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2023 Report21 Annual Report A RECORD- BREAKING YEAR A Leading Consumer Healthcare Company in the Middle East and Africa 20 2021 ANNUAL REPORT A RECORD-BREAKING YEAR A Leading Consumer Healthcare Company in the Middle East and Africa S T N E T N O C 21 Annual Report IDH delivered an outstanding 2021, bringing its services to a record number of patients and setting the foundations for more growth in the future 04 Strategic Report 06 Who We Are 12 Highlights of 2021 16 Chairman’s Message 18 Chief Executive’s Report 26 Our Markets 40 Our Brands 44 Our Services 48 Competitive Strengths & Growth Strategy 52 Principal Risks, Uncertainties & their Mitigation 60 Performance 62 Financial & Operational Review 78 Corporate Social Responsibility 82 Corporate Governance 84 Board of Directors 88 Corporate Governance Report 98 Audit Committee Report 102 Remuneration Committee Report 104 Directors’ Report 110 Financial Statements 112 Independent Auditors’ Report 121 Consolidated Financial Statements 126 Notes to the Consolidated Financial Statements 20 Strategic Report 97% Revenue growth versus 2020 90% Net sales* growth versus 2020 145% Net profit growth versus 2020 * Revenue and net sales reconciliation is outlined on page 11 4 IDH 2021 Annual Report 2021 Annual Report IDH 5 Strategic Report Who We Are Who We Are Integrated Diagnostics Holdings (“IDH,” the “Group,” established in 2019 to generate growth opportunities in or the “Company”) is a leading consumer healthcare the healthcare management space by leveraging the company in the Middle East and Africa with opera- Company’s database of over 13 million patients. tions in Egypt, Jordan, Sudan and Nigeria. With a track record of over four decades, IDH is a trusted and fully The Group continues to invest in organic growth, while integrated provider of pathology and radiology services simultaneously pursuing strategic acquisition opportu- with internationally recognised accreditations. Today, nities in new markets where IDH can leverage its busi- the Group offers patients a vast suite of over 2,000 ness model to capitalise on healthcare and consumer high-quality diagnostic tests. As at 31 December 2021, trends similar to those witnessed across its current IDH operated a network of 502 branches across its geo- geographies. IDH has been a Jersey-registered entity graphic footprint, deploying a CAPEX-light Hub, Spoke with a Standard Listing on the Main Market of the Lon- and Spike business model to fuel its continued expan- don Stock Exchange since May 2015. In May 2021, the sion. IDH also delivers data-driven healthcare services Company’s EGP-denominated and dual-listed ordinary through its Egypt-based subsidiary “Wayak”, which was shares made their debut on the Egyptian Exchange. 5.2 EGP BN in revenue in 2021, +97% vs 2020 +40 years track record at the subsidiary levels BN 5.0EGP 4 countries across the Middle East and Africa in net sales1 in 2021, +90% vs 2020 LSE listed since May 2015 7 EGX listed since May 2021 key brands with strong awareness in underserved markets 502 operational branches as at 31 December 2021 1 Revenue and net sales reconciliation is outlined on page 11. 6 IDH 2021 Annual Report Our Services Through IDH’s brands, the Group offers over 2,000 a full suite of radiology services through Al Borg Scan internationally accredited pathology tests ranging in Egypt and Echo-Lab in Nigeria. Finally, IDH also from basic blood glucose tests for diabetes to advanced offers highly tailored healthcare management services molecular testing for genetic disorders. IDH also offers through its Egypt-based subsidiary, Wayak 1 4 7 Immunology Microbiology Haematology 2 5 8 Endocrinology Clinical Chemistry Molecular Biology 3 6 9 Cytogenetics Histopathology Radiology Our Brands Our Markets IDH’s core brands include Al Borg, Al Borg Scan, Al IDH’s geographic footprint across the Middle East and Africa Mokhtabar and Wayak in Egypt, Biolab in Jordan, includes Egypt, Sudan, Jordan and Nigeria. The generally Ultralab and Al Mokhtabar Sudan in Sudan, and underpenetrated and underserved nature of these markets’ Echo-Lab in Nigeria. diagnostic services industries provide the Group with attrac- tive fundamentals from which to drive future growth. Egypt Jordan Nigeria Sudan 2021 Annual Report IDH 7 Strategic Report Who We Are Our Patients IDH serves two principal types of clients: contract (cor- has two strategic components; first, IDH’s easily scalable porate) and walk-in (individuals). Within each of these “Hub, Spoke and Spike” network of branch laboratories. categories, the Group also offers house call services, and Second, key supplier relationships that facilitate rapid within the contract segment, a lab-to-lab service. expansion without the need for the Company to pur- chase expensive medical diagnostic equipment. IDH’s walk-in clients, also known as “self-payers”, represented 43% of the Group’s 2021 net sales2. IDH’s contract clients, who in 2021 accounted for the remaining 57% of the Group’s net sales2, are comprised of institutions such as unions, syn- Hub, Spoke and Spike The Group’s CAP-accredited* Mega Lab functions as the ‘Hub’ and is fitted with state-of-the-art equip- ment. This provides the required tools and capacity to process all tests and services for samples col- dicates, private and public insurance companies, lected by the B-Labs (Spokes) and C-Labs (Spikes). banks and corporations who enter into one-year IHD utilises its B-Labs to process routine tests and renewable contracts at agreed rates per-test and on leverages their capacity to manage traffic to the a per-client basis. An Asset-Light Business Model IDH adopts an asset-light business model that allows the Group’s Mega Lab when needed. Meanwhile, C-Labs or Spikes serve primarily as collection centres and most notably increase the Group’s geographic reach to clients nationwide. This “plug and play” busi- Group to grow in a capital-efficient manner. The model ness model forms the operational backbone of the 2 Revenue and net sales reconciliation is outlined on page 11. *Accreditation is granted by the College of American Pathologist 8 IDH 2021 Annual Report Group and provides it with considerable leverage in testing as well as ongoing maintenance and support extracting superior revenue and cost synergies. services. Moreover, IDH stipulates contracts with tenors typically ranging from five to seven years, with Supplier Relationships IDH’s unique business model strengthens the Com- the equipment substituted following the contract’s renewal. The extended tenors effectively shield IDH pany’s position in its relationship with its suppliers. from temporary price fluctuations, a strategic advan- As one of the largest providers of diagnostics in the tage which proved particularly beneficial in light of MENA region, the Group enjoys substantial bargain- rising inflation rates during 2021. ing power that enables it to negotiate favourable contract terms with medical equipment and test kit Owing to the Group’s sheer business size and suppliers. The Group’s contracts with its key suppli- increasing test volumes, IDH comfortably covers ers of medical testing kits also include the provision the minimum annual payments. Moreover, the high of the equipment to analyse the laboratory test volume of kit consumption supports its pricing results. These agreements have minimum annual power, reducing the cost per test while simultane- commitment payments to cover the medical diag- ously incurring no initial capital outlay for the nostic equipment, kits and chemicals to be used for purchase of medical diagnostic equipment. Integrated Diagnostics Holdings Suppliers 2021 Annual Report IDH 9 Strategic Report 2021 Highlights Important Notice Treatment of Revenue-Sharing Agreements and Use of Alternative Performance Measures As part of IDH’s efforts to support local authorities in Egypt Throughout the report, management utilizes net sales and Jordan in the fight against the pandemic, Biolab (IDH’s of EGP 5,048 million for FY 2021 (IFRS revenues stand Jordanian subsidiary) secured several revenue-sharing at EGP 5,225 million for the year), and cost of net sales agreements to operate testing stations, primarily dedicated of EGP 2,244 million (IFRS cost of sales recorded EGP to PCR testing for Covid-19, in multiple locations across the 2,421 million). Net sales for the period are calculated country including Queen Alia International Airport (QAIA) as total gross revenues (IFRS compliant measure) and Aqaba Port. Under these agreements, Biolab receives excluding concession fees and sales taxes paid as part the full revenue (gross sales) for each test performed and of Biolab’s revenue sharing agreements with Queen Alia pays a proportion to QAIA (38% of gross sales) and Aqaba International Airport (QAIA) and Aqaba Port. Port (36% of gross sales) as concession fees to operate in the facilities, thus effectively earning the net of these It is important to note that aside from revenue and cost amounts (net sales) for each test supplied. of sales, all other figures related to gross profit, operat- ing profit, EBITDA, and net profit are identical in the APM For IFRS purposes Biolab is considered the principal in and IFRS calculations. However, the margins related to this relationship and record the full amount received the aforementioned items differ between the two sets as revenue. For internal purposes management consid- of performance indicators due to the use of Net Sales ers the net amount earned to be net sales, and have in the APM calculations and the use of Revenues for therefore included this measure as an “alternative the IFRS calculations. More specifically, under the APM, performance measure” (APM) alongside the IFRS mea- in FY 2021 IDH reported a gross profit margin on net sure when describing the business’ performance. The sales of 56%, an EBITDA margin on net sales of 50%, decision to present APMs reflects the Directors’ view and a net profit margin on net sales of 30%. Under the that they provide the user of the accounts with addi- IFRS regime, gross profit margin recorded 54%, EBITDA tional information to the IFRS information reported to margin stood at 48%, and net profit margin recorded help understand the performance of the business, and 29%. Furthermore, this amendment has no impact on is consistent with how the Company’s performance is the prior year reported revenues. reviewed internally. Moreover, it allows further com- parability when describing the performance of the Group’s regions and year-on-year analysis. 10 IDH 2021 Annual Report Adjustment breakdown on each country’s results Revenues FY 2021 (IFRS 15) Net Sales FY 2021 (APM) (EGP mn) Egypt Jordan Nigeria Sudan Group total Adjustments Breakdown (EGP mn) Net Sales QAIA and Aqaba Port Concession Fees Revenues Cost of Net Sales Adjustment for QAIA, and Aqaba Port Agreements Cost of Sales 4,108 1,046 54 17 5,225 4,108 869 54 17 5,048 FY 2021 5,048 177 5,225 (2,244) (177) (2,421) 2021 Annual Report IDH 11 Strategic Report 2021 Highlights 2021 Highlights 2021 was an exceptional year for IDH, as the Company delivered record-breaking growth, supported by strong demand across its entire service offering, and delivered on all its longer-term strategic priorities, setting the foundations for more sustainable growth in the coming years Financial Highlights — Revenue expanded 97% year-on-year to reach EGP 5.2 bn in 2021 supported by strong demand for IDH’s full test portfolio. — Net Sales surpassed the EGP 5 billion mark to record EGP 5,048 mil- lion in 2021, representing a 90% year-on-year expansion. Net sales growth for the year was dual-driven, with total increasing tests performed 24% year-on-year and aver- age price per test expanding 53% versus 2020. Net sales were supported by both IDH’s Covid-19-related3 and con- ventional test portfolios, both of which recorded growing demand throughout the year. — Gross Profit grew 109% year-on-year in 2021 to record EGP 2,804 million. Gross profit margin on net sales stood at 56%, a solid five percentage point expansion compared to the previous twelve months. — Adjusted Operating Profit5 recorded EGP 2,292 million in 2021, up 132% year-on-year. Adjusted operating profit margin on net sales stood at 45% for the year, up eight percentage points from 2020. — Adjusted EBITDA4 increased 116% year-on-year in 2021 to reach EGP 2,530 adjusted million, while EBITDA margin on net sales expanded six percentage points to record 50% for the year. EBITDA recorded EGP 2,501 million in 2021, up 114% versus 2020 and with an associated margin on net sales of 50%. — Net Profit reached EGP 1,493 million in 2021, up 145% versus 2020. Net profit margin on net sales expanded seven percentage points from 2020 to record 30% for the year. — Recommended Final Dividend of EGP 2.17 per share, or EGP 1.3 billion in aggregate (exact US dollar amount is subject to the exchange rate at the time of the upstreaming from the subsidiar- ies to the holding company). — Earnings Per Share stood at EGP 2.35 in 2021 compared to EGP 0.99 in 2020. 3 Covid-19-related tests include both core Covid-19 tests (Polymerase Chain Reaction (PCR), Antigen, and Antibody) as well as other routine inflammatory and clotting markers including, but not limited to, Complete Blood Picture, Erythrocyte Sedimentation Rate (ESR), D-Dimer, Ferritin and C-reactive Protein (CRP), which the Company opted to include in the classification as “other Covid-19-related tests” due to the strong rise in demand for these tests witnessed following the outbreak of Covid-19. 4 Adjusted EBITDA is calculated as operating profit adding back depreciation and amortization and excluding one-off fees incurred in FY 2021 (EGP 29 million) related to the Company’s EGX listing completed in May 2021. 5 Adjusted operating profit excludes one-off fees incurred in FY 2021 (EGP 29.0 million) related to the Company’s dual listing on the EGX completed in May 2021. Note(1): Adjusted operating profit, EBITDA and adjusted EBITDA are measures utilized by management in assessing performance of the group. These adjusted measures eliminate the one off impacts of items in the year to provide a measure of underlying performance. EBITDA is an important measure as it shows the performance of the Group and the Group’s ability to reinvest funds generated and this is a widely used term for acquisitive businesses such as ourselves. Note (2): It is important to note that throughout the Group’s 2021 Annual Report, percentage changes between reporting periods are calculated using the exact value (as reported in the Company’s Consolidated Financials starting page 110 of this report) and not the corresponding rounded figure. 12 IDH 2021 Annual Report 2021 Annual Report IDH 13 Strategic Report 2021 Highlights Our Frontline Role in the Fight Against Covid-19” Throughout 2021, the Company continued to play a Supporting International Travel frontline role in helping governments across its foot- IDH secured multiple partnerships with international print combat the ongoing Covid-19 pandemic. air carriers and regional healthcare providers like Egypt In its home market of Egypt, IDH continue to offer a wide range of Covid-19-related6 tests, helping patients all around the country promptly detect Covid-19 and National Aviation Services (NAS) Kuwait and Pure Health UAE to conduct PCR testing for passengers traveling from Egypt to other regional destinations. The Company also offered PCR testing for passengers on a walk-in basis, with IDH being the first lab in supporting the government’s containment efforts. Egypt to provide QR codes on travel certificates. In Throughout the year, IDH made Covid-19-related tests Jordan, Biolab signed revenue-sharing agreements more widely available and increasingly more affordable, with Queen Alia International Airport (QAIA), King and organized several promotional and discounts cam- Hussain International Airport (KHIA), and Aqaba Port paigns to help needy patients and healthcare workers to offer PCR and rapid Covid-19 testing for passengers across the country. In the twelve months to 31 Decem- arriving and departing. ber 2021, IDH performed 1.3 million PCR, Antigen and Antibody tests and an additional 379 thousand other Covid-19-related tests in Egypt. As a share of revenue Delivering on Our Strategy During the year, the Company also pushed forward generated in Egypt, Covid-19-related revenue reached on its longer-term growth strategy, delivering on all 49% in 2021, versus 21% in 2020. its sustainable growth pillars and putting down solid foundations on which to build its next phase of growth Jordan and development. Biolab has been at the forefront of Covid-19 testing in Jordan since the very start of the pandemic, offering Branch Network Covid-19-related tests (PCR, Antigen, and Antibody) to During the last twelve months, IDH rolled out 24 new patients through its 21 branches, expanded house call branches, bringing its total number of branches to services, and testing stations located in several airports 502 as at year-end 2021. This sees the Group currently and ports across the country. In 2021, Biolab performed operating the largest network of branches amongst 1.3 million PCR and Antibody tests in Jordan, with Covid-19 tests contributing to 66% of total net sales7 in the country, up from the 46% contribution made in 2020. private players in Egypt, enabling it to maintain its leadership position in its home market. 6 Covid-19-related tests include both core Covid-19 tests (Polymerase Chain Reaction (PCR), Antigen, and Antibody) as well as other routine inflammatory and clotting markers including, but not limited to, Complete Blood Picture, Erythrocyte Sedimentation Rate (ESR), D-Dimer, Ferritin and C-reactive Protein (CRP), which the Company opted to include in the classification as “other Covid-19-related tests” due to the strong rise in demand for these tests witnessed following the outbreak of Covid-19. 7 Net Sales is calculated as revenues excluding commission fees paid by Biolab as part of the company’s revenue sharing agreements with QAIA and Aqaba Port. In FY 2021, in Jordan, IDH recorded revenue of EGP 1,046 million (up 156% year-on-year) and net sales of EGP 869 million (up 112% year-on-year). 14 IDH 2021 Annual Report House Call Services 70% rise in tests performed for the year. To capitalise IDH’s house call services in both Egypt and Jordan on the rising patient demand for IDH’s radiology continued to record steady growth in 2021, with the service, the Group opened two new Al-Borg Scan Company serving 51% more house call patients than branches in October and December 2021. in the previous year. Through its house call service, IDH is able to carry out more tests per patient than Wayak at its traditional branches, enabling the Company to Operations at Wayak, IDH’s AI-focused subsidiary, deliver on an important pillar of our long-term growth continued to be ramped up effectively, with the ven- strategy and further emphasising the significant ture’s losses declining further throughout 2021 sup- potential offered by the service well beyond the end of ported by strong revenue growth and management’s the Covid-19 pandemic. cost optimisation strategy. Conventional Patients Nigeria Despite the challenges posed by the pandemic, Echo-Lab posted strong 49% year-on-year revenue IDH never lost sight of the needs of its conventional growth in 2021, supported by a steady rise in both patients, continuing to care for them even at the patient and test volumes. The venture’s consistent height of the Covid-19 crisis. The Company’s efforts revenue growth and successful cost optimisation have focused on expanding its service offering and strategy implemented by the company’s new manage- delivery capabilities, as well as organising special ment team, see Echo-Lab on track to turn EBITDA campaigns to raise healthcare awareness specifically positive in early 2022. targeting patients suffering from chronic diseases, a particularly vulnerable category in light of the Dual Listing on EGX ongoing pandemic. Throughout 2021, the Company In May 2021, IDH made its debut on the Egyptian performed 28.6 million conventional tests and, as at Exchange, becoming the first dual-listed health- year-end 2021, conventional test net sales for the year care company on the EGX and LSE. The dual list- stood 11% above its pre-pandemic level. ing gives the Company access to a larger pool of Al-Borg Scan investors and offers local retail and institutional investors, who regularly invest through the EGX, an Al-Borg Scan reported outstanding growth in 2021, attractive opportunity to capitalise on IDH’s solid with revenue up 81% year-on-year supported by a growth prospects. 2021 Annual Report IDH 15 Strategic Report Chairman’s Message Chairman’s Message During the year, we performed more than 2.6 mil- lion PCR, antigen, and antibody tests, and contin- ued to improve our delivery capabilities to bring our services to as many people as possible. We also achieved a robust recovery in our conven- tional business offerings, which now exceeds our pre-Covid-19 levels enhancing our long established track record in our core business. In Nigeria, following our restructuring of the busi- ness and with our strong management team we achieved solid and sustainable results. We are expecting Echo-Lab to turn EBITDA positive in the coming months. I am pleased to report that despite the continued operational challenges posed by Covid-19, your Com- pany delivered an outstanding performance in 2021, A Forward-looking Business As firm believers in proactive healthcare, at IDH we providing its services to a record number of patients, take pride in our ability to deliver service excellence while laying new foundations from which to generate today, while always keeping an eye to the future. sustainable growth in the coming years. Throughout the year, we continued to invest in Record-Breaking Results In our seventh year as a publicly listed company on new services to our portfolio and world-class doc- tors to our team, to expanding our delivery chan- the London Stock Exchange, we were proud to see our nels and enhancing our digital infrastructure. developing all aspects of our business, from adding revenue surpass EGP 5 billion for the first time, grow- ing year-on-year by over 90%. We have successfully expanded our house call services. Leveraging on our expanded service offerings, we We have also accomplished steady growth of our attracted a record number of patients to our laborato- radiology venture, Al-Borg Scan. ries, serving over 10 million patients in 2021. In both Egypt and Jordan, we continued to honour environment, we are exploring ways to utilize our our responsibility as a leading healthcare provider, vast database to develop new services increasingly assisting local authorities tackle the pandemic and tailored to patients’ individual needs. In the ever burgeoning data analytics business supporting the recovery of international travel. 16 IDH 2021 Annual Report We continue to ensure strict data privacy and professionally in line with their ambitions while remain vigilant in strengthening our IT infrastruc- providing a long-term incentive programme (LTIP) ture to proactively address all cybersecurity risks. starting 2022. Expanding our Footprint Your Company continues to enjoy strong organic growth We have also recently expanded and strengthened your Company’s Board of Directors, welcoming Yvonne Still- momentum while constantly evaluating potential M&A hart as a Non-Executive Director. Yvonne brings a wealth opportunities across new African, Middle Eastern, and of experience across multiple sectors, and replaces James Asian markets. Nolan who stepped down in September of last year. On this front, we look forward to potentially adding Paki- We are enormously grateful to James for his excellent stan to our footprint and commencing our partnership service and wise counsel to IDH. with Islamabad Diagnostics Centre and Dr. Uppal once all pending conditions precedent are satisfied. The com- bination of our two businesses will see us well-placed to Broadening our Shareholder Base IDH’s shares are now listed on both the London Stock meet the country’s growing healthcare needs. Exchange and Egyptian Stock Exchange. We are confi- Environmental, Social, and Governance (ESG) We are proud to have published our first Sustainability Report and are cognizant of our social responsibilities dent that this will expand our shareholder base to include local institutional and retail investors in Egypt, while increasing liquidity and visibility in our largest market. while seeking to constantly monitor and address all In 2022 we also welcomed IFC as a strategic shareholder, areas of ESG within the business in Egypt and elsewhere and look forward to carrying on working closely together in our offices around the world. to continue meeting the strong demand for healthcare Management regularly monitors and revises our risk matrix and heat map to ensure we have the right As our countries of operation prepare to transition checks and balances in place and ensuring business into a post-Covid-19 world, your Company is well services across our footprint. continuity processes. A United Team We have benefitted hugely over the past three years hav- ing most of our team working out of our headquarters in Cairo’s Smart Village. positioned to maintain growth and profitability and continue delivering exceptional and consistent value to patients and shareholders. We value our loyal and hard-working workforce and constantly review their KPIs to help them progress Lord St John of Bletso Chairman 2021 Annual Report IDH 17 Strategic Report Chief Executive’s Report Chief Executive’s Report 2021 was an exceptional year for IDH which saw our 5,000 employees serve more than 10 million patients and perform more tests than ever before, helping us deliver outstanding financial results. 2021 was an exceptional year for IDH which saw our to coexist with the virus, driving widespread economic 5,000 employees serve more than 10 million patients recovery from the previous year’s lows. and perform more tests than ever before, helping us deliver outstanding financial results. In parallel, we In the midst of a challenging operating environ- added new services to our roster, expanded our reach ment, we displayed a remarkable ability to adapt to across both digital and physical channels, enhanced changing market and demand dynamics and con- the overall experience of our patients, grew our foot- sistently cater to the evolving needs of our growing print, and completed our dual-listing on the Egyptian patient base, ensuring we continue to provide our Exchange, complementing our LSE listing. This saw us communities with access to high quality, affordable end the year having built new foundations on which to healthcare and diagnostic services. Over the past drive the next phase of growth across all our markets. twelve months, we continued to effectively care for both our conventional and Covid-19 patients lever- Similar to the previous year, 2021 was heavily impacted aging an expanded branch network, a ramped-up both economically and socially by Covid-19, as countries house call service, and a growing digital presence around the world combatted various waves of new infec- to make our services increasingly accessible and tions and confronted multiple new variants. Despite this, our payment methods increasingly convenient. 2021 was also a turnaround year for the fight against the Our efforts translated in significant improve- pandemic as vaccines were gradually rolled out and gov- ments in our patients’ overall experience, with the ernments and individuals became increasingly willing Group’s net promoter score for the year recording 18 IDH 2021 Annual Report consistently above the 80 mark, ahead of last year’s Throughout the year, we also devoted increasing atten- value and well above industry averages. tion and resources towards developing our digital infra- structure to expand our reach, provide new services During 2021, we continued to serve our Covid-19 to our patients, and improve their overall experience. patients by ensuring we were well-equipped to Highlights for the year included the roll out of multiple handle peaks in demand when infection rates new patient touch points including a revamped IDH increased, while promptly adapting our offering to app, a new chatbot function, as well as an additional the requirements of patients. In the twelve months call centre. At the same time, we also made it increas- to 31 December 2021, we performed over 2.6 mil- ingly convenient for our patients to pay for our services. lion PCR, antigen and antibody tests, continuing to provide patients and healthcare workers with a trustworthy first line of defence against the virus. At the same time we secured multiple partner- Record-breaking Growth and Operational Results Our ability to transform the business in step with ships with international air carriers and regional changing demand dynamics enabled us to build on healthcare providers like National Aviation Services an already strong 2020, to deliver a formidable set (NAS) Kuwait and Pure Health UAE to conduct PCR of operational and financial results in 2021. More testing for passengers traveling from Egypt to other specifically, in the twelve months to 31 December regional destinations. We also offered PCR testing 2021, we recorded consolidated revenue of EGP for passengers on a walk-in basis, and were the first 5.2 billion, up 97% year-on-year and represent- lab in Egypt to provide QR codes on travel certifi- ing the highest full-year revenue figure on record. cates. This enabled us to not only to play an impor- Meanwhile, net sales expanded an impressive 90% tant role in supporting the recovery of international from the previous year, coming in at EGP 5.0 billion travel, but also ensured that we successfully cap- in FY 2021. Net sales growth for the year was dual tured a leading market share for the service. driven, as we performed 24% more tests than in the previous year and recorded a 53% year-on-year rise In parallel, despite the challenges posed by the in average price per test versus 2020. pandemic, we never lost sight of the needs of our conventional patients, continuing to care for them Throughout the year, consolidated net sales was sup- even at the height of the Covid-19 crisis. Our efforts ported by strong demand for both our Covid-19-re- focused on expanding our service offering and lated and conventional tests portfolios, with each delivery capabilities, as well as organising special segment contributing to around half of consolidated campaigns to raise healthcare awareness specifi- net sales for the year. On the conventional tests front, cally targeting patients suffering from chronic dis- demand recorded a sustained recovery following the eases, a particularly vulnerable category in light of Covid-19-related slowdown experienced in the previ- the ongoing pandemic. ous year, with conventional test net sales expanding 2021 Annual Report IDH 19 Strategic Report Chief Executive’s Report 22% versus 2020, and coming in a noteworthy 13% our success in keeping turnaround times strictly above pre-Covid-19 levels recorded in 2019. below 24 hours even throughout the multiple peaks Volume and net sales growth for the year also effectively ramp up the service to match its growing reflected our ongoing investments to expand our popularity is enabling us to perform over five thou- delivery capabilities, which over the course of sand house visits per day, the most out of any other 2021 saw us grow our patient reach across both player in the market, and process over ten thousand in infection rates witnessed in 2021. Our ability to traditional branches and our house call service. On calls each day. the one hand, we inaugurated 23 new branches in Egypt and an additional branch in Jordan, taking Regionally, in Egypt, as with the consolidated per- the total number of operational branches as at year- formance, our revenues were supported by both our end 2021 to 502. Our ability to consistently rollout Covid-19-related test offering, which in 2021 made new branches within and outside the Greater Cairo up 49% of the country’s revenues, as well as the area currently sees us operate the largest network country’s conventional test offering, which made up of branches amongst private players in the coun- the remaining 51%. During the year, we continued to try, enabling us to strengthen our brand name and lead the market in terms of core Covid-19 tests per- maintain our leadership position in the market. formed, further testament to the high quality of our Moreover, it is also important to note that our Mega offering and the extensive reach of our services. At Lab, which continues to be the sole CAP-accredited the same time, we observed a sustained recovery in facility in Egypt, typically operates at around 55% of our conventional business, with revenues generated its maximum capacity leaving abundant room for by conventional tests increasing a solid 23% versus further growth. In 2021, we also continued to work the previous year supported by a 15% rise in conven- closely with local authorities in Egypt to obtain the tional tests performed and a 7% expansion in average necessary certifications to take part in the govern- revenue per conventional test. ment’s Universal Healthcare Insurance (UHI) system which is being rolled out across the entire country. Egypt’s revenues were further buoyed by revenues As at year-end 2021, IDH had 13 out of the 19 UHI- generated by our house call service, which expanded accredited labs in the country, with several more of an impressive 94% versus 2020, contributing an our labs looking to obtain accreditation in the com- additional EGP 935 million to the country’s total ing year. On the other hand, in response to the grow- revenues for the year. Meanwhile, at our fast-growing ing demand for our house call services in both Egypt radiology venture, Al-Borg Scan, we witnessed a solid and Jordan, we continued to ramp up our house call 81% year-on-year increase in revenue to EGP 45 mil- capabilities. In our home market of Egypt, where lion supported by a 70% year-on-year rise in both sample collected directly in patient homes made up tests performed and patients served, which recorded 23% of the country’s revenue for the year, we added 78 thousand and 62 thousand, respectively. I am a second call centre, expanded our house call team particularly happy to note the growing success of to an average of 400 chemists, and streamlined Al-Borg Scan, which is helping us to capitalise on the logistics to further decrease turnaround times. On important growth opportunities offered by Egypt’s this last point, we were particularly happy to note fragmented radiology market while delivering on 20 IDH 2021 Annual Report our vision of providing patients with a one-stop- In Nigeria, we continued to record steady revenue shop service offering featuring both pathology and growth throughout the entire year on the back of radiology. To capitalise on the rising patient demand growing test and patient volumes. In 2021, Echo- for our radiology services, we inaugurated two new Lab’s revenues expanded 49% year-on-year on the Al-Borg Scan branches in 2021 and a third in March back of a 31% increase in tests performed coupled 2022. In the coming months, we plan to continue with a 14% rise in average revenue per test. Grow- launching additional branches, further expanding ing volumes continue to highlight the effectiveness our reach across Great Cairo. Finally, it is also worth of our investments to revamp Echo-Lab’s operations highlighting Wayak’s growing market traction, with and the success of our targeted marketing efforts. The the venture continuing to expand its patient base consistent growth delivered by our Nigerian opera- and product offering. The company’s EBITDA losses tions also reflect the incredible work done by Dr. have narrowed significantly and management has Alok Bhatia, who joined Echo-Lab as CEO in March ambitious plans to build on this momentum by roll- 2021. Dr. Bhatia and his team have brought the skills ing out multiple new services in 2022. and expertise needed to deliver on our long-term vision for Echo-Lab and we look forward to reaping Jordan was the standout performer for the year, with the rewards of their hard work in the coming years. Biolab reporting year-on-year net sales growth of 112% and contributing a record share of consolidated Finally, in Sudan our results for the year were heavily net sales at 17.2%. During the year, Covid-19-related impacted by the devaluation of the Sudanese Pound tests contributed to 68% of Biolab’s net sales as the in February 2021 as well as the rise in social and politi- venture continued to record strong demand at both cal unrest witnessed in the final months of the year. its regular branches and across its testing booths However, management’s continued success in raising located in the country’s main airports and ports. In prices in step with inflation, saw revenue in local cur- fact, Covid-19-related net sales in Jordan was boosted rency terms grow an impressive 159% in 2021. It is also by strong contributions from Biolab’s new partner- worth highlighting that despite the operational diffi- ship with Queen Alia International Airport, King culties and heightened uncertainty faced throughout Hussain International Airport, and Aqaba Port. As the past year, operations are continuing without part of these agreements, Biolab has been operating major interruptions. testing stations across all three locations primarily focused on offering PCR testing for Covid-19 to pas- Further down the income statement, we reported sengers arriving in Jordan. Through these initiatives, impressive margin expansions at all levels of profit- Biolab was able to continue playing a frontline role in ability supported by strong revenue growth and the the country’s fight against the pandemic and simul- subsequent dilution of IDH’s fixed costs. More specifi- taneously expand its patient base and reach across cally gross profit for the year more than doubled with new segments of the population. Meanwhile, we a five-point margin expansion. Meanwhile, EBITDA were also very pleased to note the robust recovery in adjusted for one-off listing fees expanded 116% with Biolab’s conventional test net sales, which increased a margin on net sales of 50%, up six percentage points 26% year-on-year on the back of a solid rise in con- from 2020 (adjusted EBITDA margin on revenues ventional tests performed. stood at 48% in FY 2021). Strong adjusted EBITDA 2021 Annual Report IDH 21 Strategic Report Chief Executive’s Report level profitability supported a 145% year-on-year like many of the markets we currently operate in, expansion in net profit which reached EGP 1,493 mil- its healthcare industry is characterised by a widen- lion in 2021. Net profit margin on net sales expanded ing demand-supply gap for high quality healthcare seven percentage points versus 2020 to record 30% for services, a high degree of out-of-pocket payments the year (net profit margin on revenues stood at 29% (medical expenses not reimbursed by insurance), in FY 2021). It is worth highlighting that the remark- and increasingly favourable regulations aimed at able net profit growth comes despite the Company encouraging private sector participation. Similar to booking EGP 29 million in one-off fees related to our our existing businesses, IDC boasts an established dual-listing as well as EGP 20 million in fees related to position in the Pakistani market with network of over the IFC loan secured in May of last year. 85 branches across 30 cities, and offers a full roster of Expanding Our Footprint While effectively serving our patients and delivering pathology and radiology diagnostic services. These characteristics make IDC the perfect partner for IDH, and Pakistan an ideal location where our proven busi- exceptional results across our existing geographies, ness model is well placed to drive new value and help we also worked to expand our footprint into new ter- meet the rising demand for high quality healthcare. ritories. On this front, in December 2021, we signed a sale and purchase agreement to acquire 50% of Islam- abad Diagnostic Centre (IDC), one of Pakistan’s larg- Dual-listing on the EGX Adding to this past year’s list of achievements, in May est, most respected, and fastest growing integrated 2021 we successfully completed our dual-listing on diagnostics companies, for a total consideration of the Egyptian Exchange (EGX), successfully meeting USD 72.35 million. The deal, which is currently pend- our goal of offering IDH’s unique value proposition ing regulatory approval, would see us partner with to the widest investor base possible. With our shares IDC’s founder and CEO, Dr Rizwan Uppal, and acquire now listed on the both the LSE and the EGX and a stake in an established provider with a strong track- tradeable in a fully fungible manner, we have provided record, solid financial performance, and an ambitious local retail and institutional investors as well as global growth plan. The transaction will see us add a fifth emerging markets specialists who regularly invest country to our footprint and help us further diversify through the EGX with the possibility to capitalize on our revenue base in line with our long-term strategy. our attractive growth profile. We remain optimistic IDC will be fully consolidated on IDH’s accounts that going forward investors will find having two ven- following the completion of the transaction and ues on which to trade IDH shares increasingly useful, the transfer of funds to the Evercare Group. Under realizing our target of having a larger number of the the agreement, IDH will hold four of the seven seats Company’s shares being traded on the EGX. on IDC’s board. The transaction, which is subject to the satisfaction of a number of conditions precedent should be completed later in 2022. Our Sustainability Journey Across our operations, we continue to place a strong focus on strengthening our environmental, social With a population of over 200 million, 63% of which and governance (ESG) monitoring and compliance is under the age of 30, Pakistan boasts an attractive frameworks to ensure we continue working to the demographic profile providing long-term sustainable betterment of our communities and safeguarding demand for quality healthcare services. Meanwhile, the interests of all our stakeholders. Throughout 22 IDH 2021 Annual Report 2021, we devoted our attention to developing a more overseeing all aspects of the business since our list- assertive road map that draws clear guidelines and ing on the LSE in 2015. Our Board is composed in the methods to monitor, evaluate, and improve our sus- majority by independent, non-executive directors and tainability practices. Under the guidance of a top- is backed by a robust and constantly enhanced policy tier ESG consultant, we undertook a rigorous ESG framework. In early 2022, our Board of Directors was assessment across all functions to highlight key further strengthened with the appointment of Ms. sustainability initiatives while identifying areas of Yvonne Stillhart, as a Non-Executive Director. Yvonne improvement. This allowed us to set the foundation is a seasoned Senior Executive working with innovation for future ESG implementation by internally map- and growth driven companies across a wide range of ping key performance indicators to the newly devel- industries and geographical regions, including Europe, oped sustainability framework. As a critical sector, USA, North Africa and Sub-Saharan Africa. the healthcare industry stands at the threshold of each of the UN’s Sustainable Development Goals (SDGs). Throughout our operations, we have direct Dividend Policy and Proposed Dividend In view of the strong cash-generative nature of our impacts on a number of key SDGs, and indirectly business and its asset-light strategy, our dividend pol- impact multiple others. Through our Sustainability icy is to return to shareholders the maximum amount Report, we were able to successfully share with of excess cash after taking careful account of the cash our peers and wider community our contributions needed to support operations and expansions. As across all 17 SDGs, providing stakeholders with a such, IDH is delighted to recommend a final dividend clear framework to benchmark our contributions in respect of the financial year ended 31 December and hold us accountable in the years to come. 2021 of EGP 2.17 per share, or EGP 1.3 billion in aggre- gate. The equivalent value, which will depend on the In a world where investment decisions are being taken exchange rate at the time of the upstreaming from the with an increasing focus on the ESG profile of a com- subsidiaries to the holding company, represents a sig- pany, we have provided investors with an in-depth nificant increase from the dividend of US$ 29.1 million analysis of our ESG performance, facilitating their due distributed for the previous financial year. diligence processes. On this front, we have dedicated a chapter of the report to address our investors’ inqui- ries related to our ESG performance and strategy, 2022 Outlook We kicked off 2022 recording another surge in Covid- aligning ourselves with the global action plan set by 19 infections across our markets as the highly-infec- the Principles of Responsible Investment. As we leave tive Omicron variant became increasingly prevalent. 2021 behind us, we are proud of the progress made on Throughout this new wave, in both Egypt and Jordan this front, but remain cognizant that of the long road we continued to provide our patients with widespread ahead of us. As we enter this exciting new chapter for access to Covid-19-related testing, helping to keep our IDH, we welcome all our stakeholders to share their communities safe and providing local authorities with insights and help us generate additional social and vital support in the fight against the virus. In the final environmental value for our communities. weeks of the first quarter, as vaccines continued to be rolled out, we witnessed a sustained decline in new Throughout this process, we have been closely guided infections with governments around the world signal- by our world-class Board of Directors, which has been ling a strong will to transition into a post-Covid-19 2021 Annual Report IDH 23 Strategic Report Chief Executive’s Report normality. While the Group remains vigilant and ready their overall experience. At the same time, we are tar- to respond to possible new waves in infections, we are geting the roll out of an additional 25 to 30 branches prepared and excited to kickstart our post-pandemic in and outside the Greater Cairo area, and continue strategy and venture into a new chapter of sustainable to take advantage of the abundant spare capacity at growth. During the course of 2021, while our priority our house call division to further scale up the service. remained helping governments combat the Covid-19 In Nigeria, thanks to the consistent revenue growth pandemic, we also worked tirelessly to improve all and the stellar work being done by Dr. Bhatia and his aspects of the business and lay solid foundations on team to streamline operations, Echo-Lab is on track which to build out next phase of development and to turn EBITDA positive in 2022. We are confident value creation. that the investments undertaken since the acquisi- tion of Echo-Lab back in 2018 have built a stronger, Heading into 2022, there are several exciting devel- leaner, and growth-oriented business which is well- opments I am looking forward to across both new placed to take full advantage of the significant growth and existing markets. In Egypt and Jordan, we are opportunities offered Nigeria’s diagnostics market. aiming to capitalise on our market leading posi- Finally, in Sudan, we are continuing to monitor the tion, expanded product offering and patient base, ongoing political and social instability and have put increased service delivery capabilities, and growing in place strong mitigation strategies to protect our visibility to continue delivering robust growth in the people and operations. year ahead. In particular, we are eager to capitalise on the post-Covid-19 rebound in conventional testing as Beyond our current markets, we are also looking for- patients’ focus shifts back to conventional healthcare ward to obtaining the remaining regulatory approvals as the threat of Covid-19 subsides. Moreover, across and add Pakistan to our footprint. IDC is expected to both markets, our attention will now pivot towards generate substantial value from the very start and we patient retention as well look to maintain the new are thrilled to kick off our partnership with Dr. Uppal relationships we were able to establish during the in the coming months. In parallel, we will continue pandemic thanks to our Covid-19-dedicated offer- to assess other potential value-accretive acquisition ing. On this front, we have recently launched a new opportunities both across new and existing markets dedicated loyalty programme in partnership with a in Africa, the Middle East, and Asia which present leading loyalty solutions provider, and are working similar characteristics to our current markets and to roll out multiple new marketing campaigns mak- where our operational model would be best-suited to ing full use of our growing social media presence. In drive long-term value creation. parallel, we are also leveraging our enhanced digital and data analytics capabilities to monitor patient records and disease cycles, and provide tailored A Turbulent Start to the Year In the first few months of the new year, globally we services and increase cross-selling. Our efforts con- have been confronted with a new set of challenges tinue to ensure that our patients enjoy a hassle-free related to the long-term economic spill overs of the experience from start to finish, further enhancing pandemic coupled with the impacts of the ongoing 24 IDH 2021 Annual Report Russia-Ukraine war. Supply chain issues, fast-rising I would like to conclude by thanking all my colleagues consumer demand, and the increased volatility in for their exceptional work over the course of the last commodity prices which has been exacerbated by year. 2021 was the outstanding year that it was in great the ongoing war in Eastern Europe, are continuing part due to your relentless efforts to deliver on our to push up prices, with countries around the world vision and goals. I am honoured to have the oppor- recording inflation figures not seen for many years. tunity to work with you, and I am confident that by In light of rising inflation, central banks around the working together we will be able to continue deliver- world have commenced a cycle of monetary tight- ing exceptional value in 2022. Dr. Hend El-Sherbini Chief Executive Officer ening, with many raising interest rates for the first time in years. Here in Egypt, on 21 March 2022, the Central Bank raised policy rates by 100bps and allowed the Egyp- tian Pound to devalue by more than 17% against the US Dollar. Despite the heightened uncertainty fol- lowing the announcement, we are confident that our proven track record in navigating similar turbulent times and the strong mitigation frameworks we have in place provide ample protection from the short and longer-term impacts of the decision. Going forward, we will continue to keep a close eye on the evolving situation, and have taken proactive steps to build up our inventory to safeguard ourselves from any poten- tial future disruptions. 2021 Annual Report IDH 25 Strategic Report Our Markets Our Markets | 4countries of operation | 502operational branches, +21 versus 2020 IDH operates in emerging markets whose healthcare of pocket in advance of the tests being completed framework is considerably different from those in with no insurance, corporate or syndicate covering many Western markets. In emerging markets, we the expenses. often find publicly funded and private healthcare systems operating in parallel thus giving the patient Generally, patients receive their test results in- the liberty to choose the healthcare service that best person accompanied by a report from a specialist meets their needs. Additionally, general practitioners such as a pathologist, geneticist or radiologist and (also referred to as family medicine practitioners or return to the physician who requested the tests be primary care specialists) are not commonly available, done. IDH also has the option to deliver same-day consequently, they are not the gatekeepers through results to patients electronically and via the mobile which patients access primary or specialist care. app. IDH engages in sales and marketing activities that separately target: In emerging markets, a patient seeking medical care • Physicians: through direct sales visits to may do so through several routes including visiting individual practitioners, periodic gatherings a hospital outpatient clinic or emergency room, for physicians within a specialty, promotional attending a polyclinic or directly seeking the ser- giveaways as well as discount cards for physi- vices of a specialist physician. Although physicians cians and their families, incentive-based physi- ordering diagnostic testing may recommend that cian loyalty programs and the organisation or the patient complete these tests at a specific ser- sponsorship of conferences; vice provider, more often than not, patients enjoy • Walk-in Patients: through social media a high degree of freedom in choosing their service channels, mass-market and targeted health provider. The decision is usually contingent on the awareness campaigns, outdoor advertising, perceived quality and safety, proximity, affordability television, radio and online advertising; and and/or insurance or corporate arrangements. Walk- • Contract Patients: through direct outreach to in patients (also referred to as “self-payers”) pay out insurers and employers. 26 IDH 2021 Annual Report Barriers to Market Entry Covid-19 Across IDH’s Markets Accreditation of Facilities Attracting contract clients requires accredited, high-quality testing capabilities and facilities (IDH is the sole CAP-accredited lab in Egypt) Brand Equity and Reputation Patients are loyal to leading brands with a strong track record Market Reach Fragmented market necessitates a wide geographic presence to allow for broad customer reach Relationship with Key Stakeholders Building a scalable platform requires strong relationships with stakeholders such as physicians, patients and hospitals Economies of Scale IT-enabled platform, critical mass, decades of know-how and cutting- edge equipment mitigate against new entrants Following the outbreak of Covid-19, governments across all 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. While these measures were neces- sary to guarantee the health and safety of citizens, they posed severe operational disruptions across IDH’s geographies including branch closures and reduced operating hours. Starting in the latter half of 2020, restrictive measures were gradually lifted across all countries and vaccine campaigns were successfully kicked off in the first weeks of 2021. As the year progressed, we saw patient volumes return back to normal levels across IDH’s geographic footprint, and by mid-2021 non-Covid-19 test volumes had returned to their pre-pandemic levels. Throughout the year, IDH continued to actively assist local authorities’ efforts in containing emerging variants by offering PCR testing in both Egypt and Jor- dan. The Company also played a key role in supporting the recovery of international travel, providing PCR testing to departing and arriving passengers both on a walk-in basis and as part of agreements with airports, airlines, and insurance providers. 2021 Annual Report IDH 27 Strategic Report Our Markets Egypt 81% Contribution to consolidated net sales9 in 2021 Egypt Key Highlights | 452Branches as at year-end 2021, +23 versus 2020 | 4.1 EGP BN Revenues in 2021, up 89% y-o-y | 8.5MN Patients served in 2021, up 34% y-o-y The Egyptian diagnostic market can be broadly divided into public and private sector infrastructure, with the latter including both labs attached to private hospitals and independent standalone labs (chains and single labs). The majority of labs in Egypt are located in big cities, leaving considerable room to ramp up accessibility across the country’s 27 governorates for greater coverage of the population. Additionally, the corporate market is emerging as a driver for diagnostic services as more companies elect to offer healthcare coverage to their employees. IDH is the largest fully-integrated private sector diagnostics service pro- vider, with more than 50% share by revenue of the private chain market in Egypt.10 IDH enjoys a strong competitive position in the Egyptian diag- nostic industry, having created significant barriers to entry with its 40-year track record and network of 452 branch labs at year-end 2021. This was accomplished through: Long-established brands with trusted reputations that have engendered strong patient loyalty Strong relationships with key stakeholders including physicians, patients and hospitals A scalable, asset-light business model that enables expansion in fragmented markets International accreditations notably the coveted CAP certification of the Mega Lab 9A full reconciliation of revenues and net sales by geography is available on page 11 of this report. 10According to the Boston Consulting Group (BCG) 28 IDH 2021 Annual Report Growth in the Egyptian diagnostics industry is sup- numbers go down. Successful efforts in mitigating ported by robust market fundamentals including: the spread of the virus despite the resurgence of vari- • A large and growing population of over 100 mil- ants have supported economic recovery and growth. lion, making Egypt the most populous country in the Middle East North Africa (“MENA”) region; in On 21 March 2022, the Central Bank raised policy terms of demographics, it hosts a significant pro- rates by 100bps and allowed the Egyptian Pound to portion of elderly people. devalue by more than 17% against the US Dollar which • An increasing prevalence of diseases including com- is expected to impose Inflationary pressures in the municable and non-communicable diseases, tropi- short to medium term. Inflation rates are expected to cal diseases, and lifestyle diseases such as diabetes. average around 13% to 15% during 2022, up from 5.9% • A growing government role to increase aware- in December 2021. Moreover, GDP growth in FY22/23 ness on the importance of diagnostic testing in was revised downward to 5.5% from 5.7% by the Egyp- preventative healthcare, supporting the growth in tian government in March 2022. laboratory diagnostics as a tool in clinical practice. Macroeconomic Developments The Covid-19 outbreak in early 2020 led the govern- Operational and Financial Highlights In Egypt, IDH recorded revenues of EGP 4,108 million and contributed to 79% of IDH revenues (81% of net ment to implement a series of restrictive measures sales) for the year. Revenue year-on-year growth of to curb the spread of the virus, which had material 89% in 2021 came on the back of solid growth in both impacts on IDH’s operations including reduced working hours causing a decline in volumes for sev- eral months. Towards the end of 2020 and through- patient and test volumes. Revenues in IDH’s home market were supported by both Covid-19-related11 and conventional tests, and were further boosted by out 2021, restrictions were relaxed and the road to the Group’s house call service which in the twelve economic recovery began as businesses returned to months ended on 31 December 2021 saw its revenues normal operations. nearly double, contributing 23% of Egypt’s revenues versus 22% in 2020. Throughout 2021, demand for Egypt officially kicked off its vaccination campaign conventional tests continued to recover following in the final week of January 2021. As at the end of the Covid-19-related slowdown recorded in 2020, March 2022, approximately 45% of the population with conventional test revenues increasing 23% year- had received at least one dose of the Covid-19 vaccine on-year on the back of a 15% year-on-year increase in and the country saw both hospitalisation and death conventional test volumes. 11 Covid-19-related tests include both core Covid-19 tests (Polymerase Chain Reaction (PCR), Antigen, and Antibody) as well as other routine inflammatory and clotting markers including, but not limited to, Complete Blood Picture, Erythrocyte Sedimentation Rate (ESR), D-Dimer, Ferritin and C-reactive Protein (CRP), which the Company opted to include in the classification as “other Covid-19-related tests” due to the strong rise in demand for these tests witnessed following the outbreak of Covid-19. 2021 Annual Report IDH 29 Strategic Report Our Markets Meanwhile, IDH’s fast-growing radiology business, Al-Borg Scan, recorded year-on-year revenue growth of 81%, with the venture’s revenues reaching EGP 45 million in 2021. Revenue growth was supported by solid growth in volumes, with both tests performed and patients served standing 70% above the preced- ing year’s figures. To capitalise on Al-Borg Scan’s growing popularity, the Group inaugurated two Al-Borg Scan branches in the second half of 2021 and one in early March 2022. Looking ahead, the Company is working to roll out additional branches to further expand its reach across Greater Cairo. In its home market of Egypt, IDH continues to leverage its expanded service offering and delivery capabilities to serve its Covid-19 and conventional patients whilst delivering outstanding growth and profitability for the year. IDH’s house call service in Egypt, which has been EBITDA for IDH’s Egyptian operations recorded EGP successfully ramped up to capitalise on the service’s 2,206 million in 2021, up 112% year-on-year on the growing popularity, recorded revenues of EGP 935 back of strong revenue growth. EBITDA margin on net million in 2021, up 94% year-on-year. The service’s sales increased six percentage points to 54% the year. contribution to the country’s revenues stood at 23% in 2021, versus the 22% contribution made in 2020. Core12 Covid-19 tests performed through its house call service made up 30% of total core Covid-19 Operationally, IDH rolled out 23 new branches in Egypt during 2021, including two new Al-Borg Scan branches rolled out in October and December. tests performed by IDH in the country throughout Through its expanded branch and house call ser- the year. Tests performed through IDH’s house call vices, IDH served 8.5 million patients in 2021, up service are offered at the same price as at traditional 34% year-on-year, and performed 29.7 million tests, branches, with only an additional house call delivery representing a 21% increase from 2020. fee charged to patients to cover the transportation costs of the chemist. 12 Core Covid-19 tests refer to Polymerase Chain Reaction (PCR), Antigen, and Antibody. 30 IDH 2021 Annual Report 2021 Annual Report IDH 31 Strategic Report Our Markets Jordan 17% Contribution to consolidated net sales13 in 2021 Jordan Key Highlights | 21Branches as at year-end 2021, +1 versus 2020 | 869 EGP BN Net Sales14 in 2021, up 112% y-o-y | 1.6MN Patients served in 2021, up 196% y-o-y Jordan has one of the most modern healthcare infrastructures in the Middle East, with services highly concentrated in Amman and c.70% of Jordanians having medical insurance. The Jordanian market’s strong fundamentals allow IDH to deliver consistent growth despite strict price regulation on medical laboratories 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 21 central labs perform many of the 1,000+ pathology tests offered, four that are consid- ered specialty labs perform particular types of tests including, but not limited to, hematology, endocrinology, immunochemistry, parasitol- ogy, oncology, transfusion medicine, molecular genetics and antenatal diagnostics and gene sequencing. Furthermore, Biolab does not share purchasing, supply and logistics, IT, marketing or sales functions 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 management 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 pandemic and related restrictions on international flights affecting planned audit visits, logistics and external quality control – an agreement has been reached with GHG to postpone the implementation of the management agreement and its scheduled payments to 2022. 13 A full reconciliation of revenues and net sales by geography is available on page 11 of this report. 14 Net Sales is calculated as revenues excluding commission fees paid by Biolab as part of the company’s revenue sharing agreements with QAIA and Aqaba Port. In FY 2021, in Jordan, IDH recorded revenue of EGP 1,046 million (up 156% year-on-year) and net sales of EGP 869 million (up 112% year-on-year). 32 IDH 2021 Annual Report Despite the difficult operating environment due a significant improvement to the 1.6% contraction to Covid-19, the planned integration of the Mega experienced in 2020. Lab with GHG’s network proceeded as scheduled, and by mid-2021 all 76 locations had successfully completed the technology transfer, including the installation of the lab’s Laboratory Information Management Systems (LIMS). Initially serving GHG’s network, that is expected to utilize one- Operational Highlights IDH’s Jordanian operations saw net sales more than double year-on-year to reach EGP 869 million for the year, up 112% versus 2020 ( Jordan’s revenues15 (IFRS) recorded EGP 1,046 million in FY 2021, up third of the facility’s capacity, the Mega Lab plans 156% year-on-year). Net sales growth was driven by to develop a B2B network of healthcare providers an 75% increase in test performed coupled with a outside the Group to reach full utilization. 21% rise in Biolab’s average revenue per test. Dur- Macroeconomic Developments To curtail the spread of the Covid-19 virus in 2020, ing the year, Covid-19-related tests contributed to 68% of Biolab’s net sales and to 37% of its tests performed. Covid-19-related net sales in Jordan the Jordanian government ordered the closure of all was boosted by contributions of EGP 185 million educational institutions, governmental and private from Biolab’s new partnership with QAIA coupled entities and introduced a curfew. The restrictions had with the EGP 107 million in net sales coming from an impact on Biolab’s branches which were ordered its partnerships with KHIA and Aqaba Port. As part to close or operate reduced working hours. In early of these agreements, Biolab has been operating 2021, the government began the gradual easing of testing stations across all three locations primarily these measures following a decline in new infections focused on PCR testing for Covid-19 to passengers across the country, which saw operations resume to arriving in Jordan. The stations also offer additional their normal volumes. diagnostic tests to patients including rapid PCR testing for Covid-19 for departing passengers and Jordan launched its Covid-19 vaccination campaign other, more generic diagnostic tests. Meanwhile, in early January 2021. As at the end of March 2022, conventional test net sales increased 26% year-on- 45% of the population had received at least one dose year on the back of a 28% increase in conventional of the Covid-19 vaccine, which is supporting the tests performed. Meanwhile, the country’s net sales country’s efforts towards economic recovery. Jor- continued to be supported by Biolab’s house call dan’s forecasted GDP growth for 2022 is 2.7%, which service which generated EGP 55 million in net sales is up from the realized 2.0% growth rate in 2021 and in 2021, up 12% year-on-year. 15 Biolab’s revenues for the year are calculated as net sales plus concession fees paid to QAIA and Aqaba Port as part of their revenue sharing agreement. 2021 Annual Report IDH 33 Strategic Report Our Markets IDH’s Jordanian operations recorded EBITDA of EGP 331 million in 2021, up 155% versus the previous year on the back of strong net sales growth. In local currency terms, EBITDA grew 157% compared to the previous year. EBITDA margin on net sales recorded 38% in 2021 compared to 32% in 2020. Throughout the year, Biolab rolled out an additional branch in the country, taking the total number of branches to 21 as at year-end 2021. Jordan was a strong performer in 2021, with Biolab delivering exceptional financial and operational results while continuing to play a frontline role in the fight against Covid-19 Meanwhile, in Georgia, where Biolab has partnered LIMS roll out, Biolab has received an 8.025% equity with Georgia Healthcare Group (GHG) to establish a interest in Mega Lab. Moreover, in exchange for man- 7,500 sqm Mega Lab, the ramp up phase is progress- agement services, which Bio Lab will be supplying ing as scheduled, with Biolab concluding the roll for a two-year period with the option to extend, the out of the new Laboratory Information Manage- company will receive an annual fees as well as a fixed ment System (LIMS) across all of GHG’s 76 medical percentage of Mega Lab’s annualized EBITDA. facilities (7 hospitals and 69 clinics) in the first half of 2021. The Mega Lab is the region’s largest diagnostic medical laboratory which will leverage the advanced technological systems provided by Biolab to connect more than 40 hospitals and diagnostic centers that are part of GHG’s network. As compensation for the 34 IDH 2021 Annual Report 2021 Annual Report IDH 35 Strategic Report Our Markets Nigeria 1.1% Contribution to consolidated net sales16 in 2021 Nigeria Key Highlights | 10Branches as at year-end 2021, -2 versus 2020 | 54 EGP BN Revenues in 2021, up 49% y-o-y | 153K Patients served in 2021, up 16% y-o-y IDH’s operations in Nigeria commenced in February 2018 following its acquisition of Eagle Eye Echo-Scan Limited (“Echo-Scan”) through a stra- tegic alliance with Man Capital LLC (“Man Capital”), the London-based investment arm of the Mansour Group, called Dynasty Holding Group (“Dynasty”), which is 51% owned and controlled by IDH. In turn, Dynasty partnered with the International Finance Corporation (“IFC”) 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 202517. The strategic rationale for investing in Nigeria’s healthcare system is very compelling and supports the Group’s goal of expanding its regional footprint. Nigeria’s diagnostic services market is very large, highly fragmented and underpenetrated, offering significant opportunities for growth and economies of scale. Nigeria’s diagnostics industry can be broadly divided into three groups; the largest being independent standalone labs (chains and single labs), followed by public and private hospitals. Moreover, Nigeria has a population of over 213 million and shares many similarities with Egypt’s market in the 1980s and 1990s in terms of structure, pace of development, and the emerging disease profile of patients. Since acquisition, IDH 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. 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. IDH continues to ramp up its opera- tions in Nigeria with its efforts already proving successful in strengthen- ing Eco-Lab’s brand equity and driving strong growth volumes. 16 A full reconciliation of revenues and net sales by geography is available on page 11 of this report. 17 Source: Boston Consulting Group. 36 IDH 2021 Annual Report Macroeconomic Developments IDH’s Nigerian operations were impacted in 2020 due During 2021, Echo-Lab closed down two underper- forming branches taking the number of operational to complete lockdowns in several cities as well as a branches to 10 as at year-end 2021. The strategic deci- wave protests and civil unrest which led to branch sion is part of a wider plan to optimize the venture’s closures at times. In 2021, all branches returned to operations as the new management team works to normal working hours and operated without disrup- turn the business EBITDA positive. On this front, it tions which improved overall volumes. is important to note that Echo-Lab has undergone a management restructuring with a new CEO joining Despite recording the country’s worst recession in the team in early 2021 to guide the venture in its new four decades during 2020, Nigeria economic growth phase of growth and value creation. in 2021 was back on track as pandemic restrictions were eased, oil prices recovered and authorities Operations in Nigeria posted an EBITDA loss of EGP 7 implemented policies to counter the economic million, in line with the previous year’s figure. Losses shock. Nigeria’s GDP is expected to grow 2.7% in 2022 for the year partially reflect a one-off EGP 4.4 million on par with the realized growth rate in 2021. adjustment related to the previous year. Controlling for the one-off adjustment, EBITDA would come in Operational Highlights At the Group’s Nigerian subsidiary, revenues expanded at a loss of EGP 2.6 million, significantly narrowing from the previous year’s figure. In light of the steady 49% year-on-year to reach EGP 54 million in 2021. improvements witnessed throughout 2021, Nigeria Growth was even more pronounced in local currency is expected to turn EBITDA positive during the first terms with revenues up 53% year-on-year supported half of 2022. by a 31% year-on-year expansion in tests performed (patients served were up 16%) coupled with a 14% rise in average revenue per test. Over the last two years, Echo-Lab’s has consistently delivered solid volume growth thanks to an effective revamp strategy which has involved the complete renovation of the venture’s branches combined with the rollout of targeted marketing campaigns aimed at stimulating demand for the venture’s services. Volumes for the year also benefitting from a gradual normalisation of traffic fol- lowing the easing of restrictive measures enforced to curb the spread of Covid-19 throughout 2020. 2021 Annual Report IDH 37 Strategic Report Our Markets Sudan 0.3% Contribution to consolidated net sales18 in 2021 Sudan Key Highlights | 19Branches as at year-end 2021, -1 versus 2020 | 17EGP BN Net Sales in 2021, down 56% y-o-y | 17K patients served in 2021, down 46% y-o-y IDH operates under two brand names in Sudan, Ultralab and Al Mokh- tabar 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. 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, depriving 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. Subsequently, a power-sharing agree- ment was signed between the military and an opposition coalition in July 2019 which brought about fragile stability during the transitional period. In 2021, the situation remained volatile as civil unrest coupled with a weak Sudanese Pound (SDG) continued to plague the country. The current environment may adversely affect IDH’s businesses, as such, management is closely monitoring the situation and any develop- ments on the ground. Macroeconomic Developments In December 2020 the US government officially removed Sudan from its States Sponsors of Terrorism list. The change in the country’s designa- tion is expected to allow Sudan to have access to international funds and investment, including the International Monetary Fund, paving the way for the country’s economic growth. 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. 18A full reconciliation of revenues and net sales by geography is available on page 11 of this report. 38 IDH 2021 Annual Report In February 2021, Sudan’s government announced it management’s continued success in raising prices would allow for the free float of the Sudanese Pound in step with inflation throughout the year, saw net (SDG) leading to a sharp devaluation of the currency sales in local currency terms grow an impressive and a rapid rise in inflation. The central bank set 159% in 2021. the indicative rate at 375 pounds to the dollar up from 55 pounds, which had a significant impact on During the twelve months to 31 December 2021, IDH IDH’s operations. Later in the year, protests broke closed one branch in Sudan, with the number of opera- out following the Sudanese Military’s decision to tional branches in the country now standing at 20. depose the civilian prime minister. Despite being reinstated in the final week of November, Abdalla The Company recorded an EBITDA loss of EGP 0.5 Hamdok later resigned in early January 2022 as civil million in 2021, compared to a positive EBITDA of unrest continued. The protests led to the temporary EGP 6.1 million in 2020. EBITDA for the year was closure of all of IDH’s Sudanese branches. However, impacted by the sharp SDG devaluation in Febru- all locations were reopened within a few days and ary 2021. In SDG terms EBITDA declined 148% quickly gained back momentum. Management on year-on-year. the ground continues to monitor the situation and has put in place an all-encompassing mitigation strategy to safeguard staff and patient wellbeing and protect IDH’s operations. Meanwhile, the country’s Covid-19 vaccination cam- paign launched in March 2021. As at the end of March 2022, around 13% of the population had received at least one dose. Operational Highlights In Sudan, IDH reported a 56% year-on-year con- traction in revenue to EGP 17 million for the year. The country’s results continue to be significantly impacted by the devaluation of the Sudanese pound in early 2021 with the average SDG/EGP rate in 2021 standing at 0.05 versus 0.29 in 2020. Nonetheless, 2021 Annual Report IDH 39 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. Meanwhile, the Group’s newest venture, Egypt-based Wayak, utilises data analytics to offer patients data-driven healthcare management services and compile electronic medical records. Al Mokhtabar – Egypt Al Mokhtabar was first launched over 40 years ago when microbiology/infectious diseases, toxicology, cytology, Dr. Moamena Kamel, Professor of Immunology at Cairo surgical pathology, flowcytometry, molecular biology University, founded MK Lab in 1979. In 2004, MK Lab was and cytogenetics. As of 31 December 2021, Al Mokhtabar rebranded Al Mokhtabar and has since built a reputation operated a network of 244 branches across Egypt, mak- as a quality care provider with a portfolio of over 2,000 ing it the largest privately owned laboratory group in clinical analyses in the areas of immunology, haema- the region, and served 5.0 million patients who received tology/coagulation, clinical chemistry, parasitology, more than 17.3 million tests. Al Mokhtabar Key Highlights | 244operational branches as at 31 December 2021 | 50MN patients served in 2021 | 17.3MN tests performed in 2021 Al Borg Laboratories – Egypt Founded in 1991, Al Borg Laboratories is the first tests covering the whole spectrum of conventional medical laboratory in the Middle East to successfully and non-conventional medical testing. The company implement a Hub, Spoke and Spike business model. Al caters to outpatient walk-in customers in addition to Borg is now amongst the largest privately owned labo- corporate, insurance and lab-to-lab clients. ratory group in the region, offering more than 2,000 Al Borg Laboratories Key Highlights | 203operational branches as at 31 December 2021 | 3.4MN patients served in 2021 | 12.2MN tests performed in 2021 40 IDH 2021 Annual Report Al Borg Scan – Egypt IDH established Al Borg Scan in 2018 to capture 2022. Al Borg Scan draws on the latest technology to growth opportunities presented by Egypt’s high-value offer the highest quality in MRI, CT, ultrasound, x-ray, and high-fragmented radiology sector. Al Borg Scan mammogram and cath lab services. Run by some of offers a full range of radiology services and leverages Egypt’s most competent and distinguished radiolo- the Al Borg brand equity along with its large customer gists, Al Borg Scan is a key component of IDH’s strat- base to consolidate its position as Egypt’s premium egy to build a national brand in Egypt, and enables provider of medical imaging. The company currently the Group to deliver on its vision of providing patients operates five state-of-the-art facilities in Egypt and with a one-stop-shop service offering featuring both is actively working on launching multiple more in pathology and radiology. Al Borg Scan Key Highlights | 4operational branches as at 31 December 2021 | 62K patients served in 2021 | 78K exams performed in 2021 2021 Annual Report IDH 41 Strategic Report Our Brands Wayak – Egypt Wayak was established in 2019 to invest in data mining to develop electronic medical records for patients and artificial intelligence platforms and capitalise on and better serve their needs with innovative patient IDH’s patient database to capture new growth oppor- healthcare profiles, medication home-delivery, diag- tunities in the healthcare management space. With nostics testing reminders, referrals to service provid- a database of over 13 million patients, of which 10% ers under the IDH network with discounted prices as live with chronic illnesses, Wayak has allowed IDH well as follow-up services. Biolab – Jordan IDH launched Biolab in 2001 with the goal of becoming referring clinical laboratories. Biolab is accredited by a leader in Jordan’s private medical laboratory sector. the Jordanian Ministry of Health (“MOH”), with two Through a nationwide network of 21 branches fitted branches accredited with ISO 15189 and Joint Com- with state-of-the-art medical technology, Biolab offers mission International (JCI) and one branch receiving a vast suite of over 1,000 diagnostic tests to a customer CAP accreditation in 2018. base comprised of patients, physicians, hospitals and Biolab Key Highlights | 21operational branches as at 31 December 2021 | 3.5K patients served in 2021 | 1.6MN tests performed in 2021 Echo-Lab – Nigeria Founded in 1991, Al Borg Laboratories is the first tests covering the whole spectrum of conventional medical laboratory in the Middle East to successfully and non-conventional medical testing. The company implement a Hub, Spoke and Spike business model. caters to outpatient walk-in customers in addition to Al Borg is now the largest privately owned labora- corporate, insurance and lab-to-lab clients. tory group in the region, offering more than 2,000 Echo-Lab Key Highlights | 10operational branches as at 31 December 2021 | 153K patients served in 2021 | 281 K tests performed in 2021 42 IDH 2021 Annual Report UltraLab – Sudan Established in 2008, UltraLab quickly developed into clinical centre-based labs. The company has broad Sudan’s largest and most respected laboratory chain. exposure across Sudan with branches in Khartoum, As at year-end 2021, UltraLab operated 12 laborato- Om Dorman and Port Sudan. ries, including 9 independent labs and 3 hospital/ UltraLab Key Highlights | 12operational branches as at 31 December 2021 | 57K patients served in 2021 | 143K tests performed in 2021 Al Mokhtabar – Sudan Al Mokhtabar Sudan was established in 2010 prior to subsidiaries adhere to the Group’s proven Hub, Spoke IDH’s acquisition of Al Mokhtabar in Egypt. The com- and Spike model, mirroring the approach employed pany offers a comparable suite of diagnostic services by Al Borg and Al Mokhtabar in Egypt. as that provided by UltraLab. Both of IDH’s Sudanese Al Mokhtabar – Sudan Key Highlights | 7operational branches as at 31 December 2021 | 13K patients served in 2021 | 40K tests performed in 2021 The Group boasts a multi-decade-long track record of successful service delivery, with its brands enjoying a strong reputation and an established position in their respective markets of operation 2021 Annual Report IDH 43 Strategic Report Our Services Our Services Through IDH’s brands, the Group spans the full Additionally, IDH’s Egypt-based subsidiary Wayak, spectrum of diagnostic testing services with over leverages the Group’s vast patient database and wide 2,000 internationally accredited pathology tests rang- geographic reach to build electronic medical records ing from basic blood glucose tests for diabetes to and provide patients with customized services includ- advanced molecular testing for genetic disorders. IDH ing home-delivery of medications, diagnostic testing also offers the full suite of radiology services through reminders and referrals to service providers. Al Borg Scan in Egypt and Echo-Lab in Nigeria. Pathology IDH’s comprehensive pathology product portfolio covers immunology, haematology, endocrinology, 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 targeted services to its customers. With a database of Al Borg Scan in Egypt and Echo-Lab in Nigeria, includ- over 13 million patients, of which 10% live with chronic ing but not limited to magnetic resonance imaging illnesses, Wayak invests in data mining and artificial (MRI), computed tomography (CT), ultrasound, x-ray, intelligence platforms to develop electronic medical mammograms and cath lab facilities. records for patients and better serve their needs with Healthcare Management Services In 2019, IDH ventured into the healthcare management new value propositions. These include building patient healthcare profiles, medication home-delivery, diag- nostics testing reminders, referrals to service providers space with the launch of Wayak. The subsidiary aims to under IDH’s network with discounted prices as well as capitalise on the Group’s vast patient database and offer follow-up services, amongst others. 44 IDH 2021 Annual Report Internationally-Accredited Test Portfolio Across its brand portfolio, IDH boasts international-quality accreditations with a stringent internal audit pro- cess to ensure it continues to deliver the world-class services patients have come to expect from IDH’s facilities. ISO College of American Pathologists (CAP) ISO accreditation requires an initial inspection of IDH operates the only laboratory in Egypt to receive laboratory practices, calibration and medical analysis this distinguished certification, which was renewed by an accreditation body. For Al Mokhtabar and for Al in October 2021. Unlike ISO accreditation, CAP certi- Borg, it was URS Certification (accredited internation- fication is awarded to individual labs, rather than the ally by the United Kingdom Accreditation Service); Group’s operations as a whole and is widely considered and for Biolab, it was the Jordanian Accreditation the global leader in laboratory quality assurance. The System (JAS). The inspection involves the clinical Group’s central Mega Lab in Cairo, which was inau- chemistry area, the virology unit, the haematology gurated in 2015, first received its CAP certification in unit and the general laboratory management practice. February 2018 and is renewable every two years. The The accreditation’s standards include both manage- Mega Lab replaces two smaller, independent “A-labs” ment and technical requirements. The Company’s ISO one of which was also CAP certified. 9001:2008 accreditations for both Al Mokhtabar and Al Borg passed accreditation reviews in December 2020 and are valid for three years. 2021 Annual Report IDH 45 Strategic Report Our Services | 300Employees trained per month Quality Assurance Employee Training IDH’s quality assurance programme ensures that all The Group views education as an essential means internal diagnostic processes, lab testing procedures of ensuring quality across its laboratories. To help and results analyses are accurate. The quality assur- develop the skills of employees, IDH has a dedicated ance program ensures that all the standards of the training facility in Cairo with four training laborato- CAP and ISO accreditations are met by inspecting ries. In 2021, the training team was composed of one hardware and equipment, ensuring compliance with manager, one medical consultant, two supervisors, procedure manuals, inspecting the accuracy of results one administrator and six full-time training special- and administering competency assessments for ists. The centre provides training to more than 600 employees. The internal audit team also maintains a employees per month, including doctors, chemists, specific audit checklist for the basic and routine tests receptionists, branch and area managers, sales per- conducted in the Group’s C-labs, including conformity sonnel and administrators. The training curriculum of process; testing the competency of employees is determined based on performance KPIs, internal through oral, observational, practical and written audit reports, management reviews, competency tests; and conducting managerial audits to assess the assessment reports and analysis of customer feedback labs’ management and administrative efficiency. and complaints. IDH’s employee training is structured along four modules: new employee training, compe- tency based, need-based and practical re-training. 46 IDH 2021 Annual Report 2021 Annual Report IDH 47 Strategic Report Competitive Strengths & Growth Strategy Competitive Strengths & Growth Strategy IDH’s prominent market position and agile business model coupled with its scalable platform and experienced management provide the required tools to deliver on the Group’s ambitious long-term growth strategy Competitive Strengths Exposure to resilient markets with favourable dynamics IDH operates in markets underpinned by strong structural growth driv- ers, with generally under-penetrated and underserved diagnostic ser- vices markets. Given the counter-cyclical nature of the diagnostic and healthcare industries, the Group is able to remain resilient in the face of economic and political obstacles across its geographic footprint. This is best illustrated by IDH’s consistent double-digit revenue growth in recent years and, more recently, by its ability to achieve record-breaking top- and bottom-line growth despite the unprecedented challenges posed by the Covid-19 pandemic. Strong market position with over four decades of industry experience The Group benefits from strong barriers to entry in the markets where it operates (as detailed in Our Markets on page 26). This provides a competitive advantage for players who, like IDH, maintain an estab- lished market position. With a success track recording spanning four decades, IDH’s subsidiaries have successfully nurtured a strong brand equity and reputation, earning patients’ trust and loyalty and position- ing themselves as the go-to service providers in the markets where they operate. IDH also leverages its internationally accredited facilities to attract contract clients, while its scalable business model and relation- ships with key stakeholders enable the Group to extend its reach in a fragmented market. 48 IDH 2021 Annual Report | 33.7MN tests performed in 2021 Scalable asset-light business model IDH’s efficient Hub, Spoke and Spike business model allows the Group to organically expand its geographic footprint through a low-capital intensive platform. The Group’s centralised Mega Lab, which is fitted with modern, high-capacity equipment and enjoys ample throughput, facilitates the rapid deployment of asset-light, plug and play C labs for sample collection and simple testing across its markets. Safety and test- ing 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. Strong balance sheet and cash generation capacity IDH’s asset-light model renders minimal borrowing and significant stra- tegic flexibility, which allows the Company to maintain a strong financial position with an unlevered balance sheet. Additionally, core profitability is consistently strong, with the Group delivering EBITDA margins exceed- ing 40% and sustaining healthy cash balances irrespective of the challeng- ing operating conditions endured throughout the years. Experienced and entrepreneurial management The Group boasts a highly qualified management team with several decades of healthcare experience, while its Board of Directors brings a wealth of healthcare, MENA region and investment experience to the table. 2021 Annual Report IDH 49 Strategic Report Competitive Strengths & Growth Strategy Long Term Growth Strategy IDH leverages its competitive strengths to capture the penetration of new geographic markets through substantial opportunities and deliver on a four- selective, value-accretive acquisitions; and (4) the pillar growth strategy focused on 1) the continued introduction of new medical services by leveraging expansion of its customer base; (2) the expansion of the Group’s network and reputable brand position its service portfolio to increase tests per patient; (3) Expand Customer Reach IDH is constantly seeking opportunities to increase Increase Tests per Patient IDH’s state-of-the-art Mega Lab boosts its ability to patient accessibility and expand its customer base, perform higher volume and more advanced tests capitalising on the favourable market dynamics and that are not available at competing labs. The Group strong demand for private healthcare services that also bundles testing services into discounted health prevail across its geographic footprint. IDH’s scal- packages offered to existing customers, further able, asset-light business model allows the Group to driving volume growth and revenue per patient. rapidly and efficiently rollout new labs and further Additionally, IDH actively engages in awareness cam- expand its presence in the Middle East and Africa. paigns focusing on particular diseases and educating In addition to its core offerings, the Group provides people on lifestyle diseases such as diabetes and high an array of complementary services including house cholesterol, and highlighting the importance of fre- calls, e-services and results delivery, which enable quent testing. Such efforts have successfully driven a smoother, well-rounded experience for both volume growth in IDH, bolstering average test and existing and prospective patients. IDH’s house call revenue per patient. services have become increasingly popular in the last two years given the ongoing Covid-19 pandemic, accounting for 20% of consolidated revenues in 2021 compared to around 9% in 2019. In response to higher demand, the Company has effectively ramped up the service and can now perform up to 5,000 house call visits per day and process as many as 10,000 daily calls. This has enabled the Company to effectively cater to the growing demand while still enjoying ample spare capacity to ramp up the service further. 50 IDH 2021 Annual Report | 24new branches in 2021 | 10.3MN patients served in 2021 Geographic Expansion The Group is constantly pursuing strategic acquisi- Diversify into New Medical Services As Egypt’s medical testing space evolves from a tion opportunities within the Middle East and Africa single-doctor model to a branded chain model, IDH where markets tend to be highly fragmented and realizes the opportunity to offer services that are not underpenetrated. IDH’s business model is well- currently available at private healthcare providers positioned to capitalise on prevailing healthcare on a large scale. The Group believes that its brand and consumer trends in the region. Leveraging the equity, experience, and patient following ideally posi- strength of its balance sheet, IDH delivers on its stra- tion it too pursue opportunities in adjacent markets. tegic objective through value-accretive acquisitions To this end, the Group marked its expansion into such as that of Echo-Lab in Nigeria in 2018. the high-value radiology segment in October 2018 through Al Borg Scan and its expansion into data- driven, tailored healthcare management services in September 2019 through Wayak. 2021 Annual Report IDH 51 Strategic Report Principal Risks, Uncertainties & their Mitigation Principal Risks, Uncertainties & their Mitigation As in any corporation, IDH has exposure to risks every risk — and some risks, as at the country level, and uncertainties that may adversely affect its are largely without potential mitigants — the Group performance. IDH Chairman Lord St John of Bletso has in place processes, procedures and baseline has emphasised that ownership of the risk matrix is assumptions that provide mitigation. The Board and sufficiently important to the Group’s long-term suc- senior management agree that the principal risks cess that it must be equally shared by the Board and and uncertainties facing the Group include: senior management. While no system can mitigate Specific Risk Mitigation Country/regional risk — Economic & Forex The Group is subject to the economic conditions of Egypt specifically and, to a lesser extent, those of the other geographies. Egypt accounted for c. 81% of our revenues in 2021 (2020: 82%). Overall, management notes that IDH has a resilient business model and that the business continued to grow year-on-year through two revolutions, as well as under extremely difficult operating conditions in 2016 and in 2020. Economic risk: On the 21st of March 2022, the Central Bank of Egypt (CBE) raised policy rates by 100bps and allowed the Egyptian Pound (EGP) to depreciate against the United States Dollar (USD) by around 17%, which will impose Inflationary pres- sures in the short to medium term. Inflation rates are expected to average around 13% to 15% during 2022, up from 5.9% in December 2021. Moreover, GDP growth in FY22/23 was revised downward to 5.5% from 5.7% by the Egyptian government in March 2022. Foreign investors welcomed March 2022 CBE move as it demonstrated the Egyptian government’s will- ingness to improve investment climate. IDH management is closely monitoring the impact of the rise of inflation on its cost base, especially raw material. The risk is partially mitigated given its long-term contractual agreement with its raw material suppliers. 52 IDH 2021 Annual Report Specific Risk Mitigation Country/regional risk — Economic & Forex Foreign currency risk: The Group is exposed to foreign currency risk on the cost side of the business. The majority of supplies it acquires are paid in Egyp- tian 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. High Inflation in Sudan: Following substantial cur- rency devaluation 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 Cen- tral 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. In February 2021, the Sudanese govern- ment announced it would float the Sudanese Pound in an effort to bridge the gap with the forex prices at the parallel market. This led to a significant increase in the currency rates. The US Dollar rate for instance rose from SDG 55 to more than SDG 375. This was followed by the removal of fuel subsidies in June 2021, which again led to the increase of consumer prices. Accord- ing to data from Sudan’s Central Bureau of Statistics, the country’s headline inflation rate averaged 359% in 2021, up from 163% in 2020. Nigeria: Capital controls could make profit repatria- tion 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 offi- cial exchange converge with the black market rate, the central bank has yet to allow the naira to float freely. During FY2021, only 10% of IDH’s cost of supplies (c.2% of revenues) are payable in US dollars, mini- mising the Group’s exposure to foreign exchange (FX) scarcity and in part, the volatility of the Egyp- tian pound. The Group is closely monitoring the economic situ- ation 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 dependence on local hires. In Nigeria, until currency exchange policy is clari- fied and there is greater visibility regarding profit repatriation, IDH expects to reinvest early profits into its Nigerian business. Dividend payments are expected to be repatriated after the completion of the branch roll-out plan. 2021 Annual Report IDH 53 Strategic Report Principal Risks, Uncertainties & their Mitigation Specific Risk Mitigation Country risk — Political & Security Sudan is currently undergoing a significant political transition which began in 2019 when severe politi- cal unrest and protests led the military to remove long-time president Omar Al-Bashir. Following his removal, the military signed a power-sharing agree- ment with an opposition coalition in July 2019, with the aim of eventually transferring power to a civilian government. On 25 October 2021, Sudan’s Prime Minister was detained by armed forces, and Army chief General Abdel Fattah al-Burhan announced that the civilian government and other transitional bodies have been dissolved. Throughout November, the country witnessed several mass rallies and increased civil unrest with protesters asking for the reinstatement of the civilian Prime Minister, Abdalla Hamdok. The protests led to the temporary closure of all of IDH’s Sudanese branches. All locations were reopened within a few days and quickly gained back momentum. On 21 November 2021, Mr. Hamdok took office once again but later stepped down on 2 January 2022. Civil unrest and protests are continu- ing as the country’s future remains unclear. The situation in Sudan is volatile and continued civil unrest could adversely affect IDH’s business. It is important to note that in FY 2021 Sudan made up just 0.3% of IDH’s net sales. Moreover, while nationwide protests do affect patient and test vol- umes in Sudan, the diagnostic industry is relatively immune given the inelastic demand for healthcare services. Additionally, management in Sudan has been successful in offsetting the effect of lower volumes due to protest with higher pricing, and in 2019, 2020, and 2021 the geography recorded solid year-on-year revenue growth in SDG terms. 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 investment, including the International Monetary Fund, paving the way for the country’s economic growth. IDH’s management on the ground continues to monitor the evolving situation and has put in place an all-encompassing mitigation strategy to safeguard staff and patient wellbeing and protect IDH’s operations. Nigeria faced security challenges on several fronts, including re-emerging ethnic tensions and resur- gent attacks by Islamist militants in the northeast. Against the backdrop of a sluggish economy and the slow implementation of reforms, mounting discon- tent could translate into further social unrest. While this is relatively hard to mitigate, IDH is continuously evaluating its processes to safeguard its employees and operations. Overall, IDH applies rigorous standards to evaluating all aspects of its business processes in Nigeria to ensure it is well- equipped to respond to the evolving situation. The government dissolved the special division known as SARS (Special Anti-Robbery Squad) in October 2021. In late 2020 and throughout 2021, protests have decreased significantly across the country but a potential escalation of civil unrest remains possible. 54 IDH 2021 Annual Report 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 quarantines and their effect on IDH’s business oper- ations and risk of infection among IDH employees. In 2021, the rollout of vaccines across its countries of operation coupled with governments’ willingness and ability to coexist with the virus, saw restrictions imposed to curb the spread being lifted and opera- tions running normally throughout the year. No new restrictions have been imposed following the rise of new Covid-19 variants throughout the year, with countries across IDH’s footprint continuing to push forward their vaccination campaigns. As at the end of March 2022, the share of the population having received at least one Covid-19 vaccine dose stood at approximately: 45% in Egypt, 45% in Jordan, 10% in Nigeria, and at 13% in Sudan. Covid-19 global economic impact: Rising inflation rates, supply chain disruptions, and the rise of new, more fast-spreading Covid-19 variants continue to pose a threat for the global economic recovery. Covid-19 impact on IDH Financials Throughout FY 2021, IDH generated around 50% of its revenues from Covid-19-related testing. In light of the increasing roll out of vaccines and the widespread decline in infection rates, Covid-19-re- lated revenues are expected to gradually decline throughout 2022. All of IDH staff use appropriate protective equip- ment when interacting with patients, including those suspected of having Covid-19 or any other infectious disease. IDH is currently administering PCR, Antibody, and Antigen testing for Covid-19 in Egypt and Jordan. All of the Group’s employees have been fully vac- cinated during 2021 and they are subject to regular communications reminding them that they may not report to work if they have symptoms of a Covid-19 infection. The effective rollout of vaccines and the increasing ability and willingness of governments to coexist with the virus and its variants have supported a steady recovery of the global economy throughout 2021. Throughout the Covid-19 crisis, IDH has maintained a strong focus on growing its conventional (non-Covid- 19-related) business, which in FY 2021 expanded 22% versus FY 2020, and came in 13% above pre-covid levels recorded in FY 2019. Moreover, in both Egypt and Jordan, IDH enjoys a market leading position and plans to capitalise on its expanded product offering and patient base, increased service delivery capabilities, and growing visibility to continue deliv- ering growth in the year ahead. Across both markets, the Group’s strategy will now pivot towards patient retention as it looks to maintain the new relation- ships established during the pandemic thanks to its Covid-19-dedicated offering. 2021 Annual Report IDH 55 Strategic Report Principal Risks, Uncertainties & their Mitigation Specific Risk Mitigation Global Supply Chain Disruptions Throughout 2021, restrictions imposed to curb the spread of Covid-19, labour shortages, and fast-rising demand for goods saw global supply chains come under strong pressure causing delays and shortages worldwide. The ongoing global supply chain dis- ruptions have had no impacts on IDH’s operations throughout the year. Supplier risk IDH faces the risk of suppliers re-opening negotia- tions in the face of cost pressure owing to the pre- vailing inflationary environment and/or a possible albeit limited devaluation risk. IDH’s supplier risk is concentrated amongst three key suppliers — Siemens, Roche and BM (Sysmex)— who provide it with kits representing 24% of the total value of total raw materials in 2021 (2020: 52%). 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 remit- tance restrictions. More specifically, under Egyptian law, companies must obtain government clearance to transfer dividends overseas and are subject to higher taxation on payment of dividends. IDH’s management team continually monitors the evolv- ing situation and have taken proactive steps to build up its inventory to shield the Group from any potential future disruptions. 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. IDH’s test kits are purchased on fixed-price con- tracts with tenors ranging from five to seven years, providing effective protection from short-term price fluctuations. IDH has strong, longstanding relationships with its suppliers, to whom it is a significant regional client. Due to the volumes of kits the Group purchases, IDH is able to negotiate favourable pricing and maintain raw material 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 net sales were 19.6% in 2021 compared with 18.4% in 2020. As a foreign investor in Egypt, IDH does not have issues with the repatriation of dividends, yet given the recent depreciation in the EGP value, the Company foresees probable delays in FX sourcing and repatriation. 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. 56 IDH 2021 Annual Report 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 antitrust and competition- related restrictions, as well as the possibility of inves- tigation by the Egyptian Competition Authority. The Group’s general counsel and the quality assur- ance team work together to keep IDH abreast of, and in compliance with, both legislative and regula- tory changes. On the antitrust front, the private laboratory seg- ment (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 gov- ernmental and quasigovernmental institutions. Risk from contract clients Contract clients including private insurers, unions and corporations, account for c. 57% of the Group’s net sales in 2021. Should IDH’s relationship with these clients deteriorate, for example if the Group were unable to negotiate and retain similar fee arrangements or should these clients be unable to make payments to the Group, IDH’s business could be materially and adversely affected. IDH diligently works to maintain sound relation- ships with contract clients. All changes to pricing and contracts are arrived at through discussion rather than blanket imposition by IDH. Relations are further enhanced by regular visits to contract clients by the Group’s sales staff. IDH’s attractiveness to contract clients is enhanced by the extent of its national network. It should be highlighted that, excluding the contri- butions from IDH’s multiple partnerships to con- duct PCR testing for passengers (Pure Health, NAS, QAIA), which in 2021 generated EGP 365 million in contract segment net sales, no single client contract accounts for more than 1% of total net sales or 1.4% of contract net sales. 2021 Annual Report IDH 57 Strategic Report Principal Risks, Uncertainties & their Mitigation Specific Risk Mitigation Pricing pressure in a competitive, regulated environment The Group faces pricing pressure from various third-party payers, including national health insur- ance, syndicates, other governmental bodies, which could materially and adversely affect its revenue. Pricing may be restrained in cases by recommended or mandatory fees set by government ministries and other authorities. This risk may be more pronounced in the context of the imminent inflationary pressures following the recent depreciation of the Egyptian Pound. The Group might face pricing pressure from existing competitors and new entrants to the market. Cybersecurity risks The Company controls a vast amount of confiden- tial data for its patients’ records; to this end, there is a cybersecurity risk for both data confidentiality and data security. 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. 57% of IDH net sales in 2021 is generated by servicing contract clients (pri- vate insurer, unions and corporations) who prefer IDH’s national network to patchworks of local players. IDH has a limited ability to influence changes to mandatory pricing policies imposed by government agencies, as is the case in Jordan, where basic tests that account for the majority of IDH’s business in that nation are subject to price controls. IDH enjoys a strong brand equity in its markets of operation which enables all its brands to enjoy a solid positioning in the markets in which it operates. As such, IDH is a price maker, especially in Egypt, where the Group currently controls the largest network of branches amongst all private sector players. Moreover, in its home market of Egypt, which in FY 2021 accounted for 81.4% of total revenues, the Group faces no potential risk of price regulation by the government. The Company has stringent control over its data secu- rity and regularly stress tests its IT infrastructure to assess the robustness of its internal controls. Moreover, its cybersecurity controls and protocols are regularly updated to proactively address potential shortcomings, keep them in full adherence with data security regula- tions in the Group’s markets of operation, and maintain them in line with global best practices. 58 IDH 2021 Annual Report Specific Risk Mitigation Business continuity risks Management concentration risk: IDH is dependent on the unique skills and experience of a talented management team. The loss of the services of key members of that team could materially and adversely affect the Company’s operations and business. Business interruption: IT systems are used exten- sively in virtually all aspects of the Group’s business and across each of its lines of business, including test and exam results reporting, billing, customer service, logistics and management of medical data. Similarly, business interruption at one of the Group’s larger laboratory facilities could result in significant losses and reputational damage to the Group’s business as a result of external factors such as natural disasters, fire, riots or extended power failures. The Group’s operations therefore depend on the continued and uninterrupted performance of its systems. Interruption: across Business its geographies, the reimposition of restrictive measures related to Covid-19 (including curfews and lockdowns) could impact the working hours of branches and in extreme cases could lead to their 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 composed of heads of departments. The Executive Committee meets every second week. The Group has in place a full disaster recovery plan, with procedures and provisions for spares, redun- dant power systems and the use of mobile data sys- tems as alternatives 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 poten- tial branch closures on operations, the Group has been ramping up its house call services. Moreover, the Group’s important role in conducting PCR test- ing for Covid-19 in both Egypt and Jordan makes it unlikely that branches would be closed even if new restrictive measures were introduced. 2021 Annual Report IDH 59 Performance IDH delivered outstanding financial and operational results in 2021 48% 50% 29% Adjusted EBITDA margin on consolidated revenue in 2021 Adjusted EBITDA margin on net sales in 2021 Net profit margin on consolidated revenue in 2021 30% Net profit margin on net sales in 2021 60 IDH 2021 Annual Report 2021 Annual Report IDH 61 Performance Financial & Operational Review Important Notice Treatment of Revenue-Sharing Agreements and Use of Alternative Performance Measures As part of IDH’s efforts to support local authorities in Egypt Throughout the report, management utilizes net sales and Jordan in the fight against the pandemic, Biolab (IDH’s of EGP 5,048 million for FY 2021 (IFRS revenues stand Jordanian subsidiary) secured several revenue-sharing at EGP 5,225 million for the year), and cost of net sales agreements to operate testing stations, primarily dedicated of EGP 2,244 million (IFRS cost of sales recorded EGP to PCR testing for Covid-19, in multiple locations across the 2,421 million). Net sales for the period are calculated country including Queen Alia International Airport (QAIA) as total gross revenues (IFRS compliant measure) and Aqaba Port. Under these agreements, Biolab receives excluding concession fees and sales taxes paid as part the full revenue (gross sales) for each test performed and of Biolab’s revenue sharing agreements with Queen Alia pays a proportion to QAIA (38% of gross sales) and Aqaba International Airport (QAIA) and Aqaba Port. Port (36% of gross sales) as concession fees to operate in the facilities, thus effectively earning the net of these It is important to note that aside from revenue and cost amounts (net sales) for each test supplied. of sales, all other figures related to gross profit, operat- ing profit, EBITDA, and net profit are identical in the APM For IFRS purposes Biolab is considered the principal in and IFRS calculations. However, the margins related to this relationship and record the full amount received the aforementioned items differ between the two sets as revenue. For internal purposes management consid- of performance indicators due to the use of Net Sales ers the net amount earned to be net sales, and have in the APM calculations and the use of Revenues for therefore included this measure as an “alternative the IFRS calculations. More specifically, under the APM, performance measure” (APM) alongside the IFRS mea- in FY 2021 IDH reported a gross profit margin on net sure when describing the business’ performance. The sales of 56%, an EBITDA margin on net sales of 50%, decision to present APMs reflects the Directors’ view and a net profit margin on net sales of 30%. Under the that they provide the user of the accounts with addi- IFRS regime, gross profit margin recorded 54%, EBITDA tional information to the IFRS information reported to margin stood at 48%, and net profit margin recorded help understand the performance of the business, and 29%. Furthermore, this amendment has no impact on is consistent with how the Company’s performance is the prior year reported revenues. reviewed internally. Moreover, it allows further com- parability when describing the performance of the Group’s regions and year-on-year analysis. 62 IDH 2021 Annual Report Adjustment breakdown on each country’s results Revenues FY 2021 (IFRS 15) Net Sales FY 2021 (APM) (EGP mn) Egypt Jordan Nigeria Sudan Group total Adjustments Breakdown (EGP mn) Net Sales QAIA and Aqaba Port Concession Fees Revenues Cost of Net Sales Adjustment for QAIA, and Aqaba Port Agreements Cost of Sales 4,108 1,046 54 17 5,225 4,108 869 54 17 5,048 FY 2021 5,048 177 5,225 (2,244) (177) (2,421) 2021 Annual Report IDH 63 Performance Financial & Operational Review Financial & Operational Review Key Performance Indicators EGP mn Net Sales Cost of Net Sales Gross Profit Gross Profit Margin on Net Sales Adjusted Operating Profit* Adjusted EBITDA** Adjusted EBITDA Margin on Net Sales Net Profit Net Profit Margin on Net Sales Cash Balance FY 2020 2,656 (1,314) 1,343 51% 986 1,171 44% 609 23% 877 FY 2021 5,048 (2,244) 2,804 56% 2,292 2,530 50% 1,493 30% 2,350 Change 90% 71% 109% 5.0 pts 132% 116% 6.1 pts 145% 6.6 pts 168% * Adjusted operating Profit excludes one-off fees incurred in FY 2021 (EGP 29.0 million) related to the Company’s dual listing on the EGX completed in May 2021. ** Adjusted EBITDA is calculated as operating profit plus depreciation and amortization and excluding one-off fees incurred in FY 2021 (EGP 29.0 million) related to the Company’s dual listing on the EGX completed in May 2021. Note: Adjusted operating profit, EBITDA and adjusted EBITDA are measures utilized by management in assessing performance of the group. These adjusted measures eliminate the one off impacts of items in the year to provide a measure of underlying performance. EBITDA is an important measure as it shows the performance of the Group and the Group’s ability to reinvest funds generated and this is a widely used term for acquisitive businesses such as ourselves. Revenue/Net Sales and Cost Analysis Revenue/Net Sales Consolidated Analysis IDH reported total revenues of EGP 5,225 million test portfolios, both of which recorded growing in FY 2021, up 97% year-on-year. Consolidated net sales19 surpassed the EGP 5 billion mark, recording EGP 5,048 million in FY 2021, up 90% versus FY demand during the period. IDH’s Covid-19-related offering contributed to just over half of consoli- dated net sales in FY 2021 compared to the 24% 2020. The remarkable growth was dual driven with contribution made in FY 2020. The segment wit- tests performed during the year growing 24% and nessed high demand throughout the entire year, average price per test rising 53% year-on-year. supported by rising infection rates in the first half of the year and the widespread lifting of travel bans On a service basis, net sales growth was supported by both IDH’s Covid-19-related20 and conventional in the second half of 2021. 19 A reconciliation between revenue and net sales is available on page 11 of this report. 20 Covid-19-related tests include both core Covid-19 tests (Polymerase Chain Reaction (PCR), Antigen, and Antibody) as well as other routine inflammatory and clotting markers including, but not limited to, Complete Blood Picture, Erythrocyte Sedimentation Rate (ESR), D-Dimer, Ferritin and C-reactive Protein (CRP), which the Company opted to include in the classification as “other Covid-19-related tests” due to the strong rise in demand for these tests witnessed following the outbreak of Covid-19. 64 IDH 2021 Annual Report 2021 Annual Report IDH 65 Performance Financial & Operational Review In parallel, a steady recovery in demand for conventional generated EGP 990 million in revenue in FY 2021, tests, saw conventional net sales expand 22% year-on-year up 87% versus the previous year. By test type, in FY supported by a 15% year-on-year rise in tests performed 2021 house call revenue generated by core Covid-19 and a 7% increase in average price per conventional test. tests stood at EGP 544 million, making up 55% of Conventional test net sales for the year stood 13% above total house call revenue for the year. Geographically, its pre-pandemic level, a testament to the Company’s in Egypt house call services generated EGP 935 mil- impressive ability to expand its service accessibility and lion in revenue, contributing 23% to the country’s delivery capabilities, to drive a rapid recovery across its revenues. Meanwhile, In Jordan house call revenue conventional test portfolio despite the difficult operating stood at EGP 55 million, making up 6% of the coun- conditions faced over the last two years. try’s net sales for the year. It is worth highlighting House Call Service The Group’s consolidated net sales was buoyed by its house call services in Egypt and Jordan, which that in FY 2021, average revenue per house call test stood at EGP 202, significantly above the Group’s average of EGP 150. Detailed Consolidated Performance Breakdown Total net sales (EGP mn) Total tests (mn) Conventional test net sales (EGP mn) Conventional tests performed (mn) Total Covid-19-related test net sales (EGP mn) Core Covid-19 tests (PCR, Antigen, Antibody) (EGP mn) Core Covid-19 tests performed (k) Other Covid-19-related tests (EGP mn) Other Covid-19-related tests performed (k) FY 2020 2,656 27.1 2,007 24.9 649 437 438 213 1,722 Contribution to consolidated results Conventional test net sales Conventional tests performed Total Covid-19-related tests Core Covid-19 tests (PCR, Antigen, Antibody) Core Covid-19 tests performed Other Covid-19-related tests Other Covid-19-related tests performed 76% 92% 24% 16% 2% 8% 6% 66 IDH 2021 Annual Report FY 2021 5,048 33.7 2,452 28.5 2,596 2,217 2,610 379 2,507 49% 85% 51% 44% 8% 8% 7% Net Sales Analysis: Contribution by Patient Segment Contract Segment Revenue generated by IDH’s contract segment reached for passengers. More specifically, IDH’s agreement with EGP 3,062 million in FY 2021, representing a 113% year- Pure Health UAE and with National Aviation Services on-year increase versus the previous twelve months. Kuwait (NAS) generated EGP 89 million and EGP 91 mil- Meanwhile, net sales generated by the Group’s contract lion, respectively, in FY 2021. The number of PCR tests segment more than doubled year-on-year to record EGP performed during the year as part of IDH’s partnerships 2,885 million in FY 2021 supported by a 25% increase in with Pure Health stood at 83 thousand, making up 7% of contract tests performed and a 61% rise in the average net total PCR tests performed in Egypt for the year. Mean- sales per contract test. The segment’s contribution to total while, tests performed as part of the Company’s agree- net sales subsequently increased to reach 57% from 54% in FY 2020. Covid-19-related21 testing contributed 53% of contract net sales in FY 2021 as the Company continued to ment with NAS stood at 51 thousand, representing 4% of total PCR tests performed in Egypt during FY 2021. record strong patient demand in both Egypt and Jordan. In Jordan, the Group’s partnership with Queen Alia Controlling for contributions made by Covid-19-related International Airport (QAIA) generated net sales of EGP tests during the year, the contract segment would record 185 million. As part of the agreement, Biolab carried out a 23% year-on-year increase in conventional test net sales 503 thousand PCR tests, representing 41% of total PCR on the back of a 17% increase in tests performed and a 6% tests performed in Jordan for the year. At the same time, expansion in average net sales per test. Biolab’s agreements with Aqaba’s King Hussein Interna- The contract segment’s results include contributions additional EGP 107 million to the segment. It is worth from IDH’s multiple partnerships to conduct PCR testing noting that Biolab’s partnership with KHIA started in tional Airport (KHIA) and Aqaba Port contributed an Key Performance Indicators Walk-in Segment Contract Segment Total FY20 FY21* Change FY20 FY21* Change FY20 FY21* Change Net sales^ (EGP mn) 1,222 Total Covid-19-related net sales (EGP mn) 314 Patients ('000) % of Patients Revenue per Patient (EGP) 2,288 32% 534 2,162 1,063 3,464 34% 624 Tests ('000) % of Tests 7,052 8,693 26% 26% 77% 1,434 239% 335 51% 4,825 68% 297 17% 23% 2,885 1,533 6,853 66% 421 101% 357% 42% 2,656 649 5,048 2,596 90% 300% 7,113 10,317 45% 42% 25% 373 489 27,073 33,659 31% 24% 20,021 24,966 74% 74% Total Covid-19-related tests (‘000) Net Sales per Test (EGP) Test per Patient 659 173 3.1 1,745 165% 1,501 3,372 125% 2,160 5,117 249 2.5 44% -19% 72 4.1 116 3.6 61% -12% 98 3.8 150 3.3 137% 53% -14% 21 Covid-19-related tests include both core Covid-19 tests (Polymerase Chain Reaction (PCR), Antigen, and Antibody) as well as other routine inflammatory and clotting markers including, but not limited to, Complete Blood Picture, Erythrocyte Sedimentation Rate (ESR), D-Dimer, Ferritin and C-reactive Protein (CRP), which the Company opted to include in the classification as “other Covid-19-related tests” due to the strong rise in demand for these tests witnessed following the outbreak of Covid-19. 2021 Annual Report IDH 67 Performance Financial & Operational Review August 2020, followed by the company’s agreement with House Call Service Aqaba Port which kicked off in May 2021, and its part- IDH’s house call service in Egypt, which has been suc- nership with QAIA which commenced in August 2021. cessfully ramped up to capitalise on the service’s growing Walk-in Segment popularity, recorded revenue of EGP 935 million in FY 2021, up 94% year-on-year. The service’s contribution to The Group’s walk-in segment recorded revenue and the country’s revenues stood at 23% in FY 2021, versus net sales (IFRS and APM measures for walk-in segment the 22% contribution made in FY 2020. Core Covid-19 were identical for the year) of EGP 2,162 million in FY tests performed through its house call service made up 2021, up 77% versus the previous year. The year-on-year 30% of total core Covid-19 tests performed by IDH in the growth was supported by a 23% increase in tests per- country throughout the year. It is also important to note formed and a 44% increase in average price per test. The that, tests performed through IDH’s house call service segment’s contribution to total net sales stood at 43% are offered at the same price as at traditional branches, versus the 46% in FY 2020. Meanwhile, the contribution with only an additional house call delivery fee charged to of Covid-19-related tests to the walk-in segment stood patients to cover the transportation costs of the chemist. at 49% in FY 2021, compared to 26% in FY 2020. Exclud- ing Covid-19-related contributions, conventional walk- Al-Borg Scan in net sales recorded a 21% increase versus the previous IDH’s fast-growing radiology venture, Al-Borg Scan, year, as conventional walk-in tests volumes grew 9% reported revenue of EGP 45 million in FY 2021, a solid year-on-year and net sales per conventional walk-in 81% year-on-year increase. Revenue growth was sup- test increased 11% versus FY 2020. ported by a 70% rise in both exams performed and Revenue Analysis: Contribution by Geography on the rising patient demand for IDH’s radiology service, patients served versus the previous year. To capitalise Egypt the Group inaugurated two new Al-Borg Scan branches in September and November of this year. In 2022, the In Egypt, IDH reported revenue of EGP 4,108 million, Company will look to inaugurate additional Al-Borg 89% above the previous year’s figure and contributing Scan branches to further expand its reach across to 81.4% of total net sales for the year. The impressive Great Cairo. result was supported by a 21% year-on-year rise in test performed coupled with a 56% year-on-year increase Overall, IDH served 8.5 million patients in Egypt and in average revenue per test. As with the consolidated performed 29.7 million tests in FY 2021, up 34% and performance, Egypt’s revenues were supported by both the Group’s Covid-19-related22 test offering which in FY 2021 made up 49% of the Egypt’s revenues, as well as the 21% year-on-year, respectively. Jordan country’s conventional test offering, which made up the In Jordan, the Group recorded revenue of EGP 1,046 remaining 51% of Egypt’s revenues. When controlling for million in FY 2021, up 156% from the previous year. contributions made by Covid-19-related tests during the Meanwhile, IDH’s Jordanian operations saw net sales year, revenue generated by conventional tests increased a solid 23% versus the previous year supported by a 15% rise in conventional tests performed and a 7% expansion more than double year-on-year to reach EGP 869 million for the year, up 113% versus FY 2020 (Jordan’s revenues23 (IFRS) recorded EGP 1,046 million in FY 2021, up 156% in average revenue per conventional test. year-on-year). Net sales growth was driven by an 75% 22 Covid-19-related tests include both core Covid-19 tests (Polymerase Chain Reaction (PCR), Antigen, and Antibody) as well as other routine inflammatory and clotting markers including, but not limited to, Complete Blood Picture, Erythrocyte Sedimentation Rate (ESR), D-Dimer, Ferritin and C-reactive Protein (CRP), which the Company opted to include in the classification as “other Covid-19-related tests” due to the strong rise in demand for these tests witnessed following the outbreak of Covid-19. 23 Biolab’s revenues for the period are calculated as net sales plus concession fees paid to QAIA and Aqaba Port as part of their revenue sharing agreement. 68 IDH 2021 Annual Report Detailed Egypt Revenue Breakdown FY 2020 FY 2021 Total revenue (EGP mn) Conventional revenues Total Covid-19-related revenues Core Covid-19 tests (PCR, Antigen, Antibody) Other Covid-19-related tests 2,173 1,713 460 248 213 Contribution to consolidated results Conventional tests Total Covid-19-related tests Core Covid-19 tests (PCR, Antigen, Antibody) Other Covid-19-related tests 79% 21% 11% 10% 4,108 2,103 2,005 1,626 379 51% 49% 40% 9% increase in test performed coupled with a 21% rise PCR testing for Covid-19 to passengers arriving in Jor- in Biolab’s average net sales per test. During the year, dan. The stations also offer additional diagnostic tests Covid-19-related tests contributed to 68% of Biolab’s net to patients including rapid PCR testing for Covid-19 for sales and to 37% of its tests performed. Covid-19-related departing passengers and other, more generic diagnostic net sales in Jordan was boosted by contributions of EGP tests. Meanwhile, conventional test net sales increased 185 million from Biolab’s new partnership with QAIA 26% year-on-year on the back of a 28% increase in con- coupled with the EGP 107 million in net sales coming ventional tests performed. Meanwhile, the country’s net from its partnerships with KHIA and Aqaba Port. As part sales continued to be supported by Biolab’s house call of these agreements, Biolab has been operating testing service which generated EGP 55 million in net sales in stations across all three locations primarily focused on FY 2021, up 12% year-on-year. Detailed Jordan Net Sales Breakdown FY 2020 FY 2021 Total Net Sales Conventional Net Sales Total Covid-19-related Net Sales (PCR and Antibody) 409 220 189 Contribution to consolidated results Conventional Net Sales Total Covid-19-related Net Sales (PCR and Antibody) 54% 46% 869 278 591 32% 68% 2021 Annual Report IDH 69 Performance Financial & Operational Review Nigeria At the Group’s Nigerian subsidiary, revenue expanded following the easing of restrictive measures enforced 49% year-on-year to reach EGP 54 million in FY 2021. to curb the spread of Covid-19 throughout 2020. Growth was even more pronounced in local currency terms with revenue up 53% year-on-year supported Sudan by a 31% year-on-year expansion in tests performed Finally in Sudan, IDH reported a 56% year-on-year (patients served were up 16%) coupled with a 14% rise contraction in revenue to EGP 17 million for the year. in average revenue per test. Over the last two years, The country’s results continue to be significantly Echo-Lab’s has consistently delivered solid volume impacted by the devaluation of the Sudanese pound growth thanks to an effective revamp strategy which in early 2021 with the average SDG/EGP rate in FY has involved the complete renovation of the venture’s 2021 standing at 0.05 versus 0.29 in FY 2020. None- branches combined with the rollout of targeted theless, management’s continued success in raising marketing campaigns aimed at stimulating demand prices in step with inflation throughout the year, saw for the venture’s services. Volumes for the year also revenue in local currency terms grow an impressive benefitting from a gradual normalisation of traffic 159% in FY 2021. Net Sales Contribution by Country Egypt Net Sales (EGP mn) Covid-19-related (EGP mn) Egypt Contribution to Consolidated Net Sales Jordan Net Sales (EGP mn) Covid-19-related (EGP mn) Jordan Revenues (EGP mn) (IFRS) Jordan Net Sales ( JOD mn) Jordan Revenues ( JOD mn) (IFRS) Jordan Contribution to Consolidated Net Sales Nigeria Net Sales (EGP mn) Nigeria Net Sales (NGN mn) Nigeria Contribution to Consolidated Net Sales Sudan Net Sales (EGP mn) Sudan Net Sales (SDG mn) Sudan Contribution to Consolidated Net Sales 70 IDH 2021 Annual Report FY 2020 FY 2021 Change 2,173 460 82% 409 189 409 19 18 15% 36 898 1% 38 129 1.4% 4,108 2,005 81% 869 591 1,046 39 47 17% 54 1,373 1% 17 335 0.3% 89% 335% 112% 213% 156% 113% 157% 49% 53% -56% 159% Patients Served and Tests Performed by Country FY 2020 FY 2021 Change Egypt Patients Served (mn) Egypt Tests Performed (mn) Covid-19-related tests (mn) Jordan Patients Served (k) Jordan Tests Performed (k) Covid-19-related tests (k) Nigeria Patients Served (k) Nigeria Tests Performed (k) Sudan Patients Served (k) Sudan Tests Performed (k) Total Patients Served (mn) Total Tests Performed (mn) Branches by Country Egypt Jordan Nigeria Sudan Total Branches 6.3 24.4 1.9 550 2,011 269 131 215 130 409 7.1 27.1 8.5 29.7 3.8 1,627 3,529 1,302 153 281 70 182 10.3 33.7 34% 21% 102% 196% 75% 383% 16% 31% -46% -55% 45% 24% 31 December 2020 31 December 2021 Change 429 20 12 20 481 452 21 10 19 502 23 1 -2 -1 21 Cost of Net Sales24 IDH’s cost of net sales rose 71% year-on-year to (identical in absolute terms in IFRS and APM mea- record EGP 2,244 million in FY 2021, rising at a sures). IDH’s gross profit margin on consolidated slower pace than the Group’s for the year. This revenue recorded 54% in FY 2021 versus 51% in the supported a 109% year-on-year rise in IDH’s gross previous year. Meanwhile, gross profit margin on profit for FY 2021 which recorded EGP 2,804 million net sales of 56% versus 51% in FY 2020. Cost of Net Sales Breakdown as a Percentage of Net Sales Raw Materials Wages & Salaries Depreciation & Amortisation Other Expenses Total FY 2020 FY 2021 18.4% 14.7% 6.1% 10.3% 49.5% 19.6% 12.6% 4.2% 8.1% 44.4% 24 Cost of net sales is calculated as cost of sales (IFRS) for the period excluding commission fees paid to QAIA and Aqaba Port by Biolab as part of its revenue sharing agreements with the two terminals. According to IFRS 15, cost of sales recorded EGP 2,421 million in FY 2021, up 84% year-on-year. 2021 Annual Report IDH 71 Performance Financial & Operational Review Raw material costs, which include cost of specialized higher call center costs and a new contract with PwC analysis at other laboratories, recorded EGP 987 million for external auditing services. for the year, continuing to make up the largest share of total COGS at 44%. As a share of net sales, raw material Marketing and advertising expenses came in at EGP 97 costs increased to 19.6% in FY 2021 compared to 18.4% million in FY 2021, up 57% year-on-year. The increase in the previous year. This increase is primarily attribut- largely reflects an overall expansion in IDH’s market- able to higher raw material costs as a share of net sales ing and advertisement efforts, which throughout the recorded by Biolab, driven by both the retesting of year saw the Company launch targeted campaigns Covid-19 positive cases in the first part of the year, and across a wide variety of channels. by additional fees incurred by the company as part of its revenue sharing agreement with QAIA. Direct salaries and wages for the year rose 63% year- EBITDA IDH’s adjusted EBITDA27 recorded EGP 2,530 million (identical in absolute terms when using IFRS or APM) on-year to EGP 635 million, making the second largest in the twelve months to 31 December 2021, up a solid share of total COGS at 28%. The increase comes on 116% versus the previous year. Adjusted EBITDA mar- the back of a 116% year-on-year rise in the share of gin on consolidated revenue recorded 48% in FY 2021 profits allocated to direct salaries and wages to EGP versus 44% in the previous year. Meanwhile, adjusted 175 million in FY 2021 from EGP 81 million in FY 2020 following higher net profit recorded at its Egyptian operations,26 in addition to higher bonuses and incen- tives paid during FY 2021 in light of this year’s record- breaking performance. EBITDA margin on net sales expanded to 50% in FY 2021 versus 44% in FY 2020.28 Improved EBITDA level profitability was supported by robust net sales growth for the year and the subsequent dilution of fixed costs. EBITDA growth was also supported by the decrease in level of receivable provisions for expected credit, which Direct depreciation and amortisation increased 31% recorded EGP 25 million versus the EGP 42 million year-on-year in FY 2021 to EGP 214 million, principally booked in the previous twelve months to account for due to the incremental amortisation of new branches expected credit losses in accordance with IFRS 9. It (IFRS 16 right-of-use assets). is important to note that adjusted EBITDA excludes one-off listing fees of EGP 29 million incurred in FY Other expenses for the year increased 49% versus FY 2021 related to the Company’s dual listing on the EGX 2020, to record EGP 407 million. The increase was pri- completed in May 2021. marily driven by higher transportation costs related to IDH’s house call service, and increased utilities and In IDH’s home market of Egypt, EBITDA recorded EGP cleaning expenses mainly due to the net addition of 24 2,206 million in FY 2021, up 112% year-on-year on the new branches throughout the year. back of strong revenue growth. EBITDA margin on net Selling, General and Administrative Expenses Total SG&A outlays for the year stood at EGP 513 mil- IDH’s Jordanian operations recorded EBITDA of EGP lion, up 44% from FY 2020. The increase was driven by 331 million in FY 2021, up 155% versus the previous rising salaries and marketing spending, coupled with year on the back of strong net sales growth. In local sales increased six percentage points to 54% the year. 26 According to IAS1, employee profit share is recorded in wages and salaries. 27 Adjusted EBITDA is calculated as operating profit plus depreciation and amortization and minus one-off fees incurred in FY 2021 related to the Company’s EGX listing completed in May 2021. 28 It is important to note that while in absolute terms the Adjusted EBITDA figure is identical when using IFRS or APM, its margin differs between the two sets of performance indicators. 72 IDH 2021 Annual Report currency terms, EBITDA grew 156% compared to the adjustment related to the previous year. Controlling previous year. EBITDA margin on net sales recorded for the one-off adjustment, EBITDA would come in at 38% in FY 2021 compared to 32% in FY 2020. It is EGP 2.6 million, significantly narrowing from the previ- important to note that Jordan’s EBITDA calculated ous year’s figure. In light of the steady improvements using revenues for the year (in compliance with IFRS), witnessed throughout 2021, Nigeria is expected to turn recorded the same absolute value as the APM figure EBITDA positive during the first half of 2022. for the year which utilises net sales. However, EBITDA margin calculated on revenues (IFRS compliant) would Finally, in Sudan the Company recorded an EBITDA stand at 32% in FY 2021 unchanged versus last year. loss of EGP 0.5 million in FY 2021, compared to a posi- Operations in Nigeria posted an EBITDA loss of EGP 7 the year was impacted by the sharp SDG devaluation million, in line with the previous year’s figure. Losses in February 2021. In SDG terms EBITDA declined 148% for the year partially reflect a one-off EGP 4.4 million year-on-year. tive EBITDA of EGP 6.1 million in FY 2020. EBITDA for Regional EBITDA in Local Currency Mn Egypt Margin on net sales Jordan Margin on net sales Margin on revenues (IFRS) Nigeria Margin on net sales Sudan Margin on net sales FY 2020 FY 2021 EGP JOD NGN SDG 1,041 48% 5.9 32% 32% -170 -19% 21 16% 2,206 54% 15.0 38% 32% -179 -13% -10 -3% Change 112% 156% 6% -148% Interest Income / Expense IDH recorded interest income of EGP 113 million in Egypt and Jordan and the renewal of medical in FY 2021, up 113% year-on-year on the back of equipment agreements with our main equip- higher cash balances during the year coupled with ment suppliers. an optimised cash allocation between T-bills and • Higher bank charges resulting from increased pen- time deposits. etration of, and reliance on, POS machines and elec- tronic payments in both Egypt and Jordan during Interest expense recorded EGP 118 million in the the period. It is important to note that bank charges twelve months to year-end 2021, up 65% year-on- recorded by IDH’s Jordanian operations represented year. The increase in attributable to: 58% of total bank charges during FY 2021, which is • Higher interest on lease liabilities related to mainly related to Biolab’s partnership with QAIA. IFRS 16 following the addition of new branches • Loan-related expenses incurred by IDH during 2021 Annual Report IDH 73 Performance Financial & Operational Review the period as the Company secured a new eight- specifically, IDH booked loan-related expenses of year US$ 45 million facility with the International EGP 20.3 million in FY 2021 including a front-end Finance Corporation (IFC) in May 2021. More fee, syndication fee, and legal advisory fees. Interest Expense Breakdown EGP Mn FY 2020 FY 2021 Change Interest on Lease Liabilities (IFRS 16) Interest Expenses on Borrowings29 Loan-related Expenses on IFC facility Interest Expenses on Leases Bank Charges Total Interest Expense 51.4 12.4 - 4.1 3.7 71.5 59.5 9.4 20.3 8.8 20.0 118.0 16% -24% N/A 117% 445% 65% Foreign Exchange IDH recorded a net foreign exchange loss of EGP 18 versus EGP 360 million in the previous twelve months. million in FY 2021 compared to EGP 13 million in FY The effective tax rate stood at 33% for the year versus 37% 2020. The figure largely reflects FX losses on the back of in FY 2020. The lower effective tax rate largely reflects the SDG devaluation versus the EGP in February 2021. the recognition of Echo-Scan’s deferred tax assets. It is Taxation Tax expenses recorded EGP 740 million in FY 2021 important to note that there is no tax payable for IDH’s two companies at the holding level, while tax was paid on profits generated by operating subsidiaries. Taxation Breakdown by Region EGP Mn Egypt Jordan Nigeria Sudan Total Tax Expenses FY 2020 340.6 19.0 -1.0 1.0 359.6 FY 2021 Change 704.8 54.0 -20.0 1.0 739.8 107% 184% N/A 0% 106% Net Profit IDH’s consolidated net profit expanded 145% stood at 30% for the year, up seven percentage year-on-year in FY-2021 to record EGP 1,493 mil- points from the previous twelve month period. Net lion (identical in absolute terms between IFRS and profitability improvements for the year were sup- APM measures). Net profit margin on consolidated ported by strong revenue growth coupled with the revenue recorded 29% for the year, versus 23% in FY dilution of fixed costs, and normalising provisions 2020. Meanwhile, net profit margin on net sales30 for the year. 29 Interest expenses on medium-term loans divided as EGP 2.6 million related to its medium term facility with the Commercial International Bank (CIB) and EGP 6.5 million to its facility with Ahli United Bank Egypt (AUBE). 30 It is important to note that while in absolute terms the net profit figure is identical when using IFRS or APM, its margin differs between the two sets of performance indicators. 74 IDH 2021 Annual Report Balance Sheet Analysis Assets Property, Plant and Equipment attributable to EGP 115.7 million in equipment related to the Reagent deals and to EGP 53.7 million spent on the purchase of a new radiology branch IDH held gross property, plant and equipment during the year. It is worth noting that IDH engages (PPE) of EGP 1,659 million as at year-end 2021, in Reagent deals whereby the majority of its testing up from the EGP 1,252 million as of 31 December equipment is provided at no upfront payment as 2020. Meanwhile, CAPEX outlays excluding pay- part of a wider agreement to purchase a minimum ments on account and accounting for the impact volume of kits from the equipment supplier. These of hyperinflation, represented 8.6% of consolidated contracts typically have tenors ranging from 5 to 7 net sales in FY 2021. The increase in CAPEX outlays years, with the equipment substituted following the as a share of total net sales for the year is in part contract’s renewal. Total CAPEX Breakdown EGP Mn Mega Lab Al-Borg Scan Expansion Leasehold Improvements/others Total CAPEX Additions FY 2021 % of Net Sales 132.5 154.0 147.6 434.1 2.6% 3.1% 2.9% 8.6% Accounts Receivable and Provisions due to agreements with various airline companies As at 31 December 2021, accounts receivables’ Days on as part of QAIA and KHIA agreements. Accounts Hand (DOH) stood at 107 days compared to 144 days receivables’ DOH for Jordan is calculated based at year-end 2020. The significant decline witnessed on credit revenues amounting to EGP 221 million throughout the year highlights a sustained improvement during FY 2021. in collections versus the previous year. Accounts receiv- ables’ DOH is calculated based on credit revenues (credit Provision for doubtful accounts established during revenues relates to patients who paid for IDH’s services the twelvemonths to 31 December 2021 amounted on credit) amounting to EGP 1.28 billion during FY 2021. to EGP 25 million, down from the EGP 42 million booked in the previous year. The receivables balance in Egypt and Jordan stood at EGP 366 million as at year-end 2021. More specifi- Inventory cally, in Egypt account receivables’ DOH declined to As at year-end 2021, the Group’s inventory balance 96 days as at 31 December 2021 compared to 145 reached EGP 223 million, up from EGP 100 million days as at year-end 2020. Accounts receivables’ DOH as at year-end 2020. Meanwhile, days Inventory Out- for Egypt is calculated based on credit revenues standing (DIO) decreased to 61 days as at year-end amounting to EGP 1.04 billion during FY 2021. Mean- 2021 from 72 days as at year-end 2020. The decline while, in Jordan accounts receivables’ DOH increased largely reflects the high turnover of PCR testing for from 150 days to 154 days as at year-end 2021 largely Covid-19. 2021 Annual Report IDH 75 Performance Financial & Operational Review Cash and Net Debt/Cash IDH’s cash balances increased to EGP 2,350 million at IDH’s Mega Lab, and EGP 54 million for equip- as at year-end 2021 compared to EGP 877 million as ment at Al-Borg Scan. The rise in interest-bearing at 31 December 2020. debt is related to IDH’s two medium-term facilities with Commercial International Bank (CIB) and Ahli Net cash balance31 amounted to EGP 1,483 million as of year-end 2021, an increase of 361% compared to United Bank of Egypt (AUBE). More specifically, IDH’s interest-bearing debt as of year-end 2021 is split as EGP 321 million as of 31 December 2020. EGP 13 million related to its medium-term facility Lease liabilities on property stood at EGP 532 million AUBE. It is worth noting that interest-bearing debt in as at year-end 2021, up from the EGP 390 million both twelve-month periods includes accrued interest. with CIB and EGP 85 million related to its facility with booked as at year-end 2020. The increase is attribut- able to the addition of new branches throughout 2021. Liabilities Meanwhile, financial obligations related to equipment recorded EGP 229 million as of 31 December 2021, up from EGP 69 million as of year-end 2020, reflect- Accounts Payable34 As of year-end 2021, accounts payable balance recorded ing the renewal of the Company’s contracts and the EGP 311 million up from EGP 178 million as of 31 addition of new equipment. The main components of December 2020. Nonetheless, the Group’s days payable total financial obligations related to equipment in FY outstanding (DPO) decreased to 93 days as of year-end 2021 included EGP 116 million related to equipment 2021 down from 127 days as at 31 December 2020. The EGP Mn Time Deposits T-Bills Current Accounts Cash on Hand Total EGP Mn 31 Dec 2020 31 Dec 2021 162 461 234 19 877 628 1,461 239 22 2,350 31 Dec 2020 31 Dec 2021 Cash and Financial Assets at Amortised Cost32 Interest Bearing Debt (“Medium Term Loans”)33 Lease Liabilities Property Long-term Equipment Liabilities Net Cash Balance Note: Interest Bearing Debt includes accrued interest for both periods. 877 96* 390 69 321 2,350 106* 532 229 1,483 31 The net cash balance is calculated as cash and cash equivalent balances including includes financial assets at amortised cost, less interest-bearing debt (medium term loans), finance lease and Right-of-use liabilities. 32 As outlined in Note 18 of IDH’s Consolidated Financial Statements, some term deposits and treasury bills cannot be accessed for over 90 days and are therefore not treated as cash. Term deposits which cannot be accessed for over 90 days stood at EGP 148 million in FY 2021, while there were no such term deposits in the previous year. Meanwhile, treasury bills not accessible for over 90 days stood at EGP 1,311 million in FY 2021, up from EGP 277 million in FY 2020. 33 IDH’s interest bearing debt as at year-end 2021 is split as EGP 13 million related to its medium term facility with the Commercial International Bank (CIB) and EGP 85 million to its facility with Ahli United Bank Egypt (AUBE). 34Accounts payable is calculated based on average payables at the end of each year. 76 IDH 2021 Annual Report decline is mainly related to the fact that PCR testing kit non-controlling interest (NCI). However, based on suppliers are paid within a period of 15 days. It is worth discussions and ongoing business relationship, there is noting that accounts payable is calculated on the aver- no expectation that this will happen in next 18 months. age payables at the end of each reporting period. Put Option The put option non-current liability is related to the option granted in 2018 to the International Finance The put option current liability is related to the option Corporation from Dynasty – shareholders in Echo granted in 2011 to Dr. Amid, Biolab’s CEO, to sell his Lab – and it is exercisable in 2024. The put option is stake (40%) to IDH. The put option is in the money calculated based on fair market value (FMV). and exercisable since 2016 and is calculated as 7 times LTM EBITDA minus net debt. Biolab’s put option liability increased following the subsidiary’s EBITDA Cash Flow Analysis Net cash flow from operating activities recorded EGP year-on-year growth of 155% in EGP terms. The vendor 2,269 million in FY 2021 compared to EGP 883 million has not exercised this right at 31 December 2021. It is in FY 2020. The 157% year-on-year increase versus important to note that the put option liability is treated FY 2020 demonstrates once more IDH’s strong cash as current as it could be exercised at any time by the generation ability. 2021 Annual Report IDH 77 Performance Corporate Social Responsibility Corporate Social Responsibility Corporate Social Responsibility IDH is committed to operating in a way that recog- The Foundation focuses in particular on making nizes the interconnection between business growth a difference in the lives of residents of Cairo’s Al and the needs of the communities it operates in. Duweiqa community, along with several other Through its Moamena Kamel Foundation, the Com- villages across Egypt. The Foundation deploys an pany provides medical assistance and services to integrated program and vision for the communities individuals unable to afford or access them through it helps that include economic, social and health- traditional avenues. IDH also provides free or dis- care development initiatives with primary services counted diagnostic services to thousands of people that include: every year. In parallel, it collaborates with charitable • Female empowerment initiatives organisations around the country to provide access • Free healthcare clinics to medical service, nutrition and education to • Educational services for the children of Al Duweiqa hundreds of families in need, while also supporting community the renovation and expansion of medical facilities • Providing food for families in need of such around the country. assistance Moamena Kamel Foundation Founded on the principle of providing quality medical • Coverage of running costs for the ICU at Cairo’s public-sector Kasr El Aini Hospital assistance and services to better the lives of individu- Female Empowerment als and the community at large, IDH views corporate social responsibility initiatives as an extension of its Supporting Baheya Breast Cancer Hospital core purpose, with the aim of improving the commu- IDH has had an ongoing collaboration with Baheya nities in which it does business. breast cancer hospital to support the facility’s patients. The Moamena Kamel Foundation for Training and 200 chemotherapy sessions and funded the complete Skill Development was established in 2006 by Dr. cure journey of 50 breast cancer patients. As part of the partnership, IDH has sponsored over Moamena Kamel, a Professor of Pathology at Cairo University, founder of IDH subsidiary Al-Mokhtabar Volunteers from IDH organised a visit to support and Labs, and mother of the CEO, Dr. Hend El Sherbini. encourage the hospital’s patients during the Interna- IDH commits up to 1% of the net after-tax profit of tional Breast Cancer Awareness Month and conducted the subsidiaries Al Borg and Al Mokhtabar to the an awareness session on nutrition and the importance Foundation. In 2021, this in 2021 amounted to EGP of a healthy diet. Moreover, patients from Baheya 9.6 million compared with EGP 6.5 million in 2020. organised an exhibition at the IDH headquarters 78 IDH 2021 Annual Report promoting their hand made products. On the same • IDH’s other social development and inclusion ini- day, patients organised an awareness session on early tiatives have included partnerships with Elsondos detection and self-examination to raise breast cancer People with Disabilities Orphanage and Rotary awareness for IDH employees. Other Initiatives NGO. Through these partnerships, IDH provides free and discounted medical tests to underprivi- • IDH also provides loans for entrepreneurial women leged Egyptians in need. through its Moamena Kamel Foundation. • Al Maryoutiya Axis Development through a collabo- Social Development and Inclusion Initiatives ration with Al Giza Governorate. Supported creation of three kiosks dedicated to start-up projects. Food Program & Nutritional Support Initiative IDH in collaboration with the Egyptian Food Bank “Thank You” Programme Covid-19 Support launched its Food Program & Nutritional Support Through its project “Thank you”, the Company offered initiative providing suitable nutritional components discounts on Covid-19-related tests for medical to the families in need in various marginalized areas. personnel to help frontline workers during Covid-19 IDH employees supported in the distribution and crisis. The programme provided discounted tests to packing of the nutritional boxes. The programme more than 17 thousand healthcare workers. has so far supported more than 103 thousand people across 10 districts. Other Initiatives • Financial support to unemployed citizens as part of Other Initiatives and Partnerships the Egyptian government’s Covid-19 response plan. • Financial and in-kind support for under-privileged Collaborations and Sponsorship of Medical Facilities families across Greater Cairo and Upper Egypt Kasr El Aini Hospital regions. This has seen IDH help more than 140 As part of its collaboration with Kasr El Aini Hospi- families, providing medical assistance, discounted tal, IDH has donated or sponsored: testing, and other assistance. • Medical supplies to the ICU and other units; • Financial and in-kind support to the Egyptian peo- • Monthly incentives for nurses in the ICU; ple during natural disasters and other accidents • 12-20 hospital beds; and like the Sohag train crash in March 2021. • Medical devices and equipment to the ICU and • Ramadan Iftar ( feast) meals to underprivileged kidney dialysis units. Egyptians during the holy month of Ramadan. 2021 Annual Report IDH 79 Performance Corporate Social Responsibility Al Asmarat Medical Center Training and Development Programmes IDH collaborates with Al Asmarat Medical Center to assist the 250 thousand families who depend on the centre for their medical needs. As part of the International Medical Laboratory Scientists (ASCPi-MLS) Training Program collaboration, IDH has donated vital medical equip- Through the International Medical Laboratory Sci- ment including a Complete Blood Count device. The entists (ASCPi-MLS) Training Program launched in Company estimates that its donations have directly collaboration with the American University in Cairo, impacted more than four thousand patients since IDH has provided 84 chemists and technicians the start of its partnership in 2019. through six training cycles with key training in the Al Sadr Hospital fields of haematology, chemistry, microbiology, and blood banking. The Company also offered on-the- As part of IDH’s partnership with Al Sadr Hospital, ground training inside IDH laboratories, and aided the Company funded the renovation of 25 children- in the candidates receiving their American Society of dedicated units, including funding for new, state-of- Clinical Pathology certificates. the-art beds at the hospital. Other Initiatives El Abasseya Chest Hospital • IDH sponsors events organised by the Egyptian In cooperation with Maxim foundation, Al Mokh- Paralympic Committee. tabar has supported the renovation of the paediatric • IDH strictly adheres to government guidelines for section in El Abasseya chest hospital helping to the treatment and disposal of medical waste. expand the hospital’s capacity. • IDH supported the renovation of Al Manial Palace Medical Conveys IDH, in collaboration with Ibrahim Badran Founda- through supporting a fundraising concert of the musician “Ramzy Yassa” in November 2021. tion, has for years been providing high-quality medi- Diversity and Equal Opportunities, Economic cal support for nearly 12 thousand patients through Empowerment, and Social Care 140 conveys with the participation of volunteers IDH takes pride in the fact that 34% of its workforce are from IDH staff. Other Collaborations females, with 41% of new hires in 2020 being female. Moreover, IDH is delighted to note that 100% of its 1,600 female employees entitled to maternity leaves have • Financial and in-kind support to El Manial Hospital. returned to work following the end of the period. • Financial and in-kind support to Cairo University’s hospitals. • IDH took part in the Union of Medical Syndicates Campaign on 21 January 2021. 80 IDH 2021 Annual Report 2021 Annual Report IDH 81 Corporate Governance Striving for best industry practices in governance to build a profitable and sustainable business as well as safeguarding shareholder interests 6 Board Members 7 Board Meetings in 2021 82 IDH 2021 Annual Report 2021 Annual Report IDH 83 Corporate Governance Board of Directors Board of Directors IDH’s Board of Directors is comprised of four independent members, including the independent non-executive chairman, 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 (Age 64) Prof. Dr. Hend El Sherbini (Age 53) Independent Non-Executive Chairman Group Chief Executive Officer Lord St John has been a member of the House of Dr. Hend has been IDH Group’s Chief Executive Offi- Lords of the U.K. Parliament since 1978. He serves on cer since 2012 and prior to that served as the CEO of the boards of several listed and unlisted companies Al Mokhtabar – Egypt’s oldest brand - between 2004 including Yellow Cake plc, Smithson Investment Trust and 2012. She received her MBBCh and her Master’s plc, Gulf Marine Services plc, GMS Resources, Strand degree in Clinical & Chemical Pathology from Cairo Hanson Ltd, KneoWorld UK Ltd. and Choice Mauri- University in the early 1990s, and also holds a Master’s tius. He also holds advisory roles with Farrant Group degree in Public Health from Emory University in Ltd., Shyft Network Inc., Tyvak Orbital Networks Ltd., Atlanta. Dr. Hend completed her PhD in Immunol- Qredo Ltd., BetWay Ltd., Geobear LTd., ROC Technolo- ogy from Cairo University in 2000, where she is also gies Ltd. and the Institute for Emerging Technologies a professor of clinical pathology at the university’s and Social Impact (ETSI) think tank. Lord St John has Faculty of Medicine. She sits on the Board of American a strong interest in the charitable sector and serves Society of Clinical Pathology (Egypt) and consults on as a trustee to several charities focused on wildlife the international certification process. Dr. Hend com- conservation, poverty reduction, education and pleted an Executive MBA from the London Business healthcare. Lord St John received a BA and BSocSc School in 2015 and was featured as one of Forbes most in Psychology from Cape Town University, a BProc in powerful women between 2016 and 2021. Law from the University of South Africa and an LLM from the London School of Economics. He practised as an attorney before his 25-year career in financial services in the City in London. 84 IDH 2021 Annual Report Hussein Choucri (Age 71) Dan Olsson (Age 54) Independent Non-Executive Director and Chairman of the Remuneration Committee Independent Non-Executive Director Mr. Choucri is Chairman and Managing Director of HC Mr. Olsson has long and extensive international experi- Securities & Investment, which he established in May ence in the diagnostic and healthcare services sector, 1996. He currently sits on the boards of EDITA Food where he has served in a range of executive positions. Industries S.A.E, Fawry Banking & Payment Technol- Among others as head of diagnostics in the pan-European ogy Services Ltd.(Fawry) and Integrated Diagnostic healthcare group Capio, CEO of Unilabs, a pan-European Holdings (IDH). Mr. Choucri served as a Managing diagnostic provider, CEO of Helsa, a Swedish healthcare Director of Morgan Stanley from 1987 to 1993 and group as well as CEO of Team Olivia Group, a Nordic care served as Advisory Director at Morgan Stanley from services group. He currently holds non-executive posi- 1993-2007. He received his Management Diploma tions at Purch AB, Batten AB, Svenska Labex AB, Hedera from the American University in Cairo in 1978. Group AB and is Chairman of Nämndemansgården i Sverige AB. Mr. Olsson has worked in the healthcare sector since 1999. Mr. Olsson studied economics at the University of Lund in Sweden. 2021 Annual Report IDH 85 Corporate Governance Board of Directors Richard Henry Phillips (Age 57) Non-Executive Director Yvonne Stillhart (Age 54) Independent Non-Executive Director Mr. Phillips is a founding partner of Actis LLP, the Ms. Stillhart is an experienced Senior Executive work- emerging markets private equity group. As Actis ing with innovation and growth driven companies LLP is one of the Company’s major shareholders, across a wide range of industries and geographical Mr. Phillips is not considered by the Board as being regions, including Europe, USA, North Africa and independent. He is the Head of Private Equity for Actis Sub-Sahara Africa. She has been a Non-Executive and is a member of the Actis Investment Committee. Director and Audit and Risk Committee Member for Mr. Phillips is a director on the board of a number of more than 12 years. She has co-founded and led as a companies including Honoris Holding Limited, Les Senior Partner a specialised private equity manager Laboratories Medis SA, and others. Mr. Phillips holds in Switzerland. Ms. Stillhart serves currently as a non- a degree in Economics from the University of Exeter. executive Director of UBS Asset Management Switzer- land Ltd. and is the Chairperson of the South African EPE Capital Ltd. She is also on the Board of abrdn Private Equity Opportunities Trust Plc. Ms. Stillhart holds a Director Certificate from Harvard Business School, the Corporate Risk Certificate from the DCRO Institute and the ESG Competent Boards Certificate. Yvonne will join IDH’s board of directors on 1 March 2022, replacing James Nolan who resigned on 1 Sep- tember 2021. 86 IDH 2021 Annual Report 2021 Annual Report IDH 87 Corporate Governance Corporate Governance Report Corporate Governance Report The Board of Directors (“the Board”) is responsible assist us in building a profitable and sustainable busi- for providing strong leadership and effective decision ness as well as safeguarding shareholder interests. making, safeguarding in the process the interests of all shareholders of Integrated Diagnostics Holdings. We are compliant with Financial Conduct Authority Under my chairmanship, the Board has maintained Disclosure Guidance and Transparency Rules (DTR) an unwavering commitment to provide oversight and subchapters 7.1 and 7.2, which set out certain manda- guidance to senior management as the Group contin- tory disclosures: 7.1 concerns audit committees and ues to execute its regional growth strategy. bodies carrying out equivalent functions; 7.2 concerns IDH is a Jersey-registered entity with a Standard in the Directors Report or, in this case, as part of the corporate governance standards that are included Listing on the Main Market of the London Stock Strategic Review (DTR 7.2.1). Exchange (LSE) since May 2015 with a secondary listing on the Egyptian Stock Exchange (EGX) since To that end, we have an Audit Committee as well as May 2021. Remuneration and Nomination Committees. The Board may establish additional committees as appropriate Given the company’s standard listing on the LSE, it is going forward. This Annual Report includes reports thus not required to comply with the requirements of from both the Audit and Remuneration Committees. the 2018 UK Corporate Governance Code (“the Code”) as issued by the Financial Reporting Council. IDH does Moreover, over the course of the past year, IDH has not voluntarily comply with the Code in full, however worked on complying with EGX listing rules and dis- the Company has put in place a framework which closure and corporate governance requirements that enables the Company to voluntarily comply with are set for foreign companies with dual listing. many aspects of the Code that it considers appropri- ate for the size and nature of the business. That said, The Board is committed to implementing best prac- it is the view of your Board that we continue our path tices in corporate governance, calling on both the of improving our corporate governance structure. In expertise of individual Directors as well as that of 2021 the Board carried out a corporate governance outside parties, including legal counsel and global review facilitated by external lawyers. The Board will professional services firms. work through the recommendations of the review during 2022 and seek to implement enhancements to the corporate governance structure where we believe Functioning of the Board We met seven times as a Board during the course of it to be in the best interests of the Company and its 2021, details of the individual Directors attendance is shareholders. We strongly believe that the gradual shown on page 91. The Board has invested significant adoption of best industry practices in governance will time discussing and evaluating the Group’s strategy 88 IDH 2021 Annual Report and prospects for future growth, the outcome of which excluding the Independent Non-Executive Chairman. is presented in our statement of strategy on page James Nolan resigned as Independent Non-Executive 50. We are confident that we have in place the right Director on 1 September 2021 and following a suc- strategy and the right management team to deliver cessful search process we were pleased to welcome shareholder returns going forward. Yvonne Stillhart as an Independent Non-Executive Composition of the Board Under its Articles of Association, the Group must Director on 1 March 2022, further enhancing the skills and diversity on the Board. Together, the Direc- tors offer IDH a world standard mix of expertise in have a minimum of two Directors. While there is no areas including strategy, finance and medical diag- maximum number of Directors, the Board presently nostics — as well as diverse experience in Europe, includes six Board members and following the most the Middle East and Africa. We have relevant com- recent appointment, has no intention of appointing mercial and technical experience to help direct the additional Board members. Notably, Directors do not Group as it delivers on its strategy in a very technical need to be shareholders of the Group in order to serve. field and across rapidly changing geographies. The Board and their biographies are set out on pages 84 I am pleased to report that since March 2022, we to 86 of this Annual Report and are summarised in have four Independent Non-Executive Directors, 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 Independent Non-Executive Director (12 January 2015) Dan Olsson Independent Non-Executive Director (12 January 2015) Richard Henry Phillips Non-Executive Director (23 December 2014) James Patrick Nolan Independent Non-Executive Director (resigned 1 September 2021) Yvonne Stillhart Independent Non-Executive Director (1 March 2022) 2021 Annual Report IDH 89 Corporate Governance Corporate Governance Report Leadership We continue to operate on the basis of a clear division • approving annually a strategic plan and objectives of responsibilities between the role of the Chairman for the following year for the Group; and that of the Group Chief Executive. This segrega- • approving any decision to cease to operate all or tion of roles was agreed at the Board meeting held on any material part of the Group’s business or to 12 January 2015. The Board believes that this segrega- enter into any new business or geographic areas; tion of roles remains appropriate, taking into account • monitoring the delivery of the Group’s strategy, the size and structure of the Group. objectives, business plan and budget; • adopting or amending the Group’s business plan or As Chairman, I ensure the Board is effective in the execu- annual budget; tion of all aspects of its role. The Group Chief Executive • approving the Group’s annual report and Officer, meanwhile, is responsible for managing the day- accounts and half-yearly financial statements to-day running of the business. In this, she is supported and/or any change in the accounting principles by a senior management team. The Group Chief Execu- or tax policies of any member of the IDH group tive and I have a good working relationship and discuss and/or any change in the end of the financial matters of Group strategy and performance on a regular year of any member of the IDH group except as basis. We also work together to ensure that Board meet- contemplated by the business plan or annual ings cover relevant matters, including a quarterly review budget, as required by law or to comply with a of financial and operational performance (including key new accounting standard; performance indicators), and in partnership with the • any member of the IDH group declaring or paying Group Secretary ensure that all Directors: any dividend or distribution; • are kept advised of key developments; • approving the issue of all circulars, prospectuses, • receive accurate, timely and clear information upon listing particulars and general meeting notices to which to call in the execution of their duties; and shareholders of the Group; • actively participate in the decision-making process. • ensuring the Group has effective systems of inter- nal control and risk management in place by (i) Agendas for meetings of the Board are reviewed and approving the Group’s risk appetite statements agreed in advance to ensure each Board meeting is and (ii) approving policies and procedures for the efficiently run, allowing all Directors to openly and detection of fraud, the prevention of bribery and constructively challenge the proposals made by the other areas considered by the Board to be material; Group’s senior management. I am pleased to report that • undertaking an annual review of the effectiveness of throughout the year, each Director has properly exer- the Group’s risk management and internal control cised those powers with which they have been vested and reporting on that review in the Group’s annual by the Group’s Articles of Association and relevant laws. report. The review should cover all controls, includ- ing financial, operational and compliance controls The Board operates under a Schedule of Matters and risk management; Reserved, the details of which are unchanged since • carrying out a robust assessment of the principal our last Annual Report. Matters reserved to the Board risks facing the Group, including those that threaten means any decision that may affect the overall direc- its business, future performance, solvency or liquid- tion, supervision and management of the Group, ity and to report on such assessment in the Group’s including, but not limited to: annual report; and 90 IDH 2021 Annual Report • reviewing the Group’s overall corporate governance Board Meetings During 2021 The Board met seven times during the year, four arrangements and approving any changes thereto. of which were held on an ad hoc basis to consider the Group acquisitions. Details of our Directors’ Apart from these Reserved matters, the Board del- attendance at Board and Committee meetings are egates specific items to its principal committees, shown in the table below. All of the meetings were namely the committees on Audit, Remuneration and held via teleconference due to the ongoing travel Nomination. Each Committee is authorised to seek restrictions from COVID-19. In the event that any information it requires from senior management. any Director is unable to attend a meeting of the The Board has not established separate committees Board or Committee of which they are a member, for governance, risk or compliance. The review of he or she receives the necessary papers, including governance arrangements is the responsibility of the agendas, meeting outcomes and any documents Board, as noted above, and the Audit Committee has presented for review or information. Furthermore, within its remit, the oversight of risk and compliance I endeavour to discuss with them in advance of the matters relating to the Group. meeting to obtain their views and decisions on the proposals to be considered. Below are brief recaps on each of these committees. Reports from the Chairmen of the Audit and Remu- neration Committees appear starting pages 98 and 102 of this Annual Report, respectively. Table of Director Attendance at 2021 Meetings Name Number of Meetings Directors: Lord St John of Bletso Prof. Dr. Hend El Sherbini Hussein Choucri Dan Olsson James Patrick Nolan (a) Richard Henry Phillips Yvonne Stillhart (b) Board Audit (c) Remuneration Nomination (d) 7 7 7 7 7 3 7 n/a 4 n/a n/a 4 4 3 n/a n/a 3 n/a n/a 3 3 2 n/a n/a 2 2 n/a 1 2 1 n/a n/a (a) James Patrick Nolan resigned on 1 September 2021. (b) Yvonne Stillhart was not appointed until 1 March 2022. (c) the Audit Committee met on one occasion on an ad hoc basis. (d) the Nomination Committee met on one occasion on an ad hoc basis. 2021 Annual Report IDH 91 Corporate Governance Corporate Governance Report Effectiveness Having spent considerable time in both formal meetings minutes in my capacity as Chairman before these and in learning about the skills of our Directors one on minutes are circulated to all Directors in attendance one — and drawing on my past experience as a Direc- and then tabled for approval at the next meeting, at tor — I am confident that the Board has the skills, talent which time any necessary amendments are made. and industry knowledge it needs to effectively deliver the Group’s agreed strategy. The Board, facilitated by The Group has obtained customary directors’ and the Company Secretary, carries out regular internal officers’ indemnity insurance covering the Chairman evaluations and consider the feedback from each Direc- and the Non-Executive Directors. tor in setting the agenda and strategic direction of the Company. In addition, training requirements for each The Board has delegated several areas of responsibil- Director are considered, and the Board receive regular ity to its committees. The composition of the Board’s updates from the Company Secretary or specific training committees was considered during the year and sub- from external legal counsel as deemed appropriate. sequently Dan Olsson was appointed as Chair of the Audit Committee following James Nolan’s resignation It is my considered judgement that the Board receives on 1 September 2021. from senior management sufficiently detailed budgets, forecasts, strategy proposals, reviews of the Group’s financial position and operating performance, and Nomination Committee The Nomination Committee assists the Board in annual and half yearly reports to ensure that it may be reviewing the structure, size and composition of the effective. This enables us to effectively ask questions Board. It is also responsible for reviewing succession of senior management and to hold discussions on plans for the Directors, including the Chairman and the Group’s strategy and performance. In 2021, senior Chief Executive and other senior management. management delivered regular reports to the Board ahead of regularly scheduled Board meetings. I note in this instance that all members of the Nomi- nation Committee are Non-Executive Directors. At Any concerns raised by Directors are clearly recorded the date of this report the following were members of in the minutes of each meeting. I review Board the Nomination Committee: Name Lord St John of Bletso Hussein Choucri Dan Olsson Position Chairman of the Committee Committee Member Committee Member James Nolan was a member of the Nomination Committee until his resignation on 1 September 2021. 92 IDH 2021 Annual Report Remuneration Committee The Remuneration Committee recommends the The full report of the Remuneration Committee for Group’s policy on executive remuneration determines 2021 appears starting on page 102 of this Annual the levels of remuneration for Executive Directors Report. At the date of this report the following were and the Chairman and other senior management and members of the Remuneration Committee: prepares an annual remuneration report. Name Hussein Choucri Dan Olsson Yvonne Stillhart Position Chairman of the Committee Committee Member Committee Member (Appointed 1 March 2022) James Nolan was a member of the Remuneration Committee until his resignation on 1 September 2021. Audit Committee The Audit Committee’s role is to assist the Board with the The Audit Committee will meet not less than three discharge of its responsibilities in relation to financial times a year. The Audit Committee comprises three reporting, including: reviewing the Group’s annual and Independent Non-Executive Directors who hold the half-year financial statements and accounting policies necessary competence in accounting and /or audit- and internal and external audits and controls; review- ing, recent financial experience and have competence ing and monitoring the independence and scope of the relevant to the sector in which the Group is operating. annual audit and the extent of the non-audit work under- The full report of the Audit Committee for 2021 taken by external auditors; advising on the appointment appears starting on page 98 of this Annual Report. At of external auditors; and reviewing the effectiveness of the date of the report, the following were members of the internal audit, internal controls, whistleblowing and the Audit Committee: fraud systems in place within the Group. Name Dan Olsson Hussein Choucri Yvonne Stillhart Position Chairman of the Committee Committee Member Committee Member (Appointed 1 March 2022) James Nolan was a member of the Audit Committee until his resignation on 1 September 2021. Dan Olsson stepped in as temporary chairman following James Nolan’s resignation and was officially appointed the Chair of the Committee at the end of the 2021. 2021 Annual Report IDH 93 Corporate Governance Corporate Governance Report Internal Control and Risk Management Given the business and geographies in which the Group Your Board has furthermore put in place a control operates, I believe as Chairman that risk mitigation framework at the Group level that applies to all sub- will be key not just to the creation and preservation sidiaries, including: of shareholder value, but in the Group’s growth going • Board approval of the overall Group budget and forward. The Company’s risk matrix, outlined on pages strategic plans; 52-59, is sufficiently vital that it must be owned equally • a clear organisational structure delineating lines of by the management team and members of the Board. responsibility, authorities and reporting requirements; • defined expenditure authorisation levels; Our view as a Board is that the Group must be proactive • a regular process for operational reviews at the on risk in order to meet shareholder expectations, and senior management level on a weekly, monthly and I have advised that I expect the IDH management team quarterly basis covering all aspects of the business; to be ahead of the curve in this area. You may expect • a strategic planning process that defines the key risk and its mitigation will be a theme to which your steps senior management must take to deliver on the Board returns repeatedly in 2022, as we did in 2021. Group’s long-term strategy; • a comprehensive system of financial reporting The Board has ultimate responsibility for the Group’s including weekly flash reports to management, internal controls; however, they have delegated monthly reporting to management and an annual oversight of the Group’s system of internal controls budget process involving both senior management to the Audit Committee so as to safeguard the assets and the Board; the Board received reports on a quar- of the Group and the interests of shareholders. The terly basis in 2021; and Audit Committee thus reviews the effectiveness of the • as part of the reporting process in 2021, management Group’s internal controls on an ongoing basis to ensure reviewed monthly and year-to-date actual results the keeping of proper accounting records, safeguarding against prior year, against budget and against forecast; the assets of the Group and detecting fraud and other these reports were circulated to the Board; any signifi- irregularities. The Audit Committee reports back to the cant changes and adverse variances are reviewed by Board with their findings and recommendations. the Group Chief Executive and by senior management and remedial action is taken where appropriate. 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 Investor Relations Engagement with shareholders continues to be a key level of operating departments by the heads of those function at both the senior management and the Board departments; and level. Our investor relations function held numerous • regular Board level discussion of the major business meetings with current and potential investors during risks of the Group, together with measures being the course of the year. Management met with investors taken to contain and mitigate those risks. at eight virtual investor conferences during 2021; in • The Group’s principal risks and uncertainties and addition to two roadshows arranged by brokers, while mitigation for them are set out on pages 52-59 of this handling hundreds of one-on-one call requests and Annual Report. queries throughout the year. 94 IDH 2021 Annual Report 2021 Annual Report IDH 95 Corporate Governance Corporate Governance Report The Board is committed to 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 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 publish our Annual Report by the end of April 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 Meet- ing (AGM) and related papers to shareholders at least 20 working days prior to the meeting. In 2021, we published half-year, nine-month reviewed results in addition to audited full-year results and The Group’s is looking to hold its sixth Annual General further released trading update on performance at Meeting as a listed company on 7 June 2022 in London, the three-month periods. We intend to continue UK, subject to Covid-19-related restrictions. Further publishing reviewed results for the first, second and details regarding the Group’s AGM will be communi- third-quarter marks in 2022, to abide by the Egyptian cated when available. Exchange’s listing rules. Due to the ongoing restrictions and safety concerns The Board communicates with shareholders as a result of the Covid-19 pandemic, the AGM through public announcements disseminated via will be run as a closed meeting with Shareholders the London Stock Exchange, analyst briefings, unable to attend the meeting in person. The Board roadshows and press interviews. Copies of public remains keen to encourage engagement with Share- announcements and financial results are published holders. To that end, the Directors would like to on the Group’s website, along with a number of invite questions from Shareholders in advance of other investor relations tools. It is worth highlight- and during the AGM. Should Shareholders wish to ing that the Group launched new corporate and submit questions to the Board prior to the deadline investor relations websites in 2018, offering more for proxy voting they can do so, and these will be comprehensive and better structured information responded to on an individual basis. In addition, on the Group along with additional shareholder the Board will offer shareholders the opportunity tools and a richer interface. to dial into the AGM, at which time they can also The Board receives regular updates from the senior management team on the views of shareholders Details of the AGM are included in the Notice of Meet- and on milestones in the investor relations pro- ing that accompanies this Annual Report and which is gram. We will continue throughout 2022 to grow available on our website. submit questions to the Board. 96 IDH 2021 Annual Report At the AGM, all of the Group’s Directors will retire and In formulating this Annual Report, we have called on submit themselves for re-election with the exclusion of the Group Chief Executive and her senior management Yvonne Stillhart who will be seeking election. staff to provide us with clear documentary evidence The outcome of the voting at the AGM will be Audit Committee has confirmed to us that the financial announced by way of a London/Egypt Stock Exchange statements as contained in the 2021 Annual Report are announcements and full details will be published on true and fair and that the work of the external auditors the Group’s website shortly after the AGM. has been accurate and effective. of the Group’s performance and policies for 2021. The Limitations of this Report As I noted earlier, the Group is not bound to adhere to the requirements of the 2018 UK Corporate Governance Code. Nevertheless, we have endeavoured to ensure that this Annual Report is, as a whole, fair, balanced Lord St John of Bletso Chairman and understandable. 20 April 2022 2021 Annual Report IDH 97 Corporate Governance Audit Committee Report Audit Committee Report relevant financial experience in financial and health- care industry matters to carry out its duties with the appropriate knowledge and challenge as set out under the 2018 UK Corporate Governance Code (“the Code”) as issued by the Financial Reporting Council. The Committee has also been actively working to ensure IDH’s financial reporting complies with EGX rules and requirements set out for foreign companies with a dual listing. During 2021, the Audit Committee met four times. The Committee members reviewed the integrity and content of external financial reporting, risk management and internal controls and reported the findings and recom- mendations to the Board. Outside of scheduled meet- ings, the Audit Committee also communicated regularly Dan Olsson Independent Non-Executive Director throughout 2021 with the Group Chief Financial Officer and Vice President of Finance & Strategies and the external auditors. During the year KPMG, the external The Audit Committee is responsible for overseeing auditors who served since July 2015 resigned and Price- IDH’s financial reporting and ensuring the integrity waterhouseCoopers LLP (“PwC”) were appointed. of the Group’s financial statements. The Committee is also responsible for reviewing and monitoring the The audit partner and audit manager from the effectiveness of the Group’s risk management processes Group’s external auditors are invited to attend meet- and internal controls, as well as for ensuring that audit ings of the Committee on a regular basis. During processes are robust. 2021, they attended all meetings. The Group Chief Financial Officer and Vice President of Finance During the year, the composition of the Audit Com- & Strategies, who is not a member of the Board, mittee changed. James Nolan resigned from the Board also attends the meetings by invitation, and other and consequently as Chair of the Audit Committee members of the senior management team attend and I was appointed to that position. At the date of as required; these include the Director of Investor this report, the Audit Committee comprises three Relations, the Chief Internal Audit Director and the Non-Executive Directors, all of whom are considered Group Secretary. independent. In addition to myself, Hussein Choucri and Yvonne Stillhart are also members of the Com- There are also private meetings between the Audit mittee. The Committee as a whole considers it has the Committee and the external auditors outside the 98 IDH 2021 Annual Report audit timetable at which senior management is not present. The Committee will continue with the Roles and Duties of the Audit Committee The Audit Committee’s role is to assist the Board with practice of meeting in private with the external the discharge of its responsibilities in relation to finan- auditors in the future. cial reporting, including: • reviewing the Group’s annual and half-year financial FRC Audit Quality Review The FRC is the UK’s independent regulator respon- statements and quarterly financial statements; • reviewing the Group’s accounting policies, internal sible for promoting high-quality corporate gover- and external audits and controls; nance and reporting to foster investment. The FRC’s • reviewing and monitoring the scope of the annual responsibilities include independent monitoring audit and the extent of the non-audit work under- of audits of listed and certain other public interest taken by external auditors; and entities performed by firms registered to conduct • advising on the appointment of external auditors audits in the UK by a Recognised Supervisory Body and reviewing the effectiveness of the internal audit, ( further details are set out on the FRC’s website). internal controls, whistleblowing and fraud systems This monitoring is performed by the FRC’s Audit in place within the Group. Quality Review (‘AQR’) team. The reviews of indi- vidual audit engagements are intended to contribute to safeguarding and promoting improvement in the Audit Committee Meetings During 2021 During 2021 the Audit Committee had four scheduled overall quality of auditing in the UK. The Group’s meetings. At each scheduled meeting, the Committee previous accounts have not been subject to a review considers the matters outlined above under the sub- in the period. heading “Roles and Duties of the Audit Committee.” Committee Member James Nolan Dan Olsson Hussein Choucri Meeting attended 3/3 4/4 4/4 Significant Issues The audit committee have held regular meetings across subsidiaries and valuations of options over non con- trolling interests. Detailed discussions have been held the period with the external auditors. In these meetings around corporate governance and steps being taken to the external auditors have presented their audit plan strengthen the control environment. and shared their assessment of financial statement risks. Areas of risk and focus for the audit include revenue recognition, procedures around management Internal Auditors The scope of internal auditor encompasses, but is override of controls, assessments of control over our not limited to, the examination and evaluation of the 2021 Annual Report IDH 99 Corporate Governance Audit Committee Report adequacy and effectiveness of the Group’s governance, • Evaluating specific operations at the request of risk management, and internal controls as well as the Board / Audit Committee or management, the quality of performance in carrying out assigned as appropriate. responsibilities to achieve the Group’s stated goals and objectives. This includes: The Internal Auditor reports to the Audit Commit- • Evaluating risk exposure relating to achieve- tee and the Committee received three reports on ment of the Group’s strategic objectives. the findings of the internal audit in 2021. The Com- • Evaluating the reliability and integrity of infor- mittee also received a report from internal audit on mation and the means used to identify, measure, their annual review of the system of internal control classify, and report such information. and risk management. The Committee continues to • Evaluating the systems established to ensure monitor and reviews the effectiveness and capabili- compliance with those policies, plans, proce- ties of the internal audit during the year. dures, laws, and regulations which could have a significant impact on the Group. • Evaluating the means of safeguarding assets External Auditors Independence Since July 2015 up until June 2021, KPMG acted as and, as appropriate, verifying the existence of the Group’s external auditors. At the AGM in June such assets. 2021, KPMG resigned and PwC were appointed. • Evaluating the effectiveness and efficiency with During the year, the Committee met regularly with which resources are employed. representatives of the external auditors, without • Evaluating operations or programs to ascertain management present and also met with manage- whether results are consistent with established ment without the presence of the external auditors. objectives and goals and whether the operations The Auditors’ independence was considered by the or programs are being carried out as planned. Committee during the year and following care- • Monitoring and evaluating governance processes. ful consideration, it was agreed that the Auditors • Reporting periodically on the internal audit remained independent. activity’s purpose, authority, responsibility, and performance relative to its plan. The Audit Committee reviewed the work com- • Reporting significant risk exposures and control pleted by the external auditors. The Audit Com- issues, including fraud risks, governance issues, mittee confirms that during 2021, PwC audit and other matters needed or requested by the services amounted to EGP 28.8 million compared Board / Audit Committee. to the EGP 12.6 million paid to KPMG in 2020. 100 IDH 2021 Annual Report The increase in external auditors fees is due to financial statements, the Audit Committee advised the the dual-listing of IDH’s shares on both the LSE Board at its meeting on 20 April 2022 that is their opin- and the EGX which necessitated the publishing ion that the financial statements as at 31 December of three reviewed financial statements for 1Q, 2Q 2021 provide a true and fair view of the financial perfor- and 3Q in addition to audited financial statements mance of the Group and recommend that it be adopted for the full year in consolidated and standalone by the Board and recommended to shareholders for forms versus only consolidated audited full-year approval at the forthcoming Annual General Meeting. financial statements in 2020. External Auditors Following consideration of the performance of the Auditors, the services provided during the year and a review of its independence and objectivity, the Com- mittee has recommended to the Board the appoint- Dan Olsson Chairman, Audit Committee ment of PwC as Auditors to the Company. As such, the 20 April 2022 notice of the 2022 Annual General Meeting includes a resolution, to be approved by shareholders, that PwC be re-appointed as Auditors. 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 sharehold- ers to assess the Group’s position and performance, business model and strategy. It is the Audit Commit- tee’s role to assist the Board in discharging its responsi- bilities 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 2021 Annual Report IDH 101 Corporate Governance Remuneration Committee Report Remuneration Committee Report Following this review, it was agreed to increase the fees for the independent non-executive directors with effect from 1 September 2021. Chairman: Lord St John of Bletso is entitled to receive an annual salary of US$ 100,000. He is entitled to the reimbursement of reasonable expenses; indepen- dent Non-Executive Directors: Hussein Choucri and, Dan Olsson, and Yvonne Stillhart have been engaged by the Group as Independent Non-Executive Direc- tors under letters of appointment. Hussein Choucri and Yvonne Stillhart are each entitled to an annual fee of US$ 65,000, while Dan Olsson is entitled to an annual fee of US$ 70,000, in recognition of his role as Chairman of the Audit Committee. The Independent Non-Executive Directors are all entitled to the reim- bursement of reasonable expenses; non-Executive Hussein Choucri Independent Non-Executive Director and Chairman Directors: Richard Henry Phillips has been engaged of the Remuneration Committee by the Group as a Non-Executive Director under let- In this report from the Remuneration Committee, tive Directors are all entitled to the reimbursement I outline on behalf of my colleagues and myself the of reasonable expenses. ter of appointment. He will not be entitled to receive any fee from the Group for this role. The Non-Execu- basis on which Directors and select members of senior management will be remunerated for their service in 2021. 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 2021 appears below. During 2021, the Committee commissioned a consultant to review the non-executive remunera- tion to ensure these were aligned to the market. 102 IDH 2021 Annual Report Remuneration of Directors in 202135 Figures in EGP36 Executive Director Base Salary / fees 2021 Base Salary / fees 2020 Annual Bonus 202137 Annual Bonus 202037 Total 2021 Total 2020 Dr. Hend El Sherbini38 8,495,102 8,532,450 450,000 450,000 8,945,102 8,982,450 Non-Executive Directors Lord St John of Bletso 1,303,371 1,172,228 Hussein Choucri 912,358 859,634 James Patrick Nolan 703,823 937,782 Dan Olsson 912,358 859,634 Richard Henry Phillips39 - - - - - - - - - - - - 1,303,371 1,172,228 912,358 859,634 703,823 937,782 912,358 859,634 - - Yvonne Stillhart was appointed on 1 March 2022 and therefore did not receive any fees for the year ended 2021. Hussein Choucri Chairman, Remuneration Committee 20 April 2022 35 There are no taxable benefits, corporate pensions or long-term incentive plans for the Company’s directors. 36 Average USD:EGP exchange rate was 15.63 in 2020 and 15.64 in 2021. 37 BOD members are not eligible for profit share distributions. 38 All amounts shown are paid in USD, except for part of Dr. Hend El Sherbini’s annual bonus which is paid in EGP in the form of an annual award amounting to EGP 450,000. 39 Mr. Philips is the board representative of a major shareholder, Actis, and is therefore not remunerated. 2021 Annual Report IDH 103 Corporate Governance Directors’ Report Directors’ Report The statements and reviews on pages 4 to 59 comprise Report in sections including the Chairman’s Message the Strategic Report, which contains certain informa- (page 16 and 17), Chief Executive’s Report (pages 18 to tion that is incorporated into this Directors’ Report 25), Strategic Report (beginning page 4) and particu- by reference, including indications as to the Group’s larly the Performance section (beginning on page 60). likely future business developments. Financial statements for 2021 appear in the Audited Financial Statements (starting on page 110). Directors The Directors who held office at 31 December 2021 and up to the date of this report are set out on pages Results and Dividends The Group’s Results for 2021 are set out in the Audited 84 to 86 along with their biographies. The remunera- Financial Statements starting on page 110. The Board tion of the Directors is set out in the Remuneration of Directors is pleased to recommend a final dividend Report on page 103. of EGP 2.17 per share, or EGP 1.3 billion in aggregate (exact US dollar amount is subject to the exchange Directors’ and Officers’ Liability Insurance and Indem- rate at the time of the upstreaming from the subsidiar- nification of Directors. ies to the holding company), in respect of the financial year ended 31 December 2021. This represents an sig- Subject to the conditions set out in the Companies (Jer- nificant increase compared to a final dividend of US$ sey) Law 1991 (as amended), the Group has arranged 29.1 million in aggregate in the previous financial year. appropriate Directors’ and Officers’ liability insurance to indemnify the Directors against liability in respect of proceedings brought by third parties. Such provisions Principal Risks and Uncertainties The principal risks and uncertainties that may affect remain in force at the date of this report. IDH’s business, as well as their potential mitigants, are outlined on pages 52 to 59 of this Annual Report. Principal Activities The Group’s principal activity is the provision of medical diagnostics services. An overview of the Share Capital The Group has 600,000,000 ordinary shares each with Group’s principal activities is an integral component a nominal value of US$ 0.25. There are no other shares of the Strategic Review included in this Annual Report in issue, other than ordinary shares. beginning on page 4. Business Review and Future Developments A review of the development and performance of the Substantial Share Holdings As at 31 December 2021, the Company ascertained from its own analysis that the following held inter- ests of 3% or more of the voting rights of its issued Group’s business forms an integral part of this Annual share capital: 104 IDH 2021 Annual Report Shareholder Hena Holdings Limited Actis IDH B.V. International Finance Corporation (IFC) and IFC MENA Fund Fidelity Investments T. Rowe Price International Number of Voting Rights % of Voting Rights 152,982,356 126,000,000 28,456,384 26,451,142 23,946,015 25.50 21.00 4.70 4.41 3.99 Note (1): The table displays the top 5 shareholders in IDH across both exchanges (LSE and EGX). Note (2): As at year-end 2021, 92.9% of IDH’s shares were listed on the LSE, with the remaining 7.1% listed on the EGX. And that the table is actually demonstaring the top 5 shareholders aggregately among both exchnages The Directors certify that there are no issued securities that carry special rights with regard to control of the Corporate Responsibility The Group’s report on Corporate Responsibility is set Company. There are similarly no restrictions on voting out on page 78. rights. Chief Executive Officer Dr. Hend El-Sherbini and her mother, Dr. Moamena Kamel jointly hold the shares held by Hena Holdings Limited which include Corporate Governance The Group’s report on Corporate Governance is on the described voting rights. pages 82 to 108. The Company has not been informed of any changes to the above interests between 31 December 2021 and Articles of Association The Company’s Articles of Association set out the the date of this Report. Committees of the Board The Board has established Audit, Nomination and rights of shareholders including voting rights, distri- bution rights, attendance at general meetings, powers of Directors, proceedings of Directors as well as bor- rowing limits and other governance controls. A copy Remuneration Committees. Details of these Commit- of the Articles of Association can be requested from tees, including membership and their activities during the Group Company Secretary. 2021, are contained in the Corporate Governance sec- tion of this Annual Report and in the Remuneration The Articles of Association may be amended by and Audit Reports. members of the Company via special resolution at 2021 Annual Report IDH 105 Corporate Governance Directors’ Report a General Meeting of the Company, the Company is not seeking any amendments at the forthcoming Political Donations The Group made no political donations in 2021 (2020: nil). annual general meeting. Rules on the Appointment and Replacement of Directors Rules on the appointment and replacement of Direc- Financial Instruments The Group’s principal financial instruments comprise cash balances, balances with related parties, trade receivables and payables and other payables and tors are set out in the Group’s Articles of Association, receivables that arise in the normal course of busi- a copy of which may be requested from the Group ness. The Group’s financial instruments risk manage- Company Secretary. ment objectives and policies are set out in Note 2 to the Financial Statements. Agreements Related to Change of Control of the Group There is an agreement related to the IFC’s $45 Employees The Group has one (1) Executive Director, namely million loan agreement whereby within 60 days of Group Chief Executive Dr. Hend El Sherbini, as receipt of notice from IFC that a Major Shareholder identified in the Corporate Governance section. Her Event has occurred, IDH should prepay the aggre- biographical information appears on page 84 of this gate outstanding principal amount of the loan in Annual Report, and her compensation is reported in full together with accrued interest and Increased the Remuneration Committee Report on page 103. Costs (if any) thereon and all other amounts pay- IDH has service agreements with the Group Chief able under the agreement, including the amount Executive and with the Group Chief Financial Officer payable under unwinding costs if the prepayment and Vice President of Finance & Strategies, Mr. Omar is not made on an Interest Payment Date. Bedewy, who is not a Company Director. Dr. Hend El Sherbini leads the Company’s Executive Committee, Major Shareholder Event means the aggregate eco- which also includes all heads of departments and nomic and voting interests (a) directly held by the meets every second week to review and discuss per- Major Shareholder and (b) indirectly held by Dr. Hend formance, priorities and upcoming events in light of El Sherbini and Dr. Moamena Kamel in the Parent’s the Group’s strategic plan. In view of the Company’s share capital falling below 12.5% (determined on a regional growth plans, IDH is committed to building fully diluted basis). Conflicts of Interest During the year, no Director held any beneficial inter- out its senior management team in preparation for a larger footprint. The Group and its subsidiaries had total of 5,346 employees as at 31 December 2021 (2020: 4,754) employed in Egypt, Jordan, Sudan and est in any contract significant to the Group’s business, Nigeria. 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 Creditor Payment Policy Individual subsidiaries of the Group are responsible for become aware that they, or their connected parties, agreeing on the terms and conditions under which busi- have an interest in an existing or proposed transac- ness transactions with their suppliers are conducted. It is tion with the Group, they are required to notify the the Group’s policy that payments to suppliers are made Board as soon as reasonably practicable. in accordance with all relevant terms and conditions. 106 IDH 2021 Annual Report Going Concern The Directors have considered a number of downside • make judgements and accounting estimates that are reasonable and prudent; and scenarios, including the most severe but plausible • prepare the financial statements on the going con- scenario, for a period of 16 months from the signing cern basis unless it is inappropriate to presume of the financial statements. They have also assessed that the group will continue in business. the likelihood of any key one off payments arising such as dividends or those in respect of M&A activity. The directors are responsible for safeguarding the Under all of these scenarios there remains significant assets of the group and hence for taking reasonable headroom from a liquidity and covenant perspective. steps for the prevention and detection of fraud and Reverse stress tests have been performed to determine other irregularities. the level of downside required to cause a liquidity or covenant issue with these scenarios not considered The directors are also responsible for keeping ade- plausible. Therefore the Directors believe the Group quate accounting records that are sufficient to show has the ability to meet its liabilities as they fall due and explain the group’s transactions and disclose and the use of the going concern basis in preparing with reasonable accuracy at any time the financial the financial statements is appropriate. position of the group and enable them to ensure that Statement of directors’ responsibilities in respect of the financial statements The directors are responsible for preparing the Annual the financial statements comply with the Companies ( Jersey) Law 1991. The directors are responsible for the maintenance Report and the financial statements in accordance and integrity of the group’s website. Legislation in with applicable law and regulation. the United Kingdom governing the preparation and dissemination of financial statements may differ Company law requires the directors to prepare financial from legislation in other jurisdictions. statements for each financial year. Under that law the directors have prepared the group financial statements in accordance with International Financial Reporting Directors’ confirmations Each of the directors, whose names and functions are Standards (IFRSs) as adopted by the European Union. listed in the Board of Directors section of the Annual Report confirm that, to the best of their knowledge: Under company law, directors must not approve the • the group financial statements, which have been financial statements unless they are satisfied that prepared in accordance with IFRSs as adopted by the they give a true and fair view of the state of affairs European Union, give a true and fair view of the assets, of the group and of the profit or loss of the group for liabilities, financial position and profit of the group; and that period. In preparing the financial statements, the • the Financial & Operational Review includes a fair directors are required to: review of the development and performance of the • select suitable accounting policies and then apply business and the position of the group, together them consistently; with a description of the principal risks and uncer- • state whether applicable IFRSs as adopted by the tainties that it faces. European Union have been followed, subject to any material departures disclosed and explained in the In the case of each director in office at the date the financial statements; directors’ report is approved: 2021 Annual Report IDH 107 Corporate Governance Directors’ Report • so far as the director is aware, there is no relevant Details of the AGM are included in the Notice of Meet- audit information of which the group’s auditors are ing that accompanies this Annual Report and which is unaware; and available on our website. • they have taken all the steps that they ought to have taken as a director in order to make them- At the AGM, all of the Group’s Directors will retire and selves aware of any relevant audit information and submit themselves for re-election with the exclusion to establish that the group’s auditors are aware of of Yvonne Stillhart who will be seeking election. that information. Annual General Meeting (AGM) IDH is looking to hold its 2022 AGM on 7 June 2022 in announced by way of a London/Egypt Stock Exchange announcements and full details will be published on London, UK, subject to Covid-19-related restrictions. the Group’s website shortly after the AGM. The outcome of the voting at the AGM will be Further details regarding the Group’s AGM will be com- municated when available. Auditors PwC have confirmed their willingness to act as the Due to the ongoing restrictions and safety concerns Company’s external auditors and a separate resolu- as a result of the COVID-19 pandemic, the AGM will tion will be proposed at the forthcoming AGM con- be run as a closed meeting with Shareholders unable cerning their appointment and to authorise the Board to attend the meeting in person. The Board remains to agree their remuneration. keen to encourage engagement with Shareholders. To that end, the Directors would like to invite questions By order of the Board 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 Dr. Hend El Sherbini Executive Director opportunity to dial into the AGM, at which time they 20 April 2022 can also submit questions to the Board. 108 IDH 2021 Annual Report 2021 Annual Report IDH 109 Consolidated Financial Statements 110 IDH 2021 Annual Report 2021 Annual Report IDH 111 Independent auditors’ report to the members of Integrated Diagnostics Holdings plc Report on the audit of the financial statements Opinion In our opinion, Integrated Diagnostics Holdings plc’s consolidated financial statements: • give a true and fair view of the state of the group’s affairs as at 31 December 2021 and of its profit and cash flows for the year then ended; • have been properly prepared in accordance with International Financial Reporting Standards as adopted in the European Union; and • have been prepared in accordance with the requirements of the Companies (Jersey) Law 1991. We have audited the financial statements, included within the 2021 Annual Report (the “Annual Report”), which comprise: the Consolidated statement of financial position as at 31 December 2021; the Consolidated income statement, Consolidated statement of comprehensive income/(expenses), Consolidated statement of cashflows, and Consolidated statement of changes in equity for the year then ended; and the notes to the financial statements, which include a description of the significant accounting policies. Our opinion is consistent with our reporting to the Audit Committee. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We remained independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, which includes the Financial Reporting Council’s (“FRC”) Ethical Standard, as applicable to listed public interest entities in accordance with the requirements of the Crown Dependencies’ Audit Rules and Guidance for market-traded companies, and we have fulfilled our other ethical responsibilities in accordance with these requirements. To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard were not provided. Other than those disclosed in note 8.5 to the consolidated financial statements, we have provided no non-audit services to the company or its controlled undertakings in the period under audit. 112 IDH 2021 Annual Report Financial Statements Independent Auditors’ Report Independent auditors’ report to the members of Integrated Diagnostics Holdings plc (continued) Our audit approach Context Integrated Diagnostics Holdings plc (“IDH”) is a company incorporated in Jersey with shares listed on the London Stock Exchange (“LSE”) and the Egyptian Exchange (“EGX”). PricewaterhouseCoopers LLP (“PwC UK”) are appointed to audit the consolidated financial statements of IDH for the purposes of the requirements of the LSE and Jersey law. All trading operations of IDH are outside of the UK (Generally in the Middle East and Africa). Therefore, the role of PwC UK is predominantly that of a group auditor with other PwC network firms acting as component auditors. Overview Audit scope • Components were considered to be individual legal entities within the group. Full scope audits were performed on 4 significant components which covered 98% of reported revenues and 96% of reported profits. The four components included the 3 main trading subsidiary companies in Egypt and the trading subsidiary company in Jordan. These were selected due to their relative size (i.e. being more than 10% of the reported profits before tax). • Additional testing was performed on “non-significant components” where individual balances represented at least 5% of the consolidated balance and was above group materiality. • For all other balances not included in the above, analytical review procedures and enquiries of management were performed by the group auditor. • Testing over the consolidation and the Annual Report and consolidated financial statements was all performed by the group auditor. Key audit matters • Revenue recognition from customers Materiality • Overall materiality: EGP89,293,000 based on 4% of consolidated profit before tax. • Performance materiality: EGP44,646,500 2021 Annual Report IDH 113 Independent auditors’ report to the members of Integrated Diagnostics Holdings plc (continued) The scope of our audit As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements. Key audit matters Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures thereon, were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. This is not a complete list of all risks identified by our audit. Key audit matter Revenue recognition from customers The Group reported revenue of EGP5,224,712,000 from health diagnostics related activities, during the year ended 31 December 2021. Revenue is processed involving large volumes of data with a combination of different products, services, and pricing mechanisms. We therefore considered this to be a key audit matter, as there is an inherent risk around the recognition of revenue from the services rendered by the Group. In addition, there was a significant increase in the covid-19 related tests and services in comparison to prior periods. Consequently, a significant portion of our audit effort was directed towards the accuracy of reported revenues. Refer to the following notes to the consolidated financial statements for details: • Note 3.2: Significant accounting policies • Note 6: Revenue 114 IDH 2021 Annual Report How our audit addressed the key audit matter We performed audit procedures over this significant area, which included a combination of tests of controls and substantive procedures as described below: • We obtained an understanding of the various significant revenue streams and identified the relevant controls, IT systems and reports; • We assessed the Group’s revenue accounting policies, including the key judgements and estimates applied by management in consideration of the requirements of IFRS 15; • We performed manual controls testing and substantive procedures, to verify accuracy and occurrence of revenue. This included testing the end- to-end reconciliations from data records extracted from source systems to the cash / credit balances ledger. • We used data analytic tools to assess the reasonableness of the total value of the revenue recorded based on pricelists and traced them back to that charged to customers. • We performed a reconciliation between revenue transactions and cash collected and selected a sample to test the occurrence, accuracy and validity of the underlying source documentation and its related postings, including those journals we considered unusual in nature. • We also assessed the adequacy of the Group’s disclosures in the consolidated financial statements with respect to revenue. Based upon the procedures performed above we concluded that sufficient and appropriate audit evidence was obtained in relation to this risk. Financial Statements Independent Auditors’ Report Independent auditors’ report to the members of Integrated Diagnostics Holdings plc (continued) How we tailored the audit scope We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole, taking into account the structure of the group, the accounting processes and controls, and the industry in which it operates. IDH is Headquartered in Egypt, where the finance team manages the group operations and those of the Egyptian subsidiaries. There are other operations, notably in Sudan and Nigeria, with the largest non-Egyptian operation being in Jordan. All of these operate under common systems and controls, but with separate local management and finance teams reporting into the Egyptian head office team. Components were considered to be individual legal entities within the group. There were 14 individual components within the group (including the Company). Those components which represented at least 10% of the reported profit before tax were considered to be significant components. Full scope audits were performed on these components (4 in total) which covered 98% of reported revenues and 96% of reported profits. The four components included 3 trading companies in Egypt and the trading company in Jordan. We considered the out of scope components and the potential for material error. Additional procedures were performed, where the balances represented a significant proportion of the relevant consolidated balance (deemed to be 5%) and the balance was above materiality. This resulted in four additional areas being tested across the out of scope components. For each individual Financial Statement Line Item (“FSLI”) we considered if sufficient coverage was obtained from the combination of the above two areas. Sufficient coverage was deemed to be 45% for a normal risk, 55% for an elevated risk and 65% for a significant risk. Based upon this final assessment no other areas were brought into the scope of our audit. For all other balances not included in the above, analytical review procedures and enquiries of management were performed. We also considered if any other risk criteria would result in additional areas being included within the scope of our audit. We concluded that, based upon the coverage obtained above and our understanding of the group, that no further components or balances were included in our scope. All initial underlying audit work on the significant components and additional areas selected on the out of scope components, was performed by component auditors. The work was planned, directed, supervised and reviewed by the group auditor through regular meetings (both on video calls and through visits to the local country) throughout the audit between July 2021 and April 2022. These discussions included risk assessment, materiality, testing approaches (i.e. the nature, extent and timing of audit testing and expected controls reliance) and the response to fraud and completeness of related party transactions. 2021 Annual Report IDH 115 Independent auditors’ report to the members of Integrated Diagnostics Holdings plc (continued) How we tailored the audit scope (continued) Working papers for the component auditors were reviewed by the group auditor for all significant components and local management and the auditors were challenged regarding the conclusions reached and evidence obtained. Where significant, further consultations were also performed by the Group auditor regarding significant accounting matters or judgements. Materiality The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the financial statements as a whole. Based on our professional judgement, we determined materiality for the financial statements as a whole as follows: Overall group materiality EGP89,293,000 How we determined it 4% of consolidated profit before tax Rationale for benchmark applied We believe that profit before tax is the key measure used by the shareholders in assessing the performance of the group. It is also a widely accepted benchmark for assessing materiality for listed groups. For each component in the scope of our group audit, we allocated a materiality that is less than our overall group materiality. The range of materiality allocated across components was between EGP81,800,000 to EGP15,800,000. We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the nature and extent of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes. Our performance materiality was 50% of overall materiality, amounting to EGP44,646,500 for the group financial statements. In determining the performance materiality, we considered a number of factors - the history of misstatements, risk assessment and aggregation risk and the effectiveness of controls - and concluded that an amount at the lower end of our normal range was appropriate. We agreed with the Audit Committee that we would report to them misstatements identified during our audit above EGP4,464,500 as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons. 116 IDH 2021 Annual Report Financial Statements Independent Auditors’ Report Independent auditors’ report to the members of Integrated Diagnostics Holdings plc (continued) Conclusions relating to going concern Our evaluation of the directors’ assessment of the group’s ability to continue to adopt the going concern basis of accounting included: • discussions with management and those charged with governance around the performance in 2021, the budgets for 2022 and beyond and the performance in the 2022 financial year to date. These discussions included the impact of current events on management’s forecasts and the key drivers behind any expected changes to the current level of performance; • We compared the forecasted profits and cashflows to the latest approved budgets and actuals achieved in the prior year and sought evidence for any unexpected trends. We considered the level of underperformance required prior to their being insufficient facilities and compared this to the past levels of budget accuracy; • We validated management’s assessment of available cash and debt facilities to bank confirmations and committed debt facilities, including assessing managements forecasts regarding any covenants or other such requirements attached to the debt facilities; • We considered the plausible but severe downsides included in managements model for reasonableness based upon our understanding of the group and known commitments such as any remaining amounts payable under prior acquisitions; • Testing the accuracy of the model containing management’s forecasted future financial performance and cashflows; and • Reviewing the disclosures made within the Annual Report for consistency with our audit work and compliance with the respective legal and accounting requirements Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue. In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the group’s ability to continue as a going concern. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. Reporting on other information The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report thereon. The directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or any form of assurance thereon. 2021 Annual Report IDH 117 Independent auditors’ report to the members of Integrated Diagnostics Holdings plc (continued) Reporting on other information (continued) In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to conclude whether there is a material misstatement of the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report based on these responsibilities. Responsibilities for the financial statements and the audit Responsibilities of the directors for the financial statements As explained more fully in the Statement of directors’ responsibilities in respect of the financial statements, the directors are responsible for the preparation of the financial statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The directors are also responsible for 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. In preparing the financial statements, the directors are responsible for assessing the group’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 the directors either intend to liquidate the group or to cease operations, or have no realistic alternative but to do so. Auditors’ responsibilities for the audit of the financial statements 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 an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a 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 the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below. 118 IDH 2021 Annual Report Financial Statements Independent Auditors’ Report Independent auditors’ report to the members of Integrated Diagnostics Holdings plc (continued) Auditors’ responsibilities for the audit of the financial statements (continued) Based on our understanding of the group and industry, we identified that the principal risks of non-compliance with laws and regulations related to compliance with employment legislation, and we considered the extent to which non-compliance might have a material effect on the financial statements. We also considered those laws and regulations that have a direct impact on the financial statements such as compliance with taxation laws and legislation and the Companies (Jersey) Law 1991. We evaluated management’s incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls), and determined that the principal risks were related to overstatement of revenues or the financial performance/position of the Group through inappropriate use of journal entries, manipulation of significant management estimates or inappropriate recording of significant or unusual transactions/events. The group engagement team shared this risk assessment with the component auditors so that they could include appropriate audit procedures in response to such risks in their work. Audit procedures performed by the group engagement team and/or component auditors included: • Discussions with management and those charged with governance regarding any known or suspected instances of fraud, non-compliance with laws and regulations or claims being made against the Group. Where claims were noted, management had taken legal advice in the respective country or Jersey regarding the impact (if any) on the financial position of the Group. We have confirmed matters directly with the Group’s legal counsel and considered the recording and disclosure of these matters, in light of the requirements of IFRS and the respective legal requirements; • Reviewing board minutes and performing legal confirmations to ascertain the completeness of the above disclosures made to us; • Auditing key management estimates and judgements, including assessment of compliance with the accounting requirements and validity of the estimates (underlying data and accuracy of past assumptions); • Reviewing the progress made by the Group on their risk mitigation plan. This was a plan which was created following our appointment as auditors, to address the matters identified by KPMG relating to the Group’s corporate governance. We have assessed the progress made and the implications in respect of our work in relation to fraud and non-compliance with laws and regulations and concluded that no significant matters have arisen; • Reviewing the disclosures provided within these consolidated financial statements for appropriateness based upon the Group’s legal and accounting requirements; and • Testing journal entries made during the year, using a risk-based target testing approach, focusing on those which impacted reported revenues or had unusual account combinations. There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion. 2021 Annual Report IDH 119 Independent auditors’ report to the members of Integrated Diagnostics Holdings plc (continued) Auditors’ responsibilities for the audit of the financial statements (continued) Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing techniques. However, it typically involves selecting a limited number of items for testing, rather than testing complete populations. We will often seek to target particular items for testing based on their size or risk characteristics. In other cases, we will use audit sampling to enable us to draw a conclusion about the population from which the sample is selected. A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report. Use of this report This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance with Article 113A of the Companies (Jersey) Law 1991 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. Other required reporting Companies (Jersey) Law 1991 exception reporting Under the Companies (Jersey) Law 1991 we are required to report to you if, in our opinion: • we have not obtained all the information and explanations we require for our audit. We have no exceptions to report arising from this responsibility. Appointment Following the recommendation of the Audit Committee, we were appointed by the directors on 2 July 2021 to audit the financial statements for the year ended 31 December 2021 and subsequent financial periods. The total period of our uninterrupted engagement as auditor is 1 year, covering the year ended 31 December 2021. David Teager for and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Recognized Auditor East Midlands 20 April 2022 120 IDH 2021 Annual Report Financial Statements Independent Auditors’ Report Consolidated statement of financial position As at 31 December 2021 Assets Non-current assets Property, plant and equipment Intangible assets and goodwill Right of use assets Financial assets at fair value through profit and loss Total non-current assets Current assets Inventories Trade and other receivables Financial assets at amortized cost 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 Provisions Borrowings Other financial obligations Non-current put option liability Deferred tax liabilities Total non-current liabilities Current liabilities Trade and other payables Other financial obligations Current put option liability Borrowings Current tax liabilities Total current liabilities Total liabilities Total equity and liabilities Notes 2021 EGP’000 2020 EGP’000 11 12 26 14 15 16 18 17 19 19 19 19 19 19 2 21 24 26 25 9 22 26 23 24 29 1,061,808 1,658,867 462,432 10,470 3,193,577 222,612 469,727 1,458,724 891,451 3,042,514 6,236,091 1,072,500 1,027,706 (314,310) 51,641 (956,397) 150,730 1,550,976 2,582,846 211,513 2,794,359 4,088 76,345 645,196 35,037 332,149 1,092,815 777,354 115,478 921,360 21,721 513,004 2,348,917 3,441,732 6,236,091 793,013 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 3,408 67,617 398,525 31,790 240,333 741,673 383,623 60,517 282,267 25,416 257,540 1,009,363 1,751,036 4,177,410 The accompanying notes on pages 126-182 form an integral part of these consolidated financial statements. These consolidated financial statements were approved and authorised for issue by the Board of Directors and signed on their behalf on 20 April 2022 by: Dr. Hend El Sherbini Hussein Choucri Chief Executive Officer Independent Non-Executive Director 2021 Annual Report IDH 121 Consolidated income statement For the year ended 31 December 2021 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 costs Profit before income tax Income tax expense Profit for the year Profit attributed to: Owners of the Company Non-controlling interests Earnings per share Basic and Diluted Notes 6 8.1 8.2 8.3 16 8.6 8.6 8.6 9 10 2021 EGP’000 5,224,712 (2,420,647) 2,804,065 (163,163) (370,014) (24,656) 15,828 2,262,060 (142,917) 113,178 (29,739) 2,232,321 (739,815) 1,492,506 1,412,609 79,897 1,492,506 2020 EGP’000 2,656,264 (1,313,688) 1,342,576 (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 2.35 0.99 The accompanying notes on pages 126-182 form an integral part of these consolidated financial statements. 122 IDH 2021 Annual Report Financial Statements Consolidated Consolidated statement of comprehensive income/(expenses) For the year ended 31 December 2021 Net profit for the year Other comprehensive income/(expenses): Items that may be reclassified to profit or loss: Exchange difference on translation of foreign operations Other comprehensive income/(expenses) for the year, net of tax Total comprehensive income/loss for the year Attributable to: Owners of the Company Non-controlling interests 2021 EGP’000 1,492,506 2020 EGP’000 609,482 7,808 7,808 1,500,314 1,417,722 82,592 1,500,314 (20,292) (20,292) 589,190 583,809 5,381 589,190 The accompanying notes on pages 126-182 form an integral part of these consolidated financial statements. 2021 Annual Report IDH 123 Consolidated statement of cash flows For the year ended 31 December 2021 Cash flows from operating activities Profit before tax Adjustments for: Depreciation of property, plant and equipment Depreciation of right of use assets Amortisation of intangible assets Unrealised foreign exchange gains and losses Finance income Finance Expense Gain on disposal of Property, plant and equipment Impairment in trade and other receivables Equity settled financial assets at fair value ROU Asset/Lease Termination Hyperinflation Change in Provisions Change in Inventories Change in Trade and other receivables Change in Trade and other payables Cash generated from operating activities before income tax payment Taxes paid Net cash generated from operating activities Cash flows from investing activities Proceeds from sale of property, plant and equipment Interest received on financial asset at amortised cost Payments for acquisition of property, plant and equipment Payments for acquisition of intangible assets Decrease / (increase) in restricted cash Payments for the purchase of financial assets at amortized cost Proceeds for the sale of financial assets at amortized cost Net cash used in investing activities Cash flows from financing activities Proceeds from borrowings Repayment of borrowings Payments of lease liabilities Payment of financial obligations Dividends paid Interest paid Bank charge paid Injection of cash by non-controlling interest Net cash flows used in financing activities Net increase in cash and cash equivalents Cash and cash equivalents at the beginning of the year Effect of exchange rate Cash and cash equivalents at the end of the year Notes 2021 EGP’000 2020 EGP’000 2,232,321 969,082 11 26 12 8.6 8.6 8.6 16 21 28 28 17 151,826 79,617 7,201 17,912 (113,178) 118,029 (78) 24,656 (866) 1,351 6,976 681 (127,643) (106,458) 351,803 2,644,150 (374,305) 2,269,845 6,627 111,367 (253,385) (10,354) - (1,599,238) 417,139 (1,327,844) 30,450 (25,416) (50,227) (9,383) (478,748) (93,799) (20,026) - (647,149) 294,852 600,130 (3,531) 891,451 118,632 60,803 5,926 12,580 (53,120) 71,527 (98) 42,131 (3,213) (609) (14,523) (1,866) (17,121) (140,563) 53,822 1,103,390 (220,875) 882,515 5,316 51,187 (118,372) (7,638) 247 (112,115) 57,107 (124,268) 11,727 (25,416) (33,509) (9,237) (450,737) (73,736) - 17,372 (563,536) 194,711 408,892 (3,473) 600,130 Non-cash investing and financing activities disclosed in other notes are: • acquisition of right-of-use assets – note 26 • Property plant and equipment – note 11 • Put option liability – note 23 and 25 The accompanying notes on pages 126-182 form an integral part of these consolidated financial statements. 124 IDH 2021 Annual Report Financial Statements Consolidated , 4 7 3 6 2 4 2 , , 6 0 5 2 9 4 1 , 8 0 8 7 , , 4 1 3 0 0 5 1 , 5 9 6 2 , 7 9 8 9 7 , 2 9 5 2 8 , 3 8 3 6 5 1 , l a t o T y t i u q E g n i l l o r t n o C e h t f o s t s e r e t n i y n a p m o C - n o N e h t o t s r e n w o l a t o T d e t u b i r t t a , 1 9 9 9 6 2 2 , , 9 0 6 2 1 4 1 , 3 1 1 5 , - , 2 2 7 7 1 4 1 , , 9 0 6 2 1 4 1 , i d e n a t e R i s g n n r a e 7 1 3 3 0 6 , , 9 0 6 2 1 4 1 , ) 0 4 3 2 4 6 ( , - ) 0 4 3 2 4 6 ( , - - - ) 1 4 2 1 1 ( , ) 6 9 8 3 ( , - ) 5 4 3 7 ( , ) 3 2 4 2 ( , ) 5 4 3 7 ( , ) 8 4 7 8 7 4 ( , ) 6 6 5 3 2 ( , ) 2 8 1 5 5 4 ( , ) 2 8 1 5 5 4 ( , , ) 9 2 3 2 3 1 1 ( , , 9 5 3 4 9 7 2 , , 6 5 2 0 6 3 2 , 2 8 4 9 0 6 , ) 2 9 2 0 2 ( , 0 9 1 9 8 5 , ) 2 6 4 7 2 ( , 3 1 5 1 1 2 , 0 1 7 4 4 1 , 7 6 4 5 1 , ) 6 8 0 0 1 ( , 1 8 3 5 , , ) 7 6 8 4 0 1 1 ( , ) 0 5 9 4 6 4 ( , , 6 4 8 2 8 5 2 , , 6 4 5 5 1 2 2 , 5 1 0 4 9 5 , ) 6 0 2 0 1 ( , 9 0 8 3 8 5 , 1 6 6 6 5 4 , 5 1 0 4 9 5 , - 5 1 0 4 9 5 , , 6 7 9 0 5 5 1 , ) 7 3 7 0 5 4 ( , ) 2 8 8 8 ( , ) 5 5 8 1 4 4 ( , ) 5 5 8 1 4 4 ( , ) 3 9 8 4 8 ( , - - ) 4 1 8 4 ( , - ) 8 9 1 2 ( , - ) 6 1 6 2 ( , ) 3 9 8 4 8 ( , 2 7 3 7 1 , 2 7 3 7 1 , - , ) 2 7 0 3 2 5 ( 2 9 2 6 , ) 4 6 3 9 2 5 ( , , 4 7 3 6 2 4 2 , 3 8 3 6 5 1 , , 1 9 9 9 6 2 2 , - - ) 8 8 8 2 ( , ) 6 1 6 2 ( , 7 1 3 3 0 6 , ) 9 5 3 7 4 4 ( , 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 1 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 n o i t a l s n a r T n o i t p o t u P l a g e L e r a h S i m u m e r p e r a h S l a t i p a C , 6 0 7 7 2 0 1 , , 0 0 5 2 7 0 1 , - - - - - - 3 1 1 5 , 3 1 1 5 , e v r e s e r 7 1 6 5 4 1 , - 0 3 7 0 5 1 , 3 2 8 5 5 1 , ) 6 0 2 0 1 ( , ) 6 0 2 0 1 ( , - - - - - - 7 1 6 5 4 1 , - - - - - - ) 0 4 3 2 4 6 ( , - - - - - - 3 2 4 2 , ) 0 4 3 2 4 6 ( , 3 2 4 2 , ) 7 5 0 4 1 3 ( , 8 1 2 9 4 , 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 ) 0 1 3 4 1 3 ( , ) 7 9 3 6 5 9 ( , ) 4 6 1 9 2 2 ( , 1 4 6 1 5 , 0 3 3 6 4 , ) 0 1 3 4 1 3 ( , ) 0 1 3 4 1 3 ( , - - - - - - - ) 3 9 8 4 8 ( , - - - - - - - 8 8 8 2 , ) 3 9 8 4 8 ( , ) 7 5 0 4 1 3 ( , 8 8 8 2 , 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 , , 6 0 7 7 2 0 1 , , 0 0 5 2 7 0 1 , , 6 0 7 7 2 0 1 , , 0 0 5 2 7 0 1 , s r e n w o s a y t i c a p a c r i e h t n i s r e n w o h t i w s n o i t c a s n a r T r a e y 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 e h t r o f s e i 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 * 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 n o i t a fl n i r e p y h f o t c a p m I s d n e d i v i D 1 2 0 2 y r a u n a J 1 t a s A r a e y e h t r o f t fi o r P ' 0 0 0 P G E 1 2 0 2 r e b m e c e D 1 3 t A 0 2 0 2 y r a u n a J 1 t a s A r a e y e h t r o f t fi o r P l a t o T r a e y s r e n w o s a y t i c a p a c r i e h t n i s r e n w o h t i w s n o i t c a s n a r T r a e y e h t r o f e s n e p x e 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 e h t r o f s e i 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 * 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 n o i t a fl n i r e p y h f o t c a p m I s d n e d i v i D 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 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 0 2 0 2 r e b m e c e D 1 3 t A l a t o T 2021 Annual Report IDH 125 . y n a p m o C e h t f o s r e n w o e h t o t l e b a t u b i r t s d i 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 ’ i s y r a d s b u s i h c a e f o % 0 5 s t n e s e r p e r i s 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 s a i t e s t s u m y r a d s b u s i i h c a e w a L n a i t p y g E r e d n U * Notes to the Consolidated Financial Statements For the year ended 31 December 2021 (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 2021 were authorised for issue in accordance with a resolution of the directors on 20 April 2022. Integrated Diagnostics Holdings plc “IDH” or “the company” has been established according to the provisions of the Companies (Jersey) law 1991 under No. 117257. The registered office address of the Company is 12 Castle Street, St Helier, Jersey, JE2 3RT. The Company is a dually listed entity, in both London stock exchange (since 2015) and in the Egyptian stock exchange (in May 2021). The principal activity of the Company is investments in all types of the healthcare field of medical diagnostics (the key activities are pathology and Radiology related tests), either through acquisitions of related business in different jurisdictions or through expanding the acquired investments IDH has. The key jurisdictions that the group operates are in Egypt, Jordan, Nigeria, and Sudan The Group’s financial year starts on 1 January and ends on 31 December each year. 126 IDH 2021 Annual Report Financial Statements Notes to the Consolidated Financial Statements Group information 2. Information about subsidiaries The consolidated financial statements of the Group include: Principal activities Country of Incorpora- tion % Equity interest Non-Controlling interest 2021 2020 2021 2020 Medical diagnostics service Egypt 99.30% 99.30% 0.70% 0.70% Medical diagnostics service Egypt 99.90% 99.90% 0.10% 0.10% Medical diagnostics service Egypt 55.00% 55.00% 45.00% 45.00% Al Borg Laboratory Company (“Al-Borg”) Al Mokhtabar Company for Medical Labs (“Al Mokhtabar”) Medical Genetic Center Al Makhbariyoun Al Arab Group Medical diagnostics service Jordan 60.00% 60.00% 40.00% 40.00% Holding company of SAMA Medical diagnostics service Medical diagnostics service Golden Care for Medical Services Integrated Medical Analysis Company (S.A.E) SAMA Medical Laboratories Co. (“Ultralab medical laboratory “) AL-Mokhtabar Sudanese Egyptian Co. Medical diagnostics service Intermediary holding company Intermediary holding company Intermediary holding company Medical diagnostics service Integrated Diagnostics Holdings Limited Dynasty Group Holdings Limited Eagle Eye-Echo Scan Limited Echo-Scan* Egypt 100.00% 100.00% 0.00% 0.00% Egypt 99.60% 99.60% 0.40% 0.40% Sudan 80.00% 80.00% 20.00% 20.00% Sudan Caymans Island England and Wales 65.00% 65.00% 35.00% 35.00% 100.00% 100.00% 0.00% 0.00% 51.00% 51.00% 49.00% 49.00% Mauritius 76.50% 76.50% 23.50% 23.50% Nigeria 100.00% 100.00% 0.00% 0.01% 0.00% 0.01% WAYAK Pharma Medical services Egypt 99.99% 99.99% * The group consolidate “Echoscan” a subsidiary based in Nigeria despite of 37% indirect ownership for more details refer to note 4-2. Non-Controlling interest Non-Controlling Interest is measured at the proportionate share basis. Financial information of subsidiaries that have material non-controlling interests is provided below: Proportion of equity interest held by non-controlling interests: Medical Genetic Center Al Makhbariyoun Al Arab Group (Hashemite Kingdom of Jordan) SAMA Medical Laboratories Co. “ Ultra lab medical laboratory “ Al Borg Laboratory Company Dynasty Group Holdings Limited Eagle Eye-Echo Scan Limited Country of incorporation Egypt Jordan Sudan Egypt England and Wales Mauritius 2021 45.0% 40.0% 20.0% 0.7% 49% 2020 45.0% 40.0% 20.0% 0.7% 49% 23.53% 23.53% 2021 Annual Report IDH 127 The summarised financial information of these subsidiaries is provided below. This information is based on amounts before inter-company eliminations. Medical Genetic Center Al Makh- bariyoun Al Arab Group Alborg Labora- tory Company Other subsidiar- ies with immate- rial NCI Dynasty Group Total EGP’000 EGP’000 EGP’000 EGP’000 EGP’000 EGP’000 Summarised statement of Income for 2021: Revenue Profit 3,092 1,046,107 1,594,275 3,821,004 53,604 6,518,082 (2,627) 214,588 401,401 1,162,009 (8,795) 1,766,576 Other comprehensive income - (56) - 10,935 (4,733) 6,146 Total comprehensive income (2,627) 214,532 401,401 1,172,944 (13,528) 1,772,722 Profit allocated to non-controlling interest Other comprehensive income allocated to non-controlling interest (1,193) 86,747 2,841 (3,261) (5,237) 79,897 - 64 - 5,667 (3,036) 2,695 Summarised statement of financial position as at 31 December 2021: Non-current assets Current assets Non-current liabilities Current liabilities Net assets Net assets attributable to non-controlling interest 682 3,975 211,430 432,149 541,782 707,847 90,509 1,629,987 598,084 2,017,197 24,356 3,051,276 (27) (76,599) (361,520) (303,142) 20,743 (741,272) (7,148) (237,206) (266,796) (701,516) 28,313 (1,216,878) (2,518) 329,774 511,550 1,720,386 163,921 2,723,113 (1,143) 133,310 3,621 (4,626) 80,351 211,513 128 IDH 2021 Annual Report Financial Statements Notes to the Consolidated Financial Statements Medical Genetic Center Al Makh- bariyoun Al Arab Group Alborg Labora- tory Company Other subsidiar- ies with immate- rial NCI Dynasty Group Total EGP’000 EGP’000 EGP’000 EGP’000 EGP’000 EGP’000 2,822 409,069 911,923 1,731,237 36,089 3,091,140 (3,412) 71,043 238,889 454,318 (26,832) 734,006 - (2,691) - 1,060 (15,789) (17,420) (3,412) (1,549) 68,352 238,889 455,378 (42,621) 716,586 28,719 1,691 2,599 (15,992) 15,468 - (1,088) - 263 (9,261) (10,086) 736 4,105 183,237 155,185 357,303 556,725 113,941 1,211,942 436,895 1,040,393 43,615 1,680,193 (27) (64,249) (199,597) (216,983) (23,621) (504,477) (4,705) (104,517) (254,625) (462,853) (24,121) (850,821) 109 169,656 339,976 917,282 109,814 1,536,837 49 68,582 2,405 40,324 45,023 156,383 Summarised statement of profit or loss for 2020: Revenue Profit Other comprehensive expense Total comprehensive income Profit allocated to non-controlling interest Other comprehensive expense allocated to non-controlling interest Summarised statement of financial position as at 31 December 2020: Non-current assets Current assets Non-current liabilities Current liabilities Net assets Net assets attributable to non-controlling interest Basis of preparation 3. Statement of compliance Integrated Diagnostics Holdings plc “IDH” or “the company” has been established according to the provisions of the Companies (Jersey) law 1991 under No. 117257. The Company is a dually listed entity, in both London stock exchange and in the Egyptian stock exchange. The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union and the Companies (Jersey) Law 1991. 2021 Annual Report IDH 129 Basis of measurement The consolidated financial statements have been prepared on a historical cost basis, except where adopted IFRS man- dates that fair value accounting is required which is related to financial assets and liabilities measured at fair value. New standards and interpretations adopted The Group has applied the following amendments for the first time for their annual reporting period commenc- ing 1 January 2021: • Covid-19-Related Rent Concessions – amendments to IFRS 16, • Interest Rate Benchmark Reform – Phase 2 – amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16. • Annual Improvements to IFRS Standards 2018–2020, and • Deferred Tax related to Assets and Liabilities arising from a Single Transaction – amendments to IAS 12. The amendments listed above did not have any impact on current and prior years and and not expected to affect future years New standards and interpretations not yet adopted Certain new accounting standards, amendments to accounting standards and interpretations have been pub- lished that are not mandatory for 31 December 2021 reporting period and have not been early adopted by the company. These standards, amendments or interpretations are not expected to have a material impact on the group in the current or future reporting periods and on foreseeable future transactions. Going concern These consolidated financial statements have been prepared on the going concern basis. At 31 December 2021, the Group had net assets amounting to KEGP 2,794,359. The Directors have considered a number of downside scenarios, including the most severe but plausible scenario, for a period of 16 months from the signing of the financial statements. They have also assessed the likelihood of any key one-off payments arising such as divi- dends or those in respect of M&A activity. Under all of these scenarios there remains significant headroom from a liquidity and covenant perspective. Reverse stress tests have been performed to determine the level of down- side required to cause a liquidity or covenant issue with these scenarios not considered plausible. Therefore the Directors believe the Group has the ability to meet its liabilities as they fall due and the use of the going concern basis in preparing the financial statements is appropriate. 130 IDH 2021 Annual Report Financial Statements Notes to the Consolidated Financial Statements 3.1. Basis of consolidation The consolidated financial statements comprise the financial statements of the Group and its subsidiaries as at 31 December 2021. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. i. Subsidiaries Subsidiaries are all entities over which the group has control. The group controls an entity where the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases. Inter-company transactions, balances and unrealised gains on transactions between group companies are elimi- nated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the group. Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated state- ment of income statement of comprehensive income, statement of changes in equity and statement of financial position respectively. ii. Changes in ownership interests The group treats transactions with non-controlling interests that do not result in a loss of control as transactions with equity owners of the group. A change in ownership interest results in an adjustment between the carrying amounts of the controlling and non-controlling interests to reflect their relative interests in the subsidiary. Any difference between the amount of the adjustment to non-controlling interests and any consideration paid or received is recognised in a separate reserve within equity attributable to owners of the group. When the group ceases to consolidate or equity account for an investment because of a loss of control, joint con- trol or significant influence, any retained interest in the entity is remeasured to its fair value, with the change in carrying amount recognised in profit or loss. This fair value becomes the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss. If the ownership interest in a joint venture or an associate is reduced but joint control or significant influence is retained, only a proportionate share of the amounts previously recognised in other comprehensive income are reclassified to profit or loss where appropriate. 2021 Annual Report IDH 131 3.2. Significant accounting policies The accounting policies set out below have been consistently applied to all the years presented in these Consoli- dated financial statements. a) Business combinations The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsid- iary comprises the: • fair values of the assets transferred • liabilities incurred to the former owners of the acquired business • equity interests issued by the group • fair value of any asset or liability resulting from a contingent consideration arrangement, and • fair value of any pre-existing equity interest in the subsidiary. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. The group recognises any non-controlling interest in the acquired entity on an acquisition-by-acquisition basis either at fair value or at the non-controlling interest’s proportionate share of the acquired entity’s net identifiable assets. Acquisition-related costs are expensed as incurred. The excess of the: • consideration transferred, • amount of any non-controlling interest in the acquired entity, and • acquisition-date fair value of any previous equity interest in the acquired entity over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the business acquired, the difference is recognised directly in profit or loss as a bargain purchase. Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under com- parable terms and conditions. Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value, with changes in fair value recognised in profit or loss. If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at the acquisition date. Any gains or losses arising from such remeasurement are recognised in profit or loss. 132 IDH 2021 Annual Report Financial Statements Notes to the Consolidated Financial Statements b) Impairment of assets Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that suf- fered an impairment are reviewed for possible reversal of the impairment at the end of each reporting period. c) Fair value measurement The Group measures financial instruments such as non-derivative financial instruments and contingent consid- eration 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 measure- ment is directly or indirectly observable. • Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measure- ment 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 categorisa- tion (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. 2021 Annual Report IDH 133 d) Revenue recognition: Revenue represents the value of medical diagnostic services rendered in the year and is stated net of discounts. The Group has two types of customers: Walk-in patients and patients served under contracts. For patients under contracts, rates are agreed in advance on a per-test, client-by-client basis based on the pricelists agreed within these contracts. The following steps are considered for all types of patients: 1. Identification of the Contracts: written contracts are agreed between IDH and customers. The contracts stipulate the duration, price per test and credit period. 2. Determining performance obligations are the diagnostics tests within the pathology and radiology services. The performance obligation is achieved when the customer receives their test results, and so are recognised at point in time. 3. Transaction price: Services provided by the Group are distinct in the contract, as the contract stipulates the series of tests’ names/types to be conducted along with its distinct prices. 4. Allocation of price to performance obligations: Stand-alone selling price per test is stipulated in the con- tract. In case of discounts, it is allocated proportionally to all of tests prices in the contract. 5. Revenue is being recorded after the satisfaction of the above mentioned conditions. The group considers whether it is the principal or the agent in each of its contractual arrangements. In line with IFRS 15 “Revenue from contracts” in assessing the appropriate treatment of each contract, factors that are considered include which party is controlling the service being performed for the customer and bears the inven- tory risk. Where the group is largely controlling the service and bearing the inventory risk it is deemed to be the principal and the full consideration received from the customer is recognised as revenue, with any amounts paid to third parties treated as cost of sales. Customer loyalty program: The group operates a loyalty program where customers accumulate points for purchases made which entitle them to a discount on future purchases. The points are valid for 24 months from the time they are awarded. The value of points to be provided is based on the expectation of what level will be redeemed in the future before their expiration date. This amount is netted against revenue earned and included as a contract liability and only recognised as revenue when the points are then redeemed. 134 IDH 2021 Annual Report Financial Statements Notes to the Consolidated Financial Statements e) Income Taxes Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. i. Current tax Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. ii. Deferred tax Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date. Deferred tax is recognised on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised. Deferred tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the reporting date and are expected to apply when the related deferred income tax asset is realized, or the deferred income tax liability is settled. f) i) Foreign currency translation Functional and presentation currency Each of the Group’s entities is using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The Group’s consolidated financial statements are presented in Egyptian Pounds, being the reporting currency of the main Egyptian trading subsidiaries within the Group and the pri- mary economic environment in which the Group operates. ii) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions, and from the translation of monetary assets and liabilities denominated in foreign currencies at year end exchange rates, are generally recognised in profit or loss. They are deferred in equity if they relate to qualifying cash flow hedges and qualifying net investment hedges or are attributable to part of the net investment in a foreign operation. 2021 Annual Report IDH 135 Foreign exchange gains and losses that relate to borrowings are presented in the statement of profit or loss, within finance costs. All other foreign exchange gains and losses are presented in the statement of profit or loss on a net basis within other gains/(losses). Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Translation differences on assets and liabilities carried at fair value are reported as part of the fair value gain or loss. For example, translation differences on non-monetary assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss, and translation differences on non-monetary assets such as equities classified as at fair value through other comprehensive income are recognised in other comprehensive income. g) Property, plant and equipment All property and equipment are stated at historical cost or fair value at acquisition, less accumulated deprecia- tion. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the consolidated statement of income during the financial period in which they are incurred. Land is not depreciated. Depreciation expense is calculated using the straight-line method to allocate the cost or to their residual value over their estimated useful lives, as follows: Buildings Medical, electric and information systems equipment Leasehold improvements Fixtures, fittings & vehicles 50 years 4-10 years 4-5 years 4-16 years The assets useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within ‘Other (losses)/gains – net’ in the consolidated statement of income. 136 IDH 2021 Annual Report Financial Statements Notes to the Consolidated Financial Statements h) Intangible assets Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses. Internally generated intangibles, excluding capitalised development costs, are not capitalised and the related expenditure is reflected in profit or loss in the period in which the expenditure is incurred. The useful lives of intangible assets are assessed as either finite or indefinite. Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the statement of income in the expense category that is consistent with the function of the intangible assets. The Group amortises intangible assets with finite lives using the straight-line method over the following periods: • IT development and software 4-5 years Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually, either individually or at the cash-generating unit level. The assessment of indefinite life is reviewed annually to deter- mine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis. Goodwill Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred over interest in net fair value of the net identifiable assets, liabilities and contingent liabilities of the acquiree and the fair value of the non-controlling interest in the acquire. Goodwill is stated at cost less any accumulated impairment losses. For the purpose of impairment testing, good- will acquired in a business combination is allocated to each of the cash-generating units (CGUs), or groups of CGUs, that is expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. the impairment assessment is done on an annual basis. Brand Brand names acquired in a business combination are recognised at fair value at the acquisition date and have an indefinite useful life. 2021 Annual Report IDH 137 The Group brand names are considered to have indefinite useful life as the Egyptian brands have been estab- lished 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 busi- nesses, in addition, there is a sufficient ongoing marketing efforts to support the brands and this level of market- ing effort is economically reasonable and maintainable for the foreseeable future. Impairment of intangible assets The Group tests annually whether goodwill and other intangibles with indefinite lives have suffered any impair- ment. Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The recoverable amounts of cash generating units have been determined based on value in use. The value in use calculation is based on a discounted cash flow (“DCF”) model. The cash flows are derived from the budget for the next five years and do not include restructuring activities that the Group is not yet committed to or significant future investments that will enhance the asset’s performance of the CGU being tested. We test for impairment at the smallest grouping of CGUs at which a material impairment could arise or at the lowest level at which goodwill is monitored. References to testing being performed at a CGU level throughout the rest of the financial statements is referring to the grouping of CGUs at which at the test is performed. The grouping of CGUs are shown in note 13 where the assumptions for the impairment assessment are disclosed. I) Financial instruments – initial recognition and subsequent measurement A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. i) Financial assets Classification The group reclassifies debt investments when and only when its business model for managing those assets changes. The group classifies its investments in debt Instruments in the following measurement categories: • those to be measured subsequently at fair value (either through OCI or through income statement), and • those to be measured at amortised cost. The classification depends on the entity’s business model for managing the financial assets and the contractual terms of the cash flows. For investment is equity instrument measured at fair value, gains and losses will either be recorded in income statement or OCI. 138 IDH 2021 Annual Report Financial Statements Notes to the Consolidated Financial Statements For investments in equity instruments that are not held for trading, this will depend on whether the group has made an irrevocable election at the time of initial recognition to account for the equity investment at fair value through other comprehensive income (FVOCI). Recognition and derecognition According to the standard purchases and sales of financial assets are recognised on trade date, being the date on which the group commits to purchase or sell the asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the group has transferred substantially all the risks and rewards of ownership. Measurement At initial recognition, the group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in profit or loss. Financial assets with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest. Debt instruments Subsequent measurement of debt instruments depends on the group’s business model for managing the asset and the cash flow characteristics of the asset. There are three measurement categories into which the group classifies its debt instruments: • Amortised cost: Assets that are held for collection of contractual cash flows, where those cash flows rep- resent solely payments of principal and interest, are measured at amortised cost. Interest income from these financial assets is included in finance income using the effective interest rate method. Any gain or loss arising on derecognition is recognised directly in profit or loss and presented in other gains/(losses) together with foreign exchange gains and losses. Impairment losses are presented as a separate line item in the consolidated income statement. • FVOCI: Assets that are held for collection of contractual cash flows and for selling the financial assets, where the assets’ cash flows represent solely payments of principal and interest, are measured at FVOCI. Move- ments in the carrying amount are taken through OCI, except for the recognition of impairment losses, inter- est income and foreign exchange gains and losses, which are recognised in profit or loss. When the financial asset is derecognised, the cumulative gain or loss previously recognised in OCI is reclassified from equity to profit or loss and recognised in other gains/(losses). Interest income from these financial assets is included in finance income using the effective interest rate method. Foreign exchange gains and losses are presented in other gains/(losses), and impairment expenses are presented as separate line item in the consolidated income statement. 2021 Annual Report IDH 139 • FVPL: Assets that do not meet the criteria for amortised cost or FVOCI are measured at FVPL. A gain or loss on a debt investment that is subsequently measured at FVPL is recognised in profit or loss and presented net within other gains/(losses) in the period in which it arises. Management has assessed the underlying nature of the investments and designated upon investment that this should be treated as an investment held at fair value with movements going through the income statement on the basis of the size of the investment and the reasons for making the investment. Equity instruments The group subsequently measures all equity investments at fair value. Where the group’s management has elected to present fair value gains and losses on equity investments in OCI, there is no subsequent reclassifica- tion of fair value gains and losses to profit or loss following the derecognition of the investment. Dividends from such investments continue to be recognised in profit or loss as other income when the group’s right to receive payments is established. Changes in the fair value of financial assets at FVPL are recognised in other gains/(losses) in the statement of income as applicable. Impairment losses (and reversal of impairment losses) on equity investments measured at FVOCI are not reported separately from other changes in fair value. Impairment The group assesses on a forward-looking basis the expected credit losses associated with its debt instruments carried at amortised cost and FVOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk. For trade receivables, the group applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables. Further disclosures relating to impairment of financial assets are also provided in the following notes: Disclosures for significant estimates and assumptions Financial assets Trade receivables Note 4.2 Note 5 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 seg- ments 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. 140 IDH 2021 Annual Report Financial Statements Notes to the Consolidated Financial Statements ii. Financial liabilities Initial recognition and measurement Financial liabilities are classified as measured at amortised cost or FVTPL. A financial liability is classified at FVTPL if it is classified as held for trading, financial liabilities at FVTPL are measured at fair value and net gains and losses including any interest expenses are recognised in profit or loss. Put options included in put option liabilities are carried at the present value of the redemption amount in accor- dance with IAS 32 in regard to the guidance on put option on an entity’s own equity shares. The group has written put options over the equity of its (Bio Lab and Echo Scan) subsidiaries the option on exercise is initially recognised at the present value of the redemption amount with a corresponding charge directly to equity. The charge to equity is recognised separately as written put options reserve and that this is in line with paragraph 23 of IFRS 10 with the non-controlling interests, adjacent to non-controlling interests in the net assets of consolidated subsidiaries. All of the Group’s financial liabilities are classified as financial liabilities carried at amortised cost using the effective interest method. The Group does not use derivative financial instruments or hedge account for any transactions. Unless otherwise indicated, the carrying amounts of the Group’s financial liabilities are a reason- able approximation of their fair values. The Group’s financial liabilities include trade and other payables, put option liabilities, borrowings, and other financial obligations. Derecognition A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of income. iii. Offsetting of financial instruments Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously. 2021 Annual Report IDH 141 j) Impairment of non-financial assets 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 Note 4.2 Note 13 The Group assesses at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or CGU’s fair value less costs of disposal and its value in use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators. The Group bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for each of the Group’s CGUs to which the individual assets are allocated. These budgets and forecast calculations generally cover a period of five years. A long-term growth rate is calculated and applied to project future cash flows after the fifth year. Impairment losses of continuing operations are recognised in the statement of profit or loss in expense catego- ries consistent with the function of the impaired asset. For assets excluding goodwill and indefinite lived intangible assets, an assessment is made at each reporting date to determine whether there is an indication that previously recognised impairment losses no longer exist or have decreased. If such indication exists, the Group estimates the asset’s or CGU’s recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the consolidated income statement. 142 IDH 2021 Annual Report Financial Statements Notes to the Consolidated Financial Statements Goodwill is tested for impairment annually as at 31 October and when circumstances indicate that the carry- ing value may be impaired. Management takes into consideration any changes that occur and have impacts between the impairment report date of 31 October and date of end year of 31 December. Impairment is determined for goodwill by assessing the recoverable amount of each CGU (or group of CGUs) to which the goodwill relates. When the recoverable amount of the CGU is less than its carrying amount, an impairment loss is recognised. Impairment losses relating to goodwill cannot be reversed in future periods. Intangible assets with indefinite useful lives are tested for impairment annually as at 31 October at the CGU level, as appropriate, and when circumstances indicate that the carrying value may be impaired. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circum- stances 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 impair- ments of non-financial assets (other than goodwill) are reviewed for possible reversal at each reporting date. k) Inventories Raw materials are stated at the lower of cost and net realisable value. Cost comprises direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenditure, the latter being allocated on the basis of normal operating capacity. Costs are assigned to individual items of inventory on the basis of weighted average costs. Costs of purchased inventory are determined after deducting rebates and discounts. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. l) Cash and short-term deposits Cash and short-term deposits in the statement of financial position comprise cash at banks and on hand and short-term deposits with an original maturities of three months or less, which are subject to an insignificant risk of changes in value. For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash and short-term deposits, as defined above, net of outstanding bank overdrafts as they are considered an integral part of the Group’s cash management. 2021 Annual Report IDH 143 m) Borrowings Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently mea- sured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the facility to which it relates. Borrowings are removed from the statement of financial position when the obligation specified in the contract is discharged, cancelled or expired. The difference between the carrying amount of a financial liability that has been extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss as other income or finance costs. Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period. n) Borrowing costs General and specific borrowing costs that are directly attributable to the acquisition, construction or produc- tion of a qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended use or sale. Qualifying assets are assets that necessarily take a substantial period of time to get ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings, pending their expenditure on qualifying assets, is deducted from the borrowing costs eligible for capitalisation. Other borrowing costs are expensed in the period in which they are incurred. o) Provisions Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Group expects some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain. The expense relating to a provision is presented in the statement of profit or loss net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provi- sion 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. 144 IDH 2021 Annual Report Financial Statements Notes to the Consolidated Financial Statements p) Pensions and other post-employment benefits A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate entity. The Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. Obligations for contributions to defined contribution pension plans are recognized as an expense in the income statement in the periods during which services are rendered by employees. q) Segmentation The Group has four operating segments based on geographical location rather than two operating segments based on service provided. r) Leases as lessee (IFRS 16) At the inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. As a lessee At commencement or on modification of a contract that contains a lease component, along with one or more other lease or non-lease components, the Group accounts for each lease component separately from the non- lease components. However, for the non-leases element of the underlying asset, the Group has elected not to separate non-lease components and account for the lease and non-lease components as a single lease compo- nent. The Group allocates the consideration in the contract to each lease component on the basis of its relative stand-alone price and the aggregate stand-alone price of the non-lease components. The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received. The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term, unless the lease transfers ownership of the underlying asset to the Group by the end of the lease term or the cost of the right-of-use asset reflects that the Group will exercise a purchase option. In that case the right-of-use asset will be depreciated over the useful life of the underlying asset, which is deter- mined 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. 2021 Annual Report IDH 145 The lease liability is initially measured at the present value of the lease payments that are not paid at the com- mencement date, discounted using the incremental borrowing rate for the IFRS 16 calculations. This is set based upon the interest rate attached to the groups financing and adjusted, where appropriate, for specific factors such as asset or company risk premiums.. Lease payments included in the measurement of the lease liability comprise the following: • fixed payments, including in-substance fixed payments; • variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the commencement date • amounts expected to be payable under a residual value guarantee; and • the exercise price under a purchase option that the Group is reasonably certain to exercise, • lease payments in an optional renewal period if the Group is reasonably certain to exercise an extension option, and • penalties for early termination of a lease unless the Group is reasonably certain not to terminate early. The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, there is a change in the Group’s estimate of the amount expected to be payable under a residual value guarantee, if the Group changes its assess- ment of whether it will exercise a purchase, extension or termination option or if there is a revised in-substance fixed lease payment. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, to the extent that the right-of-use asset is reduced to nil, with any further adjustment required from the remeasurement being recorded in profit or loss. Short-term leases and leases of low-value assets The Group has elected not to recognise right-of-use assets and lease liabilities for lease of low-value assets and short-term leases. The Group recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term. 4. 4.1. Judgement and estimates Judgement Useful economic lives of Brands Management have assessed that the brands within the group which have a value have an indefinite life. This is based on their strong history and existence in the market over a large number of years, in addition to the fact that these brands continue to grow and become more profitable. As the brands have been assigned an indefinite life then they are not amortised and assessed for impairment on an annual basis. 146 IDH 2021 Annual Report Financial Statements Notes to the Consolidated Financial Statements Control over subsidiaries The group makes acquisitions that often see a non-controlling interest retained by the seller. The assessment of if the group has control of these acquisitions in order to consolidate is a critical judgement in these financial statements. The group consolidate the subsidiaries assessed for the following reasons: 1. The group has the majority on shareholder stake 2. The group has the majority on the board of subsidiaries 3. The group has full control of the operations and is involved in all decisions. The group consolidate “Echoscan” a subsidiary based in Nigeria despite of 37% indirect ownership for the fol- lowing reasons: 1. The group has control over all intermediate entities between the parent and Echoscan 2. The group has a technical service agreement which enables them to direct and control the operations in Nigeria. 4.2. Estimates and assumptions The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabili- ties within the next financial year, are described below. The Group based its assumptions and estimates on parameters available when the consolidated financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Group. Such changes are reflected in the assumptions when they occur. Impairment of intangible assets The Group tests annually whether goodwill and other intangibles with indefinite lives have suffered any impair- ment. Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The recoverable amounts of cash generating units have been determined based on value in use. The value in use calculation is based on a discounted cash flow (“DCF”) model. The cash flows are derived from the budget for the next five years and do not include restructuring activities that the Group is not yet committed to or significant future investments that will enhance the asset’s performance of the CGU being tested. The recoverable amount is sensitive to the discount rate used for the DCF model as well as the expected future cash-inflows and the growth rate used for extrapolation purposes. For more detailed assumptions refer to (note 13). 2021 Annual Report IDH 147 Customer loyalty program The group operates a loyalty program where customers accumulate points for purchases made which entitle them to a discount on future purchases. A contract liability is recognised for the points awarded at the time of the sale based on the expected level of redemption. At 31 December 2021 the level of points accumulated by customers which had not expired was equivalent to 24m EGP. The estimate made by management is how much of this amount ought to be recognised as a liability based on future usage. The level of future redemption is estimated using his- torical data and adjustments for likely future trends in usage. Therefore, upon initial recognition of the sale to a customer, if management expects the group to be entitled to a breakage amount (i.e. not all points will be redeemed and so it is highly probable that there will be no significant reversal of revenue) this breakage amount is recognised within revenue. This assessment is reviewed periodically, to ensure that only revenue which is highly probable not to result in a significant reversal in future periods is recognised. Management has estimated that 24m EGP out of the total potential amount that could be redeemed is likely to be utilised by customers Financial assets and financial liabilities 5. 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 Financial obligation Loans and borrowings Total other financial liabilities Total financial instruments* 2021 EGP’000 891,451 1,458,724 447,080 2,797,255 2020 EGP’000 600,130 276,625 364,117 1,240,872 2021 2020 EGP’000 EGP’000 749,272 956,397 760,674 101,545 2,567,888 229,367 380,201 314,057 459,043 96,455 1,249,756 (8,884) * The financial instruments exclude prepaid expenses, deferred revenue, and tax (current tax, payroll tax, withholding tax,…etc). The fair values measurements for all the financial assets and liabilities have been categorized as Level 3, it is fair value can’t be determined by using readily observable measures and Echo-Scan put option (note 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. 148 IDH 2021 Annual Report Financial Statements Notes to the Consolidated Financial Statements Financial instruments risk management objectives and policies The Group’s principal financial liabilities are trade and other payables, put option liabilities, borrowings and other financial liabilities. The Group’s principal financial assets include trade and other receivables, financial asset at amortised cost, financial asset at fair value and cash and cash equivalent that derive directly from its operations. The Group is exposed to market risk, credit risk and liquidity risk. The Group’s overall risk management pro- gram focuses on the unpredictability of markets and seeks to minimize potential adverse effects on the Group’s financial performance. The Group’s senior management oversees the management of these risks. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarised below. The board provides written principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk, and credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity. - Market risk Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, currency risk and other price risk, such as equity price risk and commodity risk. Financial instruments affected by market risk include borrowings and deposits. The sensitivity analysis in the following sections relate to the position as at 31 December in 2021 and 2020 The sensitivity analysis have been prepared on the basis that the amount of net debt, the ratio of fixed to floating interest rates of the debt and the proportion of financial instruments in foreign currencies are all constant. The analysis exclude the impact of movements in market variables on provisions; and the non-financial assets and liabilities of foreign operations. The following assumptions have been made in calculating the sensitivity analysis: • The sensitivity of the relevant consolidated income statement item is the effect of the assumed changes in respective market risks. This is based on the financial assets and financial liabilities held at 31 December 2021 and 2020. - Interest rate risk The Group is trying to minimize its interest rate exposure, especially in Egypt region, which has seen several interest rate cuts over the last two years. Minimising interest rate exposure has been achieved partially by enter- ing into fixed-rate instruments. 2021 Annual Report IDH 149 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 Financial obligation (note 26) CIB - BANK Loans and borrowings (note 24) Variable-rate instruments AUB - BANK Loans and borrowings (note 24) 2021 EGP’000 760,674 13,238 2020 EGP’000 459,043 - 84,828 93,033 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 980K (2020: EGP 930K). This analysis assumes that all other vari- ables, 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 expo- sures, primarily with respect to the US Dollar, Sudanese Pound, the Jordanian Dinar and Nigerian Naira. Foreign exchange risk arises from the Group’s operating activities (when revenue or expense is denominated in a foreign currency), recognized assets and liabilities and net investments in foreign operations. However, management aims to minimize open positions in foreign currencies to the extent that is necessary to conduct its activities. Management has set up a policy to require group companies to manage their foreign exchange risk against their functional currency. Foreign exchange risk arises when future commercial transactions or recognised assets or liabilities are denominated in a currency that is not the entity’s functional currency. 150 IDH 2021 Annual Report Financial Statements Notes to the Consolidated Financial Statements At year end, major financial assets / (liabilities) denominated in foreign currencies were as follows (the amounts presented are shown in thousands in EGP): Assets Liabilities 31-Dec-21 Net exposure Cash and cash equiva- lents Other assets Total assets Put option Finance lease Trade payables Total liability US Euros JOD SDG NGN 917,673 11,880 929,553 397 - 397 - - (56,744) (140,808) (197,552) 732,001 - (342) (342) 55 297,154 112,409 409,563 (921,360) (93,999) (171,481) (1,186,840) (777,277) 1,010 8,591 604 5,094 1,614 13,685 - (35,037) (850) (9,104) (1,718) (9,413) (2,568) (53,554) (954) (39,869) Assets Liabilities 31-Dec-20 Net exposure Cash and cash equiva- lents 81,956 176 76,954 2,429 8,749 US Euros JOD SDG NGN Other assets Total assets Put option Finance lease Trade payables Total liability 5,138 - 87,094 176 - - (67,764) (29,120) (96,884) - (1,588) (1,588) (9,790) (1,412) 62,062 139,015 (282,266) (75,365) (70,489) (428,121) (289,106) 2,712 9,211 5,140 17,960 - (6,682) (6,376) (31,790) (14,825) (14,574) (13,058) (61,189) (7,918) (43,229) 2021 Annual Report IDH 151 The following is the exchange rates applied: US Dollars Euros GBP JOD SAR SDG NGN US Dollars Euros GBP JOD SAR SDG NGN Average rate for the year ended 31-Dec-21 31-Dec-20 15.64 18.46 21.51 22.03 4.17 0.06 0.04 15.71 17.85 20.25 22.13 4.21 0.29 0.04 Spot rate for the year ended 31-Dec-21 31-Dec-20 15.65 17.73 21.12 22.05 4.17 0.04 0.04 15.66 19.23 21.38 22.06 4.18 0.28 0.04 At 31 December 2021, if the Egyptian Pound had weakened/strengthened by 10% against the US Dollar with all other variables held constant, total equity for the year would have increased/decreased by EGP (73m) (2020: EGP (0.9m)), mainly as a result of foreign exchange gains/losses and translation reserve on the translation of US dollar-denominated financial assets and liabilities as at the financial position of 31 December 2021. At 31 December 2021, if the Egyptian Pound had weakened / strengthened by 10% against the Jordanian Dinar with all other variables held constant, total equity for the year would have increased/decreased by EGP 77m (2020: EGP 28m), mainly as a result of foreign exchange gains/losses and translation reserve on translation of JOD -denominated financial assets and liabilities as at the financial position of 31 December 2021. At 31 December 2021, if the Egyptian Pound had weakened / strengthened by 25% against the Sudanese Pound with all other variables held constant, total equity for the year would have increased/decreased by by EGP 0.238 (2020: EGP (1.9m)), mainly as a result of foreign exchange gains/losses and translation reserve on the translation of SDG - denominated financial assets and liabilities as at the financial position of 31 December 2021. At 31 December 2021, if the Egyptian Pound had weakened / strengthened by 10% against the Nigeria Naira with all other variables held constant, total equity for the year would have increased/decreased by EGP 3.9m (2020: 4.3m), mainly as a result of foreign exchange gains/losses and translation reserve on the translation of Naira - denominated financial assets and liabilities as at the financial position of 31 December 2021. 152 IDH 2021 Annual Report Financial Statements Notes to the Consolidated Financial Statements - Price risk The group’s exposure to equity securities price risk arises from investments held by the group and classified in the balance sheet as at fair value through profit or loss (FVPL) (note 14). - Credit risk Credit risk is the risk a financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations and it arises principally from under the Groups receivables. The Group is exposed to credit risk from its operating activities (primarily trade receivables) and financial assets at amortised cost, such as term deposits and treasury bills. Credit risk is managed on a group basis, except for credit risk relating to accounts receivable balances. Each local entity is responsible for managing and analysing the credit risk for each of their new clients before stan- dard payment and delivery terms and conditions are offered. Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures to customers, including outstanding receivables and committed transactions. The cash balance and financial assets at amortized cost within the group is held within financial institutions, 86% with a rating of B+ and 7% is rated at least BB. 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, includ- ing the default risk associated with the industry and country or region in which customers operate. Details of concentration of revenue are included in the operating segment note (see Note 6). The risk management committee has established a credit policy under which each new customer is analysed individually for creditworthiness before the Group’s standard payment and delivery terms and conditions are offered and credit limit is set for each customer. The Group’s review includes external ratings, if available, finan- cial 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 col- lectively. The calculation is based on actual incurred historical data and expected future credit losses. The Group does not hold collateral as security. Any receivables balances over 365 days are fully provided for by the group. The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed in Note 16. 2021 Annual Report IDH 153 Cash and cash equivalents Credit risk from balances with banks and financial institutions is managed by the Group’s treasury department in accordance with the Group’s policy. Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counterparty. Counterparty credit limits are reviewed by the Group’s Board of Directors on an annual basis and may be updated throughout the year subject to approval of the Group’s management. The limits are set to minimise the concentration of risks and therefore mitigate financial loss through a counterparty’s potential failure to make payments. The maximum exposure to credit risk at the reporting date is the carrying value of cash and cash equivalents disclosed in Note 17. - Liquidity risk The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of finance leases and loans. The table below summarises the maturity profile of the Group’s financial liabilities based on contractual undis- counted cashflows: 31 December 2021 Financial obligations Put option liabilities Borrowings Trade and other payables 31 December 2020 Financial obligations Put option liabilities Borrowings Trade and other payables 1 year or less 1 to 5 years 211,242 921,360 31,107 749,272 1,912,981 701,084 35,037 94,490 - 830,611 1 year or less 1 to 5 years 126,999 282,267 33,977 380,201 823,444 463,646 31,790 70,001 - 565,437 more than 5 years 191,229 - - - Total 1,103,555 956,397 125,597 749,272 191,229 2,934,821 more than 5 years 131,605 - 11,252 - 142,857 Total 722,250 314,057 115,230 380,201 1,531,738 Cash flow forecasting is performed in the operating entities of the group and aggregated by group finance. Group finance monitors rolling forecasts of the group’s liquidity requirements to ensure it has sufficient cash to meet operational needs. Such forecasting takes into consideration the group’s compliance with internal financial posi- tion 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. 154 IDH 2021 Annual Report Financial Statements Notes to the Consolidated Financial Statements Segment reporting 6. Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the steering committee that makes strategic decisions. The preparation of the Group’s consolidated financial statements in conformity with adopted IFRSs requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities. The Group has four operating segments based on geographical location rather than two operating segments based on service provided, as the Group’s Chief Operating Decision Maker (CODM) reviews the internal manage- ment reports and KPIs of each geography. The CODM does not separately review assets and liabilities of the group by reportable segment. The Group operates in four geographic areas, Egypt, Sudan, Jordan, and Nigeria. As a provider of medical diag- nostic services, IDH’s operations in Sudan are not subject to sanctions. The revenue split, EBITDA split (being the key profit measure reviewed by CODM), impairment loss on trade receivables and net profit and loss between the four regions is set out below. For the year ended Egypt region Sudan region Jordan region Nigeria region Revenue by geographic location 4,108,357 2,173,411 16,644 37,695 1,046,107 409,069 53,604 36,089 Total 5,224,712 2,656,264 Adjusted EBITDA by geographic location Egypt region Sudan region Jordan region Nigeria region 2,177,160 1,041,359 (500) 6,100 331,042 129,885 (6,998) (6,826) Dual listing fees 29,033 - Total 2,529,737 1,170,518 31-Dec-21 31-Dec-20 For the year ended 31-Dec-21 31-Dec-20 Impairment loss on trade receivables by geographic location For the year ended Egypt region Sudan region Jordan region Nigeria region 31-Dec-21 31-Dec-20 21,537 38,051 - 440 1,412 3,230 1,707 410 Total 24,656 42,131 For the year ended Egypt region Sudan region Jordan region Nigeria region Total 31-Dec-21 31-Dec-20 1,309,247 557,743 (22,533) 7,529 214,588 71,043 (8,796) (26,833) 1,492,506 609,482 Net profit and loss by geographic location 2021 Annual Report IDH 155 The following additional analysis of performance by service has been provided as it is also reviewed by the CODM: Walk-in Contract Conventional test revenues Covid-19-related test revenue Radiology Pathology Radiology Revenue by categories 2021 EGP’000 2,162,415 3,062,297 5,224,712 2020 EGP’000 1,119,953 1,536,311 2,656,264 Revenue Analysis Performance 2021 EGP’000 2,352,870 2,773,043 98,799 5,224,712 2020 EGP’000 1,945,327 649,000 61,937 2,656,264 Net profit by type 2021 EGP’000 1,528,132 (35,626) 1,492,506 2020 EGP’000 645,307 (35,826) 609,482 Pathology profits include profits from conventional tests and Covid 19 tests. The operating segment profit measure reported to the CODM is EBITDA, as follows: Profit from operations Property, plant and equipment and Right of use depreciation Amortization of Intangible assets EBITDA Nonrecurring items “Dual listing fees” Adjusted EBITDA 2021 EGP’000 2,262,060 231,443 7,201 2,500,704 29,033 2,529,737 The non- current assets reported to CODM is in accordance with IFRS are as follows: For the year ended Egypt region Sudan region Jordan region Nigeria region 31-Dec-21 31-Dec-20 2,803,954 2,415,220 7,234 24,132 291,880 263,767 90,509 113,941 Non-current assets by geographic location 156 IDH 2021 Annual Report 2020 EGP’000 985,546 179,046 5,926 1,170,518 - 1,170,518 Total 3,193,577 2,817,060 Financial Statements Notes to the Consolidated Financial Statements Capital management 7. The Group’s objectives when managing capital are to safeguard the Group’s ability to continue in order to pro- vide 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 share- holders, return capital to shareholders, issue new shares or sell assets to reduce debt. The repatriation of a declared dividend from Egyptian group entities are subject to regulation by Egyptian authorities. The outcome of an Ordinary General Meeting of Shareholders declaring a dividend is first certified by the General Authority for Investment and Free Zones (GAFI). Approval is subsequently transmitted to Misr for Central Clearing, Depository and Registry (MCDR) to distribute dividends to all shareholders, regardless of their domicile, following notification of shareholders via publication in one national newspapers. The Group monitors capital on the basis of the net debt to equity ratio. This ratio is calculated as net debt divided by total equity. Net debt is calculated as (short-term and long-term financial obligation plus short-term and long term borrowings) less cash and cash equivalents and financial assets at amortised cost. Financial obligations (note 26) Borrowings Less: Financial assets at amortised cost (note 18) Less: Cash and cash equivalents (Note 17) Net debt Total Equity Net debt to equity ratio 2021 EGP’000 2020 EGP’000 760,674 459,043 105,693 96,455 (1,458,724) (276,625) (891,451) (600,130) (1,483,808) (321,257) 2,794,359 2,426,374 -53.1% -13.2% No changes were made in the objectives, policies or processes for managing capital during the years ended 31 December 2021 and 31 December2020. 2021 Annual Report IDH 157 Expense 8. Included in consolidated income statement are the following: 8.1 Cost of sales Raw material Cost of specialized analysis at other laboratories Wages and salaries Property, plant and equipment, right of use depreciation and Amortisation Other expenses Total 8.2 Marketing and advertising expenses Advertisement expenses Wages and salaries Property, plant and equipment and Amortisation Other expenses Total 8.3 Administrative expenses Wages and salaries Property, plant and equipment and Right of use depreciation Other expenses Total 2021 EGP’000 962,748 24,086 635,407 213,919 584,487 2020 EGP’000 466,679 20,992 390,020 162,928 273,069 2,420,647 1,313,688 2021 EGP’000 96,745 44,739 518 21,161 2020 EGP’000 61,530 30,187 340 15,158 163,163 107,215 2021 EGP’000 146,929 24,207 198,878 370,014 2020 EGP’000 104,211 21,704 95,959 221,874 158 IDH 2021 Annual Report Financial Statements Notes to the Consolidated Financial Statements 8.4 Expenses by nature Raw material Wages and Salaries Property, plant and equipment, right of use depreciation and Amortisation Advertisement expenses Cost of specialized analysis at other laboratories Transportation and shipping cleaning expenses Call Center Hospital Contracts consulting Fees Utilities License Expenses Other expenses Total 2021 EGP’000 962,748 827,075 238,644 96,745 24,086 101,239 60,488 33,531 39,051 112,398 28,307 19,792 409,720 2,953,824 2020 EGP’000 466,679 524,419 184,972 61,530 20,991 73,570 50,967 16,822 19,227 47,743 34,891 15,776 125,189 1,642,776 8.5 Auditors’ remuneration The group paid or accrued the following amounts to its auditor PWC year 2021 (KPMG 2020) 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 Assurance services 8.6 Net finance costs Loss on hyperinflationary net monetary position 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 2021 EGP’000 21,759 6,998 - 302 29,059 2021 EGP’000 (6,976) (98,003) (17,912) (20,026) (142,917) 2021 EGP’000 113,178 - 113,178 (29,739) 2020 EGP’000 8,544 4,008 55 - 12,607 2020 EGP’000 - (67,851) (12,580) (3,676) (84,107) 2020 EGP’000 53,120 14,523 67,643 (16,464) 2021 Annual Report IDH 159 8.7 Employee numbers and costs The average number of persons employed by the Group (including directors) during the year and the aggregate payroll costs of these persons, analysed by category, were as follows: 2021 Administra- tion and market Medical 5,364 1,024 Total 6,388 2020 Administra- tion and market Medical 4,813 798 Total 5,611 2021 2020 Medical Administration Total Medical Administration 600,527 26,735 183,611 784,138 6,003 32,738 363,397 19,736 127,655 5,269 Total 491,052 25,005 8,145 2,054 10,199 6,888 1,473 8,361 635,407 191,668 827,075 390,021 134,397 524,418 Average number of employees Wages and salaries Social security costs Contributions to defined contribution plan Total Details of Directors’ and Key Management remuneration and share incentives are disclosed in the Remunera- tion Report, the Remuneration Committee Report on note 27. 9. 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 2021 EGP’000 (579,262) (68,737) (647,999) (106,767) 14,951 (91,816) (739,815) 2020 EGP’000 (268,796) (24,470) (293,266) (67,124) 790 (66,334) (359,600) 160 IDH 2021 Annual Report Financial Statements Notes to the Consolidated Financial Statements b) Reconciliation of effective tax rate The company is considered to be a UK tax resident, and subject to UK taxation. Dividend income into the com- pany is exempt from taxation when received from a wholly controlled subsidiary, and costs incurred by the company are considered unlikely to be recoverable against future UK taxable profits and therefore form part of our unrecognised deferred tax assets. Our judgement on tax residency has been made based on where we hold board meetings, our listing on the London Stock Exchange and interactions with investors, and where our company secretarial function is physically based. Our external company secretarial function manages a number of activities of our parent and its board. During the year and due to the ongoing impact of Covid, although our board meetings are still actively managed through London, directors have largely attended virtually. Our view is our tax residency has not changed, however if it were deemed that the company was no longer a UK tax resident, our assessment is this would not lead to a material change to the taxation payable by the group. Profit before tax Profit before tax multiplied by rate of corporation tax in Egypt of 22.5% (2020: 22.5%) Effect of tax rate in UK of 19% (2020: Jersey 0%) Effect of tax rates in Cayman, Jordan, Sudan and Nigeria of 0%, 21%, 30% and 30% respectively (2020: 0%, 21%, 30% and 30%) Tax effect of: Recognition of previously unrecognised deferred tax Deferred tax not recognised Deferred tax arising on undistributed dividend Non-deductible expenses for tax purposes - employee profit share Non-deductible expenses for tax purposes - other Tax expense recognised in profit or loss 2021 EGP’000 2,232,321 502,272 3,445 (6,676) (24,435) 28,132 175,504 39,419 22,154 739,815 2020 EGP’000 969,082 218,044 (346) 9,855 - 20,454 91,593 18,223 1,777 359,600 Deferred tax Deferred tax relates to the following: Property, plant and equipment Intangible assets Undistributed reserves from group subsidiaries* Tax Losses Total deferred tax assets - liability 2021 Assets EGP’000 - - - 25,559 25,559 Liabilities EGP’000 (28,925) (105,358) (223,425) - (357,708) (332,149) 2020 Assets EGP’000 - - - 1,360 1,360 - Liabilities EGP’000 (18,334) (106,702) (116,657) - (241,693) (240,333) All deferred tax amounts are expected to be recovered or settled more than twelve months after the reporting period. 2021 Annual Report IDH 161 The difference between net deferred tax balances recorded on the income statement is as follows: 2021 Property, plant and equipment Intangible assets Undistributed dividend from group subsidiaries Tax losses 2020 Property, plant and equipment Intangible assets Undistributed dividend from group subsidiaries Tax losses Net Balance 1 January Deferred tax recognized in profit or loss WHT tax paid Net Balance 31 December (18,333) (106,702) (116,658) 1,360 (240,333) (10,592) 1,344 (175,504) 24,199 (160,553) (28,925) (105,358) (223,425) 25,559 (332,149) 68,737 68,737 Net balance at 1 January Deferred tax recognised in profit or loss WHT tax paid Net balance 31 December (17,460) (108,365) (49,534) 1,360 (173,999) (873) 1,663 (91,593) - (90,803) 24,469 (18,333) (106,702) (116,658) 1,360 24,469 (240,333) 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 2021 for the country the liabilities and assets has arisen. The enacted tax rate in Egypt is 22.5% (2020: 22.5%), Jordan 21% (2020: 21%), Sudan 30% (2020: 30%) and Nigeria 30% (2020: 30%). * Undistributed reserves from group subsidiaries The Group’s dividend policy is to distribute any excess cash after taking into consideration all business cash requirements and potential acquisition considerations. The expectation is to distribute profits held within sub- sidiaries of the Group in the near foreseeable future. During 2015 the Egyptian Government imposed a tax on dividends at a rate of 5% of dividends distributed from Egyptian entities. On September 30, 2020, the Egyptian government issued a law to increase the tax rate to 10%. As a result a deferred tax liability has been recorded for the future tax expected to be incurred from undistributed reserves held within the Group which will be taxed under the new legislation imposed and were as follows: Al Mokhtabar Company for Medical Labs Alborg Laboratory Company Integrated Medical Analysis Company Al Makhbariyoun Al Arab Group 162 IDH 2021 Annual Report 2021 EGP’000 85,546 38,545 75,841 23,493 223,425 2020 EGP’000 58,558 24,122 22,319 11,659 116,658 Financial Statements Notes to the Consolidated Financial Statements Unrecognized deferred tax assets The following items make up unrecognised deferred tax assets. The local tax law does not permit deductions for provisions against income tax until the provision becomes realised. No deferred tax asset has been recognised on tax losses for both Echo-Scan Nigeria and Wayak Egypt due to the uncertainty of the available future taxable profit, which the Group can use the benefits therefrom. Impairment of trade receivables (Note 16) Impairment of other receivables (Note 16) Provision for legal claims (Note 21) Tax losses* Unrecognized deferred tax asset 2021 Gross Amount EGP’000 101,183 8,585 4,088 320,391 434,247 2021 Tax Effect EGP’000 22,766 1,932 920 78,142 103,760 103,760 There is no expiry date for the Unrecognized deferred tax assets. * The company has carried forward tax losses on which no deferred tax asset is recognised as follow: Company Integrated Diagnostics Holdings plc Dynasty Group Holdings Limited Eagle Eye-Echo Scan Limited Echo-Scan WAYAK Pharma Medical Genetic Center Golden care 2021 Gross Amount EGP’000 2021 Tax Effect EGP’000 Country Jersey 271,689 67,922 England and Wales Mauritius Nigeria Egypt Egypt Egypt 13,446 3,556 - 16,269 6,421 9,010 2,555 533 - 3,660 1,445 2,027 320,391 78,142 2020 Gross Amount EGP’000 77,727 8,509 3,134 107,341 196,711 2020 Gross Amount EGP’000 - 12,371 1,222 81,450 8,503 3,795 - 107,341 2020 Tax Effect EGP’000 17,489 1,915 705 29,736 49,845 49,845 2020 Tax Effect EGP’000 - 2,350 183 24,435 1,913 854 - 29,736 2021 Annual Report IDH 163 Earnings per share (EPS) 10. Basic EPS is calculated by dividing the profit for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year. There are no dilutive effects from ordinary share and no adjustment required to weighted-average numbers of ordinary shares. The following table reflects the income and share data used in the basic and diluted EPS computation: Profit attributable to ordinary equity holders of the parent for basic earnings Weighted average number of ordinary shares for basic and dilutive EPS Basic and dilutive earnings per share 2021 EGP’000 1,412,609 600,000 2.35 2020 EGP’000 594,015 600,000 0.99 Earnings per diluted share are calculated by adjusting the weighted average number of shares by the effects resulting from all the ordinary potential shares that causes this dilution. The Company has no potential diluted shares as of the 31 December 2021 and 31 December 2020, therefore; the earnings per diluted share are equivalent to basic earnings per share. 164 IDH 2021 Annual Report Financial Statements Notes to the Consolidated Financial Statements ’ 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 0 P G E ’ 0 0 0 P G E ’ 0 0 0 P G E l a t o T t n u o c c a n o t n e m y a P i & g n d l i u B d l o h e s a e L - e v o r p m i n i s t n e m n o i t c u r t s n o c , s e r u t x F i s e l c h e v i & s g n i t t fi d l o h e s a e L s t n e m e v o r p m i i , l a c d e M c i r t c e l e & t n e m p u q e i & d n a L i s g n d l i u B i t n e m p u q e d n a t n a l p , y t r e p o r P . 1 1 , 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 ( , , 7 0 4 2 5 2 1 , - 2 8 1 4 4 4 , ) 0 4 7 8 ( , ) 2 7 1 3 1 ( , ) 9 9 2 5 1 ( , , 8 7 3 9 5 6 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 , 6 2 8 1 5 1 , ) 3 2 6 6 ( , ) 7 2 0 7 ( , 0 7 5 7 9 5 , 3 1 0 3 9 7 , , 8 0 8 1 6 0 1 , - - - 9 9 0 4 , 4 2 3 1 , 3 2 4 5 , 8 3 3 1 , - - - - 1 6 7 6 , - - - - - - - - - - 1 1 0 5 , 4 2 9 9 1 , ) 8 3 9 ( ) 9 8 7 2 ( , 8 0 2 1 2 , 6 1 0 4 , - - ) 1 4 1 1 ( , ) 6 4 1 8 ( , 7 3 9 5 1 , - - - - - - - - - 1 6 7 6 , 3 2 4 5 , 7 3 9 5 1 , 8 0 2 1 2 , - 3 0 7 8 , 1 6 4 6 6 , ) 2 2 5 ( ) 1 8 3 1 ( , 1 6 2 3 7 , 0 3 6 5 2 , - ) 7 6 5 1 ( , ) 8 5 3 1 ( , - 6 6 9 5 9 , 0 7 0 1 2 , 4 5 1 6 , 1 8 8 ) 6 7 8 ( 9 2 2 7 2 , 4 7 0 8 , ) 5 8 1 1 ( , ) 4 7 0 1 ( , 4 4 0 3 3 , 2 2 9 2 6 , 2 3 0 6 4 , - 3 7 4 2 3 , 1 8 2 5 2 2 , ) 8 3 6 ( ) 3 4 6 2 ( , 3 9 9 5 7 , 3 7 4 4 5 2 , - ) 2 9 0 1 ( , ) 7 1 3 2 ( , 6 4 1 8 , 3 0 2 5 3 3 , 7 6 9 3 3 , 8 0 1 5 0 1 , 7 8 ) 0 5 6 ( 9 6 5 0 4 , 2 1 5 8 3 1 , ) 6 1 9 ( ) 5 3 9 ( 0 3 2 7 7 1 , 3 7 9 7 5 1 , 1 6 9 5 1 1 , 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 , 8 4 8 5 8 2 , ) 0 4 7 8 ( , ) 2 4 0 8 ( , ) 5 3 1 0 1 ( , - 8 2 6 4 2 8 , 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 , 6 8 3 7 9 , ) 2 2 5 4 ( , ) 7 8 9 4 ( , 6 0 8 3 3 3 , 2 2 8 0 9 4 , 8 6 7 9 1 3 , - - 5 5 5 3 5 3 2 3 3 , ) 3 6 5 ( 7 5 3 1 5 , 5 4 3 2 3 3 , - ) 8 4 3 ( ) 1 7 4 2 ( , - 3 8 8 0 8 3 , 7 5 0 8 , 8 1 7 9 3 , 5 ) 6 5 ( 7 9 7 5 , 4 2 7 7 4 , - ) 1 3 ( 0 9 4 3 5 , 3 9 3 7 2 3 , 1 2 6 4 8 2 , 0 2 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 s l a s o p s i D t s o C 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 i s e c n e r e ff d e g n a h c x E s r e f s n a r T 1 2 0 2 r e b m e c e D 1 3 t A 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 0 2 0 2 y r a u n a J 1 t A 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 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 1 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 1 2 0 2 - 2 1 - 1 3 t A 0 2 0 2 - 2 1 - 1 3 t A d e s i l a t i p a c y n a e d u l c n I t o n s e o d t n u o m a s i . . Th m 7 8 4 P G E s s e n s u B i l a t i p a C h c n a r b w e n d n a t n e m p u q e i l i a c d e m o t d e t a e r l . m 3 9 7 P G E , s e h c n a r b n a c S g r o b A o t l d e t a e r l m 4 5 1 P G E e d u l c n i s n o i t i d d a e h t 1 2 0 2 r a e y g n i r u D * . e s u o t y d a e r s i d n a s t s o c i g n w o r r o b 2021 Annual Report IDH 165 12. Intangible assets and goodwill Goodwill EGP’000 Brand Name EGP’000 Software EGP’000 Cost At 1 January 2020 Additions Effect of movements in exchange rates At 31 December 2020 Additions Effect of movements in exchange rates 1,264,086 384,414 - (2,278) 1,261,808 - (843) - (492) 383,922 - (13) At 31 December 2021 1,260,965 383,909 Amortisation and impairment At 1 January 2020 Amortisation Effect of movements in exchange rates At 31 December 2020 Impairment* Amortisation Effect of movements in exchange rates At 31 December 2021 Net book value At 31 December 2021 At 31 December 2020 1,849 - - 1,849 341 - 2,362 4,552 - - - - 47 - 325 372 1,256,413 1,259,959 383,537 383,922 59,558 7,639 (40) 67,157 10,354 (117) 77,394 45,373 5,926 (16) 51,283 - 7,201 (7) 58,477 18,917 15,874 Total EGP’000 1,708,058 7,639 (2,810) 1,712,887 10,354 (973) 1,722,268 47,222 5,926 (16) 53,132 388 7,201 2,680 63,401 1,658,867 1,659,755 * The impairment amount in goodwill and brand name related to Ultra lab company in Sudan has full impaired in impairment study due to the severe devaluation of SDG currency. 166 IDH 2021 Annual Report Financial Statements Notes to the Consolidated Financial Statements Goodwill and intangible assets with indefinite lives (note 3.2-h) 13. Goodwill acquired through business combinations and intangible assets with indefinite lives are allocated to the Group’s CGUs as follows: Medical Genetics Center Goodwill Al Makhbariyoun Al Arab Group (“Biolab”) Goodwill Brand name Golden Care for Medical Services (“Ultralab”) Goodwill Brand name Alborg Laboratory Company (“Al-Borg”) Goodwill Brand name Al Mokhtabar Company for Medical Labs (“Al-Mokhtabar”) Goodwill Brand name Echo-Scan Goodwill Balance at 31 December 2021 EGP’000 2020 EGP’000 1,755 1,755 46,145 20,153 66,298 - - - 497,275 142,066 639,341 699,102 221,319 920,421 12,136 12,136 1,639,950 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 12,950 12,950 1,643,881 The Group performed its annual impairment test in October 2021. Nothing occurred between the impairment test and the balance sheet date that would require the assumptions in the models to be updated. The Group considers the relationship between its market capitalisation and its book value, among other factors, when reviewing for indicators of impairment. Assumptions used in value in use calculations and sensitivity to changes in assumptions IDH worked with Alpha Capital, management’s expert, to prepare an impairment assessments of the Group’s CGUs. The assessment was carried out based on business plans provided by IDH. 2021 Annual Report IDH 167 These plans have been prepared based on criteria set out below: Average annual patient growth rate from 2022 -2026 Average annual price per test growth rate from 2022 -2026 Annual revenue growth rate from 2022 -2026 Average gross margin from 2022 -2026 Terminal value growth rate from 1 January 2027 Discount rate 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 Ultra Lab Bio Lab Al-Mokhtabar Al-Borg Echo-Scan Year 2021 4% 49% 56% 35% 3% 0.2% -7% -5% 38% 3% -0.1% -2% 0.4% 52% 5% 2% 3% 6% 48% 5% 26% 7% 40% 39% 3% 40.6% 14.8% 20.19% 20.4% 21.7% Ultra Lab Bio Lab Al-Mokhtabar Al-Borg Echo-Scan Year 2020 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% Management have compared the recoverable amount of CGUs to the carrying value of CGUs. The recoverable amount is the higher of value in use and fair value less costs of disposal. In the exercise performed and the assumptions noted above the value in use was noted to be higher than the fair value less costs of disposal. During year 2021, The management has conducted business plan projection with the help of a management’s expert, (Alpha Capital), using the assumptions above to be able to calculate the net present value of the asset in use and determine the recoverable amount. The projected cash flows from 2022- 2026 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. As a sensitivity analysis, Management considered a change in the discount rates of 2% increase to reflect addi- tional 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. 168 IDH 2021 Annual Report Financial Statements Notes to the Consolidated Financial Statements Management has also considered a change in the terminal growth rate by 1% decrease to reflect additional risk, which did not result in any impairment under any of the CGUs. This recoverable amount is then compared to the carrying value of the asset as recorded in the books and records of IDH plc. The WACC has been used considering the risks of each CGU. These risks include country risk, cur- rency risk as well as the beta factor relating to the CGU and how it performs relative to the market. The headroom between the carrying value and value in use as follows: Company Almokhtabar Alborg Bio Lab Echo Scan Value in use CGU carrying value Headroom EGP'000 3,373,147 2,727,434 572,968 233,476 EGP'000 1,161,565 1,007,779 152,963 44,190 2,211,582 1,719,655 420,005 189,286 14. Financial asset at fair value through profit and loss Equity investment* Balance at 31 December 2021 EGP’000 10,470 10,470 2020 EGP’000 9,604 9,604 *On August 17, 2017, Almakhbariyoun AL Arab (seller) has signed IT purchase Agreement with JSC Mega Lab (Buyer) to transfer and install the Laboratory Information Management System (LIMS) for a purchase price amounted to USD 400 000, which will be in the form of 10% equity stake in JSC Mega Lab. In case the valuation of the project is less or more than USD 4,000,000, the seller stake will be adjusted accordingly, in a way that the seller equity stake shall not fall below 5% of JSC Mega Lab. • ownership percentage in JSC Mega Lab at the transaction date on April 8, 2019, and as of December 31, 2021, was 8.25%. • On April 8, 2019, Al Mokhabariyoun Al Arab (Biolab) has signed a Shareholder Agreement with JSC Mega Lab and JSC Georgia Healthcare Group (CHG), whereas, BioLab Shall have a put option, exercisable within 12 months immediately after the expiration of five(5) year period from the signing date, which allows Bio- Lab stake to be bought out by CHG at a price of the equity value of BioLab Shares/total stake (being USD 400,000.00) plus 15% annual IRR (including preceding 5 Financial years). After the expiration of above 12 months from the date of the put option period expiration, which allows CHG to purchase Biolab’s all shares at a price of equity value of Biolab’s stake (having value of USD 400,000) plus higher of 20% annual IRR or 6X EV/EBITDA (of the financial year immediately preceding the call option exercise date. In case the Man- agement Agreement or the Purchase Agreement and/or the SLA is terminated/cancelled within 6 months period from the date of such termination/cancellation, CHG shall have a call option, which allows the CHG to purchase Biolab’s all Shares at a price of the equity value of BioLab’s stake in JSC Mega Lab (having value of USD 400,000.00) plus 205 annual IRR. If JCI accreditation is not obtained, immediately after the expiration of 2021 Annual Report IDH 169 the additional 12 months period of the CHG shall have a call option (the Accreditation Call option), exercis- able within 6 months period, which allows CHG to purchase BioLab’s all Shares at a price of the equity value of BioLab’s stake in JSC Mega Lab (having value of USD 400,00.00) plus 20% annual IRR. 15. Inventories Chemicals and operating supplies 2021 EGP’000 222,612 222,612 2020 EGP’000 100,115 100,115 During 2021, EGP 962,748k (2020: EGP 466,679k) was recognised as an expense for inventories, this was recog- nised in cost of sales. The major balance of the raw material is represented in the Kits, slow-moving items of those Kits are immaterial. It is noted that day’s inventory outstanding (based on the average of opening and closing inventory) stands as 61 days at 31 Dec 2021. No impairment of inventory during the year 2021. 16. Trade and other receivables Trade receivables – net Prepayments Due from related parties note (27) Other receivables Accrued revenue 2021 EGP’000 371,051 22,647 5,237 67,974 2,818 2020 EGP’000 325,770 19,363 2,910 34,431 1,006 469,727 383,480 170 IDH 2021 Annual Report Financial Statements Notes to the Consolidated Financial Statements As at 31 December 2021, the expected credit loss related to trade and other receivables was EGP 109,768K (2020: EGP 86,237k). 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 2021 EGP’000 86,237 24,656 - (32) (1,093) 109,768 2020 EGP’000 44,528 42,131 (3,629) (837) 4,044 86,237 The Group allocates each exposure to a credit risk grade based on data that is determined to be predictive of the risk of loss (historical customer’s collection, Customers’ contracts conditions) and applying experienced credit judgement. Credit risk grades are defined using qualitative and quantitative factors that are indicative of the risk of default. Expected credit loss assessment is based on the following: 1. The customer list was divided into 9 sectors 2. Each sector was divided according to customers aging 3. Each sector was studied according to the historical events of each sector. According to the study conducted, the expected default rate was derived from each of the aforementioned period. 4. General economic conditions Based on the expected credit loss assessment, an additional provision was calculated for the year, yielding an additional Expected Credit Losses (ECL) for IDH Group amounting to EGP 24 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. Balances overdue by at least one year are fully provided for. 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 impair- ment of trade receivables was EGP 101,183K (31 December 2020: EGP 77,727K) 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 4,347K. This analysis assumes that all other variables remain constant. 2021 Annual Report IDH 171 The following table provides information about the exposure to credit risk and ECLs for trade receivables from individual customers For the nine segments at: 31-Dec-21 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 -365days past due 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 150-365 days past due Weighted average loss rate EGP’000 0.00% 1.79% 5.25% 5.89% 9.06% 18.45% 87.89% Weighted average loss rate EGP’000 0.00% 5.06% 6.18% 13.61% 18.85% 36.38% 89.98% Gross carry- ing amount EGP’000 151,592 85,764 74,505 31,028 17,469 8,576 Loss allowance EGP’000 - (1,532) (3,911) (1,828) (1,582) (1,582) 103,300 (90,748) Gross carry- ing amount EGP’000 187,705 63,771 46,097 17,322 9,816 6,436 72,350 Loss allowance EGP’000 - (3,228) (2,847) (2,358) (1,850) (2,341) (65,103) As at 31 December, the ageing analysis of trade receivables is as follows: 2021 2020 Total 371,051 325,770 < 30 days 30-60 days 61-90 days > 90 days 235,824 248,248 70,594 43,250 29,200 14,964 35,433 19,308 172 IDH 2021 Annual Report Financial Statements Notes to the Consolidated Financial Statements 17. Cash and cash equivalents Cash at banks and on hand Treasury bills (less than 90 days) Term deposits (less than 90 days) 2021 261,430 150,431 479,590 891,451 2020 253,225 184,525 162,380 600,130 Cash at banks earns interest at floating rates based on daily bank deposit rates. Short-term deposits and trea- sury bills are made for varying periods of between one day and three months, depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit weighted average rate 7.75% (2020: 7%) and Treasury bills 12.44% (2020: 10%) per annum. 18. Financial assets at amortised cost Term deposits (more than 90 days) Treasury bills (more than 90 days) 2021 EGP’000 148,136 1,310,588 1,458,724 2020 EGP’000 - 276,625 276,625 The maturity date of the fixed term deposit and treasury bills is between 3–12 months and the effective interest rate on the treasury bills is 12.44% (2020: 10%) and deposits is 7.75%. Share capital and reserves 19. The Company’s ordinary share capital is $150,000,000 equivalent to EGP 1,072,500,000. All shares are authorised and fully paid and have a par value $0.25. In issue at beginning of the year In issue at the end of the year Ordinary share capital Name Hena Holdings Limited Actis IDH B V Free floating Ordinary shares 31-Dec-21 600,000,000 Ordinary shares 31-Dec-20 150,000,000 600,000,000 600,000,000* Number of shares % of contribution Par value USD 152,982,356 126,000,000 321,017,644 600,000,000 25.50% 21.00% 53.50% 100% 38,245,589 31,500,000 80,254,411 150,000,000 * 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$0.25 each (the “New Ordinary Shares”) (the “Sub-Division”). The Sub-Division was successfully completed with effect from 24 December 2020. 2021 Annual Report IDH 173 Capital reserve The capital reserve was created when the Group’s previous parent company, Integrated Diagnostics Holdings LLC – IDH (Caymans) arranged its own acquisition by Integrated Diagnostics Holdings PLC, a new legal parent. The balances arising represent the difference between the value of the equity structure of the previous and new parent companies. Legal reserves Legal reserve was formed based on the legal requirements of the Egyptian law governing the Egyptian subsidiar- ies. According to the Egyptian subsidiaries’ article of association 5% (at least) of the annual net profit is set aside to from a legal reserve. The transfer to legal reserve ceases once this reserve reaches 50% of the entity’s issued capital. If the reserve falls below the defined level, then the entity is required to resume forming it by setting aside 5% of the annual net profits until it reaches 50% of the issued share capital. Put option reserve Through acquisitions made within the Group, put option arrangements have been entered into to purchase the remaining equity interests in subsidiaries from the vendors at a subsequent date. At acquisition date an initial put option liability is recognised and a corresponding entry recognised within the put option reserve. After initial recognition the accounting policy for put options is to recognise all changes in the carrying value of the liability within put option reserve. When the put option is exercised by the vendors the amount recognised within the reserve will be reversed. Translation reserve The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries. 20. Distributions made and proposed Cash dividends on ordinary shares declared and paid: US$ 0.0485 per qualifying ordinary share (2020: US$ 0.19) After the balance sheet date, the following dividends were proposed by the direc- tors (the dividends have not been provided for): EGP 2.17 per share (2020: $0.049) per share 2021 EGP’000 455,182 455,182 1,300,000 1,300,000 2020 EGP’000 441,855 441,855 455,831 455,831 174 IDH 2021 Annual Report Financial Statements Notes to the Consolidated Financial Statements 21. Provisions At 1 January 2021 Provision made during the year Provision used during the year Provision reversed during the year At 31 December 2021 Current Non- Current At 1 January 2020 Provision made during the year Provision used during the year Provision reversed during the year At 31 December 2020 Non- Current Legal claims provision Egyptian Government Training Fund for employees Provision for legal claims EGP’000 EGP’000 Total EGP’000 3,408 2,146 (993) (473) 4,088 3,217 2,146 (993) (282) 4,088 4,088 4,088 Provision for legal claims EGP’000 5,082 3,194 (5,040) (19) 3,217 3,217 Total EGP’000 5,273 3,194 (5,040) (19) 3,408 3,408 191 - - (191) - - Egyptian Government Training Fund for employees EGP’000 191 - - - 191 191 The amount comprises the gross provision in respect of legal claims brought against the Group. Management’s opinion, after taking appropriate legal advice, is that the outcome of these legal claims will not give rise to any significant loss beyond the amounts provided as at 31 December 2021. In addition to the provisions for legal claims recognised, there is also an Arbitration Claim that has been made and includes the Company as a respondent. No provision is recognised for this claim, as the Group believes it will succeed in this matter as demonstrated by previous claims by the claimant that have been successfully defended. 2021 Annual Report IDH 175 22. Trade and other payables Trade payables Accrued expenses Due to related parties note (27) Other payables Deferred revenue Accrued finance cost 23. Current put option liability Put option – Biolab Jordan 2021 EGP’000 311,321 325,677 13,234 99,040 24,603 3,479 777,354 2021 EGP’000 921,360 921,360 2020 EGP’000 177,603 151,201 439 50,959 - 3,421 383,623 2020 EGP’000 282,267 282,267 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 is calculated at seven times EBITDA of the last 12 months – Net Debt and exercisable in whole from the fifth anniversary of completion of the original purchase agreement, which fell due in June 2016. The vendor has not exercised this right at 31 December 2021. It is important to note that the put option liability is treated as current as it could be exercised at any time by the NCI. However, based on discussions and ongoing business relationship, there is no expectation that this will happen in next 18 months. The option has no expiry date. Loan and borrowings 24. The terms and conditions of outstanding loans are as follows: Currency Nominal interest rate Maturity 31 Dec 21 31 Dec 20 A) CIB _ BANK A) AUB _ BANK EGP EGP Secured rate 9.5% 5 April 2022 CBE corridor rate*+1% 26 April 2026 Amount held as: Current liability Non- current liability 176 IDH 2021 Annual Report 13,238 84,828 98,066 21,721 76,345 98,066 38,654 54,379 93,033 25,416 67,617 93,033 Financial Statements Notes to the Consolidated Financial Statements A) In April 2017 AL-Mokhtabar for medical lab, one of IDH subsidiaries, was granted a medium term loan amount- ing to EGP 110m from Commercial International Bank “CIB Egypt” to finance the purchase of the new administrative building for the group. Starting May 2021, the loan has been secured through restricted time deposits. B) In July 2018, AL-Borg lab, one of IDH subsidiaries, was granted a medium term loan amounting to EGP 130.5m from Ahli United Bank “AUB Egypt” to finance the investment cost related to the expansion into the radiology segment. As at 31 December 2021 only EGP 84.8m had been drawn down from the total facility available. The loan contains the following financial covenants which if breached will mean the loan is repayable on demand: 1. The financial leverage shall not exceed 0.7 throughout the period of the loan “Financial leverage”: total bank debt divided by net equity 2. The debt service ratios (DSR) shall not be less than 1.35 starting 2020 “Debt service ratio”: cash operating profit after tax plus depreciation for the financial year less annual maintenance on machinery and equipment adding cash balance (cash and cash equivalent ) divided by total financial payments. “Cash operating profit”: Operating profit after tax, interest expense, depreciation and amortization, is calculated as follows: Net income after tax and unusual items adding Interest expense, Depreciation, Amortisation and provisions excluding tax related provisions less interest income and Investment income and gains from extraordinary items “Financial payments”: current portion of long-term debt including interest expense and fees and dividends distributions. 3. The current ratios shall not be less than 1. “Current ratios”: Current assets divided current liabilities. *As at 31 December 2021 corridor rate 9.25% (2020: 9.25%) AL- Borg company didn’t breach any covenants for MTL agreements. The group signed two agreements of debt facilities. The debt package includes the US$ 45.0 million facilities secured an 8-year period starting May 2021 from International Finance Corporation (IFC), and an additional US$ 15.0 million IFC syndicated facility from Mashreq Bank in Dec 2021 debt has not been withdrawn by IDH. 25. Non-current put option liability Put option liability* 2021 EGP’000 35,037 35,037 2020 EGP’000 31,790 31,790 *According to definitive agreements signed on 15 January 2018 between Dynasty Group Holdings Limited and International Finance Corporation (IFC) related to the Eagle Eye-Echo Scan Limited transaction, IFC has the option to put it is shares to Dynasty Group Holdings Limited in year 2024. The put option price will be calculated on the basis of the fair market value determined by an independent valuer. 2021 Annual Report IDH 177 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 35 million was calculated as the valuation as at 31 December 2021 (2020; EGP 32m). 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 Lagos and the following years yielding a Compounded Annual Growth Rate of 40% from 2022 to 2025. Financial obligations 26. The Group leases property and equipment. Property leases include branches, warehouse, parking and adminis- tration buildings. The leases typically run for average period from 5-10 years, with an option to renew the lease after that date. Lease payments are renegotiated with renovation after the end of the lease term to reflect market rentals. For certain leases, the Group is restricted from entering into any sub-lease arrangements. The property leases were entered into as combined leases of land and buildings. Adding to remaining agreement signed in 2015, to service the Group’s state-of-the-art Mega Lab. The agreement peri- ods are 5 and 8 years which is deemed to reflect the useful life of the equipment. If the minimum annual commitment payments are met over the agreement period ownership of the equipment supplied will legally transfer to the IDH. The finance asset and liability has been recognised at an amount equal to the fair value of the underlying equipment. This is based on the current cost price of the equipment supplied provided by the suppliers of the agreement. The averaged implicit interest rate of finance obligation has been estimated to be 9.85%. The equipment is being depreciated based on units of production method as this most closely reflects the consumption of the benefits from the equipment. Information about the agreements for which the Group is lessee is presented below. a) Right-of-use assets Balance at 1 January Addition for the year Depreciation charge for the year Terminated Contracts Exchange differences Balance at 31 December Buildings Buildings 2021 EGP’000 354,688 198,402 (79,617) (7,643) (3,398) 462,432 2020 EGP’000 264,763 152,030 (60,803) (1,302) - 354,688 b) Other Financial obligations Future minimum financial obligation payments under leases and sales purchase contracts, together with the present value of the net minimum lease payments are, as follows: *Financial liability– laboratory equipment *Lease liabilities building *The financial obligation liabilities for the laboratory equipment and building are payable as follows: 178 IDH 2021 Annual Report 2021 EGP’000 228,870 531,804 760,674 2020 EGP’000 69,123 389,920 459,043 Financial Statements Notes to the Consolidated Financial Statements At 31 December 2021 Less than one year Between one and five years More than 5 years At 31 December 2020 Less than one year Between one and five years More than 5 years Minimum payments 2021 EGP’000 211,242 701,084 191,229 1,103,555 Minimum payments 2020 EGP’000 126,999 463,646 131,605 722,250 Interest 2021 EGP’000 95,764 227,314 19,803 342,881 Interest 2020 EGP’000 66,481 176,312 20,415 263,208 Principal 2021 EGP’000 115,478 473,770 171,426 760,674 Principal 2020 EGP’000 60,518 287,334 111,190 459,042 c) Amounts other financial obligations recognised in consolidated income statement Interest on lease liabilities Expenses related to short-term lease 2021 EGP’000 68,352 18,875 2020 EGP’000 58,864 13,771 Related party transactions disclosures 27. The significant transactions with related parties, their nature volumes and balance during the period 31 Decem- ber 2021 and 2020 are as follows: 2021 Related Party Nature of transaction Nature of relationship ALborg Scan (S.A.E)* Expenses paid on behalf Affiliate International Fertility (IVF)** Expenses paid on behalf Affiliate H.C Security Provide service Life Health Care Provide service Dr. Amid Abd Elnour Put option liability International Finance corporation (IFC) Put option liability International Finance corporation (IFC) Current account Integrated Treatment for Kidney Diseases (S.A.E) Rental income Medical Test analysis Total Entity owned by Company’s board member Entity owned by Company’s CEO Bio. Lab C.E.O and shareholder Eagle Eye – Echo Scan limited shareholder Eagle Eye – Echo Scan limited shareholder Entity owned by Company’s CEO Transaction amount of the year Amount due from / (to) EGP’000 EGP’000 1 - (243) 351 1,767 (319) (11,232) 2,094 (639,093) (921,360) (3,247) (35,037) (12,915) (12,915) (298) 530 1,025 (964,394) 2021 Annual Report IDH 179 2020 Related Party Nature of transaction Nature of relationship ALborg Scan (S.A.E)* Expenses paid on behalf Affiliate International Fertility (IVF)** Expenses paid on behalf Affiliate H.C Security Provide service Life Health Care Provide service Dr. Amid Abd Elnour Put option liability International Finance corporation (IFC) Put option liability Integrated Treatment for Kidney Diseases (S.A.E) Rental income Medical Test analysis Total Entity owned by Company’s board member Entity owned by Company’s CEO Bio. Lab C.E.O and shareholder Eagle Eye – Echo Scan limited shareholder Entity owned by Company’s CEO Transaction amount of the year Amount due from / (to) EGP’000 EGP’000 6 (3,449) (412) 350 1,767 (76) (11,058) (363) (83,126) (282,267) (1,757) (31,790) - 588 793 (311,586) * ALborg Scan is a company whose shareholders include Dr. Moamena Kamel (founder of IDH subsidiary Al-Mokhtabar Labs). ** International Fertility (IVF) is a company whose shareholders include Dr. Moamena Kamel (founder of IDH subsidiary Al-Mokhtabar Labs). Chief Executive Officer Dr. Hend El-Sherbini and her mother, Dr. Moamena Kamel jointly hold the 25.5% of shares held by Hena Holdings Limited, Hena Holdings Limited is a related party and received dividends of USD 7,419,644 in year 2021 and USD 7,151,925 received in year 2020. Terms and conditions of transactions with related parties The transactions with the related parties are made on terms equivalent to those that prevail in transactions. Outstanding balances at the year-end are unsecured and interest free and settlement occurs in cash. There have been no guarantees provided or received for any related party receivables or payables. For the year ended 31 December 2021, the Group has not recorded any impairment of receivables relating to amounts owed by related parties (2020: 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 health- care development initiatives. In 2021 EGP 9,578 K (2020: EGP 6,510K) was paid to the foundation by the IDH Group. 180 IDH 2021 Annual Report Financial Statements Notes to the Consolidated Financial Statements Compensation of key management personnel of the Group Key management people can be defined as the people who have the authority and responsibility for planning, directing, and controlling some of the activities of the Company, directly or indirectly The amounts disclosed in the table are the amounts recognised as an expense during the reporting period related to key management personnel. Short-term employee benefits Total compensation paid to key management personnel 2021 EGP’000 55,082 55,082 2020 EGP’000 51,556 51,556 28. Reconciliation of movements of liabilities to cash flows arising from financing activities EGP’000 Balance at 1 January 2021 Proceeds from loans and borrowings Repayment of borrowings Payment of liabilities Interest paid Total changes from financing cash flows New agreements signed in the period Terminated contracts during the year Interest expense Total liability-related other changes Balance at 31 December 2021 EGP’000 Balance at 1 January 2020 Proceeds from loans and borrowings Repayment of borrowings Payment of liabilities Interest paid Total changes from financing cash flows New agreements signed in the period Terminated contracts during the year Interest expense Total Liability – related other changes Balance as at 31 December 2020 Other loans and borrowings 96,455 30,450 (25,416) - (25,446) (20,412) - - 29,651 29,651 105,694 Other loans and borrowings 111,750 11,727 (25,416) - (14,160) (27,849) - - 12,554 12,554 96,455 Other financial obligation 459,043 - - (59,610) (68,354) (127,964) 367,533 (6,292) 68,353 429,594 760,673 Other financial obligation 338,073 - - (42,746) (59,576) (102,321) 166,339 (1,912) 58,864 223,291 459,043 2021 Annual Report IDH 181 29. Current tax liabilities Debit withholding Tax (Deduct by customers from sales invoices) Income Tax Credit withholding Tax (Deduct from vendors invoices) Other 2021 EGP’000 (34,166) 521,929 17,922 7,319 513,004 2020 EGP’000 (37,282) 281,777 9,672 3,373 257,540 Post Balance Sheet Events 30. On the 20th of December 2021, Integrated Diagnostics Holdings Plc announced the signing of a sale and purchase agreement (the “SPA”) to acquire 50% shareholding in Base Consultancy FZ LLC, the holding company of Islamabad Diagnostic Centre Limited (“IDC”), from the Evercare Group, an emerging markets healthcare delivery platform man- aged by TPG for a total consideration of US$ 72.35 million. The transaction, which is subject to the satisfaction of a number of key conditions precedent including, but not limited to, the receipt of regulatory approval from the Competi- tion Commission of Pakistan, will see IDH acquire a stake in one of Pakistan’s leading diagnostic providers and partner with the founder Dr Rizwan Uppal. IDC will be fully consolidated on IDH’s accounts following the completion of the transaction and transfer of funds to the Evercare Group. The transaction is expected to close in the first half of 2022. IDH plans to finance the transaction through a combination of existing cash and committed debt facilities. The debt package includes the US$ 45.0 million facility secured an 8-year period starting May 2021 from International Finance Corporation (IFC), and an additional US$ 15.0 million IFC syndicated facility from Mashreq Bank. On 21 March 2022, the Central Bank raised policy rates by 100bps and allowed the Egyptian Pound to devalue by more than 17% against the US Dollar which is expected to impose Inflationary pressures in the short to medium term. Inflation rates are expected to average around 13% to 15% during 2022, up from 5.9% in December 2021. Moreover, GDP growth in FY22/23 was revised downward to 5.5% from 5.7% by the Egyptian government in March 2022. The Group is closely monitoring the situation and the impact that may arise. Contingent liabilities 31. 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 24m to EGP 54m could become payable, however this is not considered probable. 182 IDH 2021 Annual Report Financial Statements Notes to the Consolidated Financial Statements IDHCORP.COM
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