REG - Integrated Diag Hdgs - Preliminary Results
06/04/2023 07:00
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RNS Number : 5609V Integrated Diagnostics Holdings PLC 06 April 2023
Integrated Diagnostics Holdings Plc
FY 2022 Results
Thursday, 6 April 2023
Integrated Diagnostics Holdings Plc concludes 2022 reporting solid 18% growth
in non-Covid revenues
(Cairo and London) - Integrated Diagnostics Holdings ("IDH," "the Group," or
"the Company"), a leading consumer healthcare company with operations in
Egypt, Jordan, Nigeria and Sudan, released today its audited financial
statements and operational performance for the year ended 31 December 2022,
reporting revenue of EGP 3,605 million, 31% below the figure recorded in the
previous year. Revenues were supported by a sustained expansion in the
Company's conventional(1) (non-Covid) offering (81% of the consolidated
figure), which recorded a strong 18% year-on-year rise in FY 2022, in part
outweighing the anticipated drop in Covid-19-related(2) revenues throughout
the year.
Growth of IDH's conventional business was dual driven as both conventional
tests performed and average revenue per conventional test expanded a solid 9%
each versus the previous year. IDH reported net profit for the year of EGP 527
million, with an associated margin of 15%. Adjusting for the losses resulting
from transactions completed by the Company to secure the USD balance needed to
fulfil its FY 2021 dividend obligations to shareholders and the one-off item
related to Pakistan transaction fees, the Group would have recorded a net
profit of EGP 692 million in FY 2022, with a margin on revenue of 19%.
On a quarterly basis, conventional revenues recorded EGP 780 million in Q4
2022, a 31% year-on-year expansion, significantly outpacing the year-on-year
growth recorded last quarter and signalling once again the underlying strength
of the Group's conventional business.
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.
Financial Results (IFRS)
EGP mn Q4 2021 Q4 2022 Change FY 2021 FY 2022 Change
Revenues 1,458 805 45% 5,225 3,605 -31%
Conventional Revenues 597 780 31% 2,452 2,903 18%
Covid-19-related Revenues 862 24 -97% 2,773 702 -75%
Cost of Sales (821) (524) -36% (2,421) (2,143) -11%
Gross Profit 638 281 -56% 2,804 1,462 -48%
Gross Profit Margin 44% 35% -9 pts 54% 41% -13 pts
Operating Profit 468 106 -77% 2,291 854 -63%
EBITDA(3) 537 175 -67% 2,501 1,150 -54%
Adjusted EBITDA(4) 537 197 -63% 2,530 1,172 -54%
Adjusted EBITDA Margin 37% 25% -12 pts 48% 33% -15 pts
Net Profit 345 123 -64% 1,493 527 -65%
Net Profit Margin 24% 15% -9 pts 29% 15% -14 pts
Cash Balance 2,350 816 -65% 2,350 816 -65%
Note (1): Throughout the document, percentage changes between reporting
periods are calculated using the exact value (as per the Consolidated
Financials) and not the corresponding rounded figure.
Key Operational Indicators(5)
FY 2021 FY 2022 Change
Branches 502 552 50
Patients ('000) 10,317 8,721 -15%
Net Sales per Patient (EGP) 489 406 -17%
Tests ('000) 33,659 32,685 -3%
Conventional Tests ('000) 28,542 30,985 9%
Covid-19-related Tests ('000) 5,117 1,700 -67%
Net Sales per Test 150 108 -28%
Net Sales per Conventional Test (EGP) 86 94 9%
Net Sales per Covid-19-related Test (EGP) 507 376 -26%
Test per Patient 3.3 3.7 15%
1 Conventional (non-Covid) tests include all of the Group's test offering with
the exception of its Covid-19-related test offering outlined below.
2 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.
3 EBITDA is calculated as operating profit plus depreciation and amortization.
4 Adjusted EBITDA is calculated as EBITDA excluding one-off expenses incurred
by the Group.
5 Key operational indicators are calculated based on net sales for the year of
EGP 3,542 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 (APM)
As part of IDH's efforts to support local authorities in 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. These agreements
kicked off in May 2021 at Aqaba Port and in August 2021 at QAIA. However,
following the decision by Jordanian authorities on 1 March 2022 to end
mandatory testing, testing booths across both locations recorded sharp
declines in patient traffic.
Under these agreements, Biolab received the full revenue (gross sales) for
each test performed and paid a proportion to QAIA (38% of gross sales
excluding sales tax) 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. Starting in Q4 2021, the treatment of
these agreements was altered 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. It is
important to note that sales generated from these agreements were reflected on
the Company's results in Q1 2022 only as the agreements were terminated at the
end of the first quarter of 2022.
In an effort to present an accurate picture of IDH's performance for the
twelve-month period ended 31 December 2022, throughout the report management
utilizes net sales of EGP 3,542 million for FY 2022 (IFRS revenues stand at
EGP 3,605 million for the twelve-month period). Net sales for the twelve-month
period ended 31 December 2022 are calculated as total gross revenues excluding
concession fees and sales taxes paid as part of Biolab's revenue sharing
agreements with QAIA and Aqaba Port. This is a similar approach taken by IDH
in the Company's FY 2021 Results Announcement.
It is worth nothing that following the reduction in activity, net sales will
not be reported as an APM in 2023.
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.
Adjustments Breakdown
EGP mn Q1 2022 Q2 2022 Q3 2022 Q4 2022 FY 2022
Net Sales 1,117 774 846 805 3,542
QAIA and Aqaba Port Concession Fees 63 0 0 0 63
Revenues 1,180 774 846 805 3,605
Cost of Net Sales (586) (473) (497) (524) (2,080)
Adjustment for QAIA, and Aqaba Port Agreements (63) (0) (0) (0) (63)
Cost of Sales (649) (473) (497) (524) (2,143)
Adjustments by Country
EGP mn FY 2022 (IFRS) FY 2022 (APM)
Egypt 2,894 2,894
Jordan 612 549
Nigeria 79 79
Sudan 20 20
Group total 3,605 3,542
Note: differences between IFRS and APM figures are highlighted in grey.
Alternative Performance Measures (APM)
EGP mn Q4 2021 Q4 2022 Change FY 2021 FY 2022 Change
Net Sales 1,281 805 -37% 5,048 3,542 -30%
Conventional Revenue 597 780 31% 2,452 2,903 18%
Covid-19-related Net Sales 684 24 -96% 2,596 639 -75%
Cost of Net Sales (644) (524) -19% (2,244) (2,080) -7%
Gross Profit 638 281 -56% 2,804 1,462 -48%
Gross Profit Margin on Revenue 50% 35% -15 pts 54% 41% -13 pts
Gross Profit Margin on Net Sales(6) 50% 35% -15 pts 56% 41% -15 pts
Operating Profit 468 106 -77% 2,291 854 -63%
EBITDA(7) 537 175 -67% 2,501 1,150 -54%
Adjusted EBITDA(8) 537 197 -63% 2,530 1,172 -54%
Adjusted EBITDA Margin on Revenue 42% 25% -17 pts 48% 33% -15 pts
Adjusted EBITDA Margin on Net Sales 42% 25% -17 pts 50% 33% -17 pts
Net Profit 345 123 -64% 1,493 527 -65%
Net Profit Margin on Revenue 27% 15% -12 pts 29% 15% -14 pts
Net Profit Margin on Net Sales 27% 15% -12 pts 30% 15% -15 pts
Cash Balance 2,350 816 -65% 2,350 816 -65%
Note: differences between IFRS and APM figures are highlighted in grey.
6 Gross profit, EBITDA, and net profit margins are calculated on net sales for
APM in both periods.
7 EBITDA is calculated as operating profit plus depreciation and amortization.
8 Adjusted EBITDA is calculated as EBITDA excluding one-off expenses incurred
by the Group. These include one-off listing expenses in FY 2021 of EGP 29.0
million related to IDH's dual listing on the EGX, and one-off transaction
expenses in FY 2022 of EGP 22.3 million related to IDH's aborted acquisition
in Pakistan. Adjusted measures eliminate the one-off impacts of items in the
year to provide a measure of underlying performance which is regularly
utilized by management.
Important notice: The analysis provided in this section presents both APM
measures and IFRS comparisons when necessary. A reconciliation between IFRS
and APM measures is provided earlier in this announcement.
Introduction
i. Financial Highlights
· Conventional(9) Revenue (81% of consolidated revenue in FY 2022 and
which includes IDH's full test offering except for Covid-19-related tests)
posted robust growth on the back of a continued normalisation of patient
traffic post-Covid-19, and supporting consolidated net sales for FY 2022 which
were otherwise weighed down by a rapid decline in Covid-19-related business.
Conventional revenue expanded 18% year-on-year to EGP 2,903 million in FY
2022, driven by a 9% year-on-year increase in both conventional test volumes
and average revenue per test. On a quarterly basis, conventional revenue
delivered an impressive 31% year-on-year expansion to EGP 780 million,
supported by a 12% year-on-year increase in test volumes and a 16% rise in
average revenue per test (in part due to the post-devaluation translation
effect).
· Simultaneously, and in line with the Company's expectations,
Covid-19-related(10) revenues (19% of consolidated revenue in FY 2022)
recorded EGP 702 million in 2022, down 75% year-on-year. Similarly,
Covid-19-related net sales declined sharply, contracting by 75% year-on-year
to EGP 639 million in FY 2022. The decline reflected a widespread fall in
infection rates, the lifting of government regulations on mandatory testing,
as well as a reduction in the average price of PCR and Antigen tests. On a
quarterly basis, IDH booked only EGP 24 million in Covid-19-related revenue
(identical to net sales) in Q4 2022, down 96% year-on-year.
· Consolidated revenue declined 31% year-on-year to record EGP 3,605
million in 2022. Meanwhile, consolidated net sales recorded EGP 3,542 million
during FY 2022, a 30% year-on-year contraction. The decline wholly reflects
the fall in Covid-19-related business which had boosted consolidated results
in FY 2021. Lower Covid-19-related revenues were partially offset by the
strong growth in conventional revenues. On a quarterly basis, consolidated
revenues (identical to net sales) declined 37% year-on-year to reach EGP 805
million.
· Gross Profit recorded EGP 1,462 million for FY 2022, down 48%
year-on-year from the EGP 2,804 million recorded in FY 2021. Gross profit
margin on revenue and net sales recorded 41% in FY 2022 versus a margin of 54%
on revenue and 56% on net sales in FY 2021. Lower gross profitability
principally reflects a normalisation of margins following the year-on-year
decline in Covid-19-related business which had significantly boosted net sales
and profitability in FY 2021. Gross profitability was also in part weighed
down by an increase in direct salaries and wages (related to additional
staffing requirements for the 50 new branches and annual salary increases for
existing employees), higher direct depreciation expenses on new branch
additions, and a slight increase in raw material prices in the second half of
the year (reflecting the devaluation of the Egyptian pound throughout the
year). In Q4 2022, gross profit recorded EGP 281 million, down 56%
year-on-year primarily reflecting the reduction in the significantly higher
margin achieved by IDH's Covid-19-related business in FY 2021 and similar
reasons to those driving full-year gross profitability. Gross profit margin on
revenue (identical to net sales) recorded 35% in Q4 2022.
· EBITDA(11) recorded EGP 1,150 million in 2022, down 54% from the EGP
2,501 million recorded last year. EBITDA margin on revenue and net sales both
stood at 32% for the year. Meanwhile, Adjusted EBITDA,(12) which adjusts for
non-recurring expenses incurred by IDH in 2021 and 2022, came in at EGP 1,172
million in FY 2022, representing a 54% year-on-year decrease. Adjusted EBITDA
margin on revenue recorded 33% in 2022 from 48% last year. Meanwhile, Adjusted
EBITDA margin on net sales of 33% versus 50% in FY 2021. The decline is
attributable to lower gross profitability for the year coupled with an
increase in SG&A expenses, primarily related to increased marketing
activities to support new branch roll outs, and the launch of a new patient
loyalty programme. In Q4 2022, EBITDA recorded EGP 197 million, down 63%
year-on-year and with an associated margin on revenue (identical to net sales)
of 25%.
· Net Profit recorded EGP 527 million for FY 2022, down 65%
year-on-year. Net profit margin on revenue normalised following the
exceptional profitability recorded throughout FY 2021, recording 15% in FY
2022 from 29% in FY 2021. Similarly, net profit margin on net sales recorded
15% in FY 2022 versus 30% in the year prior. It is important to note that
adjusting for the losses resulting from transactions completed by the Company
to secure the USD balance needed to fulfil its FY 2021 dividend obligations to
shareholders and transaction cost related to Pakistan transaction,(13) the
Group would have recorded a net profit of EGP 692 million in FY 2022, with a
margin on revenue of 19% and on net sales of 20%. In Q4 2022, net profit
recorded EGP 123 million, down 64% year-on-year and with a margin on revenue
(identical to net sales) of 15%.
· Earnings per share stood at EGP 0.90 in FY 2022 compared to EGP 2.35
in FY 2021.
9 Conventional (non-Covid) tests include IDH's full service offering excluding
the Covid-19 related tests outlined below.
1(0) 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.
1(1) EBITDA is calculated as operating profit plus depreciation and
amortization.
1(2) Adjusted EBITDA is calculated as EBITDA excluding one-off expenses
incurred by the Group.
1(3) In December 2021, the Company signed a sale and purchase agreement to
acquire 50% shareholding in Base Consultancy FZ LLC, the holding company of
Islamabad Diagnostic Centre ("IDC"). While the original SPA, expired on 29
August 2022, IDH and the Seller continued negotiations aimed at concluding a
transaction on modified terms. Despite the efforts of the parties, extensive
delays in the regulatory review process, the challenging global economic
environment and the condition precedent related to repatriating funds, have
resulted in the discontinuation in January 2023 of negotiations towards
completing the transaction.
ii. Operational Highlights
· IDH's revenue generating branch network reached 552 branches as of 31
December 2022, an increase of 50 branches from the 502 branches recorded as of
31 December 2021.
· Conventional tests(14) recorded 31.0 million during FY 2022, a robust
9% year-on-year increase. The strong increase in conventional tests partially
offset the 67% year-on-year decrease in Covid-19-related tests, which dropped
to 1.7 million for FY 2022. Finally, total tests performed fell 3%
year-on-year to 32.7 million tests.
· Average net revenue per conventional test increased a solid 9%
year-on-year in FY 2022 to reach EGP 94. Meanwhile, net revenue per
Covid-19-related test declined 26% year-on-year on the back of a significant
drop in the selling prices of PCR and Antigen tests. As such, IDH's total
average net revenue per test dropped 28% year-on-year to record EGP 108 in FY
2022.
· Total patients served by IDH throughout the year recorded 8.7
million, a 15% year-on-year decline from the 10.3 million patients served in
FY 2021. Meanwhile, the Group's tests per patient metric increased to 3.7 in
FY 2022 from 3.3 in FY 2021. The drop in total patient volumes and the
simultaneous increase in tests per patient metric during FY 2022 both reflect
the decrease in Covid-19-related patients (who typically visited IDH's
branches for single Covid-19 tests) and the normalisation in conventional
patient traffic (who typically visit the Group's branches for multiple tests).
· Across both Egypt and Jordan (80.3% and 16.9% of consolidated
revenues in FY 2022), IDH continued to record sustained growth in conventional
revenue as both test volumes and average revenue per conventional test
increased versus the previous year. In Egypt conventional revenue expanded 16%
year-on-year, while in Jordan conventional revenue was up 29% in EGP terms and
2% in JOD terms. This partially offset a fall in Covid-19-related business.
· In Nigeria (2.2% of consolidated net sales in FY 2022), IDH continued
to record robust revenue growth (up 47% year-on-year in EGP terms and 24% in
NGN terms) supported by an increasingly favourable test mix and higher test
volumes. Despite this, Echo-Lab's profitability continued to be impacted by
rising diesel prices.
· In Sudan (0.6% of consolidated net sales in FY 2022), IDH recorded
solid growth in both SDG and EGP terms, supported by rising test prices.
(14) 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.
iii. Management Commentary
Commenting on the Group's performance, IDH Chief Executive Officer Dr. Hend
El-Sherbini said: "2022 has been a year of confirmations for IDH which saw us
demonstrate the resilience and potential of our traditional business, the
effectiveness of our post-Covid-19 strategy, and the fundamentals of our
markets. During the past twelve months, the Company reaped the fruits of our
tremendous efforts over the last three years and delivered robust,
double-digit revenue growth at its conventional business, in line with our
guidance to investors and supported by record test volumes. Meanwhile, we
continued to push forward our multi-pronged growth strategy, expanding our
reach and service offering across existing markets, whilst penetrating a new
geography.
This year's successes came against a difficult operating backdrop with our
markets, and particularly our home market of Egypt, facing an unprecedented
mix of economic challenges stemming from the ongoing conflict in Ukraine and
lingering impacts of the pandemic. Throughout the year, businesses in Egypt
had to confront a wide range of troubles starting with the multiple
devaluations of the Egyptian pound (EGP), which ended the year down more than
50% (and was down 96% as at 12 March 2023), the subsequent rise in inflation
and interest rates, with the former reaching multi-year highs and increasingly
weighing on patients' purchasing power, and the imposition of capital and
import restrictions. In parallel, we also witnessed currency devaluations in
both Nigeria and Sudan, and continued troubles related to global supply
chains.
Despite these setbacks, the Company successfully leveraged its resilient
business model, proven strategies, leading market positioning, and unmatched
value proposition to deliver a remarkable set of results in 2022 and position
itself for new growth in the coming years.
In light of the above and the results recorded in the first three months of
the year, we are confident that despite the ongoing economic challenges
witnessed in our geographies, we have put in place the necessary strategies
and mitigation mechanisms to continue delivering double-digit conventional
revenue growth in 2023."
- End -
Analyst and Investor Call Details
An analyst and investor call will be hosted at 1pm (UK) | 2pm (Egypt) on
Thursday, 6 April 2023. You can register for the call by clicking on link
(https://efghermesevents.webex.com/webappng/sites/efghermesevents/meeting/register/a35bec7623c04592b9ced4649f81287f?ticket=4832534b00000006cfdfe6a1fca060a3ea92b4e8d3ba3f5d60439a3b90422fc13f5d30f4540e5b14×tamp=1680701796405&RGID=rc7b0ac140606288312fcad565932e4f2)
.
For more information about the event, please contact: amoataz@EFG-HERMES.com
(mailto:amoataz@EFG-HERMES.com)
About Integrated Diagnostics Holdings (IDH)
IDH is a leading diagnostics services provider in the Middle East and Africa
offering a broad range of pathology and radiology tests to patients 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 552 branches as of 31 December 2022, IDH
served over 8.7 million patients and performs more than 32.7 million tests in
2022. 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 2022 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: The analysis provided in this section presents both APM
measures and IFRS comparisons when necessary. A reconciliation between IFRS
and APM measures is provided earlier in this announcement.
Chairman's Message
I am pleased to report that despite the exceptional challenges faced in Egypt
and across our other geographies, your Company continued to deliver solid
results in 2022, marked by impressive growth in our traditional non-Covid-19
business and clear progress on our longer-term value creation strategy.
Overcoming Challenges
Since March 2022, the fallout from the war in Ukraine and the lingering global
impact of Covid-19 had significant knock-on effects on Egypt: The Egyptian
pound has devalued by over 50%, inflation has risen sharply, and interest
rates are at multi-year highs.
Despite these challenges, we once again demonstrated the resilience of our
business model and the appeal of our value proposition, generating double
digit year-on-year growth in conventional revenue, which now stands a
remarkable 33% above pre-Covid-19 levels.
Throughout the year, we performed over 31 million conventional tests - the
highest test volumes ever recorded by IDH. In parallel, we honoured our
responsibility as a leading healthcare company by sharing the burden of
inflation with our patients, limiting price increases to ensure our services
remained accessible to the millions of patients who entrust us with their
health tests every year. We will continue to pass on price rises judiciously
and in a manner that preserves our clear leadership in an increasingly
competitive market.
Also last year, we added new branches in Egypt, Jordan and Nigeria,
guaranteeing greater accessibility and coverage. We also added new medical
services, ensuring that our offering remained competitive and in line with
patients' evolving needs and expectations.
We maintained the service quality for which our brands are known.
IDH became the first provider in in 2022 in Africa to earn American College of
Radiology accreditation.
Expanding Our Footprint
We continue to enjoy strong organic growth prospects at the same time that we
continue to consider M&A opportunities across new African, Middle Eastern,
and Asian markets.
We look forward to officially launching operations in Saudi Arabia in the
coming months, marking our official entry in the Kingdom's fast-growing and
under-served diagnostic market. We are confident that the strategic
partnership of Biolab, IDH, and Izhoor, a company owned by Fawaz Alhokair,
will ensure we have the mix of strengths needed to serve the Saudi people and
ensure the long-term success of this new venture.
In parallel, after thorough due diligence and in light of social, economic,
and political developments in Pakistan, IDH decided not to pursue its planned
acquisition of Islamabad Diagnostics Centre.
We would like to thank Dr. Upal and his team for their continued
professionalism throughout the entire process and we wish them the best in
their future endeavours.
Our commitment to ESG
We are committed to expanding our global operations in a sustainable and
responsible manner. ESG is of fundamental importance to our long-term
strategy. Early last year, we issued our first Sustainability Report,
outlining our ESG vision and strategy and providing a clear framework to
evaluate our performance and guarantee our accountability. Building on this,
we will continue to monitor and address all areas of ESG within our new and
existing geographies.
Risk Matrix
Management proactively monitors and revises our risk matrix and heat map to
ensure we have the right controls and governance in place and ensuring
business continuity processes.
A Growing Team
Over the last 12 months, we continued to strengthen our management team with
several new additions that have brought in new skills and multi-discipline
expertise.
We appreciate our loyal and hard-working workforce and continuously evaluate
and monitor their KPIs to help them develop professionally, in line with their
ambitions. We have prepared an employee incentive plan to reward and
incentivize our team for their consistent efforts which is ready for roll out
subject to necessary approvals.
Our headquarter office in Smart Village continues to provide significant
benefits and economies of scale.
Gratitude to our Shareholders
Our gratitude goes out to our valued and loyal shareholders. We are confident
that the attractive underlying fundamentals of our markets, our unique value
proposition, and our proven strategy should translate in an appreciation of
our share price over the coming period.
Your Company has always been committed to paying our shareholders a regular
dividend. Egypt's current foreign exchange restrictions have posed a temporary
challenge that has led your Board to postpone a decision on dividend pay-out
for the year ended 31 December 2022. We have not changed our dividend policy.
As part of our asset-light strategy, our dividend policy is to return to
shareholders the maximum amount of excess cash after taking careful account of
the capital needed to support operations, capital expenditure plans, organic
expansion opportunities, and potential acquisitions.
We look forward to updating our valued shareholders on developments following
our Board meeting in August.
Heading into 2023, your Company is well placed to deliver new growth and
profitability whilst generating sustainable value for its communities and
shareholders.
Lord St John of Bletso
Chairman
Important notice: The analysis provided in this section presents both APM
measures and IFRS comparisons when necessary. A reconciliation between IFRS
and APM measures is provided earlier in this announcement.
Chief Executive's Review
2022 has been a year of confirmations for IDH which saw us demonstrate the
resilience and potential of our traditional business, the effectiveness of our
post-Covid-19 strategy, and the fundamentals of our markets. During the past
twelve months, the Company reaped the fruits of our tremendous efforts over
the last three years and delivered robust, double-digit revenue growth at its
conventional business, in line with our guidance to investors and supported by
record test volumes. Meanwhile, we continued to push forward our multi-pronged
growth strategy, expanding our reach and service offering across existing
markets, whilst penetrating a new geography.
This year's successes came against a difficult operating backdrop with our
markets, and particularly our home market of Egypt, facing an unprecedented
mix of economic challenges stemming from the ongoing conflict in Ukraine and
lingering impacts of the pandemic. Throughout the year, businesses in Egypt
had to confront a wide range of troubles starting with the multiple
devaluations of the Egyptian pound (EGP), which ended the year down more than
50% (and was down 96% as at 12 March 2023), the subsequent rise in inflation
and interest rates, with the former reaching multi-year highs and increasingly
weighing on patients' purchasing power, and the imposition of capital and
import restrictions. In parallel, we also witnessed currency devaluations in
both Nigeria and Sudan, and continued troubles related to global supply
chains.
While economic troubles were on the rise, 2022 brought significant positive
developments in the fight against Covid-19. In fact, following a new wave of
infections in January and February, we witnessed a widespread decrease of
infection rates starting in March of last year as countries made headway on
their vaccination campaigns, and individuals became increasingly able to
coexist with the virus. This supported the gradual lifting of all remaining
Covid-19-related regulations, including the removal of mandatory testing and
quarantines. As expected, this translated in a rapid decline in our
Covid-19-related revenue and net sales(15) as demand and pricing for
Covid-19-related testing fell throughout the year.
Despite these setbacks, the Company successfully leveraged its resilient
business model, proven strategies, leading market positioning, and unmatched
value proposition to deliver a remarkable set of results in 2022 and position
itself for new growth in the coming years.
Sustained Growth of Our Conventional Offering
Over the course of the last three years, despite the pandemic-related
challenges and opportunities, IDH never lost sight of its conventional
business, continuing to care for its traditional patients' needs even at the
height of the Covid-19 crisis. Our efforts not only focused on expanding our
service offering and delivery capabilities, but also on organising special
campaigns and launching dedicated test packages aimed at raising healthcare
awareness and ensuring continued affordability for patients suffering from
chronic diseases. Simultaneously, we also focused on patient retention, aiming
to build long-term relationships with new patients initially acquired through
our Covid-19-dedicated offering.
Our efforts delivered the desired results in 2022, with conventional revenue
posting sustained growth throughout the year dually driven by rising test
volumes and increasingly favourable pricing. More specifically, conventional
revenue expanded 18% year-on-year to record EGP 2.9 billion in 2022, on the
back of a 9% year-on-year increase in both conventional test volumes and
average net sale per test. What is arguably even more impressive, and what
clearly displays the effectiveness of our strategy over the last three years,
is the fact that our conventional revenue now stands at a remarkable 33% above
its pre-pandemic value, with test volumes also recording 11% higher than their
corresponding figure in 2019, adjusting for increased testing due to the 100
million lives campaign during 2019. Sustained growth in our conventional
business helped to partially offset a 75% year-on-year decline in
Covid-19-related revenue as both tests performed and average revenue per test
fell throughout the twelve-month period. Overall, we recorded revenues of EGP
3.6 billion, down 31% year-on-year, and net sales(16) of EGP 3.5 billion, down
30% from the previous year when our consolidated results had been boosted by
an exceptional contribution made by our Covid-19-related offering.
Robust test volumes growth over the last twelve months, and in the three years
since the start of the pandemic, is directly attributable to our investment
strategy which has seen us devote substantial resources to expand our delivery
capabilities and reach. In the year ended 31 December 2022, we inaugurated 52
new branches, including 48 in Egypt, two in Jordan, and two in Nigeria. This
brought our total network to 552, with our Egyptian network reaching the 500
mark, a historic achievement which saw us reaffirm our leadership position in
the local diagnostic market. Of the new additions in Egypt, I was pleased to
note the two new Al-Borg Scan branches launched in 2022, which took our total
radiology network to six branches and enabled us to successfully capitalise on
the rapidly growing demand for our radiology offering. In parallel to new
branch roll outs, we have also been actively investing to make our services
more accessible through non-traditional avenues including home services and
digital. The former, which peaked in popularity during the pandemic, continues
to outperform our expectations, contributing 18% of Egypt's revenues in 2022,
well above its pre-Covid-19 averages. This demonstrates our ability to
transform Covid-19-related opportunities into long-term gains for the Company,
which I am confident will continue to support our revenues and profitability
in the coming years. Similarly, we continued to invest in our digital
capabilities. Our AI-focused subsidiary, Wayak, continued to ramp up
operations with total orders completed in 2022 jumping a solid 29%
year-on-year and EBITDA losses narrowing further. Meanwhile, we continued to
enhance our digital outreach channels making it increasingly easy for patients
to reserve their tests and access their results and reports.
Regionally, in both Egypt and Jordan we recorded similar trends as those
witnessed at the consolidated level. In Egypt, despite the fast-rising
inflation, our conventional top-line expanded a solid 16% year-on-year to
reach EGP 2.4 billion compared to EGP 2.1 billion in 2021. This saw
conventional revenue contribute to 84% of our Egyptian top-line for the year,
significantly above the 51% contribution made in the previous year. Meanwhile,
Covid-19-related revenues declined 78% year-on-year, making up just 16% of
Egypt's top-line compared to 49% in the previous twelve months. Total revenues
in Egypt for 2022, subsequently declined 30% versus their corresponding value
in 2021, as our test mix normalised throughout the year. Egypt's top-line for
the year were also buoyed by our fast-growing radiology venture, Al-Borg Scan.
Revenues at Al-Borg Scan expanded an impressive 91% year-on-year in 2022 to
reach EGP 85 million supported by new branch launches (four since October
2021) and an aggressive marketing campaign implemented by the team throughout
the past year. We expect the rapid growth trend to continue in 2023 as Al Borg
Scan cements its position in the highly fragmented Egyptian market.
In Jordan, conventional revenues increased 29% year-on-year in EGP terms
partially reflecting the translation effect resulting from the multiple
devaluations of the Egyptian pound. We were also pleased to note Biolab's
year-on-year expansion in JOD terms supported by rising conventional test
volumes. Higher conventional revenues were overshadowed by a 67% year-on-year
decline in Covid-19-related revenues (Covid-19-related net sales declined 68%
year-on-year) as demand decreased significantly. It is also worth highlighting
that due to the lifting of international travel restrictions, Biolab's
agreements to provide Covid-19-related testing at Jordan's Queen Alia
International Airport (QAIA) and Aqaba Port were terminated at the end of the
first quarter of 2022, further weighing on the segment's performance for the
year. As such, overall revenue at Biolab declined 41% in EGP terms and 50% in
JOD terms. Similarly, net sales(17) decreased 37% year-on-year in EGP terms
and 47% in JOD terms.
Our Nigerian subsidiary, Echo-Lab, continued its impressive expansion, growing
24% in NGN terms and up 47% year-on-year in EGP terms. Top-line growth was
supported by an increasingly favourable test mix and higher test volumes
despite the difficult operating environment. Over the past year, we witnessed
sustained growth in Echo-Lab's average net sale per test reflecting the
increase in the number of patients visiting the venture to undergo the
generally higher-priced CT and MRI exams, directly in line with our commercial
strategy at the venture. It is also worth highlighting that test and patient
volumes in the first part of the year were impacted by our decision to shut
down two underperforming branches. Volumes picked up again following the
launch of two new branches in the second quarter of 2022 and have remained
strong since. Echo-Lab's 2022 performance reaffirms our conviction in its
growth potential.
Finally, in Sudan, economic and political instability coupled with the
devaluation of the Sudanese Pound in March 2022, significantly impacted our
subsidiaries' operations and results. Nonetheless, our Sudanese operations
posted an impressive 63% year-on-year rise in revenue in local currency terms
on the back of a 114% rise in the average revenue per test in SDG terms.
Further down the income statement, we observed a contraction in gross, EBITDA,
and net profitability largely reflecting a post-Covid-19 normalisation. Gross
profitability was also impacted by increased outlays related to additional
staffing requirements for the new branches, annual salary increases, and a
marginal increase in raw material prices in the second half of the year
following the EGP's devaluation. Our ability to restrict the increase in raw
material costs despite the significant devaluation of the EGP reflected both
our proactive inventory management strategy and our long-lasting relationships
with major test kit providers which enable us to consistently secure
favourable pricing for new stock. Meanwhile, EBITDA profitability was
partially impacted by higher marketing spending as we invested to support the
ramp up of new branches and of a new patient loyalty programme. Finally, our
bottom-line, which contracted 65% year-on-year, was also impacted by losses
resulting from transactions completed by the Company to secure the USD balance
needed to fulfil our 2021 dividend obligations to shareholders and transaction
costs related to the Pakistan transaction. Adjusting for these, net profit
would have recorded EGP 692 million in 2022, with a margin on revenue of 19%
and on net sales of 20%.
Expanding Our Footprint
Over the years, we have adhered to a clearly defined inorganic growth strategy
centred on identifying and investing in greenfield and brownfield assets in
new African, Middle Eastern, and Asian markets where our business model is
best suited to capitalize on healthcare trends and serve local communities.
With this in mind, in 2022 we signed a landmark agreement with Biolab and
Fawaz Alhokair's healthcare subsidiary, Izhoor, to launch a new greenfield
diagnostic venture in Saudi Arabia. Ultimately, we are looking to build a
full-fledged diagnostic services provider capable of catering to the
underserved demand for high quality services in the Kingdom and supporting the
local government's ambitious healthcare agenda. I am particularly excited
about starting this journey with our two partners, both of whom bring
complementary experiences and resources which will play crucial roles in
guaranteeing the venture's success.
The Saudi Arabian market represents an ideal new addition to our portfolio due
to its attractive growth profile underpinned by favourable demographics, an
increasingly health-conscious patient base, robust macroeconomic fundamentals,
changing healthcare sector dynamics in favour of private providers, and a
supportive regulatory framework. Overall, Saudi Arabia currently records some
of the highest per-capita spending on healthcare in the region, with the
number set to rise further in the coming years. Moreover, reforming and
developing the Kingdom's healthcare sector is a top priority for the local
government, with new regulatory reforms and incentives rolled out to attract
private sector participation.
Meanwhile, in Pakistan, we decided in early 2023 to forego negotiations to
acquire a 50% stake of the Islamabad Diagnostic Center (IDC). Despite
sustained negotiations and relentless efforts on both sides, the current
economic conditions and continued regulatory hurdles have led to the
termination of the transaction. Nevertheless, we remain committed to
researching and identifying suitable potential markets for future investments,
as IDH remains adamant on realizing its long-term goal of expanding its
footprint to different markets across the Middle East, Africa, and Asia.
Our Commitment to Excellence
Sustaining and improving the quality of our services has always been a central
priority for the Group. This commitment to excellence has translated in IDH
earning prestigious accreditations and certificates over the years, including
multiple new ones in 2022.
Most notably, we received the American College of Radiology (ACR)
accreditation for both Al Borg Scan's nuclear medicine (NucMed) and ultrasound
units in August 2022. This makes Al Borg Scan the first radiology centre in
Africa, as well as one of the select few in the Middle East, to boast this
prestigious accreditation which complements our previously obtained College of
American Pathologists (CAP) accreditation. Meanwhile, we have now secured the
Egyptian government's full General Authority for Healthcare Accreditation and
Regulation (GAHAR) for ten of our labs (at the time of writing this report).
This makes us the private provider with the most GAHAR-accredited labs in the
country and will enable us to play a central role in supporting the roll out
of the Egyptian government's Universal Healthcare Insurance system.
Our Sustainability Journey
As we continue to serve a growing community across four markets, we have only
renewed our commitment to building and developing our environmental, social,
and governance (ESG) monitoring and compliance framework to ensure we continue
to deliver sustainable value to all stakeholders. In 2021, we issued our first
ever Sustainability Report, providing investors and stakeholders with an
initial strategy and monitoring framework. Meanwhile, we also worked closely
with a leading ESG consultant to design an encompassing ESG strategy which
will set clear long-term goals and targets to guide our sustainability efforts
in the coming years. These goals will not only provide milestones for the
Company, but will also increase accountability to our investors, stakeholders,
and regulators. Once defined, our ESG strategy will be implemented and
monitored by a specialized ESG board committee. In addition to publishing a
GRI-compliant sustainability report, management is enclosing the Task Force on
Climate-related Financial Disclosures (TCFD) in our 2022 annual report in line
with listing requirements.
As always, we continue to be supported and guided by our seasoned Board of
Directors which is comprised of leading executives who have been overseeing
all aspects of our business and operations since IDH's listing on the LSE in
2015. The Board of Directors is made up mainly of independent, non-executive
directors and is further supported by updated and robust policy framework.
2023 Outlook
While progress has been made to overcome the economic challenges faced
throughout 2022, it has become increasingly apparent that they will remain
with us throughout 2023. Despite this, I am confident that we possess the
needed experience, resources, and strategy to continue navigating them
successfully. In fact, IDH boasts a long track record of success in
manoeuvring through unanticipated times of economic turmoil, including the
2011 Egyptian Revolution and the devaluation of the Egyptian pound in 2016.
With this in mind, our targets and priorities for the new year remain
unchanged and I look forward to reporting on our progress throughout the
coming year.
Front and central will be the continued double-digit growth of our
conventional business, in particular across our two largest markets of Egypt
and Jordan. To deliver on this, we are targeting the roll out of an additional
20 to 25 branches, including three new branches in Jordan and two new Al-Borg
Scan branches in Egypt. Meanwhile, on the pricing front, while throughout 2022
and early 2023 we introduced multiple price adjustments to partially account
for the fast-rising inflation in Egypt, we have thus far refrained from
passing on the full burden to patients. We believe that as a leading
healthcare provider in the country, we have a responsibility to ensure that
our services remain accessible to as many patients as possible. Moreover, we
are confident that providing additional support to patients in time of
financial need will translate in increased loyalty, enhancing long-term
patient retention and revenue generation. Finally, across both geographies, we
are looking to leverage our market leading position to continue attracting and
retaining new patients to the Group offering them appealing value propositions
which only a Group boasting our scale can offer.
In light of the above and the results recorded in the first three months of
the year, we are confident that despite the ongoing economic challenges
witnessed in our geographies, we have put in place the necessary strategies
and mitigation mechanisms to continue delivering double-digit conventional
revenue growth in 2023.
On the profitability front, we expect margins for the coming year to remain
healthy and broadly unchanged compared to the year just ended despite rising
inflation, in particular in Egypt. Meanwhile, in the longer-term, we see
margins converging back to our historical averages as the impacts of the
post-Covid-19 normalisation and the recent EGP devaluations subside. As
always, a main component of our cost control strategy has been the continued
collaboration with our main test kit providers to maintain adequate stocks and
secure new stock at competitive prices (with a less than proportionate
increase compared to inflation caused by the EGP devaluation). At the same
time, we are looking to introduce a wide range of cost optimisation
initiatives across the Group's main functions to further streamline operations
and extract additional efficiencies where possible.
Dividend Policy and Proposed Dividend
While we maintain our long-term dividend policy that sees us return to
shareholders the maximum amount of excess cash after taking careful account of
the cash needed to support operations and expansions, our Board of Directors
will postpone the dividend decision in light of the ongoing uncertainty and
lack of foreign currency availability in Egypt. We will review the situation
in our upcoming Board meeting in August and assess the Group's cash position
and the macroeconomic situation in Egypt at the time before a decision is made
and a distribution date is set.
Dr. Hend El-Sherbini
Chief Executive Officer
(15) A reconciliation between revenues (compliant with IFRS) and net sales is
available earlier in this release.
(16) Net Sales is calculated as revenues excluding commission fees paid by
Biolab as part of the company's revenue sharing agreements with QAIA and Aqaba
Port.
(17) Net Sales is calculated as revenues excluding commission fees paid by
Biolab as part of the company's revenue sharing agreements with QAIA and Aqaba
Port. In 2022, in Jordan, IDH recorded revenue of EGP 612 million (down 42%
year-on-year) and net sales of EGP 549 million (down 37% year-on-year).
Important notice: The analysis provided in this section presents both APM
measures and IFRS comparisons when necessary. A reconciliation between IFRS
and APM measures is provided earlier in this announcement.
Group Operational & Financial Review
i. Revenue and Cost Analysis
Consolidated Revenue
IDH witnessed sustained growth at its conventional business (which includes
IDH's full test roster except for its Covid-19-related offering) in FY 2022 as
patient traffic continued to normalise post-Covid-19 and IDH capitalised on
its post-pandemic growth strategy. Growth for the year was dual driven as
conventional test volumes and average revenue per test each posted solid
year-on-year expansions. Meanwhile, Covid-19-related(18) revenues declined
sharply throughout the year. Demand for Covid-19-related tests fell rapidly
starting in the second quarter of this year as infection rates declined and
governments lifted mandatory testing. Meanwhile, price drops were primarily
seen in the first quarter of the year. Combined this saw the Group book
consolidated revenue (IFRS) of EGP 3,605 million in FY 2022, a 31%
year-on-year decrease, and consolidated net sales(19) of EGP 3,542 million,
down 30% year-on-year. It is worth noting that the year-on-year decline in
part reflects the high base effect from FY 2021 when the consolidated figure
had been boosted by an exceptional contribution made by IDH's Covid-19-related
test offering.
Net Sales Analysis
Q1 2021 Q1 2022 Q2 2021 Q2 2022 Q3 2021 Q3 2022 Q4 2021 Q4 2022 % FY FY %
2021 2022
Total revenue (EGP mn) 1,130 1,180 1,163 774 1,473 847 1,458 804 -45% 5,225 3,605 -31%
Total net sales (EGP mn) 1,130 1,117 1,163 774 1,473 847 1,281 804 -37% 5,048 3,542 -30%
Conventional revenue (EGP mn) 594 640 594 699 667 784 597 780 31% 2,452 2,903 18%
Total Covid-19-related revenue (EGP mn) 536 540 569 75 807 63 862 24 -97% 2,773 702 -75%
Total Covid-19-related net sales (EGP mn) 536 477 569 75 807 63 685 24 -96% 2,596 639 -75%
Core Covid-19 net sales (PCR, Antigen, Antibody) (EGP mn) 399 421 431 62 760 54 627 19 -97% 2,217 556 -75%
Other Covid-19-related net sales (EGP mn) 137 56 138 13 47 9 58 5 -91% 379 83 -78%
Contribution to Consolidated Net Sales
Conventional revenue 53% 57% 51% 90% 45% 93% 47% 97% 49% 82%
Total Covid-19-related net sales 47% 43% 49% 10% 55% 7% 53% 3% 51% 18%
Core Covid-19 net sales (PCR, Antigen, Antibody) 35% 38% 37% 8% 52% 6% 49% 2% 44% 16%
Other Covid-19-related net sales 12% 5% 12% 2% 3% 1% 5% 1% 7% 2%
Test Volume Analysis
Total tests (mn) 8.1 8.4 8.3 7.6 8.6 8.3 8.7 8.3 -5% 33.6 32.7 -3%
Conventional tests performed (mn) 6.8 7.1 6.9 7.4 7.5 8.2 7.3 8.3 14% 28.5 31.0 9%
Core Covid-19 tests performed (k) 407 837 387 109 882 135 935 47 -95% 2,611 1,128 -57%
Other Covid-19-related tests performed (k) 874 417 933 95 284 39 416 21 -95% 2,507 572 -77%
Contribution to Consolidated Results
Conventional tests performed 84% 85% 83% 97% 87% 99% 84% 99% 85% 95%
Core Covid-19 tests performed 5% 10% 5% 1% 10% 2% 11% 1% 8% 3%
Other Covid-19-related tests performed 11% 5% 11% 1% 3% 0.5% 5% 0.3% 7% 2%
Net Sale per Test Analysis
Total revenue per test (EGP) 140 140 141 102 170 101 168 97 -42% 155 110 -29%
Total net sale per test (EGP) 140 133 141 102 170 101 147 97 -34% 150 108 -28%
Conventional revenue per test (EGP) 87 90 86 94 89 96 82 94 16% 86 94 9%
Covid-19-related net sale per test (EGP) 418 380 431 367 692 361 507 354 -30% 507 376 -26%
(18) 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.
(19) A reconciliation between revenue and net sales is available earlier in
this announcement.
Net Sales Analysis: Contribution by Patient Segment
Contract Segment (58% of Group revenue)
Conventional revenue at IDH's contract segment (86% of total contract revenue)
recorded a significant expansion of 32% year-on-year to book EGP 1,784 million
in FY 2022 on the back of year-on-year increases in test volumes and revenue
per test. Test volumes benefitted from several new initiatives introduced by
management over the course of 2022, including the inauguration of a new
loyalty program for the first time in the contract segment as well as a
normalisation of IDH's patient mix as Covid-19-related volumes subsided. The
immediate effects of the newly introduced loyalty programme were significant,
with average tests per patient increasing 14% year-on-year to reach 4.1 in FY
2022 from 3.6 tests per patient in the prior year. Despite the sustained
expansion in the contract segment's conventional revenue, a steep 80%
year-on-year decrease in Covid-19-related(20) contract revenue resulted in an
overall contraction of contract revenue of 28% year-on-year in FY 2022.
Walk-in Segment (42% of Group revenue)
Meanwhile, at IDH's walk-in segment, conventional revenue (constituting 74% of
total walk-in revenue) reported a 2% year-on-year increase on the back of 9%
year-on-year rise in the average revenue per test which more than offset a
decline in conventional test volumes at the segment. On the other hand,
Covid-19-related revenue at the segment declined 68% year-on-year to record
EGP 400 million. Similarly, Covid-19-related net sales(21) at the walk-in
segment also declined 68% year-on-year to EGP 337 million. As a result, total
revenues at the walk-in segment declined to EGP 1,519 million in FY 2022, 35%
below last year's figure. Meanwhile, net sales at the walk-in segment
decreased to EGP 1,456 million in FY 2022, a 33% year-on-year decline.
(20) 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.
(21) Covid-19-related walk-in net sales is calculated as Covid-19-related
walk-in revenues excluding concession fees paid as part of Biolab's agreements
with QAIA, KHIA, and Aqaba Port.
Key Performance Indicators
Walk-in Segment Contract Segment Total
FY21 FY22 Change FY21 FY22 Change FY21 FY22 Change
Revenue (EGP mn) 2,339 1,519 -35% 2,885 2,086 -28% 5,225 3,605 -31%
Net sales (EGP mn) 2,163 1,456 -33% 2,885 2,086 -28% 5,048 3,542 -30%
Conventional Revenue (EGP mn) 1,100 1,119 2% 1,352 1,784 32% 2,452 2,903 18%
Total Covid-19-related net sales (EGP mn) 1,063 337 -68% 1,533 302 -80% 2,596 639 -75%
Patients ('000) 3,464 2,592 -25% 6,853 6,129 -11% 10,317 8,721 -15%
% of Patients 34% 30% 66% 70%
Revenue per Patient (EGP) 675 586 -13% 421 340 -19% 506 413 -18%
Net sales per Patient (EGP) 624 562 -10% 421 340 -19% 489 406 -17%
Tests ('000) 8,693 7,313 -16% 24,966 25,372 2% 33,659 32,685 -3%
% of Tests 26% 22% 74% 78%
Conventional tests ('000) 6,948 6,462 -7% 21,594 24,523 14% 28,542 30,985 9%
Total Covid-19-related tests ('000) 1,745 851 -51% 3,372 849 -75% 5,117 1,700 -67%
Revenue per Test (EGP) 269 208 -23% 116 82 -29% 155 110 -29%
Net Sales per Test (EGP) 249 199 -20% 116 82 -29% 150 108 -28%
Test per Patient 2.5 2.8 12% 3.6 4.1 14% 3.3 3.7 12%
Revenue Analysis: Contribution by Geography
Egypt (80.3% of Group revenue)
The Company's Egyptian operations delivered solid year-on-year growth in
conventional revenues, driven by higher test volumes and average revenue per
test. On the other hand, Covid-19-related revenues declined sharply as both
demand and prices decreased throughout the year. Lower pricing reflected
increased competition. This was particularly visible in the 70% year-on-year
drop in PCR test volumes for FY 2022 and the 44% year-on-year decline in the
average revenue per PCR test in FY 2022 compared to FY 2021.
On a three-month basis, IDH experienced similar results, with conventional
revenues from Egyptian operations increasing 25% year-on-year to record EGP
642 million. Covid-19-related revenues also decreased significantly, recording
EGP 17 million for the quarter and contributing only 2.6% to Egypt's overall
revenues for Q4 2022.
Al-Borg Scan
Al-Borg Scan, IDH's Egyptian radiology venture, recorded an impressive 91%
year-on-year increase in revenues to book EGP 85.2 million during FY 2022. The
sustained top-line expansion was primarily driven by a 93% year-on-year rise
in case volumes (patients served rose 89% for the year). The continued
operational ramp-up during FY 2022 was supported by the opening of two new
branches over the twelve-month period, with Al Borg Scan's network now
standing at a total of six strategically located branches spanning the full
Greater Cairo area. Meanwhile, IDH also successfully obtained the ACR
(American College of Radiology) accreditation or both Al Borg Scan's nuclear
medicine (NucMed) and ultrasound units, making Al-Borg Scan the first
radiology centre in Africa, as well as one of the few radiology facilities in
the Middle East, to boast this prestigious certification. Throughout the year,
IDH supported new branch openings with large-scale marketing campaigns which
played a key role in growing patient volumes at the venture.
House Calls
IDH's house call service in Egypt recorded revenue of EGP 517 million in FY
2022, contributing to 18% of Egypt's revenues for the year, well above the
service's pre-pandemic contributions. The robust contribution was recorded
despite the fall in Covid-19-related revenue generated through the house call
service as infection rates in the country declined significantly starting
March.
Wayak
Wayak recorded a 29% year-on-year increase in the number of orders, which
reached 132 thousand for FY 2022 compared to 102 thousand orders during FY
2021. Meanwhile, the venture's EBITDA losses declined a solid 33% year-on-year
to record EGP 3.8 million compared to negative EGP 5.7 million in FY 2022.
Detailed Egypt Revenue Breakdown
EGP mn Q1 2021 Q1 2022 Q2 2021 Q2 2022 Q3 2021 Q3 2022 Q4 2021 Q4 2022 % FY 2021 FY 2022 %
Total Revenue 921 879 1,014 645 1,187 711 987 659 -33% 4,108 2,894 -30%
Conventional Revenue 507 549 510 591 573 662 513 642 25% 2,103 2,444 16%
Radiology Revenue 9 17 11 19 11 23 14 27 93% 45 86 91%
Total Covid-19-related Revenue 414 330 504 54 614 49 474 17 -96% 2,005 449 -78%
Core Covid-19 revenue (PCR, Antigen, Antibody) 277 274 366 41 567 40 416 12 -97% 1,626 367 -77%
Other Covid-19-related revenue 137 56 138 13 47 9 58 5 -91% 379 83 -78%
Contribution to Consolidated Results
Conventional revenue 55% 62% 50% 92% 48% 93% 52% 97% 51% 84%
Radiology revenue 1.1% 2.9%
Total Covid-19-related revenue 45% 37% 50% 8% 52% 7% 48% 3% 49% 16%
Core Covid-19 revenue (PCR, Antigen, Antibody) 30% 31% 36% 6% 48% 6% 42% 2% 40% 13%
Other Covid-19-related revenue 15% 6% 14% 2% 4% 1% 6% 1% 9% 3%
Jordan (16.9% of Group revenue)
IDH's Jordanian subsidiary, Biolab, delivered conventional revenue
year-on-year growth of 2% in JOD terms (in EGP terms revenue was up 29%
year-on-year) supported by a marginal rise in conventional test volumes for
the year. On the other hand, similar to trends witnessed in Egypt, Biolab's
Covid-19-related revenue and net sales(22) declined substantially throughout
the year. As such, total revenues in JOD terms declined 50% year-on-year to
record JOD 23.9 million (in EGP terms revenues were down 37% year-on-year).
Meanwhile, total net sales in JOD terms declined 47% year-on-year in FY 2022
to record JOD 21.1 million (down 37% year-on-year in EGP terms).
Biolab's full-year revenues were supported by EGP 253 million in
Covid-19-related revenue booked during the year. Meanwhile, Covid-19-related
net sales recorded by Biolab in FY 2022 stood at EGP 189 million. During the
year, revenue and net sales generated by Biolab's Covid-19-related offering
were boosted by the company's agreements with Queen Alia International Airport
(QAIA) Aqaba Port, and King Hussain International Airport (KHIA). More
specifically, Biolab generated EGP 140 million in net sales at QAIA and EGP 17
million in net sales at the Aqaba Port. It is worth noting that while the
testing stations experienced heavy traffic during the first two months of the
year, the lifting of mandatory testing saw volumes decline sharply starting
March 2022. Biolab's agreements with all three locations were terminated at
the end of Q1 2022.
On a quarterly basis, Biolab reported exceptional conventional net sales
growth of 66% year-on-year to record EGP 109 million. Overall revenues from
Jordanian operations declined to EGP 116 million, a 58% decrease compared to
the final quarter of the previous year entirely driven by a substantial 97%
year-on-year decrease in Covid-19-related revenues. In fact, contributions
from the Covid-19-related offering stood at just 6% in Q4 2022 versus 76% in
the same period of last year.
(22) 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.
Detailed Jordan Net Sales Breakdown
The table presents Alternative Performance Measures (APM) for each period
(further information available earlier in the release)
EGP mn Q1 2021 Q1 2022 Q2 2021 Q2 2022 Q3 2021 Q3 2022 Q4 2021 Q4 2022 % FY 2021 FY 2022 %
Total Revenue 190 280 133 105 268 109 454 116 -63% 1,046 612 -41%
Total Net Sales 190 217 133 105 268 109 277 116 -58% 869 549 -37%
Conventional Revenue 68 70 68 84 76 95 66 109 65% 278 359 29%
Total Covid-19-related Net Sales (PCR and Antibody) 122 147 65 21 192 14 211 7 -97% 591 190 -68%
Contribution to Consolidated Results
Conventional Revenue 36% 32% 51% 80% 28% 87% 24% 94% 32% 65%
Total Covid-19-related Net Sales (PCR and Antibody) 64% 68% 49% 20% 71% 13% 76% 6% 68% 35%
Nigeria (2.2% of revenue)
The Company's Nigerian subsidiary, Echo-Lab, recorded an impressive
year-on-year revenue growth rate in NGN terms of 24% in FY 2022 as average
revenue per test increased 15% year-on-year in NGN terms and tests performed
rose 8% versus FY 2021.
Sustained growth in Echo-Lab's average revenue per test reflects the increase
in the number of patients visiting the venture to undergo the generally
higher-priced CT and MRI exams. It is worth highlighting that the termination
of operational activities at under-performing branches in Q4 2021 impacted
results in the first quarter of 2022. Meanwhile, the launch of two new
branches during the second quarter of 2022 generated immediate positive
contributions for Echo-Lab, boosting revenues for the second half of the
year. Echo-Lab now boasts 12 fully operational branches across Nigeria. In
EGP terms, revenue for the year rose 47% to record EGP 79 million.
With regards to Q4 2022, Echo-Lab reported year-on-year revenue growth in NGN
terms of 24% on the back of a 34% rise in total tests performed for the
quarter. In EGP terms, revenue rose 80% year-on-year to reach EGP 24 million.
Sudan (0.6% of revenue)
IDH's operations in Sudan booked revenue of SDG 547 million in FY 2022, up 63%
year-on-year on the back of a 114% rise in the average revenue per test in SDG
terms. In EGP terms, revenue recorded a 22% rise to reach EGP 20 million.
Throughout the year, IDH shut down two underperforming branches in the
country, taking the total number of operating branches to 17 as at year-end
2022.
On a quarterly basis, revenue at the Group's Sudanese subsidiaries increased
by 5% year-on-year in SDG terms and by 24% year-on-year in EGP terms.
Revenue/Net Sales Contribution by Country
The table presents Alternative Performance Measures (APM) for each period
(further information available earlier in the release)
1Q 1Q 2Q 2Q 3Q 3Q 4Q 4Q % FY 2021 FY 2022 %
2021 2022 2021 2022 2021 2022 2021 2022
Egypt Revenue (EGP mn) 921 879 1,014 644 1187 711 987 659 -33% 4,108 2,894 -30%
Conventional (EGP mn) 507 549 510 591 573 662 513 642 25% 2,103 2,444 16%
Covid-19-related (EGP mn) 414 330 504 53 614 49 474 17 -96% 2,005 450 -78%
Egypt Contribution to IDH Revenue 81.5% 74.5% 87.2% 83.2% 80.6% 83.9% 67.7% 82.0% 78.6% 80.3%
Egypt Contribution to IDH Net Sales 81.5% 78.7% 87.2% 83.3% 80.6% 84.0% 77.0% 81.9% 81.4% 81.7%
Jordan Revenue (EGP mn) 190 281 134 106 269 109 454 116 -74% 1,046 612 -42%
Jordan Net Sales (EGP mn) 190 217 133 105 268 109 277 116 -58% 869 549 -37%
Conventional (EGP mn) 68 70 68 84 76 95 66 109 65% 278 359 29%
Covid-19-related (EGP mn) 122 147 65 21 192 14 211 7 -97% 591 190 -68%
Jordan Revenues (JOD mn) 8.6 12.5 6.1 4.0 12.2 4.0 20.6 3.4 -84% 47.5 23.9 -50%
Jordan Net Sales (JOD mn) 8.6 9.6 6.0 4.0 12.2 4.0 12.6 3.4 -73% 39.4 21.0 -47%
Jordan Revenue Contribution to IDH Revenue 16.8% 23.8% 11.5% 13.7% 18.3% 12.9% 31.1% 14.4% 20.0% 17.0%
Jordan Net Sales Contribution to IDH Net Sales 16.8% 19.4% 11.5% 13.7% 18.2% 12.9% 21.6% 14.4% 17.2% 15.5%
Nigeria Revenue (EGP mn) 12 15 13 19 15 21 13 24 85% 53 79 47%
Nigeria Revenue (NGN mn) 302 371 330 416 390 473 352 438 24% 1,374 1,698 24%
Nigeria Contribution to IDH Revenue 1.1% 1.3% 1.1% 2.5% 1.0% 2.5% 0.9% 3.0% 1.0% 2.2%
Nigeria Contribution to IDH Net Sales 1.1% 1.3% 1.1% 2.5% 1.0% 2.5% 1.0% 3.0% 1.1% 2.2%
Sudan Revenue (EGP mn) 6.8 5.7 2.5 4.8 2.9 4.3 4.5 5.5 22% 16.7 20.3 22%
Sudan Revenue (SDG mn) 61 152 67 137 82 128 125 130 4% 335 547 63%
Sudan Contribution to IDH Revenue 0.6% 0.5% 0.2% 0.6% 0.2% 0.5% 0.3% 0.7% 0.3% 0.6%
Sudan Contribution to IDH Net Sales 0.6% 0.5% 0.2% 0.6% 0.2% 0.5% 0.4% 0.7% 0.3% 0.6%
Patients Served and Tests Performed by Country
FY 2021 FY 2022 Change
Egypt Patients Served (mn) 8.5 7.6 -11%
Egypt Tests Performed (mn) 29.7 29.5 -1%
Conventional tests (mn) 25.9 28.3 9%
Covid-19-related tests (mn) 3.8 1.2 -68%
Jordan Patients Served (k) 1,627 890 -45%
Jordan Tests Performed (k) 3,530 2,789 -21%
Conventional tests (k) 2,228 2,243 1%
Covid-19-related tests (k) 1,302 546 -58%
Nigeria Patients Served (k) 153 149 -3%
Nigeria Tests Performed (k) 281 303 8%
Sudan Patients Served (k) 70 70 N/A
Sudan Tests Performed (k) 182 139 -24%
Total Patients Served (mn) 10.3 8.7 -16%
Total Tests Performed (mn) 33.6 32.7 -3%
Branches by Country
31 December 2021 31 December 2022 Change
Egypt 452 500 48
Jordan 21 23 2
Nigeria 10 12 2
Sudan 19 17 -2
Total Branches 502 552 50
Cost of Sales(23)
Cost of sales declined 11% year-on-year in FY 2022 to reach EGP 2,143 million.
Similarly, cost of net sales declined 7% year-on-year to record EGP 2,080
million in FY 2022 reflecting a fall in raw material outlays as net sales
dropped. On a quarterly basis, IDH recorded cost of sales (identical in value
between IFRS and APM measures) of EGP 524 million in Q4 2022, 19% below last
year's figure.
(23) 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. According to IFRS 15, cost
of sales recorded EGP 2,143 million in FY 2022, down 11% year-on-year.
Cost of Net Sales Breakdown as a Percentage of Net Sales
% of Revenue % of Net Sales
FY 2021 FY 2022 FY 2021 FY 2022
Raw Materials -18.9% -20.4% 19.6% 20.7%
Wages & Salaries -12.2% -17.0% 12.6% 17.3%
Depreciation & Amortisation -4.1% -7.9% 4.2% 8.0%
Other Expenses -7.8% -12.4% 8.1% 12.6%
Total -43.0% -57.7% 44.5% 58.6%
Raw material costs including the cost of specialized analysis at other
laboratories (35% of consolidated cost of sales), made up the lion share of
total cost of net sales recording EGP 734 million in FY 2022, down 26%
year-on-year. Although raw material costs declined in absolute terms, as a
percentage of net sales raw material expenses increased to 20.7% in FY 2022
versus 19.6% in FY 2021. The increase primarily reflects high raw material
costs incurred in the second half of the year, and particularly in the final
quarter, in IDH's home market of Egypt following the multiple devaluations of
the EGP over the course of 2022. The increase in raw material costs was
widespread impacting both IDH's conventional and Covid-19-related test
offering. It is also worth noting that the during the first quarter IDH's raw
material to net sales ratio increased significantly reflecting a large decline
in the average selling price of Covid-19-related tests during the quarter.
Wages and salaries including employee share of profits (29% share of
consolidated cost of sales) declined 3% year-on-year, recording EGP 613
million for FY 2022 and representing the second largest share of consolidated
cost of net sales. The decrease for the year is attributable to lower employee
share of profits, which declined reflecting lower net profits for the
twelve-month period. Direct wages & salaries (excluding employee profit
share), however, increased 17% year-on-year due to staffing requirements at
new branches and annual salary increases for existing employees. It is worth
noting that there was a 9% quarter-on-quarter increase in direct wages and
salaries (excluding profit share) in the final three months of the year versus
Q3 2022, in part reflecting the translation effect in Jordan (EGP 9 million).
Direct depreciation and amortization costs (14% of consolidated cost of sales)
for the year recorded EGP 285 million for FY 2022, a 33% year-on-year increase
from the EGP 214 million recorded in FY 2021. Depreciation and amortization
expenses increased on the back of incremental depreciation of new branches
(mainly new radiology branches) (IFRS 16 right-of-use assets), as the Company
added 50 new branches during FY 2022.
Other expenses (21% of consolidated cost of sales) for the period increased by
10% year-on-year to EGP 447 million. The year-on-year increase was primarily
attributable to higher branch cleaning and repair & maintenance costs
which together increased 41% year-on-year and made up 29% of total other
expenses for the year. This reflected both the roll out of new branches in the
year (+50) as well as the introduction of a new model for the maintenance and
cleaning of new and existing branches.
Gross Profit
Gross profit booked EGP 1,462 million for FY 2022, down 48% year-on-year.
IDH's gross profit margin on revenue stood at 41% in FY 2022 versus 54% in FY
2021. Similarly, IDH's gross profit margin(24) on net sales recorded 41% FY
2022 versus 56% in FY 2021 when strong results from IDH's Covid-19-related
segment had boosted gross profitability. It is worth highlighting that gross
profit in absolute terms is identical for both APM and IFRS in both FY 2022
and FY 2021.
Lower gross profitability for the year principally reflected a post-Covid-19
normalisation with Covid-19-related business declining sharply in FY 2022.
Gross profitability was also weighed down by the aforementioned increases in
direct salaries and wages, as well as higher direct depreciation expenses
following the new branch additions. Gross profit was also partially impacted
by an increase in raw material prices in the second half of the year
reflecting the devaluation of the Egyptian pound (EGP) throughout the year.
Gross profit for the fourth quarter recorded EGP 281 million, down 56%
year-on-year as gross profit normalized post-Covid-19. Gross profit margin on
net sales stood at 35% in Q4 2022 versus 50% in Q4 2021 (GPM on revenue
recorded 35% versus 44% last year) mainly driven by a post-Covid-19
normalization as well as an increase in wages and salaries and other expenses.
(24) It is important to note that while in absolute terms the Gross Profit
figure is identical when using IFRS or APM, its margin differs between the two
sets of performance indicators.
Selling, General and Administrative Expenses
Total SG&A outlays amounted to EGP 608 million for the full year, an 18%
year-on-year increase from the 513 million recorded in FY 2021. Increases in
SG&A expenses for the year are attributable to:
· An increase in accounting fees related to the external auditor "PWC"
which reached to EGP 38 million in FY 2022 compared to EGP 29 million in FY
2021, as well as a one-off legal consulting fee paid by the Company during FY
2022. Both items were impacted by the multiple devaluations of the EGP.
· Increased advertising expenses, which rose by 28% compared to FY
2021, mainly related to marketing efforts launched to support Al-Borg Scan's
ramp-up and to boost operations at newly launched branches.
Due to the economic circumstances faced across the Company's markets of
operation, IDH has booked higher provisions reflecting an increase in the
period of time it takes to collect from debtors as well as a higher provision
rate being applied to older balances.
Selling, General and Administrative Expenses
FY 2021 FY 2022 Change
Wages & Salaries 192 197 3%
Accounting and professional services fees 114 130 14%
Market - Advertisement expenses 97 123 27%
Other Expenses 65 90 38%
Depreciation & Amortisation 25 33 32%
Impairment loss on trade and other receivable 25 30 20%
Travelling and transportation expenses 11 17 55%
Other income (16) (12) -25%
Total 513 608 18%
EBITDA
IDH's EBITDA(25) came in at EGP 1,150 million in FY 2022, down 54% from the
EGP 2,501 million recorded in the previous twelve months. Meanwhile, adjusted
EBITDA,(26) which excludes one-off expenses incurred by the Group in FY 2021
and FY 2022, recorded EGP 1,172 million in FY 2022 compared to EGP 2,530 in FY
2021. Adjusted EBITDA margin on revenues recorded 33% in FY 2022 versus 48%
last year. Meanwhile, EBITDA margin on net sales recorded 33% for the year
down from 50% in FY 2021.(27) Lower EBITDA level profitability is attributable
to lower gross profitability for the year coupled with the aforementioned
increase in SG&A expenses and particularly marketing outlays, and the
launch of a new patient loyalty programme. It is important to mention that the
absolute values of EBITDA and Adjusted EBITDA are identical for both IFRS and
APM measures.
In line with the same trend witnessed on a full-year basis, Adjusted EBITDA
for Q4 2022 declined 63% compared to the same period of 2021 to record EGP 197
million.
(25) 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.
(26) Adjusted EBITDA is calculated as EBITDA excluding one-off expenses
incurred by the Group. These include one-off listing expenses in FY 2021 of
EGP 29.0 million related to IDH's dual listing on the EGX, and one-off
transaction expenses in FY 2022 of EGP 22.3 million related to IDH's aborted
acquisition in Pakistan. Adjusted measures eliminate the one-off impacts of
items in the year to provide a measure of underlying performance which is
regularly utilized by management.
(27) It is important to note that while in absolute terms the EBITDA figure is
identical when using IFRS or APM, its margin differs between the two sets of
performance indicators.
EBITDA by Country
In Egypt, came in at EGP 1,031 million, down 53% year-on-year. Similarly,
Adjusted EBITDA recorded EGP 1,053 million for FY 2022, down 52% year-on-year.
EBITDA margin on revenue (IFRS and APM figures are identical) in Egypt stood
at 36% for the full year, declining from the high base of 54% recorded in FY
2021. Adjusted EBITDA from IDH's Egyptian operations contributed 90% to the
Company's consolidated Adjusted EBITDA in FY 2022.
Biolab, IDH's Jordanian subsidiary, reported an EBITDA contraction of 59% in
EGP terms and 63% in JOD terms. Similarly, EBITDA margin was down both on
revenues and net sales (IFRS and APM). Lower EBITDA profitability reflected
lower gross profits following a post-Covid-19 normalisation, as well as
increased expenses at the Company's testing booths in QAIA and Aqaba Port.
In Nigeria, EBITDA losses recorded EGP 17.1 million for FY 2022, widening
significantly from EBITDA losses in FY 2021 despite the strong revenue growth
recorded by the venture in the past year. Widening EBITDA losses were largely
attributable to rising Diesel costs which posted a three-fold year-on-year
increase in FY 2022 from NGN 250 per litre in FY 2021 to NGN 805 per litre in
FY 2022. It is worth noting that Echo-Lab's branches in Nigeria require
electricity for which the company utilises its own diesel powered generators,
and therefore the rise in diesel prices has a significant impact on the
business.
In Sudan, the Company booked an EBITDA loss of SDG 1.9 million, a significant
improvement from the EBITDA losses of SDG 47 million booked in FY 2021. In EGP
terms, EBITDA recorded a loss of EGP 196 thousand in FY 2022, up from the EGP
500 thousand loss recorded in FY 2021.
Regional EBITDA in Local Currency
Mn FY 2021 FY 2022 Change
Egypt EBITDA EGP 2,177 1,031 -53%
EBITDA margin on revenue 53% 36%
Egypt Adjusted EBITDA(28) EGP 2,206 1,053 -52%
Adj. EBITDA Margin on net sales 54% 36%
Jordan JOD 15.0 5.5 -63%
Margin on net sales (APM) 38% 26%
Margin on revenues (IFRS) 32% 23%
Nigeria NGN -179 -337 88%
Margin on revenue -13% -20%
Sudan SDG -10 -1.9 -81%
Margin on revenue -3% -0.3%
(28) Adjusted EBITDA in Egypt is calculated as EBITDA excluding one-off
expenses incurred by the Group. These include one-off listing expenses in FY
2021 of EGP 29.0 million related to IDH's dual listing on the EGX, and one-off
transaction expenses in FY 2022 of EGP 22.3 million related to IDH's aborted
acquisition in Pakistan.
Interest Income / Expense
IDH recorded interest income of EGP 95 million for FY 2022, a 16% decrease
from the EGP 113 million recorded during FY 2021. Lower interest income came
on the back of lower cash balances over the twelve-month period as IDH paid
out a record cash dividend for FY 2021.
Interest expense booked EGP 136 million for the full year, increasing 15%
year-on-year from EGP 118 million in 2021. The increase in attributable to:
· Higher interest on lease liabilities related to IFRS 16 following the
addition of new branches and the renewal of medical equipment agreements with
the Group's main equipment suppliers.
· Fees amounting to EGP 12.5 million related to the US$ 45 million
facility with the International Finance Corporation (IFC) granted in May 2021
and the US$ 15 million IFC syndicated facility from Mashreq Bank in December
2021. Fees include commitment and supervisory fees. It is worth nothing that
fees related to the IFC facility decreased 38% year-on-year.
· Higher interest expenses following the CBE decision to increase rates
by 800 bps over the course of FY 2022. It is worth highlighting that IDH
interest bearing debt balance increased by EGP 18.3 million year-on-year to
reach EGP 116 million as at 31 December 2022 related to Ahly United Bank loan
granted to finance Al Borg-Scan expansionary plan. The loan will be fully
repaid in Jan 2027.
· Interest expenses related to IDH's Deferral Agreement with Hena
Holdings Ltd and Actis IDH Limited for disbursement of the Company's FY 2021
dividend amounting to EGP 3.4 million.
Interest Expense Breakdown
EGP mn FY 2021 FY 2022 Change
Interest on Lease Liabilities (IFRS 16) 59.5 73.4 23%
Interest Expenses on Leases 8.8 21.4 143%
Bank Charges 20.0 12.9 -36%
Loan-related Expenses on IFC facility 20.3 12.5 -38%
Interest Expenses on Borrowings(29) 9.4 11.9 27%
Shareholder Dividend Deferral Agreement(30) - 3.4 N/A
Total Interest Expense 118.0 135.5 15%
Foreign Exchange
The Company recorded a foreign exchange gain of EGP 188 million during FY 2022
compared to a net foreign exchange loss of EGP 18 million recorded in FY 2021.
Fair Value through Profit and Loss (FVTPL)
IDH booked a FVTPL loss related to Global Depository Receipts (GDRs) of EGP
143 million in FY 2022. The loss is associated with transactions undertaken by
the Company to secure the necessary USD balance to fulfil its FY 2021 dividend
obligations to shareholders. As part of its strategy to secure the necessary
USD balance, the Company purchased GDRs in EGP on the Egyptian Exchange (EGX)
to later sell them on the London Stock Exchange (LSE) for USD.
Taxation
Tax expenses (income tax and deferred tax) recorded in FY 2022 were EGP 327
million compared to EGP 740 million in FY 2021. IDH's effective tax rate stood
at 38% in FY 2022 versus 33% in FY 2021. There is no tax payable for IDH's two
companies at the holding level, while tax was paid on profits generated by its
operating subsidiaries (Egypt 22.5%, Jordan 21%, Nigeria 30% and Sudan 30%).
The increase in effective tax rate is mainly due to the increase in
non-deductible expenses within the Group.
Taxation Breakdown by Region
EGP Mn FY 2021 FY 2022 Change
Egypt 704.8 274.3 -61%
Jordan 54.0 21.8 -59%
Nigeria -20.0 30.6 N/A
Sudan 1.0 0.4 -60%
Total Tax Expenses 739.8 327.1 -56%
Net Profit
IDH's consolidated net profit for the year booked EGP 527 million, a 65%
year-on-year decrease. The Company's net profit margin on revenue stood at 15%
versus 29% in the prior year. Net profit margin on net sales also stood at 15%
compared to 30% in FY 2021. It should be highlighted that EGP 22.3 million
were recorded as transaction costs related to the Pakistan deal.
Meanwhile, excluding FVTPL losses related to securing the USD balance required
for dividend obligations and the one-off item related to Pakistan transaction
fees, IDH would have recorded a net profit of EGP 692 million for FY 2022,
down 54% year-on-year and with a margin on revenue of 19% and on net sales of
20%.
On a quarterly basis, net profit decreased 64% year-on-year, reaching EGP 123
million for Q4 2022. It is worth highlighting that net profit in absolute
terms is identical for both IFRS and APM measures on both a quarterly and
full-year basis.
Raw material costs including the cost of specialized analysis at other
laboratories (35% of consolidated cost of sales), made up the lion share of
total cost of net sales recording EGP 734 million in FY 2022, down 26%
year-on-year. Although raw material costs declined in absolute terms, as a
percentage of net sales raw material expenses increased to 20.7% in FY 2022
versus 19.6% in FY 2021. The increase primarily reflects high raw material
costs incurred in the second half of the year, and particularly in the final
quarter, in IDH's home market of Egypt following the multiple devaluations of
the EGP over the course of 2022. The increase in raw material costs was
widespread impacting both IDH's conventional and Covid-19-related test
offering. It is also worth noting that the during the first quarter IDH's raw
material to net sales ratio increased significantly reflecting a large decline
in the average selling price of Covid-19-related tests during the quarter.
Wages and salaries including employee share of profits (29% share of
consolidated cost of sales) declined 3% year-on-year, recording EGP 613
million for FY 2022 and representing the second largest share of consolidated
cost of net sales. The decrease for the year is attributable to lower employee
share of profits, which declined reflecting lower net profits for the
twelve-month period. Direct wages & salaries (excluding employee profit
share), however, increased 17% year-on-year due to staffing requirements at
new branches and annual salary increases for existing employees. It is worth
noting that there was a 9% quarter-on-quarter increase in direct wages and
salaries (excluding profit share) in the final three months of the year versus
Q3 2022, in part reflecting the translation effect in Jordan (EGP 9 million).
Direct depreciation and amortization costs (14% of consolidated cost of sales)
for the year recorded EGP 285 million for FY 2022, a 33% year-on-year increase
from the EGP 214 million recorded in FY 2021. Depreciation and amortization
expenses increased on the back of incremental depreciation of new branches
(mainly new radiology branches) (IFRS 16 right-of-use assets), as the Company
added 50 new branches during FY 2022.
Other expenses (21% of consolidated cost of sales) for the period increased by
10% year-on-year to EGP 447 million. The year-on-year increase was primarily
attributable to higher branch cleaning and repair & maintenance costs
which together increased 41% year-on-year and made up 29% of total other
expenses for the year. This reflected both the roll out of new branches in the
year (+50) as well as the introduction of a new model for the maintenance and
cleaning of new and existing branches.
Gross Profit
Gross profit booked EGP 1,462 million for FY 2022, down 48% year-on-year.
IDH's gross profit margin on revenue stood at 41% in FY 2022 versus 54% in FY
2021. Similarly, IDH's gross profit margin(24) on net sales recorded 41% FY
2022 versus 56% in FY 2021 when strong results from IDH's Covid-19-related
segment had boosted gross profitability. It is worth highlighting that gross
profit in absolute terms is identical for both APM and IFRS in both FY 2022
and FY 2021.
Lower gross profitability for the year principally reflected a post-Covid-19
normalisation with Covid-19-related business declining sharply in FY 2022.
Gross profitability was also weighed down by the aforementioned increases in
direct salaries and wages, as well as higher direct depreciation expenses
following the new branch additions. Gross profit was also partially impacted
by an increase in raw material prices in the second half of the year
reflecting the devaluation of the Egyptian pound (EGP) throughout the year.
Gross profit for the fourth quarter recorded EGP 281 million, down 56%
year-on-year as gross profit normalized post-Covid-19. Gross profit margin on
net sales stood at 35% in Q4 2022 versus 50% in Q4 2021 (GPM on revenue
recorded 35% versus 44% last year) mainly driven by a post-Covid-19
normalization as well as an increase in wages and salaries and other expenses.
(24) It is important to note that while in absolute terms the Gross Profit
figure is identical when using IFRS or APM, its margin differs between the two
sets of performance indicators.
Selling, General and Administrative Expenses
Total SG&A outlays amounted to EGP 608 million for the full year, an 18%
year-on-year increase from the 513 million recorded in FY 2021. Increases in
SG&A expenses for the year are attributable to:
· An increase in accounting fees related to the external auditor "PWC"
which reached to EGP 38 million in FY 2022 compared to EGP 29 million in FY
2021, as well as a one-off legal consulting fee paid by the Company during FY
2022. Both items were impacted by the multiple devaluations of the EGP.
· Increased advertising expenses, which rose by 28% compared to FY
2021, mainly related to marketing efforts launched to support Al-Borg Scan's
ramp-up and to boost operations at newly launched branches.
Due to the economic circumstances faced across the Company's markets of
operation, IDH has booked higher provisions reflecting an increase in the
period of time it takes to collect from debtors as well as a higher provision
rate being applied to older balances.
Selling, General and Administrative Expenses
FY 2021 FY 2022 Change
Wages & Salaries 192 197 3%
Accounting and professional services fees 114 130 14%
Market - Advertisement expenses 97 123 27%
Other Expenses 65 90 38%
Depreciation & Amortisation 25 33 32%
Impairment loss on trade and other receivable 25 30 20%
Travelling and transportation expenses 11 17 55%
Other income (16) (12) -25%
Total 513 608 18%
EBITDA
IDH's EBITDA(25) came in at EGP 1,150 million in FY 2022, down 54% from the
EGP 2,501 million recorded in the previous twelve months. Meanwhile, adjusted
EBITDA,(26) which excludes one-off expenses incurred by the Group in FY 2021
and FY 2022, recorded EGP 1,172 million in FY 2022 compared to EGP 2,530 in FY
2021. Adjusted EBITDA margin on revenues recorded 33% in FY 2022 versus 48%
last year. Meanwhile, EBITDA margin on net sales recorded 33% for the year
down from 50% in FY 2021.(27) Lower EBITDA level profitability is attributable
to lower gross profitability for the year coupled with the aforementioned
increase in SG&A expenses and particularly marketing outlays, and the
launch of a new patient loyalty programme. It is important to mention that the
absolute values of EBITDA and Adjusted EBITDA are identical for both IFRS and
APM measures.
In line with the same trend witnessed on a full-year basis, Adjusted EBITDA
for Q4 2022 declined 63% compared to the same period of 2021 to record EGP 197
million.
(25) 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.
(26) Adjusted EBITDA is calculated as EBITDA excluding one-off expenses
incurred by the Group. These include one-off listing expenses in FY 2021 of
EGP 29.0 million related to IDH's dual listing on the EGX, and one-off
transaction expenses in FY 2022 of EGP 22.3 million related to IDH's aborted
acquisition in Pakistan. Adjusted measures eliminate the one-off impacts of
items in the year to provide a measure of underlying performance which is
regularly utilized by management.
(27) It is important to note that while in absolute terms the EBITDA figure is
identical when using IFRS or APM, its margin differs between the two sets of
performance indicators.
EBITDA by Country
In Egypt, came in at EGP 1,031 million, down 53% year-on-year. Similarly,
Adjusted EBITDA recorded EGP 1,053 million for FY 2022, down 52% year-on-year.
EBITDA margin on revenue (IFRS and APM figures are identical) in Egypt stood
at 36% for the full year, declining from the high base of 54% recorded in FY
2021. Adjusted EBITDA from IDH's Egyptian operations contributed 90% to the
Company's consolidated Adjusted EBITDA in FY 2022.
Biolab, IDH's Jordanian subsidiary, reported an EBITDA contraction of 59% in
EGP terms and 63% in JOD terms. Similarly, EBITDA margin was down both on
revenues and net sales (IFRS and APM). Lower EBITDA profitability reflected
lower gross profits following a post-Covid-19 normalisation, as well as
increased expenses at the Company's testing booths in QAIA and Aqaba Port.
In Nigeria, EBITDA losses recorded EGP 17.1 million for FY 2022, widening
significantly from EBITDA losses in FY 2021 despite the strong revenue growth
recorded by the venture in the past year. Widening EBITDA losses were largely
attributable to rising Diesel costs which posted a three-fold year-on-year
increase in FY 2022 from NGN 250 per litre in FY 2021 to NGN 805 per litre in
FY 2022. It is worth noting that Echo-Lab's branches in Nigeria require
electricity for which the company utilises its own diesel powered generators,
and therefore the rise in diesel prices has a significant impact on the
business.
In Sudan, the Company booked an EBITDA loss of SDG 1.9 million, a significant
improvement from the EBITDA losses of SDG 47 million booked in FY 2021. In EGP
terms, EBITDA recorded a loss of EGP 196 thousand in FY 2022, up from the EGP
500 thousand loss recorded in FY 2021.
Regional EBITDA in Local Currency
Mn FY 2021 FY 2022 Change
Egypt EBITDA EGP 2,177 1,031 -53%
EBITDA margin on revenue 53% 36%
Egypt Adjusted EBITDA(28) EGP 2,206 1,053 -52%
Adj. EBITDA Margin on net sales 54% 36%
Jordan JOD 15.0 5.5 -63%
Margin on net sales (APM) 38% 26%
Margin on revenues (IFRS) 32% 23%
Nigeria NGN -179 -337 88%
Margin on revenue -13% -20%
Sudan SDG -10 -1.9 -81%
Margin on revenue -3% -0.3%
(28) Adjusted EBITDA in Egypt is calculated as EBITDA excluding one-off
expenses incurred by the Group. These include one-off listing expenses in FY
2021 of EGP 29.0 million related to IDH's dual listing on the EGX, and one-off
transaction expenses in FY 2022 of EGP 22.3 million related to IDH's aborted
acquisition in Pakistan.
Interest Income / Expense
IDH recorded interest income of EGP 95 million for FY 2022, a 16% decrease
from the EGP 113 million recorded during FY 2021. Lower interest income came
on the back of lower cash balances over the twelve-month period as IDH paid
out a record cash dividend for FY 2021.
Interest expense booked EGP 136 million for the full year, increasing 15%
year-on-year from EGP 118 million in 2021. The increase in attributable to:
· Higher interest on lease liabilities related to IFRS 16 following the
addition of new branches and the renewal of medical equipment agreements with
the Group's main equipment suppliers.
· Fees amounting to EGP 12.5 million related to the US$ 45 million
facility with the International Finance Corporation (IFC) granted in May 2021
and the US$ 15 million IFC syndicated facility from Mashreq Bank in December
2021. Fees include commitment and supervisory fees. It is worth nothing that
fees related to the IFC facility decreased 38% year-on-year.
· Higher interest expenses following the CBE decision to increase rates
by 800 bps over the course of FY 2022. It is worth highlighting that IDH
interest bearing debt balance increased by EGP 18.3 million year-on-year to
reach EGP 116 million as at 31 December 2022 related to Ahly United Bank loan
granted to finance Al Borg-Scan expansionary plan. The loan will be fully
repaid in Jan 2027.
· Interest expenses related to IDH's Deferral Agreement with Hena
Holdings Ltd and Actis IDH Limited for disbursement of the Company's FY 2021
dividend amounting to EGP 3.4 million.
Interest Expense Breakdown
EGP mn FY 2021 FY 2022 Change
Interest on Lease Liabilities (IFRS 16) 59.5 73.4 23%
Interest Expenses on Leases 8.8 21.4 143%
Bank Charges 20.0 12.9 -36%
Loan-related Expenses on IFC facility 20.3 12.5 -38%
Interest Expenses on Borrowings(29) 9.4 11.9 27%
Shareholder Dividend Deferral Agreement(30) - 3.4 N/A
Total Interest Expense 118.0 135.5 15%
Foreign Exchange
The Company recorded a foreign exchange gain of EGP 188 million during FY 2022
compared to a net foreign exchange loss of EGP 18 million recorded in FY 2021.
Fair Value through Profit and Loss (FVTPL)
IDH booked a FVTPL loss related to Global Depository Receipts (GDRs) of EGP
143 million in FY 2022. The loss is associated with transactions undertaken by
the Company to secure the necessary USD balance to fulfil its FY 2021 dividend
obligations to shareholders. As part of its strategy to secure the necessary
USD balance, the Company purchased GDRs in EGP on the Egyptian Exchange (EGX)
to later sell them on the London Stock Exchange (LSE) for USD.
Taxation
Tax expenses (income tax and deferred tax) recorded in FY 2022 were EGP 327
million compared to EGP 740 million in FY 2021. IDH's effective tax rate stood
at 38% in FY 2022 versus 33% in FY 2021. There is no tax payable for IDH's two
companies at the holding level, while tax was paid on profits generated by its
operating subsidiaries (Egypt 22.5%, Jordan 21%, Nigeria 30% and Sudan 30%).
The increase in effective tax rate is mainly due to the increase in
non-deductible expenses within the Group.
Taxation Breakdown by Region
EGP Mn FY 2021 FY 2022 Change
Egypt 704.8 274.3 -61%
Jordan 54.0 21.8 -59%
Nigeria -20.0 30.6 N/A
Sudan 1.0 0.4 -60%
Total Tax Expenses 739.8 327.1 -56%
Net Profit
IDH's consolidated net profit for the year booked EGP 527 million, a 65%
year-on-year decrease. The Company's net profit margin on revenue stood at 15%
versus 29% in the prior year. Net profit margin on net sales also stood at 15%
compared to 30% in FY 2021. It should be highlighted that EGP 22.3 million
were recorded as transaction costs related to the Pakistan deal.
Meanwhile, excluding FVTPL losses related to securing the USD balance required
for dividend obligations and the one-off item related to Pakistan transaction
fees, IDH would have recorded a net profit of EGP 692 million for FY 2022,
down 54% year-on-year and with a margin on revenue of 19% and on net sales of
20%.
On a quarterly basis, net profit decreased 64% year-on-year, reaching EGP 123
million for Q4 2022. It is worth highlighting that net profit in absolute
terms is identical for both IFRS and APM measures on both a quarterly and
full-year basis.
( )
(29) Interest expenses on medium-term loans include EGP 11.6 related to the
Group's facility with Ahli United Bank Egypt (AUBE) & interest expense
amounting to EGP 3.4 million was booked related to shareholders dividends
deferral agreement, and EGP 0.3 million related to CIB facility. Meanwhile,
the Group's facility with the Commercial International Bank (CIB) was fully
repaid as of 5 April 2022.
(30) As announced on 27 July 2022, as part of IDH's agreement with Hena
Holdings Ltd and Actis IDH Limited (its two largest shareholders) in
consideration for the two shareholders agreeing to defer their right to
receive their pro rata share of the Dividend Payment, IDH agreed to pay to
each interest on the outstanding amounts due at the rate of 10% per annum
(with interest accruing on a daily basis) for a two-month period starting 27
July 2022. Payment to both shareholders was successfully completed on 18
August 2022.
ii. Balance Sheet Analysis
Assets
Property, Plant and Equipment
IDH recorded gross property, plant and equipment (PPE) of EGP 2,219 million as
at year-end 2022, up from the EGP 1,659 held as at year-end 2021. The rise in
CAPEX as a share of net sales during 2022 is partially attributable to the EGP
138 million spent on new radiology branches in Egypt, as well as the EGP 190
million translation effect (associated with Jordan, Sudan, and Nigeria) which
resulted from the Egyptian Pounds devaluation throughout the past twelve
months.
Total CAPEX Addition Breakdown
EGP Mn FY 2022 % of Net Sales
Leasehold Improvements/new branches 231.0 6.5%
Al-Borg Scan Expansion 138.5 3.9%
Total CAPEX Additions Excluding Translation 369.5 10.4%
Accounts Receivable and Provisions
As at year-end 2022, IDH's accounts receivable stood at EGP 432 million versus
EGP 371 million as at year-end 2021. Meanwhile, receivables' Days on Hand
(DOH) booked 124 days versus 107 days in 2021. The increase in DoH for the
year came reflected a rise in collection periods with corporate customers
during FY 2022 due to challenging economic conditions faced in Egypt
throughout the past twelve months.
Provision for doubtful accounts for FY 2022 stood at EGP 30 million, a 21%
year-on-year increase from the EGP 25 million booked during FY 2021. The rise
in provisions reflects an increase in collection periods from debtors as well
as a higher provision rate being applied to older balances.
Inventory
As at 31 December 2022, IDH's inventory balance stood at EGP 265 million, up
from the EGP 223 million balance as at year-end 2021. Simultaneously, Days
Inventory Outstanding (DIO) increased to 127 days as at 31 December 2022, up
from 61 days as at year-end 2021. The increase in DIO is a result of
management decisions to proactively accumulate inventory as part of its
strategy to hedge against inflation as a result of the ongoing devaluation of
the Egyptian Pound.
Cash and Net Debt/Cash
Cash balances as at year-end 2022 decreased to EGP 816 million, a 65% drop
compared to the EGP 2,350 million recorded as at 31 December 2021. The
decrease in cash balances is due to the distribution of FY 2021 dividend
obligations to shareholders in July and August 2022.
EGP million 31 Dec 2021 31 Dec 2022
T-Bills 1,461 293
Time Deposits 628 123
Current Accounts 239 382
Cash on Hand 22 18
Total 2,350 816
IDH's net debt(31) balance as at year-end 2022 stood at EGP 373 million,
compared to a net cash balance of EGP 1,483 as at year-end 2021. For
disclosures related to credit risk please refer to note 5 in the Company's
Financial Statements.
EGP million 31 Dec 2021 31 Dec 2022 31 Dec 2021
Cash and Financial Assets at Amortised Cost(32) 2,350 816 2,350
Lease Liabilities Property (532) (727) 106
Total Financial Liabilities (Short-term and Long-term) (229) (335)
Interest Bearing Debt ("Medium Term Loans")(33) (106) (127)
Net Cash/(debt) Balance 1,483 (373) 1,483
Note: Interest Bearing Debt includes accrued interest for each period.
(31) The net cash/(debt) balance is calculated as cash and cash equivalent
balances including financial assets at amortised cost, less interest-bearing
debt (medium term loans), finance lease and Right-of-use liabilities.
(32) As outlined in Note 18 of IDH's Consolidated Financial Statements, some
term deposits and treasury bills cannot be accessed for over 3 months and are
therefore not treated as cash. Term deposits which cannot be accessed for over
3 months stood at EGP 60 million in FY 2022, versus EGP 148 million as at
year-end 2021. Meanwhile, treasury bills not accessible for over 3 months
stood at EGP 107 million in FY 2022, down from EGP 1,311 million in FY 2021.
(33) IDH's interest bearing debt as at 31 December 2022 included EGP 116
million to its facility with Ahli United Bank Egypt (AUBE) (outstanding loan
balances are excluding accrued interest for the period).
Lease liabilities and financial obligations on property increased to EGP 727
million as of 31 December 2022, primarily due to the addition of new branches
to IDH's networks throughout the year (+50 new branches).
Meanwhile, financial obligations related to equipment increased to EGP 335
million as of year-end 2022, mainly due to the renewal of Company contracts as
well as equipment upgrades completed throughout the year. Total financial
obligations related to equipment also encompasses EGP 212 million spent on Al
Borg Scan's equipment.
Finally, interest bearing debt increased to EGP 127 as of 31 December 2022.
The rise is related to additional usage of MTL to finance Al Borg-Scan
expansions. It is worth highlighting that interest-bearing debt for both
periods included accrued interest. It is also important to note that IDH's
facility with the Commercial International Bank (CIB) has been fully repaid as
of April 2022.
Liabilities
Accounts Payable(34)
As at 31 December 2022, the Company's accounts payable balance stood at EGP
270 million, a decrease from the EGP 311 million recorded as at 31 December
2021. The Group's Days Payable Outstanding (DPO), on the other hand, increased
to 151 days as at year-end 2022 compared to 93 days as at 31 December 2021.
The increase in DPO was primarily driven by lower Covid-19-related kits
demand.
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 Biolab's LTM
EBITDA minus net debt. Biolab's put option liability decreased following the
significant decline in the venture's EBITDA for the period.
The 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).
(34) Accounts payable is calculated based on average payables at the end of
each year.
Accounts Receivable and Provisions
As at year-end 2022, IDH's accounts receivable stood at EGP 432 million versus
EGP 371 million as at year-end 2021. Meanwhile, receivables' Days on Hand
(DOH) booked 124 days versus 107 days in 2021. The increase in DoH for the
year came reflected a rise in collection periods with corporate customers
during FY 2022 due to challenging economic conditions faced in Egypt
throughout the past twelve months.
Provision for doubtful accounts for FY 2022 stood at EGP 30 million, a 21%
year-on-year increase from the EGP 25 million booked during FY 2021. The rise
in provisions reflects an increase in collection periods from debtors as well
as a higher provision rate being applied to older balances.
Inventory
As at 31 December 2022, IDH's inventory balance stood at EGP 265 million, up
from the EGP 223 million balance as at year-end 2021. Simultaneously, Days
Inventory Outstanding (DIO) increased to 127 days as at 31 December 2022, up
from 61 days as at year-end 2021. The increase in DIO is a result of
management decisions to proactively accumulate inventory as part of its
strategy to hedge against inflation as a result of the ongoing devaluation of
the Egyptian Pound.
Cash and Net Debt/Cash
Cash balances as at year-end 2022 decreased to EGP 816 million, a 65% drop
compared to the EGP 2,350 million recorded as at 31 December 2021. The
decrease in cash balances is due to the distribution of FY 2021 dividend
obligations to shareholders in July and August 2022.
EGP million 31 Dec 2021 31 Dec 2022
T-Bills 1,461 293
Time Deposits 628 123
Current Accounts 239 382
Cash on Hand 22 18
Total 2,350 816
IDH's net debt(31) balance as at year-end 2022 stood at EGP 373 million,
compared to a net cash balance of EGP 1,483 as at year-end 2021. For
disclosures related to credit risk please refer to note 5 in the Company's
Financial Statements.
EGP million 31 Dec 2021 31 Dec 2022 31 Dec 2021
Cash and Financial Assets at Amortised Cost(32) 2,350 816 2,350
Lease Liabilities Property (532) (727) 106
Total Financial Liabilities (Short-term and Long-term) (229) (335)
Interest Bearing Debt ("Medium Term Loans")(33) (106) (127)
Net Cash/(debt) Balance 1,483 (373) 1,483
Note: Interest Bearing Debt includes accrued interest for each period.
(31) The net cash/(debt) balance is calculated as cash and cash equivalent
balances including financial assets at amortised cost, less interest-bearing
debt (medium term loans), finance lease and Right-of-use liabilities.
(32) As outlined in Note 18 of IDH's Consolidated Financial Statements, some
term deposits and treasury bills cannot be accessed for over 3 months and are
therefore not treated as cash. Term deposits which cannot be accessed for over
3 months stood at EGP 60 million in FY 2022, versus EGP 148 million as at
year-end 2021. Meanwhile, treasury bills not accessible for over 3 months
stood at EGP 107 million in FY 2022, down from EGP 1,311 million in FY 2021.
(33) IDH's interest bearing debt as at 31 December 2022 included EGP 116
million to its facility with Ahli United Bank Egypt (AUBE) (outstanding loan
balances are excluding accrued interest for the period).
Lease liabilities and financial obligations on property increased to EGP 727
million as of 31 December 2022, primarily due to the addition of new branches
to IDH's networks throughout the year (+50 new branches).
Meanwhile, financial obligations related to equipment increased to EGP 335
million as of year-end 2022, mainly due to the renewal of Company contracts as
well as equipment upgrades completed throughout the year. Total financial
obligations related to equipment also encompasses EGP 212 million spent on Al
Borg Scan's equipment.
Finally, interest bearing debt increased to EGP 127 as of 31 December 2022.
The rise is related to additional usage of MTL to finance Al Borg-Scan
expansions. It is worth highlighting that interest-bearing debt for both
periods included accrued interest. It is also important to note that IDH's
facility with the Commercial International Bank (CIB) has been fully repaid as
of April 2022.
Liabilities
Accounts Payable(34)
As at 31 December 2022, the Company's accounts payable balance stood at EGP
270 million, a decrease from the EGP 311 million recorded as at 31 December
2021. The Group's Days Payable Outstanding (DPO), on the other hand, increased
to 151 days as at year-end 2022 compared to 93 days as at 31 December 2021.
The increase in DPO was primarily driven by lower Covid-19-related kits
demand.
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 Biolab's LTM
EBITDA minus net debt. Biolab's put option liability decreased following the
significant decline in the venture's EBITDA for the period.
The 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).
(34) Accounts payable is calculated based on average payables at the end of
each year.
iii. 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:
Specific Risk Mitigation
Country/regional risk - Economic & Forex
Egypt: The Group is subject to the economic conditions of Egypt specifically Overall, management notes that IDH has a resilient and defensive business
and, to a lesser extent, those of the other geographies. Egypt accounted for model and that the business continued to grow year-on-year through two
c.80% of our revenues in 2022 (2021: c.81%) and 90% of adjusted EBITDA (2021: revolutions, as well as under the extremely difficult operating conditions
87%). faced between 2016 and 2022, during which time the country faced the Covid-19
pandemic and several rounds of currency devaluation.
While the Russia-Ukraine war has had significant economic repercussions on
countries all over the world, Egypt's dependency on both countries for wheat IDH has historically taken a proactive approach to shield the business from
imports and tourism revenues, its high import bill, the widespread outflow of exchange rate fluctuations. As part of IDH's mitigation strategy the Company
capital from emerging markets at the start of the war, and the tight monetary secures contracts with tenors ranging from five to seven years (with
conditions globally have left the country in a particularly weak position. semi-fixed FX rates) and purchases laboratory test kits on contract with
volume-linked pricing. Moreover, thanks to IDH's significant volume and scale,
and its long-lasting supplier relationships, the Company is in a favourable
position to negotiate test kit prices with all its major suppliers.
As part of the government's plans to boost FX reserves and investor
confidence, the country finalised a US$ 3 billion loan from the IMF in
December 2022. A central condition within the agreement was the move to a
flexible exchange rate in the country. As a result of multiple devaluations During FY 2022, only 12% of IDH's cost of supplies (c.2% of revenues) were
throughout the year, in March 2023, the EGP was down 97% year-on-year payable in USD, minimising the Group's exposure to foreign exchange (FX)
recording an EGP/US$ rate of 30.9 in March 2023 from 15.7 in early March 2022 scarcity and, in part, the volatility of the EGP. During the first part of
(prior to the first devaluation). Despite this, pressure on the currency 2022, the Group had secured its stock at pre-devaluation rates, helping to
persists stemming from a strong US$, a US$ shortage in the market, and further further minimise the impact of the devaluation. Moreover, during the course of
speculation of a weaker currency. 2022, the Company was able to renegotiate supplier prices at a lower rate than
the devaluation rates, which resulted in an overall increase in the proportion
of raw materials to sales of 20.7%, compared to 19.6% in 2021. Going forward,
IDH's management will continue to leverage its long-lasting relationships with
As a result of the devaluation, rising global food and energy prices, and test kit providers to secure additional stock at competitive prices, shielding
import restrictions imposed throughout most of 2022 by the CBE, Egypt recorded our business from the impacts of rising inflation and the EGP devaluation.
high and rising inflation throughout 2022, with inflation hitting a five-year
high in January 2023 of 25.8%. In an attempt to rein in inflation, the central
bank has raised rates by 800 bps higher since the beginning of 2022.
Foreign currency risk: The Group is exposed to foreign currency risk on the
cost side of the business. The majority of supplies it acquires are paid in
EGP, but given they are imported, their price will vary with the rate of
exchange between the EGP and foreign currencies. In addition, a portion of
supplies are priced and paid in foreign currencies.
Nigeria: Depreciation of the NGN would make imported products and raw
materials more expensive and would reduce Nigeria's contribution to
consolidated Company revenues. Meanwhile, inflation in Nigeria surged in 2022,
reaching 21.3% in December 2022. Higher price levels were driven by the sharp In an effort to mitigate high inflationary environment in Nigeria, management
rise in diesel prices, which increased from NGN 250 per litre in 2021 to NGN is increasing prices and focusing on cutting unnecessary cost.
805 per litre in 2022.
Sudan: Following substantial currency devaluation in Sudan during 2018, the
currency lost 85% of its value. In 2019, the SDG's official rate versus the
US$ remained relatively stable at 45.11 as at 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 subsidies due to a huge
budget deficit and an economic crisis aggravated by the Covid-19 pandemic. In
February 2021, the currency was devalued again, and fuel subsidies were
completely removed in June 2021, which led to a further increase in consumer The Group is closely monitoring the economic situation in Sudan and has
prices. In March 2022, the Sudanese government floated the SDG, which saw the implemented several price increases to keep in step with inflationary
currency end 2022 at a rate of 571.5 versus the US$. Sudan's headline pressures. IDH is also working to limit expatriate salaries and foreign
inflation rate has been gradually declining throughout 2022, ending the year currency needs by increasing dependence on local hires.
at a rate of 87.3%, down from 259.8% in January 2022.
Country risk - Political & Security
Sudan: In 2019, severe political unrest and protests led the military to It is important to note that in FY 2022 Sudan made up just 0.6% of IDH's
remove long-time president Omar Al-Bashir. Following his removal, the military revenues. Moreover, while nationwide protests do affect patient and test
signed a power-sharing agreement with an opposition coalition in July 2019, volumes in Sudan, the diagnostic industry is relatively immune given the
with the aim of eventually transferring power to a civilian government. On 25 inelastic demand for healthcare services. Additionally, management in Sudan
October 2021, Sudan's Prime Minister, Abdalla Hamdok, was detained by armed has been successful in offsetting the effect of lower volumes due to protest
forces, and Army chief General Abdel Fattah al-Burhan announced that the with higher pricing, and in 2019, 2020, 2021, and 2022, the geography recorded
civilian government and other transitional bodies have been dissolved, leading solid year-on-year revenue growth in SDG terms. In FY 2022, IDH's Sudanese
to mass rallies and civilian unrest. The protests led to the temporary closure operations also returned to growth in EGP terms.
of all of IDH's Sudanese branches. All locations were reopened within a few
days and quickly gained back momentum. On 21 November 2021, Mr. Hamdok took
office once again but later stepped down on 2 January 2022. On 5 December
2022, a new deal was signed between military generals and political parties IDH's management on the ground continues to monitor the evolving situation and
that would pave the way for a civilian-led transition. However, civil unrest has put in place an all-encompassing mitigation strategy to safeguard staff
and protests are continuing as the country's future remains unclear. The and patient wellbeing and protect IDH's operations in case of any future
situation in Sudan is volatile, and continued civil unrest could adversely unrest.
affect IDH's business.
It is worth noting that in December 2020, the US removed Sudan from its States
Sponsors of Terrorism list. The change in the country's designation is
expected to allow Sudan to have access to international funds and investment,
including the International Monetary Fund, paving the way for the country's
economic growth.
Nigeria: The country faces security challenges on several fronts, including
re-emerging 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.
Following the disbandment of the special division known as Special
Anti-Robbery Squad (SARS) by the Nigerian government in October 2020, protests
have decreased significantly across the country, but a potential escalation of
civil unrest remains possible. Throughout 2022, there were several instances
of escalation following multiple terrorist attacks and widespread cases of
kidnapping. Nigeria held elections in the first quarter of 2023. It is worth highlighting that in FY 2022, Nigeria made up just 2.2% of IDH's
consolidated revenues. Moreover, while nationwide security challenges do
affect patient and test volumes in the country, the diagnostic industry is
relatively immune given the inelastic demand for healthcare services. This is
showcased by the healthy rise in both patient and test volumes that has been
recorded by the venture since IDH's takeover of operations in 2018. While
security challenges and ethnic tensions are relatively hard to mitigate, IDH
is continuously evaluating its processes to safeguard its employees and
operations. Overall, IDH applies rigorous standards to evaluating all aspects
of its business processes in Nigeria to ensure it is well-equipped to respond
to the evolving situation.
Covid-19
The risks posed by Covid-19 on the business have declined significantly in All of IDH staff use appropriate protective equipment when interacting with
2022 as vaccination campaigns ramped up, infection rates declined, and patients, including those suspected of having Covid-19 or any other infectious
governments and businesses continued to effectively coexist with the virus. As disease. IDH is currently administering PCR, Antibody, and Antigen testing for
of December 2022, no new restrictions have been imposed following the rise of Covid-19 in Egypt and Jordan. All of the Group's employees have been fully
new Covid-19 variants throughout the past year. As at the end of 2022, the vaccinated during 2021, and they are subject to regular communications
share of the population having received at least one Covid-19 vaccine dose reminding them that they may not report to work if they have symptoms of a
stood at approximately 46% in Egypt, 47% in Jordan, 30% in Nigeria, and 15% in Covid-19 infection.
Sudan, and all four countries are currently free from any Covid-19 related
restrictions.
Throughout the Covid-19 crisis, IDH has maintained a strong focus on growing
its conventional (non-Covid19-related) business, which expanded 18% in FY 2022
Covid-19 impact on IDH Financials versus FY 2021, and came in 33% above pre-covid levels recorded in FY 2019
(adjusting for the contribution generated by the 100 Million Healthy Lives
Throughout FY 2022, IDH generated around 18% of its revenues from Campaign in 2019). As part of the Group's post-Covid-19 strategy in both Egypt
Covid-19-related testing. In light of the increasing roll-out of vaccines and and Jordan, IDH's focus has now turned to patient retention as it looks to
the widespread decline in infection rates, Covid-19-related revenues rapidly maintain the new relationships established during the pandemic thanks to its
declined as the year progressed and in Q4 2022 made up just 3% of total Covid-19-dedicated offering.
revenues versus 43% in Q1 2022.
The Russia-Ukraine War
The conflict between Russia and Ukraine, which has been ongoing since February As with similar situations in the past, IDH expects protracted high inflation,
2022, has negatively impacted the global economy and IDH's markets of in particular in Egypt, to have the most significant impact on patients who
operation. In particular, IDH's home and largest market of Egypt saw a rapid pay for their own healthcare. IDH has been developing marketing programmes
rise in inflation and a large outflow of capital following the outbreak of the targeted to this patient segment with a strong health awareness message in
conflict. This is due to multiple factors, including the country's reliance on combination with a compelling value component. This includes offering bundled
the imports of oil and wheat, coupled with a relatively weak FX position. diagnostic test packages for lifestyle-related diseases and chronic health
Rising inflation has increasingly eaten away at patients' purchasing power in conditions, as well as an in-house point redemption system. The Company is
the country. Fast-rising inflation was also recorded across IDH's other also exploring various solutions to offer more affordable payment plans to
markets. retain patients despite rising inflation.
At the same time, IDH enjoys a strong brand equity built over many years,
which has translated into strong loyalty, ensuring that patients continue to
choose the Group as their trusted diagnostic services provider irrespective of
the ongoing inflationary pressures.
On the costs front, IDH has been actively working with suppliers to negotiate
favourable test kit prices and contracts to mitigate the impact of a weaker
EGP on its raw material cost base.
Global Supply Chain Disruptions
The Russia-Ukraine conflict has exacerbated supply chain disruptions that had IDH's management team continually monitors the evolving situation and has
already come about as a result of restrictions imposed to curb the spread of taken proactive steps to build up its inventory to shield the Group from any
Covid-19, labour shortages, and fast-rising demand for goods, causing delays potential future disruptions. IDH is in continual dialogue with key suppliers
and shortages worldwide. The ongoing global supply chain disruptions has had to gauge the risk associated with a shortage of materials and is yet to
limited impacts on IDH's operations throughout 2022 and in early 2023. identify a weakness.
Throughout 2022 and in the first part of 2023, thanks to IDH's proactive
inventory build-up and sourcing strategy, the Group continued to face no
problems acquiring raw materials.
Supplier Risk
IDH faces the risk of suppliers re-opening 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 was typically able to negotiate favourable pricing and maintain raw
material costs increases at a rate slower than local currency devaluation. It
is worth highlighting that IDH's supplier relations were not impacted by
Covid-19.
Total raw material costs as a percentage of revenues stood at 20.4% in 2022
versus 18.9% in 2021 (raw materials to net sales stood at 20.7% in 2022
compared to 19.6% in 2021).
IDH's supplier risk is concentrated among three key suppliers - Siemens,
Roche, and Sysmex- who provide it with kits representing 31% of the total
value of total raw materials in 2022 (2021: 24%).
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 did not have issues with the repatriation
are subject to higher taxation on payment of dividends. Additionally, in line of dividends. However, starting in early 2022, the Company has faced
with the most recent devaluation of the EGP, there have been significant significant difficulties in sourcing the USD balance needed to fulfil its
shortages of foreign currency at Egyptian banks, with the ability to source dividend obligations. Heading into 2023, the Company expects the difficulties
foreign currency becoming more difficult under strict regulations. to persist and is closely monitoring the evolving situation to shield the
business from potential challenges.
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
quasi-governmental institutions.
Risk from contract clients
Contract clients, including private insurers, unions, and corporations, IDH diligently works to maintain sound relationships with contract clients.
account for 58% of Group revenues for the year. 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.
In an effort to mitigate risks from contact clients, no single client contract
accounts for more than 3% of total revenues or 4% of contract revenues.
Pricing pressure in a competitive, regulated environment
The Group may face pricing pressure from various third-party payers, including
national health insurance, syndicates, and other governmental bodies, which
could materially and adversely affect its revenue. Pricing may be restrained This is an external risk for which there exist few mitigants.
in cases by recommended or mandatory fees set by the government's 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.58% of IDH
revenues in 2022 is generated by servicing contract clients (private insurer,
unions, and corporations) who prefer IDH's national network to patchworks of
This risk may be more pronounced in the context of the imminent inflationary local players.
pressures following the recent depreciation of the EGP.
IDH has a limited ability to influence changes to mandatory pricing policies
The Group might face pricing pressure from existing competitors and new imposed by government agencies, as is the case in Jordan, where basic tests
entrants to the market. 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. As such, IDH is a price maker, especially in Egypt, where the Group
currently controls the largest network of branches among all private sector
players. Moreover, in its home market of Egypt, which accounted for 80% of
total revenues in FY 2022, 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, with regular updating and
internal and external audits.
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
performance of its systems.
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 In Egypt and Jordan, to mitigate the impact of potential branch closures on
temporary closure. 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.
Climate-related risks
IDH's operations currently face low physical and transitional risks related to For the first time, the Company is reporting, based on the Task Force on
climate change. Climate-Related Financial Disclosures (TCFD) programme, disclosures to provide
stakeholders with a clear framework to assess its climate-related risks and
opportunities. Overall, the risk and opportunities related to climate change
are considered immaterial, especially in the short-to-medium term. For TCFD
disclosures, please refer to pages 80 to 84 of the Group's Annual Report.
-End-
INTEGRATED DIAGNOSTICS HOLDINGS plc - "IDH"
AND ITS SUBSIDIARIES
Consolidated Financial Statements
for the year ended 31 December 2022
Consolidated statement of financial position as at 31 December 2022
Notes 2022 2021
EGP'000 EGP'000
Assets
Non-current assets
Property, plant and equipment 11 1,326,262 1,061,808
Intangible assets and goodwill 12 1,703,636 1,658,867
Right of use assets 26 622,975 462,432
Financial assets at fair value through profit and loss 14 18,064 10,470
Total non-current assets 3,670,937 3,193,577
Current assets
Inventories 15 265,459 222,612
Trade and other receivables 16 543,887 469,727
Financial assets at amortized cost 18 167,404 1,458,724
Cash and cash equivalents 17 648,512 891,451
Total current assets 1,625,262 3,042,514
Total assets 5,296,199 6,236,091
Equity
Share capital 19 1,072,500 1,072,500
Share premium reserve 19 1,027,706 1,027,706
Capital reserves 19 (314,310) (314,310)
Legal reserve 19 51,641 51,641
Put option reserve 19 (490,695) (956,397)
Translation reserve 19 24,173 150,730
Retained earnings 783,081 1,550,976
Equity attributable to the owners of the Company 2,154,096 2,582,846
Non-controlling interests 2 292,885 211,513
Total equity 2,446,981 2,794,359
Non-current liabilities
Provisions 21 3,519 4,088
Borrowings 24 93,751 76,345
Other financial obligations 26 914,191 645,196
Non-current put option liability 25 51,000 35,037
Deferred tax liabilities 9 321,732 332,149
Total non-current liabilities 1,384,193 1,092,815
Current liabilities
Trade and other payables 22 701,095 777,354
Other financial obligations 26 148,705 115,478
Current put option liability 23 439,695 921,360
Borrowings 24 22,675 21,721
Current tax liabilities 29 152,855 513,004
Total current liabilities 1,465,025 2,348,917
Total liabilities 2,849,218 3,441,732
Total equity and liabilities 5,296,199 6,236,091
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 05 April 2023 by:
Dr. Hend El Sherbini Hussein Choucri
Chief Executive Officer Independent Non-Executive Director
Consolidated income statement for the year ended 31 December 2022
Notes 2022 2021
EGP'000 EGP'000
Revenue 6 3,605,047 5,224,712
Cost of sales 8.1 (2,142,984) (2,420,647)
Gross profit 1,462,063 2,804,065
Marketing and advertising expenses 8.2 (213,151) (163,163)
Administrative expenses 8.3 (398,533) (370,014)
Impairment loss on trade and other receivable 16 (29,914) (24,656)
Other Income 11,726 15,828
Operating profit 832,191 2,262,060
Net fair value losses on financial assets at fair value through profit or loss 8.8 (142,950) -
Finance costs 8.6 (135,586) (142,917)
Finance income 8.6 299,992 113,178
Net finance income /(costs) 8.6 164,406 (29,739)
Profit before income tax 853,647 2,232,321
Income tax expense 9 (327,064) (739,815)
Profit for the year 526,583 1,492,506
Profit attributed to:
Owners of the Company 541,110 1,412,609
Non-controlling interests (14,527) 79,897
526,583 1,492,506
Earnings per share 10
Basic and diluted 0.90 2.35
The accompanying notes form an integral part of these consolidated financial
statements.
Consolidated statement of comprehensive income for the year ended 31 December
2022
2022 2021
EGP'000 EGP'000
Net profit for the year 526,583 1,492,506
Other comprehensive income:
Items that may be reclassified to profit or loss:
Exchange difference on translation of foreign operations 69,081 7,808
Other comprehensive income for the year, net of tax 69,081 7,808
Total comprehensive income for the year 595,664 1,500,314
Attributable to:
Owners of the Company 414,553 1,417,722
Non-controlling interests 181,111 82,592
595,664 1,500,314
The accompanying notes form an integral part of these consolidated financial
statements.
Consolidated statement of cash flows for the year ended 31 December 2022
Note 2022 2021
EGP'000 EGP'000
Cash flows from operating activities
Profit before tax 853,647 2,232,321
Adjustments for:
Depreciation of property, plant and equipment 11 206,993 151,826
Depreciation of right of use assets 26 103,099 79,617
Amortisation of intangible assets 12 7,251 7,201
Unrealised foreign exchange gains and losses 8.6 (188,442) 17,912
FV Through P&L 142,950 -
Finance income 8.6 (95,371) (113,178)
Finance Expense 8.6 135,586 118,029
Loss/(gain) on disposal of PPE 200 (78)
Impairment in trade and other receivables 16 29,914 24,656
Impairment in goodwill 1,755 -
Equity settled financial assets at fair value (7,594) (866)
ROU Asset/Lease Termination 305 1,351
Hyperinflation (16,179) 6,976
Change in Provisions 21 (569) 681
Change in Inventories (30,159) (127,643)
Change in Trade and other receivables (53,445) (106,458)
Change in Trade and other payables (166,130) 351,803
Cash generated from operating activities before income tax payment 923,811 2,644,150
Taxes paid (715,082) (374,305)
Net cash generated from operating activities 208,729 2,269,845
Cash flows from investing activities
Proceeds from sale of property, plant and equipment 10,212 6,627
Interest received on financial asset at amortised cost 95,897 111,367
Payments for acquisition of property, plant and equipment (299,762) (253,385)
Payments for acquisition of intangible assets (9,076) (10,354)
Payments for the purchase of financial assets at amortised cost (267,819) (1,599,238)
Proceeds from the sale of financial assets at amortized cost 1,603,611 417,139
Payment for purchase of global depository receipts (short-term investment) 8.8 (1,011,376) -
Proceeds from sale of global depository receipts (short-term investments) 8.8 868,426 -
Net cash generated from/(used in) investing activities 990,113 (1,327,844)
Cash flows from financing activities
Proceeds from borrowings 28 40,081 30,450
Repayment of borrowings 28 (21,721) (25,416)
Proceeds loan received from related party 27 17,025 -
Repayment loan paid to related party 27 (17,025) -
Payments of lease liabilities 28 (71,635) (50,227)
Payment of financial obligations 28 (29,206) (9,383)
Dividends paid (1,411,752) (478,748)
Interest paid 28 (119,308) (93,799)
Bank charge paid (12,909) (20,026)
Cash injection by owner of non-controlling interest 8,763 -
Net cash flows used in financing activities (1,617,687) (647,149)
Net (decrease) increase in cash and cash equivalents (418,845) 294,852
Cash and cash equivalents at the beginning of the year 891,451 600,130
Effect of exchange rate 175,906 (3,531)
Cash and cash equivalents at the end of the year 17 648,512 891,451
Non-cash investing and financing activities disclosed in other notes are:
· acquisition of right-of-use assets - note 26
· 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
2022
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) 51,641 (956,397) 150,730 1,550,976 2,582,846 211,513 2,794,359
As at 1 January 2022
Profit / (loss) for the year - - - - - - 541,110 541,110 (14,527) 526,583
Other comprehensive (expense)/ income for the year - - - - - (126,557) - (126,557) 195,638 69,081
Total comprehensive income - - - - - (126,557) 541,110 414,553 181,111 595,664
Transactions with owners in their capacity as owners
Dividends - - - - - - (1,304,805) (1,304,805) (106,947) (1,411,752)
Impact of hyperinflation - - - - - - (4,200) (4,200) (1,555) (5,755)
Movement in put option liabilities for the year - - - - 465,702 - - 465,702 - 465,702
Acquisition of non-controlling interests without change in control - - - - - - - - 8,763 8,763
Total - - - - 465,702 - (1,309,005) (843,303) (99,739) (943,042)
At 31 December 2022 1,072,500 1,027,706 (314,310) 51,641 (490,695) 24,173 783,081 2,154,096 292,885 2,446,981
As at 1 January 2021 1,072,500 1,027,706 (314,310) 49,218 (314,057) 145,617 603,317 2,269,991 156,383 2,426,374
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
* Under Egyptian Law each subsidiary must set aside at least 5% of its annual
net profit into a legal reserve until such time that this represents 50% of
each subsidiary's issued capital. This reserve is not distributable to the
owners of the Company
.
(In the notes all amounts are shown in Egyptian Pounds "EGP'000" unless
otherwise stated)
1. Corporate information
The consolidated financial statements of Integrated Diagnostics Holdings plc
and its subsidiaries (collectively, "the Group") for the year ended 31
December 2022 were authorised for issue in accordance with a resolution of the
directors on 05 April 2023. Integrated Diagnostics Holdings plc "IDH" or "the
company" is a public company incorporated in Jersey. Has been established
according to the provisions of the Companies (Jersey) law 1991 under No.
117257. The registered office address of the Company is 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
2022 2021 2022 2021
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 77.18% 76.5% 22.82% 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
39.4% indirect ownership.
for more details refer to note 4.1.
Non-Controlling interest
Non-Controlling Interest is measured at the proportionate share basis.
Financial information of subsidiaries that have material non-controlling
interests is provided below:
Proportion of equity interest held by non-controlling interests:
Country of incorporation 2022 2021
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 22.82% 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 (Hashemite Kingdom of Jordan) Alborg Laboratory Company Other individually Dynasty Group Total
EGP'000
EGP'000
EGP'000
immaterial subsidiaries
EGP'000
EGP'000
EGP'000
Summarised statement of profit or loss for 2022:
Revenue 383 611,840 1,210,716 2,348,371 78,864 4,250,174
(loss)/Profit (10,339) 57,917 266,201 470,492 (54,602) 729,669
Other comprehensive (expense)/income - 134,909 - (3,796) 248,726 379,839
Total comprehensive (expense)/income (10,339) 192,826 266,201 466,696 194,124 1,109,508
(loss)/Profit allocated to non-controlling interest (4,655) 23,167 1,884 555 (11,913) 9,038
Other comprehensive income/(expense) allocated to non-controlling interest - 53,964 - (876) 140,041 193,129
Summarised statement of financial position as at 31 December 2022:
Non-current assets 670 367,404 710,836 775,581 121,770 1,976,261
Current assets 1,909 247,636 428,668 1,212,429 14,130 1,904,772
Non-current liabilities (27) (164,478) (516,784) (351,111) (11,286) (1,043,686)
Current liabilities (15,409) (189,371) (244,970) (449,373) (33,181) (932,304)
Net (liabilities)/assets (12,857) 261,191 377,750 1,187,526 91,433 1,905,043
Net (liabilities)/assets attributable to non-controlling interest (5,788) 104,476 2,674 (993) 16,608 116,977
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
(loss)/Profit (2,627) 214,588 401,401 1,162,009 (8,795) 1,766,576
Other comprehensive (expense)/income - (56) - 10,935 (4,733) 6,146
Total comprehensive (expense)/income (2,627) 214,532 401,401 1,172,944 (13,528) 1,772,722
(loss)/Profit allocated to non-controlling interest (1,193) 86,747 2,841 (3,261) (5,237) 79,897
Other comprehensive income/(expense) 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 1,552,250
Current assets 3,975 432,149 598,084 2,017,197 24,356 3,075,761
Non-current liabilities (27) (76,599) (361,520) (303,142) 20,743 (720,545)
Current liabilities (7,148) (237,206) (266,796) (701,516) 28,313 (1,184,353)
Net (liabilities)/assets (2,518) 329,774 511,550 1,720,386 163,921 2,723,113
Net (liabilities)/assets attributable to non-controlling interest (1,143) 133,310 3,621 (4,626) 80,351 211,513
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 2022:
· Property, Plant and Equipment: Proceeds before intended use -
Amendments to IAS 16,
· Reference to the Conceptual Framework - Amendments to IFRS 3
· Onerous Contracts - Cost of Fulfilling a Contract Amendments to IAS
37, and
· Annual Improvements to IFRS Standards 2018-2020.
The amendments listed above did not have any impact on current and prior years
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
2022 reporting period and have not been early adopted by the company. These
standards, amendments or interpretations are not expected to have a material
impact on the group in the current or future reporting periods and on
foreseeable future transactions.
Going concern
These consolidated financial statements have been prepared on the going
concern basis. On 31 December 2022, the Group had (cash and cash equivalent
balance plus treasury bills / deposits minus borrowing) amounting to KEGP
699,490 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 conducted multiple
sensitivity analyses to assess the impact of inflationary pressures,
particularly on the line items that are denominated in hard currency also
during the going concern assessment for the next 16 months. We did not
consider the Biolab put option since it is improbable that the option will be
exercised refer to (note 23). They have also assessed the likelihood of any
key one-off payments arising such as dividends or those in respect of merger
and acquisition 'M&A' activity. Under all of these scenarios, there
remains significant headroom from a liquidity and covenant perspective.
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 2022. 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 12 months from the time they are awarded. The value of
points to be provided is based on the expectation of what level will be
redeemed in the future before their expiration date. This amount is netted
against revenue earned and included as a contract liability and only
recognised as revenue when the points are then redeemed or have expired.
e) Income Taxes
Tax on the profit or loss for the year comprises current and deferred tax. Tax
is recognised in the income statement except to the extent that it relates to
items recognised directly in equity, in which case it is recognised in equity.
i. Current tax
Current tax is the expected tax payable or receivable on the taxable income or
loss for the year, using tax rates enacted or substantively enacted at the
balance sheet date, and any adjustment to tax payable in respect of previous
years.
ii. Deferred tax
Deferred tax is provided using the liability method on temporary differences
between the tax bases of assets and liabilities and their carrying amounts for
financial reporting purposes at the reporting date.
Deferred tax is recognised on temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts in the consolidated
financial statements.
However, deferred tax liabilities are not recognised if they arise from the
initial recognition of goodwill; deferred income tax is not accounted for if
it arises from initial recognition of an asset or liability in a transaction
other than a business combination and differences relating to investments in
subsidiaries to the extent that they will probably not reverse in the
foreseeable future.
Deferred tax assets are recognised for all deductible temporary differences,
the carry forward of unused tax credits and any unused tax losses. Deferred
tax assets are recognised to the extent that it is probable that taxable
profit will be available against which the deductible temporary differences,
and the carry forward of unused tax credits and unused tax losses can be
utilised. Deferred tax is determined using tax rates (and laws) that have been
enacted or substantively enacted by the reporting date and are expected to
apply when the related deferred income tax asset is realized, or the deferred
income tax liability is settled.
f) Foreign currency translation
i) Functional and presentation currency
Each of the Group's entities is using the currency of the primary economic
environment in which the entity operates ('the functional currency'). The
Group's consolidated financial statements are presented in Egyptian Pounds,
being the reporting currency of the main Egyptian trading subsidiaries within
the Group and the primary economic environment in which the Group operates.
ii) Transactions and balances
Foreign currency transactions are translated into the functional currency
using the exchange rates at the dates of the transactions. Foreign exchange
gains and losses resulting from the settlement of such transactions, and from
the translation of monetary assets and liabilities denominated in foreign
currencies at year end exchange rates, are generally recognised in profit or
loss. They are deferred in equity if they relate to qualifying cash flow
hedges and qualifying net investment hedges or are attributable to part of the
net investment in a foreign operation.
Foreign exchange gains and losses that relate to borrowings are presented in
the statement of profit or loss, within finance costs. All other foreign
exchange gains and losses are presented in the statement of profit or loss on
a net basis within other gains/(losses).
Non-monetary items that are measured at fair value in a foreign currency are
translated using the exchange rates at the date when the fair value was
determined. Translation differences on assets and liabilities carried at fair
value are reported as part of the fair value gain or loss. For example,
translation differences on non-monetary assets and liabilities such as
equities held at fair value through profit or loss are recognised in profit or
loss as part of the fair value gain or loss, and translation differences on
non-monetary assets such as equities classified as at fair value through other
comprehensive income are recognised in other comprehensive income.
g) Hyperinflationary Economies
The financial statements of "SAMA Medical Laboratories Co. and AL-Mokhtabar
Sudanese Egyptian Co." report their financial statements in the currency of
a hyperinflationary economy. In accordance with IAS 29 financial reporting in
Hyperinflationary Economies, the financial statements of those subsidiaries
were restated by applying the consumer price index at closing rates in
December 2022 65,137 (2021 December, 31,423) before they were included in the
consolidated financial statements.
h) Property, plant and equipment
All property and equipment are stated at historical cost or fair value at
acquisition, less accumulated depreciation. Historical cost includes
expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset's carrying amount or recognised as
a separate asset, as appropriate, only when it is probable that future
economic benefits associated with the item will flow to the group and the cost
of the item can be measured reliably. The carrying amount of the replaced part
is derecognised. All other repairs and maintenance are charged to the
consolidated statement of income during the financial period in which they are
incurred. Land is not depreciated.
Depreciation expense is calculated using the straight-line method to allocate
the cost or to their residual value over their estimated useful lives, as
follows:
Buildings
50 years
Medical, electric and information systems equipment
4-10 years
Leasehold
improvements
4-5 years
Fixtures, fittings &
vehicles
4-16 years
The assets useful lives are reviewed, and adjusted if appropriate, at the end
of each reporting period.
An asset's carrying amount is written down immediately to its recoverable
amount if the asset's carrying amount is greater than its estimated
recoverable amount. Gains and losses on disposals are determined by comparing
the proceeds with the carrying amount and are recognised within 'Other
(losses)/gains - net' in the consolidated statement of income.
i) Intangible assets
Intangible assets acquired separately are measured on initial recognition at
cost. The cost of intangible assets acquired in a business combination is
their fair value at the date of acquisition. Following initial recognition,
intangible assets are carried at cost less any accumulated amortisation and
accumulated impairment losses.
Internally generated intangibles, excluding capitalised development costs, are
not capitalised and the related expenditure is reflected in profit or loss in
the period in which the expenditure is incurred.
The useful lives of intangible assets are assessed as either finite or
indefinite.
Intangible assets with finite lives are amortised over the useful economic
life and assessed for impairment whenever there is an indication that the
intangible asset may be impaired. The amortisation period and the amortisation
method for an intangible asset with a finite useful life are reviewed at least
at the end of each reporting period. Changes in the expected useful life or
the expected pattern of consumption of future economic benefits embodied in
the asset are considered to modify the amortisation period or method, as
appropriate, and are treated as changes in accounting estimates. The
amortisation expense on intangible assets with finite lives is recognised in
the statement of income in the expense category that is consistent with the
function of the intangible assets. The Group amortises intangible assets with
finite lives using the straight-line method over the following periods:
- IT development and software 4-5 years
Intangible assets with indefinite useful lives are not amortised, but are
tested for impairment annually, either individually or at the cash-generating
unit level. The assessment of indefinite life is reviewed annually to
determine whether the indefinite life continues to be supportable. If not, the
change in useful life from indefinite to finite is made on a prospective
basis.
Goodwill
Goodwill arises on the acquisition of subsidiaries and represents the excess
of the consideration transferred over interest in net fair value of the net
identifiable assets, liabilities and contingent liabilities of the acquiree
and the fair value of the non-controlling interest in the acquire.
Goodwill is stated at cost less any accumulated impairment losses. For the
purpose of impairment testing, goodwill acquired in a business combination is
allocated to each of the cash-generating units (CGUs), or groups of CGUs, that
is expected to benefit from the synergies of the combination. Each unit or
group of units to which the goodwill is allocated represents the lowest level
within the entity at which the goodwill is monitored for internal management
purposes. the impairment assessment is done on an annual basis.
Brand
Brand names acquired in a business combination are recognised at fair value at
the acquisition date and have an indefinite useful life.
The Group brand names are considered to have indefinite useful life as the
Egyptian brands have been established in the market for more than 40 years and
the health care industry is very stable and continues to grow.
The brands are not expected to become obsolete and can expand into different
countries and adjacent businesses, in addition, there is a sufficient ongoing
marketing efforts to support the brands and this level of marketing effort is
economically reasonable and maintainable for the foreseeable future.
Impairment of intangible assets
The Group tests annually whether goodwill and other intangibles with
indefinite lives have suffered any impairment. Impairment exists when the
carrying value of an asset or cash generating unit exceeds its recoverable
amount, which is the higher of its fair value less costs of disposal and its
value in use.
The recoverable amounts of cash generating units have been determined based on
value in use. 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 is shown in note 13 where the
assumptions for the impairment assessment are disclosed.
I) Financial instruments - initial recognition and subsequent measurement
A financial instrument is any contract that gives rise to a financial asset of
one entity and a financial liability or equity instrument of another entity.
i. Financial assets
Classification
The group reclassifies debt investments when and only when its business model
for managing those assets changes.
The group classifies its investments in debt Instruments in the following
measurement categories:
• those to be measured subsequently at fair value (either through OCI or
through income statement), and
• those to be measured at amortised cost.
The classification depends on the entity's business model for managing the
financial assets and the contractual terms of the cash flows.
For investment is equity instrument measured at fair value, gains and losses
will either be recorded in income statement or OCI.
For investments in equity instruments that are not held for trading, this will
depend on whether the group has made an irrevocable election at the time of
initial recognition to account for the equity investment at fair value through
other comprehensive income (FVOCI).
Recognition and derecognition
According to the standard purchases and sales of financial assets are
recognised on trade date, being the date on which the group commits to
purchase or sell the asset. Financial assets are derecognised when the rights
to receive cash flows from the financial assets have expired or have been
transferred and the group has transferred substantially all the risks and
rewards of ownership.
Measurement
At initial recognition, the group measures a financial asset at its fair value
plus, in the case of a financial asset not at fair value through profit or
loss (FVPL), transaction costs that are directly attributable to the
acquisition of the financial asset. Transaction costs of financial assets
carried at FVPL are expensed in profit or loss.
Financial assets with embedded derivatives are considered in their entirety
when determining whether their cash flows are solely payment of principal and
interest.
Debt instruments
Subsequent measurement of debt instruments depends on the group's business
model for managing the asset and the cash flow characteristics of the asset.
There are three measurement categories into which the group classifies its
debt instruments:
• Amortised cost: Assets that are held for collection of contractual cash
flows, where those cash flows represent solely payments of principal and
interest, are measured at amortised cost. Interest income from these financial
assets is included in finance income using the effective interest rate method.
Any gain or loss arising on derecognition is recognised directly in profit or
loss and presented in other gains/(losses) together with foreign exchange
gains and losses. Impairment losses are presented as a separate line item in
the consolidated income statement.
• FVOCI: Assets that are held for collection of contractual cash flows and
for selling the financial assets, where the assets' cash flows represent
solely payments of principal and interest, are measured at FVOCI. Movements in
the carrying amount are taken through OCI, except for the recognition of
impairment losses, interest income and foreign exchange gains and losses,
which are recognised in profit or loss. When the financial asset is
derecognised, the cumulative gain or loss previously recognised in OCI is
reclassified from equity to profit or loss and recognised in other
gains/(losses). Interest income from these financial assets is included in
finance income using the effective interest rate method. Foreign exchange
gains and losses are presented in other gains/(losses), and impairment
expenses are presented as separate line item in the consolidated income
statement.
• FVPL: Assets that do not meet the criteria for amortised cost or FVOCI are
measured at FVPL. A gain or loss on a debt investment that is subsequently
measured at FVPL is recognised in profit or loss and presented net within
other gains/(losses) in the period in which it arises. Management has assessed
the underlying nature of the investments and designated upon investment that
this should be treated as an investment held at fair value with movements
going through the income statement on the basis of the size of the investment
and the reasons for making the investment.
Equity instruments
The group subsequently measures all equity investments at fair value. Where
the group's management has elected to present fair value gains and losses on
equity investments in OCI, there is no subsequent reclassification of fair
value gains and losses to profit or loss following the derecognition of the
investment. Dividends from such investments continue to be recognised in
profit or loss as other income when the group's right to receive payments is
established.
Changes in the fair value of financial assets at FVPL are recognised in other
gains/(losses) in the statement of income as applicable. Impairment losses
(and reversal of impairment losses) on equity investments measured at FVOCI
are not reported separately from other changes in fair value.
Impairment
The group assesses on a forward-looking basis the expected credit losses
associated with its debt instruments carried at amortised cost and FVOCI. The
impairment methodology applied depends on whether there has been a significant
increase in credit risk. For trade receivables, the group applies the
simplified approach permitted by IFRS 9, which requires expected lifetime
losses to be recognised from initial recognition of the receivables.
Further disclosures relating to impairment of financial assets are also
provided in the following notes:
Ø Disclosures for significant estimates and assumptions
Note 4.2
Ø Financial assets
Note 5
Ø Trade
receivables
Note 16
The Group uses an allowance matrix to measure the ECLs of trade receivables
from individual customers, which comprise a very large number of small
balances.
Loss rates are calculated using a 'roll rate' method based on the probability
of a receivable progressing through successive stages of delinquency to
write-off. Roll rates are calculated separately for exposures in different
segments based on credit risk characteristics, age of customer relationship.
Loss rates are based on actual credit loss experience over the past three
years. These rates are multiplied by scalar factors to reflect differences
between economic conditions during the period over which the historical data
has been collected, current conditions and the Groups view of economic
conditions over the expected lives of the receivables.
ii. Financial liabilities
Initial recognition and measurement
Financial liabilities are classified as measured at amortised cost or FVTPL. A
financial liability is classified at FVTPL if it is classified as held for
trading, financial liabilities at FVTPL are measured at fair value and net
gains and losses including any interest expenses are recognised in profit or
loss.
Put options included in put option liabilities are carried at the present
value of the redemption amount in accordance with IAS 32 in regard to the
guidance on put option on an entity's own equity shares. The group has written
put options over the equity of its (Bio Lab 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 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 and considered as one
reportable segment due to having similar characteristics.
r) Leases as lessee (IFRS 16)
At the inception of a contract, the Group assesses whether a contract is, or
contains, a lease. A contract is, or contains, a lease if the contract conveys
the right to control the use of an identified asset for a period of time in
exchange for consideration.
As a lessee
At commencement or on modification of a contract that contains a lease
component, along with one or more other lease or non-lease components, the
Group accounts for each lease component separately from the non-lease
components. However, for the non-leases element of the underlying asset, the
Group has elected not to separate non-lease components and account for the
lease and non-lease components as a single lease component. The Group
allocates the consideration in the contract to each lease component on the
basis of its relative stand-alone price and the aggregate stand-alone price of
the non-lease components.
The Group recognises a right-of-use asset and a lease liability at the lease
commencement date. The right-of-use asset is initially measured at cost, which
comprises the initial amount of the lease liability adjusted for any lease
payments made at or before the commencement date, plus any initial direct
costs incurred and an estimate of costs to dismantle and remove the underlying
asset or to restore the underlying asset or the site on which it is located,
less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line
method from the commencement date to the end of the lease term, unless the
lease transfers ownership of the underlying asset to the Group by the end of
the lease term or the cost of the right-of-use asset reflects that the Group
will exercise a purchase option. In that case the right-of-use asset will be
depreciated over the useful life of the underlying asset, which is determined
on the same basis as those of property and equipment. In addition, the
right-of-use asset is periodically reduced by impairment losses, if any, and
adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease
payments that are not paid at the commencement date, discounted using the
incremental borrowing rate for the IFRS 16 calculations. This is set based
upon the interest rate attached to the groups financing and adjusted, where
appropriate, for specific factors such as asset or company risk premiums.
Lease payments included in the measurement of the lease liability comprise the
following:
- fixed payments, including in-substance fixed payments;
- variable lease payments that depend on an index or a rate, initially
measured using the index or rate as at the commencement date.
- amounts expected to be payable under a residual value guarantee; 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. Key judgments and critical accounting estimates
4.1. Judgement
Useful economic lives of Brands
Management have assessed that the brands within the group which have a value
have an indefinite life. This is based on their strong history and existence
in the market over a large number of years, in addition to the fact that these
brands continue to grow and become more profitable. As the brands have been
assigned an indefinite life then they are not amortised and assessed for
impairment on an annual basis.
Control over subsidiaries
The group makes acquisitions that often see a non-controlling interest
retained by the seller. The assessment of if the group has control of these
acquisitions in order to consolidate is a critical judgement in these
financial statements.
The group consolidate the subsidiaries assessed for the following reasons:
1) The group 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
39.4% 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 to be
utilised within one year. A contract liability is recognised for the points
awarded at the time of the sale based on the expected level of redemption.
At 31 December 2022 the level of points accumulated by customers which had not
expired was equivalent to 160 MEGP. 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 61 MEGP out of the total potential amount that could be
redeemed is likely to be utilised by customers. If the points utilised during
the year were 10% more than estimated, this would result in an additional
charge of 6m EGP.
Impairment of financial assets
The loss allowances for financial assets are based on assumptions about risk
of default and expected loss rates. The group uses judgement in making these
assumptions and selecting the inputs to the impairment calculation, based on
the group's history and existing market conditions, as well as forward-looking
estimates at the end of each reporting period. Details of the key assumptions
and inputs used are disclosed in note 16.
5. Financial assets and financial liabilities
2022 2021
EGP'000
EGP'000
Cash and cash equivalents 648,512 891,451
Term deposits and treasury bills 167,404 1,458,724
Trade and other receivables (Note 16) 509,806 447,080
Total financial assets 1,325,722 2,797,255
2022 2021
EGP'000
EGP'000
Trade and other payables (Note 22) 628,313 749,272
Put option liability 490,695 956,397
Financial obligations 1,062,896 760,674
Loans and borrowings (Note 28) 127,420 105,694
Total other financial liabilities 2,309,324 2,572,037
Total financial instruments* (983,602) 225,218
* The financial instruments exclude prepaid expenses, deferred revenue, and
tax (current tax, payroll tax, withholding tax…etc).
The fair values of financial assets and liabilities are considered to be
equivalent to their book value.
The fair values measurements for all the financial assets and liabilities have
been categorized as Level 3, it is fair value can't be determined by using
readily observable measures and Echo-Scan put option (note 25) has been
categorized as Level 3 as the fair value of the option is based on
un-observable inputs using the best information available in the current
circumstances, including the company's own projection and taking into account
all the market assumptions that are reasonably available.
Financial instruments risk management objectives and policies
The Group's principal financial liabilities are trade and other payables, put
option liabilities, borrowings and other financial liabilities. The Group's
principal financial assets include trade and other receivables, financial
assets at amortised cost, financial asset at fair value and cash and cash
equivalents that derive directly from its operations.
The Group is exposed to market risk, credit risk and liquidity risk. The
Group's overall risk management program focuses on the unpredictability of
markets and seeks to minimize potential adverse effects on the Group's
financial performance. The Group's senior management oversees the management
of these risks. The Board of Directors reviews and agrees policies for
managing each of these risks, which are summarised below.
The board provides written principles for overall risk management, as well as
written policies covering specific areas, such as foreign exchange risk,
interest rate risk, and credit risk, use of derivative financial instruments
and non-derivative financial instruments, and investment of excess liquidity.
- Market risk
Market risk is the risk that the fair value of future cash flows of a
financial instrument will fluctuate because of changes in market prices.
Market risk comprises three types of risk: interest rate risk, currency risk
and other price risk, such as equity price risk and commodity risk. Financial
instruments affected by market risk include borrowings and deposits.
The sensitivity analysis in the following sections relate to the position as
at 31 December 2022 and 2021. The sensitivity analysis have been prepared on
the basis that the amount of net debt, the ratio of fixed to floating interest
rates of the debt and the proportion of financial instruments in foreign
currencies are all constant.
The analysis excludes the impact of movements in market variables on
provisions, and the non-financial assets and liabilities of foreign
operations. The following assumptions have been made in calculating the
sensitivity analysis:
Ø The sensitivity of the relevant consolidated income statement item is the
effect of the assumed changes in respective market risks. This is based on the
financial assets and financial liabilities held at 31 December 2022 and 31
December 2021.
- Interest rate risk
The Group is trying to minimize its interest rate exposure, especially in
Egypt region, which has seen several interest rate rises over the year.
Minimising interest rate exposure has been achieved partially by entering into
fixed-rate instruments.
Exposure to interest rate risk
The interest rate profile of the Group's interest-bearing financial
instruments as reported to the management of the group is as follows:
2022 2021
EGP'000 EGP'000
Fixed-rate instruments
Financial obligations (note 26) 1,062,896 760,674
CIB ـــ BANK Loans and borrowings (note 24) - 13,238
Variable-rate instruments
AUB ـــ BANK Loans and borrowings (note 24) 116,426 84,828
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 1,164k (2021: EGP 980K). 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.
The rapid depreciation of the Egyptian pound in 2022 resulted in an increase
in expenses denominated in foreign currencies. The total amount of these
expenses in 2022 amounted to 15M EGP.
At year end, major financial assets / (liabilities) denominated in foreign
currencies were as follows:
31-Dec-22
Assets Liabilities Net exposure
Cash and cash equivalents Other Total Put option Finance Trade Total
assets
assets
lease
payables
liability
US 13,112 - 13,112 - (299,128) (8,840) (307,968) (294,856)
JOD - - - (439,695) - - (439,695) (439,695)
31-Dec-21
Assets Liabilities Net exposure
Cash and cash equivalents Other Total Put option Finance Trade Total
assets
assets
lease
payables
liability
US 364 9,481 9,845 - (56,744) (123,618) (180,362) (170,517)
JOD - - - (921,360) - - (921,360) (921,360)
The following is the exchange rates applied:
Average rate for the year ended
31-Dec-22 31-Dec-21
US Dollars 19.67 15.64
Euros 20.59 18.46
GBP 24.02 21.51
JOD 27.71 22.03
SAR 5.24 4.17
SDG 0.04 0.06
NGN 0.05 0.04
Spot rate for the year ended
31-Dec-22 31-Dec-21
US Dollars 24.70 15.65
Euros 26.27 17.73
GBP 29.70 21.12
JOD 34.78 22.05
SAR 6.57 4.17
SDG 0.04 0.04
NGN 0.06 0.04
At 31 December 2022, if the Egyptian Pound had weakened/strengthened by 40%
against the US Dollar with all other variables held constant, total equity for
the year would have increased/decreased by EGP (118m) (2021: EGP 68m), 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 2022.
At 31 December 2022, 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 (44m) (2021: EGP
(92m)), 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 2022.
- 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, 85% with a rating of B3 and 7% is rated at
least Aa3.
Trade receivables
The Group's exposure to credit risk is influenced mainly by the individual
characteristics of each customer. However, management also considers the
factors that may influence the credit risk of its customer base, including the
default risk associated with the industry and country or region in which
customers operate. Details of concentration of revenue are included in the
operating segment note (see Note 6).
The risk management committee has established a credit policy under which each
new customer is analysed individually for creditworthiness before the Group's
standard payment and delivery terms and conditions are offered and credit
limit is set for each customer. The Group's review includes external ratings,
if available, financial statements, industry information and in some cases
bank references. Receivable limits are established for each customer and
reviewed quarterly. Any receivable balance exceeding the set limit requires
approval from the risk management committee. Outstanding customer receivables
are regularly monitored and the average general credit terms given to contract
customers are 45 - 60 days.
An impairment analysis is performed at each reporting date on an individual
basis for major clients. In addition, a large number of minor receivables are
grouped into homogenous groups and assessed for impairment collectively. The
calculation is based on actual incurred historical data and expected future
credit losses. The Group does not hold collateral as security. That maximum
exposure to credit risk is disclosed in note 16.
Cash and cash equivalents
Credit risk from balances with banks and financial institutions is managed by
the Group's treasury department in accordance with the Group's policy.
Investments of surplus funds are made only with approved counterparties and
within credit limits assigned to each counterparty. Counterparty credit limits
are reviewed by the Group's Board of Directors on an annual basis and may be
updated throughout the year subject to approval of the Group's management. The
limits are set to minimise the concentration of risks and therefore mitigate
financial loss through a counterparty's potential failure to make payments.
The maximum exposure to credit risk at the reporting date is the carrying
value of cash and cash equivalents disclosed in Note 17.
- Liquidity risk
The Group's objective is to maintain a balance between continuity of funding
and flexibility through the use of finance leases and loans.
The table below summarises the maturity profile of the Group's financial
liabilities based on contractual undiscounted cashflows:
31 December 2022 1 year or less 1 to 5 years more than 5 years Total
Financial obligations 285,962 1,030,750 227,715 1,544,427
Put option liabilities 439,695 51,000 - 490,695
Borrowings 41,681 119,673 - 161,354
Trade and other payables 628,313 - - 628,313
1,395,651 1,201,423 227,715 2,824,789
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
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 adjusted 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-22 2,894,042 20,301 611,840 78,864 3,605,047
31-Dec-21 4,108,357 16,644 1,046,107 53,604 5,224,712
Adjusted EBITDA by geographic location
For the year ended Egypt region Sudan region Jordan region Nigeria region Nonrecurring items Total
31-Dec-22 1,030,622 (196) 136,195 (17,087) 22,259 1,171,793
31-Dec-21 2,177,160 (500) 331,042 (6,998) 29,033 2,529,737
Impairment loss /(reversed of impairment) on trade receivables by geographic
location
For the year ended Egypt region Sudan region Jordan region Nigeria region Total
31-Dec-22 27,734 3 (628) 2,805 29,914
31-Dec-21 21,537 - 1,412 1,707 24,656
Net profit and loss by geographic location
For the year ended Egypt region Sudan region Jordan region Nigeria region Total
31-Dec-22 514,353 16,978 53,065 (57,813) 526,583
31-Dec-21 1,309,247 (22,533) 214,588 (8,796) 1,492,506
The operating segment profit measure reported to the CODM is adjusted EBITDA,
as follows:
2022 2021
EGP'000 EGP'000
Profit from operations 832,191 2,262,060
Property, plant and equipment and right of use depreciation 310,092 231,443
Amortization of Intangible assets 7,251 7,201
EBITDA 1,149,534 2,500,704
Nonrecurring items 22,259 29,033
Adjusted EBITDA 1,171,793 2,529,737
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-22 3,039,930 14,993 494,244 121,770 3,670,937
31-Dec-21 2,803,954 7,234 291,880 90,509 3,193,577
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.
2022 2021
EGP'000 EGP'000
Financial obligations (note 26) 1,062,896 760,674
Borrowings (note 28) 127,420 105,694
Less: Financial assets at amortised cost (note 18) (167,404) (1,458,724)
Less: Cash and cash equivalents (Note 17) (648,512) (891,451)
Net debt / (cash) 374,400 (1,483,807)
Total Equity 2,446,981 2,794,359
Net debt / (cash) to equity ratio 15.3% (53.1%)
No changes were made in the objectives, Policies, or processes for managing
capital during the years ended 31 December 2022 and 31 December 2021.
8. Expense
Included in consolidated income statement are the following:
8.1 Cost of sales
2022 2021
EGP'000 EGP'000
Raw material 703,693 962,748
Cost of specialized analysis at other laboratories 30,756 24,086
Wages and salaries 613,495 635,407
Property, plant and equipment, right of use depreciation and Amortisation 284,740 213,919
Other expenses 510,300 584,487
Total 2,142,984 2,420,647
8.2 Marketing and advertising expenses
2022 2021
EGP'000 EGP'000
Advertisement expenses 123,442 96,745
Wages and salaries 54,750 44,739
Property, plant and equipment and amortisation 739 518
Other expenses 34,220 21,161
Total 213,151 163,163
8.3 Administrative expenses
2022 2021
EGP'000 EGP'000
Wages and salaries 142,689 146,929
Property, plant and equipment and right of use depreciation 31,864 24,207
Transactions fees related to aborted Pakistan acquisition 22,259 -
Other expenses 201,721 198,878
Total 398,533 370,014
8.4 Expenses by nature
2022 2021
EGP'000 EGP'000
Raw material 703,693 962,748
Wages and Salaries 810,934 827,075
Property, plant and equipment, right of use depreciation and amortisation 317,343 238,644
Advertisement expenses 123,442 96,745
Cost of specialized analysis at other laboratories 30,756 24,086
Transportation and shipping 87,490 101,239
Cleaning expenses 74,290 60,488
Call Center 32,976 33,531
Hospital Contracts 14,357 39,051
Consulting Fees 142,012 112,398
Transactions fees related to aborted Pakistan acquisition 22,259 -
Utilities 49,453 28,307
License Expenses 30,492 19,792
Other expenses 315,171 409,720
Total 2,754,668 2,953,824
8.5 Auditors' remuneration
The group paid or accrued the following amounts to its auditor for the
financial year ended 31 December 2022 and 2021 and its associates in respect
of the audit of the financial statements and for other services provided to
the group
2022 2021
EGP'000 EGP'000
Fees payable to the Company's auditor for the audit of the Group's annual 28,919 21,759
financial statements
The audit of the Company's subsidiaries pursuant to legislation 9,443 6,998
Assurance services 197 302
38,559 29,059
8.6 Net finance income/(costs)
2022 2021
EGP'000 EGP'000
Loss on hyperinflationary net monetary position - (6,976)
Interest expense (122,677) (98,003)
Net foreign exchange loss - (17,912)
Bank Charges (12,909) (20,026)
Total finance costs (135,586) (142,917)
Interest income 95,371 113,178
Gain on hyperinflationary net monetary position 16,179 -
Net foreign exchange Gain 188,442 -
Total finance income 299,992 113,178
Net finance income / (cost) 164,406 (29,739)
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:
2022 2021
Medical Administration and market Total Medical Administration and market Total
Average number of employees 5,428 1,290 6,718 5,364 1,024 6,388
2022 2021
EGP'000
EGP'000
Medical Administration and market Total Medical Administration and market Total
Wages and salaries 566,385 185,628 752,013 600,527 183,611 784,138
Social security costs 36,053 8,925 44,978 26,735 6,003 32,738
Contributions to defined contribution plan 11,057 2,886 13,943 8,145 2,054 10,199
Total 613,495 197,439 810,934 635,407 191,668 827,075
Details of Directors' and Key Management remuneration and share incentives are
disclosed in the Remuneration Report, the Remuneration Committee Report on
note 27.
8.8 Fair value losses on financial assets at fair value through profit or
loss
During the third quarter of 2022, ALmokhtabar and Alborg companies invested in
Global Depositary Receipt (GDR) tradable in stock exchanges, where the
companies purchased 27,304 million shares, EGP 1,011.4 M from the Egyptian
Stock Exchange and sold them during the same period on the London Stock
exchange at USD 45.8 M excluding the transaction cost.
Number of shares'000 2022
EGP'000
listed equity securities Shares bought 27,304 (1,011,376)
Shares sale 27,304 868,426
(142,950)
9. Income tax
a) Amounts recognised in profit or loss.
2022 2021
EGP'000 EGP'000
Current year tax (210,477) (579,262)
WHT suffered (122,731) (68,737)
Current tax (333,208) (647,999)
DT on undistributed reserves 46,554 (106,767)
DT on reversal of temporary differences (40,410) 14,951
Total Deferred tax 6,144 (91,816)
Tax expense recognized in profit or loss (327,064) (739,815)
b) Reconciliation of effective tax rate
The company is considered to be a UK tax resident, and subject to UK taxation.
Dividend income into the company is exempt from taxation when received from a
wholly controlled subsidiary, and costs incurred by the company are considered
unlikely to be recoverable against future UK taxable profits and therefore
form part of our unrecognised deferred tax assets. Our judgement on tax
residency has been made based on where we hold board meetings, our listing on
the London Stock Exchange and interactions with investors, and where our
company secretarial function is physically based. Our external company
secretarial function manages a number of activities of our parent and its
board. Board meetings are chaired in London and are now largely taking place
physically in London with the expectation of one physical board meeting a year
in Cairo.
2022 2021
EGP'000 EGP'000
Profit before tax 853,647 2,232,321
Profit before tax multiplied by rate of corporation tax in Egypt of 22.5% 192,071 502,272
(2021: 22.5%)
Effect of tax rate in UK of 19% (2021: UK 19%) 1,871 3,445
Effect of tax rates in Jordan, Sudan, and Nigeria of 21%, 30% and 30% (3,317) (6,676)
respectively (2021: 21%, 30% and 30%)
Tax effect of:
Recognition of previously unrecognised deferred tax - (24,435)
Deferred tax not recognised 19,960 28,132
Deferred tax arising on undistributed dividend 76,177 175,504
Non-deductible expenses for tax purposes - employee profit share 16,653 39,419
Non-deductible expenses for tax purposes - other 23,649 22,154
Tax expense recognised in profit or loss 327,064 739,815
Deferred tax
Deferred tax relates to the following:
2022 2021
Assets Liabilities Assets Liabilities
EGP'000 EGP'000 EGP'000 EGP'000
Property, plant and equipment (35,804) - (28,925)
Intangible assets (109,118) - (105,358)
Undistributed reserves from group subsidiaries (176,871) - (223,425)
Tax Losses 61 25,559 -
Total deferred tax assets - (liability) 61 (321,793) 25,559 (357,708)
(321,732) (332,149)
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:
2022 Net Balance 1 January Deferred tax recognized in profit or loss Effect of translation to presentation currency WHT tax Net Balance 31 December
paid
Property, plant and equipment (28,925) (6,315) (564) - (35,804)
Intangible assets (105,358) (3,760) - - (109,118)
Undistributed dividend from group subsidiaries (223,425) (76,177) - 122,731 (176,871)
Tax losses 25,559 (30,335) 4,837 - 61
(332,149) (116,587) 4,273 122,731 (321,732)
2021 Net balance at 1 January Deferred tax recognised in profit or loss Effect of translation to presentation currency WHT tax paid Net balance 31 December
Property, plant and equipment (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)
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 2022 for the country the liabilities and assets has
arisen. The enacted tax rate in Egypt is 22.5% (2021: 22.5%), Jordan 21%
(2021: 21%), Sudan 30% (2021: 30%) and Nigeria 30% (2021: 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:
2022 2021
EGP'000 EGP'000
Al Mokhtabar Company for Medical Labs 44,640 85,546
Alborg Laboratory Company 31,035 38,545
Integrated Medical Analysis Company 83,277 75,841
Al Makhbariyoun Al Arab Group 17,919 23,493
176,871 223,425
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.
2022 2022 2021 2021
Gross Amount Tax Effect Gross Amount Tax Effect
EGP'000 EGP'000 EGP'000 EGP'000
Impairment of trade receivables (Note 16) 136,981 30,821 101,183 22,766
Impairment of other receivables (Note 16) 8,604 1,936 8,585 1,932
Provision for legal claims (Note 21) 3,519 792 4,088 920
Tax losses* 382,999 93,768 320,391 78,142
532,103 127,317 434,247 103,760
Unrecognized deferred tax asset 127,317 103,760
There is no expiry date for the Unrecognized deferred tax assets.
* The company has carried forward tax losses on which no deferred tax asset is
recognised as follows:
2022 2022 2021 2021
Gross Amount Tax Effect Gross Amount Tax Effect
Company Country EGP'000 EGP'000 EGP'000 EGP'000
Integrated Diagnostics Holdings plc Jersey 325,155 81,289 271,689 67,922
Dynasty Group Holdings Limited England and Wales 11,359 2,158 13,446 2,555
Eagle Eye-Echo Scan Limited Mauritius 1,839 276 3,556 533
WAYAK Pharma Egypt 20,564 4,627 16,269 3,660
Medical Genetic Center Egypt 15,156 3,410 6,421 1,445
Golden care Egypt 8,926 2,008 9,010 2,027
382,999 93,768 320,391 78,142
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:
2022 2021
Profit attributable to ordinary equity holders of the parent for basic 541,110 1,412,609
earnings EGP'000
Weighted average number of ordinary shares for basic and dilutive EPS'000 600,000 600,000
Basic and dilutive earnings per share EGP'000 0.90 2.35
Earnings per diluted share are calculated by adjusting the weighted average
number of shares by the effects resulting from all the ordinary potential
shares that causes this dilution.
The Company has no potentially dilutive shares as of the 31 December 2022 and
31 December 2021, 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 2021 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
Additions* 38,275 179,954 114,235 25,287 17,258 3,853 378,862
Hyper inflation - 6,628 - - - - 6,628
Disposals - (6,877) (523) (8,617) - - (16,017)
Exchange differences 7,803 107,534 53,675 20,559 246 - 189,817
Transfers - - 4,852 - (4,852) - -
At 31 December 2022 426,961 1,111,867 507,442 133,195 28,589 10,614 2,218,668
Depreciation and impairment
At 1 January 2021 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 differences (31) (4,987) (935) (1,074) - - (7,027)
At 31 December 2021 53,490 333,806 177,230 33,044 - - 597,570
Depreciation charge for the year 6,765 131,569 58,404 10,255 - - 206,993
Disposals - (3,414) (457) (1,734) - - (5,605)
Exchange differences 1,323 51,908 26,528 13,689 - - 93,448
At 31 December 2022 61,578 513,869 261,705 55,254 - - 892,406
Net book value
At 31-12-2022 365,383 597,998 245,737 77,941 28,589 10,614 1,326,262
At 31-12-2021 327,393 490,822 157,973 62,922 15,937 6,761 1,061,808
*During year 2022 the additions include EGP 171 m related to Alborg Scan
branches, including 79m related to new equipment and other 33m related to a
new branch at Nasr city. This amount does not Include any capitalised
borrowing costs and is ready to use.
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 2021 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
Additions - - 9,076 9,076
Effect of movements in exchange rates 30,858 11,642 6,366 48,866
At 31 December 2022 1,291,823 395,551 92,836 1,780,210
Amortisation and impairment
At 1 January 2021 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
Impairment* 1,755 - - 1,755
Amortisation - - 7,251 7,251
Effect of movements in exchange rates 66 9 4,092 4,167
At 31 December 2022 6,373 381 69,820 76,574
Net book value
At 31 December 2022 1,285,450 395,170 23,016 1,703,636
At 31 December 2021 1,256,413 383,537 18,917 1,658,867
* The Group sees there is an impairment indicator on the goodwill related to
Medical Genetics Center company due to the negative free cash flow and EBITDA
of the company.
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:
2022 2021
EGP'000 EGP'000
Medical Genetics Center
Goodwill - 1,755
- 1,755
Al Makhbariyoun Al Arab Group ("Biolab")
Goodwill 72,783 46,145
Brand name 31,785 20,152
104,568 66,297
Alborg Laboratory Company ("Al-Borg")
Goodwill 497,275 497,275
Brand name 142,066 142,066
639,341 639,341
Al Mokhtabar Company for Medical Labs ("Al-Mokhtabar")
Goodwill 699,102 699,102
Brand name 221,319 221,319
920,421 920,421
Echo-Scan
Goodwill 16,290 12,136
16,290 12,136
Balance at 31 December 1,680,620 1,639,950
The Group performed its annual impairment test in October 2022. 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 2022
Bio Lab Al-Mokhtabar Al-Borg Echo-Scan
Average annual patient growth rate from 2023 -2029 5% 8% 8% 21%
Average annual price per test growth rate from 2023 -2029 0% 6% 7% 5%
Annual revenue growth rate from 2023 -2029 3% 13% 13% 33%
Average gross margin from 2023 -2029 46% 51% 45% 81%
Terminal value growth rate from 1 January 2029 3% 5% 5% 4%
Discount rate 19% 25% 25% 28%
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%
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 2022, 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 2024- 2029
have been based on detailed forecasts prepared by management for each CGU and
a terminal value thereafter. Management have used experience and historical
trends achieved to determine the key growth rate and margin assumptions set
out above. The terminal value growth rate applied is not considered to exceed
the average growth rate for the industry and geographic locations of the CGUs.
The Group performed a distinct sensitivity analysis for the December 31, 2022
balances related to the Goodwill recorded for Echo-Scan due to the challenges
faced by the business given the Nigerian market situation. The analysis is
demonstrated as follows:
Year 2022
Scenario Enterprise Value EGP'000 CGU carrying Value Headroom EGP'000
EGP'000
Pathology number of patients growth was decreased starting FY25, with an 145,480 35,253 110,227
average of -4% from FY25-29
133,774 35,253 98,521
The total number of patients growth was decreased starting FY25, with an
average of -4% from FY25-29 97,341 35,253 62,088
Senstising Revenues by -20% across all years
As a sensitivity analysis, Management considered a change in the discount
rates of 2% increase to reflect additional risk that could reasonably be
foreseen in the marketplaces in which the Group operates. This did not result
in an impairment under any of the CGUs.
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
EGP'000
Almokhtabar 3,757,764 1,421,626 2,336,138
Alborg 2,459,724 1,458,547 1,001,177
Bio Lab 513,395 295,185 218,210
Echo Scan 159,299 35,253 124,046
14. Financial asset at fair value through profit and loss
2022 2021
EGP'000 EGP'000
Equity investment* 18,064 10,470
Balance at 31 December 18,064 10,470
* 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, 2022, 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
2022 2021
EGP'000 EGP'000
Chemicals and operating supplies 265,459 222,612
265,459 222,612
During 2022, EGP 703,693K (2021: EGP 962,748k) 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 127 days at 31 Dec 2022.
There has been no impairment of inventory during 2022 (2021: EGP nil).
16. Trade and other receivables
2022 2021
EGP'000 EGP'000
Trade receivables - net 395,220 371,051
Prepayments 34,081 22,647
Due from related parties note (27) 5,930 5,237
Other receivables 106,363 67,974
Accrued revenue 2,293 2,818
543,887 469,727
As at 31 December 2022, the expected credit loss related to trade and other
receivables was EGP 145,586K (2021: EGP 109,768k). Below show the movements in
the provision for impairment of trade and other receivables:
2022 2021
EGP'000 EGP'000
At 1 January 109,768 86,237
Charge for the year 29,914 24,656
Utilised - -
Unused amounts reversed - (32)
Exchange differences 5,904 (1,093)
At 31 December 145,586 109,768
The Group allocates each exposure to a credit risk grade based on data that is
determined to be predictive of the risk of loss (historical customer's
collection, Customers' contracts conditions) and applying experienced credit
judgement. Credit risk grades are defined using qualitative and quantitative
factors that are indicative of the risk of default.
Expected credit loss assessment is based on the following:
1. The customer list was divided into 9 sectors,
2. Each sector was divided according to customers aging,
3. Each sector was studied according to the historical events of each
sector. According to the study conducted, the expected default rate was
derived from each of the aforementioned period,
4. General economic conditions.
The results of the quarterly assessment will increase/decrease the percentage
allocated to each period. Balances overdue by at least one year are fully
provided for. On a quarterly basis, IDH revises its forward-looking estimates
and the general economic conditions to assess the expected credit loss.
Impairment of trade and notes receivables
The requirement for impairment of trade receivables is made through monitoring
the debts aging and reviewing customer's credit position and their ability to
make payment as they fall due. An impairment is recorded against receivables
for the irrecoverable amount estimated by management. At the year end, the
provision for impairment of trade receivables was EGP 136,981K (31 December
2021: EGP 101,183K)
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 5,241K. This analysis assumes that all other variables remain
constant.
The following table provides information about the exposure to expected credit
loss (ECL) for trade receivables from individual customers for the nine
segments at:
Weighted average Gross carrying Loss
loss rate
amount
allowance
31-Dec-22 EGP'000 EGP'000 EGP'000
Current (not past due) 1.11% 174,249 (1,927)
1-30 days past due 4.06% 85,072 (3,451)
31-60 days past due 4.55% 65,470 (2,982)
61-90 days past due 13.61% 32,563 (4,433)
91-120 days past due 18.12% 25,868 (4,688)
121-150 days past due 27.81% 19,275 (5,360)
More than 150 days past due 88.00% 129,704 (114,140)
Gross carrying Loss
amount
allowance
Weighted average
loss rate
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 days past due 87.89% 103,300 (90,748)
As at 31 December, the ageing analysis of trade receivables is as follows:
Total < 30 days 30-60 days 61-90 days > 90 days
2022 395,220 253,943 62,488 28,130 50,659
2021 371,051 235,824 70,594 29,200 35,433
17. Cash and cash equivalents
2022 2021
Cash at banks and on hand 399,957 261,430
Treasury bills (less than 3 months) 185,513 150,431
Term deposits (less than 3 months) 63,042 479,590
648,512 891,451
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 8.17% (2021: 7.75%) and Treasury bills 13.30% (2021: 12.44%) per
annum.
18. Financial assets at amortised cost
2022 2021
EGP'000 EGP'000
Term deposits (more than 3 months) 60,200 148,136
Treasury bills (more than 3 months) 107,204 1,310,588
167,404 1,458,724
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 12.92% (2021:
12.44%) and deposits is 5.34% (2021: 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.
31-Dec-22 31-Dec-21
In issue at beginning of the year 600,000,000 600,000,000
In issue at the end of the year 600,000,000 600,000,000
The table below shows the number of shares held by Hena Holdings Limited and
Actis IDH BV as well as how many shares are then held which are floating and
not held by companies that do not have individuals on the board of the Group.
Ordinary shares Ordinary shares
Ordinary share capital Name Number of shares % of contribution Par value
USD
Hena Holdings Limited 160,250,305 26.71% 40,062,576
Actis IDH B V 126,000,000 21% 31,500,000
Free floating 313,749,695 52.29% 78,437,424
600,000,000 100% 150,000,000
Ordinary share capital Name
Number of shares
% of contribution
Par value
USD
Hena Holdings Limited
160,250,305
26.71%
40,062,576
Actis IDH B V
126,000,000
21%
31,500,000
Free floating
313,749,695
52.29%
78,437,424
600,000,000
100%
150,000,000
Capital reserve
The capital reserve was created when the Group's previous parent company,
Integrated Diagnostics Holdings LLC - IDH (Caymans) arranged its own
acquisition by Integrated Diagnostics Holdings PLC, a new legal parent. The
balances arising represent the difference between the value of the equity
structure of the previous and new parent companies.
Legal reserves
Legal reserve was formed based on the legal requirements of the Egyptian law
governing the Egyptian subsidiaries. According to the Egyptian subsidiaries'
article of association 5% (at least) of the annual net profit is set aside to
from a legal reserve. The transfer to legal reserve ceases once this reserve
reaches 50% of the entity's issued capital. If the reserve falls below the
defined level, then the entity is required to resume forming it by setting
aside 5% of the annual net profits until it reaches 50% of the issued share
capital.
Put option reserve
Through acquisitions made within the Group, put option arrangements have been
entered into to purchase the remaining equity interests in subsidiaries from
the vendors at a subsequent date. At acquisition date an initial put option
liability is recognised and a corresponding entry recognised within the put
option reserve. After initial recognition the accounting policy for put
options is to recognise all changes in the carrying value of the liability
within put option reserve. When the put option is exercised by the vendors the
amount recognised within the reserve will be reversed.
Translation reserve
The foreign currency translation reserve is used to record exchange
differences arising from the translation of the financial statements of
foreign subsidiaries.
20. Distributions made and proposed
2022 2021
EGP'000
EGP'000
Cash dividends on ordinary shares declared and paid:
US$ 0.116 per qualifying ordinary share (2021: US$ 0.0485) 1,304,805 455,182
1,304,805 455,182
After the balance sheet date, the following dividends were proposed by the - 1,300,000
directors (the dividends have not been provided for):
Nil per share (2021: EGP 2.17) per share - 1,300,000
21. Provisions
Provision for legal claims
EGP'000
At 1 January 2022 4,088
Provision made during the year 3,950
Provision used during the year (3,997)
Provision reversed during the year (522)
At 31 December 2022 3,519
Current -
Non- Current 3,519
Provision for legal claims
EGP'000
At 1 January 2021 3,217
Provision made during the year 2,146
Provision used during the year (993)
Provision reversed during the year (282)
At 31 December 2021 4,088
Current -
Non- Current 4,088
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 2022.
22. Trade and other payables
2022 2021
EGP'000 EGP'000
Trade payables 269,782 311,321
Accrued expenses 241,060 325,677
Due to related parties note (27) 25,058 13,234
Other payables 98,204 99,040
Deferred revenue 60,948 24,603
Accrued finance cost 6,043 3,479
701,095 777,354
23. Current put option liability
2022 2021
EGP'000 EGP'000
Put option - Biolab Jordan 439,695 921,360
439,695 921,360
The accounting policy for put options after initial recognition is to
recognise all changes in the carrying value of the put liability within
equity.
Through the historical acquisitions of 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 2022. It is important to note that the put
option liability is treated as current as it could be exercised at any time by
the NCI. However, based on discussions and ongoing business relationship,
there is no expectation that this will happen in next 21 months. The option
has no expiry date.
24. Borrowings
The terms and conditions of outstanding loans are as follows:
Currency Nominal Maturity 31 Dec 22 31 Dec 21
interest rate
A) CIB ـــ BANK EGP Secured rate 9.5% 5 April 2022 - 13,238
B) AUB ـــ BANK EGP CBE corridor rate*+1% 26 January 2027 116,426 84,828
- 116,426 98,066
Amount held as:
Current liability 22,675 21,721
Non- current liability 93,751 76,345
116,426 98,066
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, It is also important to note that
the Company's facility with the Commercial International Bank (CIB) was fully
repaid as of April 2022.
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 2022 only EGP 125 M had been drawn down from the
total facility available with 9m had been repaid. Loan withdrawal availability
period was extended till July 2023 and the loan will be fully repaid by
January 2027.
The loan contains the following financial covenants which if breached will
mean the loan is repayable on demand:
1. The financial leverage shall not exceed 0.7 throughout the period of
the loan
"Financial leverage": total bank debt divided by net
equity
2. The debt service ratios (DSR) shall not be less than 1.35 starting
2020
"Debt service ratio": cash operating profit after tax plus depreciation for
the financial year less annual maintenance on machinery and equipment adding
cash balance (cash and cash equivalents) divided by total financial payments.
"Cash operating profit": Operating profit after tax, interest expense,
depreciation and amortization, is calculated as follows: Net income after tax
and unusual items adding Interest expense, Depreciation, Amortisation and
provisions excluding tax related provisions less interest income and
Investment income and gains from extraordinary items.
"Financial payments": current portion of long-term debt including interest
expense and fees and dividends distributions.
3. The current ratios shall not be less than 1.
"Current ratios": Current assets divided current liabilities.
*As at 31 December 2022 corridor rate 17.25% (2021: 9.25%)
AL- Borg company didn't breach any covenants for MTL agreements.
During 2021 the group signed two agreements of debt facilities. The debt
package includes the US$ 45.0 million facilities secured an 8-year period
starting from International Finance Corporation (IFC), and an additional US$
15.0 million IFC syndicated facility from Mashreq Bank in Dec 2022 debt has
not been withdrawn by IDH. The company incurred 12.5 M EGP for the year ended
31 December 2022, and 20.3M EGP for the year ended 31 December 2021. as
commitment Fees and supervisory fees related to this agreement.
25. Non-current put option liability
2022 2021
EGP'000 EGP'000
Put option liability* 51,000 35,037
51,000 35,037
*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 51 million was calculated as the valuation as at 31 December 2022
(2021; EGP 35m). In line with applicable accounting standards with IAS 32 the
entity has recognised a liability for the present value of the exercise price
of the option price. 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 36% from 2023 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
2022 2021
EGP'000 EGP'000
Balance at 1 January 462,432 354,688
Addition for the year 214,846 198,402
Depreciation charge for the year (103,099) (79,617)
Terminated Contracts (13,564) (7,643)
Exchange differences 62,360 (3,398)
Balance at 31 December 622,975 462,432
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:
2022 2021
EGP'000 EGP'000
*Financial liability- laboratory equipment 335,470 228,870
*Lease liabilities building 727,426 531,804
1,062,896 760,674
*The financial obligation liabilities for the laboratory equipment and
building are payable as follows:
Minimum payments Interest Principal
At 31 December 2022 2022 2022 2022
EGP'000 EGP'000 EGP'000
Less than one year 285,962 137,257 148,705
Between one and five years 1,030,750 314,656 716,094
More than 5 years 227,715 29,618 198,097
1,544,427 481,531 1,062,896
Interest Principal
Minimum payments
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
c) Amounts other financial obligations recognised in consolidated income
statement
2022 2021
EGP'000 EGP'000
Interest on lease liabilities 73,393 68,352
Expenses related to short-term lease 87,962 18,875
27. Related party transactions disclosures
The significant transactions with related parties, their nature volumes and
balance during the period 31 December 2022 and 2021 are as follows:
2022
Related Party Nature of transaction Nature of relationship Transaction amount of the year Amount due from / (to)
EGP'000 EGP'000
ALborg Scan (S.A.E)* Expenses paid on behalf Affiliate** - 351
International Fertility (IVF)** Expenses paid on behalf Affiliate*** 4 1,771
H.C Security Provide service Entity owned by Company's board member 220 (99)
Life Health Care Provided service Entity owned by Company's CEO 424 2,518
Dr. Amid Abd Elnour Put option liability Bio. Lab C.E.O and shareholder 481,665 (439,695)
Current account Bio. Lab C.E.O and shareholder (20,008) (20,008)
International Finance corporation (IFC) Put option liability Echo-Scan shareholder (15,963) (51,000)
International Finance corporation (IFC) Current account Echo-Scan shareholder 12,292 (623)
Integrated Treatment for Kidney Diseases (S.A.E) Rental income Entity owned by Company's CEO 116 1,290
Medical Test analysis 381
Dr. Hend El Sherbini*** Loan CEO** 17,025 -
arrangement
HENA HOLDINGS LTD shareholders' dividends deferral agreement shareholder (2,373) (2,373)
ACTIS IDH LIMITED shareholders' dividends deferral agreement shareholder (1,955) (1,955)
(509,823)
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)
* ALborg Scan is a company whose shareholders include Dr. Moamena Kamel
(founder of IDH subsidiary Al-Mokhtabar Labs).
** International Fertility (IVF) is a company whose shareholders include Dr.
Moamena Kamel (founder of IDH subsidiary Al-Mokhtabar Labs).
*** During the year 2022, Dr. Hend (C.E.O) granted a loan to IDH Cayman
amounting to USD 750K. and the loan was settled by Al Mokhtabar on behalf of
IDH Cayman for EGP 17m at the prevailing exchange rate of US$/EGP 22.70. The
loan was not interest bearing.
Chief Executive Officer Dr. Hend El-Sherbini and her mother, Dr. Moamena Kamel
jointly hold the 26.7% of shares held by Hena Holdings Limited, Hena Holdings
Limited is a related party and received dividends of USD 17,745,953 in year
2022 and USD 7,419,644 received in year 2021.
During the year payments relating to lease obligations of Biolab were made to
entities considered to be related parties due to the interest in them held by
Dr Amid Abd Elnour. Payments made during 2022 were JOD 241,038 (EGP 6,679,163)
and during 2021 were JOD 665,461 (EGP 14,660,106).
Terms and conditions of transactions with related parties
Outstanding balances at the year-end are unsecured and interest free and
settlement occurs in cash. There have been no guarantees provided or received
for any related party receivables or payables. For the year ended 31 December
2022, the Group has not recorded any impairment of receivables relating to
amounts owed by related parties (2021: 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 2022 EGP 8,934 K
(2021: EGP 9,578K) was paid to the foundation by the IDH Group in relation to
profits earned for companies Al Borg and Al Mokhtabar in the prior year.
Compensation of key management personnel of the Group
Key management people can be defined as the people who have the authority and
responsibility for planning, directing, and controlling some of the activities
of the Company, directly or indirectly.
The amounts disclosed in the table are the amounts recognised as an expense
during the reporting period related to key management personnel.
2022 2021
EGP'000 EGP'000
Short-term employee benefits 48,078 55,082
Total compensation paid to key management personnel 48,078 55,082
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 2022 105,694 760,674
Proceeds from loans and borrowings 40,081 -
Repayment of borrowings (21,721) -
Payment of liabilities - (100,841)
Interest paid (24,513) (94,795)
Exchange differences - 122,376
Total changes from financing cash flows (6,153) (73,260)
New agreements signed in the period - 293,946
Terminated contracts during the year - (13,259)
Interest expense 27,879 94,795
Total liability-related other changes 27,879 375,482
Balance at 31 December 2022 127,420 1,062,896
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 - 367,534
Terminated contracts during the year - (6,292)
Interest expense 29,651 68,353
Total Liability - related other changes 29,651 429,595
Balance as at 31 December 2021 105,694 760,674
29. Current tax liabilities
2022 2021
EGP'000 EGP'000
Debit withholding Tax (Deduct by customers from sales invoices) (26,166) (34,166)
Income Tax 162,773 521,929
Credit withholding Tax (Deduct from vendors invoices) 7,719 17,922
Other 8,529 7,319
152,855 513,004
30. Post Balance Sheet Events
· Subsequent to the year end-the Company completed the incorporation of
medical health development a limited liability company located in the kingdom
of Saudi Arabia with a total stake of 51% directly or indirectly. The new
company will be operated in the same field as the group proclitic health care
diagnostics service.
· IDH management has decided to irrevocably terminate the IFC loan
agreement as the intended purpose of the loan, which was to finance an
acquisition in Pakistan, was not realized.
· The Group has effectively reduced its exposure to foreign currency
risk by coming to an agreement with General Electric (GE) for the early
repayment of its contractual obligation of USD 5.7 million. As of March 28,
2023, the remaining obligation balance stood at USD 5.0 million, with USD 0.7
million having been repaid since the contract was initiated in 2020. The Group
and GE have agreed to settle this balance early for USD 3.55 million, payable
in EGP, equivalent to EGP 110 million.
To finance the settlement, The Group will utilize a bridge loan facility, with
half of the amount being funded internally and the other half provided by a
loan from Ahly United Bank - Egypt. The management anticipates fully repaying
the loan before the end of the second quarter of 2023.
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, Al Mokhtabar Company for Medical Labs and Integrated medical analysis
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 , Al Mokhtabar
Company for Medical Labs and Integrated medical analysis 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, Al Mokhtabar Company for Medical Labs and Integrated
medical analysis, an to up to 46m EGP could become payable, however this is
not considered probable.
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