Annual Report 2016
The largest
fully-integrated
diagnostics
provider in
Egypt
Contents
Strategic Report
02
IDH at a Glance 04
2016 Highlights 06
A Note from Our Chairman 10
A Note from Our CEO 12
Egypt – Our Principal Market 16
IDH’s Competitive Strengths & Business Model 18
Our Market 20
Our Business Model 22
Internationally Accredited Test Portfolio 24
Growth Strategy 26
Principal Risks, Uncertainties and Their Mitigation 28
Financial Review 34
Corporate Responsibility
Corporate Governance
40
42
Board of Directors 44
Corporate Governance Report 46
Audit Committee Report 54
Remuneration Committee Report 58
Directors’ Report 60
Financial Statements
64
Strategic
Report
IDH is the largest fully-
integrated diagnostics
provider in Egypt, with
more than a 50% share
by revenue of the private
chain market segment.
2
IDH annual report 2016
IDH annual report 2016
3
Strategic Report
IDH
at a Glance
Integrated Diagnostics Holdings (IDH, the Group,
or the Company) is the largest fully-integrated
private sector provider of diagnostics services in
Egypt, where the Group can trace its history back
38 years. A long track record for quality and safety
has earned the Company a trusted reputation, as
well as internationally recognised accreditations
for its portfolio of over 1,000 diagnostics tests. From
its base of 354 branches in Egypt, Sudan and Jordan
as of 31 December 2016, the Group will continue to
add laboratories through a Hub, Spoke and Spike
business model that provides a scalable platform
for efficient expansion and can be replicated to
capitalise on future growth opportunities in markets
beyond those in which IDH currently operates, such
as high-growth markets in Africa and the Middle
East. The Group has been a Jersey-registered entity
with a Standard Listing on the Main Market of the
London Stock Exchange since May 2015.
+ 38 years
track record at the subsidiary level
354
operational branch labs as at
31 December 2016
5
key brands with strong awareness
in underserved markets
24 mn
tests completed in 2016
eGp 1,171 mn
in revenue in 2016, up 15% on 2015
1,000 +
internationally accredited diagnostic
tests offered
5.8 mn
patients served in 2016
44 %
eBItDa margin in 2016
Dividend
of 14 uS cents per share (vs. 6 uS
cents in 2015)
4
IDH annual report 2016
IDH annual report 2016
5
Strategic Report
2016
Highlights
Revenues
up 15% in 2016 to EGP 1,171 million, driven largely by bet-
ter pricing as well as the impact of volume and the foreign
currency translation of results from IDH’s Sudanese and
Jordanian subsidiaries into Egyptian pounds.
Gross profit
increased 15% period-on-period to EGP 628 million on the
back of strong cost discipline despite macro-economic
headwinds including a high-inflation environment.
Net profit
of EGP 267 million, up from EGP 155 million in 2015.
EBITDA
of EGP 511 million, up from EGP 304 million in 2015.
Operating profit
of EGP 466 million compared with EGP 267 million in 2015.
The comparative figure for last year reflects the impact
of fees associated with IDH’s initial public offering on the
London Stock Exchange of EGP 125 million as well other
non-recurring expenses of EGP 6.0 million.
Net foreign exchange loss
amounted to EGP 89 million compared with a net forex gain
of EGP 3.5 million in 2015.
Recommended final dividend
of US$ 0.14 ( fourteen US cents) per share, equivalent to US$
21 million in total compared with US$ 0.06 (six US cents)
per share, equivalent to US$ 9 million in total in 2015.
Earnings per Share
of EGP 1.74, up from EGP 0.97 in 2015.
Expansion of branch footprint
to 354 in 2016, up from 314 branches in 2015.
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.
Egypt is IDH’s principal market, where we operate primarily through our
Al Borg and Al Mokhtabar businesses, each of which is a well-known and
market-leading brand with a loyal following. Together, our Egyptian brands
accounted for 87% of IDH’s revenue in the year ended 31 December 2016.
Our Services
Through our Al Borg, Al Mokhtabar, Biolab, Ultralab and Al Mokhtabar Sudan
brands, IDH offers more than 1,000 diagnostic tests, ranging from basic tests,
such as glucose testing for diabetes, to molecular tests for hepatitis and highly-
specialised DNA tests.
Immunology
Radiology
Hematology
Endocrinology
Clinical Chemistry
Molecular Biology
CytogenEtics
Hatopathology
Microbiology
6
IDH annual report 2016
IDH annual report 2016
7
Strategic Report
FINANCIAl & OpERATIONAl
pERFORMANCE
Indicator
Units
2016
2015
Operational
Number of Tests
million
24.1
23.8
Number of Patients
million
Number of Labs
Tests per Patient
Financial
Revenue
Per Patient
Per Test
Per Lab
EBITDA*
Net Profit
#
#
EGP
million
EGP
EGP
EGP
million
EGP
million
EGP
million
5.8
354
5.8
314
4.15
4.11
1,171
1,015
201
48.6
3.3
511
267
175
42.6
3.5
304
155
Earnings per share
EGP
1.74
0.97
*
EBITDA is calculated as operating profit plus depreciation and amortisation. EBITDA for 2015
reflects the impact of fees associated with IDH’s initial public offering on the London Stock
Exchange of EGP 125 million as well other non-recurring expenses of EGP 6.0 million.
Revenue by Geography 2016 and 2015
% of total revenue
in 2016
Egypt
Jordan
Sudan
2016
2015
87% 90%
10%
3%
7%
3%
% of total revenue
in 2015
REvENUE By TypE IN 2016 AND 2015
% of total revenue
in 2016
2016
2015
Walk in
39% 39%
Contract
61% 61%
% of total revenue
in 2015
8
IDH annual report 2016
IDH annual report 2016
9
Strategic Report
A Note
from Our Chairman
Despite the strong macro-economic headwinds faced by
Egypt, I am pleased to report that your Company delivered
resilient operating results for 2016.
Our ability to continue to show resilient performance de-
spite the currency crisis of 2016 (with a wide gulf between
official and parallel market prices of foreign exchange, cul-
minating in a free-float of the Egyptian pound in November
that saw the currently lose more than 50% of its value) and
continued high-inflation environment is testament to our
established, trusted brands; internationally accredited
laboratories; scalable business model; and wide-reaching
branch network.
I am now significantly more optimistic on the political
and economic future of Egypt. The country is now better
positioned to make progress in stabilising the currency and
accelerating economic growth following the recent much-
needed fiscal and monetary reforms and the US$ 12 billion
International Monetary Fund (IMF) extended fund facility.
This was most recently underscored by the government’s
success with its oversubscribed US$ 4 billion Eurobond of-
fering in the early weeks of 2017.
Whilst our commanding brand position in Egypt offers fur-
ther opportunities to both expand and extend our business
in that nation, with our LSE listing — and with the success
of our stable and proven diagnostics services platform —
we are looking to expand our geographic reach, particularly
in other high-growth markets in Africa and the Middle East.
We are acutely cognisant that improving and sustaining
execution requires the ongoing enhancement of human
capital. To this end, the senior management team led by
our Chief Executive Dr. Hend El Sherbini, whose accom-
plishments and vision continue to underpin the Company’s
progress, will be enhanced with additional senior appoint-
ments to support the Company’s growing footprint.
Your Board and management are committed to meeting
shareholder expectations, and we are also very cognisant of
our responsibilities regarding accountability, transparency
and good governance.
Our mission is to continue to deliver sustainable growth
with additional value-added services in existing jurisdic-
tions while actively pursuing value-accretive acquisitions
in new geographies that will realise the Company's full
potential as a regional success story.
Lord St John of Bletso
Chairman
21 March 2017
10
IDH annual report 2016
IDH annual report 2016
11
Strategic Report
A Note
from Our CEO
Fellow shareholders,
2016 demonstrated our Company’s fundamental ability to
deliver a strong operating performance in a year character-
ised by extraordinary macro-economic headwinds in our
principal market. In Egypt, where we generated 87% of our
2016 revenues, the primary factor in our business environ-
ment was the build-up to the devaluation of the Egyptian
pound. This came to a head in early November when the
Central Bank of Egypt allowed the interbank market to set
the value of the pound relative to key foreign currencies.
This was followed days later by the International Monetary
Fund’s (IMF) approval of a three-year, US$ 12 billion extend-
ed fund facility that underpinned the strong government
commitment to an ambitious package of economic reform.
In the months prior to the devaluation, a parallel exchange
rate had opened up; confidence and investment fell, and
there was mounting inflationary pressure on consumers.
The devaluation, whilst representing a major economic
dislocation that heralded what is expected to be a tran-
sient period of rising inflation, has reset the economy
and is leading to a resumption of investments and more
optimistic outlook.
In absolute terms, the Egyptian pound accordingly lost 56%
of its value in 2016 ( from an official value of EGP 7.83 : US$
1 on 1 January 2016 to EGP 18.00 per US$ 1 on 31 December
2016), pressuring inflation to a seven-year high of 23% at
year end. By January 2017, headline inflation stood at 28%,
with inflation in healthcare running at 33%.
Our response to these economic forces in 2017 — as last
year — will be enabled by the fundamental strength of our
brands as well as our scalable, asset-light business model.
We will continue to leverage our unequalled network of
branches (which provides us with the widest reach of any
provider of diagnostic services in the Egyptian market)
and our long-standing relationships with leading equip-
ment and kit providers for whom we are key partners on a
regional basis.
Together with our strong marketing infrastructure target-
ing patients and physicians alike, this will provide us with
an opportunity to enhance our market share in Egypt
in 2017 as smaller laboratories and chains lacking our
financial resources and assets struggle to keep pace with a
challenging environment.
Our revenues increased 15% period-on-period to EGP 1,171
million in 2016, underpinned by our strong brands, which
over the past 38 years have come to be synonymous with
quality and safety. We were able to raise prices selectively to
achieve top-line growth, driving our key metrics of average
revenue-per-patient up 15% and our average revenue-per-
test 14% higher.
While the total number of patients we served in 2016 was
approximately the same as a year earlier, we saw a contin-
ued shift in our mix of walk-in versus corporate contract
patients. Individuals paying for their own healthcare have
been cutting back on their spending in reaction to high
inflation and economic uncertainty. Thus, whilst corporate
patient volumes were nominally higher, walk-in patient
volumes declined slightly. Our business has benefited from
the rising numbers of patients covered by corporate health-
care agreements, a counterbalancing trend we expect to
continue in 2017. In parallel, we will continue to deliver
targeted marketing campaigns to capture higher-margin
walk-in traffic.
pressure on operating margins. Our ability to keep the
costs of our materials in check reflects both the strength
of our supplier relationships and the significant volumes
we regularly purchase from them. While we successfully
renegotiated key supplier contracts in early 2017, further
volatility in the foreign exchange rate may lead to discus-
sions on price at some point during the year.
Our geographic footprint grew 13% in 2016 to 354
branches in total at year end. We opened 39 new units in
Egypt and three in Jordan, while we closed two in Sudan.
The investment in our state-of-the-art central Mega Lab,
which when inaugurated in 2015 doubled our capacity,
continued to pay off, enabling us to further deploy our
Hub, Spoke and Spike business model at a comparatively
low capital cost.
To support all of our future growth plans, our Company will
be consolidating our current corporate offices in downtown
Cairo into a new headquarters. In 2017, we are planning to
acquire a building in Smart Village, a corporate office park
in the city of 6th of October, located slightly west of Cairo,
that will provide sufficient space for headquarters and
central staff.
This shift from higher-margin walk-ins to lower-margin
corporate clients is a short-term challenge, but we believe
it will ultimately accrue to IDH’s benefit. Average revenue
per test may decline in the short term, but the long-term
restructuring of the market in favour of corporate-led con-
tracts benefits large, multi-branch players with the broad-
est footprints, most-trusted brands and lower cost driven
by economies of scale.
proposed Dividend and Dividend policy
We are pleased to propose paying a final dividend of US$
0.14 ( fourteen US cents per share), or US$ 21 million in
aggregate, to shareholders in respect of the financial year
ended 31 December 2016. This represents an increase of
more than 100% compared to a final dividend of US$ 0.06
(six US cents per share) or US$ 9.0 million in aggregate the
previous financial year.
Management took important proactive steps in 2016 to
insulate the Company as much as possible from the nega-
tive impact of the currency devaluation and associated
inflationary pressure. To spur sales throughout the year,
our advertising and marketing teams launched preventive
healthcare campaigns to encourage doctors to promote —
and patients to take advantage of — recurring diagnostic
packages for lifestyle-related diseases and chronic health
conditions. We also engaged with our key suppliers to
negotiate more moderate price increases to mitigate the
In view of the strong cash-generative nature of our busi-
ness and its asset-light strategy, our dividend policy is to
return to shareholders the maximum amount of excess
cash after taking careful account of the cash needed to
support operations, capital expenditure plans, organic
expansion opportunities, and potential acquisitions.
A proactive approach to cash management has enabled
IDH to convert the Egyptian pound-denominated earnings
into US$.
our response to these economic forces
in 2017 — as last year — will be
enabled by the fundamental strength
of our brands as well as our scalable,
asset-light business model.
12
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IDH annual report 2016
13
Strategic Report
outlook
We are optimistic that 2017 will see the beginning of improve-
ment in macro-economic conditions in Egypt. While the
negative impact of currency devaluation and inflation have
challenged the counter-cyclicality of the healthcare system
in 2016, strong fundamentals continue to support a positive
outlook for growth in diagnostics services in Egypt. With
more people than any other country in the region at c. 92 mil-
lion, Egypt hosts a large and growing number of the elderly,
a significant segment of the Egyptian diagnostics industry.
The Egyptian population is also marked by low awareness of
health issues, a high prevalence of diseases requiring high test
volumes, and most labs are still concentrated in big cities. Fi-
nally, the rapid pace of population growth and a large cohort
of individuals entering the workforce over the coming decade
all speak to continued demand for healthcare services.
In Egypt, our focus in 2017 will be on broadening our base of
patients and increasing our revenues per patient through
educational and scientific marketing messages that stress the
quality and safety of our brands. Our Al Borg and Al Mokhtabar
brands are recognised and trusted, with a loyal following, and
together accounted for 87% of IDH’s revenue in 2016. We also
see ample room to increase accessibility to laboratory services
by opening more branch labs around the country. The strength
of our brands would also support expansion into adjacent
healthcare verticals. Our sights are set on complementary di-
agnostic services that in combination would raise IDH’s profile
to that of a “one-stop-shop” diagnostics provider.
We are also mindful of the opportunity to make acquisitions
outside Egypt in Africa and the Middle East, where our busi-
ness model is well-suited to capitalise on similar healthcare
and consumer trends and capture a significant share of frag-
mented markets. We are as keen as ever to build the Company
through focused acquisitions, but at the same time mindful of
finding the right balance of timing and strategic fit that would
maximise shareholder value over the long term.
We do expect macro-economic challenges to persist in the
coming year, in particular inflationary pressures on our op-
erating margins. Inflation will have a negative impact on the
spending habits of our patients; our ability to pass on some
price increases; and the positive impact from our targeted mar-
keting campaigns. Based on our assessment of the operating
environment as we begin the new year, we would guide inves-
tors to expect that although we believe a double-digit increase
in revenues is achievable, our EBITDA margin could be in the
range of 40-43%, only marginally down from last year’s 44%.
I remain optimistic about IDH's growth prospects in Egypt and
beyond, and look forward to updating you on our progress on
all fronts in the coming year. I am honoured to have you on this
journey with us.
Dr. Hend El-Sherbini
Chief executive officer
21 March 2017
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IDH annual report 2016
IDH annual report 2016
15
Strategic Report
Strategic Report
Egypt – Our
Principal Market
The Egyptian diagnostics industry can be broadly
divided into public and private sector infrastructure,
with the latter including both labs attached to private
hospitals and independent standalone labs (chains and
single labs). IDH is the largest fully-integrated private
sector diagnostics service provider, with more than 50%
share by revenue of the private chain market.
While the counter-cyclicality of the healthcare
system in Egypt has been challenged by currency de-
valuation and inflation in 2016, powerful structural
growth drivers continue to support future growth in
diagnostic services:
• With more than 92 million people, Egypt is the most
populous country in the MENA region; in terms of
demographics, it hosts a growing population of
elderly people.
• The population is marked by a high disease burden,
with high prevalence of both communicable and
non-communicable diseases; tropical diseases; and
lifestyle diseases, such as diabetes.
• There is a rising prevalence of diseases command-
ing high test volumes, indicating an expanding
need gap compared with more developed markets.
• There is ample opportunity to increase the usage of
laboratory diagnostics as a tool in clinical practice,
the awareness of which will be raised with higher
penetration of health insurance and improved cog-
nisance of preventive healthcare.
• Most labs in Egypt are still concentrated in big
cities; there is a still substantial room to increase
accessibility to lab services by adding branches in
all of the country’s 27 governorates for greater cov-
erage of the population.
• The corporate market is emerging as a driver
for diagnostic services, as more companies offer
healthcare coverage to their employees.
IDH is in a strong competitive position in the Egyptian
diagnostic industry, having created formidable barriers
to entry with its 38-year track record, trusted brands,
scalable business model and network of 354 branch labs:
• IDH’s accreditations, which underscore its high-
quality testing capabilities, are key to attracting
patients. IDH’s now decommissioned A labs pos-
sessed accreditation from the College of American
Pathologists (CAP), underscoring its high-quality
testing capabilities to attract contract clients. The
Group is now pursuing CAP accreditation of its
Mega Lab and expects this process to be complete
in 2017.
• IDH’s long-established brands have trusted reputa-
tions that have engendered strong patient loyalty.
• With a wide geographic presence, IDH is well po-
sitioned to cater to the fragmented nature of the
regional market.
• IDH has a strong relationship with key stakeholders
such as physicians, patients and hospitals.
16
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IDH annual report 2016
17
Strategic Report
IDH’s Competitive
Strengths & Business Model
IDH’s competitive strengths have positioned it well for
future organic growth within the diagnostic industry, as
well as set the stage for value-accreting acquisitions in
new geographies and in complementary services that
could raise the Group’s profile as a “one-stop shop” diag-
nostics provider.
Exposure to
resilient markets
Established
business
model
Experienced,
entrepreneurial
management
IDH’s markets are characterised as having strong structural growth drivers and an
underserved diagnostic services demand. The Group has been able to demonstrate
growth based on strong underlying industry fundamentals despite political and
economic turmoil in recent years. Barriers to entry are high, which the Group has
been able to surmount with established strong brands, internationally accredited
laboratories, a scalable business model and a wide geographic reach.
IDH’s Hub, Spoke and Spike business model provides the Group with an efficient
low-capital intensive platform for organic expansion over a wide geographic area.
It enhances the consistency of safety and testing procedures as more tests are con-
ducted through its centralised Mega Lab with modern, high-capacity equipment
and significant throughput.
The Group has a highly experienced management team with decades of experience
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
IDH has enjoyed a strong track record of profitable growth, even under adverse macro-
economic conditions. This was demonstrated again in 2016, when against the back-
drop of currency devaluation and associated high inflation, the Group produced an
EBITDA margin of 44%. In parallel, the Company’s asset-light business model notably
translates into minimal borrowings while allowing for significant strategic flexibility.
Substantial opportunities
to expand into new
geographies, as well
as adjacent diagnostic
categories
The Group continues to explore opportunities to expand into new high-growth
markets in Africa and the Middle East as well as adjacent verticals, where com-
plementary diagnostic services could in combination raise IDH’s profile to that
of a “one-stop-shop” diagnostics provider.
BARRIERS TO ENTRy
Accreditation of Facilities
Attracting contract clients requires
accredited, 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 stakehold-
ers such as physicians, patients and
hospitals.
18
IDH annual report 2016
IDH annual report 2016
19
Strategic Report
Our
Market
The mechanics of the Egyptian healthcare market are mark-
edly different from those in many Western healthcare sectors.
Publicly funded and private healthcare systems exist in paral-
lel, and in the private market served by IDH, patients have
substantially more freedom to make healthcare decisions than
do their counterparts in more institutionalised markets.
General practitioners (also referred to as family medicine
practitioners or primary care specialists) are rare in Egypt
and accordingly not the gatekeepers through which patients
access primary or specialist care. Patients seeking treatment
may accordingly elect to obtain initial care by (a) attending a
hospital outpatient clinic or emergency room; (b) attending
a polyclinic; or (c) directly seeking the services of a specialist
physician. The patient’s choice may be influenced by whether
or not the patient has employer-provided health insurance
or a corporate arrangement with a specific provider.
Physicians ordering diagnostic procedures to be completed
outside a hospital setting may recommend that the patient
complete these tests at a specific service provider, but patients
enjoy a high degree of freedom in choosing the service pro-
vider they attend based on perceived quality and pricing or on
insurance or corporate arrangements. Walk-in patients (also
referred to as “self-payers”) pay out of pocket in advance of the
tests being completed.
Patients then typically obtain test results in person (often
with an accompanying report from a pathologist, ge-
neticist, radiologist or other specialist) and return with the
results to the physician who requested the tests in the first
instance. It is noteworthy that IDH has the ability to deliver
test results to patients on the same day electronically as
well as via a mobile app.
IDH accordingly engages in sales and marketing activities that
separately target:
• Physicians, through direct sales visits to individual prac-
titioners, periodic gatherings for physicians within a spe-
ciality, promotional giveaways as well as discount cards for
physicians and their families that are compliant with our
Anti-Bribery and Corruption Policy, incentive-based physi-
cian loyalty programs and the organisation or sponsorship
of conferences;
• Walk-in patients, through social media channels, mass-
market and targeted health awareness campaigns, et
cetera, calling on outdoor advertising, television, radio and
online advertising; and
• Corporate patients, through direct outreach to insurers
and employers.
20
IDH annual report 2016
OUR SUpplIERS
IDH has an asset-light business model that is also illustrated by its supplier
relationships. The Group’s contracts with its key suppliers of medical testing kits
include the provision of the equipment to analyse the laboratory test results.
These agreements have minimum annual commitment payments to cover the
supply of the medical diagnostic equipment, kits and chemicals to be used for
testing and ongoing maintenance and support services. The agreement periods
are typically for five to eight years. The supply of the medical diagnostics equip-
ment through these arrangements has been judged to be finance lease in nature.
The Group’s main suppliers of kits are Roche, Siemens and BM (Sysmex), who
collectively represented 69% of total raw materials in Egypt in 2016; this com-
pares with 45% in 2015, as the Group’s Megalab was not fully operational for the
entire 2015 year. On the whole, raw materials as a percentage of sales declined to
16% in 2016 from 17% in 2015. IDH does not rely on any single supplier of test kits
or any other medical supply purchases in the Mega Lab so as to avoid backorders
and any ensuing interruptions to operations.
The number of kits purchased is determined by a combination of historical
consumption patterns and future growth plans, and our high volume of kit
consumption feeds into pricing power with suppliers going forward. Increasing
test volumes thus puts the Group in a strong position to negotiate favourable kit
prices, thereby reducing the cost per test while at the same time incurring no
initial capital outlay for the purchase of medical diagnostic equipment.
IDH is exposed to foreign exchange risk in purchasing supplies, as a significant
portion of its purchases are either payable or effectively priced in foreign cur-
rency (see “Specific Risk/Mitigation” table starting on on page 28). Siemens,
accounting for 15% of total raw materials, is the only supplier that the Group
actually pays in US dollars. While other suppliers provide the Company with
imported product, they are paid in Egyptian pounds.
The Group is one of the largest providers of diagnostic services in the region,
and as such, one of the largest volume purchasers of test kits. Over the years,
IDH has developed strong and long-standing relationships with its supplier
base. Accordingly, the Company has been able to successfully negotiate favour-
able contract terms against the backdrop of the currency devaluation, so that
the prices of its kits have been increasing at a slower rate than that at which the
Egyptian pound has lost value against the US dollar.
IDH annual report 2016
21
Strategic Report
Our
Business Model
The scalable Hub, Spoke and Spike business model works very well in a fragment-
ed industry characterised by high barriers to entry that benefit existing professional
operators such as IDH.
B labs (Spokes)
• B-labs serve as IDH’s spokes that work to reduce traf-
fic to Mega Lab by processing routine tests onsite,
including chemistry, parasitology and haematology.
• They are higher in capacity and larger in size than
the C labs.
• At 2016 year-end, there were seven B labs in Egypt,
two B labs in Jordan and 20 in Sudan.
C labs (Spikes)
• C labs are collection centres that allow for expan-
sion of reach.
• They conduct basic tests including urine, stool, se-
men, ESR and pregnancy tests.
• At 2016 year-end, there were 354 operational C
lab branches compared with 314 at the end of the
previous year.
IDH operates an easily scalable business model, allowing
for expansion in a capital-efficient manner and geared
toward operational efficiency. The Group deploys a Hub,
Spoke and Spike model in which the Mega Lab functions
as the Hub that is equipped for all services and tests of-
fered, particularly with advanced diagnostic tools, for
samples collected by the B and C labs. The B labs (Spokes)
are capable of processing routine tests, and they effectively
reduce traffic to the Mega Lab where warranted. The C labs
(Spikes) function as collection and basic test centres that
importantly increase our reach to clients nationwide.
Supported by the strong operational backbone of the Mega
Lab, IDH is able to offer a broad range of tests and can “plug
and play” new C labs to extend its geographic reach. The
addition of new and esoteric test facilities at the Mega Lab
provides a “one-stop” solution for customers, which, in
combination with value-package offerings, drives our key
test-per-patient financial metric. Replacing the two A labs
in 2015, the Mega Lab now houses additional machines that
have increased automation and offers excess capacity to
support future growth in the business.
Mega lab (Hub)
• The Mega Lab, the largest automated lab in Egypt,
serves as IDH’s diagnostic hub, equipped with the
latest technology and providing a full suite of diag-
nostic tests.
• A majority of equipment is provided at no upfront
cash cost in return for IDH agreeing to purchase a
minimum volume of kits from the equipment supplier.
• Specialty tests from IDH subsidiaries are shipped to
the Mega Lab in Egypt, and results are retrieved elec-
tronically.
• Significant cost synergies are realised on kits, logistics
and quality control.
22
IDH annual report 2016
IDH annual report 2016
23
Strategic Report
Internationally
Accredited Test Portfolio
IDH’s comprehensive product portfolio covers immu-
nology, radiology, haematology, endocrinology, clinical
chemistry, molecular biology, cytogenetics, histopa-
thology and microbiology. Across its brand portfolio,
IDH maintains international-quality accreditations
with a stringent internal audit process to ensure best-
in-class service.
ISo
ISO accreditation requires an initial inspection of labo-
ratory practices, calibration and medical analysis by an
accreditation body. For Al Mokhtabar and for Al Borg, it
was URS Certification (accredited internationally by the
United Kingdom Accreditation Service); and for Biolab,
it was the Jordanian Accreditation System (JAS). The in-
spection involves the clinical chemistry area, the virolo-
gy unit, the haematology unit and the general laboratory
management practice. The accreditation’s standards
include both management and technical requirements.
The Company’s ISO 9001:2008 accreditations for both Al
Mokhtabar and Al Borg passed year-end accreditation
reviews in 2016 and will next be renewed in 2017.
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 certified by CAP. 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 resourc-
es, including physical space, testing instruments,
reagents, information processing and communica-
tion systems, ventilation, 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
policies and procedures in place to ensure quality
testing and patient safety. These should include the
validation of test systems, analytic quality control,
quality management of pre- and post-analytic
processes, proficiency testing, human resource
management, information management, ongoing
quality improvement and appropriate communica-
tion procedures.
• Administrative requirements: The laboratory must
maintain appropriate records and adhere to CAP
certification requirements and certain other poli-
cies, and will be subject to onsite inspections, interim
inspections and interim self-assessments.
IDH filed for CAP certification for the Mega Lab as
scheduled in 2016 and expects inspectors on site in
2017. The CAP certification will thereafter be subject to
renewal every two years.
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 accurate. The quality assurance program
ensures that all the standards of the CAP and ISO accredi-
tations are met by inspecting hardware and equipment,
ensuring compliance with procedure manuals, inspecting
the accuracy of results and administering competency
assessments for employees. The internal 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 employ-
ees 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 en-
suring quality across its laboratories. To help develop the
skills of employees, IDH has a dedicated training facility in
Cairo with four training laboratories. In 2016, the training
centre employed one director, five full-time specialists,
four administrators and fourteen part-time instructors.
The centre provides training to around 250 employees per
month, including doctors, chemists, sales personnel and
administrators. The training curriculum is determined
based on performance KPIs, internal audit reports, man-
agement reviews, competency assessment reports and
analysis of customer feedback and complaints. IDH’s
employee training is structured along four modules: New
employee training, competency-based, need-based and
practical re-training.
24
IDH annual report 2016
IDH annual report 2016
25
Strategic Report
Growth
Strategy
IDH’s growth strategy rests on leveraging its established
business model to achieve four key strategic goals,
namely: (1) continue to expand customer reach; (2)
increase tests per patient by expanding the Group’s
services portfolio; (3) expand into new geographic mar-
kets through selective, value-accretive acquisitions; and
(4) introduce new medical services by leveraging the
Group’s network and reputable brand position.
Expand Customer Reach
Increase Tests per patient
Expand Geographically
Diversify into New Medical Services
IDH 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 patients, thereby
expanding the customer base. Further, the Group’s
add-on services, such as house calls, e-services
and results delivery, make its regular service offer-
ings easier to use for both existing and prospective
patients. IDH is also actively engaged in advertising
campaigns to raise awareness of particular diseases
and the importance of being tested, as well as to ed-
ucate people with lifestyle diseases, such as diabetes
and high cholesterol, to undergo frequent testing.
IDH intends to expand its branch network and di-
versify its portfolio of test services offered in order
to take full advantage of the expected increased
demand for private healthcare services in Egypt. The
Group is expanding its ability to perform more com-
plex tests not offered in other labs by broadening its
portfolio of specialised and advanced tests, which
will help to drive testing volumes. IDH is also focused
on bundling testing services into health packages to
offer to its existing customers at discounted rates as
a way to increase tests, thus revenues, per patient.
IDH is looking to expand through value-accreting
acquisitions in the MENA region, the GCC and
sub-Saharan Africa, where our business model is
well-suited to capitalise on similar healthcare and
consumer trends and capture a significant share of
fragmented markets.
As the medical testing market in Egypt is evolving
from a single doctor-oriented model to a branded
chain model, IDH recognises the opportunity to
offer services that are not currently being provided
by any private healthcare provider on a large scale.
The Company believes that its scale and experience
make it better positioned than its competitors to
take advantage of developing diagnostic services op-
portunities in Egypt, ranging from specialised physi-
cian services to radiology to in-vitro fertilisation,
among possibilities, that would raise IDH’s profile to
that of a “one-stop-shop” diagnostics provider.
26
IDH annual report 2016
IDH annual report 2016
27
Strategic Report
Principal Risks,
Uncertainties and Their Mitigation
As in any corporation, IDH has exposure to risks and
uncertainties that may adversely affect its performance.
IDH Chairman Lord St John of Bletso has emphasised that
ownership of the risk matrix is sufficiently important to the
Group’s long-term success that it must be equally shared by
the Board and senior management.
While no system can mitigate every risk — and some risks,
as at the country level, are largely without potential miti-
gants — 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 oper-
ates, have experienced political volatility since 2011 and
continue to experience occasional terrorist incidents.
There remains a risk of occasional civil disorder.
Country / regional risk — Economic
The Group is subject to the economic conditions of Egypt
specifically and, to a lesser extent, those of the wider MENA
region. Egypt accounted for c. 87% of our revenues in 2016
(2015: 90%).
High inflation: Egypt’s headline inflation rate closed De-
cember 2016 at a record-high of 23.3%, pressured by food
prices increases. Consensus expectations are for inflation
to remain at high year-on-year levels throughout the first
half of 2017, gradually decelerating to c. 14% by mid-year.
See mitigants for “Country / regional risk — Economic,” below.
As with country risk, this is largely not subject to mitiga-
tion. In both political / security and economic risk, man-
agement notes that IDH operates in a defensive industry
and that the business continued to grow year-on-year
through two revolutions, as well as under extremely dif-
ficult operating conditions in 2016.
High inflation is one consequence of Egypt’s policy-
restructuring cycle. The structural change underway in
government spending and general repricing of goods
and services represents a reversal of 50 years of compre-
hensive government support. While it will take time, the
reform program is designed to put the country on a more
sustainable path to growth and fiscal consolidation.
The Group’s contemplated acquisitions outside of Egypt
would also mitigate the Egypt-specific country risk over
time.
28
IDH annual report 2016
Specific risk
Mitigation
Foreign currency and banking regulation risk
Foreign currency risk: The Group is exposed to foreign cur-
rency risk on the cost side of the business. The majority
of supplies it acquires are paid in Egyptian pounds (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.
As was the case in 2015, Egypt experienced in 2016 a foreign
currency shortage that limited the ability of companies to
source foreign exchange. That shortage worsened in 2016 and
resulted in a wide gap between the official and parallel market
value of the Egyptian pound against the US dollar and other
key foreign currencies. This shortage was accompanied by
measures to limit the import of non-essential goods as well as
others designed to restrict cash deposits of foreign currency
and to slow the transfer of foreign currency out of the country.
In parallel, the Central Bank of Egypt (CBE) enforced in 2016
a 13-year-old rule that forbade any Egyptian Company from
paying another Egyptian Company in foreign currency.
The CBE moved to a fully floating foreign exchange regime on
3 November 2016, since which time the value of the Egyptian
pound against the US dollar has been set by the interbank
market. As of 31 December 2016, the pound had lost 56% of
its value against the US dollar compared to its value as at 1
January 2016. The Egyptian pound closed 2016 at 18.00 per
US$ 1.00 against an opening rate of EGP 7.83.
The Egyptian pound was valued at 18.06 to US$ 1.00 as of 15
March 2017.
Banking regulation risk: A priority list and allocation mecha-
nism imposed by the CBE was in effect throughout 2016 to
prioritise essential imports. This mechanism was in place in
response to an active parallel market for foreign exchange.
While foreign exchange is increasingly available following the
November 2016 float of the Egyptian pound and prices set by
the interbank mechanism, IDH faces the risk of variability in
the exchange rate as a result of economic and other factors.
Supplier risk
In the period 1 January 2016 to 31 December 2016, the
EGP lost 56% of its value against the US$, creating signifi-
cant risk of suppliers re-opening negotiations in the face
of cost pressure.
IDH’s supplier risk is particularly concentrated with three
key suppliers — Siemens, Roche and BM (Sysmex)— who
provide it with kits representing 69% of the total value of
total raw materials in 2016 in Egypt (2015: 45%).
IDH’s exposure to foreign currency risk takes two primary
forms: price and availability. Price risk impacts the cost of
supplies (almost all imported, either directly by IDH or by
third parties), on which spending was equivalent to c. 16%
of revenues in 2016 (2015: 17%). Management believes that
it can mitigate the effects of devaluation through a combina-
tion of improved pricing and cost efficiencies (see Supplier
Risk below for more).
Only 15% of IDH’s cost of supplies (c. 2% of revenues) are
payable in US dollars, minimising the Group’s exposure to
foreign exchange (FX) scarcity and in part, the volatility of the
Egyptian pound.
In 2016, IDH recorded a net foreign exchange loss of EGP 89
million compared with a net foreign exchange gain of EGP 3.5
million in 2015.
The priority list and allocation mechanism have been relaxed
following the float of the Egyptian pound. Companies now
report increasing availability of foreign exchange for imports.
The parallel market for foreign exchange is presently dormant.
Caps on deposits of foreign exchange into the banking sys-
tem, which were in place during 2015 and throughout much
of 2016, have been removed, although strict documentation
requirements remain in place.
There are currently no restrictions in Egypt on repatriation
of dividends by foreign companies. The CBE confirmed it
verbally informed banks in December 2016 that they may,
subject to available foreign currency liquidity, repatriate
dividends and other funds for foreign companies. The repa-
triation queue for investors in Egyptian equities traded on
the Egyptian Exchange (EGX) has been cleared, but there
remains a repatriation queue for other funds. The size of this
backlog has not been disclosed.
IDH has strong, longstanding relationships with its suppli-
ers, to whom it is a significant regional client. Due to the
volumes of kits the Company purchases, IDH is able to
negotiate favourable pricing that in 2016 saw the price it
pays for kits rise slower than did inflation (which rose to
new highs as a result of the devaluation of the EGP).
The percentage of kits sourced from Siemens, Roche and
BM (Sysmex) rose period-on-period due to changing sup-
plier relationships for the MegaLab inaugurated in the sec-
ond half of 2015. Total raw materials costs as a percentage
of sales declined to 16% in 2016 from 17% in 2015.
IDH annual report 2016
29
Strategic Report
Specific risk
Remittance of dividend regulations & repatriation of profit
The Group’s ability to remit dividends abroad may be
adversely affected by the imposition of remittance restric-
tions where, under Egyptian law, companies must obtain
government clearance to transfer dividends overseas and
are subject to higher taxation on payment of dividends.
International banks are very cautious in carrying out trans-
actions with any Sudanese business and so while there are
no actual restrictions on the payment of dividends from the
Sudanese subsidiary in practice, the probability of enabling
payments of dividends from Sudan to Egypt is quite low.
legal & regulatory risk to the business
The Group’s business is subject to, and affected by, exten-
sive, stringent and frequently changing laws and regula-
tions, 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 restrictions, as well as the possibility of investiga-
tion by the Egyptian Competition Authority.
Quality control risks
Failure to establish and comply with appropriate quality
standards when performing testing and diagnostics ser-
vices could result 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 professionals who prescribe
and recommend the Group’s services.
Risk from contract clients
Contract clients including private insurers, unions and
corporations, account for c. 61% 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 be unable to make
payments to the Group, IDH’s business may be materially
and adversely affected.
Mitigation
Specific risk
Mitigation
pricing pressure in a competitive, regulated environment
The Group faces pricing pressure from various third-party
payers that could materially and adversely affect its rev-
enue. Pricing may be restrained in cases by recommended
or mandatory fees set by government ministries and other
authorities.
This risk may be more pronounced in the context of head-
line monthly inflation, which, as of December 2016, reached
a record high of 23.3%.
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 have arisen from historic acquisi-
tions made by the Group and include the brand names
used in the business.
Business continuity risks
Management concentration risk: IDH is dependent on the
unique skills and experience of a talented management
team. The loss of the services of key members of that team
could materially and adversely affect the Company’s opera-
tions and business.
Business interruption: IT systems are used extensively in
virtually all aspects of the Group’s business and across
each of its lines of business, including test and exam results
reporting, billing, customer service, logistics and manage-
ment of medical data. Similarly, business interruption at
one of the Group’s larger laboratory facilities could result in
significant losses and reputational damage to the Group’s
business as a result of external factors such as natural
disasters, fire, riots or extended power failures. The Group’s
operations therefore depend on the continued and uninter-
rupted performance of its systems.
This is an external risk for which there exist few mitigants.
In the event there is escalation of price competition be-
tween market players, the Group sees its wide national
footprint as a mitigant; c. 61% of our revenue is generated
by servicing contract clients (private insurer, unions and
corporations) who prefer IDH’s national network to patch-
works of local players.
IDH has a limited ability to influence changes to manda-
tory pricing policies imposed by government agencies, as
is the case in Jordan, where basic tests that account for
the majority of IDH’s business in that nation are subject to
price controls.
IDH 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 headroom
between the recoverable amount (based on value in use)
and the carrying value of each of the identified Cash Gen-
erating Units and no impairment is deemed to be required
For more detail see note 14 of the Financial Statements.
IDH understands the need to support its future growth
plans by strengthening its human capital and engaging in
appropriate succession planning. The Company is commit-
ted to expanding the senior management team, led by its
CEO Dr. Hend El Sherbini, to include the talent needed for
a larger footprint. The Group has constituted an Executive
Committee led by Dr. El Sherbini and composed of heads
of departments. The Executive Committee meets every
second week.
The Group has in place a full disaster recovery plan, with
procedures and provisions for spares, redundant power
systems and the use of mobile data systems as alternatives
to landlines, among multiple other factors. IDH tests its
disaster recovery plans on a regular basis.
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 of foreign exchange in the markets in which
the Group operates, particularly Egypt.
As a provider of medical diagnostic services, IDH’s opera-
tions in Sudan are not subject to sanctions. Management
moreover notes that the international community has
signalled its desire to ease the sanctions regime.
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 market, which consists of small private labs, private
chain labs and large governmental and quasi-governmental
institutions.
The Group’s quality assurance (QA) function ensures com-
pliance with best practices across all medical diagnostic
functions. All laboratory staff participate in ongoing pro-
fessional education with quality assurance emphasised at
each juncture.
The head of quality assurance for the Group is a member of
the 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.
IDH diligently works to maintain sound relationships with
contract clients. All changes to pricing and contracts are
arrived at through discussion rather than blanket imposi-
tion by IDH. Relations 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
extent of its national network.
No single client contract currently accounts for more than
1.1% of revenues.
Prudent management of contract clients translated into
the Group taking provisions of EGP 4.3 million in 2016
for doubtful accounts (2015: EGP 9.2 million). (See note
17 to the accompanying Financial Statements for more
information.)
30
IDH annual report 2016
IDH annual report 2016
31
Strategic Report
Specific risk
loss of talent
IDH depends on the skills, knowledge, experience and
expertise of its senior managers to run its business and
implement its strategies. 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 laboratory professionals.
Loss of senior managers could materially and adversely af-
fect the Group’s results of operations and business.
loss of certifications and accreditations
One of IDH’s subsidiaries was the only laboratory in Egypt
accredited by the College of American Pathologists (CAP);
the Group’s new Mega Lab is presently undergoing CAP
certification. Many of IDH’s facilities are also certified by
the International Organization for Standards. The failure to
obtain CAP accreditation for Mega Lab or the failure to re-
new ISO certifications would call into question the Group’s
quality standards and competitive differentiators.
Mitigation
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 recruit-
ment and training program. We furthermore have in place
a program to monitor the performance of graduates of the
training program.
Egypt is a net exporter of trained healthcare professionals
as there is surplus staff in the market. IDH’s efforts are ac-
cordingly focused on retention of qualified staff as opposed
to recruitment of new personnel.
IDH filed to acquire CAP accreditation for Mega Lab in
2016 and expects inspectors on site in 2017. The Company
also renewed its ISO certifications in 2016, with the next
renewal due in 2017. IDH’s ability to keep current its certi-
fications and accreditation are supported by ongoing QA,
training and internal audit procedures.
32
IDH annual report 2016
IDH annual report 2016
33
Strategic Report
FINANCIAL REVIEW
IDH delivered strong operational and financial performances
in the year ended 31 December 2016, most notably against
the backdrop of significant macro-economic challenges in its
home market of Egypt. The Group’s top line was driven largely
by better pricing, as well as the impact of volume and foreign
currency translation of results from the Group’s Sudanese and
Jordanian subsidiaries into Egyptian pounds. Bottom-line re-
sults notably reflect the impact of fees amounting to EGP 125
million associated with the Company’s initial public offering
on the London Stock Exchange in 2015 against nil in 2016.
Lab with excess capacity that enables the Group to deploy
its Hub, Spoke and Spike business model to open capital
efficient “C” labs more rapidly. During 2016, the Group
added 40 new labs in total, including 19 new branches for
Al Mokhtabar (Egypt), 20 new branches for Al Borg (Egypt)
and 3 new branches for Biolab (Jordan); one branch each
was closed for Ultralab and MK Sudan, both of which op-
erate in Sudan. Total IDH branches reached 354 as of 31
December 2016 versus 314 branches at 2015 year end, for
13% total unit expansion.
The Company continued to invest in expanding its geo-
graphic footprint, supported by its state-of-the-art Mega
The results for the year are summarised below:
EGp million
Revenue
Cost of sales
Gross Profit
Gross Profit Margin %
Operating expenses
Operating Profit
Depreciation
Amortisation
EBITDA*
Net Profit*
2016
1,171
(543)
628
54%
(162)
466
45
-
511
267
2015
1,015
(468)
547
54%
(280)
267
36
-
304
155
% Change
15%
16%
15%
-
-42%
74%
25%
-
68%
72%
* EBITDA is calculated as operating profit plus depreciation and amortisation. EBITDA and Net Profit for 2015 reflect the impact of fees associated with
IDH’s initial public offering on the London Stock Exchange of EGP 125 million as well other non-recurring expenses of EGP 6.0 million.
In respect of this summary, the Group notes:
34
IDH annual report 2016
our Customers
IDH serves two principal types of clients: contract (corpo-
rate) and walk-in (individuals). Within each of these catego-
ries, the Group also offers a house-call service, and within
the contract segment, a lab-to-lab service.
accounting for more than 1.1% of revenues. Within the
contract segment, IDH also provides lab-to-lab services
for hospitals and other laboratories not able to process
certain tests in house.
Contract Clients
IDH’s contract clients, who in 2016 represented 61% of
the Group’s revenues, include institutions such as unions,
private insurance companies and corporations who enter
into one-year renewable contracts at agreed rates per-test
and on a per-client basis. During 2016, IDH served 4.2
million patients under these contracts and performed a
total of 18.5 million tests, with no single contract client
Walk-in Clients
IDH derived 39% of its revenues in 2016 from walk-in clients.
Walk-in clients numbered 1.6 million in 2016, representing
28% of total patients served. As IDH’s markets develop and
become more institutionally oriented, more patients will be
performing pathology tests under corporate agreements,
a trend that plays to the Group’s strength with the best
economies of scale in the Egyptian diagnostics industry.
IDH revenue by type and Key performance Indicators
Contract Clients
Revenue (EGP mn)
Patients (‘000)
Tests (‘000)
Walk-in Clients
Revenue (EGP mn)
Patients (‘000)
Tests (‘000)
Total revenue (EGP mn)
Total patients (‘000)
Total tests (‘000)
Tests per patient
Revenue per patient (EGP)
Revenue per test (EGP)
2016
713
4,174
18,540
458
1,642
5,530
1,171
5,816
24,070
4.15
201
49
2015
615
4,074
18,173
400
1,718
5,660
1,015
5,792
23,833
4.11
175
43
IDH annual report 2016
35
Strategic Report
IDH revenue by type and Key performance Indicators
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
% of total 2016 revenues
% of total 2015 revenues
14%
2%
26%
2%
4%
6%
7%
61%
39%
18%
2%
18%
4%
5%
7%
7%
61%
39%
revenue analysis
Consolidated revenues increased 15% year-on-year to
EGP1,171 million, underpinned by IDH’s strong brands and
focused marketing strategies. While the total number of
patients in 2016 was on par with that of 2015, the combi-
nation of selected price increases and a better mix of test
types drove growth of the top line. This can be seen in the
key metrics of average revenue-per-patient (up 15% year-
on-year across both contract and walk-in patients) and
average revenue-per-test (14% higher year-on-year across
both patient categories).
Revenues from contract clients increased 16% in 2016,
despite gains of only 2% in patient and test volumes. It is
noteworthy that in a difficult year, this strong revenue per-
formance was achieved on top of a 31% year-on-year gain
in 2015, further demonstrating the trend toward corporate
health insurance coverage, in particular in the Group’s
principal market of Egypt. In the contract client category,
average revenue-per-patient and average revenue-per-test
increased 15% and 14% period-on-period, respectively. IDH
signed 456 new corporate contracts with insurers last year
versus 312 in 2015.
Revenues from walk-in clients gained 14% year-on-year,
even as the number of walk-in patients decreased 4%
and the number of walk-in tests declined 2%. In part, this
reflects consumer migration toward corporate healthcare
agreements, a shift in mix expected to continue. Since late
2015, however, walk-in patient volumes have been hurt as
consumers have been curbing their spending in general in
reaction to the high inflation associated with the devalu-
ation of the Egyptian pound. Average revenue per walk-in
patient rose 13% period-on-period, while average revenue
per walk-in test climbed 14%.
In particular, IDH has been successful in maintaining
high levels of walk-in volumes against the backdrop of
unprecedented high inflation through tactical marketing
campaigns targeting families of recurring tests of patients
with lifestyle and other chronic diseases. These campaigns
emphasise the Group’s brand messages of quality and safe-
ty; and they are educational in nature, encouraging medical
testing and offering value packages and promotions for
diabetes treatment, pregnancy check-ups and weight man-
agement, among others.
The largest factor backing higher revenues in 2016 was
price and mix of tests (58%), followed by test volumes (24%)
and currency translation (18%).
The currency effect was due to the translation of revenues
in local currencies from Sudan and Jordan into Egyptian
pounds. In 2016, the Sudanese pound (SDG) was translated
at an average rate of 1.204 (2015: 1.144) while the Jordanian
dinar (JOD) was translated at an average rate of 14.573
(2015: 10.815).
On a geographic basis, Egypt contributed 87% of Consoli-
dated Group Revenues in 2016 followed by Jordan at 10%
and Sudan at 3%. In 2015, Egypt accounted for 90%, Jordan
for 7% and Sudan for 3%.
Cost of Sales
Cost of sales increased 16% year-on-year to EGP 543 mil-
lion in 2016 compared with EGP 468 million in 2015. Raw
material costs were positively leveraged, as IDH maintained
strict cost disciplines in what was a challenging economic
environment. The Group was also able to negotiate favour-
able contract terms with its three main suppliers: Roche,
Siemens and BM (Sysmex). The ability to keep material costs
in check is reflected in the competitive advantages of both
the strength of the Company’s supplier relationships and the
large volumes that it regularly purchases from them. Thus,
in the high inflation environment in Egypt associated with
the currency devaluation, the prices of test kits have been
increasing at a slower rate than that at which the Egyptian
pound has lost value against the US dollar.
reason for this was the absence of expenses in 2016 related
to the Company’s IPO the previous year, which totalled EGP
125 million.
Wages and salaries were the largest component of cost of
sales in 2016 at 36% of total (2015: 34%) and rose 22% year-
on-year. The increase was driven by annual employee salary
raises and by new hires primarily associated with branch
expansion. Higher employee profit share entitlement for
Egyptian operations, based on annual growth in net profits
in 2016, was also a factor.
The depreciation expense accounted for in COGS in-
creased 24% to EGP 41 million in 2016 (2015: EGP 33 mil-
lion). The difference was primarily due to the depreciation
of leased equipment calculated for a full year in 2016,
compared with 7.5 months in 2015, and the opening of 40
new branches last year.
Gross profit
Gross profit increased 15% for the year, or in line with
revenues, to EGP 628 million compared with EGP 547 mil-
lion in 2015. The Group’s gross profit margin was accord-
ingly flat in 2016 compared with 54% in 2015. As discussed
above, this reflected the Company’s ability to maintain cost
discipline and negotiate favourable pricing with suppliers
despite macro-economic headwinds.
operating expenses
Operating expenses were EGP 162 million in 2016 versus
EGP 280 million in 2015. As a percentage of sales, operating
expenses fell to 13.2% from 25.8% a year earlier. The primary
Other factors that represented favourable year-on-year
expense swings included lower allowances for bad debt
collection, reduced provisions related to legal cases and the
release of a provision no longer required.
operating profit
Operating profit for 2016 was accordingly EGP 466 million
compared with EGP 267 million in 2015.
eBItDa1
EBITDA rose 68% to EGP 511 million, with an associated
EBITDA margin improvement to 44%. EBITDA in 2015
included IPO costs of EGP 125 million as well as the write-
off of costs of EGP 6.0 million relating to plans to set up
operations in Qatar, the closure of Molecular Diagnostics
Centre in Cairo and surplus stationery stock included
within inventory.
Egyptian operations contributed just under 94% of EBITDA,
Jordan slightly less than 5% and Sudan nearly 2% in 2016.
In 2015, these contributions stood at 94% Egypt, 4% Jordan
and 2% Sudan.
1 EBITDA is calculated as operating profit plus
depreciation and amortisation.
36
IDH annual report 2016
IDH annual report 2016
37
Strategic Report
We consider EBITDA to be an appropriate alternative per-
formance measure, as it is a metric commonly followed by
the institutional investment community.
Foreign exchange
In 2016, the Group’s net foreign exchange loss amounted
to EGP 89 million, as an FX loss of EGP 133 million more
than offset an EGP 44 million FX gain. This compares with
a net foreign exchange gain of EGP 3.5 million in 2015.
Out of the EGP 133 million foreign exchange loss, EGP 105
million was primarily attributable to revalued foreign de-
nominated contracts with major suppliers. The FX gain
of EGP 44 million was mainly due to the revaluation of
intercompany balances between IDH and its subsidiar-
ies and with the different functional currencies within
the group, including the Egyptian pound, the Sudanese
pound, the Jordanian dinar and the US dollar.
During 2016, IDH purchased US$ 14.2 million at an aver-
age price of US$ : EGP of 11.62.
taxation
In 2016, IDH recorded income tax expense of EGP 136
million, with an effective tax rate of 31% versus 44% in
2015. There is no tax payable in the two IDH holding
companies ( Jersey and Cayman); thus, costs incurred at
the holding company level are not tax deductible. These
would include, but are not limited to, KPMG UK fees and
IDH administrative fees in London.
All tax is paid within the Group’s operating companies.
The corporate income tax rates in countries in which
IDH operates are as follows: Egypt 22.5%, Sudan 15.0%
and Jordan 20.0%.
The Group’s dividend policy is to distribute any excess
cash after taking into consideration all business cash
requirements and potential acquisition considerations.
As a result, a deferred tax liability is recognised for the
5% tax on dividends for the future expected distribution
payable by Egyptian entities under Egyptian tax legisla-
tion. Deferred tax in 2016 amounted to EGP 14.1 million
(gain) compared with EGP 11.4 million (loss) in 2015.
net profit
Net profit for the year was EGP 267 million versus EGP
155 million recorded in 2015. Net profit in 2015 included
the impact of fees amounting to EGP 125 million associ-
ated with the Company’s initial public offering on the
London Stock Exchange against nil in 2016. These results
also include the net impact of an EGP 89 million foreign
exchange loss in 2016 compared with the net impact of
an EGP 3.5 million foreign exchange gain in 2015.
Balance Sheet
On the assets side of the balance sheet, property, plant and
equipment (PPE) rose to EGP 391 million at 31 December
2016 from EGP 338 million a year earlier due to the opening
of 40 new branches in 2016, as well as new investment in
Information Technology systems.
In 2015, IDH entered into equipment lease agreements with
its major suppliers that became effective in May 2015. The
agreement periods range from five to eight years, which
is deemed to reflect the useful life of the equipment. The
agreements include annual commitment payments to cover
the supply of medical diagnostic equipment, test kits and
chemicals to be used for testing and ongoing maintenance
and support services over the term of the agreement. If the
minimum annual commitment payments are met over the
agreement period, ownership of the equipment supplied
will legally transfer to IDH. On one side, the leased equip-
ment is recorded in PPE, and the finance lease is recorded as
a liability on the other side.
Trade and other receivables rose 27% to EGP 148 million
compared with EGP 117 million in 2015. The gain was pri-
marily due to higher pre-paid expenses and an increase in
the net accounts receivable balance associated with higher
revenues generated by contract clients.
On the liabilities side, trade and other payables increased to
EGP 346 million in 2016 from EGP 230 million in 2015 as the
overall supplier balance rose due to management’s decision
to accumulate inventory as a hedge against further devalua-
tion of the Egyptian pound. The 13% Value Added Tax (VAT)
also contributed to the higher supplier balance, as did an
increase in the put option liability related to the Company’s
Jordanian operation.
Inventories at 2016 year-end were EGP 52 million, up 51%
versus a year ago, also reflecting the decision to hedge
against further currency devaluation.
During 2016, IDH managed to deliver strong operational
cash flow, which led to an increase in the cash balance at
year end of c.76% compared to 31 December 2015.
Dividend
Proposed dividends for ordinary shares are subject to the
approval of the Annual General Meeting and are not rec-
ognised as a liability as at 31 December 2016. The Board of
Directors has recommended that a final dividend of US$
0.14 ( fourteen US cents) per share, or US$ 21 million in
aggregate, should be paid to shareholders who appear on
the register as at 12 May 2017, with an ex-dividend date of
11 May 2017. The payment date for the dividend will be 6
June 2017.
38
IDH annual report 2016
IDH annual report 2016
39
Strategic Report
Corporate
Responsibility
Founded on the principle of providing quality medical
assistance and services to better the lives of individu-
als 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
subsidiaries Al Borg and Al Mokhtabar to the Moamena
Kamel Foundation for Training and Skill Development.
The Foundation 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 organisations and groups in need of assistance,
with a particular 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 de-
ploys an integrated program and vision for the communi-
ties it helps that include economic, social and healthcare
development initiatives. In 2016, EGP 2.7 million was paid
to the foundation by the IDH Group; the comparable figure
for 2015 was EGP 0.8 million.
The foundation’s primary services include:
1
2
3
4
5
Free healthcare clinics
Loans for entrepreneurial women
Educational services for the children of Al
Duweiqa community
Providing food for families in need of such
assistance
Coverage of running costs for the intensive
care unit (ICU) at Cairo’s public-sector Kasr
El Aini Hospital, including the purchase of
consumables for the unit, donations of in-
struments and allowances for staff training,
among other costs.
40
IDH annual report 2016
IDH annual report 2016
41
Corporate
Governance
IDH is committed to
implementing best
practices in corporate
governance through the
expertise of both the
individual Directors and
outside parties.
42
IDH annual report 2016
IDH annual report 2016
43
Corporate Governance
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.
lord St John of Bletso (age 59)
Independent non-executive Chairman
Lord St John has been a crossbencher in the House of Lords, UK Parliament, since
1978 and is an Extra Lord-in-Waiting to HM Queen Elizabeth II. He is currently non-
executive chairman of Strand Hanson Ltd and Global Resources Investment Trust
(GRIT) and serves as a director of Falcon Group and Albion Enterprise VCT. He is also
a member of the advisory boards of 10Sat, Betway Group, ECO Capacity Exchange
and Impala Energy. Lord St John received a BA (Law) and BSocSc (Psychology) from
Cape Town University, BProc (Law) from the University of South Africa and an LLM
from the LSE, London.
prof. Dr. Hend el Sherbini (age 48)
Group Chief executive officer
Dr. El Sherbini is a professor of clinical pathology at the Faculty of Medicine, Cairo
University and currently sits on the board of American Society of Clinical Pathol-
ogy (Egypt) and consults on the international certification process. She received
her MBBCh, Masters in Clinical and Chemical Pathology, PhD in Immunology
from Cairo University, and an Executive MBA from London Business School. Dr.
El Sherbini served as CEO of Al Mokhtabar since 2004, until becoming CEO of the
Group in 2012.
Hussein Choucri (age 66)
Independent non-executive Director and Chairman of the remuneration Committee
Mr. Choucri is Chairman and Managing Director of HC Securities & Investment,
which he established in May 1996, and he currently sits on the boards of Edita Food
Industries, Six of October Development and Investment Co. (SODIC), 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.
James patrick nolan (age 56)
Independent non-executive Director and Chairman of the audit and M&a Committees
Mr. Nolan is an Independent Director. He spent 15 years with Royal Philips NV, lat-
terly as Head of Mergers & Acquisitions, and has also served as Head of Mergers &
Acquisitions at Veon Inc., a major mobile telecoms operator in Emerging Markets.
During his time at Philips, 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.
Dan olsson (age 51)
Independent non-executive Director
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 Unilabs Group in Geneva,
Switzerland from 2007 to 2009 and has worked in the healthcare sector since 1999.
Mr. Olsson studied economics at the University of Lund in Sweden.
richard Henry phillips (age 52)
non-executive Director
Mr. Phillips is a founding partner of Actis LLP, the emerging markets private equity group.
As Actis LLP is one of the Company’s major shareholders, Mr. Philips is not considered by
the Board as being independent. 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. During the year he was responsible for the investment activity of
Actis in North Africa and, latterly, Asia. Mr. Phillips is a director on the board of a number of
companies including Edita Food Industries SAE, Emerging Markets Knowledge Holdings
Ltd. and others. Mr. Phillips holds a degree in Economics from the University of Exeter.
ahmed Badreldin* (age 45)
non-executive Director
Mr. Badreldin is a Partner at The Abraaj Group and oversees its investments in the
Middle East and North Africa. He is currently 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 As-
sad. Prior to joining The Abraaj Group in 2008, he was a Director in Investment Bank-
ing at Barclays Capital in London in the Financial Sponsors and Leveraged Finance
Team. Mr. Badreldin graduated in Mechanical Engineering and Business Administra-
tion from the American University in Cairo and holds an MBA from Cranfield School
of Management in the UK with a focus on Strategy and Finance.
* Mr. Badreldin resigned from the Board on 22 November 2016 as The Abraaj Group had ceased to
be a shareholder of IDH.
44
IDH annual report 2016
IDH annual report 2016
45
Corporate Governance
Corporate Governance
Report
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. Under my chairman-
ship, the Board has been resolute in providing oversight and
guidance to senior management as the Group continues to
execute its regional growth strategy.
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, nor does IDH
voluntarily comply with the Code. That said, it is the view
of your Board that we continue our path of improving our
corporate governance structure to adhere to best practices.
We strongly believe that the gradual adoption of best in-
dustry practices in governance will assist us in building a
profitable and sustainable business as well as safeguarding
shareholder interests.
We are compliant with Financial Conduct Authority Disclo-
sure Guidance and Transparency Rules (DTR) subchapters
7.1 and 7.2, which set out certain mandatory disclosures:
7.1 concerns audit committees and bodies carrying out
equivalent functions; 7.2 concerns corporate governance
standards 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 an Audit Committee as well as Remu-
neration, Nomination and Mergers & Acquisitions (M&A)
Committees. The Board may establish additional commit-
tees as appropriate going forward. This Annual Report
includes reports from both the Audit and Remuneration
Committees. The Nomination Committee did not meet
during the year. The new M&A Committee created in 2016
met twice by telephone.
Your Board aims to work towards implementing best prac-
tices in corporate governance, calling on both the expertise
of individual Directors as well as that of outside parties, in-
cluding legal counsel and global professional services firms.
Functioning of the Board
We met nine times as a Board during the course of 2016
(twice in each of March and December and once in each of
May, July, August, October and November). I was delighted
to have had the opportunity to visit IDH’s main base of op-
erations in Cairo, Egypt, in summer 2016. During the visit,
I engaged directly with senior management to discuss both
the Group’s strategic plans and how management (includ-
ing our Chief Executive) is evolving the policies and proce-
dures necessary to continue the full institutionalisation of
the business.
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 26. We are confident that we have
in place the right strategy and the right management team
to deliver shareholder returns going forward.
Composition of the Board
Under its Articles of Association, the Group must have a
minimum of two Directors. While there is no maximum
number of Directors, the Board presently includes six
Board members and has no intention at present of appoint-
ing additional members. Notably, Directors have no share
qualification, meaning they do not need to be shareholders
of the Group in order to serve.
I am pleased to report that we have four Independent
Non-Executive Directors. 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.
We have relevant commercial and technical experience to
help direct the Group as it delivers on its strategy in a very
technical field and across rapidly changing geographies.
Following the sale of Abraaj Group's shareholding of IDH,
Mr. Ahmed Badreldin resigned as a Non-Executive Direc-
tor of the Board on 22 November 2016. The Board is most
grateful to Mr. Badreldin for his valued service to IDH. His
insights and market experience were instrumental to the
establishment and growth of the Group. The Board cur-
rently has no plan to replace Mr Badreldin.
Your Board in 2016 and their biographies are set out on
pages 44 and 45 of this Annual Report and are summarised
in the table below.
Name
position (Date of appointment)
Lord St John of Bletso
Independent Non-Executive Chairperson (12 January 2015)
Prof. Dr. Hend El Sherbini
Group Chief Executive Officer (23 December 2014)
Ahmed Badreldin2
Hussein Choucri
Non-Executive Director (5 December 2014)
Independent Non-Executive Director (12 January 2015)
James Patrick Nolan
Independent Non-Executive Director (8 April 2015)
Dan Olsson
Independent Non-Executive Director (12 January 2015)
Richard Henry Phillips
Non-Executive Director (23 December 2014)
2 Mr. Badreldin resigned from the Board on 22 November 2016 as The Abraaj Group had ceased to be a shareholder of IDH.
46
IDH annual report 2016
IDH annual report 2016
47
Corporate Governance
leadership
We continue to operate on the basis of a clear division of
responsibilities between the role of the Chairman and that
of the Group Chief Executive. This segregation of roles was
agreed at the Board meeting held 12 January 2015.
As Chairman, I ensure the Board is effective in the execu-
tion of all aspects of its role. The Group Chief Executive
Officer, meanwhile, is responsible for managing the
day-to-day running of the business. In this, she is sup-
ported 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, including a quarterly review of financial
and operational performance (including key performance
indicators), and in partnership with the Group secretary
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; and
• 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 effi-
ciently run, allowing all Directors to openly and construc-
tively 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,
the details of which are unchanged since our last Annual
Report. Matters reserved to the Board means any deci-
sion that may affect the overall direction, supervision and
management of the 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;
e) adopting or amending the Group’s business plan or
annual budget;
f ) incurring any capital expenditure in respect of any
item or project of more than EGP 5 million that is
not within the annual budget already approved by
the Board;
g) entering into any contract, liability or commitment
that: (i) could involve a liability for expenditure in
excess of EGP 25 million that is not within the annual
budget already approved by the Board or (ii) is outside
the ordinary course of business of the Group, unless
a contract involves costs within the annual budget
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 procedures
for the Group;
h) making any material acquisition or disposal (includ-
ing 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 poten-
tial 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
accounting 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 contemplated by the business plan or an-
nual budget, as required by law or to comply with a
new accounting standard;
k) adopting (or varying) the Group’s group 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 meet-
ing of any such committee or approving its, or any
changes to its, terms of reference;
n) approving the issue of all circulars, prospectuses,
listing particulars and general meeting notices to
shareholders 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) approv-
ing 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
financial, operational and compliance controls and
risk management;
q) carrying out a robust assessment of the principal
risks facing the Group, including those that threaten
its business, future performance, solvency or liquidity
and to report on such assessment in the Group’s an-
nual report; and
r) reviewing the Group’s overall corporate governance
arrangements and approving any changes thereto.
Apart from these Reserved matters, the Board delegates
specific items to its principal committees, namely the com-
mittees on Audit, Remuneration, Nominations and M&A.
Each Committee is authorised to seek any information it
requires from senior management.
I provide brief recaps below on each of these committees.
Reports from the Chairmen of the Audit and Remuneration
committees appear starting pages 54 and 58, respectively, of
this Annual Report, respectively.
Board activities during 2016
Your Board of Directors held nine meetings in 2016: three
in London, one in Jersey, one in Cairo, one via conference
call and three ad-hoc meetings by teleconference during
the course of the year.
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 any con-
flicts of interest that may arise; and
• Establishes the purpose of the meeting.
• Reviews and approves minutes of the previous meeting
of the Board.
Details of our Directors’ attendance at Board and Com-
mittee meetings are shown on the table on page 52. 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. Furthermore, I endeavour to dis-
cuss with them in advance of the meeting to obtain their
views and decisions on the proposals to be considered.
The Board held 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
members of the Group’s senior management on an as-
needed basis. We will continue this practice in 2017.
Within the wider corporate governance framework,
management established in 2016 a Management Com-
mittee led by the Chief Executive. Its members include all
heads of departments, and it meets every second week
to discuss issues related to sales, manual analysis units,
automated analysis units, human resources, finance,
marketing, quality and investor relations. The Group’s
general counsel also attends these meetings on an as-
needed basis. Senior management uses this as a forum
to review upcoming priorities, recent performance, and
the operational steps necessary to ensure the manage-
ment team delivers on its business goals and the Group’s
strategic plan.
Meeting
Highlights
18 March 2016
(Held at 2 More London
Riverside, London)
Discussion of business developments including financial and operational highlights.
Discussion of the foreign currency situation and macro backdrop in Egypt. Review of
year-to-date financial highlights. Approval of the hiring of an internal auditor.
24 March 2016
(Via conference call)
Approval of the Group’s Annual Report and Financial Statements for the year
ended 31 December 2015, recommendation to shareholders of a final dividend
for approval at the AGM.
10 May 2016
(Held in St. Helier, Jersey)
Review of key operational and financial performance indicators, discussion of
strategy and business opportunities going forward.
6 July 2016
(Held at 310 Harbour Yard,
Chelsea Harbour, London)
Review of the Group’s performance and discussion following a site visit to Cairo.
Review of business strategy and key performance indicators. Discussion of the
budget for the year.
22 August 2016
(Held in Cairo, Egypt)
22 November 2016
(Held at 2 More London
Riverside, London)
Approval to establish Mergers and Acquisitions committee. Discussion of busi-
ness developments in Egypt, including the macro-economic backdrop as well as
a review of the half-year’s priorities with management. Approval of the Group’s
Interim Financial Statements for the period to 30 June 2016
Discussion of 2017 budget and review of Financial Statements for Group’s Egyptian
subsidiaries. Discussion of business strategy and recent developments.
48
IDH annual report 2016
IDH annual report 2016
49
Corporate Governance
effectiveness
The Board of IDH does not currently have formal mecha-
nisms in place to evaluate its effectiveness as regards to
the on-boarding of new Directors, strategic planning or
its formulation of goals. That said, having spent consider-
able 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 industry knowledge it
needs to effectively deliver the Group’s agreed strategy. It is,
moreover, our hope that we will over time develop 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
detailed 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 effective. This enables us to effectively ask questions of
senior management and to hold discussions on the Group’s
strategy and performance. In 2016, senior management
delivered regular reports to the Board ahead of regularly
scheduled Board meetings.
All meetings of the Board and its Committees are min-
uted by the Group Secretary or a designated alternate. Any
concerns 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 meeting, at which time any necessary amend-
ments are made.
The Group has obtained customary directors’ and officers’
indemnity insurance covering the Chairman and the Non-
Executive Directors.
overview of the nomination Committee
Chairman
Members
Lord St John of Bletso
Hussein Choucri
Dan Olsson
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 Direc-
tors, including the Chairman and Chief Executive and other
senior management. The Nomination Committee did not
meet in 2016.
I note in this instance that all members of the Nomination
Committee are Non-Executive Directors. As a result, we
are fully compliant with the Code’s recommendation that
a majority of the Nomination Committee should comprise
Independent Non-Executive Directors. Hussein Choucri
50
IDH annual report 2016
is deemed to be our Non-Executive Director with relevant
financial experience in compliance with the DTR.
overview of the remuneration Committee
Chairman
Members
Hussein Choucri
Dan Olsson
James Patrick Nolan
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 Code recommends that the Remuneration Committee
should comprise, in the case of smaller companies, 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 recommenda-
tions of the Code in this respect.
The Remuneration Committee met on 4 July 2016. The
complete report of the Remuneration Committee for 2016
appears starting on page 58.
overview of the M&a Committee
Members
Chairman
James Patrick Nolan
Dan Olsson
Hussein Choucri
The Committee was established under the Chairmanship of
James Nolan on 29 September 2016 in order to formalise the
process for developing strategies for non-organic growth
and to review the management team’s work on evaluating
potential acquisition opportunities. The Committee met by
telephone twice in the year together with other members of
the Board. Mr. Nolan is joined on the Committee by Hussein
Choucri, Chairman and Managing Director of HC Securities
& Investment in Egypt.
overview of the audit Committee
Members
Chairman
James Patrick Nolan
Dan Olsson
Hussein Choucri
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 statements and accounting policies and
internal and external audits and controls; reviewing and
monitoring the independence 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, whistleblowing and fraud systems
in place within the Group. The Audit Committee will meet
not less than three times a year.
The Code requires that at least one member of the Audit
Committee be independent and that at least one member
has competence in accounting and /or auditing. In addition,
the Code recommends that the Audit Committee 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 and
that members of the Committee must have competence
relevant to the sector in which the Group is operating. The
Board considers that the Audit Committee complies with
the requirements and recommendations of the Code in
those respects.
The full report of the Audit Committee for 2016 appears
starting on page 54 of this Annual Report.
Internal Control and risk Management
Given the business and geographies in which the Group
operates, 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 Com-
pany’s risk matrix, outlined on pages 28-32, is of sufficiently
vital importance that it must be owned equally by the man-
agement team and members of the Board.
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 the IDH management team to be ahead
of the curve in this 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 returns repeatedly in 2017, as we did in 2016.
The Board has ultimate responsibility for the Group’s inter-
nal controls; however, they have 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 ef-
fectiveness 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 Audit Committee reports back
to the Board with their findings and recommendations.
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) until an Internal
Auditor was appointed for the Group on 16 May 2016;
• the identification and management of risk at the level
of operating departments by the heads of those depart-
ments; and
• 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 28-32 of this Annual Report.
Your Board has furthermore put in place a control frame-
work 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 authorisation 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
reporting to management and an annual budget
process involving both senior management and the
Board. The Board received reports on a quarterly basis
in 2016.
• as part of the reporting process in 2016, management
reviewed monthly and year-to-date actual results
against prior year, against budget and against fore-
cast; beginning 2016, these reports were circulated to
the Board. Any significant changes and adverse vari-
ances are reviewed by the Group Chief Executive and
by senior management and remedial action is taken
where appropriate.
An internal audit plan for 2016 was prepared and agreed
with the Audit Committee.
Investor relations
Engagement with shareholders continues to be a key
function at both the senior management and the Board
level. Our investor relations function held more than 50
meetings with current and potential investors during the
course of the year. Management met investors at seven
investor conferences organised by CI Capital (Cairo and
New York; counted as one conference), EFG Hermes
(Dubai and London; two separate conferences), Renais-
sance Capital (Cape Town), Arqaam Capital (Dubai),
HSBC (London) and, Deutsche Bank (Dubai); welcomed
potential and current investors to meetings in Cairo; and
handled queries, whether delivered verbally or in writing,
from more than 70 investors.
IDH annual report 2016
51
Corporate Governance
We published both half- and full-year results and further
released trading updates on performance at the three- and
nine-month periods. We intend to continue publishing
trading updates at the first- and third-quarter marks in
2017, while simultaneously meeting the minimum regula-
tory disclosure as required of a UK Standard listed entity.
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 2017.
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
continue throughout 2017 to grow our investor relations
program 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
We typically publish our Annual Report in March in respect
of the prior year ended 31 December.
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.
At the AGM, all of the Group’s Directors will retire and sub-
mit themselves for re-election.
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 shortly after
the AGM.
limitations of this report
As I noted earlier, the Group is not bound to adhere to
the requirements of the 2014 UK Code of Corporate Gov-
ernance. Nevertheless, we have endeavoured to ensure
that this Annual Report is, as a whole, fair, balanced 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 2016. The Audit
Committee has confirmed to us that the financial state-
ments as contained in the 2016 Annual Report are true
and fair and that the work of the external auditor has been
accurate and effective.
The Group’s second Annual General Meeting as a listed com-
pany will be held in London on 22 May 2017. Shareholders are
encouraged to attend the AGM and to ask questions about
the business, its financial performance and its strategy.
Lord St John of Bletso
Chairman
21 March 2017
table of Director attendance at 2016 Meetings
Number of meetings
Directors
Lord St John of Bletso
Dr. Hend El Sherbini
Ahmed Badreldin*
Hussein Choucri
James Nolan
Dan Olsson
Richard Phillips
Board
9
9
9
4
9
9
8
8
Audit
3
-
-
-
3
3
3
-
Remuneration
Nominations
1
-
-
-
1
1
1
-
0
-
-
-
-
-
-
-
* Prior to his resignation from the Board on 22 November 2016, Ahmed Badreldin attended 4 of 5 meetings while a member.
52
IDH annual report 2016
IDH annual report 2016
53
Corporate Governance
Audit Committee
Report
2017 marks my second year as Chairman of the Audit
Committee, having been appointed to that role 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 have held the positions of
Global Head of Mergers & Acquisitions both at Veon and
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 summarised on pages 44-45. I am
very grateful for their valuable contributions and am
happy that we work well together as a team.
During 2016, the Audit Committee convened three times,
twice in March and once in August. We provided govern-
ance of external financial reporting, risk management
and internal controls and reported our findings and
recommendations to the Board. Outside of scheduled
committee meetings, the Audit Committee also com-
municated throughout 2016 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
external auditor, KPMG, are invited to attend meetings of
the Committee on a regular basis. During 2016, they at-
tended meetings in whole or in part, both in person and
by telephone. The Vice-President Finance and Strategy,
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 Com-
mittee and the external auditor outside the half-year and
year end timetable 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.
At our Board Meeting in August 2016, the Audit Commit-
tee approved the Internal Audit Activity Charter as well as
the appointment of Mr Ashraf Hallaba as Internal Auditor
reporting to the Audit Committee. The role reports func-
tionally to the Audit Committee and administratively to
the Chief Executive Officer. Since inception, the Internal
Auditor has been building a team, writing a manual on
James Nolan
Chairman, audit Committee
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 effective-
ness of the Group’s risk management processes and inter-
nal controls, as well as for ensuring that audit processes
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 myself, the members are Dan
Olsson and Hussein Choucri.
operations, reviewing process of key functions within the
Company and discussing the same with the Company’s
management. The Internal Auditor delivered his first com-
prehensive overview of activities to the Audit Committee
at the 21 March 2017 meeting of the Audit Committee, and
will continue to do so at all future meetings of the Com-
mittee. I am pleased with the progress made on develop-
ing this role to date.
FrC audit Quality review
The FRC is the UK’s independent regulator responsible
for promoting high-quality corporate governance and
reporting to foster investment. The FRC’s responsibilities
include independent monitoring of audits of listed and
certain other public interest entities performed by firms
registered to conduct audits in the UK by a Recognised
Supervisory Body ( further details are set out on the FRC’s
website). This monitoring is performed by the FRC’s Audit
Quality Review (‘AQR’) team. The reviews of individual au-
dit engagements are intended to contribute to safeguard-
ing and promoting improvement in the overall quality of
auditing in the UK.
During the year, the Company’s auditor was subject to the
FRC Audit Quality Review of the Company’s Consolidated
Financial Statements for the year ended 31 December
2015. The assessment of the audit work by the FRC was
category 1 ‘good’. There were no points arising from the
review, which need to be addressed by the Audit Commit-
tee or the Company.
roles and 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:
During its scheduled meetings, the Committee also con-
siders the following matters:
• confirm compliance with Directors’ duties and con-
sider any new conflicts of interest;
• review minutes of previous meetings;
• review actions from previous meetings; and
• review progress against current year objectives.
audit Committee activities During 2016
During 2016 the Audit Committee had three scheduled
meetings; two were held in March and one was held in Au-
gust. At each scheduled meeting, the Committee considers
the matters outlined above under the subheading “Roles
and Duties of the Audit Committee.”
17 March 2016
• Overview of the 2015 audit of the Company
• Identification and discussion of key risk factors, includ-
ing the impairment of goodwill, lease accounting, rev-
enue recognition, management override controls and
foreign exchange issues
• Discussion of dividend policy
• Discussion of further voluntary compliance with the
UK Governance Code
• Decision to recommend proposed UK listing compli-
ance services to the Board
24 March 2016
• Update on and review of the Annual Report and finan-
cial statements for the year ended 31 December 2015
• Letter of Representation recommended to the Board
for signature
• Final dividend recommended to the Board
22 August 2016
• reviewing the Group’s annual and half-year financial
• Consideration of half-year financials for the period to
statements;
30 June 2016
• reviewing the Group’s accounting policies, internal
and external audits and controls;
• reviewing and monitoring the scope of the annual au-
dit and the extent of the non-audit work undertaken
by external auditors; and
• advising on the appointment of external auditors
and reviewing the effectiveness of the internal audit,
internal controls, whistleblowing and fraud systems
in place within the Group.
• Identification and discussion of key risk factors includ-
ing the impairment of goodwill, lease accounting,
hyperinflation and foreign currency availability
• Recommendation to the Board on half-year results
• Approval of KPMG’s letter of engagement, including
audit fees for 2016
• Approval of the Group’s “Internal Audit Charter”
• Approval of the appointment of Mr. Ashraf Hallaba as
Internal Auditor
54
IDH annual report 2016
IDH annual report 2016
55
Corporate Governance
Significant Issues
The Committee considered several significant accounting
issues, matters and judgements in relation to the Group’s
financial statements and disclosures for the year ended
31 December 2016. As part of the half-year and full-year
reporting process, management communicates key ac-
counting issues to the Committee, and the external audi-
tor is asked to comment on the key significant areas of
accounting judgement and disclosure. The information
Issue
How it is being addressed
presented is used by the Committee to critically review
and assess the key policies and judgements that have
been applied, the consistency of policy application from
year to year and the appropriateness of key disclosures
made, together with compliance with the applicable ac-
counting standards. The significant issues arising and a
description of how each was addressed are shown in the
following table.
Finance lease
accounting
The contracts entered into during 2015 for the supply of medical testing kits with the key suppliers to the
business (Siemens, BM (Sysmex) and Roche) include the provision of the equipment to analyse the results
of the testing kits. The 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. The agreement periods are for 5-8 years. Under IAS 17 ‘Leases,’ these agreements
were judged to meet the definition of a finance lease arrangement. The Committee critically reviewed the
accounting treatment along with the significant judgement and estimates during 2016.
The Committee has re-evaluated the currency denomination of the finance lease agreements during
2016 in response to the significant devaluation of Egyptian pound against the US dollar. The Committee
deemed the Siemens and Roche contracts to be US dollar denominated. Under IAS 21, the US dollar fi-
nance lease liability at 31 December 2016 will need to be retranslated into the Egyptian pound functional
currency using the year end spot rate. The increase in the finance lease liability caused by the foreign
exchange loss is recognised in the Profit and Loss Account.
Impairment of
intangible assets
The carrying value of goodwill is subject to annual impairment testing undertaken by management, who
apply a series of assumptions concerning future revenue and cash flows and appropriate discount rates
for Cash Generating Units (CGU). Management presented the outcome of the impairment review to the
Audit Committee, highlighting the level of headroom. The external auditor also commented on this.
The Committee critically reviewed management’s assessment of the outlook and carrying value of these
intangible assets and their disclosure in the Group’s financial statements.
The Committee concurred with management’s conclusion that the carrying value of goodwill attributed
to each CGU was fully supported, and no impairment is required at 31 December 2016.
external auditor
KPMG has acted as the Group’s external auditor since
appointment in July 2015, with Mr. Adrian Wilcox having
been appointed audit partner. The Auditor’s independ-
ence was considered by the Committee during the year
and following careful consideration, it was agreed that
the Auditors remained independent. 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 acknowledgment of the Competition and Markets Au-
thority’s proposal that companies must put their statutory
audit engagement out to tender 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.
provision of non-audit Services
IDH may, on occasion, retain the external auditor for
non-audit services on matters including accounting
advice in relation to acquisitions and divestments, cor-
porate governance and risk management advice, among
other services.
The Audit Committee reviewed the work completed by
the external auditor, as well as the provision of non-audit
services to ensure that the auditor maintained its inde-
pendence. The Audit Committee confirms that during
2016, £60,000 was paid to KPMG in respect of non-audit
work compared to the audit fee for the Group financial
statements for the year ended 31 December 2016 of
£200,000 (audit fee for the Group financial statements
for the year ended 31 December 2015: £230,000). This
non-audit work was related to the review of the half year
financial statements.
recommendation
Ultimately, it is the Board’s responsibility to review and
approve the Group’s full-year and half-year financial state-
ments, as well as to determine that, taken as a whole, the
Annual Report is balanced, understandable and provides
the information necessary for shareholders to assess the
Group’s position and performance, business model and
strategy. It is the Audit Committee’s role to assist the
Board in discharging its responsibilities 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 advised the Board at its meeting on
21 March 2017 that is was their opinion that the financial
statements as at 31 December 2016 provide a true and
fair view of the financial performance of the Group and
recommend that it be adopted by the Board and recom-
mended to shareholders for approval at the forthcoming
Annual General Meeting.
The Audit Committee has recommended to the Board that
the Auditors be put forward for re-election at the forth-
coming Annual General Meeting. The Committee arrived
at this recommendation after having: met with the Audit
partner and Audit team; reviewed the quality of the Audi-
tors’ reports and the quality of the work undertaken in
respect of the half-yearly and Annual Report; considered
the Audit fees of both Audit and Non-Audit work; and
reviewed the Auditors’ independence.
James Nolan
Chairman of the audit Committee
21 March 2017
56
IDH annual report 2016
IDH annual report 2016
57
Corporate Governance
Remuneration Committee
Report
an annual bonus of EGP 450,000. 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 remuneration is set
forth in a service agreement between Dr. El Sherbini and the
Group that also outlines additional taxable benefits, holiday
leave, the mechanism for reimbursement of expenses, and
the conditions under which the agreement may be termi-
nated by her or by the Group.
On 4 July 2016, Dr. El Sherbini’s service agreement was
amended to facilitate the ease of payment, so as to allow Dr.
El Sherbini to elect to receive her Annual Award as either
cash or as a payment of Ordinary Shares in the Company.
Chairman: Lord St John of Bletso is entitled to receive an
annual salary of US$75,000. He is entitled to the reimburse-
ment 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.
Ahmed Badreldin resigned as an Independent Non-Executive
Director as of 22 November 2016.
Non-Executive Directors: Richard Henry Phillips has been
engaged by the Group as a Non-Executive Director under
letter of appointment. He 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 rea-
sonable expenses.
Hussein Choucri
Chairman of the remuneraton Committee
21 March 2017
Hussein Choucri
Chairman of the remuneraton Committee
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 2016.
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 2016 appears below
and is summarised in tabular form on page 59.
Director Compensation in 2016
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 receive
remuneration of Directors in 2016 (all figures in eGp)3
Figures in EGp
Executive Director
Dr. Hend El Sherbini4
Non-Executive Directors
Lord St John of Bletso5
Hussein Choucri5
James Nolan5
Dan Olsson5
Richard Phillips6
Ahmed Badreldin7
Base salary /
fees 2016
Base salary /
fees 2015
Annual bonus
2016
Annual Bonus
2015
Total
2016
Total
2015
3,898,322
3,458,250
450,000
450,000
4,348,322
3,908,250
761,565
507,710
507,710
507,710
-
253,855
583,500
389,000
389,000
389,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
761,565
507,710
507,710
507,710
-
253,855
583,500
389,000
389,000
389,000
-
-
3 There are no taxable benefits, corporate pensions or long-term incentive plans for the Company’s directors.
4 Dr. Hend El Sherbini receives part of her annual bonus in the form of an annual award amounting to EGP 450,000.
5 Director compensation was unchanged year-on-year in US dollar terms, but is translated into Egyptian pounds owing to the float of the EGP in
November 2016, which affects the rate of translation for part of the the Directors’ fees.
6 Mr. Philips is the board representative of a major shareholder, Actis, and is therefore not remunerated.
7 Mr. Badreldin resigned from the Board on 22 November 2016 as The Abraaj Group had ceased to be a shareholder of IDH.
58
IDH annual report 2016
IDH annual report 2016
59
Corporate Governance
Corporate Governance
Directors’
Report
The statements and reviews on pages 2 to 40 comprise
the Strategic Report, which contains certain information
that is incorporated into this Directors’ Report by refer-
ence, including indications as to the Group’s likely future
business developments.
principal activities
The Group’s principal activity is the provision of medical diag-
nostics services. An overview of the Group’s principal activities
is an integral component of the Strategic Review included in
this Annual Report beginning on page 18.
Directors
The Directors who held office at 31 December 2016 and
up to the date of this report are set out on pages 44 to 45
along with their photographs and biographies. Mr. Ahmed
Badreldin resigned his position as a Non-Executive Director
on 22 November 2016. The remuneration of the Directors
(including their respective shareholdings in the Group,
where applicable) is set out in the Remuneration Report on
pages 58 to 59.
Directors’ and officers’ liability Insurance and
Indemnification of Directors
Subject to the conditions set out in the Companies (Jersey)
Law 1991 (as amended), the Group has arranged appropri-
ate Directors’ and Officers’ liability insurance to indem-
nify the Directors against liability in respect of proceedings
brought by third parties. Such provisions remain in force at
the date of this report.
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 sec-
tions including A Note from Our Chairman (pages 10-11), A
Note from our CEO (pages 12 to 14), Strategic Report (begin-
ning page 2) and particularly the Financial Review (beginning
on page 34). Financial statements for 2016 appear in the Au-
dited Financial Statements (starting on page 64).
results and Dividends
The Group’s Results for 2016 are set out in the Audited Financial
Statements starting on page 64.
The Board of Directors has recommended that a dividend of
US$ 0.14 ( fourteen US cents) per share (2015: US$ 0.06, six US
cents) should be paid to shareholders who appear on the regis-
ter as at 12 May 2017, with an ex-dividend date of 11 May 2017.
The payment date for the dividend is 6 June 2017.
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 28 to 33 of this Annual Report.
Substantial share holdings
As at 1 March 2017, the Company ascertained from its own
analysis that the following held interests of 3% or more of
the voting rights of its issued share capital:
Share capital
The Group has 150,000,000 ordinary shares each with a
nominal value of US$ 1.00. There are no other shares in is-
sue, other than ordinary shares. Note 21 to the consolidated
financial statements on page 99 summarises the rights of
the ordinary shares as well as the number issued during
2016. An analysis of shareholdings is shown below.
The Directors certify that there are no issued securities that
carry special rights with regard to control of the Company.
There are similarly no restrictions on voting rights. Chief
Executive Officer Dr. Hend El-Sherbini jointly holds vot-
ing rights to shares held by Hena Holdings Ltd. with her
mother, Dr. Moamena Kamel.
Shareholder
Hena Holdings Ltd.
Actis Idn B.v.
HSBC Global Asset Mgmt (UK)
Fidelity Management & Research (US)
Pictet Asset Management (Geneva)
Number of voting rights
% of voting rights
38,245,589
31,500,000
12,834,161
5,809,411
4,641,178
25.50
21.00
8.56
3.87
3.09
60
IDH annual report 2016
IDH annual report 2016
61
Corporate Governance
Committees of the Board
The Board has established Audit, Nominations, Remunera-
tion and M&A Committees. Details of these Committees,
including membership and their activities during 2016, are
contained in the Corporate Governance section of this An-
nual Report and in the Remuneration Report.
Corporate responsibility
The Group’s report on Corporate Responsibility is set out on
pages 40 to 41.
Corporate Governance
The Group’s report on Corporate Governance is on pages 42
to 63.
articles of association
The Company’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 members of
the Company via special resolution at a General Meeting of
the Company.
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 Company 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.
political Donations
The Group made no political donations in 2016 (2015: nil).
Financial Instruments
The Group’s principal financial instruments comprise cash
balances, balances with related parties, trade receivables
and payables and other payables and receivables that arise
in the normal course of business. The Group’s financial in-
struments 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 informa-
tion appears on page 44 of this Annual Report, and her
compensation is reported in the Remuneration Commit-
tee Report on pages 58 to 59. IDH has service agreements
with the Group Chief Executive and with the Group Chief
Financial Officer, Mr. Tarek Hemida, who is not a Com-
pany Director. Dr. Hend El Sherbini leads the Company’s
Executive Committee, which also includes all heads of
departments and meets every second week to review and
discuss performance, priorities and upcoming events in
light of the Group’s strategic plan. In view of the Company’s
regional growth plans, IDH is committed to building out
its senior management team in preparation for a larger
footprint. The Group and its subsidiaries had total of 4,688
(2015: 4,323) employees as of 31 December 2016 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.
post-Balance Sheet events
There are no such events to report.
Going Concern
Having made enquiries, the Directors have a reasonable
expectation that the Group has adequate resources to
meet its liabilities as they fall due for at least 12 months
from the date of approval of these consolidated financial
statements. Thus, they continue to adopt the going concern
basis in preparing the financial information. The Group’s
business activities, together with the factors likely to affect
its future development, performance and position, are set
out in the Strategic Review on pages 2 to 39. The financial
position of the Group, its cash flows, liquidity position and
borrowing facilities are described in the financial state-
ments and notes thereon on pages 64 to 104.
Statement of Directors’ responsibilities
The Directors are responsible for preparing the annual
report and the financial statements in accordance with
International Financial Reporting Standards as adopted
by the EU (“IFRS as adopted by the EU”), interpretations
from the International Financial Reporting Interpretations
Committee (“IFRIC”) and Companies (Jersey) Law 1991 (as
amended). 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 assets, liabilities, financial position and profit or loss of
the Group for that year.
In preparing the financial statements, the Directors are
required 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 state-
ments comply with 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 different 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
prepared in accordance with International Financial
Reporting Standards, including International Account-
ing Standards; and Interpretations adopted by the
International Accounting Standards Board give a true
and fair view of the assets, liabilities, financial position
and profit or loss of the Company and the undertakings
included in the consolidation taken as a whole; and
• The sections of this Report, including the Chairman’s
Statement, Strategic Report, 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 included
in the consolidation taken as a whole, together with
a description of the principal risks and uncertainties
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 auditor is
unaware. Having made enquiries of fellow Directors and the
Group’s auditors, each Director has taken all the steps that
he/she is obliged to take as a Director in order to have made
himself/herself aware of any relevant audit information and
to establish that the auditor is aware of that information.
annual General Meeting (aGM)
The 2017 AGM will be held at the Hilton London Tower
Bridge on 22 May 2017 at 9:30 am, 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.
During the AGM, all of the Group’s Directors will retire and
submit themselves for re-election.
auditor
KPMG LLP has expressed its willingness to continue in office
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
21 March 2017
62
IDH annual report 2016
IDH annual report 2016
63
Financial
Statements
Independent auditor’s report to the Members of IDH plc . . . . . . . . 66
Consolidated Statement of Financial position . . . . . . . . . . . . . . 68
Consolidated Income Statement . . . . . . . . . . . . . . . . . . . . . 69
Consolidated Statement of profit or loss and other Comprehensive Income 70
Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . . . 71
Consolidated Statement of Changes In equity . . . . . . . . . . . . . . 72
Integrated Diagnostics Holdings plc – “IDH” and its Subsidiaries . . . . . 73
64
IDH annual report 2016
IDH annual report 2016
65
Independent audItor’s report to the
members of Integrated dIagnostIcs
holdIngs plc
We have audited financial statements of Integrated Diagnostics Holdings plc for the year ended 31 December 2016 which
comprise the Consolidated Income Statement, the Consolidated Statement of Profit or loss and Other Comprehensive
Income, the Consolidated Statement of Financial Position, the Consolidated Statement of Changes in Equity, the Consoli-
dated Statement of Cash Flows and the related notes. The financial reporting framework that has been applied 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’ Responsibilities set out on page xx, the Directors are responsible for
the preparation of the financial statements and for being satisfied that they 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 circumstances and have
been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the
Directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial
information in the annual report to identify material inconsistencies with the audited financial statements and to identify
any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired
by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies
we consider the implications for our report.
opinion on the financial statements
In our opinion the financial statements:
• give a true and fair view in accordance with International Financial Reporting Standards as adopted by the EU of the
state of the group’s affairs as at 31 December 2016; and
• have been prepared in accordance with the requirements of 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 matters 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 received 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 explanations 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
21 March 2017
notes:
• The maintenance and integrity of the Integrated Diagnostics Holdings Plc website is the responsibility of the directors;
the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors
accept no responsibility for any changes that may have occurred to the financial statements or our audit report since
they were initially presented on the website. KPMG LLP has carried out no procedures of any nature subsequent to 21
March 2017 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 remain responsible for establishing and controlling the process for doing so,
and for ensuring that the financial statements are complete and unaltered in any way.
66
Idh annual report 2016
Idh annual report 2016
67
consolIdated statement
of fInancIal posItIon
as at december 31, 2016
consolIdated Income
statement
for the financial year ended december 31, 2016
Revenue
Cost of sales
Gross profit
Marketing and advertising expenses
Administrative expenses
Other expenses
Operating profit
Finance costs
Finance income
Net finance 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
Notes
4
9
9.2
10
8
11
2016
EGP’000
1,170,621
(542,687)
627,934
(53,187)
(105,390)
(3,165)
466,192
(99,072)
21,418
(77,654)
388,538
2015
EGP’000
1,014,844
(467,528)
547,316
(53,688)
(210,417)
(15,750)
267,461
(6,380)
13,412
7,032
274,493
(121,620)
266,918
(119,521)
154,972
260,399
6,519
266,918
144,873
10,099
154,972
1.74
0.97
Assets
Non-current assets
Property, plant and equipment
Intangible assets and goodwill
Deferred tax assets
Restricted cash
Total non-current assets
Current assets
Inventories
Trade and other receivables
Other investments
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
Current tax liabilities
Total current liabilities
Total liabilities
Total equity and liabilities
Notes
2016
EGP’000
2015
EGP’000
12
13
10
19
16
17
20
18
21
21
21
21
21
21
8
10
23
25
24
391,141
1,643,595
18,307
13,253
2,066,296
51,715
148,375
95,575
683,721
979,386
3,045,682
1,072,500
1,027,706
(314,310)
30,251
(102,082)
207,720
315,518
-
2,237,303
62,161
2,299,464
132,627
12,202
119,638
264,467
345,776
135,975
481,751
746,218
3,045,682
337,877
1,606,225
-
-
1,944,102
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
The accompanying notes on pages xx - xx form an integral part of these consolidated financial statements.
These consolidated financial statements were approved and authorised for issue by the Board of Directors and signed on
their behalf on 21 March 2017 by:
Chief Executive Officer
Dr. Hend El Sherbini
Head of Audit Committee
James Nolan
68
Idh annual report 2016
Idh annual report 2016
69
consolIdated statement of profIt or
loss and other comprehensIve Income
for the financial year ended december 31, 2016
consolIdated statement
of cash flows
for the financial year ended december 31, 2016
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
2016
EGP’000
2015
EGP’000
266,918
154,972
228,130
228,130
495,048
467,664
27,384
495,048
1,432
1,432
156,404
144,862
11,542
156,404
Cash flows from operating activities
Profit for the period before tax
Adjustments for:
Depreciation
Amortisation
Impairment of Intangible assets
(Loss)/Gain 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
Loss/(gain) of foreign exchange
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
Change in restricted Cash
Change in other investment
Net cash flows used in investing activities
Cash flows from financing activities
Repayments of borrowings
Interest paid
Acquisition non-controlling interest
Dividends paid
Financial lease
Net cash flows used in financing activities
Net increase in cash and cash equivalents
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
2016
EGP’000
2015
EGP’000
388,538
274,493
12
13
9
17
23
23
9.2
9.2
9.2
23
19
20
18
44,730
-
1,849
60
4,298
(2,768)
2,224
(717)
-
9,271
(21,418)
88,877
514,944
(267)
(17,388)
(30,436)
39,935
506,788
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
(108,130)
398,658
(111,224)
189,862
19,753
(48,539)
90
(13,253)
(95,575)
(137,524)
-
(10,263)
(10,450)
(88,560)
(8,928)
(118,201)
142,933
387,716
153,072
683,721
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
70
Idh annual report 2016
Idh annual report 2016
71
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A
Integrated dIagnostIcs holdIngs
plc – “Idh” and Its subsIdIarIes
annual report and consolidated financial statements for the year ended
31 december 2016
1. coRpoRate infoRmation
The consolidated financial statements of Integrated Diagnostics Holdings plc and its subsidiaries (collectively, the Group)
for the year ended 31 December 2016 were authorised for issue in accordance with a resolution of the directors on 21 March
2017. 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 pRepaRation
Statement of compliance
The consolidated financial statements of the Group have been prepared in accordance with International Financial
Reporting Standards (IFRS) as adopted by the European Union (adopted IFRS) issued by the International Accounting
Standards 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.
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 2016, the Group
had net assets amounting to EGP 2,299,464. The Group is profitable and cash generative and the Directors have considered
the Group’s cash forecasts for a period of 12 months from the signing of the balance sheet. The Directors have a reasonable
expectation that the Group has adequate resources to meet its liabilities as they fall due for at least 12 months from the
date of approval of these condensed consolidated interim financial statements. Thus, they continue to adopt the going
concern basis in preparing the financial information.
2.1. Basis of consolidation
The consolidated financial statements comprise the financial statements of the Group and its subsidiaries as at 31 Decem-
ber 2016. 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.
72
Idh annual report 2016
Idh annual report 2016
73
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 included 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 doing so causes the non-controlling interests to have a deficit balance.
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
former subsidiary is measured at fair value when control is lost.
iii. Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are
eliminated. Unrealised gains arising from transactions with equity-accounted investees are eliminated against the invest-
ment 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.
2.2. Significant accounting policies
Except for the changes below, the accounting policies set out below have been consistently applied to all the years pre-
sented 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 2016.
• Annual Improvements to IFRSs – 2012-2014 Cycle
• Disclosure initiative – amendment to IAS 1
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
aggregate of the consideration transferred, which is measured at acquisition date fair value, and the amount of any
non-controlling 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 impairment testing, goodwill acquired in a business combination is, from the acquisition date, al-
located 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.
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
directly or indirectly observable
• Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement
is unobservable
For assets and liabilities that are recognised in the financial statements at fair value on a recurring basis, the Group 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
nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy, as explained above.
The fair value less any estimated credit adjustments for financial assets and liabilities with maturity dates less than one
year is assumed to approximate their carrying value. The fair value of financial liabilities for disclosure purposes is 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 Group has two types of customers: Walk-in patients and patients served under contract. For patients under contract,
rates are agreed in advance on a per-test, client-by-client basis. For both types of customers, revenue is recognised 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 con-
sideration 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
74
Idh annual report 2016
Idh annual report 2016
75
liability are recognised 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 value
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 out-
standing 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.
Income Taxes
e)
Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the income statement except
to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
i. Current tax
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or
substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.
ii. Deferred tax
Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities
and their carrying amounts for financial reporting purposes at the reporting date.
Deferred tax is recognised on temporary differences arising between the tax bases of assets and liabilities and their carry-
ing amounts in the consolidated financial statements.
However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill; deferred income
tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business
combination and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the
foreseeable future.
Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any
unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available
against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can
be utilised. Deferred tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the
reporting date and are expected to apply when the related deferred income tax asset is realised 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
currencies are translated at the functional currency spot rates of exchange at the reporting date.
On consolidation, the assets and liabilities of foreign operations are translated into Egyptian Pounds at the rate of exchange
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 expenditure
that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when
it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be
measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged
to the consolidated statement of income during the financial period in which they are incurred.
Land is not depreciated.
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 recognised 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.
Differences arising on settlement or translation of monetary items are recognised in the income statement.
The useful lives of intangible assets are assessed as either finite or indefinite.
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.
Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there
is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an
intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected
useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify
the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation
76
Idh annual report 2016
Idh annual report 2016
77
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 recognised at fair value at the acquisition date and have an indefinite useful life.
Customer list
Customer lists acquired in a business combination are recognised at fair value at the acquisition date and have finite useful
life. Amortisation method on a straight-line basis and the estimated useful live is 4 years, as determined by management.
Derecognition
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily
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 arrange-
ment, 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.
Impairment of financial assets
Further disclosures relating to impairment of financial assets are also provided in the following notes:
i) Financial instruments – initial recognition and subsequent measurement
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity
instrument of another entity.
• Disclosures for significant estimates and assumptions
• Financial assets
• Trade receivables
Note 3
Note 15
Note 17
i. Financial assets
Initial recognition and measurement
Financial assets are classified, at initial recognition, as financial assets at fair value through profit or loss, loans and re-
ceivables, 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 con-
vention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Group commits 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 financial
assets at 31 December 2016 and 31 December 2015.
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 included 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.
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 debt-
ors is experiencing 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. Unless otherwise
indicated, the carrying amounts of the Group’s financial liabilities are a reasonable approximation of their fair values.
The Group’s financial liabilities include trade and other payables, finance lease liabilities and loans and borrowings includ-
ing 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 recognised in
the statement of profit or loss.
78
Idh annual report 2016
Idh annual report 2016
79
iii. Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of financial
position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on
a net basis, to realise the assets and settle the liabilities simultaneously.
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 3
Note 14
The Group assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication
exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount.
An asset’s recoverable amount is the higher of an asset’s or CGU’s fair value less costs of disposal and its value in use. The
recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely
independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its
recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair
value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an
appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for
publicly traded companies or other available fair value indicators.
The Group bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for
each of the Group’s CGUs to which the individual assets are allocated. These budgets and forecast calculations generally cover
a period of five years. A long-term growth rate is calculated and applied to project future cash flows after the fifth year.
Impairment losses of continuing operations are recognised in the statement of profit or loss in expense categories consist-
ent 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
recognised. Impairment losses relating to goodwill cannot be reversed in future periods.
Intangible assets with indefinite useful lives are tested for impairment annually as at 31 October at the CGU level, as ap-
propriate, and when circumstances indicate that the carrying value may be impaired.
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 realisable value. Cost is determined using the weighted average method.
Net realisable 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 reimbursement is virtually certain. The expense relating to a provision is presented in the statement of profit
or loss net of any reimbursement.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when
appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of
time is recognised as a finance cost.
Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a
pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The
increase in the provision due to passage of time is recognised as a finance cost.
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 recognised 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 recognised as an ex-
pense, with a corresponding increase in equity, over the vesting period of the awards. The amount recognised 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 recognised 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 decision-
maker. The chief operating decision-maker who is responsible for allocating resources and assessing performance of the
operating segments, has been identified as the steering committee that makes strategic decisions.
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 recognised for the amount by which the asset’s
carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of
disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there
2.3. New and amended standards and interpretations not yet adopted
The Group has not early adopted any other standard, interpretation or amendments that have been issued but not yet effec-
tive for the year ended 31 December 2016. 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.
80
Idh annual report 2016
Idh annual report 2016
81
• IFRS 9 “Financial instruments” (expected effective date of January 2018).
• 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 li-
abilities. 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
Note 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 26.
Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that
have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next
financial year, are described below. The Group based its assumptions and estimates on parameters available when the
consolidated financial statements were prepared. Existing circumstances and assumptions about future developments,
however, may change due to market changes or circumstances arising that are beyond the control of the Group. Such
changes are reflected in the assumptions when they occur.
Impairment of intangible assets
The Group tests annually whether goodwill and other intangibles with indefinite lives have suffered any impairment. Im-
pairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the
higher of its fair value less costs of disposal and its value in use. The recoverable amounts of cash generating units have
been determined based on value in use. The value in use calculation is based on a discounted cash flow (“DCF”) model. The
cash flows are derived from the budget for the next five years and do not include restructuring activities that the Group is
not yet committed to or significant future investments that will enhance the asset’s performance of the CGU being tested.
The recoverable amount is sensitive to the discount rate used for the DCF model as well as the expected future cash-inflows
and the growth rate used for extrapolation purposes.
Impairment of trade and other receivables
The requirement for impairment of trade receivables is made through monitoring the debts aging and reviewing customer’s
credit position and their ability to make payment as they fall due. An impairment is recorded against receivables for the
irrecoverable amount estimated by management. At the year end, the provision for impairment of trade receivables was
EGP 19,154k (31 December 2015: EGP 17,030k).
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.
For the year ended
31 December 2016
31 December 2015
Revenue by geographic location
Egypt region
EGP’000
1,024,378
910,886
Sudan region
EGP’000
34,103
30,740
Jordan region
EGP’000
112,140
73,218
Total
EGP’000
1,170,621
1,014,844
The operating segment profit measure reported to the CODM is EBITDA, as follows:
Profit from operations
Property, plant and equipment depreciation
Amortisation of Intangible assets
EBITDA
2016
EGP’000
466,192
44,730
-
2015
EGP’000
267,461
35,840
352
510,922
303,653
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.
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 from Egyptian group entities are subject to regulation by Egyptian authorities. The
outcome of an Ordinary General Meeting of Shareholders declaring a dividend is first certified by the General Authority for
Investment and Free Zones (GAFI). Approval is subsequently transmitted to Misr for Central Clearing, Depository and Reg-
istry (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.
As a provider of medical diagnostic services, IDH’s operations in Sudan are not subject to sanctions. However International
banks are very cautious in carrying out transactions with any Sudanese business and so while there are no actual restric-
tions on the payment of dividends and remittance of cash from the Sudanese subsidiary in practice, there is no opportunity
to enable payments of dividends from Sudan to Egypt. The amount of undistributed reserves held in Sudanese subsidiaries
is not significant to the Group’s total capital management and the total reserves that could be distributed from Sudan is
EGP 599K and the total cash held in Sudan is EGP 14,355K. No funds will be remitted from until such a time as the sanctions
imposed on Sudan are clarified or released.
82
Idh annual report 2016
Idh annual report 2016
83
Total liabilities
Less: cash and short-term deposits (Note 18)
Net (cash)/debt
Total Equity
Net debt to equity ratio
2016
EGP’000
601,389
(683,721)
(82,332)
2,299,464
-3.6%
2015
EGP’000
401,437
(387,716)
13,721
1,942,473
0.7%
No changes were made in the objectives, policies or processes for managing capital during the years ended 31 December
2016 and 2015.
6. gRoup infoRmation
Information about subsidiaries
The consolidated financial statements of the Group include:
Al Borg Laboratory Company (“Al-Borg”)
Al Mokhtabar Company for Medical Labs (“Al
Mokhtabar”)
Molecular Diagnostic Center*
Medical Genetic Center
Al Makhbariyoun Al Arab Group (Hashemite King-
dom of Jordan)
Golden Care for Medical Services
Integrated Medical Analysis Company (S.A.E)
SAMA Medical Laboratories Co. ("Ultralab medi-
cal laboratory ")
AL-Mokhtabar Sudanese Egyptian Co.
Integrated Diagnostics Holdings Limited
Dynasty Group Holdings Limited**
Principal
activities
Medical diagnostics service
Country of
Incorporation
Egypt
Medical diagnostics service
Medical diagnostics service
Medical diagnostics service
Medical diagnostics service
Holding company of SAMA
Medical diagnostics service
Egypt
Egypt
Egypt
Jordan
Egypt
Egypt
Medical diagnostics service
Medical diagnostics service
Sudan
Sudan
Intermediary holding company Cayman Island
Intermediary holding company Cayman Island
% equity interest
2016
99.3%
99.9%
99.9%
55.0%
60.0%
100.0%
99.6%
80.0%
65.0%
100.0%
51.0%
2015
99.3%
99.9%
99.9%
55.0%
60.0%
75.0%
99.6%
60.0%
65.0%
100.0%
-
* "Molecular Diagnostic Center” is no longer treated as a subsidiary with effect from 5 May 2016 following the start of liquidation proceedings as control
has been passed to the liquidator [ Abd EL Wahab Kamal] under Egyptian Law..
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 "
Al Borg Laboratory Company
Country of
Incorporation
Egypt
Jordan
Sudan
Egypt
2016
45.0%
40.0%
20.0%
0.7%
2015
45.0%
40.0%
40.0%
0.7%
The summarised financial information of these subsidiaries is provided below. This information is based on amounts
before 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
Other
individually
immaterial
subsidiaries
EGP’000
Intra-Group
eliminations
EGP’000
Total
EGP’000
Summarised statement of profit or loss for 2016:
Revenue
11,881
112,266
27,160
482,002
207,452
-
840,761
Profit
Other comprehensive
income
Total comprehensive
income
Profit allocated to non-
controlling interest
Other comprehensive
income allocated to
non-controlling interest
1,818
13,850
1,360
199,827
(57,725)
-
159,130
-
52,930
(1,115)
-
393
-
52,208
-
52,930
(1,115)
-
393
-
52,208
818
5,540
272
1,414
(916)
(610)
6,518
-
21,172
(446)
-
139
-
20,865
** On 22 December 2016, IDH established a new subsidiary “Dynasty Group Holdings Limited”, in which it holds 51%, for the purpose of investing in
acquisition opportunities mainly in Africa.
Summarised statement of financial position as at 31 December 2016:
Full details of the Group historical acquisitions can be found in the prospectus for the initial public offering by the Company dated 6 May 2015 and
Non-current assets
885
92,168
3,363
136,938
136,316
-
369,670
available at www.idhcorp.com.
7. business combinations anD acquisition of non-contRolling inteRests
Acquisition of non-controlling interest in Golden Care for Medical Services
On 8 December 2016, the put option held by the vendor of Golden Care for Medical Services (LLC) was exercised which
forced Al-Borg to purchase the remaining 25% equity.
As a result, Al-Borg’s percentage share of total equity shares in Golden Care for Medical Services (LLC) increase from 75%
to 100% from this date.
Current assets
7,761
47,090
20,548
311,085
306,983
-
693,467
Non-current liabilities
9
773
-
-
99,339
-
100,121
Current liabilities
4,518
42,014
14,657
120,345
324,452
-
505,986
Net assets
Net assets attributable to
non-controlling interest
13,173
182,045
38,568
568,368 867,090
-
1,669,244
5,930
72,818
7,714
4,023
(1,327)
(26,997)
62,161
84
Idh annual report 2016
Idh annual report 2016
85
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
Other
individually
immaterial
subsidiaries
EGP’000
Intra-Group
eliminations
EGP’000
Total
EGP’000
Summarised cash flow information for year ended 31 December 2016:
Operating
Investing
Financing
Net increase/(de-
crease) in cash and
cash equivalents
1,508
(410)
-
18,034
(11,955)
(6,848)
2,687
(37)
(3,163)
1,098
(513)
(769)
189,193
(55,929)
(52,256)
81,008
73,254
(8,326)
(8,928)
-
-
-
284,676
(76,657)
(71,195)
56,000
-
136,824
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
Other
individually
immaterial
subsidiaries
EGP’000
Intra-Group
eliminations
EGP’000
9. expenses anD otheR income
Included in profit and loss are the following
Impairment on trade and other receivables
Impairment of goodwill
Charge for increase in provisions
Operating lease payments (buildings)
Professional and advisory fees*
Amortisation
Depreciation
Total
2016
EGP’000
4,298
1,849
2,224
32,234
24,907
-
44,730
110,242
2015
EGP’000
9,230
-
2,881
22,278
138,436
352
35,840
209,017
* In comparative year 2015 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 were 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
73,523
10,894
12,468
3,818
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
1,719
-
-
-
3,016
3,016
4,358
1,033
24,518 433,944
4,720 135,008
126,063
34,531
850
-
(297)
850
- (297)
-
-
-
-
Total
EGP’000
670,516
188,971
3,569
3,569
Fees payable to the Company’s auditor for the audit of the Group’s annual finan-
cial statements
The audit of the Company’s subsidiaries pursuant to legislation
Tax compliance and advisory services
Other services
1,888 956
1,425 (247)
10,099
9.2.
Net finance costs
340
-
70
-
1,443
Net assets
Net assets attributable to
non-controlling interest
Summarised statement of financial position as at 31 December 2015:
Non-current assets
920
35,038
4,612 126,539
82,363
Current assets
8,442
17,853
18,765 167,615
109,422
Non-current liabilities
(2)
-
-
(1,297)
(2,155)
Current liabilities
(3,239)
(12,046)
(14,368)
(97,957)
(67,047)
6,121
40,845
9,009 194,900 122,583
-
-
-
-
-
249,472
322,097
(3,454)
(194,657)
373,458
2,756
16,338
3,604
1,379
2,180
20,616
46,873
Summarised cash flow information for year ended 31 December 2015:
Operating
Investing
Financing
Net increase/(de-
crease) in cash and
cash equivalents
2,727
13,711
7,254 63,675
39,052
181
(5,665)
(1,228) (2,968)
(30,224)
(2,759)
(9,019)
(1,390) (73,933)
39,750
-
-
-
126,419
(39,904)
(47,351)
149
(973)
4,636
(13,226) 48,578
-
39,164
Finance charges payable under finance leases
Net foreign exchange loss
Bank Charges
Total finance costs
Interest income
Net foreign exchange gain
Total finance income
Net finance (cost)/ income
2016
EGP’000
2015
EGP’000
2,686
1,234
-
806
4,726
2,645
629
64
2,970
6,308
2016
EGP’000
(9,271)
(88,877)
(924)
(99,072)
2016
EGP’000
21,418
-
21,418
(77,654)
2015
EGP’000
(5,725)
-
(655)
(6,380)
2015
EGP’000
9,930
3,482
13,412
7,032
IDH has entered into a number of currency swap transactions during 2016 to convert Egyptian pounds into US Dollars.
During the year there was a difference between the official exchange rate and an unofficial parallel exchange rate for
the Egyptian pound against the US Dollar. A foreign exchange loss has arisen due to the difference between the official
exchange rate and the less favourable unofficial parallel exchange rate received by IDH when entering into these transac-
tions. In the period IDH purchased a total of US$ 14,200K (Dec 2015: US$ 8,570K) which resulted in a total foreign exchange
loss recognised of EGP 44,198K (Dec 2015: EGP 3,485K). Certain finance lease liabilities held by the Group are denominated
86
Idh annual report 2016
Idh annual report 2016
87
in US$. Due to the devaluation in the EGP against the US$ a foreign exchange loss of EGP 85,078k has been recognised in
2016 on translating these monetary liabilities at the year end. See note 26 for further details.
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:
2016
2015
Medical Administration
Total
Medical Administration
Total
Average number
of employees
4,307
381
4,688
3,917
406
4,323
2016
EGP'000
2015
EGP'000
Medical Administration
59,276
2,678
179,626
12,086
Total
238,902
14,764
Medical Administration
43,229
1,818
148,604
9,238
Total
191,833
11,056
3,131
511
3,642
2,216
386
2,602
-
194,843
-
62,465
-
257,308
-
160,058
1,034
46,467
1,034
206,525
Wages and salaries
Social security costs
Contributions to defined
contribution plan
Equity settled shared
based payments
Total
Details of Directors’ and Key Management remuneration and share incentives are disclosed in the Remuneration Report
and note 27.
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 undistributed reserves in subsidiaries
Relating to origination and reversal of temporary differences
Total Deferred tax income / (expense)
Tax expense recognised in profit or loss
2016
EGP’000
2015
EGP’000
(135,727)
(108,128)
-
(18,876)
32,983
14,107
(121,620)
13,139
(22,614)
(1,918)
(11,393)
(119,521)
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
Company determined to switch its tax domicile from its current status as resident in Jersey to become resident in the UK,
with effect from 1 July 2016. As a holding company for the IDH group, the Board concluded that the UK represents the
most effective and efficient jurisdiction from which to manage the Company. The current income tax charge for the Group
represents tax charges on profits arising in Egypt, Jordan and Sudan. The significant profits arising within the Group
subject to corporate income tax are generated from the Egyptian operations and subject to 22.5% (2015: 22.5%) 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% (2015:
22.5%)
Effect of tax rate in Jersey of 0% (2015: 0%)
Effect of tax rates in Jordan and Sudan of 20% and 15% respectively (2015: 20%
and 15%)
Tax effect of:
Change in unrecognised 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
2016
EGP’000
388,538
2015
EGP’000
274,493
87,421
(2,210)
61,761
27,985
(452)
(805)
303
18,876
-
8,940
8,742
121,620
(1,476)
22,614
(13,139)
7,549
15,032
119,521
Deferred tax
Deferred tax relates to the following:
Property, plant and equipment
Intangible assets
Undistributed reserves from group sub-
sidiaries*
Provisions and finance lease liabilities
Deferred tax assets (liabilities) before
set-off
Set-off of tax
Net deferred tax assets (liabilities)
2016
Assets
EGP’000
-
-
Liabilities
EGP’000
(9,528)
(101,661)
2015
Assets
EGP’000
-
-
Liabilities
EGP’000
(5,668)
(102,113)
-
27,044
(30,175)
-
-
1,968
(22,614)
-
27,044
(8,737)
18,307
(141,364)
8,737
(132,627)
1,968
(1,968)
-
(130,395)
1,968
(128,427)
All movements in the deferred tax asset/liability in the year have been recognised in the profit or loss account.
Deferred tax liabilities and assets have been calculated based on the enacted tax rate at 31 December 2016 for the country
the liabilities and assets has arisen. The enacted tax rate in Egypt is 22.5% (2015: 22.5%), Jordan 20% (2015: 20%) and Sudan
15% (2015: 15%).
* Undistributed reserves from group subsidiaries
The Group’s dividend policy is to distribute any excess cash after taking into consideration all business cash requirements
and potential acquisition considerations. The expectation is to distribute profits held within subsidiaries of the Group in
the near foreseeable future. During 2015 the Egyptian Government imposed a tax on dividends at a rate of 5% of dividends
distributed from Egyptian entities. As a result a deferred tax liability has been recorded for the future tax expected to be
incurred from undistributed reserves held within the Group which will be taxed under the new legislation imposed and
were as follows:
88
Idh annual report 2016
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89
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
2016
EGP’000
11,378
11,490
2,192
1,095
677
189
3,154
30,175
2015
EGP’000
8,859
5,776
2,192
2,724
677
236
2,150
22,614
Unrecognised deferred tax assets
The following deferred tax assets were not recognised due to the uncertainty that those items will have a future tax benefit:
Impairment of trade receivables (Note 17)
Impairment of other receivables (Note 17)
Provision for legal claims (Note 23)
Unrecognised deferred tax asset
2016
EGP’000
19,154
8,068
2,191
29,413
6,618
2015
EGP’000
17,030
8,068
2,967
28,065
6,315
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
weighted average number of ordinary shares outstanding during the year. There are no dilutive effects from ordinary share
and no adjustment required to weighted-average numbers of ordinary shares.
The following table reflects the income and share data used in the basic and diluted EPS computation:
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)
There is no dilutive effect from equity.
2016
EGP’000
260,399
150,000
1.74
2015
EGP’000
144,873
150,000
0.97
12. pRopeRty, plant anD equipment
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
Total
EGP’000
129,103 93,354
- 95,422
- (9,179)
509
1,697
38,000 15,459
167,612 196,753
- 23,177
(648) (1,994)
6,285 16,728
4,114
173,249 238,778
-
52,324
24,788
(1,391)
551
-
76,272
18,050
(315)
23,646
1,198
118,851
25,738
5,094
(584)
1,701
-
31,949
2,740
(342)
6,095
-
40,442
53,813
354,332
128,448
3,144
- (11,154)
4,536
78
-
(53,459)
476,162
3,576
4,570
48,537
- (3,299)
55,002
2,248
-
(5,312)
576,402
5,082
16,582 61,135
22,535
10,206
-
110,458
2,600 21,390
- (7,588)
466
75,403
149
19,331
9,726
(1,335)
162
31,088
2,124
(367)
500
12,463
-
35,840
- (9,290)
1,277
-
138,285
-
2,757 26,551
- (1,497)
2,275
77
22,165 102,732
12,947
(306)
1,280
45,009
2,475
(248)
665
15,355
-
44,730
- (2,051)
4,297
-
185,261
-
151,084 136,046
148,281 121,350
73,842
45,184
25,087
19,486
5,082
3,576
391,141
337,877
Cost
At 1 January 2015
Additions
Disposals
Exchange differences
Transfers
At 31 December 2015
Additions
Disposals
Exchange differences
Transfers
At 31 December 2016
Depreciation and im-
pairment
At 1 January 2015
Depreciation charge for
the year
Disposals
Exchange differences
At 31 December 2015
Depreciation charge for
the year
Disposals
Exchange differences
At 31 December 2016
Net book value
At 31 December 2016
At 31 December 2015
Leased equipment
EGP 74m of medical and electric equipment was supplied under finance lease arrangements during the year ended 31
December 2015. This equipment was supplied to service the Group’s new state of the art Mega Lab. The equipment secures
lease obligations, see note 26 for further details on the recognition and the leasing arrangement. At 31 December 2016 the
net carrying amount of lease equipment was EGP 59m (2015: EGP 68m).
90
Idh annual report 2016
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91
13. intangible assets
Cost
At 1 January 2015
Effect of movements in exchange rates
At 31 December 2015
Effect of movements in exchange rates
At 31 December 2016
Amortisation and impairment
At 1 January 2015
Amortisation
At 31 December 2015
Impairment Loss*
At 31 December 2016
Net book value
At 31 December 2016
At 31 December 2015
Goodwill
EGP’000
Brand Name
EGP’000
Customer list
EGP’000
Total
EGP’000
1,234,432
(3,233)
1,231,199
26,153
1,257,352
374,055
971
375,026
13,066
388,092
17,043
-
17,043
-
17,043
1,625,530
(2,262)
1,623,268
39,219
1,662,487
-
-
-
1,849
1,849
-
-
-
-
-
16,691
352
17,043
-
17,043
16,691
352
17,043
1,849
18,892
1,255,503
1,231,199
388,092
375,026
-
-
1,643,595
1,606,225
* During the year goodwill of EGP 1,849K allocated to the Molecular Diagnostics Centre CGU has been fully impaired due to the start of the liquidation
plan of this legal entity in May 2016. The impairment has been charged to ‘Other expenses’ in the consolidation income statement.
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:
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
2016
EGP’000
-
-
1,755
1,755
47,953
23,224
71,177
9,417
1,484
10,901
497,275
142,066
639,341
2015
EGP’000
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
Al Mokhtabar Company for Medical Labs (“Al-Mokhtabar”)
Goodwill
Brand name
699,102
221,319
920,421
Balance at 31 December
1,606,225
The Group performed its annual impairment test in October 2016. The Group considers the relationship between its mar-
ket capitalisation and its book value, among other factors, when reviewing for indicators of impairment.
699,102
221,319
920,421
1,643,595
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:
Average annual patient growth rate from 2016 -2020
Average annual price per test growth rate from 2016 -2020
Annual revenue growth rate from 2016 -2020
Average gross margin from 2016 -2020
Terminal value growth rate from 1 January 2022
Discount rate
Ultra Lab
3%
14%
7%
43%
2%
23.8%
Bio Lab Al-Mokhtabar
1%
7%
10%
54%
3%
19.1%
9%
0%
9%
40%
2%
15.3%
Al-Borg
1%
9%
8%
47%
3%
19.1%
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 headroom within the forecasts and therefore no impair-
ment is required.
15. 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:
Held-to-maturity
Short term deposits - treasury bills
Loans and receivables
Cash and cash equivalent
Trade and other receivables
Total financial assets
Financial liabilities measured at amortised cost
Trade and other payables
Put option liability
Finance lease liabilities
Total financial liabilities
Total financial instruments
2016
EGP’000
2015
EGP’000
95,575
-
683,721
120,873
900,169
387,716
103,688
491,404
211,533
102,082
151,799
465,414
434,755
151,320
64,069
74,569
289,958
201,446
The fair values of all of the Group’s financial instruments are the same as their carrying values. All financial instruments
are deemed Level 2.
15.1. 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.
92
Idh annual report 2016
Idh annual report 2016
93
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 minimise potential adverse effects on the Group’s financial performance. The
Group’s senior management oversees the management of these risks. The Board of Directors reviews and agrees policies
for managing each of these risks, which are summarised below.
The board provides written principles for overall risk management, as well as written policies covering specific areas,
such as foreign exchange risk, interest rate risk, and credit risk, use of derivative financial instruments and non-derivative
financial instruments, and investment of excess liquidity.
Market risk
Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in
market prices. Market risk comprises three types of risk: interest rate risk, currency risk and other price risk, such as equity
price risk and commodity risk. Financial instruments affected by market risk include loans and borrowings and deposits.
The sensitivity analyses in the following sections relate to the position as at 31 December in 2016 and 2015. 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 2016 and 2015.
• 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 2016 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 2016 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 2016 were for finance lease
liabilities held and disclosed in note 26. 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 operates internationally and is exposed to foreign exchange risk arising from various currency exposures,
primarily with respect to the US Dollar, Sudanese Pound and the Jordanian Dinar. Foreign exchange risk arises from to
the Group’s operating activities (when revenue or expense is denominated in a foreign currency), recognised assets and
liabilities and net investments in foreign operations. However, the management aims to minimise open positions in foreign
currencies to the extent that is necessary to conduct its activities.
Management has set up a policy to require group companies to manage their foreign exchange risk against their functional
currency. Foreign exchange risk arises when future commercial transactions or recognised assets or liabilities are denomi-
nated in a currency that is not the entity’s functional currency.
At year end, major financial assets / (liabilities) denominated in foreign currencies were as follows (the amounts presented
are shown in the foreign currencies):
31-Dec-16 ('000)
Assets
Liabilities
Cash
and cash
equivalents
22,652
95
12
157
12,652
US Dollars
Euros
GBP
JOD
SDG
Other
assets
203
-
-
1,692
7,501
Total
assets
22,855
95
12
1,849
20,153
Put
option
-
-
-
(4,017)
-
Finance
lease
(7,866)
-
-
-
-
Trade
payables
and other
liabilities
Total
liability Net exposure
12,370
27
(199)
(3,315)
16,130
(2,619) (10,485)
(68)
(68)
(211)
(211)
(5,164)
(1,147)
(4,023)
(4,023)
31-Dec-15 ('000)
Assets
Liabilities
US Dollars
Euros
GBP
JOD
SDG
Cash
12,581
87
11
210
12,609
Other
assets
-
-
-
1,432
4,222
Total
assets
12,581
87
11
1,642
16,831
Put
option
-
-
-
(4,320)
-
Finance
lease
(8,986)
-
-
-
-
The following is the exchange rates applied against EGP:
Trade
payables
and other
liabilities
Total
liability Net exposure
1,637
(39)
3
(3,783)
(821)
(1,958) (10,944)
(126)
(126)
(8)
(8)
(5,425)
(1,105)
(17,652) (17,652)
US Dollar
Euros
GBP
JOD
SAR
SDG
US Dollar
Euros
GBP
JOD
SAR
SDG
Average rate for the year ended
2016
10.15
11.09
13.43
14.57
2.71
1.20
Spot rate at the year ended
31-Dec-16
18.00
18.87
22.04
25.41
4.80
1.13
2015
7.70
8.48
11.73
10.81
2.05
1.20
31-Dec-15
7.78
8.46
11.52
10.90
2.07
1.28
94
Idh annual report 2016
Idh annual report 2016
95
At 31 December 2016, 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 22k (2015: EGP 8,264k), mainly
as a result of foreign exchange gains/losses on translation of US dollar-denominated financial assets and liabilities. The effect
on equity would have been an increase/decrease by EGP (2,500k) due to the impact from translation of foreign subsidiaries.
At 31 December 2016, 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 would have been increased / decreased by EGP (8k) (2015: EGP
(4,124k)), mainly as a result of foreign exchange gains/losses on translation of JOD - denominated financial assets and
liabilities. The effect on equity would have been an increase/decrease by EGP (1,667k) due to the impact from translation
of foreign subsidiaries.
At 31 December 2016, 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 would have been increased / decreased by EGP 2k (2015: EGP
(105k)), mainly as a result of foreign exchange gains/losses on translation of SDG -denominated financial assets and li-
abilities. The effect on equity would have been an increase/decrease by EGP (162k) due to the impact from translation of
foreign subsidiaries.
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 a group basis, except for credit risk relating to accounts receivable balances. Each local entity is
responsible for managing and analysing the credit risk for each of their new clients before standard payment and delivery
terms and conditions are offered. Credit risk arises from cash and cash equivalents, derivative financial instruments and
deposits with banks and financial institutions, as well as credit exposures to customers, including outstanding receivables
and committed transactions.
The table below summarises the maturity profile of the Group’s financial liabilities based on contractual undiscounted payments:
Year ended 31 December 2016
Obligations under finance leases
Put option liability
Trade and other payables
Year ended 31 December 2015
Obligations under finance leases
Put option liability
Trade and other payables
1 year or less
EGP’000
48,373
102,082
211,533
361,988
1 year or less
EGP’000
22,321
69,956
151,320
243,597
1 to 5 years
EGP’000
152,234
-
-
152,234
more than 5 years
EGP’000
8,438
-
-
8,438
1 to 5 years
EGP’000
more than 5 years
EGP’000
62,681
-
-
62,681
21,375
-
-
21,375
Total
EGP’000
209,045
102,082
211,533
522,660
Total
EGP’000
106,377
69,956
151,320
327,653
Cash flow forecasting is performed in the operating entities of the group and aggregated by group finance. Group finance
monitors rolling forecasts of the group’s liquidity requirements to ensure it has
sufficient cash to meet operational needs. Such forecasting takes into consideration the group’s compliance with internal
financial position ratio targets and, if applicable external regulatory or legal requirements – for example, currency restrictions.
The group’s management retain cash balances in order to allow repayment of obligations in due dates, without taking
into account any unusual effects which it cannot be predicted such as natural disasters. All suppliers and creditors will be
repaid over a period not less 30 days from the date of the invoice or the date of the commitment.
For banks and financial institutions, the Group is only dealing with the banks which have a high independent rating and a
good reputation.
16. inventoRies
Trade receivables
Each business unit subject to the Group’s established policy, procedures and control relating to customer credit risk man-
agement manages customer credit risk. 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 and the average
general credit terms given to contract customers are 45 days.
An impairment analysis is performed at each reporting date on an individual basis for major clients. In addition, a large
number of minor receivables are grouped into homogenous groups and assessed for impairment collectively. The 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 accordance
with the Group’s policy. Investments of surplus funds are made only with approved counterparties and within credit limits
assigned to each counterparty. Counterparty credit limits are reviewed by the Group’s Board of Directors on an annual basis,
and may be updated throughout the year subject to approval of the Group’s management. The limits are set to minimise the
concentration of risks and therefore mitigate financial loss through a counterparty’s potential failure to make payments.
The maximum exposure to credit risk at the reporting date is the carrying value of cash and cash equivalents disclosed in Note 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.
Chemicals and operating supplies
2016
EGP’000
51,715
51,715
2015
EGP’000
34,326
34,326
During 2016, EGP 184,087k (2015: EGP 172,354k) 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
2016
EGP’000
107,193
27,502
4,294
6,214
3,172
148,375
2015
EGP’000
100,033
13,467
465
2,143
1,047
117,155
For terms and conditions relating to related party receivables, refer to Note 27.
As at 31 December 2016, trade and other receivables with an initial carrying value of EGP 27,222k (2015: EGP 25,098k)
were impaired and fully provided for. Below shows the movements in the provision for impairment of trade and other
receivables:
96
Idh annual report 2016
Idh annual report 2016
97
At 1 January
Charge for the year
Utilised
Unused amounts reversed
Exchange differences
At 31 December
2016
EGP’000
25,098
4,298
-
(2,768)
594
27,222
2015
EGP’000
19,132
9,230
(343)
(2,873)
(48)
25,098
20. otheR investments
Fixed term deposits
Treasury bills
2016
EGP’000
90,000
5,575
95,575
2015
EGP’000
-
-
-
As at 31 December, the ageing analysis of trade receivables is as follows:
2016
2015
Total
EGP’000
107,193
100,033
1 - 30 days
EGP’000
54,072
29,508
30-60 days
EGP’000
8,450
28,774
61-90 days
EGP’000
19,477
20,668
Over 90 days
EGP’000
25,194
21,083
The maturity date of the fixed term deposit between 9–12 months and the effective interest rate on the deposit is 14.65%.
The maturity date of the treasury bills is between 3–6 months and have settled interest rate of 18.10%.
Fixed term deposits and treasury bills are classified as held to maturity.
21. shaRe capital anD ReseRve
The Company’s ordinary share capital is $150,000,000 equivalent to EGP 1,072,500,000.
All shares are authorised and fully paid and have a pair value of $1.
18. cash anD cash equivalent
Cash at banks and on hand
Short-term deposits (less than 3 months)
2016
EGP’000
426,578
257,143
683,721
2015
EGP’000
124,332
263,384
387,716
In issue at beginning of the year
In issue at the end of the year
Ordinary shares
31-Dec-16
150,000,000
150,000,000
Ordinary shares
31-Dec-15
150,000,000
150,000,000
EGP 14,355K (2015: EGP 16,166K) of total cash and cash equivalents are held in subsidiaries operating in Sudan. As detailed
in note 5 no cash will be remitted from Sudanese subsidiaries until such a time as the sanctions imposed on Sudan are
clarified or released and International banks facilitate transactions with Sudanese businesses.
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 10%- 11% per annum.
19. RestRicteD cash
Restricted cash
2016
EGP’000
13,253
13,253
2015
EGP’000
-
-
The cash balance related to “Molecular Diagnostic Center” and not available for use by the Group because the entity de-
consolidated starting May 2016 and control has been transferred to the liquidator. The process of liquidation will take more
than one year and once complete the total cash amount is expected to be returned to IDH.
Capital reserve
The capital reserve was created when the Group’s previous parent company, Integrated Diagnostics Holdings LLC – IDH
(Caymans) arranged its own acquisition by Integrated Diagnostics Holdings PLC, a new legal parent. The balances arising
represent the difference between the value of the equity structure of the previous and new parent companies. 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.
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99
22. DistRibutions maDe anD pRoposeD
24. tRaDe anD otheR payables
Cash dividends on ordinary shares declared and paid:
US$ 0.06 per qualifying ordinary share (2015: US$ nil)
2016
EGP’000
79,470
79,470
2015
EGP’000
-
-
After the balance sheet date the following dividends were proposed by
the directors (the dividends have not been provided for):
US$0.14 per share (2015: US$ 0.06) per share
378,000
79,470
Trade payables
Accrued expenses
Other payables
Put option liability
Finance lease liabilities
2016
EGP’000
126,069
77,646
7,818
102,082
32,161
345,776
2015
EGP’000
70,743
73,747
6,830
64,069
14,242
229,631
The proposed 2016 dividend on ordinary shares are subject to approval at the annual general meeting and is not recognised
as a liability as at 31 December 2016.
The accounting policy for put options after initial recognition is to recognise all changes in the carring value of the put
liability within equity.
23. pRovision
At 1 January 2016
Provision made during the year
Provision used during the year
Provision reversed during the year
At 31 December 2016
Current
Non- Current
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
Egyptian
Government
Training Fund for
employees
EGP’000
7,995
2,016
-
-
10,011
-
10,011
Egyptian
Government
Training Fund for
employees
EGP’000
6,606
1,389
-
-
7,995
-
7,995
Provision for legal
claims
EGP’000
2,967
208
(267)
(717)
2,191
-
2,191
Provision for legal
claims
EGP’000
2,372
1,492
(891)
(6)
2,967
-
2,967
Total
EGP’000
10,962
2,224
(267)
(717)
12,202
-
12,202
Total
EGP’000
8,978
2,881
(891)
(6)
10,962
-
10,962
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,
after taking appropriate legal advice, is that the outcome of these legal claims will not give rise to any significant loss
beyond the amounts provided as at 31 December 2016.
Through the historic acquisitions of Makhbariyoun Al Arab and Golden Care Medical Services the Group entered into 2
separate put option arrangements to purchase the remaining equity interests from the vendors at a subsequent date. At
acquisition a put option liability has been recognised for the net present value for the exercise price of the option.
The options are exercisable in whole from the fifth anniversary of completion of the original purchase agreement, which
fell due in June 2016.
In July 2016 the Group was notified by the vendors of Golden Care Medical Services that the put option had been exercised.
The purchase of the remaining shares has been completed in December 2016 which amounting EGP 10,450K of cash con-
sideration paid for the remaining equity interest.
25. long-teRm financial obligations
Finance lease liabilities (see note 26)
26. 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
2016
EGP’000
119,638
119,638
2015
EGP’000
60,327
60,327
2016
EGP’000
39,805
139,466
81,868
261,139
2015
EGP’000
21,706
68,817
37,450
127,973
The Group lease certain branches for the operation of the business. During the year EGP 32,234K was recognised as an
expense in the income statement in respect of operating leases (2015: EGP 22,278K).
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Idh annual report 2016 101
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:
Contingent liabilities
There are no contingent liabilities relating to the group’s transactions and commitment with banks.
Finance lease liability – laboratory equipment
Finance lease liability – other
Finance lease liabilities for the laboratory equipment are payable as follows
At 31 December 2016
Less than one year
Between one and five years
More than five years
At 31 December 2015
Less than one year
Between one and five years
More than five years
Minimum lease
payments
2016
EGP’000
47,834
150,971
8,438
207,243
Minimum lease
payments
2015
EGP’000
21,860
62,681
21,375
105,916
2016
EGP’000
149,996
1,803
151,799
2015
EGP’000
74,023
461
74,484
Interest
2016
EGP’000
16,212
38,628
2,407
57,247
Interest
2015
EGP’000
7,965
20,290
3,638
31,893
Principal
2016
EGP’000
31,622
112,343
6,031
149,996
Principal
2015
EGP’000
13,895
42,391
17,737
74,023
The Group entered into 2 significant agreements during the prior year 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
consumption of the benefits from the equipment.
Both agreements have been judged to be US$ denominated due to the future minimum lease payments for the use of the
equipment and corresponding finance lease liability being directly connected to the US$. Due to the significant devalua-
tion in the EGP against the US$ a foreign exchange loss of EGP 85,078k has been recognised in 2016 on translating the two
‘monetary’ finance lease liabilities at the year end exchange rate.
27. RelateD paRty DisclosuRes
The significant transactions with related parties, their nature volumes and balance during the period 31 December 2016
and 2015 are as follows:
31-Dec-16
Nature of
relationship
Transaction
amount of the year
EGP’000
Amount due from
EGP’000
Related Party
Health-care Tech Company*
Life Scan (S.A.E)**
International Fertility (IVF)***
Nature of transaction
Expenses paid on
behalf
Expenses paid on
behalf
Expenses paid on
behalf
Rental income
Affiliate*
Affiliate**
Affiliate***
Integrated Treatment for Kidney Diseases
(S.A.E)
Total
Medical Test analysis
Entity owned by
Company’s CEO
16
-
3,760
274
53
204
277
3,760
53
4,294
Related Party
Health-care Tech Company
Life Scan (S.A.E)
Integrated Treatment for Kidney Diseases
(S.A.E)
Total
Nature of
transaction
Expenses paid on
behalf
Expenses paid on
behalf
Rental income
31-Dec-15
Nature of
relationship
Transaction
amount of the year
EGP’000
Amount due from
EGP’000
Affiliate*
Affiliate**
Entity owned by
Company’s CEO
75
277
274
188
277
-
465
* 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).
*** International Fertility (IVF) is a company whose shareholders include Dr. Moamena Kamel ( founder of IDH subsidiary Al-Mokhtabar Labs).
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 2016,
the Group has not recorded any impairment of receivables relating to amounts owed by related parties (2015: nil). This
assessment is undertaken each financial year through examining the financial position of the related party and the market
in which the related party operates.
IDH 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
Foundation allocates this sum to organisations and groups in need of assistance. The foundation deploys an integrated
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Idh annual report 2016 103
program and vision for the communities it helps that include economic, social, and healthcare development initiatives. In
2016 EGP 2,740K (2015: EGP 800K) was paid to the foundation by the IDH Group.
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
2016
EGP’000
23,085
-
23,085
2015
EGP’000
17,252
1,034
18,286
The Executive receive incentive award in the form of an award of ordinary shares in the company (‘’Shares’’) or as a cash payment at the Executive’s
discretion (in either case, an ‘’Award’’). During 2016 and within the required notice period, the Executive made the decision to receive their 2015 Award
in cash payment and not shares.
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