Integrated Diagnostics Holdings Annual Report 2020

Plain-text annual report

A YEAR OF RESILIENT BUSINESS Contents 04 Strategic Report 06 Who We Are 10 Highlights of 2020 14 Covid-19 Response Protocols 18 Chairman’s Message 20 Chief Executive’s Report 28 Our Markets 40 Our Brands 44 Our Services 48 Competitive Strengths & Growth Strategy 52 Principle Risks, Uncertainties & their Mitigation 62 Performance 64 Financial & Operational Review 74 Corporate Social Responsibility 76 Corporate Governance 78 Board of Directors 80 Corporate Governance Report 88 Audit Committee Report 92 Remuneration Committee Report 94 Directors’ Report 100 Financial Statements 102 Independent Auditor’s Report 108 Consolidated Financial Statements 113 Notes to the Consolidated Financial Statements 2020 Annual Report A YEAR OF RESILIENT BUSINESS A Leading Consumer Healthcare Company in the Middle East and Africa 4 STRATEGIC REPORT IDH demonstrated once more its ability to adjust to changing market dynamics and deliver strong financial and operational results despite the challenges 19% Revenue growth versus 2019 21% Net profit growth versus 2019 6 Strategic Report // Who We Are Who We Are +40 years track record at the subsidiary levels 7 key brands with strong awareness in underserved 4 countries across the Middle East and Africa EGP/BN 2.7 in revenue in 2020, +19% vs 2019 LSE listed since May 2015 481 operational branches as at 31 December 2020 Integrated Diagnostics Holdings (“IDH,” the “Group,” or the “Company”) is a leading consumer healthcare company in the Middle East and Africa with operations in Egypt, Jordan, Sudan and Nige- ria. With a 40-year track record, IDH is a trusted provider of high-quality pathology and radiology services with internationally recognised accredi- tations. Today, the Group offers a wide suite ser- vices encompassing over 2,000 diagnostic tests. As at 31 December 2020, IDH operated a network of 481 branches across its geographic footprint, deploying a CAPEX-light Hub, Spoke and Spike business model to fuel its continued expansion. The Group also offers data-driven healthcare services through its latest subsidiary “Wayak”. Launched in 2019, the new venture sees the Group leverage a database of over 13 million patients with the aim of generating growth opportunities in the healthcare management space. Alongside the Group’s continuous investment in organic growth, IDH also pursues strategic acquisition opportunities in new markets where it can leverage its business model to capitalise on similar healthcare and consumer trends. IDH is a Jersey-registered entity with a Standard Listing on the Main Market of the London Stock Exchange since May 2015. Our Brands IDH’s core brands include Al Borg, Al Borg Scan, Al Mokhtabar and Wayak in Egypt, Biolab in Jordan, Ultralab and Al Mokhtabar Sudan in Sudan, and Echo-Lab in Nigeria. 2020 Annual Report7 Our Services Through IDH’s brands, the Group offers over 2,000 internationally accredited pathology tests ranging from basic blood glucose tests for diabetes to advanced molecular testing for genetic disorders. Addi- tionally, IDH offers the full suite of radiology services through Al Borg Scan in Egypt and Echo-Lab in Nigeria. In Egypt, IDH leverages advanced data systems to provide patients with highly tailored health- care management services through its subsidairy, Wayak. Immunology Microbiology Haematology Endocrinology Clinical Chemistry Molecular Biology Cytogenetics Histopathology Radiology Our Markets IDH has a footprint spanning four countries in the Middle East and Africa, including Egypt, Sudan, Jor- dan, and Nigeria. The generally under-penetrated and underserved nature of these markets’ diagnostic services industry provide significant structural growth drivers for the Group. Egypt Jordan Nigeria Sudan Annual Report 2020Integrated Diagnostics Holdings8 Strategic Report // Who We Are Our Patients IDH serves two principal types of clients: contract (corporate) and walk-in (individuals). Within each of these categories, the Group also offers a house call service, and within the con- tract segment, a lab-to-lab service. IDH’s walk-in clients, also referred to as “self-payers”, represented 46% of the Group’s revenues in 2020, and include individuals who pay out of pocket in advance of tests being completed. IDH’s contract clients, who in 2020 represented 54% of the Group’s revenues, include institutions such as unions, syndicates, private and public insurance companies, banks and corporations who enter into one-year renewable contracts at agreed rates per-test and on a per-client basis. An Asset-Light Business Model IDH’s asset-light business model provides the Group with a platform to grow in a capital efficient manner and is comprised of two stra- tegic components. The first is the IDH’s easily scalable “Hub, Spoke and Spike” network of branch laboratories. The second is key supplier relationships that supports rapid expansion and alleviates the Company from having to pur- chase expansive medical diagnostic equipment. Hub, Spoke and Spike The Group’s CAP-accredited Mega Lab serves as the ‘Hub’ and is equipped with state-of-the- art equipment. This provides the tools and the capacity required to process all tests and services for samples collected by the B-Labs (Spokes) and C-Labs (Spikes). The Group utilises 2020 Annual Report9 MEGA LAB its B-Labs to process routine test and leverages their capacity to manage traffic to the Group’s Mega Lab when needed. On the other hand, C-Labs or Spikes function primarily as collec- tion centres and most importantly increase the Group’s geographic reach to clients nationwide. This “plug and play” business model forms the operational backbone of the Group and pro- vides it with significant leverage in extracting advantageous revenue and cost synergies. Supplier Relationships IDH’s unique business model strengthens the Company’s position in its relationship with its suppliers. As one of the MENA region’s largest provider for diagnostic services, the Group has substantial bargaining power that allows it to negotiate favourable contract terms with medical equipment and test kit suppliers. The Group’s contracts with its key suppliers of medi- cal testing kits also include the provision of the equipment to analyse the laboratory test results. These agreements have minimum annual commitment payments to cover the medical diagnostic equipment, kits and chemicals to be used for testing and ongoing maintenance and support services. As test volumes continue to increase, IDH’s eas- ily covers these minimum annual payments due to its sheer business size, while the high volume of kit consumption supports its pricing power, reducing the cost per test while simultaneously incurring no initial capital outlay for the pur- chase of medical diagnostic equipment. Annual Report 2020Integrated Diagnostics Holdings10 Strategic Report // Highlights of 2020 Highlights of 2020 Overall, our large operational scale, wide geographic reach, and prompt response to the difficulties posed by Covid-19 proved vital in 2020 Financial Highlights Revenues Gross Profit recorded EGP 2,656 million in 2020, up 19% year-on-year. Strong growth for the year was a direct result of IDH’s ability to swiftly adapt its service offering to changing dynamics by offering PCR and Covid-19-related1 testing in Egypt and Jordan and ramping up its house calls services in both countries. recorded EGP 1,343 million in 2020, up 24% year- on-year and with an associated margin of 51% versus 49% in 2019. Improved gross profitability was supported by strong top-line growth. Operating Profit EBITDA2 grew by 25% year-on-year to EGP 986 million in 2020 with an associated margin of 37% versus 36% in 2019. Strong operating profit growth comes despite IDH booking EGP 42 million in provisions to account for expected credit losses in accordance with IFRS 9. surpassed the EGP 1 billion mark to record EGP 1,171 million for 2020, up 24% against the EGP 945 million figure recorded in 2019. EBITDA margin increased to 44% in 2020 from 42% in the previous year supported by improved gross profitability for the year. 1 Covid-19-related tests include Polymerase Chain Reaction (PCR) and antibody testing as well as a bundle of inflammatory and clotting markers such as Complete Blood Picture, Erythrocyte Sedimentation Rate (ESR), D-Dimer, Ferritin and C-reactive Protein (CRP), among others. 2 EBITDA is calculated as operating profit plus depreciation and amortization. 2020 Annual Report11 Net Profit Recommended Final Dividend increased 21% year-on-year to EGP 609 million in 2020, with a net profit margin of 23% unchanged versus 2019. Bottom-line profitability was sup- ported by solid revenue growth for the year com- bined with higher interest income in 2020. of US$ 0.049 per share, equivalent to US$ 29.1 million in total. Earnings Per Share3 stood at EGP 0.99 in 2020 compared to EGP 0.85 in 2019 3 Based on 600 million shares. Annual Report 2020Integrated Diagnostics Holdings12 Strategic Report // Highlights of 2020 Operational Highlights Egypt Radiology strong demand for PCR and Covid- 19-related testing and the company’s house call services supported a 14% year-on-year increase in revenue for 2020. increase in Al Borg Scan operations with growing contribution to revenue and EBITDA and a third branch set to commence operations in 2021. Jordan Nigeria Biolab was at the forefront of CPR testing for Covid-19 from the very start, supporting an impressive increase in the geography’s top-line for the year. increased brand awareness and demand for Echo-Lab’s high-quality services drove strong top-line growth despite Covid-19-related difficulties. 481 27.1 operational branches in 2020, up from 452 in 2019. million tests performed across the Group in 2020. 7.1 EGP 98 million patients served in across the Group in 2020. average revenue per test, up 34% year-on-year. Revenue by Geography % of total revenue in 2019 % of total revenue in 2020 ■ Egypt ■ Jordan ■ Sudan Nigeria 85% 12% 2% 1% ■ Egypt ■ Jordan ■ Sudan Nigeria 82% 15% 1% 1% 2020 Annual Report13 Results Summary Financial EGP mn Revenues* Cost of Sales Gross Profit Gross Profit Margin Operating Profit EBITDA4 EBITDA Margin Net Profit Net Profit Margin Cash Balance 2020 2019 Change 2,656 2,226 (1,314) (1,143) 1,343 1,084 51% 49% 986 791 1,171 945 44% 42% 609 505 23% 23% 877 631 19% 15% 24% 1.9 pts 25% 24% 1.6 pts 21% 0.3 pts 39% * Excluding the 100 Million Healthy Lives Campaign from 2019 figures, consolidated revenues would have increased 22% year-on-year. The 100 Million Healthy Lives campaign ran from November 2018 through June 2019. In the six months to 30 June 2019 IDH served 224 thousand patients under the campaign’s umbrella and performed 2.4 million tests. Total campaign-related revenue in 2019 reached EGP 47 million. 4 EBITDA is calculated as operating profit plus depreciation and amortization. Operational Branches Patients ('000) Revenue per Patient (EGP) Tests ('000) Revenue per Test (EGP) Test per Patient Revenue by Type 2019 Change 2020 481 7,113 373 452 7,481 298 27,073 30,471 98 3.8 73 4.1 29 -5% 25% -11% 34% -7% % of total revenue in 2019** ■ Walk in ■ Contract 44% 56% % of total revenue in 2020 ■ Walk in ■ Contract 46% 54% ** In 2020, management revisited the definition of contract customers who have contractual agreements and are granted discounts above 20%, hence all cash paying customers with discounts equal or below 20% were reclassified as walk-in. Reclassification adjustments include the transfer of 720 thousand tests in 2019 and associated revenue of EGP 79 million from the contract segment to walk-ins. The upper mentioned reclassification allows better representation of both segments. Annual Report 2020Integrated Diagnostics Holdings14 Strategic Report // Covid-19 Response Protocols Covid-19 Response Protocols From the very start of the Covid-19 pandemic, IDH has implemented detailed internal proto- cols to protect the safety of its staff and patients and safeguard its operations. Under the over- sight of a dedicated team, these protocols have been regularly assessed and refined to ensure that they best reflect the evolving situation across the Company’s countries of operation. Across IDH’s headquarter offices and branch network, these protocols continue to be scrupu- lously adhered to allowing the Group to safely carry on providing its world-class services. IDH’s response to the spread of Covid-19 is focused on two fronts: Staff and patient safety and business continuity. Staff and Patient Safety Appropriate Protective Equipment All of IDH use appropriate protective equipment when interacting with patients, including those suspected of having Covid-19 or any other infectious disease. IDH maintains a robust stock of protective equipment to ward against supply-chain risk. Procedures for Interacting with Patients All of IDH’s frontline staff are trained on procedures for interacting with patients suspected of carrying Covid-19 or any other communicable disease. Managers regularly review these procedures with their teams and a refresher has been dis- seminated to all employees. These procedures include steps that are taken to (a) protect IDH’s staff and (b) protect other patients presenting at the Group’s clinics for testing. Referring Patients Suspected of Carrying Covid-19 Branch office staff have a strict protocol for referring patients they suspect may carry Covid-19 to the nearest state lab for testing. 2020 Annual Report15 From the very start of the Covid-19 pandemic, IDH has implemented detailed internal protocols to protect the safety of its staff and patients and safeguard its operations Regular Communication All staff members are subject to regular messages reminding them that they may not report to work if they have symptoms of a Covid-19 infection. Cleaning and Disinfection Across all branches and HQ office, the Group has increased the frequency of clean- ing and disinfection and all facilities are regularly decontaminated. Gate processing Gate processing at branches and HQ office for employees and visitors with fever- screening devices, barring entry for anyone recording a temperature above 37.2°C. Annual Report 2020Integrated Diagnostics Holdings16 Strategic Report // Covid-19 Response Protocols Business Continuity Equipment Stock Since the start of the crisis, IDH has worked diligently to secure additional testing kit stock to ensure the Company was well prepared in case of unexpected supply chain disruptions. Diversifying Suppliers As part of its contingency planning exercise, the Company’s supply chain profes- sionals qualified additional potential suppliers. This qualification process includes testing by medical professionals at IDH’s Mega Lab and by the Company’s quality assurance team. Covid-19 Testing and House Call Services The Group is currently offering Covid-19 testing, including PCR testing for Covid-19, in both Egypt and Jordan. In parallel, the Group also strengthened its house call services in both countries to mitigate the impacts of restrictive measures while ensuring all patients had access to the Group’s services despite ongoing challenges. Smart Working The Company transitioned to a work from home arrangement for many head- office functions while holding the majority of meetings virtually through video or audio conferencing. Clear and Regular Communication The Company regularly communicates its business continuity protocols to all employees with all staff well-prepared to navigate potential challenging times ahead. Review of Internal Processes Regular review of IDH’s disaster recovery and business continuity policies to ensure that the Group is well prepared for any eventuality. 2020 Annual Report17 Annual Report 2020Integrated Diagnostics Holdings18 Strategic Report // Chairman’s Message Chairman’s Message Dear Shareholders, I am pleased to report that against a backdrop of a very challenging year with the global Covid-19 pandemic, your Company has proven very resilient and rose to the challenge with an impressive set of results. We were able to leverage our well-established business model and track record to facilitate new revenue generating opportunities. We remained committed to our social responsi- bilities in providing high-quality healthcare to the countries where IDH have extended our footprint. In 2020, we recorded a 19% growth in revenue. We were able to provide much-needed PCR and other testing facilities in both Egypt and Jordan, while expanding our house call services. Egypt continues to experience a more stable economic and political environment, coupled with an efficient exchange rate regime and a commitment by the Government to promote proactive healthcare services. We also were delighted with the solid perfor- mance in Jordan, where we delivered almost 60% growth in regional revenue. In Nigeria, we continue to make progress in restructuring the business, which has resulted in a very encour- aging improvement in performance. In Sudan, A clear focus of the Group is on proactive healthcare, one which allows us to cater to the changing needs of patients through constant innovation and service offering adaptability, enabling us to provide affordable healthcare services to as many individuals as possible 2020 Annual Report19 the business remains stable amidst a significant political transition. We continue to look at opportunities to expand our global footprint, both organically and by acquisition in both the Middle East and Africa. We are committed to maintaining sound fiscal management and closed the year with a strong balance sheet and an efficient capital structure. In Egypt, the business has benefitted greatly by relocating to the IDH new headquarters in Smart Village on the West side of Cairo. IDH is dedicated to its ESG responsibilities across all our jurisdictions. A clear focus of the Group is on proactive healthcare, one which allows us to cater to the changing needs of patients through constant innovation and service offering adaptability, enabling us to pro- vide affordable healthcare services to as many individuals as possible. This comes parallel to our continued focus on business sustainability to ensure we continue growing in a responsible and risk-free manner. Management continues to regularly update and monitor IDH’s risk matrix and ensure regular checks and balances, providing contingency Business Continuity Processes. We value our loyal and hard-working workforce and con- stantly review their KPIs. Your Company is vigilant in strengthening our IT infrastructure to both provide the highest levels of cyber security, as well as ensuring data privacy. We also remain committed to achieving our dual listing on the Egyptian Stock Exchange, complementary to our existing presence on the London Stock Exchange. We are confident that a larger participation from local institutional and retail investors will provide better liquidity and increase our local visibility in Egypt, where the Company generates the majority of business. I am grateful to the continued dedication and hard work of both our management team and workforce. We are well-positioned to maintain our consistent strong growth track record and trajectory. Finally, I am most grateful for the loyalty and support of all our shareholders. Lord St John of Bletso Chairman Annual Report 2020Integrated Diagnostics Holdings20 Strategic Report // Chief Executive’s Report Chief Executive’s Report In the midst of an unprecedent healthcare and economic crisis, IDH demonstrated once more its ability to adjust to changing market dynam- ics and deliver strong financial and operational results despite the challenges. Throughout 2020, the outbreak of Covid-19 and the imposition of restrictive measures aimed at curbing the spread of the virus posed significant operational difficulties across our footprint, including the temporary closure of certain branches and the reduction of working hours. While this presented the most challenging obstacle in 2020, the year also brought a number of other transitory dif- ficulties including riots in Nigeria and a political transition and severe inflationary environment in Sudan. Nevertheless, we were able to leverage the strength of IDH’s flexible business model, the defensive nature of our industry, and the effectiveness of our proactive Covid-19 response strategy to deliver a commendable performance and a strong 19% growth in revenue for 2020. As a leading provider of healthcare services in the countries where we operate, our number one priority and responsibility throughout the crisis was to protect our people and patients while sup- porting local health authorities in their efforts to curb the pandemic. With the onset of Covid-19, we were quick to rollout comprehensive health, safety, and business continuity protocols to safeguard our people and our operations. Our efforts ranged from providing regular training and communication to staff on the correct pro- tocols for handling suspected Covid-19-positive patients, to providing the necessary protective equipment and special assistance to our staff As a leading provider of healthcare services in the countries where we operate, our number one priority and responsibility throughout the crisis was to protect our people and patients while supporting local health authorities in their efforts to curb the pandemic 2020 Annual Report21 and their families in case of Covid-19-suspected cases. On the business continuity front, we care- fully monitored and managed our cash flow and placed contingencies for possible changes in our cash conversion cycle while taking the necessary precautions to shield our business from potential supply chain disruptions. A full breakdown of our Covid-19 response is available on page 14. Parallel to mitigating the immediate health and operational risks, a key driver of our success in 2020 was IDH’s ability to swiftly adjust its service offering and delivery to adapt to shifting patient needs and market dynamics. In both Egypt and Jordan, IDH began offering PCR testing for Covid-19 and other Covid-19-related tests, while simultaneously ramping up its house call services in both countries to ensure that patients unable or unwilling to visit our branches in person con- tinued to have access to our services. Our Covid- 19-adapted service offering recorded strong and growing patient demand as the year progressed, and helped us largely offset lower volumes follow- ing the closure of branches and the restriction of people’s mobility earlier in the year. Overall, we conducted some 400 thousand PCR tests across both geographies and were able to serve over 800 thousand patients through our house call service, growing its revenue by more than twofold. As such, Covid-19-related testing and our house call services contributed to 24% and 20% (2019: 9%) of consolidated revenue for 2020, respectively. I am pleased to report that parallel to IDH’s suc- cess capturing the surge in demand for Covid- 19-related tests in Egypt and Jordan, we were also able to continue growing our non-Covid-19 busi- ness while pushing forward with our long-term strategic directives. In Nigeria, despite the tem- porary branch closures, we effectively capitalised on Echo-Lab’s increasing brand awareness and service demand to deliver robust growth in both patients served and tests performed. In Sudan, management’s continued ability to raise prices in step with inflation saw the Group successfully off- set lower volumes on account of branch closures throughout the year. Finally, Al Borg Scan inau- gurated its second branch during the year and continues to deliver significant revenue growth with robust profitability. Overall, our large operational scale, wide geo- graphic reach, and prompt response to the difficulties posed by Covid-19 proved vital in sup- porting the remarkable financial and operational results delivered in 2020. Over the past twelve months, IDH recorded impressive top- and bottom-line growth, with expanding margins across the board, and closed 2020 on a more solid footing with a resumption of its historical growth trajectory. Strong Growth and Operational Performance IDH’s ability to adapt its service offering to the changing dynamics and capture a growing share of demand for Covid-19-related services as the year progressed, supported a 19% year-on-year rise in revenues to EGP 2.7 billion for 2020. Top- line growth for the year was partly supported by the generally higher-priced Covid-19-related tests combined with our annual price hikes rolled Annual Report 2020Integrated Diagnostics Holdings22 Strategic Report // Chief Executive’s Report out at the beginning of each year. This more than offset an 11% year-on-year decline in total tests performed, which were weighed down by lower volumes earlier in the year following the imposi- tion of Covid-19-related measures across IDH’s footprint. It is worth noting that while Covid-19 related business made a notable contribution to growth during the year, in the fourth quarter 2020 non-Covid-19 test volumes were on par with the same period in 2019, indicating a strong recovery of our traditional business with the eas- ing of restrictions. This is even more pronounced with patient traffic through our branches which increased by c.23% year-on-year during the fourth quarter. Our growth in 2020 was also driven by IDH’s continued investment in expanding its branch network. Despite the challenging operational environment, we inaugurated 30 new branches in our home market of Egypt and one new branch in Jordan, while closing down two under- performing branches in Nigeria and Sudan. This saw IDH’s total operational branches across our four geographies reach 481 as at year-end 2020, up from 452 a year prior. Moreover, our Mega Lab continues to be the sole CAP-accredited facility in Egypt. Regionally, in Egypt top-line growth was partly supported by our Covid-19-adapted service offering as well as a general normalisation of patient volumes as Covid-19-related restrictions were eased in the second half of the year. Since the very start of the crisis, IDH offered patients promotional packages for a series of Covid- 19-indicative tests, including a bundle of inflam- matory and clotting markers. Starting the second half of the year, the Group began administering PCR testing and was able to complement the government’s efforts in fighting the pandemic as the second wave peaked. Additionally, thanks to our strong brand equity and position as the only CAP-accredited diagnostics service provider in Egypt, the Group was selected by Pure-Health UAE to be the first lab to conduct PCR testing to screen passengers travelling from Egypt. Overall, PCR testing and Covid-19-related packages con- tributed a combined to 21% of Egypt’s top-line for the year. As the year progressed, we were able to reduce the price of both PCR and Covid-19-re- lated tests making them more widely accessible. We also extended special deals and discounts for doctors and the wider medical community to protect the country’s frontline workers. I am also pleased to report that IDH was able to ramp up its house call service in Egypt, conducting up to 4,500 visits per day, in turn growing its con- tribution to Egypt’s revenue from 10% in 2019 to 22% in 2020. Capitalizing on this success, IDH is studying further ways to make the service more efficient and convenient to its growing patient base. Egypt’s revenues were further buoyed by contributions from Al-Borg Scan, IDH radiology venture, which recorded a 76% year-on-year growth in revenue supported by the inaugura- tion of the venture’s second branch in February 2020. Finally, at Wayak, our Egypt-based subsid- iary investing in data mining and artificial intel- ligence which launched in 2019, the company continues to ramp up its operations with orders for medications completed in 2020 reaching 72 thousand orders compared to just 21 thousand orders completed last year. Wayak not only enables IDH to better serve our patients through tailored services which complement our tradi- tional diagnostics offering, but also represents a strategic platform from which to further expand our digital presence and offering, and remain at the forefront of a changing healthcare industry. Our Jordanian operations were the standout performer in 2020, as a 59% year-on-year growth in revenue for the year drove a nearly four 2020 Annual Report23 percentage-point expansion in the country’s contribution to consolidated revenues to 15%. Growth was largely volume driven despite the temporary closure of most of our branches ear- lier in the year, owing to our Covid-19-adapted service offering. Biolab has been at the forefront of PCR testing in Jordan from the very start, with the company being amongst the first two pri- vate labs allowed to perform PCR testing in the country. Throughout the year, Biolab continued to record strong demand for PCR testing with the service contributing to just under half of the country’s top-line for 2020. Jordan’s top-line was further bolstered by the company’s ramped up house call services which in 2020 made up 12% of the country’s revenues, up from 4% in 2019. In Sudan, on top of Covid-19-related restrictions the country continued to witness a significant political transition which unfolded in 2019. Nonetheless, despite lower volumes on account of branch closures in the second quarter of the year, we delivered a 28% year-on-year rise in revenues in local currency terms, driven by higher pricing as management kept in step with the hyperinflationary environment following a currency devaluation and the Sudanese govern- ment’s decision to cut fuel subsidies. In EGP terms, revenue growth was 2% year-on-year reflecting an average SDG/EGP exchange rate of 0.29 in 2020 versus 0.36 in 2019. Strong consolidated revenue growth coupled with a continued focus on driving operational efficiencies and keeping a tight rein on costs saw us deliver margins enhancements at all levels of profitability. Through strict cost discipline, we successfully maintained a stable raw material costs to sales ratio at 18% for the year. In paral- lel, IDH’s direct salaries and wages as a percent of sales declined from 17% in 2019 to 15% in 2020, largely driven by lower salaries in Nigeria following the restructuring of the business. As such, gross profit for the year increased 24% ver- sus 2019, with a two-percentage point expansion in its associated margin to 51%. At the EBITDA level, we surpassed the EGP 1 bil- lion mark for the first time, with EBITDA record- ing a 24% year-on-year rise to EGP 1.2 billion for 2020 with an associated margin of 44% versus 42% last year. Strong revenue growth for the year combined with the Group’s cost management efforts and higher interest income for the year saw IDH recorded a 21% year-on-year increase in net profit to EGP 609 million in 2020, with a stable net profit margin of 23%. Growth in Nigeria In Nigeria, despite the Covid-19-related disrup- tions faced earlier in the year, and an escala- tion of social unrest during the final quarter of 2020, we reported a 20% year-on-year rise in revenues, a particularly remarkable feat in light of Echo-Lab not offering Covid-19-related testing. In local currency terms, growth is even more pronounced with revenues up 38% year- on-year in 2020. Top-line growth came on the back of a 20% rise in both patients served and tests performed for the year, as we capitalized on the increased brand awareness and demand for Echo-Lab’s services. Echo-Lab’s strengthened position and growing reputation in the local market is a direct effect of the successful value-building strategy we have been implementing since we took over opera- tions back in 2018. The strategy aims to revamp the subsidiary’s service offering and branch network while simultaneously streamlining its operations. In the past two years, we have completed the renovation of eight of Echo-Lab’s Annual Report 2020Integrated Diagnostics Holdings24 Strategic Report // Chief Executive’s Report 12 operating branches. We have also installed new radiology equipment, including magnetic resonance imaging (MRI) and computed tomog- raphy scan (CT). In parallel, we continue to optimise Echo-Lab’s service mix by placing addi- tional focus on pushing radiology and pathology services. Finally, we have also completed an internal restructuring exercise that aided in reducing redundancies by centralizing shared functions and streamlining processes, including staff downsizing which has seen us drive down Echo-Lab’s total salary expenses in 2020 by 18% versus 2019. Overall, our efforts are continuing to support improvements in profitability, with the operation’s EBITDA losses narrowing to EGP 7 million in 2020 from EGP 30 million in 2019, and we expect the operation to turn EBITDA positive in the coming year. Expanding Al Borg Scan At Al Borg Scan, the Group’s first full-fledged radiology venture, we are continuing to deliver on our ramp up strategy. Supported by the launch of a second branch in February in 2020, Al Borg Scan reported a 69% and 88% year-on-year rise in tests performed and patients served, respec- tively, during the year. Robust volume growth saw revenues surge 76% year-on-year to EGP 25 million. Strong top-line growth reflected on Al Borg Scan’s EBITDA which increased to EGP 4.8 million in 2020 from EGP 1.8 million last year. Looking ahead, we are expecting to continue widening the venture’s patient base with the launch of a third branch in April 2021. The new facility will be located in another strategic neigh- bourhood of the Greater Cairo area and will play an important role in further strengthening the venture’s brand equity. We are also in the process of completing the necessary modules to obtain ACR (American College of Radiology) accreditation for Al Borg Scan’s branches, a process we expect to conclude by next year and which would make Al Borg Scan the only pro- vider in Egypt to boast the accreditation. Our Commitment to our Stakeholders At IDH, our primary mission is to ensure that everyone across our communities has access to high quality, affordable healthcare and diagnos- tic services, providing them with the tools they need to take charge of their health. To achieve this, we are continuing to make service acces- sibility a priority by continuously rolling out new branches in underserved neighbourhoods while ramping up our digital offering to ensure that we provide access to as many patients as possible. In parallel, we are also working closely with governments and local health authorities to raise awareness of chronic diseases and the steps all individuals can take to live healthier lives. In both Egypt and Jordan, we worked side-by-side with health authorities in 2020 to combat the spread of Covid-19, carrying out more than 2.1 million PCR and Covid- 19-related tests. We also have a longstand- ing track record of being at the forefront of government-organised awareness campaigns, including most recently the c. 2.4 million tests we completed for the 100 Million Healthy Lives campaign in Egypt. Launched in November 2018, the campaign was part of Egypt’s efforts to eradicate Hepatitis C across the country through the testing of asymptomatic people. Similarly, we are currently working to obtain the necessary certifications to take part in the Egyptian government’s Universal Healthcare Insurance (UHI) system which is being rolled out across the entire country. The new UHI framework aims to provide insurance coverage to all Egyptians citizens over the next decade while supporting a general improvement of the 2020 Annual Report25 sector from reducing waiting times to improv- ing the quality of services and medical facilities. In line with our ambitions to safeguard scal- able growth without compromising any of our commitment to the value propositions that are most critical to our various stakeholders, our management team devoted an increased focus on strengthening our environmental, social and governance (ESG) monitoring and compliance frameworks. Since late 2019 and throughout 2020, we have taken diligent steps to constantly improve all aspects of our operations. While I am proud of our efforts thus far, given the complex nature of the operational and business practices required in the health sector, IDH finds a growing need to establish a more assertive road map that draws clear guidelines and methods to monitor, evaluate, and improve its interconnected ESG practices. To guide us through this process, we have acquired the expertise and services of a top-tier ESG consultant who has worked with us to assess our ESG performance, create IDH’s first ESG policy, establish key indicators to monitor and quantify progress, and strengthen our reporting frameworks. This will allow us to better quantify the positive impacts that IDH has on our patients, employees and wider community, establish the required measures to prevent or mitigate future impacts, and further improve wherever possible. To oversee all aspects of our business, since our listing on the London Stock Exchange, we have been governed by a world-class Board of Direc- tors made of up majority independent, non- executive directors and backed up by a robust and constantly enhanced policy framework. Our Board’s guidance throughout 2020 proved invalu- able as we adapted to navigate the unexpected challenges and prepared for a new chapter of growth in a post-Covid-19 world. Dividend Policy and Proposed Dividend In view of the strong cash-generative nature of our business and its asset-light strategy, our dividend policy is to return to shareholders the maximum amount of excess cash after taking careful account of the cash needed to support operations, capital expenditure plans, organic expansion opportuni- ties and potential acquisitions. IDH is pleased to recommend a final dividend of US$ 0.049 per share, or US$ 29.1 million in aggre- gate, to shareholders in respect of the financial year ended 31 December 2020. This represents an increase of 4% compared to a final dividend of US$ 28 million in aggregate in the previous financial year. 2021 Outlook While the Covid-19 crisis and the related opera- tional difficulties are far from over, 2021 offers multiple reasons to be optimistic. First and foremost, the strong fundamentals underpin- ning the future growth of the healthcare industry across our countries of operation remain intact. Moreover, we have witnessed the start of the vac- cination campaign in both Egypt and Jordan in the first quarter of the 2021. Over the past twelve months, we have set the foundations for further growth by penetrating new patient segments, expanding our branch network, and enhancing our service roster and delivery capabilities. In Egypt and Jordan, our Covid-19-adjusted service offering saw us tap into new patient groups with whom we aim to build long-term relationships well beyond the Covid-19 crisis. In parallel, our expansion efforts will be further supported by the roll out of an additional 30 to 35 branches across our home market of Egypt, including a third Al Borg Scan branch to capitalize on rising demand Annual Report 2020Integrated Diagnostics Holdings26 Strategic Report // Chief Executive’s Report We are heading into 2021 with a consistent, clearly defined strategy that will continue to unlock significant growth potential for years to come for our radiology offering. We are also actively assessing new services to add to our roster, to provide patients access to more tests at a single centre and allow doctors to make accurate diagnostics more efficiently. In particular, we are looking to invest in enhancing our genetic testing capabilities to capitalise on the growing demand for these tests. In Sudan, while social unrest, high inflation and a weak SDG continue to pose challenges for the Group, we hope that once the sanctions are offi- cially lifted this will open up important growth opportunities for our operations in the coming years. With the country now open to interna- tional suppliers; the Group should be able to directly import test kits and in turn improve its operational efficiency and profitability. Finally, we are working to continuously improve our operations in Nigeria and to turn EBITDA positive in the coming year as we complete Echo- Lab’s turnaround strategy and continue leverag- ing the growing brand awareness and demand. Nigeria represents a market with significant growth potential for IDH and I am confident that the steps taken since entering the market in 2018 see us well-positioned to capitalise on such opportunities in the coming years. 2020 has once again demonstrated our ability to adapt and overcome even the most difficult challenges supported by the adaptability of our business model, the strength of our brands, and the solidity of our financial position. We are heading into 2021 with a consistent, clearly defined strategy that will continue to unlock 2020 Annual Report27 significant growth potential for years to come. Accordingly, we are again targeting double- digit revenue growth in 2021 and an EBITDA margin of c. 40%. change. I look forward to working with every single one of you to deliver yet another year of strong growth and value creation. Dr. Hend El-Sherbini Chief Executive Officer We are also particularly excited about bring- ing home IDH’s shares for trading on the EGX, one of the region’s leading exchanges and a key entry point for MENA equity and debt capital markets. The dual listing offers Egypt-based investors, who are sometimes unable to access shares in London, an opportunity to capitalise on our Company’s strong growth prospects. I would like to conclude by extending a heart- felt thank you to all our staff for the incredible dedication and adaptability they have shown throughout this year full of uncertainty and Annual Report 2020Integrated Diagnostics Holdings28 Strategic Report // Our Markets Our Markets Key Market Dynamics The mechanics of the healthcare markets in which IDH operates are significantly different from those in many Western healthcare sectors. As opposed to the more institutionalised markets, in the emerging markets where the Group operates, publicly funded and private healthcare systems exist in parallel. This means that patients have substantially more freedom to make healthcare decisions. General practitioners (also referred to as family medicine practitioners or primary care specialists) are rare in these emerging markets and are, accordingly, not the gatekeepers through which patients access primary or specialist care. In emerging markets, a patient may seek medi- cal care either through a hospital outpatient clinic or emergency room, attending a polyclinic or directly seeking the services of a specialist physician. Although physicians ordering diag- nostic testing may recommend that the patient complete these tests at a specific service pro- vider, patients enjoy a high degree of freedom in choosing the service provider they attend based on perceived quality and pricing or on insurance or contract arrangements. Walk-in patients (also referred to as “self-payers”) pay out of pocket in advance of the tests being completed. Patients typically obtain test results in person (often with an accompanying report from a pathologist, geneticist, 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 abil- ity 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 individual practitioners, periodic to gatherings for physicians within a spe- ciality, promotional giveaways as well as discount 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; • Contract Patients: through direct out- reach to insurers and employers. 481 4 Operational Branches, +29 versus 2019 countries of Operation 2020 Annual ReportAnnual Report 2020 Integrated Diagnostics Holdings 29 Barriers to Market Entry Accreditation of Facilities Relationship with Key Stakeholders Attracting contract clients requires accredited, high-quality testing capabilities. Brand Equity and Reputation Market Reach Building a scalable platform requires strong relationship with stakeholders such as physicians, patients and hospitals Patients are loyal to leading brands with a strong track record Fragmented market necessitates a wide geographic presence to allow for broad customer reach. Covid-19 Across IDH’s Markets Following the outbreak of Covid-19, governments across all four of IDH’s countries of operation instituted strict restrictive measures to curb the spread of the virus. These included, curfews, the shuttering of non-essential business, travel bans and restrictions on public gatherings (country-specific measures can be found on pages 30 to 39). While these measures were necessary to protect the health and safety of citizens, they posed severe operational disruptions across IDH’s geographies including complete branch clo- sures for several weeks during the months of April and May. Restrictive measures were progressively eased starting in June 2020, with IDH able to reopen its entire branch network during the third quarter and return to normal operating hours across all territories by late July 2020. To help local authorities contain possible new waves of infections, IDH offers PCR testing for Covid-19 in both Egypt and Jordan. 30 Strategic Report // Our Markets Egypt The Egyptian diagnostic market can be divided into public and private sector infrastructure, with the latter including both labs attached to private hospitals and independent standalone labs (chains and single labs). Most labs in Egypt are concentrated in big cities, with substantial room to increase accessibility across the coun- try’s 27 governorates for greater coverage of the population. The corporate market is emerging as a driver for diagnostic services, as more compa- nies offer healthcare coverage to their employees. Growth in the Egyptian diagnostics industry is supported by the robust market fundamentals including: • A large and growing population of over 100 mil- lion, making Egypt the most populous country in the Middle East North Africa (“MENA”) region; in terms of demographics, it hosts a significant proportion of elderly people. • An increasing prevalence of diseases includ- ing communicable and non-communicable diseases, tropical diseases, and lifestyle dis- eases such as diabetes. • A growing government role to increase aware- ness on the importance of diagnostic testing in preventative healthcare, supporting the growth in laboratory diagnostics as a tool in clinical practice. IDH is in a strong competitive position in the Egyptian diagnostic industry, having created formidable barriers to entry with its 40-year track record, trusted brands, scalable business model and network of 429 branch labs at year- end 2020. 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. Covid-19 Impact and Response The Egyptian government’s response to the ini- tial Covid-19 outbreak in the country included a series of restrictive measures couple of an extensive economic relief plan to help citizens and businesses during the crisis. While all of IDH’s labs remained operational throughout the year, they operated at reduced working hours causing a decline in volumes during the months of April, May and June. Restrictions were relaxed in the second half of the year with all branches returning to normal working hours and patient volumes recording a steady recov- ery. Egypt officially kicked off its vaccination campaign in the final week of January 2021. To mitigate the impacts of restrictive measures on IDH’s business, management promptly rolled out a series of initiatives aimed at sup- porting volumes whilst ensuring that the Egyptian people continued to have access to IDH’s services in full safety and compliance with government directives. These included the ramp up of IDH’s house calls service offered at no extra charge to its patients and the roll out of Covid-19 indicative testing. The Group’s house call service immediately registered strong patient demand, as reflected by the growing contribution to Egypt’s revenue from this ser- vice, which increased to 22% in 2020 from 11% in 2019. IDH’s Covid-19 indicative test offering includes PCR and antibody testing as well as a bundle of inflammatory and clotting markers, 2020 Annual Report31 Cairo, Egypt and in 2020 contributed to 21% of the country’s total revenues. Operational Highlights In Egypt revenues increased 14% year-on-year to EGP 2,173 million for 2020, with the country contributing to 82% of consolidated revenues for the year. Revenue growth in 2020 was sup- ported by IDH’s house call service and Covid- 19-related test offering both of which recorded growing demand from patients as the year pro- gressed. Top-line growth for the year was fully price-driven with volumes adversely impacted by restrictions imposed during the first wave of Covid-19 in the second quarter of the year. Egypt’s revenues were further supported by contributions from Al-Borg Scan, IDH radiology venture, which generated revenue of EGP 25 million in 2020, up 76% year-on-year. Through- out the year, Al Borg Scan’s two branches served 36 thousand patients, up 88% year-on-year, and performed nearly 46 thousand tests during the year, up 69% versus 2019. 12% year-on-year, respectively. When excluding volumes related to the 100 Million Healthy Lives campaign in 2019, the decline in patients served and test performed for 2020 narrows to 5% and 4% year-on-year, respectively. Nationwide cur- fews and lockdowns during the second quarter of 2020 had contributed to lower patient and test volumes for the year. However, the impact of Covid-19-related restrictions was partially mitigated through the increased penetration of IDH’s house call service. EBITDA was EGP 1,041 million in 2020, up a robust 19% year-on-year. EBITDA margin increased to 48% in 2020 from 46% in 2019. The EBITDA increase was supported by the country’s strong top-line growth in the second half of the year which offset a doubtful accounts provision of EGP 35 million (EGP 27 million in 1H2020 and EGP 8 million in 2H2020) related to expected credit losses in accordance with IFRS 9, and the impact of Covid-19 on Egypt’s opera- tions earlier in the year. IDH served 6.3 million patients in Egypt and performed 24.4 million tests, down by 8% and On the operational side, despite the Covid- 19-related difficulties, IDH pressed on with its Annual Report 2020Integrated Diagnostics Holdings32 Strategic Report // Our Markets IDH is in a strong competitive position in the Egyptian diagnostic industry, having created formidable barriers to entry with its 40-year track record, trusted brands, scalable business model and network of 429 branch labs branch rollout plan adding 30 new branches across the country throughout 2020. In Febru- ary, the Group successfully launched a second Al-Borg Scan branch in Cairo and throughout the year continued to work towards the rollout of a third branch which is expected to take place in 2021. In parallel, the Company began completing the necessary modules to obtain ACR (American College of Radiology) accredita- tion for Al Borg Scan’s branches. Earlier in the year, thanks to IDH’s strong brand equity and its position as the only CAP-accredited diagnostics service provider in Egypt, the Group had been selected by Pure-Health UAE to be the first lab to conduct PCR testing to screen passengers travelling from Egypt. The Group’s contractual agreement with Pure Health contributed EGP 62 million to Egypt’s revenues for the year (5% of Egypt’s contract segment revenues), with PCR tests for Covid-19 performed as part of the agreement making up 35% of total PCR tests performed during the year. Wayak, IDH’s Egypt-based subsidiary investing in data mining and artificial intelligence which launched in 2019, recorded revenues of EGP 2.2 million in 2020 versus EGP 632 thousand in 2019. However, the company recorded a negative EBITDA as it’s still in the early development stage. Egypt Key Highlights 429 Branches as at year-end 2020, +30 versus 2019 2,173 EGP/MN Revenues in 2020, up 14% y-o-y 81.8% Contribution to consolidated revenues in 2020 2020 Annual Report33 Annual Report 2020Integrated Diagnostics Holdings34 Strategic Report // Our Markets Jordan Jordan has one of the most modern health care infrastructures in the Middle East, with services highly concentrated in Amman and c. 70% of Jor- danians having medical insurance. Over the years, the strong fundamentals of the Jordanian market have allowed IDH to deliver consistent growth despite strict price regulation on medical labo- ratories with a set price list that has not changed since its issuance by the Jordanian Ministry of Health in 2008. Biolab has thus focused on driving volume growth in the market, deploying strategies to expand its services portfolio and packages that encourage increased testing per patient. Unlike Al Borg and Al Mokhtabar in Egypt, Biolab does not operate a Hub, Spoke and Spike business model. Whilst Biolab’s 20 central labs perform many of the 1,000+ pathology tests offered, four that are considered specialty labs perform particular types of tests including, but not limited to, haematology, endocrinol- ogy, immunochemistry, parasitology, oncology, transfusion medicine, molecular genetics and antenatal diagnostics and gene sequencing. Furthermore, Biolab does not share purchasing, supply and logistics, IT, marketing or sales func- tions with its Egyptian parent company. During 2020, Biolab followed through with its agreement with Georgia Healthcare Group PLC (GHG) to establish a Mega Laboratory (Mega Lab) in the Georgian capital of Tbilisi. The 7,500 square meter, multi-disciplinary Mega Lab is the largest of its kind in Georgia. In exchange for providing information technology and man- agement services, Biolab holds an 8.025% equity stake in the Mega Lab project and receives annual IT support services fees for a period of 10 years and annual management service fees for a period of two years. Due to the Covid-19 pan- demic and related restrictions on international fights – affecting planned audit visits, logistics and external quality control – an agreement has been reached with GHG to postpone the imple- mentation of the management agreement and its scheduled payments to 2021. On the technology front, the Mega Lab is integrat- ing with GHG’s network, with 49 locations having completed the technology transfer, including the installation of the lab’s Laboratory Information Managements Systems (LIMS), out of a total of 76 locations or a 65% completion rate. Initially serv- ing GHG’s network, that is expected to utilize one- third of the facility’s capacity, the Mega Lab plans to develop a B2B network of healthcare providers outside the Group to reach full utilization. Covid-19 Impact and Response To curb the spread of the Covid-19 virus, the Jordanian government ordered the closure of all educational institutions, governmental and private entities and introduced a curfew. From the end of March to the last week of April, out of Biolab’s 19 branches, only two were allowed to remain open, one to conduct Covid-19 tests and the other located in Abdel Hadi hospital. Biolab’s branches were allowed to return to normal working hours in early June. During the fourth quarter, the government imposed a series of new Covid-19-related restrictions. However, these did not have material impacts on Biolab’s operations. In early January 2021, the government began the gradual easing of these measures following a decline in new infections across the country. Biolab has been at the forefront of PCR testing for Covid-19 since the very start of the crisis, with the company recording strong demand for the service throughout the entire year. In 2020, PCR testing for Covid-19 contributed to 46% of 2020 Annual Report35 Amman, Jordan total revenues from IDH’s Jordanian operations. In parallel, Biolab also worked to strengthen and expand its house call services. This not only allows the company to provide its services to people unable or unwilling to visit physical branches but will also help the company mitigate the impacts of possible new restrictive measures. Operational Highlights In Jordan, revenue for 2020 increased 59% year- on-year to EGP 409 million, with the country’s contribution to consolidated revenue increas- ing to 15% in 2020 from 12% in 2019. In JOD terms, revenue increased 69% year-on-year in 2020 supported by robust demand for PCR test- ing for Covid-19 which drove a 77% year-on-year and 9% year-on-year rise in patients served and tests performed, respectively. In 2020, PCR test- ing for Covid-19 made up 46% of the country’s top-line and contributed to 13% of total tests performed during the year. IDH’s Jordanian operations recorded a 44% year- on-year rise in EBITDA to EGP 130 million in 2020 on the back of strong revenue growth for the year. In local currency terms, EBITDA grew 53% year-on-year in 2020. EBITDA margin recorded 32% in 2020 versus 35% in the previous year. Jordan Key Highlights 20 Branches as at year-end 2020 409 EGP/MN Revenues in 2020, up 59% y-o-y 15.4% Contribution to consolidated revenues in 2020 Annual Report 2020Integrated Diagnostics Holdings36 Strategic Report // Our Markets Nigeria in Nigeria commenced IDH’s operations in February 2018 following its acquisition of Eagle Eye Echo-Scan Limited (“Echo-Scan”) through a strategic alliance with Man Capital LLC (“Man Capital”), the London-based investment arm of the Mansour Group. IDH and Man Capital estab- lished Dynasty Holding Group (“Dynasty”), which is 51% owned and controlled by IDH and 49% by Man Capital. In turn, Dynasty partnered with the International Finance Corporation (“IFC”) and invested in Echo-Scan (since rebranded as Echo-Lab) to capture the opportunity present in the country’s large medical diagnostics industry, valued at c. US$ 140 million in 2017 and projected to reach US$ 1 billion by 20251 . Whilst also highly fragmented, the Nigeria diagnostics industry can be broadly divided into three groups. The largest is independent standalone labs (chains and single labs), followed by public and private hospitals. Since acquisition, the Group rolled out an integra- tion and value-building plan for the expansion of Echo-Lab’s branch network, renovating existing branches, procuring state-of-the-art equip- ment and growing the lab’s service offerings and enhancing its quality standards. The process of integrating Echo-Lab entails realigning its existing labs into IDH’s “Hub, Spoke and Spike” business model to form B-labs (“Spokes” capable of processing routine tests) in Nigeria’s three major cities of Abuja, Lagos and Benin; and C-labs (“Spikes” functioning as collection and basic test centres) in less populated areas. Covid-19 Impact and Response In late March, the Nigerian government intro- duced extensive restrictive measures including 1Source: Boston Consulting Group complete lockdowns in Abuja and Lagos. Branches across the country were allowed to continue oper- ating at reduced work hours. Starting in early May, the government began the progressive easing of restrictive measures with all branches returning to normal work hours by early June. Following a wave of protests and civil unrest, a 24-hour curfew was imposed in the Lagos, Edo and Delta states from October 19 until October 23 in response to protests. This caused the closure of all four Lagos branches as well as the Benin branch and Asaba Main branch. All branches have since returned to normal operational hours. Operational Highlights Revenue from Nigeria recorded EGP 36 million in 2020, up 20% year-on-year. In local currency terms, revenues were up 38% year-on-year in 2020 on the back of a 20% year-on-year increase in both patients served and tests performed for the year. The strong rise in volumes comes as IDH continues to capitalise on the increased brand awareness and demand for its services in Nigeria, and despite the Covid-19-related disruptions faced earlier in the year. As part of the Group’s efforts to restructure the business in Nigeria, Echo-Lab hired Dr. Alok Bhatia, an industry veteran, as CEO in February 2021. EBITDA losses narrowed significantly to EGP 7 million in 2020 from the negative EGP 30 million recorded in 2019. Decreased losses were due to strong revenue growth for the year and lower salaries following the restructuring that took place during the second half of 2019. 2020 Annual Report37 Lagos, Nigeria Nigeria Key Highlights 12 Branches as at year-end 2020 36 EGP/MN Revenues in 2020, up 20% y-o-y 1.4% Contribution to consolidated revenues in 2020 Since acquisition, the Group rolled out an integration and value-building plan for the expansion of Echo-Lab’s branch network, renovating existing branches, procuring state-of-the-art equipment and growing the lab’s service offerings and enhancing its quality standards Annual Report 2020Integrated Diagnostics Holdings38 Strategic Report // Our Markets Sudan Sudan’s economic backdrop continued to be affected by the social conflict and civil unrest which has endured since the 2011 secession of South Sudan, and subsequent loss of c.75% of oil production. These events have hindered the country’s economic growth, deprived it of its major foreign currency sources which culminated in a severe currency devaluation in 2018 with the Sudanese Pound lose c.85% of its value. During 2019, economic hardships and political unrest led to month-long protests early in the year and the removal of long-time president Omar Al-Bashir in April 2019. This was followed by the signing of a power-sharing agreement signed between the military and an opposition coalition in July 2019 which brought about a fragile stability. Despite this, in 2020 Sudan continued to face social unrest as protest- ers demanded faster reforms and the delivery of promises made in 2019 as part of the country’s transitional period. As of year-end 2020, the situ- ation remains volatile and a return to civil unrest combined with a weak Sudanese Dollar (SDG) could adversely affect IDH’s business. In December 2020 the US government officially removed Sudan from its States Sponsors of Terrorism list. The change in the country’s designation is expected to allow Sudan to have access to international funds and investment, including the International Monetary Fund, pav- ing the way for the country’s economic growth. The lifting of sanctions also opens up important growth opportunities for IDH’s operations in the coming years. With the country now open to international suppliers; the Group will be able to directly import test kits and in turn improve its operational efficiency and profitability. IDH operates under two brand names in Sudan, Ultralab and Al Mokhtabar Sudan. Al Borg acquired a majority interest in Ultralab in 2011, whilst Al Mokhtabar Sudan had been established in 2010 prior to the Group’s acquisition of Al Mokhtabar in Egypt. Covid-19 Impact and Response The initial response of the Sudanese govern- ment included the closure of schools, religious institutes and polyclinics as well as a national night-time curfew. Stricter measures, including a complete lockdown in Khartoum, were imposed in April and May which led to the closure of several of the Group’s branches and the reduc- tion of work hours for branches which remained operational. In parallel, in July 2020 Sudan's government announced it would devalue its cur- rency and cut fuel subsidies due to a huge budget deficit and an economic crisis aggravated by the coronavirus pandemic. Restrictive measures were progressively eased during the third quar- ter of 2020, will all 21 of the Group’s branches allowed to reopen normally in late July. Operational Highlights The Group’s Sudanese operations recorded a 2% year-on-year increase in revenue to EGP 38 mil- lion in 2020, impacted by the SDG devaluation. In SDG terms, revenue reported a 28% year-on-year rise for the year due to higher pricing as manage- ment kept in step with inflationary pressures. This helped offset a decline in volumes following 2020 Annual Report39 Khartoum, Sudan imposition of Covid-19-related restric- the tive measures and the closure of the Group’s branches earlier in the year. Sudan recorded an EBITDA of EGP 6 million in 2020, down 18% year-on-year with an EBITDA margin of 16% compared to 20% last year. EBITDA for the year was impacted by the SDG devaluation. In SDG terms, EBITDA was up 2% year-on-year to SDG 21 million in 2020 as higher pricing offset branch closures earlier in the year. With the country now open to international suppliers; the Group will be able to directly import test kits and in turn improve its operational efficiency and profitability Sudan Key Highlights 20 Branches as at year-end 2020 38 EGP/MN Revenues in 2020, up 2% y-o-y 1.4% Contribution to consolidated revenues in 2020 Annual Report 2020Integrated Diagnostics Holdings40 Strategic Report // Our Brands Our Brands IDH’s core brands include Al Mokhtabar, Al Borg and Al Borg Scan in Egypt, Biolab in Jordan, Ultralab and Al Mokhtabar Sudan in Sudan, and Echo-Lab in Nigeria. In 2019, IDH launched Wayak, an Egypt-based subsidiary which utilizes data analytics to capitalise on IDH’s patient database. Al Mokhtabar – Egypt Al Mokhtabar has been operating for almost 40 years with its roots dat- ing back to 1979 when Dr. Moamena Kamel, Professor of Immunology at Cairo University, founded her first lab “MK Lab”. MK Lab was later merged with Al Mokhtabar in 2004 and has since built a reputation as a quality care provider with a portfolio of over 1,200 clinical analy- ses in the areas of immunology, haematology/coagulation, clinical chemistry, parasitology, microbiology/infectious diseases, toxicol- ogy, cytology, surgical pathology, flowcytometry, molecular biology and cytogenetics. As of 31 December 2020, Al Mokhtabar operated a network of 230 branches across Egypt and has served over 3.6 million patients who received 14 million tests. Al Mokhtabar Key Highlights 230 Operational Branches as at 31 December 2020 3.6mn Patients Served in 2020 13.9mn Tests Performed in 2020 Al Borg Laboratories – Egypt Founded in 1991, Al Borg Laboratories is the first medical labora- tory company in the Middle East to implement an efficient Hub, Spoke and Spike business model. This has seen it quickly grow to become the largest privately owned laboratory group in the region offering an extensive list of more than 2,000 tests, covering the whole spectrum of conventional and non-conventional medical- testing. Al Borg caters to outpatient walk-in customers as well as contract, insurance and lab-to-lab customers. Al Borg Laboratories Key Highlights 196 Operational Branches as at 31 December 2020 2.6mn Patients Served in 2020 10.5mn Tests Performed in 2020 2020 Annual Report41 IDH’s core brands include Al Borg, Al Borg Scan, Al Mokhtabar and Wayak in Egypt, Biolab in Jordan, Ultralab and Al Mokhtabar Sudan in Sudan, and Echo-Lab in Nigeria Al Borg Scan – Egypt IDH established Al Borg Scan in 2018 to capitalise on the growth opportunities presented by Egypt’s high-value radiology space. Offering a full range of radiology services, Al Borg Scan leverages Al Borg’s brand equity and its large customer base to consolidate its position as the Egyptian market’s premium provider of medi- cal imaging. The company currently operates two state-of-the art facilities in Egypt and is actively working towards the rollout of its third branch. Al Borg Scan draws on the latest technology to offer the highest quality in MRI, CT, ultrasound, x-ray, mammogram and cath lab services. Led by some of the Egypt’s most capable and recognized radiologists, Al Borg Scan is a key component of IDH’s strategy to build a national brand in Egypt. Al Borg Scan Key Highlights 2 Operational Branches as at 31 December 2020 36k Patients Served in 2020 46K Tests Performed in 2020 Wayak – Egypt Wayak was launched in 2019 to invest in data mining and artificial intelligence plat- forms and capitalise on IDH’s patient database to capture new growth opportunities in the healthcare management space. With a database covering more than 13 million patients, of which 10% suffer from chronic diseases, Wayak will allow IDH to build electronic medical records of patients and better cater to their needs with innovative patient healthcare profiles, home-delivery of medications, diagnostics testing remind- ers, referrals to service providers under the IDH network with discounted prices as well as follow-up services. Annual Report 2020Integrated Diagnostics Holdings42 Strategic Report // Our Brands Biolab – Jordan Biolab was established in 2001 as IDH looked to create a com- pany to lead Jordan’s private medical laboratory space. Using state-of-the-art medical technology and a nationwide network of 19 branches, Biolab offers a suite of over 1,000 diagnostic tests to a customer base including patients, physicians, hospitals and referring clinical laboratories. Biolab is accredited by the Jorda- nian Ministry of Health (“MOH”), with two branches accredited with ISO 15189 and Joint Commission International ( JCI) and one branch receiving CAP accreditation in 2018. Biolab Key Highlights 20 Operational Branches as at 31 December 2020 550K Patients Served in 2020 2.0mn Tests Performed in 2020 Echo-Lab – Nigeria IDH acquired Nigerian medical diagnostics firm Echo-Lab (previ- ously Echo-Scan) in 2018 as part of the Group’s wider geographic expansion strategy. Through the acquisition IDH broadened its exposure to fragmented and underpenetrated Nigerian market, where it can leverage advantageous market conditions similar to those prevailing in its other geographies. Echo-Lab offers a com- prehensive suite of pathology and radiology diagnostic testing, consolidating different test categories under the same roof. Echo-Lab Key Highlights 12 Operational Branches as at 31 December 2020 131K Patients Served in 2020 215K Tests Performed in 2020 2020 Annual Report43 UltraLab – Sudan Ultralab was founded in 2008 and has quickly grown into Sudan’s largest and most respected laboratory chain. Ultralab operated 12 laboratories at year-end 2020, including 9 independent labs and 3 hospital / clinical centre-based labs. The company enjoys broad geographic exposure in Sudan, with Khartoum, Om Dor- man and Port Sudan. UltraLab Key Highlights 12 Operational Branches as at 31 December 2020 109K Patients Served in 2020 338K Tests Performed in 2020 Al Mokhtabar Sudan – Sudan Al Mokhtabar Sudan was established in 2010 prior to IDH’s acqui- sition of Al Mokhtabar in Egypt. The company offers a comparable suite of diagnostic services as that provided by UltraLab. Both of IDH’s Sudanese subsidiaries adhere to the Group’s proven Hub, Spoke and Spike model, mirroring the approach employed by Al Borg and Al Mokhtabar in Egypt. Al Mokhtabar Sudan-Lab Key Highlights 8 Operational Branches as at 31 December 2020 22K Patients Served in 2020 71K Tests Performed in 2020 Annual Report 2020Integrated Diagnostics Holdings44 Strategic Report // Our Services Our Services Through IDH’s brands, the Group offers over 2,000 internationally accredited pathology tests ranging from basic blood glucose tests for diabetes to advanced molecular testing for genetic disorders. Additionally, IDH offers the full suite of radiology services through Al Borg Scan in Egypt and Echo-Lab in Nigeria. IDH also leverages its patient database and wide geographic reach to build electronic medical records and offer its patients tailored services – home-delivery of medications, diagnostics testing reminders and referrals to service providers – under its subsidiary Wayak. Pathology IDH’s comprehensive pathology product portfolio covers immunology, haematology, endocri- nology, clinical chemistry, molecular biology, cytogenetics, histopathology and microbiology. Immunology Microbiology Haematology Endocrinology Clinical Chemistry Molecular Biology Cytogenetics Histopathology Radiology Radiology IDH offers the full suite of radiology services through Al Borg Scan in Egypt and Echo-Lab in Nigeria, including but not limited to magnetic resonance imaging (MRI), computed tomogra- phy (CT), ultrasound, x-ray, mammograms and cath lab facilities. Healthcare Management Services Wayak was launched in 2019 to capitalize on the Group’s patient database and capture new growth opportunities in the healthcare management space and offer targeted services to its customers. With a database covering more than 13 million patients, of which c.10% suffer from chronic diseases, the Egypt-based subsidiary invests in data mining and artificial intelligence plat- forms to build electronic medical records of patients and better cater to their needs with new value propositions. These include build- ing patient healthcare profiles, home-delivery of medications, diagnostics testing reminders, referrals to service providers under IDH’s net- work with discounted prices as well as follow- up services, amongst others. 2020 Annual Report45 Annual Report 2020Integrated Diagnostics Holdings46 Strategic Report // Our Services Internationally-Accredited Test Portfolio Across its brand portfolio, IDH maintains international-quality accreditations with a stringent internal audit process to ensure best-in-class service. ISO ISO accreditation requires an initial inspection of laboratory 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 Accredita- tion 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 stan- dards include both management and technical requirements. The Company’s ISO 9001:2008 accreditations for both Al Mokhtabar and Al Borg passed accreditation reviews in December 2020 and is valid for three years. College of American Pathologists (CAP) Unlike ISO accreditation, CAP certification is awarded to individual labs, rather than the Group’s operations as a whole and is widely considered the leader in laboratory quality assurance globally. The Group’s central Mega Lab in Cairo, which was inau- gurated in 2015 replacing two smaller, independent “A-labs” one of which was also CAP certified, received its CAP certification in February 2018 and is renewable every two years. This sees IDH currently operate the only laboratory in Egypt to receive this distinguished certification, which is scheduled for renewal in October 2021. 2020 Annual Report47 Quality Assurance IDH’s quality assurance programme ensures that all internal diagnostic processes, lab testing procedures and results analyses are accurate. The quality assurance pro- gram ensures that all the standards of the CAP and ISO accreditations are met by inspecting hardware and equipment, ensuring compliance with procedure manuals, inspecting the accuracy of results and administering competency assessments for employees. The internal audit team also maintains a specific audit checklist for the basic and routine tests conducted in the Group’s C-labs, including conformity of process; testing the competency of employees through oral, observational, practical and written tests; and conducting managerial audits to assess the labs’ management and administrative efficiency. Employee Training The Group views education as an essential means of ensuring quality across its labo- ratories. To help develop the skills of employees, IDH has a dedicated training facil- ity in Cairo with four training laboratories. In 2020, the training team was composed of one manager, one medical consultant, two supervisors, one administrator and six full-time training specialists. The centre provides training to around 630 employees per month, including doctors, chemists, receptionists, branch and area managers, sales personnel and administrators. The training curriculum is determined based on performance KPIs, internal audit reports, management reviews, competency assess- ment reports and analysis of customer feedback and complaints. IDH’s employee training is structured along four modules: new employee training, competency- based, need-based and practical re-training. Annual Report 2020Integrated Diagnostics Holdings48 Strategic Report // Competitive Strengths & Growth Strategy Competitive Strengths & Growth Strategy IDH’s established market position and flexible business model coupled with its scalable platform and experienced management provide the necessary tools and resilience to deliver on the Group’s ambitious long-term growth strategy while weathering short-term challenges across its markets. Competitive Strengths Exposure to resilient markets with favourable dynamics Strong market position with over three decades of industry experience The Group operates in markets characterised by strong structural growth drivers, with generally under-penetrated and underserved diagnostic services markets. The counter-cyclical nature of the diagnostic and healthcare industries has allowed the Group to remain resilient in the face of economic and political headwinds in the regions where it operates. This is best exempli- fied by IDH’s consistent double-digit revenue growth in recent years and, more recently, by its ability to deliver exceptional top- and bottom- line growth despite the unprecedented difficul- ties faced in 2020. Across its markets of operation, IDH enjoys high barriers to entry (as detailed in Our Markets on page 28). This provides significant advantages for players with an establish market position. With close to four decades of industry experi- ence, IDH’s subsidiaries have built a strong brand equity and reputation, in turn earning the trust and loyalty of its patients. Additionally, IDH’s internationally accredited facilities are essential to attracting contract clients, while its scalable business model and relationships with key stakeholders extend its reach in a frag- mented market. 2020 Annual Report49 Scalable asset-light business model Strong balance sheet and cash generation capacity IDH’s Hub, Spoke and Spike business model provides the Group with an efficient low-capital intensive platform for organic expansion over a wide geographic footprint. The Group’s cen- tralised Mega Lab with modern, high-capacity equipment and significant throughput allows IDH to roll-out asset-light, plug and play C labs for sample collection and simple testing. Safety and testing procedures are continuously enhanced as more tests are performed using the advanced diagnostic tools and state-of-the-art technology installed at IDH’s Mega Lab. The Group’s asset-light model, which translates into minimal borrowing and significant strate- gic flexibility, enables IDH to maintain a strong financial position with an unlevered balance sheet. Meanwhile, core profitability remains consistently strong, with the Group delivering EBITDA margins in excess of 40% and main- taining healthy cash balances irrespective of the challenging operating conditions faced throughout the years. Experienced and entrepreneurial management The Group has a highly experienced management team with several decades of healthcare experi- ence. Furthermore, IDH’s world-class Board of Directors brings a wealth of healthcare, MENA region and investment experience to the table. 27.1mn Tests performed in 2020 Annual Report 2020Integrated Diagnostics Holdings50 Strategic Report // Competitive Strengths & Growth Strategy Long Term Growth Strategy IDH leverages its competitive strengthens to capture substantial opportunities and deliver on a four-pillar growth strategy focused on 1) the continued expansion of its customer base; (2) the expansion of its service portfolio to increase tests per patient; (3) the penetration of new geographic markets through selective, value-accretive acqui- sitions; and (4) the introduction of new medical services by leveraging the Group’s network and reputable brand position. Expand Customer Reach Increase Tests per Patient The Group’s state-of-the-art Mega Lab expands its ability to perform higher volumes and more complex tests not offered in other labs, thus broadening its portfolio. Meanwhile, IDH also bundles testing services into discounted health packages offered to existing customers, further driving volume growth and revenue per patient. The Group is also actively engaged in advertis- ing campaigns to raise awareness of particular diseases and the importance of being tested, as well as to educate people on lifestyle diseases, such as diabetes and high cholesterol, and the need to undergo frequent testing. Such efforts have successfully driven volume growth in IDH, bolstering average test and revenue per patient. IDH is constantly looking for opportunities to increase accessibility for patients as it seeks to capitalise on the favourable market dynamics and take full advantage of the strong demand for private healthcare services across its geographic footprint. IDH’s scalable, low is well- capital-intensive business model suited to support the Group’s efforts on this front as it allows for the quick and efficient rollout of new labs and geographic expansion in the Middle East and Africa. Furthermore, the Group offers an array of complementary services, such as house calls, e-services, and results delivery, which make its regular service offerings easier to use for both existing and prospective patients. IDH’s house call services have become increasingly popular in 2020 in light of the ongoing Covid-19 pandemic, representing 20% of consolidated revenues in the year compared to around 9% in 2019 as the Company ramped up the service to perform circa 4,500 house visits per day in Egypt. 2020 Annual Report51 30 7.1mn New branches in 2020 Patients served in 2020 Geographic Expansion IDH is constantly on the lookout for new acqui- sition opportunities, focusing on highly frag- mented and underpenetrated markets in the Middle East and Africa. The Group’s business model is well-suited to capitalise on healthcare and consumer trends prevalent in these regions. Leveraging the strength of its balance sheet, IDH delivers on this strategic objective through value-accretive acquisitions, including that of Echo-Lab of Nigeria in 2018. Diversify into New Medical Services As the medical testing market in Egypt evolves 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 brand equity, experience, and patient following ideally position it to pursue opportunities in adjacent markets. To this end, the Group marked its expansion into the high-value radiology segment in October 2018 through Al Borg Scan. This was soon followed by the launch of the Company’s Egypt-based subsidiary Wayak. The new venture aims invest in artificial intelligence and data mining to provide tailored healthcare manage- ment services to its patients, increasing loyalty and retention rates. Annual Report 2020Integrated Diagnostics Holdings52 Strategic Report // Principle Risk, Uncertainties & Their Mitigation Principle Risk, Uncertainties & Their Mitigation As in any corporation, IDH has exposure to risks and uncertainties that may adversely affect its performance. IDH Chairman Lord St John of Bletso has emphasised that ownership of the risk matrix is sufficiently important to the Group’s long-term success that it must be equally shared by the Board and senior management. While no system can mitigate every risk — and some risks, as at the country level, are largely without potential mitigants — the Group has in place processes, procedures and baseline assumptions that provide mitigation. The Board and senior management agree that the principal risks and uncertainties facing the Group include: 2020 Annual Report53 Specific Risk Mitigation Country risk — Political & Security Egypt and the wider MENA region, where the Group operates, have experienced political volatility and there remains a risk of occasional civil disorder. Sudan is currently undergoing a significant political transition which began in 2019 when severe political unrest and protests led the military to remove long-time president Omar Al-Bashir. Fol- lowing his removal, the military signed power-sharing agreement with an opposition coalition in July 2019, with the aim of eventu- ally transferring power to a civilian government, nonetheless, the country continued to witness protest throughout 2020 as citizens demanded faster reform. The situation remains volatile and a return to civil unrest could adversely affect IDH’s business. See mitigants for “Country/regional risk — Economic,” below. While nationwide protests do affect patient and test volumes at IDH, the diagnostic industry is relatively immune given the inelas- tic demand for healthcare services. Additionally, IDH has been successful in offsetting the effect of lower volumes due to protest with higher pricing, and in both 2019 and 2020 the geography recorded year-on-year revenue growth in EGP terms. The current power-sharing agreement and subsequent formation of a sovereign council composed of civilian and military repre- sentatives will see the country through a three-year transitional period after which elections are to be held. In December 2020, US removed Sudan from its States Sponsors of Terrorism list. The change in the country’s designation is expected to allow Sudan to have access to international funds and invest- ment, including the International Monetary Fund, paving the way for the country’s economic growth. Nigeria is facing security challenges on several fronts, including re-emerging ethnic tensions and resurgent attacks by Islamist militants in the northeast. Against the backdrop of a sluggish economy and the slow implementation of reforms, mounting discontent could translate into further social unrest. Regarding other operating risks, including but not limited to legal and compliance risks, IDH will apply the same rigorous 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. Tensions spiked in October 2020 as thousands of people took to the streets to protest against police brutality in the country. The government responded by dissolving the special division known as SARS (Special Anti-Robbery Squad). In late 2020 and early 2021, protests have decreased significantly across the country. Annual Report 2020Integrated Diagnostics Holdings54 Strategic Report // Principle Risk, Uncertainties & Their Mitigation Specific Risk Mitigation Country/regional risk — Economic The Group is subject to the economic conditions of Egypt specifi- cally and, to a lesser extent, those of the wider MENA region. Egypt accounted for c. 82% of our revenues in 2020 (2019: 85%). High inflation in Egypt: According to the Central Bank of Egypt, headline inflation recorded 5.4% in December 2020, continuing a declining trend from 7.1% in December 2019, 21.6% in January 2018 and a record high of c.35% in July 2017 following the November 2016 devaluation of the Egyptian Pound and subsequent energy subsidy cuts. Meanwhile core inflation that strips out volatile items came in at 3.8% in December 2020, compared to 2.4% in December 2019 and 8.3% in December 2018. High Inflation in Sudan: Following substantial currency devalua- tion in Sudan during 2018 the currency lost 85% of its value. In 2019, the Sudanese Pound’s official rate versus the US Dollar remained relatively stable at 45.11 as 31 December according to the Central Bank of Sudan. However, in July 2020 the Sudanese government announced it would devalue its currency and cut fuel subsidies due to a huge budget deficit and an economic crisis aggravated by the coronavirus pandemic. The currency reached an official rate against the US Dollar of 55.25 in early March 2020 (140 on the parallel market). This saw annual inflation continue to rise, hitting a new record peak of 212.3% in September of 2020 according to Trading Economics. Nigeria: Capital controls could make profit repatriation difficult in the short term. Nigeria: Depreciation of the naira would make imported products and raw materials more expensive and would reduce Nigeria’s contribution to consolidated Company revenues. Whilst capital controls have helped the official exchange converge with the black- market rate, the central bank has yet to allow the naira to float freely. 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 dif- ficult operating conditions in 2016 and in 2020. 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 sustainable path to growth and fiscal consolidation. According to Egypt’s Ministry of Planning and Administrative Reform, as of the fiscal year ended June 2020 Egypt recorded GDP growth of 3.6%, while the budget deficit as a percentage of GDP had declined to 7.8 compared to 8.4% in the fiscal year ended June 2019. The Group’s contemplated acquisitions outside of Egypt would also mitigate the Egypt-specific country risk over time. The Group is closely monitoring the economic and political situa- tion in Sudan and has implemented several price increases to keep instep with inflationary pressures. IDH is also working to limit expatriate salaries and foreign currency needs by increasing depen- dence on local hires. In Nigeria, until currency exchange policy is clarified and there is greater visibility regarding profit repatriation, IDH expects to rein- vest 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 suppliers to procure kits at competitive prices. 2020 Annual Report55 Specific Risk Mitigation COVID-19 The ongoing Covid-19 pandemic presents business continuity risks to IDH including, but not limited to, supply-chain disruptions, government enforced quaran- tines and their effect IDH business operations and risk of infection among IDH employees. Government-imposed curfews and lockdowns have also negatively impacted the Group’s operations leading to the full closure or to the decrease of working hours for branches across the Group’s geographies. While as at 31 December 2020 all of IDH’s branches were operating normally, new restric- tions could be imposed in the coming months in light of potential resurgences of Covid-19-positive cases across IDH’s countries of operation. IDH is in continual dialogue with key suppliers to gauge the risk associated with a shortage of materials and is yet to identify a weakness. The Group is ready to build inven- tory of key test kits as necessary, should supply disrup- tions begin to emerge. All of IDH staff use appropriate protective equipment when interacting with patients, including those suspected of having covid-19 or any other infectious disease. IDH is currently administering PCR testing for Covid-19 in Egypt and Jordan. All of the Group’s employees are subject to regular com- munications reminding them that they may not report to work if they have symptoms of a Covid-19 infection. To limit risk for headquarter staff, IDH has identified several head-office functions that can be performed from home and has implemented a shift policy to avoid overcrowding in its main offices. In parallel, the Group is regularly reviewing its disaster recovery and business continuity policies to ensure that it is well prepared for any eventuality. investment, Covid-19 global economic impact: Nationwide lock- downs and social distancing measures enacted across the world beginning April 2020 have led to lower con- sumption, industrial production, retail sales, purchasing managers’ indices for the manufactur- ing and service sectors, and higher unemployment rates. According to the International Monetary Fund (IMF), the Covid-19 pandemic drove a 3.5% contraction in global growth, which could continue in 2021 if the pandemic is not effectively contained. The development and regulatory approval of several vaccine approvals in late 2020 and early 2021 has raised hopes of a turnaround in the pandemic, with the IMF now projecting the global economy to grow by 5.5% in 2021 and 4.2% in 2022. According to the IMG, the strength of the recovery is projected to vary significantly across countries, depending on access to medical inter- ventions, effectiveness of policy support, exposure to cross-country spillovers, and structural characteristics entering the crisis. Annual Report 2020Integrated Diagnostics Holdings56 Strategic Report // Principle Risk, Uncertainties & Their Mitigation Specific Risk Mitigation Foreign currency and banking regulation risk Foreign currency risk: The Group is exposed to foreign currency risk on the cost side of the business. The major- ity 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. Only 12% of IDH’s cost of supplies (c.2% of revenues) are payable in US dollars, minimising the Group’s exposure to foreign exchange (FX) scarcity and in part, the volatil- ity of the Egyptian pound. In 2020, IDH recorded a net foreign exchange loss/gain of EGP 12.6 million, largely stable compared to a net foreign exchange loss of EGP 15.5 million in 2019. 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 2020 at mid- market CBE rate of 15.73 per US$1 against an opening rate of EGP 15.04. Throughout 2020, the Central Bank of Egypt (CBE) implemented interest rate cuts for a total of 400 bps. This, however, did not have significant adverse impacts on the EGP-USD exchange rate especially following the US Federal Reserve decision to cut its benchmark rate to zero in response to the Covid-19-related economic crisis. The Egyptian pound was valued at 15.73 to US$ 1.00 as of 3 February 2021. 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. Following a decline in foreign reserves in early 2020, the CBE’s foreign currency reserves have continued to climb steadily to reach US$ 40 billion in December 2020. In light of the sustained recovery, the return of capital controls previously implemented following the pound’s devaluation is unlikely. Whilst foreign exchange is increasingly available fol- lowing 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 because of economic and other factors. Inflation of Sudan has risen to one of the highest levels in the world and the country slipped into hyperinflation. Over the past two years, management was able to raise prices in Sudan with more than 100% in a trial to miti- gate the hyperinflation. 2020 Annual Report57 Specific Risk Mitigation Supplier risk IDH faces the risk of suppliers re-opening negotiations in the face of cost pressure owing to the prevailing infla- tionary environment and/or a possible albeit limited devaluation risk in 2020. IDH’s supplier risk is concentrated amongst three key suppliers — Siemens, Roche and BM (Sysmex)— who provide it with kits representing 52% of the total value of total raw materials in 2020 (2019: 45%). IDH has strong, longstanding relationships with its sup- pliers, to whom it is a significant regional client. Due to the volumes of kits the Company purchases, IDH is able to negotiate favourable pricing and maintain raw mate- rial costs increases at a rate slower than inflation. It is worth highlighting that IDH’s supplier relations were not impacted by COVID-19. Total raw materials costs as a percentage of sales were 18.4% in 2020 compared with 18.3% in 2019. Remittance of dividend regulations and repatriation of profit risk The Group’s ability to remit dividends abroad may be adversely affected by the imposition of remittance restrictions where, under Egyptian law, companies must obtain government clearance to transfer dividends over- seas and are subject to higher taxation on payment of dividends. 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 and Sudan. As a provider of medical diagnostic services, IDH’s oper- ations in Sudan are not subject to sanctions. Notably, in October 2017 the US lifted a host of sanctions imposed 20 years ago that included a comprehensive trade embargo, a freeze on government assets and tight restrictions on financial institutions dealing with the country. More recently, in December 2020 the US removed Sudan from its States Sponsors of Terrorism list. Annual Report 2020Integrated Diagnostics Holdings58 Strategic Report // Principle Risk, Uncertainties & Their Mitigation Specific Risk Mitigation Legal and regulatory risk to the business The Group’s business is subject to, and affected by, extensive, stringent and frequently changing laws and regulations, as well as frequently changing enforcement regimes, in each of the countries in which it operates. Moreover, as a significant player in the Egyptian private clinical laboratory market, the Group is subject to anti- trust and competition-related restrictions, as well as the possibility of investigation by the Egyptian Competition Authority. The Group’s general counsel and the quality assurance team work together to keep IDH abreast of, and in com- pliance 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. 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 relation- ships with healthcare professionals who prescribe and recommend the Group’s services. The Group’s quality assurance (QA) function ensures compliance with best practices across all medical diagnostic functions. All laboratory staff participate in ongoing professional 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 strat- egy and discuss issues of concern to the Group as a whole. Risk from contract clients Contract clients including private insurers, unions and corporations, account for c. 54% of the Group’s revenue in 2020. Should IDH’s relationship with these clients dete- riorate, for example if the Group were unable to negoti- ate 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. IDH diligently works to maintain sound relationships with contract clients. All changes to pricing and con- tracts are arrived at through discussion rather than blan- ket 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. Excluding the Pure-Health agreement, which generated EGP 62 million in revenue during 2020, no single client contract accounts for more than 1% of total revenues or 1.4% of contract revenues. 2020 Annual Report59 Specific Risk Mitigation Pricing pressure in a competitive, regulated environment The Group faces pricing pressure from various third-party payers, including national health insurance, syndicates, other governmental bodies, that could materially and adversely affect its revenue. Pricing may be restrained in cases by recommended or mandatory fees set by govern- ment ministries and other authorities. This risk may be more pronounced in the context of headline monthly inflation in Egypt, which as of Decem- ber 2020 stood at 5.4% as per the Central Bank of Egypt. This is an external risk for which there exist few mitigants. In the event there is escalation of price competition between market players, the Group sees its wide national footprint as a mitigant; c. 54% of our revenue is gener- ated by servicing contract clients (private insurer, unions and corporations) who prefer IDH’s national network to patchworks 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 sub- ject to price controls. Carrying value of goodwill and other intangible assets A decline in financial performance could lead to an impairment risk over the carrying value of IDH’s good- will 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 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 (11) of the Financial Statements. Annual Report 2020Integrated Diagnostics Holdings60 Strategic Report // Principle Risk, Uncertainties & Their Mitigation Specific Risk Mitigation Business continuity risks Management concentration risk: IDH is dependent on the unique skills and experience of a talented manage- ment team. The loss of the services of key members of that team could materially and adversely affect the Com- pany’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 management of medical data. Similarly, business inter- ruption 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 contin- ued and uninterrupted performance of its systems. Business Interruption: across its geographies, the reim- position of restrictive measures related to Covid-19 (including curfews and lockdowns) could impact the working hours of branches and in extreme cases could lead to their temporary closure. IDH understands the need to support its future growth plans by strengthening its human capital and engaging in appropriate succession planning. The Company is committed to expanding the senior management team, led by its CEO Dr. Hend El Sherbini, to include the talent needed for a larger footprint. The Group has constituted an Executive Committee led by Dr. El Sherbini and com- posed of heads of departments. The Executive Commit- tee 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 alterna- tives to landlines, among multiple other factors. IDH tests its disaster recovery plans on a regular basis. In Egypt and Jordan, to mitigate the impact of potential branch closures on operations, the Group has been ramping up its house call services. Moreover, the Group’s important role in conducting PCR testing for Covid-19 in both Egypt and Jordan makes it unlikely that branches would be closed even if new restrictive measures were introduced. 2020 Annual Report61 Specific Risk Mitigation 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 affect 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. Loss of certifications and accreditations Many of IDH’s facilities have received internationally accreditations for high-quality standards. The failure to renew these certifications, including the College of Ameri- can Pathologists (CAP) accreditation for the Mega Lab or the International Organization for Standards (IOS) for other facilities, would call into question the Group’s qual- ity standards and competitive differentiators. 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 profession- als as there is surplus staff in the market. IDH’s efforts are accordingly 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. In October 2017, IDH’s central Mega Lab in Cairo was accredited by CAP which is subject to renewal every two years. The accreditation was renewed in October 2019 with the next renewal date in October 2021. The Company also renewed its ISO certifications in 2019, with the next renewal due in three years. In Jordan, Biolab has received Joint Commission International (JCI) accreditation, as well as ISO 150189, HCAC and CAP certifications in 2018. Branches in Sudan and Nigeria are not accredited. IDH’s ability to keep current its certifications and accredi- tation are supported by ongoing QA, training and internal audit procedures. Cybersecurity risk The company controls a vast amount of confidential data for its patients’ records; to this end, there is a cyberse- curity risk emerged as for both data confidentiality and data security. The company has stringent control over its security and regularly does stress tests over its IT infrastructure and is currently commissioning an independent leading international service provider to perform independent stress tests and to diagnose its IT infrastructure controls, in order to ensure the confidentiality of all data. Annual Report 2020Integrated Diagnostics Holdings62 PERFORMANCE IDH delivered a strong financial performance in 2020 despite operational challenges in its markets 51% Gross profit margin in 2020 44% EBITDA margin in 2020 64 Performance // Financial and Operational Review Financial and Operational Review Key Performance Indicators* EGP mn Revenues Gross Profit Gross Profit Margin EBITDA** EBITDA Margin Net Profit Net Profit Margin 1Q2020 2Q2020 3Q2020 4Q2020 FY2020 FY2019 change 500 243 49% 203 41% 102 21% 450 203 45% 164 36% 72 16% 720 384 53% 343 48% 201 28% 986 513 52% 460 47% 234 24% 2,656 2,226 1,343 1,084 51% 1,171 44% 609 23% 49% 945 42% 505 23% 19% 24% 1.9 pts 24% 1.6 pts 21% 0.3 pts * Quarterly figures are unaudited ** EBITDA is calculated as operating profit plus depreciation and amortization. i. Revenue and Cost Analysis Revenue IDH reported revenue of EGP 2,656 million in 2020, up 19% year-on-year (22% when excluding the campaign). The robust performance in 2020 was supported by IDH’s ability to adapt its service offering to the changing dynamics by ramping up its house call services in Egypt and capturing the rising demand for Covid-19-related1 testing in Egypt and Jordan. Covid-19-related testing contributed 24% of consolidated revenue for the year. Top-line growth for the year was price driven as a 34% year-on-year increase in average price per test more than offset an 11% year-on- year decline in total tests performed. On a quarterly basis, IDH’s operations during the first half of 2020 were weighed down by varying degrees of lockdowns and other mobil- ity restrictions imposed by governments across its footprint to limit the spread of the Covid-19 virus. This impacted patient volumes across all of IDH’s markets in the months of March, April and May. As such, the Company’s top line in the first and second quarter of the year was down 8% year-on-year and 13% year-on-year, respectively. As restrictions were progressively lifted in the second half of 2020, the Company witnessed a gradual normalisation of traffic at its branches, further supported by its Covid-19-adapted ser- vice offering. This saw IDH record impressive year-on-year revenue growth of 23% and 71% in 3Q 2020 and 4Q 2020, respectively. Revenue Analysis: Contribution by Patient Segment Contract Segment At the Group’s contract segment, revenue increased 15% year-on-year in 2020 with the segment’s 1 Covid-19-related tests include Polymerase Chain Reaction (PCR) and antibody testing as well as a bundle of inflammatory and clotting markers such as Complete Blood Picture, Erythrocyte Sedimentation Rate (ESR), D-Dimer, Ferritin and C-reactive Protein (CRP), among others. 2020 Annual Report65 contribution to consolidated revenues standing at 54% for the year. Revenue growth at the seg- ment was price driven as a 31% year-on-year rise in average revenue per test more than offset a 12% year-on-year decline in tests performed. Lower test volumes for the year were due to Covid-19-related restrictions imposed across the Group’s countries of operations earlier in the year, combined with the expected normalisation in contract volumes following the end of the 100 Million Healthy Lives campaign in Egypt. The campaign had contributed 224 thousand patients and 2.4 million tests to the contract segment during 2019. It is important to note that, PCR testing contributed to 14% of con- tract revenues in 2020. Walk-in Segment Revenue from IDH’s walk-in segment recorded a robust 25% year-on-year expansion in 2020, contrib- uting to 46% of consolidated revenues for the year. In 2020, average revenue per test at the walk-in seg- ment increased 36% year-on-year, while tests per- formed decreased by 8% versus 2019, weighed down by Covid-19-related restrictions. Walk-in revenue was supported by IDH’s PCR test offering, which in 2020 contributed to 18% of the segment’s revenues. Key Performance Indicators IDH ‘000 Walk-in Segment Contract Segment** Total FY20 FY19* Change FY20 FY19* Change FY20 FY19* Change Revenue (EGP ‘000) 1,222 974 25% 1,434 1,252 15% 2,656 2,226 19% % of Revenue 46% 44% 54% 56% Patients ('000) 2,288 2,332 -2% 4,825 5,149 -6% 7,113 7,481 -5% % of Patients 32% 31% 68% 69% Revenue per Patient (EGP) 534 418 28% 297 243 22% 373 298 25% Tests ('000) 7,052 7,638 -8% 20,021 22,833 -12% 27,073 30,471 -11% % of Tests 26% 25% 74% 75% Revenue per Test (EGP) Test per Patient 173 3.1 128 3.3 36% -6% 72 4.1 55 4.4 31% -6% 98 3.8 73 4.1 34% -7% * In 2020, management revisited the definition of contract customers who have contractual agreements and are granted discounts above 20%, hence all cash paying customers with discounts equal or below 20% were reclassified as walk-in. Reclassification adjustments include the transfer of 720 thousand tests in 2019 and associated revenue of EGP 79 million from the contract segment to walk-ins. The upper mentioned reclassification allows better representation of both segments. ** Please note that contract segment includes contributions made by the 100 Million Healthy Lives campaign in Egypt, which in 2019 had contrib- uted 224 thousand patients and 2.4 million tests to the contract segment. ^ 2019 and 2020 figures include Wayak’s results. Annual Report 2020Integrated Diagnostics Holdings66 Performance // Financial and Operational Review Revenue Analysis: Contribution by Geography Egypt In Egypt revenues increased 14% year-on-year (17% excluding the campaign) to EGP 2,173 million for 2020, with the country contributing to 82% of consolidated revenues for the year. Revenue growth for the year was supported by IDH’s ramped-up house call service and Covid- 19-related test offering both of which recorded growing demand from patients as the year pro- gressed. As such, house call services contributed to 22% of Egypt’s 2020 revenue compared to just 11% in the previous year. Covid-19-related test- ing contributed to around 21% of Egypt’s 2020 revenues, with PCR testing for Covid-19 alone making up 11% of the country’s top-line. Egypt’s revenues were further supported by con- tributions from Al-Borg Scan which generated revenue of EGP 25 million in 2020, up 76% year- on-year. Throughout the year, Al Borg Scan’s two branches served 36 thousand patients, up 88% year-on-year, and performed nearly 46 thousand tests during the year, up 69% versus 2019. IDH served 6.3 million patients in Egypt and performed 24.4 million tests, down by 8% and 12% year-on-year, respectively. When excluding volumes related to the 100 Million Healthy Lives campaign in 2019, the decline in patients served and test performed for 2020 narrows to 5% and 4% year-on-year, respectively. Nationwide cur- fews and lockdowns during the second quarter of 2020 had contributed to lower patient and test volumes for the year. However, the impact of Covid-19-related restrictions was partially mitigated through the increased penetration of IDH’s house call service. Earlier in the year, thanks to IDH’s strong brand equity and its position as the only CAP-accred- ited diagnostics service provider in Egypt, the Group had been selected by Pure-Health UAE to be the first lab to conduct PCR testing to screen passengers travelling from Egypt. The Group’s contractual agreement with Pure Health contrib- uted EGP 62 million to Egypt’s revenues for the year (5% of Egypt’s contract segment revenues), with PCR tests for Covid-19 performed as part of the agreement making up 35% of total PCR tests performed during the year. Jordan In Jordan, revenue for 2020 increased 59% year- on-year to EGP 409 million. Subsequently, the country’s contribution to consolidated revenue increase to reach 15.4% in 2020 from 11.5% in 2019. In JOD terms, revenue increased 69% year- on-year in 2020 supported by robust demand for PCR testing for Covid-19 which drove a 77% year-on-year and 9% year-on-year rise in patients served and tests performed, respectively. In 2020, PCR testing for Covid-19 made up 46% of the country’s top-line and contributed to 13% of total tests performed during the year. Jordan’s top-line was further bolstered by the company’s ramped up house call services, which in 2020 contributed to 12% of the country’s top-line versus the 4% contribution made in 2019. Nigeria At the Group’s Nigerian subsidiary, revenue recorded EGP 36 million in 2020, up 20% from EGP 30 million in 2019. In local currency terms, revenues were up 38% year-on-year in 2020 on the back of a 20% year-on-year expansion in both patients served and tests performed for the year. The strong rise in volumes comes as IDH continues to capitalise on the increased brand awareness and demand for its services in Nigeria despite the Covid-19-related disruptions faced earlier in the year and an escalation of social 2020 Annual Report67 unrest during the final quarter of the year. These included a complete lockdown and limited traf- fic as people adhered to shelter-in-place orders. Sudan The Group’s Sudanese operations recorded a 2% year-on-year increase in revenue to EGP 38 million in 2020, impacted by the SDG devaluation, where the average SDG/EGP rate in 2020 was 0.29 versus 0.36 in 2019. In SDG terms, revenue reported a 28% year-on-year rise in 2020 due to higher pricing as management kept in step with the hyperinflation- ary environment. This helped offset a decline in vol- umes following the imposition of Covid-19-related restrictive measures and the closure of the Group’s branches earlier in the year. Revenue Contribution by Country Egypt Revenue (EGP mn) Egypt Contribution Jordan Revenue (EGP mn) Jordan Revenue ( JOD mn) Jordan Contribution Nigeria Revenue (EGP mn) Nigeria Revenue (NGN mn) Nigeria Contribution Sudan Revenue (EGP mn) Sudan Revenue (SDG mn) Sudan Contribution Patients Served and Tests Performed by Country Egypt Patients Served (mn) Egypt Tests Performed (mn) Jordan Patients Served (k) Jordan Tests Performed (mn) Nigeria Patients Served (k) Nigeria Tests Performed (k) Sudan Patients Served (k) Sudan Tests Performed (k) Total Patients Served (mn) Total Tests Performed (mn) 2020 2,173.4 81.8% 409.1 18.5 15.4% 36.1 897.7 1.4% 37.7 129.5 1.4% 2020 6.3 24.4 550 2.0 131 215 130 409 7.1 27.1 2019 1,902.8 85.5% 256.7 10.9 11.5% 30.1 649.9 1.4% 36.9 101.5 1.7% 2019 6.9 27.9 311 1.8 109 179 180 597 7.5 30.5 Change 14% 59% 69% 20% 38% 2% 28% Change -8% -12% 77% 9% 20% 20% -28% -31% -5% -11% Annual Report 2020Integrated Diagnostics Holdings68 Performance // Financial and Operational Review Branches by Country Egypt Jordan Nigeria Sudan Total Branches 31 December 2020 31 December 2019 Change 429 20 12 20 481 399 19 13 21 452 30 1 -1 -1 29 Cost of Goods Sold IDH’s cost of goods sold increased 15% year-on-year to EGP 1,314 million in 2020. Strong top-line growth supported a 24% year-on-year expansion in gross profit to EGP 1,343 million in 2020, with an associated margin of 51% versus 49% in 2019. COGS Breakdown as a Percentage of Revenue Raw Materials Wages & Salaries Depreciation & Amortisation Other Expenses Total 2020 18.4% 14.7% 6.1% 10.3% 49.5% 2019 18.3% 17.2% 6.0% 9.8% 51.3% Raw material costs, which include cost of special- ized analysis at other laboratories, reached EGP 488 million in 2020, making up the largest share of total consolidated COGS during the year at 37.1% (18.4% as a share of consolidated revenues). The 20% year-on-year increase in raw material costs is in part attributable to a significant rise in raw material costs recorded at IDH’s Jordanian operations during 4Q 2020 which weighed on consolidated margins in the final quarter of 2020 compared to the previous quarter. The increase came following higher positivity rates which require retesting before announcing to the Jorda- nian Ministry of Health, which caused an increase in Jordan’s raw material as a share of revenue from 26% in 3Q 2020 to 46% in 4Q 2020. It is worth highlighting that in Egypt, PCR and Covid-19-related tests have largely the same contribution margin as conventional tests. However, in Jordan, due to the Ministry of Health guidelines, PCR tests have a lower contribution margin. With regards to the Group’s house call services, tests performed through this channel in both Egypt and Jordan have largely the same contribution margin as conventional tests per- formed at the Group’s labs. Direct salaries and wages made up the second largest share of total COGS for the year at 29.7%, having increased just 2% year-on-year to reach EGP 390 million in 2020. The largely stable fig- ure was due to higher direct salaries and wages in Jordan and Sudan being largely offset by lower salaries in Nigeria following the restruc- turing that took place during the second half of 2019. In 2020, the curfew periods led IDH to book lower bonuses, incentives, and overtime 2020 Annual Report69 payments, whereas in 2019 the Group recorded EGP 27 million in profit shares over and above of the required 10% (profit share in 2019 was 13% while profit share 2020 was 10%). Given the marginal year-on-year increase in direct salaries and wages for 2020, and the significant top-line growth for the year, as a percentage of revenues, salaries and wages declined to 14.7% in 2020 versus 17.2% in 2019. Direct depreciation and amortisation was up 22% year-on-year in 2020 to EGP 163 million, largely due to the addition of new equip- ment at Al Borg-Scan and Nigeria, as well as the incremental amortisation of additional branches (IFRS 16 right-of-use assets). Direct depreciation and amortization as a percentage of revenues increased only marginally to 6.1% in 2020 from 6.0% in 2019. EBITDA increased 24% IDH’s consolidated EBITDA year-on-year to EGP 1,171 million in 2020, with an associated margin of 44% versus 42% in 2019. EBITDA growth was supported by strong gross profitability which offset higher selling, general and administrative (SG&A) outlays for 2020 and a doubtful accounts provision of EGP 42 million to account for expected credit losses in accordance with IFRS 9 booked in the year compared to EGP 8 million in 2019. It is worth noting that the major- ity of said provision were booked during the first half of 2020 (EGP 28 million) while the second half Regional EBITDA in Local Currency of the year provisions declined to EGP 14 million as the Group reassessed its recoverability rate. In Egypt, EBITDA recorded EGP 1,041 million in 2020, up a robust 19% year-on-year. EBITDA mar- gin increased to 48% in 2020 from 46% in 2019. The EBITDA expansion was supported by the country’s strong top-line growth in the second half of the year which offset an EGP 35 million doubtful accounts provision established in Egypt and the impact of Covid-19 on Egypt’s operations earlier in the year. IDH’s Jordanian operations recorded a 44% year- on-year rise in EBITDA to EGP 130 million in 2020 on the back of strong revenue growth for the year. In local currency terms, EBITDA grew 53% year-on-year in 2020. EBITDA margin recorded 32% in 2020 versus 35% in the previous year. In Nigeria, EBITDA losses narrowed significantly to EGP 7 million in 2020 from the negative EGP 30 million recorded in 2019. Decreased losses were due to a 20% year-on-year rise in revenues (38% in NGN terms) and an 18% year-on-year decrease in salary expenses during the year. Finally, Sudan’s EBITDA recorded EGP 6 million in 2020, down 18% year-on-year with an EBITDA margin of 16% compared to 20% last year. EBITDA for the year was weighed down by the SDG devalu- ation. In SDG terms, EBITDA came in relatively flat for the year at SDG 21 million as higher pricing offset branch closures earlier in the year. Mn Egypt Jordan Nigeria Sudan EGP JOD NGN SDG 2020 1,041 5.9 (170) 21 2019 Change 877 3.8 (642) 21 19% 53% 74% 2% Annual Report 2020Integrated Diagnostics Holdings70 Performance // Financial and Operational Review Interest Income / Expense IDH recorded interest income of EGP 53 million in 2020, up 22% year-on-year. Interest income increased due to higher cash balances as the Group postponed to September 2020 the distri- bution of USD 28 million (EGP 451 million) in dividends in relation to 2019 profits. Interest expense recorded EGP 72 million in 2020 versus EGP 65 million in 2019. The increase in interest expenses is due to higher interest on lease liabilities related to IFRS 16. following the addition of new branches. This offset the decrease in interest expenses on borrowings which benefitted from the lower interest rate environment following a cumulative 400 basis point cut in interest rates by the Central Bank of Egypt since the start of 2020. Interest Expense Breakdown EGP Mn Interest on Lease Liabilities (IFRS 16) Interest Expenses on Borrowings* Interest Expenses on Leases Total Interest Expense 2020 51.4 16.1 4.1 71.5 2019 35.1 20.0 9.5 64.6 Change 46% -20% -57% 11% * Related to medium-terms loans for the Al Borg Scan expansion (EGP 6.1 million) and the Group’s new headquarters in Cairo’s Smart Village (EGP 6.3 million), in addition to EGP 3.7 million in bank charges. (interest expense hasn’t been capitalized) Foreign Exchange IDH recorded a net foreign exchange loss of EGP 13 million in 2020 compared to EGP 16 million in 2019. The figure is primarily related to FX losses on the back of the SDG devaluation versus the EGP. Taxation Tax expenses recorded for the year were EGP 360 million compared to EGP 254 million in 2019. The effective tax rate stood at 37% in 2020 versus 33% in 2019. There is no tax pay- able for IDH’s two companies at the holding Tax Expense Breakdown EGP Mn Egypt Jordan Nigeria Sudan Total Tax Expenses Effective Tax Rate level, while tax was paid on profits generated by operating subsidiaries. The increase in IDH’s effective tax rate to 37% compared to 33% in 2019 is attributable to the decision by the Egyptian Government in September 2020 to increase the Withholding Tax on profit distribution from 5% for owner- ship exceeding 25% to 10% (irrespective of the ownership stake). It should be highlighted that previously IDH used to incur a 5% WHT as its ownership in the subsidiaries exceeded 25%. 2020 340.2 19.5 (0.8) 0.8 360 37% 2019 244.8 10.8 (2.4) 0.4 254 33% Change 39% 80% -66% 90% 42% 3.7 pts 2020 Annual Report71 Net Profit IDH’s consolidated net profit was EGP 609 mil- lion in 2020, up 21% year-on-year supported by strong revenue growth for the year combined with the Group’s cost management efforts and higher interest income for the year. Net profit margin stood at 23% in 2020 up unchanged from 2019. ii. Balance Sheet Analysis Assets Property, Plant and Equipment IDH held gross property, plant and equipment (PPE) of EGP 1,261 million as of year-end 2020, up from the EGP 1,140 million as of 31 December 2019. CAPEX outlays represented around 5% of consolidated revenues in 2020. During 2020, the average CAPEX of a new C branch (collection points) in Egypt ranged from EGP 750 thousand to EGP 1.2 million. Accounts Receivable and Provisions As at 31 December 2020, accounts receivables’ Days on Hand (DOH) reached 144 days com- pared to 129 days at year-end 2019. Accounts receivables’ DOH is calculated based on credit revenues amounting to EGP 827 million in 2020. The increase is mainly related to the PCR testing for Covid-19 balance (as part of the agreement with Pure Health), which represented around 10% of total receivables in 2020 at EGP 34 mil- lion. On gross receivables, DoH in 2020 were 171 days compared to 149 days in 2019. Provision for doubtful accounts established dur- ing 2020 amounted to EGP 42 million compared to only EGP 8 million in 2019. The increase is EGP thousand Cash mainly related to the expected credit losses in accordance with IFRS 9 of government/semi- government entities in Egypt. It should be noted that the provisions established in Egypt repre- sented around 90% of consolidated provisions established during the year. Inventory As at 31 December 2020, the Group’s inventory balance reached EGP 100 million, up from EGP 84 million as at year-end 2019. Days Inventory Outstanding (DIO) decreased to 72 days as at year-end 2020 from 82 days as at 31 December 2019. The decline is largely attributable to a decrease in Jordan’s DIO due to the high PCR testing for Covid-19 turnover. Cash and Net Debt/Cash IDH’s cash balances increased to EGP 877 million as at 31 December 2020 compared to EGP 631 million as at 31 December 2019. The increase comes despite the distribution of EGP 451 million in dividends for 2019 paid in Sep- tember 2020. It should be noted that cash bal- ances include cash on hand, current accounts, time deposits and treasury bills. 2020 2019 876,755 630,509 Interest Bearing Debt (“Medium Term Loans”) 96,455 111,752 Lease Liabilities Property 389,920 269,401 Lease Liabilities Equipment 69,122 68,671 Net Cash Balance 321,258 180,932 Annual Report 2020Integrated Diagnostics Holdings72 Performance // Financial and Operational Review Net cash balance1 amounted to EGP 321 million as at year-end 2020, an increase of 78% compared to EGP 181 million as at 31 December 2019. Biolab’s put option liability increased following the subsidiary’s EBITDA year-on-year growth of 44% in EGP terms. As at year-end 2020, the Group had two out- standing loan balances: • An EGP 38.6 million facility from Commercial International Bank (CIB) used to finance IDH’s headquarters in Cairo and will be fully repaid in 2022; • An EGP 54.3 million loan from Ahly United Bank (AUB) used to finance the first two branches of IDH’s new radiology venture in Egypt. The total facility amounts to a total of EGP 130.5 million, from which EGP 54.3 mil- lion was used to finance the radiology venture. The loan will be fully repaid in 2026; • The interest rate on both loans is 1% above the Central Bank of Egypt’s borrowing corridor rate (currently at 9.25%). Liabilities Accounts Payable As at 31 December 2020, accounts payable bal- ance stood at EGP 178 million up from EGP 145 million as at year-end 2019. The Group’s days payable outstanding (DPO) is 127 days com- pared to 141 days as at 31 December 2019, with the decrease mainly related to PCR testing kit suppliers who are paid within a period of 15 days. Put Option The put option “short-term” liability is related to the option granted to Dr. Amid; Biolab CEO, to sell his stake (40%) to IDH. The put option is in the money and exercisable since 2016 and is cal- culated as 7 times LTM EBITDA minus net debt. The put option “long-term” liability is related to the option granted to the International Finance Corporation from Dynasty – shareholders in Echo Lab – and it is exercisable in 2024. iii. Cash Flow Analysis Net cash flow from operating activities recorded EGP 926 million in 2020 compared to EGP 697 million in 2019, demonstrating the company’s strong cash generation ability despite the chal- lenging operating environment. iv. Dividend The Board of Directors is recommending a final dividend of US$ 0.049 per share, or US$ 29.1 mil- lion in aggregate, to shareholders in respect of the financial year ended 31 December 2020. This represents an increase of 4% compared to a final dividend of US$ 28 million in aggregate in the previous financial year. The Board of Directors is recommending a final dividend of US$ 0.049 per share, or US$ 29.1 million in aggregate, to shareholders in respect of the financial year ended 31 December 2020 1 Net cash is calculated as cash and cash equivalent balances less interest-bearing debt (medium term loans) and finance lease. 2020 Annual Report 73 Annual Report 2020Integrated Diagnostics Holdings74 Performance // Corporate Social Responsibility Corporate Social Responsibility IDH views corporate responsibility initiatives as an extension of its core purpose, with the aim of improving the communities in which it does business Founded on the principle of providing quality medical assistance and services to better the lives of individuals and the community at large, IDH views corporate responsibility initiatives as an extension of its core purpose, with the aim of improving the communities in which it does business. 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, which in 2020 amounted to EGP 6.5 million compared with EGP 5.3 million in 2019. The Foundation 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. 2020 Annual Report75 The Foundation allocates sums received from IDH 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 program and vision for the communi- ties 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 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 include 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 underprivi- leged Egyptians during the holy month of Ramadan • Providing food for families in need of such • Free medical tests to underprivileged Egyp- assistance tian children • Coverage of running costs for the ICU at Cairo’s public-sector Kasr El Aini Hospital • Sponsorship of medical convoys to the city of Fayoum Annual Report 2020Integrated Diagnostics Holdings76 CORPORATE GOVERNANCE Striving for best industry practices in governance to build a profitable and sustainable business as well as safeguarding shareholder interests 78 Corporate Governance // Board of Directors Board of Directors IDH’s Board of Directors is comprised of four independent members, one non-executive member and one executive director, all of whom offer significant experience in the healthcare market, MENA region and investment activities. Lord St John of Blesto Prof. Dr. Hend El Sherbini Hussein Choucri (Age 63) (Age 52) (Age 70) Independent Non-Executive Chairman Group Chief Executive Officer process. Dr. El Sherbini is a professor of clinical pathology at the Fac- ulty of Medicine, Cairo Univer- sity and currently sits on the board of American Society of Clinical Pathology (Egypt) and consults on the international certification She received her MBBCh, Masters in Clinical and Chemical pathology, PhD in Immunol- ogy from Cairo University, and MBA from London Business School. Dr. El Sherbini served as CEO of Al Mokhtabar since 2004, until becoming CEO of the Group in 2012. Lord St John has been a member of the House of Lords of the U.K. Parliament since 1978. He serves on the boards of several listed and unlisted companies includ- ing Yellow Cake plc, Smithson Investment Trust plc, Strand Hanson Ltd, Tyvak Orbital Net- works Ltd, KNeoWorld UK Ltd, Geobear, Falcon Group, Empati, and African Business Solutions Limited. He also holds advisory roles with BetWay Limited, ECO Capacity Exchange, and Wet Holdings (Global) Limited. Lord St John has an interest in the charitable sector and serves as a trustee to several charities focused on wildlife conservation, poverty reduction, education and healthcare. Lord St John received a BA and a BSocSc in Psychology from Cape Town University, a BProc in Law from the University of South Africa and an LLM from the London School of Economics. Independent Non-Executive Director and Chairman of the Remuneration Committee Mr. Choucri is Chairman and Managing Director of HC Securities & Investment, which he established in May 1996. He currently sits on the boards of EDITA Food Indus- tries S.A.E and SODIC (Sixth of October Development & Investment Company), as well as the Egyptian British Busi- ness Council and the Egyptian Greek Business Council. Mr. Choucri served as a Managing Director of Morgan Stanley from 1987 to 1993 and served as Advisory Director at Mor- gan Stanley from 1993-2007. He received his Management Diploma from the American University in Cairo in 1978. 2020 Annual Report79 James Patrick Nolan Dan Olsson Richard Henry Phillips (Age 61) (Age 55) (Age 56) Independent Non-Executive Director Mr. Olsson has long and exten- sive international experience in the diagnostic and healthcare services sector, where he has served in a range of executive positions. Among others as head of diagnostics in the pan-Euro- pean healthcare group Capio, CEO of Unilabs, a pan-European diagnostic provider, CEO of Helsa, a Swedish healthcare group as well as CEO of Team Olivia Group, a Nordic care services group. Mr. Olsson has worked in the healthcare sector since 1999. Mr. Olsson studied economics at the University of Lund in Sweden. Non-Executive Director is a founding Mr. Phillips partner of Actis LLP, the emerging markets private 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 is the Head of Private Equity for Actis and is a member of the Actis Investment Committee. Mr. Phillips is a director on the board of a number of com- panies including Emerging Markets Knowledge Holdings (Mauritius) Limited, Les Labo- ratories Medis SA, and others. Mr. Phillips holds a degree in Economics from the Univer- sity of Exeter. Independent Non-Executive Director and Chairman of the Audit Committee Mr. Nolan is an Independent Director. He recently joined Intertrust as Head of Strategy and Mergers & Acquisitions. Prior to that he spent 15 years with Royal Philips NV, latterly as Head of Mergers & Acquisi- tions, and has also served as Head of Mergers & Acquisi- tions at Veon Inc., a major mobile telecoms operator in Emerging Markets. During his time at Philips, he led a series of acquisitions in diagnostic imaging, an area in which Philips is now a global leader. He has extensive quoted- company board experience having served on the boards of M*Modal Inc., Navteq Inc and SHL Telemedicine Ltd. Mr. Nolan graduated from Oxford University in Law in 1983 and is a qualified barrister in Eng- land and Wales. He also holds an MBA from INSEAD. Annual Report 2020Integrated Diagnostics Holdings80 Corporate Governance // Corporate Governance Report Corporate Governance Report Your Board of Directors (“the Board”) is respon- sible for providing strong leadership and effec- tive decision making, safeguarding in the process the interests of all shareholders of Integrated Diagnostics Holdings. Under my chairmanship, the Board has maintained an unwavering com- mitment to provide 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 2018 UK Corporate Governance Code (“the Code”) as issued by the Financial Reporting Council, nor does IDH vol- untarily comply with the Code. That said, it is the view of your Board that we continue our path of improving our corporate governance structure. We strongly believe that the gradual adoption of best industry practices in governance will assist us in building a profitable and sustainable busi- ness as well as safeguarding shareholder interests. We are compliant with Financial Conduct Authority Disclosure Guidance and Transpar- ency Rules (DTR) subchapters 7.1 and 7.2, which set out certain mandatory disclosures: 7.1 concerns audit committees and bodies carrying out equivalent functions; 7.2 concerns corporate governance standards that are included in the Directors Report or, in this case, as part of the Strategic Review (DTR 7.2.1). To that end, we have an Audit Committee as well as Remuneration and Nomination Committees. The Board may establish additional committees as appropriate going forward. This Annual Report includes reports from both the Audit and Remuneration Committees. Your Board aims to work towards implementing best practices in corporate governance, calling on both the expertise of individual Directors as well as that of outside parties, including legal counsel and global professional services firms. Functioning of the Board We met six times as a Board during the course of 2020 and have invested significant time discuss- ing and evaluating the Group’s strategy and pros- pects for future growth, the outcome of which is presented in our statement of strategy on page 50. 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 appointing 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 Inde- pendent 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 experi- ence in Europe, the Middle East and Africa. We 2020 Annual Report 81 6 Board meetings in 2020 have relevant commercial and technical experi- ence to help direct the Group as it delivers on its strategy in a very technical field and across rapidly changing geographies. Your Board in 2020 and their biographies are set out on pages 78 and 79 of this Annual Report and are summarised in the following table. Board of Directors of Integrated Diagnostics Holdings Plc Name Position (Date of Appointment) Lord St John of Bletso Independent Non-Executive Chairman (12 January 2015) Prof. Dr. Hend El Sherbini Group Chief Executive Officer (23 December 2014) Hussein Choucri James Patrick Nolan Dan Olsson Independent Non-Executive Director (12 January 2015) Independent Non-Executive Director (8 April 2015) 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 Execu- tive. 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 running of the business. In this, she is supported by a senior management team. The Group Chief Executive and I have a good working relationship and discuss matters of Group strategy and performance on a regular basis. We also work together to ensure that Board meet- ings 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 Direc- tors to openly and constructively challenge the Annual Report 2020Integrated Diagnostics Holdings82 Corporate Governance // Corporate Governance Report 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 management of the Group, including, but not limited to: • approving annually a strategic plan and objec- tives for the following year for the Group; • approving any decision to cease to operate all or any material part of the Group’s busi- ness or to enter into any new business or geographic areas; • monitoring the delivery of the Group’s strat- egy, objectives, business plan and budget; • adopting or amending the Group’s business plan or annual budget; • approving the Group’s annual report and ac- counts and half-yearly financial statements and/or any change in the accounting prin- ciples or tax policies of any member of the IDH group and/or any change in the end of the financial year of any member of the IDH group except as contemplated by the business plan or annual budget, as required by law or to comply with a new accounting standard; • any member of the IDH group declaring or paying any dividend or distribution; • approving the issue of all circulars, prospec- tuses, listing particulars and general meeting notices to shareholders of the Group; Board Meetings During 2020 Your Board of Directors held six meetings in 2020: • ensuring the Group has effective systems of internal control and risk management in place by (i) approving the Group’s risk appe- tite statements and (ii) approving policies and procedures for the detection of fraud, the pre- vention of bribery and other areas considered by the Board to be material; • undertaking an annual review of the effective- ness 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; • carrying out a robust assessment of the prin- cipal risks facing the Group, including those that threaten its business, future performance, solvency or liquidity and to report on such as- sessment in the Group’s annual report; and • reviewing the Group’s overall corporate gov- ernance arrangements and approving any changes thereto. Apart from these Reserved matters, the Board delegates specific items to its principal commit- tees, namely the committees on Audit, Remu- neration and Nomination. Each Committee is authorised to seek any information it requires from senior management. Below are brief recaps on each of these commit- tees. Reports from the Chairmen of the Audit and Remuneration Committees appear starting pages 88 and 92 of this Annual Report, respectively. Name 25 March 2020 27 April 2020 1 June 2020 1 September 2020 18 November 2020 30 November 2020 Position (Date of Appointment) London (majority of attendees attended by teleconference) London (majority of attendees attended by teleconference) London (majority of attendees attended by teleconference) London (majority of attendees attended by teleconference) London (majority of attendees attended by teleconference) London (majority of attendees attended by teleconference) 2020 Annual Report83 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 conflicts of interest that may arise; • establishes the purpose of the meeting; and • reviews and approves minutes of the previous meeting of the Board. All meetings of the Board and its Committees are minuted by the Group Secretary or a designated alternate. Any concerns raised by Directors are clearly recorded in the minutes of each meet- ing. 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 amendments are made. Details of our Directors’ attendance at Board and Committee meetings are shown in the table on page 84. 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, meeting outcomes and any documents presented for review or informa- tion. Furthermore, I endeavour to discuss with them in advance of the meeting to obtain their views and decisions on the proposals to be considered. Effectiveness Having spent considerable time in both formal meet- ings 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 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 2020, senior management delivered regular reports to the Board ahead of regularly scheduled Board meetings. 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. Your Board aims to work towards implementing best practices in corporate governance, calling on both the expertise of individual Directors as well as that of outside parties, including legal counsel and global professional services firms I note in this instance that all members of the Nomination Committee are Non-Executive Directors Name Position Lord St John of Bletso Chairman of the Committee Hussein Choucri Dan Olsson Committee Member Committee Member Annual Report 2020Integrated Diagnostics Holdings84 Corporate Governance // Corporate Governance Report 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 remuneration report. The full report of the Remuneration Committee for 2020 appears starting on page 92 of this Annual Report. Name Position Hussein Choucri James Patrick Nolan Dan Olsson Chairman of the Committee Committee Member Committee Member 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, whistle- blowing and fraud systems in place within the Group. The Audit Committee will meet not less than three times a year. The Audit Committee comprises three Independent Non-Executive Directors who hold the necessary competence in accounting and /or auditing, recent financial experience and have competence relevant to the sector in which the Group is operating. The full report of the Audit Committee for 2020 appears starting on page 88 of this Annual Report. Name Position James Patrick Nolan Chairman of the Committee Hussein Choucri Dan Olsson Committee Member Committee Member Table of Director Attendance at 2020 Meetings Name Board Audit Remuneration Nomination Number of Meetings Directors: Lord St John of Bletso Prof. Dr. Hend El Sherbini Hussein Choucri James Patrick Nolan Dan Olsson Richard Henry Phillips 6 6 6 6 6 6 6 4 - - 3 4 4 - 1 - - 1 1 1 - 0 - - - - - - 2020 Annual Report85 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 Company’s risk matrix, outlined on pages 52-61, is suffi- ciently 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. You may expect risk and its mitiga- tion will be a theme to which your Board returns repeatedly in 2021, as we did in 2020. The Board has ultimate responsibility for the Group’s internal controls; however, they have del- egated 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 share- holders. 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 irregu- larities. The Audit Committee reports back to the Board with their findings and recommendations. The Board has accordingly established that the Group has in place internal controls to manage risk including: • the 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 business risks of the Group, together with measures being taken to contain and mitigate those risks. The Group’s principal risks and uncertainties and mitigation for them are set out on pages 52-61 of this Annual Report. Your Board has furthermore put in place a con- trol framework at the Group level that applies to all subsidiaries, including: • Board approval of the overall Group budget and strategic plans; • a clear organisational structure delineating lines of responsibility, authorities and report- ing 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 as- pects 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 manage- ment, monthly reporting to management and an annual budget process involving both senior management and the Board; the Board received reports on a quarterly basis in 2020. • as part of the reporting process in 2020, manage- ment reviewed monthly and year-to-date actual results 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 Exec- utive and by senior management and remedial action is taken where appropriate. 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 numerous meetings with current and potential investors during the course of the year. Management met with investors at several investor conferences during 2020, including three in-person conferences prior to Covid-19 in Egypt, Morocco and South Arica as well as four virtual conferences; and handled queries, whether delivered verbally or in writing, from more than 100 investors. Annual Report 2020Integrated Diagnostics Holdings86 Corporate Governance // Corporate Governance Report 2020 Annual Report We will continue throughout 2021 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 We published both half- and full-year results and further released trading updates on performance at the three- and nine-month periods. We intend to continue publishing trading updates at the first- and third-quarter marks in 2021, while simultane- ously meeting the minimum 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 brief- ings, roadshows and press interviews. Copies of public announcements and financial results are published on the Group’s website, along with a number of other investor relations tools. It is worth highlighting that the Group launched new corporate and investor relations websites in 2018, offering more comprehensive and better struc- tured information on the Group along with addi- tional shareholder tools and a richer interface. IDH also retained the services of outside con- sultants to help enhance its public relations outfit Hudson Sandler in London to advise the company, increase media traction and widen our audience as well as organize results meetings to better communicate IDH’s on-the-ground performance. Hudson Sandler are working in partnership with IDH’s Cairo-based investor relations advisors Inktank Communications. 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 2021 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. Where possible we follow corporate governance best practice to send a Notice of Meeting of an Annual General Meeting (AGM) and related papers to shareholders at least 20 working days prior to the meeting. The Group’s sixth Annual General Meeting as a listed company will be held at IDH’s headquar- ters, Building B216-F7, Smart Village, Giza, Egypt on 23 June 2021. Annual Report 2020 Integrated Diagnostics Holdings 87 Due to the ongoing restrictions and safety concerns as a result of the Covid-19 pandemic, the AGM will be run as a closed meeting with Shareholders unable to attend the meeting in person. The Board remains keen to encourage engagement with Shareholders. To that end, the Directors would like to invite questions from Shareholders in advance of and during the AGM. Should Shareholders wish to submit questions to the Board prior to the deadline for proxy voting they can do so, and these will be responded to on an individual basis. In addition, the Board will offer shareholders the opportunity to dial into the AGM, at which time they can also submit questions to the Board. Details of the AGM are included in the Notice of Meeting that accompanies this Annual Report and which is available on our website. At the AGM, all of the Group’s Directors will retire and 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 requirements of the 2018 UK Cor- porate Governance Code. Nevertheless, we have endeavoured to ensure that this Annual Report is, as a whole, fair, balanced and understandable. In formulating this Annual Report, we have called on the Group Chief Executive and her senior management staff to provide us with clear docu- mentary evidence of the Group’s performance and policies for 2020. The Audit Committee has confirmed to us that the financial statements as contained in the 2020 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 17 May 2021 88 Corporate Governance // Audit Committee Report Audit Committee Report James Nolan Chairman, Audit Committee The Audit Committee is responsible for over- seeing 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 effectiveness 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. 2020 marked my sixth year as Chairman of the Audit Committee, having been appointed to that role owing to my relevant financial expe- rience 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 Phil- ips. I hold an MBA from INSEAD and studied law at university. The other members of the Committee have a broad range of appropri- ate skills and experience covering financial and healthcare industry matters and their biographies are summarised on pages 78 and 79. I am very grateful for their valuable con- tributions and am happy that we work well together as a team. During 2020, the Audit Committee convened four times. We provided governance of exter- nal financial reporting, risk management and 2020 Annual Report89 internal controls and reported our findings and recommendations to the Board. Outside of scheduled committee meetings, the Audit Committee also communicated throughout 2020 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 2020, they attended meetings in whole or in part, by phone. The Vice-President Finance and Strategy, who is not a member of the executive board, attends our meetings by invitation, and other members of the senior management team attend as required; these include the Director of Investor Relations, the Acting Chief Internal Audit Director and the Group Secretary. There are also private meetings between the Audit Committee 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. FRC Audit Quality Review The FRC is the UK’s independent regula- tor 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 enti- ties 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 audit engagements are intended to contribute to safeguarding and promoting improvement in the overall quality of auditing in the UK. The Group’s previous accounts have not been subject to a review in the period. Roles and Duties of the Audit Committee The Audit Committee’s role is to assist the Board with the discharge of its responsibilities in relation to financial reporting, including: • 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 audit and the extent of the non-audit work undertaken by external auditors; and • advising on the appointment of external audi- tors and reviewing the effectiveness of the in- ternal audit, internal controls, whistleblowing and fraud systems in place within the Group. During its scheduled meetings, the Committee also considers the following matters: • confirm compliance with Directors’ duties and consider any new conflicts of interest; • review minutes of previous meetings; • review actions from previous meetings; and • review progress against current year objectives. Annual Report 2020Integrated Diagnostics Holdings90 Corporate Governance // Audit Committee Report Audit Committee Meetings During 2020 During 2020 the Audit Committee had four scheduled meetings. At each scheduled meet- ing, the Committee considers the matters out- lined above under the subheading “Roles and Duties of the Audit Committee.” Meeting Dates 19 March 2020 24 April 2020 25 August 2020 7 December 2020 Significant Issues The Committee considered several significant accounting issues, matters and judgements in rela- tion to the Group’s financial statements and dis- closures for the year ended 31 December 2020. As part of the half-year and full-year reporting process, management communicates key accounting issues to the Committee, and the external auditor is asked to comment on the key significant areas of account- ing judgement and disclosure. The information 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 appropriate- ness of key disclosures made, together with compli- ance with the applicable accounting standards. The significant issue arising and a description of how it was addressed is shown in the following table: External Auditor Independence KPMG has acted as the Group’s external auditor since appointment in July 2015, with Mr. David Neale serving as audit partner on behalf of KPMG since August 2017.The Auditors’ independence was considered by the Committee during the year and following careful consideration, it was agreed that the Auditors remained independent. The Audit Committee reviewed the work com- pleted by the external auditor, as well as the provision of non-audit services to ensure that the auditor maintained its independence. The Audit Committee confirms that during 2020, Issue How it is being addressed IDH adopted IFRS 16 for annual reporting periods begin- The Group purchased IFRS 16 software from SAP on ning on 1 January 2019. IFRS 16 introduces a single lessee which all leases related to IFRS 16 are recorded and thus accounting model and requires a lessee to recognize assets minimizing human error. The software became operational and liabilities for all leases with a term of more than 12 in the second half of 2020. months unless the underlying asset is of low value. A lessee is required to recognize a right-of-use asset representing its right to use the underlying leased asset and a lease liability representing its obligation to make lease payments. Giving that IDH has more than 500 contracts, and that the calculation is currently conducted manually on excel sheets, there were a number of manual errors in the lease calculations resulting from human error on entering contractual information. 2020 Annual Report91 on 6 May 2021 that is their opinion that the financial statements as at 31 December 2020 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. James Nolan Chairman, Audit Committee 17 May 2021 EGP 55,000 was paid to KPMG in respect of non-audit work compared to the audit fee for the Group financial statements for the year ended 31 December 2020 of EGP 12,552,000 (audit fee for the Group financial statements for the year ended 31 December 2019: EGP 14,211,000). This non-audit work was related to the review of the half year financial state- ments and tax services. External Auditor KPMG LLP have indicated to the board that they had planned not to seek reappointment for the 2021 audit. On behalf of the Board, I would like to thank KPMG for the service they have provided to the Group during their ten- ure. In accordance with the recommendation of the Audit Committee, the Board proposes the appointment of PricewaterhouseCoopers LLP (“PwC”) as the Company’s external audi- tor and a resolution in this regard is contained in the Notice of AGM. Recommendation Ultimately, it is the Board’s responsibility to review and approve the Group’s full-year and half-year financial statements, as well as to determine that, taken as a whole, the Annual Report is balanced, understandable and provides the information necessary for share- holders to assess the Group’s position and per- formance, 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 Annual Report 2020Integrated Diagnostics Holdings92 Corporate Governance // Remuneration Committee Report Remuneration Committee Report Hussein Choucri Chairman, Remuneration Committee In this report from the Remuneration Com- mittee, 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 2020. A detailed discussion of the basis on which the aforementioned (as well as one key member of senior management) were remunerated for their service in 2020 appears below. Chairman: Lord St John of Bletso is entitled to receive an annual salary of US$ 75,000. He is entitled to the reimbursement of reasonable expenses; independent Non-Executive Direc- tors: Hussein Choucri, James Patrick Nolan and Dan Olsson have been engaged by the Group as Independent Non-Executive Direc- tors under letters of appointment. Hussein Choucri and Dan Olsson are each entitled to an annual fee of US$ 55,000, while James Pat- rick Nolan is entitled to an annual fee of US$ 60,000. The Independent Non-Executive Direc- tors are all entitled to the reimbursement of reasonable 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. ESOP IDH’s employee stock ownership plan (ESOP) Policy was adopted by the IDH Board on 1 June 2020 following recommendation by the Remu- neration Committee. The Remuneration Com- mittee contributed to the development of the ESOP Policy and approved the ESOP structure. 2020 Annual Report93 The objectives of the ESOP Policy are: • Retention - to retain key executives who have contributed significantly to the growth plans of the Company; • Compensation - to align management incen- tive and shareholder value; and • Culture - to build a culture of meritocracy and reward good performance and commitment. The ESOP will vest over five years and participants in the plan will be limited to employees nominated by the CEO based on their performance rating. Remuneration of Directors in 20201 Figures in EGP2 Base Salary / Base Salary / Annual Bonus Annual Bonus Total 2020 Total 2019 fees 2020 fees 2019 2020^ 2019^ Executive Director Dr. Hend El Sherbini3 Non-Executive Director Lord St John of Bletso Hussein Choucri James Patrick Nolan Dan Olsson USD 540,000 USD 540,000 EGP 450,000 EGP 450,000 USD 540,00 EGP450,000 USD 540,00 EGP450,000 USD 75,000 USD 55,000 USD 60,000 USD 55,000 USD 75,000 USD 55,000 USD 60,000 USD 55,000 - - - - - - - - - - USD 75,000 USD 75,000 USD 55,000 USD 55,000 USD 60,000 USD 60,000 USD 55,000 USD 55,000 - - Richard Henry Phillips4 - - Hussein Choucri Chairman, Remuneration Committee 17 May 2021 1 There are no taxable benefits, corporate pensions or long-term incentive plans for the Company’s directors. 2 Average USD:EGP exchange rate was 16.68 in 2019 and 15.71 in 2020. 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. ^BOD members are not eligible for profit share distributions. Annual Report 2020Integrated Diagnostics Holdings94 Corporate Governance // Directors’ Report Directors’ Report The statements and reviews on pages 4 to 61 comprise the Strategic Report, which contains certain information that is incorporated into this Directors’ Report by reference, including indications as to the Group’s likely future busi- ness developments. Directors The Directors who held office at 31 December 2020 and up to the date of this report are set out on pages 78 and 79 along with their biographies. The remuneration of the Directors (including their respective shareholdings in the Group, where applicable) is set out in the Remuneration Report on page 92. Directors’ and Officers’ Liability Insurance and Indemnification of Directors Subject to the conditions set out in the Compa- nies (Jersey) Law 1991 (as amended), the Group has arranged appropriate Directors’ and Officers’ liability insurance to indemnify the Directors against liability in respect of proceedings brought by third parties. Such provisions remain in force at the date of this report. Principal Activities The Group’s principal activity is the provision of medical diagnostics services. An overview of the Group’s principal activities is an integral com- ponent of the Strategic Review included in this Annual Report beginning on page 44. 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 the Chairman’s Message (page 18), Chief Executive’s Report (pages 20 to 27), Strategic Report (begin- ning page 4) and particularly the Performance section (beginning on page 62). Financial state- ments for 2020 appear in the Audited Financial Statements (starting on page 100). Results and Dividends The Group’s Results for 2020 are set out in the Audited Financial Statements starting on page 100. The Board of Directors is pleased to recommend a final dividend of US$ 0.049 per share, or US$ 29.1 million in aggregate, to shareholders in respect of the financial year ended 31 December 2020. This represents an increase of 4% compared to a final dividend of US$ 28 million in aggregate in the previous financial year. 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 52 to 61 of this Annual Report. Share Capital The Group has 600,000,000 ordinary shares each with a nominal value of US$ 0.25. There are no other shares in issue, other than ordinary shares. Substantial Share Holdings As at 21 March 2021, 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: 2020 Annual Report95 Shareholder Hena Holdings Ltd. Actis IDH B.V. HSBC Global Asset Mgmt (UK) Fidelity Mgmt & Research T. Rowe Price E Oppenheimer & Son Number of Voting Rights % of Voting Rights 152,982,356 126,000,000 42,224,558 26,450,612 24,741,404 20,215,360 25.50 21.00 7.04 4.41 4.12 3.37 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 and her mother, Dr. Moamena Kamel jointly hold the shares held by Henna holdings which include the described voting rights. Committees of the Board The Board has established Audit, Nomination and Remuneration Committees. Details of these Committees, including membership and their activities during 2020, are contained in the Cor- porate Governance section of this Annual Report and in the Remuneration and Audit Reports. Corporate Responsibility The Group’s report on Corporate Responsibility is set out on page 74. 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, proceedings of Directors as well as borrowing limits and other governance controls. A copy of the Articles of Association can be requested from the Group Company Secretary. The Articles of Association may be amended by members of the Company via special resolution at a General Meeting of the Company. Rules on the Appointment and Replacement of Directors Rules on the appointment and replacement of Directors are set out in the Group’s Articles of Association, a copy of which may be requested from the Group Company Secretary. Corporate Governance The Group’s report on Corporate Governance is on pages 76 to 99. Agreements Related to Change of Control of the Group No such agreements exist. Annual Report 2020Integrated Diagnostics Holdings96 Corporate Governance // Directors’ Report Conflicts of Interest During the year, no Director held any ben- eficial 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 transac- tion with the Group, they are required to notify the Board as soon as reasonably practicable. Political Donations The Group made no political donations in 2020 (2019: nil). Financial Instruments The Group’s principal financial instruments comprise cash balances, balances with related parties, trade receivables and payables and other payables and receivables that arise in the normal course of business. The Group’s financial instru- ments risk management objectives and policies are set out in Note 2 to the Financial Statements. Employees The Group has one (1) Executive Director, namely Group Chief Executive Dr. Hend El Sherbini, as identified in the Corporate Gov- ernance section. Her biographical information appears on page 78 of this Annual Report, and her compensation is reported in the Remunera- tion Committee Report on page 92. IDH has ser- vice agreements with the Group Chief Executive and with the Group Chief Financial Officer, Mr. Omar Bedewy, who is not a Company Director. Dr. Hend El Sherbini leads the Company’s Exec- utive Committee, which also includes all heads of departments and meets every second week to review and discuss performance, priorities and upcoming events in light of the Group’s strategic plan. In view of the Company’s regional growth plans, IDH is committed to building out its senior management team in preparation for a larger footprint. The Group and its subsidiaries had total of 4,754 employees as at 31 December 2020 (2019: 5,440) employed in Egypt, Jordan, Sudan and Nigeria. Creditor Payment Policy Individual subsidiaries of the Group are respon- sible for agreeing on the terms and conditions under which business transactions with their suppliers are conducted. It is the Group’s policy that payments to suppliers are made in accor- dance with all relevant terms and conditions. Going Concern As part of the going concern assessment to assess the resilience of the Group’s financial position and liquidity, management has con- sidered several scenarios and a reasonable, but plausible severe downside test to the period from the annual account’s approval to May 2022. The severe downside scenario has anticipated the same lowest volume that occurred in April and May 2020 for Q2 and Q3 2021. This lowest level occurred due to the disruption caused by the pandemic at the very beginning where the adaptability of people was significantly low, and also this is the period in which the government had taken the strictest restrictions for business and movement of people. This volume represents a 40% reduction than the average normal rate in which the company used to achieve before the pandemic. Additionally, Q4 2021 assumes the same trading levels as January 2021 (which does not factor in seasonality, as average monthly revenue in Q4 tends to be around 20% higher than January of the same year) and is more than 40% lower than Q4 2020. Revenue for January and February 2022 was also assumed to be in line with January 2021, while March 2022 was assumed at a 20% increase from February 2022 due to seasonality, and finally April 2022 factored 2020 Annual Report97 in a reduction in volumes during Ramadan. The scenario has assumed that there is no fixed cost reduction; no reduction in the forecasted capital expenditure, while it has assumed the postponement of dividend payments. That said scenario did not affect the Group’s ability to meet its financial obligation nor the financial cov- enants. The sever downside scenarios showed that the Group’s current financial position and cash balance, generated from its operational activities, will alleviate any potential downside risk; moreover, it presents that the group has sufficient cash within this downside scenario to repay debts and to continue to operate as a going concern without the need to refinance the debt or raise future equity. Consequently, the Directors are confident that the Group will have sufficient funds to continue to meet its liabilities as they fall due for at least 12 months from the date of approval of the financial statements and therefore have prepared the financial statements on a going concern basis. The Group’s business activities, together with the factors likely to affect its future development, per- formance and position, are set out in the Strategic Review on pages 4 to 61. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the financial statements and notes thereon on pages 113 to 158. Statement of Directors’ Responsibilities The directors are responsible for preparing the financial statements in accordance with appli- cable law and International Financial Report- ing Standards as adopted by the EU (“IFRS as adopted by the EU”). Company law requires the directors to prepare Group financial statements for each financial year which give a true and fair view of the state of affairs of the Group and of the profit or loss of the Group for that year. In preparing those financial statements, the directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and estimates that are rea- sonable, relevant and reliable; • state whether applicable accounting stan- dards have been followed, subject to any material departures disclosed and explained in the financial statements; • assess the Group’s ability to continue as a go- ing concern, disclosing, as applicable, matters related to going concern; and • use the going concern basis of accounting un- less they either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so. The directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Com- panies (Jersey) Law 1991. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstate- ment, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and the Company and to prevent and detect fraud and other irregularities. The directors are responsible for the mainte- nance and integrity of the corporate and financial information included on the company’s website. The Directors of the Group confirm that to the best of their knowledge that: • The Group is in compliance with the Jersey code in relation to all applicable corporate law and tax filing requirements; Annual Report 2020Integrated Diagnostics Holdings98 Corporate Governance // Directors’ Report • The consolidated financial statements have been prepared in accordance with Internation- al Financial Reporting Standards as adopted by the EU, including International Accounting Standards; and Interpretations adopted by the International Accounting Standards Board give a true and fair view of the assets, liabili- ties, financial position and profit or loss of the Group and the undertakings included in the consolidation taken as a whole; and • The sections of this Report, including the Strategic Report, Performance Review and Principal Risks and Uncertainties, which constitute the management report, include a fair review of the development and perfor- mance 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. We consider the annual report and accounts, taken as a whole, is fair, balanced and understand- able and provides the information necessary for shareholders to assess the Group’s position and performance, business model and strategy. 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 connec- tion with preparing its report, of which the auditor is unaware. Having made enquiries of fellow Directors and the Group’s auditors, each Director has taken all the steps that he/she is obliged to take as a Director in order to have made himself/herself aware of any relevant audit information and to establish that the auditor is aware of that information. Annual General Meeting (AGM) The 2021 AGM will be held at the Headquarters of IDH Integrated Diagnostics Holdings, Build- ing B216-F7, Smart Village, Giza, Egypt on 23 June 2021. Due to the ongoing restrictions and safety concerns as a result of the COVID-19 pandemic, the AGM will be run as a closed meeting with Shareholders unable to attend the meeting in person. The Board remains keen to encourage engagement with Shareholders. To that end, the Directors would like to invite questions from Shareholders in advance of and during the AGM. Should Shareholders wish to submit questions to the Board prior to the deadline for proxy voting they can do so, and these will be responded to on an individual basis. In addition, the Board will offer shareholders the opportunity to dial into the AGM, at which time they can also submit questions to the Board. Details of the AGM are included in the Notice of Meeting that accompanies this Annual Report and which is available on our website. At the AGM, all of the Group’s Directors will retire and 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. Auditor KPMG LLP have indicated to the board that they had planned not to seek reappointment for the 2021 audit. PricewaterhouseCoopers LLP have confirmed their willingness to act as the Com- pany’s external auditor and a separate resolu- tion will be proposed at the forthcoming AGM concerning their appointment and to authorise the Board to agree their remuneration. By order of the Board Dr. Hend El Sherbini Executive Director 17 May 2021 2020 Annual Report99 Annual Report 2020Integrated Diagnostics Holdings100 CONSOLIDATED FINANCIAL STATEMENTS 102 Independent auditor’s report to the members of Integrated Diagnostics Holdings plc 1. Our opinion is unmodified We have audited the consolidated financial statements of Integrated Diagnostics Holdings plc (“the Company”) for the year ended 31 December 2020 which comprise the Consolidated Statement of Financial Position, Consolidated Consolidated Statement Income, Consolidated Statement of Cash Flows, Consolidated Statement of Changes in Equity and the related notes, including the accounting policies in note 2. Statement, Comprehensive Income Other of We were first appointed as auditor by the directors on 14 July 2015. The period of total uninterrupted engagement is for the 5 financial years ended 31 December 2020. We have fulfilled our ethical responsibilities under, and we remain independent of the Group in accordance with, UK ethical requirements including the FRC Ethical Standard as applied to listed public interest entities. No non‐audit services prohibited by that standard were provided. In our opinion the consolidated financial statements: Overview — give a true and fair view, in accordance with International Standards as Financial Reporting adopted by the EU, of the state of the Group’s affairs as at 31 December 2020 and of the Group’s profit for the year then ended; — have been properly prepared in accordance with the requirements of Companies (Jersey) Law 1991; Basis for opinion in our conducted accordance with audit We International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities are described below. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion. Our audit opinion is consistent with our report to the audit committee. Materiality: group financial statements as a whole EGP32.5m (2019:EGP32m) 3.4% (2019: 4.2%) of group profit before tax Coverage 100% (2019: 99%) of the total profits and losses that made up group profit before tax Key audit matters vs 2019 New risk IFRS 16 lease accounting – data capture and system implementation 103 2. Key audit matters: our assessment of risks of material misstatement Key audit matters are those matters that, in our professional judgement, 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. We summarise below the key audit matter in arriving at our audit opinion above, together with our key audit procedures to address those matters and, as required for public interest entities, our results from those procedures. This matter was addressed, and our results are based on procedures undertaken, in the context of, and solely for the purpose of, our audit of the financial statements as a whole, and in forming our opinion thereon, and consequently are incidental to that opinion, and we do not provide a separate opinion on this matter. IFRS 16 lease accounting – Data capture and system implementation Right of use assets 355EGP million; (2019: EGP265m) Lease liabilities EGP 390m; (2019: EGP269m) Refer to page 90 (Audit Committee Report), page 124 (accounting policy) and page 154 (financial disclosures) The risk Our response Data Capture and system implementation Our procedures included: The Group transitioned its largest two components from manually maintained schedules to a lease software system during the year. included in the system to previously audited manually maintained schedules and confirmed the key data elements for all leases were transitioned correctly. — Data comparisons: Reconciled the leases The transition requires a migration of data for a large portfolio of leases, which is a manual process with the potential for error in data capture. There is also a large number of lease renewals within the portfolio which require capture. — Reconciled all leases included in the system to the revenue generating branches held by the Group. — Methodology implementation: Assessed whether the methodology of the lease software calculation is in line with the requirements of the accounting standard — Reperformance: Reperformed the calculation for all new leases and lease renewals by inspecting the relevant contracts and ensuring the contractual terms had been appropriately captured and recorded in the system. Our results — The results of our procedures were satisfactory. We continue to perform procedures over Going Concern. However, taking into consideration the performance of the company in the year, we have not assessed this as one of the most significant risks in our current year audit and, therefore, it is not separately identified in our report this year. The application of IFRS 16 lease accounting identified previously was specific to the year of adoption. 104 3. Our application of materiality and an overview of the scope of our audit Group profit before tax EGP969m (2019: EGP758m) Group materiality EGP32.5m (2019: EGP32m) Materiality for the group financial statements as a whole was set at EGP32.5m (2019: EGP32m), determined with reference to a benchmark of group profit before tax , of which it represents 3.4% (2019: 4.2%). In line with our audit methodology, our procedures on individual account balances and disclosures were performed to a lower threshold, performance materiality, so as to reduce to an acceptable level the risk that individually immaterial misstatements in individual account balances add up to a material amount across the financial statements as a whole. Performance materiality was set at 65% (2019: 75%) of materiality for the financial statements as a whole, which equates to EGP21.125m (2019: EGP24m) for the group. We applied this percentage in our determination of performance materiality based on the level of identified misstatements during the prior period. We agreed to report to the Audit Committee any corrected or uncorrected identified misstatements exceeding EGP1.625m (2019: EGP1.6m), in addition to other identified misstatements that warranted reporting on qualitative grounds. Of the group’s 14 (2019: 15) reporting components, we subjected 5 (2019: 5) to full scope audits for group purposes and 9 (2019: 5) to specified risk‐ focused audit procedures over cash. The latter were not individually financially significant enough to require a full scope audit for group purposes, but did present specific individual risks that needed to be addressed. The components within the scope of our work accounted for the post‐consolidated percentages illustrated opposite. The Group team instructed component auditors as to the significant areas to be covered, including the relevant risks detailed above and the information to be reported back. The Group team approved the component materialities, which ranged from EGP11.375 to EGP22.75m (2019: EGP6.4m to EGP22.4m), having regard to the mix of size and risk profile of the Group across the components. The work on 4 of the 14 components (2019: 5 of the 15 components) was performed by component auditors and the rest, including the audit of the parent company, was performed by the Group team. The Group team did not visit component locations due to travel restrictions as a result of the COVID‐19 pandemic. Video and telephone conference meetings were held with component auditors in Egypt and Jordan instead. At these meetings, the risks, strategy and 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 (2019: visited locations in Egypt). EGP32.5m Whole financial statements materiality (2019: EGP32m) EGP21.125m Whole financial statements performance materiality (2019: EGP24m) EGP22.75m Range of materiality at 5 components (EGP11.375m – EGP22.75m) (2019: EGP6.4m to 22.4m) EGP1.625m Misstatements reported to the audit committee (2019: 1.6m) PBT Group materiality Post‐consolidated Group revenue Post consolidated Group profit before tax 6 6 100% (2019 99%) 93 94 3 3 100% (2019 100%) 97 97 Post‐consolidated Group total assets 5 5 100% (2019 100%) 95 95 Key: Full scope for group audit purposes 2020 Specified risk‐focused audit procedures 2020 Full scope for group audit purposes 2019 Specified risk‐focused audit procedures 2019 Residual components 105 4. Going concern 5. Fraud and breaches of laws and regulations – ability to detect The Directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Group or the Company or to cease their operations, and as they have concluded that the Group and the Company’s financial position means that this is realistic. They have also concluded that there are no material uncertainties that could have cast significant doubt over their ability to continue as a going concern for at least a year from the date of approval of the financial statements (“the going concern period”). its industry, and the We used our knowledge of the Group, general economic environment to identify the inherent risks to its business model and analysed how those risks might affect the Group’s and Company’s financial resources or ability to continue operations over the going concern period. The risk that we considered most likely to adversely affect the Group’s and Company’s available financial resources and metrics relevant to debt covenants over this period is the demand for the Group’s services being adversely impacted by extended periods of curfew or lockdown in the geographies in which the Group operates. We considered whether these risks could plausibly affect the liquidity or covenant compliance in the going concern period by comparing severe, but plausible downside scenarios that could arise from these risks individually and collectively against the level of available financial resources and covenants indicated by the Group’s financial forecasts. We assessed the completeness of the going concern disclosure Our conclusions based on this work: — we consider that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate; Identifying and responding to risks of material misstatement due to fraud To identify risks of material misstatement due to fraud (“fraud risks”) we assessed events or conditions that could indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud. Our risk assessment procedures included: — Enquiring of directors, the audit committee, internal audit and inspection of policy documentation as to the Group’s high‐level policies and procedures to prevent and detect fraud and the Group’s channel for “whistleblowing”, as well as whether they have knowledge of any actual, suspected or alleged fraud. — Reading Board minutes. — Considering performance targets for management. — Using our own forensic specialists to assist us in identifying fraud risks based on discussions of the circumstances of the Group. We communicated identified fraud risks throughout the audit team and remained alert to any indications of fraud throughout the audit. This included communication from the group to full scope component audit teams of relevant fraud risks identified at the Group level and request to full scope component audit teams to report to the Group audit team any instances of fraud that could give rise to a material misstatement at group. As required by auditing standards, and taking into account possible pressures to meet profit targets and our overall knowledge of the control environment, we perform procedures to address the risk of management override of controls and the risk of fraudulent revenue recognition, in particular the risk that contract revenue is incorrectly recognised and the risk that Group and component management may be in a position to make inappropriate accounting entries. — we have not identified, and concur with the directors’ We did not identify any additional fraud risks. assessment that there is not, a material uncertainty related to events or conditions that, individually or collectively, may cast significant doubt on the Group’s or Company's ability to continue as a going concern for the going concern period; and — we found the going concern disclosure in note 2 to be acceptable However, as we cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with judgements that were reasonable at the time they were made, the above conclusions are not a guarantee that the Group or the Company will continue in operation. We performed procedures including: — Identifying journal entries to test for all full scope components based on risk criteria and comparing the identified entries to supporting documentation. These included journal entries posted to revenue where the corresponding entry was posted to an unexpected account. 106 5. Fraud and breaches of laws and regulations – ability to detect (cont.) Identifying and responding to risks of material misstatement due to non‐compliance with laws and regulations We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements from our general commercial and sector experience, and through discussion with the directors and other management (as required by auditing standards), and from inspection of the Group’s regulatory and legal correspondence and discussed with the directors and other management the policies and procedures regarding compliance with laws and regulations. As the Group is regulated, our assessment of risks involved gaining an understanding of the control environment including complying with regulatory the requirements. entity’s procedures for team and remained alert We communicated identified laws and regulations throughout our to any indications of non‐ compliance throughout the audit. This included communication from the group to full‐scope component audit teams of relevant laws and regulations identified at the Group level, and a request for full scope component auditors to report to the group team any instances of non‐compliance with laws and regulations that could give rise to a material misstatement at group. The potential effect of these laws and regulations on the financial statements varies considerably. Firstly, the Group is subject to laws and regulations that directly affect the financial statements including financial reporting legislation (including related companies legislation), distributable profits legislation as set out by Companies (Jersey) Law 1991 and taxation legislation and we assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial statement items. to many other the Group is subject laws and Secondly, regulations where the consequences of non‐compliance could have a material effect on amounts or disclosures in the financial statements, for instance through the imposition of fines or litigation or the loss of the Group’s license to operate. We identified the following areas as those most likely to have such an effect: health and safety, anti‐bribery, employment law, certain aspects of company legislation and laws relating to the provision of healthcare services recognising the regulated nature of the Group’s activities and its legal form. Auditing standards limit the required audit procedures to identify non‐compliance with these laws and regulations to enquiry of the directors and other management and inspection of regulatory and legal correspondence, if any. Therefore if a breach of operational regulations is not disclosed to us or evident from relevant correspondence, an audit will not detect that breach. We discussed with the audit committee matters related to actual or suspected breaches of for which disclosure is not necessary, and considered any implications for our audit. regulations, laws or Context of the ability of the audit to detect fraud or breaches of law or regulation Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example, the further removed non‐ compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it. In addition, as with any audit, there remained a higher risk of non‐detection of fraud, as these may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. Our audit procedures are designed to detect material misstatement. We are not responsible for preventing non‐compliance or fraud and cannot be expected to detect non‐ compliance with all laws and regulations. 6. We have nothing to report on the other information in the Annual Report the other The directors are responsible for information presented in the Annual Report together with the financial statements. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except as explicitly stated below, any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit the information therein is materially misstated or work, inconsistent with the financial statements or our audit knowledge. Based solely on that work we have not identified material misstatements in the other information. Directors’ remuneration report In our opinion the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies (Jersey) Law 1991. 7. 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 — 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 explanations we require for our audit. We have nothing to report in these respects. 107 8. Respective responsibilities Directors’ responsibilities As explained more fully in their statement set out on page 97, 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 and parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of accounting unless they either intend to liquidate the Group or the parent Company 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 audit 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, individually 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. 9. 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 matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the 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 Chartered Accountants and Recognised Auditor 15 Canada Square London E14 5GL 18 May 2021 108 Consolidated Statement of Financial Position As at 31 December 2020 Notes 2020 2019 000’EGP 000’EGP Assets Non-current assets Property, plant and equipment Intangible assets and goodwill Right-Of-Use Asset Other investments 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 Short-term financial obligations Loans and borrowings Current tax liabilities Total current liabilities Total liabilities Total equity and liabilities 10 11, 12 26 13 15 16 18 19 17 20 20 20 20 20 20 6 8 22 25 26 23 24 25 793,013 1,659,755 354,688 9,604 2,817,060 100,115 383,480 - 276,625 600,130 1,360,350 4,177,410 1,072,500 1,027,706 (314,310) 49,218 (314,057) 145,617 603,317 2,269,991 156,383 2,426,374 240,333 3,408 67,617 430,315 741,673 383,623 342,784 25,416 257,540 1,009,363 1,751,036 4,177,410 785,546 1,660,836 264,763 6,391 2,717,536 84,339 322,805 247 221,617 408,892 1,037,900 3,755,436 1,072,500 1,027,706 (314,310) 46,330 (229,164) 155,823 456,661 2,215,546 144,710 2,360,256 174,000 5,273 81,305 306,384 566,962 320,083 260,853 25,416 221,866 828,218 1,395,180 3,755,436 The accompanying notes on pages 113- 158 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 17 May 2021 by: Dr. Hend El Sherbini Chief Executive Officer Hussein Choucri Independent Non-Executive Director Financial Statements • Consolidated Financial StatementsAnnual Report 2020Consolidated Income Statement For the Year Ended 31 December 2020 Revenue Cost of sales Gross profit Marketing and advertising expenses Administrative expenses Impairment loss on trade and other receivable Other Income Operating profit Finance costs Finance income Net finance cost Profit before tax Income tax expense Profit for the year Profit attributed to: Owners of the Company Non-controlling interests Earnings per share (expressed in EGP) Basic and Diluted Notes 3 16 7.2 7.2 7.2 8 9 109 2020 000’EGP 2,656,264 (1,313,688) 1,342,576 2019 000’EGP 2,226,495 (1,142,681) 1,083,814 (107,216) (221,874) (42,131) 14,191 985,546 (84,107) 67,643 (16,464) 969,082 (359,600) 609,482 594,015 15,467 609,482 - 0.99 (115,764) (189,465) (8,647) 20,902 790,840 (80,105) 47,409 (32,696) 758,144 (253,609) 504,535 510,931 (6,396) 504,535 - 3.41 The accompanying notes on pages 113- 158 form an integral part of these consolidated financial statements. Integrated Diagnostics HoldingsAnnual Report 2020110 Consolidated Statement of Other Comprehensive Income For the Year Ended 31 December 2020 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 2020 2019 000’EGP 000’EGP 609,482 504,535 (20,292) (20,292) 589,190 583,809 5,381 589,190 (59,402) (59,402) 445,133 471,991 (26,858) 445,133 The accompanying notes on pages 113- 158 form an integral part of these consolidated financial statements. Financial Statements • Consolidated Financial StatementsAnnual Report 2020Consolidated Statement of Cash Flows For the Year Ended 31 December 2020 111 Cash flows from operating activities Profit or loss for the year Adjustments for: Depreciation of property, plant and equipment ('PPE') Amortisation of intangible assets Unrealised foreign exchange gains and losses Interest Income Interest Expense Gain/(Loss) on sale of PPE Impairment in trade and other receivables Reversal of impairment in trade and other receivables Equity settled share-based payment receipt ROU Asset/Lease Termination Hyperinflation Cash (used in)/generated from operating activities Income taxes paid Change in Provisions Change in Inventories Change in Trade and other receivables Change in Trade and other payables Net cash from operating activities Cash flows from investing activities Proceeds from sale of PPE Interest received Acquisition of PPE Acquisition of intangible assets Decrease in restricted cash Change in other investment "acquisition" Change in other investment "sale" Net cash from investing activities Cash flows from financing activities Proceeds from loans and borrowings Repayment of loans and borrowings Payment of finance lease liabilities Dividends paid Interest paid Injection of cash by non-controlling interest Net cash flows used in financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at 31/12/2019 Effect of exchange rate fluctuations on cash held Cash and cash equivalents at 31/12/2020 Notes 2020 2019 000’EGP 000’EGP 969,082 758,144 10 11 7.2 7.2 7.2 16 22 18 17 179,435 5,926 12,580 (53,120) 71,527 (98) 42,131 - (3,213) (609) (14,523) 1,209,118 (220,875) (1,866) (17,121) (140,563) 53,821 882,515 5,316 51,187 (118,372) (7,638) 247 (112,115) 57,106 (124,268) 11,727 (25,416) (42,745) (450,737) (73,736) 17,372 (563,536) 194,711 408,892 (3,473) 600,130 146,617 6,862 15,517 (43,576) 60,997 (926) 8,647 (1,155) (6,391) - (3,833) 940,902 (184,856) (9,314) 4,933 (78,167) 23,700 697,198 3,555 48,086 (213,310) (4,688) 11,718 (282,781) 301,069 (136,351) 5,283 (25,416) (64,451) (450,502) (63,192) 49,540 (548,738) 12,109 412,607 (15,824) 408,892 The accompanying notes on pages 113- 158 form an integral part of these consolidated financial statements. Integrated Diagnostics HoldingsAnnual Report 2020112 y t i u q E n i s e g n a h C f o t n e m e t a t S d e t a d i l o s n o C 0 2 0 2 r e b m e c e D 1 3 d e d n E r a e Y e h t r o F - - - ) 4 1 8 4 ( , ) 3 9 8 4 8 ( , 2 7 3 7 1 , - ) 8 9 1 2 ( , 2 7 3 7 1 , - - - ) 6 1 6 2 ( , ) 3 9 8 4 8 ( , ) 7 3 7 0 5 4 ( , ) 2 8 8 8 ( , ) 5 5 8 1 4 4 ( , - - - ) 6 1 6 2 ( , ) 8 8 8 2 ( , ) 5 5 8 1 4 4 ( , ) 2 7 0 , 3 2 5 ( 2 9 2 , 6 ) 4 6 3 , 9 2 5 ( ) 9 5 3 , 7 4 4 ( - - - - - - - - - - - - - - - ) 3 9 8 4 8 ( , - - - - - - - - 8 8 8 2 , ) 3 9 8 , 4 8 ( 8 8 8 , 2 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - l a t o T y t i u q E 2 8 4 9 0 6 , ) 2 9 2 0 2 ( , 0 9 1 , 9 8 5 6 5 2 , 0 6 3 , 2 0 1 7 , 4 4 1 7 6 4 5 1 , ) 6 8 0 0 1 ( , 1 8 3 , 5 , 5 1 0 4 9 5 ) 6 0 2 0 1 ( , 9 0 8 , 3 8 5 6 4 5 , 5 1 2 , 2 1 6 6 , 6 5 4 , 5 1 0 4 9 5 - 5 1 0 , 4 9 5 - ) 6 0 2 0 1 ( , ) 6 0 2 , 0 1 ( - n o N l a t o T e t u b i r t t a s r e n w o e h t s t s e r e t n i g n i l l o r t n o C o t d e h t f o y n a p m o C i d e n a t e R i s g n n r a e l n o i t a s n a r T n o i t p o t u P l a g e L e v r e s e r e v r e s e r * e v r e s e r l a t i p a C e v r e s e r e r a h S i m u m e r p e r a h S l a t i p a C 3 2 8 , 5 5 1 ) 4 6 1 , 9 2 2 ( 0 3 3 , 6 4 ) 0 1 3 , 4 1 3 ( 6 0 7 , 7 2 0 , 1 0 0 5 , 2 7 0 , 1 4 7 3 , 6 2 4 , 2 3 8 3 , 6 5 1 1 9 9 , 9 6 2 , 2 7 1 3 , 3 0 6 7 1 6 , 5 4 1 ) 7 5 0 , 4 1 3 8 1 2 , 9 4 ) 0 1 3 , 4 1 3 ( 6 0 7 , 7 2 0 , 1 0 0 5 , 2 7 0 , 1 ) 2 0 5 0 5 4 ( , ) 6 8 3 8 ( , ) 6 1 1 2 4 4 ( , - 0 4 5 9 4 , ) 4 6 6 ( ) 9 8 8 3 8 ( , ) 5 1 5 , 5 8 4 ( - 0 4 5 9 4 , - ) 5 7 1 ( 9 7 9 , 0 4 - - ) 9 8 4 ( ) 9 8 8 3 8 ( , ) 4 9 4 , 6 2 5 ( ) 1 7 3 8 ( , ) 6 1 1 2 4 4 ( , - - ) 9 8 4 ( ) 6 7 9 , 0 5 4 ( - - - - - - 5 3 5 4 0 5 , ) 2 0 4 9 5 ( , 3 3 1 , 5 4 4 7 3 6 , 0 0 4 , 2 ) 6 9 3 6 ( , 8 8 5 , 0 3 1 ) 2 6 4 0 2 ( , ) 8 5 8 , 6 2 ( , 1 3 9 0 1 5 ) 0 4 9 8 3 ( , 1 9 9 , 1 7 4 9 4 0 , 0 7 2 , 2 6 0 7 , 6 9 3 , 1 3 9 0 1 5 - 1 3 9 , 0 1 5 - ) 0 4 9 8 3 ( , ) 0 4 9 , 8 3 ( - - - - - - - ) 9 8 8 3 8 ( , ) 9 8 8 , 3 8 ( - - - - 1 7 3 8 , - - - 1 7 3 , 8 - - - - - - - - - - - - - - - - - - - - - - - - - - - 3 6 7 , 4 9 1 ) 5 7 2 , 5 4 1 ( 9 5 9 , 7 3 ) 0 1 3 , 4 1 3 6 0 7 , 7 2 0 , 1 0 0 5 , 2 7 0 , 1 6 5 2 , 0 6 3 , 2 0 1 7 , 4 4 1 6 4 5 , 5 1 2 , 2 1 6 6 , 6 5 4 3 2 8 , 5 5 1 ) 4 6 1 , 9 2 2 ( 0 3 3 , 6 4 ) 0 1 3 , 4 1 3 ( 6 0 7 , 7 2 0 , 1 0 0 5 , 2 7 0 , 1 d o i r e p e h t r o f e m o c n i e v i s n e h e r p m o c r e h t O e m o c n i e v i s n e h e r p m o c l a t o T y n a p m o C e h t f o s r e n w o h t i w s n o i t c a s n a r T s n o i t u b i r t s i d d n a s n o i t u b i r t n o C r a e y e h t n i y t i l i b a i l n o i t p o t u p n i t n e m e v o M n i n o i t c e j n i h s a c t s e r e t n i g n i l l o r t n o c - n o N r a e y e h t g n i r u d s e i r a i d i s b u s d e t a d i l o s n o c n o i t a fl n i r e p y h f o t c a p m i r o f t n e m e t a t s e R m o r f g n i t l u s e r s t s e r e t n i g n i l l o r t n o c - n o N * r a e y e h t g n i r u d d e m r o f e v r e s e r l a g e L s d n e d i v i D s n o i t u b i r t s i d d n a s n o i t u b i r t n o c l a t o T s t s e r e t n i p i h s r e n w o n i e g n a h C 0 2 0 2 r e b m e c e D 1 3 t A r a e y e h t g n i r u d s e i r a i d i s b u s d o i r e p e h t r o f e m o c n i e v i s n e h e r p m o c r e h t O e m o c n i e v i s n e h e r p m o c l a t o T y n a p m o C e h t f o s r e n w o h t i w s n o i t c a s n a r T s n o i t u b i r t s i d d n a s n o i t u b i r t n o C r a e y e h t n i y t i l i b a i l n o i t p o t u p n i t n e m e v o M s n o i t u b i r t s i d d n a s n o i t u b i r t n o c l a t o T r a e y e h t g n i r u d s e i r a i d i s b u s d e t a d i l o s n o c n o i t a fl n i r e p y h f o t c a p m i r o f t n e m e t a t s e R m o r f g n i t l u s e r s t s e r e t n i g n i l l o r t n o c - n o N * r a e y e h t g n i r u d d e m r o f e v r e s e r l a g e L s t s e r e t n i p i h s r e n w o n i e g n a h C 9 1 0 2 r e b m e c e D 1 3 t A s d n e d i v i D 9 1 0 2 y r a u n a J 1 t a s A d o i r e p e h t r o f t fi o r P 0 2 0 2 y r a u n a J 1 t a s A d o i r e p e h t r o f t fi o r P ’ 0 0 0 P G E o t e l b a t u b i r t s i d t o n s i e v r e s e r s i Th . l a t i p a c d e u s s i ’ s y r a i d i s b u s h c a e f o % 0 5 s t n e s e r p e r s i h t t a h t e m i t h c u s l i t n u e v r e s e r l a g e l a o t n i t fi o r p t e n l a u n n a s t i f o % 5 t s a e l t a e d i s a t e s t s u m y r a i d i s b u s h c a e w a L n a i t p y g E r e d n U * . y n a p m o C e h t f o s r e n w o e h t Financial Statements • Consolidated Financial StatementsAnnual Report 2020 113 Notes to the Condensed Consolidated Financial Statements For the Year Ended 31 December 2020 (In the notes all amounts are shown in Egyptian Pounds “EGP’000” unless otherwise stated) Corporate information 1. The consolidated financial statements of Integrated Diagnostics Holdings plc and its subsidiaries (collectively, “the Group”) for the year ended 31 December 2020 were authorised for issue in accordance with a resolution of the direc- tors on 17 May 2021. 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 Companies 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 concentrated 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 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 state- ments 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 oper- ates (‘the functional currency’). The Group’s consolidated financial statements are presented in Egyptian Pounds, being the reporting currency of the main Egyptian trading subsidiaries within the Group and the primary economic environment in which the Group operates. 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 As part of the going concern assessment to assess the resilience of the Group’s financial position and liquidity, man- agement has considered several scenarios and a reasonable, but plausible severe downside test to the period from the annual account’s approval to May 2022. The severe downside scenario has anticipated the same lowest volume that occurred in April and May 2020 for Q2 and Q3 2021. This lowest level occurred due to the disruption caused by the pandemic at the very beginning where the adaptability of people was significantly low, and also this is the period in which the government had taken the strictest restrictions for business and movement of people. This volume represents a 40% reduction than the average normal rate in which the company used to achieve before the pandemic. Additionally, Q4 2021 assumes the same trading levels as January 2021 (which does not factor in seasonality, as Integrated Diagnostics HoldingsAnnual Report 2020114 average monthly revenue in Q4 tends to be around 20% higher than January of the same year) and is more than 40% lower than Q4 2020. Revenue for January and February 2022 was also assumed to be in line with January 2021, while March 2022 was assumed at a 20% increase from February 2022 due to seasonality, and finally April 2022 factored in a reduction in volumes during Ramadan. The scenario has assumed that there is no fixed cost reduction; no reduction in the forecasted capital expenditure, while it has assumed the postponement of dividend payments. That said scenario did not affect the Group’s ability to meet its financial obligation nor the financial covenants. The sever downside scenarios showed that the Group’s current financial position and cash balance, generated from its operational activities, will alleviate any potential downside risk; moreover, it presents that the group has sufficient cash within this downside scenario to repay debts and to continue to operate as a going concern without the need to refinance the debt or raise future equity. Consequently, the Directors are confident that the Group will have suf- ficient funds to continue to meet its liabilities as they fall due for at least 12 months from the date of approval of the financial statements and therefore have prepared the financial statements on a going concern basis. Basis of consolidation 2.1. The consolidated financial statements comprise the financial statements of the Group and its subsidiaries as at 31 December 2020. Control is achieved when the Group is exposed, or has rights, to variable returns from its involve- ment with the investee and has the ability to affect those returns through its power over the investee. Subsidiaries i. 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. Change in subsidiary ownership and loss of control ii. Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. 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. Transactions eliminated on consolidation iii. Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transac- tions, are eliminated. Unrealised gains arising from transactions with equity-accounted investees are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment. 2.2. Significant accounting policies The accounting policies set out below have been consistently applied to all the years presented in these consolidated financial statements. The accounting policies applied by the Group in these condensed consolidated financial statements are consis- tent with those applied in the audited consolidated financial statements published as at and for the year ended 31 December 2019. Financial Statements • Consolidated Financial StatementsAnnual Report 2020115 Business combinations and goodwill a) Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, which is measured at acquisition date fair value, and the amount of any non-controlling interests in the acquiree. For each business combination, the Group elects whether to measure the non- controlling interests in the acquiree at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred and included in administrative expenses. When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accor- dance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. Any con- tingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Goodwill is initially measured at cost (being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interests) and any previous interest held over the net identifiable assets acquired and 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 on an annual basis, goodwill acquired in a business combina- tion 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 determining 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. Fair value measurement b) The Group measures financial instruments such as non-derivative financial instruments and contingent consider- ation 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 determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period. For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy, as explained above. The fair value less any estimated credit adjustments for financial assets and liabilities with maturity dates less than one year is assumed to approximate their carrying value. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contracted cash flows at the current market interest rate that is available to the Group for similar transactions. Integrated Diagnostics HoldingsAnnual Report 2020116 Revenue recognition c) 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. The following steps are considered for patients served under contracts: 1. 2. Identification of the Contracts: written contracts are signed between IDH and customers. The contracts stipulate the duration, price per test and credit period. Transaction price: Services provided by the Group are distinct in the contract, as the contract stipulates the series of tests’ names/types to be conducted along with its distinct prices. Allocation of price to performance obligations: Stand-alone selling price per test is stipulated in the contract. In case of discounts, it is allocated proportionally to all of tests prices in the contract. The performance obligations are the diagnostics tests within the pathology and radiology services. The performance obligation is achieved when the customer receives their test results, and so are recognised at point in time. 5. That there are no other revenue streams other than those whose performance obligation occurs at a point in time. 3. 4. Income Taxes d) 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. Current tax i. 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. Deferred tax ii. Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date. Deferred tax is recognised on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised. Deferred tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the reporting date and are expected to apply when the related deferred income tax asset is realized, or the deferred income tax liability is settled. Financial Statements • Consolidated Financial StatementsAnnual Report 2020117 Foreign currency e) 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 cur- rency 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 exchange prevailing at the reporting date and their statements of profit or loss are translated at average rate (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions). The exchange differences arising on translation for consolidation are recognised in other comprehensive income and accumulated in the translation reserve or NCI as the case may be. On disposal of a foreign operation, the component of other comprehensive income relating to that particular foreign operation is recognised in profit or loss. Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition are treated as assets and liabilities of the foreign operation and translated at the spot rate of exchange at the reporting date. Hyperinflationary Economies f) The financial statements of “SAMA Medical Laboratories Co. and AL-Mokhtabar Sudanese Egyptian Co.” report their financial statements in the currency of a hyperinflationary economy. In accordance with IAS 29 financial report- ing in Hyperinflationary Economies, the financial statements of those subsidiaries were restated by applying the consumer price index at closing rates in December 2020 6,746 (2019 December, 2,321) before they were included in the consolidation financial statements. The comparative information as the financial information as the financial information of SAMA Medical Laboratories Co. and AL-Mokhtabar Sudanese Egyptian Co whose functional currency is hyperinflationary is translated into a different presentation currency (EGP), this is done in accordance with IAS 21 as follows. If the presentation currency is not hyperinflationary, then comparative amounts are not restated for changes in either the general price level in the functional currency (i.e. as otherwise required by IAS 29) or the exchange rate between the functional and presentation currencies. As such, the comparative amounts remain those amounts reported as current for the previous reporting period. When the functional currency of a foreign operation is the currency of a hyperinflationary economy, all assets, liabilities, equity items, income and expenses are translated using an official exchange rate prevailing at the end of each reporting period. Exchange differences arising, if any, are recognized on income statement within the finance cost and accumulated in equity (attributed to non-controlling interests as appropriate). The gain or loss on the net monetary position is recognised in profit or loss. Property, plant and equipment g) All property and equipment are stated at historical cost less accumulated depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. The carry- ing amount of the replaced part is derecognised. All other repairs and maintenance are charged to the consolidated statement of income during the financial period in which they are incurred. Land is not depreciated. Laboratory Equipment held to perform the ‘Hub spoke’ at the Mega Lab and provided under lease arrangements are depreciated under a unit of production method as this most closely reflects the consumption of benefits from the equipment. Integrated Diagnostics HoldingsAnnual Report 2020118 Depreciation on other assets is calculated using the straight-line method to allocate their cost or revalued amounts to their residual value over their estimated useful lives, as follows: Buildings Medical, electric and information systems equipment Leasehold improvements Fixtures, fittings & vehicles 50 years 4-10 years 4-5 years 4-16 years The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within ‘Other (losses)/gains – net’ in the consolidated statement of income. Intangible assets h) Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition. Following initial recognition, intan- gible 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 expen- diture is reflected in profit or loss in the period in which the expenditure is incurred. The useful lives of intangible assets are assessed as either finite or indefinite. Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the statement of 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 indi- vidually or at the cash-generating unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis. Financial Statements • Consolidated Financial StatementsAnnual Report 2020119 Goodwill Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred over interest in net fair value of the net identifiable assets, liabilities and contingent liabilities of the acquiree and the fair value of the non-controlling interest in the acquire. Goodwill is stated at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash-generating units (CGUs), or groups of CGUs, that is expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. the impairment assessment is done one an annual basis. Brand Brand names acquired in a business combination are recognised at fair value at the acquisition date and have an indefinite useful life. The Group brand names are considered to have indefinite useful life as the Egyptian brands have been established in the market for more than 40 years and the health care industry is very stable and continues to grow. The Brands are not expected to become obsolete and can expand into different countries and adjacent businesses, in addition, there is a sufficient ongoing marketing efforts to support the brands and this level of marketing effort is economically reasonable and maintainable for the foreseeable future. Financial instruments – initial recognition and subsequent measurement J) 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, as appro- priate. 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. Subsequent measurement For purposes of subsequent measurement, financial assets are classified in three categories: • Financial assets at fair value through profit or loss • Fair value through other comprehensive income • Amortised cost The Group did not hold any material financial assets classified as financial assets at fair value through the profit or loss at 31 December 2020 and 31 December 2019. Integrated Diagnostics HoldingsAnnual Report 2020120 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 arrangement, 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 uses an allowance matrix to measure the ECLs of trade receivables from individual customers, which comprise a very large number of small balances. Loss rates are calculated using a ‘roll rate’ method based on the probability of a receivable progressing through successive stages of delinquency to write-off. Roll rates are calculated separately for exposures in different segments based on credit risk characteristics, age of customer relationship. Loss rates are based on actual credit loss experience over the past three years. These rates are multiplied by scalar factors to reflect differences between economic conditions during the period over which the historical data has been collected, current conditions and the Groups view of economic conditions over the expected lives of the receivables. Financial Statements • Consolidated Financial StatementsAnnual Report 2020121 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. Put option Echo-Scan included in long-term financial obligations are carried at fair value (note 26). 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, put option (Bio lab) 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. Offsetting of financial instruments iii. 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 k) 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 11 The Group assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indica- tion 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 dis- count 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 transac- tions 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. Integrated Diagnostics HoldingsAnnual Report 2020122 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 indica- tion that previously recognised impairment losses no longer exist or have decreased. If such indication exists, the Group estimates the asset’s or CGU’s recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recover- able 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 impair- ment loss is recognised. Impairment losses relating to goodwill cannot be reversed in future periods. Intangible assets with indefinite useful lives are tested for impairment annually as at 31 October at the CGU level, as appropriate, and when circumstances indicate that the carrying value may be impaired. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely independent cash inflows (CGU). Prior impairments of non-financial assets (other than goodwill) are reviewed for possible reversal at each reporting date. 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 77,727K (31 December 2019: EGP 36,012K) Financial Statements • Consolidated Financial StatementsAnnual Report 2020123 Inventories l) Inventories are stated at the lower of cost and net realisable value. Cost is determined using the weighted average method. Net realisable value is the estimated selling price in the ordinary course of business, less estimated selling, and distribution expenses. Cash and short-term deposits m) 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. Provisions n) Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Group expects some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain. The expense relating to a provision is presented in the statement of profit or loss net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as a finance cost. Pensions and other post-employment benefits o) 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. Segment reporting p) 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 per- formance of the operating segments, has been identified as the steering committee that makes strategic decisions. The preparation of the Group’s consolidated financial statements in conformity with adopted IFRSs requires man- agement to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities. Integrated Diagnostics HoldingsAnnual Report 2020 124 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 Notes 14 Notes 14 Judgments In preparing these consolidated financial statements, management have made a material judgment, that affect the application of the Group’s lease accounting policy and the reported amounts of assets, liabilities, and expenses. Information about judgment, estimate and assumptions relating to leases are set out in note 27. 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 state- ments were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Group. Such changes are reflected in the assumptions when they occur. Impairment of intangible assets The Group tests annually whether goodwill and other intangibles with indefinite lives have suffered any impairment. Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The recoverable amounts of cash generating units have been determined based on value in use. The value in use calculation is based on a discounted cash flow (“DCF”) model. The cash flows are derived from the budget for the next five years and do not include restructuring activities that the Group is not yet. committed to or significant future investments that will enhance the asset’s performance of the CGU being tested. Significant judgements are used to estimate the growth in the volume of patients and applied in computing the recoverable amount of the different Echo Scan CGUs. The sensitivity of estimates used to calculate the value in use of each CGU are discussed in note12. Leases as lessee (IFRS 16) q) At the inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or con- tains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. As a lessee The Group allocates the consideration in the contract to each lease component on the basis of its relative stand- alone price and the aggregate stand-alone price of the non-lease components. Financial Statements • Consolidated Financial StatementsAnnual Report 2020125 The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received. The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term, unless the lease transfers ownership of the underlying asset to the Group by the end of the lease term or the cost of the right-of-use asset reflects that the Group will exercise a purchase option. In that case the right-of-use asset will be depreciated over the useful life of the underlying asset, which is determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability. The lease liability is initially measured at the present value of the lease payments that are not paid at the commence- ment date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate. Lease payments included in the measurement of the lease liability comprise the following: • • fixed payments, including in-substance fixed payments; variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date amounts expected to be payable under a residual value guarantee; and the exercise price under a purchase option that the Group is reasonably certain to exercise, lease payments in an optional renewal period if the Group is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Group is reasonably certain not to terminate early. • • • • The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, there is a change in the Group’s estimate of the amount expected to be payable under a residual value guarantee, if the Group changes its assessment of whether it will exercise a purchase, extension or termination option or if there is a revised in-substance fixed lease payment. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, to the extent that the right-of-use asset is reduced to nil, with any further adjustment required from the remeasurement being recorded in profit or loss. Integrated Diagnostics HoldingsAnnual Report 2020126 Segment information 3. The Group has four operating segments based on geographical location rather than two operating segments based on service provided, as the Group’s Chief Operating Decision Maker (CODM) reviews the internal management reports and KPIs of each geography. The Group operates in four geographic areas, Egypt, Sudan, Jordan and Nigeria. The revenue split between the four regions is set out below. For the year ended Egypt region 31-Dec-20 31-Dec-19 2,173,411 1,902,788 For the year ended Egypt region 31-Dec-20 31-Dec-19 557,743 499,745 Revenue by geographic location Sudan region 37,695 36,927 Jordan region 409,069 256,700 Nigeria region 36,089 30,080 Net profit and loss by geographic location Sudan region 7,529 3,684 Jordan region 71,043 44,162 Nigeria region (26,833) (43,056) Total 2,656,264 2,226,495 Total 609,482 504,535 Walk-in contract Walk-in contract Revenue by categories 2020 2019 EGP’000 EGP’000 1,119,953 1,536,311 2,656,264 895,335 1,331,160 2,226,495 Revenues by categories (restated) 2020 2019 EGP’000 EGP’000 1,221,926 1,434,338 2,656,264 974,036 1,252,459 2,226,495 Financial Statements • Consolidated Financial StatementsAnnual Report 2020127 In 2020, management revisited the definition of contract customers who have contractual agreements and are granted discounts above 20%, hence all cash paying customers with discounts equal or below 20% were reclassified as walk-in”. Before 2019, the contract client’s definition included all patients who were granted discounts from the regular prices, irrespective of any contractual agreement. Therefore, management revisited the definition and the criteria so that contract clients only include patients who have contractual agreements with IDH. The operating segment profit measure reported to the CODM is EBITDA, as follows: Pathology Radiology Revenue by type Net profit by type 2020 EGP’000 2,595,173 61,092 2019 EGP’000 2,182,208 44,287 2,656,264 2,226,495 2020 2019 EGP’000 EGP’000 645,307 (35,826) 609,482 556,929 (52,395) 504,534 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 2020 EGP’000 985,546 179,046 5,926 1,170,518 2019 EGP’000 790,840 146,617 6,862 944,319 The non- current assets reported to CODM is in accordance with IFRS are as follows: For the year ended Egypt region 31-Dec-20 31-Dec-19 2,415,220 2,334,043 Non-current assets by geographic location Sudan region 24,132 17,518 Jordan region 263,767 237,155 Nigeria region 113,941 128,820 Total 2,817,060 2,717,536 Capital management 4. The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a s in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the group may adjust the amount of dividends paid to sharehold- ers, return capital to shareholders, issue new shares or sell assets to reduce debt. The repatriation of a declared dividend from Egyptian group entities are subject to regulation by Egyptian authorities. The outcome of an Ordinary General Meeting of Shareholders declaring a dividend is first certified by the General Authority for Investment and Free Zones (GAFI). Approval is subsequently transmitted to Misr for Central Clearing, Depository and Registry (MCDR) to distribute dividends to all shareholders, regardless of their domicile, following notification of shareholders via publication in one national newspapers. Integrated Diagnostics HoldingsAnnual Report 2020128 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 obliga- tions) less cash and cash equivalents. As a provider of medical diagnostic services, IDH’s operations in Sudan are not subject to sanctions. Total liabilities Less: cash and short-term deposits (Note 17) Net debt Total Equity Net debt to equity ratio 2020 1,507,295 (600,130) 907,165 2019 1,215,907 (408,892) 807,015 2,426,374 2,360,256 37.4% 34.2% No changes were made in the objectives, policies or processes for managing capital during the years ended 31 December 2020 and 2019. Group information 5. Information about subsidiaries The consolidated financial statements of the Group include: Al Borg Laboratory Company (“Al-Borg”) Al Mokhtabar Company for Medical Labs (“Al Mokhtabar”) Medical Genetic Center Al Makhbariyoun Al Arab Group (Hashemite Kingdom of Jordan) Golden Care for Medical Services Integrated Medical Analysis Company (S.A.E) SAMA Medical Laboratories Co. (“Ultralab medical laboratory “) AL-Mokhtabar Sudanese Egyptian Co. Integrated Diagnostics Holdings Limited Dynasty Group Holdings Limited Eagle Eye Echo-Scan WAYAK Pharma % equity interest Principal activities Country of Incorporation 2020 Medical diagnostics service Egypt 99.30% Medical diagnostics service Medical diagnostics service Medical diagnostics service Holding company of SAMA Medical diagnostics service Egypt Egypt Jordan Egypt Egypt 99.90% 55.00% 60.00% 100.00% 99.60% Medical diagnostics service Sudan 80.00% Medical diagnostics service Sudan 65.00% 2019 99.30% 99.90% 55.00% 60.00% 100.00% 99.60% 80.00% 65.00% Intermediary holding company Intermediary holding company Intermediary holding company Medical diagnostics service Medical services Caymans Island 100.00% 100.00% England and Wales 51.00% 51.00% Mauritius 76.50% Nigeria Egypt 100.00% 99.99% 76.50% 100.00% 99.99% 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. Financial Statements • Consolidated Financial StatementsAnnual Report 2020Non-Controlling interest 6. Non-Controlling Interest is measured at the proportionate share basis. Financial information of subsidiaries that have material non-controlling interests is provided below: Proportion of equity interest held by non-controlling interests: 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 Dynasty Group Holdings Limited England and Wales 2020 45.0% 40.0% 20.0% 0.7% 49% 129 2019 45.0% 40.0% 20.0% 0.7% 49% Eagle Eye Mauritius 23.53% 23.53% Integrated Diagnostics HoldingsAnnual Report 2020130 . s n o i t a n m i i l e y n a p m o c - r e t n i e r o f e b s t n u o m a n o d e s a b s i n o i t a m r o f n i s i Th w o . l e b d e d i v o r p s i s e i r a i d i s b u s e s e h t f o n o i t a m r o f n i l a i c n a n fi d e s i r a m m u s e Th l a t o T p u o r G y t s a n y D h t i w s e i r a d s b u s i i I C N l a i r e t a m m i r e h t O g r o b A l y n a p m o C y r o t a r o b a L ’ 0 0 0 P G E ’ 0 0 0 P G E ’ 0 0 0 P G E ’ 0 0 0 P G E , 0 4 1 1 9 0 3 , 6 0 0 4 3 7 , ) 0 2 4 7 1 ( , 6 8 5 , 6 1 7 8 6 4 5 1 , ) 6 8 0 , 0 1 ( , 2 4 9 1 1 2 1 , , 3 9 1 0 8 6 1 , ) 7 7 4 4 0 5 ( , ) 1 2 8 0 5 8 ( , 7 3 8 , 6 3 5 , 1 3 8 3 , 6 5 1 9 9 0 2 2 1 , ) 7 4 8 5 2 ( , ) 9 1 9 4 3 ( , ) 1 6 2 6 ( , 2 7 0 , 5 5 9 8 0 6 3 , ) 2 3 8 6 2 ( , ) 9 8 7 5 1 ( , ) 1 2 6 , 2 4 ( ) 2 9 9 5 1 ( , ) 1 6 2 , 9 ( 1 4 9 3 1 1 , 5 1 6 3 4 , ) 1 2 6 3 2 ( , ) 1 2 1 4 2 ( , 4 1 8 , 9 0 1 3 2 0 , 5 4 7 3 9 0 9 8 , ) 1 7 1 4 8 1 ( , ) 6 4 7 1 1 5 ( , ) 1 6 2 6 ( , 9 5 7 , 8 8 1 , 7 3 2 1 3 7 1 , 0 6 0 1 , 8 1 3 4 5 4 , 8 7 3 , 5 5 4 9 9 5 2 , 3 6 2 5 2 7 6 5 5 , , 3 9 3 0 4 0 1 , ) 3 8 9 6 1 2 ( , ) 3 5 8 2 6 4 ( , 2 8 2 , 7 1 9 4 2 3 , 0 4 ) 9 1 1 3 4 ( , ) 6 8 7 3 6 ( , 5 0 6 3 1 1 , - 0 0 7 , 6 - - 3 2 9 1 1 9 , 9 8 8 8 3 2 , 1 9 6 1 , 9 8 8 , 8 3 2 3 0 3 7 5 3 , 5 9 8 6 3 4 , ) 7 9 5 9 9 1 ( , ) 5 2 6 4 5 2 ( , 6 7 9 , 9 3 3 5 0 4 , 2 - 4 8 8 8 9 4 , ) 6 3 4 7 2 1 ( , ) 6 7 7 8 1 3 ( , 9 6 0 9 0 4 , 3 4 0 1 7 , ) 1 9 6 2 ( , 2 5 3 , 8 6 9 1 7 8 2 , ) 8 8 0 , 1 ( 7 3 2 3 8 1 , 5 8 1 5 5 1 , ) 9 4 2 4 6 ( , ) 7 1 5 4 0 1 ( , 6 5 6 , 9 6 1 2 8 5 , 8 6 - 3 7 0 3 1 3 , 8 9 8 2 3 , ) 6 5 6 1 7 2 ( , ) n a d r o J e t i m e h s a H ( f o m o d g n K i ’ 0 0 0 P G E p u o r G b a r A l A n u o y i r a b h k a M l A ’ 0 0 0 P G E - 2 2 8 2 , ) 2 1 4 3 ( , ) 2 1 4 , 3 ( ) 9 4 5 1 ( , - 6 3 7 5 0 1 4 , ) 7 2 ( ) 5 0 7 4 ( , 9 0 1 9 4 9 9 0 2 2 1 , ) 7 4 8 5 2 ( , ) 9 1 9 4 3 ( , ) 1 6 2 6 ( , 2 7 0 , 5 5 r e t n e C c i t e n e G l i a c d e M : 0 2 0 2 r o f s s o l r o t fi o r p f o t n e m e t a t s d e s i r a m m u S o t d e t a c o l l a e m o c n i e v i s n e h e r p m o c r e h t O t s e r e t n i g n i l l o r t n o c - n o n o t d e t a c o l l a t fi o r P t s e r e t n i g n i l l o r t n o c - n o n e m o c n i e v i s n e h e r p m o c l a t o T e m o c n i e v i s n e h e r p m o c r e h t O n o i t i s o p l a i c n a n fi f o t n e m e t a t s d e s i r a m m u S : 0 2 0 2 r e b m e c e D 1 3 t a s a e u n e v e R t fi o r P g n i l l o r t n o c - n o n o t e l b a t u b i r t t a s t e s s a t e N t s e r e t n i r a e y r o f n o i t a m r o f n i w o fl h s a c d e s i r a m m u S : 0 2 0 2 r e b m e c e D 1 3 d e d n e h s a c d n a h s a c n i ) e s a e r c e d ( / e s a e r c n i t e N s t n e l a v i u q e I C N o t d n e d i v i D g n i t a r e p O g n i t s e v n I g n i c n a n F i s e i t i l i b a i l t n e r r u c - n o N s t e s s a t n e r r u c - n o N s t e s s a t n e r r u C s e i t i l i b a i l t n e r r u C s t e s s a t e N 2 7 6 , 2 5 5 1 3 , 4 7 Financial Statements • Consolidated Financial StatementsAnnual Report 2020 131 ) 7 5 9 5 1 2 ( , ) 3 3 2 9 6 3 ( , 6 7 1 , 1 5 8 , 1 8 0 7 , 4 4 1 7 7 5 6 , , 3 6 9 6 1 7 ) 5 2 5 7 6 ( , ) 9 7 0 1 8 6 ( , ) 4 6 0 , 5 2 ( , 2 0 5 3 0 3 1 , , 4 6 8 2 3 1 1 , 7 8 8 0 2 7 , ) 4 1 1 2 3 ( , 3 7 7 , 8 8 6 ) 6 9 3 6 ( , ) 2 6 4 , 0 2 ( , 0 4 5 4 7 6 2 , 2 1 7 0 3 , ) 4 2 6 7 4 ( , ) 6 2 5 0 2 ( , ) 0 5 1 , 8 6 ( ) 0 9 0 6 2 ( , ) 5 9 7 , 5 1 ( - 7 7 6 0 6 1 , 2 7 5 6 2 , ) 6 5 1 7 2 ( , 3 9 0 , 0 6 1 4 4 4 , 8 7 - ) 0 0 5 ( 5 6 8 4 3 , ) 9 6 5 6 6 ( , , 6 6 1 2 0 5 1 , 7 1 2 4 4 0 9 1 , 9 5 5 1 5 4 9 4 7 , 1 5 4 2 6 3 1 2 5 , 7 9 4 5 9 7 , ) 6 5 5 4 9 ( , ) 9 3 9 0 7 1 ( , 4 6 3 , 1 5 0 , 1 9 2 8 - 3 7 1 3 4 4 , ) 0 3 7 3 5 ( , ) 0 6 2 9 2 4 ( , - - 4 3 3 7 7 8 , 3 3 8 3 7 2 , 8 4 2 2 , 3 3 8 , 3 7 2 6 4 5 0 8 2 , 1 4 2 7 9 3 , ) 3 9 1 9 6 ( , ) 6 8 1 3 2 1 ( , 8 0 4 , 5 8 4 6 3 4 , 3 - 4 1 4 9 2 2 , 9 6 3 8 6 , ) 3 8 1 0 6 2 ( , ) 4 0 2 , 2 3 ( ) 7 1 8 , 9 3 ( 0 0 6 , 7 3 l a t o T p u o r G y t s a n y D h t i w s e i r a d s b u s i i I C N l a i r e t a m m i r e h t O g r o b A l y n a p m o C y r o t a r o b a L ’ 0 0 0 P G E ’ 0 0 0 P G E ’ 0 0 0 P G E ’ 0 0 0 P G E 0 0 7 6 5 2 , 4 0 5 3 4 , ) 8 7 7 1 1 ( , 6 2 7 , 1 3 2 0 4 7 1 , ) 1 1 7 , 4 ( 1 9 4 9 6 1 , 2 9 8 7 7 , ) 8 0 2 2 5 ( , ) 7 4 3 6 4 ( , 8 2 8 , 8 4 1 1 3 5 , 9 5 6 6 5 4 4 , ) 5 9 5 5 1 ( , ) 1 0 5 6 2 ( , 7 7 5 6 , 7 4 0 , 9 - 8 2 6 7 , ) 5 8 3 ( ) 5 8 3 ( ) 3 7 1 ( - - 8 8 7 0 0 3 6 , ) 5 0 6 1 ( , 3 8 4 , 5 8 6 4 , 2 - - - 0 1 3 0 1 3 ) n a d r o J e t i m e h s a H ( f o m o d g n K i ’ 0 0 0 P G E p u o r G b a r A l A n u o y i r a b h k a M l A ’ 0 0 0 P G E r e t n e C c i t e n e G l i a c d e M : 9 1 0 2 r o f s s o l r o t fi o r p f o t n e m e t a t s d e s i r a m m u S o t d e t a c o l l a e m o c n i e v i s n e h e r p m o c r e h t O t s e r e t n i g n i l l o r t n o c - n o n o t d e t a c o l l a t fi o r P t s e r e t n i g n i l l o r t n o c - n o n e m o c n i e v i s n e h e r p m o c l a t o T e m o c n i e v i s n e h e r p m o c r e h t O n o i t i s o p l a i c n a n fi f o t n e m e t a t s d e s i r a m m u S : 9 1 0 2 r e b m e c e D 1 3 t a s a e u n e v e R t fi o r P g n i l l o r t n o c - n o n o t e l b a t u b i r t t a s t e s s a t e N t s e r e t n i r a e y r o f n o i t a m r o f n i w o fl h s a c d e s i r a m m u S : 9 1 0 2 r e b m e c e D 1 3 d e d n e h s a c d n a h s a c n i ) e s a e r c e d ( / e s a e r c n i t e N s t n e l a v i u q e I C N o t d n e d i v i D g n i t a r e p O g n i t s e v n I g n i c n a n F i s e i t i l i b a i l t n e r r u c - n o N s t e s s a t n e r r u c - n o N s t e s s a t n e r r u C s e i t i l i b a i l t n e r r u C s t e s s a t e N Integrated Diagnostics HoldingsAnnual Report 2020 132 Expenses and other income 7. Included in profit and loss are the following: Impairment on trade and other receivables (Credit)/Charge for increase in provisions Professional and advisory fees Amortisation Depreciation Total 2020 2019 EGP’000 EGP’000 42,131 (1,865) 16,408 5,926 179,046 241,646 8,647 3,521 9,499 6,862 146,617 175,146 7.1. 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 7.2. Net finance costs Interest expense Net foreign exchange loss Bank Charges Total finance costs Interest income Gain on hyperinflationary net monetary position Total finance income Net finance cost 2020 2019 EGP’000 EGP’000 8,544 4,008 55 8,512 2,992 164 12,607 11,668 2020 2019 EGP’000 EGP’000 (67,851) (12,580) (3,676) (84,107) (60,997) (15,517) (3,591) (80,105) 2020 2019 EGP’000 EGP’000 53,120 14,523 67,643 43,576 3,833 47,409 (16,464) (32,696) Financial Statements • Consolidated Financial StatementsAnnual Report 2020133 Employee numbers and costs 7.3. The average number of persons employed by the Group (including directors) during the year and the aggregate pay- roll costs of these persons, analysed by category, were as follows: 2020 2019 Medical Administration Total Medical Administration Total Average number of employees 4,813 798 5,611 4,168 1,272 5,440 Wages and salaries Social security costs Contributions to defined contribution plan Total 2020 EGP’000 Medical Administration 363,397 19,736 6,888 127,655 5,269 1,473 2019 EGP’000 Total 491,052 25,005 8,361 Medical Administration 357,308 20,082 5,700 109,932 4,647 1,399 Total 467,240 24,729 7,099 390,021 134,397 524,418 383,090 115,978 499,068 Details of Directors’ and Key Management remuneration and share incentives are disclosed in the Remuneration Report and note 28. 8. a) Income tax Amounts recognised in profit or loss Current year tax WHT suffered Current tax DT on undistributed reserves DT on reversal of temporary differences Total Deferred tax Tax expense recognized in profit or loss 2020 EGP’000 (268,796) (24,470) (293,266) (67,124) 790 (66,334) (359,600) 2019 EGP’000 (220,390) (27,581) (247,971) (5,241) (397) (5,638) (253,609) Reconciliation of effective tax rate b) The Company is treated as a tax resident of Jersey for the purpose of Jersey tax laws and is subject to a tax rate of 0%. The Company 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% (2019: 22.5%) tax rate. The reconciliation of effective income tax rate has been performed using this rate. In accordance with the Egyptian Law No. 991 of 2005, the employees’ profit share are deducted from the retained earnings of the company and are approved by the general association meeting. Integrated Diagnostics HoldingsAnnual Report 2020134 In July 2018, the Egyptian Government imposed a new tax related to health care of 0.25% on total income. As result the Group has recorded an additional EGP 6.8m in income tax expense. Profit before tax Profit before tax multiplied by rate of corporation tax in Egypt of 22.5% (2019: 22.5%) Effect of tax rate in Jersey of 0% (2019: 0%) Effect of tax rates in Jordan, Sudan and Nigeria of 21%, 30% and 30% respectively (2019: 21%, 15% and 30%) Tax effect of: Change in unrecognized deferred tax assets Deferred tax arising on undistributed dividend Non-deductible expenses for tax purposes - employee profit share Current year losses for which no deferred tax asset was recognized Non-deductible expenses for tax purposes - other Tax expense recognised in profit or loss 2020 2019 EGP’000 EGP’000 969,083 218,044 12,839 (3,330) 8,947 91,593 18,223 11,507 1,778 758,143 170,582 12,901 (3,705) 2,018 32,822 22,430 12,025 4,536 359,600 253,609 Deferred tax Deferred tax relates to the following: Property, plant and equipment Intangible assets Undistributed reserves from group subsidiaries* Provisions and finance lease liabilities Total deferred tax assets - liability 2020 Assets EGP’000 - - - 1,360 1,360 - Liabilities EGP’000 (18,334) (106,702) (116,657) - (241,693) (240,333) 2019 Assets EGP’000 - - - 1,360 1,360 - Liabilities EGP’000 (17,460) (108,365) (49,534) - (175,359) (174,000) Financial Statements • Consolidated Financial StatementsAnnual Report 2020135 The difference between net deferred tax balances recorded on the income statement is as follows: 2020 Property, plant and equipment Intangible assets Undistributed dividend from group subsidiaries Provisions and finance lease liabilities 2019 Property, plant and equipment Intangible assets Undistributed dividend from group subsidiaries Provisions and finance lease liabilities Deferred tax recognized in profit or loss (874) 1,663 (91,593) - Net Balance 1 January (17,460) (108,365) (49,534) 1,360 WHT tax paid 24,469 Net Balance 31 December (18,334) (106,702) (116,658) 1,360 (173,999) (90,804) 24,469 (240,334) Deferred tax recognised in profit or loss 3,102 (2,240) (32,822) (1,259) (33,219) Net balance at 1 January (20,562) (106,125) (44,293) 2,619 (168,361) WHT tax paid 27,581 Net balance 31 December (17,460) (108,365) (49,534) 1,360 27,581 (173,999) 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 2020 for the country the liabilities and assets has arisen. The enacted tax rate in Egypt is 22.5% (2019: 22.5%), Jordan 21% (2019: 21%), Sudan 30% (2019: 30%) and Nigeria 30% (2019: 30%). * Undistributed reserves from group subsidiaries The Group’s dividend policy is to distribute any excess cash after taking into consideration all business cash require- ments and potential acquisition considerations. The expectation is to distribute profits held within subsidiaries of the Group in the near foreseeable future. During 2015 the Egyptian Government imposed a tax on dividends at a rate of 5% of dividends distributed from Egyptian entities. On September 30, 2020, the Egyptian government issued a law to increase the tax rate on non-distributed dividends to 10%. As a result a deferred tax liability has been recorded for the future tax expected to be incurred from undistributed reserves held within the Group which will be taxed under the new legislation imposed and were as follows: Al Mokhtabar Company for Medical Labs Alborg Laboratory Company Integrated Medical Analysis Company Molecular Diagnostic Center Medical Genetics Center Al Makhbariyoun Al Arab Group 2020 2019 EGP’000 EGP’000 58,558 24,122 22,319 - - 11,659 116,658 22,524 12,343 8,987 434 44 5,202 49,534 Integrated Diagnostics HoldingsAnnual Report 2020136 Unrecognized deferred tax assets The following items make up unrecognised deferred tax assets. The local tax law does not permit deductions for provisions against income tax until the provision becomes realised. No deferred tax asset has been recognised on tax losses for both Eco Scan Nigeria and Wayak Egypt due to the uncertainty of the available future taxable profit, which the Group can use the benefits therefrom.” Impairment of trade receivables (Note 16) Impairment of other receivables (Note 16) Provision for legal claims (Note 22) Tax losses* Unrecognized deferred tax asset 2020 Gross Amount EGP’000 77,727 8,509 3,134 107,341 196,711 49,844 2020 Tax Effect EGP’000 17,489 1,915 705 29,736 49,844 2019 Gross Amount EGP’000 36,012 8,516 5,082 57,633 107,243 28,452 * The company has carried forward tax losses on which no deferred tax asset is recognised as follow: Company Country Dynasty Group Holdings Limited England and Wales Eagle Eye Echo-Scan WAYAK Pharma Medical Genetic Center Mauritius Nigeria Egypt Egypt 2020 Gross Amount EGP’000 12,371 1,222 81,450 8,503 3,795 107,341 2019 Tax Effect EGP’000 8,103 1,916 1,143 17,290 28,452 2020 Tax Effect EGP’000 2,350 183 24,435 1,913 854 29,736 Earnings per share (EPS) 9. 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. 2020 2019 EGP’000 EGP’000 594,015 600,000 0.99 510,931 600,000 0.85 * At the Extraordinary General Meeting of the Company held on 23 December 2020, it was resolved that the Company’s existing issued ordinary share capital of 150,000,000 ordinary shares of US$1.00 each (the “Existing Ordinary Shares”) will be sub-divided into 600,000,000 ordinary shares of US$0.25 each (the “New Ordinary Shares”) (the “Sub-Division”). The Sub-Division was successfully completed with effect from 24 December 2020. Financial Statements • Consolidated Financial StatementsAnnual Report 2020 l a t o T 9 6 8 2 , 7 0 0 3 7 9 , , 1 4 4 0 1 2 - ) 2 4 1 9 ( , ) 7 8 6 5 4 ( , 8 8 4 , 1 3 1 , 1 8 2 6 8 , 1 8 6 2 3 1 , ) 4 2 6 6 ( , ) 6 6 7 3 1 ( , 8 2 2 7 6 2 , 2 0 9 8 9 , ) 4 1 5 6 ( , ) 4 7 6 3 1 ( , 2 4 9 , 5 4 3 , 2 3 6 8 1 1 ) 7 0 4 1 ( , ) 3 7 7 3 ( , 4 9 3 , 9 5 4 3 1 0 , 3 9 7 6 4 5 , 5 8 7 - - - - - 9 9 0 4 , - - - 9 9 0 , 4 4 2 3 1 , - - - - - - - - - 7 0 4 , 2 5 2 , 1 3 2 4 , 5 - - 8 3 7 5 5 , 7 4 7 5 4 1 , 1 1 0 5 , 4 2 9 , 9 1 ) 6 9 6 4 ( , ) 5 6 8 6 7 1 ( , - ) 8 3 9 ( ) 9 8 7 2 ( , 8 0 2 , 1 2 - - - - - - - - - 3 2 4 , 5 9 9 0 , 4 8 0 2 , 1 2 4 2 9 , 9 1 * * t n u o c c a n o t n e m y a P & g n d i l i u B l d o h e s a e L s t n e m e v o r p m i n i n o i t c u r t s n o c , s e r u t x F i & s g n i t t i f l d o h e s a e L , l i a c d e M & c i r t c e e l m e t s y s n o i t a m r o f n i - 6 0 5 5 5 , 6 5 7 4 1 , - ) 3 6 7 2 ( , ) 8 9 5 5 ( , 0 6 5 4 , 1 6 4 , 6 6 3 0 7 8 , ) 2 2 5 ( ) 1 8 3 1 ( , 1 6 2 , 3 7 0 4 1 5 , 4 3 7 1 2 , ) 8 3 2 2 ( , ) 6 6 5 3 ( , 0 7 0 , 1 2 4 5 1 6 , 1 8 8 ) 6 7 8 ( 9 2 2 , 7 2 2 3 0 , 6 4 1 9 3 , 5 4 l s e c h e v i - 1 6 9 2 4 , 8 7 4 5 8 1 , - ) 2 1 7 1 ( , ) 7 7 5 9 ( , 1 3 1 8 , 3 7 4 2 3 , 1 8 2 , 5 2 2 ) 8 3 6 ( ) 3 4 6 2 ( , 3 7 4 , 4 5 2 3 0 8 0 8 , 2 5 0 8 2 , ) 2 5 3 1 ( , ) 5 9 3 2 ( , 7 6 9 3 3 , 8 0 1 , 5 0 1 7 8 ) 0 5 6 ( 2 1 5 , 8 3 1 1 6 9 , 5 1 1 3 7 1 , 0 2 1 9 6 8 2 , 8 3 2 2 9 , 3 1 6 7 6 3 , ) 7 6 6 4 ( , ) 7 4 5 1 2 ( , 4 6 8 6 4 , 0 7 3 , 3 8 4 8 2 6 8 , 5 1 6 4 8 , ) 5 7 6 2 ( , ) 1 4 2 8 ( , 7 9 6 , 5 6 5 9 4 3 2 3 1 , 4 5 0 8 5 , ) 4 2 9 2 ( , ) 3 3 4 7 ( , 6 4 0 , 0 8 1 4 5 4 0 7 , ) 0 8 3 2 ( , ) 1 9 1 2 ( , 9 2 9 , 5 4 2 8 6 7 , 9 1 3 4 2 3 , 3 0 3 s t n e m e v o r p m i t n e m p u q e i & d n a L s g n d i l i u B - - 9 4 6 3 6 6 8 1 2 , - - 5 5 5 ) 9 6 2 4 ( , 0 1 3 7 1 1 , 3 5 3 , 2 3 3 ) 3 6 5 ( 5 4 3 , 2 3 3 - 6 5 6 7 , 2 4 3 2 3 , ) 0 8 2 ( 8 1 7 , 9 3 7 5 0 8 , 5 ) 6 5 ( 4 2 7 , 7 4 1 2 6 , 4 8 2 5 3 6 , 2 9 2 n o i t a n i b m o c s s e n i s u b n i d e r i u q c A n o i t a u l a v r o t s o C 9 1 0 2 y r a u n a J 1 t A n o i t a fl n i r e p y h * s n o i t i d d A i s e c n e r e ff d e g n a h c x E s l a s o p s i D s r e f s n a r T 9 1 0 2 r e b m e c e D 1 3 t A 0 2 0 2 r e b m e c e D 1 3 t A i s e c n e r e ff d e g n a h c x E n o i t a fl n i r e p y h s n o i t i d d A s l a s o p s i D t n e m r i a p m i d n a n o i t a i c e r p e D r a e y e h t r o f e g r a h c n o i t a i c e r p e D 9 1 0 2 y r a u n a J 1 t A 9 1 0 2 r e b m e c e D 1 3 t A i s e c n e r e ff d e g n a h c x E s l a s o p s i D r a e y e h t r o f e g r a h c n o i t a i c e r p e D 0 2 0 2 r e b m e c e D 1 3 t A i s e c n e r e ff d e g n a h c x E s l a s o p s i D e u l a v k o o b t e N 0 2 0 2 - 2 1 - 1 3 t A 9 1 0 2 - 2 1 - 1 3 t A i t n e m p u q e d n a t n a p l , y t r e p o r P . 0 1 137 t n e m p i u q e l l a e s u a c e b s t s o c g n i w o r r o b d e s i l a t i p a c y n a d e d u l c n I t o n t n u o m a s i Th . 0 2 0 2 y r a u r b e F n i d e n e p o ) a r b u o h S ( h c n a r b w e n n a c S g r o b l A f o t n e m p i u q e l a c i d e m e h t o t d e t a l e r . m 3 0 1 P G E e d u l c n i s n o i t i d d A * . e l u d e h c s t n e m y a p a a i v ff o g n i y a p e r a d n a 4 2 0 2 - 3 2 0 2 s r a e y n i n w o d n a e v i e c e r l l i w H D I t a h t s e h c n a r b o t t c e p s e r h t i w a s a e d a m s t n e m y a p o t s e t a l e r s i h t t n u o c c a n o t n e m y a P * * . e s u o t y d a e r Integrated Diagnostics HoldingsAnnual Report 2020 138 Leased equipment The Group leases medical and electric equipment under lease arrangements. This equipment is supplied to service the Group’s new state-of-the-art Mega Lab. 11. Intangible assets Cost At 1 January 2019 Additions Effect of movements in exchange rates At 31 December 2019 Additions (note 6) Effect of movements in exchange rates At 31 December 2020 Amortisation and impairment At 1 January 2019 Amortisation Effect of movements in exchange rates At 31 December 2019 Amortisation Effect of movements in exchange rates At 31 December 2020 Net book value At 31 December 2020 At 31 December 2019 Goodwill Brand Name EGP’000 EGP’000 Software EGP’000 1,270,996 - (6,910) 1,264,086 - (2,278) 1,261,808 1,849 - - 1,849 - - 1,849 386,757 - (2,343) 384,414 - (492) 383,922 - - - - - - - 1,259,959 1,262,237 383,922 384,414 55,170 4,688 (300) 59,558 7,639 (40) 67,157 38,611 6,862 (100) 45,373 5,926 (16) 51,283 15,874 14,185 Total EGP’000 1,712,923 4,688 (9,553) 1,708,058 7,639 (2,810) 1,712,887 40,460 6,862 (100) 47,222 5,926 (16) 53,132 1,659,755 1,660,836 Financial Statements • Consolidated Financial StatementsAnnual Report 202012. Goodwill and intangible assets with indefinite lives (note 2.2-i) Goodwill acquired through business combinations and intangible assets with indefinite lives are allocated to the Group’s CGUs as follows: 139 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 Echo-Scan Goodwill Balance at 31 December 2020 EGP’000 2019 EGP’000 1,755 1,755 46,174 20,165 66,339 2,703 372 3,075 497,275 142,066 639,341 699,102 221,319 920,421 1,755 1,755 47,096 20,567 67,663 3,353 462 3,815 497,275 142,066 639,341 699,102 221,319 920,421 12,950 12,950 1,643,881 13,656 13,656 1,646,651 The Group performed its annual impairment test in October 2020. Nothing occurred between the impairment test and the balance sheet date that would require the assumptions in the models to be updated. The Group consid- ers the relationship between its market capitalisation and its book value, among other factors, when reviewing for indicators of impairment. Integrated Diagnostics HoldingsAnnual Report 2020140 Assumptions used in value in use calculations and sensitivity to changes in assumptions IDH instructed Alpha Capital an independent financial advisor, to prepare 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: Ultra Lab Bio Lab Year 2020 Al- Mokhtabar Al-Borg Echo-Scan Average annual patient growth rate from 2021 -2025 Average annual price per test growth rate from 2021 -2025 Annual revenue growth rate from 2021 -2025 Average gross margin from 2021 -2025 Terminal value growth rate from 1 January 2026 Discount rate 8% 2% 11% 36.5% 1% 34.5% 6% 0% 6% 46.4% 2% 18.6% 5% 7% 12% 55% 3% 5% 7.5% 13% 49% 3% 20.3% 20.3% 25% 9.5% 54% 53% 2% 20% Average annual patient growth rate from 2020 -2024 Average annual price per test growth rate from 2020 -2024 Annual revenue growth rate from 2020 -2024 Average gross margin from 2020 -2024 Terminal value growth rate from 1 January 2025 Discount rate Ultra Lab Bio Lab Year 2019 Al- Mokhtabar Al-Borg Echo-Scan 8% 4% 14% 36% 2% 5% 0% 5% 40% 2% 4% 8% 12% 52% 3% 4% 9% 13% 47% 3% 25% 13% 51% 46% 2% 27.20% 14.70% 16.60% 16.20% 22.20% During year 2020, The management has conducted business plan projection with the help of an independent advisor (Alpha Capital), using the assumptions above to be able to calculate the net present value of the asset in use and determine the recoverable amount. The projected cash flows from 2021- 2025 have been based on detailed forecasts prepared by management for each CGU and a terminal value thereafter. Management have used experience and historic trends achieved to determine the key growth rate and margin assumptions set out above. The terminal value growth rate applied is not considered to exceed the average growth rate for the industry and geographic locations of the CGUs. Given the economic implication following Covid-19 pandemic, management opted to be conservative in the assumptions which are reflected in a low average annual price increase and a higher discount rate. Starting H2 2020 patients returned to the Labs to conduct their routine tests. Factoring out PCR tests from H2 volume, routine tests are almost at par vs. same period last year, hence, Management estimated the volume to be recovered to pre COVID level starting 2022 Echo Scan is expected to recover starting 2021 driven by the increase of both brand awareness and the demand of its services in Nigeria. Financial Statements • Consolidated Financial StatementsAnnual Report 2020141 As a sensitivity analysis, Management considered a change in the discount rates of 5% increase to reflect additional risk that could reasonably be foreseen in the marketplaces in which the Group operates. This has not result to an impairment under any of the CGUs. For Goodwill allocated to Echo Scan CGU, management further considered a reduction in the projected annual growth in patient volume to a compound average growth rate of 12%. Under these circumstances, the group would have recognised an impairment charge of EGP 19.5m. EGP 13.0m of this impairment charge would have been allo- cated to goodwill. A fair value assessment would be made over the property plant and equipment in order to consider if the additional EGP 6.5m of impairment is required over these assets. This recoverable amount is then compared to the carrying value of the asset as recorded in the books and records of IDH plc. The WACC has been used considering the risks of each CGU. These risks include country risk, currency risk as well as the beta factor relating to the CGU and how it performs relative to the market. 13. Other investees Equity investment* Balance at 31 December 2020 2019 EGP’000 EGP’000 9,604 9,604 6,391 6,391 *Biolab has signed an agreement with EVEX Medical Corporation to establish the biggest laboratory among the West Asia countries located in Tbilisi. Biolab received consideration in the form of equity for its management services rendered to EVEX Medical corporation. This 4000-square-meters diag- nostic medical laboratory will connect more than 40 hospitals, and diagnostic centres that are part of EVEX group, utilizing the advanced technological systems that Biolab created in Jordan. EVEX Medical Corporation is the largest chain of hospitals in Georgia, currently represented with 78 clinics in 6 regions of Georgia. The agreement is based on two elements: 1. 2. Implementation of the technological platforms and biolab LIMS at Evex labs. Taking the Mega Lab through the journey of Joint Commission International accreditation (JCI), within two years from the expected launch date of the central laboratory. Integrated Diagnostics HoldingsAnnual Report 2020142 14. Financial assets and financial liabilities The fair values of all financial assets and financial liabilities by class shown in the balance sheet are as follows: Cash and cash equivalent Short term deposits - treasury bills Trade and other receivables (Note 16) Total financial assets Trade and other payables Put option liability Lease liabilities Loans and borrowings Total other financial liabilities Total financial instruments 2020 EGP’000 600,130 276,625 364,117 1,240,872 2020 EGP’000 380,201 314,057 459,043 96,455 1,249,756 (8,884) 2019 EGP’00 408,892 221,617 289,833 920,342 2019 EGP’00 315,054 229,164 338,073 111,750 994,041 (73,699) The fair values measurements for all the Group companies have been categorized as Level 2, except Echo-Scan which has been categorized as level 3, it is fair value can’t be determined by using readily observable measures. Echo-Scan put option (note 26) has been categorized as Level 3 as the fair value of the option is based on un- observable inputs using the best information available in the current circumstances, including the company’s own projection and taking into account all the market assumptions that are reasonably available. Financial instruments risk management objectives and policies The Group’s principal financial liabilities are trade and other payables, put option liability and finance lease liabili- ties. 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. The board provides written principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk, and credit risk, use of derivative financial instruments and non- derivative financial instruments, and investment of excess liquidity. - Market risk Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, currency risk and other price risk, such as equity price risk and commodity risk. Financial instruments affected by market risk include loans and borrowings and deposits. The sensitivity analyses in the following sections relate to the position as at 31 December in 2020 and 2019. 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. Financial Statements • Consolidated Financial StatementsAnnual Report 2020143 The analyses exclude the impact of movements in market variables on: the carrying values of pension and other post- retirement obligations; provisions; and the non-financial assets and liabilities of foreign operations. The following assumptions have been made in calculating the sensitivity analyses: • The sensitivity of the relevant statement of profit or loss item is the effect of the assumed changes in respective market risks. This is based on the financial assets and financial liabilities held at 31 December 2020 and 2019. Interest rate risk - The Group is trying to minimize its interest rate exposure, especially in Egypt region, characterized by decreasing interest rate environment. 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 Lease liabilities (note 27) Variable-rate instruments Loans and borrowings (note 25) 2020 2019 EGP’000 EGP’000 459,043 338,073 93,033 106,721 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 930K. This analysis assumes that all other variables, remain constant. - Foreign currency risk Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US Dollar, Sudanese Pound, the Jordanian Dinar and Nigerian Naira. Foreign exchange risk arises from 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 mini- mize open positions in foreign currencies to the extent that is necessary to conduct its activities. Management has set up a policy to require group companies to manage their foreign exchange risk against their functional currency. Foreign exchange risk arises when future commercial transactions or recognised assets or liabilities are denominated in a currency that is not the entity’s functional currency. Integrated Diagnostics HoldingsAnnual Report 2020144 At year end, major financial assets / (liabilities) denominated in foreign currencies were as follows (the amounts presented are shown in the foreign currencies in thousands): Assets Liabilities 31-Dec-20 Cash and cash equivalents Other assets Total assets Put option Finance lease Trade payables Total liability Net exposure US Dollars Euros GBP JOD SDG NGN US Dollars Euros GBP JOD SDG 5,232 328 5,560 8 4 3,488 8,527 - - 2,813 9,521 8 4 6,301 18,048 (4,326) (1,859) (6,185) (72) (9) (3,195) (22,387) (72) (9) (19,405) (45,850) (625) (64) (5) (13,104) (27,802) (12,794) - (3,416) (23,463) 212,249 223,448 435,697 (771,189) (359,641) (353,546) (1,484,376) (1,048,679) Assets Liabilities 31-Dec-19 Cash and cash equivalents Other assets Total assets Put option Finance lease Trade payables Total liability Net exposure (4,049) (1,330) (5,379) (1,267) 3,715 397 4,112 9 4 986 13,608 - - 2,224 10,150 9 4 3,210 23,758 (8,850) - (3,252) (15,559) - - - - - - - - - - The following is the exchange rates applied: US Dollars Euros GBP JOD SAR SDG NGN US Dollars Euros GBP JOD SAR SDG NGN (14) - (1,894) (20,253) (14) - (13,996) (35,812) (5) 4 (10,786) (12,054) Average rate for the year ended 31-Dec-20 15.71 17.85 20.25 22.13 4.21 0.29 0.04 31-Dec-19 16.68 18.68 21.35 23.49 4.47 0.36 0.05 Spot rate for the year ended 31-Dec-20 15.66 19.23 21.38 22.06 4.18 0.28 0.04 31-Dec-19 15.98 17.94 21.09 22.50 4.26 0.35 0.04 Financial Statements • Consolidated Financial StatementsAnnual Report 2020145 At 31 December 2020, if the Egyptian Pounds had weakened / strengthened by 10% against the US Dollar with all other variables held constant, pre-tax profit for the year would have increased / decreased by EGP (27m) (2019: EGP (1.2m)), mainly as a result of foreign exchange gains/losses on translation of US dollar-denominated financial assets and liabilities. At 31 December 2020, 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 17m (2019: EGP 37m), mainly as a result of foreign exchange gains/losses on translation of JOD - denominated financial assets and liabilities. At 31 December 2020, if the Egyptian Pounds had weakened / strengthened by 25% against the Sudanese Pound with all other variables held constant, pre-tax profit for the year would have been increased / decreased by EGP (1.2m) (2019: EGP 2.6m), mainly as a result of foreign exchange gains/losses on translation of SDG -denominated financial assets and liabilities. At 31 December 2020, if the Egyptian Pounds had weakened / strengthened by 10% against the Nigeria Naira with all other variables held constant, pre-tax profit for the year would have been increased / decreased by EGP 4m (2019: 8m), mainly as a result of foreign exchange gains/losses on translation of SDG -denominated financial assets and liabilities. - Price risk The group does not have investments in equity securities or bonds and accordingly is not exposed to price risk related to the change in the fair value of the investments. - Credit risk Credit risk is the risk a financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations and if arises principally from under the Groups receivables. 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. 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 The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the factors that may influence the credit risk of its customer base, including the default risk associated with the industry and country or region in which customers operate. Details of concentration of revenue are included in the operating segment note (see Note 3). Integrated Diagnostics HoldingsAnnual Report 2020146 The risk management committee has established a credit policy under which each new customer is analyzed individu- ally for creditworthiness before the Group’s standard payment and delivery terms and conditions are offered and credit limit is set for each customer. The Group’s review includes external ratings, if available, financial statements, industry information and in some cases bank references. Receivable limits are established for each customer and reviewed quarterly. Any receivable balance exceeding the set limit requires approval from the risk management committee. In response to the COVID-19 pandemic, the risk management committee has also been performing more frequent reviews of sales limits for customers in regions and industries that are severely impacted. Outstanding customer receivables are regularly monitored and the average general credit terms given to contract customers are 45 - 60 days. An impairment analysis is performed at each reporting date on an individual basis for major clients. In addition, a large number of minor receivables are grouped into homogenous groups and assessed for impairment collectively. The calculation is based on actual incurred historical data and expected future credit losses. The Group does not hold collateral as security. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed in Note 16. Cash and cash equivalents Credit risk from balances with banks and financial institutions is managed by the Group’s treasury department in accordance with the Group’s policy. Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counterparty. Counterparty credit limits are reviewed by the Group’s Board of Directors on an annual basis and may be updated throughout the year subject to approval of the Group’s man- agement. 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 dis- closed 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 undis- counted payments: Year ended 31 December 2020 Lease liabilities Put option liability Loans and borrowings Trade and other payables Year ended 31 December 2019 Lease liabilities Put option liability Loans and borrowings Trade and other payables 1 year or less 126,999 282,267 33,977 380,201 823,444 1 year or less 117,712 199,141 38,580 315,054 670,487 1 to 5 years more than 5 years 463,646 31,790 70,001 - 131,605 - 11,252 - Total 722,250 314,057 115,230 380,201 565,437 142,857 1,531,738 1 to 5 years more than 5 years 368,832 - 85,726 - 87,558 41,732 23,834 - Total 574,102 240,873 148,140 315,054 454,558 153,124 1,278,169 Financial Statements • Consolidated Financial StatementsAnnual Report 2020147 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 opera- tional needs. Such forecasting takes into consideration the group’s compliance with internal financial position ratio targets and, if applicable external regulatory or legal requirements – for example, currency restrictions. The group’s management retain cash balances in order to allow repayment of obligations in due dates, without taking into account any unusual effects which it cannot be predicted such as natural disasters. All suppliers and creditors will be repaid over a period not less 30 days from the date of the invoice or the date of the commitment. 15. Inventories Chemicals and operating supplies 2020 2019 EGP’000 EGP’000 100,115 100,115 84,339 84,339 During 2020, EGP 466,679k (2019: EGP 391,574k) was recognised as an expense for inventories, this was recognised in cost of sales. The major balance of the raw material is represented in the Kits; slow-moving items of those Kits are immaterial. The shelf life of the kits ranges between 3-6 months and high proportion of the kits are used before expiry date. Noting that day’s inventory outstanding stands as 72 days at 31 Dec 2020 16. Trade and other receivables Trade receivables Prepaid expenses Receivables due from related parties Other receivables Accrued revenue 2020 EGP’000 325,770 19,363 2,910 34,431 1,006 2019 EGP’000 260,746 32,972 6,191 21,969 927 383,480 322,805 For terms and conditions relating to related party receivables, refer to Note 28. As at 31 December 2020, the expected credit loss related to trade and other receivables was EGP 86,237k (2019: EGP 44,528k). Below show the movements in the provision for impairment of trade and other receivables: At 1 January Charge for the year Utilised Unused amounts reversed Exchange differences At 31 December No debts have met the group’s definition of default 2020 2019 EGP’000 EGP’000 44,528 42,131 (3,629) (837) 4,044 86,237 37,811 8,647 (493) (1,155) (282) 44,528 Integrated Diagnostics HoldingsAnnual Report 2020148 The Group allocates each exposure to a credit risk grade based on data that is determined to be predictive of the risk of loss (historical customer’s collection, Customers’ contracts conditions) and applying experienced credit judge- ment. Credit risk grades are defined using qualitative and quantitative factors that are indicative of the risk of default. Expected credit loss assessment is based on the following: 1. The customer list was divided into 9 sectors 2. 3. Each sector was divided according to customers aging Each sector was studied according to the historical events of each sector. According to the study conducted, the expected default rate was derived from each of the aforementioned period. General economic conditions 4. Based on the expected credit loss assessment, additional provision was calculated for each period, yielding an addi- tional Expected Credit Losses (ECL) for IDH Group amounting to EGP 42 million. On quarterly basis, IDH revises its forward-looking estimates and the general economic conditions to assess the expected credit loss, which will be mainly based on current and expected inflation rates. The results of the quarterly assessment will increase/decrease the percentage allocated to each period. A reasonable possible change of 100 basis points in the expected credit loss at the reporting date would have increased (decreased) profit or loss by the amount of EGP 4,035K. This analysis assumes that all other variables remain constant. The following table provides information about the exposure to credit risk and ECLs for trade receivables and con- tract assets from individual customers as at: 31-Dec-20 Current (not past due) 1–30 days past due 31–60 days past due 61–90 days past due 91–120 days past due 121–150 days past due More than 150 days past due 31-Dec-19 Current (not past due) 1–30 days past due 31–60 days past due 61–90 days past due 91–120 days past due 121–150 days past due More than 150 days past due Weighted average loss rate EGP’000 0.00% 5.06% 6.18% 13.61% 18.85% 36.38% 89.98% Weighted average loss rate EGP’000 0.06% 0.15% 0.24% 8.14% 11.09% 12.97% 41.17% Gross carrying amount EGP’000 187,705 63,771 46,097 17,322 9,816 6,436 72,350 Gross carrying amount EGP’000 89,066 55,915 38,601 16,544 9,594 8,716 78,308 Loss allowance EGP’000 - (3,228) (2,847) (2,358) (1,850) (2,341) (65,103) Loss allowance EGP’000 (56) (81) (94) (1,347) (1,064) (1,131) (32,239) Financial Statements • Consolidated Financial StatementsAnnual Report 2020149 As at 31 December, the ageing analysis of trade receivables is as follows: Total < 30 days 30-60 days 61-90 days > 90 days 2020 2019 325,770 260,746 248,248 144,856 43,250 38,508 14,964 15,197 19,308 62,185 17. Cash and cash equivalent Cash at banks and on hand Treasury bills Short-term deposits 2020 253,225 184,525 162,380 600,130 2019 93,471 194,302 121,119 408,892 Cash at banks earns interest at floating rates based on daily bank deposit rates. Short-term deposits and treasury bills are made for varying periods of between one day and three months, depending on the immediate cash require- ments of the Group, and earn interest at the respective short-term deposit weighted average rate 7% and Treasury bills 10% per annum. 18. Restricted cash Restricted cash 19. Other investments Fixed term deposits Treasury bills 2020 2019 EGP’000 EGP’000 - - 247 247 2020 2019 EGP’000 EGP’000 - 276,625 276,625 - 221,617 221,617 The maturity date of the fixed term deposit and treasury bills is between 9–12 months and the effective interest rate on the treasury bills is 10% (2019: 16.65%). Integrated Diagnostics HoldingsAnnual Report 2020150 20. Share capital and reserves The Company’s ordinary share capital is $150,000,000 equivalent to EGP 1,072,500,000. All shares are authorised and fully paid and have a par value of 2020 $0.25 (2019: $1). In issue at beginning of the year In issue at the end of the year Ordinary shares Ordinary shares 31-Dec-20 31-Dec-19 150,000,000 150,000,000 600,000,000* 150,000,000 * At the Extraordinary General Meeting of the Company held on 23 December 2020, it was resolved that the Company’s existing issued ordinary share capital of 150,000,000 ordinary shares of US$1.00 each (the “Existing Ordinary Shares”) will be sub-divided into 600,000,000 ordinary shares of US$0.25 each (the “New Ordinary Shares”) (the “Sub-Division”). The Sub-Division was successfully completed with effect from 24 December 2020. Capital reserve The capital reserve was created when the Group’s previous parent company, Integrated Diagnostics Holdings LLC – IDH (Caymans) arranged its own acquisition by Integrated Diagnostics Holdings PLC, a new legal parent. The balances arising represent the difference between the value of the equity structure of the previous and new parent companies. Legal reserves Legal reserve was formed based on the legal requirements of the Egyptian law governing the Egyptian subsidiaries. According to the Egyptian subsidiaries’ article of association 5% (at least) of the annual net profit is set aside to from a legal reserve. The transfer to legal reserve ceases once this reserve reaches 50% of the entity’s issued capital. If the reserve falls below the defined level, then the entity is required to resume forming it by setting aside 5% of the annual net profits until it reaches 50% of the issued share capital. Put option reserve Through acquisitions made within the Group, put option arrangements have been entered into to purchase the remaining equity interests in subsidiaries from the vendors at a subsequent date. At acquisition date an initial put option liability is recognised and a corresponding entry recognised within the put option reserve. After initial recognition the accounting policy for put options is to recognise all changes in the carrying value of the liability within put option reserve. When the put option is exercised by the vendors the amount recognised within the reserve will be reversed. Translation reserve The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries. 21. Distributions made and proposed Cash dividends on ordinary shares declared and paid: US$ 0.19 per qualifying ordinary share (2019: US$ 0.18) After the balance sheet date, the following dividends were proposed by the directors (the dividends have not been provided for): 2020 2019 EGP’000 EGP’000 441,855 441,855 455,831 442,116 442,116 466,968 US$ 0.0.049 per share (2019: $0.19) per share 455,831 466,968 Financial Statements • Consolidated Financial StatementsAnnual Report 202022. Provision At 1 January 2020 Provision made during the year Provision used during the year Provision reversed during the year At 31 December 2020 Current Non- Current At 1 January 2019 Provision made during the year Provision used during the year Provision reversed during the year At 31 December 2019 Current Non- Current 151 Total EGP’000 5,273 3,194 (5,040) (20) 3,407 - 3,407 Total EGP’000 14,842 3,521 (1,267) (11,823) 5,273 Provision for legal claims EGP’000 5,082 3,194 (5,040) (20) 3,216 - 3,216 Provision for legal claims EGP’000 2,828 3,521 (1,267) 5,082 5,082 5,273 Egyptian Government Training Fund for employees EGP’000 191 - - - 191 - 191 Egyptian Government Training Fund for employees EGP’000 12,014 - - (11,823) 191 191 Legal claims provision The amount comprises the gross provision in respect of legal claims brought against the Group. Management’s opin- ion, 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 2020. 23. Trade and other payables Trade payables Accrued expenses Other payables Accrued interest 2020 2019 EGP’000 EGP’000 178,042 151,201 50,959 3,421 383,623 145,195 129,357 40,502 5,029 320,083 Integrated Diagnostics HoldingsAnnual Report 2020152 24. Short-term financial obligations Put option liability Lease liabilities 2020 2019 EGP’000 EGP’000 282,267 60,517 342,784 199,141 61,712 260,853 The accounting policy for put options after initial recognition is to recognise all changes in the carrying value of the put liability within equity. Through the historic acquisitions of Makhbariyoun Al Arab the Group entered into separate put option arrange- ments to purchase the remaining equity interests from the vendors at a subsequent date. At acquisition a put option liability has been recognised for the net present value for the exercise price of the option. The options are calculated at seven times EBITDA of the last 12 months – Net Debt and exercisable in whole from the fifth anniversary of completion of the original purchase agreement, which fell due in June 2016. The vendor has not exercised this right at 31 December 2020 25. Loan and borrowings 1. The financial leverage shall not exceed the following percentages Year % 2017 2018 2019 2020 2021 2022 2.33 1.71 2.31 1.95 1.64 1.47 “Financial leverage”: total liabilities divided by net equity The debt service ratios (DSR) shall not be less than 1. 2. “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 50m per year, other than year 2017 which 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. Financial Statements • Consolidated Financial StatementsAnnual Report 2020 153 A) In July 2018, AL-Borg lab, one of IDH subsidiaries, was granted a medium term loan amounting to EGP 130.5m from Ahli united bank “AUB Egypt” to finance the investment cost related to the expansion into the radiology segment. As at 31 December 2020 only EGP 54.4m 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: The financial leverage shall not exceed 0.7 throughout the period of the loan 1. “Financial leverage”: total bank debt divided by net equity The debt service ratios (DSR) shall not be less than 1.35 starting 2020 2. “Debt service ratio”: cash operating profit after tax plus depreciation for the financial year less annual maintenance on machinery and equipment adding cash balance divided by total financial payments. “Cash operating profit”: Operating profit after tax, interest expense, depreciation and amortization, is calculated as follows: Net income after tax and unusual items adding Interest expense, Depreciation, Amortisation and provisions excluding tax related provisions less interest income and Investment income and gains from extraordinary items “Financial payments”: current portion of long-term debt including finance lease payments, interest expense and fees and dividends distributions. 3. The current ratios shall not be less than 1. “Current ratios”: Current assets divided current liabilities. The terms and conditions of outstanding loans are as follows: Currency Nominal interest rate Maturity 31 Dec 20 31 Dec 19 CIB - BANK AUB - BANK EGP EGP CBE corridor rate*+1% CBE corridor rate*+1% Apr-22 Apr-26 Amount held as: Current liability Non- current liability 38,654 54,379 93,033 25,416 67,617 93,033 64,070 42,651 106,721 25,416 81,305 106,721 *As at 31 December 2020 corridor rate 9.25% (2019: 13.25%) Contingent liabilities As required by article 134 of the labour law on Vocational Guidance and Training issued by the Egyptian Government in 2003, Al Borg Laboratory Company and Al Mokhtabar Company for Medical Labs are required to conform to the requirements set out by that law to provide 1% of net profits each year into a training fund. Integrated Diagnostics Holdings plc have taken legal advice and considered market practice in Egypt relating to this and more specifically whether the vocational training courses undertaken by Al Borg Laboratory Company and Al Mokhtabar Company for Medical Labs suggest that obligations have been satisfied through training programmes undertaken in-house by those entities. Since the issue of the law on Vocational Guidance and Training, Al Borg Laboratory Company and Al Mokhtabar Company for Medical Labs have not been requested by the government to pay or have voluntarily paid any amounts into the external training fund. Should a claim be brought against Al Borg Laboratory Company and Al Mokhtabar Company for Medical Labs, an amount of between EGP 19.5m to EGP 41.4m could become payable, however this is not considered probable. Integrated Diagnostics HoldingsAnnual Report 2020 154 Accounting policies Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are discounted using a current pre-tax rate if the time value of money is significant. Contingent liabilities are possible obligations that arise from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group. 26. Long-term financial obligations Lease liabilities building (see note 27) Lease liabilities Medical equipment (see note 27) Put option liability* 2020 2019 EGP’000 EGP’000 355,856 42,669 31,790 430,315 232,075 44,287 30,022 306,384 *According to definitive agreements signed on 15 January 2018 between Dynasty Group Holdings Limited and International Finance Corporation (IFC) related to the Eagle Eye-Echo scan transaction, IFC has the option to put it is shares to Dynasty in year 2024. The put option price will be calculated on the basis of the fair market value determined by an independent valuer (one of the big four accounting firms). According to the International Private Equity and Venture Capital Valuation Guidelines, there are multiple ways to calculate the put option including Discounted Cash Flow, Multiples, Net assets. Multiple valuation was applied and EGP 32 million was calculated as the valuation as at 31 December 2020 (2019; EGP 30.0m). In line with IAS 32 the entity has recognised a liability for the present value of the exercise price of the option price. The ramp-up of Echo- Scan operations driven by the new radiology equipment installed during Q4 2019 in Lago and the following years yielding a Compounded Annual Growth Rate of 39% from 2020 to 2025. 27. Leases as lessee (IFRS 16) The Group leases property and equipment. Property leases include branches, warehouse, parking and administra- tion buildings. The leases typically run for average period from 5-10 years, with an option to renew the lease after that date. Lease payments are renegotiated with renovation after the end of the lease term to reflect market rentals. For certain leases, the Group is restricted from entering into any sub-lease arrangements. The property leases were entered into as combined leases of land and buildings and were previously, classified as operating leases under IAS 17. The Group has elected not to apply Low-value assets’ exemption. The Group entered into 2 significant agreements during the year ended 31 December 2015 to service the Group’s state-of- the-art Mega Lab. The agreement periods are 5 and 8 years which is deemed to reflect the useful life of the equipment. If the minimum annual commitment payments are met over the agreement period ownership of the equipment supplied will legally transfer to the IDH. The finance asset and liability has been recognised at an amount equal to the fair value of the underlying equipment. This is based on the current cost price of the equipment supplied provided by the suppliers of the agreement. The implicit interest rate of both finance leases has been estimated to be 11.5%. The equipment is being depreci- ated 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$. These contracts leases were previ- ously identified as finance leases under IAS 17, with the assets held within property planet and equipment (see note 10). Financial Statements • Consolidated Financial StatementsAnnual Report 2020Information about leases for which the Group is lessee is presented below. a) Right-of-use assets 2019 Balance at 1 January Addition for the year Depreciation charge for the year Terminated Contracts Balance at 31 December 155 Buildings 2020 EGP’000 264,763 152,030 (60,803) (1,302) 354,688 Buildings 2019 EGP’000 213,870 98,609 (47,716) 264,763 Leases liabilities b) Future minimum lease payments under leases and hire purchase contracts, together with the present value of the net minimum lease payments are, as follows: *Lease liability – laboratory equipment *Lease liabilities building Lease liability – other *The lease liabilities for the laboratory equipment and building are payable as follows: At 31 December 2020 Less than one year Between one and five years More than 5 years At 31 December 2019 Less than one year Between one and five years More than 5 years 2020 EGP’000 69,123 389,920 - 459,043 2019 EGP’000 67,690 269,401 982 338,073 Minimum lease payments 2020 Interest Principal 2020 2020 EGP’000 EGP’000 EGP’000 126,999 463,646 131,605 722,250 Minimum lease payments 2019 66,481 176,312 20,414 263,207 60,518 287,334 111,191 459,043 Interest Principal 2019 2019 EGP’000 EGP’000 EGP’000 106,436 381,378 87,972 575,786 45,706 169,803 23,186 238,695 60,730 211,575 64,786 337,091 Integrated Diagnostics HoldingsAnnual Report 2020156 c) Amounts recognised in profit or loss Interest on lease liabilities Expenses related to short-term lease 2020 2019 EGP’000 EGP’000 58,864 13,771 41,491 4,154 28. Related party transactions disclosures The significant transactions with related parties, their nature volumes and balance during the period 31 December 2020 and 2019 are as follows: Rental income Medical Test analysis Entity owned by Company’s CEO 588 793 Related Party Nature of transaction Nature of relationship Life Scan (S.A.E)* Expenses paid on behalf Affiliate** International Fertility (IVF)** Expenses paid on behalf Affiliate*** Provide service Provide service Entity owned by Company’s board member Entity owned by Company’s CEO Put option liability Bio. Lab C.E.O and shareholder Put option liability Echo-Scan shareholder H.C Security Life Health Care Dr. Amid Abd Elnour^ International Finance corpora- tion (IFC) Integrated Treatment for Kidney Diseases (S.A.E) Total Related Party Nature of transaction Nature of relationship Life Scan (S.A.E)* Expenses paid on behalf Affiliate* International Fertility (IVF)** Expenses paid on behalf Affiliate** H.C Security Life Health Care Dr. Amid Abd Elnour^ International Finance corpora- tion (IFC) Integrated Treatment for Kidney Diseases (S.A.E) Provide service Provide service Entity owned by Company’s board member Entity owned by Company’s CEO Put option liability Bio. Lab C.E.O and shareholder Put option liability Echo-Scan shareholder Rental income Medical Test analysis Entity owned by Company’s CEO Total 31-Dec-20 Transaction amount of the year Amount due from EGP’000 EGP’000 6 (3,449) (412) (11,058) (83,126) (1,757) 350 1,767 (76) (363) (282,267) (31,790) (311,586) 31-Dec-19 Transaction amount of the year Amount due from EGP’000 EGP’000 14 (584) (268) (6,774) (67,470) (16,431) 344 377 344 5,216 (78) (3) (199,141) (30,033) 631 (223,064) * 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). *** Chief Executive Officer Dr. Hend El-Sherbini and her mother, Dr. Moamena Kamel jointly hold the 25.5% of shares held by Hena Holdings which include the described voting rights on Page 95. Hena Holdings is a related party and received dividends of USD 7,151,925 in year 2020 and USD 6,731,223 received in year 2019. ^ Dr. Amid Abd Elnour receives EGP 5,277,376 in relation to Office Rent (in addition to his salary). Financial Statements • Consolidated Financial StatementsAnnual Report 2020 157 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 transac- tions. 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 2020, the Group has not recorded any impairment of receivables relating to amounts owed by related parties (2019: nil). This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates. IDH opts to pay up to 1% of the net after-tax profit of the subsidiaries Al Borg and Al Mokhtabar to the Moamena Kamel Foundation for Training and Skill Development. Established in 2006 by Dr. Moamena Kamel, a Professor of Pathology at Cairo University and founder of IDH subsidiary Al-Mokhtabar Labs and mother to the CEO Dr. Hend El Sherbini. The Foundation allocates this sum to organisations and groups in need of assistance. The foundation deploys an integrated program and vision for the communities it helps that include economic, social, and healthcare development initiatives. In 2020 EGP 6,510K (2019: EGP 5,259K) 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 2020 2019 EGP’000 EGP’000 51,556 51,556 43,088 43,088 Integrated Diagnostics HoldingsAnnual Report 2020158 29. Reconciliation of movements of liabilities to cash flows arising from financing activities EGP’000 Balance at 1 January 2020 Proceeds from loans and borrowings Repayment of borrowings Payment of leases liabilities Interest paid Total changes from financing cash flows New leases signed in the period Terminated contracts during the year Interest expense Total liability-related other changes Balance at 31 December 2020 EGP’000 Balance at 1 January 2019 Proceeds from loans and borrowings Repayment of borrowings Payment of leases liabilities Interest paid Total changes from financing cash flows Capitalised borrowing costs Implementation of IFRS 16 New leases signed in the period Interest expense Total Liability – related other changes Balance as at 31 December 2019 Other loans and borrowings 111,750 11,727 (25,416) - (14,160) (27,849) 12,553 12,553 96,455 Other loans and borrowings 133,039 5,283 (25,416) - (21,165) (41,298) - - - 20,009 20,009 111,750 Lease liabilities 338,073 - - (42,745) (59,576) (102,231) 166,339 (1,911) 58,864 223,291 459,043 Lease liabilities 90,581 - (64,451) (42,027) (106,478) - 213,870 98,609 41,491 353,970 338,073 Financial Statements • Consolidated Financial StatementsAnnual Report 2020IDHCORP.COM

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