group which have a value
have an indefinite life. This is based on their strong history and existence
in the market over a large number of years, in addition to the fact that these
brands continue to grow and become more profitable. As the brands have been
assigned an indefinite life then they are not amortised and assessed for
impairment on an annual basis.
Control over subsidiaries
The group makes acquisitions that often see a non-controlling interest
retained by the seller. The assessment of if the group has control of these
acquisitions in order to consolidate is a critical judgement in these
financial statements.
The group consolidate the subsidiaries assessed for the following reasons:
1) The group holds the majority of the share capital
2) The group has the majority on the board of subsidiaries
3) The group has full control of the operations and is involved in all
decisions.
The group is able to consolidate its subsidiaries, Echoscan in Nigeria and
Medical Health Development in Saudi Arabia, despite owning only 39.4% and
42.51% indirect ownership, respectively. This is due to several reasons:
1) The group exercises control over all intermediate entities that connect the
parent company to Echoscan and Medical Health Development.
2) The group has a technical service agreement in place, which grants them the
authority to direct and oversee the operations of the subsidiaries in Nigeria.
3) The appointment of Dr. Amid Abdelnour as CEO in Saudi Arabia further
strengthens the group's ability to control the subsidiary.
Despite not having majority ownership, the group's control over the
intermediate entities, technical service agreement, and CEO appointment allows
them to exercise control in their financial statements.
4.2. Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation
uncertainty at the reporting date, that have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within
the next financial year, are described below.
The Group based its assumptions and estimates on parameters available when the
consolidated financial statements were prepared. Existing circumstances and
assumptions about future developments, however, may change due to market
changes or circumstances arising that are beyond the control of the Group.
Such changes are reflected in the assumptions when they occur.
Impairment of intangible assets
The Group tests annually whether goodwill and other intangibles with
indefinite lives have suffered any impairment. Impairment exists when the
carrying value of an asset or cash generating unit exceeds its recoverable
amount, which is the higher of its fair value less costs of disposal and its
value in use.
The recoverable amounts of cash generating units have been determined based on
value in use. The value
in use calculation is based on a discounted cash flow ("DCF") model. The
exception to this was Echo Scan where the realisable value was greater than
the value in use, therefore, the recoverable amount was based on realisable
value.
The cash flows are derived from the budget for the next five years and do not
include restructuring activities that the Group is not yet committed to or
significant future investments that will enhance the asset's performance of
the CGU being tested. The recoverable amount is sensitive to the discount rate
used for the DCF model as well as the expected future cash-inflows and the
growth rate used for extrapolation purposes. For more detailed assumptions
refer to (note 13).
Customer loyalty program
The group operates a loyalty program where customers accumulate points for
purchases made which entitle them to a discount on future purchases to be
utilised within one year. A contract liability is recognised for the points
awarded at the time of the sale based on the expected level of redemption.
At 31 December 2023 the level of points accumulated by customers which had not
expired was equivalent to 189MEGP. The estimate made by management is how much
of this amount ought to be recognised as a liability based on future usage.
The level of future redemption is estimated using historical data and
adjustments for likely future trends in usage. Therefore, upon initial
recognition of the sale to a customer, if management expects the group to be
entitled to a breakage amount (i.e., not all points will be redeemed and so it
is highly probable that there will be no significant reversal of revenue) this
breakage amount is recognised within revenue. This assessment is reviewed
periodically, to ensure that only revenue which is highly probable not to
result in a significant reversal in future periods is recognised. Management
has estimated that 60 MEGP out of the total potential amount that could be
redeemed is likely to be utilised by customers. If the points utilised during
the year were 10% more than estimated, this would result in an additional
charge of 6m EGP.
Impairment of financial assets
The loss allowances for financial assets are based on assumptions about risk
of default and expected loss rates. The group uses judgement in making these
assumptions and selecting the inputs to the impairment calculation, based on
the group's history and existing market conditions, as well as forward-looking
estimates at the end of each reporting period. Details of the key assumptions
and inputs used are disclosed in note 16.
5. Financial assets and financial liabilities
2023 2022
EGP'000
EGP'000
Cash and cash equivalents (Note 17) 674,253 648,512
Term deposits and treasury bills (Note 18) 161,098 167,404
Trade and other receivables (Note 16) 685,050 509,806
Total financial assets 1,520,401 1,325,722
2023 2022
EGP'000
EGP'000
Trade and other payables (Note 22) 556,563 628,313
Put option liability (Note 23) 356,582 490,695
Financial obligations (Note 25) 1,068,054 1,062,896
Loans and borrowings (Note 27) 125,439 127,420
Total other financial liabilities 2,106,638 2,309,324
Total financial instruments* (586,237) (983,602)
* The financial instruments exclude prepaid expenses, deferred revenue, and
tax (current tax, payroll tax, withholding tax,…etc).
The fair values of financial assets and liabilities are considered to be
equivalent to their book value.
The fair values measurements for all the financial assets and liabilities have
been categorized as Level 3, it is fair value can't be determined by using
readily observable measures and Echo-Scan put option (note 23) has been
categorized as Level 3 as the fair value of the option is based on
un-observable inputs using the best information available in the current
circumstances, including the company's own projection and taking into account
all the market assumptions that are reasonably available.
Financial instruments risk management objectives and policies
The Group's principal financial liabilities are trade and other payables, put
option liabilities, borrowings and other financial liabilities. The Group's
principal financial assets include trade and other receivables, financial
assets at amortised cost, financial asset at fair value and cash and cash
equivalents that derive directly from its operations.
The Group is exposed to market risk, credit risk and liquidity risk. The
Group's overall risk management program focuses on the unpredictability of
markets and seeks to minimize potential adverse effects on the Group's
financial performance. The Group's senior management oversees the management
of these risks. The Board of Directors reviews and agrees policies for
managing each of these risks, which are summarised below.
The board provides written principles for overall risk management, as well as
written policies covering specific areas, such as foreign exchange risk,
interest rate risk, and credit risk, use of derivative financial instruments
and non-derivative financial instruments, and investment of excess liquidity.
- Market risk
Market risk is the risk that the fair value of future cash flows of a
financial instrument will fluctuate because of changes in market prices.
Market risk comprises three types of risk: interest rate risk, currency risk
and other price risk, such as equity price risk and commodity risk. Financial
instruments affected by market risk include borrowings and deposits.
The sensitivity analysis in the following sections relate to the position as
at 31 December 2023 and 2022. The sensitivity analysis have been prepared on
the basis that the amount of net debt, the ratio of fixed to floating interest
rates of the debt and the proportion of financial instruments in foreign
currencies are all constant.
The analysis excludes the impact of movements in market variables on
provisions, and the non-financial assets and liabilities of foreign
operations. The following assumptions have been made in calculating the
sensitivity analysis:
Ø The sensitivity of the relevant consolidated income statement item is the
effect of the assumed changes in respective market risks. This is based on the
financial assets and financial liabilities held at 31 December 2023 and 31
December 2022.
- Interest rate risk
The Group is trying to minimize its interest rate exposure, especially in
Egypt region, which has seen several interest rate rises over the year.
Minimising interest rate exposure has been achieved partially by entering into
fixed-rate instruments.
Exposure to interest rate risk
The interest rate profile of the Group's interest-bearing financial
instruments as reported to the management of the group is as follows:
2023 2022
EGP'000 EGP'000
Fixed-rate instruments
Financial obligations (note 25) 1,068,054 1,062,896
Loans and borrowings (note 24) 16,694 -
Variable-rate instruments
Loans and borrowings (note 24) 94,451 116,426
Cash flow sensitivity analysis for variable-rate instruments
A reasonable possible change of 100 basis points in interest rates at the
reporting date would have increased (decreased) profit or loss by the amounts
EGP 945k (2022: EGP 1,164K). This analysis assumes that all other variables,
remain constant.
- Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of
an exposure will fluctuate because of changes in foreign exchange rates.
The Group operates internationally and is exposed to foreign exchange risk
arising from various currency exposures, primarily with respect to the US
Dollar, Sudanese Pound, the Jordanian Dinar, Nigerian Naira and Saudi Riyal.
Foreign exchange risk arises from the Group's operating activities (when
revenue or expense is denominated in a foreign currency), recognized assets
and liabilities and net investments in foreign operations. However, management
aims to minimize open positions in foreign currencies to the extent that is
necessary to conduct its activities.
Management has set up a policy to require group companies to manage their
foreign exchange risk against their functional currency. Foreign exchange risk
arises when future commercial transactions or recognised assets or liabilities
are denominated in a currency that is not the entity's functional currency.
At year end, major financial assets / (liabilities) denominated in foreign
currencies were as follows:
31-Dec-23
Assets Liabilities Net exposure
Cash and cash equivalents Other Total Put option Finance Trade Total
assets
assets
lease
payables
liability
US 22,698 - 22,698 - (49,290) (28,767) (78,057) (55,359)
JOD - - - (301,383) - - (301,383) (301,383)
SAR - - - (42,786) - - (42,786) (42,786)
31-Dec-22
Assets Liabilities Net exposure
Cash and cash equivalents Other Total Put option Finance Trade Total
assets
assets
lease
payables
liability
US 13,112 - 13,112 - (299,128) (8,840) (307,968) (294,856)
JOD - - - (439,695) - - (439,695) (439,695)
The following is the exchange rates applied:
Average rate for the year ended
31-Dec-23 31-Dec-22
US Dollars 30.76 19.67
Euros 33.31 20.59
GBP 38.35 24.02
JOD 43.12 27.71
SAR 8.20 5.24
SDG 0.05 0.04
NGN 0.05 0.05
Spot rate for the year ended
31-Dec-23 31-Dec-22
US Dollars 30.84 24.70
Euros 34.04 26.27
GBP 39.26 29.70
JOD 43.42 34.78
SAR 8.22 6.57
SDG 0.05 0.04
NGN 0.03 0.06
At 31 December 2023, if the Egyptian Pound had weakened/strengthened by 40%
against the US Dollar with all other variables held constant, total equity for
the year would have increased/decreased by EGP (22.14m) (2022: EGP 118m),
mainly as a result of foreign exchange gains/losses and translation reserve on
the translation of US dollar-denominated financial assets and liabilities as
at the financial position of 31 December 2023.
At 31 December 2023, if the Egyptian Pound had weakened / strengthened by 10%
against the Jordanian Dinar with all other variables held constant, total
equity for the year would have increased/decreased by EGP (30m) (2022: EGP
(44m)), mainly as a result of foreign exchange gains/losses and translation
reserve on translation of JOD -denominated financial assets and liabilities as
at the financial position of 31 December 2023.
At 31 December 2023, if the Egyptian Pound had weakened / strengthened by 10%
against the Saudi Riyal with all other variables held constant, total equity
for the year would have increased/decreased by EGP (4m), mainly as a result of
foreign exchange gains/losses and translation reserve on translation of SAR
-denominated financial assets and liabilities as at the financial position of
31 December 2023.
- Price risk
The group's exposure to equity securities price risk arises from investments
held by the group and classified in the balance sheet as at fair value through
profit or loss (FVPL) (note 14).
- Credit risk
Credit risk is the risk a financial loss to the Group if a customer or
counterparty to a financial instrument fails to meet its contractual
obligations and it arises principally from under the Groups receivables. The
Group is exposed to credit risk from its operating activities (primarily trade
receivables) and financial assets at amortised cost, such as term deposits and
treasury bills.
Credit risk is managed on a group basis, except for credit risk relating to
accounts receivable balances. Each local entity is responsible for managing
and analysing the credit risk for each of their new clients before standard
payment and delivery terms and conditions are offered. Credit risk arises from
cash and cash equivalents, derivative financial instruments and deposits with
banks and financial institutions, as well as credit exposures to customers,
including outstanding receivables and committed transactions.
The cash balance and financial assets at amortized cost within the group is
held within financial institutions, 76% with a rating of B- ,6% is rated at
least A and 18% is rated at least Aa3.
Trade receivables
The Group's exposure to credit risk is influenced mainly by the individual
characteristics of each customer. However, management also considers the
factors that may influence the credit risk of its customer base, including the
default risk associated with the industry and country or region in which
customers operate. Details of concentration of revenue are included in the
operating segment note (see Note 6).
The risk management committee has established a credit policy under which each
new customer is analysed individually for creditworthiness before the Group's
standard payment and delivery terms and conditions are offered and credit
limit is set for each customer. The Group's review includes external ratings,
if available, financial statements, industry information and in some cases
bank references. Receivable limits are established for each customer and
reviewed quarterly. Any receivable balance exceeding the set limit requires
approval from the risk management committee. Outstanding customer receivables
are regularly monitored and the average general credit terms given to contract
customers are 45 - 60 days.
An impairment analysis is performed at each reporting date on an individual
basis for major clients. In addition, a large number of minor receivables are
grouped into homogenous groups and assessed for impairment collectively. The
calculation is based on actual incurred historical data and expected future
credit losses. The Group does not hold collateral as security. That maximum
exposure to credit risk is disclosed in note 16.
Cash and cash equivalents
Credit risk from balances with banks and financial institutions is managed by
the Group's treasury department in accordance with the Group's policy.
Investments of surplus funds are made only with approved counterparties and
within credit limits assigned to each counterparty. Counterparty credit limits
are reviewed by the Group's Board of Directors on an annual basis and may be
updated throughout the year subject to approval of the Group's management. The
limits are set to minimise the concentration of risks and therefore mitigate
financial loss through a counterparty's potential failure to make payments.
The maximum exposure to credit risk at the reporting date is the carrying
value of cash and cash equivalents disclosed in Note 17.
- Liquidity risk
The Group's objective is to maintain a balance between continuity of funding
and flexibility through the use of finance leases and loans.
The table below summarises the maturity profile of the Group's financial
liabilities based on contractual undiscounted cashflows:
31 December 2023 1 year or less 1 to 5 years more than 5 years Total
Financial obligations 291,342 1,054,902 166,965 1,513,209
Put option liabilities 313,796 42,786 - 356,582
Borrowings 60,199 83,211 - 143,410
Trade and other payables 556,563 - - 556,563
1,221,900 1,180,899 166,965 2,569,764
31 December 2022 1 year or less 1 to 5 years more than 5 years Total
Financial obligations 285,962 1,030,750 227,715 1,544,427
Put option liabilities 439,695 51,000 - 490,695
Borrowings 41,681 119,673 - 161,354
Trade and other payables 628,313 - - 628,313
1,395,651 1,201,423 227,715 2,824,789
Cash flow forecasting is performed in the operating entities of the group and
aggregated by group finance. Group finance monitors rolling forecasts of the
group's liquidity requirements to ensure it has sufficient cash to meet
operational needs. Such forecasting takes into consideration the group's
compliance with internal financial position ratio targets and, if applicable
external regulatory or legal requirements - for example, currency
restrictions.
The group's management retain cash balances in order to allow repayment of
obligations in due dates, without taking into account any unusual effects
which it cannot be predicted such as natural disasters. All suppliers and
creditors will be repaid over a period not less 30 days from the date of the
invoice or the date of the commitment.
6. Segment reporting
Operating segments are reported in a manner consistent with the internal
reporting provided to the chief operating decision-maker. The chief operating
decision-maker who is responsible for allocating resources and assessing
performance of the operating segments, has been identified as the steering
committee that makes strategic decisions.
The preparation of the Group's consolidated financial statements in conformity
with adopted IFRSs requires management to make judgements, estimates and
assumptions that affect the reported amounts of revenues, expenses, assets and
liabilities.
The Group has five operating segments based on geographical location, with the
Group's Chief Operating Decision Maker (CODM) reviewing the internal
management reports and KPIs of each geography. The CODM does not separately
review assets and liabilities of the group by reportable segment.
The Group operates in five geographic areas, Egypt, Sudan, Jordan, Nigeria and
Saudi Arabia. As a provider of medical diagnostic services, IDH's operations
in Sudan are not subject to sanctions. The revenue split adjusted EBITDA split
(being the key profit measure reviewed by CODM), impairment loss on trade
receivables and net profit and loss between the five regions is set out
below.
Revenue by geographic location
For the year ended Egypt region Sudan region Jordan region Nigeria region Saudi Arabia Total
31-Dec-23 3,410,720 11,367 604,025 96,394 - 4,122,506
31-Dec-22 2,894,042 20,301 611,840 78,864 - 3,605,047
Adjusted EBITDA by geographic location
For the year ended Egypt region Sudan region Jordan region Nigeria region Saudi Arabia Total
31-Dec-23 1,058,254 1,107 157,306 (24,623) - 1,192,044
31-Dec-22 1,052,881 (196) 136,195 (17,087) - 1,171,793
Impairment loss / (reversed of impairment) on trade receivables by geographic
location
For the year ended Egypt region Sudan region Jordan region Nigeria region Saudi Arabia Total
31-Dec-23 45,268 5,013 - 974 - 51,255
31-Dec-22 27,734 3 (628) 2,805 - 29,914
Net profit / loss by geographic location
For the year ended Egypt region Sudan region Jordan region Nigeria region Saudi Arabia Total
31-Dec-23 530,207 (1,735) 33,813 (72,536) (21,386) 468,363
31-Dec-22 514,353 16,978 53,065 (57,813) - 526,583
The operating segment profit measure reported to the CODM is adjusted EBITDA,
as follows:
2023 2022
EGP'000 EGP'000
Profit from operations 737,762 832,191
Property, plant and equipment and right of use depreciation 393,488 310,092
Amortization of Intangible assets 7,750 7,251
EBITDA 1,139,000 1,149,534
Nonrecurring items* 53,044 22,259
Adjusted EBITDA 1,192,044 1,171,793
* Nonrecurring items
IDH recorded several one-off expenses during the year, namely:
2023 2022
EGP'000 EGP'000
Transactions fees related to aborted Pakistan acquisition - 22,259
The Egyptian government for vocational training 11,865 -
Pre-operating expenses in Saudi Arabia 18,196 -
Impairment expenses due to the ongoing conflict in Sudan 5,013 -
Impairment expenses in goodwill and assets for operations in Nigeria 17,970 -
53,044 22,259
The non-current assets reported to CODM is in accordance with IFRS are as
follows:
Non-current assets by geographic location
For the year ended Egypt region Sudan region Jordan region Nigeria region Saudi Arabia Total
31-Dec-23 3,091,485 3,848 609,699 47,639 55,262 3,807,933
31-Dec-22 3,039,930 14,993 494,244 121,770 - 3,670,937
7. Capital management
The Group's objectives when managing capital are to safeguard the Group's
ability to continue in order to provide returns for shareholders and benefits
for other stakeholders and to maintain an optimal capital structure to reduce
the cost of capital.
In order to maintain or adjust the capital structure, the group may adjust the
amount of dividends paid to shareholders, return capital to shareholders,
issue new shares or sell assets to reduce debt.
The repatriation of a declared dividend from Egyptian group entities are
subject to regulation by Egyptian authorities. The outcome of an Ordinary
General Meeting of Shareholders declaring a dividend is first certified by the
General Authority for Investment and Free Zones (GAFI).
Approval is subsequently transmitted to Misr for Central Clearing, Depository
and Registry (MCDR) to distribute dividends to all shareholders, regardless of
their domicile, following notification of shareholders via publication in one
national newspapers.
The Group monitors capital on the basis of the net debt to equity ratio. This
ratio is calculated as net debt divided by total equity. Net debt is
calculated as (short-term and long-term financial obligation plus short-term
and long term borrowings) less cash and cash equivalents and financial assets
at amortised cost.
2023 2022
EGP'000 EGP'000
Financial obligations (note 25) 1,068,054 1,062,896
Borrowings (note 27) 125,439 127,420
Less: Financial assets at amortised cost (note 18) (161,098) (167,404)
Less: Cash and cash equivalents (Note 17) (674,253) (648,512)
Net debt 358,142 374,400
Total Equity 3,100,788 2,446,981
Net debt 11.6% 15.3%
No changes were made in the objectives, Policies, or processes for managing
capital during the years ended 31 December 2023 and 31 December 2022.
8. Expense
Included in consolidated income statement are the following:
8.1 Cost of sales
2023 2022
EGP'000 EGP'000
Raw material 875,296 703,693
Cost of specialized analysis at other laboratories 38,765 30,756
Wages and salaries 773,565 613,495
Property, plant and equipment, right of use depreciation and Amortisation 362,230 284,740
Other expenses 548,303 510,300
Total 2,598,159 2,142,984
8.2 Marketing and advertising expenses
2023 2022
EGP'000 EGP'000
Advertisement expenses 98,034 123,442
Wages and salaries 65,580 54,750
Property, plant and equipment depreciation 718 739
Other expenses 47,291 34,220
Total 211,623 213,151
8.3 Administrative expenses
2023 2022
EGP'000 EGP'000
Wages and salaries 216,037 142,689
Property, plant and equipment and right of use depreciation 38,290 31,864
Transactions fees related to aborted Pakistan acquisition - 22,259
Other expenses 256,066 201,721
Total 510,393 398,533
8.4 Other expenses and income
2023 2022
Other expenses EGP'000 EGP'000
Impairment in assets (6,705) (1,830)
Impairment in goodwill (11,265) -
Provision for end Of Service (331) -
Provision for legal claims (3,496) (3,950)
Provision for Egyptian Government Training Fund for employees (11,865) -
Total (33,662) (5,780)
2023 2022
Other income EGP'000 EGP'000
Other income 20,348 17,506
Total 20,348 17,506
Other expenses and income (13,314) 11,726
8.5 Expenses by nature
2023 2022
EGP'000 EGP'000
Raw material 875,296 703,693
Wages and Salaries 1,055,182 810,934
Property, plant and equipment, right of use depreciation and amortisation 401,238 317,343
Advertisement expenses 98,034 123,442
Cost of specialized analysis at other laboratories 38,765 30,756
Transportation and shipping 100,850 87,490
Cleaning expenses 78,400 74,290
Call Center 27,874 32,976
Hospital Contracts 69,342 14,357
Consulting Fees 170,319 142,012
Transactions fees related to aborted Pakistan acquisition - 22,259
Utilities 59,915 49,453
License Expenses 46,583 30,492
Other expenses 298,377 315,171
Total 3,320,175 2,754,668
8.6 Auditors' remuneration
The group paid or accrued the following amounts to its auditor for the
financial year ended 31 December 2023 and 2022 and its associates in respect
of the audit of the financial statements and for other services provided to
the group.
2023 2022
EGP'000 EGP'000
Fees payable to the Company's auditor for the audit of the Group's annual 49,217 28,919
financial statements
The audit of the Company's subsidiaries pursuant to legislation 15,779 9,443
Assurance services* 308 197
65,304 38,559
*Assurance services relate to review of Corporate Governance report in Egypt
that is required to be performed by the auditor.
8.7 Net finance (costs) / income
2023 2022
EGP'000 EGP'000
Interest expense (141,688) (122,677)
Bank Charges (19,295) (12,909)
Total finance costs (160,983) (135,586)
Interest income 72,779 95,371
Gain on hyperinflationary net monetary position - 16,179
Net foreign exchange Gain 87,798 188,442
Total finance income 160,577 299,992
Net finance (cost) / income (406) 164,406
8.8 Employee numbers and costs
The average number of persons employed by the Group (including directors)
during the year and the aggregate payroll costs of these persons, analysed by
category, were as follows:
2023 2022
Medical Administration and market Total Medical Administration and market Total
Number of employees 5,435 1,257 6,692 5,428 1,290 6,718
2023 2022
EGP'000
EGP'000
Medical Administration and market Total Medical Administration and market Total
Wages and salaries 710,515 253,729 964,244 566,385 185,628 752,013
Social security costs 49,786 24,386 74,172 36,053 8,925 44,978
Contributions to defined contribution plan 13,264 3,502 16,766 11,057 2,886 13,943
Total 773,565 281,617 1,055,182 613,495 197,439 810,934
Details of key management remuneration are provided in note 26 and details of
amounts paid to directors are included in the Remuneration Committee Report.
8.9 Fair value losses on financial assets at fair value through profit or
loss
During 2023 the group didn't invest in Global Depositary Receipt (GDR)
tradable in stock exchanges. In the third quarter of 2022 the ALmokhtabar and
Alborg companies invested in Global Depositary Receipts (GDR) tradable in
stock exchanges, where the companies purchased 27,304 million shares, EGP
1,011.4 M from the Egyptian Stock Exchange and sold them during the same
period on the London Stock exchange at USD 45.8 M excluding the transaction
cost.
2023 2022
Number of shares'000
EGP'000 EGP'000
listed equity securities Shares bought 27,304 - (1,011,376)
Shares sale 27,304 - 868,426
- (142,950)
9. Income tax
a) Amounts recognised in profit or loss.
2023 2022
EGP'000 EGP'000
Current year tax (216,425) (210,477)
WHT suffered - (122,731)
Current tax (216,425) (333,208)
DT on undistributed reserves (50,004) 46,554
DT on reversal of temporary differences (2,564) (40,410)
Total Deferred tax (52,568) 6,144
Tax expense recognized in profit or loss (268,993) (327,064)
b) Reconciliation of effective tax rate
The company is considered to be a UK tax resident, and subject to UK taxation.
Dividend income into the company is exempt from taxation when received from a
wholly controlled subsidiary, and costs incurred by the company are considered
unlikely to be recoverable against future UK taxable profits and therefore
form part of our unrecognised deferred tax assets. Our judgement on tax
residency has been made based on where we hold board meetings, our listing on
the London Stock Exchange and interactions with investors, and where our
company secretarial function is physically based. Our external company
secretarial function manages a number of activities of our parent and its
board. Board meetings are chaired in London and are now largely taking place
physically in London with the expectation of one physical board meeting a year
in Cairo.
2023 2022
EGP'000 EGP'000
Profit before tax 737,356 853,647
Profit before tax multiplied by rate of corporation tax in Egypt of 22.5% 165,905 192,071
(2022: 22.5%)
Effect of tax rate in UK of 23.5% (2022: UK 19%) (2,335) 1,871
Effect of tax rates in Jordan, Sudan, and Nigeria of 21%, 30% and 30% (4,188) (3,317)
respectively (2022: 21%, 30% and 30%); and Saudi Arabia with a rate of 20%
Tax effect of:
Deferred tax not recognised 37,684 19,960
Deferred tax arising on undistributed dividend 50,004 76,177
Non-deductible expenses for tax purposes - employee profit share 14,075 16,653
Non-deductible expenses for tax purposes - other 7,848 23,649
Tax expense recognised in profit or loss 268,993 327,064
Deferred tax
Deferred tax relates to the following:
2023 2022
Assets Liabilities Assets Liabilities
EGP'000 EGP'000 EGP'000 EGP'000
Property, plant and equipment (39,552) (35,804)
Intangible assets (111,033) (109,118)
Undistributed reserves from group subsidiaries (226,875) (176,871)
Tax Losses 2,731 61
Total deferred tax assets - (liability) 2,731 (377,460) 61 (321,793)
(374,729) (321,732)
All deferred tax amounts are expected to be recovered or settled more than
twelve months after the reporting period.
The difference between net deferred tax balances recorded on the income
statement is as follows:
2023 Net Balance 1 January Deferred tax recognized in profit or loss Effect of translation to presentation currency WHT tax Net Balance 31 December
paid
Property, plant and equipment (35,804) (3,319) (429) - (39,552)
Intangible assets (109,118) (1,915) - - (111,033)
Undistributed dividend from group subsidiaries (176,871) (50,004) - - (226,875)
Tax losses 61 2,670 - - 2,731
(321,732) (52,568) (429) - (374,729)
2022 Net balance at 1 January Deferred tax recognised in profit or loss Effect of translation to presentation currency WHT tax paid Net balance 31 December
Property, plant and equipment (28,925) (6,315) (564) - (35,804)
Intangible assets (105,358) (3,760) - - (109,118)
Undistributed dividend from group subsidiaries (223,425) (76,177) - 122,731 (176,871)
Tax losses 25,559 (30,335) 4,837 - 61
(332,149) (116,587) 4,273 122,731 (321,732)
All movements in the deferred tax asset/liability in the year have been
recognised in the profit or loss account.
Deferred tax liabilities and assets have been calculated based on the enacted
tax rate at 31 December 2023 for the country the liabilities and assets has
arisen. The enacted tax rate in Egypt is 22.5% (2022: 22.5%), Jordan 21%
(2022: 21%), Sudan 30% (2022: 30%) and Nigeria 30% (2022: 30%).
* Undistributed reserves from group subsidiaries
The Group's dividend policy is to distribute any excess cash after taking into
consideration all business cash requirements and potential acquisition
considerations. The expectation is to distribute profits held within
subsidiaries of the Group in the near foreseeable future. During 2015 the
Egyptian Government imposed a tax on dividends at a rate of 5% of dividends
distributed from Egyptian entities. On September 30, 2020, the Egyptian
government issued a law to increase the tax rate to 10%. As a result, a
deferred tax liability has been recorded for the future tax expected to be
incurred from undistributed reserves held within the Group which will be taxed
under the new legislation imposed and were as follows:
2023 2022
EGP'000 EGP'000
Al Mokhtabar Company for Medical Labs 72,642 44,640
Alborg Laboratory Company 42,514 31,035
Integrated Medical Analysis Company 86,917 83,277
Al Makhbariyoun Al Arab Company 24,802 17,919
226,875 176,871
Unrecognized deferred tax assets
The following items make up unrecognised deferred tax assets. The local tax
law does not permit deductions for provisions against income tax until the
provision becomes realised. No deferred tax asset has been recognised on tax
losses for both Echo-Scan Nigeria and Wayak Egypt due to the uncertainty of
the available future taxable profit, which the Group can use the benefits
therefrom.
2023 2023 2022 2022
Gross Amount Tax Effect Gross Amount Tax Effect
EGP'000 EGP'000 EGP'000 EGP'000
Impairment of trade receivables (Note 16) 183,070 41,191 136,981 30,821
Impairment of other receivables (Note 16) 8,509 1,915 8,604 1,936
Provision for legal claims (Note 21) 5,561 1,251 3,519 792
Tax losses* 500,171 122,047 382,999 93,768
697,311 166,404 532,103 127,317
Unrecognized deferred tax asset 166,404 127,317
There is no expiry date for the Unrecognized deferred tax assets.
* The company has carried forward tax losses on which no deferred tax asset is
recognised as follows:
2023 2023 2022 2022
Gross Amount Tax Effect Gross Amount Tax Effect
Company Country EGP'000 EGP'000 EGP'000 EGP'000
Integrated Diagnostics Holdings plc Jersey 418,561 104,639 325,155 81,289
Dynasty Group Holdings Limited England and Wales 11,445 2,175 11,359 2,158
Eagle Eye-Echo Scan Limited Mauritius 278 42 1,839 276
WAYAK Pharma Egypt 24,767 5,573 20,564 4,627
Medical Genetic Center Egypt 15,264 3,435 15,156 3,410
Golden care Egypt 8,470 1,906 8,926 2,008
Medical health care Saudi Arabia 21,386 4,277 - -
500,171 122,047 382,999 93,768
10. Earnings per share (EPS)
Basic EPS is calculated by dividing the profit for the year attributable to
ordinary equity holders of the parent by the weighted average number of
ordinary shares outstanding during the year. There are no dilutive effects
from ordinary share and no adjustment required to weighted-average numbers of
ordinary shares.
The following table reflects the income and share data used in the basic and
diluted EPS computation:
2023 2022
Profit attributable to ordinary equity holders of the parent for basic 510,304 541,110
earnings EGP'000
Weighted average number of ordinary shares for basic and dilutive EPS'000 600,000 600,000
Basic and dilutive earnings per share EGP'000 0.85 0.90
Earnings per diluted share are calculated by adjusting the weighted average
number of shares by the effects resulting from all the ordinary potential
shares that causes this dilution.
The Company has no potentially dilutive shares as of the 31 December 2023 and
31 December 2022, therefore; the earnings per diluted share are equivalent to
basic earnings per share.
11. Property, plant and equipment
Land & Buildings Medical, & electric equipment Leasehold improvements Fixtures, fittings & vehicles Building & Leasehold improvements in construction Payment on account Total
EGP'000 EGP'000 EGP'000 EGP'000 EGP'000 EGP'000 EGP'000
Cost
At 1 January 2022 380,883 824,628 335,203 95,966 15,937 6,761 1,659,378
Additions* 38,275 179,954 114,235 25,287 17,258 3,853 378,862
Hyper inflation - 6,628 - - - - 6,628
Disposals - (6,877) (523) (8,617) - - (16,017)
Exchange differences 7,803 107,534 53,675 20,559 246 - 189,817
Transfers - - 4,852 - (4,852) - -
At 31 December 2022 426,961 1,111,867 507,442 133,195 28,589 10,614 2,218,668
Additions 31,772 174,589 99,977 18,841 28,091 268 353,538
Hyper inflation - (13,098) - - - - (13,098)
Disposals - (4,981) (506) (2,139) - - (7,626)
Exchange differences 2,136 (13,483) 19,660 5,271 (70) - 13,514
Transfers - - 18,383 - (18,383) - -
At 31 December 2023 460,869 1,254,894 644,956 155,168 38,227 10,882 2,564,996
Depreciation and impairment
At 1 January 2022 53,490 333,806 177,230 33,044 - - 597,570
Depreciation charge for the year 6,765 131,569 58,404 10,255 - - 206,993
Disposals - (3,414) (457) (1,734) - - (5,605)
Exchange differences 1,323 51,908 26,528 13,689 - - 93,448
At 31 December 2022 61,578 513,869 261,705 55,254 - - 892,406
Depreciation charge for the year 7,169 152,583 83,522 16,181 - - 259,455
Disposals - (3,890) (443) (1,661) - - (5,994)
Exchange differences 564 (8,393) 5,558 (30) - - (2,301)
Impairment* - 1,480 3,466 1,759 - - 6,705
At 31 December 2023 69,311 655,649 353,808 71,503 - - 1,150,271
Net book value
At 31-12-2023 391,558 599,245 291,148 83,665 38,227 10,882 1,414,725
At 31-12-2022 365,383 597,998 245,737 77,941 28,589 10,614 1,326,262
*For one of the Group's CGUs ""Echo Scan"" an impairment loss of EGP 6.7M has
been recorded as a result of the decreased value of PPE. This impairment loss
in the carrying value of the assets to reflect their realisable amount is
recorded as an impairment expense in the financial statements. Further details
on the impairment are made within note 13.
12. Intangible assets and goodwill
Goodwill Brand Name Software Total
EGP'000 EGP'000 EGP'000 EGP'000
Cost
At 1 January 2022 1,260,965 383,909 77,394 1,722,268
Additions - - 9,076 9,076
Effect of movements in exchange rates 30,858 11,642 6,366 48,866
At 31 December 2022 1,291,823 395,551 92,836 1,780,210
Additions - - 2,490 2,490
Effect of movements in exchange rates 13,144 7,910 4,032 25,086
At 31 December 2023 1,304,967 403,461 99,358 1,807,786
Amortisation and impairment
At 1 January 2022 4,552 372 58,477 63,401
Impairment* 1,755 - - 1,755
Amortisation - - 7,251 7,251
Effect of movements in exchange rates 66 9 4,092 4,167
At 31 December 2022 6,373 381 69,820 76,574
Impairment* 11,265 - - 11,265
Amortisation - - 7,750 7,750
Effect of movements in exchange rates 80 11 1,923 2,014
At 31 December 2023 17,718 392 79,493 97,603
Net book value
At 31 December 2023 1,287,249 403,069 19,865 1,710,183
At 31 December 2022 1,285,450 395,170 23,016 1,703,636
* The Group has identified an impairment indicator on the goodwill associated
with the Medical Genetics Center company in both 2022 and 2023, as well as the
Echo Scan CGU in 2023. This is primarily due to the company's negative free
cash flow and EBITDA.
13. Goodwill and intangible assets with indefinite lives (note
3.2-i)
Goodwill acquired through business combinations and intangible assets with
indefinite lives are allocated to the Group's CGUs as follows:
2023 2022
EGP'000 EGP'000
Al Makhbariyoun Al Arab Group ("Biolab")
Goodwill 90,872 72,783
Brand name 39,684 31,785
130,556 104,568
Alborg Laboratory Company ("Al-Borg")
Goodwill 497,275 497,275
Brand name 142,066 142,066
639,341 639,341
Al Mokhtabar Company for Medical Labs ("Al-Mokhtabar")
Goodwill 699,102 699,102
Brand name 221,319 221,319
920,421 920,421
Echo-Scan
Goodwill* - 16,290
- 16,290
Balance at 31 December 1,690,318 1,680,620
* The Group has recorded an impairment in relation to Echo-Scan in Nigeria as
a result of its history of recording losses at a cash flow and EBITDA level.
The value in use was considered lower than the realisable value of the assets
the Group had and therefore this was used as the recoverable amount, as the
value in use could not be guaranteed to be positive given the history of
making losses. The realisable value was largely based on the value of PPE and
totalled EGP 43,283k compared to a carrying value of the CGU of EGP 61,253k.
Therefore, goodwill of EGP 11,265k has been fully impaired with an additional
impairment of EGP 6,705k recorded on PPE.
Assumptions used in value in use calculations and sensitivity to changes in
assumptions.
IDH worked with Alpha Capital, management's expert, to prepare an impairment
assessment of the Group's CGUs. The assessment was carried out based on
business plans provided by IDH.
These plans have been prepared based on criteria set out below:
2023
Bio Lab Al-Mokhtabar Al-Borg
Average annual patient growth rate from 2024 -2028 5% 8% 5%
Average annual price per test growth rate from 2024 -2028 5% 11% 11%
Annual revenue growth rate from 2024 -2028 10% 16% 17%
Average gross margin from 2024 -2028 41% 44% 37%
Terminal value growth rate from 1 January 2028 3% 5% 5%
Discount rate 17% 25% 25%
2022
Bio Lab Al-Mokhtabar Al-Borg Echo-Scan
Average annual patient growth rate from 2023 -2027 5% 8% 8% 21%
Average annual price per test growth rate from 2023 -2027 0% 6% 7% 5%
Annual revenue growth rate from 2023 -2027 3% 13% 13% 33%
Average gross margin from 2023 -2027 46% 51% 45% 81%
Terminal value growth rate from 1 January 2027 3% 5% 5% 4%
Discount rate 19% 25% 25% 28%
Management have compared the recoverable amount of CGUs to the carrying value
of CGUs. The recoverable amount is the higher of value in use and fair value
less costs of disposal. In the exercise performed and the assumptions noted
above the value in use was noted to be higher than the fair value less costs
of disposal. The exception to this was Echo-Scan where the realisable value
was greater than the value in use as noted above and therefore the recoverable
amount was based on realisable value.
During 2023, excluding Echo-Scan, management has conducted a business plan
projection with the support of a management expert (Alpha Capital), with the
assumptions above used to calculate the net present value of future cashflows
to determine recoverable amount. The projected cash flows from 2024- 2028 have
been based on detailed forecasts prepared by management for each CGU and a
terminal value thereafter. Management have used experience and historical
trends achieved to determine the key growth rate and margin assumptions set
out above. The terminal value growth rate applied is not considered to exceed
the average growth rate for the industry and geographic locations of the CGUs.
As a sensitivity analysis, Management considered a change in the discount
rates of 2% increase to reflect additional risk that could reasonably be
foreseen in the marketplaces in which the Group operates. This did not result
in an impairment under any of the CGUs that had a recoverable amount based on
value in use.
Management has also considered a change in the terminal growth rate by 1%
decrease to reflect additional risk, This did not result in an impairment
under any of the CGUs that had a recoverable amount based on value in use.
This recoverable amount is then compared to the carrying value of the asset as
recorded in the books and records of IDH plc. The WACC has been used
considering the risks of each CGU. These risks include country risk, currency
risk as well as the beta factor relating to the CGU and how it performs
relative to the market.
The headroom/(impairment) between carrying value and recoverable amount is as
follows:
Company Recoverable amount CGU carrying value Headroom/(Impairment)
EGP'000
EGP'000
EGP'000
Almokhtabar 3,449,092 1,649,728 1,799,364
Alborg 2,215,534 1,600,213 615,321
Al Makhbariyoun Al Arab 1,071,711 654,342 417,369
Echo Scan 43,283 61,253 (17,970)
14. Financial asset at fair value through profit and loss
2023 2022
EGP'000 EGP'000
Non-current equity investments - 18,064
Current equity investments 25,157 -
Balance at 31 December 18,064
25,157
* On August 17, 2017, Al Makhbariyoun Al Arab (seller) has signed IT
purchase Agreement with JSC Mega Lab (Buyer) to transfer and install the
Laboratory Information Management System (LIMS) for a purchase price amounted
to USD 400 000, which will be in the form of 10% equity stake in JSC Mega Lab.
In case the valuation of the project is less or more than USD 4,000,000, the
seller stake will be adjusted accordingly, in a way that the seller equity
stake shall not fall below 5% of JSC Mega Lab.
- ownership percentage in JSC Mega Lab at the
transaction date on April 8, 2019, and as of December 31, 2023, was 8.25%.
- On April 8, 2019, Al Mokhabariyoun Al Arab (Biolab) has signed a
Shareholder Agreement with JSC Mega Lab and JSC Georgia Healthcare Group
(CHG), whereas, BioLab Shall have a put option, exercisable within 12 months
immediately after the expiration of five (5) year period from the signing
date, which allows BioLab stake to be bought out by CHG at a price of the
equity value of BioLab Shares/total stake (being USD 400,000.00) plus 15%
annual IRR (including preceding 5 Financial years). After the expiration of
above 12 months from the date of the put option period expiration, which
allows CHG to purchase Biolab's all shares at a price of equity value of
Biolab's stake (having value of USD 400,000) plus higher of 20% annual IRR or
6X EV/EBITDA (of the financial year immediately preceding the call option
exercise date). In case the Management Agreement or the Purchase Agreement
and/or the SLA is terminated/cancelled within 6 months period from the date of
such termination/cancellation, CHG shall have a call option, which allows the
CHG to purchase Biolab's all Shares at a price of the equity value of BioLab's
stake in JSC Mega Lab (having value of USD 400,000.00) plus 205 annual IRR.
If JCI accreditation is not obtained, immediately after the expiration of the
additional 12 months period of the CHG shall have a call option (the
Accreditation Call option), exercisable within 6 months period, which allows
CHG to purchase BioLab's all Shares at a price of the equity value of BioLab's
stake in JSC Mega Lab (having value of USD 400,000) plus 20% annual IRR.
15. Inventories
2023 2022
EGP'000 EGP'000
Chemicals and operating supplies 374,650 265,459
374,650 265,459
During 2023, EGP 875,296 K (2022: EGP 703,693K) was recognised as an expense
for inventories, this was recognised in cost of sales. The major balance of
the raw material is represented in the Kits, slow-moving items of those Kits
are immaterial. It is noted that day's inventory outstanding (based on the
average of opening and closing inventory) stands as 133 days at 31 Dec 2023.
The COVID-19 pandemic had a significant impact on inventory, leading to
impairment in 2023. Specifically, there was an impairment of kit materials
related to COVID-19, resulting in an amount of EGP 17,372K. This is a notable
increase compared to the previous year when no impairment was recorded.
Additionally, there was an impairment of inventory in the Sudan region,
totalling EGP 1,529K, also showing an increase from the previous year's
absence of impairment. the specific challenges faced in the Sudan region.
16. Trade and other receivables
2023 2022
EGP'000 EGP'000
Trade receivables - net 569,738 395,220
Prepayments 42,185 34,081
Due from related parties note (26) 5,037 5,930
Other receivables 108,521 106,363
Accrued revenue 1,754 2,293
727,235 543,887
As at 31 December 2023, the expected credit loss related to trade and other
receivables was EGP 191,580K (2022: EGP 145,586K). Below show the movements in
the provision for impairment of trade and other receivables:
2023 2022
EGP'000 EGP'000
At 1 January 145,586 109,768
Charge for the year 51,255 29,914
Exchange differences (5,261) 5,904
At 31 December 191,580 145,586
The Group allocates each exposure to a credit risk grade based on data that is
determined to be predictive of the risk of loss (historical customer's
collection, Customers' contracts conditions) and applying experienced credit
judgement. Credit risk grades are defined using qualitative and quantitative
factors that are indicative of the risk of default.
Expected credit loss assessment is based on the following:
1. The customer list was divided into 9 sectors,
2. Each sector was divided according to customers aging,
3. Each sector was studied according to the historical events of each
sector. According to the study conducted, the expected default rate was
derived from each of the aforementioned period,
4. General economic conditions.
The results of the quarterly assessment will increase/decrease the percentage
allocated to each period. Balances overdue by at least one year are fully
provided for. On a quarterly basis, IDH revises its forward-looking estimates
and the general economic conditions to assess the expected credit loss.
Impairment of trade and notes receivables
The requirement for impairment of trade receivables is made through monitoring
the debts aging and reviewing customer's credit position and their ability to
make payment as they fall due. An impairment is recorded against receivables
for the irrecoverable amount estimated by management. At the year end, the
provision for impairment of trade receivables was EGP 183,070K (31 December
2022: EGP 136,981K). This is lower than the amount of EGP 191,580k (31
December 2022: EGP 145,586k) as that amount also includes provision on other
receivables.
A reasonable possible change of 100 basis points in the expected credit loss
at the reporting date would have increased (decreased) profit or loss by the
amount of EGP 7,528K. This analysis assumes that all other variables remain
constant.
The following table provides information about the exposure to expected credit
loss (ECL) for trade receivables from individual customers for the nine
segments at:
Weighted average Gross carrying Loss
loss rate
amount
allowance
31-Dec-23 EGP'000 EGP'000 EGP'000
Current (not past due) 2.42% 227,746 (5,507)
1-30 days past due 6.41% 115,230 (7,389)
31-60 days past due 8.13% 95,834 (7,790)
61-90 days past due 13.53% 49,489 (6,694)
91-120 days past due 14.56% 35,089 (5,109)
121-150 days past due 16.47% 24,383 (4,017)
More than 150 days past due 71.48% 205,037 (146,564)
Gross carrying Loss
amount
allowance
Weighted average
loss rate
31-Dec-22 EGP'000 EGP'000 EGP'000
Current (not past due) 1.11% 174,249 (1,927)
1-30 days past due 4.06% 85,072 (3,451)
31-60 days past due 4.55% 65,470 (2,982)
61-90 days past due 13.61% 32,563 (4,433)
91-120 days past due 18.12% 25,868 (4,688)
121-150 days past due 27.81% 19,275 (5,360)
More than 150 days past due 88.00% 129,704 (114,140)
As at 31 December, the ageing analysis of trade receivables is as follows:
EGP'000 EGP'000 EGP'000 EGP'000 EGP'000
Total < 30 days 30-60 days 61-90 days > 90 days
2023 569,738 330,080 88,044 42,795 108,819
2022 395,220 253,943 62,488 28,130 50,659
17. Cash and cash equivalents
2023 2022
EGP'000 EGP'000
Cash at banks and on hand 412,561 399,957
Treasury bills (less than 3 months) 21,461 185,513
Term deposits (less than 3 months) 240,231 63,042
674,253 648,512
Cash at banks earns interest at floating rates based on daily bank deposit
rates. Short-term deposits and treasury bills are made for varying periods of
between one day and three months, depending on the immediate cash requirements
of the Group, and earn interest at the respective weighted average rate. Of
the above Short-term deposits, EGP 210,000k (2022: EGP 20,000k) relates to
amounts held in Egypt with a weighted average rate of 16.40% (2022: 11.93%),
EGP 20,103k (2022: EGP 34,777k) relates to amounts held in Jordan with a
weighted average rate of 5.00% (2022: 4.50%) and EGP 10,128k (2022: EGP:
8,265k) relates to amounts held in Nigeria with a weighted average rate of
5.6% (2022:7%). Treasury bills are denominated in EGP and earn interest at a
weighted average rate of 24.95% (2022: 15.76%) per annum.
18. Financial assets at amortised cost
2023 2022
EGP'000 EGP'000
Term deposits (more than 3 months) 49,244 60,200
Treasury bills (more than 3 months) 111,854 107,204
161,098 167,404
The maturity date of the fixed term deposit and treasury bills is between 3-12
months. Treasury bills are denominated in EGP and earn interest at an
effective rate of 25.34% (2022: 14.09%) per annum. Of the above Term
deposits, EGP 17,126k (2022: EGP 6,626k) relates to amounts held in Egypt with
a weighted average rate of 5.17% (2022: 5.19%) and EGP 32,118k (2022: EGP
53,574k) relates to amounts held in Jordan with a weighted average rate of
5.38% (2022: 4.24%)
19. Share capital and reserves
The Company's ordinary share capital is $150,000,000 equivalent to EGP
1,072,500,000.
All shares are authorised and fully paid and have a par value $0.25.
31-Dec-23 31-Dec-22
In issue at beginning of the year 600,000,000 600,000,000
In issue at the end of the year 600,000,000 600,000,000
The table below shows the number of shares held by Hena Holdings Limited and
Actis IDH BV as well as how many shares are then held which are floating and
not held by companies that do not have individuals on the board of the Group.
Ordinary shares Ordinary shares
Ordinary share capital Name Number of shares % of contribution Par value
USD
Hena Holdings Limited 162,445,383 27.07% 40,611,346
Actis IDH B V 126,000,000 21.00% 31,500,000
Free floating 311,554,617 51.93% 77,888,654
600,000,000 100% 150,000,000
Ordinary share capital Name
Number of shares
% of contribution
Par value
USD
Hena Holdings Limited
162,445,383
27.07%
40,611,346
Actis IDH B V
126,000,000
21.00%
31,500,000
Free floating
311,554,617
51.93%
77,888,654
600,000,000
100%
150,000,000
Capital reserve
The capital reserve was created when the Group's previous parent company,
Integrated Diagnostics Holdings LLC - IDH (Caymans) arranged its own
acquisition by Integrated Diagnostics Holdings PLC, a new legal parent. The
balances arising represent the difference between the value of the equity
structure of the previous and new parent companies.
Legal reserves
Legal reserve was formed based on the legal requirements of the Egyptian law
governing the Egyptian subsidiaries. According to the Egyptian subsidiaries'
article of association 5% (at least) of the annual net profit is set aside to
from a legal reserve. The transfer to legal reserve ceases once this reserve
reaches 50% of the entity's issued capital. If the reserve falls below the
defined level, then the entity is required to resume forming it by setting
aside 5% of the annual net profits until it reaches 50% of the issued share
capital.
Put option reserve
Through acquisitions made within the Group, put option arrangements have been
entered into to purchase the remaining equity interests in subsidiaries from
the vendors at a subsequent date. At acquisition date an initial put option
liability is recognised and a corresponding entry recognised within the put
option reserve. After initial recognition the accounting policy for put
options is to recognise all changes in the carrying value of the liability
within put option reserve. When the put option is exercised by the vendors the
amount recognised within the reserve will be reversed.
Translation reserve
The foreign currency translation reserve is used to record exchange
differences arising from the translation of the financial statements of
foreign subsidiaries.
20. Distributions made and proposed
2023 2022
EGP'000
EGP'000
Cash dividends on ordinary shares declared and paid:
Nil per qualifying ordinary share (2022: US$ 0.116) - 1,304,805
- 1,304,805
After the balance sheet date, the following dividends were proposed by the - -
directors (the dividends have not been provided for):
- -
21. Provisions
Provision for end Of Service Provision for Egyptian Government Training Fund for employees Provision for legal claims Total
EGP'000 EGP'000 EGP'000
At 1 January 2023 - - 3,519 3,519
Provision made during the year 331 11,865 3,496 15,692
Provision used during the year - - (771) (771)
Provision reversed during the year - - (683) (683)
Effect of translation currency 1 - - 1
At 31 December 2023 332 11,865 5,561 17,758
Current - - - -
Non- Current 332 11,865 5,561 17,758
Provision for end Of Service Provision for Egyptian Government Training Fund for employees Provision for legal claims Total
EGP'000
EGP'000 EGP'000
At 1 January 2022 - - 4,088 4,088
Provision made during the year - - 3,950 3,950
Provision used during the year - - (3,997) (3,997)
Provision reversed during the year - - (522) (522)
At 31 December 2022 - - 3,519 3,519
Current - - - -
Non- Current - - 3,519 3,519
Egyptian Government Training Fund for employees
According to Article 134 of the Labor Law for Vocational Guidance and Training
issued by the Egyptian government in 2003, Al-Borg, Almokhtabar and Integrated
Medical Analysis Company shall comply with the requirements stipulated in this
law to provide 1% of net profits each year in the training fund.
End Of Service
As per Article 88 of the Labor Law in Saudi Arabia, in the event of the
termination of an employee's service, the company is required to settle the
wages owed within one week. Conversely, if the employee terminates the
contract, the company is obligated to fulfil their rights within two weeks.
Legal claims provision
The amount comprises the gross provision in respect of legal claims brought
against the Group. Management's opinion, after taking appropriate legal
advice, is that the outcome of these legal claims will not give rise to any
significant loss beyond the amounts provided as at 31 December 2023.
22. Trade and other payables
2023 2022
EGP'000 EGP'000
Trade payables 271,741 269,782
Accrued expenses 178,499 241,060
Due to related parties note (26) 5,962 25,058
Other payables 112,750 98,204
Deferred revenue 59,918 60,948
Accrued finance cost 8,891 6,043
637,761 701,095
23. Put option liability
2023 2022
EGP'000 EGP'000
Current put option - Al Makhbariyoun Al Arab 301,383 439,695
Current put option - Eagle Eye-Echo scan 12,413 -
313,796 439,695
2023 2022
EGP'000 EGP'000
Non-current put option - Eagle Eye-Echo scan - 51,000
Non-current put option - Medical Health Development 42,786 -
42,786 51,000
Put option - Al Makhbariyoun Al Arab Group
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 historical acquisitions of Al 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 is calculated at seven times EBITDA of the last 12 months - Net
Debt and exercisable in whole from the fifth anniversary of completion of the
original purchase agreement, which fell due in June 2016. The vendor has not
exercised this right at 31 December 2023. It is important to note that the put
option liability is treated as current as it could be exercised at any time by
the NCI. However, based on discussions and ongoing business relationship,
there is no expectation that this will happen in next 21 months. The option
has no expiry date.
Put option - Eagle Eye-Echo scan
IFC has the option to put its shares according to definitive agreements signed
on 15 January 2018 between Dynasty Group Holdings Limited and International
Finance Corporation (IFC) related to the Eagle Eye-Echo Scan Limited
transaction, IFC has the option to put it is shares to Dynasty Group Holdings
Limited in year 2024. The put option price will be calculated on the basis of
the fair market value determined by an independent valuer.
According to the International Private Equity and Venture Capital Valuation
Guidelines, there are multiple ways to calculate the put option including
Discounted Cash Flow, Multiples, Net assets. Multiple valuation was applied
and EGP 12 million was calculated as the valuation as at 31 December 2023
(2022; EGP 51m). In line with applicable accounting standards with IAS 32 the
entity has recognised a liability for the present value of the exercise price
of the option price.
Put option - Medical Health Development
Based on the agreement made on October 27th, 2022, between Business Flower
Holding LLC, Integrated Diagnostics Holdings plc and Al Makhbariyoun Al Arab
there is a clause that in cases of bankruptcy and defaulting, a non-defaulting
party is entitled to implement any of the following options for a defaulting
party's share without reference to it:
(A) sell to the Non-Defaulting Party its Shares at the Fair Price of such
Shares.
(B) buy the Non-Defaulting Party's Shares at the Fair Price of such Shares.
(C) requesting the dissolution and liquidation of the Company.
It's important to note that the put option, which grants these rights to the
non-defaulting party, does not have a specified expiration date.
The company has not yet commenced its operations, the group has recognized a
put option as a liability in the non-current assets. This put option
represents a 49% share of non-controlling interest in the total equity,
amounting to EGP 43 million. The valuation was determined as of December 31,
2023. Following the IAS 32 accounting standard, the entity has recorded a
liability for the present value of the exercise price of the option.
24. Borrowings
The terms and conditions of outstanding loans are as follows:
Currency Nominal Maturity 31 Dec 23 31 Dec 22
interest rate
AUB ـــ BANK EGP CBE corridor rate*+1% 26 January 2027 94,451 116,426
AUB - BANK EGP Secured 5% 3 March 2024 13,121 -
Bank: Sterling BANK NGN Secured 19% 26-May 2024 3,573 -
- 111,145 116,426
Amount held as:
Current liability 43,680 22,675
Non- current liability 67,465 93,751
111,145 116,426
A) In July 2018, AL-Borg lab, one of IDH subsidiaries,
was granted a medium term loan amounting to EGP 130.5m from Ahli United Bank
"AUB Egypt" to finance the investment cost related to the expansion into the
radiology segment. As at 31 December 2023 only EGP 124.9M had been drawn down
from the total facility available with EGP 30.4M had been repaid. Loan
withdrawal availability period was extended till July 2023 and the loan will
be fully repaid by January 2027.
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 0.7
throughout the period of the loan
"Financial leverage": total bank debt divided by net
equity
2. The debt service ratios (DSR) shall not be less
than 1.35 starting 2020
"Debt service ratio": cash operating profit after tax plus depreciation for
the financial year less annual maintenance on machinery and equipment adding
cash balance (cash and cash equivalents) divided by total financial payments.
"Cash operating profit": Operating profit after tax, interest expense,
depreciation and amortization, is calculated as follows: Net income after tax
and unusual items adding Interest expense, Depreciation, Amortisation and
provisions excluding tax related provisions less interest income and
Investment income and gains from extraordinary items.
"Financial payments": current portion of long-term debt including interest
expense and fees and dividends distributions.
3. The current ratios shall not be less than 1.
"Current ratios": Current assets divided current liabilities.
*As at 31 December 2023 corridor rate 20.25% (2022: 17.25%)
AL- Borg company didn't breach any covenants for MTL agreements.
IDH opted to reduce its exposure to foreign currency risk by agreeing with
General Electric (GE) for the early repayment of its dollar obligation. The
Group agreed to settle this balance early for USD 3.55 million, payable in
EGP, equivalent to EGP 110 million and made this repayment in March 2023.
To finance the settlement, IDH utilized a bridge loan facility, with half of
the amount (EGP 55 million) being funded internally and the other half (EGP 55
million) provided by a loan from Ahly United Bank - Egypt, this credit
facility was fully repaid in two instalments of EGP 28.5M in May and a final
instalment of EGP 26.5M in June 2023.
25. Financial obligations
The Group leases property and equipment. Property leases include branches,
warehouse, parking and administration buildings. The leases typically run for
average period from 5-10 years, with an option to renew the lease after that
date. Lease payments are renegotiated with renovation after the end of the
lease term to reflect market rentals. For certain leases, the Group is
restricted from entering into any sub-lease arrangements. The property leases
were entered into as combined leases of land and buildings.
Adding to remaining agreement signed in 2015, to service the Group's
state-of-the-art Mega Lab. The agreement periods are 5 and 8 years which is
deemed to reflect the useful life of the equipment. If the minimum annual
commitment payments are met over the agreement period ownership of the
equipment supplied will legally transfer to the IDH. The finance asset and
liability has been recognised at an amount equal to the fair value of the
underlying equipment. This is based on the current cost price of the equipment
supplied provided by the suppliers of the agreement. The averaged implicit
interest rate of finance obligation has been estimated to be 10.3%. The
equipment is being depreciated based on units of production method as this
most closely reflects the consumption of the benefits from the equipment.
Information about the agreements for which the Group is lessee is presented
below.
a) Right-of-use assets
Buildings Buildings
2023 2022
EGP'000 EGP'000
Balance at 1 January 622,975 462,432
Addition for the year 157,482 214,846
Depreciation charge for the year (134,033) (103,099)
Terminated Contracts (5,170) (13,564)
Exchange differences 41,771 62,360
Balance at 31 December 683,025 622,975
b) Other Financial obligations
Future minimum financial obligation payments under leases and sales purchase
contracts, together with the present value of the net minimum lease payments
are, as follows:
2023 2022
EGP'000 EGP'000
*Financial liability- laboratory equipment 240,015 335,470
*Lease liabilities building 828,039 727,426
1,068,054 1,062,896
*The financial obligation liabilities for the laboratory equipment and
building are payable as follows:
Minimum payments Interest Principal
At 31 December 2023 2023 2023 2023
EGP'000 EGP'000 EGP'000
Less than one year 291,342 114,638 176,704
Between one and five years 1,054,902 295,586 759,316
More than 5 years 166,965 34,931 132,034
1,513,209 445,155 1,068,054
Interest Principal
Minimum payments
At 31 December 2022 2022 2022 2022
EGP'000 EGP'000 EGP'000
Less than one year 285,962 137,257 148,705
Between one and five years 1,030,750 314,656 716,094
More than 5 years 227,715 29,618 198,097
1,544,427 481,531 1,062,896
c) Amounts other financial obligations recognised in consolidated income
statement
2023 2022
EGP'000 EGP'000
Interest on lease liabilities 93,298 73,393
Expenses related to short-term lease 10,540 87,962
26. Related party transactions disclosures
The significant transactions with related parties, their nature volumes and
balance during the period 31 December 2023 and 2022 are as follows:
2023
Related Party Nature of transaction Nature of relationship Transaction amount of the year Amount due from / (to)
EGP'000 EGP'000
ALborg Scan (S.A.E)* Expenses paid on behalf Affiliate** (351) -
International Fertility (IVF)** Expenses paid on behalf Affiliate*** (1,771) -
H.C Security Provide service Entity owned by Company's board member 6 (93)
Life Health Care Provided service Entity owned by Company's CEO 855 3,373
Dr. Amid Abd Elnour Put option liability Bio. Lab C.E.O and shareholder 138,312 (301,383)
Current account Bio. Lab C.E.O and shareholder 19,542 (466)
International Finance corporation (IFC) Put option liability Echo-Scan shareholder 38,587 (12,413)
International Finance corporation (IFC) Current account Echo-Scan shareholder 623 -
Integrated Treatment for Kidney Diseases (S.A.E) Rental income Entity owned by Company's CEO 217 1,664
Medical Test analysis 591
HENA HOLDINGS LTD shareholders' dividends deferral agreement shareholder (590) (2,963)
ACTIS IDH LIMITED shareholders' dividends deferral agreement shareholder (485) (2,440)
Business Flowers Holding Put option liability shareholder - (42,786)
(357,507)
2022
Related Party Nature of transaction Nature of relationship Transaction amount of the year Amount due from
/to
EGP'000 EGP'000
ALborg Scan (S.A.E)* Expenses paid on behalf Affiliate - 351
International Fertility (IVF)** Expenses paid on behalf Affiliate 4 1,771
H.C Security Provide service Entity owned by Company's board member 220 (99)
Life Health Care Provide service Entity owned by Company's CEO 424 2,518
Dr. Amid Abd Elnour Put option liability Bio. Lab C.E.O and shareholder 481,665 (439,695)
Current account Bio. Lab C.E.O and shareholder (20,008) (20,008)
International Finance corporation (IFC) Put option liability Echo-Scan shareholder (15,963) (51,000)
International Finance corporation (IFC) Current account Echo-Scan shareholder 12,292 (623)
Integrated Treatment for Kidney Diseases (S.A.E) Rental income Entity owned by Company's CEO 116 1,290
Medical Test analysis 381
Dr. Hend El Sherbini*** Loan CEO** 17,025 -
arrangement
HENA HOLDINGS LTD shareholders' dividends deferral agreement shareholder (2,373) (2,373)
ACTIS IDH LIMITED shareholders' dividends deferral agreement shareholder (1,955) (1,955)
Total (509,823)
* ALborg Scan is a company whose shareholders include Dr. Moamena Kamel
(founder of IDH subsidiary Al-Mokhtabar Labs).
** International Fertility (IVF) is a company whose shareholders include Dr.
Moamena Kamel (founder of IDH subsidiary Al-Mokhtabar Labs).
*** During the year 2022, Dr. Hend (C.E.O) granted a loan to IDH Cayman
amounting to USD 750K. and the loan was settled by Al Mokhtabar on behalf of
IDH Cayman for EGP 17m at the prevailing exchange rate of US$/EGP 22.70. The
loan was not interest bearing.
During 2022 Chief Executive Officer Dr. Hend El-Sherbini and her mother, Dr.
Moamena Kamel jointly hold the 25.5% of shares held by Hena Holdings Limited,
Hena Holdings Limited is a related party and received dividends of USD
17,745,953 in year 2022.
During the year payments relating to lease obligations of Biolab were made to
entities considered to be related parties due to the interest in them held by
Dr Amid Abd Elnour. Payments made during 2023 were JOD 240,991 (EGP
10,392,148) and during 2022 were JOD 241,038 (EGP 6,679,163).
Terms and conditions of transactions with related parties
Outstanding balances at the year-end are unsecured and interest free and
settlement occurs in cash. There have been no guarantees provided or received
for any related party receivables or payables. For the year ended 31 December
2023, the Group has not recorded any impairment of receivables relating to
amounts owed by related parties (2022: nil). This assessment is undertaken
each financial year through examining the financial position of the related
party and the market in which the related party operates.
IDH opts to pay approximately 1% of the net after-tax profit of the
subsidiaries Al Borg and Al Mokhtabar to the Moamena Kamel Foundation for
Training and Skill Development. Established in 2006 by Dr. Moamena Kamel, a
Professor of Pathology at Cairo University and founder of IDH subsidiary
Al-Mokhtabar Labs and mother to the CEO Dr. Hend El Sherbini. The Foundation
allocates this sum to organisations and groups in need of assistance. The
foundation deploys an integrated program and vision for the communities it
helps that include economic, social, and healthcare development initiatives.
In 2023 EGP 6,631 K (2022: EGP 8,934 K) was paid to the foundation by the IDH
Group in relation to profits earned for companies Al Borg and Al Mokhtabar in
the prior year.
Compensation of key management personnel of the Group
Key management people can be defined as the people who have the authority and
responsibility for planning, directing, and controlling some of the activities
of the Company, directly or indirectly.
The amounts disclosed in the table are the amounts recognised as an expense
during the reporting period related to key management personnel.
2023 2022
EGP'000 EGP'000
Short-term employee benefits 68,621 48,078
Total compensation paid to key management personnel 68,621 48,078
27. Reconciliation of movements of liabilities to cash
flows arising from financing activities
EGP'000 Other loans, Other financial
borrowings and obligation
accrued interest
Balance at 1 January 2023 127,420 1,062,896
Proceeds from loans and borrowings 71,630 -
Repayment of borrowings (76,911) -
Payment of liabilities - (239,132)
Interest paid (19,612) (118,777)
Exchange differences - 62,391
Total changes from financing cash flows (24,893) (295,518)
New agreements signed in the period - 187,581
Terminated contracts during the year - (5,682)
Interest expense 22,912 118,777
Total liability-related other changes 22,912 300,676
Balance at 31 December 2023 125,439 1,068,054
EGP'000 Other loans, Other financial
borrowings and obligation
accrued interest
Balance at 1 January 2022 105,694 760,674
Proceeds from loans and borrowings 40,081 -
Repayment of borrowings (21,721) -
Payment of liabilities - (100,841)
Interest paid (24,513) (94,795)
Exchange differences - 122,376
Total changes from financing cash flows (6,153) (73,260)
New agreements signed in the period - 293,946
Terminated contracts during the year - (13,259)
Interest expense 27,879 94,795
Total liability-related other changes 27,879 375,482
Balance at 31 December 2022 127,420 1,062,896
28. Current tax liabilities
2023 2022
EGP'000 EGP'000
Debit withholding Tax (Deduct by customers from sales invoices) (10,412) (26,166)
Income Tax 87,835 162,773
Credit withholding Tax (Deduct from vendors invoices) 8,762 7,719
Other 17,324 8,529
103,509 152,855
29. Post Balance Sheet Events
· In January 2024 Al Borg repaid EGP 13.4m of due
borrowings.
· On 1 February 2024, interest rates were hiked a
further 200 basis points to 21.75%. Significant improvements in the country's
economic situation and outlook were recorded starting in late February and
early March 2024, following the signing of a historic USD 35 billion agreement
between the Egyptian government and Abu Dhabi's sovereign wealth fund, ADQ,
granting the latter development rights to Ras El Hekma on Egypt's North Coast.
Following the announcement, the black-market rate decreased significantly
settling in the low 50 to the US Dollar range. This is expected to be just the
first in a series of announcements and initiatives aimed at attracting FX and
investments back into the country.
· On 6 March 2024, the Central Bank devalued the
Egyptian Pound, settling at nearly EGP 49.5 to the US Dollar at official bank
rates, compared to the EGP 30.85 which had remained nearly unchanged for the
past year. Following the decision, the Central Bank increased interest rates
by another 600 basis points, reaching 27.75%.
· On the heels of the devaluation, Egypt and the
International Monetary Fund (IMF) finalized an agreement, securing an expanded
loan package of USD 8 billion. At the same time, in 2024 the Egyptian
government is looking to raise over USD 6 billion from its privatization
program through the sale of stakes in government and military-owned businesses
to private local and foreign investors. Combined, these are set to cover
Egypt's short-term financing needs for the coming three to four years.
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