A Leading Consumer Healthcare
Company in the Middle East and Africa
Annual Report 2017
A long track record for quality and safety has
earned the Group a trusted reputation, as well
as internationally recognised accreditations
TABlE OF
ContEntS
Strategic Report
IDH at a Glance
Highlights in 2017
Financial & Operational Performance
A Note from Our Chairman
A Note from Our CEO
Our Markets
IDH’s Competitive Strengths & Business Model
Our Healthcare Systems
Our Business Model
Internationally Accredited Test Portfolio
Growth Strategy
Principal Risks, Uncertainties and Their Mitigation
Financial Review
Corporate Responsibility
Corporate Governance
Board of Directors
Corporate Governance Report
Audit Committee Report
Remuneration Committee Report
Directors’ Report
Financial Statements
02
04
06
08
10
12
16
24
26
28
30
32
34
40
46
48
50
52
58
62
64
68
Strategic
Report
IDH is well-positioned with trusted brands, strong
supplier relationships, and a proven asset-light
business model to deliver high-quality medical
diagnostics to the Middle East and Africa regions
IDH ANNUAl REPORT 2017
5
4
IDH ANNUAl REPORT 2017
Strategic Report
IDH
at a Glance
Integrated Diagnostics Holdings (“IDH,” the “Group,” or
the “Company”) is a leading consumer healthcare com-
pany with operations in Egypt, Jordan, Sudan and Nigeria.
A long track record for quality and safety has earned the
Group a trusted reputation, as well as internationally
recognised accreditations for its portfolio of over 1,400
diagnostics tests. From its base of 383 branches as of 31
December 2017, the Company will continue to add labo-
ratories through a Hub, Spoke and Spike business model
that provides a scalable platform for efficient expansion.
Beyond organic growth, IDH’s expansion plans include
acquisitions in new Middle Eastern and African markets
where its model is well-suited to capitalise on similar
healthcare and consumer trends and capture a significant
share of underpenetrated and highly-fragmented markets.
Notably in early 2018, the Group expanded its geographic
footprint with an investment in Nigeria, Africa’s largest and
most populous country. IDH has been a Jersey-registered
entity with a Standard Listing on the Main Market of the
London Stock Exchange since May 2015.
egp 1,514 mn
in revenue in 2017,
up 29% on 2016
+ 39 years
383
6
track record at the
subsidiary level
operational branch labs as
at 31 December 2017
key brands with strong
awareness in underserved
markets*
26 mn
6.4 mn
+ 1400
tests completed across the
Group in 2017
patients served across the
Group in 2017
internationally accredited
diagnostic tests offered
*As at January 2018.
egp 384 mn
in net profit in 2017,
up 44% on 2016
Dividend
of US$ 0.16 per share
(vs. US$ 0.14 in 2016)
6
IDH ANNUAl REPORT 2017
Strategic Report
Highlights of 2017
IDH ANNUAl REPORT 2017
7
net foreign
exchange loss
Revenues
Gross profit
increased 29% to EGP 1,514 million in 2017 from EGP 1, 171
million in 2016, driven by a combination of better pricing,
favourable currency translation and higher volumes.
gained 16% to EGP 730 million from EGP 628 million in 2016,
despite ongoing inflationary pressures on raw material costs
following the November 2016 floatation of the Egyptian pound.
Net profit
EBITDA*
grew 44% year-on-year to EGP 384 million in 2017 versus EGP
267 million in 2016, benefiting from increased interest income
and a lower foreign exchange loss.
grew 18% to EGP 602 million from EGP 511 million in 2016,
despite higher raw material costs as well as higher rent and
utilities expenses.
Interest income
Operating profit
reached EGP 51 million versus EGP 21 million a year earlier,
reflecting highly effective management of excess cash.
rose 16% to EGP 540 million compared with EGP 466 million in
2016, also constrained by post-devaluation inflationary pressures.
Net foreign exchange loss
Earnings per share
amounted to EGP 20 million, substantially lower than EGP 89
million in 2016.
of EGP 2.49 compared with EGP 1.74 in 2016.
Recommended final dividend
Expansion of branch network
of US$ 0.16 (sixteen US$ cents) per share, equivalent to US$ 24
million in total, compared with US$ 0.14 (fourteen US$ cents)
per share, equivalent to US$ 21 million in total in 2016.
to 383 in 2017 from 354 in 2016 represented 8% annual unit growth.
Immunology
Microbiology
Haematology
Endocrinology
Clinical Chemistry
Molecular Biology
Cytogenetics
Histopathology
Radiology
Sudan
Egypt
Jordan
Nigeria
our Brands
In Egypt, IDH’s largest market, the
Group’s core brands include Al Borg
and Al Mokhtabar, each of which is
well-known and enjoys a loyal fol-
lowing. In Jordan, the Company op-
erates Biolab; in Sudan, Ultralab and
Al Mokhtabar Sudan; and in Nigeria,
Echo-Scan*.
our Services
IDH offers more than 1,400 diagnos-
tic pathology tests, ranging from
basic blood glucose tests for diabetes
to advanced molecular testing for
genetic disorders.
our Geography
IDH’s geographic platform has expand-
ed to include four countries across the
Middle East and Africa including Egypt,
Sudan, Jordan and Nigeria*.
* EBITDA is calculated as operating profit (EGP 540 million) plus depreciation (EGP 62 million) and amortisation (nil).
*As at January 2018.
8
IDH ANNUAl REPORT 2017
Strategic Report
IDH ANNUAl REPORT 2017
9
Financial & Operational
Performance
IDH delivered strong operational and financial results in the year ended
31 December 2017, despite macroeconomic challenges, in particular
high inflation — in sharp contrast to many consumer names in Egypt
Indicator
units
2017
2016
Operational
Number of Tests
mn
Number of Patients
mn
Number of Labs
Tests per Patient
#
#
Financial
25.7
6.4
383
4.03
24.1
5.8
354
4.16
Revenue
EGP mn
1,514
1,171
Per Patient
Per Test
EGP
EGP
Per Lab
EGP mn
EBITDA*
EGP mn
Net Profit
EGP mn
238
59.0
4.0
602
384
201
48.6
3.3
511
267
Earnings per share
EGP
2.49
1.74
Revenue by Geography 2017 and 2016
Revenue by type in 2017 and 2016
% of total revenue
in 2016
% of total revenue
in 2017
■ Egypt
■ Jordan
■ Sudan
■ Egypt
■ Jordan
■ Sudan
83%
14%
3%
83%
14%
3%
% of total revenue
in 2016
■ Walk in
■ Contract
39%
61%
% of total revenue
in 2017
■ Walk in
■ Contract
39%
61%
* EBITDA is calculated as operating profit (EGP 540 million) plus depreciation (EGP 62 million) and amortisation (nil).
10
IDH ANNUAl REPORT 2017
Strategic Report
A Note
from Our Chairman
IDH ANNUAl REPORT 2017
11
In 2017, your Company delivered very encouraging op-
erational and financial performance despite the ongo-
ing macroeconomic challenges in our primary market.
We also expanded our footprint in Africa in early 2018
with a key strategic investment in Nigeria that will
broaden our diagnostic services suite beyond pathology
to include radiology.
We have seen more sustainable macroeconomic stability
in Egypt. Whilst inflationary pressures persist, the Gov-
ernment has been implementing a robust programme of
reforms that has resulted in stronger economic growth
and led to increased foreign direct investment with the
improvement in general confidence. The Central Bank of
Egypt (CBE)’s floatation of the Egyptian pound in Novem-
ber 2016, with the ensuing lifting of capital controls, has
freed up the foreign exchange market, thus improving the
ease of doing business in the country.
Despite the ongoing inflationary headwinds, IDH main-
tained both our profit margins and market share. The
well-entrenched strength of our brands and supplier
relationships enabled our management to successfully
execute our business model. We are naturally delighted
by the recovery in our stock price. Your management are
constantly seeking to consolidate and maintain the prof-
itability of the business with the provision of additional
value-added services. With our long-established presence
in Egypt, together with our loyal patient base, we have
built a considerable base of patient data whilst at all times
maintaining strict confidentiality and privacy.
We remain committed to fulfilling our business strategy
through expanding our geographical footprint in other
countries, both in Africa and in the Middle East. We are
delighted by the growth and strength of our subsidiaries in
Jordan and Sudan, which have successfully implemented
our business model. With the lifting of longstanding US
sanctions on Sudan, the outlook for that country has im-
proved markedly.
With Nigeria having by far the largest population in Africa,
we are keen to expand our presence in that country. We
shall be building on our recent investment in Echo-Scan,
a network of radiology and diagnostic laboratories that
has provided us with an attractive entry point into the
country. With its fragmented and largely unestablished
healthcare services market, we see huge potential for fu-
ture growth to match our successful track record in Egypt.
We are proud to be investing in Nigeria alongside Man
Capital LLC and the IFC.
We are very cognisant that as we expand the geographical
reach of our emerging market platform, we must maintain
our high standards of operational excellence and ensure
that our balance sheet remains strong and resilient. In
2017, we also focused on strengthening our senior finan-
cial management team, and this year we will undertake
a comprehensive review of all aspects of our human
resources management so as to entrench and ensure
sustainable performance at all levels of the organisation.
We are at an advanced stage in building and completing
our new corporate headquarters in Cairo, where consoli-
dating our offices will greatly facility the daily interaction
of our staff.
In conclusion, your Board and management are com-
mitted to maintaining strong corporate governance and
promoting corporate social responsibility whilst under-
pinning our business model with the highest standards
of accountability and transparency, thus fulfilling the
expectations of our shareholders.
Lord St John of Bletso
Chairman
20 March 2018
We remain committed to
fulfilling our business strategy
through expanding our
geographical footprint — both
in Africa and in the Middle East
12
IDH ANNUAl REPORT 2017
Strategic Report
A Note
from Our CEO
IDH ANNUAl REPORT 2017
13
Fellow shareholders,
In 2017, IDH again delivered superior operational and
financial performance despite ongoing macroeconomic
challenges in Egypt, our largest market. We have also ex-
panded our geographic reach with an investment in Nigeria
in early 2018, adding a fourth country to our platform.
We close the year as a leading consumer healthcare com-
pany in the Middle East and Africa. Our proven business
model allowed us to deliver revenue growth of 29% in
2017, reflecting our ability to deliver high-quality medical
diagnostic services to more than six million patients as
measured by 26 million tests. We now look to sustain that
performance thanks to our presence in Egypt and Nigeria
— two of Africa’s largest and most populous countries —
as well as our operations in Jordan and Sudan.
Strong operational and Financial performance
Our revenues were very strong throughout the 2017 year,
increasing 29% year-on-year to EGP 1,514 million. Whilst
patient and test volumes gained 9% and 7%, respectively,
the power of the Group’s brands and the favourable impact
of our tactical marketing campaigns can be seen most
clearly in the recovery in volumes that is under way in our
higher-margin walk-in patient category. Walk-in patient
revenues grew 29% period-on-period as patient volumes
rose 2% compared with a year-earlier decrease of 4%; and
test volumes rose 7% versus a 2% year-ago decline.
Understanding that protracted high inflation in Egypt has
had the most significant impact on our patients who pay
for their own healthcare, we have developed our market-
ing programs to target them with a strong health aware-
ness message in combination with a compelling value
component. This includes offering bundled diagnostic test
packages for lifestyle-related diseases and chronic health
conditions; an in-house point redemption system; and bank
partnerships for more affordable payment plans. Moreover,
in recognition of the pressures being felt by all our patients,
our price increases have been significantly below the high
rates of inflation caused by the November 2016 devaluation
of the Egyptian pound. The brand equity we have built over
many years has translated into strong loyalty among the
millions of patients who came to know and trust us long
before facing the current inflationary pressures.
We continued to expand our geographic footprint in 2017,
bringing our total network of laboratories to 383 with
8% annual unit growth. We opened 23 new branches in
Egypt, four in Jordan and two in Sudan. It is noteworthy
that our subsidiaries in both Jordan and Sudan continued
their steady growth last year, together contributing 17%
of consolidated sales and 9% of consolidated EBITDA last
year. In Sudan, the recent lifting of longstanding US sanc-
tions marked an important milestone, signalling an end to
the country’s economic isolation and paving the way for a
brighter economic future.
IDH delivered EBITDA growth of 18% year-on-year to EGP
602 million — despite shouldering additional corporate
expense burdens that accompanied the implementation
of Egypt’s much-needed macroeconomic reforms. Beyond
the lingering inflationary impact of the devaluation of the
Egyptian pound, the higher costs of rent, transportation
and utilities were all pressure points, as was the value-
added tax imposed in July 2016 and increased to 14% from
13% in July 2017. The effect of higher interest rates has
been double-edged, as higher interest income on the large
cash balances we carry on our balance sheet was partially
offset by rising interest expenses on our medium-term
debt. Our bottom line did benefit from a substantially
lower foreign exchange loss this year than last, helping net
profit to rise 44% period-on-period to EGP 384 million.
from the College of American Pathologists (CAP), widely
considered the leader in laboratory quality assurance
globally. The international accreditation of our Mega
Lab constructs a competitive barrier to entry to our
markets and, as importantly, imparts an assurance of
quality and safety that engenders strong loyalty among
our valued corporate as well as individual customers.
IDH operates the only laboratory in Egypt with the dis-
tinguished CAP accreditation.
In sum, our Company stayed the course last year, relying
on the fundamental strength of our brands and sharply
focused on deploying our asset-light model. We have suc-
cessfully managed to contain our costs whilst at the same
time upholding our high-quality standards Company-wide
and maintaining our high patient and physician satisfac-
tion levels. By doing so, we were able to both protect our
margins and increase our market share in 2017.
In marked contrast to many consumer names in Egypt,
IDH has been able to successfully drive volumes and pass
on selected price increases post-devaluation. Beyond the
insulation provided by the inherently defensive nature
of the healthcare industry, I believe it is also very much
a testament of our trusted brands. We enter 2018 in a
strong financial position with an under-leveraged and
highly cash-generative balance sheet that provides us
with strategic flexibility.
Macroeconomic progress in our Largest Market
There is welcome evidence that Egypt, representing 83%
of our 2017 revenues, is turning the economic corner. Last
year, demonstrable progress was seen regarding the imple-
mentation of reforms to stabilise the country’s finances as
well as promote growth and employment.
As IDH maintains international-quality accreditations
to ensure best-in-class service, we are honoured to have
been awarded the certification for our Cairo Mega Lab
With the floatation of the Egyptian pound in November
2016, the foreign exchange market has normalised and
We enter 2018 in a strong financial
position with an under-leveraged
and highly cash-generative balance
sheet that provides us with
strategic flexibility
14
IDH ANNUAl REPORT 2017
Strategic Report
IDH ANNUAl REPORT 2017
15
the parallel market has been eliminated. After losing more
than 50% of its value in 2016, the Egyptian pound closed
the 2017 year at 17.67 per US$ 1.00, down only slightly from
18.00 at 2016 year end. Among other reforms, the govern-
ment also began a gradual reduction of energy subsidies
with some of the resources reallocated to strengthening
the social safety net.
As a consequence of the sharp devaluation of the cur-
rency as well as the new energy policy, however, inflation
has remained high. In December 2017, headline inflation
stood at 21.9% after peaking at 33% in July. To address this
extreme inflationary pressure, the Central Bank of Egypt
(CBE) has adopted tight monetary policy, with aggressive
interest rate hikes in May and July of 2017. The Govern-
ment of Egypt expects headline inflation to fall to 10-13%
by the end of 2018, whilst the consensus forecast among
analysts appears to be 13-14% at mid-year.
Expanding 0ur Geographic Footprint in Africa
I am also pleased to report that in early 2018 we added
Nigeria to our geographic footprint as a “one-stop shop”
diagnostics services provider. We have accomplished
this by forming a joint venture with Man Capital LLC, the
London-based investment arm of the Mansour Group,
called Dynasty Holding Group. Dynasty is 51% owned
and controlled by IDH, and together with Man Capital we
are very pleased to have partnered with the International
Finance Corporation to invest in Eagle Eye Echo-Scan
Limited. Echo-Scan is a leading medical diagnostics
business in Nigeria with all of the licenses it requires to
operate and expand on a national scale in Africa’s most
populous country.
The strategic rationale for making Nigeria the fourth
country on our regional platform is compelling. Nigeria’s
diagnostic services market is very large, highly fragmented
and underpenetrated, offering significant opportunities
for growth and economies of scale. As importantly, it
shares many similarities with Egypt’s market in the 1980s
and 1990s in terms of structure, pace of development, and
the emerging disease profile of patients.
Dynasty and the IFC have committed to invest significant
capital in Echo-Scan over the next four years. Dynasty
has acquired a majority stake in Echo-Scan and assumed
management control of the company, whilst both Dynasty
and the IFC will invest US$ 25 million to expand Echo-
Scan’s diagnostics network, service offerings, and quality
standards. I am especially pleased that we will be joining
forces with Man Capital, an organisation that matches
our more than four decades of operating experience in the
industry with similarly long experience working on the
ground in West Africa.
We will continue to look beyond Egypt to accelerate our
long-term growth through strategic acquisitions. Consist-
ent with our aim to make modern medical diagnostics
more accessible to the most resource-poor populations,
we are eager to begin our work in Nigeria. Diagnostic test-
ing is becoming even more essential to quality healthcare,
and we want to play a central role in improving health
outcomes in all of our emerging markets. In particular,
I believe we have a unique long-term opportunity to
replicate our historical growth in Egypt by applying our
extensive knowledge and experience to unlock the same
potential in Nigeria.
proposed Dividend and Dividend policy
IDH is pleased to propose paying a final dividend of US$
0.16 (sixteen US$ cents) per share, or US$ 24 million in
aggregate, to shareholders in respect of the financial year
ended 31 December 2017. This represents an increase of
14% compared to a final dividend of US$ 0.14 ( fourteen
US$ cents), or US$ 21 million in aggregate the previous
financial year.
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.
2018 outlook
The fundamentals of our inherently counter-cyclical
healthcare industry remain sound. We are well posi-
tioned with our strong brands and geographic position-
ing to capitalise on the structural drivers that support
future growth in medical diagnostic services including
large, rapidly-growing populations; a high prevalence
of lifestyle-related medical conditions; and a growing
health consciousness in our emerging markets.
We are looking forward to moving to our new corporate
headquarters in 2018, which is located in Smart Village, a
corporate office park in the city of Sixth of October, slightly
west of Cairo. Our new headquarters will consolidate all of
the offices we have been occupying in the city core into
one building with sufficient space for the entire organisa-
tion, making day-to-day interaction much more efficient.
We are keen to begin the process of integrating our new
Nigerian operations, having determined our first priori-
ties. We will implement the policies and procedures that
underpin the strong IDH corporate organisation starting
with the establishment of an IT infrastructure that fully
connects and controls all Echo-Scan branches, as well as
a Human Resource structure that taps into the Group’s
highly-qualified and experienced staff to apply the Group’s
standards of efficiency to the Nigerian operations.
We look to the coming year with optimism that in our
largest market of Egypt, the economy will continue to
gather strength characterised by an easing in inflation
and some appreciation in the currency. The fundamental
strength of our brands and our solid relationships with
our suppliers make it possible for us to successfully
execute our scalable asset-light business model — even
under difficult operating conditions such as those we
faced in 2016 and 2017. Accordingly, we guide our val-
ued shareholders to once again expect annual revenue
growth of 20% and an EBITDA margin of c. 40%.
I would like to thank our Board, management team and
employees for their dedication and commitment, and our
shareholders for their continued support. I am honoured
to have you with us on this journey as a rapidly-growing
consumer healthcare company across the Middle East
and Africa.
Dr. Hend El-Sherbini
Chief Executive Officer
20 March 2018
16
IDH ANNUAl REPORT 2017
Strategic Report
Our
Markets
Egypt – our Largest 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 inde-
pendent standalone labs (chains and single labs). According
to the Boston Consulting Group (BCG), IDH is the largest
fully-integrated private sector diagnostics service provider,
with more than 50% share by revenue of the private chain
market in Egypt.
Whilst the counter-cyclical nature of the healthcare system
in Egypt has been challenged by ongoing difficult macro-
economic conditions, powerful structural growth drivers
continue to support future growth in diagnostic services:
• With the country’s population crossing the 100 mil-
lion mark in 2017, Egypt is the most populous country
in the Middle East North Africa (“MENA”) region; in
terms of demographics, it hosts a significant propor-
tion 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 commanding
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 cogni-
sance of preventive healthcare.
• Most labs in Egypt are concentrated in big cities; there
is still substantial room to increase accessibility to lab
services by adding branches in all of the country’s 29
governorates for greater coverage of the population.
• The corporate market is emerging as a driver for di-
agnostic services, as more companies offer healthcare
coverage to their employees.
IDH ANNUAl REPORT 2017
17
On our way to realising our full po-
tential as a leading consumer health-
care company in the Middle East and
Africa, we are pleased to have added
Nigeria, Africa’s largest and most
populous country, to our geographic
footprint in early 2018
IDH is in a strong competitive position in the Egyptian
diagnostic industry, having created formidable barriers to
entry with its 39-year track record, trusted brands, scalable
business model and network of 340 branch labs at 2017 year
end. This has been achieved by:
•
IDH’s accreditations, which underscore the high-
quality and safety of its testing capabilities, are key
to attracting patients. In February 2018, the Group’s
central Mega Lab in Cairo earned the distinguished
certification of The College of American Pathologists
(CAP). The Mega Lab, inaugurated in 2015, replaced
two smaller, independent “A labs” that were also CAP
certified.
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.
•
•
In 2017, revenues in Egypt increased 22% year-on-year
to EGP 1,251 million, driven by higher volumes as well as
selected price increases. Contract revenues gained 24%,
whilst revenues in the walk-in category rose 19%. EBITDA
grew 14% year-on-year to EGP 547 million, with an associ-
ated EBITDA margin of 44% versus 47%. Egypt is the Com-
pany’s largest market, contributing 83% of total revenues
and 91% of total EBITDA in 2017. Last year, IDH treated
9% more patients and performed 5% more tests in Egypt.
At 2017 year end, there were 340 branch labs in Egypt, 7%
more than a year earlier.
18
IDH ANNUAl REPORT 2017
Strategic Report
Jordan
IDH ANNUAl REPORT 2017
19
Jordan has one of the most modern
health care infrastructures in the Mid-
dle East. Whilst medical services re-
main highly concentrated in Amman,
c. 70% of Jordanians have medical
insurance. Notably, medical laborato-
ries must abide by the price list that
was issued by the Jordanian Ministry
of Health in 2008, which has not since
changed. Consequently, Biolab’s strat-
egy is to expand its range of check-up
packages offered, thereby increasing
the number of tests per patient. In
2017, Biolab performed c. 1.5 million
tests for c. 242,000 patients, generat-
ing 6.2 average tests-per-patient com-
pared with 6.1 in 2016.
Unlike Al Borg and Al Mokhtabar in
Egypt, Biolab does not operate a Hub,
Spoke and Spike business model.
Whilst Biolab’s 18 central labs perform
many of the +1,000 pathology tests
offered, four that are considered spe-
cialty labs perform particular types
of tests including, but not limited to,
haematology, endocrinology,
immu-
nochemistry, parasitology, oncology,
transfusion medicine, molecular genet-
ics and antenatal diagnostics and gene
sequencing. Furthermore, Biolab does
not share purchasing, supply and lo-
gistics, IT, marketing or sales functions
with its Egyptian parent company.
In 2017, Biolab signed a joint venture
agreement with Georgia-based EVEX
Medical Corporation to establish the
largest medical laboratory among
West Asian countries, which will be
located in Tbilsi. This 4,000-square-
metre facility will connect more than
40 hospitals and diagnostic centres
that are part of the EVEX network.
EVEX Medical Corporation is the
largest chain of hospitals in Georgia,
currently operating 78 clinics in six
regions of the country. The agreement
between Biolab and EVEX has two
components: i) the implementation
of Biolab’s technological platforms
and laboratory information manage-
ment systems (LIMS) at EVEX; and
ii) taking the Mega Lab through the
Joint Commission International ( JCI)
accreditation within two years of the
laboratory’s expected launch date.
The new laboratory is expected to
open in the second half of 2018, with
initial installations and connectiv-
ity, as well as the training of quality
control officers in both Jordan and
Georgia, completed. All tests that
are not performed in Georgia will be
referred to Biolab in Jordan.
In 2017, revenues from operations in
Jordan increased 94% to EGP 218 mil-
lion, in large part due to the favorable
impact of translating Jordanian di-
nars ( JOD) into Egyptian pounds. The
subsidiary did perform well, however,
notably achieving a 14% revenue gain
in local currency. Patient and test
volumes were both strong, rising 12%
and 13%, respectively. Whilst EBITDA
grew 71% year-on-year to EGP 41 mil-
lion, higher salary and rental costs
associated with the opening of four
new branches in 2017 pressured the
EBITDA margin by c. 200 basis points
to 19%. Jordan contributed 14% of
2017 revenues (2016: 10%) and 7% of
EBITDA (2016: 5%). At 2017 year end,
there were 18 branch labs in Jordan,
4% more than a year earlier.
218
egp
mn
in revenues in 2017, for
94% y-o-y growth
18
branch laboratories offer
1,000+ pathology tests
20
IDH ANNUAl REPORT 2017
Strategic Report
Sudan
IDH ANNUAl REPORT 2017
21
IDH operates under two brand names
in Sudan, Ultralab and Al Mokhtabar
Sudan. Al Borg acquired a majority
interest in Ultralabs in 2011, whilst
Al Mokhtabar Sudan had been es-
tablished in 2010 prior to the Group’s
acquisition of Al Mokhtabar in Egypt.
While Al Mokhtabar Sudan operates
independently, Ultralab shares pur-
chasing, supply and logistics, and IT
functions with the Company’s Egyp-
tian operations.
Sudan has endured social conflict,
civil war, and with the 2011 seces-
sion of South Sudan, the loss of c.
75% of the oil production that had
underpinned the country’s economic
growth since 1999 and had been its
main source of foreign currency. The
government had been struggling to
re-stabilise the economy, pressured
further by international sanctions
imposed by the US and others.
In October 2017, the US decided to lift
a host of sanctions imposed 20 years
ago that included a comprehensive
trade embargo, a freeze on govern-
ment assets and tight restrictions on
financial institutions dealing with
the country. The subsequent weak-
ening of the Sudanese pound (SDG)
resulted in the government’s January
2018 devaluation of the currency, a
necessary step toward growth and
investment. Meanwhile, the lifting
is an
of
important milestone for the people
and businesses of Sudan, signaling
an end to the country’s economic
isolation and a renewal of interest
among Western investors eager to
enter the region.
longstanding sanctions
In 2017, revenues from operations in
Sudan increased 34% year-on-year to
EGP 46 million on a reported basis.
The impact of translating Sudanese
dollars (SDG) into Egyptian pounds
was negative, however, as revenues de-
nominated in the local currency gained
55%. Importantly, the top line was
driven by the signing of a new and very
substantial contract with the Sudanese
government that contributed to 43%
more patients and 84% more tests last
year. Whilst reported EBITDA declined
13% year-on-year to EGP 14 million, in
Sudanese dollars EBITDA would have
gained 75%. The associated EBITDA
margin was 31% compared with 22%
in 2016. Sudan contributed 3% of total
revenues (2016: 3%) and 2% of total
EBITDA (2016: 1%). At 2017 year end,
there were 25 branch labs in Sudan, 2%
more than a year earlier.
46
egp
mn
in revenues in 2017, for
34% y-o-y growth
20 years
after being imposed, US
trade sanctions are lifted
22
IDH ANNUAl REPORT 2017
Strategic Report
Nigeria
IDH ANNUAl REPORT 2017
23
the opportunity
In Nigeria, the medical diagnostics industry is large, val-
ued at c. US$ 140 million in 2017 and projected to reach
US$ 1 billion by 20251, driven primarily by increased access
to and spending on healthcare overall. This forecast could
prove conservative should the government spend more
than currently planned under difficult macroeconomic
conditions; and should health insurance be mandated for
all companies sooner than expected.
Whilst also highly fragmented, the industry can be broadly
divided into three groups. The largest is independent stan-
dalone labs (chains and single labs), representing c. 45%
of the market. This should be considered in the context of
the fact that there are only five key multi-unit players with
different brand positioning and varied service offerings
that on a combined basis account for just c. 7% of total
test volumes and c. 20% of the diagnostic market’s value
due to their ability to perform advanced tests. The other
two groups include public hospitals with 35% of the mar-
ket and private hospitals that make up the remaining 20%.
1Source: Boston Consulting Group
the Investment
IDH has expanded its geographic platform to four coun-
tries with an investment in Nigeria’s promising healthcare
industry. The Group closed on a transaction in February
2018 in which it formed a joint venture with Man Capital
LLC (“Man Capital”), the London-based investment arm
of the Mansour Group, called Dynasty Holding Group
(“Dynasty”), which is 51% owned and controlled by IDH.
In turn, Dynasty partnered with the International Finance
Corporation (“IFC”) to invest in Eagle Eye Echo-Scan Lim-
ited (“Echo-Scan”), a leading medical diagnostics business
based in Nigeria.
Dynasty and the IFC have committed to invest significant
capital in Echo-Scan over the next four years. Dynasty
has acquired a majority stake in Echo-Scan and assumed
management control of the company, whilst both Dy-
nasty and the IFC will invest US$ 25 million to expand
Echo-Scan’s laboratory network, service offerings, and
quality standards.
Dynasty combines IDH’s c. four decades of experience in
Africa’s medical diagnostics industry with Man Capital’s
similarly long experience on the ground in West Africa to
drive Echo-Scan’s expansion and the institutionalization of
all aspects of its operations. Echo-Scan enjoys a strong repu-
tation among physicians and patients alike and will greatly
benefit from Dynasty’s extensive expertise.
The process of integrating Echo-Scan will begin with the
realignment of its existing labs into IDH’s “Hub, Spoke and
Spike” business model to form three B-labs (“Spokes” capable
of processing routine tests) in Nigeria’s three major cities of
Abuja, Lagos and Benin; and 12 C-labs (“Spikes” functioning
as collection and basic test centres) in less populated areas.
Dynasty’s four-year plan calls for an Echo-Scan network of
50-plus branches including conventional B-labs, enhanced
B-labs (offering the most sophisticated radiology tests), and
C-labs that will reach patients nationwide.
In building the Echo-Scan brand, Dynasty aims to equate
the name with quality and safety, embodying the same
core values that have earned the Al Borg and Al Mokhtabar
brands strong loyalty in Egypt over the years. The Group
will also reach out as it does in Egypt to physicians with
joint programs and medical conferences and newsletters;
and to patients through public relations campaigns and
digital media customer relationship management (CRM)
programs, among others.
190+ mn
people in Nigeria, Africa’s
most populous country
140
Us$
mn
the value of Nigeria’s
diagnostics industry
24
IDH ANNUAl REPORT 2017
Strategic Report
IDH’s Competitive Strengths
& Business Model
Exposure to resilient
markets
Established business
model
Experienced, entrepreneurial
management
Strong, unlevered balance
sheet and cash generation
capacity
Substantial opportunities
to expand into new
geographies
IDH’s markets are characterised as
having strong structural growth driv-
ers and an underserved diagnostic
services demand. The Group has been
able to demonstrate growth based on
strong underlying industry fundamen-
tals despite political and economic
turmoil in recent years in the regions
in which it operates. Barriers to entry
are high, which the Company has been
able to surmount with established
strong brands, internationally accred-
ited laboratories, a scalable business
model and a wide geographic reach.
Notably, consensus expectations are
for further economic improvement in
Egypt, IDH’s largest market, in 2018.
IDH’s Hub, Spoke and Spike business
model provides the Group with an ef-
ficient low-capital intensive platform
for organic expansion over a wide geo-
graphic area. It enhances the consist-
ency of safety and testing procedures
as more tests are conducted through
its centralised Mega Lab with modern,
high-capacity equipment and signifi-
cant 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 experi-
ence to the table.
IDH has enjoyed a strong track record
of profitable growth, even under
adverse macro-economic conditions.
This was demonstrated again in 2017,
when against the backdrop of persis-
tent inflationary pressures associated
with 2016’s currency devaluation, the
Group delivered an EBITDA margin of
40% versus 44% a year earlier. In paral-
lel, the Company’s asset-light business
model notably translates into minimal
borrowings while allowing for signifi-
cant strategic flexibility.
The Group continues to explore op-
portunities to expand into new high-
growth markets in the Middle East
and Africa as well as adjacent verti-
cals, where complementary diagnos-
tic services would help to raise IDH’s
profile to that of a “one-stop shop”
diagnostics provider. The Company
executed on this strategy in January
2018, expanding into Nigeria with an
investment in a chain of diagnostic
laboratories offering both pathology
and radiology services.
IDH ANNUAl REPORT 2017
25
Barriers to Entry
Accreditation of Facilities
Attracting contract clients
requires accredited, high-quality
testing capabilities.
Brand Equity and Reputation
Patients are loyal to leading
brands with a strong track record.
Market Reach
Fragmented market necessitates a
wide geographic presence to allow
for broad customer reach.
Relationship with Key
Stakeholders
Building a scalable platform
requires strong relationship with
stakeholders such as physicians,
patients and hospitals.
IDH ANNUAl REPORT 2017
27
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 main-
tenance and support services. The agreement periods are
typically for five to eight years. The supply of the medical
diagnostics equipment through these arrangements has
been judged to be finance lease in nature.
The Company’s main suppliers of kits are Roche, Siemens
and BM (Sysmex), who collectively represent 47% of total
raw materials in 2017 compared with 49% in 2016, exclud-
ing the cost of tests conducted abroad. On the whole, raw
materials as a percentage of sales increased to 20% in 2017
from 16% in 2016. 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 inter-
ruptions to operations.
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 currency
(see “Specific Risk/Mitigation” table on page 36). Siemens
accounted for 15% of total raw materials and is the main
supplier that the Group pays in US dollars. While other
suppliers provide the Company with imported products,
they are paid in Egyptian pounds.
IDH is one of the largest providers of diagnostic services
in the MENA 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 Group has been able to successfully
negotiate favourable 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. It
is noteworthy that management has been able to negoti-
ate an agreement with its main suppliers not to increase
prices during 2018.
The number of kits purchased is determined by a combina-
tion of historical consumption patterns and future growth
plans, with our high volume of kit consumption supporting
our pricing power with suppliers going forward. Increasing
test volumes puts IDH in a stronger 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.
26
IDH ANNUAl REPORT 2017
Strategic Report
Our Healthcare
Systems
The mechanics of the healthcare markets in which IDH
operates are markedly different from those in many Western
healthcare sectors. Publicly funded and private healthcare
systems exist in parallel, and in the private market served
by the Group, patients have substantially more freedom to
make healthcare decisions than their counterparts do in
more institutionalised markets.
General practitioners (also referred to as family medicine prac-
titioners or primary care specialists) are rare in these emerging
markets and are, accordingly, not the gatekeepers through
which patients access primary or specialist care. Patients
seeking treatment may elect to obtain initial care by attending
a hospital outpatient clinic or emergency room; attending a
polyclinic or directly seeking the services of a specialist physi-
cian. 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 pa-
tients enjoy a high degree of freedom in choosing the service
provider 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 practitioners,
periodic gatherings for physi-
cians within a speciality, promo-
tional giveaways as well as dis-
count cards for physicians and
their families, incentive-based
physician loyalty programs and
the organisation or sponsorship
of conferences;
Walk-in patients,
through
social media channels, mass-
market and targeted health
awareness campaigns, outdoor
advertising, television, radio
and online advertising; and
Corporate patients, through
direct outreach to insurers and
employers.
28
IDH ANNUAl REPORT 2017
Strategic Report
Our Business
Model
IDH operates an easily scalable busi-
ness 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 tests and services, notably with
advanced diagnostic tools, for sam-
ples collected by the B- and C-labs. The
B-labs (Spokes) are capable of process-
ing routine tests, and they effectively
reduce traffic to the Mega Lab where
warranted. The C-labs (Spikes) func-
tion as collection centres that most
the Group’s
increase
importantly
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” solu-
tion for patients that, in combination
with value-package offerings, drives
the Company’s key test-per-patient
financial metric.
Mega Lab (Hub)
• The Mega Lab, the largest automated lab in Egypt, serves as IDH’s diagnos-
tic hub, equipped with the latest technology and providing a full suite of
diagnostic tests.
• A majority of equipment is provided at no upfront cash cost in return for IDH
agreeing to purchase minimum volumes of kits from equipment suppliers.
• Specialty tests from IDH subsidiaries are shipped to the Mega Lab in Egypt,
and results are retrieved electronically.
• Significant cost synergies are realised on kits, logistics and quality control;
after the introduction of Mega Lab in 2015, the Group’s contribution margin
witnessed improvement on higher volumes.
B Labs (Spokes)
• B-labs serve as IDH’s spokes that work to reduce traffic to Mega Lab by
processing routine tests on-site including chemistry, parasitology and
haematology.
• They are higher in capacity and larger in size than the C-labs.
• At 2017 year end, there were 7 B-labs in Egypt and 4 in Jordan.
C Labs (Spikes)
• C-labs are collection centres that allow for expansion of reach.
• They conduct basic tests including urine, stool, semen, ESR and preg-
nancy tests.
• At 2017 year end, there were 348 operational C-lab branches.
IDH ANNUAl REPORT 2017
29
IDH operates the only laboratory in Egypt that has been awarded
certification from the College of American Pathologists (CAP), widely
considered the leader in laboratory quality assurance
MEGA LAB
30
IDH ANNUAl REPORT 2017
Strategic Report
Internationally Accredited
Test Portfolio
IDH ANNUAl REPORT 2017
31
IDH’s comprehensive pathology product portfolio cov-
ers immunology, radiology, haematology, endocrinol-
ogy, clinical chemistry, molecular biology, cytogenetics,
histopathology and microbiology. Across its brand
portfolio, IDH maintains international-quality accredi-
tations 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 inspection involves the clinical chemistry area, the
virology 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 accredita-
tions for both Al Mokhtabar and Al Borg passed year end
accreditation reviews in 2017 and will next be renewed
in 2018.
College of American pathologists (CAp)
Unlike ISO accreditation, CAP certification is awarded
to individual labs, rather than the Group’s operations as
a whole. In February 2018, IDH’s central Mega Lab in
Cairo earned certification from the College of American
Pathologists (CAP). The Group’s Mega Lab, inaugurated
in 2015, replaced two smaller, independent “A-labs” one
of which was also CAP certified.
IDH operates the only laboratory in Egypt to receive this
distinguished certification. The College of American Pa-
thologists, widely considered the leader in laboratory qual-
ity assurance globally, upholds standards that 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 poli-
cies and procedures in place to ensure quality testing
and patient safety. These should include the valida-
tion of test systems, analytic quality control, and qual-
ity management of pre- and post-analytic processes,
proficiency testing, human resource management,
information management, ongoing quality improve-
ment and appropriate communication procedures.
• Administrative requirements: The laboratory must
maintain appropriate records and adhere to CAP
certification requirements and certain other policies,
and will be subject to on-site inspections, interim
inspections and interim self-assessments.
The CAP certification remains subject to renewal every
two years.
Quality Assurance
IDH’s quality assurance programme ensures that all inter-
nal 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 rou-
tine tests conducted in the Group’s C-labs, including con-
formity of process; testing the competency of employees
through oral, observational, practical and written tests; and
conducting managerial audits to assess the labs’ manage-
ment and administrative efficiency.
Employee training
The Group views education as an essential means of ensur-
ing quality across its laboratories. To help develop the skills
of employees, IDH has a dedicated training facility in Cairo
with four training laboratories. In 2017, the training centre
employed one director, eight full-time specialists, three ad-
ministrators, two consultants and seven part-time instruc-
tors. The centre provides training to around 350 employees
per month, including doctors, chemists, receptionists,
branch and area managers, sales personnel and adminis-
trators. The training curriculum is determined based on
performance KPIs, internal audit reports, management re-
views, competency assessment reports and analysis of cus-
tomer feedback and complaints. IDH’s employee training
is structured along four modules: new employee training,
competency-based, need-based and practical re-training.
IDH ANNUAl REPORT 2017
33
32
IDH ANNUAl REPORT 2017
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 markets through selec-
tive, 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 in the Middle East and Africa. A wider geo-
graphic reach will increase accessibility for patients, thereby
expanding the customer base. Furthermore, the Group’s
add-on services, such as house calls, e-services and results
delivery, make its regular service offerings easier to use for
both existing and prospective patients. IDH is also actively
engaged in advertising campaigns to raise awareness of par-
ticular diseases and the importance of being tested, as well
as to educate people with lifestyle diseases, such as diabetes
and high cholesterol, to undergo frequent testing.
IDH intends to expand its branch network and diversify its
portfolio of test services offered in order to take full advan-
tage of the strong demand for private healthcare services
across its geographic platform. The Group is expanding its
ability to perform more complex 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 acquisi-
tions in highly-fragmented and underpenetrated markets
in the Middle East and Africa, where our business model
is well-suited to capitalise on similar healthcare and con-
sumer trends. Beyond acquisitions in new geographies, the
Group is also interested in acquiring complementary diag-
nostic services that in combination would enhance IDH’s
profile as that of a “one-stop shop” diagnostics provider. In
sync with these strategies, the Group was pleased to have
closed on an investment in Nigeria in January 2018.
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 Group believes that its
scale and experience make it better positioned than its
competitors to take advantage of developing diagnostic
services opportunities in Egypt, ranging from specialised
physician services to radiology to in-vitro fertilisation,
among other possibilities.
34
IDH ANNUAl REPORT 2017
Strategic Report
Principal Risks,
Uncertainties & Their Mitigation
As in any corporation, IDH has exposure to risks and
uncertainties that may adversely affect its performance.
IDH Chairman Lord St John of Bletso has emphasised that
ownership of the risk matrix is sufficiently important to the
Group’s long-term success that it must be equally shared by
the Board and senior management.
While no system can mitigate every risk — and some risks,
as at the country level, are largely without potential 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.
Nigeria is facing security challenges on several fronts, in-
cluding re-emerging ethnic tensions and resurgent attacks
by Islamist militants in the northeast. Against the backdrop
of a sluggish economy and the slow implementation of
reforms, mounting discontent could translate into further
social unrest.
See mitigants for “Country/regional risk — Economic,”
below.
Echo-Scan’s laboratories are located primarily in Lagos,
Abuja and Benin, far from the current unrest occurring in
the northeast part of Nigeria.
Regarding other operating risks, including but not limited
to legal and compliance risks, IDH will apply the same rig-
orous standards to evaluating all aspects of its business
processes in Nigeria as it has implemented in all of the
emerging markets in which it operates.
IDH ANNUAl REPORT 2017
35
Specific Risk
Mitigation
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. 83% of our revenues
in 2017 (2016: 87%).
High inflation: According to Reuters, Egypt’s annual infla-
tion rates fell in January 2018 to their lowest levels since the
November 2016 devaluation of the Egyptian pound. Annual
Urban Consumer Price Inflation eased to 17.1% in January
2018 from 21.9% in December 2017, whilst core inflation
that strips out volatile items dropped to 14.4% from 19.9%
for the same periods. Inflation had reached a record high in
July 2017 at c. 35% on the back of energy subsidy cuts, but
then subsequently declined gradually as inflationary pres-
sures caused by floating the currency eased.
nigeria: Capital controls could make profit repatriation dif-
ficult in the short term.
nigeria: Depreciation of the naira would make imported
products and raw materials more expensive and would
reduce Nigeria’s contribution to consolidated Company
revenues. Whilst capital controls have helped the official
exchange converge with the black-market rate, the central
bank has yet to allow the naira to float freely.
As with country risk, this is largely not subject to mitigation.
In both political/security and economic risk, management
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 difficult 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 comprehensive
government support. Whilst it will take time, the reform
program is designed to put the country on a more sustain-
able path to growth and fiscal consolidation.
The Group’s contemplated acquisitions outside of Egypt
would also mitigate the Egypt-specific country risk over time.
In Nigeria, until currency exchange policy is clarified and
there is greater visibility regarding profit repatriation, IDH
expects to reinvest early profits into its Nigerian business.
Dividend payments are not expected to be repatriated in
the first four years of operation.
IDH will capitalise on its regional agreements with suppli-
ers to procure kits at competitive prices.
36
IDH ANNUAl REPORT 2017
Strategic Report
IDH ANNUAl REPORT 2017
37
Specific Risk
Mitigation
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.
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. After losing more than 50% of its value
in 2016, the Egyptian pound closed 2017 at 17.76 per US$1
against an opening rate of EGP 18.00.
The Egyptian pound was valued at 17.60 to US$ 1.00 as of
15 March 2018.
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.
20% of revenues in 2017 (2016: 16%). Management believes
that it can mitigate the effects of devaluation through a
combination of improved pricing and cost efficiencies (see
Supplier Risk below for more).
Only 15% of IDH’s cost of supplies (c.3% 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 2017, IDH recorded a net foreign exchange loss of EGP 20
million compared with a net foreign exchange loss of EGP
89 million in 2016.
With bank liquidity improving, helped by Egypt’s three-
year US$ 12 billion IMF loan agreement and the November
2016 floatation of the Egyptian pound, 2017 saw the CBE
remove the strict capital controls that had been imposed
following the country’s 2011 political uprising. Foreign
exchange is now freely available in the market, from banks
and exchange companies alike; and the parallel market
has been eliminated.
Banking regulation risk: A priority list and allocation
mechanism imposed by the CBE was in effect through-
out 2016 to prioritise essential imports. This mechanism
was in place in response to an active parallel market for
foreign exchange.
The priority list and allocation mechanism have been
relaxed following the Egyptian pound devaluation. Compa-
nies now report increasing availability of foreign exchange
for imports. The parallel market for foreign exchange is
presently dormant.
Whilst 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.
Caps on deposits of foreign exchange into the banking
system, which were in place during 2015 and throughout
much of 2016, have been removed.
There are currently no restrictions in Egypt on repatriation
of dividends by foreign companies.
Supplier risk
In the year to December 2016, the EGP lost 56% of its value
against the US$, creating significant risk of suppliers re-
opening negotiations in the face of cost pressure.
In the year to 31 December 2017 the value of the Egyp-
tian pound has remained consistent against the US$ at
17.67:1.00 (closing rate).
IDH’s supplier risk is concentrated amongst three key sup-
pliers — Siemens, Roche and BM (Sysmex)— who provide
it with kits representing 47% of the total value of total raw
materials in 2017 (2016: 49%).
Remittance of dividend regulations and repatriation
of profit risk
The Group’s ability to remit dividends abroad may be
adversely affected by the imposition of remittance 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.
Legal and 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
healthcare professionals who prescribe and recommend
the Group’s services.
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 ne-
gotiate favourable pricing that in 2016 saw the price it pays
for kits rise slower than inflation, which rose to new highs
as a result of the devaluation of the EGP. IDH management
has agreed with its main suppliers that no price increases
will be imposed during 2018.
Total raw materials costs as a percentage of sales were 20%
in 2017 compared with 16% in 2016.
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 operations in
Sudan are not subject to sanctions. Notably, in October 2017 the
US lifted a host of sanctions imposed 20 years ago that included
a comprehensive trade embargo, a freeze on government assets
and tight restrictions on financial institutions dealing with the
country. Management views this as an important milestone
signaling the end to the country’s economic isolation.
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.
38
IDH ANNUAl REPORT 2017
Strategic Report
IDH ANNUAl REPORT 2017
39
Specific Risk
Mitigation
Specific Risk
Mitigation
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, for
example if the Group was unable to negotiate and retain
similar fee arrangements or should these clients be unable
to make payments to the Group, IDH’s business could be
materially and adversely affected.
pricing pressure in a competitive, regulated environment
The Group faces pricing pressure from various third-
party payers that could materially and adversely affect
its revenue. Pricing may be restrained in cases by recom-
mended or mandatory fees set by government ministries
and other authorities.
This risk may be more pronounced in the context of
headline monthly inflation, which as of December 2017
stood at 21.9%.
Carrying value of goodwill and other intangible assets
A decline in financial performance could lead to an impair-
ment risk over the carrying value of IDH’s goodwill and
other intangible assets. Goodwill and intangible assets
have arisen from historic acquisitions made by the Group
and include the brand names used in the business.
IDH diligently works to maintain sound relationships with
contract clients. All changes to pricing and contracts are ar-
rived at through discussion rather than blanket imposition
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
0.8% of total revenues or 1.4% of Corporate revenues.
Prudent management of contract clients translated into
the Group taking provisions of EGP 5.6 million in 2017 for
doubtful accounts (2016: EGP 4.3 million). (See note 16 to the
accompanying Financial Statements for more information.)
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 13 of the Financial Statements.
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
operations 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.
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. Furthermore, IDH is 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.
In Nigeria, IDH will face a more limited talent pool of
healthcare workers due to a weak education system and the
tendency for trained professionals to move abroad.
IDH understands the need to support its future growth
plans by strengthening its human capital and engaging in
appropriate succession planning. The Company is com-
mitted 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 Ex-
ecutive 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.
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.
In Nigeria, IDH intends to offer a strong value proposition
for staff that includes opportunity for both compensation
and training. The Group will seek to bring in expatriates
to fill key leadership roles whilst local teams are being
trained and developed.
Loss of certifications and accreditations
Many of IDH’s facilities have received internationally ac-
creditations for high-quality standards. The failure to renew
these certifications, including the College of American
Pathologists (CAP) accreditation for the Mega Lab or the
International Organization for Standards (IOS) for other fa-
cilities, would call into question the Group’s quality stand-
ards and competitive differentiators.
In February 2018, IDH’s central Mega Lab in Cairo received
CAP certification. The CAP certification will thereafter be
subject to renewal every two years. The Company also re-
newed its ISO certifications in 2017, with the next renewal
due in 2018. IDH’s ability to keep current its certifications
and accreditation are supported by ongoing QA, training
and internal audit procedures.
40
IDH ANNUAl REPORT 2017
Strategic Report
Financial
Review
IDH ANNUAl REPORT 2017
41
2017 performance overview
IDH delivered strong operational and financial results in
the year ended 31 December 2017, despite macroeconomic
challenges, in particular high inflation, that continued in
the aftermath of the November 2016 floatation of the Egyp-
tian pound. This is noteworthy as it stands in sharp contrast
to many consumer names in Egypt. Whilst the healthcare
industry is inherently defensive, this performance also
reflects the customer loyalty that has been earned by the
Company’s trusted brands over many years. On a 29%
year-on-year revenue increase in 2017, EBITDA gained 18%,
constrained somewhat by ongoing pressure from higher
raw material costs. Net profits, however, surged by 44%
year-on-year, helped by higher interest income and a sharp
year-on-year decline in foreign exchange losses given what
has been relative stability in exchange rates.
The Group continued to invest in expanding its geo-
graphic footprint in 2017, and notably through a trans-
action that closed in February 2018 entered the Nigerian
market (see discussion on page 22). Supported by its
state-of-the-art Mega Lab with additional capacity, the
Company is able to deploy its Hub, Spoke and Spike
business model to open capital efficient “C” labs more
rapidly. During 2017, the Group added 29 new labs in
total, including 19 new branches for Al Mokhtabar in
Egypt; four for Al Borg in Egypt; four for Biolab in Jor-
dan; and two for MK Sudan. Total IDH branches reached
383 as of 31 December 2017 versus 354 at 2016 year end,
for 8% total unit expansion.
The results for the year are summarised below:
our Customers
IDH serves two principal types of clients: contract (cor-
porate) and walk-in (individuals). Within each of these
categories, the Group also offers a house-call service,
and within the contract segment, a lab-to-lab service.
Contract Clients
IDH’s contract clients, who in 2017 represented 61%
of the Group’s revenues, include institutions such as
unions, syndicates, private and public insurance com-
panies, banks and corporations who enter into one-year
renewable contracts at agreed rates per-test and on a
per-client basis. During 2017, IDH served 4.7 million
patients under these contracts and performed a total
of 19.7 million tests, with no single contract client ac-
counting for more than 0.8% of total 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.
Walk-in Clients
IDH derived 39% of its revenues in 2017 from walk-in
clients. Walk-in clients numbered 1.7 million in 2017,
representing 26% of total patients served. As IDH’s mar-
kets 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 Egyp-
tian diagnostics industry.
2017
2016
% Change
2017
2016
IDH Revenue by type and Key performance Indicators
EGp million
Revenue
Cost of sales
Gross profit
Gross profit margin %
Operating expenses
Operating profit
Depreciation
EBITDA*
Net profit
1,514
(785)
730
48%
(189)
540
62
602
384
1,171
(543)
638
54%
(162)
466
45
511
267
29%
45%
16%
-
17%
16%
38%
18%
44%
*EBITDA is calculated as operating profit (EGP 540 million) plus depreciation (EGP 62 million) and amortisation (nil).
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)
Revenue per patient (EGP)
Revenue per test (EGP)
923
4,685
19,746
591
1,682
5,918
1,514
6,367
25,664
238
59
713
4,174
18,540
458
1,642
5,530
1,171
5,816
24,070
201
49
42
IDH ANNUAl REPORT 2017
Strategic Report
Breakdown of Contract Revenue
type
Contracts – Unions
Contracts – Banks
Contracts – Corporate
Contracts – Government Institutions
Contracts – Hospitals
Contracts – Public Insurance
Contracts – Medical Care
Contracts as % of total revenue
Walk-ins as % of total revenue
% of total 2017
% of total 2016
13%
2%
26%
2%
3%
6%
9%
61%
39%
14%
2%
26%
2%
4%
6%
7%
61%
39%
IDH ANNUAl REPORT 2017
43
Revenue Analysis
Consolidated revenues increased 29% year-on-year to
EGP 1,514 million, attributable to price and mix of tests,
followed by currency translation and test volumes. The fa-
vourable impact of translating the revenues of IDH’s Jorda-
nian operations into Egyptian pounds more than offset the
negative effect of translating the revenues of its Sudanese
operations. In 2017, the Jordanian dinar (JOD) was trans-
lated at an average rate of 24.92 (2016: 14.573), the Sudanese
pound (SDG) at an average rate of 1.04 (2016: 1.204). Whilst
patient and test volumes gained 9% and 7%, respectively,
selected price increases and a better mix of test types were
also key drivers of top-line growth. This can be seen in the
key metrics of average revenue-per-patient, up 18%, and
average revenue-per-test, 21% higher.
Revenues from contract clients grew 29% year-on-year
in 2017, supported by an overall trend toward corporate
health insurance coverage, in particular in Egypt, IDH’s
largest market. Whilst the number of contract patients was
12% higher and the number of contract tests was up 7%,
average revenue-per-patient increased 15% and average
revenue-per-test gained 22% on better pricing and mix. IDH
signed 311 new corporate contracts with insurers last year
versus 456 in 2016.
Revenues from walk-in clients also rose 29% year-on-year,
helped by improving patient volumes. The Group served
2% more walk-in patients in 2017 compared with a 4%
decline in 2016. Consequently, the Company was able to
achieve a 26% increase in revenue-per-patient; and on 4%
more tests-per-patient, a 21% gain in revenue-per-test in
the walk-in category.
In particular, it is the improvement seen in the walk-in pa-
tient category that highlights the loyalty consumers have to
the Al Borg and Al Mokhtabar brands in Egypt, IDH’s largest
market. They have come to know and trust these names over
the years, and they return to the laboratories they equate
with quality and safety. Cognisant of the burden faced by
its customers, IDH’s price increases have been significantly
below the high inflation rates caused by the November
2016 currency devaluation. The Group has also designed
its tactical marketing programs with attractive features for
them, such as discounts on chronic disease tests as well as
partnerships with banks for affordable payment programs.
On a geographic basis, Egypt contributed 83% of total rev-
enues in 2017 followed by Jordan at 14% and Sudan at 3%,
in the same proportions as 2016.
Cost of Sales
Cost of sales increased 45% year-on-year to EGP 785 mil-
lion in 2017 compared with EGP 543 million in 2016 pri-
marily due to raw material cost pressures. Raw materials
represented the largest component of cost of sales at 39%
of total (2016: 34%) and rose 67%. Whilst IDH was able to
negotiate favourable contract terms with its three main
suppliers – Roche, Siemens and BM (Sysmex) — the prices
of imported medical test kits continued to climb post-
devaluation.
Wages and salaries, the second largest component of cost
of sales in 2017, accounting for 30% of total (2016: 36%),
were favourably leveraged on the strong revenues. The
22% year-on-year increase in these expenses is mainly
attributable to the translation into Egyptian pounds of
higher salaries for the Group’s Jordanian subsidiary and
Board of Directors caused by the exchange rate difference
between the two reporting period.
The depreciation expense accounted for in COGS increased
40% to EGP 57 million in 2017 (2016: EGP 41 million). This
increase in direct depreciation is primarily attributable to
increased kit consumption related to leased equipment.
Gross Profit
Gross profit increased 16% year-on-year to EGP 729 mil-
lion compared with EGP 628 million in 2016, constrained
by higher raw material costs. The associated gross margin
decreased c. 600 basis points to 48% from 54% a year
earlier. This pressure could also be seen in the decline in
gross profit contribution percentage from Egypt, whose
gross margin is higher than those of Jordan and Sudan.
Egypt’s contribution to total gross profit was 89% in 2017
compared with 92% in 2016.
operating Expenses
Operating expenses gained 17% year-on-year to EGP 189
million in 2017 versus EGP 162 million in 2016. As a per-
centage of sales, however, operating expenses decreased
to 12% from 14% a year ago. The favourable leverage of
these largely fixed costs partially mitigated the negative
impact of the higher raw material costs.
Operating Profit
Operating profit for 2017 was accordingly EGP 540 million
compared with EGP 466 million in 2016.
EBItDA
EBITDA* rose 18% year-on-year to EGP 602 million versus
EGP 511 in 2016. The associated EBITDA margin came
under pressure from higher raw material costs, which was
only partially offset by the favourable leverage of fixed
costs. The ratio stood at 40% in 2017 compared with 44%
in 2016. We consider EBITDA to be an appropriate alter-
native performance measure, as it is a metric commonly
followed by the institutional investment community.
By region, Egypt contributed 91% of total EBITDA down
from 94% in 2016, whilst Jordan and Sudan contributed 7%
and 2%, respectively, compared with 5% and 1% a year earlier.
Foreign Exchange
In 2017, the Group’s net foreign exchange loss amounted
to EGP 19.9 million, as an FX loss of EGP 24.5 million was
partially offset by an EGP 4.5 million FX gain. This was
substantially below the net foreign exchange loss of EGP
89 million in 2016.
*EBITDA is calculated as operating profit (EGP 540 million) plus depreciation (EGP 62 million) and amortisation (nil).
IDH ANNUAl REPORT 2017
45
44
IDH ANNUAl REPORT 2017
Strategic Report
The EGP 24.5 million foreign exchange loss was attrib-
utable to revalued foreign denominated contracts with
major suppliers as well as the revaluation of intercom-
pany balances between IDH and its subsidiaries and with
the different functional currencies within the group,
including the Egyptian pound, the Sudanese pound, the
Jordanian dinar and the US dollar. The EGP 4.5 million
FX gain related to finance lease obligations resulting
from appreciation of the Egyptian pound.
taxation
In 2017, IDH recorded tax expense of EGP 174 million,
with an effective tax rate of 31% (2016: 31%). 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%, Jordan 20.0% and
Sudan 15.0%.
The Group’s dividend policy is to distribute any excess
cash after taking into consideration all business cash re-
quirements and potential acquisition considerations. As
a result, a deferred tax liability is recognised for the 5%
tax on dividends for the future expected distribution pay-
able by Egyptian entities under Egyptian tax legislation.
Deferred tax in 2017 amounted to EGP 56.9 million (loss)
compared with EGP 14.1 million (gain) in 2016.
Net Profit
Net profit for the year increased 44% to EGP 384 million
versus EGP 267 million recorded in 2016. This growth was
spurred by effective cash management generating interest
income that offset higher interest expense incurred due
to the Central Bank of Egypt’s rate hike policy and the
adoption of International Accounting Standard (23) that
capitalised interest on the Group’s Medium-Term Loan for
its new corporate headquarters building. The bottom line
also benefited from a sharp year-on-year decline in foreign
exchange losses, given what has been relative stability in
exchange rates.
Balance Sheet
On the assets side of the balance sheet, property, plant and
equipment (PPE) rose to EGP 486 million at 31 December
2017 from EGP 391 million a year earlier primarily due to
new investment in the Group’s new corporate headquar-
ters, slated for completion in 2018, as well as the opening
of 29 new branches region-wide.
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 commit-
ment payments to cover the supply of medical diagnos-
tic 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 pe-
riod, ownership of the equipment supplied will legally
transfer to IDH. On one side, the leased equipment is
recorded in PPE, and the finance lease is recorded as a
liability on the other side.
Trade and other receivables rose 36% to EGP 202 million
compared with EGP 148 million in 2016. The difference
was primarily related to an increase in the accounts
receivable balance associated with the gain in contract
revenues, together with higher accrued revenues related
to time deposit interest.
The total bad debt provision balance amounted to EGP
21.7 million, out of which EGP 5.6 million was estab-
lished in 2017: EGP 4.7 million for Egypt; EGP 0.4 million
for Sudan; and the remaining balance for Jordan.
On the Liabilities side, trade and other payables de-
creased to EGP 333 million in 2017 from EGP 346 million
in 2016 mainly due to the decline in put option liability
related to the Jordanian operation given the spot rate
as at 31 December 2016 stood at EGP:JOD 25.41 versus
EGP:JOD 24.89 as at 31 December 2017.
Inventories at 2017 year end were EGP 70 million, up
36% versus a year earlier largely due to higher raw mate-
rial prices in 2017 compared with 2016.
IDH managed to deliver strong operational cash flow,
with an ending cash balance at 2017 year end of EGP 694
million (excluding restricted cash).
Dividend
Proposed dividends for ordinary shares are subject to
the approval of the Annual General Meeting and are
not recognised as a liability as at 31 December 2017.
The Board of Directors has recommended that a final
dividend of US$ 24 million, or US$ 0.16 per share, should
be paid to shareholders who appear on the register as at
18 May 2018, with an ex-dividend date of 17 May 2018.
The payment date for the dividend will be 8 June 2018.
46
IDH ANNUAl REPORT 2017
Strategic Report
Corporate
Responsibility
IDH ANNUAl REPORT 2017
47
Corporate responsibility initiatives are an
extension of our core purpose to better the
lives of individuals and improve the com-
munities in which we operate
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, with the aim of improving the communities in
which it does business.
The Moamena Kamel Foundation for Training and Skill De-
velopment was established in 2006 by Dr. Moamena Kamel,
a Professor of Pathology at Cairo University, founder of IDH
subsidiary Al-Mokhtabar Labs, and mother of the CEO, Dr.
Hend El Sherbini. IDH commits up to 1% of the net after-tax
profit of the subsidiaries Al Borg and Al Mokhtabar to the
Foundation, which in 2017 amounted to EGP 3.9 million
compared with EGP 2.8 million in 2016.
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 deploys an integrated pro-
gram and vision for the communities it helps that include
economic, social and healthcare development initiatives.
The Foundation’s primary services include:
• 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 ICU at Cairo’s
public-sector Kasr El Aini Hospital
IDH has also been expanding the reach of its Corporate
Responsibility initiatives in recent years to include:
• Additional services to Kasr El Aini Hospital that in-
clude providing medical supplies to the ICU and other
units; monthly incentives for nurses in the ICU; and
12-20 hospital beds
• Financial and in-kind support to El Manial Hospital
• Financial and in-kind support to the Egyptian people
during natural disasters
• Ramadan Iftar ( feast) meals to underprivileged Egyp-
tians during the holy month of Ramadan
• Free medical tests to underprivileged Egyptian
children
• Sponsorship of medical convoys to the city of Fayoum
Corporate
Governance
IDH is committed to implementing strong corporate
governance, upholding the highest standards of
accountability and transparency
50
IDH ANNUAl REPORT 2017
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.
IDH ANNUAl REPORT 2017
51
Lord St John of Bletso (Age 60)
Independent non-Executive Chairman
Lord St John has been a member of
the House of Lords of the U.K. Par-
liament since 1978 and is currently
Deputy Chairman of Strand Hanson
Ltd., Non-Executive Chairman of
Global Resources Investment Trust,
a member of the Advisory Board of
Silicon Valley Bank, Non-Executive
Director of Albion Ventures LLP,
Chairman of the Governing Board of
Certification International and holds
advisory roles with Milio Interna-
tional, Alliance Media Group USA,
Sapinda and ABN Corporation. Lord
St John received a BA and a BSocSc in
Psychology from Cape Town Univer-
sity, a BProc in Law from the Univer-
sity of South Africa and an LLM from
the London School of Economics.
prof. Dr. Hend El Sherbini (Age 49)
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 Clini-
cal Pathology (Egypt) and consults on
the international certification process.
She received her MBBCh, Masters in
Clinical and Chemical pathology, PhD
in Immunology from Cairo Univer-
sity, and MBA from London Business
School. Dr. El Sherbini served as CEO
of Al Mokhtabar since 2004, until be-
coming CEO of the Group in 2012.
Hussein Choucri (Age 67)
Independent non-Executive Director
and Chairman of the Remuneration
Committee
Mr. Choucri is Chairman and Manag-
ing Director of HC Securities & Invest-
ment, which he established in May
1996. He currently sits on the boards
of EDITA Food Industries S.A.E and
SODIC (Sixth of October Develop-
ment & Investment Company), as
well as the Egyptian British Business
Council and the Egyptian Greek Busi-
ness 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 Man-
agement Diploma from the American
University in Cairo in 1978.
James patrick nolan (Age 58)
Independent non-Executive Director
and Chairman of the Audit Committee
Mr. Nolan is an Independent Director.
He spent 15 years with Royal Philips
NV, latterly as Head of Mergers & Ac-
quisitions, 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 acquisi-
tions 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 52)
Independent non-Executive Director
Mr. Olsson is CEO of the Team Olivia
Group AB, a Swedish healthcare group.
He has long and extensive interna-
tional 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 53)
non-Executive Director
Mr. Phillips is a founding partner of
Actis LLP, the emerging markets pri-
vate equity group. As Actis LLP is one
of the Company’s major shareholders,
Mr. Phillips is not considered by the
Board as being independent. He was
previously responsible for the invest-
ment activity of Actis in North Africa
and is currently responsible for Asia.
He is a member of the Actis Investment
Committee. Mr. Phillips is a director on
the board of a number of companies
including Emerging Markets Knowl-
edge Holdings (Mauritius) Limited, Les
Laboratoires Medis SA, and others. Mr.
Phillips holds a degree in Economics
from the University of Exeter.
52
IDH ANNUAl REPORT 2017
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 and Transparency Rule (DTR) subchapters 7.1 and 7.2,
which set out certain mandatory disclosures: 7.1 concerns
audit committees and bodies carrying out equivalent func-
tions; 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 Re-
muneration and Nomination Committees. The Board may
establish additional committees as appropriate going for-
ward. This Annual Report includes reports from both the
Audit and Remuneration Committees.
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 five times as a Board during the course of 2017,
including once in Cairo, Egypt in November 2017. I was
delighted to have had the opportunity to visit IDH’s main
base of operations in Cairo, during which time I engaged di-
rectly with senior management to discuss both the Group’s
strategic plans and how management (including our Chief
Executive) is evolving the policies and procedures neces-
sary 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 32. 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 expe-
rience in Europe, the Middle East and Africa. We have rel-
evant 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.
Your Board in 2017 and their biographies are set out on
pages 50 and 51 of this Annual Report and are summarised
in the following table.
IDH ANNUAl REPORT 2017
53
Board of Directors of Integrated Diagnostic Holdings plc
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)
Hussein Choucri
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)
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. The
Board continues to believe that this segregation of roles
remains appropriate, taking into account the size and
structure of the Group.
As Chairman, I ensure the Board is effective in the execution
of all aspects of its role. The Group Chief Executive Officer,
meanwhile, is responsible for managing the day-to-day run-
ning of the business. In this, she is supported by a senior
management team. The Group Chief Executive and I have
a good working relationship and discuss matters of Group
strategy and performance on a regular 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 efficiently run,
allowing all Directors to openly and constructively chal-
lenge the proposals made by the Group’s senior manage-
ment. 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 decision
that may affect the overall direction, supervision and man-
agement 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. adopting or amending the Group’s business plan or
e.
annual budget;
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;
f. 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;
g. making any material acquisition or disposal (includ-
ing any grant of any material licence) of or relating to
any intellectual property rights;
h. decisions relating to the conduct (including the set-
tlement) of any legal proceedings to which any mem-
ber of the Group’s group is a party where there is a
potential liability or claim of more than EGP 100,000;
54
IDH ANNUAl REPORT 2017
Corporate Governance
i. approving the Group’s annual report and 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 busi-
ness plan or annual budget, as required by law or to
comply with a new accounting standard;
j. adopting (or varying) the Group’s group material poli-
cies in respect of employees’ remuneration, employ-
ment terms and/or pension schemes;
k. any member of the Group’s group declaring or paying
any dividend or distribution;
l. 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;
m. approving the issue of all circulars, prospectuses,
listing particulars and general meeting notices to
shareholders of the Group;
n. 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;
o. 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;
Meeting
Highlights
p. carrying out a robust assessment of the principal
risks facing the Group, including those that threaten
its business, future performance, solvency or liquid-
ity and to report on such assessment in the Group’s
annual report; and
q. 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
committees on Audit, Remuneration and Nomination.
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 Remunera-
tion Committees appear starting pages 58 and 62 of this
Annual Report, respectively.
Board activities during 2017
Your Board of Directors held five meetings in 2017: three in
London, one in Cairo and one via conference call.
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;
• Establishes the purpose of the meeting; and
• Reviews and approves minutes of the previous meet-
ing of the Board.
2 February 2017
21 March 2017
22 May 2017
21 August 2017
21 November 2017
Review of strategy and business opportunities going forward.
Approval of the Group’s Annual Report and Accounts for the year ended 31 De-
cember 2017. Recommendation of a final dividend to shareholders for approval
at the AGM. Discussion of the macroeconomic backdrop in Egypt. Review of the
year-to-date financial highlights.
Review of the Group’s operational and financial performance during the interim
three-month period to 31 March 2017 and approval of the Quarterly Interim
Management Statement. Discussion of strategy and business opportunities going
forward.
Discussion of key operational and financial highlights in the first half of 2017. Ap-
proval of the Group’s Interim Financial Statements for the period to 30 June 2017.
Review of strategy and business opportunities going forward.
Discussion of the Remuneration Committee’s report regarding the Group’s Hu-
man Resources (HR) structure and newly-appointed HR Director. Review of the
Group’s operational and financial performance during the nine-month period to
30 September 2017. Discussion of the Group’s 2018 budget. Review of strategy and
business opportunities going forward.
IDH ANNUAl REPORT 2017
55
Details of our Directors’ attendance at Board and Com-
mittee meetings are shown in the table on page 57. In the
event that any Director is unable to attend a meeting of the
Board or Committee of which they are a member, he or she
receives the necessary papers, including agendas, meet-
ing outcomes and any documents presented for review
or information. Furthermore, I endeavour to discuss with
them in advance of the meeting to obtain their views and
decisions on the proposals to be considered.
The Board meeting held one meeting in Cairo, Egypt in 2017
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.
Within the wider corporate governance framework, man-
agement established in 2016 a Management Committee
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, qual-
ity and investor relations. The Group’s general counsel also
attends these meetings on an as-needed basis. Senior man-
agement uses this as a forum to review upcoming priorities,
recent performance, and the operational steps necessary to
ensure the management team delivers on its business goals
and the Group’s strategic plan.
Effectiveness
The Board of IDH does not currently have formal 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 2017, 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
The Nomination Committee assists the Board in reviewing
the structure, size and composition of the Board. It is also
responsible for reviewing succession plans for the Directors,
including the Chairman and Chief Executive and other senior
management. The Nomination Committee met on 21 August
2017 within the context of the regular Board of Directors
meeting, where it was resolved to appoint Mr. Omar Bedewy
as Chief Financial Officer in succession to Mr. Tarek Hamida.
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
is deemed to be our Non-Executive Director with relevant
financial experience in compliance with the DTR.
Chairman
Members
Lord St John of Bletso
Hussein Choucri
Dan Olsson
overview of the Remuneration Committee
The Remuneration Committee recommends the Group’s
policy on executive remuneration determines the levels of
remuneration for Executive Directors and the Chairman
and other senior management and prepares an annual re-
muneration report for approval by the Shareholders at the
Annual General Meeting.
The 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 full report of the Remuneration Committee for 2017
appears starting on page 62 of this Annual Report.
56
IDH ANNUAl REPORT 2017
Corporate Governance
Chairman
Hussein Choucri
Members
Dan Olsson
James Patrick Nolan
overview of the Audit Committee
The Audit Committee’s role is to assist the Board with the
discharge of its responsibilities in relation to financial
reporting, including: reviewing the Group’s annual and
half-year financial 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 Com-
mittee be independent and that at least one member has com-
petence 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 recom-
mendations of the Code in those respects.
Chairman
Members
James Patrick Nolan
Dan Olsson
Hussein Choucri
The full report of the Audit Committee for 2017 appears
starting on page 58 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 34-39, is sufficiently
vital that it must be owned equally by the management
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 2018, as we did in 2017.
The Board has ultimate responsibility for the Group’s in-
ternal 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 effectiveness of the Group’s internal
controls on an ongoing basis to ensure the keeping of
proper accounting records, safeguarding the assets of
the Group and detecting fraud and other irregularities.
The 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:
• an Internal Auditor was appointed in May 2016;
•
the identification and management of risk at the
level of operating departments by the heads of
those departments; and
regular Board level discussion of the major busi-
ness risks of the Group, together with measures
being taken to contain and mitigate those risks.
•
The Group’s principal risks and uncertainties and miti-
gation for them are set out on pages 34-39 of this Annual
Report.
Your Board has furthermore put in place a control
framework at the Group level that applies to all subsidi-
aries, including:
• Board approval of the overall Group budget and
strategic 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
including 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 quar-
terly basis in 2017.
• as part of the reporting process in 2017, manage-
ment reviewed monthly and year-to-date actual re-
sults against prior year, against budget and against
forecast; these reports were circulated to the Board;
any significant changes and adverse variances
are reviewed by the Group Chief Executive and by
senior management and remedial action is taken
where appropriate.
IDH ANNUAl REPORT 2017
57
An internal audit plan for 2018 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 dur-
ing 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),
Renaissance 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 ver-
bally or in writing, from more than 100 investors.
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 pub-
lishing trading updates at the first- and third-quarter
marks in 2018, while simultaneously meeting the mini-
mum regulatory disclosure as required of a UK Standard
listed entity.
The Board communicates with shareholders through
public announcements disseminated via the London
Stock Exchange, analyst briefings, roadshows and press
interviews. Copies of public announcements and finan-
cial results are published on the Group’s website, along
with a number of other investor relations tools.
The Board receives regular updates from the senior
management team on the views of major shareholders
and on milestones in the investor relations program.
We will continue throughout 2018 to grow our investor
relations program to ensure that our shareholders and
stakeholders remain informed of the Group’s strategy
and ongoing financial 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. We voluntarily comply with
the Code’s requirement to send a Notice of Meeting of an An-
nual General Meeting (AGM) and related papers to sharehold-
ers at least 20 working days prior to the meeting.
The Group’s second Annual General Meeting as a listed com-
pany will be held in London on 14 May 2018. Shareholders are
encouraged to attend the AGM and to ask questions about the
business, its financial performance and its strategy. All Board
members are scheduled to attend the upcoming AGM. Details
of the AGM are included in the Notice of Meeting that accompa-
nies this Annual Report and which is available on our website.
At the AGM, all of the Group’s Directors will retire and submit
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 re-
quirements of the 2016 U.K. Code of Corporate Governance.
Nevertheless, we have endeavoured to ensure that this An-
nual 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 2017. The Audit Committee has
confirmed to us that the financial statements as contained in
the 2017 Annual Report are true and fair and that the work of
the external auditor has been accurate and effective.
Lord St John of Bletso
Chairman
20 March 2018
table of Director Attendance at 2017 Meetings
Number of meetings
Directors
Lord St John of Bletso
Dr. Hend El Sherbini
Hussein Choucri
James Nolan
Dan Olsson
Richard Phillips
Board
Audit
Remuneration
nomination
5
5
5
5
5
5
5
3
3
3
2
1
1
1
1
1
1
1
1
58
IDH ANNUAl REPORT 2017
Corporate Governance
Audit Committee
Report
2018 marks my third year as Chairman of the Audit Com-
mittee, 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 biogra-
phies are summarised on pages 50 and 51. I am very grateful
for their valuable contributions and am happy that we work
well together as a team.
During 2017, the Audit Committee convened three times,
once each in March, August and November. We provided
governance of external financial reporting, risk manage-
ment and internal controls and reported our findings and
recommendations to the Board. Outside of scheduled
committee meetings, the Audit Committee also com-
municated throughout 2017 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 2017, 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 manage-
ment team attend as required; these include the Director of
Investor Relations and the Group Secretary.
There are also private meetings between the Audit Commit-
tee 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.
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 ef-
fectiveness of the Group’s risk management processes
and internal 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.
At our Board Meeting in August 2016, the Audit Com-
mittee approved the Internal Audit Activity Charter
as well as the appointment of Mr. Ashraf Hallaba as
Internal Auditor reporting to the Audit Committee. The
IDH ANNUAl REPORT 2017
59
role reports functionally to the Audit Committee and
administratively to the Chief Executive Officer. Since in-
ception, the Internal Auditor has been building a team,
writing a manual on operations, reviewing process of
key functions within the company and discussing the
same with the company’s management. The Internal
Auditor delivered his comprehensive risk register on 19
November 2017, as well as his progress report in setting
up and establishing his department. It was noted that
the department was not yet fully staffed and that the
position of Compliance Officer was not filled. Adequate
staffing is an essential ingredient of the success of the
Internal Audit function and is under review.
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.
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 re-
porting, including:
•
•
•
reviewing the Group’s annual and half-year financial
statements;
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.
During its scheduled meetings, the Committee also consid-
ers 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 2017
During 2017 the Audit Committee had three scheduled
meetings, one each in March, August and November. At
each scheduled meeting, the Committee considers the
matters outlined above under the subheading “Roles and
Duties of the Audit Committee.”
21 March 2017
• Overview of the 2016 audit of the Company
•
Identification and discussion of key risk factors includ-
ing revenue recognition, impairment of goodwill, lease
accounting and management override of controls
• Discussion of dividend policy
• Final dividend recommendation to the Board
• Letter of Representation recommended to the Board
for signature
• Recommendation to the Board of approval for the
Group’s Financial Statements for the year ended 31
December 2016
• Review of the Group’s Internal Audit function
17 August 2017
• Consideration of financials for the half-year ended 30
June 2017
• Discussion of auditor’s interim review including sig-
nificant risks and key areas of focus
• Recommendation to the Board of half-year results to
30 June 2017
20 november 2017
• Review and discussion of KPMG’s Audit Plan
• Discussion and approval of the Group’s Internal
Audit Plan
• Discussion and approval of the revised Anti-Bribery
and Anti-Corruption and Trade Controls Policy (ABAC)
IDH ANNUAl REPORT 2017
61
60
IDH ANNUAl REPORT 2017
Corporate Governance
Significant Issues
The Committee considered several significant account-
ing issues, matters and judgements in relation to the
Group’s financial statements and disclosures for the year
ended 31 December 2017. As part of the half-year and
full-year reporting process, management communicates
key accounting issues to the Committee, and the exter-
nal auditor is asked to comment on the key significant
areas of accounting judgement and disclosure. The infor-
Issue
How it is being addressed
mation 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 disclo-
sures made, together with compliance with the applica-
ble accounting standards. The significant issue arising
and a description of how it was addressed is shown in the
following table.
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 con-
curred 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 2017.
External Auditor
KPMG has acted as the Group’s external auditor since ap-
pointment in July 2015, with Mr. Adrian Wilcox serving
as audit partner until August 2017, when the role was as-
sumed by Mr. David Neale on behalf of KPMG. The Auditors’
independence 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 2022.
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 Com-
mittee’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, corporate govern-
ance 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 servic-
es to ensure that the auditor maintained its independence.
The Audit Committee confirms that during 2017, £61,500
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 2017 of £243,500 (audit fee for the
Group financial statements for the year ended 31 Decem-
ber 2016: £235,000). 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
20 March 2018 that is was their opinion that the financial
statements as at 31 December 2017 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 forthcom-
ing Annual General Meeting. The Committee arrived at this
recommendation after having: met with the Audit partner
and Audit team; reviewed the quality of the Auditors’
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, Audit Committee
20 March 2018
62
IDH ANNUAl REPORT 2017
Corporate Governance
Remuneration Committee
Report
Remuneration Committee Activities During 2017
20 november 2017
• Overview of the Group’s Human Resource (HR)
organisational structure
• Review of HR work-in-progress under the leadership
of newly-appointed HR Director
Identification of training needs
•
• Review of the Group’s Compensation strategy, includ-
ing its recent Salary Survey
• Discussion of a new Performance Management Sys-
tem to be introduced in 2018
The Remuneration Committee also met in February 2018,
a meeting rescheduled from December 2017, to discuss
appropriate revisions to senior management salaries; the
firm’s salaries compared with marketplace benchmarks;
and strategies to ensure that all employees are compen-
sated competitively relative to the marketplace.
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 reason-
able expenses.
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 reasonable expenses.
Hussein Choucri
Chairman, Remuneration 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 2017.
IDH ANNUAl REPORT 2017
63
Remuneration of Directors in 2017 (all figures in EGP)2
Figures in EGp
Base salary /
fees 2017
Base salary /
fees 2016
Annual bonus
2017
Annual Bonus
2016
total 2017
total 2016
Executive Director
Dr. Hend El Sherbini
non-Executive Directors
Lord St John of Bletso
Hussein Choucri
James Nolan
Dan Olsson
Richard Phillips
3,973,500
3,898,322
450,000
450,000
4,423,500
4,348,322
1,325,938
883,958
883,958
883,958
-
761,565
507,710
507,710
507,710
-
-
-
-
-
-
-
-
-
-
-
1,325,938
883,958
883,958
883,958
-
761,565
507,710
507,710
507,710
-
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 2017 appears below
and is summarised in tabular form on page 63.
Hussein Choucri
Chairman, Remuneration Committee
20 March 2018
2 There are no taxable benefits, corporate pensions or long-term incentive plans for the Company’s directors.
3 Dr. Hend El Sherbini receives part of her annual bonus in the form of an annual award amounting to EGP 450,000.
4 Mr. Philips is the board representative of a major shareholder, Actis, and is therefore not remunerated
64
IDH ANNUAl REPORT 2017
Corporate Governance
Directors’
Report
IDH ANNUAl REPORT 2017
65
The statements and reviews on pages 02 to 47 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
diagnostics 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 24.
Directors
The Directors who held office at 31 December 2017 and up
to the date of this report are set out on pages 50 and 51 along
with their photographs and biographies. The remuneration
of the Directors (including their respective shareholdings in
the Group, where applicable) is set out in the Remuneration
Report on pages 62 and 63.
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 sections including A Note from Our Chairman
(pages 10-11), A Note from Our CEO (pages 12 to 13),
Strategic Report (beginning page 02) and particularly the
Financial Review (beginning on page 40). Financial state-
ments for 2017 appear in the Audited Financial Statements
(starting on page 68).
Results and Dividends
The Group’s Results for 2017 are set out in the Audited
Financial Statements starting on page 68.
The Board of Directors has recommended that a dividend of
US$ 0.16 (sixteen US$ cents) per share (2016: US$ 0.14, fourteen
US$ cents) should be paid to shareholders who appear on the
register as at 18 May 2018, with an ex-dividend date of 17 May
2018. The payment date for the dividend is 8 June 2018.
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 34 to 39 of this Annual Report.
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 20 to the consolidated
financial statements on page 107 summarises the rights of
the ordinary shares as well as the number issued during 2017.
An analysis of shareholdings is shown below.
Substantial share holdings
As at 1 March 2018, 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:
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 IDH B.V.
HSBC Global Asset Mgmt (UK)
T. Rowe Price
FIAM LLC
number of voting rights
% of voting rights
38,245,589
31,500,000
12,887,084
7,670,533
7,340,589
25.50
21.00
8.59
5.11
4.89
66
IDH ANNUAl REPORT 2017
Corporate Governance
IDH ANNUAl REPORT 2017
67
Committees of the Board
The Board has established Audit, Nominations and Re-
muneration Committees. Details of these Committees,
including membership and their activities during 2017, 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 46 to 47.
Corporate Governance
The Group’s report on Corporate Governance is on pages
48 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.
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 14 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 50 of this Annual Report, and her
compensation is reported in the Remuneration Committee
Report on page 63. IDH has service agreements with the
Group Chief Executive and with the Group Chief Financial
Officer, Mr. Omar Bedewy, who is not a Company Direc-
tor. 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 per-
formance, 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 4,739 (2016: 4,688)
employees as of 31 December 2017 employed in Egypt,
Jordan and Sudan.
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.
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.
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 2017 (2016: nil).
post-Balance Sheet Events
In a transaction that closed in January 2018, IDH formed
a joint venture with Man Capital LLC (“Man Capital”), the
London-based investment arm of the Mansour Group,
called Dynasty Holding Group (“Dynasty”), which is 51%
owned and controlled by IDH. In turn, Dynasty has part-
nered with the International Finance Corporation (“IFC”)
to invest in Eagle Eye Echo-Scan Limited (“Echo-Scan”), a
leading medical diagnostics business based in Nigeria.
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 02 to 45. The financial position
of the Group, its cash flows, liquidity position and borrow-
ing facilities are described in the financial statements and
notes thereon on pages 68 to 113.
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 con-
cern basis, unless it is inappropriate to presume that
the Group will continue in business.
The Directors are responsible for maintaining proper ac-
counting records that disclose with reasonable accuracy at
any time the financial position of the parent company and
to enable them to ensure that the financial statements com-
ply with 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 prepa-
ration and dissemination of financial statements may differ
from that applicable in the United Kingdom and Jersey.
Reporting Standards, including International Ac-
counting 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 audi-
tor 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 2018 AGM will be held at the Hilton London Tower
Bridge on 14 May 2018 at 11:00 am BST, London, UK.
The Chairman of the Board and of each of the Board’s Com-
mittees as well as all company Directors will be in attend-
ance 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 of-
fice as auditor and separate resolutions will be proposed at
the forthcoming AGM concerning their reappointment and
to authorise the Board to agree their remuneration.
By order of the Board
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
Dr. Hend El Sherbini
Executive Director
20 March 2018
Financial
Statements
Independent Auditor’s Report to the members of Integrated Diagnostics Holdings plc
Consolidated Statement Of Financial Position
Consolidated Income Statement
Consolidated Statement Of Profit Or Loss And Other Comprehensive Income
Consolidated Statement Of Cash Flows
Consolidated Statement Of Changes In Equity
Integrated Diagnostics Holdings Plc – “IDH” and its Subsidiaries
70
74
75
76
77
78
79
70
IDH ANNUAl REPORT 2017
Financial Statements
Independent
Auditor’s Report
to the members of Integrated Diagnostics Holdings plc
1. Our opinion is unmodified
overview
Materiality:
EGP25m (2016:EGP20m)
group financial
statements as a
whole
4.5% (2016: 5%) of Profit before tax
Coverage
99% (2016:99%) of group profit
before tax]
Risks of material misstatement
Recurring risks
Recoverabil-
ity of goodwill and
indefinite life brand
intangible assets
◀▶
We have audited the financial statements of Integrated
Diagnostics Holdings plc (“the Company”) for the year
ended 31 December 2017 which comprise the Consolidated
Income Statement, the Consolidated Statement of Other
Comprehensive Income, the Consolidated Statement of Fi-
nancial Position, the Consolidated Statement of Changes in
Equity, the Consolidated Statement of Cash Flows and the
related notes, including the accounting policies in note 2.
In our opinion the financial statements:
– give a true and fair view, in accordance with Interna-
tional Financial Reporting Standards as adopted by
the European Union, of the state of the Group’s affairs
as at 31 December 2017 and of the Group’s profit for
the year then ended; and
– have been properly prepared in accordance with the
Companies (Jersey) Law 1991.
Basis for opinion
We conducted our audit in accordance with Interna-
tional Standards on Auditing (UK) (“ISAs (UK)”) and
applicable law. Our responsibilities are described below.
We have fulfilled our ethical responsibilities under, and
are independent of the Company in accordance with, UK
ethical requirements including FRC Ethical Standard as
applied to listed entities. We believe that the audit evi-
dence we have obtained is a sufficient and appropriate
basis for our opinion.
IDH ANNUAl REPORT 2017
71
2. Key audit matters: our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the
financial statements and include the most significant assessed risks of material misstatement (whether or not due
to fraud) identified by us, including those which had the greatest effect on: the overall audit strategy; the allocation
of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the
context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters. In arriving at our audit opinion above, the key audit matters were as follows
[(unchanged from [2016)]:
the risk
our response
Recoverability of goodwill and
indefinite life brand intangible
assets
(EGP1,640million; 2016:
EGP1,644million)
Refer to page 58 (Audit Committee
Report), page 86 (accounting policy)
and page 100 ( financial disclosures).
Forecast-based valuation
Each of the CGU’s operate within
a market subject to high degrees of
competition, price inflation and cost
rises which provide market challenges.
Recoverability of the goodwill and
brand names intangible asset is subject
to judgement in terms of the assump-
tions used and inherent uncertainty
involved in forecasting the future cash
flows that are used in the Group’s
discounted cash flow models, in
particular in respect of revenue growth
(i.e. patient numbers and price) and
discount rate. This is a key judgemental
area that our audit is concentrated on.
Our procedures included:
– Historical comparison: assessing
the reasonableness of the Group’s
forecasting by comparing actual
performance for the year against
forecasts for the same period in the
prior year model;
– Benchmarking assumptions: evalu-
ating the Group‘s assumptions
included within the discounted
cash flow forecasts by comparing
key inputs such as projected
growth, cost inflation and discount
rates to internally and externally
derived data;
– Sector expertise: We used our own
valuation specialist to assist us in
evaluating the assumptions and
methodology used in calculating
the discount rate;
– Sensitivity analysis: performing
sensitivity analysis on the assump-
tions noted above; and
– Assessing transparency: assessing
whether the group's disclosures
about the sensitivity of the out-
come of the impairment assess-
ment to changes in key assump-
tions reflected the risks inherent in
the valuation of goodwill.
72
IDH ANNUAl REPORT 2017
Financial Statements
3. our application of materiality
and an overview of the scope
of our audit
Materiality for the group financial statements as a
whole was set at EGP25m (2016: EGP 20m), deter-
mined with reference to a benchmark of group profit
before tax, of which it represents 4.5% (2016: 5%).
We agreed to report to the Audit Committee any cor-
rected or uncorrected identified misstatements ex-
ceeding EGP1.2m (2016: EGP1m), in addition to other
identified misstatements that warranted reporting
on qualitative grounds.
Of the group’s 11 (2016: 11) reporting components,
we subjected 6 (2016: 6) to full scope audits for
group reporting purposes and 3 (2016: 3) to specified
risk-focused audit procedures. The latter were not
individually financially significant enough to require
an full scope audit for group reporting purposes,
but did present specific individual risk that needed
to be addressed. For the residual 2 components, we
performed analysis at an aggregated group level to
re-examine our assessment that there were no signifi-
cant risks of material misstatement within these.
The components within the scope of our work ac-
counted for the percentages illustrated opposite.
The Group team instructed the component auditors
as to the significant areas to be covered, including
the relevant risks detailed above and the informa-
tion to be reported back. The Group team approved
component materialities which in the ranged from
EGP2.2m to EGP8m (2016: EGP0.9m to EGP 7.5m),
having regard to the mix of size and risk profile of
the Group across the components. The work on 7 of
the 9 components (2016: 7 of the 9 components) was
performed by component auditors and the rest was
performed by the Group team.
The Group team visited the 6 (2016: 6) components,
all in the same location, in Egypt on multiple occa-
sions, including to assess the audit risk and strategy
and to attend a clearance meeting. Telephone confer-
ence meetings were also held with this component
auditor and with the component auditor in Jordan
component that was not physically visited.. At these
visits and meetings, the findings reported to the
Group team were discussed in more detail, and any
further work required by the Group team was then
performed by the component auditor.
IDH ANNUAl REPORT 2017
73
4. We have nothing to report on going
7. Respective responsibilities
Group profit before taxEGP559m
(2016: EGp397m)
Group Materiality
EGp25m (2016: EGp20m)
concern
EGp25m
Whole financialstatements
materiality(2016: EGP20m)
EGp8m
Range of materiality at 6
components EGP2.2m-EGP8m
(2016: EGP0.9m to EGP7.5m)
■ Group PBT
■ Group materiality
EGp1.2m
Misstatements reported to
the audit committee (2016:
EGP1m)
Group revenue
Group profit before tax
0.3
0
100%
(2016: 97%)
97.5
99.3
3.1
0
99%
(2016: 96%)
96.7
96.1
Group net assets
0.6
0.1
100%
(2016: 100%)
98.8
99.1
■ Full scope for group audit purposes 2017
■ Specified risk-focused audit procedures 2017
■ Full scope for group audit purposes 2016
■ Specified risk-focused audit procedures 2016
■ Residual components
We are required to report to you if we have concluded
that the use of the going concern basis of accounting is
inappropriate or there is an undisclosed material un-
certainty that may cast significant doubt over the use of
that basis for a period of at least twelve months from the
date of approval of the financial statements. We have
nothing to report in these respects.
5. We have nothing to report on the other
information in the Annual Report
The directors are responsible for the other information
presented in the Annual Report together with the finan-
cial statements. Our opinion on the financial statements
does not cover the other information and, accordingly,
we do not express an audit opinion or any form of assur-
ance conclusion thereon.
Our responsibility is to read the other information and, in
doing so, consider whether, based on our financial state-
ments audit work, the information therein is materially
misstated or inconsistent with the financial statements or
our audit knowledge. Based solely on that work we have not
identified material misstatements in the other information.
6. We have nothing to report on the other
matters on which we are required to
report by exception
Under the Companies ( Jersey) Law 1991 we are required
to report to you if, in our opinion:
• proper accounting records have not been kept by the
Company, or
• proper returns adequate for our audit have not been
•
received from branches not visited by us; or
the Company’s accounts are not in agreement with
the accounting records and returns; or
• we have not received all the information and explana-
tions we require for our audit.
We have nothing to report in these respects.
Directors’ responsibilities
As explained more fully in their statement set out on page
67, the directors are responsible for: the preparation of the
financial statements including being satisfied that they give
a true and fair view; such internal control as they determine
is necessary to enable the preparation of financial statements
that are free from material misstatement, whether due to
fraud or error; assessing the Group’s ability to continue as a
going concern, disclosing, as applicable, matters related to go-
ing concern; and using the going concern basis of accounting
unless they either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to
issue our opinion in an auditor’s report. Reasonable assurance
is a high level of assurance, but does not guarantee that an au-
dit conducted in accordance with ISAs (UK) will always detect
a material misstatement when it exists. Misstatements can
arise from fraud or error and are considered material if, indi-
vidually or in aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis
of the financial statements
A fuller description of our responsibilities is provided on the
FRC’s website at www.frc.org.uk/auditorsresponsibilities.
8. the purpose of our audit work and to whom
we owe our responsibilities
This report is made solely to the Company’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 Company’s members those mat-
ters 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 Company and the Company’s members, as a
body, for our audit work, for this report, or for the opinions
we have formed.
David Neale (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
15 Canada Square London
E14 5GL
20 March 2018
Shareholder
Hena Holdings Ltd.
Actis IDH B.V.
T. Rowe Price
FIAM LLC
HSBC Global Asset Mgmt (UK)
Number of voting rights
% of voting rights
38,245,589
31,500,000
12,887,084
7,670,533
7,340,589
25.50
21.00
8.59
5.11
4.89
74
IDH annual rePort 2017
Financial Statements
Consolidated Statement of Financial Position
As at 31 December 2017
Notes
2017
EGP’000
2016
EGP’000
Consolidated Income Statement
For the year ended 31 December 2017
Notes
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
3
8
8.2
9
7
10
The accompanying notes on pages 79 - 113 form an integral part of these consolidated financial statements.
Assets
Non-current assets
Property, plant and equipment
Intangible assets and goodwill
Restricted cash
Deferred tax assets
Total non-current assets
Current assets
Inventories
Trade and other receivables
Restricted cash
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
Equity attributable to the owners of the Company
Non-controlling interests
Total equity
Non-current liabilities
Deferred tax liabilities
Other provisions
Loans and borrowings
Long-term financial obligations
Total non-current liabilities
Current liabilities
Trade and other payables
Loans and borrowings
Current tax liabilities
Total current liabilities
Total liabilities
Total equity and liabilities
11
12
18
9
15
16
18
19
17
20
20
20
20
20
20
7
9
22
24
25
23
24
473,786
1,658,252
-
-
2,132,038
380,374
1,654,362
13,253
18,307
2,066,296
69,935
202,255
13,226
9,149
685,211
979,776
3,111,814
51,715
148,375
-
95,575
683,721
979,386
3,045,682
1,072,500
1,027,706
(314,310)
33,383
(93,256)
203,709
315,856
2,245,588
68,502
2,314,090
158,712
14,699
38,425
100,478
312,314
333,432
14,575
137,403
485,410
797,724
3,111,814
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
The accompanying notes on pages 79 - 113 form an integral part of these consolidated financial statements.
These consolidated financial statements were approved and authorised for issue by the Board of Directors and signed
on their behalf on 20 March 2018 by:
Chief Executive Officer
Dr. Hend El Sherbini
Head of Audit Committee
James Nolan
IDH annual rePort 2017
75
2017
EGP’000
1,514,257
(784,701)
729,556
(59,843)
(126,517)
(2,825)
540,371
(33,005)
51,064
18,059
558,430
(174,701)
383,729
374,023
9,706
383,729
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
(121,620)
266,918
260,399
6,519
266,918
2.49
1.74
76
IDH annual rePort 2017
Financial Statements
Consolidated Statement of Profit or Loss and Other
Comprehensive Income
for the year ended 31 December 2017
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
The accompanying notes on pages 79 - 113 form an integral part of these consolidated financial statements.
2017
EGP’000
383,729
(5,577)
(5,577)
378,152
370,012
8,140
378,152
2016
EGP’000
266,918
228,130
228,130
495,048
467,664
27,384
495,048
Consolidated Statement of Cash Flows
for the year ended 31 December 2017
Cash flows from operating activities
Profit for the period before tax
Adjustments for:
Depreciation
Amortization
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
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
Proceeds from 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
11
12
8
16
22
22
8.2
8.2
8.2
22
18
19
18
The accompanying notes on pages 79 - 113 form an integral part of these consolidated financial statements.
IDH annual rePort 2017
77
2017
EGP’000
2016
EGP’000
558,430
388,538
57,148
4,774
-
77
5,561
(1,461)
3,536
(1,000)
10,391
(51,064)
19,940
606,332
(39)
(18,220)
(43,575)
(29,652)
514,846
40,224
4,506
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
(111,771)
403,075
(108,130)
398,658
36,660
(157,349)
343
27
86,426
(33,893)
53,000
(10,096)
-
(376,744)
(36,984)
(370,824)
(1,642)
683,721
3,132
685,211
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
78
IDH annual rePort 2017
Financial Statements
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1
5
5
1
3
,
0
2
7
7
0
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8
0
2
0
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(
,
1
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2
0
3
,
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0
1
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IDH annual rePort 2017
79
Integrated Diagnostics Holdings plc – “IDH” and
its subsidiaries
Notes to the Consolidated Financial Statements for the year ended 31 December 2017
Corporate information
1.
The consolidated financial statements of Integrated Diagnostics Holdings plc and its subsidiaries (collectively, the Group)
for the year ended 31 December 2017 were authorized for issue in accordance with a resolution of the directors on 20
March 2018. 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.
Basis of preparation
2.
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 2017, the Group
had net assets amounting to EGP 2,314,090. 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 annual 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 2017. 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.
80
IDH annual rePort 2017
Financial Statements
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 2017.
• Annual Improvements to IFRSs – 2014-2016 Cycle
• Disclosure initiative – amendment to IAS 7
• Recognition of Deferred Tax Assets for Unrealised Losses – Amendments to IAS 12
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 classifica-
tion 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 Finan-
cial Instruments: Recognition and Measurement, is measured at fair value with the changes in fair value recognised in the
statement of profit or loss. And when it is classified as equity it should not be remeasured and accounted for within equity.
Goodwill is initially measured at cost (being the excess of the aggregate of the consideration transferred and the amount
IDH annual rePort 2017
81
recognised for non-controlling interests) and any previous interest held over the net identifiable assets acquired and
liabilities 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 which it is done one an annual basis, goodwill acquired in a business combination
is, from the acquisition date, allocated to each of the Group’s cash-generating units that are expected to benefit from the
combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.
Where goodwill has been allocated to a cash-generating unit (CGU) and part of the operation within that unit is disposed
of, the goodwill associated with the disposed operation is included in the carrying amount of the operation when deter-
mining the gain or loss on disposal. Goodwill disposed in these circumstances is measured based on the relative values of
the disposed operation and the portion of the cash-generating unit retained.
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 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 recognized on completion of the services rendered. Revenue is recognised to the
extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured,
regardless of when the payment is received.
82
IDH annual rePort 2017
Financial Statements
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
liability are recognized at an amount equal to the fair value of the underlying asset; subsequently, the liability is reduced as
payments are made and an imputed finance cost on the liability is recognised using the Group’s incremental borrowing rate.
ii. Leased assets
Assets held by the Group under leases that transfer to the Group substantially all of the risks and rewards of ownership
are classified as finance leases. The leased assets are measured initially at an amount equal to the lower of their fair 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.
IDH annual rePort 2017
83
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.
Differences arising on settlement or translation of monetary items are recognised in the income statement.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange
rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated
using the exchange rates at the date when the fair value is determined.
On consolidation, the assets and liabilities of foreign operations are translated into Egyptian Pounds at the rate of ex-
change prevailing at the reporting date and their statements of profit or loss are translated at average rate (unless this
average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which
case income and expenses are translated at the rate on the dates of the transactions). The exchange differences arising on
translation for consolidation are recognised in other comprehensive income and accumulated in the translation reserve or
NCI as the case may be. On disposal of a foreign operation, the component of other comprehensive income relating to that
particular foreign operation is recognised in profit or loss.
Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of
assets and liabilities arising on the acquisition are treated as assets and liabilities of the foreign operation and translated at
the spot rate of exchange at the reporting date.
g) Property, plant and equipment
All property and equipment are stated at historical cost less accumulated depreciation. Historical cost includes expendi-
ture that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when
it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can
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.
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.
Land is not depreciated.
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 recognized 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 recognized if they arise from the initial recognition of goodwill; deferred income
tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business
combination and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the
foreseeable future.
Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any
unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available
against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can
be utilised. Deferred tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the
reporting date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax
liability is settled.
Laboratory Equipment held to perform the ‘Hub spoke’ at the Mega Lab and provided under finance lease arrangements
are depreciated under a unit of production method as this most closely reflects the consumption of benefits from the
equipment.
Depreciation on other assets is calculated using the straight-line method to allocate their cost or revalued amounts to their
residual value over their estimated useful lives, as follows:
Buildings
Medical, electric and information systems equipment
Leasehold improvements
Fixtures, fittings & vehicles
50 years
4-10 years
4-5 years
4-16 years
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater
than its estimated recoverable amount. Gains and losses on disposals are determined by comparing the proceeds with the
carrying amount and are recognized within ‘Other (losses)/gains – net’ in the consolidated statement of income.
84
IDH annual rePort 2017
Financial Statements
h) Intangible assets
Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired
in a business combination is their fair value at the date of acquisition. Following initial recognition, intangible assets are
carried at cost less any accumulated amortisation and accumulated impairment losses. Internally generated intangibles,
excluding capitalised development costs, are not capitalised and the related expenditure is reflected in profit or loss in the
period in which the expenditure is incurred.
The useful lives of intangible assets are assessed as either finite or indefinite.
Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there
is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an
intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected
useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to
modify the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amor-
tisation expense on intangible assets with finite lives is recognised in the statement of profit or loss in the expense category
that is consistent with the function of the intangible assets. The Group amortises intangible assets with finite lives using
the straight-line method over the following periods:
IT development and software
4-5 years
Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually, either individually
or at the cash-generating unit level. The assessment of indefinite life is reviewed annually to determine whether the 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. the
impairment assessment is done one an annual basis.
Brand
Brand names acquired in a business combination are recognized at fair value at the acquisition date and have an
indefinite useful life.
i. Financial instruments – initial recognition and subsequent measurement
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity
instrument of another entity.
i. Financial assets
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 convention 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.
IDH annual rePort 2017
85
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
• Available for sale (“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 2017 and 31 December 2016.
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 rate 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.
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:
• Disclosures for significant estimates and assumptions
• Financial assets
• Trade receivables
Note 2.3
Note 14
Note 16
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.
86
IDH annual rePort 2017
Financial Statements
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
including bank overdrafts.
Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When
an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms
of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the
original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in
the statement of profit or loss.
iii. Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of 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 2.3
Note 13
The Group assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication
exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount.
An asset’s recoverable amount is the higher of an asset’s or CGU’s fair value less costs of disposal and its value in use. The
recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely
independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its
recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair
value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an
appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for
publicly traded companies or other available fair value indicators.
The Group bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for
each of the Group’s CGUs to which the individual assets are allocated. These budgets and forecast calculations generally cover
a period of five years. A long-term growth rate is calculated and applied to project future cash flows after the fifth year.
Impairment losses of continuing operations are recognised in the statement of profit or loss in expense categories consistent with
the function of the impaired asset, except for properties previously revalued with the revaluation taken to other comprehensive
income (“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.
IDH annual rePort 2017
87
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. Assets that are subject to amortisation
are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. For the purposes
of assessing impairment, assets are grouped at the lowest levels for which there are largely independent cash inflows (CGU).
Prior impairments of non-financial assets (other than goodwill) are reviewed for possible reversal at each reporting date.
k) Inventories
Inventories are stated at the lower of cost and net realizable value. Cost is determined using the weighted average method. Net
realizable value is the estimated selling price in the ordinary course of business, less estimated selling and distribution expenses.
l) Cash and short-term deposits
Cash and short-term deposits in the statement of financial position comprise cash at banks and on hand and short-term
deposits with a maturity of three months or less, which are subject to an insignificant risk of changes in value.
For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash and short-term deposits,
as defined above, net of outstanding bank overdrafts as they are considered an integral part of the Group’s cash management.
m) Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is prob-
able 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 exam-
ple, 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 recognized as an expense in the income statement in the periods during which
services are rendered by employees.
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IDH annual rePort 2017
Financial Statements
o) 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.
2.3 Significant accounting judgments, estimates and assumptions
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
effective for the year ended 31 December 2017.
None of these are expected to have a material effect on these consolidated financial statements of the Group, except for the
following which could change the classification and measurements of financial assets.
•
•
IFRS 9 “Financial instruments” (expected effective date of January 2018).
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.
Estimated impact of the adoption of IFRS 9 and IFRS 15
IFrS 15
The Group is required to adopt IFRS 15 Revenue From Contracts With Customers From 1 January 2018.
IFRS 15 ‘Revenue from Contracts with Customers’ sets out the principles for the measurement and recognition of revenue
and will replace IAS 18. The standard provides a five step model to determine when an entity should recognise revenue
and at what amount, by allocation of the transaction price to separate performance obligations. The Group has two types
of customer: walk-in patients and patients served under contract. For patients served under contract, rates are agreed
in advance on a per-test, client-by-client basis. For both types of customer, revenue is recognized on completion of the
services rendered.
The Group’s services are provided a point in time rather than over a period of time and there are stand alone sales prices
per test stipulated in the contracts that exist with selected customers.
The Group considers the current basis of revenue recognition to remain appropriate as the only performance obligation, being
completion of a test, reflects the current policy. Therefore the Group considers that the initial application IFRS 15 will have no
impact on its consolidated financial statements based on the assessment undertaken to date, however the Group may enter
into contracts in the near future that would be accounted for differently under IFRS 15 than the existing standards.
IFrS9
The Group is required to adopt IFRS 9 Financial Instruments from 1 January 2018.
IFRS 9 ‘Financial Instruments’ sets out the requirements for recognizing, classifying and measuring financial assets and
financial liabilities and includes guidance in respect of general hedge accounting. This standard replaces IAS 39 and sets
out two key criteria for determining the classification and measurement of financial assets including the entity’s business
model for managing financial assets and the contractual cash flow characteristics. IFRS 9 also sets out a single impairment
model to ensure expected credit losses on financial instruments are always recognized as soon as they are forecast. In
relation to hedge accounting, IFRS 9 adopts a principles-based approach for testing hedge effectiveness instead of setting
specific numerical thresholds.
The Group has made an initial assessment of the impact that the initial application of IFRS 9 will have on its consolidated
Financial statement by considering the level of loss experienced from customers across the portfolio at a macro level. The
financial impact of this assessment is an adjustment (net of tax) to the opening balance of the Group’s equity at 1 January
2018 of EGP 2.5 m due to the recognition of an impairment charge for the expected credit loss of trade receivables. The
final impact of adopting the standard at 1 January 2018 may change because the Group is in the process of undertaking an
extensive exercise to assess the credit loss on a customer basis, which has not been finalised.
IDH annual rePort 2017
89
Additionally, the testing and assessment of controls over new IT systems has not been complete. It is not expected that the
impact of the final assessment will be materially different.
The total estimated adjustment (net of tax) to the opening balance of the Group’s equity at 1 January 2018 is EGP 2.5 m due
to the recognition of an impairment charge for the expected credit loss of trade receivables.
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 4
Note 14
Notes 14
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 notes receivables
The requirement for impairment of trade receivables is made through monitoring the debts aging and reviewing customer’s
credit position and their ability to make payment as they fall due. An impairment is recorded against receivables for the
irrecoverable amount estimated by management. At the year end, the provision for impairment of trade receivables was
EGP 21,784K (31 December 2016: EGP 19,154k).
Segment information
3.
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.
90
IDH annual rePort 2017
IDH annual rePort 2017
91
Financial Statements
For the year ended
31 December 2017
31 December 2016
Egypt region
EGP’000
1,250,584
1,024,378
Revenue by geographic location
Sudan region
EGP’000
Jordan region
EGP’000
45,687
34,103
The operating segment profit measure reported to the CODM is EBITDA, as follows:
Profit from operations
Property, plant and equipment depreciation
Amortization of Intangible assets
EBITDA
217,986
112,140
2017
EGP’000
540,371
57,148
4,774
602,293
Total
EGP’000
1,514,257
1,170,621
2016
EGP’000
466,192
40,224
4,506
510,922
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.
Capital management
4
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
reduce the cost of capital.
5.
Group information
Information about subsidiaries
The consolidated financial statements of the Group include:
Principal activities
Country of
Incorporation
% equity interest
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 Kingdom of Jordan)
Golden Care for Medical Services
Integrated Medical Analysis Company
(S.A.E)
SAMA Medical Laboratories Co. (“Ul-
tralab medical laboratory “)
AL-Mokhtabar Sudanese Egyptian Co.
Medical diagnostics service
Medical diagnostics service
Medical diagnostics service
Medical diagnostics service
Medical diagnostics service
Holding company of SAMA
Medical diagnostics service
Egypt
Egypt
Egypt
Egypt
Jordan
Egypt
Egypt
Medical diagnostics service
Sudan
Medical diagnostics service
Integrated Diagnostics Holdings Limited
Intermediary holding company
Dynasty Group Holdings Limited
Intermediary holding company
Sudan
Caymans
Island
Caymans
Island
2017
99.3%
99.9%
99.9%
55.0%
60.0%
2016
99.3%
99.9%
99.9%
55.0%
60.0%
100.0%
100.0%
99.6%
99.6%
80.0%
65.0%
80.0%
65.0%
100.0%
100.0%
51%.0
51.0%
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.
* “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.
The repatriation of a declared dividend from Egyptian group entities are subject to regulation by Egyptian authorities. The
outcome of an Ordinary General Meeting of Shareholders declaring a dividend is first certified by the General Authority for
Investment and Free Zones (GAFI).
Approval is subsequently transmitted to Misr for Central Clearing, Depository and Registry (MCDR) to distribute dividends to
all shareholders, regardless of their domicile, following notification of shareholders via publication in one national newspapers.
The Group monitors capital on the basis of the net debt to equity ratio. This ratio is calculated as net debt divided by total
equity. Net debt is calculated as total liabilities (being total current liabilities plus long-term financial obligations) less cash
and cash equivalents.
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
available at www.idhcorp.com.
6.
Business combinations and acquisition of non-controlling interests
No change in business combinations and acquisition of non-controlling interests during the year.
7.
Non-Controlling interest
As a provider of medical diagnostic services, IDH’s operations in Sudan are not subject to sanctions.
Financial information of subsidiaries that have material non-controlling interests is provided below:
Total liabilities
Less: cash and short-term deposits (Note 17)
Net (cash)/debt
Total Equity
Net debt to equity ratio
2017
EGP’000
624,313
(685,211)
(60,898)
2,314,090
-2.6%
2016
EGP’000
601,389
(683,721)
(82,332)
2,299,464
-3.6%
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
2017
45.0%
40.0%
20.0%
0.7%
2016
45.0%
40.0%
20.0%
0.7%
No changes were made in the objectives, policies or processes for managing capital during the years ended 31 December
2017 and 2016.
92
IDH annual rePort 2017
Financial Statements
The summarised financial information of these subsidiaries is provided below. This information is based on amounts
before inter-company eliminations.
Medical
Genetic
CenterEGP’000
Al
Makhbariyoun
Al Arab Group
(Hashemite
Kingdom
of Jordan)
EGP’000
SAMA Medical
Laboratories
Co. “Ultralab
medical
laboratory
“EGP’000
Alborg
Laboratory
Company
EGP’000
Other
individually
immaterial
subsidiaries
EGP’000
Intra-
Groupelimina-
tions EGP’000
Total
EGP’000
218,077
22,253
(4,082)
-
11,454
1,311
Summarised statement of profit or loss for 2017:
Revenue
Profit
Other comprehensive
income
Total comprehensive
income
Profit allocated to
non-controlling
interest
Other comprehensive
income allocated
to non-controlling
interest
590
-
-
(4,082)
(1,633)
8,901
36,959
1,948
(2,341)
(2,341)
589,275
194,660
323,786
61,224
-
-
1,528
1,528
- 1,179,551
281,396
-
-
-
(4,895)
(4,895)
390
1,378
(1,200)
(353)
9,706
(468)
-
535
-
(1,566)
Summarised statement of financial position as at 31 December 2017:
962
Non-current assets
6,844
Current assets
42
Non-current liabilities
4,154
Current liabilities
Net assets
12,002
Net assets attributable
to non-controlling
interest
106,439
50,562
-
60,639
217,640
2,454
18,448
-
12,004
32,906
87,056
5,403
6,581
145,751
430,089
6,118
132,693
714,651
118,934
159,687
85,427
110,905
474,953
374,540
-
665,630
-
91,587
-
-
320,395
- 1,452,152
5,058
(1,981)
(33,616)
68,502
IDH annual rePort 2017
93
Medical
Genetic
CenterEGP’000
Al
Makhbariyoun
Al Arab Group
(Hashemite
Kingdom
of Jordan)
EGP’000
SAMA Medical
Laboratories
Co. “Ultralab
medical
laboratory
“EGP’000
Alborg
Laboratory
Company
EGP’000
Other
individually
immaterial
subsidiaries
EGP’000
Intra-
Groupelimina-
tions EGP’000
Total
EGP’000
(319)
(856)
1,456
437
(756)
-
40,715
(28,326)
(10,933)
Summarised cash flow information for year ended 31 December 2017:
625
Operating
84
Investing
Financing
(1,565)
Net increase/
(decrease) in cash and
cash equivalents
Summarised statement of profit or loss for 2016:
Revenue
Profit
Other comprehensive
income
Total comprehensive
income
Profit allocated to
non-controlling
interest
Other comprehensive
income allocated
to non-controlling
interest
112,266
13,850
11,881
1,818
27,160
1,360
21,172
52,930
(1,115)
3,016
5,540
(446)
818
272
850
-
-
-
155,451
45,017
(69,410)
131,058
482,002
199,827
-
-
41,979
(2,199)
(46,577)
(6,797)
207,452
(57,725)
393
(297)
-
-
-
-
-
-
-
-
239,207
13,820
(128,485)
124,542
840,761
159,130
52,208
3,569
1,414
(916)
(610)
6,519
-
139
-
20,865
Medical
Genetic
CenterEGP’000
Al
Makhbariyoun
Al Arab Group
(Hashemite
Kingdom
of Jordan)
EGP’000
SAMA Medical
Laboratories
Co. “Ultralab
medical
laboratory
“EGP’000
Alborg
Laboratory
Company
EGP’000
Other
individually
immaterial
subsidiaries
EGP’000
Intra-
Groupelimina-
tions EGP’000
Total
EGP’000
Summarised statement of financial position as at 31 December 2016:
885
Non-current assets
7,761
Current assets
Non-current liabilities
9
4,518
Current liabilities
6,121
Net assets
92,168
47,090
773
42,014
40,845
3,363
20,548
-
14,657
9,009
136,938
311,085
-
120,345
194,900
136,316
306,983
99,339
324,452
122,583
-
-
-
-
-
369,670
693,467
100,121
505,986
373,458
Net assets attributable
to non-controlling
interest
Operating
Investing
Financing
Net increase/(de-
crease) in cash and
cash equivalents
5,930
72,818
7,714
4,023
(1,327)
(26,997)
62,161
2,687
(37)
(3,163)
18,034
(11,955)
(6,848)
1,508
(410)
-
189,193
(55,929)
(52,256)
73,254
(8,326)
(8,928)
(513)
(769)
1,098
81,008
56,000
-
-
-
-
284,676
(76,657)
(71,195)
136,824
94
IDH annual rePort 2017
Financial Statements
8.
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
2017
EGP’000
5,561
-
3,536
51,478
22,945
4,774
57,148
145,442
2016
EGP’000
4,298
1,849
2,224
32,234
24,907
4,506
40,224
110,242
8.1 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
Fees payable to the Company’s auditor for the audit of the Group’s annual
financial statements
The audit of the Company’s subsidiaries pursuant to legislation
Tax compliance and advisory services
8.2 Net finance costs
Finance charges payable under finance leases
Net foreign exchange loss
Bank Charges
Total finance costs
Interest income
Total finance income
Net finance (cost)/ income
2017
EGP’000
5,459
1,593
608
7,660
2017
EGP’000
(10,391)
(19,940)
(2,674)
(33,005)
2017
EGP’000
51,064
51,064
18,059
2016
EGP’000
2,411
1,136
571
4,118
2016
EGP’000
(9,271)
(88,877)
(924)
(99,072)
2016
EGP’000
21,418
21,418
(77,654)
IDH annual rePort 2017
95
8.3 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:
2017
2016
Average number of employees
Medical Administration
443
4,226
Total
4,669
Medical Administration
381
4,307
Total
4,688
Wages and salaries
Social security costs
Contributions to defined
contribution plan
Total
2017 EGP’000
2016 EGP’000
Medical Administration
73,604
219,493
4,091
15,537
Total
293,097
19,628
Medical Administration
59276
179,626
2678
12,086
3,168
479
3,647
3,131
511
Total
238,902
14,764
3,642
238,198
78,174
316,372
194,843
62,465
257,308
Details of Directors’ and Key Management remuneration and share incentives are disclosed in the Remuneration Report
and note 27.
9.
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)
2017
EGP’000
2016
EGP’000
(117,844)
(135,727)
(19,808)
(37,049)
(56,857)
(18,876)
32,983
14,107
Tax expense recognised in profit or loss
(174,701)
(121,620)
96
IDH annual rePort 2017
Financial Statements
b) Reconciliation of effective tax rate
The Company is treated as a tax resident of Jersey for the purpose of Jersey tax laws and is subject to a tax rate of 0%. And
the Company tax domicile in the UK. 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% (2016: 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% (2016: 22.5%)
Effect of tax rate in Jersey of 0% (2016: 0%)
Effect of tax rates in Jordan and Sudan of 20% and 15% respectively (2016: 20% and 15%)
Tax effect of:
Change in unrecognized deferred tax assets
Deferred tax arising on undistributed reserves
Reduction in tax rate on deferred tax balances
Non-deductible expenses for tax purposes - employee profit share
Non-deductible expenses for tax purposes - other
Tax expense recognised in profit or loss
2017
EGP’000
558,430
125,647
9,558
(609)
703
19,808
10,240
9,354
174,701
Deferred tax
Deferred tax relates to the following:
Property, plant and equipment
Intangible assets
Undistributed reserves from group
subsidiaries*
Provisions and finance lease liabilities
Deferred tax assets (liabilities)
before set-off
Set-off of tax
Net deferred tax assets (liabilities)
2017
2016
Assets
EGP’000
-
-
-
2,630
2,630
-
-
Liabilities
EGP’000
(17,159)
(106,651)
(37,532)
(161,342)
-
(158,712)
Assets
EGP’000
-
-
-
27,044
27,044
(8,737)
18,307
2016
EGP’000
388,538
87,421
(2,210)
(452)
303
18,876
8,940
8,742
121,620
Liabilities
EGP’000
(9,528)
(101,661)
(30,175)
-
(141,364)
8,737
(132,627)
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 2017 for the country
the liabilities and assets has arisen. The enacted tax rate in Egypt is 22.5% (2016: 22.5%), Jordan 20% (2016: 20%) and Sudan
15% (2016: 15%).
* Undistributed reserves from group subsidiaries
IDH annual rePort 2017
97
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:
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
2017
EGP’000
13,517
17,507
2,582
317
-
47
3,562
37,532
2016
EGP’000
11,378
11,490
2,192
1,095
677
189
3,154
30,175
Unrecognized deferred tax assets
The following deferred tax assets were not recognized due to the uncertainty that those items will have a future tax benefit:
Impairment of trade receivables (Note 16)
Impairment of other receivables (Note 16)
Provision for legal claims (Note 22)
Unrecognized deferred tax asset
2017
EGP’000
21,784
8,069
2,685
32,538
7,321
2016
EGP’000
19,154
8,068
2,191
29,413
6,618
Earnings per share (EPS)
10.
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.
2017
EGP’000
374,023
150,000
2.49
2016
EGP’000
260,399
150,000
1.74
98
IDH annual rePort 2017
Financial Statements
11.
Property, plant and equipment
12.
Intangible assets
Land &
Buildings
EGP’000
Medical, electric
& electronic
equipment
EGP’000
Leasehold
improvements
EGP’000
Fixtures, fittings
& vehicles
EGP’000
Building &
Leasehold
improvements
in construction
EGP’000
Cost
At 1 January 2016
Additions
Disposals
Exchange differences
Transfers
At 31 December 2016
Additions*
Disposals
Exchange differences
Transfers
At 31 December 2017
167,612
-
(648)
6,285
-
173,249
27,700
10,825
-
211,774
Depreciation and impairment
At 1 January 2016
Depreciation charge for
the year
Disposals
Exchange differences
At 31 December 2016
Depreciation charge for
the year
Disposals
Exchange differences
At 31 December 2017
Net book value
At 31 December 2017
At 31 December 2016
19,331
2,757
-
77
22,165
2,857
-
-
25,022
186,752
151,084
164,382
18,138
(1,994)
15,937
4,114
200,577
41,275
(2,697)
(1,547)
237,608
52,690
22,045
(1,497)
2,060
75,298
33,446
(2,594)
(154)
105,996
131,612
125,279
76,272
18,050
(315)
23,646
1,198
118,851
17,788
(888)
(1,037)
12,637
147,351
31,088
12,947
(306)
1,280
45,009
17,278
(663)
(18)
61,606
85,745
73,842
31,949
2,740
(342)
6,095
-
40,442
5,588
(477)
(503)
-
45,050
12,463
2,475
(248)
665
15,355
3,567
(385)
(34)
18,503
26,547
25,087
3,576
4,570
-
2,248
(5,312)
5,082
50,765
-
(80)
(12637)
43,130
-
-
-
-
-
-
-
-
-
43,130
5,082
Cost
At 1 January 2016
Additions
Effect of movements in exchange rates
At 31 December 2016
Additions
Effect of movements in exchange rates
At 31 December 2017
Amortisation and impairment
At 1 January 2016
Impairment Loss
Amortisation
Effect of movements in exchange rates
At 31 December 2016
Amortisation
Effect of movements in exchange rates
At 31 December 2017
Net book value
At 31 December 2017
At 31 December 2016
Goodwill
EGP’000
Brand Name
EGP’000
1,231,199
-
26,153
1,257,352
4,391
(1,290)
1,260,453
-
1,849
-
-
1,849
-
-
1,849
375,026
-
13,066
388,092
-
(805)
387,287
-
-
-
-
-
-
-
-
1,258,604
1,255,503
387,287
388,092
Total
EGP’000
443,791
43,498
(3,299)
54,211
-
538,201
143,116
(4,062)
7,658
-
684,913
115,572
40,224
(2,051)
4,082
157,827
57,148
(3,642)
(206)
211,127
473,786
380,374
IDH annual rePort 2017
99
Software
EGP’000
32,371
5,039
791
38,201
6,386
(18)
44,569
22,713
-
4,506
215
27,434
4,774
-
32,208
12,361
10,767
Total
EGP’000
1,638,596
5,039
40,010
1,683,645
10,777
(2,113)
1,692,309
22,713
1,849
4,506
215
29,283
4,774
-
34,057
1,658,252
1,654,362
*Additions include EGP 60.8m (EGP 23.7m land, EGP 29.3m building) related to the Group’s new Headquarter purchased in April 2017. Included in this
amount are capitalised borrowing costs related to the improvement of the building of EGP 7.8m. Calculated using capitlisation rate of 20.75% (note 24).
Leased equipment
The Group leases medical and electric equipment under finance lease arrangements. This equipment is supplied to service
the Group’s new state-of-the-art Mega Lab. The equipment secures lease obligations, see note 26 for further details. At 31
December 2017, the net carrying amount of leased equipment was EGP 47m (Dec 2016: EGP 59m).
100
IDH annual rePort 2017
Financial Statements
Goodwill and intangible assets with indefinite lives
13.
Goodwill acquired through business combinations and intangible assets with indefinite lives are allocated to the Group’s
CGUs as follows:
Medical Genetics Center
Goodwill
Al Makhbariyoun Al Arab Group (“Biolab”)
Goodwill
Brand name
Golden Care for Medical Services (“Ultralab”)
Goodwill
Brand name
Alborg Laboratory Company (“Al-Borg”)
Goodwill
Brand name
Al Mokhtabar Company for Medical Labs (“Al-Mokhtabar”)
Goodwill
Brand name
Balance at 31 December
2017
EGP’000
1,755
1,755
52,086
22,746
74,832
8,386
1,156
9,542
497,275
142,066
639,341
699,102
221,319
920,421
1,645,891
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
699,102
221,319
920,421
1,643,595
The Group performed its annual impairment test in October 2017. The Group considers the relationship between its mar-
ket capitalisation and its book value, among other factors, when reviewing for indicators of impairment.
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 2018 -2022
Average annual price per test growth
rate from 2018 -2022
Annual revenue growth rate from 2018
-2022
Average gross margin from 2018 -2022
Terminal value growth rate from 1
January 2023
Discount rate
Ultra Lab
Bio Lab
Al-Mokhtabar
Al-Borg
7%
7%
15%
41%
2%
5%
0%
5%
36%
2%
5%
11%
17%
52%
3.9%
3%
12%
15%
48%
3.9%
25.8%
15.4%
19.58%
19.58%
IDH annual rePort 2017 101
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 2018- 2022 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.
Based on the sensitivity analysis, A 1% change in the WACC would result in a 5-7% change in the valuation of the CGU.
The conclusions from the impairment review were that there was headroom within the forecasts and therefore no impair-
ment is required.
14.
The fair values of all financial assets and financial liabilities by class shown in the balance sheet are as follows:
Financial assets and financial liabilities
Held-to-maturity
Short term deposits - treasury bills
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
Loans and borrowings
Total financial liabilities
Total financial instruments
2017
EGP’000
685,211
9,149
174,902
869,262
215,176
93,256
117,714
60,763
486,909
382,353
2016
EGP’000
683,721
95,575
120,873
900,169
211,533
102,082
151,799
-
465,414
434,755
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.
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.
The Group is exposed to market risk, credit risk and liquidity risk. The Group’s overall risk management program focuses on
the unpredictability of markets and seeks to minimize potential adverse effects on the Group’s financial performance. The
Group’s senior management oversees the management of these risks. The Board of Directors reviews and agrees policies
for managing each of these risks, which are summarised below.
102
IDH annual rePort 2017
Financial Statements
IDH annual rePort 2017 103
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.
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.
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 2017 and 2016. 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 assump-
tions 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 2017 and 2016.
• 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 2017 for the effects of the assumed changes of the underlying risk.
Interest rate risk
The Group adopts a policy of ensuring that between 50 and 55% of this interest rate risk exposure is at a fixed rate. This is
achieved partially by entering into fixed-rate instrument and partly by borrowing at the floating rate.
Exposure to interest rate risk
The interest rate profile of the Group’s interest-bearing financial instruments as reported to the management of the group
is as follow:
Fixed-rate instruments
Finance lease liabilities (note 26)
Variable-rate instruments
Loan and borrowings (note 24)
2017
EGP’000
117,714
60,763
2016
EGP’000
151,799
-
The Group does not account for any fixed-rate financial liabilities at FVTPL. Therefore, a change in interest rates at the
reporting date would not affect profit or loss.
Cash flow sensitivity analysis for variable-rate instruments
A reasonable possible change of 100 basis points in interest rates at the reporting date would have increased (decreased)
profit or loss by the amounts EGP 779K. This analysis assumes that all other variables, remain constant.
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), recognized assets and
liabilities and net investments in foreign operations. However, the management aims to minimize open positions in foreign
currencies to the extent that is necessary to conduct its activities.
Management has set up a policy to require group companies to manage their foreign exchange risk against their functional
currency. Foreign exchange risk arises when future commercial transactions or recognized 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):
Cash
and cash
equivalents
11,705
66
4
216
12,826
Other
assets
149
-
-
1,816
11,722
Assets
Total
assets
11,854
66
4
2,032
24,548
31-Dec-17
Liabilities
Put option
-
-
-
(3,747)
Finance
lease
(7,062)
-
-
(334)
Trade
payables
and other
liabilities
(1,660)
(13)
(197)
(1,228)
(5,316)
Total
liability
Net
exposure
(8,722)
(13)
(197)
(5,309)
(5,316)
3,132
53
(193)
(3,277)
19,232
Assets
Liabilities
31-Dec-16
Cash
22,652
95
12
157
12,652
Other
assets
Total
assets
Put option
203
-
-
1,692
7,501
22,855
95
12
1,849
20,153
-
-
-
(4,017)
-
Finance
lease
(7,866)
-
-
-
-
Trade
payables
and other
liabilities
(2,619)
(68)
(211)
(1,147)
(4,023)
Total
liability
Net
exposure
(10,485)
(68)
(211)
(5,164)
(4,023)
12,370
27
(199)
(3,315)
16,130
US Dollars
Euros
GBP
JOD
SDG
US Dollars
Euros
GBP
JOD
SDG
104
IDH annual rePort 2017
Financial Statements
The following is the exchange rates applied against EGP:
Average rate for the year ended
US Dollar
Euros
GBP
JOD
SAR
SDG
US Dollar
Euros
GBP
JOD
SAR
SDG
2017
17.68
20.05
22.84
24.92
4.71
1.04
2016
10.15
11.09
13.43
14.57
2.71
1.20
Spot rate at the year ended
31-Dec-17
31-Dec-16
17.67
21.09
23.73
24.89
4.71
0.88
18.00
18.87
22.04
25.41
4.80
1.28
At 31 December 2017, 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 5,5m (2016: EGP 22.3m), 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 6,7m due to the impact from translation of foreign subsidiaries.
At 31 December 2017, 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 (8.2m) (2016:
EGP (8.4m)), 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 8m due to the impact from translation of
foreign subsidiaries.
At 31 December 2017, 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 1.7m (2016:
EGP 1.8m, mainly as a result of foreign exchange gains/losses on translation of SDG -denominated financial assets and
liabilities. The effect on equity would have been an increase/decrease by EGP 1.1m 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.
IDH annual rePort 2017 105
For banks and financial institutions, the Group is only dealing with the banks which have a high independent rating and a
good reputation.
Trade receivables
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 16.
Cash and cash equivalents
Credit risk from balances with banks and financial institutions is managed by the Group’s treasury department in accord-
ance with the Group’s policy. Investments of surplus funds are made only with approved counterparties and within credit
limits assigned to each counterparty. Counterparty credit limits are reviewed by the Group’s Board of Directors on an
annual basis, and may be updated throughout the year subject to approval of the Group’s management. The limits are set
to minimise the concentration of risks and therefore mitigate financial loss through a counterparty’s potential failure to
make payments.
The maximum exposure to credit risk at the reporting date is the carrying value of cash and cash equivalents disclosed in Note 17.
Liquidity risk
The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of finance
leases and loans.
The table below summarises the maturity profile of the Group’s financial liabilities based on contractual undiscounted payments:
Year ended 31 December 2017
Obligations under finance leases
Put option liability
Loans and borrowings
Trade and other payables
Year ended 31 December 2016
Obligations under finance leases
Put option liability
Loans and borrowings
Trade and other payables
1 year or less
38,275
93,256
14,575
215,176
361,282
1 year or less
48,373
102,082
-
211,533
361,988
1 to 5 years
128,726
-
38,425
-
167,151
1 to 5 years
152,234
-
-
-
152,234
more than 5 years
-
-
-
-
more than 5 years
8,438
-
-
-
8,438
Total
167,001
93,256
53,000
215,176
528,433
Total
209,045
102,082
-
211,533
522,660
Cash flow forecasting is performed in the operating entities of the group and aggregated by group finance. Group finance
monitors rolling forecasts of the group’s liquidity requirements to ensure it has sufficient cash to meet operational needs.
Such forecasting takes into consideration the group’s compliance with internal financial position ratio targets and, if ap-
plicable external regulatory or legal requirements – for example, currency restrictions.
106
IDH annual rePort 2017
Financial Statements
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.
15.
Inventories
Chemicals and operating supplies
2017
EGP’000
69,935
69,935
2016
EGP’000
51,715
51,715
During 2017, EGP 306,641k (2016: EGP 184,087k) was recognised as an expense for inventories carried at net realisable
value. This was recognised in cost of sales.
16.
Trade and other receivables
Trade receivables
Prepaid expenses
Receivables due from related parties
Other receivables
Accrued revenue
2017
EGP’000
139,885
27,353
6,441
11,000
17,576
202,255
2016
EGP’000
107,193
27,502
4,294
6,214
3,172
148,375
17.
Cash and cash equivalent
Cash at banks and on hand
Short-term deposits (less than 3 months)
IDH annual rePort 2017 107
2017
EGP’000
139,974
545,237
685,211
2016
EGP’000
426,578
257,143
683,721
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 15%- 16% per annum.
18.
Restricted cash
Restricted cash
2017
EGP’000
13,226
13,226
2016
EGP’000
13,253
13,253
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 end next
year 2018 and once complete the total cash amount is expected to be returned to IDH.
19.
Other investments
For terms and conditions relating to related party receivables, refer to Note 27.
As at 31 December 2017, trade and other receivables with an initial carrying value of EGP 29,852k (2016: EGP 27,222k) were
impaired and fully provided for. Below shows the movements in the provision for impairment of trade and other receivables:
Fixed term deposits
Treasury bills
2017
EGP’000
9,149
-
9,149
2016
EGP’000
90,000
5,575
95,575
At 1 January
Charge for the year
Utilised
Unused amounts reversed
Exchange differences
At 31 December
2017
EGP’000
27,222
5,561
(1,331)
(1,461)
(139)
29,852
2016
EGP’000
25,098
4,298
-
(2,768)
594
27,222
The maturity date of the fixed term deposit between 9–12 months and the effective interest rate on the USD deposit is 2.25%
(2016: on the EGP14.65%).
Fixed term deposits and treasury bills are classified as held to maturity
20.
The Company’s ordinary share capital is $150,000,000 equivalent to EGP 1,072,500,000.
Share capital and reserve
All shares are authorised and fully paid and have a pair value of $1.
As at 31 December, the ageing analysis of trade receivables is as follows:
2017
2016
Total
Total
139,885
107,193
< 30 days
99,143
54,072
30-60 days
12,111
8,450
61-90 days
6,523
19,477
> 90 days
22,109
25,194
In issue at beginning of the year
In issue at the end of the year
Ordinary shares
Ordinary shares
31-Dec-17
150,000,000
150,000,000
31-Dec-16
150,000,000
150,000,000
108
IDH annual rePort 2017
Financial Statements
IDH annual rePort 2017 109
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.
22.
Provision
At 1 January 2017
Provision made during the year
Provision used during the year
Provision reversed during the year
At 31 December 2017
Current
Non- Current
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
Egyptian Government Training Fund for
employees
EGP’000
10,011
2,003
-
-
12,014
-
12,014
Egyptian Government Training Fund for
employees
EGP’000
7,995
2,016
-
-
10,011
-
10,011
Provision for
legal claims
EGP’000
2,191
1,533
(39)
(1,000)
2,685
-
2,685
Provision for
legal claims
EGP’000
2,967
208
(267)
(717)
2,191
-
2,191
Total
EGP’000
12,202
3,536
(39)
(1,000)
14,699
-
14,699
Total
EGP’000
10,962
2,224
(267)
(717)
12,202
-
12,202
21.
Distributions made and proposed
Cash dividends on ordinary shares declared and paid:
US$ 0.14 per qualifying ordinary share (2016: US$ 0.06)
2017
EGP’000
371,875
371,875
2016
EGP’000
79,470
79,470
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 2017.
After the balance sheet date the following dividends were proposed by the
directors (the dividends have not been provided for):
US$0.16 per share (2016: $0.14) per share
424,080
371,875
23.
Trade and other payables
The proposed 2017 dividend on ordinary shares are subject to approval at the annual general meeting and is not recognised
as a liability as at 31 December 2017.
Trade payables
Accrued expenses
Other payables
Put option liability
Accrued interest
Finance lease liabilities
2017
EGP’000
126,140
73,821
15,215
93,256
7,763
17,237
333,4322
2016
EGP’000
126,069
77,646
7,818
102,082
-
32,161
345,776
The accounting policy for put options after initial recognition is to recognise all changes in the carring value of the put
liability within equity.
Through the historic acquisitions of Makhbariyoun Al Arab the Group entered into separate put option arrangements to
purchase the remaining equity interests from the vendors at a subsequent date. At acquisition a put option liability has
been recognised for the net present value for the exercise price of the option.
110
IDH annual rePort 2017
Financial Statements
The options are exercisable in whole from the fifth anniversary of completion of the original purchase agreement, which fell
due in June 2016. The vendor has not exercised this right at 31 December 2017.
Loan and borrowings
24.
In April 2017 AL-Mokhtabar for medical lab, one of IDH subsidiaries, was granted a medium term loan amounting to EGP
110m from Commercial international bank “CIB Egypt” to finance the purchase of the new administrative building for the
group. As at 31 December 2017 only EGP 53m had been drawn down from the total facility available. The loan contains the
following financial covenants which if breached will mean the loan is repayable on demand:
1. The financial leverage shall not exceed the following percentages
Year
%
2017
2.33
2018
1.71
2019
1.32
2020
1.04
2021
0.85
2022
0.73
“Financial leverage”: total liabilities divided by net equity
2.
The debt service ratios (DSR) shall not be less than 1.
“Debt service ratios”: cash operating profit after tax plus Depreciation for the financial year less annual mainte-
nance on machinery and equipment divided by total distributions plus accrued interest and loan instalments.
3. The current ratios shall not be less than 1.
“Current ratios”: Current assets divided current liabilities.
4. The capital expansions in AL Mokhtabar company shall not exceed EGP 20m per year, other than year 2017which
includes in addition the value of the building financed by EGP 110m loan facility. This condition is valid throughout
the term of the loan.
The agreement includes other non-financial covenants which relate to the impact of material events on the Company and
the consequential ability to repay the loan.
The terms and conditions of outstanding loans are as follows:
currency
EGP
Nominal
interest rate
CBE corridor
rate+1%
CIB ـــ BANK
-
Amount held as:
Current liability
Non- current
liability
25.
Long-term financial obligations
Finance lease liabilities (see note 26)
Maturity
31 Dec 17
31 Dec 16
Apr-22
53,000
53,000
14,575
38,425
53,000
2017
EGP’000
100,478
100,478
-
-
-
-
-
2016
EGP’000
119,638
119,638
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
IDH annual rePort 2017 111
2017
EGP’000
50,072
178,938
101,343
330,353
2016
EGP’000
39,805
139,466
81,868
261,139
The Group lease certain branches for the operation of the business. During the year EGP 51,478K was recognised as an
expense in the income statement in respect of operating leases (2016: EGP 32,234K).
Finance lease
The Group has finance leases for various items of plant and machinery. Future minimum lease payments under finance
leases and hire purchase contracts, together with the present value of the net minimum lease payments are, as follows:
Finance lease liability – laboratory equipment
Finance lease liability – other
Finance lease liabilities for the laboratory equipment are payable as follows:
At 31 December 2017
Less than one year
Between one and five years
More than five years
At 31 December 2016
Less than one year
Between one and five years
More than five years
Minimum lease
payments
2017
EGP’000
35,549
126,938
-
162,487
Minimum lease
payments
2016
EGP’000
47,834
150,971
8,438
207,243
2017
EGP’000
114,727
2,987
117,714
Interest
2017
EGP’000
19,512
28,248
-
47,760
Interest
2016
EGP’000
16,212
38,628
2,407
57,247
2016
EGP’000
74,023
461
151,799
Principal
2017
EGP’000
16,037
98,690
-
114,727
Principal
2016
EGP’000
31,622
112,343
6,031
149,996
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.
112
IDH annual rePort 2017
Financial Statements
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$.
Contingent liabilities
There are no contingent liabilities relating to the group’s transactions and commitment with banks.
Related party disclosures
27.
The significant transactions with related parties, their nature volumes and balance during the period 31 December 2017
and 2016 are as follows:
Related Party
Nature of transaction Nature of relationship
Life Scan (S.A.E)*
International Fertility (IVF)**
Dr. Hend Elshrbini***
Integrated Treatment for Kidney
Diseases (S.A.E)
Total
Affiliate**
Affiliate***
CEO**
Entity owned by
Company’s CEO
Expenses paid on
behalf
Expenses paid on
behalf
Loan arrangement
Rental income
Medical Test
analysis
Related Party
Nature of transaction Nature of relationship
Life Scan (S.A.E)**
International Fertility (IVF)***
Integrated Treatment for Kidney
Diseases (S.A.E)
Total
Affiliate**
Affiliate***
Entity owned by
Company’s CEO
Expenses paid on
behalf
Expenses paid on
behalf
Rental income
Medical Test
analysis
31-Dec-17
Transaction amount
of the year
EGP’000
Amount due from
EGP’000
1
2,240
164,483
296
33
31-Dec-16
278
6,000
-
163
6,441
Transaction amount
of the year
EGP’000
Amount due from
EGP’000
-
3,760
274
53
277
3,760
53
4,090
* Life Scan is a company whose shareholders include Dr. Moamena Kamel ( founder of IDH subsidiary Al-Mokhtabar Labs).
** International Fertility (IVF) is a company whose shareholders include Dr. Moamena Kamel ( founder of IDH subsidiary Al-Mokhtabar Labs).
*** During the year 2017 Dr. Hend (C.E.O) granted 2 loans to IDH Cayman amounting to US$ 9m. and the loan was settled by Al Mokhtabar on behalf of
IDH Cayman for EGP 164m at the prevailing exchange rate of US$/EGP 18.35 – 17.82. The loan was not interest bearing.
The transactions with related parties are conducted based on terms equivalent to those that prevail in arm’s length transactions.
IDH annual rePort 2017 113
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 2017,
the Group has not recorded any impairment of receivables relating to amounts owed by related parties (2016: 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 organizations and groups in need of assistance. The foundation deploys an integrated
program and vision for the communities it helps that include economic, social, and healthcare development initiatives. In
2017 EGP 3,674K (2015: EGP 2,740K) 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
Total compensation paid to key management personnel
2017
EGP’000
32,426
32,426
2016
EGP’000
23,085
23,085
Subsequent events
28.
Integrated Diagnostics Holdings (“IDH”), and Man Capital LLP (“Man Capital”), the investment arm of the Mansour Group,
jointly announced their first investment in Nigeria’s promising healthcare industry.
The investment will see Dynasty Group (“Dynasty”), a venture that is 51% owned by IDH, partner with the International
Finance Corporation (“IFC”), a member of the World Bank Group, to invest in Eagle Eye Echo-Scan Services Limited
(“Echo-Scan”), a leading medical diagnostics business based in Nigeria.
The transaction will see Dynasty acquire a majority stake in Echo-Scan and assume management control of the company,
while both Dynasty and the IFC will invest USD 20 million and USD 5 million respectively to expand Echo- Scan’s na-
tionwide service offering, footprint, and quality standards. Over the coming year, Echo- Scan will refurbish and upgrade
existing locations as well as significantly augment its number of branches.
In February 2018, IDH transferred MUSD 2.69 to Dynasty. Dynasty in its turn transferred MUSD 4.5, representing its con-
tribution in Eagle Eye Nigeria.
On 22 January 2018, the transaction completed but the accounting for the transaction has not been finalised and as such
detailed the fair value of the identifiable assets and liabilities acquired together with the Goodwill acquired is not available
for disclosure at present.
The shareholders structure of the transaction, Dynasty acquires 75.8%, International Finance Corporation (“IFC”) 19.1%
and 5.1% other founders.
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