REG - Integrated Diag Hdgs - Preliminary Results
21/04/2022 10:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20220421:nRSU8940Ia&default-theme=true
RNS Number : 8940I Integrated Diagnostics Holdings PLC 21 April 2022
Integrated Diagnostics Holdings Plc
FY 2021 Results
Thursday, 21 April 2022
Integrated Diagnostics Holdings Plc concludes outstanding 2021 reporting
revenues in excess of EGP 5 billion and record-high margins
(Cairo and London) - Integrated Diagnostics Holdings ("IDH," "the Group," or
"the Company"), a leading consumer healthcare company with operations in
Egypt, Jordan, Sudan and Nigeria, released today its audited financial
statements and operational performance for the year ended 31 December 2021,
reporting revenue of EGP 5,225 million, up 97% compared to FY 2020.
Profitability came in at an all-time high, with adjusted EBITDA1 growing 116%
year-on-year to record EGP 2,530 million, and net profit recording a 145%
year-on-year increase to reach EGP 1,493 million in FY 2021. In the final
quarter of the year, IDH reported revenue of EGP 1,458 million, 48% above the
previous year's figure, and net profit of EGP 345 million, up 47% from the
comparable three month period of 2020. It is important to note that
information in relation to the Company's full year results has been extracted
from our audited annual report. Meanwhile, disclosures and statements in
respect of quarterly information are unaudited.
In light of IDH's outstanding performance for the twelve months ended 31
December 2021, IDH's board of directors has recommended a dividend
distribution of EGP 2.17 per share, or EGP 1.3 billion in aggregate, to
shareholders (exact US dollar amount is subject to the exchange rate at the
time of the upstreaming from the subsidiaries to the holding company). This
represents a significant increase compared to a final dividend of US$ 29.1
million distributed for the previous financial year.
Financial Results (IFRS)
EGP mn Q4 2020 Q4 2021 Change FY 2020 FY 2021 Change
Revenues 986 1,458 48% 2,656 5,225 97%
Cost of Sales (474) (821) 73% (1,314) (2,421) 84%
Gross Profit 513 638 24% 1,343 2,804 109%
Gross Profit Margin 52% 44% -8.3 pts 51% 54% 3.1 pts
Adjusted Operating Profit2 410 468 14% 986 2,292 132%
Adjusted EBITDA(1) 460 537 17% 1,171 2,530 116%
Adjusted EBITDA Margin 47% 37% -9.8 pts 44% 48% 4.4 pts
Net Profit 234 345 47% 609 1,493 145%
Net Profit Margin 24% 24% - 23% 29% 5.6 pts
Cash Balance 877 2,350 168% 877 2,350 168%
Note (1): Adjusted operating profit, EBITDA and adjusted EBITDA are measures
utilized by management in assessing performance of the group. These adjusted
measures eliminate the one off impacts of items in the year to provide a
measure of underlying performance. EBITDA is an important measure as it shows
the performance of the Group and the Group's ability to reinvest funds
generated and this is a widely used term for acquisitive businesses such as
ourselves.
Note (2): Throughout the FY 2021 Earnings release, percentage changes between
reporting periods are calculated using the exact value (as reported in the
Company's Consolidated Financials) and not the corresponding rounded figure.
Note (3): Quarterly results are unaudited.
Key Operational Indicators3
FY 2020 FY 2021 change
Branches 481 502 21
Patients ('000) 7,113 10,317 45%
Revenue per Patient (EGP) 373 489 31%
Tests ('000) 27,073 33,659 24%
Revenue per Test (EGP) 98 150 53%
Test per Patient 3.8 3.3 -14%
(1)Adjusted EBITDA is calculated as operating profit plus depreciation and
amortization and excluding one-off fees incurred in FY 2021 (EGP 29.0 million)
related to the Company's dual listing on the EGX completed in May 2021.
(2)Adjusted Operating Profit excludes one-off fees incurred in FY 2021 (EGP
29.0 million) related to the Company's dual listing on the EGX completed in
May 2021.
(3)Key operational indicators are calculated based on net sales for the year
of EGP 5,048 million. More details on the difference between net sales and
total revenues is available below.
Important Notice: Treatment of Revenue Sharing Agreements and Use of
Alternative Performance Measures
As part of IDH's efforts to support local authorities in Egypt and Jordan in
the fight against the pandemic, Biolab (IDH's Jordanian subsidiary) secured
several revenue-sharing agreements to operate testing stations, primarily
dedicated to PCR testing for Covid-19, in multiple locations across the
country including Queen Alia International Airport (QAIA) and Aqaba Port.
Under these agreements, Biolab receives the full revenue (gross sales) for
each test performed and pays a proportion to QAIA (38% of gross sales) and
Aqaba Port (36% of gross sales) as concession fees to operate in the
facilities, thus effectively earning the net of these amounts (net sales) for
each test supplied. During Q3 2021, management had reported the net sales
generated from these contracts. The treatment has been altered during Q4 2021
in accordance with IFRS 15 paragraph B34, which considers Biolab as a
Principal (and not an Agent). Subsequently, revenues generated from these
agreements are reported in the Consolidated Financial Statements as
gross (inclusive of concession fees) and the fees paid to QAIA and Aqaba
Port are reported as a separate line item in the direct cost.
For IFRS purposes Biolab is considered the principal in this relationship and
record the full amount received as revenue. For internal purposes management
considers the net amount earned to be net sales, and have therefore included
this measure as an "alternative performance measure" (APM) alongside the IFRS
measure when describing the business' performance. The decision to present
APMs reflects the Directors' view that they provide the user of the accounts
with additional information to the IFRS information reported to help
understand the performance of the business, and is consistent with how the
Company's performance is reviewed internally. Moreover, it allows further
comparability when describing the performance of the Group's regions and
year-on-year analysis.
Throughout the report, management utilizes net sales of EGP 5,048 million for
FY 2021 (IFRS revenues stand at EGP 5,225 million for the year), and cost of
net sales of EGP 2,244 million (IFRS cost of sales recorded EGP 2,421
million). Net sales for the period are calculated as total gross revenues
(IFRS compliant measure) excluding concession fees and sales taxes paid as
part of Biolab's revenue sharing agreements with Queen Alia International
Airport (QAIA) and Aqaba Port.
It is important to note that aside from revenue and cost of sales, all other
figures related to gross profit, operating profit, EBITDA, and net profit are
identical in the APM and IFRS calculations. However, the margins related to
the aforementioned items differ between the two sets of performance indicators
due to the use of Net Sales in the APM calculations and the use of Revenues
for the IFRS calculations. More specifically, under the APM, in FY 2021 IDH
reported a gross profit margin on net sales of 56%, an EBITDA margin on net
sales of 50%, and a net profit margin on net sales of 30%. Under the IFRS
regime, gross profit margin recorded 54%, EBITDA margin stood at 48%, and net
profit margin recorded 29%. Furthermore, this amendment has no impact on the
prior year reported revenues.
Adjustments Breakdown
EGP mn Q4 2021 FY 2021
Net Sales 1,281 5,048
QAIA and Aqaba Port Concession Fees 177 177
Revenues 1,458 5,225
Cost of Net Sales (644) (2,244)
Adjustment for QAIA, and Aqaba Port Agreements (177) (177)
Cost of Sales (821) (2,421)
Adjustments by Country
EGP mn Q4 2021 (IFRS) Q4 2021 FY 2021 (IFRS) FY 2021
(APM) (APM)
Egypt 986 986 4,108 4,108
Jordan 454 277 1,046 869
Nigeria 13 13 54 54
Sudan 4 4 17 17
Group total 1,458 1,281 5,225 5,048
Alternative Performance Measures (APM)
EGP mn Q4 2020 Q4 2021 Change FY 2020 FY 2021 Change
Net Sales 986 1,281 30% 2,656 5,048 90%
Cost of Net Sales (474) (644) 36% (1,314) (2,244) 71%
Gross Profit 513 638 24% 1,343 2,804 109%
Gross Profit Margin on Net Sales 52% 50% -2.2 pts 51% 56% 5.0 pts
Adjusted Operating Profit* 410 468 14% 986 2,292 132%
Adjusted EBITDA** 460 537 17% 1,171 2,530 116%
Adjusted EBITDA Margin on Net Sales 47% 42% -4.7 pts 44% 50% 6.1 pts
Net Profit 234 345 47% 609 1,493 145%
Net Profit Margin on Net Sales 24% 27% 3.2 pts 23% 30% 6.6 pts
Cash Balance 877 2,350 168% 877 2,350 168%
*Adjusted Operating Profit excludes one-off fees incurred in FY 2021 (EGP 29.0
million) related to the Company's dual listing on the EGX completed in May
2021.
**Adjusted EBITDA is calculated as operating profit plus depreciation and
amortization and excluding one-off fees incurred in FY 2021 (EGP 29.0 million)
related to the Company's dual listing on the EGX completed in May 2021.
Note (1): Adjusted operating profit, EBITDA and adjusted EBITDA are measures
utilized by management in assessing performance of the group. These adjusted
measures eliminate the one off impacts of items in the year to provide a
measure of underlying performance. EBITDA is an important measure as it shows
the performance of the Group and the Group's ability to reinvest funds
generated and this is a widely used term for acquisitive businesses such as
ourselves.
Note (2): Quarterly results are unaudited.
Important notice: A reconciliation between IFRS and APM measures is provided
earlier in this announcement.
Introduction
i. Financial Highlights
· Net Sales surpassed the EGP 5 billion mark to record EGP 5,048
million in FY 2021, representing a 90% year-on-year expansion. Net sales
growth for the year was dual driven, with total tests performed increasing 24%
year-on-year and average price per test expanding 53% versus FY 2020.
Consolidated net sales were supported by strong demand for both IDH's
Covid-19-related4 and conventional tests portfolios, with the segments
contributing to 51% and 49% of consolidated FY 2021 net sales, respectively.
Covid-19-related tests witnessed high demand throughout FY 2021, supported by
rising infection rates in the first half of the year and the widespread
lifting of travel bans in the second half of 2021. On the conventional tests
front, demand recorded a sustained recovery following the Covid-19-related
slowdown experienced in the previous year, with conventional test net sales
expanding 22% versus FY 2020, and coming in 13% above pre-covid levels
recorded in FY 2019. On a quarterly basis, net sales stood at EGP 1,281
million in Q4 2021, up 30% versus Q4 2020.
· It is important to note that within the Covid-19-related tests
classification, the Company includes 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. During
the twelve months to 31 December 2021, core Covid-19 tests made up 44% of the
Company's consolidated net sales, while other Covid-19-related tests made an
8% contribution to consolidated net sales for the year.
· Throughout the year, IDH's ability to effectively ramp up its house
call capabilities in both Egypt and Jordan, saw the service make a significant
contribution to consolidated net sales. More specifically, net sales generated
from the service expanded an impressive 87% year-on-year in FY 2021, with its
contribution to total net sales standing at 20%, unchanged from the previous
year. It is worth highlighting that tests performed through IDH's house call
service, are offered at the same price as at traditional branches, with an
additional house call delivery fee charged to patients to cover the chemist
transportation costs.
· Gross Profit grew 109% year-on-year in FY 2021 to record EGP 2,804
million. Gross Profit Margin on net sales stood at 56%, a solid five
percentage point expansion compared to the previous twelve months. Improved
gross profitability continued to be supported by strong net sales growth and
the subsequent dilution of fixed costs for the year such as direct salaries
and wages and other expenses. On a three-month basis, gross profit came in at
EGP 638 million in Q4 2021, representing a 24% increase from Q4 2020. Gross
profit margin on net sales for the quarter recorded 50% versus 52% in the same
three months of 2020 and 58% during Q3 2021. Lower gross profit margins versus
both periods reflects a decline in the average price of Covid-19-related tests
during the quarter as well as lower demand for Covid-19-related tests as the
spike in demand from passengers traveling abroad witnessed in the third
quarter of 2021 subsided.
· Adjusted Operating Profit5 recorded EGP 2,292 million, up 132%
year-on-year. Adjusted operating profit margin on net sales stood at 45% for
the year, up eight percentage points from FY 2020. Strong operating profit
growth came on the back of solid gross profitability for the year, and was
further buoyed by the normalisation of provisions booked in FY 2021, which
stood at EGP 25 million down from the EGP 42 million recorded in FY 2020 to
account for expected credit losses in accordance with IFRS 9.
· Adjusted EBITDA6 increased 116% year-on-year in FY 2021 to reach EGP
2,530 million, while EBITDA margin on net sales expanded six percentage points
to record 50% for the year. Strong EBITDA profitability was supported by the
Company's strong net sales growth for the year and the subsequent dilution of
its fixed costs. In Q4 2021, adjusted EBITDA recorded EGP 537 million, 17%
above the previous year's figure and with an adjusted EBITDA margin on net
sales of 42% for the quarter, down from 47% in Q4 2020 and 54% in Q3 2021.
Lower margins versus both periods reflect relatively lower gross profitability
combined with increased marketing and administrative expenses for the quarter.
· Net Profit reached EGP 1,493 million in FY 2021, up 145% versus FY
2020. Net profit margin on net sales expanded seven percentage points from FY
2020 to record 30% for the year. The remarkable net profit growth comes on the
back of strong EBITDA level profitability and despite the Company booking EGP
29 million in one-off fees related to its dual-listing in May 2021 as well as
EGP 20 million in fees related to the IFC loan also secured in May 2021. In
the last three months of the year, net profit recorded EGP 345 million, up 47%
year-on-year and with an associated margin on net sales of 27% versus 24% in
the same quarter of 2020.
· Earnings per share stood at EGP 2.35 in FY 2021 compared to EGP 0.99
in FY 2020.
· IDH's board of directors has recommended a dividend distribution of
EGP 2.17 per share, or EGP 1.3 billion in aggregate, to shareholders in
respect of the financial year ended 31 December 2021 (exact US dollar amount
is subject to the exchange rate at the time of the upstreaming from the
subsidiaries to the holding company). This represents a significant increase
compared to a final dividend of US$ 29.1 million distributed for the previous
financial year.
4Covid-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.
5Adjusted Operating Profit excludes one-off fees incurred in FY 2021 (EGP 29.0
million) related to the Company's dual listing on the EGX completed in May
2021.
(6)Adjusted EBITDA is calculated as operating profit plus depreciation and
amortization and minus one-off fees incurred in FY 2021 (EGP 29 million)
related to the Company's EGX listing completed in May 2021.
ii. Operational Highlights
· IDH's branch network stood at 502 branches as at year-end 2021, up
from 481 branches as of 31 December 2020.
· Total tests performed increased 24% year-on-year to reach 33.7
million in FY 2021. Test volume growth was driven by both strong demand for
IDH's Covid-19-related7 test offering, which nearly doubled versus the
previous year, coupled with a 15% year-on-year increase in conventional tests
performed. During the final quarter of the year, IDH performed 8.7 million
tests, up 5% year-on-year.
· Average revenue per test increased 53% year-on-year to EGP 150 in FY
2021. Controlling for the generally higher value Covid-19-related(7) tests,
average revenue per test increased 7% versus the previous year.
· Total patients served surpassed the 10 million mark for the first
time, reaching 10.3 million in FY 2021, an increase of 45% from the previous
year. Average test per patient declined to 3.3 in FY 2021 from 3.8 in FY 2020
due to the increasing number of patients who visited the Group's labs for
single Covid-19 tests (PCR, Antigen and Antibody) throughout the year.
· In Egypt, IDH recorded revenue of EGP 4,108 million (contributing to
81% of IDH net sales), up 89% year-on-year in FY 2021 on the back of solid
growth in both patient and test volumes. Revenue growth in IDH's home market
was supported by both Covid-19-related(7) and conventional tests, and was
further boosted by the Group's house call service which in the twelve months
ended on 31 December 2021 saw its revenue nearly double, contributing 23% of
Egypt's revenues versus 22% in FY 2020. Throughout 2021, demand for
conventional tests continued to recover following the Covid-19-related
slowdown recorded in 2020, with conventional test revenue increasing 23%
year-on-year on the back of a 15% year-on-year increase in conventional test
volumes.
· Al-Borg Scan recorded year-on-year revenue growth of 81%, with the
venture's revenues reaching EGP 45 million in FY 2021. Revenue growth was
supported by solid growth in volumes, with both tests performed and patients
served standing 70% above the preceding year's figures. To capitalise on
Al-Borg Scan's growing popularity, the Group inaugurated two Al-Borg Scan
branches in the second half of 2021, and a third in March 2022. In the coming
months, IDH is looking to inaugurate additional branches to expand its reach
across Greater Cairo.
· Wayak recorded strong year-on-year standalone revenue growth in FY
2021, which when combined with management's cost optimisation strategy
continued to support a narrowing of the venture's standalone EBITDA losses in
FY 2021 versus the previous year.
· Meanwhile, in Jordan net sales reached EGP 869 million (IFRS
revenues8 recorded EGP 1,046 million in FY 2021), representing a 112%
expansion versus the previous year. Strong growth for the year, saw the
country's contribution to total consolidated net sales reach a record high of
17.2%, up from 15.4% in the previous twelve months. The impressive performance
was supported by solid growth in both tests performed and average revenue per
test. Covid-19-related tests made up 68% of the country's net sales with the
contribution further bolstered by Biolab's multiple revenue-sharing
partnerships. In particular, Biolab's agreement with Queen Alia International
Airport (QAIA) generated c. EGP 185 million in the five months from August to
December 2021, contributing to 21% of the country's total net sales for the
year. In parallel, demand for Biolab's conventional test offering rose
steadily throughout the year, with the number of conventional tests performed
and net sales generated during FY 2021 increasing 28% and 26% year-on-year,
respectively.
· In Georgia, where Biolab has partnered with Georgia Healthcare Group
(GHG) to establish a 7,500 sqm Mega Lab, the ramp up phase is progressing as
scheduled, with Biolab concluding the roll out of the new Laboratory
Information Management System (LIMS) across all of GHG's 76 medical facilities
(7 hospitals and 69 clinics) in 1H 2021. The Mega Lab is the region's largest
diagnostic medical laboratory which will leverage the advanced technological
systems provided by Biolab to connect more than 40 hospitals and diagnostic
centers that are part of GHG's network. As compensation for the LIMS roll out,
Biolab has received an 8.025% equity interest in Mega Lab. Moreover, in
exchange for management services, which Bio Lab will be supplying for a
two-year period with the option to extend, the company will receive an annual
fee as well as a fixed percentage of Mega Lab's annualized EBITDA.
· IDH's Nigerian operations reported year-on-year revenue growth of 49%
in FY 2021, on the back of a 16% and 31% year-on-year rise in patients served
and tests performed, respectively. Consistent revenue growth coupled with
successful cost optimisation efforts implemented by the venture's new
management team, see Echo-Lab on track to turn EBITDA positive in early 2022.
· In Sudan, despite the operational difficulties and heightened
uncertainty faced throughout the past year, operations are continuing without
major interruptions. While results for the year were significantly impacted by
the devaluation of the Sudanese Pound in February 2021, in local currency
terms, IDH's Sudanese operations reported year-on-year revenue growth of 159%,
as management continued to successfully raise test prices in step with
inflation.
(7)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.
8 Biolab's revenues for the period are calculated as net sales and including
concession fees paid to QAIA and Aqaba Port as part of their revenue sharing
agreements.
iii. Management Commentary
Commenting on the Group's full-year performance, IDH Chief Executive Officer
Dr. Hend El-Sherbini said: "2021 was an exceptional year for IDH which saw our
5,000 employees serve more than 10 million patients and perform more tests
than ever before, helping us deliver outstanding financial results. In
parallel, we added new services to our roster, expanded our reach across both
digital and physical channels, enhanced the overall experience of our
patients, grew our footprint, and completed our dual-listing on the Egyptian
Exchange, complementing our LSE listing. This saw us end the year having built
new foundations on which to drive the next phase of growth across all our
markets.
Heading into 2022, there are several exciting developments I am looking
forward to across both new and existing markets. In Egypt and Jordan, we are
aiming to capitalise on our market leading position, expanded product offering
and patient base, increased service delivery capabilities, and growing
visibility to continue delivering robust growth in the year ahead. In
particular, we are eager to capitalise on the post-Covid-19 rebound in
conventional testing as patients' focus shifts back to conventional healthcare
as the threat of Covid-19 subsides. Moreover, across both markets, our
attention will now pivot towards patient retention as well look to maintain
the new relationships we were able to establish during the pandemic thanks to
our Covid-19-dedicated offering. In Nigeria, thanks to the consistent revenue
growth and the stellar work being done by Dr. Bhatia and his team to
streamline operations, Echo-Lab is on track to turn EBITDA positive in 2022.
We are confident that the investments undertaken since the acquisition of
Echo-Lab back in 2018 have built a stronger, leaner, and growth-oriented
business which is well-placed to take full advantage of the significant growth
opportunities offered Nigeria's diagnostics market.
In the first few months of the new year, globally we have been confronted with
a new set of challenges related to the long-term economic spill overs of the
pandemic coupled with the impacts of the ongoing Russia-Ukraine war. Supply
chain issues, fast-rising consumer demand, and the increased volatility in
commodity prices which has been exacerbated by the ongoing war in Eastern
Europe, are continuing to push up prices, with countries around the world
recording inflation figures not seen for many years. In light of rising
inflation, central banks around the world have commenced a cycle of monetary
tightening, with many raising interest rates for the first time in years. Here
in Egypt, on 21 March 2022, the Central Bank raised policy rates by 100bps and
allowed the Egyptian Pound to devalue by more than 17% against the US Dollar.
Despite the heightened uncertainty following the announcement, we are
confident that our proven track record in navigating similar turbulent times
and the strong mitigation frameworks we have in place provide ample protection
from the short and longer-term impacts of the decision."
- End -
Analyst and Investor Call Details
An analyst and investor call will be hosted at 2pm (UK) | 3pm (Egypt) on
Tuesday, 26 April 2022. You can access the call by clicking on this link
(https://efghermesevents.webex.com/mw3300/mywebex/default.do?nomenu=true&siteurl=efghermesevents&service=6&rnd=0.6335848944445118&main_url=https%3A%2F%2Fefghermesevents.webex.com%2Fec3300%2Feventcenter%2Fevent%2FeventAction.do%3FtheAction%3Ddetail%26%26%26EMK%3D4832534b00000005e7cb77c80bd44309c4a68ccb438849af847beb378977ded30308d7008d73e67e%26siteurl%3Defghermesevents%26confViewID%3D225088577307937457%26encryptTicket%3DSDJTSwAAAAVG8YzkZZZenl9O-xSsPYKT10xZD-0yXmKxiBb3ukOhQQ2%26)
, and you may dial in using the conference call details below:
• Event number: 2379 872 7421
• Event password: 2FHc5saY2Cn
For more information about the event, please contact: halaa@EFG-HERMES.com
(mailto:halaa@EFG-HERMES.com)
About Integrated Diagnostics Holdings (IDH)
IDH is a leading consumer healthcare company in the Middle East and Africa
with operations in Egypt, Jordan, Sudan and Nigeria. The Group's core brands
include Al Borg, Al Borg Scan and Al Mokhtabar in Egypt, as well as Biolab
(Jordan), Ultralab and Al Mokhtabar Sudan (both in Sudan) and Echo-Lab
(Nigeria). A long track record for quality and safety has earned the Company a
trusted reputation, as well as internationally recognised accreditations for
its portfolio of over 2,000 diagnostics tests. From its base of 502 branches
as of 31 December 2021, IDH will continue to add laboratories through a Hub,
Spoke and Spike business model that provides a scalable platform for efficient
expansion. Beyond organic growth, the Group's expansion plans include
acquisitions in new Middle Eastern, 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
Nancy Fahmy
Investor Relations Director
T: +20 (0)2 3345 5530 | M: +20 (0)12 2255 7445 | nancy.fahmy@idhcorp.com
(mailto:nancy.fahmy@idhcorp.com)
Forward-Looking Statements
These results for the year ended 31 December 2021 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.
Important notice: A reconciliation between IFRS and APM measures is provided
earlier in this announcement.
Chairman's Message
I am pleased to report that despite the continued operational challenges posed
by Covid-19, your Company delivered an outstanding performance in 2021,
providing its services to a record number of patients, while laying new
foundations from which to generate sustainable growth in the coming years.
Record-Breaking Results
In our seventh year as a publicly listed company on the London Stock Exchange,
we were proud to see our revenue surpass EGP 5 billion for the first time,
growing year-on-year by over 90%.
Leveraging on our expanded service offerings, we attracted a record number
of patients to our laboratories, serving over 10 million patients in 2021.
In both Egypt and Jordan, we continued to honour our responsibility as a
leading healthcare provider, assisting local authorities tackle the pandemic
and supporting the recovery of international travel.
During the year, we performed more than 2.6 million PCR, antigen, and antibody
tests, and continued to improve our delivery capabilities to bring our
services to as many people as possible.
We also achieved a robust recovery in our conventional business offerings,
which now exceeds our pre-Covid-19 levels enhancing our long established track
record in our core business.
In Nigeria, following our restructuring of the business and with our strong
management team we achieved solid and sustainable results. We are expecting
Echo-Lab to turn EBITDA positive in the coming months.
A Forward-looking Business
As firm believers in proactive healthcare, at IDH we take pride in our ability
to deliver service excellence today, while always keeping an eye to the
future. Throughout the year, we continued to invest in developing all aspects
of our business, from adding new services to our portfolio and world-class
doctors to our team, to expanding our delivery channels and enhancing our
digital infrastructure.
We have successfully expanded our house call services.
We have also accomplished steady growth of our radiology venture, Al-Borg
Scan.
In the ever burgeoning data analytics business environment, we are exploring
ways to utilize our vast database to develop new services increasingly
tailored to patients' individual needs.
We continue to ensure strict data privacy and remain vigilant in strengthening
our IT infrastructure to proactively address all cybersecurity risks.
Expanding our Footprint
Your Company continues to enjoy strong organic growth momentum while
constantly evaluating potential M&A opportunities across new African,
Middle Eastern, and Asian markets.
On this front, we look forward to potentially adding Pakistan to our footprint
and commencing our partnership with Islamabad Diagnostics Centre and Dr. Uppal
once all pending conditions precedent are satisfied. The combination of our
two businesses will see us well-placed to meet the country's growing
healthcare needs.
Environmental, Social, and Governance (ESG)
We are proud to have published our first Sustainability Report and are
cognizant of our social responsibilities while seeking to constantly monitor
and address all areas of ESG within the business in Egypt and elsewhere in our
offices around the world.
Management regularly monitors and revises our risk matrix and heat map to
ensure we have the right checks and balances in place and ensuring business
continuity processes.
A United Team
We have benefitted hugely over the past three years having most of our team
working out of our headquarters in Cairo's Smart Village.
We value our loyal and hard-working workforce and constantly review their KPIs
to help them progress professionally in line with their ambitions while
providing a long-term incentive programme (LTIP) starting 2022.
We have also recently expanded and strengthened your Company's Board of
Directors, welcoming Yvonne Stillhart as a Non-Executive Director. Yvonne
brings a wealth of experience across multiple sectors, and replaces James
Nolan who stepped down in September of last year.
We are enormously grateful to James for his excellent service and wise counsel
to IDH.
Broadening our Shareholder Base
IDH's shares are now listed on both the London Stock Exchange and Egyptian
Stock Exchange. We are confident that this will expand our shareholder base to
include local institutional and retail investors in Egypt, while increasing
liquidity and visibility in our largest market.
In 2022 we also welcomed IFC as a strategic shareholder, and look forward to
carrying on working closely together to continue meeting the strong demand for
healthcare services across our footprint.
As our countries of operation prepare to transition into a post-Covid-19
world, your Company is well positioned to maintain growth and profitability
and continue delivering exceptional and consistent value to patients and
shareholders.
Lord St John of Bletso
Chairman
Important notice: A reconciliation between IFRS and APM measures is provided
earlier in this announcement.
Chief Executive's Review
2021 was an exceptional year for IDH which saw our 5,000 employees serve more
than 10 million patients and perform more tests than ever before, helping us
deliver outstanding financial results. In parallel, we added new services to
our roster, expanded our reach across both digital and physical channels,
enhanced the overall experience of our patients, grew our footprint, and
completed our dual-listing on the Egyptian Exchange, complementing our LSE
listing. This saw us end the year having built new foundations on which to
drive the next phase of growth across all our markets.
Similar to the previous year, 2021 was heavily impacted both economically and
socially by Covid-19, as countries around the world combatted various waves of
new infections and confronted multiple new variants. Despite this, 2021 was
also a turnaround year for the fight against the pandemic as vaccines were
gradually rolled out and governments and individuals became increasingly
willing to coexist with the virus, driving widespread economic recovery from
the previous year's lows.
In the midst of a challenging operating environment, we displayed a remarkable
ability to adapt to changing market and demand dynamics and consistently cater
to the evolving needs of our growing patient base, ensuring we continue to
provide our communities with access to high quality, affordable healthcare and
diagnostic services. Over the past twelve months, we continued to effectively
care for both our conventional and Covid-19 patients leveraging an expanded
branch network, a ramped-up house call service, and a growing digital presence
to make our services increasingly accessible and our payment methods
increasingly convenient. Our efforts translated in significant improvements in
our patients' overall experience, with the Group's net promoter score for the
year recording consistently above the 80 mark, ahead of last year's value and
well above industry averages.
During 2021, we continued to serve our Covid-19 patients by ensuring we were
well-equipped to handle peaks in demand when infection rates increased, while
promptly adapting our offering to the requirements of patients. In the twelve
months to 31 December 2021, we performed over 2.6 million PCR, antigen and
antibody tests, continuing to provide patients and healthcare workers with a
trustworthy first line of defence against the virus. At the same time we
secured multiple partnerships with international air carriers and regional
healthcare providers like National Aviation Services (NAS) Kuwait and Pure
Health UAE to conduct PCR testing for passengers traveling from Egypt to other
regional destinations. We also offered PCR testing for passengers on a walk-in
basis, and were the first lab in Egypt to provide QR codes on travel
certificates. This enabled us to not only to play an important role in
supporting the recovery of international travel, but also ensured that we
successfully captured a leading market share for the service.
In parallel, despite the challenges posed by the pandemic, we never lost sight
of the needs of our conventional patients, continuing to care for them even at
the height of the Covid-19 crisis. Our efforts focused on expanding our
service offering and delivery capabilities, as well as organising special
campaigns to raise healthcare awareness specifically targeting patients
suffering from chronic diseases, a particularly vulnerable category in light
of the ongoing pandemic.
Throughout the year, we also devoted increasing attention and resources
towards developing our digital infrastructure to expand our reach, provide new
services to our patients, and improve their overall experience. Highlights for
the year included the roll out of multiple new patient touch points including
a revamped IDH app, a new chatbot function, as well as an additional call
centre. At the same time, we also made it increasingly convenient for our
patients to pay for our services.
Record-breaking Growth and Operational Results
Our ability to transform the business in step with changing demand dynamics
enabled us to build on an already strong 2020, to deliver a formidable set of
operational and financial results in 2021. More specifically, in the twelve
months to 31 December 2021, we recorded consolidated revenue of EGP 5.2
billion, up 97% year-on-year and representing the highest full-year revenue
figure on record. Meanwhile, net sales expanded an impressive 90% from the
previous year, coming in at EGP 5.0 billion in FY 2021. Net sales growth for
the year was dual driven, as we performed 24% more tests than in the previous
year and recorded a 53% year-on-year rise in average price per test versus
2020.
Throughout the year, consolidated net sales was supported by strong demand for
both our Covid-19-related and conventional tests portfolios, with each
segment contributing to around half of consolidated net sales for the year. On
the conventional tests front, demand recorded a sustained recovery following
the Covid-19-related slowdown experienced in the previous year, with
conventional test net sales expanding 22% versus 2020, and coming in a
noteworthy 13% above pre-Covid-19 levels recorded in 2019.
Volume and net sales growth for the year also reflected our ongoing
investments to expand our delivery capabilities, which over the course of 2021
saw us grow our patient reach across both traditional branches and our house
call service. On the one hand, we inaugurated 23 new branches in Egypt and an
additional branch in Jordan, taking the total number of operational branches
as at year-end 2021 to 502. Our ability to consistently rollout new branches
within and outside the Greater Cairo area currently sees us operate the
largest network of branches amongst private players in the country, enabling
us to strengthen our brand name and maintain our leadership position in the
market. Moreover, it is also important to note that our Mega Lab, which
continues to be the sole CAP-accredited facility in Egypt, typically operates
at around 55% of its maximum capacity leaving abundant room for further
growth. In 2021, we also continued to work closely with local authorities in
Egypt to obtain the necessary certifications to take part in the government's
Universal Healthcare Insurance (UHI) system which is being rolled out across
the entire country. As at year-end 2021, IDH had 13 out of the 19
UHI-accredited labs in the country, with several more of our labs looking to
obtain accreditation in the coming year. On the other hand, in response to the
growing demand for our house call services in both Egypt and Jordan, we
continued to ramp up our house call capabilities. In our home market of Egypt,
where sample collected directly in patient homes made up 23% of the country's
revenues for the year, we added a second call centre, expanded our house call
team to an average of 400 chemists, and streamlined logistics to further
decrease turnaround times. On this last point, we were particularly happy to
note our success in keeping turnaround times strictly below 24 hours even
throughout the multiple peaks in infection rates witnessed in 2021. Our
ability to effectively ramp up the service to match its growing popularity is
enabling us to perform over five thousand house visits per day, the most out
of any other player in the market, and process over ten thousand calls each
day.
Regionally, in Egypt, as with the consolidated performance, our revenues were
supported by both our Covid-19-related test offering, which in 2021 made up
49% of the country's revenues, as well as the country's conventional test
offering, which made up the remaining 51%. During the year, we continued to
lead the market in terms of core Covid-19 tests performed, further testament
to the high quality of our offering and the extensive reach of our services.
At the same time, we observed a sustained recovery in our conventional
business, with revenues generated by conventional tests increasing a solid 23%
versus the previous year supported by a 15% rise in conventional tests
performed and a 7% expansion in average revenue per conventional test.
Egypt's revenues were further buoyed by revenues generated by our house call
service, which expanded an impressive 94% versus 2020, contributing an
additional EGP 935 million to the country's total revenues for the year.
Meanwhile, at our fast-growing radiology venture, Al-Borg Scan, we witnessed a
solid 81% year-on-year increase in revenue to EGP 45 million supported by a
70% year-on-year rise in both tests performed and patients served, which
recorded 78 thousand and 62 thousand, respectively. I am particularly happy to
note the growing success of Al-Borg Scan, which is helping us to capitalise on
the important growth opportunities offered by Egypt's fragmented radiology
market while delivering on our vision of providing patients with a
one-stop-shop service offering featuring both pathology and radiology. To
capitalise on the rising patient demand for our radiology services, we
inaugurated two new Al-Borg Scan branches in 2021 and a third in March 2022.
In the coming months, we plan to continue launching additional branches,
further expanding our reach across Great Cairo. Finally, it is also worth
highlighting Wayak's growing market traction, with the venture continuing to
expand its patient base and product offering. The company's EBITDA losses have
narrowed significantly and management has ambitious plans to build on this
momentum by rolling out multiple new services in 2022.
Jordan was the standout performer for the year, with Biolab reporting
year-on-year net sales growth of 112% and contributing a record share of
consolidated net sales at 17.2%. During the year, Covid-19-related tests
contributed to 68% of Biolab's net sales as the venture continued to record
strong demand at both its regular branches and across its testing booths
located in the country's main airports and ports. In fact, Covid-19-related
net sales in Jordan was boosted by strong contributions from Biolab's new
partnership with Queen Alia International Airport, King Hussain International
Airport, and Aqaba Port. As part of these agreements, Biolab has been
operating testing stations across all three locations primarily focused on
offering PCR testing for Covid-19 to passengers arriving in Jordan. Through
these initiatives, Biolab was able to continue playing a frontline role in the
country's fight against the pandemic and simultaneously expand its patient
base and reach across new segments of the population. Meanwhile, we were also
very pleased to note the robust recovery in Biolab's conventional test net
sales, which increased 26% year-on-year on the back of a solid rise in
conventional tests performed.
In Nigeria, we continued to record steady revenue growth throughout the entire
year on the back of growing test and patient volumes. In 2021, Echo-Lab's
revenues expanded 49% year-on-year on the back of a 31% increase in tests
performed coupled with a 14% rise in average revenue per test. Growing volumes
continue to highlight the effectiveness of our investments to revamp
Echo-Lab's operations and the success of our targeted marketing efforts. The
consistent growth delivered by our Nigerian operations also reflect the
incredible work done by Dr. Alok Bhatia, who joined Echo-Lab as CEO in March
2021. Dr. Bhatia and his team have brought the skills and expertise needed to
deliver on our long-term vision for Echo-Lab and we look forward to reaping
the rewards of their hard work in the coming years.
Finally, in Sudan our results for the year were heavily impacted by the
devaluation of the Sudanese Pound in February 2021 as well as the rise in
social and political unrest witnessed in the final months of the year.
However, management's continued success in raising prices in step with
inflation, saw revenue in local currency terms grow an impressive 159% in
2021. It is also worth highlighting that despite the operational difficulties
and heightened uncertainty faced throughout the past year, operations are
continuing without major interruptions.
Further down the income statement, we reported impressive margin expansions at
all levels of profitability supported by strong revenue growth and the
subsequent dilution of IDH's fixed costs. More specifically gross profit for
the year more than doubled with a five-point margin expansion. Meanwhile,
EBITDA adjusted for one-off listing fees expanded 116% with a margin on net
sales of 50%, up six percentage points from 2020 (adjusted EBITDA margin on
revenues stood at 48% in FY 2021). Strong adjusted EBITDA level profitability
supported a 145% year-on-year expansion in net profit which reached EGP 1,493
million in 2021. Net profit margin on net sales expanded seven percentage
points versus 2020 to record 30% for the year (net profit margin on revenues
stood at 29% in FY 2021). It is worth highlighting that the remarkable net
profit growth comes despite the Company booking EGP 29 million in one-off fees
related to our dual-listing as well as EGP 20 million in fees related to the
IFC loan secured in May of last year.
Expanding Our Footprint
While effectively serving our patients and delivering exceptional results
across our existing geographies, we also worked to expand our footprint into
new territories. On this front, in December 2021, we signed a sale and
purchase agreement to acquire 50% of Islamabad Diagnostic Centre (IDC), one of
Pakistan's largest, most respected, and fastest growing integrated diagnostics
companies, for a total consideration of USD 72.35 million. The deal, which is
currently pending regulatory approval, would see us partner with IDC's founder
and CEO, Dr Rizwan Uppal, and acquire a stake in an established provider with
a strong track-record, solid financial performance, and an ambitious growth
plan. The transaction will see us add a fifth country to our footprint and
help us further diversify our revenue base in line with our long-term
strategy. IDC will be fully consolidated on IDH's accounts following the
completion of the transaction and the transfer of funds to the Evercare Group.
Under the agreement, IDH will hold four of the seven seats on IDC's board. The
transaction, which is subject to the satisfaction of a number of conditions
precedent should be completed later in 2022.
With a population of over 200 million, 63% of which is under the age of 30,
Pakistan boasts an attractive demographic profile providing long-term
sustainable demand for quality healthcare services. Meanwhile, like many of
the markets we currently operate in, its healthcare industry is characterised
by a widening demand-supply gap for high quality healthcare services, a high
degree of out-of-pocket payments (medical expenses not reimbursed by
insurance), and increasingly favourable regulations aimed at encouraging
private sector participation. Similar to our existing businesses, IDC boasts
an established position in the Pakistani market with network of over 85
branches across 30 cities, and offers a full roster of pathology and radiology
diagnostic services. These characteristics make IDC the perfect partner for
IDH, and Pakistan an ideal location where our proven business model is well
placed to drive new value and help meet the rising demand for high quality
healthcare.
Dual-listing on the EGX
Adding to this past year's list of achievements, in May 2021 we successfully
completed our dual-listing on the Egyptian Exchange (EGX), successfully
meeting our goal of offering IDH's unique value proposition to the widest
investor base possible. With our shares now listed on the both the LSE and the
EGX and tradeable in a fully fungible manner, we have provided local retail
and institutional investors as well as global emerging markets specialists who
regularly invest through the EGX with the possibility to capitalize on our
attractive growth profile. We remain optimistic that going forward investors
will find having two venues on which to trade IDH shares increasingly useful,
realizing our target of having a larger number of the Company's shares being
traded on the EGX.
Our Sustainability Journey
Across our operations, we continue to place a strong focus on strengthening
our environmental, social and governance (ESG) monitoring and compliance
frameworks to ensure we continue working to the betterment of our communities
and safeguarding the interests of all our stakeholders. Throughout 2021, we
devoted our attention to developing a more assertive road map that draws clear
guidelines and methods to monitor, evaluate, and improve our sustainability
practices. Under the guidance of a top-tier ESG consultant, we undertook a
rigorous ESG assessment across all functions to highlight key sustainability
initiatives while identifying areas of improvement. This allowed us to set the
foundation for future ESG implementation by internally mapping key performance
indicators to the newly developed sustainability framework. As a critical
sector, the healthcare industry stands at the threshold of each of the UN's
Sustainable Development Goals (SDGs). Throughout our operations, we have
direct impacts on a number of key SDGs, and indirectly impact multiple others.
Through our Sustainability Report, we were able to successfully share with our
peers and wider community our contributions across all 17 SDGs, providing
stakeholders with a clear framework to benchmark our contributions and hold us
accountable in the years to come.
In a world where investment decisions are being taken with an increasing focus
on the ESG profile of a company, we have provided investors with an in-depth
analysis of our ESG performance, facilitating their due diligence processes.
On this front, we have dedicated a chapter of the report to address our
investors' inquiries related to our ESG performance and strategy, aligning
ourselves with the global action plan set by the Principles of Responsible
Investment. As we leave 2021 behind us, we are proud of the progress made on
this front, but remain cognizant that of the long road ahead of us. As we
enter this exciting new chapter for IDH, we welcome all our stakeholders to
share their insights and help us generate additional social and environmental
value for our communities.
Throughout this process, we have been closely guided by our world-class Board
of Directors, which has been overseeing all aspects of the business since our
listing on the LSE in 2015. Our Board is composed in the majority by
independent, non-executive directors and is backed by a robust and constantly
enhanced policy framework. In early 2022, our Board of Directors was further
strengthened with the appointment of Ms. Yvonne Stillhart, as a Non-Executive
Director. Yvonne is a seasoned Senior Executive working with innovation and
growth driven companies across a wide range of industries and geographical
regions, including Europe, USA, North Africa and Sub-Saharan Africa.
Dividend Policy and Proposed Dividend
In view of the strong cash-generative nature of our business and its
asset-light strategy, our dividend policy is to return to shareholders the
maximum amount of excess cash after taking careful account of the cash needed
to support operations and expansions. As such, IDH is delighted to recommend a
final dividend in respect of the financial year ended 31 December 2021 of EGP
2.17 per share, or EGP 1.3 billion in aggregate. The equivalent value, which
will depend on the exchange rate at the time of the upstreaming from the
subsidiaries to the holding company, represents a significant increase from
the dividend of US$ 29.1 million distributed for the previous financial year.
2022 Outlook
We kicked off 2022 recording another surge in Covid-19 infections across our
markets as the highly-infective Omicron variant became increasingly prevalent.
Throughout this new wave, in both Egypt and Jordan we continued to provide our
patients with widespread access to Covid-19-related testing, helping to keep
our communities safe and providing local authorities with vital support in the
fight against the virus. In the final weeks of the first quarter, as vaccines
continued to be rolled out, we witnessed a sustained decline in new infections
with governments around the world signalling a strong will to transition into
a post-Covid-19 normality. While the Group remains vigilant and ready to
respond to possible new waves in infections, we are prepared and excited to
kickstart our post-pandemic strategy and venture into a new chapter of
sustainable growth. During the course of 2021, while our priority remained
helping governments combat the Covid-19 pandemic, we also worked tirelessly to
improve all aspects of the business and lay solid foundations on which to
build out next phase of development and value creation.
Heading into 2022, there are several exciting developments I am looking
forward to across both new and existing markets. In Egypt and Jordan, we are
aiming to capitalise on our market leading position, expanded product offering
and patient base, increased service delivery capabilities, and growing
visibility to continue delivering robust growth in the year ahead. In
particular, we are eager to capitalise on the post-Covid-19 rebound in
conventional testing as patients' focus shifts back to conventional healthcare
as the threat of Covid-19 subsides. Moreover, across both markets, our
attention will now pivot towards patient retention as well look to maintain
the new relationships we were able to establish during the pandemic thanks to
our Covid-19-dedicated offering. On this front, we have recently launched a
new dedicated loyalty programme in partnership with a leading loyalty
solutions provider, and are working to roll out multiple new marketing
campaigns making full use of our growing social media presence. In parallel,
we are also leveraging our enhanced digital and data analytics capabilities to
monitor patient records and disease cycles, and provide tailored services and
increase cross-selling. Our efforts continue to ensure that our patients enjoy
a hassle-free experience from start to finish, further enhancing their overall
experience. At the same time, we are targeting the roll out of an additional
25 to 30 branches in and outside the Greater Cairo area, and continue to take
advantage of the abundant spare capacity at our house call division to further
scale up the service. In Nigeria, thanks to the consistent revenue growth and
the stellar work being done by Dr. Bhatia and his team to streamline
operations, Echo-Lab is on track to turn EBITDA positive in 2022. We are
confident that the investments undertaken since the acquisition of Echo-Lab
back in 2018 have built a stronger, leaner, and growth-oriented business which
is well-placed to take full advantage of the significant growth opportunities
offered Nigeria's diagnostics market. Finally, in Sudan, we are continuing to
monitor the ongoing political and social instability and have put in place
strong mitigation strategies to protect our people and operations.
Beyond our current markets, we are also looking forward to obtaining the
remaining regulatory approvals and add Pakistan to our footprint. IDC is
expected to generate substantial value from the very start and we are thrilled
to kick off our partnership with Dr. Uppal in the coming months. In parallel,
we will continue to assess other potential value-accretive acquisition
opportunities both across new and existing markets in Africa, the Middle East,
and Asia which present similar characteristics to our current markets and
where our operational model would be best-suited to drive long-term value
creation.
A Turbulent Start to the Year
In the first few months of the new year, globally we have been confronted with
a new set of challenges related to the long-term economic spill overs of the
pandemic coupled with the impacts of the ongoing Russia-Ukraine war. Supply
chain issues, fast-rising consumer demand, and the increased volatility in
commodity prices which has been exacerbated by the ongoing war in Eastern
Europe, are continuing to push up prices, with countries around the world
recording inflation figures not seen for many years. In light of rising
inflation, central banks around the world have commenced a cycle of monetary
tightening, with many raising interest rates for the first time in years.
Here in Egypt, on 21 March 2022, the Central Bank raised policy rates by
100bps and allowed the Egyptian Pound to devalue by more than 17% against the
US Dollar. Despite the heightened uncertainty following the announcement, we
are confident that our proven track record in navigating similar turbulent
times and the strong mitigation frameworks we have in place provide ample
protection from the short and longer-term impacts of the decision. Going
forward, we will continue to keep a close eye on the evolving situation, and
have taken proactive steps to build up our inventory to safeguard ourselves
from any potential future disruptions.
I would like to conclude by thanking all my colleagues for their exceptional
work over the course of the last year. 2021 was the outstanding year that it
was in great part due to your relentless efforts to deliver on our vision and
goals. I am honoured to have the opportunity to work with you, and I am
confident that by working together we will be able to continue delivering
exceptional value in 2022.
Dr. Hend El-Sherbini
Chief Executive Officer
Important notice: A reconciliation between IFRS and APM measures is provided
earlier in this announcement.
Group Operational & Financial Review
i. Revenue/Net Sales and Cost Analysis
Revenue/Net Sales
Consolidated Analysis
IDH reported total revenues of EGP 5,225 million in FY 2021, up 97%
year-on-year. Consolidated net sales9 surpassed the EGP 5 billion mark,
recording EGP 5,048 million in FY 2021, up 90% versus FY 2020. The remarkable
growth was dual driven with tests performed during the year growing 24% and
average price per test rising 53% year-on-year.
On a service basis, net sales growth was supported by both IDH's
Covid-19-related1(0) and conventional test portfolios, both of which recorded
growing demand during the period. IDH's Covid-19-related offering contributed
to just over half of consolidated net sales in FY 2021 compared to the 24%
contribution made in FY 2020. The segment witnessed high demand throughout the
entire year, supported by rising infection rates in the first half of the year
and the widespread lifting of travel bans in the second half of 2021.
In parallel, a steady recovery in demand for conventional tests, saw
conventional net sales expand 22% year-on-year supported by a 15% year-on-year
rise in tests performed and a 7% increase in average price per conventional
test. Conventional test net sales for the year stood 13% above its
pre-pandemic level, a testament to the Company's impressive ability to expand
its service accessibility and delivery capabilities, to drive a rapid recovery
across its conventional test portfolio despite the difficult operating
conditions faced over the last two years.
On a quarterly basis, consolidated revenue recorded EGP 1,458 million, up 48%
year-on-year, while net sales recorded EGP 1,281 million, up 30% year-on-year.
Despite the strong growth versus the previous year, net sales for the quarter
posted a 13% quarter-on-quarter decline. This was largely attributable to a
17% quarter-on-quarter decline in net sales generated by IDH's core Covid-19
tests, which recorded EGP 627 million in Q4 2021 versus EGP 760 million in Q3
2021. Falling Covid-19-related net sales reflect both a decrease in average
price of Covid-19-related tests as well as lower demand generated by
passengers traveling abroad as the surge in traveling-related demand witnessed
in Q3 2021 following the lifting of travel bans subsided.
House Call Service
The Group's consolidated net sales was buoyed by its house call services in
Egypt and Jordan, which generated EGP 990 million in revenue in FY 2021, up
87% versus the previous year. By test type, in FY 2021 revenue net sales
generated by core Covid-19 tests stood at EGP 544 million, making up 55% of
total house call revenue for the year. Geographically, in Egypt house call
services generated EGP 935 million in revenue, contributing 23% to the
country's revenue. Meanwhile, In Jordan house call revenue stood at EGP 55
million, making up 6% of the country's revenue for the year. It is worth
highlighting that in FY 2021, average net sales per house call test stood at
EGP 202, significantly above the Group's average of EGP 150.
9 A reconciliation between revenue and net sales is available earlier in this
announcement.
(10) 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.
Detailed Consolidated Performance Breakdown
Q1 2020 Q1 2021 Q2 2020 Q2 2021 Q3 2020 Q3 2021 Q4 2020 Q4 2021 FY 2020 FY 2021
Total net sales (EGP mn) 500 1,130 450 1,164 720 1,473 986 1,281 2,656 5,048
Total tests (mn) 6.1 8.1 5.1 8.3 7.5 8.6 8.3 8.7 27.1 33.7
Conventional test net sales (EGP mn) 495 594 367 594 568 667 577 597 2,007 2,452
Conventional tests performed (mn) 6.1 6.8 4.6 6.9 7.0 7.5 7.3 7.3 24.9 28.5
Total Covid-19-related test net sales (EGP mn) 5 536 83 569 152 806 409 684 649 2,596
Core Covid-19 tests (PCR, Antigen, Antibody) (EGP mn) 5 399 26 431 92 760 314 627 437 2,217
Core Covid-19 tests performed (k) 4 407 42 387 92 882 300 935 438 2,610
Other Covid-19-related tests (EGP mn) 0 137 57 138 60 47 95 58 213 379
Other Covid-19-related tests performed (k) 0 874 531 933 477 284 714 416 1,722 2,507
Contribution to consolidated results
Conventional test net sales 99% 53% 82% 51% 79% 45% 59% 47% 76% 49%
Conventional tests performed 100% 84% 89% 84% 92% 87% 88% 84% 92% 85%
Total Covid-19-related tests 1% 47% 18% 49% 21% 55% 41% 53% 24% 51%
Core Covid-19 tests (PCR, Antigen, Antibody) 1% 35% 6% 37% 13% 52% 32% 49% 16% 44%
Core Covid-19 tests performed 0% 5% 1% 5% 1% 10% 4% 11% 2% 8%
Other Covid-19-related tests 0% 12% 13% 12% 8% 3% 10% 5% 8% 8%
Other Covid-19-related tests performed 0% 11% 10% 11% 6% 3% 9% 5% 6% 7%
Note: Quarterly results included in the table above are unaudited.
Net Sales Analysis: Contribution by Patient Segment
Contract Segment
Revenue generated by IDH's contract segment reached EGP 3,062 million in FY
2021, representing a 113% year-on-year increase versus the previous twelve
months. Meanwhile, net sales generated by the Group's contract segment more
than doubled year-on-year to record EGP 2,885 million in FY 2021 supported by
a 25% increase in contract tests performed and a 61% rise in the average net
sales per contract test. The segment's contribution to total net sales
subsequently increased to reach 57% from 54% in FY 2020. Covid-19-related(11)
testing contributed 53% of contract net sales in FY 2021 as the Company
continued to record strong patient demand in both Egypt and Jordan.
Controlling for contributions made by Covid-19-related tests during the year,
the contract segment would record a 23% year-on-year increase in conventional
test net sales on the back of a 17% increase in tests performed and a 6%
expansion in average net sales per test.
The contract segment's results include contributions from IDH's multiple
partnerships to conduct PCR testing for passengers. More specifically, IDH's
agreement with Pure Health UAE and with National Aviation Services Kuwait
(NAS) generated EGP 89 million and EGP 91 million, respectively, in FY 2021.
The number of PCR tests performed during the year as part of IDH's
partnerships with Pure Health stood at 83 thousand, making up 7% of total PCR
tests performed in Egypt for the year. Meanwhile, tests performed as part of
the Company's agreement with NAS stood at 51 thousand, representing 4% of
total PCR tests performed in Egypt during FY 2021.
In Jordan, the Group's partnership with Queen Alia International Airport
(QAIA) generated net sales of EGP 185 million. As part of the agreement,
Biolab carried out 503 thousand PCR tests, representing 41% of total PCR tests
performed in Jordan for the year. At the same time, Biolab's agreements with
Aqaba's King Hussein International Airport (KHIA) and Aqaba Port contributed
an additional EGP 107 million to the segment. It is worth noting that Biolab's
partnership with KHIA started in August 2020, followed by the company's
agreement with Aqaba Port which kicked off in May 2021, and its partnership
with QAIA which commenced in August 2021.
Walk-in Segment
The Group's walk-in segment recorded revenue and net sales (IFRS and APM
measures for walk-in segment were identical for the year) of EGP 2,162 million
in FY 2021, up 77% versus the previous year. The year-on-year growth was
supported by a 23% increase in tests performed and a 44% increase in average
price per test. The segment's contribution to total net sales stood at 43%
versus the 46% in FY 2020. Meanwhile, the contribution of Covid-19-related
tests to the walk-in segment stood at 49% in FY 2021, compared to 26% in FY
2020. Excluding Covid-19-related contributions, conventional walk-in net sales
recorded a 21% increase versus the previous year, as conventional walk-in
tests volumes grew 9% year-on-year and net sales per conventional walk-in test
increased 11% versus FY 2020.
1(1 )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.
Key Performance Indicators
Walk-in Segment Contract Segment Total
FY20 FY21 Change FY20 FY21 Change FY20 FY21 Change
Net sales^ (EGP mn) 1,222 2,162 77% 1,434 2,885 101% 2,656 5,048 90%
Total Covid-19-related net sales (EGP mn) 314 1,063 239% 335 1,533 357% 649 2,596 300%
Patients ('000) 2,288 3,464 51% 4,825 6,853 42% 7,113 10,317 45%
% of Patients 32% 34% 68% 66%
Net sales per Patient (EGP) 534 624 17% 297 421 42% 373 489 31%
Tests ('000) 7,052 8,693 23% 20,021 24,966 25% 27,073 33,659 24%
% of Tests 26% 26% 74% 74%
Total Covid-19-related tests ('000) 659 1,745 165% 1,501 3,372 125% 2,160 5,117 137%
Net Sales per Test (EGP) 173 249 44% 72 116 61% 98 150 53%
Test per Patient 3.1 2.5 -19% 4.1 3.6 -12% 3.8 3.3 -14%
Revenue Analysis: Contribution by Geography
Egypt
In Egypt, IDH reported revenue of EGP 4,108 million, 89% above the previous
year's figure and contributing to 81.4% of total net sales for the year. The
impressive result was supported by a 21% year-on-year rise in test performed
coupled with a 56% year-on-year increase in average revenue per test. As with
the consolidated performance, Egypt's revenues were supported by both the
Group's Covid-19-related1(2) test offering which in FY 2021 made up 49% of the
Egypt's revenues, as well as the country's conventional test offering, which
made up the remaining 51% of Egypt's revenues. When controlling for
contributions made by Covid-19-related tests during the year, revenue
generated by conventional tests increased a solid 23% versus the previous year
supported by a 15% rise in conventional tests performed and a 7% expansion in
average revenue per conventional test.
On a quarterly basis, net sales generated by IDH's Egyptian operations reached
EGP 986 million in Q4 2021, up 29% versus the final three months of FY 2020.
Despite the strong year-on-year rise, on a quarter-on-quarter basis, revenue
declined 17% primarily driven by lower revenue generated by the Company's core
Covid-19 test offering versus the previous quarter. Lower Covid-19-related
revenue reflect a more than 21% quarter-on-quarter fall in the average price
for core Covid-19 test during Q4 2021 coupled with lower demand from
international travellers, which had boosted results in the third quarter
following a widespread lifting of international travel restrictions.
House Call Service
IDH's house call service in Egypt, which has been successfully ramped up to
capitalise on the service's growing popularity, recorded revenue of EGP 935
million in FY 2021, up 94% year-on-year. The service's contribution to the
country's revenues stood at 23% in FY 2021, versus the 22% contribution made
in FY 2020. Core Covid-19 tests performed through its house call service made
up 30% of total core Covid-19 tests performed by IDH in the country throughout
the year. It is also important to note that, tests performed through IDH's
house call service are offered at the same price as at traditional branches,
with only an additional house call delivery fee charged to patients to cover
the transportation costs of the chemist.
Al-Borg Scan
IDH's fast-growing radiology venture, Al-Borg Scan, reported revenue of EGP 45
million in FY 2021, a solid 81% year-on-year increase. Revenue growth was
supported by a 70% rise in both tests performed and patients served versus the
previous year. To capitalise on Al-Borg Scan's growing popularity, the Group
inaugurated two Al-Borg Scan branches in the second half of 2021, and a third
in March 2022. In the coming months, IDH is looking to inaugurate additional
branches to expand its reach across Greater Cairo.
Overall, IDH served 8.5 million patients in Egypt and performed 29.7 million
tests in FY 2021, up 34% and 21% year-on-year, respectively.
(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.
Detailed Egypt Revenue Breakdown
EGP mn Q1 2020 Q1 2021 Q2 2020 Q2 2021 Q3 2020 Q3 2021 Q4 2020 Q4 2021 FY 2020 FY 2021
Total Revenue 424 920 381 1,015 602 1,187 767 986 2,173 4,108
Conventional Revenue 424 507 314 510 482 573 493 513 1,713 2,103
Total Covid-19-related Revenue 0 414 67 504 120 614 273 474 460 2,005
Core Covid-19 tests (PCR, Antigen, Antibody) 0 277 10 366 60 567 178 416 248 1,626
Other Covid-19-related tests 0 137 57 138 60 47 95 58 213 379
Contribution to Egypt Net Sales
Conventional tests 100% 55% 82% 50% 80% 48% 64% 52% 79% 51%
Total Covid-19-related tests 0% 45% 18% 50% 20% 52% 36% 48% 21% 49%
Core Covid-19 tests (PCR, Antigen, Antibody) 0% 30% 3% 36% 10% 48% 23% 42% 11% 40%
Other Covid-19-related tests 0% 15% 15% 14% 10% 4% 12% 6% 10% 9%
Note: Quarterly results included in the table above are unaudited.
Jordan
In Jordan, the Group recorded revenue of EGP 1,046 million in FY 2021, up 156%
from the previous year. Meanwhile, IDH's Jordanian operations saw net
sales1(3) more than double year-on-year to reach EGP 869 million for the year,
up 113% versus FY 2020. Net sales growth was driven by an 75% increase in test
performed coupled with a 21% rise in Biolab's average net sales per test.
During the year, Covid-19-related tests contributed to 68% of Biolab's net
sales and to 37% of its tests performed. Covid-19-related net sales in Jordan
was boosted by contributions of EGP 185 million from Biolab's new partnership
with QAIA coupled with the EGP 107 million in net sales coming from its
partnerships with KHIA and Aqaba Port. As part of these agreements, Biolab has
been operating testing stations across all three locations primarily focused
on PCR testing for Covid-19 to passengers arriving in Jordan. The stations
also offer additional diagnostic tests to patients including rapid PCR testing
for Covid-19 for departing passengers and other, more generic diagnostic
tests. Meanwhile, conventional test net sales increased 26% year-on-year on
the back of a 28% increase in conventional tests performed. Meanwhile, the
country's net sales continued to be supported by Biolab's house call service
which generated EGP 55 million in net sales in FY 2021, up 12% year-on-year.
In Q4 2021, Jordan's net sales recorded EGP 277 million, representing a 45%
increase from Q4 2020 and up 3% versus Q3 2021 (Jordan's revenues (IFRS) in Q4
2021 recorded EGP 454 million, up 137% versus Q4 2020). During the quarter,
Biolab's partnership with QAIA generated EGP 101 million in net sales while
net sales from its partnerships with KHIA and Aqaba Port stood at EGP 48
million. In Q4 2021, PCR tests performed as part of Biolab's agreement with
QAIA recorded 278 thousand (55% of Jordan's total PCR tests for the quarter).
In parallel, during the quarter Biolab performed 118 thousand PCR tests at
KHIA and Aqaba Port, representing 23% of total PCR tests carried out by Biolab
in the year. Robust volumes generated though these agreements more than offset
a general decrease in demand for Covid-19-related testing as infection rates
declined following the continued ramp up of the country's vaccination
campaign.
Detailed Jordan Net Sales Breakdown
EGP mn Q1 2020 Q1 2021 Q2 2020 Q2 2021 Q3 2020 Q3 2021 Q4 2020 Q4 2021 FY 2020 FY 2021
Total Net Sales 58 190 59 134 100 269 191 277 409 869
Conventional Net Sales 53 68 44 68 68 76 55 66 220 278
Total Covid-19-related Net Sales (PCR and Antibody) 5 122 16 65 32 192 136 211 189 591
Contribution to Jordan Net Sales
Conventional Net Sales 91% 36% 74% 51% 68% 28% 29% 24% 54% 32%
Total Covid-19-related Net Sales (PCR and Antibody) 9% 64% 26% 49% 32% 72% 71% 76% 46% 68%
Note: Quarterly results included in the table above are unaudited.
1(3) Biolab's net sales for the period are calculated as revenues excluding
concession fees paid to QAIA and Aqaba Port as part of their revenue sharing
agreement.
Nigeria
At the Group's Nigerian subsidiary, revenue expanded 49% year-on-year to reach
EGP 54 million in FY 2021. Growth was even more pronounced in local currency
terms with revenue up 53% year-on-year supported by a 31% year-on-year
expansion in tests performed (patients served were up 16%) coupled with a 14%
rise in average revenue per test. Over the last two years, Echo-Lab's has
consistently delivered solid volume growth thanks to an effective revamp
strategy which has involved the complete renovation of the venture's branches
combined with the rollout of targeted marketing campaigns aimed at stimulating
demand for the venture's services. Volumes for the year also benefitting from
a gradual normalisation of traffic following the easing of restrictive
measures enforced to curb the spread of Covid-19 throughout 2020.
In Q4 2021, IDH's Nigeria operations recorded year-on-year revenue growth of
18% to record EGP 13.4 million. As part of the venture's revamp strategy,
Echo-Lab's management team was strengthened with several key hires. Most
notably, Dr. Alok Bhatia, an industry expert with over 25 years of experience
in the field, joined Echo-Lab as CEO in March 2021.
Sudan
Finally in Sudan, IDH reported a 56% year-on-year contraction in revenue to
EGP 17 million for the year. The country's results continue to be
significantly impacted by the devaluation of the Sudanese pound in early 2021
with the average SDG/EGP rate in FY 2021 standing at 0.05 versus 0.29 in FY
2020. Nonetheless, management's continued success in raising prices in step
with inflation throughout the year, saw revenue in local currency terms grow
an impressive 159% in FY 2021.
Net Sales Contribution by Country
FY 2020 FY 2021 Change
Egypt Net Sales (EGP mn) 2,173 4,108 89%
Covid-19-related (EGP mn) 460 2,005 335%
Egypt Contribution 82% 81%
Jordan Net Sales (EGP mn) 409 869 112%
Covid-19-related (EGP mn) 189 591 213%
Jordan Revenues (EGP mn) (IFRS) 409 1,046 156%
Jordan Net Sales (JOD mn) 19 39 113%
Jordan Revenues (JOD mn) (IFRS) 18 47 157%
Jordan Contribution 15% 17%
Nigeria Net Sales (EGP mn) 36 54 49%
Nigeria Net Sales (NGN mn) 898 1,373 53%
Nigeria Contribution 1% 1%
Sudan Net Sales (EGP mn) 38 17 -56%
Sudan Net Sales (SDG mn) 129 335 159%
Sudan Contribution 1.4% 0.3%
---
Patients Served and Tests Performed by Country
FY 2020 FY 2021 Change
Egypt Patients Served (mn) 6.3 8.5 34%
Egypt Tests Performed (mn) 24.4 29.7 21%
Covid-19-related tests (mn) 1.9 3.8 102%
Jordan Patients Served (k) 550 1,627 196%
Jordan Tests Performed (k) 2,011 3,529 75%
Covid-19-related tests (k) 269 1,302 383%
Nigeria Patients Served (k) 131 153 16%
Nigeria Tests Performed (k) 215 281 31%
Sudan Patients Served (k) 130 70 -46%
Sudan Tests Performed (k) 409 182 -55%
Total Patients Served (mn) 7.1 10.3 45%
Total Tests Performed (mn) 27.1 33.7 24%
Branches by Country
31 December 2020 31 December 2021 Change
Egypt 429 452 23
Jordan 20 21 1
Nigeria 12 10 -2
Sudan 20 19 -1
Total Branches 481 502 21
-Cost of Net Sales14
IDH's cost of net sales rose 71% year-on-year to record EGP 2,244 million15 in
FY 2021, rising at a slower pace than the Group's revenue for the year. This
supported a 109% year-on-year rise in IDH's gross profit for FY 2021 which
recorded EGP 2,804 million. IDH's gross profit margin on consolidated revenue
recorded 54% in FY 2021 versus 51% in the previous year. Meanwhile, gross
profit margin on net sales of 56% versus 51% in FY 2020.
Cost of Net Sales Breakdown as a Percentage of Net Sales
FY 2020 FY 2021
Raw Materials 18.4% 19.6%
Wages & Salaries 14.7% 12.6%
Depreciation & Amortisation 6.1% 4.2%
Other Expenses 10.3% 8.1%
Total 49.5% 44.4%
Raw material costs, which include cost of specialized analysis at other
laboratories, recorded EGP 987 million for the year, continuing to make up the
largest share of total COGS at 44%. As a share of net sales, raw material
costs increased to 19.6% in FY 2021 compared to 18.4% in the previous year.
This increase is primarily attributable to higher raw material costs as a
share of net sales recorded by Biolab, driven by both the retesting of
Covid-19 positive cases in the first part of the year, and by additional fees
incurred by the company as part of its revenue sharing agreement with QAIA. On
a quarterly basis, raw material costs as a share of on net sales reached 23%
in Q4 2021 versus 19% in Q3 2021. This is mainly attributable to IDH's
Egyptian operations which saw their raw material to net sales ratio expand
five percentage points quarter-on-quarter in Q4 2021, on the back of a 23%
decline in the average price of core Covid-19 tests coupled with a 12%
increase in the average cost per PCR test kit versus the third quarter of this
year.
Direct salaries and wages for the year rose 63% year-on-year to EGP 635
million, making the second largest share of total COGS at 28%. The increase
comes on the back of a 116% year-on-year rise in the share of profits
allocated to direct salaries and wages to EGP 175 million in FY 2021 from EGP
81 million in FY 2020 following higher net profit recorded at its Egyptian
operations,1(6) in addition to higher bonuses and incentives paid during FY
2021 in light of this year's record-breaking performance.
Direct depreciation and amortisation increased 31% year-on-year in FY 2021 to
EGP 214 million, principally due to the incremental amortisation of new
branches (IFRS 16 right-of-use assets).
Other expenses for the year increased 49% versus FY 2020, to record EGP 407
million. The increase was primarily driven by higher transportation costs
related to IDH's house call service, and increased utilities and cleaning
expenses mainly due to the net addition of 21 new branches throughout the
year.
(14)Cost of net sales is calculated as cost of sales (IFRS) for the period
excluding commission fees paid to QAIA and Aqaba Port by Biolab as part of its
revenue sharing agreements with the two terminals.
15( )According to IFRS 15, cost of sales recorded EGP 2,421 million in FY
2021, up 84% year-on-year. In the final quarter of the year, IDH recorded a
cost of sales of EGP 821 million. Meanwhile, gross profit margin recorded 44%
in Q4 2021 versus 52% in Q4 2020.
(16)According to IAS1, employee profit share is recorded in wages and
salaries.
Selling, General and Administrative Expenses
Total SG&A outlays for the year stood at EGP 513 million, up 44% from FY
2020. The increase was driven by rising salaries and marketing spending,
coupled with higher call center costs and a new contract with PwC for external
auditing services.
Marketing and advertising expenses came in at EGP 97 million in FY 2021, up
57% year-on-year. The increase largely reflects an overall expansion in IDH's
marketing and advertisement efforts, which throughout the year saw the Company
launch targeted campaigns across a wide variety of channels.
EBITDA
IDH's adjusted EBITDA(17) recorded EGP 2,530 million (identical in absolute
terms when using IFRS or APM) in the twelve months to 31 December 2021, up a
solid 116% versus the previous year. Adjusted EBITDA margin on consolidated
revenue recorded 48% in FY 2021 versus 44% in the previous year. Meanwhile,
adjusted EBITDA margin on net sales expanded to 50% in FY 2021 versus 44% in
FY 2020.1(8) Improved EBITDA level profitability was supported by robust
revenue growth for the year and the subsequent dilution of fixed costs. EBITDA
growth was also supported by a decrease in level of receivable provisions for
expected credit, which recorded EGP 25 million versus the EGP 42 million
booked in the previous twelve months to account for expected credit losses in
accordance with IFRS 9. It is important to note that adjusted EBITDA excludes
one-off listing fees of EGP 29 million incurred in FY 2021 related to the
Company's dual listing on the EGX completed in May 2021.
On a three-month basis, adjusted EBITDA expanded 17% year-on-year to record
EGP 537 million in the final quarter of 2021 (identical in absolute terms
between IFRS and APM). However, on a quarter-on-quarter basis normalized
EBITDA declined 32% versus Q3 2021 mainly due to a quarter-on-quarter decrease
in net sales and concurrent increase in outlays for the quarter, in particular
sales and marketing expenses. Adjusted EBITDA margin on consolidated revenue
recorded 37% in Q4 2021 versus 47% in the same quarter of the previous year.
Meanwhile, adjusted EBITDA margin on net sales stood at 42% for the quarter,
down from 47% recorded in Q4 2020 and the 54% margin recorded in Q3 2021.
In IDH's home market of Egypt, EBITDA recorded EGP 2,206 million in FY 2021,
up 112% year-on-year on the back of strong revenue growth. EBITDA margin on
net sales increased six percentage points to 54% the year.
IDH's Jordanian operations recorded EBITDA of EGP 331 million in FY 2021, up
155% versus the previous year on the back of strong growth. In local currency
terms, EBITDA grew 156% compared to the previous year. EBITDA margin on net
sales recorded 38% in FY 2021 compared to 32% in FY 2020. It is important to
note that Jordan's EBITDA calculated using revenues for the year (in
compliance with IFRS), recorded the same absolute value as the APM figure for
the year which utilises net sales. However, EBITDA margin calculated on
revenues (IFRS compliant) would stand at 32% in FY 2021 unchanged versus last
year.
Operations in Nigeria posted an EBITDA loss of EGP 7 million, in line with the
previous year's figure. Losses for the year partially reflect a one-off EGP
4.4 million adjustment related to the previous year. Controlling for the
one-off adjustment, EBITDA losses would come in at EGP 2.6 million,
significantly narrowing from the previous year's figure. In light of the
steady improvements witnessed throughout 2021, Nigeria is expected to turn
EBITDA positive during the first half of 2022.
1(7) Adjusted EBITDA is calculated as operating profit plus depreciation and
amortization and minus one-off fees incurred in FY 2021 related to the
Company's EGX listing completed in May 2021.
1(8)It is important to note that while in absolute terms the Normalised EBITDA
figure is identical when using IFRS or APM, its margin differs between the two
sets of performance indicators.
Finally, in Sudan the Company recorded an EBITDA loss of EGP 0.5 million in FY
2021, compared to a positive EBITDA of EGP 6.1 million in FY 2020. EBITDA for
the year was impacted by the sharp SDG devaluation in February 2021. In SDG
terms EBITDA declined 148% year-on-year.
Regional EBITDA in Local Currency
Mn FY 2020 FY 2021 Change
Egypt EGP 1,041 2,206 112%
Margin on net sales 48% 54%
Jordan JOD 6 15 156%
Margin on net sales 32% 38%
Margin on revenues (IFRS) 32% 32%
Nigeria NGN -170 -179 6%
Margin on net sales -19% -13%
Sudan SDG 21 -10 -148%
Margin on net sales 16% -3%
Interest Income / Expense
IDH recorded interest income of EGP 113 million in FY 2021, up 113%
year-on-year on the back of higher cash balances during the year coupled with
an optimised cash allocation between T-bills and time deposits.
Interest expense recorded EGP 118 million in the twelve months to year-end
2021, up 65% year-on-year. The increase in attributable to:
· Higher interest on lease liabilities related to IFRS 16 following the
addition of new branches in Egypt and Jordan and the renewal of medical
equipment agreements with our main equipment suppliers.
· Higher bank charges resulting from increased penetration of, and
reliance on, POS machines and electronic payments in both Egypt and Jordan
during the period. It is important to note that bank charges recorded by IDH's
Jordanian operations represented 58% of total bank charges during FY 2021,
which is mainly related to Biolab's partnership with QAIA.
· Loan-related expenses incurred by IDH during the period as the
Company secured a new eight-year US$ 45 million facility with the
International Finance Corporation (IFC) in May 2021. More specifically, IDH
booked loan-related expenses of EGP 20.3 million in FY 2021 including a
front-end fee, syndication fee, and legal advisory fees.
Interest Expense Breakdown
EGP Mn FY 2020 FY 2021 Change
Interest on Lease Liabilities (IFRS 16) 51.4 59.5 16%
Interest Expenses on Borrowings1(9) 12.4 9.4 -24%
Loan-related Expenses on IFC facility - 20.3 N/A
Interest Expenses on Leases 4.1 8.8 117%
Bank Charges 3.7 20.0 445%
Total Interest Expense 71.5 118.0 65%
(19)Interest expenses on medium-term loans divided as EGP 2.6 million related
to its medium term facility with the Commercial International Bank (CIB) and
EGP 6.5 million to its facility with Ahli United Bank Egypt (AUBE).
Foreign Exchange
IDH recorded a net foreign exchange loss of EGP 18 million in FY 2021 compared
to EGP 13 million in FY 2020. The figure largely reflects FX losses on the
back of the SDG devaluation versus the EGP in February 2021.
Taxation
Tax expenses recorded EGP 740 million in FY 2021 versus EGP 360 million in the
previous twelve months. The effective tax rate stood at 33% for the year
versus 37% in FY 2020. The lower effective tax rate largely reflects the
recognition of Echo-Scan's deferred tax assets. It is important to note that
there is no tax payable for IDH's two companies at the holding level, while
tax was paid on profits generated by operating subsidiaries.
Taxation Breakdown by Region
EGP Mn FY 2020 FY 2021 Change
Egypt 340.6 704.8 107%
Jordan 19.0 54.0 184%
Nigeria -1.0 -20.0 N/A
Sudan 1.0 1.0 0%
Total Tax Expenses 359.6 739.8 106%
Net Profit
IDH's consolidated net profit expanded 145% year-on-year in FY-2021 to record
EGP 1,493 million (identical in absolute terms between IFRS and APM measures).
Net profit margin on consolidated revenue recorded 29% for the year, versus
23% in FY 2020. Meanwhile, net profit margin2(0) on net sales stood at 30% for
the year, up seven percentage points from the previous twelve month period.
Net profitability improvements for the year were supported by strong revenue
growth coupled with the dilution of fixed costs, and normalising provisions
for the year. In Q4 2021, net profit stood at EGP 345 million, up 47%
year-on-year. Net profit margin on consolidated revenue stood at 24% unchanged
year-on-year. Net profit margin on net sales recorded 27%, up three percentage
points year-on-year.
2(0) It is important to note that while in absolute terms the net profit
figure is identical when using IFRS or APM, its margin differs between the two
sets of performance indicators.
---
Patients Served and Tests Performed by Country
FY 2020 FY 2021 Change
Egypt Patients Served (mn) 6.3 8.5 34%
Egypt Tests Performed (mn) 24.4 29.7 21%
Covid-19-related tests (mn) 1.9 3.8 102%
Jordan Patients Served (k) 550 1,627 196%
Jordan Tests Performed (k) 2,011 3,529 75%
Covid-19-related tests (k) 269 1,302 383%
Nigeria Patients Served (k) 131 153 16%
Nigeria Tests Performed (k) 215 281 31%
Sudan Patients Served (k) 130 70 -46%
Sudan Tests Performed (k) 409 182 -55%
Total Patients Served (mn) 7.1 10.3 45%
Total Tests Performed (mn) 27.1 33.7 24%
Branches by Country
31 December 2020 31 December 2021 Change
Egypt 429 452 23
Jordan 20 21 1
Nigeria 12 10 -2
Sudan 20 19 -1
Total Branches 481 502 21
-Cost of Net Sales14
IDH's cost of net sales rose 71% year-on-year to record EGP 2,244 million15 in
FY 2021, rising at a slower pace than the Group's revenue for the year. This
supported a 109% year-on-year rise in IDH's gross profit for FY 2021 which
recorded EGP 2,804 million. IDH's gross profit margin on consolidated revenue
recorded 54% in FY 2021 versus 51% in the previous year. Meanwhile, gross
profit margin on net sales of 56% versus 51% in FY 2020.
Cost of Net Sales Breakdown as a Percentage of Net Sales
FY 2020 FY 2021
Raw Materials 18.4% 19.6%
Wages & Salaries 14.7% 12.6%
Depreciation & Amortisation 6.1% 4.2%
Other Expenses 10.3% 8.1%
Total 49.5% 44.4%
Raw material costs, which include cost of specialized analysis at other
laboratories, recorded EGP 987 million for the year, continuing to make up the
largest share of total COGS at 44%. As a share of net sales, raw material
costs increased to 19.6% in FY 2021 compared to 18.4% in the previous year.
This increase is primarily attributable to higher raw material costs as a
share of net sales recorded by Biolab, driven by both the retesting of
Covid-19 positive cases in the first part of the year, and by additional fees
incurred by the company as part of its revenue sharing agreement with QAIA. On
a quarterly basis, raw material costs as a share of on net sales reached 23%
in Q4 2021 versus 19% in Q3 2021. This is mainly attributable to IDH's
Egyptian operations which saw their raw material to net sales ratio expand
five percentage points quarter-on-quarter in Q4 2021, on the back of a 23%
decline in the average price of core Covid-19 tests coupled with a 12%
increase in the average cost per PCR test kit versus the third quarter of this
year.
Direct salaries and wages for the year rose 63% year-on-year to EGP 635
million, making the second largest share of total COGS at 28%. The increase
comes on the back of a 116% year-on-year rise in the share of profits
allocated to direct salaries and wages to EGP 175 million in FY 2021 from EGP
81 million in FY 2020 following higher net profit recorded at its Egyptian
operations,1(6) in addition to higher bonuses and incentives paid during FY
2021 in light of this year's record-breaking performance.
Direct depreciation and amortisation increased 31% year-on-year in FY 2021 to
EGP 214 million, principally due to the incremental amortisation of new
branches (IFRS 16 right-of-use assets).
Other expenses for the year increased 49% versus FY 2020, to record EGP 407
million. The increase was primarily driven by higher transportation costs
related to IDH's house call service, and increased utilities and cleaning
expenses mainly due to the net addition of 21 new branches throughout the
year.
(14)Cost of net sales is calculated as cost of sales (IFRS) for the period
excluding commission fees paid to QAIA and Aqaba Port by Biolab as part of its
revenue sharing agreements with the two terminals.
15( )According to IFRS 15, cost of sales recorded EGP 2,421 million in FY
2021, up 84% year-on-year. In the final quarter of the year, IDH recorded a
cost of sales of EGP 821 million. Meanwhile, gross profit margin recorded 44%
in Q4 2021 versus 52% in Q4 2020.
(16)According to IAS1, employee profit share is recorded in wages and
salaries.
Selling, General and Administrative Expenses
Total SG&A outlays for the year stood at EGP 513 million, up 44% from FY
2020. The increase was driven by rising salaries and marketing spending,
coupled with higher call center costs and a new contract with PwC for external
auditing services.
Marketing and advertising expenses came in at EGP 97 million in FY 2021, up
57% year-on-year. The increase largely reflects an overall expansion in IDH's
marketing and advertisement efforts, which throughout the year saw the Company
launch targeted campaigns across a wide variety of channels.
EBITDA
IDH's adjusted EBITDA(17) recorded EGP 2,530 million (identical in absolute
terms when using IFRS or APM) in the twelve months to 31 December 2021, up a
solid 116% versus the previous year. Adjusted EBITDA margin on consolidated
revenue recorded 48% in FY 2021 versus 44% in the previous year. Meanwhile,
adjusted EBITDA margin on net sales expanded to 50% in FY 2021 versus 44% in
FY 2020.1(8) Improved EBITDA level profitability was supported by robust
revenue growth for the year and the subsequent dilution of fixed costs. EBITDA
growth was also supported by a decrease in level of receivable provisions for
expected credit, which recorded EGP 25 million versus the EGP 42 million
booked in the previous twelve months to account for expected credit losses in
accordance with IFRS 9. It is important to note that adjusted EBITDA excludes
one-off listing fees of EGP 29 million incurred in FY 2021 related to the
Company's dual listing on the EGX completed in May 2021.
On a three-month basis, adjusted EBITDA expanded 17% year-on-year to record
EGP 537 million in the final quarter of 2021 (identical in absolute terms
between IFRS and APM). However, on a quarter-on-quarter basis normalized
EBITDA declined 32% versus Q3 2021 mainly due to a quarter-on-quarter decrease
in net sales and concurrent increase in outlays for the quarter, in particular
sales and marketing expenses. Adjusted EBITDA margin on consolidated revenue
recorded 37% in Q4 2021 versus 47% in the same quarter of the previous year.
Meanwhile, adjusted EBITDA margin on net sales stood at 42% for the quarter,
down from 47% recorded in Q4 2020 and the 54% margin recorded in Q3 2021.
In IDH's home market of Egypt, EBITDA recorded EGP 2,206 million in FY 2021,
up 112% year-on-year on the back of strong revenue growth. EBITDA margin on
net sales increased six percentage points to 54% the year.
IDH's Jordanian operations recorded EBITDA of EGP 331 million in FY 2021, up
155% versus the previous year on the back of strong growth. In local currency
terms, EBITDA grew 156% compared to the previous year. EBITDA margin on net
sales recorded 38% in FY 2021 compared to 32% in FY 2020. It is important to
note that Jordan's EBITDA calculated using revenues for the year (in
compliance with IFRS), recorded the same absolute value as the APM figure for
the year which utilises net sales. However, EBITDA margin calculated on
revenues (IFRS compliant) would stand at 32% in FY 2021 unchanged versus last
year.
Operations in Nigeria posted an EBITDA loss of EGP 7 million, in line with the
previous year's figure. Losses for the year partially reflect a one-off EGP
4.4 million adjustment related to the previous year. Controlling for the
one-off adjustment, EBITDA losses would come in at EGP 2.6 million,
significantly narrowing from the previous year's figure. In light of the
steady improvements witnessed throughout 2021, Nigeria is expected to turn
EBITDA positive during the first half of 2022.
1(7) Adjusted EBITDA is calculated as operating profit plus depreciation and
amortization and minus one-off fees incurred in FY 2021 related to the
Company's EGX listing completed in May 2021.
1(8)It is important to note that while in absolute terms the Normalised EBITDA
figure is identical when using IFRS or APM, its margin differs between the two
sets of performance indicators.
Finally, in Sudan the Company recorded an EBITDA loss of EGP 0.5 million in FY
2021, compared to a positive EBITDA of EGP 6.1 million in FY 2020. EBITDA for
the year was impacted by the sharp SDG devaluation in February 2021. In SDG
terms EBITDA declined 148% year-on-year.
Regional EBITDA in Local Currency
Mn FY 2020 FY 2021 Change
Egypt EGP 1,041 2,206 112%
Margin on net sales 48% 54%
Jordan JOD 6 15 156%
Margin on net sales 32% 38%
Margin on revenues (IFRS) 32% 32%
Nigeria NGN -170 -179 6%
Margin on net sales -19% -13%
Sudan SDG 21 -10 -148%
Margin on net sales 16% -3%
Interest Income / Expense
IDH recorded interest income of EGP 113 million in FY 2021, up 113%
year-on-year on the back of higher cash balances during the year coupled with
an optimised cash allocation between T-bills and time deposits.
Interest expense recorded EGP 118 million in the twelve months to year-end
2021, up 65% year-on-year. The increase in attributable to:
· Higher interest on lease liabilities related to IFRS 16 following the
addition of new branches in Egypt and Jordan and the renewal of medical
equipment agreements with our main equipment suppliers.
· Higher bank charges resulting from increased penetration of, and
reliance on, POS machines and electronic payments in both Egypt and Jordan
during the period. It is important to note that bank charges recorded by IDH's
Jordanian operations represented 58% of total bank charges during FY 2021,
which is mainly related to Biolab's partnership with QAIA.
· Loan-related expenses incurred by IDH during the period as the
Company secured a new eight-year US$ 45 million facility with the
International Finance Corporation (IFC) in May 2021. More specifically, IDH
booked loan-related expenses of EGP 20.3 million in FY 2021 including a
front-end fee, syndication fee, and legal advisory fees.
Interest Expense Breakdown
EGP Mn FY 2020 FY 2021 Change
Interest on Lease Liabilities (IFRS 16) 51.4 59.5 16%
Interest Expenses on Borrowings1(9) 12.4 9.4 -24%
Loan-related Expenses on IFC facility - 20.3 N/A
Interest Expenses on Leases 4.1 8.8 117%
Bank Charges 3.7 20.0 445%
Total Interest Expense 71.5 118.0 65%
(19)Interest expenses on medium-term loans divided as EGP 2.6 million related
to its medium term facility with the Commercial International Bank (CIB) and
EGP 6.5 million to its facility with Ahli United Bank Egypt (AUBE).
Foreign Exchange
IDH recorded a net foreign exchange loss of EGP 18 million in FY 2021 compared
to EGP 13 million in FY 2020. The figure largely reflects FX losses on the
back of the SDG devaluation versus the EGP in February 2021.
Taxation
Tax expenses recorded EGP 740 million in FY 2021 versus EGP 360 million in the
previous twelve months. The effective tax rate stood at 33% for the year
versus 37% in FY 2020. The lower effective tax rate largely reflects the
recognition of Echo-Scan's deferred tax assets. It is important to note that
there is no tax payable for IDH's two companies at the holding level, while
tax was paid on profits generated by operating subsidiaries.
Taxation Breakdown by Region
EGP Mn FY 2020 FY 2021 Change
Egypt 340.6 704.8 107%
Jordan 19.0 54.0 184%
Nigeria -1.0 -20.0 N/A
Sudan 1.0 1.0 0%
Total Tax Expenses 359.6 739.8 106%
Net Profit
IDH's consolidated net profit expanded 145% year-on-year in FY-2021 to record
EGP 1,493 million (identical in absolute terms between IFRS and APM measures).
Net profit margin on consolidated revenue recorded 29% for the year, versus
23% in FY 2020. Meanwhile, net profit margin2(0) on net sales stood at 30% for
the year, up seven percentage points from the previous twelve month period.
Net profitability improvements for the year were supported by strong revenue
growth coupled with the dilution of fixed costs, and normalising provisions
for the year. In Q4 2021, net profit stood at EGP 345 million, up 47%
year-on-year. Net profit margin on consolidated revenue stood at 24% unchanged
year-on-year. Net profit margin on net sales recorded 27%, up three percentage
points year-on-year.
2(0) It is important to note that while in absolute terms the net profit
figure is identical when using IFRS or APM, its margin differs between the two
sets of performance indicators.
ii. Balance Sheet Analysis
Assets
Property, Plant and Equipment
IDH held gross property, plant and equipment (PPE) of EGP 1,659 million as at
year-end 2021, up from the EGP 1,252 million as of 31 December 2020.
Meanwhile, CAPEX outlays excluding payments on account and accounting for the
impact of hyperinflation, represented 8.6% of consolidated net sales in FY
2021. The increase in CAPEX outlays as a share of total net sales for the year
is in part attributable to EGP 115.7 million in equipment related to the
Reagent deals and to EGP 53.7 million spent on the purchase of a new radiology
branch during the year. It is worth noting that IDH engages in Reagent deals
whereby the majority of its testing equipment is provided at no upfront
payment as part of a wider agreement to purchase a minimum volume of kits from
the equipment supplier. These contracts typically have tenors ranging from 5
to 7 years, with the equipment substituted following the contract's renewal.
Total CAPEX Breakdown
EGP Mn FY 2021 % of Net Sales
Mega Lab 132.5 2.6%
Al-Borg Scan Expansion 154.0 3.1%
Leasehold Improvements/others 147.6 2.9%
Total CAPEX Additions 434.1 8.6%
Accounts Receivable and Provisions
As at 31 December 2021, accounts receivables' Days on Hand (DOH) stood at 107
days compared to 144 days at year-end 2020. The significant decline witnessed
throughout the year highlights a sustained improvement in collections versus
the previous year. Accounts receivables' DOH is calculated based on credit
revenues (credit revenues relates to patients who paid for IDH's services on
credit) amounting to EGP 1.28 billion during FY 2021.
The receivables balance in Egypt and Jordan stood at EGP 366 million as at
year-end 2021. More specifically, in Egypt account receivables' DOH declined
to 96 days as at 31 December 2021 compared to 145 days as at year-end 2020.
Accounts receivables' DOH for Egypt is calculated based on credit revenues
amounting to EGP 1.04 billion during FY 2021. Meanwhile, in Jordan accounts
receivables' DOH increased from 150 days to 154 days as at year-end 2021
largely due to agreements with various airline companies as part of QAIA and
KHIA agreements. Accounts receivables' DOH for Jordan is calculated based on
credit revenues amounting to EGP 221 million during FY 2021.
Provision for doubtful accounts established during the twelvemonths to 31
December 2021 amounted to EGP 25 million, down from the EGP 42 million booked
in the previous year.
Inventory
As at year-end 2021, the Group's inventory balance reached EGP 223 million, up
from EGP 100 million as at year-end 2020. Meanwhile, days Inventory
Outstanding (DIO) decreased to 61 days as at year-end 2021 from 72 days as at
year-end 2020. The decline largely reflects the high turnover of PCR testing
for Covid-19.
Cash and Net Debt/Cash
IDH's cash balances increased to EGP 2,350 million as at year-end 2021
compared to EGP 877 million as at 31 December 2020.
EGP million 31 Dec 2020 31 Dec 2021
Time Deposits 162 628
T-Bills 461 1,461
Current Accounts 234 239
Cash on Hand 19 22
Total 877 2,350
Net cash balance2(1) amounted to EGP 1,483 million as of year-end 2021, an
increase of 361% compared to EGP 321 million as of 31 December 2020.
EGP million 31 Dec 2020 31 Dec 2021
Cash and Financial Assets at Amortised Cost(22) 877 2,350
Interest Bearing Debt ("Medium Term Loans")(23) 96 106
Lease Liabilities Property 390 532
Long-term Equipment Liabilities 69 229
Net Cash Balance 321 1,483
Note: Interest Bearing Debt includes accrued interest for each period.
2(1)The net cash balance is calculated as cash and cash equivalent balances
including includes financial assets at amortised cost, less interest-bearing
debt (medium term loans), finance lease and Right-of-use liabilities.
2(2 )As outlined in Note 18 of IDH's Consolidated Financial Statements, some
term deposits and treasury bills cannot be accessed for over 90 days and are
therefore not treated as cash. Term deposits which cannot be accessed for over
90 days stood at EGP 148 million in FY 2021, while there were no such term
deposits in the previous year. Meanwhile, treasury bills not accessible for
over 90 days stood at EGP 1,311 million in FY 2021, up from EGP 277 million in
FY 2020.
(23)IDH's interest bearing debt as at year-end 2021 is split as EGP 13 million
related to its medium term facility with the Commercial International Bank
(CIB) and EGP 85 million to its facility with Ahli United Bank Egypt (AUBE).
Lease liabilities on property stood at EGP 532 million as at year-end 2021, up
from the EGP 390 million booked as at year-end 2020. The increase is
attributable to the addition of new branches throughout 2021. Meanwhile,
financial obligations related to equipment recorded EGP 229 million as of 31
December 2021, up from EGP 69 million as of year-end 2020, reflecting the
renewal of the Company's contracts and the addition of new equipment. The main
components of total financial obligations related to equipment in FY 2021
included EGP 116 million related to equipment at IDH's Mega Lab, and EGP 54
million for equipment at Al-Borg Scan. The rise in interest-bearing debt is
related to IDH's two medium-term facilities with Commercial International Bank
(CIB) and Ahli United Bank of Egypt (AUBE). More specifically, IDH's
interest-bearing debt as of year-end 2021 is split as EGP 13 million related
to its medium-term facility with CIB and EGP 85 million related to its
facility with AUBE. It is worth noting that interest-bearing debt in both
twelve-month periods includes accrued interest.
Liabilities
Accounts Payable(24)
As of year-end 2021, accounts payable balance recorded EGP 311 million up from
EGP 178 million as of 31 December 2020. Nonetheless, the Group's days payable
outstanding (DPO) decreased to 93 days as of year-end 2021 down from 127 days
as at 31 December 2020. The decline is mainly related to the fact that PCR
testing kit suppliers are paid within a period of 15 days.
Put Option
The put option current liability is related to 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 LTM EBITDA
minus net debt. Biolab's put option liability increased following the
subsidiary's EBITDA year-on-year growth of 155% in EGP terms. The vendor has
not exercised this right at 31 December 2021. It is important to note that the
put option liability is treated as current as it could be exercised at any
time by the non-controlling interest (NCI). However, based on discussions and
ongoing business relationship, there is no expectation that this will happen
in next 18 months.
The put option non-current liability is related to 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).
Accounts Receivable and Provisions
As at 31 December 2021, accounts receivables' Days on Hand (DOH) stood at 107
days compared to 144 days at year-end 2020. The significant decline witnessed
throughout the year highlights a sustained improvement in collections versus
the previous year. Accounts receivables' DOH is calculated based on credit
revenues (credit revenues relates to patients who paid for IDH's services on
credit) amounting to EGP 1.28 billion during FY 2021.
The receivables balance in Egypt and Jordan stood at EGP 366 million as at
year-end 2021. More specifically, in Egypt account receivables' DOH declined
to 96 days as at 31 December 2021 compared to 145 days as at year-end 2020.
Accounts receivables' DOH for Egypt is calculated based on credit revenues
amounting to EGP 1.04 billion during FY 2021. Meanwhile, in Jordan accounts
receivables' DOH increased from 150 days to 154 days as at year-end 2021
largely due to agreements with various airline companies as part of QAIA and
KHIA agreements. Accounts receivables' DOH for Jordan is calculated based on
credit revenues amounting to EGP 221 million during FY 2021.
Provision for doubtful accounts established during the twelvemonths to 31
December 2021 amounted to EGP 25 million, down from the EGP 42 million booked
in the previous year.
Inventory
As at year-end 2021, the Group's inventory balance reached EGP 223 million, up
from EGP 100 million as at year-end 2020. Meanwhile, days Inventory
Outstanding (DIO) decreased to 61 days as at year-end 2021 from 72 days as at
year-end 2020. The decline largely reflects the high turnover of PCR testing
for Covid-19.
Cash and Net Debt/Cash
IDH's cash balances increased to EGP 2,350 million as at year-end 2021
compared to EGP 877 million as at 31 December 2020.
EGP million 31 Dec 2020 31 Dec 2021
Time Deposits 162 628
T-Bills 461 1,461
Current Accounts 234 239
Cash on Hand 19 22
Total 877 2,350
Net cash balance2(1) amounted to EGP 1,483 million as of year-end 2021, an
increase of 361% compared to EGP 321 million as of 31 December 2020.
EGP million 31 Dec 2020 31 Dec 2021
Cash and Financial Assets at Amortised Cost(22) 877 2,350
Interest Bearing Debt ("Medium Term Loans")(23) 96 106
Lease Liabilities Property 390 532
Long-term Equipment Liabilities 69 229
Net Cash Balance 321 1,483
Note: Interest Bearing Debt includes accrued interest for each period.
2(1)The net cash balance is calculated as cash and cash equivalent balances
including includes financial assets at amortised cost, less interest-bearing
debt (medium term loans), finance lease and Right-of-use liabilities.
2(2 )As outlined in Note 18 of IDH's Consolidated Financial Statements, some
term deposits and treasury bills cannot be accessed for over 90 days and are
therefore not treated as cash. Term deposits which cannot be accessed for over
90 days stood at EGP 148 million in FY 2021, while there were no such term
deposits in the previous year. Meanwhile, treasury bills not accessible for
over 90 days stood at EGP 1,311 million in FY 2021, up from EGP 277 million in
FY 2020.
(23)IDH's interest bearing debt as at year-end 2021 is split as EGP 13 million
related to its medium term facility with the Commercial International Bank
(CIB) and EGP 85 million to its facility with Ahli United Bank Egypt (AUBE).
Lease liabilities on property stood at EGP 532 million as at year-end 2021, up
from the EGP 390 million booked as at year-end 2020. The increase is
attributable to the addition of new branches throughout 2021. Meanwhile,
financial obligations related to equipment recorded EGP 229 million as of 31
December 2021, up from EGP 69 million as of year-end 2020, reflecting the
renewal of the Company's contracts and the addition of new equipment. The main
components of total financial obligations related to equipment in FY 2021
included EGP 116 million related to equipment at IDH's Mega Lab, and EGP 54
million for equipment at Al-Borg Scan. The rise in interest-bearing debt is
related to IDH's two medium-term facilities with Commercial International Bank
(CIB) and Ahli United Bank of Egypt (AUBE). More specifically, IDH's
interest-bearing debt as of year-end 2021 is split as EGP 13 million related
to its medium-term facility with CIB and EGP 85 million related to its
facility with AUBE. It is worth noting that interest-bearing debt in both
twelve-month periods includes accrued interest.
Liabilities
Accounts Payable(24)
As of year-end 2021, accounts payable balance recorded EGP 311 million up from
EGP 178 million as of 31 December 2020. Nonetheless, the Group's days payable
outstanding (DPO) decreased to 93 days as of year-end 2021 down from 127 days
as at 31 December 2020. The decline is mainly related to the fact that PCR
testing kit suppliers are paid within a period of 15 days.
Put Option
The put option current liability is related to 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 LTM EBITDA
minus net debt. Biolab's put option liability increased following the
subsidiary's EBITDA year-on-year growth of 155% in EGP terms. The vendor has
not exercised this right at 31 December 2021. It is important to note that the
put option liability is treated as current as it could be exercised at any
time by the non-controlling interest (NCI). However, based on discussions and
ongoing business relationship, there is no expectation that this will happen
in next 18 months.
The put option non-current liability is related to 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).
2(4)Accounts payable is calculated based on average payables at the end of
each year.
iii. Cash Flow Analysis
Net cash flow from operating activities recorded EGP 2,269 million in FY 2021
compared to EGP 883 million in FY 2020. The 157% year-on-year increase versus
FY 2020 demonstrates once more IDH's strong cash generation ability.
iv. Principal Risks, Uncertainties & Their Mitigation
As in any corporation, IDH has exposure to risks and uncertainties that may
adversely affect its performance. IDH Chairman Lord St John of Bletso has
emphasised that ownership of the risk matrix is sufficiently important to the
Group's long-term success that it must be equally shared by the Board and
senior management. While no system can mitigate every risk - and some risks,
as at the country level, are largely without potential mitigants - the Group
has in place processes, procedures and baseline assumptions that provide
mitigation. The Board and senior management agree that the principal risks and
uncertainties facing the Group include:
Country/regional risk - Economic & Forex
The Group is subject to the economic conditions of Egypt specifically and, to Overall, management notes that IDH has a resilient business model and that the
a lesser extent, those of the other geographies. Egypt accounted for c. 81% of business continued to grow year-on-year through two revolutions, as well as
our revenues in 2021 (2020: 82%). under extremely difficult operating conditions in 2016 and in 2020.
Foreign investors welcomed March 2022 CBE move as it demonstrated the Egyptian
government's willingness to improve investment climate.
Economic risk: On the 21st of March 2022, the Central Bank of Egypt (CBE)
raised policy rates by 100bps and allowed the Egyptian Pound (EGP) to
depreciate against the United States Dollar (USD) by around 17%, which will
impose Inflationary pressures in the short to medium term. Inflation rates IDH management is closely monitoring the impact of the rise of inflation on
are expected to average around 13% to 15% during 2022, up from 5.9% in its cost base, especially raw material. The risk is partially mitigated
December 2021. Moreover, GDP growth in FY22/23 was revised downward to 5.5% given its long-term contractual agreement with its raw material suppliers.
from 5.7% by the Egyptian government in March 2022.
Country/regional risk - Economic & Forex
Foreign currency risk: The Group is exposed to foreign currency risk on the During FY2021, only 10% of IDH's cost of supplies (c.2% of revenues) are
cost side of the business. The majority of supplies it acquires are paid in payable in US dollars, minimising the Group's exposure to foreign exchange
Egyptian pounds (EGP), but given they are imported, their price will vary with (FX) scarcity and in part, the volatility of the Egyptian pound.
the rate of exchange between the EGP and foreign currencies. In addition, a
portion of supplies are priced and paid in foreign currencies.
High Inflation in Sudan: Following substantial currency devaluation in Sudan
during 2018 the currency lost 85% of its value. In 2019, the Sudanese Pound's
official rate versus the US Dollar remained relatively stable at 45.11 as 31
December according to the Central Bank of Sudan. However, in July 2020 the
Sudanese government announced it would devalue its currency and cut fuel The Group is closely monitoring the economic situation in Sudan and has
subsidies due to a huge budget deficit and an economic crisis aggravated by implemented several price increases to keep instep with inflationary
the coronavirus pandemic. In February 2021, the Sudanese government announced pressures. IDH is also working to limit expatriate salaries and foreign
it would float the Sudanese Pound in an effort to bridge the gap with the currency needs by increasing dependence on local hires.
forex prices at the parallel market. This led to a significant increase in the
currency rates. The US Dollar rate for instance rose from SDG 55 to more than
SDG 375. This was followed by the removal of fuel subsidies in June 2021,
which again led to the increase of consumer prices. According to data from
Sudan's Central Bureau of Statistics, the country's headline inflation rate
averaged 359% in 2021, up from 163% in 2020.
Nigeria: Capital controls could make profit repatriation difficult in the
short term.
Nigeria: Depreciation of the Naira would make imported products and raw
materials more expensive and would reduce Nigeria's contribution to
consolidated Company revenues. Whilst capital controls have helped the
official exchange converge with the black market rate, the central bank has
yet to allow the naira to float freely.
In Nigeria, until currency exchange policy is clarified and there is greater
visibility regarding profit repatriation, IDH expects to reinvest early
profits into its Nigerian business. Dividend payments are expected to be
repatriated after the completion of the branch roll-out plan.
Country risk - Political & Security
Sudan is currently undergoing a significant political transition which began It is important to note that in FY 2021 Sudan made up just 0.3% of IDH's net
in 2019 when severe political unrest and protests led the military to remove sales. Moreover, while nationwide protests do affect patient and test volumes
long-time president Omar Al-Bashir. Following his removal, the military signed in Sudan, the diagnostic industry is relatively immune given the inelastic
a power-sharing agreement with an opposition coalition in July 2019, with the demand for healthcare services. Additionally, management in Sudan has been
aim of eventually transferring power to a civilian government. On 25 October successful in offsetting the effect of lower volumes due to protest with
2021, Sudan's Prime Minister was detained by armed forces, and Army chief higher pricing, and in 2019, 2020, and 2021 the geography recorded solid
General Abdel Fattah al-Burhan announced that the civilian government and year-on-year revenue growth in SDG terms.
other transitional bodies have been dissolved. Throughout November, the
country witnessed several mass rallies and increased civil unrest with
protesters asking for the reinstatement of the civilian Prime Minister,
Abdalla Hamdok. The protests led to the temporary closure of all of IDH's In December 2020, US removed Sudan from its States Sponsors of Terrorism list.
Sudanese branches. All locations were reopened within a few days and quickly The change in the country's designation is expected to allow Sudan to have
gained back momentum. On 21 November 2021, Mr. Hamdok took office once again access to international funds and investment, including the International
but later stepped down on 2 January 2022. Civil unrest and protests are Monetary Fund, paving the way for the country's economic growth.
continuing as the country's future remains unclear. The situation in Sudan is
volatile and continued civil unrest could adversely affect IDH's business.
IDH's management on the ground continues to monitor the evolving situation and
has put in place an all-encompassing mitigation strategy to safeguard staff
Nigeria faced security challenges on several fronts, including re-emerging and patient wellbeing and protect IDH's operations.
ethnic tensions and resurgent attacks by Islamist militants in the northeast.
Against the backdrop of a sluggish economy and the slow implementation of
reforms, mounting discontent could translate into further social unrest.
While this is relatively hard to mitigate, IDH is continuously evaluating its
The government dissolved the special division known as SARS (Special processes to safeguard its employees and operations. Overall, IDH applies
Anti-Robbery Squad) in October 2021. In late 2020 and throughout 2021, rigorous standards to evaluating all aspects of its business processes in
protests have decreased significantly across the country but a potential Nigeria to ensure it is well-equipped to respond to the evolving situation.
escalation of civil unrest remains possible.
Covid-19
The ongoing Covid-19 pandemic presents business continuity risks to IDH All of IDH staff use appropriate protective equipment when interacting with
including, but not limited to, supply-chain disruptions, government enforced patients, including those suspected of having Covid-19 or any other infectious
quarantines and their effect on IDH's business operations and risk of disease. IDH is currently administering PCR, Antibody, and Antigen testing for
infection among IDH employees. In 2021, the rollout of vaccines across its Covid-19 in Egypt and Jordan.
countries of operation coupled with governments' willingness and ability to
coexist with the virus, saw restrictions imposed to curb the spread being
lifted and operations running normally throughout the year. No new
restrictions have been imposed following the rise of new Covid-19 variants All of the Group's employees have been fully vaccinated during 2021 and they
throughout the year, with countries across IDH's footprint continuing to push are subject to regular communications reminding them that they may not report
forward their vaccination campaigns. As at the end of March 2022, the share of to work if they have symptoms of a Covid-19 infection.
the population having received at least one Covid-19 vaccine dose stood at
approximately: 45% in Egypt, 45% in Jordan, 10% in Nigeria, and at 13% in
Sudan.
The effective rollout of vaccines and the increasing ability and willingness
of governments to coexist with the virus and its variants have supported a
steady recovery of the global economy throughout 2021.
Covid-19 global economic impact: Rising inflation rates, supply chain
disruptions, and the rise of new, more fast-spreading Covid-19 variants
continue to pose a threat for the global economic recovery.
Covid-19 impact on IDH Financials
Throughout FY 2021, IDH generated around 50% of its revenues from
Covid-19-related testing. In light of the increasing roll out of vaccines and
the widespread decline in infection rates, Covid-19-related revenues are
expected to gradually decline throughout 2022.
Throughout the Covid-19 crisis, IDH has maintained a strong focus on growing
its conventional (non-Covid-19-related) business, which in FY 2021 expanded
22% versus FY 2020, and came in 13% above pre-covid levels recorded in FY
2019. Moreover, in both Egypt and Jordan, IDH enjoys a market leading position
and plans to capitalise on its expanded product offering and patient base,
increased service delivery capabilities, and growing visibility to continue
delivering growth in the year ahead. Across both markets, the Group's strategy
will now pivot towards patient retention as it looks to maintain the new
relationships established during the pandemic thanks to its Covid-19-dedicated
offering.
Global Supply Chain Disruptions
Throughout 2021, restrictions imposed to curb the spread of Covid-19, labour IDH's management team continually monitors the evolving situation and have
shortages, and fast-rising demand for goods saw global supply chains come taken proactive steps to build up its inventory to shield the Group from any
under strong pressure causing delays and shortages worldwide. The ongoing potential future disruptions. IDH is in continual dialogue with key suppliers
global supply chain disruptions have had no impacts on IDH's operations to gauge the risk associated with a shortage of materials and is yet to
throughout the year. identify a weakness.
IDH's test kits are purchased on fixed-price contracts with tenors ranging
from five to seven years, providing effective protection from short-term price
fluctuations.
Supplier risk
IDH faces the risk of suppliers re-opening negotiations in the face of cost IDH has strong, longstanding relationships with its suppliers, to whom it is a
pressure owing to the prevailing inflationary environment and/or a possible significant regional client. Due to the volumes of kits the Group purchases,
albeit limited devaluation risk. IDH is able to negotiate favourable pricing and maintain raw material costs
increases at a rate slower than inflation. It is worth highlighting that IDH's
supplier relations were not impacted by COVID-19.
Total raw materials costs as a percentage of net sales were 19.6% in 2021
compared with 18.4% in 2020.
IDH's supplier risk is concentrated amongst three key suppliers - Siemens,
Roche and BM (Sysmex)- who provide it with kits representing 24% of the total
value of total raw materials in 2021 (2020: 52%).
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. More specifically, under Egyptian law,
companies must obtain government clearance to transfer dividends overseas and As a foreign investor in Egypt, IDH does not have issues with the repatriation
are subject to higher taxation on payment of dividends. of dividends, yet given the recent depreciation in the EGP value, the Company
foresees probable delays in FX sourcing and repatriation.
As a provider of medical diagnostic services, IDH's operations in Sudan are
not subject to sanctions. Notably, in October 2017 the US lifted a host of
sanctions imposed 20 years ago that included a comprehensive trade embargo, a
freeze on government assets and tight restrictions on financial institutions
dealing with the country. More recently, in December 2020 the US removed Sudan
from its States Sponsors of Terrorism list.
Legal and regulatory risk to the business
The Group's business is subject to, and affected by, extensive, stringent and The Group's general counsel and the quality assurance team work together to
frequently changing laws and regulations, as well as frequently changing keep IDH abreast of, and in compliance with, both legislative and regulatory
enforcement regimes, in each of the countries in which it operates. Moreover, changes.
as a significant player in the Egyptian private clinical laboratory market,
the Group is subject to antitrust and competition-related restrictions, as
well as the possibility of investigation by the Egyptian Competition
Authority. On the antitrust front, the private laboratory segment (of which IDH is a
part) accounts for a small proportion of the total market, which consists of
small private labs, private chain labs and large governmental and
quasigovernmental institutions.
Risk from contract clients
Contract clients including private insurers, unions and corporations, account IDH diligently works to maintain sound relationships with contract clients.
for c. 57% of the Group's net sales in 2021. Should IDH's relationship with All changes to pricing and contracts are arrived at through discussion rather
these clients deteriorate, for example if the Group were unable to negotiate than blanket imposition by IDH. Relations are further enhanced by regular
and retain similar fee arrangements or should these clients be unable to make visits to contract clients by the Group's sales staff.
payments to the Group, IDH's business could be materially and adversely
affected.
IDH's attractiveness to contract clients is enhanced by the extent of its
national network.
It should be highlighted that, excluding the contributions from IDH's multiple
partnerships to conduct PCR testing for passengers (Pure Health, NAS, QAIA),
which in 2021 generated EGP 365 million in contract segment net sales, no
single client contract accounts for more than 1% of total net sales or 1.4% of
contract net sales.
Pricing pressure in a competitive, regulated environment
The Group faces pricing pressure from various third-party payers, including
national health insurance, syndicates, other governmental bodies, which could
materially and adversely affect its revenue. Pricing may be restrained in This is an external risk for which there exist few mitigants.
cases by recommended or mandatory fees set by government ministries and other
authorities.
In the event there is escalation of price competition between market players,
the Group sees its wide national footprint as a mitigant; c. 57% of IDH net
This risk may be more pronounced in the context of the imminent inflationary sales in 2021 is generated by servicing contract clients (private insurer,
pressures following the recent depreciation of the Egyptian Pound. unions and corporations) who prefer IDH's national network to patchworks of
local players.
IDH has a limited ability to influence changes to mandatory pricing policies
imposed by government agencies, as is the case in Jordan, where basic tests
that account for the majority of IDH's business in that nation are subject to
price controls.
IDH enjoys a strong brand equity in its markets of operation which enables all
its brands to enjoy a solid positioning in the markets in which it operates.
The Group might face pricing pressure from existing competitors and new As such, IDH is a price maker, especially in Egypt, where the Group currently
entrants to the market. controls the largest network of branches amongst all private sector players.
Moreover, in its home market of Egypt, which in FY 2021 accounted for 81.4% of
total revenues, the Group faces no potential risk of price regulation by the
government.
Cybersecurity risks
The Company controls a vast amount of confidential data for its patients' The Company has stringent control over its data security and regularly stress
records; to this end, there is a cybersecurity risk for both data tests its IT infrastructure to assess the robustness of its internal controls.
confidentiality and data security. Moreover, its cybersecurity controls and protocols are regularly updated to
proactively address potential shortcomings, keep them in full adherence with
data security regulations in the Group's markets of operation, and maintain
them in line with global best practices.
Business continuity risks
Management concentration risk: IDH is dependent on the unique skills and IDH understands the need to support its future growth plans by strengthening
experience of a talented management team. The loss of the services of key its human capital and engaging in appropriate succession planning. The Company
members of that team could materially and adversely affect the Company's is committed to expanding the senior management team, led by its CEO Dr. Hend
operations and business. El Sherbini, to include the talent needed for a larger footprint. The Group
has constituted an Executive Committee led by Dr. El Sherbini and composed of
heads of departments. The Executive Committee meets every second week.
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. IDH tests
its disaster recovery plans on a regular basis.
Business interruption: IT systems are used extensively in virtually all
aspects of the Group's business and across each of its lines of business,
including test and exam results reporting, billing, customer service,
logistics and management of medical data. Similarly, business interruption at
one of the Group's larger laboratory facilities could result in significant
losses and reputational damage to the Group's business as a result of external
factors such as natural disasters, fire, riots or extended power failures. The
Group's operations therefore depend on the continued and uninterrupted In Egypt and Jordan, to mitigate the impact of potential branch closures on
performance of its systems. operations, the Group has been ramping up its house call services. Moreover,
the Group's important role in conducting PCR testing for Covid-19 in both
Egypt and Jordan makes it unlikely that branches would be closed even if new
restrictive measures were introduced.
Business Interruption: across its geographies, the reimposition of restrictive
measures related to Covid-19 (including curfews and lockdowns) could impact
the working hours of branches and in extreme cases could lead to their
temporary closure.
-End-
INTEGRATED DIAGNOSTICS HOLDINGS plc - "IDH"
AND ITS SUBSIDIARIES
Consolidated Financial Statements
for the year ended 31 December 2021
Consolidated statement of financial position as at 31 December 2021
Notes 2021 2020
EGP'000 EGP'000
Assets
Non-current assets
Property, plant and equipment 11 1,061,808 793,013
Intangible assets and goodwill 12 1,658,867 1,659,755
Right of use assets 26 462,432 354,688
Financial assets at fair value through profit and loss 14 10,470 9,604
Total non-current assets 3,193,577 2,817,060
Current assets
Inventories 15 222,612 100,115
Trade and other receivables 16 469,727 383,480
Financial assets at amortized cost 18 1,458,724 276,625
Cash and cash equivalents 17 891,451 600,130
Total current assets 3,042,514 1,360,350
Total assets 6,236,091 4,177,410
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 49,218
Put option reserve 19 (956,397) (314,057)
Translation reserve 19 150,730 145,617
Retained earnings 1,550,976 603,317
Equity attributable to the owners of the Company 2,582,846 2,269,991
Non-controlling interests 2 211,513 156,383
Total equity 2,794,359 2,426,374
Non-current liabilities
Provisions 21 4,088 3,408
Borrowings 24 76,345 67,617
Other financial obligations 26 645,196 398,525
Non-current put option liability 25 35,037 31,790
Deferred tax liabilities 9 332,149 240,333
Total non-current liabilities 1,092,815 741,673
Current liabilities
Trade and other payables 22 777,354 383,623
Other financial obligations 26 115,478 60,517
Current put option liability 23 921,360 282,267
Borrowings 24 21,721 25,416
Current tax liabilities 29 513,004 257,540
Total current liabilities 2,348,917 1,009,363
Total liabilities 3,441,732 1,751,036
Total equity and liabilities 6,236,091 4,177,410
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 20 April 2021 by:
Dr. Hend El Sherbini Hussein Choucri
Chief Executive Officer Independent Non-Executive Director
Consolidated income statement for the year ended 31 December 2021
Notes 2021 2020
EGP'000 EGP'000
Revenue 6 5,224,712 2,656,264
Cost of sales 8.1 (2,420,647) (1,313,688)
Gross profit 2,804,065 1,342,576
Marketing and advertising expenses 8.2 (163,163) (107,216)
Administrative expenses 8.3 (370,014) (221,874)
Impairment loss on trade and other receivable 16 (24,656) (42,131)
Other Income 15,828 14,191
Operating profit 2,262,060 985,546
Finance costs 8.6 (142,917) (84,107)
Finance income 8.6 113,178 67,643
Net finance costs 8.6 (29,739) (16,464)
Profit before income tax 2,232,321 969,082
Income tax expense 9 (739,815) (359,600)
Profit for the year 1,492,506 609,482
Profit attributed to:
Owners of the Company 1,412,609 594,015
Non-controlling interests 79,897 15,467
1,492,506 609,482
Earnings per share 10
Basic and Diluted 2.35 0.99
The accompanying notes form an integral part of these consolidated financial
statements.
Consolidated statement of comprehensive income/(expenses) for the year ended
31 December 2021
2021 2020
EGP'000 EGP'000
Net profit for the year 1,492,506 609,482
Other comprehensive income/(expenses):
Items that may be reclassified to profit or loss:
Exchange difference on translation of foreign operations 7,808 (20,292)
Other comprehensive income/(expenses) for the year, net of tax 7,808 (20,292)
Total comprehensive income/loss for the year 1,500,314 589,190
Attributable to:
Owners of the Company 1,417,722 583,809
Non-controlling interests 82,592 5,381
1,500,314 589,190
The accompanying notes form an integral part of these consolidated financial
statements.
Consolidated statement of cash flows for the year ended 31 December 2021
Note 2021 2020
EGP'000 EGP'000
Cash flows from operating activities
Profit before tax 2,232,321 969,082
Adjustments for:
Depreciation of property, plant and equipment 11 151,826 118,632
Depreciation of right of use assets 26 79,617 60,803
Amortisation of intangible assets 12 7,201 5,926
Unrealised foreign exchange gains and losses 8.6 17,912 12,580
Finance income 8.6 (113,178) (53,120)
Finance Expense 8.6 118,029 71,527
Gain on disposal of Property, plant and equipment (78) (98)
Impairment in trade and other receivables 16 24,656 42,131
Equity settled financial assets at fair value (866) (3,213)
ROU Asset/Lease Termination 1,351 (609)
Hyperinflation 6,976 (14,523)
Change in Provisions 21 681 (1,866)
Change in Inventories (127,643) (17,121)
Change in Trade and other receivables (106,458) (140,563)
Change in Trade and other payables 351,803 53,822
Cash generated from operating activities before income tax payment 2,644,150 1,103,390
Taxes paid (374,305) (220,875)
Net cash generated from operating activities 2,269,845 882,515
Cash flows from investing activities
Proceeds from sale of property, plant and equipment 6,627 5,316
Interest received on financial asset at amortised cost 111,367 51,187
Payments for acquisition of property, plant and equipment (253,385) (118,372)
Payments for acquisition of intangible assets (10,354) (7,638)
Decrease / (increase) in restricted cash - 247
Payments for the purchase of financial assets at amortized cost (1,599,238) (112,115)
Proceeds for the sale of financial assets at amortized cost 417,139 57,107
Net cash used in investing activities (1,327,844) (124,268)
Cash flows from financing activities
Proceeds from borrowings 28 30,450 11,727
Repayment of borrowings 28 (25,416) (25,416)
Payments of lease liabilities (50,227) (33,509)
Payment of financial obligations (9,383) (9,237)
Dividends paid (478,748) (450,737)
Interest paid (93,799) (73,736)
Bank charge paid (20,026) -
Injection of cash by non-controlling interest - 17,372
Net cash flows used in financing activities (647,149) (563,536)
Net increase in cash and cash equivalents 294,852 194,711
Cash and cash equivalents at the beginning of the year 600,130 408,892
Effect of exchange rate (3,531) (3,473)
Cash and cash equivalents at the end of the year 17 891,451 600,130
Non-cash investing and financing activities disclosed in other notes are:
· acquisition of right-of-use assets - note 26
· Property plant and equipment - note 11
· Put option liability - note 23 and 25
The accompanying notes form an integral part of these consolidated financial
statements.
Consolidated statement of changes in equity for the year ended 31 December
2021
EGP'000 Share Capital Share premium Capital reserve 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) 49,218 (314,057) 145,617 603,317 2,269,991 156,383 2,426,374
As at 1 January 2021
Profit for the year - - - - - - 1,412,609 1,412,609 79,897 1,492,506
Other comprehensive income for the year - - - - - 5,113 - 5,113 2,695 7,808
Total comprehensive income - - - - - 5,113 1,412,609 1,417,722 82,592 1,500,314
Transactions with owners in their capacity as owners
Dividends - - - - - - (455,182) (455,182) (23,566) (478,748)
Legal reserve formed during the year* - - - 2,423 - - (2,423) - - -
Impact of hyperinflation - - - - - - (7,345) (7,345) (3,896) (11,241)
Movement in put option liabilities for the year - - - - (642,340) - - (642,340) - (642,340)
Total - - - 2,423 (642,340) - (464,950) (1,104,867) (27,462) (1,132,329)
At 31 December 2021 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
As at 1 January 2020 1,072,500 1,027,706 (314,310) 46,330 (229,164) 155,823 456,661 2,215,546 144,710 2,360,256
Profit for the year - - - - - - 594,015 594,015 15,467 609,482
Other comprehensive expense for the year - - - - - (10,206) - (10,206) (10,086) (20,292)
Total comprehensive income - - - - - (10,206) 594,015 583,809 5,381 589,190
Transactions with owners in their capacity as owners
Dividends - - - - - - (441,855) (441,855) (8,882) (450,737)
Legal reserve formed during the year* - - - 2,888 - - (2,888) - - -
Impact of hyperinflation - - - - - - (2,616) (2,616) (2,198) (4,814)
Movement in put option liabilities for the year - - - - (84,893) - - (84,893) - (84,893)
Non-controlling interest cash injection in subsidiaries - - - - - - - - 17,372 17,372
during the year
Total - - - 2,888 (84,893) - (447,359) (529,364) 6,292 (523,072)
At 31 December 2020 1,072,500 1,027,706 (314,310) 49,218 (314,057) 145,617 603,317 2,269,991 156,383 2,426,374
* Under Egyptian Law each subsidiary must set aside at least 5% of its annual
net profit into a legal reserve until such time that this represents 50% of
each subsidiary's issued capital. This reserve is not distributable to the
owners of the Company
.
Notes to the Consolidated Financial Statements - For the Year Ended 31
December 2021
(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 2021 were authorised for issue in accordance with a resolution of the
directors on 20 April 2022. 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 registered office address of the
Company is 12 Castle Street, St Helier, Jersey, JE2 3RT. 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 Company 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,
and Sudan
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
2021 2020 2021 2020
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 99.6% 99.6% 0.4% 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 76.5% 76.5% 23.5% 23.5%
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%
* The group consolidate "Echoscan" a subsidiary based in Nigeria despite of
37% indirect ownership for more details refer to note
4-2.
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 2021 2020
Medical Genetic Center Egypt 45.0% 45.0%
Al Makhbariyoun Al Arab Group (Hashemite Kingdom of Jordan) Jordan 40.0% 40.0%
SAMA Medical Laboratories Co. " Ultra lab medical laboratory " Sudan 20.0% 20.0%
Al Borg Laboratory Company Egypt 0.7% 0.7%
Dynasty Group Holdings Limited England and Wales 49% 49%
Eagle Eye-Echo Scan Limited Mauritius 23.53% 23.53%
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 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 2021:
Revenue 3,092 1,046,107 1,594,275 3,821,004 53,604 6,518,082
Profit (2,627) 214,588 401,401 1,162,009 (8,795) 1,766,576
Other comprehensive income - (56) - 10,935 (4,733) 6,146
Total comprehensive income (2,627) 214,532 401,401 1,172,944 (13,528) 1,772,722
Profit allocated to non-controlling interest (1,193) 86,747 2,841 (3,261) (5,237) 79,897
Other comprehensive income allocated to non-controlling interest - 64 - 5,667 (3,036) 2,695
Summarised statement of financial position as at 31 December 2021:
Non-current assets 682 211,430 541,782 707,847 90,509 1,629,987
Current assets 3,975 432,149 598,084 2,017,197 24,356 3,051,276
Non-current liabilities (27) (76,599) (361,520) (303,142) 20,743 (741,272)
Current liabilities (7,148) (237,206) (266,796) (701,516) 28,313 (1,216,878)
Net assets (2,518) 329,774 511,550 1,720,386 163,921 2,723,113
Net assets attributable to non-controlling interest (1,143) 133,310 3,621 (4,626) 80,351 211,513
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 profit or loss for 2020:
Revenue 2,822 409,069 911,923 1,731,237 36,089 3,091,140
Profit (3,412) 71,043 238,889 454,318 (26,832) 734,006
Other comprehensive expense - (2,691) - 1,060 (15,789) (17,420)
Total comprehensive income (3,412) 68,352 238,889 455,378 (42,621) 716,586
Profit allocated to non-controlling interest (1,549) 28,719 1,691 2,599 (15,992) 15,468
Other comprehensive expense allocated to non-controlling interest - (1,088) - 263 (9,261) (10,086)
Summarised statement of financial position as at 31 December 2020:
Non-current assets 736 183,237 357,303 556,725 113,941 1,211,942
Current assets 4,105 155,185 436,895 1,040,393 43,615 1,680,193
Non-current liabilities (27) (64,249) (199,597) (216,983) (23,621) (504,477)
Current liabilities (4,705) (104,517) (254,625) (462,853) (24,121) (850,821)
Net assets 109 169,656 339,976 917,282 109,814 1,536,837
Net assets attributable to non-controlling interest 49 68,582 2,405 40,324 45,023 156,383
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 2021:
· Covid-19-Related Rent Concessions - amendments to IFRS 16,
· Interest Rate Benchmark Reform - Phase 2 - amendments to IFRS 9, IAS
39, IFRS 7, IFRS 4 and IFRS 16.
· Annual Improvements to IFRS Standards 2018-2020, and
· Deferred Tax related to Assets and Liabilities arising from a Single
Transaction - amendments to IAS 12.
The amendments listed above did not have any impact on current and prior years
and and not expected to affect future years
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
2021 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. At 31 December 2021, the Group had net assets amounting to KEGP
2,794,359. 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. They have also assessed the
likelihood of any key one-off payments arising such as dividends or those in
respect of M&A activity. Under all of these scenarios there remains
significant headroom from a liquidity and covenant perspective. Reverse stress
tests have been performed to determine the level of downside required to cause
a liquidity or covenant issue with these scenarios not considered plausible.
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 2021. 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. Significant accounting policies
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:
Ø Level 1 - Quoted (unadjusted) market prices in active markets for identical
assets or liabilities.
Ø Level 2 - Valuation techniques for which the lowest level input that is
significant to the fair value measurement is directly or indirectly
observable.
Ø Level 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 24 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.
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) 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.
h) 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. The value
in use calculation is based on a discounted cash flow ("DCF") model.
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 are 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 and Echo Scan) 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 as written put options reserve and that
this is in line with paragraph 23 of IFRS 10 with the non-controlling
interests, adjacent to non-controlling interests in the net assets of
consolidated subsidiaries.
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 as at 31 October 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 an 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 four operating segments based on geographical location rather
than two operating segments based on service provided.
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; and
- 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. Judgement and 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 has the majority on shareholder stake
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 consolidate "Echoscan" a subsidiary based in Nigeria despite of 37%
indirect ownership for the following reasons:
1) The group has control over all intermediate entities between the parent and
Echoscan
2) The group has a technical service agreement which enables them to direct
and control the operations in Nigeria.
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 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. 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 2021 the
level of points accumulated by customers which had not expired was equivalent
to 24m EGP. 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 24m EGP out of the
total potential amount that could be redeemed is likely to be utilised by
customers
5. Financial assets and financial liabilities
The fair values of all financial assets and financial liabilities by class
shown in the balance sheet are as follows:
2021 2020
EGP'000
EGP'00
Cash and cash equivalent 891,451 600,130
Short term deposits - treasury bills 1,458,724 276,625
Trade and other receivables (Note 16) 447,080 364,117
Total financial assets 2,797,255 1,240,872
2021 2020
EGP'000
EGP'00
Trade and other payables 749,272 380,201
Put option liability 956,397 314,057
Financial obligation 760,674 459,043
Loans and borrowings 101,545 96,455
Total other financial liabilities 2,567,888 1,249,756
Total financial instruments* 229,367 (8,884)
* The financial instruments exclude prepaid expenses, deferred revenue, and
tax (current tax, payroll tax, withholding tax,…etc).
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 26) 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
asset at amortised cost, financial asset at fair value and cash and cash
equivalent 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 in 2021 and 2020 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 exclude 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 2021 and 2020.
- Interest rate risk
The Group is trying to minimize its interest rate exposure, especially in
Egypt region, which has seen several interest rate cuts over the last two
years. 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 follow:
2021 2020
EGP'000 EGP'000
Fixed-rate instruments
Financial obligation (note 26) 760,674 459,043
CIB ـــ BANK Loans and borrowings (note 24) 13,238 -
Variable-rate instruments
AUB ـــ BANK Loans and borrowings (note 24) 84,828 93,033
The Group does not account for any fixed-rate financial liabilities at FVTPL.
Therefore, a change in interest rates at the reporting date would not affect
profit or loss.
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 980K (2020: EGP 930K). 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 and Nigerian Naira. 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 (the amounts presented are shown in thousands in
EGP):
31-Dec-21
Assets Liabilities Net exposure
Cash and cash equivalents Other Total Put option Finance Trade Total
assets
assets
lease
payables
liability
US 917,673 11,880 929,553 - (56,744) (140,808) (197,552) 732,001
Euros 397 - 397 - - (342) (342) 55
JOD 297,154 112,409 409,563 (921,360) (93,999) (171,481) (1,186,840) (777,277)
SDG 1,010 604 1,614 - (850) (1,718) (2,568) (954)
NGN 8,591 5,094 13,685 (35,037) (9,104) (9,413) (53,554) (39,869)
31-Dec-20
Assets Liabilities Net exposure
Cash and cash equivalents Other Total Put option Finance Trade Total
assets
assets
lease
payables
liability
US 81,956 5,138 87,094 - (67,764) (29,120) (96,884) (9,790)
Euros 176 - 176 - - (1,588) (1,588) (1,412)
JOD 76,954 62,062 139,015 (282,266) (75,365) (70,489) (428,121) (289,106)
SDG 2,429 2,712 5,140 - (6,682) (6,376) (13,058) (7,918)
NGN 8,749 9,211 17,960 (31,790) (14,825) (14,574) (61,189) (43,229)
The following is the exchange rates applied:
Average rate for the year ended
31-Dec-21 31-Dec-20
US Dollars 15.64 15.71
Euros 18.46 17.85
GBP 21.51 20.25
JOD 22.03 22.13
SAR 4.17 4.21
SDG 0.06 0.29
NGN 0.04 0.04
Spot rate for the year ended
31-Dec-21 31-Dec-20
US Dollars 15.65 15.66
Euros 17.73 19.23
GBP 21.12 21.38
JOD 22.05 22.06
SAR 4.17 4.18
SDG 0.04 0.28
NGN 0.04 0.04
At 31 December 2021, if the Egyptian Pound had weakened/strengthened by 10%
against the US Dollar with all other variables held constant, total equity for
the year would have increased/decreased by EGP (73m) (2020: EGP (0.9m)),
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 2021.
At 31 December 2021, 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 77m (2020: EGP 28m),
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 2021.
At 31 December 2021, if the Egyptian Pound had weakened / strengthened by 25%
against the Sudanese Pound with all other variables held constant, total
equity for the year would have increased/decreased by by EGP
0.238 (2020: EGP (1.9m)), mainly as a result of foreign exchange gains/losses
and translation reserve on the translation of SDG - denominated financial
assets and liabilities as at the financial position of 31 December 2021.
At 31 December 2021, if the Egyptian Pound had weakened / strengthened by 10%
against the Nigeria Naira with all other variables held constant, total equity
for the year would have increased/decreased by EGP 3.9m (2020: 4.3m), mainly
as a result of foreign exchange gains/losses and translation reserve on the
translation of Naira - denominated financial assets and liabilities as at the
financial position of 31 December 2021.
- 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, 86% with a rating of B+ and 7% is rated at
least BB.
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. In response to the COVID-19
pandemic, the risk management committee has also been performing more frequent
reviews of sales limits for customers in regions and industries that are
severely impacted. 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. Any receivables
balances over 365 days are fully provided for by the group.
The maximum exposure to credit risk at the reporting date is the carrying
value of each class of financial assets 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 2021 1 year or less 1 to 5 years more than 5 years Total
Financial obligations 211,242 701,084 191,229 1,103,555
Put option liabilities 921,360 35,037 - 956,397
Borrowings 31,107 94,490 - 125,597
Trade and other payables 749,272 - - 749,272
1,912,981 830,611 191,229 2,934,821
31 December 2020 1 year or less 1 to 5 years more than 5 years Total
Financial obligations 126,999 463,646 131,605 722,250
Put option liabilities 282,267 31,790 - 314,057
Borrowings 33,977 70,001 11,252 115,230
Trade and other payables 380,201 - - 380,201
823,444 565,437 142,857 1,531,738
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 four operating segments based on geographical location rather
than two operating segments based on service provided, as the Group's Chief
Operating Decision Maker (CODM) reviews 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 four geographic areas, Egypt, Sudan, Jordan, and
Nigeria. As a provider of medical diagnostic services, IDH's operations in
Sudan are not subject to sanctions. The revenue split, EBITDA split (being the
key profit measure reviewed by CODM), impairment loss on trade
receivables and net profit and loss between the four regions is set out
below.
Revenue by geographic location
For the year ended Egypt region Sudan region Jordan region Nigeria region Total
31-Dec-21 4,108,357 16,644 1,046,107 53,604 5,224,712
31-Dec-20 2,173,411 37,695 409,069 36,089 2,656,264
Adjusted EBITDA by geographic location
For the year ended Egypt region Sudan region Jordan region Nigeria region Dual listing Total
fees
31-Dec-21 2,177,160 (500) 331,042 (6,998) 29,033 2,529,737
31-Dec-20 1,041,359 6,100 129,885 (6,826) - 1,170,518
Impairment loss on trade receivables by geographic location
For the year ended Egypt region Sudan region Jordan region Nigeria region Total
31-Dec-21 21,537 - 1,412 1,707 24,656
31-Dec-20 38,051 440 3,230 410 42,131
Net profit and loss by geographic location
For the year ended Egypt region Sudan region Jordan region Nigeria region Total
31-Dec-21 1,309,247 (22,533) 214,588 (8,796) 1,492,506
31-Dec-20 557,743 7,529 71,043 (26,833) 609,482
The following additional analysis of performance by service has been provided
as it is also reviewed by the CODM:
Revenue by categories
2021 2020
EGP'000 EGP'000
Walk-in 2,162,415 1,119,953
Contract 3,062,297 1,536,311
5,224,712 2,656,264
Revenue Analysis Performance
2021 2020
EGP'000 EGP'000
Conventional test revenues 2,352,870 1,945,327
Covid-19-related test revenue 2,773,043 649,000
Radiology 98,799 61,937
5,224,712 2,656,264
Net
profit by type
2021 2020
EGP'000 EGP'000
Pathology 1,528,132 645,307
Radiology (35,626) (35,826)
1,492,506 609,482
Pathology profits include profits from conventional tests and Covid 19 tests.
The operating segment profit measure reported to the CODM is EBITDA, as
follows:
2021 2020
EGP'000 EGP'000
Profit from operations 2,262,060 985,546
Property, plant and equipment and Right of use depreciation 231,443 179,046
Amortization of Intangible assets 7,201 5,926
EBITDA 2,500,704 1,170,518
Nonrecurring items "Dual listing fees" 29,033 -
Adjusted EBITDA 2,529,737 1,170,518
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 Total
31-Dec-21 2,803,954 7,234 291,880 90,509 3,193,577
31-Dec-20 2,415,220 24,132 263,767 113,941 2,817,060
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.
2021 2020
EGP'000 EGP'000
Financial obligations (note 26) 760,674 459,043
Borrowings 105,693 96,455
Less: Financial assets at amortised cost (note 18) (1,458,724) (276,625)
Less: Cash and cash equivalents (Note 17) (891,451) (600,130)
Net debt (1,483,808) (321,257)
Total Equity 2,794,359 2,426,374
Net debt to equity ratio -53.1% -13.2%
No changes were made in the objectives, policies or processes for managing
capital during the years ended 31 December 2021 and 31 December2020.
8. Expense
Included in consolidated income statement are the following:
8.1 Cost of sales
2021 2020
EGP'000 EGP'000
Raw material 962,748 466,679
Cost of specialized 24,086 20,992
analysis at other laboratories
Wages and salaries 635,407 390,020
Property, plant and equipment, right of use depreciation and Amortisation 213,919 162,928
Other expenses 584,487 273,069
Total 2,420,647 1,313,688
8.2 Marketing and advertising expenses
2021 2020
EGP'000 EGP'000
Advertisement expenses 96,745 61,530
Wages and salaries 44,739 30,187
Property, plant and equipment and Amortisation 518 340
Other expenses 21,161 15,158
Total 163,163 107,215
8.3 Administrative expenses
2021 2020
EGP'000 EGP'000
Wages and salaries 146,929 104,211
Property, plant and equipment and Right of use depreciation 24,207 21,704
Other expenses 198,878 95,959
Total 370,014 221,874
8.4 Expenses by nature
2021 2020
EGP'000 EGP'000
Raw material 962,748 466,679
Wages and Salaries 827,075 524,419
Property, plant and equipment, right of use depreciation and Amortisation 238,644 184,972
Advertisement expenses 96,745 61,530
Cost of specialized 24,086 20,991
analysis at other laboratories
Transportation and shipping 101,239 73,570
cleaning expenses 60,488 50,967
Call Center 33,531 16,822
Hospital Contracts 39,051 19,227
consulting Fees 112,398 47,743
Utilities 28,307 34,891
License Expenses 19,792 15,776
Other expenses 409,720 125,189
Total 2,953,824 1,642,776
8.5 Auditors' remuneration
The group paid or accrued the following amounts to its auditor PWC year 2021
(KPMG 2020) and its associates in respect of the audit of the financial
statements and for other services provided to the group
2021 2020
EGP'000 EGP'000
Fees payable to the Company's auditor for the audit of the Group's annual 21,759 8,544
financial statements
The audit of the Company's subsidiaries pursuant to legislation 6,998 4,008
Tax compliance and advisory services - 55
Assurance services 302 -
29,059 12,607
8.6 Net finance costs
2021 2020
EGP'000 EGP'000
Loss on hyperinflationary net monetary position (6,976) -
Interest expense (98,003) (67,851)
Net foreign exchange loss (17,912) (12,580)
Bank Charges (20,026) (3,676)
Total finance costs (142,917) (84,107)
2021 2020
EGP'000 EGP'000
Interest income 113,178 53,120
Gain on hyperinflationary net monetary position - 14,523
Total finance income 113,178 67,643
Net finance cost (29,739) (16,464)
8.7 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:
2021 2020
Medical Administration and market Total Medical Administration and market Total
Average number of employees 5,364 1,024 6,388 4,813 798 5,611
2021 2020
EGP'000
EGP'000
Medical Administration Total Medical Administration Total
Wages and salaries 600,527 183,611 784,138 363,397 127,655 491,052
Social security costs 26,735 6,003 32,738 19,736 5,269 25,005
Contributions to defined contribution plan 8,145 2,054 10,199 6,888 1,473 8,361
Total 635,407 191,668 827,075 390,021 134,397 524,418
Details of Directors' and Key Management remuneration and share incentives are
disclosed in the Remuneration Report, the Remuneration Committee Report on
note 27.
9. Income tax
a) Amounts recognised in profit or loss
2021 2020
EGP'000 EGP'000
Current year tax (579,262) (268,796)
WHT suffered (68,737) (24,470)
Current tax (647,999) (293,266)
DT on undistributed reserves (106,767) (67,124)
DT on reversal of temporary differences 14,951 790
Total Deferred tax (91,816) (66,334)
Tax expense recognized in profit or loss (739,815) (359,600)
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. During the year and due to the ongoing impact of Covid, although our
board meetings are still actively managed through London, directors have
largely attended virtually. Our view is our tax residency has not changed,
however if it were deemed that the company was no longer a UK tax resident,
our assessment is this would not lead to a material change to the taxation
payable by the group.
2021 2020
EGP'000 EGP'000
Profit before tax 2,232,321 969,082
Profit before tax multiplied by rate of corporation tax in Egypt of 22.5% 502,272 218,044
(2020: 22.5%)
Effect of tax rate in UK of 19% (2020: Jersey 0%) 3,445 (346)
Effect of tax rates in Cayman, Jordan, Sudan and Nigeria of 0%, 21%, 30% and (6,676) 9,855
30% respectively (2020: 0%, 21%, 30% and 30%)
Tax effect of: -
Recognition of previously unrecognised deferred tax (24,435) -
Deferred tax not recognised 28,132 20,454
Deferred tax arising on undistributed dividend 175,504 91,593
Non-deductible expenses for tax purposes - employee profit share 39,419 18,223
Non-deductible expenses for tax purposes - other 22,154 1,777
Tax expense recognised in profit or loss 739,815 359,600
Deferred tax
Deferred tax relates to the following:
2021 2020
Assets Liabilities Assets Liabilities
EGP'000 EGP'000 EGP'000 EGP'000
Property, plant and equipment - (28,925) - (18,334)
Intangible assets - (105,358) - (106,702)
Undistributed reserves from group subsidiaries* - (223,425) - (116,657)
Tax Losses 25,559 - 1,360 -
Total deferred tax assets - liability 25,559 (357,708) 1,360 (241,693)
(332,149) - (240,333)
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:
2021 Net Balance 1 January Deferred tax recognized in profit or loss WHT tax Net Balance 31 December
paid
Property, plant and equipment (18,333) (10,592) (28,925)
Intangible assets (106,702) 1,344 (105,358)
Undistributed dividend from group subsidiaries (116,658) (175,504) 68,737 (223,425)
Tax losses 1,360 24,199 25,559
(240,333) (160,553) 68,737 (332,149)
2020 Net balance at 1 January Deferred tax recognised in profit or loss WHT tax paid Net balance 31 December
Property, plant and equipment (17,460) (873) (18,333)
Intangible assets (108,365) 1,663 (106,702)
Undistributed dividend from group subsidiaries (49,534) (91,593) 24,469 (116,658)
Tax losses 1,360 - 1,360
(173,999) (90,803) 24,469 (240,333)
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 2021 for the country the liabilities and assets has
arisen. The enacted tax rate in Egypt is 22.5% (2020: 22.5%), Jordan 21%
(2020: 21%), Sudan 30% (2020: 30%) and Nigeria 30% (2020: 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:
2021 2020
EGP'000 EGP'000
Al Mokhtabar Company for Medical Labs 85,546 58,558
Alborg Laboratory Company 38,545 24,122
Integrated Medical Analysis Company 75,841 22,319
Al Makhbariyoun Al Arab Group 23,493 11,659
223,425 116,658
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.
2021 2021 2020 2020
Gross Amount Tax Effect Gross Amount Tax Effect
EGP'000 EGP'000 EGP'000 EGP'000
Impairment of trade receivables (Note 16) 101,183 22,766 77,727 17,489
Impairment of other receivables (Note 16) 8,585 1,932 8,509 1,915
Provision for legal claims (Note 21) 4,088 920 3,134 705
Tax losses* 320,391 78,142 107,341 29,736
434,247 103,760 196,711 49,845
Unrecognized deferred tax asset 103,760 49,845
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 follow:
2021 2021 2020 2020
Gross Amount Tax Effect Gross Amount Tax Effect
Company Country EGP'000 EGP'000 EGP'000 EGP'000
Integrated Diagnostics Holdings plc Jersey 271,689 67,922 - -
Dynasty Group Holdings Limited England and Wales 13,446 2,555 12,371 2,350
Eagle Eye-Echo Scan Limited Mauritius 3,556 533 1,222 183
Echo-Scan Nigeria - - 81,450 24,435
WAYAK Pharma Egypt 16,269 3,660 8,503 1,913
Medical Genetic Center Egypt 6,421 1,445 3,795 854
Golden care Egypt 9,010 2,027 - -
320,391 78,142 107,341 29,736
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:
2021 2020
EGP'000 EGP'000
Profit attributable to ordinary equity holders of the parent for basic 1,412,609 594,015
earnings
Weighted average number of ordinary shares for basic and dilutive EPS 600,000 600,000
Basic and dilutive earnings per share 2.35 0.99
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 potential diluted shares as of the 31 December 2021 and 31
December 2020, 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 2020 332,353 483,370 225,281 66,461 19,924 4,099 1,131,488
Additions 555 84,615 32,473 8,703 5,011 1,324 132,681
Hyper inflation - 8,628 - - - - 8,628
Disposals - (2,675) (638) (522) (2,789) - (6,624)
Exchange differences (563) (8,241) (2,643) (1,381) (938) - (13,766)
At 31 December 2020 332,345 565,697 254,473 73,261 21,208 5,423 1,252,407
Additions* 51,357 285,848 75,993 25,630 4,016 1,338 444,182
Hyper inflation - (8,740) - - - - (8,740)
Disposals (2,471) (8,042) (1,092) (1,567) - - (13,172)
Exchange differences (348) (10,135) (2,317) (1,358) (1,141) - (15,299)
Transfers - - 8,146 - (8,146) - -
At 31 December 2021 380,883 824,628 335,203 95,966 15,937 6,761 1,659,378
Depreciation and impairment
At 1 January 2020 39,718 180,046 105,108 21,070 - - 345,942
Depreciation charge for the year 8,057 70,454 33,967 6,154 - - 118,632
Disposals 5 (2,380) 87 881 - - (1,407)
Exchange (56) (2,191) (650) (876) - - (3,773)
differences
At 31 December 2020 47,724 245,929 138,512 27,229 - - 459,394
Depreciation charge for the year 5,797 97,386 40,569 8,074 - - 151,826
Disposals - (4,522) (916) (1,185) - - (6,623)
Exchange (31) (4,987) (935) (1,074) - - (7,027)
differences
At 31 December 2021 53,490 333,806 177,230 33,044 - - 597,570
Net book value
At 31-12-2021 327,393 490,822 157,973 62,922 15,937 6,761 1,061,808
At 31-12-2020 284,621 319,768 115,961 46,032 21,208 5,423 793,013
*During year 2021 the additions include EGP 154m related to Alborg Scan
branches, EGP 79.3m related to medical equipment and new branch Capital
Business EGP 48.7m. This amount does not Include any capitalised borrowing
costs and is ready to use.
12. Intangible assets and goodwill
Goodwill Brand Name Software Total
EGP'000 EGP'000 EGP'000 EGP'000
Cost
At 1 January 2020 1,264,086 384,414 59,558 1,708,058
Additions - - 7,639 7,639
Effect of movements in exchange rates (2,278) (492) (40) (2,810)
At 31 December 2020 1,261,808 383,922 67,157 1,712,887
Additions - - 10,354 10,354
Effect of movements in exchange rates (843) (13) (117) (973)
At 31 December 2021 1,260,965 383,909 77,394 1,722,268
Amortisation and impairment
At 1 January 2020 1,849 - 45,373 47,222
Amortisation - - 5,926 5,926
Effect of movements in exchange rates - - (16) (16)
At 31 December 2020 1,849 - 51,283 53,132
Impairment* 341 47 - 388
Amortisation - - 7,201 7,201
Effect of movements in exchange rates 2,362 325 (7) 2,680
At 31 December 2021 4,552 372 58,477 63,401
Net book value
At 31 December 2021 1,256,413 383,537 18,917 1,658,867
At 31 December 2020 1,259,959 383,922 15,874 1,659,755
* The impairment amount in goodwill and brand name related to Ultra lab
company in Sudan has full impaired in impairment study due to the severe
devaluation of SDG currency.
13. Goodwill and intangible assets with indefinite lives (note
3.2-h)
Goodwill acquired through business combinations and intangible assets with
indefinite lives are allocated to the Group's CGUs as follows:
2021 2020
EGP'000 EGP'000
Medical Genetics Center
Goodwill 1,755 1,755
1,755 1,755
Al Makhbariyoun Al Arab Group ("Biolab")
Goodwill 46,145 46,174
Brand name 20,153 20,165
66,298 66,339
Golden Care for Medical Services ("Ultralab")
Goodwill - 2,703
Brand name - 372
- 3,075
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 12,136 12,950
12,136 12,950
Balance at 31 December 1,639,950 1,643,881
The Group performed its annual impairment test in October 2021. Nothing
occurred between the impairment test and the balance sheet date that would
require the assumptions in the models to be updated.
The Group considers the relationship between
its market capitalisation and its book value, among other
factors, when reviewing for indicators of impairment.
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
assessments 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:
Year 2021
Ultra Lab Bio Lab Al-Mokhtabar Al-Borg Echo-Scan
Average annual patient growth rate from 2022 -2026 4% 0.2% -0.1% 2% 26%
Average annual price per test growth rate from 2022 -2026 49% -7% -2% 3% 7%
Annual revenue growth rate from 2022 -2026 56% -5% 0.4% 6% 40%
Average gross margin from 2022 -2026 35% 38% 52% 48% 39%
Terminal value growth rate from 1 January 2027 3% 3% 5% 5% 3%
Discount rate 40.6% 14.8% 20.19% 20.4% 21.7%
Year 2020
Ultra Lab Bio Lab Al-Mokhtabar Al-Borg Echo-Scan
Average annual patient growth rate from 2021 -2025 8% 6% 5% 5% 25%
Average annual price per test growth rate from 2021 -2025 2% 0% 7% 7.5% 9.5%
Annual revenue growth rate from 2021 -2025 11% 6% 12% 13% 54%
Average gross margin from 2021 -2025 36.5% 46.4% 55% 49% 53%
Terminal value growth rate from 1 January 2026 1% 2% 3% 3% 2%
Discount rate 34.5% 18.6% 20.3% 20.3% 20%
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.
During year 2021, The management has conducted business plan projection with
the help of a management's expert, (Alpha Capital), using the assumptions
above to be able to calculate the net present value of the asset in use and
determine the recoverable amount. The projected cash flows from 2022- 2026
have been based on detailed forecasts prepared by management for each CGU and
a terminal value thereafter. Management have used experience and historic
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 has not result
to an impairment under any of the CGUs.
Management has also considered a change in the terminal growth rate by 1%
decrease to reflect additional risk, which did not result in any impairment
under any of the CGUs.
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 between the carrying value and value in use as follows:
Company Value in use CGU carrying value Headroom
EGP'000
EGP'000
Almokhtabar 3,373,147 1,161,565 2,211,582
Alborg 2,727,434 1,007,779 1,719,655
Bio Lab 572,968 152,963 420,005
Echo Scan 233,476 44,190 189,286
14. Financial asset at fair value through profit and loss
2021 2020
EGP'000 EGP'000
Equity investment* 10,470 9,604
Balance at 31 December 10,470 9,604
* On August 17, 2017, Almakhbariyoun 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, 2021, 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 400,00.00) plus 20% annual IRR.
15. Inventories
2021 2020
EGP'000 EGP'000
Chemicals and operating supplies 222,612 100,115
222,612 100,115
During 2021, EGP 962,748k (2020: EGP 466,679k) 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 61 days at 31 Dec
2021.
No impairment of inventory during the year 2021.
16. Trade and other receivables
2021 2020
EGP'000 EGP'000
Trade receivables - net 371,051 325,770
Prepayments 22,647 19,363
Due from related parties note (27) 5,237 2,910
Other receivables 67,974 34,431
Accrued revenue 2,818 1,006
469,727 383,480
As at 31 December 2021, the expected credit loss related to trade and other
receivables was EGP 109,768K (2020: EGP 86,237k). Below show the movements in
the provision for impairment of trade and other receivables:
2021 2020
EGP'000 EGP'000
At 1 January 86,237 44,528
Charge for the year 24,656 42,131
Utilised - (3,629)
Unused amounts reversed (32) (837)
Exchange differences (1,093) 4,044
At 31 December 109,768 86,237
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
Based on the expected credit loss assessment, an additional provision was
calculated for the year, yielding an additional Expected Credit Losses (ECL)
for IDH Group amounting to EGP 24 million. On quarterly basis, IDH revises its
forward-looking estimates and the general economic conditions to assess the
expected credit loss, which will be mainly based on current and expected
inflation rates. 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.
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 101,183K (31 December
2020: EGP 77,727K)
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 4,347K. This analysis assumes that all other variables remain
constant.
The following table provides information about the exposure to credit risk and
ECLs for trade receivables from individual customers For the nine segments
at:
Weighted average Gross carrying Loss
loss rate
amount
allowance
31-Dec-21 EGP'000 EGP'000 EGP'000
Current (not past due) 0.00% 151,592 -
1-30 days past due 1.79% 85,764 (1,532)
31-60 days past due 5.25% 74,505 (3,911)
61-90 days past due 5.89% 31,028 (1,828)
91-120 days past due 9.06% 17,469 (1,582)
121-150 days past due 18.45% 8,576 (1,582)
More than 150 -365days past due 87.89% 103,300 (90,748)
Weighted average Gross carrying Loss
loss rate
amount
allowance
31-Dec-20 EGP'000 EGP'000 EGP'000
Current (not past due) 0.00% 187,705 -
1-30 days past due 5.06% 63,771 (3,228)
31-60 days past due 6.18% 46,097 (2,847)
61-90 days past due 13.61% 17,322 (2,358)
91-120 days past due 18.85% 9,816 (1,850)
121-150 days past due 36.38% 6,436 (2,341)
More than 150-365 days past due 89.98% 72,350 (65,103)
As at 31 December, the ageing analysis of trade receivables is
as follows:
Total < 30 days 30-60 days 61-90 days > 90 days
2021 371,051 235,824 70,594 29,200 35,433
2020 325,770 248,248 43,250 14,964 19,308
17. Cash and cash equivalents
2021 2020
Cash at banks and on hand 261,430 253,225
Treasury bills (less than 90 days) 150,431 184,525
Term deposits (less than 90 days) 479,590 162,380
891,451 600,130
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 short-term deposit weighted average rate 7.75% (2020: 7%) and
Treasury bills 12.44% (2020: 10%) per annum.
18. Financial assets at amortised cost
2021 2020
EGP'000 EGP'000
Term deposits (more than 90 days) 148,136 -
Treasury bills (more than 90 days) 1,310,588 276,625
1,458,724 276,625
The maturity date of the fixed term deposit and treasury bills is between 3-12
months and the effective interest rate on the treasury bills is 12.44% (2020:
10%) and deposits is 7.75%.
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.
Ordinary shares Ordinary shares
31-Dec-21 31-Dec-20
In issue at beginning of the year 600,000,000 150,000,000
In issue at the end of the year 600,000,000 600,000,000*
Ordinary share capital Name Number of shares % of contribution Par value
USD
Hena Holdings Limited 152,982,356 25.50% 38,245,589
Actis IDH B V 126,000,000 21.00% 31,500,000
Free floating 321,017,644 53.50% 80,254,411
600,000,000 100% 150,000,000
* At the Extraordinary General Meeting of the Company held on 23 December
2020, it was resolved that the Company's existing issued ordinary share
capital of 150,000,000 ordinary shares of US$1.00 each (the "Existing Ordinary
Shares") will be sub-divided into 600,000,000 ordinary shares of US$0.25 each
(the "New Ordinary Shares") (the "Sub-Division"). The Sub-Division was
successfully completed with effect from 24 December 2020.
Capital reserve
The capital reserve was created when the Group's previous parent company,
Integrated Diagnostics Holdings LLC - IDH (Caymans) arranged its own
acquisition by Integrated Diagnostics Holdings PLC, a new legal parent. The
balances arising represent the difference between the value of the equity
structure of the previous and new parent companies.
Legal reserves
Legal reserve was formed based on the legal requirements of the Egyptian law
governing the Egyptian subsidiaries. According to the Egyptian subsidiaries'
article of association 5% (at least) of the annual net profit is set aside to
from a legal reserve. The transfer to legal reserve ceases once this reserve
reaches 50% of the entity's issued capital. If the reserve falls below the
defined level, then the entity is required to resume forming it by setting
aside 5% of the annual net profits until it reaches 50% of the issued share
capital.
Put option reserve
Through acquisitions made within the Group, put option arrangements have been
entered into to purchase the remaining equity interests in subsidiaries from
the vendors at a subsequent date. At acquisition date an initial put option
liability is recognised and a corresponding entry recognised within the put
option reserve. After initial recognition the accounting policy for put
options is to recognise all changes in the carrying value of the liability
within put option reserve. When the put option is exercised by the vendors the
amount recognised within the reserve will be reversed.
Translation reserve
The foreign currency translation reserve is used to record exchange
differences arising from the translation of the financial statements of
foreign subsidiaries.
20. Distributions made and proposed
2021 2020
EGP'000
EGP'000
Cash dividends on ordinary shares declared and paid:
US$ 0.0485 per qualifying ordinary share (2020: US$ 0.19) 455,182 441,855
455,182 441,855
After the balance sheet date, the following dividends were proposed by the 1,300,000 455,831
directors (the dividends have not been provided for):
EGP 2.17 per share (2020: $0.049) per share 1,300,000 455,831
21. Provisions
Egyptian Government Training Fund for employees Provision for legal claims Total
EGP'000 EGP'000 EGP'000
At 1 January 2021 191 3,217 3,408
Provision made during the year - 2,146 2,146
Provision used during the year - (993) (993)
Provision reversed during the year (191) (282) (473)
At 31 December 2021 - 4,088 4,088
Current
Non- Current - 4,088 4,088
Egyptian Government Training Fund for employees Provision for legal claims Total
EGP'000
EGP'000
EGP'000
At 1 January 2020 191 5,082 5,273
Provision made during the year - 3,194 3,194
Provision used during the year - (5,040) (5,040)
Provision reversed during the year - (19) (19)
At 31 December 2020 191 3,217 3,408
Non- Current 191 3,217 3,408
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 2021.
In addition to the provisions for legal claims recognised, there is also an
Arbitration Claim that has been made and includes the Company as a respondent.
No provision is recognised for this claim, as the Group believes it will
succeed in this matter as demonstrated by previous claims by the claimant that
have been successfully defended.
22. Trade and other payables
2021 2020
EGP'000 EGP'000
Trade payables 311,321 177,603
Accrued expenses 325,677 151,201
Due to related parties note (27) 13,234 439
Other payables 99,040 50,959
Deferred revenue 24,603 -
Accrued finance cost 3,479 3,421
777,354 383,623
23. Current put option liability
2021 2020
EGP'000 EGP'000
Put option - Biolab Jordan 921,360 282,267
921,360 282,267
The accounting policy for put options after initial recognition is to
recognise all changes in the carrying value of the put liability within
equity.
Through the historic acquisitions of Makhbariyoun Al Arab the Group entered
into separate put option arrangements to purchase the remaining equity
interests from the vendors at a subsequent date. At acquisition a put option
liability has been recognised for the net present value for the exercise price
of the option.
The options 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 2021. 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 18 months. The option
has no expiry date.
24. Loan and borrowings
The terms and conditions of outstanding loans are as follows:
Currency Nominal Maturity 31 Dec 21 31 Dec 20
interest rate
A) CIB ـــ BANK EGP Secured rate 9.5% 5 April 2022 13,238 38,654
B) AUB ـــ BANK EGP CBE corridor rate*+1% 26 April 2026 84,828 54,379
- 98,066 93,033
Amount held as:
Current liability 21,721 25,416
Non- current liability 76,345 67,617
98,066 93,033
A) In April 2017 AL-Mokhtabar for medical lab, one of IDH subsidiaries,
was granted a medium term loan amounting to EGP 110m from Commercial
International Bank "CIB Egypt" to finance the purchase of the new
administrative building for the group. Starting May 2021, the loan has been
secured through restricted time deposits.
B) 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 2021 only EGP 84.8m had been drawn down from the
total facility available. 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 equivalent ) 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 2021 corridor rate 9.25% (2020: 9.25%)
AL- Borg company didn't breach any covenants for MTL agreements.
The group signed two agreements of debt facilities. The debt package includes
the US$ 45.0 million facilities secured an 8-year period starting May 2021
from International Finance Corporation (IFC), and an additional US$ 15.0
million IFC syndicated facility from Mashreq Bank in Dec 2021 debt has not
been withdrawn by IDH.
25. Non-current put option liability
2021 2020
EGP'000 EGP'000
Put option liability* 35,037 31,790
35,037 31,790
*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 35 million was calculated as the valuation as at 31 December 2021
(2020; EGP 32m). In line with IAS 32 the entity has recognised a liability for
the present value of the exercise price of the option price. The ramp-up of
Echo-Scan operations driven by the new radiology equipment installed during Q4
2019 in Lagos and the following years yielding a Compounded Annual Growth Rate
of 40% from 2022 to 2025.
26. 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 9.85%. 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
2021 2020
EGP'000 EGP'000
-
Balance at 1 January 354,688 264,763
Addition for the year 198,402 152,030
Depreciation charge for the year (79,617) (60,803)
Terminated Contracts (7,643) (1,302)
Exchange differences (3,398) -
Balance at 31 December 462,432 354,688
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:
2021 2020
EGP'000 EGP'000
*Financial liability- laboratory equipment 228,870 69,123
*Lease liabilities building 531,804 389,920
760,674 459,043
*The financial obligation liabilities for the laboratory equipment and
building are payable as follows:
Minimum payments Interest Principal
At 31 December 2021 2021 2021 2021
EGP'000 EGP'000 EGP'000
Less than one year 211,242 95,764 115,478
Between one and five years 701,084 227,314 473,770
More than 5 years 191,229 19,803 171,426
1,103,555 342,881 760,674
Interest Principal
Minimum payments
At 31 December 2020 2020 2020 2020
EGP'000 EGP'000 EGP'000
Less than one year 126,999 66,481 60,518
Between one and five years 463,646 176,312 287,334
More than 5 years 131,605 20,415 111,190
722,250 263,208 459,042
c) Amounts other financial obligations recognised in consolidated income
statement
2021 2020
EGP'000 EGP'000
Interest on lease liabilities 68,352 58,864
Expenses related to short-term lease 18,875 13,771
27. Related party transactions disclosures
The significant transactions with related parties, their nature volumes and
balance during the period 31 December 2021 and 2020 are as follows:
2021
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 1 351
International Fertility (IVF)** Expenses paid on behalf Affiliate - 1,767
H.C Security Provide service Entity owned by Company's board member (243) (319)
Life Health Care Provide service Entity owned by Company's CEO (11,232) 2,094
Dr. Amid Abd Elnour Put option liability Bio. Lab C.E.O and shareholder (639,093) (921,360)
International Finance corporation (IFC) Put option liability Eagle Eye - Echo Scan limited shareholder (3,247) (35,037)
International Finance corporation (IFC) Current account Eagle Eye - Echo Scan limited shareholder (12,915) (12,915)
Integrated Treatment for Kidney Diseases (S.A.E) Rental income Entity owned by Company's CEO
(298)
1,025
Medical Test analysis 530
Total (964,394)
2020
Related Party Nature of transaction Nature of relationship Transaction amount of the year Amount due from
EGP'000 EGP'000
ALborg Scan (S.A.E)* Expenses paid on behalf Affiliate 6 350
International Fertility (IVF)** Expenses paid on behalf Affiliate (3,449) 1,767
H.C Security Provide service Entity owned by Company's board member (412) (76)
Life Health Care Provide service Entity owned by Company's CEO (11,058) (363)
Dr. Amid Abd Elnour Put option liability Bio. Lab C.E.O and shareholder (83,126) (282,267)
International Finance corporation (IFC) Put option liability Eagle Eye - Echo Scan limited shareholder (1,757) (31,790)
Integrated Treatment for Kidney Diseases (S.A.E) Rental income Entity owned by Company's CEO -
793
Medical Test analysis 588
Total (311,586)
* 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).
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 7,419,644 in year
2021 and USD 7,151,925 received in year 2020.
Terms and conditions of transactions with related parties
The transactions with the related parties are made on terms
equivalent to those that prevail in transactions. 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 2021, the Group has not recorded any impairment of receivables
relating to amounts owed by related parties (2020:
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 up to 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 2021 EGP 9,578 K
(2020: EGP 6,510K) was paid to the foundation by the IDH Group.
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.
2021 2020
EGP'000 EGP'000
Short-term employee benefits 55,082 51,556
Total compensation paid to key management personnel 55,082 51,556
28. Reconciliation of movements of liabilities to cash flows arising
from financing activities
EGP'000 Other loans Other financial
and borrowings
obligation
Balance at 1 January 2021 96,455 459,043
Proceeds from loans and borrowings 30,450 -
Repayment of borrowings (25,416) -
Payment of liabilities - (59,610)
Interest paid (25,446) (68,354)
Total changes from financing cash flows (20,412) (127,964)
New agreements signed in the period - 367,533
Terminated contracts during the year - (6,292)
Interest expense 29,651 68,353
Total liability-related other changes 29,651 429,594
Balance at 31 December 2021 105,694 760,673
EGP'000 Other loans Other financial
and borrowings
obligation
Balance at 1 January 2020 111,750 338,073
Proceeds from loans and borrowings 11,727 -
Repayment of borrowings (25,416) -
Payment of liabilities - (42,746)
Interest paid (14,160) (59,576)
Total changes from financing cash flows (27,849) (102,321)
New agreements signed in the period - 166,339
Terminated contracts during the year - (1,912)
Interest expense 12,554 58,864
Total Liability - related other changes 12,554 223,291
Balance as at 31 December 2020 96,455 459,043
29. Current tax liabilities
2021 2020
EGP'000 EGP'000
Debit withholding Tax (Deduct by customers from sales invoices) (34,166) (37,282)
Income Tax 521,929 281,777
Credit withholding Tax (Deduct from vendors invoices) 17,922 9,672
Other 7,319 3,373
513,004 257,540
30. Post Balance Sheet Events
On the 20th of December 2021, Integrated Diagnostics Holdings Plc announced
the signing of a sale and purchase agreement (the "SPA") to acquire 50%
shareholding in Base Consultancy FZ LLC, the holding company of Islamabad
Diagnostic Centre Limited ("IDC"), from the Evercare Group, an emerging
markets healthcare delivery platform managed by TPG for a total consideration
of US$ 72.35 million. The transaction, which is subject to the satisfaction of
a number of key conditions precedent including, but not limited to, the
receipt of regulatory approval from the Competition Commission of Pakistan,
will see IDH acquire a stake in one of Pakistan's leading diagnostic providers
and partner with the founder Dr Rizwan Uppal. IDC will be fully consolidated
on IDH's accounts following the completion of the transaction and transfer of
funds to the Evercare Group. The transaction is expected to close in the first
half of 2022. IDH plans to finance the transaction through a combination of
existing cash and committed debt facilities. The debt package includes the US$
45.0 million facility secured an 8-year period starting May 2021 from
International Finance Corporation (IFC), and an additional US$ 15.0 million
IFC syndicated facility from Mashreq Bank.
On 21 March 2022, the Central Bank raised policy rates by 100bps and allowed
the Egyptian Pound to devalue by more than 17% against the US Dollar which is
expected to impose Inflationary pressures in the short to medium term.
Inflation rates are expected to average around 13% to 15% during 2022, up from
5.9% in December 2021. Moreover, GDP growth in FY22/23 was revised downward to
5.5% from 5.7% by the Egyptian government in March 2022. The Group is closely
monitoring the situation and the impact that may arise.
31. Contingent liabilities
As required by article 134 of the labour law on Vocational Guidance and
Training issued by the Egyptian Government in 2003, Al Borg Laboratory Company
and Al Mokhtabar Company for Medical Labs are required to conform to the
requirements set out by that law to provide 1% of net profits each year into a
training fund. Integrated Diagnostics Holdings plc have taken legal advice and
considered market practice in Egypt relating to this and more specifically
whether the vocational training courses undertaken by Al Borg Laboratory
Company and Al Mokhtabar Company for Medical Labs suggest that obligations
have been satisfied through training programmes undertaken in-house by those
entities. Since the issue of the law on Vocational Guidance and Training, Al
Borg Laboratory Company and Al Mokhtabar Company for Medical Labs have not
been requested by the government to pay or have voluntarily paid any amounts
into the external training fund. Should a claim be brought against Al Borg
Laboratory Company and Al Mokhtabar Company for Medical Labs, an amount of
between EGP 24m to EGP 54m could become payable, however this is not
considered probable.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR EAPLFALDAEEARecent news on Integrated Diagnostics Holdings
See all newsREG - Integrated Diag Hdgs - Annual Financial Report & Notice of AGM
AnnouncementREG - Integrated Diag Hdgs - Final Results
AnnouncementREG - Integrated Diag Hdgs - Notice of Results
AnnouncementREG - Integrated Diag Hdgs - IDH INCREASES STAKE IN BIOLAB KSA
AnnouncementREG - Integrated Diag Hdgs - 3rd Quarter Results
Announcement