AnnuAl RepoRt
2015
eGYpt’s leAdinG pRovideR of
diAGnostic seRvices
Inside this report
Strategic Report
IDH at a Glance
A Note from our CEO
History & Milestones
Egypt — Our Primary Market
Hub, Spoke & Spike Business Model
Internationally Accredited Test Portfolio
Our Customers
IDH’s Competitive Strengths
Forward Looking Strategy
Principal Risks, Uncertainties and their Mitigation
Financial Review
Corporate Responsibility
Corporate Governance
Board of Directors
Chairman’s Report
Audit Committee Report
Remuneration Committee Report
Directors’ Report
Financial Statements
Independent Auditor’s Report
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4
8
12
14
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18
20
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24
26
30
34
38
40
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50
56
60
66
68
stRAteGic
RepoRt
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IDH AnnuAl RepoRt 2015
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IDH AnnuAl RepoRt 2015
3
idH At
A GlAnce
Integrated Diagnostic Holding (IDH, or the Group) is the largest, fully
integrated private sector diagnostics service provider in Egypt with a
private chain market share of more than 50%* by revenue. The Group
also controls subsidiaries in Jordan and Sudan.
IDH is the largest fully integrated private sector provider of
diagnostics services in Egypt, backed by an internationally
accredited diagnostics service portfolio of over 1,000 di-
agnostic tests, a footprint spanning 314 branch labs as of
December 2015, and a trusted reputation built on more than
35 years of experience in the medical diagnostics industry.
The Group employs a Hub, Spoke and Spike business model
that is geared towards operational efficiency, allowing IDH to
build a scalable platform and positioning the Group to cap-
ture future growth opportunities in fragmented markets.
HIGHlIGHtS oF 2015
RevenueS
eBItDA
noRmAlISeD eBItDA
net pRoFIt
up 18% on 2014 to EGP
1,014.8 million amid im-
provements in all key op-
erational metrics.
of EGP 303.7 million,
down 17% from 2014,
largely as a result of costs
associated with IDH’s list-
ing on the London Stock
Exchange (LSE).
of EGP 434.8 million, up
16% from a normalised
2014 figure of EGP 374.4
million.+
of EGP 155.0 million,
up 9.4% on 2014.
noRmAlISeD
net pRoFIt
ReCommenDeD
FInAl DIvIDenD
eARnInGS
peR SHARe
for the year of EGP 286.1
million, up 18.5% on 2014.
of US$0.06 (six U.S. cents)
per share, equivalent to
US$ 9 million in total.
of EGP 0.97, up from EGP
0.89 in 2014
meGA lAB
the new automated central
lab, began operations in
2Q2015 and is fully func-
tional, serving as a core
element of the growth
strategy going forward.
* Most recent data available according to Frost & Sullivan Analysis conducted in 2013.
+
The adjustments to 2015 EBITDA are IPO costs of EGP 125.1 million and the write-off of costs of EGP 6.0 million relating to plans to set
up operations in Qatar which are now not being pursued, the closure of Molecular Diagnostics Centre in Cairo, and surplus stationery
included within inventory. 2014 figure adjusted for one-time IPO expenses of EGP 8.4 million. A detailed breakdown of non-recurring
expenses is provided in the Financial Review section on pages 30-33 of this report.
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IDH AnnuAl RepoRt 2015
STRATEGIC REPORT
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finAnciAl stAtements
More than 35-year
track record at the subsid-
iary level
SIX
key brands with strong
awareness in underserved
markets
+1,000
internationally accredited
diagnostic tests offered
314
operational branch labs as
at December 2015
23.8 million
tests completed across the
Group in 2015
5.8 million
patients served across the
Group in 2015
Successful IPO
listed on the London Stock
Exchange on 6 May 2015
EGP 1,014.8 mn
in revenue in 2015, up 18%
on 2014
EGP 154.9 mn
in net income in 2015, up
9.4% on 2014
ouR BRAnDS
IDH’s core brands include Al Borg
and Al Mokhtabar in Egypt, as well
as Biolab in Jordan and Ultralab and
Al Mokhtabar Sudan in Sudan. We
also operate the Medical Genetics
Centre brand in Egypt.
Egypt is the Group’s principal mar-
ket, where we operate primarily
through our Al Borg and Al Mokh-
tabar businesses, each of which is
a well-known and market-leading
brand with a loyal following. Togeth-
er, our Egyptian brands accounted
for 90% of IDH’s revenue in 2015.
The Group’s other businesses repre-
sented 10% of IDH’s revenue in the
year ending 31 December 2015.
ouR SeRvICeS
Through our Al Borg, Al Mokhtabar, Biolab, Ultralab and Al Mokhtabar Sudan brands, the Group offers more than 1,000
diagnostic tests, ranging from basic tests (such as glucose testing for diabetes) to molecular tests for hepatitis and
highly specialized DNA tests.
ImmunoloGy
RADIoloGy
HemAtoloGy
enDoCRInoloGy
ClInICAl CHemIStRy
moleCulAR BIoloGy
CytoGene tICS
HAtopAtHoloGy
mICRoBIoloGy
IDH AnnuAl RepoRt 2015
5
FInAnCIAl peRFoRmAnCe
Indicator
Operational
Number of Tests
Number of Patients
Number of Labs
Tests per Patient
Financial
Revenue
Per Patient
Per Test
Per Lab
EBITDA
Normalised EBITDA*
Net Profit
Normalised Net Profit
Earnings per share
Units
million
million
#
#
EGP million
EGP
EGP
EGP million
EGP million
EGP million
EGP million
EGP million
EGP
2014
2015
22.3
5.6
288
3.98
860.2
154.0
38.7
3.0
366.0
374.4
141.7
241.5
0.89
23.8
5.8
314
4.11
1,014.8
175.2
42.6
3.5
303.7
434.8
155.0
286.1
0.97
Revenue By GeoGRApHy 2014 AnD 2015
Revenue By type In 2014 AnD 2015
4%
7%
54%
% of total
revenue in
2014
89%
% of total
revenue in
2014
46%
Egypt
Jordan
Sudan
Walk in
Contract
7% 3%
61%
% of total
revenue in
2015
90%
% of total
revenue in
2015
39%
*
The adjustments to 2015 EBITDA are IPO costs of EGP 125.1 million and the write-off of costs of EGP 6.0 million relating to plans
to set up operations in Qatar which are now not being pursued, the closure of Medical Diagnostics Centre in Cairo, and surplus
stationery included within inventory. 2014 figure adjusted for one-time IPO expenses of EGP 8.4 million. A detailed breakdown of
non-recurring expenses is provided in the Financial Review section on page 30-33 of this report.
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IDH AnnuAl RepoRt 2015
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IDH AnnuAl RepoRt 2015
7
A note fRom
ouR ceo
Dr. Hend el Sherbini
Fellow shareholders,
It is an honour to present you our first ever Annual Report as
a publicly traded company.
Born of a merger in 2012 between Al Mokhtabar and Al Borg
Laboratories, Integrated Diagnostics Holding (IDH) is one of the
largest diagnostics groups in emerging markets. From modest
beginnings over 35 years ago, we have grown to become the larg-
est private sector and fully integrated diagnostics service pro-
vider in Egypt, with our share of the private chain market total-
ling more than 50% by revenue as per the latest data available*.
We also operate in Jordan and Sudan and are considering ad-
ditional opportunities to expand beyond our present geography.
Today, we offer more than 1,000 international standard di-
agnostic tests, and in the year ended 31 December 2015 we
performed more than 23.8 million tests for over 5.8 million
patients. That represents 7% annual growth in total tests and
4% annual growth in patients served. This is reflected in an
increase in revenue of 18% to EGP 1,014.8 million. Careful at-
tention to our cost structure saw this top line performance
carry to our bottom line despite incurring expenses related
to our listing on the London Stock Exchange and expenses
related to the ramp-up of operations at the Mega Lab. Net
profit for 2015 rose 9.4% on the previous year to close at EGP
155.0 million. Normalising for one-off expenses related to the
Group’s listing on the LSE and for write-offs relating to plans
* Most recent data available according to Frost & Sullivan Analysis
conducted in 2013.
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IDH AnnuAl RepoRt 2015
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We have begun our journey as a quoted company
with a solid legacy: A financially sound business
with good opportunities to grow, governed by a
newly formed board.
to establish operations in Qatar, normalised net profit would
have risen 18.4% to EGP 286.1 million in 2015.
2015 was a milestone year on multiple fronts. In May of 2015,
we began the next stage of our growth as we transitioned
from being a privately owned company into a public corpora-
tion. Our IPO on the London Stock Exchange was 11.2 times
oversubscribed, indicating heavy institutional investment
appetite for a leading healthcare business with an expand-
ing Middle East and North Africa (MENA) footprint. The IPO,
which offered 50% of IDH shares, was the first ever listing of
an Egyptian healthcare business on the LSE.
to expand with comparatively low capital costs and continue
to improve our operational efficiency. We are now seeking ac-
creditation from the College of American Pathologists (CAP)
for Mega Lab; the “A” labs Mega Lab replaces were previously
the only such facilities in Egypt with CAP accreditation.
Critically, the Mega Lab will support IDH’s growth by allowing
us to roll out capital efficient “C” Labs more rapidly. Effective
cost management and the simultaneous expansion of our diag-
nostic services will also drive growth going forward. This strat-
egy is already starting to bear fruit, with our throughput capac-
ity nearly doubling with the inauguration of the Mega Lab.
We have begun our journey as a quoted company with a
solid legacy: A financially sound business with good oppor-
tunities to grow, governed by a newly formed board. This
board will take the business forward and develop our gov-
ernance, reporting and other systems that we will continue
to develop in the years ahead. Our goal in doing so is to be-
come voluntarily compliant with such aspects of the 2014
U.K. Corporate Governance Code as are appropriate to the
size of our business and our state of development.
Whilst we recognize the importance of global standard tech-
nologies and laboratory procedures, continued investment in
our people is a key driver of sustainable growth. Our employ-
ees engage in ongoing professional education, and the quality
of our services is ensured by our quality assurance function.
As we expand as a Group, so do our numbers: Our headcount
grew 7% to 4,323 in 2015, and 30% of our staff are women. We
also extend bonuses, healthcare and other insurance, and
benefits to all members of our staff across the Group.
Operationally, 2015 was key for our growth with the inaugu-
ration of the Mega Lab, our new state of the art central labo-
ratory, which nearly doubles our existing capacity and offers
cost saving opportunities. Mega Lab enables us to efficiently
deploy our Hub, Spoke, and Spike business model, allowing us
GoveRnAnCe
Whilst our Chairman, Lord St John of Bletso, touches on this in
some detail in his Chairman’s Report in this document, I would
like to stress that management is very supportive of the Board’s
view that IDH should aim to voluntarily comply with elements
IDH AnnuAl RepoRt 2015
9
of the 2014 U.K. Corporate Governance Code (“the Code”). We
have begun implementing a framework that is leading us to this
objective. I further note that our Directors bring IDH a wealth of
experience in healthcare, investments and MENA markets. Our
Chairman’s Report on Corporate Governance, as well as reports
from our Audit Committee, Remuneration Committee and our
Directors’ Report, appear in this document beginning on page 42.
pRopoSeD DIvIDenD AnD DIvIDenD polICy
We are delighted to propose paying a final dividend of six (6)
U.S. cents per share (totalling US$ 9 million in aggregate) to
shareholders in respect of the financial year ending 31 Decem-
ber 2015. The amount of the dividend has been calculated with
reference to three important factors: historical profit for the
year, anticipated financial needs agreed in the current budget,
and the availability of U.S. dollars for payment depending on
market conditions in IDH’s markets from time to time. Having
assessed what the IDH Board of Directors considers to be ex-
cess cash, we will look to declare the majority of that surplus.
Our dividend policy is driven by the strong cash generative na-
ture of our business and its asset-light strategy. We believe that
the fundamentals of our business will enable us to have a con-
sistent and growing dividend strategy in the future. As this is
our first year as a quoted company, we intend to declare a final
dividend only and not to declare an interim dividend. We will,
however, review this policy in the future.
outlook
Going forward, our goal is to enhance our market position
across our current suite of diagnostic services and geogra-
phies. In particular, we believe the excess capacity afforded
by the Mega Lab will allow us to further penetrate the cor-
porate (B2B) market in Egypt. In parallel, we see significant
opportunity to write a similar success story by penetrating
the very fragmented radiology market without impacting
return on investment. This would effectively transform IDH
into a one stop shop diagnostics provider.
Securing hospital business is another key target for 2016.
Hospitals carry out some 40 million tests per year and we see
opportunities in both outsourcing contracts for tests to be
performed at the Mega Lab as well as opportunities to win
management contracts and concessions. We also expect our
businesses in our non-Egyptian markets to continue to grow
(albeit at lower rates than in Egypt) and we are looking at
other expansion opportunities in the Middle East and Africa.
Innovation and efficiency lie at the heart of our continued
business success. By investing in the training of our people,
continuously updating technology in our labs, expanding into
underdeveloped markets, and maintaining our diligent cost
management culture, we will grow our business and continue to
provide high quality, cost efficient medical laboratory services.
We are honoured to have you on this journey with us.
Dr. Hend el-Sherbini
Chief Executive Officer
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IDH AnnuAl RepoRt 2015
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Going forward, our goal
is to enhance our market
position across our current
suite of diagnostic services
and geographies.
IDH AnnuAl RepoRt 2015 11
HistoRY &
milestones
IDH’s development story dates back the establishment of
Dr. Moamena Kamel Lab (MK Lab) in Egypt in 1979, and
later Al Borg Labs in 1990. Over the years the two competi-
tors built well-known and market-leading diagnostic ser-
vices brands in Egypt, and established a strong and loyal
patient following. In 2008 IDH Caymans was created when
the UAE based private equity firm Abraaj Capital acquired
more than 75% of Al Borg. Over the next several years the
IDH made a number of acquisitions and expanded its ser-
vice offerings and geographical footprint. In 2012, the IDH
acquired Al Borg’s main competitor, Al Mokhtabar, creating
Egypt’s largest diagnostic laboratory business.
eStABlISHment
oF mk lAB
• dr. moamena
Kamel, professor
of immunology at
cairo university,
founded the mK
lab, which merged
with Al mokhtabar
in 2004.
IDH eStABlISHeD
By ABRAAj
• Abraaj acquired
76.8% of Al Borg
to establish idH
caymans,
• Branches (a): 127
expAnSIon
oF pRoDuCt
oFFeRInG
• Acquisition of 55%
stake in medical Ge-
netics centre
• increase of stake in Al
Borg to 80% post its
delisting
• Branches (a): 195
1979
1991
2008
2009
2010
2011
Al BoRG IS
FounDeD
• founded by a group
of four doctors,
Al Borg is the first
medical laboratory
in egypt to have an
effective hub, spoke
and spike model.
expAnSIon oF
IDH
• Acquisition of mo-
lecular diagnostics
centre
• Branches (a): 154
BuIlDInG
InFRAStRuCtuRe
AnD SCAle
• penetration in sudan
and Jordan comes with
acquisition of ultralab
and Biolab, respectively.
• Branches (a): 210
(a) Branches refer to operations of Al Borg and Al Mokhtabar. (b) Branches refer to IDH Group
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IDH AnnuAl RepoRt 2015
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The Group is in a strong competitive position given
its 35-year track record, its trusted brands with over
314 branches covering a wide geographic presence.
CReAtInG A
leADInG plAtFoRm
• Acquisition of Al mokh-
tabar (Al Borg’s biggest
competitor)
• increase of stake in Al
Borg to 99.3%
• Branches (a): 214
SuCCeSSFul
CompletIon oF Ipo
on lSe
• standard listing on the lon-
don stock exchange (lse)
• 50% offering at us$ 4.45
per share
• market capitalization of
us$ 667.5 million
• idH closes the year
having added 28 new
branches.
2012
2013
2014
MAy
2015
JUNE
2015
DECEMBER
2015
• initial operations
begin at megalab
InteGRAtIon
AnD FuRtHeR
expAnSIon
• establishes the larg-
est automated lab in
egypt
• Diversifies into adja-
cent medical services.
• Branches (b): 262
(2013); 288 (2014)
IDH AnnuAl RepoRt 2015 13
eGYpt – ouR
pRincipAl mARKet
The Egyptian diagnostic industry (EDI), where IDH generates the
majority of its revenues, can be characterized as having strong
structural growth drivers, high barriers to entry and being a highly
fragmented market.*
The EDI can be broadly divided into public and private
sector infrastructure, with the latter being further di-
vided into labs attached to private hospitals and inde-
pendent standalone labs (chains and single labs). The
most recent data* available shows that as of FY13, there
were between 12 and 15 standalone lab chains with an
estimated 550 branches, in addition to some 5,500 single
labs spread across the country. Standalone chains ac-
counted for c.40% of the EGP 2.6 billion private market
in 2013, with a projected CAGR of 18-20% until 2018.
With 90 million people, Egypt is the most populous coun-
try in the MENA region. In terms of demographics, it hosts
a large proportion of elderly people, a significant arm of
the structural growth drivers for the EDI. The population is
also marked by a rising prevalence of diseases command-
ing high test volumes, indicating an existing and expand-
ing need gap than in more developed markets.
While the EDI enjoys strong structural growth drivers, there
are high barriers to entry because:
• IDH’s now decommissioned A labs possessed ac-
creditation from the College of American Pathologists
(CAP), underscoring its high quality testing capabilities
to attract contract clients. The Group is pursuing ac-
creditation of the Mega Lab in 2016;
• IDH has a number of solid brands and a good reputa-
tion that ensures patient loyalty;
• IDH has a wide geographic presence to cater to the
fragmented nature of the regional market;
• IDH has a strong relationship with key stakeholders
such as physicians, patients and hospitals.
With 90 million people, Egypt
is the most populous country
in the MENA region... hosting a
large proportion of elderly peo-
ple, a structural growth driver
for the diagnostic industry
The Group is in a strong competitive position given its 35-
year track record, its trusted brands with over 314 branches
covering a wide geographic presence and, most important-
ly, an established business model that serves as its platform
for growth in Egypt’s formidable diagnostic playing field.
IDH derives 90% of its revenues from Egypt, where the eco-
nomic growth rate slowed in 2015 as a result of a multiplicity of
factors that, combined, contributed to a significant shortage
of foreign exchange in the market. These factors included low-
er revenues from the nation’s primary foreign exchange earn-
ers. In particular, Suez Canal tolls fell as global trade slowed
and low oil prices made it more economical for ships to sail
around the Horn of Africa, and a nascent recovery in the tour-
ism sector was extinguished after the crash in Sinai of a Rus-
sian jetliner. With demand for foreign exchange significantly
outpacing supply, Egypt suffered a divergence between official
and parallel market rates for foreign exchange (FX).
* Frost & Sullivan, 2014
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IDH AnnuAl RepoRt 2015
STRATEGIC REPORT
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finAnciAl stAtements
BARRIeRS to entRy
Accreditation of Facilities
Attracting contract clients requires accred-
ited, high quality testing capabilities.
Brand & Reputation
Patients are loyal to leading brands with a
strong track record.
Market Reach
Fragmented market necessitates a wide
geographic presence to allow for broad
customer reach.
Relationship with Key Stakeholders
Building a scalable platform requires strong
relationship with stakeholders such as
physicians, patients and hospitals.
IDH AnnuAl RepoRt 2015 15
HuB, spoKe & spiKe
Business model
IDH operates an asset light business model, allowing for
expansion in a capital efficient manner and geared toward
operational efficiency.
• Specialty tests from IDH subsidiaries are shipped to the
Mega Lab in Egypt and results are retrieved electronically.
• Cost synergies on kits, logistics and quality.
B-lABS (SpokeS)
• B-labs serve as IDH’s spokes that work to reduce traffic
to Mega Lab by processing routine, onsite tests includ-
ing chemistry, parasitology and haematology.
• Higher capacity and larger in size than IDH’s C-labs.
• As at 31 December 2015 there were eight B labs in Egypt
and six in Sudan.
C-lABS (SpIkeS)
• Collection centres that allow for expansion of reach.
• Conduct basic tests including urine, stool, semen, ESR
and pregnancy tests.
• 314 operational branches as at 31 December 2015
The Group deploys a Hub, Spoke and Spike business
model in which our Mega Lab functions as the Hub that is
equipped with all offered services, tests (particularly ad-
vanced diagnostic tools) for samples collected by B and C
labs. The B labs (spokes) are capable of processing routine
tests that effectively reduce traffic to the Mega Lab where
warranted, and the C labs (spikes) function as collection
centres that increase our reach to clients nationwide.
The capital efficient model is supported by a strong op-
erational backbone, giving IDH the ability to offer a broad
range of tests and enabling the Group to “plug and play”
new C labs for further expansion. The addition of new and
esoteric test facilities at Mega Lab provides a one stop
solution for customers which, combined with package of-
ferings, increases tests per patient. Replacing the two A
labs, the Mega Lab houses additional machines that have
increased automation and significant spare capacity to al-
low for future growth in the business.
The Hub Spoke and Spike business model works well in
an industry that is characterized by high barriers to entry
that benefit existing organised players. IDH is well posi-
tioned: it has economies of scale, has a solid brand and
reputation, wide geographic coverage in an otherwise
fragmented market, internationally accredited facilities,
and a sound relationship with key stakeholders. It is, in
summary, a scalable platform.
meGAlAB (HuB)
• The newly established Mega Lab serves as IDH’s diag-
nostic hub and is the largest automated lab in Egypt,
equipped with the latest technology and providing the
full suite of diagnostic tests.
• A majority of equipment is provided at no cash cost in
return for IDH agreeing to purchase a minimum vol-
ume of kits from the equipment supplier.
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IDH AnnuAl RepoRt 2015
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finAnciAl stAtements
IDH AnnuAl RepoRt 2015
17
inteRnAtionAllY AccRedited
test poRtfolio
IDH’s comprehensive product portfolio covers immunol-
ogy, radiology, haematology, endocrinology, clinical chem-
istry, molecular biology, cytogenetic, histopathology, and
microbiology. Across its brand portfolio, IDH maintains in-
ternational quality accreditations with a stringent internal
audit process to ensure best in class service.
ISo
ISO accreditation requires an initial inspection of labora-
tory practices, calibration and medical analysis by an ac-
creditation body. For Al Mokhtabar, this accreditation body
was the Egyptian Accreditation Council, for Al Borg it was
the Swedish Board for Accreditation and Conformity As-
sessment and American Systems Registrar (ASR) and for
Biolab it was the Jordanian Accreditation System (JAS). The
inspection involves the clinical chemistry area, the virology
unit, the haematology unit and the general laboratory man-
agement practice. The accreditation’s standards include
both management and technical requirements and there
are follow-up inspections once every two years.
ColleGe oF AmeRICAn pAtHoloGIStS (CAp)
Unlike ISO accreditation, CAP certification is awarded
to individual labs rather than the Group’s operation as a
whole. Prior to its decommissioning, Al Mokhtabar’s A Lab
was the only private laboratory in Egypt to have been certi-
fied by CAP. The Group is currently seeking CAP accredita-
tion for its new Mega Lab facility following its inauguration
in June 2015; the present expectation is that the process will
be completed during 2016. The CAP standards track four
aspects of laboratory operations:
• Directors and personnel: The laboratory must be staffed
with a sufficient number of personnel and the lines of
authority should be well defined so that the directors
can properly fulfil their responsibilities.
• Physical resources: There must be sufficient resources, in-
cluding physical space, testing instruments, reagents, in-
formation processing and communication systems, ven-
tilation, storage and waste disposal facilities and public
utilities. Furthermore, there must be sufficient safeguards
against hazardous conditions to ensure patient safety.
• Quality management: The laboratory must have poli-
cies and procedures in place to ensure quality testing
and patient safety. These should include the validation
of test systems, analytic quality control, quality man-
agement of pre- and post-analytic processes, proficien-
cy testing, human resource management, information
18
IDH AnnuAl RepoRt 2015
management, ongoing quality improvement and ap-
propriate communication procedures.
• Administrative requirements: The laboratory must
maintain appropriate records and adhere to CAP cer-
tification requirements and certain other policies, and
will be subject to onsite inspections, interim inspec-
tions and interim self-assessments.
The CAP certification is renewed every two years after thor-
ough inspection of the laboratory in question.
QuAlIty ASSuRAnCe
IDH’s quality assurance program serves as the internal audit
function of the Group, ensuring that all internal diagnostic
processes, lab testing procedures and results analyses are ac-
STRATEGIC REPORT
coRpoRAte GoveRnAnce
finAnciAl stAtements
curate. The quality assurance ensures that all the standards
of the CAP and ISO accreditations are met by inspecting
hardware and equipment, ensuring compliance with proce-
dure manuals, inspecting the accuracy of results, and admin-
istering competency assessments for employees. The inter-
nal audit team also maintains a specific audit checklist for
the basic and routine tests conducted in the Group’s C Labs,
including conformity of process; testing the competency of
employees through oral, observational, practical and written
tests; and conducting managerial audits to assess the labs’
management and administrative efficiency.
employee tRAInInG
The Group views education as an essential means of ensur-
ing quality across its laboratories. To help develop the skills
of its employees, the Group has a dedicated training facility
in Cairo with two training laboratories. As at 31 December
2015, the training centre employed one director, three full-
time specialists, four administrators and 25 part-time in-
structors. The centre provides training to around 120-170
employees per month, including doctors, chemists, sales
personnel and administrators. Training to be provided is
determined based on performance KPIs, audit reports,
management reviews, competency assessment reports and
customer complaints. IDH’s employee training is divided
into four modules: New Employee Training, Competency
Based, Need Based and Practical Re-Training.
IDH AnnuAl RepoRt 2015 19
ouR
customeRs
IDH serves two principal customer groups, namely contract based (cor-
porate entities) and walk-in clients (individuals). Within each of those
categories, the Group also offers a house call service as well as a lab to
lab service for its contract segment.
ContRACt ClIentS
IDH’s contract clients, who in 2015 represented 61% of the
Group’s revenues, include institutions such as unions, pri-
vate insurance companies and corporations who enter into
one year, renewable contracts at agreed rates per test and
on a per client basis. During 2015, IDH served approximate-
ly 4.1 million patients under those contracts, performing a
total of 18.2 million tests, with no single contract client con-
tributing more than 5% of revenue.
Within the contract segment, IDH also provides lab to lab
services for hospitals and other laboratories that are not
able to process certain tests in house. IDH views the lab to
lab business as a potential growth area for the future.
WAlk-In ClIentS
IDH derived 39% of its revenue in 2015 from walk-in clients,
representing 30% of total patients served (or 1.8 million walk-
in clients). As expected, number of walk-in patients declined
in 2015 as more patients shift to corporate arrangements, in
line with the long-term market trend. Nevertheless, IDH has
successively increased walk-in revenues by growing its average
revenue per test, driven by a both price increases and a bet-
ter mix of test types. As IDH’s markets develop and become
more institutional markets, more patients will be performing
pathology tests under corporate agreements or health insur-
ance. This trend plays to IDH’s strength as having the best
economies of scale in the market.
A key strategy of the Group is to continue to target walk-
in clients through marketing campaigns focused on the
Group’s brands as well as educational campaigns aimed
at increasing awareness of the importance of medical
testing and preventive medicine. Additionally, the Group
also offers a number of check-up packages and promo-
tions aimed at increasing the number of tests per patient
and encouraging repeat visits. These packages and pro-
motions include a diabetes treatment program, pregnan-
cy check-up program and weight management program
among others.
BReAkDoWn oF totAl Revenue
Type
Contracts – Unions
Contracts – Banks
Contracts – Corporate
Contracts – Government Institutions
Contracts – Hospitals
Contracts – Public Insurance
Contracts – Medical Care
Contracts as % of total revenue
Walk-ins as % of total revenue
20
IDH AnnuAl RepoRt 2015
% of total 2014
revenues
% of total 2015
revenues
16%
2%
4%
15%
4%
5%
8%
54%
46%
18%
2%
18%
4%
5%
7%
7%
61%
39%
STRATEGIC REPORT
coRpoRAte GoveRnAnce
finAnciAl stAtements
IDH Revenue By type
2014
2015
54%
61%
2015
2014
Contract Clients
Revenue (EGP mn)
Patients (‘000)
Test (‘000)
Walk-in Clients
Revenue (EGP mn)
Patients (‘000)
Tests (‘000)
Total Revenue
(EGP million)
Total Patients (‘000)
468.0
3,599
15,721
392.2
1,986
6,531
860.2
5,585
46%
39%
Revenue per Patient (EGP)
154.03
Walk in
Contract
Revenue per Test (EGP)
38.66
Total Tests (‘000)
22,252
614.6
4,074
18,173
400.2
1,718
5,659
1,014.8
5,792
23,832
175.2
42.58
IDH AnnuAl RepoRt 2015 21
idH’s competitive
stRenGtHs
IDH’s competitive strengths have strongly positioned it for future growth
within the diagnostic space and adjacent services, presenting the Group
as an attractive investment opportunity with compelling fundamentals
in its fast growing, underserved markets.
Strength
Description
Exposure to resilient markets
IDH’s markets are characterised by having structural growth drivers and an un-
derserved diagnostic services demand. Moreover, the Group’s industry has high
barriers to entry such as the need to establish brand and reputation, accredit fa-
cilities, achieve economies of scale, cover a wide geographic footprint and main-
tain strong relationships with key stakeholders, all of which IDH enjoys.
Established business model
IDH’s low capital-intensive hub, spoke and spike business model allows for sig-
nificant organic network expansion over a wide geographic area. Additionally,
this model enhances the consistency of the Group’s safety and testing procedures
and performance as more tests are conducted through its established, centralized
Mega Lab with modern, high-capacity equipment and significant throughput.
Experienced, entrepreneurial man-
agement
The Group has a highly experienced management team with decades of experi-
ence in the healthcare sector. Furthermore, IDH’s world-class Board of Directors
brings years of healthcare, MENA region and investment experience to the table.
Strong, unlevered balance sheet and
cash generation capacity
The Group has enjoyed a strong track record of profitable growth, even through
adverse economic conditions, producing a normalised EBITDA margin of 43%
in 2015 (2014: 43.5%). In parallel, IDH’s asset light business model translates
into minimal borrowings and allowing for significant strategic flexibility.
Substantial opportunities to expand
to adjacent diagnostic categories
The Group is presently exploring opportunities to expand into adjacent verti-
cals including imaging, positioning it to become a one stop diagnostics provider
for all major tests.
22
IDH AnnuAl RepoRt 2015
STRATEGIC REPORT
coRpoRAte GoveRnAnce
finAnciAl stAtements
1
2
3
4
5
formidable
playing field
with structural
growth drivers,
high barriers
to entry and
a highly frag-
mented mar-
ket
established
business
model with
strong brand
recognition
and market
leading posi-
tion
experienced,
entrepreneurial
and longstand-
ing manage-
ment team and
adherence to
best corporate
governance
practice
strong unlev-
ered balance
sheet and
strong cash
generation
Allowing for
capitalization
on growth driv-
ers
idH is strongly positioned for future growth within the
diagnostics space and adjacent services
IDH AnnuAl RepoRt 2015 23
foRwARd looKinG
stRAteGY
IDH’s forward looking strategy rests on leveraging its es-
tablished business model to achieve five key strategic goals,
namely: (1) continue to expand customer reach; (2) increase
the number of test per patient by expanding the group’s ser-
vices portfolio; (3) use the Mega Lab’s enlarged capacity to pro-
vide services to third party labs and hospitals; (4) introduce
new medical services by leveraging the Group’s network and
reputable brand position; and (5) expand into new geographic
markets through selective, value accretive acquisitions.
tHIRD pARty SeRvICeS
The Group plans to capitalize on its increased capacity award-
ed by the new Mega Lab and expand lab to lab services, con-
sequently drive further economies of scale. The Mega Lab will
also enable IDH to process advanced and esoteric testing that
most laboratories in Egypt cannot. Because the market is con-
siderably fragmented, the Group can offer these advanced and
esoteric services to other laboratories at competitive prices
while still generating substantial margins.
expAnD CuStomeR ReACH
The Group intends to use its scalable, low capital intensive
business model to quickly and efficiently open new labs and
expand geographically. A wider geographic reach will increase
accessibility for customers, thereby expanding the Group’s
customer base. Furthermore, IDH’s add-on services, such as
house calls, e-services and results delivery, make the Group’s
services easier to use, and therefore more attractive, for pro-
spective and existing patients.
InCReASe teStS peR pAtIent
IDH intends to expand its laboratory service offerings and
broaden the range of specialized and advanced testing ser-
vices offered, thereby taking full advantage of the anticipated
increased demand for private healthcare services.
DIveRSIFy Into neW meDICAl SeRvICeS
As the medical testing market in Egypt evolves from a single
doctor oriented model to a branded chain model, the Group
sees an opportunity to offer medical services in the Egyptian
market that are not currently being offered by any private
healthcare provider on a large scale.
expAnD GeoGRApHICAlly
The Group is targeting further expansion through acquisition
in the diagnostic space and adjacent segments in Egypt and
other markets. IDH is considering expansion into the Gulf Co-
operation Council and North Africa, as well as opportunisti-
cally in sub-Saharan Africa.
24
IDH AnnuAl RepoRt 2015
STRATEGIC REPORT
coRpoRAte GoveRnAnce
finAnciAl stAtements
IDH AnnuAl RepoRt 2015
25
pRincipAl RisKs,
unceRtAinties And
tHeiR mitiGAtion
As in any corporation, IDH has exposure to risks and uncer-
tainties that may adversely affect its performance. IDH Chair-
man Lord St John of Bletso has emphasized 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
by 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 RISk — polItICAl & SeCuRIty
Egypt and the wider MENA region, where the Group operates, have
experienced political volatility since 2011 and continue to experi-
ence occasional terrorist incidents and occasional civil disorder.
CountRy / ReGIonAl RISk — eConomIC
The Group is subject to the economic conditions of Egypt specifi-
cally and, to a lesser extent, those of the wider MENA region. Egypt
accounted for c.90% of our revenues in 2015 (2014: 89%).
FoReIGn CuRRenCy RISk
The Group is exposed to foreign currency risk with respect
to its impact on pricing of supplies. The majority of supplies
are priced and 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. The Group is also ex-
posed to this risk in regards to foreign currency availability
and remittance of dividends abroad.
Furthermore, Egypt is presently experiencing a foreign cur-
rency shortage that is impacting the ability of companies to
source foreign exchange. The Central Bank of Egypt deval-
ued the Egyptian pound in March 2016, and there is an ongo-
ing risk of devaluation against the U.S. dollar and other key
foreign currencies.
See mitigants for “Country / regional risk — Economic,” below.
As with country risk, this is largely not subject to mitigation. In
both political / security and economic risk, we do note that IDH
operates in a defensive industry and that the business continued
to grow year on year through two revolutions.
Cost of supplies (almost all imported, either directly by IDH or by
third parties) was equivalent to c.17% of revenues in 2015 (2014:
19%). Management believes that it can mitigate the effects of de-
valuation through a combination of improved pricing and cost
efficiencies.
Only 12% of IDH’s cost of supplies (c.2% of revenues) are pay-
able in U.S. dollars, minimising the Group’s exposure to FX scar-
city and, in part, devaluation. IDH could, however, face price
changes or negotiations with suppliers.
Despite being a cash-generative business, IDH’s ability to source
foreign exchange is limited by caps on cash deposits of foreign cur-
rency at banks in Egypt. This can put limitation on the Group’s level
of U.S. dollar dividends. The Board is accordingly studying alterna-
tives through which to make better use of excess local currency cash.
26
IDH AnnuAl RepoRt 2015
STRATEGIC REPORT
coRpoRAte GoveRnAnce
finAnciAl stAtements
SpeCIFIC RISk
mItIGAtIon
RemIttAnCe oF DIvIDenD ReGulAtIonS &
RepAtRIAtIon oF pRoFIt
The Group’s ability to remit dividends abroad may be adversely
affected by the imposition of remittance restrictions where,
under Egyptian law, companies must obtain government clear-
ance to transfer dividends overseas and are subject to higher
taxation on payment of dividends.
leGAl & ReGulAtoRy RISk to tHe BuSIneSS
The Group’s business is subject to, and affected by, extensive,
stringent and frequently changing laws and regulations, as
well as frequently changing enforcement regimes, in each of
the countries in which it operates. Moreover, as a significant
player in the Egyptian private clinical laboratory market, the
Group is subject to antitrust and competition related restric-
tions, as well as the possibility of investigation by the Egyptian
Competition Authority.
QuAlIty ContRol RISkS
Failure to establish and comply with appropriate quality stand-
ards when performing testing and diagnostics services could re-
sult in litigation and liability for the Group and could materially
and adversely affect its reputation and results of operations. This
is particularly key as the Group depends heavily on maintaining
good relationships with and acceptance by healthcare profes-
sionals who prescribe and recommend the Group’s services.
pRICInG pReSSuRe In A CompetItIve, ReGulAteD
envIRonment
The Group faces pricing pressure from various third party pay-
ers that could materially and adversely affect its revenue. Pric-
ing may be restrained in cases by recommended or mandatory
fees set by government ministries and other authorities.
As a foreign investor in Egypt, IDH does not have issues with
the repatriation of dividends, but is exposed to risk in the form
of cost and availability of — as well as deposit restrictions on —
foreign exchange in the markets in which the Group operates,
particularly Egypt.
The Group’s general counsel and the quality assurance team
work together to keep IDH abreast of, and in compliance with,
both legislative and regulatory changes.
On the antitrust front, the private laboratory segment (of which
IDH is a part) accounts for a small proportion of the total mar-
ket, which consists of small private labs, private chain labs and
large governmental and quasi-governmental institutions.
The Group’s quality assurance (QA) function ensures compli-
ance with best practices across all medical diagnostic func-
tions. All laboratory staff participate in ongoing professional
education with quality assurance emphasized at each juncture.
The head of quality assurance for the Group is a member of senior
management team at the IDH level, which meets weekly to review
recent developments, plan strategy, and discuss issues of concern
to the Group as a whole.
This is an external risk for which there exist few mitigants.
In the event there is escalation of price competition between mar-
ket players, the Group sees its wide national footprint as a miti-
gant: More than 60% of our revenue is generated by servicing con-
tract clients (private insurer, unions and corporations) who prefer
IDH’s national network to patchworks of local players.
IDH AnnuAl RepoRt 2015 27
SpeCIFIC RISk
mItIGAtIon
IDH carries out an annual impairment test on goodwill and
other intangible assets in line with IAS 36.
The results of the annual impairment test show significant head-
room across all business areas based on achievable growth rates
in the business. For more detail see note 14 of the accounts.
IDH diligently works to maintain sound relationships with con-
tract clients. All changes to pricing and contracts are arrived at
through discussion rather than blanket imposition by IDH. Re-
lations are further enhanced by regular visits to contract clients
by the Group’s sales staff.
IDH’s attractiveness to contract clients is enhanced by the ex-
tent of its national network.
No single client contract currently accounts for more than
5% of revenues
Since inaugurating the Mega Lab in the second half of 2015,
IDH has maintained one of its two former central “A” labs as a
backup facility. 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 alterna-
tives to landlines, among multiple other factors. IDH tests its
disaster recovery plans on a regular basis.
The Group will launch a long term incentive program (LTIP) in
2016 to incentivise and retain senior management.
In addition to competitive compensation packages, the Group
also ensures it has access to a broad pool of trained laboratory
professionals through its own in-house recruitment and train-
ing program. We furthermore have in place a program to moni-
tor the performance of graduates of the training program.
IDH is presently going through procedures to obtain CAP ac-
creditation for Mega Lab, and ISO certifications are renewed on
a regular basis. IDH’s ability to keep current its certifications
and accreditation are supported by ongoing QA, training and
internal audit procedures.
HIGH level oF GooDWIll AnD otHeR IntAnGIBle
ASSetS
IDH’s high level of goodwill and other intangible assets could
generate significant future asset impairments, which could be
recorded as operating losses. Goodwill and intangible assets in-
clude the brand names used in the business.
RISk FRom ContRACt ClIentS
Contract clients including private insurers, unions and cor-
porations account for more than 60% of the Group’s revenue.
Should IDH’s relationship with these clients deteriorate, if
IDH should prove unable to negotiate and retain similar fee
arrangements, or should these clients by unable to make pay-
ments to the Group, IDH’s business may be materially and ad-
versely affected.
BuSIneSS ContInuIty RISkS
IT systems are used extensively in virtually all aspects of the
Group’s business and across each of its lines of business, includ-
ing 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 natu-
ral disasters, fire, riots or extended power failures. The Group’s
operations therefore depend on the continued and uninter-
rupted performance of its systems.
loSS oF tAlent
IDH depends on the skills, knowledge, experience and expertise
of its senior managers to run its business and implement its strat-
egies. The Group’s senior management has an average of 15 years
of industry experience and the majority are medical doctors. IDH
is furthermore reliant on its ability to recruit and retain labora-
tory professionals. Loss of senior managers could materially and
adversely affect the Group’s results of operations and business.
loSS oF CeRtIFICAtIonS AnD ACCReDItAtIonS
One of IDH’s subsidiaries was the only laboratory in Egypt ac-
credited by the College of American Pathologists (CAP); the
Group’s new Mega Lab is presently undergoing CAP certifica-
tion. Many of IDH’s facilities are also certified by the Interna-
tional Organization for Standards. The failure to obtain CAP
accreditation for Mega Lab or the failure to renew ISO certifi-
cations would call into question the Group’s quality standards
and competitive differentiators.
28
IDH AnnuAl RepoRt 2015
STRATEGIC REPORT
coRpoRAte GoveRnAnce
finAnciAl stAtements
IDH AnnuAl RepoRt 2015
29
finAnciAl
Review
IDH reported an 18% rise in revenues in 2015 compared to the previous
year, while net profit advanced 9.4%. Bottom line performance was
impacted by the one-time effect of expenses of EGP 125.1 million
related to the Group’s successful listing on the London Stock Exchange
(LSE), as well as EGP 6.0 million in other non-recurring expenses.
2015 peRFoRmAnCe oveRvIeW
The Group delivered strong operational and financial perfor-
mances in the year ending 31 December 2015, with improve-
ment in both the top and bottom lines, a continued investment
in the rollout of an additional 28 capital efficient branches and
the inauguration of the central Mega Lab facility.
Mega Lab is a state of the art central laboratory. It opened in
May 2015 and is now fully operational, nearly doubling our
existing capacity and offering an opportunity for cost savings.
During 2015, IDH brought into operation a total of 28 new
labs, including 14 new branches for Al Mokhtabar (Egypt),
12 new branches for Al Borg (Egypt) and one branch each
for Ultralab branch and MK Sudan both of which operate in
Sudan. Total IDH branches reached 314 as of 31 December
2015, up from 288 branches the previous year. (Two branch-
es were closed and replaced with new locations during the
course of the year.)
The results for the year are set out in summary form below:
EGP million
Revenue
Cost of sales
Gross Profit
Gross Profit Margin %
Add back amortisation expenses
Normalised Gross Profit
Normalised GP Margin
Operating costs
Operating Profit
Adjustments to Earnings before Interest, Tax, Depreciation and
Amortisation (EBITDA)
Depreciation
Amortisation
EBITDA
Add back Non-Recurring Expenses
IPO Expenses
Closure of Molecular Diagnostics Centre in Cairo
Write off of set up costs for Qatar office now not being pursued
Write-Off of surplus stationery included within inventory
Total Non-Recurring Expenses
Normalised EBITDA
Normalised EBITDA Margin
Income Tax
Net Profit
Normalised Net Profit
Normalised NP Margin
30
IDH AnnuAl RepoRt 2015
2014
860.2
(479.5)
380.7
44%
91.5
472.2
55%
(130.2)
250.5
24.1
91.5
366.0
8.4
-
-
-
8.4
374.4
43.5%
(105.6)
141.7
241.6
28.1%
2015
1,014.8
(467.5)
547.3
54%
0.3
547.6
54%
(279.9)
267.5
35.8
0.3
303.7
125.1
3.4
1.0
1.6
131.1
434.8
42.8%
(119.5)
155.0
286.1
28.2%
% Change
18%
(2%)
44%
10 pts
-
16%
(1 pts)
115%
7%
(17%)
16%
13%
9.4%
18.4%
STRATEGIC REPORT
coRpoRAte GoveRnAnce
finAnciAl stAtements
IDH also recorded rises in total patients served (up 4% to 5.8
million) and total tests performed (up 7% to 23.8 million).
In respect of this summary, the Group notes:
• Normalised net profit is defined as net profit plus amor-
tisation and non-recurring expenditure (the non-recur-
ring expenditure is assumed to be non-tax deductible).
• Normalised EBITDA is defined as EBITDA plus non-
recurring expenditure, while normalised gross margin
is defined as Gross Margin plus amortisation.
• The IPO costs were incurred by the business over a pe-
riod from November 2014 until the Group was admit-
ted to trading on 11 May 2015 and therefore are shown
in two financial years.
• The costs of closure of the Molecular Diagnostic Centre
are seen to non-recurring expenditure in nature as the
business is being liquidated.
• The write-off of the costs of setting up the Qatar office is
seen as non-recurring expenditure as the market in Qa-
tar was not seen as a market where the IDH brand and
business would work successfully on scale which would
justify the investment necessary to make it viable.
• The write off of the surplus stationery stock was identi-
fied following a detailed review of the stationary hold-
ings and it was found that this had built up over a num-
ber of years and was of little on going value to the group.
Revenue AnAlySIS
Consolidated revenues rose 18% year on year to EGP
1,014.8 million. Revenue growth was delivered by exist-
ing branches (75% of revenue growth in the year), better
pricing and service mix (17.3% of growth) and the open-
ing of new branches (7.7%).
Contract based clients contributed 61% to IDH’s top line in
2015, growing 31% on 2014. IDH signed 312 new corporate
contracts with insurers in 2015. Meanwhile, walk-in clients
contributed 39% to total revenues, up 2% in EGP terms from
2014, but down 7% in terms of share of overall revenue. The
comparatively rapid growth of contract based revenues is
driven by IDH’s focused sales strategy and the continued ex-
pected market trend of migration from walk-in to contract
based clients as more customers join medical coverage ar-
rangements and more corporates sign group contracts.
In absolute terms, IDH served 4.1 million contract cli-
ents in 2015 (up 13% from the previous year), while the
total number of walk-in patients served fell to 1.7 mil-
lion (down 13.0% from 2014). Walk-in revenues rose com-
pared to 2014 on the back of better pricing and better
test mix despite the slight downtick in patient numbers.
Egypt continued to contribute 90% of Group revenues re-
corded during 2015 followed by Jordan (7%) and Sudan
(3%). In 2014, Egypt accounted for 89%, Jordan for 7% and
Sudan for 4%.
Continued successful advertising and marketing activi-
ties saw total patients served rise 4% in 2015 to 5.8 mil-
lion as the growing number of patients served on con-
tracts offset the decline in walk-in patients. Key metrics
also continued their growth trajectory, including rev-
enue per patient (up +14%), revenue per test (+10%) and
tests per patient (+3%).
CoSt oF SAleS
IDH’s cost of sales declined slightly in 2015 to EGP 467.5
million compared to EGP 479.5 million in 2014. Cost of sales
in 2014 included the final amortisation charge relating to
customer and supplier lists and non-compete agreements
from historical acquisitions of EGP 91.5 million that, when
factored out, would see 2015 cost of sales increase by 20.5%.
Material prices for chemicals and supplies, which make up
37% of cost of sales, increased 5% over 2014.
IDH AnnuAl RepoRt 2015 31
Cost of materials as a percentage of sales reduced by 2%
on 2014 as a result of operational efficiencies in running
the Mega Lab rather than the two A Labs as previous-
ly. Wages increased 25% on 2014 after the opening of a
further 26 net new branches and wage increases of 20%.
Newly leased machinery for the Mega Lab resulted in an
increased depreciation cost of EGP 6.1 million.
GRoSS pRoFIt
The Group produced a gross profit for the year of EGP
547.3 million, up 16% compared to the normalised 2014
figure of EGP 472.2 million. Normalised gross margin
eased slightly to 54% in 2015 compared to 55% the previ-
ous year as a result of higher materials costs, deprecia-
tion on new machines for Mega Lab and an increase in
the employees’ share of profits.
opeRAtInG expenSeS
Below the gross profit line, operating costs came in at EGP
279.9 million in 2015, up 115% on 2014 as the 2015 figure
includes non-recurring expenses of some EGP 131.1 mil-
lion primarily related to the Group’s successful listing on
the London Stock Exchange and other non-recurring ex-
penses. Normalising for these expenses, operating costs
would have come in at EGP 148.6 million, up 22% on 2014.
The increase came on the back of an 8.6% rise in market-
ing and advertising expenses, reflecting IDH’s continued
investment in marketing in a competitive landscape.
eBItDA
Normalised EBITDA for the year increased 16% to EGP
434.8 million, with Egyptian operations contributing
94% of normalised EBITDA; Jordan contributed 4% and
Sudan 2%. The EBITDA figure for 2015 has been normal-
ised for one-time IPO expenses of EGP 125.1 million and
the non-recurring expenditure of EGP 6.0 million. The
comparable figure for 2014 has been adjusted for one-
time IPO expenses of EGP 8.4 million.
IDH’s normalised EBITDA margin in the first three quar-
ters of 2015 stood at 45% against a final full year figure
of 43%. The decline reflects the impact of a 38% EBITDA
margin in the fourth quarter as result of the Group’s ac-
counting policy in 2015, which was to book certain provi-
sions and costs only in the final quarter of the year. Ex-
amples include regular provisions on debtor accounts as
well as annual employee bonuses. Accounting policies in
place for 2016 will see these expenses accrue instead on
a quarterly basis.
tAxAtIon
Income tax expenses recorded in the income statement
in 2015 totalled EGP 119.5 million during 2015 compared
to EGP 105.6 million in 2014. The total tax expense in-
cluded a current tax charge for the year of EGP 108.1 mil-
lion (2014: EGP 121.9 million) and a deferred tax charge
of EGP 11.4 million (2014: credit of EGP 16.5 million).
There is no tax payable in the two IDH holding compa-
32
IDH AnnuAl RepoRt 2015
nies ( Jersey and Cayman). All tax is paid within the oper-
ating companies in Egypt, Jordan and Sudan.
There has been a reduction in the Egyptian corporation
tax rate to 22.5% in 2015 from 30% in 2014. However, the
full benefit of this reduction in tax rate in calculating the
tax charge for 2015 is offset by the fact that the Group’s
IPO costs were incurred in the Jersey entity where profits
and losses are taxed at zero percent, thereby increasing
the overall group effective tax rate by around 10% in 2015.
Looking ahead to 2016, the Group expects the full benefit
of the reduced corporation tax rate to flow through.
During 2015, a deferred tax liability has been recognised
and a charge made for EGP 11.4 million for tax on the undis-
tributed reserves held within the IDH Group. As the Group’s
dividend policy is to distribute any excess cash after tak-
ing into consideration all business cash requirements and
potential acquisition considerations, a deferred tax liability
has been recognised for the taxes expected to be incurred
from the future distribution of reserves within the Group.
Egyptian tax legislation now imposes a 5% tax on dividends
distributed from Egyptian entities and the deferred tax
charge has been calculated using this rate.
net eARnInGS
Net profit for the year was EGP 155.0 million, up 9.4%
compared to the EGP 141.7 million recorded in 2014.
STRATEGIC REPORT
coRpoRAte GoveRnAnce
finAnciAl stAtements
Normalised net profit for 2015 was EGP 286.1 million, up
18.4% on 2014 partly owing to increased net financing in-
come which stood at EGP 7 million in 2015 versus a net
financing expense of EGP 3.2 million the previous year.
BAlAnCe SHeet
On the assets side of the balance sheet: Property, plant
and equipment on the balance sheet rose to EGP 337.9
million in 2015 from EGP 243.9 million the previous year
due to the capitalisation of leased medical equipment and
other capital expenditure at 28 new branches.
Trade debts and other receivables increased to EGP 117.2
million from EGP 90.1 million as a result of a 35% increase
in accounts receivable arising from a 31 % increase in cor-
porate sales. Cash increased significantly to EGP 387.7
million from EGP 252.1 million in 2014 due to good credit
control and extended payment terms with suppliers.
On the liabilities side, notable variances from 2014 in-
clude a rise in long-term financial leases that increased to
EGP 60.3 million from EGP 51 million the previous year.
The sharp rise is attributable to the laboratory equipment
supplied in the year to the Mega Lab facility for which the
arrangement has been deemed to be a finance lease in na-
ture. Furthermore, long-term deferred tax liabilities and
provisions rose year-on-year for two reasons: The impact
of the reduction in deferred tax rates as a result of the
headline drop in tax rates to 22.5% from 30% as well as a
change in the basis of taxing dividends. The net movement
is an EGP 11.4 million increase in deferred tax. Trade paya-
bles also rose as supplier payment terms changed to 60-90
days from 45 days.
Following a detailed review of the sale and purchase
agreements relating to the operations in Jordan and Su-
dan, a technical point was noted which meant there is a
need to account for put option in the agreements. This has
the effect of including a liability on the balance sheet and
a corresponding entry into equity for the present value of
the expected value of the option. This has been included in
the balance sheets for 2014 and 2015. More details relating
to this can be found in Note 2 to the accounts.
DIvIDenD
Proposed dividends for ordinary shares are subject to
the approval of the Annual General Meeting and are not
recognised as a liability as at 31 December 2015. The
Board of Directors have recommended that a final divi-
dend of US$ 0.06 (six U.S. cents) per share should be paid
to shareholders of record as at 8 April 2016, with an ex-
dividend date of 7 April 2016. The payment date for the
dividend is 13 May 2016.
IDH AnnuAl RepoRt 2015 33
coRpoRAte
ResponsiBilitY
Founded on the principle of providing quality medical as-
sistance and services to better the lives of individuals and
the community at large, IDH views corporate responsibility
initiatives as an extension of its core purpose: The Group
aims to leave the communities in which it does business
better than it found them.
IDH commits up to 1% of the net after-tax profit of the sub-
sidiaries Al Borg and Al Mokhtabar to the Moamena Kamel
Foundation for Training and Skill Development. The Foun-
dation was established in 2006 by Dr. Moamena Kamel, a
Professor of Pathology at Cairo University and founder of
IDH subsidiary Al-Mokhtabar Labs and mother of the CEO,
Dr. Hend El Sherbini. The Foundation allocates this sum to
organizations and groups in need of assistance, with a par-
ticular focus on making a difference in the lives of residents
of Cairo’s Al Duweiqa community along with several other
villages across Egypt. The Foundation deploys an integrated
program and vision for the communities it helps that include
economic, social, and healthcare development initiatives. In
2015, EGP 0.8 million was paid to the foundation by the IDH
Group; the comparable figure for 2014 was EGP 2.0 million.
The foundation’s primary services include:
1. Free healthcare clinics
2. Loans for entrepreneurial women
3. Educational services for the children of Al Duweiqa
community
4. Providing food for families in need of such assistance
FRee HeAltHCARe ClInICS
The Moamena Kamel Foundation considers healthcare to be
a basic right for every individual and therefore proudly spon-
sors a number of medical clinics in Al Duweiqa that provide
free healthcare services. The clinics provide those facing eco-
nomic hardship free medical check-ups, diagnostic tests, and
medical treatment in fields including gastroenterology and
paediatrics. Treatment is delivered by qualified physicians
and under the direct supervision of Dr. Kamel.
The Foundation has contributed funds to better the work
environment and operational efficiency at Al Qasr El Aini
Hospital, a flagship public hospital in Cairo. For the last
three years, it has covered the demand for all medication
in the gastroenterology department’s intensive care unit.
Moreover, it provides monthly bonuses to the department’s
nursing staff with the aim of improving nursing care. The
foundation has also sponsored 12-20 beds at the hospital
and purchased air conditioning units, mattresses, and oth-
er items for the gastroenterology department.
Similar incentives were also extended to other hospitals
across the nation. The foundation purchased surgical theatre
equipment and covered the cost of monthly medication for
kidney patients at El Manial University Hospital. It has also
constructed a premature-birth unit and provided ventilators
to Manshiyet Al Bakry hospital. Furthermore, the Foundation
covered all costs for the laboratory equipment at Al Nahda
Lab, providing much needed technical support to the facil-
ity, and it provided free clinical and pathology tests including
liver function, CBC, urine and stool analysis, and hepatitis B
and C tests for nearly 400 juvenile offenders.
RevolvInG loAnS FoR entRepReneuRIAl
Women
The foundation aims to financially assist entrepreneurial
women who shoulder the responsibility of supporting their
families by providing them with loans to help increase
household income and improve both families’ and commu-
nities’ standard of living. Applicants are asked to provide a
feasibility study for their project and receive loans with leni-
ent repayment schemes, accordingly.
34
IDH AnnuAl RepoRt 2015
STRATEGIC REPORT
coRpoRAte GoveRnAnce
finAnciAl stAtements
IDH AnnuAl RepoRt 2015
35
eDuCAtIonAl tutoRInG FoR Al DuWeIQA
CommunIty’S CHIlDRen
The foundation provides tutoring services for the children of the
Al Duweiqa community to improve their level of education and
skills, especially in the wake of decreasing levels of education
in the community. These classes are provided free of charge on
a regular basis and by highly qualified teaching professionals.
Recognizing that educational opportunities are better served
in well maintained environments where students feel a great-
er sense of cleanliness and order, the foundation oversees the
maintenance and upkeep of 571 school desks at Al Marg School.
On an aggregate scale, the foundation covers 60% of the cost
of school bus transport for a number of families and donates
a considerable amount of school supplies to the schools it
helps sponsor, at the start of each new school year.
GIve FooD to neeDy FAmIlIeS
As characteristic of any developing nation, Egypt has a
large sector of society that suffers from economic hard-
ships and low incomes, effectively stymieing their ability to
secure food rations. The foundation donates food to those
in need, and the ration hand-outs are regularly distributed,
especially during Ramadan and the Eid holidays.
In specific terms, the foundation supports 52 families in the
villages of Allam and Hateeta, on a monthly basis. It also
donates a sum of EGP 100,000 to the Al Duweiqa and Man-
shiyet Nasr communities, whereby EGP 500 and EGP 200
are given to each family, respectively.
The foundation’s food donation coverage supports over
40,000 families across the country.
CommunIty BuIlDInG, Development, AnD
ReHABIlItAtIon
Casting the CSR net beyond the reach of food rations, edu-
cation, and women empowerment, the foundation also ap-
preciates the need for diverse initiatives that address other
aspects of community development.
Whether it involves offering marriage support for the needy,
or providing a utility extension in the Beheira Oasis that bet-
tered the area’s electricity, water, and sewage systems, the
Moemena Kamel Foundation aims to improve communities
in both cultural and developmental terms, respectively.
It has also taken part in various initiatives that target reha-
bilitation schemes for juvenile offenders, and financial sup-
port extended to orphans and the elderly.
IDH continues to hold its CSR responsibilities at the fore, view-
ing such social initiatives as an extension of the cornerstone
upon which the company was founded. By appropriating
funds to the Moemena Kamel Foundation, we are confident
that our monetary aid is delivered effectively and transpar-
ently to a vast number people in need of such social generosity.
36
IDH AnnuAl RepoRt 2015
STRATEGIC REPORT
coRpoRAte GoveRnAnce
finAnciAl stAtements
IDH AnnuAl RepoRt 2015 37
coRpoRAte
GoveRnAnce
38
IDH AnnuAl RepoRt 2015
stRAteGic RepoRt
CORPORATE GOvERNANCE
finAnciAl stAtements
IDH AnnuAl RepoRt 2015
39
BoARd of
diRectoRs
The majority of members of IDH’s Board of Directors are independent and
offer significant experience in the healthcare market, MENA region, and
investment activities.
a
b
c
d
(a) loRD St joHn oF BletSo — InDepenDent
non-exeCutIve CHAIRpeRSon (AGe 58)
Lord St John has been a member of the House of Lords of the
U.K. Parliament since 1978 and is currently Deputy Chairman
of Strand Hanson Ltd., Non-Executive Chairman of Global Re-
sources Investment Trust, a member of the Advisory Board of
Silicon Valley Bank, Non-Executive Director of Albion Ventures
LLP, Chairman of the Governing Board of Certification Inter-
national and holds advisory roles with Milio International, Al-
liance Media Group USA, Sapinda and ABN Corporation. Lord
St John received a BA and a BSocSc in Psychology from Cape
Town University, a BProc in Law from the University of South
Africa and an LLM from the London School of Economics.
(b) pRoF. DR. HenD el SHeRBInI — GRoup CHIeF
exeCutIve oFFICeR (AGe 47)
Dr. El Sherbini is a professor of clinical pathology at the Fac-
ulty of Medicine, Cairo University and currently sits on the
board of American Society of Clinical Pathology (Egypt)
and consults on the international certification process. She
received her MBBCh, Masters in Clinical and Chemical pa-
thology and PhD in Immunology from Cairo University. Dr.
El Sherbini served as CEO of Al Mokhtabar since 2004 until
becoming CEO of the Group in 2012
(c) AHmeD BADRelDIn — non-exeCutIve
DIReCtoR (AGe 44)
Mr. Badreldin is a Partner at The Abraaj Group and oversees its
investments in the Middle East and North Africa. He is current-
ly vice chairman of North Africa Hospital Holdings, chairman
of Spinneys Group, and a director on the board of a number of
companies including Viking Oil Field Services, OMS, Stanford
Marine Group and Assad. Prior to joining The Abraaj Group
in 2008, he was a Director in Investment Banking at Barclays
Capital in London in the Financial Sponsors and Leveraged
Finance Team. Mr. Badreldin graduated in Mechanical Engi-
neering and Business Administration from the American Uni-
versity in Cairo and holds an MBA from Cranfield School of
Management in the UK with a focus on Strategy and Finance.
(d) HuSSeIn CHouCRI — InDepenDent non-
exeCutIve DIReCtoR (AGe 65)
Mr. Choucri is Chairman and Managing Director of HC Secu-
rities & Investment, which he established in May 1996, and
40
IDH AnnuAl RepoRt 2015
stRAteGic RepoRt
CORPORATE GOvERNANCE
finAnciAl stAtements
e
f
g
he currently sits on the board of the Holding Company for
Tourism, Hotels & Cinema and the Egyptian British Business
Council. Mr. Choucri served as a Managing Director of Morgan
Stanley from 1987 to 1993 and served as Advisory Director at
Morgan Stanley from 1993-2007. He received his Management
Diploma from the American University in Cairo in 1978.
(e) jAmeS pAtRICk nolAn — InDepenDent non-
exeCutIve DIReCtoR (AGe 55)
Mr. Nolan is currently Global Head of Mergers & Acqui-
sitions at VimpelCom Ltd., a NASDAQ quoted leading
mobile telecoms operator in emerging markets. Prior to
his role at VimpelCom, Mr. Nolan spent 15 years with
Royal Philips NV, latterly as Head of Mergers & Acquisi-
tions. During this period he led a series of acquisitions
in diagnostic imaging, an area in which Philips is now a
global leader. He has extensive quoted-company board
experience having served on the boards of M*Modal
Inc., Navteq Inc and SHL Telemedicine Ltd. Mr. Nolan
graduated from Oxford University in Law in 1983 and is
a qualified barrister in England and Wales. He also holds
an MBA from INSEAD.
(f) DAn olSSon — InDepenDent non-exeCutIve
DIReCtoR (AGe 50)
Mr. Olsson is CEO of the Team Olivia Group, a Swedish
healthcare group. He has long and extensive international
experience in the diagnostic sector, where he has served in
a range of executive positions, among others as CEO of Unil-
abs Group in Geneva, Switzerland from 2007 to 2009 and has
worked in the healthcare sector since 1999. Mr. Olsson stud-
ied economics at the University of Lund in Sweden in 1990.
(g) RICHARD HenRy pHIllIpS — non-
exeCutIve DIReCtoR (AGe 51)
Mr. Phillips is a founding partner of Actis LLP, the emerging
markets private equity group. He established the Actis Global
Consumer Sector team and served as Head of Consumer for
four years until becoming a member of the Actis Investment
Committee. He is currently responsible for the investment
activity of Actis in North Africa. Mr. Phillips is a director on
the board of a number of companies including Edita Food
Industries SAE, Emerging Markets Payments Holdings (Mau-
ritius) Limited and others. Mr. Phillips holds a degree in Eco-
nomics from the University of Exeter.
IDH AnnuAl RepoRt 2015 41
cHAiRmAn’s
RepoRt
Chairman lord St john of Bletso
discusses IDH’s corporate governance
framework and the work of the Board
and its committees during 2015
42
IDH AnnuAl RepoRt 2015
Your Board of Directors (“the Board”) is responsible for
providing strong leadership and effective decision making,
safeguarding in the process the interests of all shareholders
of Integrated Diagnostics Holdings (“IDH” or “the Group”).
Under my chairmanship, the Board has been resolute in
providing oversight and guidance to the Group’s manage-
ment as the Group began its first year as a corporation list-
ed on the London Stock Exchange.
IDH has a standard listing on the London Stock Exchange
and is thus not required to comply with the requirements
of the 2014 U.K. Corporate Governance Code (“the Code”)
as issued by the Financial Reporting Council. However, we
are firm in our belief in the importance of good govern-
ance practices and we aim to voluntarily comply with as-
pects of the code while continuously working to close the
gap with premium listed entities. We strongly believe that
adopting best industry practices in governance will assist
us in building a profitable and sustainable business as well
as safeguarding shareholder interests.
We are in compliance with Financial Conduct Authority
Disclosure and Transparency Rule (DTR) subchapters 7.1
and 7.2, which set out certain mandatory disclosures: 7.1
stRAteGic RepoRt
CORPORATE GOvERNANCE
finAnciAl stAtements
Under my chairmanship, the Board has been
resolute in providing oversight and guidance to
the Group’s management as the Group began
its first year as a corporation listed on the
London Stock Exchange.
concerns audit committees and bodies carrying out equiv-
alent functions; 7.2 concerns corporate governance stand-
ards that are included in the Directors Report or, in this
case, as part of the Strategic Review (DTR 7.2.1).
To that end, we have established in our first year as a listed
company an Audit Committee as well as remuneration and
nomination committees; the Board may establish addition-
al committees as appropriate going forward. This Annual
Report includes reports from both the Audit and Remu-
neration Committees. The nomination committee did not
meet during the year.
Your board aims to work in accordance with best prac-
tices in corporate governance, calling on both the ex-
pertise of individual Directors as well as that of outside
parties, including legal counsel and global professional
services firms.
tHe Ipo pRoCeSS
At a meeting held 12 January 2015, the board constituted an
IPO Committee, with members including Dr. Hend El Sherbini
(alternate: Sherif El Ghamrawi), Richard Phillips (alternate:
Hossam Abou Moussa), and Ahmed Badreldin (alternate: Amr
Helal). The committee was granted full power and authority
to complete the initial public offering of IDH shares and to see
to their admission to trading on the London Stock Exchange.
Deutsche Bank and EFG Hermes Investment Banking were
joint global coordinators and joint bookrunners, while and Cit-
igroup Global Markets were joint bookrunners on the transac-
tion, which saw IDH admitted to trading on 11 May 2015 after
an extensive roadshow. The Group’s entire issued share capital
of 150,000,000 ordinary shares was admitted to the standard
listing segment of the Official List of the UK Listing Authority
and to trading on London Stock Exchange’s main market for
listed securities under the ticker symbol IDHC.
We have worked diligently throughout the first year of our
appointment as directors to meet the challenges before us.
We look forward to reporting to you not just through this,
our first Annual Report, but also at our 9 May 2016 Annual
General Meeting of shareholders.
FunCtIonInG oF tHe BoARD
We met four times as a board during the course of 2015 (in
January, April, August and November), and I was delighted to
have had the opportunity to visit IDH’s main base of opera-
tions in Cairo, Egypt, in summer 2015. Whilst in Egypt, I held
IDH AnnuAl RepoRt 2015 43
meetings at corporate offices and toured the recently opened
Mega Lab (IDH’s centralized and fully automated testing fa-
cility) and collector facilities. During the visit, I engaged di-
rectly with senior management to discuss both the Group’s
strategic plans and how management (including our chief
executive) is evolving the policies and procedures necessary
to continue the full institutionalisation of the business.
As part of this institutionalisation process, IDH retained
PricewaterhouseCoopers Dubai to perform a comprehen-
sive gap analysis of IDH’s finance function post-listing. The
aim of this exercise was to:
• Improve finance policies, processes, controls and IT
utilisation;
• Develop a robust framework and mechanism to ensure
accountability, control and governance, and reduce
people dependency;
• Evolve the finance function such that it focuses its ef-
fort beyond transaction processing and thus provide
meaningful management insights;
• Ensure the availability, quality, relevance and timeli-
ness of information for robust management decision
making and meeting other stakeholder needs (such as
investor relations, tax authorities, and banks).
The Group’s senior management received the PwC report
during the fourth quarter of 2015 and is now assessing its
findings and developing a plan for implementation. The
Group and the Board are also reviewing the outcome of the
internal audit conducted in 2015 by Ernst & Young Egypt, ad-
ditional detail on which is included in this Annual Report’s
Audit Committee Report, beginning page 50.
The Board has invested significant time discussing and
evaluating the Group’s strategy and prospects for future
growth, the outcome of which is presented in our state-
ment of strategy on page 24. We are confident that we
have in place the right strategy and the right management
team to deliver shareholder returns going forward.
Throughout, I have had the pleasure of working with Dr.
Hend El Sherbini, our chief executive and sole executive
director. As chairman of a company founded and led on
a day to day basis by a powerful female chief executive,
we take seriously the recommendations of Lord Davies’
review of Women on Boards and look forward to making
further progress in this respect with the passage of time.
While our Board has some way yet to go to meet Lord
Davies’ recommendation that women account for 25% of
the members of our board, I do note that we are a group at
which fully 30% of the workforce is female.
Together, the directors offer IDH a world standard mix of
expertise in areas including strategy, finance and medical
diagnostics — as well as diverse experience in Europe, the
Middle East and Africa. In summary, we have relevant com-
mercial and technical experience to help direct the Group
as it delivers on its strategy in a very technical field and
across rapidly changing geographies. I am pleased to report
that we are optionally compliant with the Code in having
four Independent Non-Executive Directors.
Your Board and their biographies are set out on pages 40-
41 and 44 of this Annual Report and is summarized in the
table below.
leADeRSHIp
In our first year as a listed entity, we have agreed a clear
division of responsibilities between the role of the Chair-
man and that of the Group Chief Executive. This segre-
gation of roles was agreed at the Board meeting held 12
January 2015.
BoARD oF DIReCtoRS oF InteGRAteD DIAGnoStIC HolDInGS plC
Name
Age
Position
Lord St John of Bletso
Prof. Dr. Hend El Sherbini
Ahmed Badreldin
Hussein Choucri
James Patrick Nolan
Dan Olsson
Richard Henry Phillips
44
IDH AnnuAl RepoRt 2015
58
47
44
65
55
50
51
Independent Non-Executive Chairperson
(12 January 2015)
Group Chief Executive Officer
(23 December 2014)
Non-Executive Director
(5 December 2014)
Independent Non-Executive Director
(12 January 2015)
Independent Non-Executive Director
(8 April 2015)
Independent Non-Executive Director
(12 January 2015)
Non-Executive Director
(23 December 2014)
stRAteGic RepoRt
CORPORATE GOvERNANCE
finAnciAl stAtements
As Chairman, I ensure the Board is effective in the execu-
tion of all aspects of its role. The Group Chief Executive Of-
ficer, meanwhile, is responsible for managing the day to day
running of the business. In this, she is supported by a senior
management team. The Group Chief Executive and I have
a good working relationship and discuss matters of Group
strategy and performance on an as-needed basis.
We also work together to ensure that Board meetings cover
relevant matters and, in partnership with the Group secre-
tary, ensure that all Directors:
• Are kept advised of key developments;
• Receive accurate, timely and clear information upon
which to call in the execution of their duties;
• Actively participate in the decision making process.
Agendas for meetings of the Board are reviewed and agreed
in advance to ensure each Board meeting is efficiently run,
allowing all Directors to openly and constructively challenge
the proposals made by the Group’s senior management. I am
pleased to report that throughout the year, each Director has
properly exercised those powers with which they have been
vested by the Group’s Articles of Association and relevant laws.
The Board operates under a Schedule of Matters Reserved to
it, items of which were approved at a meeting of the board
held 12 January 2015, updated at a meeting held 8 April 2015,
and approved in an ordinary resolution dated 21 April 2015.
Matters reserved to the board means any decision that may
affect the overall direction, supervision and management of
the Group or the Group’s group including, but not limited to:
a. approving annually a strategic plan and objectives for
the following year for the Group;
b. approving any decision to cease to operate all or any
material part of the Group’s business or to enter into
any new business or geographic areas;
c. monitoring the delivery of the Group’s strategy, objec-
tives, business plan and budget;
d. engaging or otherwise contracting with agents, repre-
sentatives, consultants, distributors or other interme-
diaries to provide material services for or on behalf of
the Group’s group;
h. making any material acquisition or disposal (including
any grant of any material licence) of or relating to any
intellectual property rights;
i. decisions relating to the conduct (including the settle-
ment) of any legal proceedings to which any member of
the Group’s group is a party where there is a potential
liability or claim of more than EGP 100,000;
j. approving the Group’s statutory accounts and half-yearly
financial statements and / or any change in the account-
ing principles or tax policies of any member of the Group’s
group and / or any change in the end of the financial year
of any member of the Group’s group except as contem-
plated by the business plan or annual budget, as required
by law or to comply with a new accounting standard;
k. adopting (or varying) the Group group’s material poli-
cies in respect of employees’ remuneration, employ-
ment terms and/or pension schemes;
l. any member of the Group’s group declaring or paying
any dividend or distribution;
m. delegating any of the Group’s powers to a committee of
the Board, including setting the quorum for a meeting
of any such committee or approving its, or any changes
to its, terms of reference;
n. approving the issue of all circulars, prospectuses, list-
ing particulars and general meeting notices to share-
holders of the Group;
o. ensuring the Group has effective systems of internal
control and risk management in place by (i) approving
the Group’s risk appetite statements; and (ii) approving
policies and procedures for the detection of fraud, the
prevention of bribery and other areas considered by the
Board to be material;
p. undertaking an annual review of the effectiveness of
the Group’s risk management and internal control and
reporting on that review in the Group’s annual report.
The review should cover all controls, including finan-
cial, operational and compliance controls and risk
management;
q. carrying out a robust assessment of the principal risks fac-
ing the Group, including those that threaten its business,
future performance, solvency or liquidity and to report on
such assessment in the Group’s annual report; and
r. reviewing the Group’s overall corporate governance ar-
e. adopting or amending the Group’s business plan or an-
rangements and approving any changes thereto.
nual budget;
f. incurring any capital expenditure in respect of any item
or project of more than EGP 5,000,000 that is not within
the annual budget already approved by the Board;
g. entering into any contract, liability or commitment
which: (i) could involve a liability for expenditure in
excess of EGP 25,000,000 that is not within the annual
budget already approved by the Board; or (ii) is out-
side the ordinary course of business of the Group, un-
less a contract involves costs within the annual budg-
et and business plan already approved by the Board
and satisfies such authorisation criteria as the Group
may approve from time to time as part of the proce-
dures for the Group;
Apart from these Reserved matters, the Board delegates spe-
cific items to its principal committees, namely the commit-
tees on Audit, Remuneration and Nominations. Each Com-
mittee is authorised to seek any information it requires from
senior management. Beginning in 2016, the committees will
endeavour to review on an annual basis their own perfor-
mance, constitution and terms of reference.
I provide brief recaps below on each of these committees.
Reports from the Chairmen of the Audit and Remunera-
tion committees appear starting pages 50 and 56 of this
Annual Report, respectively.
IDH AnnuAl RepoRt 2015 45
BoARD ACtIvItIeS DuRInG 2015
Your Board of Directors held four meetings in 2015. The wide range of activities with which the Board dealt at
those meetings is summarized here in brief.
The following standing items are considered at each meeting:
• Determines that notice was given and that a quorum for the meeting has been obtained;
• Hears declarations of interest and considers an conflicts of interest that may arise;
• Establishes the purpose of the meeting
• Reviews and approves minutes of the previous meeting of the Board.
meetInG
key DeCISIonS
12 jAnuARy 2015
(Held in St. Helier, Jersey)
8 ApRIl 2015
(Held on Fleet St., London)
21 AuGuSt 2015
(Held in St. Helier, Jersey)
20 novemBeR 2015
(St. Helier, Jersey)
• Updates related to the IPO process
• Directors’ training
• Established an IPO committee
• Approvals of matters and agreements related to the IPO
• Established a quorum for the board
• Established the Audit, Remuneration and Nominations committees
• Approved corporate governance documents, including the Schedule of Mat-
ters Reserved to the Board and the division of responsibilities between the
Chairman and the CEO, among other matters
• Updates related to the IPO process
• Approval of each Director’s appointment letter
• Appointment of James Patrick Nolan as Non-Executive Director
• Approval of service agreements for the Chief Executive Officer and the Chief
Financial Officer
• Approval of the Group’s 2012, 2013 and 2014 historical IFRS financial statements
• Affirmation of the Audit Committee’s power to approve an engagement letter
for KPMG
• Review and approval of draft IPO prospectus and of agreements related to
the IPO
• Approval and appointment of members to the Audit, Remuneration and
Nomination committees
• Approval of certain corporate governance documents
• Cost of supplies (almost all imported) was equivalent to c. 17% of revenues in
2015 (2014: 19%). Management believes that it can mitigate the effects of de-
valuation through a combination of improved pricing and cost efficiencies.
• Only 12% of IDH’s cost of supplies (c. 2% of revenues) are payable in U.S. dollars,
minimising the Group’s exposure to FX scarcity and, in part, devaluation. IDH
could, however, face price changes or negotiations with suppliers.
• Despite being a cash-generative business, IDH’s ability to source foreign ex-
change is limited by caps on cash deposits of foreign currency at banks in
Egypt. This can put limitation on the Group’s level of U.S. dollar dividends. The
Board is accordingly studying alternatives through which to make better use of
excess local currency cash.
• Approval to open a bank account with the National Bank of Egypt (UK) Ltd.
(As at today’s date, the account has yet to be opened.)
• Discussion of the foreign currency situation in Egypt
• Update on the actions list from the meeting of 21 August 2015
• Trading update and management report
• Update on replacement in 2016 of Market Abuse Directive by Market
Abuse Regulation
46
IDH AnnuAl RepoRt 2015
stRAteGic RepoRt
CORPORATE GOvERNANCE
finAnciAl stAtements
Details of our Directors’ attendance at Board and Com-
mittee meetings are shown on the table on page 49. In the
event that any Director is unable to attend a meeting of
the Board or of a Committee of which they are a member,
he or she receives the necessary papers, including agen-
das, meeting outcomes and any documents presented for
review or information. In the event that a Director is un-
able to attend a meeting of the Board, I endeavour to dis-
cuss with them in advance of the meeting to obtain their
views and decisions on the proposals to be considered.
As often as possible, we hold a dinner to coincide with each
scheduled meeting of the Board so as to permit Directors to
discuss current business matters as well as to source updates
on current operations, markets and wider industry matters
from both the senior management team and from external
advisors. This more casual format furthermore allows us as
Directors to get to know one another and select members
of senior management in a less formal setting. We held two
such dinners in 2015 (in January and August) and aim to con-
tinue this practice in 2016.
The Board also hopes to hold one meeting in Egypt in 2016 to
afford all Directors the opportunity to tour the Group’s Egypt
offices and diagnostic facilities as well as to meet with mem-
bers of the Group’s senior management on an as-needed basis.
Within the wider corporate governance framework, I believe
it pertinent to note that while there is no standing commit-
tee of senior management, the Group holds weekly manage-
ment meetings attended by senior management, including
executives responsible for sales, manual analysis units, auto-
mated analysis units, human resources, finance, marketing,
quality and investor relations. The Group’s general counsel
also attends these meetings, at which senior management
discusses upcoming priorities, recent performance, and the
operational steps necessary to ensure the management team
delivers on its business goals and the Group’s strategic plan.
eFFeCtIveneSS
The Board of IDH does not currently have formal mechanisms
in place to evaluate its effectiveness as regards the on-board-
ing of new directors, strategic planning or its formulation of
goals. That said, having spent considerable time in both formal
meetings and in learning about the skills of our Directors one
on one — and drawing on my past experience as a director — I
am confident that the Board has the skills, talent and indus-
try knowledge it needs to effectively deliver the Group’s agreed
strategy. It is, moreover, our hope that we will over time devel-
op formal evaluation mechanisms that will allow us to report
on our effectiveness in a more rigorous manner.
In the interim, it is my considered judgement that the
Board receives from senior management sufficiently de-
tailed budgets, forecasts, strategy proposals, reviews of the
Group’s financial position and operating performance, and
annual and half yearly reports to ensure that it may be effec-
tive. This enables us to effectively ask questions of senior
management and to hold discussions on the Group’s strat-
egy and performance.
In 2015, senior management delivered quarterly reports to
the board; beginning in 2016, the Board will receive monthly
reports ahead of regularly scheduled board meetings.
All meetings of the Board and its Committees are minuted
by the Group Secretary or a designated alternate. Any con-
cerns raised by Directors are clearly recorded in the minutes
of each meeting. I review Board minutes in my capacity as
Chairman before these minutes are circulated to all Directors
in attendance and then tabled for approval at the next meet-
ing, at which time any necessary amendments are made.
CompoSItIon oF tHe BoARD
Under its Articles of Association, the Group must have a mini-
mum of two Directors. While there is no maximum number
of Directors, the Board presently includes seven members and
has no intention at present of appointing additional members.
Directors have no share qualification, meaning they do not
need to be shareholders of the Group in order to serve.
The Group has obtained customary directors’ and officers’
indemnity insurance covering the Chairperson and the Non-
Executive Directors.
oveRvIeW oF tHe nomInAtIonS CommIttee
The Nomination Committee assists the Board in reviewing
the structure, size and composition of the Board. It is also
responsible for reviewing succession plans for the Directors,
including the Chairman and Chief Executive and other sen-
ior management. The nomination committee will normally
meet not less than twice a year.
I note in this instance that all members of the Nominations
Committee are Non-Executive Directors. As a result, we are
fully compliant with the Governance Code’s recommenda-
tion that a majority of the nomination committee should
comprise Independent Non-Executive Directors. Mr. Hussein
Choucri is deemed to be our Non-Executive Director with
relevant financial experience in compliance with the DTR.
Chairman
Lord St John of Bletso
Members
Hussein Choucri
Dan Olsson
The Nominations Committee did not meet in 2015.
oveRvIeW oF tHe RemuneRAtIon CommIttee
The remuneration committee recommends the Group’s
policy on executive remuneration, determines the levels
of remuneration for Executive Directors and the Chairman
and other senior management, and prepares an annual re-
muneration report for approval by the Shareholders at the
annual general meeting. The remuneration committee will
normally meet not less than three times a year.
IDH AnnuAl RepoRt 2015 47
The Governance Code recommends that the remuneration
committee should comprise, in the case of smaller compa-
nies, at least two Independent Non-Executive Directors.
As all of the members of the Committee are Independent
Non-Executive Directors, we are in full compliance with the
recommendations of the Governance Code in this respect.
Chairman
Hussein Choucri
Members
Dan Olsson
James Patrick Nolan
The Remuneration Committee met in November 2015. The
complete report of the Remuneration Committee for 2015
appears starting page 56.
oveRvIeW oF tHe AuDIt CommIttee
The audit committee’s role is to assist the Board with the dis-
charge of its responsibilities in relation to financial reporting,
including reviewing the Group’s annual and half year finan-
cial statements and accounting policies, internal and exter-
nal audits and controls, reviewing and monitoring the inde-
pendence and scope of the annual audit and the extent of the
non-audit work undertaken by external auditors, advising
on the appointment of external auditors and reviewing the
effectiveness of the internal audit, internal controls, whistle-
blowing and fraud systems in place within the Group. The
audit committee will meet not less than three times a year.
The Governance Code requires that at least one member of the
audit committee be independent and that at least one mem-
ber has competence in accounting and/or auditing. In addi-
tion, the Governance Code recommends that the audit com-
mittee should comprise, in the case of smaller companies, at
least two Independent Non-Executive Directors and that at
least one member has recent and relevant financial experience.
The Board considers that the Group complies with the require-
ments and recommendations of the Code in those respects.
Chairman
James Patrick Nolan
Members
Dan Olsson
Hussein Choucri
The full report of the Audit Committee for 2015 appears
starting on page 50 of this Annual Report.
InteRnAl ContRol AnD RISk mAnAGement
Given the business and geographies in which the Group oper-
ates, I believe as Chairman that risk mitigation will be key not
just to the creation and preservation of shareholder value, but
in the Group’s growth going forward. The risk matrix is of suf-
ficiently vital importance that it must be owned equally by the
management team and members of the Board.
area. Senior management is working with the internal audit
team to take the risk register forward. You may expect risk
and its mitigation will be a theme to which your board re-
turns repeatedly in 2016, as we did in 2015.
The Board has delegated oversight of the Group’s system of
internal controls to the Audit Committee so as to safeguard
the assets of the Group and the interests of shareholders. The
Audit Committee thus reviews the effectiveness of the Group’s
internal controls on an ongoing basis to ensure the keeping
of proper accounting records, safeguarding the assets of the
Group and detecting fraud and other irregularities.
The Board has accordingly established that the Group has in
place internal controls to manage risk including:
• The outsourcing of the internal audit function to pro-
fessionals from Ernst & Young (EY);
• The identification and management of risk at the level of
operating departments by the heads of those departments;
• Regular Board level discussion of the major business
risks of the Group, together with measures being taken
to contain and mitigate those risks.
The Group’s principal risks and uncertainties and mitigation
for them are set out on pages 26-28 of this Annual Report.
Your Board has furthermore put in place a control framework
at the Group level that applies to all subsidiaries, including:
• Board approval of the overall Group budget and stra-
tegic plans;
• A clear organisational structure delineating lines of re-
sponsibility, authorities and reporting requirements;
• Defined expenditure authorization levels;
• A regular process for operational reviews at the senior
management level on a weekly, monthly and quarterly
basis covering all aspects of the business;
• A strategic planning process that defines the key steps
senior management must take to deliver on the Group’s
long term strategy;
• A comprehensive system of financial reporting includ-
ing weekly flash reports to management, monthly re-
porting to management and an annual budget process
involving both senior management and the Board. The
Board received reports on a quarterly basis in 2015.
Beginning in 2016, the Board will continue to receive
quarterly updates, but will furthermore receive month-
ly reports from senior management;
• As part of the reporting process in 2015, management
reviews monthly actual results against prior year, against
budget and against forecast; beginning 2016, these re-
ports will also be circulated to the Board. Any significant
changes and adverse variances are reviewed by the Group
Chief Executive and by senior management and remedial
action is taken where appropriate.
Our view as a Board is that the Group must be proactive on
risk in order to meet shareholder expectations, and I have
advised that I expect IDH to be ahead of the curve in this
An internal audit plan for 2016 will be prepared and agreed
with the Audit Committee.
48
IDH AnnuAl RepoRt 2015
stRAteGic RepoRt
CORPORATE GOvERNANCE
finAnciAl stAtements
InveStoR RelAtIonS
Engagement with shareholders has been a key function at both
the senior management and the Board level throughout our
first year as a listed company. Our investor relations function
held more than 38 meetings with 75 current shareholders and
potential investors following the Group’s admission to trading.
Management met investors at investor conferences organized by
EFG Hermes and Deutsche Bank; welcomed potential and cur-
rent investors to meetings in Cairo; and handled queries, whether
delivered verbally or in writing, from nearly four dozen investors.
We published both half- and full-year results and further-
more released an interim update on performance at the
nine-month mark. We intend to continue publishing in-
terim performance updates at the first- and third-quarter
marks in 2016 while simultaneously meeting the minimum
disclosure required by statute.
The Board communicates with shareholders through pub-
lic announcements disseminated via the London Stock Ex-
change, analyst briefings, roadshows and press interviews.
Copies of public announcements and financial results are
published on the Group’s website, along with a number of
other investor relations tools. The delivery of a richer inves-
tor relations website with additional shareholder tools is a
priority for senior management in 2016.
The Board receives regular updates from the senior man-
agement team on the views of major shareholders and on
milestones in the investor relations program. We will con-
tinue throughout 2016 to grow our investor relations pro-
gram to ensure that our shareholders and stakeholders
remain informed of the Group’s strategy and ongoing finan-
cial and business performance.
AnnuAl RepoRtInG AnD AnnuAl GeneRAl
meetInG oF SHAReHolDeRS
This is our first Annual Report as a quoted company. We
will typically publish future Annual Reports in March in
respect of the prior year ended 31 December. We voluntar-
ily comply with the Code’s requirement to send a Notice of
Meeting of an AGM and related papers at least 20 working
days prior to the meeting.
The Group’s first Annual General Meeting as a listed com-
pany will be held in London on 9 May 2016. Sharehold-
ers are encouraged to attend the AGM and to ask ques-
tions about the business, its financial performance and its
strategy. All Board members are scheduled to attend the
upcoming AGM. Details of the AGM are included in the
Notice of Meeting that accompanies this Annual Report
and which is available on our website.
During the AGM, all of the Group’s Directors will voluntar-
ily submit their retirement and seek reappointment.
The outcome of the voting at the AGM will be announced
by way of a London Stock Exchange announcement and
full details will be published on the Group’s website short-
ly after the AGM.
lImItAtIonS oF tHIS RepoRt
As I noted earlier, the Group is not bound to adhere to the
requirements of the 2014 U.K. Code of Corporate Govern-
ance. Nevertheless, we have endeavoured where possible
to ensure that this Annual Report is, as a whole, fair, bal-
anced and understandable.
In formulating this Annual Report, we have called on the
Group Chief Executive and her senior management staff
to provide us with clear documentary evidence of the
Group’s performance and policies for 2015. The Audit
Committee has confirmed to us that the financial state-
ments as contained in the 2015 Annual Report are true
and fair and that the work of the external auditor has been
accurate and effective.
lord St john of Bletso
Chairman
24 March 2016
tABle oF DIReCtoR AttenDAnCe At 2015 meetInGS
Number of meetings
Directors
Lord St John of Bletso
Dr. Hend El Sherbini
Rick Phillips
Ahmed Badreldin**
Dan Olsson
Hussein Choucri**
James Nolan*
Board
Audit
Remuneration
Nominations
4
4
4
4
3
4
3
3
3
-
-
-
-
3
2
3
1
-
-
-
-
1
1
1
0
-
-
-
-
-
-
-
* Mr. Nolan was appointed following the 12 January 2015 meeting of the Board and so has attended 100% of the meetings held post his appointment.
Mr. Choucri sent his regrets for the Board meeting of 12 January 2015 as well as for the Audit Committee meeting of 14 July 2015. Mr.
**
Badreldin sent his regrets for the Board meeting of 20 November 2015.
IDH AnnuAl RepoRt 2015 49
Audit
committee RepoRt
james nolan
Chairman, Audit Committee
50
IDH AnnuAl RepoRt 2015
The Audit Committee is responsible for overseeing IDH’s
internal financial reporting and ensuring the integrity
of the Group’s financial statements. The Committee is
also responsible for reviewing and monitoring the effec-
tiveness of the Group’s risk management processes and
internal controls as well as for ensuring that audit pro-
cesses are robust.
At the date of this report, the Audit Committee comprises
three Non-Executive Directors, all of whom are considered
independent. In addition to me, the members were Dan
Olsson and Hussein Choucri
This is the first year for the function and the Board has ap-
pointed me as the first Chairman of the Audit Committee
owing to my relevant financial experience as required by
the Code. I have served on the audit committees of three
publicly quoted companies in the past. I am currently
head of mergers and acquisitions at VimpelCom Ltd, hav-
ing previously held the same position at Royal Philips. I
hold an MBA from INSEAD and studied law at university.
The other members of the Committee have a broad range
of appropriate skills and experience covering financial
and healthcare industry matters and their biographies are
summarized on pages 40-41. I am very grateful for their
valuable contributions and am happy that we work well
together as a team.
stRAteGic RepoRt
CORPORATE GOvERNANCE
finAnciAl stAtements
A report from Mr. James Nolan,
Chairman of the Audit Committee
Integrated Diagnostics Holdings Plc.
During 2015, the Audit Committee convened a total of three
times, namely in July, August and December. We provided effec-
tive governance of external financial reporting, risk manage-
ment and internal controls and reported our findings and rec-
ommendations to the Board. Outside of scheduled committee
meetings, the Audit Committee also communicated through-
out 2015 on an as-needed basis with the Group Chief Financial
Officer and with KPMG as our external auditors.
The audit partner and audit manager from the Group’s exter-
nal auditor, KPMG, are invited to attend meetings of the Com-
mittee on a regular basis. During 2015, they attended meetings
in whole or in part, both in person and by telephone. The Chief
Financial Officer, who is not a member of the executive board,
attends our meetings by invitation, and other members of the
senior management team attend as required; these include
the Director of Investor Relations, and the Group Secretary.
There are also private meetings between the Audit Committee
and the external auditor after the half-year and year-end results
at which senior management is not present. The Committee
will continue with the practice of meeting in private with the
external auditor in the future.
rate governance, finance, inventory management, information
technology, front office operations, business development,
and sales and marketing at the Group’s two primary Egyptian
subsidiaries, Al Borg and Al Mokhtabar. These audits included
reviews of the appropriateness and effectiveness of controls.
EY delivered two reports in 2015 and has at time of writing
delivered reports covering an additional six functions in 2016.
The Audit Committee will review the recommendations of all
reports completed by EY and discuss the same with senior
management during 2016.
Also in 2015, the Group retained the Dubai office of Ernst
& Young Middle East to carry out regular reviews of Anti-
Bribery and Corruption (ABAC) internal controls in rela-
tion to the UK Bribery Act 2010. This included a one-time
review and subsequent quarterly reviews and reporting to
the Audit Committee.
RoleS & DutIeS oF tHe AuDIt CommIttee
The audit committee’s role is to assist the Board with the
discharge of its responsibilities in relation to financial
reporting, including:
• Reviewing the Group’s annual and half year financial
The Committee commissioned in 2015 an internal audit car-
ried out by Ernst & Young Egypt (EY), which reviewed procure-
ment and human resources at the IDH level as well as corpo-
statements;
• Reviewing the Group’s accounting policies, internal and
external audits and controls;
IDH AnnuAl RepoRt 2015 51
• Reviewing and monitoring the scope of the annual audit
and the extent of the non-audit work undertaken by exter-
nal auditors;
• Advising on the appointment of external auditors and
reviewing the effectiveness of the internal audit, inter-
nal controls, whistleblowing and fraud systems in place
within the Group
july 2015
• Approved KPMG’s letter of engagement, including au-
dit fees for 2015
• Approved KPMG’s audit plan for 2015
•
Identified and discussed with KPMG significant risk fac-
tors within the business including impairment of goodwill,
management override of control, and revenue recognition.
During its scheduled meetings, the Committee also considers
the following matters:
• Confirm compliance with Directors’ duties and consider
any new conflicts of interest;
• Review minutes of previous meetings;
• Review actions from previous meetings;
• Review progress against current year objectives.
There were no specific objectives set by the Audit Commit-
tee for 2015. That said, as part of our ongoing process to
further develop the Group’s governance practice, objectives
will be set for 2016.
AuDIt CommIttee ACtIvItIeS DuRInG 2015
During 2015 the Audit Committee had three scheduled
meetings, one each in July, August and December. At each
scheduled meeting the Committee considers the matters
outlined above under the subheading “Roles & Duties of the
Audit Committee.”
AuGuSt 2015
• Consideration of half-year financials for the period to 30
June 2015, including reviews of:
• Presentation of EBITDA and results
• Risks including: Goodwill impairment, currency risk, lease
accounting, bad debts
Internal controls and plans for their development
•
• Other business, including the migration to Mega Lab, the
need to consider business risks on an ongoing basis along-
side audit risks, Mega Lab land purchase
• Recommendation to the Board on:
• The half-year results and the Group’s commentary on the
same in its results release.
DeCemBeR 2015
• Overview of the 2015 year-end audit and its timeline
• Preparation of the Annual Report
• Initial findings of the goodwill and intangible impair-
ment review
• Review of systems and control findings
SIGnIFICAnt ISSueS
Issue
How it is being addressed
Finance lease accounting
The contracts for the supply of medical testing kits with the key suppliers to the busi-
ness (Siemens, BM and Roche) include the provision of the equipment to analyse the
results of the testing kits. The agreements have minimum annual commitment pay-
ments to cover the supply of medical diagnostic equipment, kits and chemicals to
be used for testing and ongoing maintenance and support services. The agreement
periods are 5 years (Siemens) and 8 years (Roche).
Management have prepared an analysis of the contracts and concluded that the
terms of the agreements, having been assessed against those set out in IAS 17 ‘Leas-
es’, meet the definition of a finance lease as under the agreements.
Management have performed a fair value exercise in order to allocate payments be-
tween the different elements of the arrangements and identify the implicit interest
rate of the finance lease. Due to the difficulty in reliably splitting the payments for
the supply of medical equipment from the total payments made, the finance asset
and liability has been recognised at an amount equal to the fair value of the under-
lying equipment. This is based on the current cost price of the equipment supplied
provided by the suppliers.
Impairment of intangible assets A full impairment review only needs to be performed on an annual basis by man-
agement which was carried out in November 2015. Management were assisted by a
respected third party to prepare cash flow forecasts for the existing business going
forward. The results of the work carried out were that no impairment was required.
52
IDH AnnuAl RepoRt 2015
stRAteGic RepoRt
CORPORATE GOvERNANCE
finAnciAl stAtements
IDH AnnuAl RepoRt 2015
53
exteRnAl AuDItoR
KPMG has acted as the Group’s external auditor since ap-
pointment in July 2015, with Mr. Adrian Wilcox having
been appointed audit partner. We aim to comply with the
requirement to rotate the audit partner every five years
and thus the term of appointment of our audit partner is
expected to end in 2020.
In accordance with the new Code, and acknowledging the
Competition and Markets Authority’s proposal that compa-
nies must put their statutory audit engagement out to ten-
der at least every ten years, it is possible that we will tender
the audit process in 2025, or earlier if KPMG’s performance
falls short of the Audit Committee’s expectations. In any
events, we note that under recently published EU require-
ment on auditor rotation, we will be required to replace
KPMG LLP as our external auditor by 2035 at the latest.
pRovISIon oF non-AuDIt SeRvICeS
IDH may, on occasion, retain the external auditor for non-au-
dit services on matters including accounting advice in rela-
tion to acquisitions and divestments, corporate governance
and risk management advice, among other services.
The Audit Committee reviews the work completed by the ex-
ternal auditor as well as the provision of non-audit services
to ensure that the auditor maintains its independence.
The Audit Committee confirms that during 2015, £260,000
was paid to KPMG in respect of non-audit work compared
to an audit fee of £130,000. This non-audit work included
£160,000 attributable to costs associated with the IPO and
£95,000 for the half year review.
ReCommenDAtIon
Ultimately, it is the Board’s responsibility to review and
approve the Group’s full-year and half-year accounts, as
well as to determine that, taken as a whole, the Annual Re-
port is balanced, understandable and provides the infor-
mation necessary for shareholders to assess the Group’s
performance, business model and strategy. It is the Audit
Committee’s role to assist the Board in discharging its re-
sponsibilities with regards to financial reporting, external
and internal audits and controls. Following a review of the
process around the annual audit and the content of the
financial statements, the Audit Committee recommended
to the Board at its meeting on 24 March 2016 the adop-
tion of the financial statements as at 31 December 2015
and that they provide a true and fair view of the financial
performance of the Group.
james nolan
Chairman of the Audit Committee
24 March 2016
54
IDH AnnuAl RepoRt 2015
stRAteGic RepoRt
CORPORATE GOvERNANCE
finAnciAl stAtements
IDH AnnuAl RepoRt 2015 55
RemuneRAtion
committee RepoRt
Hussein Choucri
Chairman, Remuneration Committee
56
IDH AnnuAl RepoRt 2015
In this report from the Remuneration Committee, I outline
on behalf of my colleagues and myself the basis on which
Directors and select members of senior management will be
remunerated for their service in 2015.
I note in this respect that compensation for the Chairman
of the Board, the Independent Non-Executive Directors
and the Executive Directors was agreed and ratified by the
Board prior to the Group’s initial public offering. Compen-
sation was agreed in principle at a pre-IPO Board meeting
held in November 2015 and approved in final form at the
Board meeting held 12 January 2015.
A detailed discussion of the basis on which the aforemen-
tioned as well (as one key member of senior management)
were remunerated for their service in 2015 appears below
and is summarized in tabular form on page 58.
lonG teRm InCentIve plAn (ltIp)
The creation of a long term incentive plan (LTIP) was approved
in principle at the pre-IPO Board meeting referenced above. At
that time and at the meeting of 12 January, the Board specifically
noted that Dr. Hend El Sherbini (as Executive Director and Group
Chief Executive) and Lord St John of Bletso (as Chairman) were
entitled to participate in an LTIP as a condition of their engage-
ment. An LTIP for Dr. El Sherbini was noted in her Service Agree-
ment (as approved in principle at the 12 January 2015 board),
stRAteGic RepoRt
CORPORATE GOvERNANCE
finAnciAl stAtements
A report from Mr. Hussein Choucri,
Chairman of the Remuneration Committee
Integrated Diagnostics Holdings Plc.
while Lord St John of Bletso was specified in his Chairman’s Ap-
pointment Letter (also approved in principle 12 January 2015).
benefits, holiday leave, the mechanism for reimbursement
of expenses, and the conditions under which the agreement
may be terminated by her or by the Group.
The Board has delegated the creation of the LTIP to the Re-
muneration Committee. At our meeting of November 2015,
the Committee agreed to the basic outline and structure
of a synthetic employee stock option plan (ESOP) for key
executives. The committee expects the mechanism for the
synthetic ESOP to be finalized in 2016.
DIReCtoR CompenSAtIon In 2015
Executive Director: The Board has approved that Dr. Hend
El Sherbini will receive an annual salary of US$450,000. In
each financial year of the Group, Dr. El Sherbini will also re-
ceive an annual award of Shares with a value at the date of
grant equal to the US dollar equivalent of EGP 450,000 (the
‘‘Annual Award’’). The number of Shares comprised in each
Annual Award will be calculated by dividing the US dollar
equivalent of EGP 450,000 by a reference price (which, other
than for the first Annual Award, shall be the average quoted
closing price on the London Stock Exchange of the Shares
over the last 30 days of the last financial year). She will also
be eligible to participate in such annual discretionary bonus
scheme and long term incentive arrangements as may be
established for executive directors of the Group. This remu-
neration is set forth in a service agreement between Dr. El
Sherbini and the Group that also outlines additional taxable
Chairperson: Lord St John of Bletso is entitled to receive
an annual award of Shares, calculated based on a notional
annual fee of US$75,000. The number of Shares attribut-
able to each financial year will be calculated by dividing
US$75,000 by a reference price (which, other than for the
first year of the appointment, shall be the average quoted
closing price on the London Stock Exchange of the Shares
over the last 30 days of the last financial year). He is entitled
to the reimbursement of reasonable expenses.
Independent Non-Executive Directors: Hussein Choucri,
James Patrick Nolan and Dan Olsson have been engaged by
the Group as Independent Non-Executive Directors under
letters of appointment. They are each entitled to an annual
fee of US$50,000. The Independent Non-Executive Directors
are all entitled to the reimbursement of reasonable expenses.
Non-Executive Directors: Ahmed Badreldin and Richard
Henry Phillips have been engaged by the Group as Non-
Executive Directors under letters of appointment. They
will not be entitled to receive any fee from the Group for
this role. The Non-Executive Directors are all entitled to
the reimbursement of reasonable expenses.
IDH AnnuAl RepoRt 2015 57
RemuneRAtIon oF DIReCtoRS AnD SenIoR mAnAGement In 2015
(All FIGuReS In eGp)
Figures in EGP
Base salary
/ fees
Benefits1
Pension2
Annual
bonus
Long term
incentives3
Total
Executive Director
Dr. Hend El Sherbini
3,458,250
Non-Executive
Directors
Lord St John of Bletso
583,5005
Hussein Choucri
389,001
James Nolan
Dan Olsson
Ahmed Badreldin
Richard Phillips
389,001
389,001
-
-
Key senior manage-
ment
9,462,935
Hussein Choucri
Chairman of the Remuneration Committee
24 March 2016
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
450,0004
-
-
-
-
-
-
3,163,4736
-
-
-
-
-
-
-
-
3,908,250
583,500
389,001
389,001
389,001
-
-
12,626,407
1 There are no taxable benefits for any of the directors or senior management of the Group.
2 The Group does not provide a corporate pension for any of its employees, management or directors.
3 The Group does not currently have a long-term incentive plan for an of its employees, management or directors.
4
Dr. Hend El Sherbini receives part of her annual bonus in the form of an annual award of Shares with a value at the date of grant equal to the US
dollar equivalent of EGP 450,000.
Lord St John of Bletso receives his director’s fees paid in an equivalent value in shares of $75,000.
The Group implements an annual bonus scheme for key senior management in the form of a share in profits recorded in each financial year of
the Group and is calculated based on performance appraisals and tenure.
5
6
58
IDH AnnuAl RepoRt 2015
stRAteGic RepoRt
CORPORATE GOvERNANCE
finAnciAl stAtements
IDH AnnuAl RepoRt 2015
59
diRectoRs’
RepoRt
The statements and reviews on pages 2-37 comprise the
Strategic Report which contains certain information that
is incorporated into this Directors’ Report by reference,
including indications as to the Group’s likely future busi-
ness developments.
DIReCtoRS
The Directors who held office at 31 December 2015 and up
to the date of this report are set out on pages 40-41 and 44
along with their photographs and biographies. During the
course of this year, Mr. James Patrick Nolan joined the Board
of Directors and was named to Chairman of the Audit Com-
mittee. The remuneration of the Directors (including their
respective share holdings in the Group, where applicable) is
set out in the Remuneration Report on pages 56-58.
DIReCtoRS’ AnD oFFICeRS’ lIABIlIty
InSuRAnCe AnD InDemnIFICAtIon oF
DIReCtoRS
Subject to the conditions set out in the Companies ( Jer-
sey) Law 1991 (as amended), the Group has arranged ap-
propriate Directors’ and Officers’ liability insurance to
indemnify the directors against liability in respect of pro-
ceedings brought by third parties. Such provisions remain
in force at the date of this report.
pRInCIpAl ACtIvItIeS
The Group’s principal activity is the provision of medical
diagnostics services. An overview of the Group’s principal
activities is an integral component of the Strategic Review
included in this Annual Report beginning page 2.
BuSIneSS RevIeW AnD FutuRe DevelopmentS
A review of the development and performance of the
Group’s business forms an integral part of this Annual
Report in sections including A Note from our CEO (pages
8-10), Strategic Report (beginning page 2, and particu-
larly the Financial Review beginning page 30). Financial
statements for 2015 appear in the Audited Financial State-
ments (starting page 67).
ReSultS AnD DIvIDenDS
The Group’s Results for 2015 are set out in the Audited Fi-
nancial Statements starting page 66.
The Board of Directors have recommended that a divi-
dend of US$ 0.06 (six U.S. cents) per share should be paid
to shareholders of record as at 8 April 2016, with an ex-
dividend date of 7 April 2016. The payment date for the
dividend is 13 May 2016.
pRInCIpAl RISkS AnD unCeRtAIntIeS
The principal risks and uncertainties that may affect IDH’s
business, as well as their potential mitigants, are outlined
on pages 26-28 of this Annual Report.
SHARe CApItAl
The Group has 150,000,000 ordinary shares each with a
nominal value of US$ 1.00 issue. All shares are ordinary
shares only. Note 19 to the consolidated financial state-
ments on page 88 summarizes the rights of the ordinary
shares as well as the number issued during 2015. An analy-
sis of share holdings is shown on the opposite page.
SuBStAntIAl SHARe HolDInGS
As at 13 2015, the Group had been advised under the Dis-
closure and Transparency Regime, or had ascertained from
its own analysis, that the following held interests of 3% or
more of the voting rights of its issued share capital:
The Directors certify that there are no issued securities that
carry special rights with regard to control of the Group.
There are similarly no restrictions on voting rights.
60
IDH AnnuAl RepoRt 2015
stRAteGic RepoRt
CORPORATE GOvERNANCE
finAnciAl stAtements
Shareholder
Hena Holdings Ltd.
Actis Idn B.v.
HSBC Global Asset Mgmt (UK)
Fidelity Management & Research (US)
Norges Bank Investment Mgt
Number of voting rights
% of voting rights
38,245,589
31,500,000
9,250,153
8,941,465
6,197,321
25.50
21.00
6.17
5.96
4.13
CommItteeS oF tHe BoARD
The Board has established Audit, Nominations and Remu-
neration Committees. Details of these Committees, includ-
ing membership and their activities during 2015, are con-
tained in the Corporate Governance section of this Annual
Report and in the Remuneration Report.
CoRpoRAte ReSponSIBIlIty
The Group’s report on corporate responsibility is set out on
pages 34-36.
CoRpoRAte GoveRnAnCe
The Group’s report on Corporate Governance is on pages
38-65 and forms part of this Directors’ Report.
ARtICleS oF ASSoCIAtIon
The Group’s Articles of Association set out the rights of
shareholders including voting rights, distribution rights,
attendance at general meetings, powers of directors, pro-
ceedings of directors as well as borrowing limits and other
governance controls. A copy of the Articles of Association
can be requested from the Group Company Secretary.
The Articles of Association may be amended by resolution
of the Board of Directors.
RuleS on tHe AppoIntment AnD ReplACement
oF DIReCtoRS
Rules on the appointment and replacement of Directors are
set out in the Group’s Articles of Association, a copy of which
may be requested from the Group Company Secretary.
AGReementS RelAteD to CHAnGe oF ContRol
oF tHe GRoup
No such agreements exist.
ConFlICtS oF InteReSt
During the year no Director held any beneficial interest in
any contract significant to the Group’s business, other than
a contract of employment. The Group has procedures set
out in the Articles of Association for managing conflicts
of interest. Should a Director become aware that they, or
their connected parties, have an interest in an existing or
proposed transaction with the Group, they are required to
notify the Board as soon as reasonably practicable.
IDH AnnuAl RepoRt 2015 61
polItICAl DonAtIonS
The Group made no political donations in 2015.
FInAnCIAl InStRumentS
The Group’s principal financial instruments comprise cash bal-
ances, balances with related parties, other payables and receiv-
ables that arise in the normal course of business. The Group’s
Financial instruments risk management objectives and policies
are set out in Note 15.2 to the Financial Statements.
employeeS
The Group has one (1) executive director, namely Group
Chief Executive Dr. Hend El Sherbini, as identified in the
Corporate Governance section; her biographical infor-
mation appears on page 44 of this Annual Report, and her
compensation is reported in the Remuneration Commit-
tee Report on page 57. IDH has service agreements with
the Group Chief Executive and with the Group Chief Finan-
cial Officer, Mr. Tarek Hemida, who is not a Company
director. The Group and its subsidiaries had total of 4,323
employees as of 31 December 2015 employed in Egypt,
Jordan and Sudan.
CReDItoR pAyment polICy
Individual subsidiaries of the Group are responsible for
agreeing on the terms and conditions under which busi-
ness transactions with their suppliers are conducted. It is
the Group’s policy that payments to suppliers are made in
accordance with all relevant terms and conditions. Trade
payables amounted to EGP 70.7 million in 2015, up from
EGP 59.4 million in 2014, on the back of a change in sup-
plier payment terms from 45 days to 60-90 days. More detail
available in note 23 of the financial statements.
poSt-BAlAnCe SHeet eventS
There are no such events to report.
GoInG ConCeRn
Having made inquiries, the Directors have a reasonable ex-
pectation that the Group has adequate resources to meet
its liabilities as they fall due for at least 12 months from the
date of approval of these consolidated financial statements.
Thus, they continue to adopt the going concern basis in pre-
paring the financial information. The Group’s business ac-
tivities, together with the factors likely to affect its future
development, performance and position, are set out in the
Strategic Review on pages 2 to 37. The financial position of
the Group, its cash flows, liquidity position and borrow-
ing facilities are described in the financial statements and
notes thereon on pages 71 to 107.
StAtement oF DIReCtoRS’ ReSponSIBIlItIeS
The directors are responsible for preparing the annual re-
port and the financial statements in accordance with Inter-
national Financial Reporting Standards as adopted by the
EU (“IFRS as adopted by the EU”), interpretations from the
International Financial Reporting Interpretations Commit-
tee (“IFRIC”) and Companies (Jersey) Law 1991 (as amend-
ed). Jersey Law requires the directors to prepare financial
statements for each financial year, which give a true and
fair view of the state of affairs of the Group and of the as-
sets, liabilities, financial position and profit or loss of the
Group for that year.
In preparing the financial statements, the directors are re-
quired to:
• select suitable accounting policies and then apply them
consistently;
• make judgements and estimates that are reasonable,
comparable, understandable and prudent;
• ensure that the financial statements comply with IFRS
as adopted by the EU; and
• prepare the financial statements on the going concern
basis, unless it is inappropriate to presume that the
Group will continue in business.
The directors are responsible for maintaining proper ac-
counting records that disclose with reasonable accuracy at
any time the financial position of the parent company and
to enable them to ensure that the financial statements com-
ply with the Jersey Law. The directors are also responsible for
safeguarding the assets of the Group and hence for taking
reasonable steps for the prevention and detection of fraud
and other irregularities. The directors are also responsible for
the maintenance and integrity of the Group’s website on the
internet. However, information is accessible in many differ-
ent countries where legislation governing the preparation
and dissemination of financial statements may differ from
that applicable in the United Kingdom and Jersey.
The Directors of the Group confirm that to the best of their
knowledge that:
• The consolidated financial statements have been pre-
pared in accordance with International Financial Re-
porting Standards, including International Accounting
Standards and Interpretations adopted by the Inter-
national Accounting Standards Board gives a true and
fair view of the assets, liabilities, financial position and
profit or loss of the company and the undertakings in-
cluded in the consolidation taken as a whole; and
• The sections of this Report, including the Chairman’s
Statement, Development Manager’s Review, Financial
Review and Principal Risks and Uncertainties, which
constitute the management report include a fair review
of the development and performance of the business
and the position of the issuer and the undertakings in-
cluded in the consolidation taken as a whole, together
with a description of the principal risks and uncertain-
ties that they face
DISCloSuRe oF InFoRmAtIon to tHe AuDItoR
So far as each person who was a director at the date of
approving this report is aware, there is no relevant audit
information, being information needed by the auditor in
connection with preparing its report, of which the audi-
tor is unaware. Having made enquiries of fellow directors
62
IDH AnnuAl RepoRt 2015
stRAteGic RepoRt
CORPORATE GOvERNANCE
finAnciAl stAtements
IDH AnnuAl RepoRt 2015
63
The Group’s 2015 Annual
General Meeting will be held
in London on 9 May 2015.
and the Group’s auditors, each director has taken all the
steps that he is obliged to take as a director in order to have
made himself aware of any relevant audit information and
to establish that the auditor is aware of that information.
AnnuAl GeneRAl meetInG (AGm)
The 2015 AGM will be held at 11:00am BST on 9 May 2016 at
Hilton London Tower Bridge, London, UK.
The Chairmen of the Board and of each of its Committees
as well as all company Directors will be in attendance at the
AGM to answer questions from shareholders.
The Group will be making use of the electronic voting
facility provided by its registrars, Capita Asset Services.
The facility includes CREST voting for members holding
their shares in uncertificated form. For further informa-
tion, please refer to the section on online services and
electronic voting set out in the notes to the Notice of
Meeting. The notice of the AGM and an explanation of
the resolutions to be put to the meeting are set out in
the Notice of Meeting accompanying this Annual Report.
The Board fully supports all the resolutions and encour-
ages shareholders to vote in favour of each of them as
they intend to in respect of their own share holdings.
During the AGM, all of the Group’s Directors will submit
their retirement and seek reappointment.
AuDItoR
KPMG LLP has expressed its willingness to continue in of-
fice as auditor and separate resolutions will be proposed at
the forthcoming AGM concerning their reappointment and
to authorise the Board to agree their remuneration.
By order of the Board
DR. HenD el SHeRBInI
Executive Director
24 March 2016
64
IDH AnnuAl RepoRt 2015
stRAteGic RepoRt
CORPORATE GOvERNANCE
finAnciAl stAtements
IDH AnnuAl RepoRt 2015 65
finAnciAl
stAtements
66
IDH AnnuAl RepoRt 2015
stRAteGic RepoRt
coRpoRAte GoveRnAnce
FINANCIAL STATEMENTS
IDH AnnuAl RepoRt 2015
67
independent AuditoR’s
RepoRt to tHe memBeRs of
inteGRAted diAGnostics
HoldinGs plc limited
We have audited the group financial statements of Integrat-
ed Diagnostics Holdings plc for the year ended 31 December
2015 which comprise the Consolidated Income Statement,
the Consolidated Statement of Profit or loss and Other Com-
prehensive Income, the Consolidated Statement of Financial
Position, the Consolidated Statement of Changes in Equity,
the Consolidated Statement of Cash Flows and the related
notes. The financial reporting framework that has been ap-
plied in their preparation is applicable law and International
Financial Reporting Standards as adopted by the EU.
This report is made solely to the Group’s members, as a body,
in accordance with Article 113A of the Companies (Jersey)
Law 1991. Our audit work has been undertaken so that we
might state to the Group’s members those matters we are
required to state to them in an auditor’s report and for no
other purpose. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than
the Group and the Group’s members as a body, for our audit
work, for this report, or for the opinions we have formed.
ReSpeCtIve ReSponSIBIlItIeS oF DIReCtoRS
AnD AuDItoR
As explained more fully in the Statement of Directors’ Re-
sponsibilities set out on page 62, the directors are responsi-
ble for the preparation of financial statements which give a
true and fair view. Our responsibility is to audit, and express
an opinion on, the financial statements in accordance with
applicable law and International Standards on Auditing (UK
and Ireland). Those standards require us to comply with the
Auditing Practices Board’s Ethical Standards for Auditors.
SCope oF tHe AuDIt oF tHe FInAnCIAl
StAtementS
An audit involves obtaining evidence about the amounts
and disclosures in the financial statements sufficient to
give reasonable assurance that the financial statements
are free from material misstatement, whether caused by
fraud or error. This includes an assessment of: whether the
accounting policies are appropriate to the group’s circum-
stances and have been consistently applied and adequately
disclosed; the reasonableness of significant accounting
estimates made by the directors; and the overall presenta-
tion of the financial statements. In addition, we read all the
financial and non-financial information in the Annual Re-
port to identify material inconsistencies with the audited
financial statements and to identify any information that is
apparently materially incorrect based on, or materially in-
consistent with, the knowledge acquired by us in the course
of performing the audit. If we become aware of any appar-
ent material misstatements or inconsistencies we consider
the implications for our report.
68
IDH AnnuAl RepoRt 2015
stRAteGic RepoRt
coRpoRAte GoveRnAnce
FINANCIAL STATEMENTS
noteS:
• The maintenance and integrity of Integrated Diagnos-
tics Holdings plc website is the responsibility of the
directors; the work carried out by auditors does not in-
volve consideration of these matters and accordingly,
KPMG LLP accepts no responsibility for any changes
that may have occurred to the financial statements or
our audit report since 24 March 2016. KPMG LLP has
carried out no procedures of any nature subsequent to
24 March 2016 which in any way extends this date.
• Legislation in Jersey governing the preparation and
dissemination of financial statements may differ from
legislation in other jurisdictions. The directors shall re-
main responsible for establishing and controlling the
process for doing so, and for ensuring that the financial
statements are complete and unaltered in any way.
opInIon on FInAnCIAl StAtementS
In our opinion the financial statements:
• give a true and fair view, in accordance with Internation-
al Financial Reporting Standards as adopted by the EU
of the state of the group’s affairs as at 31 December 2015
and of the group’s profit for the year then ended; and
• have been properly prepared in accordance with the
Companies (Jersey) Law 1991.
mAtteRS on WHICH We ARe ReQuIReD to
RepoRt By exCeptIon
We have nothing to report in respect of the following mat-
ters where the Companies (Jersey) Law 1991 requires us to
report to you if, in our opinion:
• proper accounting records have not been kept by the
Group; or
• proper returns adequate for our audit have not been re-
ceived from branches not visited by us; or
• the financial statements are not in agreement with the
accounting records and returns; or
• we have not received all the information and explana-
tions we require for our audit.
Adrian Wilcox
for and on behalf of KPMG LLP
Chartered Accountants and Recognised Auditor
15 Canada Square
London E14 5GL
24 March 2016
IDH AnnuAl RepoRt 2015 69
Balance sheet
For the Financial Year ended december 31, 2015
Assets
Non-current assets
Property, plant and equipment
Intangible assets and goodwill
Total non-current assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
Equity
Share capital
Share premium reserve
Capital reserves
Legal reserve
Put option reserve
Translation reserve
Retained earnings
Share based payment reserve
Equity attributable to the owners of the Company
Non-controlling interests
Total equity
Non-current liabilities
Deferred tax liabilities
Other provisions
Long-term financial obligations
Total non-current liabilities
Current liabilities
Trade and other payables
Borrowings
Current tax liabilities
Total current liabilities
Total liabilities
Total equity and liabilities
Notes
2015
EGP’000
2014
EGP’000
(as restated
see note 2.2)
12
13
16
17
18
19
19
19
19
19
19
20
8
10
22
24
23
15
337,877
1,606,225
1,944,102
243,874
1,608,839
1,852,713
34,326
117,155
387,716
539,197
2,483,299
1,072,500
1,027,706
(314,310)
28,834
(64,069)
1,193
142,712
1,034
1,895,600
46,873
1,942,473
128,427
10,962
60,327
199,716
229,631
-
111,479
341,110
540,826
2,483,299
36,007
90,075
252,110
378,192
2,230,905
1,072,500
1,027,706
(314,310)
26,945
(50,420)
1,204
-
-
1,763,625
41,523
1,805,148
117,034
8,978
51,002
177,014
125,015
45
123,683
248,743
425,757
2,230,905
These consolidated financial statements were approved and authorised for issue by the Board of Directors and signed on
their behalf on 24 March 2016 by:
Chief Executive Officer
Dr. Hend El Sherbini
Head of Audit Committee
James Nolan
70
IDH annual report 2015
strategIc report
corporate governance
Financial StatementS
Income statement
For the Financial Year ended december 31, 2015
Notes
2015
EGP’000
Revenue
Cost of sales
Gross profit
Marketing and advertising expenses
Administrative expenses
Other expenses
Operating profit
Finance costs
Finance income
Net finance income/(cost)
Profit before tax
Income tax expense
Profit for the year
Profit attributed to:
Owners of the Company
Non-controlling interests
Earnings per share (expressed in EGP)
Basic and Diluted
2014
EGP’000
(as restated
see note 2.2)
860,231
(479,506)
380,725
(49,445)
(72,033)
(8,762)
250,485
(9,200)
5,994
(3,206)
247,279
(105,591)
141,688
132,769
8,919
141,688
4
9
9.2
10
8
11
1,014,844
(467,528)
547,316
(53,688)
(210,417)
(15,750)
267,461
(6,380)
13,412
7,032
274,493
(119,521)
154,972
144,873
10,099
154,972
0.97
0.89
IDH annual report 2015 71
comprehensIve Income
For the Financial Year ended december 31, 2015
Net profit
Other comprehensive income:
Items that may be subsequently reclassified to profit or loss:
Currency translation differences on foreign currency subsidiaries
Other comprehensive income for the year, net of tax
Total comprehensive income for the year
Attributable to:
Owners of the Company
Non-controlling interests
2015
EGP’000
154,972
2014
EGP’000
141,688
1,432
1,432
1,345
1,345
156,404
143,033
144,862
11,542
156,404
133,623
9,410
143,033
72
IDH annual report 2015
strategIc report
corporate governance
Financial StatementS
cashflows
For the Financial Year ended december 31, 2015
Cash flows from operating activities
Profit for the period before tax
Adjustments for:
Depreciation
Amortization
(Gain)/Loss on disposal of Property, plant and equipment
Impairment in trade and other receivables
Reversal of impairment in trade and other receivables
Provisions made
Provisions reversed
Share-based payment charge
Interest expense
Interest income
Foreign currency exchange (gain) / loss
Net cash from operating activities before changes in working
capital
Provision used
Change in inventory
Change in trade and other receivables
Change in trade and other payables
Cash generated from operating activities before income tax payment
Income tax paid during period
Net cash from operating activities
Cash flows from investing activities
Interest received
Acquisition of Property, plant and equipment
Proceeds from sale of property and equipment
Net cash flows used in investing activities
Cash flows from financing activities
Repayments of borrowings
Interest paid
(Acquisition) / proceeds from change in non-controlling interest
Dividends paid
Financial lease
Net cash flows used in financing activities
Net decrease in cash and cash equivalent
Cash and cash equivalent at the beginning of the period
Effect of exchange rate fluctuations on cash held
Cash and cash equivalent at the end of the period
Note
2015
EGP’000
2014
EGP’000
274,493
247,279
12
13
9
17
22
22
20
9.2
9.2
9.2
22
18
35,840
352
(138)
9,230
(343)
2,881
(6)
1,034
6,380
(9,930)
(3,482)
316,311
(891)
1,681
(36,351)
20,336
301,086
24,104
91,481
481
7,556
(109)
1,703
(872)
-
395
(5,956)
8,590
374,652
(35)
(7,445)
(3,378)
10,485
374,279
(111,224)
189,862
(72,692)
301,587
10,477
(54,897)
2,003
(42,417)
(45)
(4,275)
(272)
(6,464)
(1,711)
(12,767)
134,678
252,110
928
387,716
5,729
(76,089)
70
(70,290)
(382)
(395)
648
(233,819)
(66)
(234,014)
(2,717)
262,586
(7,759)
252,110
IDH annual report 2015 73
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IDH annual report 2015 75
notes to the
consolIdated fInancIal
statements
For the Financial Year ended december 31, 2015
1. Corporate information
The consolidated financial statements of Integrated Diagnostics Holdings plc and its subsidiaries (collectively, the Group)
for the year ended 31 December 2015 were authorized for issue in accordance with a resolution of the directors on 24
March 2016. Integrated Diagnostics Holdings plc “IDH” or “the company” has been established according to the provisions
of the Companies (Jersey) law 1991 under No. 117257.
IDH’s purpose is not restricted and the group has full authority to do any activity as long as it is not banned by the Compa-
nies law unless amended from time to time or depending on the Companies (Jersey) law.
The Group’s financial year starts on 1 January and ends on 31 December each year. The Group’s main activity is concen-
trated in the field of medical diagnostics.
2. Basis of accounting
2.1. Basis of preparation
The financial information presented for the comparative year ended 31 December 2014 essentially represents the financial
performance and position of the same continuing business albeit that the Parent Company of the Group changed in 2014
as a result of group reorganisation.
On 23 December 2014, as a necessary step to its Initial Public Offering on 06 May 2015, the Company (i.e. Integrated Di-
agnostics Holdings plc), issued 150 million shares to the shareholders of the previous Parent Company of the Group, Inte-
grated Diagnostics Holdings LLC (“Caymans”), in exchange for 100% of the issued shares of Caymans.
The effect of this was to add a new parent company on top of the existing group – this being the only change – prior to its
flotation and gave rise to reverse acquisition accounting by the new parent company. In considering the requirements of
IFRS 3, consideration was given as to whether this was a business combination. The conclusion reached by the Directors
was that this was not a business combination by the new parent company merely the addition of a new holding company to
a continuing business, i.e., a group reorganisation. The impact, for accounting purposes, of the transaction on 23 December
2014 was to present the Company as if it had always been the Parent Company of the Group with the consequent continu-
ation of the book values and history previously reported by Caymans, save for alteration of the equity section of the prior
year’s statement of consolidated financial position to reflect that of the new Parent Company.
Statement of compliance
The consolidated financial statements of the Group have been prepared in accordance with International Financial Re-
porting Standards (IFRS) as adopted by the European Union (adopted IFRS) issued by the International Accounting Stan-
dards Board (IASB) and the Jersey Law 1991 an amendment to which means separate company financial statements are
not required.
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.
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Financial StatementS
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 report-
ing currency of the main Egyptian trading subsidiaries within the Group and the primary economic environment in which
the Group operates. For each entity, the Group determines the functional currency and items included in the financial
statements of each entity are measured using that functional currency. The Group uses the direct method of consolidation
and on disposal of a foreign operation; the gain or loss that is reclassified to profit or loss reflects the amount that arises
from using this method.
Going concern
These consolidated financial statements have been prepared on the going concern basis. At 31 December 2015, the Group
had net assets amounting to EGP 1,942,473K. The Group is profitable and cash generative and the Directors have consid-
ered the Group’s cash forecasts for a period of 12 months from the signing of the balance sheet. The Directors have a reason-
able expectation that the Group has adequate resources to meet its liabilities as they fall due for at least 12 months from
the date of approval of these condensed consolidated interim financial statements. Thus, they continue to adopt the going
concern basis in preparing the financial information.
2.2. Basis of consolidation
The consolidated financial statements comprise the financial statements of the Group and its subsidiaries as at 31 Decem-
ber 2015. 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.
On 23 December 2014 the entire share capital of Integrated Diagnostics Holdings LLC (IDH Caymans) or “the previous par-
ent company”, was acquired by Integrated Diagnostics Holdings plc “IDH” funded by an issue of the equity instruments of
IDH in exchange for these equity instruments.
There were no changes in rights or proportions of control in (IDH Caymans and its consolidated subsidiaries and subsid-
iary undertakings from time to time “the group”, and after 23 December 2014 (the date after which IDH Caymans ceased
to be the parent of the group), IDH and its consolidated subsidiaries and subsidiary undertakings from time to time “the
group”) as a result of this transaction.
Whilst, the equity instruments of IDH Caymans were legally acquired, in substance the Directors have determined that
IDH Caymans is the accounting acquirer of IDH. As such, this transaction has been accounted for as a reverse acquisition.
Accordingly, these consolidated financial statements are issued in the name of the new legal parent, IDH, but are a continu-
ation of the consolidated financial statements of IDH Caymans. In accordance with the requirements of IFRS 3: ‘Business
Combinations’, the consolidated financial statements of IDH Caymans, including comparative information, have been ret-
roactively adjusted to transfer EGP 2,099,888,000 from capital reserve to reflect the legal capital position of IDH as shown
in the consolidated statement of changes in equity. No other adjustments have arisen in respect of this reverse acquisition
accounting.
Various restatements have been made to the balance sheets as at 1january 2014 and 31 December 2014 and for the income
statement and statement in changes in equity for the year ended 31 December 2014.
IDH annual report 2015 77
i. As disclosed in the consolidated statement of changes in equity, the individual amounts within equity as at 1 January
2014 has been restated. There are three main reasons for these changes being:
a. The push back of the capital structure of IDH to retroactively account for its share capital structure to be that of the
Group as required by IFRS 3. Previously these changes had mostly been reported as changes in equity during the
year ended 31 December 2014.
b. To adjust the share premium to reflect the accounting required in the individual financial statements of IDH as
required by IAS 27 for its cost of investment in IDH Caymans.
c. The accounting of the put options in the Group see note (iii) below.
Only point (c) results in a change in the total amount of the equity as at 1 January 2014 as all others are reallocations
within equity.
ii. Certain reclassifications of the 31 December 2014 balance sheet have been retroactively adjusted, which are not ma-
terial to the overall financial statements. A prepayment of EGP 1,088,000 had been included in Property, Plant and
Equipment which has been re-allocated to trade and other receivables. Certain income tax balances included within
trade debtors and other receivables of EGP 4,247,000 and other provisions of EGP 9,492,000 have been reallocated to
current tax liabilities. Included in provisions was an accrual for holiday leave of EGP 729,000 which has been reallo-
cated to trade and other payables.
These reclassifications to the 31 December 2014 balance sheet do not result in a change to the total equity as at 31
December 2014.
iii. In addition there has been restatements made to the balance sheets as at 31 December 2013 and 31 December 2014
and to the statement in changes in equity for the year ended 31 December 2014 due the existence of NCI put options.
Through Al Borg the Group made two separate acquisitions in 2011 of Al Makhbariyoun Al Arab and Golden Care Medi-
cal Services.
Under both the sale and purchase agreement for the two acquisitions the vendors have a put option allowing them
to force Al Borg to purchase all the remaining equity interest for a formulae agreed e equity value price. The option is
exercisable in whole from the fifth anniversary of completion of the original purchase agreement being 30 June 2016.
At the date of the agreement the put option and the associated liability was not accounted for within the Group finan-
cial statements or on the conversion to IFRS on the 1 September 2012.
An adjustment has been made to 1 January 2014 position to correctly reflect this transactions within the Group finan-
cial statements. An initial liability has been recognised for the net present value at 1 January 2014 for the exercise price
of the option with the corresponding amount recognized as equity within the put option reserve of the Group. The
initial entry for the put option in Al Makhbariyoun Al Arab being EGP 30,148k and for the put option in Golden Care
Medical Services being EGP 10,834k with the total liability being EGP 40,982k upon initial recognition.
The accounting policy for put options after initial recognition is to recognise all changes in the carrying value of the
put liability within equity. The put liability recognised at 31 December 2014 and at 31 December 2015 year end were as
follows:
Put Option Liability
Makhbariyoun Al Arab
Golden Care Medical Services
Total
31 Dec 2015
EGP’000
47,087
16,982
64,069
31 Dec 2014
EGP’000
36,856
13,564
50,420
iv. Finally a reclassification of tax related expenses from other expenses to income tax expenses of EGP 5,391,108. This
reclassification is to present all tax related expenses and credits within income tax expense.
i. Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an entity when it 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 over the
entity. In assessing control, the Group takes into consideration potential voting rights that are currently exercisable. The
acquisition date is the date on which control is transferred to the acquirer. The financial statements of subsidiaries are in-
cluded in the consolidated financial statements from the date that control commences until the date that control ceases.
Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if do-
ing so causes the non-controlling interests to have a deficit balance.
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ii. Change in subsidiary ownership and loss of control
Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transac-
tions. Where the group loses control of a subsidiary, the assets and liabilities are derecognised along with any related NCI
and other components of equity. Any resulting gain or loss is recognised in profit or loss. Any interest retained in the for-
mer subsidiary is measured at fair value when control is lost.
Transactions eliminated on consolidation of Intra-group balances and transactions, and any unrealised income and ex-
penses arising from intra-group transactions, are eliminated. Unrealised gains arising from transactions with equity-ac-
counted investees are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealised
losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.
2.3. Significant accounting policies
Except for the changes below, the accounting policies set out below have been applied consistently applied to all the years
presented in these consolidated financial statements.
The Group has adopted the following new standard, including any inconsequential amendments to other standards, with
a date of initial application of 1 January 2015.
• Annual Improvements to IFRSs – 2010-2012 Cycle
This new standard had a non-material impact on these consolidated financial statements.
a) Business combinations and goodwill
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the ag-
gregate of the consideration transferred, which is measured at acquisition date fair value, and the amount of any non-con-
trolling interests in the acquiree. For each business combination, the Group elects whether to measure the non-controlling
interests in the acquiree at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-
related costs are expensed as incurred and included in administrative expenses.
When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification
and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the
acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.
Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date.
Contingent consideration classified as an asset or liability that is a financial instrument and within the scope of IAS 39
Financial Instruments: Recognition and Measurement, is measured at fair value with the changes in fair value recognised
in the statement of profit or loss.
Goodwill is initially measured at cost (being the excess of the aggregate of the consideration transferred and the amount
recognised for non-controlling interests) and any previous interest held over the net identifiable assets acquired and li-
abilities assumed. If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the
Group re-assesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed and reviews
the procedures used to measure the amounts to be recognised at the acquisition date. If the reassessment still results in
an excess of the fair value of net assets acquired over the aggregate consideration transferred, then the gain is recognised
in profit or loss.
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impair-
ment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s
cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities
of the acquiree are assigned to those units.
Where goodwill has been allocated to a cash-generating unit (CGU) and part of the operation within that unit is disposed
of, the goodwill associated with the disposed operation is included in the carrying amount of the operation when deter-
mining the gain or loss on disposal. Goodwill disposed in these circumstances is measured based on the relative values of
the disposed operation and the portion of the cash-generating unit retained.
IDH annual report 2015 79
b) Fair value measurement
The Group measures financial instruments such as non-derivative financial instruments, available-for-sale financial assets
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:
• Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities
• Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is di-
rectly or indirectly observable
• Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unob-
servable
For assets and liabilities that are recognised in the financial statements at fair value on a recurring basis, the Group deter-
mines 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 na-
ture, 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 esti-
mated by discounting the future contracted cash flows at the current market interest rate that is available to the Group for
similar transactions.
c) Revenue recognition
Revenue represents the medical value of medical diagnostic services rendered in the year, and is stated net of discounts.
The Company has two types of customers: Walk-in patients and patients served under contract. For patients under con-
tract, rates are agreed in advance on a per-test, client-by-client basis. For both types of customers, revenue is recognized
on completion of the services rendered. Revenue is recognised to the extent that it is probable that the economic benefits
will flow to the Group and the revenue can be reliably measured, regardless of when the payment is received. Revenue is
measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of
payment and excluding taxes or duty.
d) Leases
i. Determining whether an arrangement contains a lease
At inception of an arrangement, the Group determines whether the arrangement is or contains a lease.
At inception or on reassessment of an arrangement that contains a lease, the Group separates out payments and other
consideration required by the arrangement into those for the lease and those for other elements on the basis of their
relative fair values. If the Group concludes for a finance lease that it is impractical to separate the payments reliably,
then an asset and a liability are recognized at an amount equal to the fair value of the underlying asset; subsequently,
the liability is reduced as payments are made and an imputed finance cost on the liability is recognised using the
Group’s incremental borrowing rate.
ii. Leased assets
Assets held by the Group under leases that transfer to the Group substantially all of the risks and rewards of ownership
are classified as finance leases. The leased assets are measured initially at an amount equal to the lower of their fair val-
ue and the present value of the minimum lease payments. Subsequent to initial recognition, the assets are accounted
for in accordance with the accounting policy applicable to that asset. Assets held under other leases are classified as
operating leases and are not recognised in the Group’s statement of financial position.
iii. Lease payments
Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the
lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease.
Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction
of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a
constant periodic rate of interest on the remaining balance of the liability.
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Financial StatementS
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 li-
abilities and their carrying amounts for financial reporting purposes at the reporting date.
Deferred tax is recognized 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 recognized if they arise from the initial recognition of goodwill; deferred in-
come 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 report-
ing 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
Transactions in foreign currencies are initially recorded by the Group’s entities at their respective functional currency spot
rates at the date the transaction first qualifies for recognition. Monetary assets and liabilities denominated in foreign cur-
rencies are translated at the functional currency spot rates of exchange at the reporting date.
Differences arising on settlement or translation of monetary items are recognised in the income statement.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange
rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated
using the exchange rates at the date when the fair value is determined.
On consolidation, the assets and liabilities of foreign operations are translated into Egyptian Pounds at the rate of ex-
change prevailing at the reporting date and their statements of profit or loss are translated at average rate (unless this
average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which
case income and expenses are translated at the rate on the dates of the transactions). The exchange differences arising on
translation for consolidation are recognised in other comprehensive income and accumulated in the translation reserve or
NCI as the case may be. On disposal of a foreign operation, the component of other comprehensive income relating to that
particular foreign operation is recognised in profit or loss.
Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of
assets and liabilities arising on the acquisition are treated as assets and liabilities of the foreign operation and translated at
the spot rate of exchange at the reporting date.
g) Property, plant and equipment
All property and equipment are stated at historical cost less accumulated depreciation. Historical cost includes expendi-
ture that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or recognized 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
IDH annual report 2015 81
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.
Laboratory Equipment held to perform the ‘Hub spoke’ at the Mega Lab and provided under finance lease arrangements
are depreciated under a unit of production method as this most closely reflects the consumption of benefits from the
equipment.
Depreciation on other assets is calculated using the straight-line method to allocate their cost or revalued amounts to their
residual value over their estimated useful lives, as follows:
Buildings
Medical, electric and information systems equipment
Leasehold improvements
Fixtures, fittings & vehicles
50 years
4-10 years
4-5 years
4-16 years
The assets’ residual values and 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 recognized within ‘Other (losses)/gains – net’ in the consolidated statement of income.
Intangible assets
h)
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 amor-
tisation expense on intangible assets with finite lives is recognised in the statement of profit or loss in the expense category
that is consistent with the function of the intangible assets.
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 indefi-
nite 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 acquiree.
Goodwill is stated at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill ac-
quired 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.
Brand
Brands acquired in a business combination are recognized at fair value at the acquisition date and have an indefinite useful life.
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Customer list
Customer lists acquired in a business combination are recognized at fair value at the acquisition date and have finite useful
life. Amortization method on a straight-line basis and the estimated useful live is 4 years, as determined by management.
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 in-
strument of another entity.
Financial assets
i.
Initial recognition and measurement
Financial assets are classified, at initial recognition, as financial assets at fair value through profit or loss, loans and
receivables, AFS financial assets, as appropriate. All financial assets are recognised initially at fair value plus, in the
case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the
acquisition of the financial asset.
Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or
convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Group com-
mits to purchase or sell the asset.
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in three categories:
•
•
•
Financial assets at fair value through profit or loss
Loans and receivables
AFS financial assets
The Group did not hold financial assets classified as financial assets at fair value through the profit or loss or AFS finan-
cial assets at 31 December 2015 and 31 December 2014.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted
in an active market. After initial measurement, such financial assets are subsequently measured at amortised cost
using the effective interest method (“EIR”), less impairment. Amortised cost is calculated by taking into account any
discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is in-
cluded in finance income in the statement of profit or loss. The losses arising from impairment are recognised in the
statement of profit or loss in finance costs for loans and in cost of sales or other operating expenses for receivables.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primar-
ily derecognised (i.e. removed from the Group’s consolidated statement of financial position) when:
• The rights to receive cash flows from the asset have expired
Or
• The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the
received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either (a)
the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred
nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass- through ar-
rangement, it evaluates if, and to what extent, it has retained the risks and rewards of ownership. When it has neither
transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the
Group continues to recognise the transferred asset to the extent of its continuing involvement. In that case, the Group
also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that
reflects the rights and obligations that the Group has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the origi-
nal carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.
IDH annual report 2015 83
Impairment of financial assets
Further disclosures relating to impairment of financial assets are also provided in the following notes:
• Disclosures for significant estimates and assumptions
• Financial assets
• Trade receivables
Note 2
Note 15
Note 17
The Group assesses, at each reporting date, whether there is objective evidence that a financial asset or a group of financial
assets is impaired. An impairment exists if one or more events that has occurred since the initial recognition of the asset (an
incurred ‘loss event’), has an impact on the estimated future cash flows of the financial asset or the group of financial assets
that can be reliably estimated. Evidence of impairment may include indications that the debtors or a group of debtors is ex-
periencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they
will enter bankruptcy or other financial reorganisation and observable data indicating that there is a measurable decrease
in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.
ii. Financial liabilities
Initial recognition and measurement
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of
directly attributable transaction costs.
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. Un-
less 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, finance lease liabilities and loans and borrowings
including bank overdrafts.
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 recog-
nised in the statement of profit or loss.
iii. Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of fi-
nancial 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.
Impairment of non-financial assets
j)
Further disclosures relating to impairment of non-financial assets are also provided in the following notes:
•
•
Disclosures for significant assumptions and estimates
Goodwill and intangible assets with indefinite lives Note 14
Note 2
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 re-
coverable 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.
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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 consis-
tent with the function of the impaired asset, except for properties previously revalued with the revaluation taken to OCI.
For such properties, the impairment is recognised in OCI up to the amount of any previous revaluation.
For assets excluding goodwill, 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 impair-
ment 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 statement of profit or loss
unless the asset is carried at a revalued amount, in which case, the reversal is treated as a revaluation increase.
Goodwill is tested for impairment annually as at 31 October and when circumstances indicate that the carrying value may
be impaired.
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 recog-
nised. 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 ap-
propriate, and when circumstances indicate that the carrying value may be impaired.
Intangible assets that have an indefinite useful life or intangible assets not ready to use are not subject to amortisation and
are tested annually for impairment. 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.
Inventories
k)
Inventories are stated at the lower of cost and net realizable value. Cost is determined using the weighted average method.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated selling and distribution
expenses.
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 a maturity 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) 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 reim-
bursement is virtually certain. The expense relating to a provision is presented in the statement of profit or loss net of any
reimbursement.
IDH annual report 2015 85
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 interest expense.
n) 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.
o) Share-based payment transactions
The grant-date fair value of equity-settled share-based payment awards granted to employees is generally recognized as
an expense, with a corresponding increase in equity, over the vesting period of the awards. The amount recognized as an
expense is adjusted to reflect the number of awards for which the related service and non-market performance conditions
are expected to be met, such that the amount ultimately recognized is based on the number of awards that meet the related
service and non-market performance conditions at the vesting date. For share-based payment awards with non-vesting
conditions, the grant-date fair value of the share-based payment is measured to reflect such conditions and there is no
true-up for differences between expected and actual outcomes.
p) Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating deci-
sion-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 Group has not early adopted any other standard, interpretation or amendments that have been issued but not yet ef-
fective for the year ended 31 December 2015. None of these are expected to have a material effect on these consolidated
financial statements of the Group, except for the following which could change the classification and measurements of
financial assets.
•
•
IFRS 9 “Financial instruments” (expected effective date of January 2018).
Annual improvements to IFRSs - 2012 - 2014 cycle (effective date of January 2016)
IFRS 16 ‘Leases’ (effective date of January 2019) introduces an on balance sheet accounting model for operating leases. The
Group has significant operating lease commitments through the lease of branches and is anticipated to have a material
effect when these arrangements are required to be brought on balance sheet.
3. Significant accounting judgments, estimates and assumptions
The preparation of the Group’s consolidated financial statements in conformity with adopted IFRSs requires management
to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabili-
ties. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to
the carrying amount of assets or liabilities affected in future periods.
Other disclosures relating to the Group’s exposure to risks and uncertainties includes:
• Capital management
• Financial instruments risk management and policies
• Sensitivity analyses disclosures
Note 5
Note 15
Notes 15
Judgments
In preparing these consolidated financial statements, management have made a material judgment, that affect the ap-
plication of the Group’s lease accounting policy and the reported amounts of assets, liabilities, and expenses. Information
about judgment, estimate and assumptions relating to finance leases are set out in note 25.
86
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Financial StatementS
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 re-
flected 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. Impair-
ment 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 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 invest-
ments 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.
Impairment of trade and notes receivables
The requirement for impairment of trade receivables is made through monitoring the debts aging and reviewing custom-
er’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 17,030k (31 December 2014: EGP 12,138k).
4. Segment information
The group is viewed as a single operating segment, as the Group’s Chief Operating Decision Maker (CODM) reviews the
internal management reports and KPIs of the group as whole and not at a further aggregated level.
The group operates in three geographic areas, Egypt, Sudan and Jordan. Each area offers similar services and the KPIs of each
are viewed to be the same and they are not viewed as individual operating segments. The revenue split between the three
regions is set out below, the combined Sudan and Jordan operations make up less than 10% of the Group’s total revenue.
For the year ended
31 December 2015
31 December 2014
Revenue by geographic location
Egypt region
EGP’000
910,886
768,660
Sudan region
EGP’000
30,740
31,527
Jordan region
EGP’000
73,218
60,044
The operating segment profit measure reported to the CODM is Normalised EBITDA, as follows:
Profit from operations
Property, plant and equipment depreciation
Amortization of Intangible assets
EBITDA
Non Recurring Items
IPO Expenses
Closure of Molecular Diagnostics Centre in Cairo
Write off of set up costs for Qatar office now not being pursued
Write-Off of surplus stationary included within inventory
2015
EGP’000
267,461
35,840
352
303,653
125,152
3,429
1,051
1,558
Total
EGP’000
1,014,844
860,231
2014
EGP’000
250,485
24,104
91,481
366,070
8,355
-
-
-
Normalised EBITDA
434,843
374,425
The operating segment assets and liabilities measure reported to the CODM is in accordance with IFRS as shown in the
Group’s Consolidated Statement of Financial Position.
IDH annual report 2015 87
5. Capital management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order
to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to re-
duce 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 is subject to regulation by Egyptian authorities. The outcome of an Ordinary Gen-
eral 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 two
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 total liabilities (being total current liabilities plus long-term financial obligations) less cash
and cash equivalents.
Total liabilities
Less: cash and short-term deposits (Note 18)
Net debt
Total Equity
Capital and net debt
Net debt to equity ratio
2015
EGP’000
401,437
(387,716)
13,721
1,942,473
1,928,752
0.7%
2014
EGP’000
299,745
(252,110)
47,635
1,805,148
1,757,513
2.6%
No changes were made in the objectives, policies or processes for managing capital during the years ended 31 December
2015 and 2014.
Although Sudan sanctions impose restrictions on the distribution of dividends within one year, the amount of undistrib-
uted dividends is not significant to the Group total capital management. Total equity, is as shown in the statements of
financial position. No funds will be remitted from Sudan in the form of cash payments for services provided or dividends
from the company until such a time as the sanctions imposed on Sudan are clarified or released. The total of profits that
could be distributed from Sudan is EGP 4,720K and the amount of cash in Sudan is EGP 16,166K.
6. Group information
Information about subsidiaries
The consolidated financial statements of the Group include:
Al Borg Laboratory Company
Al Mokhtabar Company for Medical Labs
Molecular Diagnostic Center
Medical Genetic Center
Al Makhbariyoun Al Arab Group
(Hashemite Kingdom of Jordan)
Golden Care for Medical Services
Integrated Medical Analysis Company (S.A.E)
SAMA Medical Laboratories Co.
«Ultralab medical laboratory»
AL-Mokhtabar Sudanese Egyptian Co.
Integrated Diagnostics Holdings Limited
Principal
activities
Medical diagnostics service
Medical diagnostics service
Medical diagnostics service
Medical diagnostics service
Country of
Incorporation
Egypt
Egypt
Egypt
Egypt
Medical diagnostics service
Holding company of (Sama)
Medical diagnostics service
Jordan
Egypt
Egypt
% equity interest
2015
99.3%
99.9%
99.9%
55.0%
60.0%
75.0%
99.6%
2014
99.3%
99.9%
99.9%
55.0%
60.0%
75.0%
33.3%
Medical diagnostics service
Medical diagnostics service
Intermediary holding company Cayman Island
Sudan
Sudan
60.0%
65.0%
100.0%
60.0%
65.0%
100.0%
Full details of the historic acquisitions of the group can be found in the prospectus for the initial public offering by the
Company dated 6 May 2015 and available at www.idhcorp.com.
88
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Financial StatementS
7. Business combinations and acquisition of non-controlling interests
Acquisition of Integrated Medical Analysis Company (IMA)
At 21 December 2014 and in accordance with Al Mokhtabar Company’s board of directors’ resolution, the company ac-
quired 33.33% of the share capital of Integrated Medical Analysis Company (S.A.E). Integrated Medical Analysis Company
(S.A.E) was considered a subsidiary of Al Mokhtabar Company even though Al Mokhtabar Company had only a 33.33%
ownership interest. The remaining 66.67% was allocated equally between Dr. Momena Kamel (the Chairman of Al Mokhta-
ber), and Mr Amr Helal of Abraaj Group. Dr. Momena Kamel had waived her rights in the ownership and voting in relation
to the shares of 83,333 shares held in Integrated Company for Medical Analysis, which accounted for 33.33% of the capital
paid and Al Mokhtabar shall be considered as the beneficiary owner of these shares until it is completely transferred before
all the authorities.
As a result the directors of the company consider Al Mokhtabar Company has control over Integrated Medical Analysis
Company (S.A.E). Al Mokhtabar Company has the practical ability to direct the relevant activities of Integrated Medical
Analysis Company (S.A.E) unilaterally.
During the current year, Al Mokhtabar Company increased its share equity of the acquiree by 66.25%, as a result, the per-
centage of total shares of the company in Integrated Medical Analysis Company (S.A.E) became 99.58%.
8. Non-Controlling interest
Financial information of subsidiaries that have material non-controlling interests is provided below:
Proportion of equity interest held by non-controlling interests:
Medical Genetic Center
Al Makhbariyoun Al Arab Group (Hashemite Kingdom of Jordan)
SAMA Medical Laboratories Co. « Ultra lab medical laboratory «
Golden Care for Medical Services
Alborg Laboratory Company
Country of
incorporation
Egypt
Jordan
Sudan
Egypt
Egypt
2015
45.0%
40.0%
40.0%
25.0%
0.7%
2014
45.0%
40.0%
40.0%
25.0%
0.7%
IDH annual report 2015 89
The summarised financial information of these subsidiaries is provided below. This information is based on amounts be-
fore inter-company eliminations.
Al
Makhbariyoun
Al Arab Group
(Hashemite
Kingdom of
Jordan)
EGP’000
SAMA
Medical
Laboratories
Co. “Ultralab
medical
laboratory “
EGP’000
Medical
Genetic
Center
EGP’000
Alborg
Laboratory
Company
EGP’000
Golden
Care for
Medical
Services
EGP’000
Other
individually
subsidiaries
EGP’000
Intra-Group
eliminations
EGP’000
Total
EGP’000
12,468
3,818
73,523
10,894
Summarised statement of profit or loss for 2015:
Revenue
Profit
Other comprehensive
income
Total comprehensive
income
Profit allocated to non-
controlling interest
Other comprehensive
income allocated to non-
controlling interest
3,016
1,033
4,358
1,719
3,016
-
-
-
24,518
4,720
433,944
135,008
-
4,905
126,063
29,626
850
850
-
-
-
-
(297)
(297)
670,516
188,971
3,569
3,569
1,888
956
1,226
199
(247)
10,099
340
-
-
70
-
1,443
Summarised statement of financial position as at 31 December 2015:
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Net assets
Net assets attributable to
non-controlling interest
126,539
167,615
(1,297)
(97,957)
194,900
4,612
18,765
-
(14,368)
9,009
35,038
17,853
-
(12,046)
40,845
920
8,442
(2)
(3,239)
6,121
16,338
2,756
1,379
3,604
935
9,964
-
(144)
10,755
81,428
99,458
(2,155)
(66,903)
111,828
249,472
322,097
(3,454)
(194,657)
373,458
2,689
(509)
20,616 46,873
Al
Makhbariyoun
Al Arab Group
(Hashemite
Kingdom of
Jordan)
EGP’000
SAMA
Medical
Laboratories
Co. “Ultralab
medical
laboratory “
EGP’000
Medical
Genetic
Center
EGP’000
Alborg
Laboratory
Company
EGP’000
Golden
Care for
Medical
Services
EGP’000
Other
individually
subsidiaries
EGP’000
Intra-Group
eliminations
EGP’000
Total
EGP’000
Summarised cash flow information for year ended 31 December 2015:
Operating
Investing
Financing
Net increase/(de-
crease) in cash and
cash equivalents
63,675
(2,968)
(73,933)
7,254
(1,228)
(1,390)
13,711
(5,665)
(9,019)
2,727
181
(2,759)
(13,226)
4,636
(973)
149
(771)
-
-
39,823
(30,224)
39,750
126,419
(39,904)
(47,351)
(771)
49,349
39,164
60,355
12,011
363,114
3,326
Summarised statement of profit or loss for 2014:
Revenue
Profit
Other comprehensive
income
Total comprehensive
income
Profit allocated to non-
controlling interest
Other comprehensive
income allocated to non-
controlling interest
1,497
4,804
554
922
922
-
-
-
90
IDH annual report 2015
26,298
6,385
363,114
96,090
-
3,710
16,301
2,995
-
-
-
-
607
607
(511)
(511)
2,554
680
928
(240)
(1,304)
8,919
829,182
124,517
1,018
1,018
(369)
-
-
306
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strategIc report
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Financial StatementS
Al
Makhbariyoun
Al Arab Group
(Hashemite
Kingdom of
Jordan)
EGP’000
SAMA
Medical
Laboratories
Co. “Ultralab
medical
laboratory “
EGP’000
Medical
Genetic
Center
EGP’000
Alborg
Laboratory
Company
EGP’000
Golden
Care for
Medical
Services
EGP’000
Other
individually
subsidiaries
EGP’000
Intra-Group
eliminations
EGP’000
Total
EGP’000
Summarised statement of financial position as at 31 December 2014:
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Net assets
Net assets attributable to
non-controlling interest
129,974
158,786
(1,560)
(150,620)
136,580
30,491
14,229
-
(36,754)
7,966
965
8,148
(4)
(5,630)
3,479
4,001
13,724
-
(9,823)
7,902
14,701
2,535
1,066
3,929
Summarised cash flow information for year ended 31 December 2014:
Operating
Investing
Financing
Net increase/(de-
crease) in cash and
cash equivalents
111,491
(5,866)
(93,031)
13,850
(6,252)
(2,719)
3,139
991
(2,714)
6,968
(607)
(914)
12,594
5,447
1,416
4,879
9. Expenses and other income
Included in profit and loss are the following:
Impairment on trade and other receivables
Charge for increase in provisions
Operating lease payments (buildings)
Professional and advisory fees*
Amortisation
Depreciation
Total
935
6,507
-
(5,849)
1,593
55,317
49,283
(50)
(43,234)
61,316
221,683
250,677
(1,506)
(251,910)
218,944
1,462
(2,197)
20,027
41,523
(1,037)
-
(3,326)
1,550
(672)
-
135,961
(12,406)
(102,704)
(4,363)
878
20,851
2015
EGP’000
9,230
2,881
22,278
138,436
352
35,840
209,017
2014
EGP’000
7,556
1,703
17,989
10,524
91,481
24,104
153,357
* In the year professional and advisory fees included EGP 125 million relating to the costs for the IPO. No shares were issued
on IPO and so all costs have been expensed.
9.1. Auditor’s remuneration
The group paid or accrued the following amounts to its auditor and its associates in respect of the audit of the financial
statements and for other services provided to the group
Audit of these financial statements
Amounts receivable by the company’s auditor and its associates in respect of:
Audit of financial statements of subsidiaries of the company
Audit-related assurance services
Other assurance services
2015
EGP’000
821
2014
EGP’000
-
629
1,040
1,994
4,484
614
-
1,645
2,259
IDH annual report 2015 91
9.2. Net finance costs
Finance cost
Finance charges payable under finance leases
Net foreign exchange loss
Bank Charges
Finance income
Interest income
Gains on sale of financial investments in investment funds
Net foreign exchange gain
Net finance income/(expense)
2015
EGP’000
2014
EGP’000
(5,725)
-
(655)
(6,380)
9,930
-
3,482
13,412
7,032
(395)
(8,590)
(215)
(9,200)
5,956
38
-
5,994
(3,206)
9.3. 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:
Average number of employees
Wages and salaries
Social security costs
Contributions to defined contribution
plan
Equity settled shared based payments
Total
2015
2014
Medical Administration
406
43,229
1,818
3,917
148,604
9,238
Total
4,323
191,833
11,056
Medical Administration
348
34,219
1,305
3,680
120,144
5,526
Total
4,028
154,363
6,831
2,216
-
160,058
386
1,034
46,467
2,602
1,034
206,525
1,893
-
127,563
354
-
35,878
2,247
-
163,441
Details of Directors’ and Key Management remuneration and share incentives are disclosed in the Remuneration Report
and note 26.
10. Income tax
a)
Amounts recognised in profit or loss
Current tax:
Current year
Deferred tax:
Effect of reduction in tax rate to 22.5%
Deferred tax arising on change in tax legislation relating to undistributed reserves
in subsidiaries
Relating to origination and reversal of temporary differences
Tax expense recognised in profit or loss
2015
EGP’000
2014
EGP’000
(108,128)
(121,944)
13,139
(22,614)
(1,918)
(119,521)
-
-
16,353
(105,591)
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IDH annual report 2015
strategIc report
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Financial StatementS
b) Reconciliation of effective tax rate
The Company is treated as a tax resident of Jersey for the purpose of Jersey tax laws and is subject to a tax rate of 0%. The
current income tax charge for the Group represents tax charges on profits arising in Egypt, Jordan and Sudan. The sig-
nificant profits arising within the group subject to corporate income tax are generated from the Egyptian operations and
subject to 22.5% (2014: 30%) tax rate. The reconciliation of effective income tax rate has been performed using this rate.
Profit before tax
Profit before tax multiplied by rate of corporation tax in Egypt of 22.5% (2014: 30%)
Effect of tax rate in Jersey of 0% (2014: 0%)
Effect of tax rates in Jordan and Sudan of 15% (2014: 15%)
Tax effect of:
Unrecognised tax losses
Change in unrecognized deferred tax assets
Deferred tax arising on undistributed reserves
Reduction in tax rate on deferred tax balances
Non-deductible expenses for tax purposes - employee profit share
Non-deductible expenses for tax purposes - other
Tax expense recognised in profit or loss
Deferred tax
Deferred tax relates to the following:
2015
EGP’000
274,493
61,761
27,985
(805)
-
(1,476)
22,614
(13,139)
7,549
15,032
119,521
2014
EGP’000
247,279
74,184
-
(3,497)
(1,419)
-
-
7,531
28,792
105,591
Property, plant and equipment
Intangible assets
Undistributed reserves from group subsidiaries*
Provisions
Net deferred tax liability
* Undistributed reserves from group subsidiaries
2015
Assets
EGP’000
-
-
-
1,968
Liabilities
EGP’000
(5,668)
(102,113)
(22,614)
-
(128,427)
2014
Assets
EGP’000
-
-
-
2,114
Liabilities
EGP’000
(3,990)
(115,158)
-
-
(117,034)
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. As a result a de-
ferred tax liability has been recorded for the future tax expected to be incurred from undistributed profits held within the
Group which will be taxed under the new legislation imposed and were as follows:
Al Mokhtabar Company for Medical Labs
Alborg Laboratory Company
Integrated Medical Analysis Company
Molecular Diagnostic Center
Golden Care for Medical Services
Medical Genetics Center
Al Makhbariyoun Al Arab Group
2015
EGP’000
8,859
5,776
2,192
2,724
677
236
2,150
22,614
IDH annual report 2015 93
Reconciliation of deferred tax liabilities, net
Net tax which creates a liability at the end of the period
Less:
Net tax resulting in tax liability at the beginning of period
Deferred tax (expense)/income
2015
EGP’000
(128,427)
117,034
(11,393)
2014
EGP’000
(117,034)
133,387
16,353
Unrecognized deferred tax assets
The following deferred tax assets were not recognized due to the uncertainty that those items will have a future tax benefit:
2014
EGP’000
12,138
9,036
2,372
23,546
Impairment of trade receivables (Note 17)
Impairment of other receivables (Note 17)
Provision for legal claims (Note 22)
2015
EGP’000
17,030
10,110
2,967
30,107
Unrecognized deferred tax asset based on enacted tax rate 2015: 22.5%
(2014: 30%)
6,774
7,064
Tax Status
A) Amendments to Egyptian Tax law
The profits of Egyptian subsidiaries within the Group are subjected to corporate tax according to income tax law No. 91 of
2005 and the general applicable tax rate on all Egyptian corporations is 25%. However, the Egyptian Government imposed
an additional 5% tax on corporations with income in excess of EGP 1.0 million beginning on January 1, 2014. Accordingly,
we applied this tax rate in 2014. The Egyptian Government reduced the tax rate to 22.5% beginning in January 2015, and the
Egyptian Government imposed tax on dividends paid by the company to its shareholders (non-resident natural persons and
to corporate bodies, whether resident or non-resident) will be subject to withholding tax at a rate determined by the percent-
age of an investor’s shareholding in the Issuer, except for dividends in the form of bonus shares. Shareholders holding 25% or
more of the Issuer’s share capital or voting rights will be subject to tax on dividends at a rate of 5% of the distributed dividend
(without deducting any costs or expenses), provided they hold the shares for minimum two years Shareholders holding less
than 25% of the Issuer’s share capital or voting rights will be subject to tax on dividends at a flat rate of 10% (without deduct-
ing any costs or expenses), which have been applied accordingly when calculating current and deferred tax in 2015.
B) Integrated Diagnostics Holdings plc – “IDH”
Integrated Diagnostics Holdings plc “IDH” has been established according to the provisions of the Companies (Jersey) law
1991 under No. 117257. The company is subject to tax in Jersey at 0% in accordance with Jersey law.
11. 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 weight-
ed 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:
2015
EGP’000
144,873
150,000
0.97
Profit attributable to ordinary equity holders of the parent for basic earnings
Weighted average number of ordinary shares for basic and dilutive EPS
Basic and dilutive earnings per share (expressed in EGP)
2014
EGP’000
132,769
150,000
0.89
There is no dilutive effect from equity settled share based payment arrangements detailed in note 20. Shares issued by the
Company under the arrangement will be purchased from the market on the award date and no shares are held in treasury.
94
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Financial StatementS
12. Property, plant and equipment
Cost
At 1 January 2014
Additions
Disposals
Exchange differences
Transfers
At 31 December 2014
Additions
Disposals
Exchange differences
Transfers
At 31 December 2015
Depreciation and impairment
At 1 January 2014
Depreciation charge for the year
Exchange differences
At 31 December 2014
Depreciation charge for the year
Disposals
Exchange differences
At 31 December 2015
Net book value At 31 December
2015
At 31 December 2014
Medical,
electric &
information
system
equipment
EGP’000
Land &
Buildings
EGP’000
Leasehold
improvements
EGP’000
Fixtures,
fittings &
vehicles
EGP’000
Building &
Leasehold
improvements
in construction
EGP’000
124,960
-
-
183
3,960
129,103
-
-
509
38,000
167,612
14,089
2,434
59
16,582
2,600
-
149
19,331
80,211
11,577
(60)
(86)
1,712
93,354
95,422
(9,179)
1,697
15,459
196,753
48,263
12,900
(28)
61,135
21,390
(7,588)
466
75,403
40,155
8,127
(408)
(96)
4,546
52,324
24,788
(1,391)
551
-
76,272
15,901
6,665
(31)
22,535
9,726
(1,335)
162
31,088
23,073
2,447
(82)
300
-
25,738
5,094
(584)
1,701
-
31,949
8,005
2,105
96
10,206
2,124
(367)
500
12,463
10,218
53,813
-
-
(10,218)
53,813
3,144
-
78
(53,459)
3,576
-
-
-
-
-
-
-
-
Total
EGP’000
278,617
75,964
(550)
301
-
354,332
128,448
(11,154)
4,536
-
476,162
86,258
24,104
96
110,458
35,840
(9,290)
1,277
138,285
148,281
112,521
121,350
32,219
45,184
29,789
19,486
15,532
3,576
53,813
337,877
243,874
Leased equipment
EGP 74m of medical and electric equipment was supplied under finance lease arrangements during the year ended 31 De-
cember 2015. This equipment was supplied to service the Group’s new state of the art Mega Lab, The Mega Lab. The equip-
ment secures lease obligations, see note 25 for further details on the recognition and the leasing arrangement.
IDH annual report 2015 95
13. Intangible assets
Cost
At 31 December 2014
Effect of movements in ex-
change rates
At 31 December 2015
Amortisation and impair-
ment
At 1 January 2014
Amortisation
At 31 December 2014
Amortisation
At 31 December 2015
Net book value
At 31 December 2015
At 31 December 2014
Goodwill
EGP’000
Brand Name
EGP’000
Customer list
EGP’000
Supplier list
EGP’000
Non to
compete
agreement
EGP’000
Total
EGP’000
1,234,432
374,055
17,043
240,812
64,722
1,931,064
(3,233)
1,231,199
971
375,026
-
17,043
-
240,812
-
64,722
(2,262)
1,928,802
-
-
-
-
-
-
-
-
-
-
1,231,199
1,234,432
375,026
374,055
11,766
4,925
16,691
352
17,043
-
352
176,846
63,966
240,812
-
240,812
-
-
42,132
22,590
64,722
-
64,722
230,744
91,481
322,225
352
322,577
-
-
1,606,225
1,608,839
14. Goodwill and intangible assets with indefinite lives
Goodwill acquired through business combinations and intangible assets with indefinite lives are allocated to the Group’s
CGUs as follows:
2015
EGP’000
2014
EGP’000
Molecular Diagnostic Center
Goodwill
Medical Genetics Center
Goodwill
Al Makhbariyoun Al Arab Group (“Biolab”)
Goodwill
Brand name
Golden Care for Medical Services (“Ultralab”)
Goodwill
Brand name
Alborg Laboratory Company (“Al-Borg”)
Goodwill
Brand name
Al Mokhtabar Company for Medical Labs (“Al-Mokhtabar”)
Goodwill
Brand name
Balance at 31 December
1,849
1,849
1,755
1,755
20,576
9,965
30,541
10,641
1,677
12,318
497,275
142,066
639,341
699,102
221,319
920,421
1,606,225
1,849
1,849
1,755
1,755
16,041
7,769
23,810
18,409
2,902
21,311
497,275
142,066
639,341
699,102
221,318
920,420
1,608,486
The Group performed its annual impairment test in October 2015. The Group considers the relationship between its mar-
ket capitalisation and its book value, among other factors, when reviewing for indicators of impairment.
96
IDH annual report 2015
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Financial StatementS
Key assumptions used in value in use calculations and sensitivity to changes in assumptions
IDH instructed FinCorp Investment holding (referred to hereafter as “Fincorp”) an independent financial advisor, to pre-
pare an independent impairment assessment of the Group’s CGUs. The assessment was carried out based on business
plans provided by IDH. These plans have been prepared based on criteria set out below:
Annual revenue growth rates
Average revenue per branch
EGP’000
Average gross margin
Annual growth in costs
Terminal value growth rate from 1 January 2021
Discount rate
Ultra Lab
9%
1,933
53%
9%
2%
25.2%
Bio Lab
11%
600
Al-Mokhtabar
8%
3,227
43%
11%
2%
18.5%
63%
8%
3%
16.8%
Al-Borg
9%
3,382
55%
9%
3%
16.8%
Fincorp has prepared discounted cash flow projections using the key assumptions above so as to be able to calculate the
net present value of the asset in use and determine the recoverable amount. The projected cash flows from 2016- 2020 have
been based on detailed forecasts prepared by management for each CGU and a terminal value thereafter. Management
have used past experience and historic trends achieved in order 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.
This recoverable amount is then compared to the carrying value of the asset as recorded in the books and records of IDH
plc. The discount rate is the pre-tax rate taking into account 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 conclusions from the impairment review were that there was significant headroom within the forecasts and therefore
no impairment is required.
15. Financial assets and financial liabilities
15.1. Financial assets and financial liabilities
The fair values of all financial assets and financial liabilities by class shown in the balance sheet are as follows:
Loans and receivables
Cash and cash equivalent
Trade and other receivables
Total financial assets
Financial liabilities measured at amortised cost
Trade and other payables
Other interest-bearing loans and borrowings
Put option liability
Finance lease liabilities
Total financial liabilities
Total financial instruments
2015
EGP’000
387,716
117,155
504,871
151,320
-
64,069
74,569
289,958
214,913
2014
EGP’000
252,110
90,075
342,185
124,157
45
50,420
1,440
176,062
166,123
The fair values of all of the Group’s financial instruments are the same as their carrying values. All financial instruments
are deemed Level 3.
15.2. Financial instruments risk management objectives and policies
The Group’s principal financial liabilities are trade and other payables, put option liability and finance lease liabilities. The
Group’s principal financial assets include trade and other receivables, and cash and short-term deposits that derive directly
from its operations.
IDH annual report 2015 97
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 finan-
cial 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 loans and borrowings and deposits.
The sensitivity analyses in the following sections relate to the position as at 31 December in 2015 and 2014. The sensitivity
analyses 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 analyses exclude the impact of movements in market variables on: the carrying values of pension and other post-
retirement obligations; provisions; and the non-financial assets and liabilities of foreign operations.
The following assumptions have been made in calculating the sensitivity analyses:
• The sensitivity of the relevant statement of profit or loss 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 2015 and 2014 including the effect
of hedge accounting.
• The sensitivity of equity is calculated by considering the effect of any associated cash flow hedges and hedges of a net
investment in a foreign subsidiary at 31 December 2015 for the effects of the assumed changes of the underlying risk.
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of
changes in market interest rates. During the year ending 2015 the Group was not exposed to the risk of changes in floating
interest rates. The only interest-bearing financial liabilities held by the Group at 31 December 2015 were for finance lease
liabilities held and disclosed in note 25. The implicit interest rate for the finance leases in place was estimated to be 11.5%.
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’s exposure to the risk of changes in foreign exchange rates relates primarily to the
Group’s operating activities (when revenue or expense is denominated in a foreign currency) and the Group’s net invest-
ments in foreign subsidiaries.
The group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, pri-
marily with respect to the US Dollar, Sudanese Pound and the Jordanian Dinar. Foreign exchange risk arises from future
commercial transactions, recognized assets and liabilities and net investments in foreign operations. However, the man-
agement 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 recognized assets or liabilities are denomi-
nated in a currency that is not the entity’s functional currency.
The group has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk.
Currency exposure arising from the net assets of the group’s foreign operations is managed primarily through borrowings
denominated in the relevant foreign currencies.
98
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Financial StatementS
At year end, major financial assets / (liabilities) in foreign currencies were as follows (the amounts presented are shown in
the foreign currencies):
US Dollar
Euros
GBP
JOD
SDG
US Dollar
Euros
JOD
SDG
The following is the exchange rates applied against EGP:
US Dollar
Euros
GBP
JOD
SAR
SDG
US Dollar
Euros
GBP
JOD
SAR
SDG
Assets
’000
12,581
87
11
1,642
16,831
Assets
’000
15,389
1,176
300
9,630
2015
Liabilities
’000
(1,958)
(126)
(8)
(5,425)
(17,652)
Net exposure
’000
10,623
(39)
3
(3,783)
(821)
2014
Liabilities
’000
Net exposure
’000
(345)
(59)
(3,666)
-
15,044
1,117
(3,366)
9,630
Average rate for the year ended
2015
7.70
8.48
11.73
10.81
2.05
1.20
2014
7.09
9.34
11.63
10.04
1.89
1.14
Spot rate at the year ended against EGP
31-Dec-14
7.15
8.68
11.11
10.11
1.9
1.1
31-Dec-15
7.78
8.46
11.52
10.90
2.07
1.28
At 31 December 2015, if the Egyptian Pounds had weakened / strengthened by 10% against the US Dollar with all other vari-
ables held constant, pre-tax profit for the year would have been increased / decreased by EGP 8,264k (2014: EGP 10,757k)
higher / lower, mainly as a result of foreign exchange gains/losses on translation of US dollar-denominated financial assets
and liabilities.
At 31 December 2015, if the Egyptian Pounds had weakened / strengthened by 10% against the Jordanian Dinar with all
other variables held constant, pre-tax profit for the year / period would have been increased / decreased by EGP (4,124)k
(2014: EGP (3,403)k) higher / lower, mainly as a result of foreign exchange gains/losses on translation of JOD - denominated
financial assets and liabilities.
IDH annual report 2015 99
At 31 December 2015, if the Egyptian Pounds had weakened / strengthened by 10% against the Sudanese Pound with all
other variables held constant, pre-tax profit for the year / period would have been increased / decreased by EGP (105)k
(2014: EGP 1,059k ) higher / lower, mainly as a result of foreign exchange gains/losses on translation of SDG -denominated
financial assets and liabilities.
Price risk
The group does not have investments in equity securities or bonds and accordingly is not exposed to price risk related to
the change in the fair value of the investments.
Credit risk
Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract,
leading to a financial loss. The Group is exposed to credit risk from its operating activities (primarily trade receivables) and
from its financing activities, including deposits with banks and financial institutions, foreign exchange transactions and
other financial instruments.
Credit risk is managed on 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.
For banks and financial institutions, the Group is only dealing with the banks which have a high independent rating and a
good reputation.
Trade receivables
Customer credit risk is managed by each business unit subject to the Group’s established policy, procedures and control
relating to customer credit risk management. Credit quality of a customer is assessed based on an individual credit limits
are defined in accordance with this assessment. Outstanding customer receivables are regularly monitored at 31 December
2015.
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 calcula-
tion is based on actual incurred historical data. The Group does not hold collateral as security.
The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed
in Note 17.
Cash and cash equivalents
Credit risk from balances with banks and financial institutions is managed by the Group’s treasury department in ac-
cordance 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 18.
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.
100
IDH annual report 2015
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Financial StatementS
The table below summarises the maturity profile of the Group’s financial liabilities based on contractual undiscounted
payments:
Year ended 31 December 2015
Obligations under finance leases
Put option liability
Trade and other payables
Year ended 31 December 2014
Interest-bearing loans and borrowings
Obligations under finance leases
Put option liability
Trade and other payables
1 year or less
EGP’000
1 to 5 years
EGP’000
more than 5 years
EGP’000
Total
EGP’000
22,321
69,956
151,320
243,597
45
858
-
124,157
125,060
62,681
-
-
62,681
-
582
66,254
-
66,836
21,375
-
-
21,375
-
-
-
-
106,377
69,956
151,230
327,653
45
1,440
66,254
124,157
191,896
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 ap-
plicable 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 re-
paid over a period of 45 days from the date of the invoice or the date of the commitment.
16. Inventories
Chemicals and operating supplies
2015
EGP’000
34,326
34,326
2014
EGP’000
36,007
36,007
During 2015, EGP 172,354k (2014: EGP 163,867k) was recognised as an expense for inventories carried at net realisable
value. This was recognised in cost of sales.
17. Trade and other receivables
Trade receivables
Prepaid expenses
Receivables due from related parties
Other receivables
Accrued revenue
For terms and conditions relating to related party receivables, refer to Note 26.
2015
EGP’000
100,033
13,467
465
2,143
1,047
117,155
2014
EGP’000
74,427
10,446
1,808
2,894
500
90,075
IDH annual report 2015 101
As at 31 December 2015, trade and other receivables with an initial carrying value of EGP 27,140k (2014: EGP 21,174k) were
impaired and fully provided for. Below shows the movements in the provision for impairment of trade and other receiv-
ables:
At 1 January
Net increase during the year
Utilised during the year
Unused amounts reversed
At 31 December
As at 31 December, the ageing analysis of trade receivables is as follows:
2015
EGP’000
21,174
9,230
(2,921)
(343)
27,140
2014
EGP’000
16,213
7,556
(2,486)
(109)
21,174
2015
2014
18. Cash and cash equivalent
Cash at banks and on hand
Short-term deposits
Total
EGP’000
100,033
74,427
1 - 30 days
EGP’000
30-60 days
EGP’000
61-90 days
EGP’000
Over 90 days
EGP’000
29,508
25,698
28,774
11,293
20,668
9,896
21,083
27,540
2015
EGP’000
124,332
263,384
387,716
2014
EGP’000
66,334
185,776
252,110
EGP 16,166K (2014: EGP 10,896K) of total cash and cash equivalents are held in subsidiaries operating in Sudan. Prior ap-
proval is required to transfer these funds abroad.
Cash at banks earns interest at floating rates based on daily bank deposit rates. Short-term deposits 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 rates ranging from 7%- 8% per annum.
19. Share capital
The Company’s ordinary share capital is $150,000,000 equivalent to EGP 1,072,500,000.
In issue at beginning of the year
Issued during the year
In issue at the end of the year
Ordinary shares
31 December
2015
150,000,000
-
150,000,000
Ordinary shares
31 December
2014
-
150,000,000
150,000,000
On 23 December 2014, as a necessary step to its Initial Public Offering on 11 May 2015, the Company (i.e. Integrated Diag-
nostics Holdings plc), issued 150 million shares to the shareholders of the previous Parent Company of the Group, Inte-
grated Diagnostics Holdings LLC (“Caymans”), in exchange for 100% of the issued shares of Caymans. This created a share
premium of $130,026,958 equivalent to EGP 929,693,000.
There were no changes in rights or proportions of control in Caymans and its consolidated subsidiaries, and after 23 De-
cember 2014 (the date after which Caymans ceased to be the parent of the group) IDH and its consolidated subsidiaries as
a result of this transaction.
Whilst, the equity instruments of Caymans were legally acquired, in substance the Directors have determined that Cay-
mans is the accounting acquirer of IDH. As such, this transaction has been accounted for as a reverse acquisition.
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Financial StatementS
Capital reserve
Balances have arisen in the capital reserve 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 bal-
ances arising represent the difference between the value of the equity structure of the previous and new parent companies.
When the capital position of the parent company is rearranged, the capital reserve is adjusted appropriately such that the
equity balances presented in the Group accounts best reflect the underlying structure of the Group’s capital base.
Legal reserves
Legal reserve was formed based on the legal requirements of the Egyptian law governing the Egyptian subsidiaries. Ac-
cording 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, including gains or losses arising on net investment hedges.
20. Equity settled share based payment arrangements
The Company has established annual equity awards for the Chairman and Chief Executive Officer. The Chairman and Chief
Executive Officer receive annually the number of ordinary shares in the Company equal to US$75,000 and EGP 450,000
(at the prevailing USD:EGP conversion rate on the date of grant), respectively and is deemed to be the fair value of the ar-
rangement. In each case, the number of shares attributable to the award will be calculated by dividing the notional dollar
amount of the award (pro-rated as necessary to reflect their actual service in their first and last years of service) by a refer-
ence price. In the case of their first award, the reference price shall be the price at which the ordinary shares were acquired
by new investors in the Company’s IPO. For each subsequent financial year of service, the reference price shall be the aver-
age quoted closing price of the ordinary shares on the London Stock
Exchange over the last 30 days of that financial year (provided that, if such 30 day period would otherwise fall within a
close period, the Company’s board of directors shall determine the appropriate reference period in its absolute discretion).
The grant and vesting of each Annual Award and the release of any shares will be subject to such other conditions as the
Company may determine in its absolute discretion after prior discussion with the Executives. The first Annual Award to be
made under this agreement has been granted by year end.
21. Distributions made and proposed
Cash dividends on ordinary shares declared and paid:
Dividend paid
Proposed dividends on ordinary shares:
Final dividend for the year 2015: US$0.06 per share
(2014: nil) per share
2015
EGP’000
-
-
2014
EGP’000
229,714
229,714
70,020
-
The proposed 2015 dividend on ordinary shares are subject to approval at the annual general meeting and is not recognised
as a liability as at 31 December 2015.
IDH annual report 2015 103
22. Provision
At 1 January 2015
Provision made during the year
Provision used during the year
Provision reversed during the year
At 31 December 2015
Current
Non- Current
At 1 January 2014
Provision made during the year
Provision used during the year
Provision reversed during the year
At 31 December 2014
Current
Non- Current
Egyptian
Government Training
Fund for employees
EGP’000
6,606
1,389
-
-
7,995
-
7,995
5,579
1,027
-
-
6,606
-
6,606
Provision
for legal claims
EGP’000
2,372
1,492
(891)
(6)
2,967
-
2,967
2,603
676
(35)
(872)
2,372
-
2,372
Total
EGP’000
8,978
2,881
(891)
(6)
10,962
-
10,962
8,182
1,703
(35)
(872)
8,978
-
8,978
Employees training provision
The provision for employees training fund have been provided for in accordance with the Egyptian law and regulations.
Legal claims provision
The amount comprises the gross provision in respect of legal claims brought against the Group. Management’s opinion, af-
ter 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 2015.
23. Trade and other payables
Trade payables
Accrued expenses
Other payables
Put option liability
Finance lease liabilities
24. Long-term financial obligations
Put option liability
Finance lease liabilities (see note 25)
2015
EGP’000
70,743
73,747
6,830
64,069
14,242
229,631
2015
EGP’000
-
60,327
60,327
2014
EGP’000
59,351
57,738
7,068
-
858
125,015
2014
EGP’000
50,420
582
51,002
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 a put option liability has been recog-
nised for the net present value for the exercise price of the option.
104
IDH annual report 2015
strategIc report
corporate governance
Financial StatementS
25. Commitments and contingencies
Operating lease commitments
Non-cancellable operating lease rentals are payable as follows:
Less than one year
Between one and five years
More than five years
2015
EGP’000
21,706
68,817
37,450
127,973
2014
EGP’000
20,033
73,680
50,644
144,357
The Group lease certain branches for the operation of the business. During the year EGP 22,278K was recognised as an
expense in the income statement in respect of operating leases (2014: EGP 17,989K).
Finance lease
The Group has finance leases for various items of plant and machinery. Future minimum lease payments under finance
leases and hire purchase contracts, together with the present value of the net minimum lease payments are, as follows:
Finance lease liability – laboratory equipment
Finance lease liability – other
Finance lease liabilities for the laboratory equipment are payable as follows:
Less than one year
Between one and five years
More than five years
Minimum lease
payments
2015
EGP’000
21,860
62,681
21,375
105,916
2015
EGP’000
74,023
461
74,484
Interest
2015
EGP’000
7,965
20,290
3,638
31,893
2014
EGP’000
858
582
1,440
Principal
2015
EGP’000
13,895
42,391
17,737
74,023
The Group entered into 2 significant agreements during the period ended 31 December 2015 to service the Group’s new
state-of-the-art Mega Lab.
Both agreements have minimum annual commitment payments to cover the supply of medical diagnostic equipment, kits
and chemicals to be used for testing and ongoing maintenance and support services over the term of the agreement. 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. Management fully expect to be able to fulfil the minimum payments and the basis of treating
the proportion of payments relating to the supply of equipment as a finance lease.
Management have performed a fair value exercise in order to allocate payments between the different elements of the ar-
rangements and identify the implicit interest rate of the finance lease. Due to the difficulty in reliably splitting the payments
for the supply of medical equipment from the total payments made, 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 implicit interest rate of both finance leases has been estimated to
be 11.5%. The equipment is being depreciated based on units of production method as this most closely reflects the con-
sumption of the benefits from the equipment.
Contingent liabilities
There are no contingent liabilities relating to the group’s transactions and commitment with banks.
IDH annual report 2015 105
26. Related party disclosures
The significant transactions with related parties, their nature volumes and balance during the period 31 December 2015
and 2014 are as follows:
Related Party
Health-care Tech Company
Life Scan (S.A.E)
Integrated Treatment for Kidney Diseases
(S.A.E)
Nature of transaction
Expenses paid on behalf
Expenses paid on behalf
Nature of
relationship
Affiliate*
Affiliate**
Entity owned by
Company’s CEO
31-Dec-15
Transaction
amount
in the year
EGP’000
75
277
Total
Rental income
274
Related Party
Health-care Tech Company
Integrated Treatment for Kidney Diseases
(S.A.E)
Nature of transaction
Expenses paid on behalf
Bank transfers Value
of assets and expenses
paid on behalf
31-Dec-14
Transaction
amount
in the year
EGP’000
75
Nature of
relationship
Affiliate
Entity owned by
Company’s CEO
1,695
Amount
due from
EGP’000
188
277
-
465
Amount
due from
EGP’000
113
1,695
1,808
* Health-care Tech is a company whose shareholders include Dr. Seham Ibrahim (a member of the Senior Management)
** Life Scan is a company whose shareholders include Dr. Alaa Abd El-Rehim (a member of the Senior Management)
Terms and conditions of transactions with related parties
The transactions with the related parties are made on terms equivalent to those that prevail in arm’s length transactions.
Outstanding balances at the year-end are unsecured and interest free and settlement occurs in cash. There have been no
guarantees provided or received for any related party receivables or payables. For the year ended 31 December 2015, the
Group has not recorded any impairment of receivables relating to amounts owed by related parties (2014: nil). This assess-
ment is undertaken each financial year through examining the financial position of the related party and the market in
which the related party operates.
IDH commits 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 Foun-
dation allocates this sum to organizations 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 2015 EGP
800,000 (2014: EGP 1,998,000) was paid to the foundation by the IDH Group.
106
IDH annual report 2015
strategIc report
corporate governance
Financial StatementS
Compensation of key management personnel of the Group
The amounts disclosed in the table are the amounts recognised as an expense during the reporting period related to key
management personnel.
Short-term employee benefits
Share-based payment transactions
Total compensation paid to key management personnel
2015
EGP’000
17,252
1,034
18,286
2014
EGP’000
18,540
-
18,540
27. Establishment of saving fund to employees
The Al Borg Laboratory Company’s board of directors on 8 October 2006 approved unanimously to establish an employees’
saving fund according to the provisions of Egyptian law No. 54 for the year 1975 on private insurance funds with the follow-
ing conditions and terms:
• The participation by the employee in the Fund is optional and only for the company’s permanent employees.
The employees saving fund will be financed as follows:
- 10 % calculated monthly of annual basic salaries and incentives and contributed for by the Company.
- 2.5 % calculated monthly of annual basic salaries and incentives, and contributed for by the employees.
• The benefits and collection of contributions (source of financing the Fund) starts from 1/1/2007.
The subscribed employees in the fund will obtain the following benefits: The employee or his heirs will be reimbursed for
the contribution he/she made to the Fund upon end of his service- for any reason of the following reasons (either total or
partial disability or reach the age of retirement or death, or retirement after three years from the date the employee started
his/ her contributions to the fund) plus his share of the company’s contributions and his/her share in return of the Fund’s
investment.
At 31 December 2015 EGP 274K (2014: EGP 237K) was held in trade and other payables in relation to this fund.
IDH annual report 2015 107
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shareholder
& Investor InformatIon
Registered and Head Office
12 Castle Street,
St Helier, Jersey JE2 3RT
T: +44 153 484 7000
Egypt Office
59 Abdel Moneim Riyad St.,
Mohandiseen, Giza
Website
idhcorp.com
Issued Share Capital
150,000,000 ordinary shares
Admission Date
6 May 2015
Annual General Meeting
11:00am BST on 9 May 2016
Hilton London Tower Bridge, London, UK
Auditor
KPMG
Legal Counsel
Freshfields Bruckhaus Deringer LLP
Registrar
Capita Asset Services
Shareholder Inquiries
Mr. Sherif El-Ghamrawi
Investor Relations Director
T: +20 (0)2 3345 5530
sherif.elghamrawi@idhcorp.com
Copies of the 2015 Annual Report of Integrated Diagnostics Holdings are available for
download from the Group’s website in .pdf format. Hard copies may be requested from
the Director of Investor Relations.
idhcorp.com