MD Medical Group
We Grow
We Care
ANNUAL REPORT 2018
Contents
4
OVERVIEW
4 Multi-Disciplinary Leadership
6
8
Compelling Investment Case
Nationwide Footprint
10 CEO Statement
12
STRATEGY
14 Our Strategic Goals
16 Unrivalled Growth
18 Wide Range of Technologically
Advanced Medical Services
48
CORPORATE
SOCIAL RESPONSIBILITY
50 Our People
52 Corporate Social Responsibility
54 Shareholder Equity
20
INVESTING IN STRATEGIC
EXPANSION
22 Building a Leading
Nationwide Network
24 Hospitals in Focus
28
Interview with Chief Doctor
of Samara Hospital
30 Samara Hospital
32 Tyumen Hospital
34 Lapino-2 Hospital
36 St Petersburg Hospital
38 Market Trends in Russia
56
CORPORATE GOVERNANCE
AND RISK MANAGEMENT
58 Corporate Governance Report
60 Risk Management
62 Board of Directors
64 Board of Directors Activity
in 2018
66 Senior Management
68 Regional Directors
40
CONTINUED STRONG
PERFORMANCE
42 Operational Review
46 Financial Review
www.mcclinics.com
69
117
149
168
REPORT AND CONSOLIDATED
FINANCIAL STATEMENTS
REPORT AND SEPARATE
FINANCIAL STATEMENTS
SUSTAINABLE
DEVELOPMENT
CONTACTS
AND ADVISERS
Overview
Multi-Disciplinary
Leadership
4 5
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
Our operational and financial performance demonstrates the sustainable
development of our business with high potential for further growth.
We are continuing to ensure strong growth based on high operational performance
for the benefit of our shareholders.
Dr Mark Kurtser
CEO
OPERATIONAL KPI’s
FINANCIAL KPI’s (RUB MLN)
Deliveries
IVF
Revenue
EBITDA and EBITDA margin
6,656
6,808
5,535
4,550
12%
CAGR 2014–2018
7,277
16,806
14,004
21%
CAGR 2014–2018
16,636
9,289
7,654
13,755
12,179
9,507
7,201
20%
CAGR 2014–2018
14,937
29%
28%
2,675
2,083
30%
3,670
30%
4,165
20%
CAGR 2014–2018
29%
4,314
‘14
‘15
‘16
‘17
‘18
‘14
‘15
‘16
‘17
‘18
‘14
‘15
‘16
‘17
‘18
‘14
‘15
‘16
‘17
‘18
In-patient treatments (days)
Out-patient treatments
Net Debt and Net debt / EBITDA ratio
EPS1 (RUB/GDR)2
19%
CAGR 2014–2018
47,917
53,142
61,344
72,371
35,939
1,388,995
1,527,425
1,176,630
877,244
17%
CAGR 2014–2018
1,618,149
1.6x
3,230
0.6x
0.4x
1,680
1,640
0.7x
2,950
0.5x
2,065
22%
CAGR 2014–2018
36
33
28
21
16
‘14
‘15
‘16
‘17
‘18
‘14
‘15
‘16
‘17
‘18
‘14
‘15
‘16
‘17
‘18
‘14
‘15
‘16
‘17
‘18
Key drivers of our growth included further capacity utilisation
growth at our hospitals in Novosibirsk and Ufa, as well as the
commissioning of the new hospital in Samara.
The Company’s financial position remains robust. Despite raising
funds for our large-scale investment programme, our net debt to
EBITDA ratio remained at a comfortable 0.7х at the end of 2018.
The EBITDA margin also remained stable at 29%.
1 EPS change rate calculated by dividing rounded amounts for years
2018 and 2017
2 Basic and fully diluted earnings per share calculated as profit for
the year attributable to owners of the Company divided by weighted
average number of ordinary shares in issue during the year
Overview
Compelling
Investment Case
6 7
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
#1
healthcare
company in Russia
Revenue
Revenue (RUB mln)
EBITDA
EBITDA (RUB mln)
Deliveries
Deliveries
2018
2012
4,061
14,937
CAGR 2012–2018
+24%
2018
2012
4,317
4,314
2018
7,277
1,694
CAGR 2012–2018
2012
+17%
3,253
CAGR 2012–2018
+14%
First and only publicly listed
healthcare company in Russia –
gateway to an attractive market
with solid growth potential
Consistently one of the highest revenues
among Russian healthcare companies
Solid sustainable growth of key financial
and operational metrics since IPO
+9%
year-on-year
increase in 2018
4,314
EBITDA in 2018
Leader in IVF segment in Russia
16,636
IVF cycles
7,277
deliveries in 2018
69%
EV/EBITDA discount
to EM peers
Best-in-class network
across Russia
Attractive market
fundamentals
Clear balanced
growth strategy
• Deep understanding of the Russian private healthcare market
• Low level of consolidation and saturation, specifically
• Widespread medical network in Russia with
medical
centres1
23
regions1
highest number
of private multi-functional
hospitals in Russia
41
5
1 as of publication date
in the regions
• Still underdeveloped market with strong potential to grow
• Favourable regulatory environment - state support for private
healthcare companies including 0% income tax rate (President
Putin suggested to make this temporary benefit a perpetual
regulation during his address in February 2019), perpetual
medical licence, and participation in the Mandatory Health
Insurance programme.
• High barriers to entry
• Proven regional expansion strategy with clear targets and track-
record of successful investments
• Balanced and diversified service offering – OBGYN and IVF
remain the core of our business with expanding other medical
services demonstrating strong growth
• Combination of major greenfield hospital projects with a wide
network of clinics providing core services benefiting from
economy of scale
• Ready for use blueprint for further expansion based on
competence and available resources
And yet the stock
remains undervalued
vs EM peers
• Currently MDMG’s GDRs trade on 2018 EV/EBITDA and P/E
of 6.2х and 8.4х, respectively
• This valuation represents discounts of 69% and 58% to EM peers2
2 Research of Renaissance Capital's dated 30 August 2018
8 9
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
Nationwide network of Hi-tech facilities
Nationwide
Footprint
With hospitals and clinics in 23 regions of Russia1,
we operate the most widespread private
network of healthcare facilities in the country.
St Petersburg
1
Дмитров
Сергиев
Яхрома
MOSCOW
9
Солнечногорск
Tula
1
Voronezh
1
Yaroslavl
1
1
Kostroma
1
Vladimir
1
1
Ryazan
Nizhny
Novgorod
Красноармейск
Kazan
1
1
Perm
Зеленоград
Volgograd
1
6
Samara
2
Ufa
We help our
patients in
23regions1
Dr Yulia Kutakova
PhD, Medical Director for Organisational
and Scientific-Educational Work
As of the end of 2018, we were present
in 12 out of 15 Russian cities with a
population of more than a million as we
continue to target attractive locations
with strong demand for our high-
quality medical services
M&С Clinic Savelovskaya
M&С Clinic
Khodynskoe pole
M&С Clinic Kuntsevo
MOSCOW
M&С Clinic
Lefortovo
M&С Clinic
Novogereevo
Lapino Hospital
M&C Clinic
Odintsovo
Perinatal Medical
Centre (PMC)
M&С Clinic Yugo-Zapad
1
Tyumen
1
Omsk
Novokuznetsk
Novosibirsk
5
1
2
Barnaul
1
Krasnoyarsk
Irkutsk
1
1 As of publication date
1
Vladivostok 1
Overview
CEO
Statement
10 11
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
2018 was yet another strong year for our business, as we
delivered robust results, while also continuing to invest in
expanding our leading network in Russia.
In 2018, we continued to improve our
financial performance, delivering the sixth
consecutive year of growth since our IPO
in 2012. We increased our revenue by 9%
year-on-year to a record RUB 14,937 mln,
while EBITDA grew 4% year-on-year to
RUB 4,314 mln. Our net profit for the period
totalled RUB 2,831 mln, up 5% year-on-year.
Our financial performance was backed by
solid operating results. We had a record
number of deliveries during the year,
representing a 7% year-on-year increase,
despite a challenging demographic situation
in Russia as a whole. We also increased in-
patient and out-patient treatments by 18%
and 6% year-on-year, respectively.
Another important development of the year
was the continued diversification of our
medical services. Since our incorporation
more than 15 years ago, we have focused
on women’s and children’s healthcare.
However, we have started to selectively add
new medical services for all family members.
In particular, our recently opened and
built facilities have been multi-disciplinary
from the very beginning. This has proven
to be a successful strategy as we have
seen strong demand for the expanded
services range. In particular, in 2018 our
revenue from Other Medical Services grew
22% year-on-year and accounted for
28% of the top line for the year, up 3 p.p.
year-on-year. At the same time, OBGYN,
in particular deliveries and IVF, remain our
core focus as we have gained leadership
and unique expertise in these areas, and
I expect this to continue to be the case
in the years to come.
Major contributors to the increased volume
of other medical services were our regional
hospitals and clinics in an ever-expanding
network. Indeed, in 2018 we achieved
significant progress in strengthening our
leading footprint across Russia as part
of our investment strategy particularly
aimed at regional development. We opened
a multi-disciplinary hospital in Samara,
which saw high capacity utilisation rates
across all key segments and had already
reached breakeven within the first
10 months of operations. We also launched
the construction of our Lapino-2 and
St Petersburg hospitals which we expect to
open in 2020 and in 2021, respectively, at
which point these will become major drivers
of future growth. We also opened six new
clinics, including in four new regions – Nizhny
Novgorod, Volgograd, Tula, and Tatarstan –
and we modernised two existing clinics
in Kostroma and Moscow. Already in 2019,
we opened our first clinic in Vladivostok –
in the Russian Far East. During the year,
we continued the construction of our
sixth multi-disciplinary hospital, which
is scheduled to open in April 2019 in Tyumen,
the oil capital of Russia.
As of the end of 2018, we had 40 medical
facilities – 5 hospitals and 35 clinics –
across 22 regions in Russia. We continue to
target the most attractive locations where
we see the strongest demand for our
services and are already present in 12 out
of 15 Russian cities with a population
of more than a million.
We achieved these impressive results
in 2018 despite challenging external
conditions and we have developed a solid
foundation to ensure the future sustainable
growth of our business.
Revenue in 2018
14,937
RUB mln
Dr Mark Kurtser
CEO
At the same time, I want to address our
recent share performance as I believe our
shares are significantly undervalued and
do not reflect all the great achievements
to-date, and strong prospects for
further profitable growth. We have
demonstrated strong sustainable growth
since our IPO in 2012 and have continually
delivered on our key plans and targets.
We remain the only public company
in the lucrative Russian healthcare market
with robust growth potential, yet our
shares trade at a considerable discount
to other leading emerging market peers.
While we cannot directly influence
the share price and the external conditions
affecting it, I can assure you that all
of our employees, from the doctors to
the management team, are committed
to delivering the best performance for
patients and shareholders alike.
In addition to this, the Group has continued
to adhere to its sustainability principles.
Given our understanding that sustainability
requires a constructive dialogue with
our stakeholders, our priority is to create
shared value by offering the highest quality
of services and continuous innovation. We
do our best to create Human and Societal
Values through our activities. The Group
pays particular attention to the professional
development of our people. We constantly
interact with stakeholders in order to
make timely changes to our activities and,
consequently, to increase our effectiveness.
We take into account all aspects
of sustainable development, namely social,
economic, and environmental, both in our
day-to-day activities, and in the long-term
development of our business.
I want to sincerely thank everyone who
helped make 2018 another successful year
for MDMG, including our shareholders
for their continued trust in our business.
Onwards and upwards!
We have demonstrated
strong sustainable growth
since our IPO in 2012
Dr Mark Kurtser
CEO
CONTENTS
14 Our Strategic Goals
16 Unrivalled Growth
18 Wide Range of Technologically
Advanced Medical Services
Expansion
in 2018
4new
regions
7new medical
centres
+13%
area increase
Strategy
In 2018, we took a number of important steps towards
implementing our strategy to support the future growth
of the Company.
Strategy
Our Strategic Goals
14 15
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
PROVIDE THE HIGHEST
QUALITY OF CARE
TO PATIENTS AND
ACHIEVE A HIGH
LEVEL OF CUSTOMER
SATISFACTION
ROLL OUT
OUR PROVEN
BUSINESS MODEL
PROVIDE BALANCED
SERVICES STRUCTURE
INCLUDING CORE
AND OTHER MEDICAL
SERVICES
We are strongly committed to maintaining
the highest possible quality of our services
and not only meeting but also exceeding
our patients’ expectations. We focus on
ensuring that all of our facilities – both
existing and new ones – adhere to MD
Medical Group’s customary high standards
of medical care.
With our widespread medical network
encompassing 41 facilities in 23 regions*,
we have a deep understanding
of the Russian market and a strong track-
record. We have developed a proven
regional hospital concept (based on our
new Samara hospital) and three clinic
concepts of various scale as we continue to
implement our successful business model
throughout the country.
While we initially focused solely on
women’s and children’s healthcare, over
the years once we were 100% sure we
could maintain our customary high level
of service, we have been adding other
medical services for all family members.
Today, MDMG is a diversified healthcare
provider with OBGYN remaining our core
focus.
Our Achievements in 2018
RECRUIT AND RETAIN
THE BEST AND MOST
WELL-QUALIFIED
PERSONNEL
DELIVER VALUE
TO OUR
SHAREHOLDERS
INVESTMENT
PROGRAMME
IN ACTION
As one of the largest employers
in the sector, we pay specific attention
to ensuring optimal working conditions
and incentives for our personnel. We are
constantly improving the professional
skills of all our specialists. We will continue
to employ the best professionals
in the market by offering competitive
salaries as well as exciting opportunities
for career advancement.
Ultimately, we want to ensure that all
our actions and decisions will benefit our
shareholders. As the first and only public
healthcare company in Russia, we strive to
produce the best performance and achieve
strong results which translate into high
long-term value for our investors.
7
modern
medical
centres
were opened
in 2018
3
multi-
disciplinary
hospitals
are under
construction
In 2018, we opened and modernised
a number of medical institutions across
Russia, offering a diverse range of high-
quality medical services. In particular,
our new Samara hospital brought some
unique services to the Samara Region,
in particular in oncology, obstetrics,
urology, traumatology. To allow access
to our high-tech services to an even
wider clientele, we launched our “Protect
Your Future” healthcare insurance
programme together with VTB Insurance
and also signed a strategic cooperation
agreement with Sberbank to develop
Russia’s first nationwide healthcare
marketplace shop.docdoc.ru.
In 2018, we significantly expanded our
network in Russia. We opened a multi-
disciplinary hospital in Samara and six
new clinics, including in four new regions,
as well as modernised two existing
clinics. Also, we continued work on
the construction of our Tyumen hospital
and launched the construction of our
Lapino-2 and St Petersburg hospitals
scheduled for completion in 2020 and
in 2021, respectively. While maintaining
a sharp focus on our current projects, we
will be further expanding our network to
reach out to even more patients.
In the reporting year, we continued to
expand our offering and added new ser-
vices at both existing and new medical
facilities. As a result of our continued
efforts to expand the services offering,
in 2018 our revenue from Other Medical
Services grew 22% year-on-year and
accounted for 28% of the Group’s total
revenue.
In 2018, we passed the 7,000 mark
for staff headcount. In particular, our
Samara hospital became a major
employer of medical staff in the region
and has hired both local professionals
and current MDMG employees who were
relocated from Moscow. Throughout
the year, we continued providing
training and other professional growth
opportunities for our staff.
In 2018, we strengthened our leading
medical network in Russia and improved
our service offering to become
even more appealing to the Russian
population. Alongside the current solid
performance, we continue to invest
in our assets with the aim of ensuring
long-term growth in shareholder value.
15,000
sq m
area of recently
opened hospital
in Samara
* as of publication date
As well as posting strong results in key areas of our
business in 2018, we also had a very productive year
in terms of the further execution of our investment
programme.
• Opened
the hospital
in Samara
IN 2018,
WE CONTINUED
TO ACTIVELY
IMPLEMENT
OUR INVESTMENT
PROGRAMME:
• Opened six
clinics in:
— Vladimir
— Nizhny
Novgorod
— Moscow
— Volgograd
— Tula
— Kazan
• Modernised
• Launched
• Continued
and expanded
two clinics in:
— Moscow
— Kostroma
the construction
of two hospitals in:
— St Petersburg
— Lapino-2
the construction
of our hospital in:
— Tyumen
Strategy
Unrivalled
Growth
In 2018, we opened and expanded 8 clinics and 1 hospital.
This unrivalled growth rate enables us to deliver high-quality
medical services to an evergrowing client base.
PROJECTS
PIPELINE
Hospitals
Clinic
16 17
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
‹‹ COMPLETED
UNDER CONSTRUCTION ››
Saint Petersburg
+22,000 m2
Lapino-2
(Moscow)
+18,500 m2
Clinics
+2,500 m2
Tyumen
+15,000 m2
Clinics
+2,500 m2
3,694
RUB mln total investments
in new facilities in 2018
Nizhny
Novgorod
+600 m2
Yugo-Zapad
(Moscow)
+260 m2
Kostroma
+142 m2
Lefortovo
(Moscow)
+392 m2
Samara
+15,000 m2
Vladimir
+274 m2
Volgograd
+380 m2
Tula
+401 m2
Kazan
+677 m2
Clinics
+2,500 m2
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Strategy
Wide Range of Technologically
Advanced Medical Services
18 19
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
Paediatrics
Treatment of paediatric diseases
(in- and out-patient departments)
Immunisation shots
Home visits
OBGYN
(incl. Deliveries)
Pregnancy care
Maternity services
Gynaecology
Deliveries
Miscarriage treatment
12%
IVF
Surgery for fertility-related problems
Reproductive technology
Preimplantation genetic diagnosis
23%
Non-medical services
34%
3%
Other medical services
Laboratory services
Stem cell storage
Genetic diagnostics
Trauma
Rehabilitation
Urology
Endocrinology
Surgery
Plastic Surgery
Oncology
Therapy
Cardiology
Phlebology
Haematology
Neurology
Dentistry
MRI, CT
Radiology
Ultrasound diagnostics
Other
MDMG focuses on delivering medical assistance to a growing number of
families across Russia and catering its services to the needs of diverse patient
demographics. Our goal is to make sure every customer gets high-quality
personalised care that is as technologically advanced as it is attentive.
Delivering high-quality medical services
throughout Russia
MD Medical Group is a leading private
healthcare company in Russia. We started
as a specialised healthcare provider for
women and children and have become
the sector leader, particularly in terms
of deliveries and IVF cycles.
In response to an increasing demand from
our patients for additional medical services
outside OBGYN and paediatrics, we started
gradually introducing new services in areas
where we believed we could deliver in line
with our high standards.
Today, we have facilities all over
Russia and offer the full range
of healthcare services that any person
may need. Moreover, we cover the full
life cycle. We start with pregnancy care
(preceded by fertility and IVF treatment
if needed), and later provide various
delivery options at one of our five
hospitals. We can treat babies for various
issues, including complex cardiology
conditions, from the first minutes
of their lives. Our paediatricians, working
in dozens of hospitals and clinics, take
care of children until they are 18 years
old. For adult patients we offer a wide
range of services from surgery to cancer
treatment. Our key objective is to provide
for the patients’ comfort and offer
a premium level of service.
A hospital and clinics we opened
in 2018 focus on providing diverse medical
services tailored for the specific demand
patterns we see in the respective locations.
28% was a share of
Other Medical Services
in total revenue
for 2018
CONTENTS
22 Building a Leading
Nationwide Network
24 Hospitals in Focus
28
Interview with Chief Doctor
of Samara Hospital
30 Samara Hospital
32 Tyumen Hospital
34 Lapino-2 Hospital
36 St Petersburg Hospital
38 Market Trends in Russia
NATIONWIDE
FOOTPRINT
41
clinics and
hospitals
23
Russian
regions
Investing
in Strategic
Expansion
With 41 state-of-the-art facilities across Russia, we are able to
offer our high-technology medical services in close proximity
to the homes of millions of patients across 26 cities.*
1 As of publication date
Investing in Strategic Expansion
Building a Leading
Nationwide Network
In 2018, we continued implementing our
development strategy across Russia.
Thanks to our efforts and investment, at
the end of the year, we were operating
5 hospitals and 35 clinics and we continue
to expand our nationwide network of best-
in-class healthcare facilities in both new
and existing regions.
The true highlight of 2018 was the opening
of a new multi-disciplinary hospital
in Samara, the largest facility of its kind
in the Volga region. This greenfield
hospital has significantly strengthened
our leading position in an important and
rapidly growing market in the south-east
of the European part of Russia where we
already had a strong presence.
Throughout the reporting year, we entered
four new markets with the opening
of our first clinics in such major cities as
Nizhny Novgorod, Volgograd, Tula, and
Kazan. We also increased our footprint
in existing markets by opening new clinics
in Vladimir and Moscow (Lefortovo), as well
as expanding and modernising our clinics
in Kostroma and Moscow (Yugo-Zapad),
where we have seen increased demand for
our services.
2018 also marked the launch of construction
of two new hospitals – in Lapino and
St Petersburg – which we plan to commission
in 2020 and 2021, respectively. Our
investment programme in action, which also
includes the ongoing construction of our
hospital in Tyumen that is due to open in April
2019 as well as the opening and expanding
of new clinics, represents our continued
commitment to offer a wide range of world-
class medical services in key Russian regions
where there is strong demand, high incomes
and fundamental support for our business.
Novogereevo
397 m2
Ufa
800 m2
Khodynskoe
Pole
465 m2
Lefortovo
392 m2
St Petersburg
893 m2
Perm
800 m2
Yugo-Zapad
801 m2
OUR
hospitals
Owned
In progress
Savelovskaya
2,048 m2
PMC
27,600 m2
256
beds
41hospitals and
clinics in Russia1
Moscow
Regions
Owned
Rented
Kuntsevo
770 m2
OUR
clinics
Odintsovo
142 m2
191
beds
185
beds
Lapino
42,000 m2
Ufa
33,000 m2
93
beds
Novosibisk
(Avicenna hospital)
10,260 m2
Порядок Госпиталей на развороте с ДНК:
Новосибирск
ПМЦ +
Лапино
Уфа
Самара
Тюмень
Лапино-2
Питер
22 23
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
Tyumen
15,000 m2
164
beds
IDK Hospital
(Samara)
15,000 m2
164
beds
Vladivostok
358 m2
Kazan
677 m2
Tula
401 m2
Lapino-22
18,500 m2
Volgograd
380 m2
88
beds
GROUP
OF CLINICS
Novosibirsk
Avicenna clinics
2,755 m2
Krasnoyarsk, Novosibirsk,
Omsk, Barnaul
ARTMedGroup
2,846 m2
3
clinics
Samara
IDK Medical Company
5,210 m2
5
clinics
5
clinics
178
beds
Nizhny
Novgorod
600 m2
St Petersburg3
22,000 m2
Tyumen
350 m2
Voronezh
343 m2
Ryazan
1,400 m2
Kostroma
209 m2
Novokuznetsk
800 m2
Irkutsk
600 m2
Vladimir
354 m2
Yaroslavl
822 m2
We serve patients
in 26 cities and
23 regions in Russia*
1 As of publication date
2 Expected opening in 2020
3 Expected opening in 2021
Investing in Strategic Expansion
Hospitals
in Focus
PERINATAL MEDICAL
CENTRE (PMC)
ANNUAL CAPACITY
OF PMC:
Since its launch in 2006, PMC – the first private maternity
hospital in Russia – has expanded its range of services,
implemented innovative technologies, installed new
equipment, and delivered over 32,000 babies.
In addition to a wide range of in-patient
and out-patient services for mothers and
children, PMC offers laboratory research,
diagnostics and assistance, a stem cell
bank and other services.
This 256-bed hospital has cutting-edge
equipment including the latest MRI and CT
technology.
In August 2018, MDMG launched
reconstruction works at PMC. Following
their completion, the hospital will offer
expanded services through new surgery,
urology, traumatology and orthopaedics,
x-ray endovascular diagnostics and
treatment, and cardiology departments.
CAPEX
2.5
RUB bln
Beds
FTE1
Deliveries
IVF
256
904
3,500
2,000
In-patient days
32,120
Out-patient treatments
283,000
1 FTE – actual full-time equivalent
as of December 2018
24 25
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
LAPINO
HOSPITAL
Lapino, our largest hospital, is located near Moscow.
It provides patients with great comfort and high-quality
services. Surrounded by green space, this 191-bed
hospital is capable of providing 639,540 out-patient
treatments and 3,000 deliveries per year.
ANNUAL CAPACITY
OF LAPINO HOSPITAL:
Beds
FTE1
Deliveries
IVF
191
1,053
3,000
1,000
In-patient days
We have invested RUB 5.2 billion in
the Lapino hospital, which is one of the
largest private investments in healthcare
in the history of Russia.
obstetrics and gynaecology, IVF, paediatrics,
as well as diagnostics, urology, surgery,
trauma and rehabilitation not only for
mothers and their children but for everyone.
28,470
The 42,000 square-metre hospital offers
a wide range of services in the areas of
In 2018, a new ophthalmic surgery
department opened at Lapino.
Out-patient treatments
CAPEX
5.2
RUB bln
639,540
1 FTE – actual full-time equivalent
as of December 2018
Investing in Strategic Expansion
Hospitals
in Focus
MOTHER&CHILD
UFA
In 2018, our first regional hospital continued its
growth in the capital of Bashkortostan, one of Russia’s
leading regions in terms of gross regional product.
This 33,000 square-metre hospital
was funded mainly by the proceeds of our
successful IPO in 2012, the project was
completed on time in late 2014 and with
an investment of RUB 4.4 billion.
Mother&Child Ufa offers services for
the whole family, from deliveries, IVF,
gynaecology and obstetrics, paediatrics
and neonatology to surgery, urology,
plastic surgery and diagnostic services.
It includes Bashkortostan’s first private
maternity hospital and stem-cell bank.
CAPEX
4.4
RUB bln
ANNUAL CAPACITY
OF MOTHER&CHILD UFA:
Beds
FTE1
Deliveries
IVF
185
772
2,000
1,100
In-patient days
30,295
Out-patient treatments
290,800
1 FTE – actual full-time equivalent
as of December 2018
26 27
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
MOTHER&CHILD
NOVOSIBIRSK
Since the acquisition of Avicenna, the largest private
healthcare chain in Russia outside Moscow and
St Petersburg, in Q4 2014, the Novosibirsk hospital
has seen strong demand for its high-quality services
from the residents of Novosibirsk and nearby regions.
As the existing facility reached maximum
capacity, MDMG commissioned a new
state-of-the-art wing in February 2017,
creating the largest private healthcare
facility in Siberia.
Core services offered at Mother&Child
Novosibirsk are obstetrics and
gynaecology, surgery, urology and
ophthalmology. The hospital also offers
out-patient and diagnostics services
in nearly all therapeutic areas. As a result
of the expansion, the hospital offers
a range of new services, including those not
currently available in the city or the region.
CAPEX2
1.2
RUB bln
ANNUAL CAPACITY
OF MOTHER&CHILD
NOVOSIBIRSK HOSPITAL:
Beds
FTE1
Deliveries
IVF
93
837
1,000
1,800
In-patient days
22,630
Out-patient treatments
228,900
1 FTE – actual full-time equivalent
as of December 2018
2 CAPEX of new wing opened in February 2017
Investing in Strategic Expansion
Interview with Chief Doctor
of Samara Hospital
28 29
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
able to take into account various factors
and ensure effective implementation from
the design stage through to commissioning.
The hospital was originally created as
a multi-disciplinary centre, which is reflected
in the well-thought logistics, for example,
patient flows do not intersect here. All
departments and all kinds of state-of-the-
art equipment are concentrated in one
building, which is optimal for logistics and
efficient use of time. I would also like to
stress the importance of the round-the-
clock work of diagnostic departments.
As a result, the Samara hospital
became the first model of the regional
Mother&Child hospital. This valuable
experience is already being used for
a “twin” hospital in Tyumen. We have been
constantly in touch with colleagues who
are implementing the Tyumen project and
have been providing our recommendations
on the optimisation of the project on
the basis of our experience in Samara.
50%share of Other
Medical Services
Sergey Arabadzhyan
Chief Doctor of Samara hospital
Could you share the 2018 results for
the new hospital?
2018 was a very busy year for us. In March,
in line with the announced schedule,
we opened a hospital in Samara and
immediately began ramping up activity
here. We are very pleased with the results
of 2018, operational performance exceeded
our expectations and we demonstrated
the strongest operational results over
the first 10 months of operations compared
with any other hospital of the Group.
In 2018, we already managed to carry out
five unique operations in the Samara Region,
which simply have no analogues here, in such
areas as obstetrics, surgery, orthopaedics,
urology, and X-ray endovascular surgery.
In addition, we conducted a complex
operation at the junction of endovascular
surgery and orthopaedics which became
the 14th such operation in the world!
Why was Samara chosen as the location
for the new hospital?
The Group’s regional development
strategy involves the construction
of hospitals in regions where we
already gained experience through our
clinics. And thanks to the acquisition
of the IDK Medical Company in 2013, we
had a good understanding of the market
in the Samara Region. We already had
5 clinics under our management here, which
represented the most large-scale presence
of the Group across the regions.
In addition, Samara is one of the largest
cities in Russia and also among the ten most
populated, therefore there is a high demand
for medical services. This made it an obvious
choice as a location for our fifth hospital.
It is another greenfield project for
the Group. What are the advantages
of this approach?
Indeed, the Samara hospital was built 'from
scratch’, and owing to the Group's unique
experience in the construction of large
hospitals in regions of Russia, we were
Who are your patients
at the Samara hospital?
We treat all family members, because our
hospital is multi-disciplinary and provides
a wide range of medical services.
In geographical terms our patients
include, not only residents of Samara,
Tolyatti and the rest of the region, but
also residents of the neighbouring regions
and even Kazakhstan. This is because we
are relatively close to the state border, we
are located closer to those in the Northern
part of Kazakhstan than the capital
of the country. At the same time, patients
appreciate the high standards adopted
within the Group – we provide the level
of quality found in Mother&Child hospitals
in Moscow. We are highly customer-
focused and apply our personalised
approach to each patient.
There is also a wide range in the level
of income of our patients. In addition to
patients who pay for services themselves,
many come to us as part of Mandatory
Health Insurance (MHI) and Voluntary
Health Insurance (VHI) programmes.
The availability of our services is also
enhanced as in 2018 we engaged a bank
aggregator, through which patients can
get interest-free instalments on our
medical services, which also contributed
to the growth of patient flow.
urology, and cardiovascular surgery.
I believe that at the moment our range
of MHI services is the largest in the Group.
This is an extremely important point.
For the patients, the MHI programme
increases the availability of high-
tech medical care. For the hospital,
the programme makes it possible to
increase occupancy and revenue.
As a multi-disciplinary hospital, what
combination of the Group’s core services
and other medical services for the whole
family do you offer?
Indeed, we have specifically created
a multi-disciplinary hospital, while also
paying attention to the MDMG’s core
services. Today, OBGYN and IVF account
for about 50% of our services and a wide
range of other services account for
the other 50%.
But more importantly, we are able to
respond effectively to changes in patients'
needs. The hospital was created in such
a way that we are able to quickly shift
the balance to react to the population's
changing needs. The ability to balance
the structure of services is an important
factor of our success.
How do you cooperate with the public
sector?
We are very selective in
our investment targets
which means we choose
regions for our business
according to strict criteria.
in particular in oncology, obstetrics,
urology, traumatology. From time
to time, state medical institutions
refer patients with complex medical
conditions to us. The hospital
is a clinical base for several departments
of Samara State Medical University. We
hold scientific conferences and master
classes for the medical staff of other
institutions. Generally, the activities
of the hospital are recognised at both
local and federal levels on a regular
basis.
In turn, we benefit from state support.
Participation in the MHI programme
is particularly important. Moreover,
during the construction of the hospital,
local authorities built the utilities
infrastructure, along with roads to
the hospital and helped in every possible
way to implement the project.
What role does MHI play in the way
the hospital operates?
It is fair to say that our cooperation with
the state is mutually beneficial.
How do you interact with other
institutions of the Group?
We have received extensive quotas for
MHI on a wide range of medical services,
in particular, in the areas of IVF, oncology,
Our hospital fulfils an important social
function in the region. Some of our
services are unique to the Samara Region,
We are constantly in contact with our
colleagues on a wide range of issues.
BIOGRAPHY
2018 – Present – Chief Doctor of Mother&Child Samara hospital
2017 – 2018 – Deputy CEO for Business Development at MDMG’s IDK Medical Company
2012 – 2018 – Head of Obstetrics Department of Lapino hospital
2012 – 2014 – Commercial Director of Lapino hospital
2010 – 2012 – Obstetrician Gynaecologist at PMC’s Pathologic Pregnancy Department
2006 – 2012 – Paramedic at a first-aid station in Moscow
EDUCATION
2008 – Received a degree in General Medicine from Pirogov Medical University
2016 – Received an MBA degree from Stockholm School of Economics
Let me start with the fact that we have
a unique personnel policy in our hospital,
in a number of areas we hired local
specialists from Samara, in other areas,
we invited employees of the Group from
Moscow to move to Samara.
We regularly consult on complex medical
issues, within the Group we have
opinion leaders and unique specialists
in different areas. Mark Kurtser regularly
gives his advice on OBGYN, our experts
in urology are from Novosibirsk, we
ourselves in the Samara hospital are
a centre with unique competencies
in the field of orthopaedics and
oncology.
Investing in Strategic Expansion
Mother&Child
Samara Hospital
Opened in March 2018, Samara hospital is the largest facility of its
kind in the Volga region – an important and growing market. The new
hospital provides both our core services for women and children and
diverse medical services for all family members.
30 31
The launch of the major Mother&Child Samara hospital
demonstrates our ability to execute strategically important
projects on time and on budget.
Dr Mark Kurtser
CEO
2Q 2016
April 2017
February 2018
Start of construction
Construction works
completed
Equipment
installed
March 2018
OPENING
INVESTMENTS
3.2RUB bln
Floor plan
Floor 1
• Admissions department
• Adult’s out-patient department
• Children’s out-patient department
• Radiology department
• Functional diagnostics department
• Ultrasound diagnostics department
• Small operating theatre
(urology/traumatology)
• Small operating theatre (ENT)
• Treatment room
Floor 2
• IVF department
• Children’s in-patient department
• Women’s centre
• Adult’s intensive care unit
• Surgery department
• Mother’s school
Floor 3
• Deliveries department
• Surgery department
• Pregnancy pathology department
• Postnatal department
Floor 4
• Neonatal intensive care unit
• Second stage developmental
care department
• Postnatal department
Floor 5
• Surgery department
• Gynaecology department
• Internal medicine department
• Small operating theatre (gynaecology)
• Cardiology intensive care unit
Floor 6
• Diagnostics laboratory
• Administration
KEY FIGURES AND ANNUAL CAPACITY
15,000
sq m of space
164
beds
2,500
deliveries
1,200
IVF cycles
8,000
surgical operations
220,000
out-patient treatments
Investing in Strategic Expansion
Mother&Child
Tyumen Hospital
By opening our sixth hospital In Tyumen, we are expanding
out footprint in one of Russia’s most developed regions,
where our clinic has operated since 2017.
June 2017
February 2019
Start of
construction
Construction works
completed
INVESTMENTS
3.2RUB bln
32 33
Our approach to entering a new region – first opening a
clinic to build solid experience, strong brand awareness
among locals and a wide client base, and then opening
a hospital - has proven its efficiency in practice, and we
are pleased that Tyumen has become the next location of
MDMG’s presence in Russia.
Dr Mark Kurtser
CEO
March 2019
Equipment
installed
April 2019
OPENING
Floor plan
Floor 1
• Admissions department
• Adult’s out-patient department
• Children’s out-patient department
• Radiology department
• Functional diagnostics department
• Ultrasound diagnostics department
• Small operating theatre
(urology/traumatology)
• Small operating theatre ENT
• Treatment room
• 24/7 emergency room
Floor 2
• IVF department
• Children’s in-patient department
• Women’s centre
• Physiotherapy department
• Operating and intensive care unit
(incl. cardiology intensive care unit)
Floor 3
• Deliveries department
• Surgery department
• Intensive care unit
• Pregnancy pathology department
• Postnatal department
Floor 4
• Neonatal Intensive care unit
• Postnatal department
• Second stage developmental care
department
Floor 5
• Surgery department
• Gynaecology department
• Internal medicine department
• Traumatology department
• Endovascular surgery department
• Small operating theatre (gynaecology)
Floor 6
• Diagnostics laboratory
• Administration
• Mother’s school
KEY FIGURES AND ANNUAL CAPACITY
15,000
sq m of space
164
beds
2,500
deliveries
1,200
IVF cycles
8,500
surgical operations
220,000
out-patient treatments
Investing in Strategic Expansion
Mother&Child
Lapino-2 Hospital
Upon opening, Lapino-2 will offer the following services which are new
for the Group – neurosurgery, cardiovascular surgery, chemotherapy,
stomatology and oral and maxillofacial surgery.
INVESTMENTS
4.2RUB bln
34 35
We are bringing our Lapino hospital to an entirely new
level by expanding its capabilities to offer high-tech
medical services in different healthcare areas. We expect
that the expanded healthcare facility created in line with
the latest technologies and our track-record of launching
new hospitals from scratch will significantly contribute to
the Group’s performance.
Dr Mark Kurtser
CEO
Summer 2020
OPENING
May 2018
Start of
construction
Floor plan
Floor 1
• Admissions department
• Radiology department
• Functional diagnostics department
• Ultrasound diagnostics department
• Adult’s out-patient department
• Clinical diagnostics laboratory
Floor 2
• Adult’s out-patient department
• Children’s in-patient department
• Endoscopy department
• Dentistry, including an operating theatre
• Surgery department (6 multi-disciplinary
operating theatres)
• Intensive care unit
• Bacteriological laboratory
Floor 3
• In-patient department
Floor 4
• In-patient department
(traumatology, cardiology, neurology)
Floor 5
• In-patient department
(internal medicine)
Floor 6
• Administration
KEY FIGURES AND ANNUAL CAPACITY
18,500
sq. m of space
88
beds
380
FTE1 (in 2021)
27,000
in-patient days
15,000
surgical operations
200,000
out-patient treatments
l
i
t
n
e
a
v
u
q
E
e
m
T
-
i
l
l
u
F
1
Investing in Strategic Expansion
Mother&Child
St Petersburg Hospital
We opened our first clinic in St Petersburg in 2011 and significantly
expanded it in 2017. Based on our local experience and analysis of our
clinic’s performance in St Petersburg we believe there is significant
potential demand for high-tech medical services in an expanded format.
3Q 2018
Start of
construction
INVESTMENTS
5.0RUB bln
36 37
We see the construction of a multi-disciplinary hospital in
St Petersburg – a city with strong medical traditions and
the second largest healthcare market in Russia – as both a
great responsibility and an honour.
Dr Mark Kurtser
CEO
2021
OPENING
Floor plan
Building 1
Multi-disciplinary
in-patient facility
• Admissions department
• Radiology and endovascular diagnostics
and treatment department
• Cardiology department
• CT and MRI
• Paediatrics department
• Diagnostics and treatment centre
• Ultrasound diagnostics department
• IVF department
• Children’s surgery department
• Surgery department
• Surgery department
• Gynaecology department
• Intensive care unit
• Deliveries department
• Pregnancy pathology department
• Postnatal department
• Children’s intensive care unit
• Second stage developmental care
department
• Administration
Building 2
Out-patient facility
• Children’s centre
• Women’s centre
• Radiology department
• Clinical diagnostics laboratory
• Administration
KEY FIGURES AND ANNUAL CAPACITY
22,000
sq. m of space
178
beds
2,500
deliveries
1,200
IVF cycles
35,000
in-patient days
350,000
out-patient treatments
38 39
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
Private healthcare sector
Investing in Strategic Expansion
Market Trends
in Russia
State economy overview
Health spending, % of GDP, 2017 or latest available
Government / compulsory
Voluntary
17
16
15
14
13
12
11
10
9
8
7
6
5
4
3
2
1
2.3%
3.0%
Indonesia
India
Turkey
China
Mexico
Israel
Korea
South
Africa
Italy
Brazil
Australia
UK
Austria
Norway
Canada
Japan
Germany
France
USA
Russia
• In 2018, the Russian economy
expanded at a rate of 1.6%1 in line with
the previous year’s positive trend.
• Last year, with inflation and interest
rates remaining low, wages and pensions
continued to grow in real terms,
supporting household consumption1.
• Meanwhile, the overall business climate
in Russia improved in 2018, resulting
in the country’s four-position climb2
in the Doing Business rating, annually
published by the World Bank. Ranked as
#31, Russia received a better score than
some other developed economies, such
as France, the Netherlands, Switzerland
and Japan.
• In May 2018, President Putin announced
his Decrees that highlighted a roughly
RUB 1 trillion ($20.4 billion) increase3
in spending on healthcare, education
and infrastructure, as a way to further
advance the economy and trigger GDP
growth rates in the next year.
• The national healthcare project that
is based on May Decrees prioritises:
— Increasing birth rate from 1.62 births
per woman in 2017 to 1.7 by 2024;
— Increasing life expectancy from
73 years in 2018 to 78 years by
2024 and to 80 years by 2030;
— Lowering the rate of deaths
from cardiovascular diseases and
oncological conditions.
MD Medical Group’s services widely target
medical issues associated with the key
goals of the project.
• Russia’s relatively low level of healthcare
• The Russian private healthcare market
• Among the reasons why patients prefer
expenditure as a share of GDP
in comparison to other countries
signals that additional investment
has a significant potential to advance
the country’s healthcare system
in the years to come.
is developing in the environment
of growing popularity of fee-for-service
medicine. In 2018, in 56.6% of state
healthcare facilities the volume of paid-
for medical services increased4. This trend
normalises paying for healthcare services,
making patients more likely to seek
treatment at private clinics.
With MDMG’s wide network across
key Russian regions, the Group is well-
positioned to satisfy the additional
demand from patients.
• According to the survey conducted by
VTsIOM5 in 2016-2017:
— 42% of Russians paid for medical
services in state clinics;
— 32% sought medical assistance
in private healthcare centres.
private clinics were:
— #1 – Quality of medical assistance
— #2 – Overall experience
— #3 – Service speed
— #4 – Lack of alternative
• The fee-for-service medical sector
is expected to grow by 9.3% in 2018,
amounting to RUB 684.6 billion6.
However, only 4% of Russians are
fully dependent on private clinics7 –
a sign of unrealised market potential,
favouring MDMG’s further private
service expansion.
• Factors that can contribute to
the development of the private
healthcare sector:
— MHI tariff increase: 40% of patients
are willing to receive medical
assistance at private clinics under MHI5
1 “Global Economic Prospects – Darkening Skies”
report by World Bank, January 2019
3 “Putin expands on Russia's economic structure”,
TASS, 20 December 2018
2 “Doing Business 2019: Training for Reform”
report by World Bank, November 2018
Organisation
for Economic Cooperation
and Development
4 All-Russia People's Front Survey, 2018
5 Health Index Survey, Russian Public Opinion
Research Center (VTsIOM), 2017
6 “Russian medical services market analysis
in 2014-2018, the forecast for 2019-2023”,
BusinesStat, 2018
7 Survey “RBC Market Research", 2017
— Expansion of private clinics around
the country: Today, every 5th private clinic
chain is located in Moscow
— Transition to evidence-based medicine:
An increase in quality of services will
attract sceptical customers who lack trust
in the private sector’s integrity
— Technological development: Expanding high-
tech medical service offering by employing
state-of-the-art equipment and qualified
professionals to make care more effective
as well as providing such services under
the mandatory health insurance (MHI) to
make them more accessible
— Medical tourism: Export volume of medical
services is expected to grow to $1 billion by
2024, attracting 0.5 million foreign patients
by 2025.
In February 2019, Russia’s Ministry of Health
extended the list of high-tech medical services
that private providers can be compensated
for under the mandatory health insurance
(MHI). MDMG has been an active participant
of the programme bringing advanced and more
affordable care to patients within MHI. MDMG
has already seen the share of IVF cycles under
state insurance grow. The new list is expected to
facilitate an increase in procedures that focus on
cardiovascular and internal organs – the segments
that the company sees as drivers of its future
growth.
In March 2019, Russian Government announced
the initiative to subsidize high-tech medical
services that are not compensated under
the mandatory health insurance (MHI).
The subsidies will be allocated to medical centres
in 2019-2021 with RUB 3.8 billion reserved for
2019 alone.
Medical tourism is a part of a revised state
"Healthcare Development" programme that
aims to uncover Russia’s potential as a major
destination for medical treatment for patients
from all over the world. According to the World
Tourism Organisation, Russia ranks as the 5th
most attractive medical and wellness tourism
destination in the world, and only the 59th in terms
of its ability to utilise such potential. With additional
investment and regulatory changes, such as
simplifying the process of obtaining a Russian
visa for foreign patients, medical tourism can
efficiently advance the private healthcare industry.
CONTENTS
42 Operational Review
46 Financial Review
Medical services
for all family
members
Leader of women’s
and children’s
healthcare in Russia
#1 In IVF
in Russia
Continued Strong
Performance
2018 – was our best year so far in terms of key
financial and operational metrics
Continued Strong Performance
Operational
Review
DELIVERIES
In 2018, the number of deliveries grew 7%
year-on-year to 7,277 despite challenging
demographics in Russia and 5.4% year-on-
year decline in deliveries across the country.
WEATHERING THE
DEMOGRAPHICS STORM
MD Medical Group is well-known
for setting a uniquely high standard
in Russia for the level of quality, comfort
and care in deliveries. This has enabled
us to grow the number of deliveries we
perform year by year even amid some
challenges in the deliveries rate in Russia as
a whole. Deliveries volumes at MDMG are
also supported by the continued leadership
in Russia’s IVF segment – many patients
who become pregnant at our numerous
IVF facilities in Russia later deliver at one
of our hospitals.
BRINGING
HIGH-QUALITY SERVICES
TO THE REGIONS
We have continued expanding our best-
in-class hospital network, bringing a wide
range of our high-quality services, including
deliveries, to the Russian regions.
• As ramping up continued at the existing
regional hospitals in Ufa and Novosibirsk,
the number of deliveries at the facilities
in 2018 grew 25% and 39% year-on-
year, respectively.
• In March 2018, we opened our first
hospital in Samara, which during the first
10 months of operations already took
411 deliveries.
• In September 2018, we launched
the construction of our first
hospital in St Petersburg. Upon
the commissioning in 2021, it will have
an annual capacity of approximately
2,500 deliveries.
42 43
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
IVF
The number
of deliveries
in 2018 was
7,277
We grew our deliveries
by 7% year-on-year in
2018 in part thanks to
the further improvements
in the performance of
our expanding regional
hospital chain.
In 2018, the total number of IVF cycles
slightly decreased by 1% year-on-year,
or by just 170 cycles, to 16,636, amid
growing competition as IVF becomes
more accessible. Nevertheless, MDMG
remains Number 1 IVF player in Russia and
covers more regions than any other private
healthcare player in the country.
Despite the decline in IVF volumes
and an increase in the share of cycles
carried out under the Mandatory Health
Insurance (MHI) programme in 2018,
the average check in this segment
grew 8% year-on-year, mainly due to
the expansion of the range of IVF services
on a commercial basis. This contributed to
a revenue increase of 7% year-on-year to
RUB 3,488 mln.
The number of IVF
cycles carried out
in 2018 was
16,636
HIGH-TECH SERVICES
ACROSS RUSSIA
We provide our customers with high-
quality fertility services including:
• Diagnosis of possible causes of infertility
within a family.
• Preimplantation genetic diagnosis.
• Effective treatment for one or both
spouses.
• Individually tailored programmes.
• Achievement and maintenance
of pregnancy.
• Childbirth assistance.
• Post-natal healthcare assistance for
the child up to 16 years.
• A team of highly qualified experts
in areas of reproduction, gynaecology,
immunology etc., providing medical
expertise for every situation.
• A range of alternative fertility services
including auxiliary hatching, donor sperm
insemination, ovulation stimulation etc.
Our facilities use cutting-edge specialised
equipment in the provision of IVF services.
Our individual approach to each patient
ensures a high standard of service, as well
as a high probability of success.
SETTING A STANDARD IN THE MARKETWe offer a range of unmatched services that set us apart from the market:• We are expanding our regional network of hospitals, bringing a wide range of high-level services, which patients can expect in our Moscow facilities, to the locations across the country.• We were the first in Russia to offer women the opportunity to have the same doctor who supervised their pregnancy go on to conduct the delivery.• We offer unique anaesthesiology resources and optimal pain relief for each period of labour.• We provide a combination of classical obstetrics and advanced medical technologies.• Our patients benefit from individually tailored birthing programmes.• And we offer a unique “home birth in hospital” in our luxury in-hospital apartments.WIDE CHOICE OF DELIVERY OPTIONSWe do everything possible to ensure that our clients can give birth naturally, even following surgery or caesarean section.We offer a wide range of different birth options for future mothers to choose from:• Natural physiological childbirth.• Traditional or horizontal natural child birth.• Vertical birth.• Water birth.• “Home birth” in hospital in one of our luxury apartment rooms, furnished in the style of a home bedroom with an on-hand medical team and equipment.• Partnership birth, allowing for loved ones to be present.• Natural birth after caesarean or previous gynaecological surgery.• Surgical birth via planned or emergency caesarean section.POST-DELIVERY SERVICES• Neonatal intensive care unit.• Neonatal pathology unit.• Premature babies unit.• ER unit with fleet of ambulances.• 24/7 emergency labour service.• Breastfeeding support and assistance for patients suffering from lactostatis or hypogalactia.• Stem cell bank, with international standards in collection, testing, processing and storage of cord blood including transportation services even if the birth is at another centre.• New parents school providing assistance and birth guidance for future parents-to-be.
Continued Strong Performance
Operational
Review
44 45
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
IN-PATIENT TREATMENTS
OUT-PATIENT TREATMENTS
In 2018, the total number of in-patient treatments increased by 18% year-on-year to 72,371
which made up 17% of the Group’s revenue for the year.
In 2018, the total number of out-patient treatments increased by 6% year-on-year
to 1,618,149 which made up 31% of the Group’s revenue for the year.
OBGYN
PAEDIATRICS
• Total number of OBGYN in-patient
treatments slightly decreased by 3%
year-on-year to 24,536.
• However, revenue for the division
increased by 6% year-on-year.
• Total number of paediatrics in-patient
treatments increased by 17% year-on-
year to 21,757.
• Revenue for the division increased by
12% year-on-year.
• Division accounted for 7% of the total
• Division accounted for 3% of the total
revenue for 2018.
revenue.
• Drivers of growth were hospitals
• Drivers of growth were region hospitals.
in Ufa and Samara.
Other medical services
In-patient treatments
17,389
8,901
10,400
3,791
‘14
‘15
‘16
‘17
‘18
62%
CAGR 2014–2018
26,078
OTHER MEDICAL
SERVICES
• The total number of other medical in-
patient treatments grew significantly by
50% year-on-year to 26,078.
• Revenue from other in-patient medical
treatments increased by 28% year-on-year.
• Division accounted for 7% of the total
revenue.
• Lapino continued ramping up
departments of interventional cardiology
and cardiovascular surgery, neurology
and therapy.
• Further advances in reaching design
capacity at our Ufa hospital were driven
by improvements in surgery, therapy and
oncology.
• Novosibirsk hospital saw improvements
in cardiology, therapy, urology and
oncology.
• Samara demonstrated strong
performance in oncology, traumatology
and cardiology.
PAEDIATRICS
• Total number of paediatrics out-patient
treatments remained roughly the same –
430,086 treatments.
• Revenue for the division increased by 1%
year-on-year.
• Division accounted for 9% of the total
revenue.
• Key growth triggers were performance
of our region hospitals in Ufa,
Samara and Novosibirsk.
Other medical services
Out-patient treatments
570,064
485,631
377,641
224,812
29%
CAGR 2014–2018
630,288
‘14
‘15
‘16
‘17
‘18
OTHER MEDICAL
SERVICES
• The total number of other out-patient
treatments increased by 11% year-on-
year to 630,288.
• Revenue for the division increased by
30% year-on-year.
• Division accounted for 10% of the total
revenue.
• The largest share in other medical
out-patient growth was related to
diagnostic centre as well as a number
of trauma treatments.
• The increase in the volume of services
was supported by the diagnostics
departments at our regional hospitals
and Lapino.
OBGYN• Total number of OBGYN out-patient treatments increased by 6% year-on-year to 557,775.• Revenue for the division increased by 3% year-on-year.• Division accounted for 12% of the total revenue .• Drivers of growth were region hospitals. Continued Strong Performance
Financial
Review
In 2018, we continued to improve our financial
performance and achieved another set of record-
breaking results. This was made possible due to our
strong operating performance and continued efficient
implementation of our development strategy across
Russia.
46 47
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
REVENUE
EBITDA
CAPEX
DEBT
Revenue grew by 9% year-on-
year to RUB 14,937 mln compared
to RUB 13,755 mln in 2017 due to
the following factors:
• Continued capacity utilisation growth
at the hospitals in Lapino, Ufa and
Novosibirsk.
• Opening of a hospital in Samara.
• Improved performance of the Siberian
clinics acquired in 2016.
In 2018, the contribution of regional clinics
and hospitals to overall revenue continued
to grow and amounted to 41%, mainly due
to increased revenue from the hospitals
in Ufa, Novosibirsk and Samara, as well as
from the Siberian clinics.
EBITDA for the year amounted to RUB
4,314 mln, up 4% year-on-year due to:
• Continued capacity utilisation growth at
the hospitals in Lapino, Ufa, Novosibirsk.
• Opening of a hospital in Samara.
• Improved performance of the Siberian
clinics acquired in 2016.
• Strict cost management.
EBITDA MARGIN
EBITDA margin for the year amounted
to 29%
Key major investments in 2018 included:
• Construction of a new hospital in Tyumen
Debt as of the end of 2018 amounted to
RUB 5,665 mln.
(RUB 1,733 mln).
• Construction of a hospital
in Samara (RUB 676 mln).
• Start of construction of a new hospital
Lapino-2.
• Start of construction of a new hospital
in St Petersburg.
• Reconstruction work in PMC.
• Repairs and small projects.
Net debt was RUB 2,950 mln, up 43%
compared to 31 December 2017.
This increase was mainly due to
the construction of new hospitals in Samara,
Tyumen and start of construction
new hospital Lapino-2 and hospital
in St Petersburg.
Despite higher net debt, net debt-to-
EBITDA ratio for 2018 was at comfortable
level of 0.7x, slightly up from 0.5x a year
before.
REVENUE, RUB mln
EBITDA, RUB mln
EBITDA margin
EPS, RUB
+9%
14,937
+4%
4,314 29% 36
Recently opened and
acquired medical
facilities play a
significant role in our
overall performance.
This demonstrates
that we are carefully
taking the right
steps as part
of our strategic
development.
Revenue, RUB mln
24%
CAGR
2012-2018
EBITDA
42%
13,755
14,937
12,179
9,507
7,201
5,673
4,061
2,675
2,083
1,694
1,586
28%
29%
28%
30%
30%
4,165
3,670
17%
CAGR
2012-2018
29%
4,314
'12
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'14
'15
'16
'17
'18
'12
'13
'14
'15
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CONTENTS
50 Our People
52 Corporate Social Responsibility
54 Shareholder Equity
CSR_shmutz
Doctors
2,746
Other medical staff
2,448
Other staff
2,155
7,349
total number
of our employees
Corporate
Social Responsibility
Our contribution to our people and our local communities stretches far
beyond health
Corporate Social Responsibility
Our
People
At the centre of our continued growth and strengthening of our market leadership are
people. 24/7, our highly qualified and talented personnel, from doctors to the management
team, work hard to ensure the long-term success of our business. In return, we provide
our staff with a comfortable and supporting working environment, competitive wages and
social packages, as well as broad possibilities for further professional growth.
PERSONNEL
We never stop raising the already high level
of expertise that our doctors and other
employees have. We primarily accomplish
this thanks to our personnel training and
development structure. Our HR policy
is aimed at the following:
• Retention of existing staff and continuous
search for highly skilled employees.
• Development of the personnel
management system.
• Selection of the most talented students
for education in residence at our facilities.
For this purpose, since 2015 we have
implemented a special project. In 2018,
8 people completed their studies
in residency within the framework
of the project; 17 current participants will
finish their studies in 2019.
• Opportunities for personal and career
growth.
• Constant monitoring and adoption
of the best available technologies.
• Provision of the state-of-the-art
equipment via regular upgrades.
• Placing the best staff in leading positions
at the right time to maximise potential
and encourage internal growth.
• Provision of better working conditions to
maintain low staff turnover.
• Incentive programmes for employees.
• Training programmes across various fields
as part of our corporate education system.
AMONG OUR TRAINING PROGRAMMES
WE HAVE PROVIDED STAFF WITH:
• Webinars, featuring online
training – in 2018, MDMG doctors carried
out 25 webinars for their colleagues
focusing on relevant topics within OBGYN
and prenatal diagnosis, urology and IVF.
• Career enhancement courses.
• Short-term thematic advanced training.
• Business trips for specialists from
Moscow to help specialists in the regions
take over the leadership of regional
hospitals.
• Participation in international exhibitions,
conferences, and symposiums.
• Training centre, a system of improving
soft skills and knowledge acquisition
across different areas.
COMPLETION OF LONG-
TERM MANAGEMENT
INCENTIVE PROGRAMME
In 2018, we successfully completed our
long-term share incentive programme
aimed at senior management and key
personnel on achieving all KPIs set out in it.
The programme was aimed at achieving
closer alignment of interests between
management and shareholders and
increasing management’s motivation to
build sustainable shareholder value over
the long term. In total, the programme had
40 participants.
50 51
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
PERSONNEL FIGURES (AS OF DECEMBER 2018)
Total number of employees
Total number of employees
Total number of doctors
Total number of doctors
FTE
Headcount
5,045
4,651
5,673
5,254
6,346
6,302
5,807
6,801
7,349
6,842
FTE
Headcount
1,924
2,062
1,405
1,575
2,378
2,521
1,792
1,897
2,746
2,092
'14
'15
'16
'17
'18
'14
'15
'16
'17
'18
Employees
Employees
Full-timer
Part-timer
5,543
1,806
Personnel structure
Personnel structure
Doctors
2,746
Other medical staff
2,448
Other staff
2,155
Payroll structure
Payroll structure
Doctors
Other medical staff
Other staff
25%
29%
25%
26%
Doctors by speciality
Doctors by speciality
16%
Obstetricians
Reproductologists
Pediatricians
Other doctors
340
253
241
1,258
60%
2,092
12%
12%
Doctors qualifications
Doctors qualifications
5%
PhD
Professors
607
29
636
95%
75%
37%
7,349
7,349
33%
MDMG's success in the market is the
result of a high level of professionalism
of our employees. By continuously
improving their expertise, MDMG
employees are driving the company
forward day after day.
49%
Corporate Social Responsibility
Corporate
Social Responsibility
52 53
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
Our role as a responsible corporate citizen is important to us and is something we discuss
regularly at Board and management meetings. Our contribution to our people and our local
communities stretches far beyond health.
KEY CSR ACTIVITIES IN 2018
OUR MISSION
OUR TECHNOLOGY
OUR PROFESSION
Our deep commitment to CSR is not just
a requirement for a major listed company
and employer. Rather, it reflects our
strong belief that creating value for our
stakeholders is critical for the long-term
sustainable growth of MDMG.
OUR PEOPLE
We invest heavily in training and educating
our staff, creating opportunities for them
to learn from the best medical practitioners
in the world. Many of them have worked
with the Group since its foundation, and
we recognise and reward this dedication by
creating an environment that encourages
professional and personal growth.
We aim to maximise efficiency and
minimise patient stress by constantly
updating our technology and using
the most innovative procedures. Examples
include foetal surgeries to correct
spina bifida during pregnancy while
the baby is inside the womb. We also
use endovascular methods to correct
congenital heart defects of newborns.
OUR COMMUNITIES
As we continuously expand our network
throughout Russia and bring often unique
services to new regions, we not only
provide people with high-quality services
near their homes but also encourage
every employee to be helpful in their own
communities.
Above all, we recognise that one
of the most important roles we can
play as a leading healthcare company
in Russia is to contribute our resources,
time, expertise and know-how to raise
the overall standard of the healthcare
profession in Russia. We regularly hold
open-access webinars for doctors and
patients across the country where we
address key issues in women’s and
children’s health, thereby helping to raise
the quality of medical services provided to
patients all over the country.
PMC DONOR'S DAY
• MD Medical Group’s PMC hosted
two Donor Days in 2018. 40 people
participated in the donor event on
30 May by each donating 400 grams
of blood. On 17 December, 31 donors
contributed 12.4 litres.
LAPINO DONOR’S DAY
• In 2018, Lapino hospital hosted
two donor events attended by over
100 donors. On 22 May, 56 people
donated 22.4 litres of blood. Additional
57 participants each donated 400 grams
of blood on 30 November.
“WISH TREE” CHARITY
EVENT
• In December 2018, employees of IDK
Samara, PMC and Lapino hospital
participated in a charity event “Wish
tree” by purchasing gifts for orphaned
children.
• Children of Zaprudnenskaya boarding
school, Municipal Budget Institution
“Leisure centre “Mir” and Dmitrov
technical school wrote their wishes on
cards used to decorate Christmas trees
at MDMG’s facilities. Every hospital
employee could choose a card with
a wish and buy a gift for a child in need.
• MDMG employees collected 200 gifts
that were delivered by employee
volunteers who travelled to the Moscow
Region to present the gifts right on time
for New Year.
OTHER SOCIAL PROJECTS
• MDMG organised educational events
for children, helping them develop
health-conscious habits and learn
about future employment opportunities
in the healthcare sector.
• MDMG held a series of lectures and
workshops for students of Samara State
Medical University. In the course of these
lectures our employees shared their
knowledge and expertise with students
specialising in paediatrics, obstetrics and
gynaecology, as well as neonatology and
therapy.
• As part of our partnership with Irkutsk
State Medical University, MDMG has been
hosting a series of workshops for Irkutsk
students and students from the University
of Grenoble (France) led by senior lecturer
Mikhail Chertovskikh, an expert in IVF and
endoscopy in gynaecology.
• MDMG supports a number of charity
funds – beneficiaries of “HESED-LEYA“,
“Izgelk“, “Markhamat“, “Save Me“, and
“Our Children“ receive free services at our
Ufa hospital.
Corporate Social Responsibility
Shareholder
Equity
54 55
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
Since October 2012, MD Medical Group’s shares have been
listed on the London Stock Exchange under the ticker
MDMG in the form of Global Depositary Receipts (GDRs).
Each GDR represents an interest in one ordinary share.
MD Medical Group has
a free float of approximately 32.1%,
with the remaining 67.9% owned by
MD Medical Holding Limited, which
is beneficially owned by Dr Mark Kurtser.
The investor portfolio is represented by
a number of global institutional investors.
75,125,010
The total number
of shares outstanding
ANALYST COVERAGE
DIVIDEND TAXATION
As of 31 December 2018, MDMG was
covered by equity research analysts
representing leading banks such as Bank
of America Merrill Lynch, Goldman Sachs,
HSBC, JP Morgan, Renaissance Capital, and
VTB Capital.
DIVIDENDS
MD Medical Group has been adhering to its
unofficial dividend policy to pay out at least
25% of a year’s net profit as dividends.
Since 1 January 2015, MD Medical Group
has been a Russian tax resident and pays
dividends in line with the Russian Tax Code,
according to which dividends paid by
Russian companies are generally subject to
a tax rate of 15%. A reduced rate may be
applied in the case of Russian tax residents
and residents of foreign jurisdictions whose
Governments have signed a double tax-
ation treaty (“DTT”) with the Government
of Russia. MD Medical Group acts as a tax
agent and withholds tax in order to transfer
it to the Russian tax authorities when
paying dividends. For a list of countries that
have signed a DTT with Russia and terms
for applying a reduced tax rate, please see
the Company’s corporate website at http://
www. mcclinics.com/media/news/112.html
28.3%
of net profit declared
as dividends for 2018
KEY SHAREHOLDER
MD MEDICAL GROUP’S DIVIDEND HISTORY
NUMBER
OF SHARES AS
OF 31.12.2017
SHARE
OF SHARES
OUTSTANDING
NUMBER
OF SHARES AS
OF 31.12.2018
SHARE
OF SHARES
OUTSTANDING
Dividend approval
05.06.2015
15.04.2016
02.09.2016
21.04.2017
08.09.2017
17.04.2018 23.04.2019
2014
2015
H1 2016
2016
H1 2017
2017
2018
SHAREHOLDER NAME
Russian Direct Investment Fund1
Russia Partners
J.P. Morgan Asset Management (UK), LTD
Prosperity
Massachusetts Mutual
M&G Investment Management, LTD
Comgest S.A.
Standard Life Aberdeen
4,166,667
3,235,000
3,094,536
1,105,659
948,211
903,724
764,600
689,243
5.5%
4.3%
4.1%
1.5%
1.3%
1.2%
1.0%
0.9%
4,166,667
3,235,000
2,585,693
1,917,175
948,211
849,622
764,600
724,855
5.5%
4.3%
3.4%
2.6%
1.3%
1.1%
1.0%
1.0%
OUR INVESTORS REPRESENT
VARIOUS GEOGRAPHIES 2
UK
Russia
Scandinavia
Continental Europe
3%
8%
15%
52%
Other countries
21%
32.1%
free float
Record date
Payout date
Total dividends paid
(net of tax), ths USD
Dividends per share, USD3
05.06.2015
22.04.2016
09.09.2016
28.04.2017
19.09.2017
25.04.2018 24.05.2019
03.07.2015
20.05.2016
18.10.2016
23.05.2017
24.10.2017
22.05.2018 25.06.2019
5,455
0.07
7,310
0.10
4,325
0.06
5,060
0.08
5,311
0.08
6,838
0.09
10,858
0.14
INVESTOR RELATIONS
meetings decisions, as well as other
important corporate developments.
We see our investor relations as an
important priority and have focused on
maintaining a continued active dialogue
with the investment community since our
successful listing on the London Stock
Exchange in 2012. Our goal is to rigorously
adhere to the best practices in terms
of transparency and information disclosure
to our investors and analysts. We regularly
provide updates on operational (every
quarter) and financial performance (every
six months), new openings and acquisitions,
key Board of Directors and shareholder
Through our investor relations function
we are committed to ensuring that
the investment community has a good
understanding of our story and promptly
receives all relevant information. We do
that by making ourselves, including senior
management, available for productive
dialogue.
During 2018, we held more than
110 meetings with investors, attended
5 investor conferences in Russia and
the UK.
In our dialogue with the
investment community,
we aim to provide
objective, trasnparent, and
reliable information about
our business in line with
high disclosure standards.
1 Shares managed by RDIF Managing company Llc., including co-investors’ shares managed by RDIF Managing company Llc
2 Source: Bloomberg as of January 2019
3 at the exchange rate as of the date of the Annual General Meeting of Shareholders or Board meeting
CONTENTS
58 Corporate Governance Report
60 Risk Management
62 Board of Directors
64 Board of Directors Activity in 2018
66 Senior Management
68 Regional Directors
CG_shmutz
General Meeting
of Shareholders
Board
of Directors
Board
Committees
Audit
(Internal auditor)
Nomination
Remuneration
CORPORATE GOVERNANCE
AND CONTROL STRUCTURE
CEO
Corporate
Governance
and Risk Management
Our contribution to our people and our local communities stretches
far beyond health
General Meeting
of Shareholders
Board
of Directors
Board
Committees
Audit
(Internal auditor)
Nomination
Remuneration
CEO
Corporate Governance and Risk Management
Corporate
Governance Report
At MD Medical Group, we appreciate that
good corporate governance and effective
management are essential to our overall
success. The Board of Directors aims
to uphold the highest standards in its
interaction with all stakeholders.
We are firmly committed to maintaining
the highest corporate governance
standards
Mr Vladimir Mekler
Chairman of the Board of Directors
CORPORATE GOVERNANCE AND CONTROL STRUCTURE
General Meeting of Shareholders
Board of Directors
Board Committees
CEO
Audit (Internal auditor)
Nomination
Remuneration
58 59
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
Since its London IPO, the Company
has maintained full compliance with
the UK Corporate Governance Code. It has
established a remuneration committee,
an audit committee and a nomination
committee with formally delegated duties
and responsibilities and written terms
of reference.
All of the committees perform their duties
on behalf of the Board of Directors, which
is responsible for constituting, assigning,
co-opting and fixing the terms of service
for the committee members.
AUDIT COMMITTEE
The Audit Committee comprises three
non-executive directors, two of whom
are independent. The Audit Committee
is chaired by independent non-executive
director Liubov Malyarevskaya since
19 February 2015, Mr Kirill Dmitriev
and Mr Simon Rowlands are the other
members.
The Audit Committee meets at least four
times each year and is responsible for
considering:
• The reliability and appropriateness
of disclosures in the financial statements
and external financial communication.
• The maintenance of an effective system
of internal controls including financial,
operational and compliance controls and
risk management system.
• Preparation of recommendations to
the shareholders for approval in General
Meetings in relation to the appointment,
reappointment and removal
of the external auditors.
• Approval of the remuneration and terms
of engagement of the external auditors
in respect of audit services provided.
• The audit process, including monitoring
and review of the external auditors’
performance, independence and
objectivity.
• Development and implementation
of the policy on non-audit services
provided by the external auditors. And
• Monitoring compliance with laws and
regulations and standard of corporate
governance.
The Audit Committee assists
the Board of Directors in its oversight
of the performance and leadership
of the internal audit activity.
REMUNERATION
COMMITTEE
Where the Audit Committee’s monitoring
and review activities reveal cause for
concern or scope for improvement, it shall
make recommendation to the Board
of Directors on actions needed to address
the issues or to make improvements.
NOMINATION COMMITTEE
The Nomination Committee one executive
and two non-executive directors, one
of whom is independent. The Nomination
Committee is chaired by non-executive
director Mr Vladimir Mekler (since June
2016); non-executive director Mr Simon
Rowlands and executive director
Dr Mark Kurtser are other members since
September 2015.
The Nomination Committee meets at least
once a year and is responsible for assisting
the Board of Directors in discharging its
corporate governance responsibilities
in relation to appointment of all executive
and non-executive directors, as well as
the CEO and CFO of the Company.
The main objective of the Nomination
Committee is to lead the process for
the Board of Directors’ appointments
and make respective recommendation to
the Board of Directors, ensuring proper
balance of the Board of Directors and
qualification of its members.
The Nomination Committee also considers
the composition of the Audit and
Remuneration Committees.
The Remuneration Committee comprises
two non-executive directors and one
executive director. The Remuneration
Committee is chaired by an independent
non-executive director Mr Simon Rowlands.
The two other members are Dr Mark
Kurtser and Mr Vladimir Mekler.
The Remuneration Committee meets
at least once a year and is responsible
for assisting the Board of Directors
in discharging its corporate governance
responsibilities in relation to remuneration
of all executive directors and the Chairman
of the Board of Directors. The main objective
of the Remuneration Committee is to
determine the framework and policy for
the remuneration of the executive directors,
the Chairman of the Board of Directors
and senior executives, and the specific
remuneration of each executive director and
the Chairman of the Board of Directors and
any compensation payments.
INTERNAL AUDITOR
The Audit Committee is responsible for
monitoring and reviewing the effectiveness
of the Company’s internal audit service.
In this respect, the Audit Committee
may require investigations by, or under
the authority of, the head of Internal
Audit Service into any activities
of the Group which may be of interest or
concern to the Audit Committee.
The Company’s internal auditor
is responsible for recommending an
audit plan to the Audit Committee.
The internal auditor carries out auditing
assignments in accordance with such plan
and oversees the Company’s compliance
with the plan recommendations.
The internal auditor files a quarterly report
with his findings to the Audit Committee.
Corporate Governance and Risk Management
Risk
Management
60 61
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
RISK
Reputation
risk
POTENTIAL IMPACT
Тhe main danger of this risk is that
it can be caused by a number
of different factors. In this way
it is closely related to other risks
mentioned below.
We endeavour to maintain a low
level of reputation risk by updating
information sources and launching
new system controls. In 2019, we
will provide a range of measures
to reduce the level of reputational
risk, all based on the Company’s
development strategy.
MITIGATION
In 2018, we strengthened our
work on risks, which we did not
manage to significantly reduce
in 2017. We have a significant
effect in terms of control and
effectiveness risks, compliance
risk and reputation risk. Work was
also carried out to further reduce
the recruitment risk and the risk
to Medical Services. The work with
the media was optimised in terms
of the correctness of information
and its sources, and new measures
to protect information were
introduced. As a result, this led to
a decrease in reputational risk.
Medical
Service Risk
Compliance
Risk
Macroeconomic
Risk
Control & Efficiency
Risk
Investment Project
Execution Risk
Recruitment
Risk
Financial
Risk
Medical risk is one of the main risks
affecting the Company's reputation,
as well as the achievement of our
goals. Our reputation is based on
our work, patient satisfaction with
our services, and the safety of our
customers. Given the development
of business and the opening of new
activities, this risk requires constant
monitoring and the ability to
respond as quickly as possible to
any event.
The political and regulatory environment
with respect to the development of private
medicine in Russia is currently relatively
favourable. However, there is always a risk
that governmental attitudes and policies
with respect to private medicine could
change.
That could create difficulties for us in terms
of realising our strategic objectives,
including the implementation of our
investment programme.
Macroeconomic risk
reflects the possibility
of external impact
on the business and
requires constant
monitoring. Regular
assessment of this risk
allows us to predict
the further development
of business.
To reduce this risk, we need
the newest and most advanced
equipment, medicines and
medical supplies that will allow
us to mini mise the likelihood
of errors. We continue to place
high demands on our medical
staff in terms of qualifications
and continue to provide them
with the opportunity to develop
and specialise. The Company’s
management personally conducts
seminars and scientific conferences
for doctors, as well as evaluating
the effectiveness of key medical
staff within the Company.
In 2018, patient complaints led to
improvements in work. In medium
and complex medical cases,
recommendations are carefully
analysed, and agreed with all key
members of the Company.
We have strong relations with
the government at both the federal and
regional level, and we work continually to
make them even stronger. We participate
in a variety of public committees on relevant
health issues, including the development
of the Russian healthcare sector as a whole.
We also actively support the authorities
and provide expert advice on relevant
laws. At times, we actively advocate for
laws aimed at supporting the continued
development of the medical sector.
We also cooperate with the regulatory
bodies of Great Britain for the requirements
of the London Stock Exchange. We
constantly review the updates in the UK
and EU legislation and update our internal
standards to match.
Given the unstable
foreign policy situation
in 2018, our team
paid special attention
to monitoring trends
in the Russian economy
with an assessment
of the potential impact
on the business. Our
strategy has been
designed so that we can
adapt, as necessary, to
changes in the overall
economic environment.
Our growth depends on
acquisitions of existing healthcare
facilities as well as the construction
of new hospitals and clinics. Our
strategy is based on expanding our
network throughout the regions
of Russia. We are pioneers
in the field of regional expansion,
particularly where the effectiveness
has not been fully measured and
proven. It can be challenging
to forecast with precision
the likely return on investment
and the probable payback periods
due to a certain lack of reliable
information on the potential
number of private patients
in a given region. If expansion
projects are not implemented
effectively, projects can either
have an extremely long pay-
back period or even fail to deliver
a profit entirely.
The risk arises in the presence
of factors leading to the inability
to attract or retain highly qualified
personnel in the Company.
In the regions, this risk is particularly
relevant due to the shortage
of doctors and medical staff with
the necessary qualifications, as well as
the presence of competing employers,
such as government agencies or other
commercial organi sations. The risk
is also associated with the possible
rotation of qualified medical and
managerial personnel between
employers. This risk is aggravated
by the general standard of medical
education in Russia, which often does
not meet the standards set by private
clinics, whose reputation largely
depends on the quality of the services
they provide. The risk requires
constant activity from the HR service
and Company Management.
Financial risk includes
significant risks such as:
• Credit risk - the risk arising
from the likelihood that
the debtors will not make
the promised payments
either on time or in full.
• Operational risk - conditional
losses of the Company
due to technical failures,
intentional and accidental
human errors.
• Liquidity risk - the likelihood
of loss arising in a situation
where (1) there is not enough
cash and/or cash equivalents
to meet the needs of savers
and borrowers, (2) the sale
of illiquid assets is lower
than their fair value, or (3)
illiquid assets will not be sold
at the desired time due to
the lack of buyers.
We have a number of small clinics
in regions across Russia. These
operations give us an opportunity
to understand the local market
dynamics, including average ticket
size and overall level of demand,
before undertaking a major project
such as the construction of a new
hospital or a sizeable acquisition.
We prioritise those regions where
we already have out-patient clinics
and/or Russia’s largest regions
where we can have a higher degree
of certainty about the local market.
We also benefit from a relative lack
of competition in the regions, as
currently we are practically the only
sizeable provider of high quality
private medical services.
In 2018, the work of the HR team
was aimed at improving the quality
of the recruitment process, as
well as working conditions and
communication within the Company.
We continue to actively cooperate
with heads of departments of leading
universities in search of talented
personnel, and also provide serious
on-the-job training and continuous
medical education, including training
programmes for specialists that
we conduct in Moscow for new
employees in the regions. In 2018,
management announced a program
for horizontal rotation of personnel
within the Company in order to
cover the shortage of personnel
in the regions.
The Company's Management
personally controls the cash
flow within the Company,
as well as the quality
of execution of its instructions
in relation to any issues
related to the Company's
finances and assets. In 2018,
the number of personnel
in the Financial Department
increased, which allowed to
reduce the Operational risk.
Continuous professional
development of employees
of the Financial Department
is one of the priority
requirements of Management.
The risk is closely related to
the size of the business and
the coverage area, which was
significantly increased in 2018.
Dealing with this risk requires
significant resources, as well as
the competence of the Company’s
management. Quality control
gives us the opportunity to avoid
adverse events and additional
costs, and quality management
gives us the opportunity to
continuously develop.
In 2018, we achieved significant
success in reducing this risk by
introducing new control measures
and improving existing ones.
Constant business growth requires
us to take new decisions and use
new control technologies that
allow us to control the activities
of Company employees at all sites,
so we use international practice,
constantly developing mechanisms
to increase the effectiveness
of control over all processes
(budgeting, financial control,
treasury, accounting, procurement,
legal support, personnel
management, security and IT).
In 2018, to achieve maximum
management efficiency, additional
managerial positions were
introduced with control functions.
We carefully interact and listen to
the recommendations of world-
renowned consultants.
Corporate Governance and Risk Management
Board of Directors
62 63
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
Chairman of the Board of Directors
PhD, Member of the Board of Directors
Mr Vladimir Mekler became Chairman of the Board of Directors in June 2016. Mr Mekler was
appointed as Non-Executive Director in February 2015.
Mr Vitaly Ustimenko was the Group’s Chief Financial Officer from 2012–2016. He was elected
to the Board of Directors in February 2015.
Mr Vladimir Mekler
He is a senior and managing partner of Mekler & Partners. Mr Mekler specialises in corporate
law, including supporting and structuring complex and cross-border contracts; creating
systems of corporate governance; legal structuring development; optimisation of criminal and
antitrust legislation; legal support of mergers and acquisitions; settling corporate disputes; and
organising and coordinating legal representation and defence in complex economic and property
crimes. Mr Mekler has been a member of the Moscow City Bar since 1980 and is listed in the
Moscow Bar’s Book of Honours. He also acted as Vice Chairman of the Presidium of the Moscow
City Bar Association from 2003 to 2010. He graduated from Lomonosov Moscow State University.
Mr Ustimenko has more than 17 years of experience in finance. He was CFO of Solnechnye Produkty
Holding Company from 2017–2018. Prior to joining the Group, he was the Head of Strategic and
Business Planning at Russian Helicopters, and before that held the position of Senior Manager
at Deloitte Touche Tomatsu Ltd. Mr Ustimenko holds a bachelor’s degree from the Finance
University under the Government of the Russian Federation and a PhD in Finance from the State
University of Management.
Mr Vitaly Ustimenko
Member of Russian Academy of Sciences, CEO and Member of the Board of Directors
PhD, Member of the Board of Directors
Dr Mark Kurtser is the founder of MD Medical Group, CEO and Member of the Board of Directors.
Dr Alsou Nazyrova joined the Group in 2009 and became a member of the Board in June 2016.
Dr Kurtser began his career as a graduate assistant to the associate professor at the Obstetrics and
Gynaecology Department of Pirogov Medical University. From 1994 to 2012, he was Head of the
Centre for Family Planning and Reproduction, the largest public obstetrics hospital in Moscow.
From 2003 to 2013, Dr Kurtser was the Chief Obstetrician and Gynaecologist of the
City of Moscow. He holds a degree in medicine from Pirogov Medical University in addition
to a postdoctoral degree in medicine. Dr Kurtser remains actively involved in the Group’s healthcare
practice and day-to-day operations.
In 2016 she was appointed Director of Mother&Child Urals and Head of Regional Projects
Department. Dr Nazyrova has held the CEO position at Mother&Child hospital in Ufa since
2014 and the CEO position at Mother&Child clinic in Ufa since 2009.Alsou Nazyrova has more
than 15 years of experience in medicine and pharmaceutical business and is the Head of the
Reproductive Health Faculty at Bashkir State Medical University. Dr Nazyrova graduated from
Bashkir State Medical University and had specialty training in Paediatrics, she also holds a PhD
degree.
Dr Mark Kurtser
Independent Member of the Board of Directors
Independent Member of the Board of Directors
Mr Simon Rowlands was appointed as an independent non-executive director in September 2012.
Mrs Liubov Malyarevskaya was appointed as Independent Non-Executive Director in February 2015.
Mr Rowlands was a Co-Founding Partner of the private equity firm Cinven until 2013,
establishing and leading its healthcare team, and then served as a Senior Adviser until 2017.
Simon founded a new private equity firm in 2016 focused on healthcare and consumer
sectors of Sub-Saharan Africa. His other current appointments include non-executive
directorship at Spire Healthcare Plc and is Chairman of the Advisory Board of Cranfield
School of Management. Prior to Cinven, Mr Rowlands worked with an international consulting
firm on multi-disciplinary engineering projects in the UK and Southern Africa. He has an
MBA in Business, a BSc in Engineering and is a chartered engineer.
Mr Simon Rowlands
She has been Deputy CEO for Economics and Finance at the Russia Media Group since 2016. Before
that, from 2014 to 2016 she worked as Project Director in Sberbank Russia’s Finance Department.
Earlier, from 2011 to 2014, Mrs Malyarevskaya was a partner and head of the Corporate Finance
Department of BDO. From 2001 through 2010 she worked at PricewaterhouseCoopers and Deloitte,
including as senior manager at Deloitte Touche Tomatsu Ltd. Mrs Malyarevskaya holds a Russian
Statutory Accountant Certificate as well as a certificate from the Association of Chartered
Certified Accountants (ACCA). Mrs Malyarevskaya graduated from the Plekhanov Russian
Academy of Economics (diploma cum laude).
Dr Alsou Nazyrova
Mrs Liubov
Malyarevskaya
Member of the Board of Directors
Mr Kirill Dmitriev was elected to the Board of Directors in October 2012.
He is CEO of the Russian Direct Investment Fund – one of the world's leading sovereign funds
with a reserved capital of $10 billion under management. In all transactions, RDIF acts as a co-investor
alongside major international investors, playing the role of a catalyst in attracting direct investment
into Russia. RDIF has successfully invested with foreign partners in more than 70 projects totalling
more than 1.4 trillion roubles and covering 95% of the regions of the Russian Federation. RDIF has
established joint strategic partnerships with leading international co-investors from more than
15 countries totalling more than $40 billion. Prior to becoming CEO of RDIF in 2011, Kirill Dmitriev
headed a number of large private equity funds and completed a series of landmark transactions for
Russia, including the sale of Delta Bank to General Electric, Delta Credit Bank to Société Générale,
STS Media to Fidelity Investments, among others. Mr Dmitriev began his career at Goldman Sachs
and McKinsey & Company. He holds a BA in Economics with Honours and Distinction from Stanford
University and an MBA with High Distinction (Baker Scholar) from the Harvard Business School.
Mr Kirill Dmitriev
Corporate Governance and Risk Management
Board of Directors
Activity in 2018
64 65
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
PARTICIPATION OF THE DIRECTORS
IN THE BOARD MEETINGS DURING 2018
REMUNERATION PAID TO MEMBERS
OF THE BOARD IN 2018
NUMBER OF BOARD
MEETINGS ATTENDED
IN PERSON OR VIA PHONE
NUMBER OF MEETINGS
HELD FOR THE PERIOD
AS A BOARD MEMBER
BOARD MEMBER
TOTAL AMOUNT PAID
(BEFORE TAXES)
Mr Vladimir Mekler
5
Dr Mark Kurtser
5
Mr Simon Rowlands
5
Mr Kirill Dmitriev
4
Mr Vitaly Ustimenko
5
Dr Alsou Nazyrova
5
Mrs Liubov Malyarevskaya 5
Mr Nikolay Ishmetov
alternate director for Kirill Dmitriev
5
5
5
5
5
5
5
5
5
RUB 4.5 mln
RUB 1.2 mln
RUB 782 ths
5
Board meetings
held in 2018
39
Agenda items
were discussed
in 2018
Our Board comprises directors who both
know the Company extremely well and
have an excellent track record in areas
relevant to our business.
Corporate Governance and Risk Management
Senior
Management
66 67
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
Member of Russian Academy of Sciences, CEO and Member of the Board of Directors
Medical Director of Mother&Child, Head of Hospital Group
Dr Mark Kurtser is the founder of MD Medical Group, CEO and Member of the Board of Directors.
Dr Kurtser began his career as a graduate assistant to the associate professor at the Obstetrics and
Gynaecology Department of Pirogov Medical University. From 1994 to 2012, he was Head of the
Centre for Family Planning and Reproduction, the largest public obstetrics hospital in Moscow.
From 2003 to 2013, Dr Kurtser was the Chief Obstetrician and Gynaecologist of the
City of Moscow. He holds a degree in Medicine from Pirogov Medical University in addition
to a postdoctoral degree in Medicine. Dr Kurtser remains actively involved in the Group’s healthcare
practice and day-to-day operations.
Dr Mark Kurtser
Dr Boris Konoplev joined the Group in 2010. In 2017, he was appointed Medical Director and
Head of Hospital Group of Mother&Child.
Prior to that, in 2014–2017, Dr Konoplev was Chief Doctor of Mother&Child Ufa Hospital. Earlier, from
2012 to 2014, he was Head of Obstetrics Department at Lapino Hospital. In 2010–2012, Dr Konoplev
was Obstetric gynaecologist of Maternity Department at the Perinatal Medical Centre.
Dr Konoplev graduated from the Paediatric Faculty of Pirogov Medical University. In 2015, he became
an assistant at the Department of Reproductive Health, with speciality training in Immunology at
Bashkir State Medical University. Dr Konoplev is a practicing obstetrician-gynaecologist and has
undertaken a number of trainings in leading European clinics.
Dr Boris Konoplev
Deputy CEO for Economics and Finance
PhD, Medical Director for Organisational and Scientific-Educational Work
Mr Andrey Khoperskiy joined the Group as Head of Finance Controlling and
Treasury in 2013, he was appointed to the position of Director for Finance of the Group in 2016.
Dr Yulia Kutakova joined the Group in 2012. She has over 11 years of practical experience
in obstetrics and gynaecology.
Previously, Andrey worked for Rusagro Group and Sukhoi Aviation Holding Company
as a Finance manager and earlier he was an Auditor in BDO Russia. Mr Khoperskiy
graduated from the Moscow State University of Economics, Statistics and Informatics
with a degree in Taxes. Holds ACCA Advanced Diploma in Accounting and Business and ACCA
Diploma in International Financial Reporting.
Prior to joining the Group, Dr Kutakova was Chief of Maternity in the Organisational and Tutorial
Department of Public Healthcare of the City of Moscow.
She holds a degree in Medicine from Pirogov Medical University, a degree in Management
from the Moscow Institute of Management and a PhD in Medical Science.
Mr Andrey Khoperskiy
Dr Yulia Kutakova
Deputy CEO for Operations
Mrs Maria Nechaeva joined the Group in 2018.
Prior to joining the Group, Maria was Head of Sales at Medipal Onco in 2012–2018.
Before that, she held various positions at pharmaceutical companies such as Abbott
Laboratories and Pfizer in 2003–2012. Mrs Nechaeva graduated from Pirogov Medical
University with a degree in General Medicine and completed residency training in OBGYN
at the Centre of Family Planning and Reproduction.
Mrs Maria Nechaeva
PhD, Deputy CEO, Director of Mother&Child Centre
Dr Natalia Yakunina joined the Group in 2011. In 2019, she was appointed Deputy CEO and
Director of Mother&Child Centre.
From 2016-2018, Dr Yakunina was Deputy CEO for Patient Care and from 2014–2016 she
worked as Chief Doctor and CEO of Mother&Child Savelovskaya clinic in Moscow. Before
that, from 2012–2014 she was Head of the OBGYN out-patient department at PMC. Natalia
joined the Group in 2011 as Chief Doctor at Mother&Child Yugo-Zapad clinic in Moscow.
Before joining the Group, Dr Yakunina was Chief Obstetrician and Gynaecologist of the Central
District of Moscow. Dr Yakunina has more than 22 years of experience in obstetrics-gynaecology.
She graduated from Turkmen State Medical University with a degree in General Medicine and also
holds a PhD degree.
Dr Natalia Yakunina
Corporate Governance and Risk Management
Regional
Directors
PhD, Director of Mother & Child Urals
Dr Alsou Nazyrova joined the Group in 2009 and became a member of the Board in June 2016.
In 2016 she was appointed Director of Mother&Child Urals and Head of Regional Projects
Department. Dr Nazyrova has held the CEO position at Mother&Child hospital in Ufa since
2014 and the CEO position at Mother&Child clinic in Ufa since 2009. Alsou Nazyrova has more
than 15 years of experience in medicine and pharmaceutical business and is the Head of the
Reproductive Health faculty at Bashkir State Medical University. Dr Nazyrova graduated from
Bashkir State Medical University and had specialty training in Paediatrics, she also holds a PhD
degree.
PhD, Director of Mother&Child Volga
Dr Marat Tugushev has been Chief Doctor at five Mother&Child clinics in the Samara Region since
1992. In 2017, he was also appointed as Director of Mother&Child Volga.
With more than 27 years of experience in healthcare, he is currently a practicing obstetrician
and gynaecologist as well as a surgeon of the highest qualification category. Dr Marat
Tugushev is actively engaged in medical research. He is also Head of Reproductive Medicine, Clinical
Embryology and Genetics Department at Samara State Medical University. Dr Tugushev graduated
from Samara State Medical University with a degree in General Medicine. He holds a PhD in Medical
Science.
Director of Mother&Child Siberia
Mr Andrey Sudarev joined the Group as Director of Mother&Child Siberia in 2018, bringing more
than 29 years of experience in the healthcare and medical sector.
Prior to joining the Group, Andrey was CEO at Service Pharm from 2016–2017. Earlier he worked
at Intermedservice Company, including as the Head of its Western Siberian branch for more than
11 years. Before that, Mr Sudarev was engaged in the medical sector supplying pharmaceuticals,
medical equipment and consumables to healthcare facilities. He started his career in 1989 and
has a wide range of experience, having worked as a surgeon, oncologist, the head of a surgery
department and as a teaching assistant in surgical pathology. Mr Sudarev graduated from
Novosibirsk State Medical Institute with a degree in General Medicine.
PhD, Deputy CEO, Director of Mother&Child Centre
Dr Natalia Yakunina joined the Group in 2011. In 2019, she was appointed Deputy CEO and
Director of Mother&Child Centre.
From 2016–2018, Dr Yakunina was Deputy CEO for Patient Care and from 2014–2016 she
worked as Chief Doctor and CEO of Mother&Child Savelovskaya clinic in Moscow. Before
that, from 2012–2014 she was Head of the OBGYN out-patient department at PMC. Natalia
joined the Group in 2011 as Chief Doctor at Mother&Child Yugo-Zapad clinic in Moscow.
Before joining the Group, Dr Yakunina was Chief Obstetrician and Gynaecologist of the Central
District of Moscow. Dr Yakunina has more than 22 years of experience in obstetrics-gynaecology.
She graduated from Turkmen State Medical University with a degree in General Medicine and also
holds a PhD degree.
Dr Alsou Nazyrova
Dr Marat Tugushev
Dr Andrey Sudarev
Dr Natalia Yakunina
Report and
Consolidated
Financial
Statements
For the year ended 31 December 2018
Contents
70 Officers, Professional Advisors and Registered Office
71 Management Report
76 Directors’ Responsibility Statement
77
Independent Auditors' Report
81 Consolidated Statement of Profit or Loss and Other Comprehensive Income
82 Consolidated Statement of Financial Position
84 Consolidated Statement of Changes In Equity
88 Consolidated Statement of Cash Flows
90 Notes to the Consolidated Financial Statements
70 71
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
Officers, Professional Advisors
And Registered Office
Management Report
– Vladimir Mekler – Chairman
– Mark Kurtser
– Vitaly Ustimenko
– Kirill Dmitriev
– Nikolay Ishmetov (alternate director to Kirill Dmitriev)
– Simon Rowlands
– Alsu Nazyrova
– Liubov Malyarevskaya
Menustrust Limited
Darya Alekseeva
KPMG Limited
15 Dimitriou Karatasou street, Anastasio Building,
6th floor, office 601, Strovolos,
2024, Nicosia, Cyprus
Board of Directors
Secretary
Secretary assistant
Independent Auditors
Registered Office
The Board of Directors of MD Medical Group Investments Plc
(the “Company”) presents to the members its Annual Report
together with the audited consolidated financial statements
of the Company and its subsidiary companies (the Company and
its subsidiaries together referred to as the “Group”) for the year
ended 31 December 2018.
Profit for the year ended 31 De cem ber 2018 amounted to
RUB2,831,043 thousand (2017: RUB2,704,250 thousand).
The total assets of the Group as at 31 December 2018 were
RUB25,078,137 thousand (31 December 2017: RUB22,271,953
thousand) and the net assets were RUB15,998,948 thousand
(31 December 2017: RUB14,567,665 thousand).
INCORPORATION
MD Medical Group Investments Plc was incorporated in Cyprus
on 5 August 2010 as a private limited liability company
under the provisions of the Cyprus Companies Law, Cap. 113.
On 22 August 2012 following special resolution passed by
the shareholder, the name of the Company was changed from
“MD Medical Group Investments Ltd” to “MD Medical Group
Investments Plc” and the Company was converted into a public
limited liability company in accordance with the provisions
of the Cyprus Companies Law, Cap. 113.
PRINCIPAL ACTIVITY
The principal activity of the Company is that of an investment
holding company and, for that purpose, to acquire and hold
controlling and other interests in the share or loan capital
of any company or companies of any nature, but primarily
in the healthcare industry. Note 4 to these consolidated financial
statements gives more detailed information about the service
provided by the Group`s medical centres.
FINANCIAL RESULTS
The Group’s results of operations are affected by a number
of factors, including acquisitions, regulatory conditions, demand
for private healthcare services, patient capacity and utilisation
rate, pricing and volume, staff costs, capital expenditure
programmes and currency exchange fluctuations.
The Group’s financial results for the year ended 31 December
2018 and its financial position at that date are set out
in the consolidated statement of profit or loss and other
comprehensive income on page 81 and in the consolidated
statement of financial position on page 82 of these consolidated
financial statements.
The main reason for the increased profit was the continuing
ramp-up of Lapino, Novosibirsk and Ufa hospitals and expansion
of services provided by existing facilities, as clinics in Moscow
(M&C Khodynskoe pole and LLC Clinica Zdorovia).
The main reason for increase in total assets was the equipment
purchased for the new opened hospital in Samara and
the construction of multifunctional hospital in Tyumen, realisation
of the project Lapino-2 and renovation of PMC.
DIVIDENDS
In accordance with the Company’s Articles of Association
dividends may be paid out of its profits. To the extent that
the Company declares and pays dividends, owners of GDRs on
the relevant record date will be entitled to receive dividends
in respect of ordinary shares underlying the GDRs.
The Company is a holding company and thus its ability to pay
dividends depends on the ability of its subsidiaries to pay
dividends to the Company in accordance with relevant legislation
in the country of their incorporation and any contractual
restrictions. The payment of such dividends by its subsidiaries
is contingent upon the sufficiency of their earnings, cash flows
and distributable reserves.
On 16 March 2018 the Board of Directors declared final dividends for
the year 2017 attributable to the owners of the Company amounting
to RUB450,750 thousand (USD7,905 thousand), which corresponds to
RUB6.0 (USD0.11) per share. The dividend distribution was approved
by the Annual General Meeting of the shareholders on 17 April 2018.
The dividends were paid on 22 May 2018.
On 17 March 2017 the Board of Directors declared final dividends
for the year 2016 attributable to the owners of the Company
amounting to RUB338,063 thousand (USD5,804 thousand),
which corresponds to RUB4.5 (USD0.08) per share. The dividend
distribution was approved by the Annual General Meeting
of the shareholders on 21 April 2017. The dividends were paid on
23 May 2017.
Audited Financial Statements On 8 September 2017 the Board of Directors declared interim
dividends for the six months ended 30 June 2017 attributable
to the owners of the Company amounting to RUB350,833
thousand (USD6,140 thousand), which corresponds to
RUB4.67 (USD0.08) per share. The dividends were paid
on 24 October 2017.
On 22 March 2019 the Board of Directors recommended
the payment of RUB800,081 thousand as final dividends for
the year 2018 which corresponds to RUB10.65 per share.
EXAMINATION OF THE DEVELOPMENT,
POSITION AND PERFORMANCE
OF THE ACTIVITIES OF THE GROUP
The current financial position and performance of the Group
as presented in these consolidated financial statements
is considered satisfactory.
The Group has developed its growth strategy to meet
the increasing demand for high-quality private healthcare
services in Russia. The Group has grown significantly through
strategic acquisitions and expansion through the construction
of new facilities.
During 2018 the Group has acquired additional 30% share
in LLC Mother and Child Ugo-Zapad and LLC FimedLab, 26%
share in LLC Velum, 20% share in LLC Clinica Zdorovia and 15%
share in LLC Capital Group, LLC Mother and Child Perm, LLC
Mother and Child Ufa, LLC Mother and Child Saint-Petersburg
for RUB790,231 thousand (USD12,335 thousand).
The Group has one of the largest nationwide private healthcare
regional networks for its core services and is expanding into
new services. It has significant experience in the provision
of full-service private maternity healthcare services. The Group
has secured leading positions in the Russian private healthcare
market across a range of services including obstetrics and
gynaecology, fertility and IVF treatments, and paediatrics. It has
also been diversifying its offering by adding other medical
services for all family members, such as surgery, urology,
traumatology, cardiology, and oncology, etc. The recently
opened facilities have been multi-disciplinary from the very
beginning.
The Group’s principal objective is to use its strong existing
platform and experience in the regions to create a scalable
concept of establishing new regional hospitals and other
medical facilities, utilising rigorous investment decision-making
process and targeting the most attractive regions and ensuring
seamless execution.
The Group believes the experience, depth and diversity of its
management team to be a distinct competitive advantage
in the complex and rapidly growing healthcare industry in which
it operates.
PRINCIPAL RISKS
AND UNCERTAINTIES
The Group operates in a highly regulated industry and is subject
to supervision by federal and local authorities. As a result,
the Group would be significantly affected by material changes
to the existing, or implementation of additional, government
regulations in Russia.
The Board of Directors has the overall responsibility for
the establishment and supervision of the Company’s risk
management framework.
Details in relation to principal risks and uncertainties and steps
taken to manage these risks and uncertainties are presented
in Notes 23 and 25 of these consolidated financial statements.
The reputation, expertise and professionalism of the Group’s
medical personnel are instrumental to the Group’s ability to
attract new and repeat patients. The Group’s operating success
depends on its medical personnel providing high-quality
healthcare services throughout the Group’s medical network.
DIRECTORS’ INTEREST
The direct and indirect interests of the members of the Board
in titles of the Company as at 31 December 2018, 31 December
2017 and as at the date of signing these consolidated financial
statements are as follows:
NAME
TYPE OF INTEREST
EFFECTIVE
INTEREST %
Mark Kurtser
Kirill Dmitriev
Simon Rowlands
Indirect ownership
of shares
Indirect interest
in shares
Direct ownership
of shares
67.90
5.55
0.33
Indirect interest in shares by Kirill Dmitriev arises through
his capacity as key management personnel of indirect
shareholder.
The calculation of effective interest is based on the total amount
of issued and fully paid shares, including treasury shares acquired
by the Company.
FUTURE DEVELOPMENTS
The Group’s goal is to continually diversify its medical services by
expanding its range of services, maintaining its leading position
72 73
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
in the field of high-quality women’s health and paediatrics, as well
as addressing the increasing demand for private healthcare services
in Russia and beyond.
The Audit Committee meets at least four times each year and is re-
sponsible for considering:
• the reliability and appropriateness of disclosures in the financial
As the Group will be growing it intends to expand its portfolio
of hospital and outpatient facilities, broaden its service offerings by
providing patients with the most up-to-date treatment procedures
and medical technology available on the market, expand its services
in Moscow and other regions, exploit the value of its integrated
healthcare network by making effective use of services across its
facilities, optimising the benefits for patients and the Group as
a whole.
SHARE CAPITAL
There were no changes in the share capital of the Company
during the year.
BOARD OF DIRECTORS
The Board of Directors leads the process in making new
Board member appointments and makes recommendations
on appointments to shareholders. In accordance with
the Appointment Policy for the Board of Directors and
Committees, all directors are subject to appointment or approval
of appointment by shareholders at the first Annual General
Meeting after their appointment, and to re-appointment at
intervals of no more than three years. Any term beyond six years
(e.g. two three-year terms) for a non-executive director is subject
to particularly rigorous review, and takes into account the need
for progressive refreshing of the Board of Directors.
The members of the Board of Directors who served as at the date
of signing of these consolidated financial statements, are
presented on page 70.
Refer to Note 22 of these consolidated financial statements for
the remuneration of the directors and other key management
personnel.
THE BOARD COMMITTEES
Since September 2012, the Board of Directors established
the operation of the following three committees:
the Audit Committee, the Nomination Committee and
the Remuneration Committee.
AUDIT COMMITTEE
The Audit Committee comprises of three non-executive
directors, two of whom are independent. The Audit Committee
is chaired by independent non-executive director Liubov
Malyarevskaya since 19 February 2015, Mr. Kirill Dmitriev and
Mr. Simon Rowlands are the other members.
statements and external financial communication;
• the maintenance of an effective system of internal controls
including financial, operational and compliance controls and risk
management system;
• preparation of recommendations to the shareholders for
approval in General Meetings in relation to the appointment,
reappointment and removal of the external auditors;
• approval of the remuneration and terms of engagement
of the external auditors in respect of audit services provided;
• the audit process, including monitoring and review of the external
auditors’ performance, independence and objectivity;
• development and implementation of the policy on non-
audit services provided by the external auditors; and
• monitoring compliance with laws and regulations and standard
of corporate governance.
The Audit Committee assists the Board of Directors in its
oversight of the performance and leadership of the internal
audit activity.
Where the Audit Committee’s monitoring and review activities
reveal cause for concern or scope for improvement, it shall make
recommendation to the Board of Directors on actions needed to
address the issues or to make improvements.
INTERNAL AUDIT
The Audit Committee is responsible for monitoring and review
the effectiveness of the Company’s internal audit function.
In this respect, the Audit Committee may require investigations
by, or under the authority of, the head of Internal Audit into any
activities of the Group which may be of interest or concern to
the Audit Committee.
The Company ` s internal auditor is responsible for
the recommendation of an audit plan to the Audit Committee.
The internal auditor carries out auditing assignments
in accordance with such plan and oversees the Company ` s
compliance with the plan ` s recommendations. The internal
auditor files a quarterly report with his findings to
the Audit Committee.
NOMINATION COMMITTEE
The Nomination Committee comprises of one executive and
two non-executive directors, one of whom is independent.
The Nomination Committee is chaired by non-executive director
Mr. Vladimir Mekler (since June 2016); non-executive director Mr.
Simon Rowlands and executive director Dr. Mark Kurtser are other
members since September 2015.
The Nomination Committee meets at least once a year and
is responsible for assisting the Board of Directors in discharging
its corporate governance responsibilities in relation to
appointment of all executive and non-executive directors, as
well as the CEO and CFO of the Company. The main objective
of the Nomination Committee is to lead the process for the Board
Audited Financial Statements 74 75
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
•
•
in the case of a meeting called as the annual general meeting, by
all the shareholders entitled to attend and vote; and
in the case of any other meeting, by a majority in number
of the members having a right to attend and vote at the meeting,
being a majority together holding not less than 95 per cent
in nominal value of the shares giving that right.
EVENTS AFTER
THE REPORTING PERIOD
In March 2019 the Group opened a new clinic in Vladivostok.
A notice convening a general meeting must be sent to each
of the shareholders.
INDEPENDENT AUDITORS
All shareholders are entitled to attend the general meeting or
be represented by a proxy authorised in writing. In the general
meeting, on a poll, every share gives the holder the right to cast
one vote, whereas, on a show of hands, each member has one vote.
A corporate member may, by resolution of its directors or other
governing body, authorise a person to act as its representative at
any meeting of the Company.
BRANCHES
MD Medical Group Investments Plc has a branch in Moscow.
The independent auditors of the Company Messrs. KPMG Limited
have expressed their willingness to continue in office. A resolution
giving authority to the Board of Directors to fix their remuneration
will be submitted to the Annual General Meeting.
TREASURY SHARES
During the year ended 31 December 2018, the Company
distributed the GDRs earlier acquired by the Company to
the participants of Long-term Management Incentive Plan (LTIP)
signed in 2014.
No additional treasury shares were acquired.
By order of the Board of Directors,
Mark Kurtser
Managing Director,
member of the Board of Directors
Moscow, 22 March 2019
of Directors’ appointments and make respective recommendation
to the Board of Directors, ensuring proper balance of the Board
of Directors and qualification of its members. The Nomination
Committee also considers the composition of the Audit and
Remuneration Committees.
its responsibilities to the shareholders. The Company’s corporate
governance policies and practices include, inter alia:
• Appointment policy for the Board of Directors and Committees;
• Terms of reference of the Audit Committee, Nomination
Committee and Remuneration Committee;
REMUNERATION COMMITTEE
The Remuneration Committee comprises of two non-executive
directors and one executive director. The Remuneration
Committee is chaired by an independent non-executive director
Mr. Simon Rowlands. The two other members are Dr. Mark Kurtser
and Mr. Vladimir Mekler.
The Remuneration Committee meets at least once
a year and is responsible for assisting the Board of Directors
in discharging its corporate governance responsibilities
in relation to remuneration of all executive directors and
the chairman of the Board of Directors. The main objective
of the Remuneration Committee is to determine the framework
and policy for the remuneration of the executive directors,
the chairman of the Board of Directors and senior executives,
and the specific remuneration of each executive director and
the chairman of the Board of Directors and any compensation
payments.
CORPORATE GOVERNANCE
Since 2012, the Company has maintained full compliance
with the UK Corporate Governance Code. The Company
is committed to the highest standards of corporate governance
and transparency. The Board of Directors recognises that good
governance is a strategic asset that helps it to deliver consistent
long term value to its shareholders. By running the Company
in an open way, the Board of Directors enables shareholders
to understand how it has been able to deliver consistently
strong results. The Board of Directors believes that corporate
responsibility is an essential part of good governance and makes
sound business sense, as well as being crucial to the appropriate
management of risk within the Company.
Improving its corporate governance structure in accordance
with the internationally recognised best practices the Company
adopted important policies and procedures.
The Company’s corporate governance policies and practices are
designed to ensure that the Company is focused on upholding
• Code of Ethics and Conduct;
• Business Continuity Policy;
• Disclosure Policy;
• Regulations on Insider Information;
• Risk Management Policy; and
• Anti-Fraud Policy.
INTERNAL CONTROL IN RELATION
TO THE FINANCIAL REPORTING PROCESS
The Group has set formal policies and written term of reference
in relation to the financial reporting process that include:
• Corporate Accounting policy Guidelines;
• Methodology for the Transformation of Financial Statements
from RAS to IFRS;
• Methodology for the Consolidation of IFRS Financial Statements;
• Financial Reporting Preparation Procedure; and
• The Group’s structure.
The objective of this policу is to establish uniform procedures and
to implement requirements for the preparation of the consolidated
financial statements of the Group. The procedure should be reviewed
for compliance with International Financial Reporting Standards
as well as current conditions and planned changes in the Group’s
business activities at least once a year. When necessary, amendments
and additions to this Procedure should be adopted.
MEETINGS OF SHAREHOLDERS
The Company shall in each year hold a general meeting as its
annual general meeting in addition to any other meetings in that
year. An annual general meeting and any other shareholders’
meeting called to pass a special resolution can be convened by
the Board of Directors by a notice, specifying the matters to be
discussed, issued at least 21 days before the meeting. Any other
meetings shall be convened by the Board of Directors by a notice,
specifying the matters to be discussed, issued at least 14 days
before the meeting. If the notice period is less than 21 days or 14
days as applicable, the meeting will be deemed to have been duly
called if it is so agreed:
Audited Financial Statements Directors’ Responsibility
Statement
Each of the directors, whose names are listed below, confirms
that, to the best of their knowledge:
• these consolidated financial statements, prepared
in accordance with IFRS as adopted by the EU and
the requirements of the Cyprus Companies Law, Cap.113, give
a true and fair view of the assets, liabilities, financial position
and profit or loss of the Company and the undertakings
included in the consolidation taken as a whole;
• the adoption of the going concern basis for the preparation
of the financial statements continues to be appropriate based on
the foregoing and having reviewed the forecast financial position
of the Group; and
• the Management report includes a fair review
of the development and performance of the business and
the position of the Company and the undertakings included
in the consolidation taken as a whole, together with a description
of the principal risks and uncertainties that they face.
The Directors of the Company responsible for reporting as
at the date of this announcement are set out below:
Vladimir Mekler
Mark Kurtser
Vitaly Ustimenko
Alsu Nazyrova
Kirill Dmitriev
Simon Rowlands
Liubov Malyarevskaya
Chairman, non-executive director
Executive director
Non-executive director
Executive director
Non-executive director
Non-executive independent director
Non-executive independent director
76 77
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
Independent Auditors’ Report
to the Members of MD Medical
Group Investments plc
REPORT ON THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS
OPINION
We have audited the consolidated financial statements of MD
Medical Group Investments Plc (the “Company’’) and its subsidiar-
ies (together with the Company, referred to as “the Group”) which
are presented on pages 81 to 116 and comprise the consolidat-
ed statement of financial position as at 31 December 2018, and
the consolidated statements of profit or loss and other compre-
hensive income, changes in equity and cash flows for the year
then ended, and notes to the consolidated financial statements,
including a summary of significant accounting policies.
In our opinion, the consolidated financial statements give a true
and fair view of the consolidated financial position of the Group
as at 31 December 2018, and of its consolidated financial perfor-
mance and its consolidated cash flows for the year then ended
in accordance with International Financial Reporting Standards as
adopted by the European Union (“IFRS-EU”) and the requirements
of the Cyprus Companies Law, Cap. 113, as amended from time to
time (the “Companies Law, Cap. 113”).
BASIS FOR OPINION
We conducted our audit in accordance with International Stand-
ards on Auditing (“ISAs”). Our responsibilities under those stand-
ards are further described in the “Auditors’ responsibilities for
the audit of the consolidated financial statements” section of our
report. We remained independent of the Group in accordance with
the Code of Ethics for Professional Accountants of the Interna-
tional Ethics Standards Board for Accountants (“IESBA Code”) and
the ethical requirements in Cyprus that are relevant to our au-
dit of the consolidated financial statements, and we have fulfilled
our other ethical responsibilities in accordance with these require-
ments and the IESBA Code. We believe that the audit evidence we
have obtained is sufficient and appropriate to provide a basis for
our opinion.
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the consolidat-
ed financial statements of the current period. These matters were
addressed in the context of our audit of the consolidated financial
statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
Audited Financial Statements GOODWILL
Please refer to Note 14 of the consolidated financial statements (RUB2,032,320 thousand).
The key audit matter
How the matter was addressed in our audit
As a result of the Group’s expansion, a significant
amount of goodwill arising from business
combinations has been recognised over
the years. The management of the Group reviews
goodwill for impairment purposes on an annual
basis.
Inherent uncertainty and subjectivity is involved
in forecasting and discounting future cash
flows, which are the basis of the assessment
of the recoverability of the goodwill and hence
its carrying value recorded in the consolidated
financial statements. It is for this reason that
this is one of the key judgmental areas that our
audit is concentrated on.
Our audit procedures included among others the following:
Assessing the reasonableness of the assumptions and appropriateness
of the methodologies used by the management of the Group based on which
the forecasted cash flows were prepared. Particular attention was given to
the assumptions relating to terminal growth, after-tax profitability and discount
rates. Our own valuation specialists were also utilised within this process.
Comparing the Group’s assumptions on revenue growth and after-tax profitability
margins with equivalent medical centers of the Group in nearby regions, externally
derived data as well as our own assessment in relation to key inputs into the models.
Preparing our own sensitivity analysis around the key assumptions.
Assessing whether the disclosures in Note 14 of the consolidated financial
statements relating to key inputs in the impairment assessment model are consistent
with those employed in the model.
REVENUE RECOGNITION
Please refer to Note 4 of the consolidated financial statements (RUB14,937,366 thousand).
The key audit matter
How the matter was addressed in our audit
The Group has a number of revenue streams
with different revenue recognition policies.
The majority of the revenue is generated from
individual patients who receive medical care
either based on concluded contracts or based
on daily tickets for one-off visits. Contracts may
last for longer periods. Generally, patients prepay
for the whole amount of the contracts and
visit doctors within the period of the contract.
The number of visits in all medical centers
of the Group is significant. Therefore, the Group
relies on automation within the medical
IT system for complete and accurate
revenue recognition through interface with
the accounting system.
Given the number of different revenue streams,
the volume of transactions and related
reliance on the medical IT system, we consider
that a risk exists in relation to revenue being
recorded in the correct period at the correct
amount, including related deferred income
in the consolidated statement of financial
position.
Our audit procedures included among others the following:
Testing of general IT controls and IT application controls relevant to revenue
recognition, including segregation of duties for inputs and modification
of data in the medical IT system, allocation of cash receipts and visits of patients
for each individual contract, accuracy of data transfers from cash registers to
the medical IT system through to the accounting system.
Assessing the design and implementation, and testing of the operating effectiveness
of controls over daily cash movements and the completeness of the daily
encashment to the bank accounts of the Group.
Evaluating controls over approval and authorisation of prices and discounts for
individual agreements with patients.
Obtaining external confirmations from banks and compared annual cash receipts
and cash balances on bank accounts to the data recorded in the accounting systems.
As such, revenue recognition is an area that our
audit is focused on.
Performing substantive analytical procedures to assess deferred revenue recognised
in the year (prepayments).
78 79
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
OTHER INFORMATION
The Board of Directors is responsible for the other information.
The other information comprises the management report, the cor-
porate governance statement and the corporate social responsi-
bility statement, but does not include the consolidated financial
statements and our auditors’ report thereon.
Our opinion on the consolidated financial statements does not
cover the other information and we do not express any form of as-
surance conclusion thereon, except as required by the Companies
Law, Cap.113.
In connection with our audit of the consolidated financial state-
ments, our responsibility is to read the other information identified
above and, in doing so, consider whether the other information
is materially inconsistent with the consolidated financial statements
or our knowledge obtained in the audit or otherwise appears to be
materially misstated. If, based on the work we have performed, we
conclude that there is a material misstatement of this other infor-
mation, we are required to report that fact.
With regards to the corporate social responsibility statement we
have nothing to report.
With regards to the management report and the corporate gov-
ernance statement, our report is presented in the “Report on other
legal and regulatory requirements” section.
RESPONSIBILITIES OF THE BOARD OF DIRECTORS AND THOSE
CHARGED WITH GOVERNANCE FOR THE CONSOLIDATED FINANCIAL
STATEMENTS
The Board of Directors is responsible for the preparation of consol-
idated financial statements that give a true and fair view in accord-
ance with IFRS-EU and the requirements of the Companies Law,
Cap. 113, and for such internal controls as the Board of Directors
determines are necessary to enable the preparation of consolidat-
ed financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the consolidated financial statements, the Board of Di-
rectors is 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 there is an intention to either liquidate the Group or to cease
operations, or there is no realistic alternative but to do so.
The Board of Directors is responsible for overseeing the Group’s
financial reporting process.
AUDITORS’ RESPONSIBILITIES FOR THE AUDIT OF THE CONSOLIDATED
FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether
the consolidated 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 au-
dit conducted in accordance with ISAs 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 aggre-
gate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these consolidated financial
statements.
As part of an audit in accordance with ISAs, we exercise profes-
sional judgment and maintain professional scepticism throughout
the audit. We also:
• Identify and assess the risks of material misstatement of the con-
solidated financial statements, whether due to fraud or error,
design and perform audit procedures responsive to those risks,
and obtain audit evidence that is sufficient and appropriate to
provide a basis for our opinion. The risk of not detecting a ma-
terial misstatement resulting from fraud is higher than for one
resulting from error, as fraud may involve collusion, forgery, inten-
tional omissions, misrepresentations, or the override of internal
controls.
• Obtain an understanding of internal controls relevant to the au-
dit in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group’s internal controls.
• Evaluate the appropriateness of accounting policies used and
the reasonableness of accounting estimates and related disclo-
sures made by the Board of Directors.
• Conclude on the appropriateness of the Board of Directors’
use of the going concern basis of accounting and, based on
the audit evidence obtained, whether a material uncertainty
exists related to events or conditions that may cast significant
doubt on the Group’s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required to
draw attention in our auditors’ report to the related disclosures
in the consolidated financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on
the audit evidence obtained up to the date of our auditors’ re-
port. However, future events or conditions may cause the Group
to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content
of the consolidated financial statements, including the disclo-
sures, and whether the consolidated financial statements rep-
resent the underlying transactions and events in a manner that
achieves a true and fair view.
• Obtain sufficient appropriate audit evidence regarding the fi-
nancial information of the entities or the business activities
of the Group to express an opinion on the consolidated financial
statements. We are responsible for the direction, supervision and
performance of the Group audit. We remain solely responsible for
our audit opinion.
We communicate with those charged with governance regarding,
among other matters, the planned scope and timing of the au-
dit and significant audit findings, including any significant deficien-
cies in internal controls that we identify during our audit.
We also provide those charged with governance with a statement
that we have complied with relevant ethical requirements regard-
ing independence, and to communicate with them all relationships
Audited Financial Statements and other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
From the matters communicated with those charged with govern-
ance, we determine those matters that were of most significance
in the audit of the consolidated financial statements of the current
period and are therefore the key audit matters.
REPORT ON OTHER LEGAL AND
REGULATORY REQUIREMENTS
OTHER REGULATORY REQUIREMENTS
Pursuant to the requirements of Article 10(2) of EU Regulation
537/2014 we provide the following information in our Independent
Auditors’ Report, which is required in addition to the requirements
of ISAs.
• Date of our appointment and period of engagement
We were first appointed auditors of the Group by the General
Meeting of the Company’s members on 10 July 2012. Our ap-
pointment has been renewed annually by shareholders’ resolu-
tion. Our total uninterrupted period of engagement is 10 years
covering the periods ended 31 December 2009 to 31 December
2018.
• Consistency of the additional report to the Audit Committee
with the Independent Auditors’ Report
Our audit opinion is consistent with the additional report pre-
sented to the Audit Committee, dated 22 March 2019.
• Provision of non-audit services (“NAS”)
We have not provided any prohibited NAS referred to in Article 5
of EU Regulation 537/2014 as applied by Section 72 of the Au-
ditors Law of 2017, L.53(I)2017, as amended from time to time
(“Law L53(I)/2017”).
OTHER LEGAL REQUIREMENTS
Pursuant to the additional requirements of law L. 53(I)/2017, and
based on the work undertaken in the course of our audit, we report
the following:
• In our opinion, the consolidated management report, the prepa-
ration of which is the responsibility of the Board of Directors, has
been prepared in accordance with the requirements of the Com-
panies Law, Cap. 113, and the information given is consistent with
the consolidated financial statements.
• In the light of the knowledge and understanding of the Group’s
business and its environment obtained in the course of the audit,
we have not identified material misstatements in the consolidat-
ed management report.
• In our opinion, the information included in the corporate govern-
ance statement in accordance with the requirements of subpara-
graphs (iv) and (v) of paragraph 2(a) of Article 151 of the Com-
panies Law, Cap. 113, and which is included as a specific section
of the consolidated management report, has been prepared
in accordance with the requirements of the Companies Law, Cap,
113, and is consistent with the consolidated financial statements.
• In our opinion, the corporate governance statement includes all
information referred to in subparagraphs (i), (ii), (iii), (vi) and (vii)
of paragraph 2(a) of Article 151 of the Companies Law, Cap. 113.
• In light of the knowledge and understanding of the Group and its
environment obtained in the course of the audit, we are required
to report if we have identified material misstatements in the cor-
porate governance statement in relation to the information
disclosed for items (iv) and (v) of subparagraph 2(a) of Article
151 of the Cyprus Companies Law, Cap. 113. We have nothing to
report in this respect.
OTHER MATTER
This report, including the opinion, has been prepared for and only
for the Company’s members as a body in accordance with Sec-
tion 69 of Law L. 53(I)/2017 and for no other purpose. We do not,
in giving this opinion, accept or assume responsibility for any other
purpose or to any other person to whose knowledge this report
may come to.
The engagement partner on the audit resulting
in this independent auditors’ report is Zakis E. Hadjizacharias.
Zakis E. Hadjizacharias, CA
Certified Public Accountant and Registered Auditor
for and on behalf of
KPMG Limited
Certified Public Accountants and Registered Auditors
No. 11, June 16th 1943 Street,
3022 Limassol,
Cyprus.
22 March 2019
80 81
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
Consolidated statement
of profit or loss and other
comprehensive income
For the year ended 31 December 2018
Revenue
Cost of sales
Gross profit
Other income
Administrative expenses
Other expenses
Operating profit
Finance income
Finance expenses
Net foreign exchange transactions gain / (loss)
Net finance expenses
Profit before tax
Income tax expense
Profit for the year
TOTAL COMPREHENSIVE INCOME FOR THE YEAR
Profit for the year attributable to:
Owners of the Company
Non-controlling interests
TOTAL COMPREHENSIVE INCOME FOR THE YEAR ATTRIBUTABLE TO:
Owners of the Company
Non-controlling interests
NOTE
2018
RUB’000
2017
RUB’000
4
5
8
6
9
9
9
9
10
14,937,366
13,755,167
(9,387,499)
(8,358,369)
5,549,867
5,396,798
26,831
104,808
(2,415,615)
(2,254,079)
(36,895)
(21,407)
3,124,188
3,226,120
173,685
(546,514)
105,823
97,321
(492,084)
(50,201)
(267,006)
(444,964)
2,857,182
(26,139)
2,831,043
2,831,043
2,781,156
(76,906)
2,704,250
2,704,250
2,671,350
2,488,812
159,693
215,438
2,831,043
2,704,250
2,671,350
2,488,812
159,693
215,438
2,831,043
2,704,250
EARNINGS PER SHARE (RUB)
11
35.61
33.23
The Notes on pages 90 to 116 are an integral part of these consolidated financial statements.
Audited Financial Statements Consolidated Statement
Of Financial Position
As at 31 December 2018
ASSETS
Property, plant and equipment
Intangible assets
Trade, other receivables and deferred expenses
Deferred tax assets
TOTAL NON-CURRENT ASSETS
Inventories
Trade, other receivables and deferred expenses
Other assets
Cash and cash equivalents
TOTAL CURRENT ASSETS
TOTAL ASSETS
EQUITY
Share capital
Share premium
Reserves
Retained earnings
TOTAL EQUITY ATTRIBUTABLE TO THE OWNERS OF THE COMPANY
Non-controlling interests
TOTAL EQUITY
NOTE
31 DECEMBER
2018
RUB’000
31 DECEMBER
2017
RUB’000
13
14
15
10
15
16
17
18
18
18
26
18,157,678
15,323,649
2,258,513
2,335,477
592,416
232,159
889,933
243,165
21,240,766
18,792,224
666,122
455,768
-
525,356
421,203
28,568
2,715,481
2,504,602
3,837,371
3,479,729
25,078,137
22,271,953
180,585
5,243,319
(659,049)
10,932,291
180,585
5,243,319
(659,896)
9,377,710
15,697,146
14,141,718
301,802
425,947
15,998,948
14,567,665
82 83
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
LIABILITIES
Loans and borrowings
Trade and other payables
Deferred tax liabilities
Contract liabilities
TOTAL NON-CURRENT LIABILITIES
Loans and borrowings
Trade and other payables
Contract liabilities
TOTAL CURRENT LIABILITIES
TOTAL LIABILITIES
TOTAL EQUITY AND LIABILITIES
NOTE
31 DECEMBER
2018
RUB’000
31 DECEMBER
2017
RUB’000
19
21
10
20
19
21
20
4,586,532
3,585,213
435,809
272,565
143,773
277,320
250,504
144,860
5,438,679
4,257,897
1,078,743
1,385,628
1,176,139
985,234
1,332,364
1,128,793
3,640,510
3,446,391
9,079,189
7,704,288
25,078,137
22,271,953
On 22 March 2019 the Board of Directors of MD Medical Group Investments Plc approved and authorised these consolidated financial
statements for issue.
Vladimir Mekler
Chairman of the Board
of Directors
Mark Kurtser
Managing Director
Andrey Khoperskiy
Chief Financial Officer
The Notes on pages 90 to 116 are an integral part of these consolidated financial statements.
Audited Financial Statements 84 85
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
Consolidated Statement
Of Changes In Equity
For the year ended 31 December 2018
ATTRIBUTABLE TO OWNERS OF THE COMPANY
ATTRIBUTABLE TO OWNERS OF THE COMPANY
BALANCE AT 1 JANUARY 2018
Adjustment on initial application of IFRS 9 (net of tax)
3B
NOTE
SHARE
CAPITAL
RUB’000
180,585
-
TREASURY
SHARES
RUB’000
SHARE
PREMIUM
RUB’000
(4,544)
5,243,319
-
-
ADJUSTED BALANCE AT 1 JANUARY 2018*
180,585
(4,544)
5,243,319
Profit and other comprehensive income for the year
Contributions by and distributions to owners
Equity-settled share-based payment
Other movements
Dividends declared
TOTAL TRANSACTIONS WITH OWNERS
Changes in ownership interests
Acquisition of non-controlling interests
without a change in control
TOTAL CHANGES IN OWNERSHIP INTERESTS
12
18
-
-
-
-
-
-
-
-
847
-
-
847
-
-
-
-
-
-
-
-
-
OTHER
RESERVES
RUB’000
(655,352)
-
(655,352)
-
-
-
-
-
-
-
BALANCE AT 31 DECEMBER 2018
180,585
(3,697)
5,243,319
(655,352)
Share premium is not available for distribution.
RETAINED
EARNINGS
RUB’000
9,377,710
(30,935)
9,346,775
2,671,350
-
(15,545)
(450,750)
TOTAL
RUB’000
14,141,718
(30,935)
14,110,783
2,671,350
847
(15,545)
(450,750)
(466,295)
(465,448)
(619,539)
(619,539)
(619,539)
10,932,291
(619,539)
15,697,146
NON-CONTROLLING
INTERESTS
RUB’000
TOTAL EQUITY
RUB’000
425,947
(2,956)
422,991
159,693
-
-
(110,190)
(110,190)
(170,692)
(170,692)
301,802
14,567,665
(33,891)
14,533,774
2,831,043
847
(15,545)
(560,940)
(575,638)
(790,231)
(790,231)
15,998,948
* The Group has initially applied IFRS 15 and IFRS 9 at 1 January 2018. Under the transition methods chosen, comparative information is not restated.
For more details refer to Note 3.
The Notes on pages 90 to 116 are an integral part of these consolidated financial statements.
Audited Financial Statements 86 87
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
Consolidated Statement
Of Changes In Equity
For the year ended 31 December 2017
BALANCE AT 1 JANUARY 2017
Profit and other comprehensive income for the year
Contributions by and distributions to owners
Equity-settled share-based payment
Closing of motivation program
Dividends declared
TOTAL TRANSACTIONS WITH OWNERS
Changes in ownership interests
Acquisition of non-controlling interests
without a change in control
TOTAL CHANGES IN OWNERSHIP INTERESTS
ATTRIBUTABLE TO OWNERS OF THE COMPANY
ATTRIBUTABLE TO OWNERS OF THE COMPANY
NOTE
SHARE
CAPITAL
RUB’000
180,585
TREASURY
SHARES
RUB’000
SHARE
PREMIUM
RUB’000
(18,737)
5,243,319
-
-
-
-
-
-
-
-
34,754
(20,561)
-
14,193
-
-
-
-
-
-
-
-
-
12
18
OTHER
RESERVES
RUB’000
(655,352)
-
-
-
-
-
-
-
RETAINED
EARNINGS
RUB’000
7,597,472
2,488,812
-
20,561
(688,896)
(668,335)
(40,239)
(40,239)
9,377,710
TOTAL
RUB’000
12,347,287
2,488,812
34,754
-
(688,896)
(654,142)
(40,239)
(40,239)
14,141,718
NON-CONTROLLING
INTERESTS
RUB’000
422,850
215,438
-
-
(199,580)
(199,580)
(12,761)
(12,761)
425,947
TOTAL EQUITY
RUB’000
12,770,137
2,704,250
34,754
-
(888,476)
(853,722)
(53,000)
(53,000)
14,567,665
BALANCE AT 31 DECEMBER 2017
180,585
(4,544)
5,243,319
(655,352)
Share premium is not available for distribution.
The Notes on pages 90 to 116 are an integral part of these consolidated financial statements.
Audited Financial Statements
88 89
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
Consolidated Statement
Of Cash Flows
For the year ended 31 December 2018
Cash flows from operating activities
Profit for the year
Adjustments for:
Depreciation of property, plant and equipment
Amortisation of intangible assets
Equity-settled share-based payment transaction
(Gain) / loss from the sale of property, plant and equipment
Write-off of property, plant and equipment
Gain under Escrow Agreement
Write-off of accounts payable
Finance income
Finance expenses (excluding impairment)
Impairment of assets
Net foreign exchange transactions (gain) / loss
Income tax expense
Increase in inventories
Increase in trade and other receivables
Increase in trade and other payables
Increase in contract liabilities
CASH FLOWS FROM OPERATIONS
Tax paid
NET CASH FLOWS FROM OPERATING ACTIVITIES
Cash flows from investing activities
Payment for acquisition/construction of property, plant and equipment
Proceeds from disposal of property, plant and equipment
NET CASH FLOWS USED IN INVESTING ACTIVITIES
(3,580,999)
(3,306,958)
NOTE
2018
RUB’000
2017
RUB’000
2,831,043
2,704,250
Proceeds from Escrow Agreement
Payment for acquisition of intangible assets
13
14
8
9
9
9
9
10
1,089,720
100,275
847
(152)
5,711
-
-
(173,685)
524,062
22,452
(105,823)
26,139
938,621
97,219
34,754
418
9,602
(96,592)
(3,916)
(97,321)
477,732
14,352
50,201
76,906
Short-term deposits
Interest received
Cash flows from financing activities
Proceeds from loans and borrowings
Repayment of loans and borrowings
Proceeds from the reimbursed VAT
Finance expenses paid
Increase in ownership in subsidiary
Repayment of reimbursed VAT
Dividends paid to the owners of the Company
Dividends paid to non-controlling interests
NET CASH FLOWS (USED IN) / FROM FINANCING ACTIVITIES
4,320,589
4,206,226
NET INCREASE IN CASH AND CASH EQUIVALENTS
(140,766)
(158,822)
33,501
125,222
(80,173)
(118,056)
40,143
141,868
4,179,724
4,190,008
(8,945)
(4,138)
4,170,779
4,185,870
(3,669,078)
(3,445,028)
36,389
4,136
Cash and cash equivalents as at the beginning of the year
Effect of exchange rate changes on cash and cash equivalents
CASH AND CASH EQUIVALENTS AS AT THE END OF THE YEAR
The Notes on pages 90 to 116 are an integral part of these consolidated financial statements.
NOTE
2018
RUB’000
(25,011)
-
-
76,701
2017
RUB’000
(17,530)
96,592
(2,700)
57,572
2,055,583
2,332,688
(955,202)
(1,078,923)
307,043
(479,137)
(768,235)
(64,338)
(494,339)
(109,759)
(508,384)
81,396
124,246
(353,115)
(53,000)
(53,205)
(680,791)
(199,445)
38,455
917,367
2,504,602
1,642,944
129,483
(55,709)
2,715,481
2,504,602
18
16
16
Audited Financial Statements Notes to the Consolidated
Financial Statements
For the year ended 31 December 2018
1. INCORPORATION AND PRINCIPAL
ACTIVITIES
MD Medical Group Investments Plc (the ‘’Company’’) was
incorporated in Cyprus on 5 August 2010 as a private limited
liability company under the provisions of the Cyprus Companies
Law, Cap. 113. In August 2012, following the special resolution
passed by the shareholder, the Company was converted into
a public limited liability company in accordance with the provisions
of the Cyprus Companies Law, Cap. 113. Its Registered Office is at
Dimitriou Karatasou 15, Anastasio Building, 6th floor, office 601,
Strovolos, 2024, Nicosia, Cyprus.
The principal activity of the Company is that of an investment
holding company and, for that purpose, to acquire and hold
controlling and other interests in the share or loan capital of any
company or companies of any nature, but primarily in the healthcare
industry. Refer to Note 4 for more detailed information about
the services provided by the Group’s medical centres.
The details of the directly and indirectly owned subsidiaries are as
follows:
NAME
COUNTRY
OF INCORPORATION
ACTIVITIES
CJSC MD PROJECT 2000
Russian Federation
Medical services
LLC Khaven
LLC Velum
LLC Capital Group
LLC FimedLab
Russian Federation
Medical services
Russian Federation
Medical services
Russian Federation
Pharmaceutics retail
Russian Federation
Medical services
LLC Clinic Mother and Child
Russian Federation
Holding of trademarks
LLC Clinica Zdorovia
Russian Federation
Medical services
LLC Ivamed
LLC Dilamed
CJSC Listom
LLC Ustic-ECO
Russian Federation
Medical services
Russian Federation
Medical services
Russian Federation
Service company
Russian Federation
Medical services
LLC Mother and Child Perm
Russian Federation
Medical services
LLC Mother and Child Ufa
Russian Federation
Medical services
LLC Mother and Child Saint-Petersburg
Russian Federation
Medical services
LLC MD PROJECT 2010
Russian Federation
Medical services
LLC Mother and Child Ugo-Zapad
Russian Federation
Medical services
31 DECEMBER
2018 EFFECTIVE
HOLDING %
31 DECEMBER
2017 EFFECTIVE
HOLDING %
95
100
90
95
90
100
80
100
100
100
70
95
95
85
100
90
95
100
64
80
60
100
60
100
100
100
70
80
80
70
100
60
90 91
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
NAME
COUNTRY
OF INCORPORATION
ACTIVITIES
LLC MD Service
Russian Federation
Pharmaceutics retail
LLC Mother and Child Nizhny Novgorod
Russian Federation
Medical services
LLC Mother and Child Yekaterinburg
Russian Federation
Medical services
LLC Mother and Child Tyumen
Russian Federation
Medical services
CJSC MK IDK
LLC Apteka IDK
LLC CSR
Russian Federation
Medical services
Russian Federation
Pharmaceutics retail
Russian Federation
Medical services
LLC MD Assistance
Russian Federation
Assistance services
LLC Mother and Child Yaroslavl
Russian Federation
Medical services
LLC Mother and Child Kostroma
Russian Federation
Medical services
LLC Mother and Child Vladimir
Russian Federation
Medical services
LLC MD Management
Russian Federation
Management
company
LLC Mother and Child Ryazan
Russian Federation
Medical services
LLC Mother and Child Kazan
Russian Federation
Medical services
Ivicend Holding Ltd
JSC MC Avicenna
Cyprus
Holding
of investments
Russian Federation
Medical services
LLC H&C Medical Group
Russian Federation
Medical services
LLC Centre of Reproductive Medicine
Russian Federation
Medical services
LLC Medica-2
Russian Federation
Medical services
LLC Mother and Child Siberia
Russian Federation
Medical services
LLC Krasnoyarskii center
of Reproductive Medicine
LLC Novosibirskii center
of Reproductive Medicine
Russian Federation
Medical services
Russian Federation
Medical services
LLC Omskii center of Reproductive
Medicine
Russian Federation
Medical services
31 DECEMBER
2018 EFFECTIVE
HOLDING %
31 DECEMBER
2017 EFFECTIVE
HOLDING %
95
100
100
100
100
100
100
100
80
80
80
100
100
100
100
100
100
100
100
100
100
100
100
95
100
100
100
100
100
100
100
80
80
80
100
100
100
100
100
100
100
100
100
100
100
100
Audited Financial Statements 92 93
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
31 DECEMBER
2018 EFFECTIVE
HOLDING %
31 DECEMBER
2017 EFFECTIVE
HOLDING %
plant and equipment that are acquired through a business
combination are initially recorded at fair value at the date
of acquisition. Intangible assets with indefinite useful life are
reviewed for impairment at least annually.
is tested annually for impairment. Any gain on a bargain purchase
is recognised in profit or loss immediately. Transaction costs are
expensed as incurred, except if related to the issue of debt or
equity securities.
NAME
COUNTRY
OF INCORPORATION
ACTIVITIES
LLC Barnaulskii center of Reproductive
Medicine
Russian Federation
Medical services
LLC Nika
Russian Federation
Holding of land
LLC Stroy Vector Pluss
Russian Federation
Rental services
LLC Mother and Child Vladivostok
Russian Federation
Medical services
LLC Irkutsk Clinical Hospital
Russian Federation
Medical services
LLC Mother and Child Volga
Russian Federation
Management
company
LLC Siberia service company
Russian Federation
Service company
LLC TechMedCom
Russian Federation
Service company
LLC Service Hospital Company
Russian Federation
Service company
LLC Elleprof
Russian Federation
Service company
LLC Medtechnoservice
Russian Federation
Service company
100
100
100
100
100
100
-
-
-
-
-
100
100
100
100
100
-
-
-
-
-
-
As at 31 December 2018, 67.9% of the Company’s share capital
is owned by MD Medical Holding Limited, a company beneficially
owned by Dr. Mark Kurtser. The 32.1% of the Company’s share
capital is owned by Guarantee Nominee Limited, who holds
the shares on behalf of the GDR holders.
Federation. The Company and all its operating subsidiaries have
RUB as their functional currency.
These consolidated financial statements of the Group are
presented in RUB, rounded to the nearest thousand.
2. BASIS OF PREPARATION
(A) STATEMENT OF COMPLIANCE
These consolidated financial statements have been prepared
in accordance with International Financial Reporting Standards as
adopted by the European Union (IFRS – EU) and the requirements
of the Cyprus Companies Law, Cap.113.
These consolidated financial statements were approved by the Board
of Directors and were authorised for issue on 22 March 2019.
This is the first set of the Group’s annual financial statements
in which IFRS 15 Revenue from Contracts with Customers and IFRS
9 Financial Instruments have been applied. Changes to significant
accounting policies are described in Note 3.
(B) BASIS OF MEASUREMENT
These consolidated financial statements have been prepared under
the historical cost convention.
(C) FUNCTIONAL AND PRESENTATION CURRENCY
All of the operational Group entities are located in the Russian
(D) USE OF ESTIMATES AND JUDGEMENTS
Preparing these consolidated financial statements in accordance
with IFRSs requires management to exercise their judgement
to make estimates and assumptions that affect the application
of accounting policies and the reported amounts of assets and
liabilities, income and expenses.
The estimates and underlying assumptions are based on historical
experience and various other factors that are deemed reasonable
based on knowledge available at that time. Actual results may differ
from these estimates.
The estimates and underlying assumptions are reviewed and where
necessary revised on an ongoing basis. Revisions to estimates are
recognised prospectively.
In particular, information about significant areas of estimation,
uncertainty and critical judgments in applying accounting policies
that have the most significant effect on the amount recognised
in the consolidated financial statements are described below:
Impairment of intangible assets and property, plant and equipment
Intangible assets and property, plant and equipment are initially
recorded at acquisition cost and are amortised on a straight line
basis over their useful economic life. Intangible assets and property,
The impairment test is performed using the discounted cash flows
expected to be generated through the use of the intangible assets
and property, plant and equipment, using a discount rate that
reflects the current market estimations and the risks associated
with the asset. When it is impractical to estimate the recoverable
amount of an asset, the Group estimates the recoverable amount
of the cash generating unit to which the asset belongs.
Impairment of goodwill
Determining whether goodwill is impaired requires an estimation
of the value in use of the cash generating units of the Group to
which the goodwill has been allocated.
Other
Information about judgements, assumptions and estimation
uncertainties regarding revenue recognition, deferred taxes assets,
provisions, leasses and ECL allowance for trade receivables and
contract assets as at 31 December 2018 is described in Note 3.
3. SIGNIFICANT ACCOUNTING POLICIES
The accounting policies applied in these consolidated financial
statements are consistent with those followed in the Group’s
consolidated financial statements as at 31 December 2017 and
for the year then ended, except for initial application of IFRS 15
Revenue from Contracts with Customers and IFRS 9 Financial
Instruments.
Other new standards and amendments applied for the first time
in 2018 did not impact these consolidated financial statements
of the Group.
BASIS OF CONSOLIDATION
These consolidated financial statements incorporate the financial
statements of the Company and entities controlled by the Company
(its subsidiaries). The Group controls an entity when it is exposed to,
or has rights to, variable returns from its involvement with the entity
and has the ability to affect those returns through its power over
the entity. The financial statements of subsidiaries are included
in the consolidated financial statements from the date on which
control commences until the date on which control ceases.
The financial statements of all the Group companies are prepared
using uniform accounting policies.
The consideration transferred does not include amounts related
to the settlement of pre-existing relationships. Such amounts are
generally recognised in profit or loss.
Any contingent consideration is measured at fair value at the date
of acquisition. If an obligation to pay contingent consideration
that meets the definition of a financial instrument is classified
as equity, then it is not remeasured and settlement is accounted
for within equity. Otherwise, other contingent consideration
is remeasured at fair value at each reporting date and subsequent
changes in the fair value of the contingent consideration are
recognised in profit or loss.
ACQUISITIONS FROM ENTITIES UNDER COMMON CONTROL
Business combinations arising from transfers of interests in entities
that are under the control of the shareholder that controls
the Group are accounted for as if the acquisition had occurred at
the beginning of the earliest comparative period presented or, if
later, at the date that common control was established or, if later, at
the date the Company was incorporated. The assets and liabilities
acquired are recognised at their book values. Any difference
between the consideration paid and the book values is recognised
directly in equity.
NON-CONTROLLING INTERESTS
Non-controlling interests are measured at their proportionate share
of the acquirer’s identifiable net assets at the date of acquisition.
Changes in the Group’s interest in a subsidiary that do not result
in a loss of control are accounted for as equity transactions.
LOSS OF CONTROL
When the Group losses control over a subsidiary, it derecognises
the assets and liabilities of the subsidiary, and any related non-
controlling interest and other components of equity. Any resulting
gain or loss is recognised in profit or loss. Any interest retained
in the former subsidiary is measured at fair value when control
is lost.
TRANSACTIONS ELIMINATED ON CONSOLIDATION
Intra-group balances and transactions and any unrealised
income and expenses arising from intra-group transactions are
eliminated. Unrealised losses are eliminated in the same way as
unrealised gains, but only to the extent that there is no evidence
of impairment.
BUSINESS COMBINATIONS
Acquisitions of businesses are accounted for using the acquisition
method when control is transferred to the Group. The consideration
transferred in the acquisition is generally measured at fair value, as
are the identifiable net assets acquired. Any goodwill that arises
REVENUE
Revenue is measured based on the consideration specified
in a contract with a customer and comprises the invoiced amount
for the sale of goods and services net of rebates and discounts.
Audited Financial Statements The Group recognises revenue when it transfers control over a good
or service to a customer.
interests in joint ventures, except where the Group is able to control
the reversal of the temporary difference and it is probable that
the temporary difference will not reverse in the foreseeable future.
The Group has two main types of revenue: rendering of services
and sales of goods.
The Group has initially applied IFRS 15 from 1 January 2018.
Information about the Group’s accounting policies relating to
contracts with customers and the effect of initially applying IFRS 15
are provided in Note 3A.
FINANCE INCOME
Finance income include:
•
interest income which is recognised as it accrues in profit or loss
using the effective interest method;
income from initial recognition of other payables to tax
authorities at a market interest rate.
•
FINANCE EXPENSES
Finance expenses include interest expense and other borrowing costs
and are recognised in profit or loss using the effective interest method.
FOREIGN CURRENCY TRANSLATION
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates
of the transactions. Foreign exchange gains and losses resulting
from the settlement of such transactions and from the translation
at year end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in profit or loss.
TAX
The tax currently payable is based on taxable profit for the year.
Taxable profit differs from profit as reported in profit or loss
because it excludes items of income or expense that are taxable
or deductible in other years and it further excludes items that
are never taxable or deductible. The Group’s liability for current
tax is calculated using tax rates that have been enacted or
substantively enacted by the reporting date.
Deferred tax is recognised on differences between the carrying
amounts of assets and liabilities in the financial statements and
the corresponding tax bases used in the computation of taxable
profit, and is accounted for using the statement of financial position
liability method. Deferred tax liabilities are generally recognised
for all taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable profits
will be available against which deductible temporary differences
can be utilised. Such assets and liabilities are not recognised if
the temporary difference arises from goodwill or from the initial
recognition (other than in a business combination) of other assets
and liabilities in a transaction that affects neither the taxable
profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary
differences arising on investments in subsidiaries and associates, and
The carrying amount of deferred tax assets is reviewed at each
reporting date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow all
or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected
to apply in the period when the liability is settled or the asset
realised. Deferred tax is charged or credited to profit or loss, except
when it relates to items charged or credited directly to other
comprehensive income or equity, in which case the deferred tax
is also dealt with in other comprehensive income or equity.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to set off current tax assets against current tax
liabilities and when they relate to income taxes levied by the same
taxation authority and the Group intends to settle its current tax
assets and liabilities on a net basis.
DIVIDENDS DECLARED
Dividend distribution to the Company’s shareholders is recognised
in the Group’s financial statements when the shareholders’ right to
receive the dividends is established, either through Board resolution
(for interim dividends) or by the Group’s shareholders in the Annual
General Meeting (for final dividends).
GOVERNMENT GRANTS
Government grants are recognised where there is reasonable
assurance that the grant will be received and all attached
conditions will be complied with. When the grant relates to an
expense item, it is deducted in reporting from the related expense.
When the grant relates to an asset, it reduces the carrying
amount of the asset. The grant is then recognised in profit or loss
over the useful life of the depreciable asset by way of a reduced
depreciation charge.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are measured at cost less
accumulated depreciation and impairment losses. Properties
in the course of construction for production, rental or administrative
purposes, or for purposes not yet determined, are carried at cost,
less any recognised impairment loss. Cost includes professional fees
and, for qualifying assets, borrowing costs capitalised in accordance
with the Group’s accounting policy. Depreciation of these assets,
on the same basis as other property assets, commences when
the assets are ready for their intended use.
Depreciation is recognised in profit or loss on the straight line
method over the useful lives of each part of an item of property,
plant and equipment. The annual depreciation rates for the current
and comparative periods are based on the following estimations
of useful lives:
94 95
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
Freehold buildings
Leasehold improvements
Plant and equipment
No depreciation is provided on land.
YEARS
50
10-20
5-10
Assets under construction are not depreciated until they are
completed and brought into use. At that moment they are
reclassified in the relevant class of property, plant and equipment
and depreciated accordingly.
Depreciation methods, useful lives and residual values are
reassessed at the reporting date.
Where the carrying amount of an asset is greater than its estimated
recoverable amount, the asset is impaired immediately to its
recoverable amount.
Expenditure for repairs and maintenance of property, plant
and equipment is charged to profit or loss for the year in which
it is incurred. The cost of major renovations and other subsequent
expenditure is included in the carrying amount of the asset
when it is probable that future economic benefits in excess
of the originally assessed standard of performance of the existing
asset will flow to the Group. Major renovations are depreciated over
the remaining useful life of the related asset.
An item of property, plant and equipment is derecognised upon
disposal or when no future economic benefits are expected to
arise from the continued use of the asset. Any gain or loss arising
on the disposal or retirement of an item of property, plant and
equipment is determined as the difference between the sales
proceeds and the carrying amount of the asset and is recognised
in profit or loss.
INTANGIBLE ASSETS
(i) Goodwill
Goodwill represents the difference between the cost of an
acquisition and the fair value of the Group’s share of the net
identifiable assets of the acquired undertaking at the date
of acquisition. Positive goodwill on acquisition of subsidiaries
is included in intangible assets.
The excess of the Group’s interest in the fair value of the new
subsidiaries’ net assets over the consideration paid for their
acquisition (a bargain purchase gain) is recognised in profit or
loss in the year of acquisition of the relevant subsidiary. Positive
goodwill is tested annually for impairment and is carried at cost less
accumulated impairment losses. Gains and losses on the disposal
of an undertaking include the carrying amount of goodwill relating
to the undertaking sold. For the purpose of impairment testing
goodwill is allocated to cash generating units that are expected to
benefit from the synergies of the combinations.
(ii) Patents and trademarks
Patents and trademarks are measured initially at purchase cost and
are amortised on a straight line basis over their estimated useful
lives. Their estimated useful life is from five to seven years.
(iii) Software and web site costs
External costs that are directly associated with web site controlled
by the Group and that will probably generate economic benefits
exceeding costs beyond one year are recognised as intangible
assets. Subsequently web site costs are carried at cost less any
accumulated amortisation and any accumulated impairment losses.
Web site costs are amortised using the straight line method over
their useful lives, not exceeding a period of five years. Amortisation
commences when the site is available for use and is included
within administrative expenses.
An intangible asset is derecognised on disposal, or when no
future economic benefits are expected from use. Gains or losses
arising from derecognition of an intangible asset, measured as
the difference between the net disposal proceeds and the carrying
amount of the asset, are recognised in profit or loss when the asset
is derecognised.
INVENTORIES
Inventories include medicines and medical material and are stated
at the lower of cost and net realisable value. The cost is determined
using the weighted average method. Net realisable value
is the estimated selling price in the ordinary course of business, less
the costs to completion and selling expenses.
PROVISIONS
Provisions are recognised when the Group has a present legal or
constructive obligation as a result of past events, it is probable that
an outflow of resources will be required to settle the obligation, and
a reliable estimate of the amount can be made. Where the Group
expects 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.
FINANCIAL INSTRUMENTS
Recognition
The Group recognises financial assets and financial liabilities when,
and only when, it becomes a party of the contractual provisions
of the financial instrument.
Classification
The Group classifies financial assets on the basis of both:
the Group ` s business model for managing financial assets, as
well as the contractual cash flow characteristics of the financial
assets.
The Group’s financial assets comprise of trade and other
receivables and cash and cash equivalents. They are non-derivative
financial assets with fixed or determinable payments that are not
quoted in an active market and for which there is no intention
Audited Financial Statements of trading the receivable. They are classified as current assets unless
the Group has an unconditional responsibility to accept deferral
of receipt for at least twelve months after the balance sheet date,
in which case they are classified as non-current assets.
The Group’s financial liabilities comprise of trade and other
payables and borrowings. They are non-derivatives that are either
designated in this category or not classified in any of the other
categories. They are classified as current liabilities unless there is an
unconditional right to defer settlement for at least twelve months
after the balance sheet date, in which case they are classified as
long term liabilities.
Derecognition of financial assets
A financial asset (or, where applicable a part of a financial asset or
part of a group of similar financial assets) is derecognised when:
• the rights to receive cash flows from the asset have expired;
• the Group retains the right to receive cash flows from
the asset, but has assumed an obligation to pay them in full
without material delay to a third party under a “pass through”
arrangement; or
• the Group has transferred its rights to receive cash flows from
the asset and either (a) has transferred substantially all the risks
and rewards of the asset, or (b) has neither transferred nor
retained substantially all the risks and rewards of the asset, but
has transferred control of the asset.
Measurement
Financial assets and financial liabilities are initially measured at fair
value plus any directly attributable transaction costs.
Any interest in such derecognised financial assets that is created or
retained by the Group, is recognised as a separate asset or liability.
Trade and other receivables are amounts due from customers
for services performed in the ordinary course of business and
are stated after deducting the appropriate allowances for any
impairment.
For the purpose of the statement of cash flows, cash and cash
equivalents include cash in hand, cash at bank and short term
highly liquid investments with maturity of three months or less
from the acquisition date that are subject to an insignificant
risk of changes in their fair value and are used by the Group
in the management of its short term investments.
Impairment of non-derivative financial assets
At each balance sheet date the Group recognises a loss allowance
for expected credit losses on financial assets measured at
amortised cost.
The loss allowance for financial assets at amortised cost
is recognised in profit or loss in respondance with a balance
sheet account reducing the carrying amount of the financial
asset. Expected credit losses are determined based on historical
data of relevant probability of default.
Individually significant financial assets are tested for impairment
on an individual basis. The remaining financial assets are assessed
collectively in groups that share similar credit risk characteristics.
An impairment loss is reversed if the reversal can be related
objectively to an event occurring after the impairment loss was
recognised. For financial assets measured at amortised cost
the reversal is recognised in profit or loss.
The Group has initially applied IFRS 9 from 1 January 2018.
Information about the Group’s accounting policies relating to
new impairment model applied to financial assets measured
at amortised cost and contract assets and the effect of initially
applying IFRS 9 are provided in Note 3B.
Derecognition of financial liabilities
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 a derecognition of the original
liability and the recognition of a new liability, and the difference
in the respective carrying amounts is recognised in profit or loss.
Offsetting financial instruments
Financial assets and financial liabilities are offset and the net
amount reported in the consolidated statement of financial
position if, and only if, there is a currently enforceable legal right
to offset the recognised amounts and there is an intention to
settle on a net basis, or to realise the asset and settle the liability
simultaneously. This is not generally the case with master netting
agreements, and the related assets and liabilities are presented
gross in the consolidated statement of financial position.
Changes in cash flows on existing financial liabilities are not
considered as modification, if they result from existing contractual
terms, e.g. changes in fixed interest rates initiated by banks due to
changes in the CBR key rate, if the loan contract entitles banks to
do so and the Group have an option to either accept the revised
rate or redeem the loan at par without penalty. The Group treats
the modification of an interest rate to a current market rate using
the guidance on floating-rate financial instruments. This means
that the effective interest rate is adjusted prospectively.
IMPAIRMENT OF NON-FINANCIAL ASSETS
Assets that have an indefinite useful life are not subject to
amortisation and are tested annually for impairment. Assets
that are subject to depreciation or amortisation are reviewed
for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. An
96 97
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
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 to sell and
value in use. For the purposes of assessing impairment, assets
are grouped at the lowest levels for which there are separately
identifiable cash flows (cash generating units).
Earnings per share
The Group presents earnings per share (“EPS”) data for its ordinary
shares. EPS is calculated by dividing the profit or loss attributable
to the owners of the Company by the weighted average number
of ordinary shares in issue during the period, adjusted for own
shares held.
Share capital
Proceeds from the issue of ordinary shares are classified as equity.
The difference between the issue price of the shares and their
nominal value is taken to the share premium account.
Incremental costs directly attributable to the issue of new shares
are recognised as a deduction from share premium net of any tax
effect.
Treasury shares
When shares recognised as equity are repurchased, the amount
of the consideration paid, which includes directly attributable
costs, net of any tax effects, is recognised as a deduction
from equity. Repurchased shares are classified as treasury
shares and are presented in the treasury share reserve. When
treasury shares are sold or reissued subsequently, the amount
received is recognised as an increase in equity, and the resulting
surplus or deficit on the transaction is presented in additional
paid-in capital.
Equity-settled share-based payment arrangements
Fair value of equity-settled share-based payment arrangements
with employees is measured at the grant date based on the market
price of the shares. Service and non-market vesting conditions
are not taken into account when estimating the fair value at
the grant date. The grant date is the date on which the Group and
its employees agree the terms and conditions of the share-based
payment arrangement. Fair value is not remeasured subsequent to
the grant date.
Annually the number of shares which are expected to vest is true-
up for the differences between the number of shares initially
expected to vest and the actual number of shares vested, based on
the fulfilment of service and non-market conditions.
Within the vesting period, fair value of the equity-settled share-
based payment arrangement with employees adjusted to reflect
the true-up of the instruments which will not vest, is recognised
as staff costs with the corresponding increase recognised
in equity.
ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL
REPORTING STANDARDS AND INTERPRETATIONS
NEW CURRENTLY EFFECTIVE REQUIREMENTS
The Group has initially applied IFRS 15 (refer to Note 3A) and IFRS 9
(refer to Note 3B) from 1 January 2018. A number of other new
pronouncements are also effective from 1 January 2018 but they do
not have a material effect on the Group’s financial statements.
Due to the transition methods chosen by the Group in applying
these standards, comparative information throughout
these financial statements has not been restated to reflect
the requirements of the new standards, except for separately
presenting impairment loss on trade receivables and contract
assets (refer to Note 3B).
The effect of initially applying these standards is mainly attributed
to the following:
• allocation of financing component from stem cells contracts
•
(refer to Note 3A below);
increase of impairment losses over financial assets (refer to Note
3B below).
A. IFRS 15 REVENUE FROM CONTRACTS WITH CUSTOMERS
IFRS 15 establishes a comprehensive framework for determining
whether, how much and when revenue is recognised. It replaced
IAS 18 Revenue, IAS 11 Construction Contracts and related
interpretations.
The Group has adopted IFRS 15 using the cumulative effect
method (without practical expedients), with the effect of initially
applying this standard recognised at the date of initial application
(i.e. 1 January 2018). Accordingly, the information presented for
2017 has not been restated – i.e. it is presented, as previously
reported, under IAS 18, IAS 11 and related interpretations.
Under IFRS 15, revenue is recognised in the moment when
the service is provided to the customer. Determining the timing
of the services rendering – at a point in time or over time – requires
judgement. The details of the new significant accounting policies
and the nature of the changes to previous accounting policies
in relation to the Group’s services are set out below.
Audited Financial Statements 98 99
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
TYPE OF PRODUCT/
SERVICE
NATURE, TIMING OF SATISFACTION
OF PERFORMANCE OBLIGATIONS,
SIGNIFICANT PAYMENT TERMS
NATURE OF CHANGE IN ACCOUNTING POLICY
The details of new significant accounting policies and the nature and
effect of the changes to previous accounting policies are set out below.
The impact of IFRS 9 on the classification and measurement
of financial assets is set out below.
Rendering of services (ex-
cept storage of stem cells)
Sales of services are recognised at point in time
in which the services are rendered by reference to
completion of the actual service provided.
IFRS 15 did not have an impact on the Group’s
accounting policies.
Sales of goods are recognised when control over
the goods have been transferred to the customer,
which is usually when the Group has sold or
delivered goods to the customer, the customer has
accepted the goods and collectability of the related
receivable is reasonably assured.
Nature of service is long-term safekeeping
of biological materials comprising stem cells
concentrate. Standard terms of contract
include predetermined period of contract from
1 to 30 years paid in advance by the customer
in full amount. Revenue from contract consists
of two parts – revenue from blood collection
and stem cells isolation (charged at the moment
of the appropriate services rendered) and revenue
from storage of stem cells. Inflated revenue from
storage is accrued monthly during the whole period
of contract, with recognition of interest expenses
and net-off of advances received, receivables from
revenue recognised and payables from interest
expenses accrual in the moment of the contract
expiration.
IFRS 15 did not have an impact on the Group’s
accounting policies.
Previously revenue from stem cells contracts was
accrued on straight-line basis. Advances received
from customers were recognised as short-term
and long-term deferred income, depending
of their maturity. With adoption of IFRS 15
approach was amended: advances from customers
are inflated to current date using effective interest
rate, dividing financing component of contract
and recognised as contract liabilities. As a result, at
the moment of first application, advances received
as at that date divided into contract liabilities to
customers and financial liabilities, representing
this financing component of the contract. To show
effect of time value of money for reporting period
revenue following the initial application is inflated
to recognise both additional finance expense
for active contracts and additional revenue from
storage.
Sales of goods
Storage of stem cells
The new standard did not have a material impact on the Group’s
consolidated financial position, consolidated financial results and
consolidated cash flows as at 1 January 2018.
B. IFRS 9 FINANCIAL INSTRUMENTS
IFRS 9 sets out requirements for recognising and measuring
financial assets, financial liabilities and some contracts to buy or
sell non-financial items. This standard replaces IAS 39 Financial
Instruments: Recognition and Measurement.
The following table summarises the impact, net of tax, of transition
to IFRS 9 on the opening balance of retained earnings and non-
controlling interests (for a description of the transition method refer
to ((iii)) below).
IMPACT OF ADOPTING IFRS 9
AS AT 1 JANUARY 2018
RUB’000
Retained earnings
Recognition of expected credit
losses under IFRS 9
Related tax
IMPACT AT 1 JANUARY 2018
Non-controlling interests
Recognition of expected credit
losses under IFRS 9
Related tax
IMPACT AT 1 JANUARY 2018
(32,436)
1,501
(30,935)
(2,956)
-
(2,956)
(i) Classification and measurement
of financial assets and financial liabilities
IFRS 9 largely retains the existing requirements in IAS 39 for
the classification and measurement of financial liabilities. However,
it eliminates the previous IAS 39 categories for financial assets
of held to maturity, loans and receivables and available for sale.
The adoption of IFRS 9 has not had a significant effect on
the Group’s accounting policies related to financial liabilities.
The effect of adopting IFRS 9 on the carrying amounts of financial
assets at 1 January 2018 relates solely to the new impairment
requirements, as described further below.
The following table and the accompanying notes below
explain the original measurement categories under IAS 39 and
the new measurement categories under IFRS 9 for each class
of the Group’s financial assets as at 1 January 2018:
ORIGINAL
CLASSIFICATION
UNDER IAS 39
NEW
CLASSIFICATION
UNDER IFRS 9
ORIGINAL CARRYING
AMOUNT
UNDER IAS 39
NEW CARRYING
AMOUNT
UNDER IFRS 9
Trade and other receivables
Loans and receivables
Amortised cost
Cash and cash equivalents
Loans and receivables
Amortised cost
TOTAL FINANCIAL ASSETS
RUB’000
305,563
2,504,602
2,810,165
RUB’000
270,171
2,504,602
2,774,773
Group classified financial assets as measured at amortised cost,
as their contractual cash flows give rise on specified dates to
cash flows that are solely payments of principal and interest on
the principal amount outstanding and financial assets are held
within a business model whose objective is to hold assets to collect
contractual cash flows.
(ii) Impairment of financial assets
An increase of RUB35,392 thousand in the allowance for impairment
over trade and other receivables was recognised in opening retained
earnings at 1 January 2018 on transition to IFRS 9.
IFRS 9 replaces the “incurred loss” model in IAS 39 with an
“expected credit loss” (ECL) model. The new impairment
model applies to financial assets measured at amortised cost,
contract assets and debt investments at fair value through
other comprehensive income, but not to investments in equity
instruments. Under IFRS 9, credit losses are recognised earlier than
under IAS 39.
Trade receivables and contract assets
The following analysis provides further detail about the calculation
of ECLs related to trade receivables and contract assets on
the adoption of IFRS 9. The Group considers the model and some
of the assumptions used in calculating these ECLs as key sources
of estimation uncertainty.
The ECLs were calculated based on actual credit loss experience
over the past two years. The Group performed the calculation
of ECL rates separately for patients, legal entities and insurance
companies, meanwhile ECL rates for the insurance companies were
calculated based on their ratings (as presented below).
Audited Financial Statements The following table provides information about the exposure to credit risk and ECLs for trade receivables for patients as at 1 January 2018:
0-30 days past due
31-60 days past due
61-90 days past due
more than 91 days past due
TOTAL
WEIGHTED-
AVERAGE
LOSS RATE
GROSS CARRYING
AMOUNT
RUB’000
LOSS
ALLOWANCE
RUB’000
14%
27%
32%
85%
8,402
2,214
2,153
70,695
83,464
(1,160)
(596)
(698)
(60,331)
(62,785)
CREDIT-
IMPAIRED
partly
partly
partly
partly
The following table provides information about the exposure to credit risk and ECLs for trade and other receivables for legal entities except
insurance companies as at 1 January 2018:
0-30 days past due
31-60 days past due
61-90 days past due
more than 91 days past due
TOTAL
WEIGHTED-
AVERAGE
LOSS RATE
GROSS CARRYING
AMOUNT
RUB’000
LOSS
ALLOWANCE
RUB’000
3%
17%
50%
85%
26,058
10,325
3,297
28,481
68,161
(892)
(1,774)
(1,649)
(24,198)
(28,513)
CREDIT-
IMPAIRED
partly
partly
partly
partly
Based on the analysis of the historical data for accounts receivable
from insurance companies no provision was accrued as at 1 January
2018.
STANDARDS AND INTERPRETATIONS ADOPTED BY THE EU
AS AT 1 ANUARY 2019:
• IFRS 16 Leases (effective for annual periods beginning on or after
Cash and cash equivalents
Based on the analysis of the historical data for cash and cash
equivalents in the credit institutions with the rating of Ba3 (per
Moody’s Investors Service Ltd.) and more, no provision is accrued.
As at 1 January 2018 no impairment provision for cash and cash
equivalents was accrued.
(iii) Transition
The Group has taken an exemption not to restate comparative
information for prior periods with respect to classification and
measurement (including impairment) requirements. Therefore,
comparative periods have not been restated. Differences
in the carrying amounts of financial assets and financial liabilities
resulting from the adoption of IFRS 9 are recognised in retained
earnings and non-controlling interests as at 1 January 2018.
Accordingly, the information presented for 2017 does not generally
reflect the requirements of IFRS 9 but rather those of IAS 39.
1 January 2019);
• IFRIC 23 Uncertainty over Income Tax Treatments (effective for
annual periods beginning on or after 1 January 2019);
• Amendments to IFRS 9: Prepayment Features with Negative
Compensation (effective for annual periods beginning on or after
1 January 2019);
• Amendments to IAS 28: Long-term Interests in Associates and
Joint Ventures (effective for annual periods beginning on or after
1 January 2019).
STANDARDS AND INTERPRETATIONS NOT ADOPTED BY THE EU
AS AT 1 JANUARY 2019:
• IFRS 17 Insurance Contracts (effective for annual periods begin-
ning on or after 1 January 2021);
• Annual Improvements to IFRS Standarts 2015–2017 Cycle
(effective for annual periods beginning on or after 1 January
2019);
100 101
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
• Amendments to IAS 19: Plan Amendment, Curtailment or
Settlement (effective for annual periods beginning on or after
1 January 2019);
• Amendments to References to the Conceptual Framework
in IFRS Standards (effective for annual periods beginning on
or after 1 January 2020);
• Amendments to IFRS 3: Business Combinations (effective for
annual periods beginning on or after 1 January 2020);
• Amendments to IAS 1 and IAS 8: Definition of Material (effec-
tive for annual periods beginning on or after 1 January 2020).
Management expects that the adoption of these standards
in future periods will not have a material effect on the consolidated
financial statements of the Group, except for effect of initial
application of IFRS 16 Leases (as disclosed below) and Annual
Improvements to IFRS Standarts 2015–2017 Cycle, which might
have influence on interest expenses capitalisation in part of IAS
23 Borrowing Costs. The Management of the Group is evaluating
the effect on the consolidated financial statements of the Group.
IFRS 16 LEASES
The Group is required to adopt IFRS 16 Leases from 1 January
2019. The Group has assessed the estimated impact that initial
application of IFRS 16 will have on its consolidated financial
statements, as described below. The actual impacts of adopting
the standard on 1 January 2019 may change because the new
accounting policies are subject to change until the Group presents
its first consolidated financial statements that include the date
of initial application.
IFRS 16 introduces a single, on-balance sheet lease accounting
model for lessees. A lessee recognises a right-of-use asset
representing its right to use the underlying asset and a lease
liability representing its obligation to make lease payments. There
are recognition exemptions for short-term leases and leases
of low-value items. Lessor accounting remains similar to the current
standard – i.e. lessors continue to classify leases as finance or
operating leases.
IFRS 16 replaces existing leases guidance, including IAS 17
Leases, IFRIC 4 Determining whether an Arrangement contains
a Lease, SIC-15 Operating Leases – Incentives and SIC-27
Evaluating the Substance of Transactions Involving the Legal
Form of a Lease.
Leases in which the Group is a lessee
The Group will recognise new assets and liabilities for
its operating leases of clinics and land plots. The nature
of expenses related to those leases will now change because
the Group will recognise a depreciation charge for right-of-use
assets and interest expense on lease liabilities.
Previously, the Group recognised operating lease expense on
a straight-line basis over the term of the lease, and recognised
assets and liabilities only to the extent that there was a timing
difference between actual lease payments and the expense
recognised.
In addition, the Group will no longer recognise provisions
for operating leases that it assesses to be onerous. Instead,
the Group will include the payments due under the lease in its
lease liability.
No significant impact is expected for the Group’s finance leases.
Based on the information currently available, the Group
estimates that it will recognise additional lease liabilities
of approximately RUB330 million as at 1 January 2019.
The Group does not expect the adoption of IFRS 16 to impact
its ability to comply with the revised maximum leverage
threshold loan covenant.
The Group used a recognition examption for leases for which
the underlying asset is of low value and didn’t account assets
and liabilities for such lease contracts.
Leases in which the Group is a lessor
No significant impact is expected for other leases in which
the Group is a lessor.
Transition
The Group plans to apply IFRS 16 initially on 1 January 2019,
using the modified retrospective approach with the cumulative
effect of initially applying the Standard without any effects
on retained earnings in accordance with paragraph C5 (b).
The Group will recognise a lease liability at the date of initial
application for leases previously classified as an operating
lease applying IAS 17. The Group will measure that lease
liability at the present value of the remaining lease payments,
discounted using the lessee`s incremental borrowing rate at
the date of initial application. Therefore, the cumulative effect
of adopting IFRS 16 will be recognised as an adjustment to
the opening balance of assets and liabilities at 1 January 2019,
with no restatement of comparative information.
Audited Financial Statements 4. REVENUE
In vitro fertilisation (IVF)
Deliveries
Obstetrics and gynaecology out-patient treatments
Other out-patient medical services
Other medical services
Paediatrics out-patient treatments
Other in-patient medical services
Obstetrics and gynaecology in-patient treatments
Paediatrics in-patient treatments
Sales of goods
Storage of stem cells
Other income
2018
RUB’000
3,487,749
2,211,035
1,827,137
1,552,796
1,366,391
1,322,959
1,048,047
1,027,306
484,977
290,013
138,240
180,716
2017
RUB’000
3,257,639
2,235,825
1,768,001
1,194,798
1,201,968
1,306,107
818,720
965,261
431,749
302,282
136,845
135,972
14,937,366
13,755,167
DISAGGREGATION OF REVENUE
The Group renders the services on the territory of the Russian
Federation. The Group’s operations and main revenue streams are
those described in the table above.
The majority of the Group’s customers are physical persons (87%
of total revenue); some services are rendered to the governmental
and non-governmental insurance companies and legal entities.
All the contracts are fixed- price and short-term except for
the contracts for the storage of stem cells.
All the Group’s revenue except for the revenue from the storage
of stem cells is recognised at the point in time when the services are
provided; the revenue from the storage of stem cells is recognised
over the time of the contract.
The contract liabilities primarily relate to the advance consideration
received from customers. The amount of RUB757,285 thousand
recognised in short-term contract liabilities at the beginning
of the year has been recognised as revenue during the period
ended 31 December 2018. The amount of RUB30,210 thousand
was returned to the customers and the amount of RUB172,450 was
transferred to the other contracts.
Other medical services include but are not limited to laboratory
examinations, diagnostics, surgery, cardiology and oncology.
The increase of other medical services revenue is mainly
represented by continuing ramp-up of Lapino, Novosibirsk and
Ufa hospitals.
102 103
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
5. COST OF SALES
Payroll and related social taxes
Materials and supplies used
Depreciation
Medical services
Energy and utilities
Property tax
Repair and maintenance
Other expenses
6. ADMINISTRATIVE EXPENSES
Payroll and related social taxes
Utilities and materials
Other professional services
Depreciation
Amortisation
Advertising
Communication costs
Independent auditors’ remuneration
Other expenses
2018
RUB’000
5,118,404
2,514,088
946,862
256,301
183,167
129,321
110,491
128,865
2017
RUB’000
4,517,572
2,292,818
803,504
244,461
147,916
129,869
97,733
124,496
9,387,499
8,358,369
2018
RUB’000
1,375,815
269,230
231,253
142,858
100,275
96,256
33,902
21,259
144,767
2017
RUB’000
1,269,232
225,294
238,117
135,117
97,219
128,661
31,112
23,096
106,231
2,415,615
2,254,079
The remuneration of the independent auditors includes an amount of RUB20,522 thousand regarding audit services, RUB375
thousand regarding audit related services and an amount of RUB362 thousand regarding tax services.
7. STAFF COSTS
8. OTHER INCOME
2018
RUB’000
2017
RUB’000
Wages and salaries
5,140,455
4,598,610
Social insurance contributions
and other taxes
1,353,764
1,188,194
TOTAL STAFF COSTS
6,494,219
5,786,804
The number of employees as at 31 December 2018 was 7,349
(31 December 2017: 6,801).
During 2017 the Group received other income of RUB104,808
thousand. This income arose mostly from the Escrow Deed
approved on 26 September 2014, under which the Group received
RUB96,592 thousand (USD1,575 thousand) from Escrow Agent
in March 2017 as a result of negotiations with the seller of Ivicend
Holding Ltd.
Audited Financial Statements 104 105
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
The Group recognised tax expense of RUB26,139 thousand
in the reporting period mostly due to the temporary differences
relating to property, plant and equipment (especially differences on
the new hospital located in Samara).
Deferred tax assets of RUB232,159 thousand as at 31 December
2018 and RUB243,165 thousand as at 31 December 2017 were
mostly recognised on tax losses related to LLC MD Project 2010.
According to Russian tax rules such tax losses will not expire.
Deferred tax liabilities of RUB272,565 thousand as at 31 December
2018 and RUB250,504 thousand as at 31 December 2017 were
mostly recognised on temporary differences relating to property,
plant and equipment. These temporary differences are expected
to be utilised after 1 January 2020 at 20% corporate income tax
rate when the currently enacted tax concession with 0% corporate
income tax rate will expire.
As at 31 December 2018 deferred tax assets relating to tax losses
carried forward in the amount of RUB191,428 thousand (31
December 2017: RUB107,560 thousand) have not been recognised.
Deferred tax assets have not been recognised in respect of these
tax losses because it is not probable that future taxable profit will
be available for utilisation against the benefits therefrom.
As at 31 December 2018, there were temporary differences
(before calculating tax effect) of RUB6,123,534 thousand (31
December 2017: RUB4,921,266 thousand) related to investments
in subsidiaries. Deferred tax liabilities related to these temporary
differences were not recognised because the Group controls
the dividend policy of its subsidiaries and, therefore, controls
the timing of reversal of the related taxable temporary
differences and management is satisfied that they will not reverse
in the foreseeable future.
11. EARNINGS PER SHARE
2018
2017
2,671,350
2,488,812
75,022,526
74,895,010
35.61
33.23
Basic and fully diluted earnings
attributable to the owners
of the Company (RUB’000)
Weighted average number
of ordinary shares in issue during
the year
BASIC AND FULLY DILUTED
EARNINGS PER SHARE (RUB)
12. DIVIDENDS
On 16 March 2018 the Board of Directors declared final dividends
for the year 2017 attributable to the owners of the Company
amounting to RUB450,750 thousand (USD7,905 thousand),
which corresponds to RUB6.0 (USD0.11) per share. The dividend
distribution was approved by the Annual General Meeting
of the shareholders on 17 April 2018. The dividends were paid on
22 May 2018.
On 17 March 2017 the Board of Directors declared final dividends
for the year 2016 attributable to the owners of the Company
amounting to RUB338,063 thousand (USD5,804 thousand),
which corresponds to RUB4.5 (USD0.08) per share. The dividend
distribution was approved by the Annual General Meeting
of the shareholders on 21 April 2017. The dividends were paid on
23 May 2017.
On 8 September 2017 the Board of Directors declared interim
dividends for the six months ended 30 June 2017 attributable to
the owners of the Company amounting to RUB350,833 thousand
(USD6,140 thousand), which corresponds to RUB4.67 (USD0.08)
per share. The dividends were paid on 24 October 2017.
On 22 March 2019 the Board of Directors recommended
the payment of RUB800,081 thousand as final dividends for
the year 2018 which corresponds to RUB10.65 per share.
9. NET FINANCE EXPENSES
Interest income
Initial recognition of other payables to tax authorities at market rate
Bank interest received
Interest from loans to third parties
Finance income
Interest expense
Interest on bank loans
Unwinding of discount on other payables to tax authorities
Other interest expenses
Other finance expense
Bank charges
Other impairment provision
Impairment of trade and other receivables
Impairment of goodwill
FINANCE EXPENSES
NET FOREIGN EXCHANGE TRANSACTIONS GAIN / (LOSS)
NET FINANCE EXPENSES
10. INCOME TAX
NOTE
2018
RUB’000
2017
RUB’000
96,984
76,308
393
173,685
38,656
58,052
613
97,321
(323,586)
(261,253)
(42,713)
(18,484)
(29,704)
(229)
(139,279)
(125,301)
(11,421)
(11,031)
-
(27,261)
(33,984)
(14,352)
(546,514)
(492,084)
105,823
(50,201)
(267,006)
(444,964)
15
14
Majority of the Group companies, that are offering medical services and are operating in the Russian Federation, apply 0% corporate income
tax rate. Other companies apply standard income tax rate of 20% or 15%.
Reconciliation between profit before taxation and income tax expense:
Profit before taxation
Less profit before taxation of non-taxable subsidiaries
LOSS BEFORE TAXATION EXCLUDING NOT-TAXABLE SUBSIDIARIES
Tax using the Group’s domestic tax rate
Effect of subsidiaries taxable at lower tax rates
Non-deductible expenses
Reversal of tax provision
Current-year losses for which no deferred tax asset is recognised
Recognised temporary differences mostly relating to property, plant and equipment on non-taxable
medical subsidiaries expected to be utilised after 1 January 2020 at 20% corporate income tax rate
TOTAL INCOME TAX EXPENSE
2018
RUB’000
2017
RUB’000
2,857,182
2,781,156
(3,221,948)
(3,332,468)
(364,766)
(551,312)
72,953
110,262
717
(6,879)
19,354
455
(4,781)
-
(83,868)
(57,411)
(28,416)
(125,431)
(26,139)
(76,906)
Audited Financial Statements 106 107
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
13. PROPERTY, PLANT AND EQUIPMENT
14. INTANGIBLE ASSETS
Initial cost
BALANCE AT 1 JANUARY 2017
Additions
Disposals
Transfer from construction in progress
BALANCE AT 31 DECEMBER 2017
Additions
Disposals
Impairment loss
Transfer from construction in progress
BALANCE AT 31 DECEMBER 2018
Depreciation
BALANCE AT 1 JANUARY 2017
Depreciation during the year
Accumulated depreciation on disposals
BALANCE AT 31 DECEMBER 2017
Depreciation during the year
Accumulated depreciation on disposals
BALANCE AT 31 DECEMBER 2018
Carrying amounts
BALANCE AT 1 JANUARY 2017
BALANCE AT 31 DECEMBER 2017
BALANCE AT 31 DECEMBER 2018
FREEHOLD
LAND AND
BUILDINGS
RUB’000
PROPERTY
UNDER
CONSTRUCTION
RUB’000
PLANT AND
EQUIPMENT
RUB’000
TOTAL
RUB’000
10,483,310
395,218
(5,632)
818,299
11,691,195
694,390
(27,357)
(3,891)
1,569,305
13,923,642
(949,666)
(241,099)
567
(1,190,198)
(302,981)
4,567
(1,488,612)
9,533,644
10,500,997
12,435,030
1,367,230
2,046,445
(2,346)
(1,117,393)
2,293,936
2,251,427
(454)
-
(2,177,235)
2,367,674
4,913,780
16,764,320
425,278
(30,733)
299,094
2,866,941
(38,711)
-
5,607,419
19,592,550
1,013,072
(45,942)
-
607,930
3,958,889
(73,753)
(3,891)
-
7,182,479
23,473,795
-
-
-
-
-
-
-
(2,404,201)
(3,353,867)
(697,522)
23,020
(938,621)
23,587
(3,078,703)
(4,268,901)
(786,739)
37,937
(1,089,720)
42,504
(3,827,505)
(5,316,117)
1,367,230
2,293,936
2,367,674
2,509,579
2,528,716
3,354,974
13,410,453
15,323,649
18,157,678
GOODWILL
RUB’000
PATENTS AND
TRADEMARKS
RUB’000
SOFTWARE
AND WEBSITE
RUB’000
TOTAL
RUB’000
Initial cost
BALANCE AT 1 JANUARY 2017
2,046,672
564,783
66,838
2,678,293
Additions
Disposals
BALANCE AT 31 DECEMBER 2017
Additions
-
(14,352)
29
-
2,032,320
564,812
-
-
5,851
(1,130)
71,559
23,311
5,880
(15,482)
2,668,691
23,311
BALANCE AT 31 DECEMBER 2018
2,032,320
564,812
94,870
2,692,002
Amortisation
BALANCE AT 1 JANUARY 2017
Amortisation during the year
Accumulated amortisation on disposals
BALANCE AT 31 DECEMBER 2017
Amortisation during the year
BALANCE AT 31 DECEMBER 2018
Carrying amounts
BALANCE AT 1 JANUARY 2017
BALANCE AT 31 DECEMBER 2017
BALANCE AT 31 DECEMBER 2018
-
-
-
-
-
-
2,046,672
2,032,320
2,032,320
(209,493)
(84,772)
-
(294,265)
(74,675)
(368,940)
355,290
270,547
195,872
(27,214)
(12,447)
712
(38,949)
(25,600)
(64,549)
39,624
32,610
30,321
(236,707)
(97,219)
712
(333,214)
(100,275)
(433,489)
2,441,586
2,335,477
2,258,513
Goodwill is allocated to each cash-generating unit (CGU), which
is defined as each individual subsidiary or group of subsidiaries
acquired operating as one business in one particular location.
Goodwill has been allocated for impairment testing purposes to
6 groups of cash generating units.
The amount of borrowing costs capitalised during the year
ended 31 December 2018 was RUB160,027 thousand
(RUB110,009 thousand for the year ended 31 December 2017).
Capitalisation rate for loans varied from 8.25% to 10.15% for
the year ended 31 December 2018 (from 10.15% to 11.75% for
the year ended 31 December 2017).
As at 31 December 2018 construction in progress mainly
includes construction costs of Tyumen hospital amounted
RUB1,713,291 thousand and Lapino hospital amounted
RUB382,830 thousand.
The total net book value of property, plant and equipment
which is held as collateral for the loans and borrowings
is RUB8,756,360 thousand as at 31 December 2018 (31
December 2017: RUB8,249,162 thousand).
JSC MC Avicenna
A group of 4 cash generating units located in Krasnoyarsk, Omsk, Novosibirsk
and Barnaul (acquired in January 2016)
LLC Medica-2
CJSC MK IDK
LLC Centre of Reproductive Medicine
Subsidiaries acquired in 2011
31 DECEMBER 2018
RUB’000
31 DECEMBER 2017
RUB’000
1,055,593
1,055,593
360,154
248,250
211,303
142,193
14,827
360,154
248,250
211,303
142,193
14,827
2,032,320
2,032,320
In order to assess any impairment in the value of goodwill, the Group performed a test of the estimated recoverable amount of the CGUs
compared to their carrying value.
Audited Financial Statements 108 109
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
The recoverable amount of each CGU group is based on the sum
of the enterprise values of the subsidiaries included in each CGU
and is measured at value in use. The calculation of the enterprise
values of each subsidiary is based on the current and estimated
future after-tax profitability. The management has projected
cash flows for the period of the five years based on the approved
financial forecasts. The growth rate in terminal period is estimated
to be 4%. Discount after-tax rate applied to the cash flow
projections is 14%.
No impairment of goodwill was recognised in 2018, in 2017
the impairment of goodwill of RUB14,352 thousand was
recognised. For all cash generating units management believes that
any reasonable possible change in the key assumptions would not
cause carrying amounts of these units to exceed their recoverable
amounts materially.
15. TRADE, OTHER RECEIVABLES
AND DEFERRED EXPENSES
CAPEX prepayments
Trade receivables
Advances paid to suppliers
Deferred expenses
Other receivables
Non-current portion
Current portion
31 DECEMBER
2018
RUB’000
31 DECEMBER
2017
RUB’000
592,416
279,644
99,818
10,777
65,529
1,048,184
592,416
455,768
1,048,184
889,933
287,140
87,311
8,061
38,691
1,311,136
889,933
421,203
1,311,136
The following table provides information about the exposure to credit risk and ECLs for trade and other receivables for legal entities except
insurance companies as at 31 December 2018.
0-30 days past due
31-60 days past due
61-90 days past due
more than 91 days past due
TOTAL
WEIGHTED-
AVERAGE
LOSS RATE
GROSS CARRYING
AMOUNT
RUB’000
LOSS
ALLOWANCE
RUB’000
2%
11%
12%
86%
21,694
9,898
1,759
25,685
59,036
(473)
(1,057)
(211)
(21,963)
(23,704)
CREDIT-
IMPAIRED
partly
partly
partly
partly
Based on the analysis of the historical data for accounts receivable
from insurance companies no provision is accrued as at 31
December 2018.
The exposure of the Group to credit and currency risk in relation to
trade, other receivables and deferred expenses is reported in Note
23 of these consolidated financial statements.
CAPEX prepayments represent capital expenditure prepayments
under contracts for construction works and acquisition of plant and
equipment.
16. CASH AND CASH EQUIVALENTS
Ageing analysis of trade receivables:
Not past due
Past due
GROSS AMOUNT
31 DECEMBER 2018
RUB’000
IMPAIRMENT
31 DECEMBER 2018
RUB’000
GROSS AMOUNT
31 DECEMBER 2017
RUB’000
IMPAIRMENT
31 DECEMBER 2017
RUB’000
259,657
115,366
375,023
-
(95,379)
(95,379)
287,140
55,906
343,046
-
(55,906)
(55,906)
In addition to the bad debt provision accrued as at 31 December
2018 the accounts receivable in the amount of RUB5,449 thousand
were written off during the year ended 31 December 2018 (year
ended 31 December 2017: RUB10,945).
The Group performed the calculation of ECL rates separately for
patients, legal entities and insurance companies, meanwhile ECL
rates for the insurance companies were calculated based on their
ratings.
The following table provides information about the exposure
to credit risk and ECLs for trade receivables for patients as at
31 December 2018.
0-30 days past due
31-60 days past due
61-90 days past due
more than 91 days past due
TOTAL
WEIGHTED-
AVERAGE
LOSS RATE
GROSS CARRYING
AMOUNT
RUB’000
LOSS
ALLOWANCE
RUB’000
22%
25%
29%
88%
15,740
3,687
3,251
75,011
97,689
(3,450)
(924)
(954)
(66,347)
(71,675)
CREDIT-
IMPAIRED
partly
partly
partly
partly
31 DECEMBER
2018
RUB’000
31 DECEMBER
2017
RUB’000
Cash at bank and in hand
476,530
350,827
Bank deposits
with maturity less than
3 months
2,238,951
2,153,775
2,715,481
2,504,602
Currency:
RUB
USD
EUR
31 DECEMBER
2018
RUB’000
31 DECEMBER
2017
RUB’000
2,307,350
1,559,268
406,983
1,148
944,313
1,021
2,715,481
2,504,602
The exposure of the Group to credit risk and currency risk in relation
to cash and cash equivalents is reported in Note 23 of these
consolidated financial statements.
17. SHARE CAPITAL
Authorised
Issued and fully paid ordinary shares
1 January / 31 December
NUMBER
OF SHARES
NOMINAL VALUE
USD
SHARE CAPITAL
RUB’000
SHARE CAPITAL
USD’000
125,250,000
75,125,010
0.08
0.08
-
10,020
180,585
6,010
Audited Financial Statements 18. SHARE PREMIUM, RESERVES
AND RETAINED EARNINGS
SHARE PREMIUM
Share premium includes the total amount received in excess
of the total nominal value of the new share capital issued.
Incremental costs directly attributable to the issue of new shares
are recognised as a deduction from equity (share premium) net
of any tax effect.
OTHER RESERVES
Other reserves include common control transactions reserve, capital
contribution reserve and treasury shares.
Common control transactions reserve includes differences
between the carrying amount of net assets acquired through
purchases of subsidiaries from parties under common control and
the consideration paid for their acquisition.
There were no significant changes during 2018.
RETAINED EARNINGS
Retained earnings include accumulated profits and losses incurred
by the Group.
19. LOANS AND BORROWINGS
During 2018 the Group has acquired additional 30% share in LLC
Mother and Child Ugo-Zapad and LLC FimedLab, 26% share
in LLC Velum, 20% share in LLC Clinica Zdorovia and 15% share
in LLC Capital Group, LLC Mother and Child Perm, LLC Mother and
Child Ufa, LLC Mother and Child Saint-Petersburg for USD12,335
thousand which corresponds to RUB790,231 thousand as at
the date of the transfer of shares and RUB768,235 thousand as at
the date of the payment. As a result non-controlling interest in these
subsidiaries decreased by RUB170,692 thousand. The difference
of RUB619,539 thousand between the value of investments as at
the ownership`s transfer date and non-controlling interest acquired
was accounted as an equity transaction.
In 2017 the Company acquired 15% share in a subsidiary, which
it controls, for RUB33,000 thousand. As a result non-controlling
interest in this subsidiary decreased by RUB5,433 thousand.
The difference of RUB27,567 thousand between consideration
paid to a minority shareholder and the amount of non-controlling
interest acquired was accounted as an equity transaction.
In 2017 the Company acquired 10% share in a subsidiary, which
it controls, for RUB20,000 thousand. As a result non-controlling
interest in this subsidiary decreased by RUB7,328 thousand.
The difference of RUB12,672 thousand between consideration
paid to a minority shareholder and the amount of non-controlling
interest acquired was accounted as an equity transaction.
31 DECEMBER
2018
RUB’000
31 DECEMBER
2017
RUB’000
Long-term liabilities
Bank loans
4,586,532
3,585,213
Short-term liabilities
Bank loans
1,078,743
985,234
TOTAL LOANS
AND BORROWINGS
5,665,275
4,570,447
Maturity of loans and borrowings:
31 DECEMBER
2018
RUB’000
31 DECEMBER
2017
RUB’000
Within one year
1,078,743
Between one and five years
4,306,546
More than 5 years
279,986
985,234
3,071,796
513,417
5,665,275
4,570,447
The total net book value of property, plant and equipment which
is held as collateral for the bank loans is disclosed in Note 13.
110 111
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
The terms and debt repayment schedule of loans are as follows:
31 DECEMBER 2018
31 DECEMBER 2017
EFFECTIVE
INTEREST
RATE
FACE
VALUE
RUB’000
CARRYING
AMOUNT
RUB’000
FACE
VALUE
RUB’000
CARRYING
AMOUNT
RUB’000
MATURITY
CURRENCY
RUB
RUB
RUB
RUB
RUB
RUB
RUB
RUB
8.45%
9.15%
8.25%
8.25%
9%
8.45%
9.15%
14.20%
2023
2,482,210
2,482,210
2,075,780
2,075,780
2024
1,940,094
1,940,094
351,664
351,664
2022
2026
2018
2019
2020
2019
989,831
989,831
1,050,350
1,050,350
38,954
38,954
-
-
189,150
189,150
16,084
8,952
16,084
8,952
-
393,369
658,446
19,980
20,858
-
393,369
658,446
19,980
20,858
5,665,275
5,665,275
4,570,447
4,570,447
Secured bank loan
Secured bank loan
Secured bank loan
Secured bank loan
Secured bank loan
Unsecured bank loan
Unsecured bank loan
Unsecured bank loan
The contractual cash flows and the exposure of the Group to liquidity risk in relation to loans and borrowings is reported in Note 23 of these
consolidated financial statements.
20. CONTRACT LIABILITIES
(DEFERRED INCOME)
21. TRADE AND OTHER PAYABLES
31 DECEMBER
2018
RUB’000
31 DECEMBER
2017
RUB’000
1,319,912
1,273,653
Other payables to tax
authorities
Accruals
143,773
144,860
Payables to employees
Patient advances
including:
Contract liabilities after
more than one year
Contract liabilities within
one year
1,176,139
1,128,793
Contract liabilities that relate to long term client advances represent
money received from patients on stem cells storage contracts
lasting from 1 to 30 years. Contract liabilities that relate to short
term client advances represent money received from patients on
stem cells storage contracts, childbirth management contracts
lasting from 1 to 9 months, and children care contracts valid up to
1 year.
Trade payables
Taxes payable
CAPEX payables
Income tax liability
Other payables
Non-current portion
Current portion
31 DECEMBER
2018
RUB’000
31 DECEMBER
2017
RUB’000
526,548
390,810
320,940
285,042
159,591
101,933
2,191
34,382
336,061
353,487
291,555
318,727
142,301
125,306
21,879
20,368
1,821,437
1,609,684
435,809
1,385,628
277,320
1,332,364
1,821,437
1,609,684
The contractual cash flows (except income tax liability) and
the exposure of the Group to liquidity risk in relation to trade
and other payables is reported in Note 23 of these consolidated
financial statements.
Audited Financial Statements 22. RELATED PARTY TRANSACTIONS
The following transactions were carried out with related parties:
22.3. DIVIDENDS DECLARED TO RELATED PARTIES
Dividends declared to the parent company MD Medical Holding
Limited amounted to RUB306,140 thousand for the year ended
31 December 2018 (31 December 2017: RUB467,885 thousand).
22.1. OPERATIONS WITH KEY MANAGEMENT PERSONNEL
The remuneration of the members of the key management personnel
and non-executive directors for the year ended 31 December 2018
was RUB74,416 thousand (31 December 2017: RUB56,791 thousand).
The remuneration of the members of the key management
personnel which remained unpaid as at 31 December 2018 was
RUB16,475 thousand (31 December 2017: RUB15,911 thousand).
The Group provided medical informational services to related
parties amounted RUB1,345 thousand for the year 31 December
2018 (for the year ended 31 December 2017: nil).
The payables for medical informational services which remained
unprovided as at 31 December 2018 was RUB939 thousand
(31 December 2017: nil).
The Group provided advertising services to the key management
personnel for the year ended 31 December 2018 amounted
to RUB1,329 thousand (for the year ended 31 December 2017:
RUB762 thousand).
The receivables for advertising services which remained unpaid as
at 31 December 2018 was RUB336 thousand (31 December 2017:
RUB762 thousand).
22.2. DIRECTORS’ INTERESTS
The direct and indirect interests of the members of the Board
in titles of the Company as at 31 December 2018, 31 December
2017 and as at the date of signing these consolidated financial
statements are as follows:
NAME
TYPE OF INTEREST
EFFECTIVE
INTEREST %
Mark Kurtser
Kirill Dmitriev
Simon Rowlands
Indirect ownership
of shares
Indirect interest
in shares
Direct ownership
of shares
67.90
5.55
0.33
Indirect interest in shares by Kirill Dmitriev arises through
his capacity as key management personnel of indirect shareholder.
The calculation of effective interest is based on the total amount
of issued and fully paid shares, including treasury shares acquired
by the Company.
23. FINANCIAL RISK MANAGEMENT
Financial risk factors
The Group is exposed to the following risks from its use of financial
instruments:
• Credit risk
• Liquidity risk
• Market risk
The Board of Directors has the overall responsibility for the establishment
and supervision of the Company’s risk management framework.
The Group’s risk management policies are established to identify
and analyse the risks faced by the Group to set appropriate risk
limits and controls and monitor risks and adherence to limits. Risk
management policies and systems are reviewed regularly to reflect
changes in market conditions and in the Group’s activities.
(i) Credit risk
Credit risk arises when a failure by counterparties to discharge
their obligations could reduce the amount of future cash inflows
from financial assets on hand at the reporting date. The Group has
no significant concentration of credit risk. The Group has policies
in place to ensure that sales of products and services are made
to customers with an appropriate credit history and monitors
on a continuous basis the ageing profile of its receivables. Cash
balances are held with various financial institutions.
Exposure to credit risk
The carrying amount of financial assets represents the maximum
credit exposure. The maximum exposure to credit risk at
the reporting date was:
31 DECEMBER
2018
RUB’000
31 DECEMBER
2017
RUB’000
Trade and other receivables
345,578
Other assets
-
326,541
2,700
Cash and cash equivalents
excluding cash in hand
2,703,965
2,494,320
3,049,543
2,823,561
Trade and other receivables
The Group’s exposure to credit risk is influenced mainly by the indi-
vidual characteristics of each customer. The Group has no significant
concentration of credit risk regarding trade and other receivables.
This fact significantly reduces possible delays and other negative
consequences that may potentially affect matching the maturity
of assets with liabilities. Furthermore, according to the internal policy,
clients usually pay in advance except for some particular cases.
112 113
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
Cash and cash equivalents
The Group held cash and cash equivalents excluding cash in hand
of RUB2,703,965 thousand as at 31 December 2018 (31 December
2017: RUB2,494,320 thousand) which represents its maximum
credit exposure on these assets. The cash and cash equivalents
are mostly held with bank and financial institution counterparties,
which are rated Baa3-A3, based on rating agency Moody’s
Investors Service ratings.
(ii) Liquidity risk
Liquidity risk is the risk that arises when the maturity of assets
and liabilities does not match. An unmatched position potentially
enhances profitability, but can also increase the risk of losses.
The Group has procedures to minimise such losses including
maintaining sufficient cash and other highly liquid current assets.
The following are the contractual maturities of financial liabilities
including estimated interest payments:
31 DECEMBER 2018
NOTE
Bank loans
CAPEX payables
Trade payables
Other payables
and accrued expenses
19
21
21
CARRYING
AMOUNTS
RUB’000
CONTRACTUAL
CASH FLOWS
RUB’000
2 MONTHS
OR LESS
RUB’000
BETWEEN
2-12 MONTHS
RUB’000
BETWEEN
1-2 YEARS
RUB’000
BETWEEN
2-5 YEARS
RUB’000
MORE THAN
5 YEARS
RUB’000
5,665,275
6,996,964
243,630
1,285,544
1,470,690 3,706,346
290,754
101,933
285,042
101,933
67,473
34,460
285,042
285,042
-
-
-
-
-
-
-
1,432,271
1,630,945
644,298
344,702
97,752
341,517
202,676
7,484,521
9,014,884
1,240,443
1,664,706 1,568,442 4,047,863
493,430
31 DECEMBER 2017
NOTE
Bank loans
CAPEX payables
Trade payables
Other payables
and accrued expenses
19
21
21
CARRYING
AMOUNTS
RUB’000
CONTRACTUAL
CASH FLOWS
RUB’000
2 MONTHS
OR LESS
RUB’000
BETWEEN
2-12 MONTHS
RUB’000
BETWEEN
1-2 YEARS
RUB’000
BETWEEN
2-5 YEARS
RUB’000
MORE THAN
5 YEARS
RUB’000
4,570,447
5,803,410
339,332
1,028,436
1,220,585
2,671,631
543,426
125,306
318,727
125,306
118,184
318,727
318,727
7,122
-
-
-
-
-
-
-
1,143,772
1,290,250
513,879
342,708
67,315
201,912
164,436
6,158,252
7,537,693
1,290,122
1,378,266 1,287,900 2,873,543
707,862
The Group has bank loans which contain debt covenants. The breach of covenants may require the Group to repay the loans earlier than
indicated in the above table.
(iii) Market risk
Market risk is the risk that changes in market prices, such as
foreign exchange rates, interest rates and equity prices which
affects the Group’s income or the value of its holdings of financial
instruments.
Interest rate risk
Interest rate risk is the risk that the value of financial instruments
will fluctuate due to changes in market interest rates. Borrowings
issued at variable rates expose the Group to cash flow interest rate
risk. Borrowings issued at fixed rates expose the Group to fair value
interest rate risk. The Group’s management monitors the interest
rate fluctuations on an ongoing basis and acts accordingly.
As at the reporting date the interest rate profile of interest bearing
financial instruments was as follows:
Fixed rate instruments
Financial assets
Financial liabilities
31 DECEMBER
2018
RUB’000
31 DECEMBER
2017
RUB’000
2,238,951
2,156,475
(5,665,275)
(4,570,447)
(3,426,324)
(2,413,972)
Audited Financial Statements 114 115
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
24. FAIR VALUES
As at 31 December 2018 and 31 December 2017 the Group had no
significant financial assets or liabilities measured at fair value.
The financial assets of the Group include cash and cash
equivalents and trade and other receivables. The financial liabilities
of the Group include loans and borrowings and trade and other
payables. The fair value of these financial instruments is classified
as Level 3 of fair value class hierarchy and is estimated only for
disclosure purposes using discounted cash flows taking interest
rates adequate to the relevant risk. The fair values of the Group’s
financial assets and liabilities approximate their carrying amounts at
the reporting date.
25. CONTINGENT LIABILITIES
(A) INSURANCE
As per current legislation in Russian Federation medical clinics are
not required to insure their activities. There is a draft Law regarding
obligatory insurance of medical clinics as from 2013. The Law has
not yet been enacted. At present the Group does not insure its
operational activities but has obtained insurance cover for some
property, plant and equipment. Until the Group obtains adequate
insurance coverage there is a risk of material adverse effect on
operations and statement of financial position.
(B) RUSSIAN BUSINESS ENVIRONMENT
The Group’s operations are primarily located in the Russian
Federation. Consequently, the Group is exposed to the economic
and financial markets of the Russian Federation which display
characteristics of an emerging market. The legal, tax and regulatory
frameworks continue development but are subject to varying
interpretations and frequent changes which together with other
legal and fiscal impediments contribute to the challenges faced by
entities operating in the Russian Federation.
The conflict in Ukraine and related events has increased
the perceived risks of doing business in the Russian Federation.
The imposition of economic sanctions on Russian individuals and
legal entities by the European Union, the United States of America,
Japan, Canada, Australia and others, as well as retaliatory sanctions
imposed by the Russian government, has resulted in increased
economic uncertainty including more volatile equity markets,
a depreciation of the Russian Rouble, a reduction in both local
and foreign direct investment inflows and a significant tightening
in the availability of credit. In particular, some Russian entities may be
experiencing difficulties in accessing international equity and debt
markets and may become increasingly dependent on Russian state
banks to finance their operations. The longer term effects of recently
implemented sanctions, as well as the threat of additional future
sanctions, are difficult to determine.
The consolidated financial statements reflect management’s
assessment of the impact of the Russian business environment on
the operations and the financial position of the Group. The future
business environment may differ from management’s assessment.
(C) RUSSIAN TAX ENVIRONMENT
The taxation system in the Russian Federation continues to
evolve and is characterised by frequent changes in legislation,
official pronouncements and court decisions, which are sometimes
contradictory and subject to varying interpretation by different
tax authorities. Taxes are subject to review and investigation by
a number of authorities, which have the authority to impose severe
fines, penalties and interest charges. A tax year generally remains
open for review by the tax authorities during the three subsequent
calendar years; however, under certain circumstances a tax year may
remain open longer. Recent events within the Russian Federation
suggest that the tax authorities are taking a more assertive and
substance-based position in their interpretation and enforcement
of tax legislation. These circumstances may create tax risks
in the Russian Federation that are substantially more significant
than in other countries. Management believes that it has provided
adequately for tax liabilities based on its interpretations of applicable
Russian tax legislation, official pronouncements and court decisions.
However, the interpretations of the tax authorities and courts,
especially due to reform of the supreme courts that are resolving tax
disputes, could differ and the effect on these consolidated financial
statements, if the authorities were successful in enforcing their
interpretations, could be significant.
Currently, the Russian Government focuses on the ways to combat
offshore structures which historically were widely used by Russian
businesses and tighten the tax anti-avoidance regulations. Recent
new Russian legislation is aimed at regulating transactions with
offshore companies and their activities, which may potentially impact
the Group’s tax position.
In particular,fixed-rate financial liabilities include fixed rate bank
loans amounted to RUB5,665,275 thousand for which the banks
have the option to revise the interest rate following the change
of key rate set by the CBR and the Group has an option to either
accept the revised rate or redeem the loan at par without penalty.
The Group does not account for any fixed rate instruments at
fair value through profit or loss and does not have any derivative
financial instruments, therefore a change in interest rates at
the reporting date would not affect profit or loss or equity.
Currency risk
Currency risk is the risk that the value of financial instruments will
fluctuate due to changes in foreign exchange rates. Currency risk
arises when future commercial transactions and recognised assets
and liabilities are denominated in a currency that is not the Group’s
functional currency. The Group is exposed to foreign exchange risk
arising from various currency exposures primarily with respect to
the United States Dollar and the Euro. The Group’s management
monitors the exchange rate fluctuations on ongoing basis and acts
accordingly.
The Group’s exposure to foreign currency risk was as follows:
Assets
Cash in bank
Trade and other receivables
Liabilities
CAPEX payables
Trade and other payables and accruals
NET EXPOSURE
31 DECEMBER 2018
31 DECEMBER 2017
USD`000
EUR`000
GBP`000
USD`000
EUR`000
GBP`000
406,983
1,904
(1,227)
(634)
407,026
1,148
168
(1,080)
(2,732)
(2,496)
-
-
-
(373)
(373)
944,313
2,431
(1,899)
(91)
944,754
1,021
1,375
-
(127)
2,269
-
-
-
-
-
The following significant exchange rates applied during the year:
USD
EUR
GBP
AVERAGE RATE
REPORTING DATE SPOT RATE
2018
62.7078
73.9546
83.5756
2017
58.3529
65.9014
75.2379
2018
69.4706
79.4605
88.2832
2017
57.6002
68.8668
77.6739
SENSITIVITY ANALYSIS
A 10% weakening of the Russian Ruble against the above
currencies will result in the increase in profit and equity
of RUB40,416 thousand as at 31 December 2018 (31 December
2017: RUB94,702 thousand). A 10% strengthening of the Russian
Ruble would have an opposite impact.
The Group monitors capital on the basis of the net debt to equity
ratio. This ratio is calculated as net debt divided by total equity.
Net debt is calculated as total loans and borrowings less cash
and cash equivalents. Total equity is calculated as “equity” shown
in the consolidated statement of financial position.
CAPITAL MANAGEMENT
The Group’s objectives in managing capital are to safeguard
the Group’s ability to continue as a going concern in order to
provide returns to owners 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 shareholders, return capital
to owners or issue of new shares.
31 DECEMBER
2018
RUB’000
31 DECEMBER
2017
RUB’000
NOTE
Financial liabilities
Less: cash and cash
equivalents
19
16
Net debt
Total equity
NET DEBT
TO EQUITY RATIO
5,665,275
4,570,447
(2,715,481)
(2,504,602)
2,949,794
2,065,845
15,998,948
14,567,665
18.44%
14.18%
Audited Financial Statements Report
and Separate
Financial
Statements
For the year ended 31 December 2018
Contents
118 Officers, Professional Advisors and Registered Office
119 Management Report
123 Directors’ Responsibility Statement
124 Independent Auditors’ Report
128 Statement of Profit or Loss and Other Comprehensive Income
129 Statement Of Financial Position
130 Statement Of Changes In Equity
134 Statement Of Cash Flows
136 Notes to the Financial Statements
26. NON-CONTROLLING INTERESTS
The only material non-controlling interest in the Group is related to CJSC MD PROJECT 2000. The information about the subsidiary before
any intra-group eliminations is presented below.
Most of the turnovers are cash based.
Revenue
Profit and other comprehensive income
Profit and other comprehensive income allocated to non-controlling interests
Dividends paid to non-controlling interests
NON-CONTROLLING INTERESTS PERCENTAGE
Non-current assets
Current assets
Non-current liabilities
Current liabilities
NET ASSETS
Carrying amount of non-controlling interests
Other non-controlling interests
2018
RUB’000
3,082,997
1,218,074
60,904
40,000
5%
2017
RUB’000
3,242,383
1,388,957
69,448
62,500
5%
31 DECEMBER 2018
RUB’000
31 DECEMBER 2017
RUB’000
3,799,467
735,668
(164,094)
(667,382)
3,703,659
185,183
116,619
301,802
3,521,804
620,589
(144,860)
(674,196)
3,323,337
166,167
259,780
425,947
27. OPERATING LEASES
28. CAPITAL COMMITMENTS
Historically, the Group has developed business in own premises.
However, in 2018 and 2017 the Group has acquired and incorporated
some new entities that lease their premises. Lease agreements are
cancellable with notification period of one to six months.
Capital commitments mostly comprise of the obligations under
construction contracts in the amount of RUB3,808,490 thousand as
at 31 December 2018 (31 December 2017: RUB2,020,427 thousand).
The future minimum lease payments for premises under lease
agreements are payable as follows:
29. SEGMENT REPORTING
Within one year
Between one and five years
More than five years
2018
RUB’000
2017
RUB’000
116,957
172,601
62,033
92,611
135,153
19,642
351,591
247,406
The Group has one primary reporting segment: provision of medical
services. The Group evaluates the performance and makes invest-
ments and strategic decisions based upon a review of profitability
for the Group as a whole and does not group subsidiaries by geog-
raphy and service lines during the analysis of their performance.
30. EVENTS AFTER
THE REPORTING PERIOD
The Group also lease land plots under several hospitals and clinics.
Lease agreements maturity for land plots are either 49 years or infinite.
In March 2019 the Group opened a new clinic in Vladivostok.
Audited Financial Statements 118 119
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
Officers, Professional Advisors
And Registered Office
Management Report
– Vladimir Mekler – Chairman
– Mark Kurtser
– Vitaly Ustimenko
– Kirill Dmitriev
– Nikolay Ishmetov (alternate director to Kirill Dmitriev)
– Simon Rowlands
– Alsu Nazyrova
– Liubov Malyarevskaya
Menustrust Limited
Darya Alekseeva
KPMG Limited
15 Dimitriou Karatasou street, Anastasio Building,
6th floor, office 601, Strovolos,
2024, Nicosia, Cyprus
Board of Directors
Secretary
Secretary assistant
Independent Auditors
Registered Office
The Board of Directors of MD Medical Group Investments Plc
(the “Company”) presents to the members its Annual Report
together with the audited financial statements of the Company for
the year ended 31 December 2018.
INCORPORATION
MD Medical Group Investments Plc was incorporated in Cyprus
on 5 August 2010 as a private limited liability company under
the provisions of the Cyprus Companies Law, Cap. 113. On 22 August
2012 following special resolution passed by the shareholder, the name
of the Company was changed from “MD Medical Group Investments
Ltd” to “MD Medical Group Investments Plc” and the Company was
converted into a public limited liability company in accordance with
the provisions of the Cyprus Companies Law, Cap. 113.
PRINCIPAL ACTIVITY
The principal activity of the Company is that of an investment holding
company and, for that purpose, to acquire and hold controlling
and other interests in the share or loan capital of any company or
companies of any nature, but primarily in the healthcare industry.
FINANCIAL RESULTS
The Company’s financial results for the year ended 31 December
2018 and its financial position as at that date are set out
in the statement of profit or loss and other comprehensive income
on page 128 and in the statement of financial position on page 129
of these financial statements.
Profit for the year ended 31 December 2018 amounted to
RUB907,382 thousand (2017: RUB1,167,886 thousand).
The total assets of the Company as at 31 December 2018 were
RUB10,738,334 thousand (31 December 2017: RUB10,293,354
thousand) and the net assets were RUB10,639,935 thousand
(31 December 2017: RUB10,198,001 thousand).
DIVIDENDS
declares and pays dividends, owners of GDRs on the relevant
record date will be entitled to receive dividends in respect
of ordinary shares underlying the GDRs.
The Company is a holding company and thus its ability to pay
dividends depends on the ability of its subsidiaries to pay
dividends to the Company in accordance with relevant legislation
in the country of their incorporation and any contractual
restrictions. The payment of such dividends by its subsidiaries
is contingent upon the sufficiency of their earnings, cash flows and
distributable reserves.
On 17 March 2017 the Board of Directors declared final dividends for
the year 2016 attributable to the owners of the Company amounting
to RUB338,063 thousand (USD5,804 thousand), which corresponds
to RUB4.5 (USD0.08) per share. The dividend distribution was
approved by the Annual General Meeting of the shareholders on
21 April 2017. The dividends were paid on 23 May 2017.
On 8 September 2017 the Board of Directors declared interim
dividends for the six months ended 30 June 2017 attributable to
the owners of the Company amounting to RUB350,833 thousand
(USD6,140 thousand), which corresponds to RUB4.67 (USD0.08)
per share. The dividends were paid on 24 October 2017.
On 16 March 2018 the Board of Directors declared final dividends for
the year 2017 attributable to the owners of the Company amounting
to RUB450,750 thousand (USD7,905 thousand), which corresponds
to RUB6.0 (USD0.11) per share. The dividend distribution was
approved by the Annual General Meeting of the shareholders on 17
April 2018. The dividends were paid on 22 May 2018.
On 22 March 2019 the Board of Directors recommended
the payment of RUB800,081 thousand as final dividends for
the year 2018 which corresponds to RUB10.65 per share.
EXAMINATION OF THE DEVELOPMENT,
POSITION AND PERFORMANCE OF THE
ACTIVITIES OF THE COMPANY
The current financial position and performance of the Company as
presented in these financial statements is considered satisfactory.
In accordance with the Company’s Articles of Association dividends
may be paid out of its profits. To the extent that the Company
During 2018 year the Company has incorporated LLC Mother and
Child Volga.
Audited Financial Statements During 2018 year the Company has acquired directly additional
30% share in LLC Fimedlab, 26% share in LLC Velum, 20% share
in LLC Clinica Zdorovia and 15% share in LLC Capital Group, LLC
Mother and Child Perm for USD8,332 thousand which corresponds
to RUB533,753 thousand as at the date of the transfer of shares
and RUB517,440 thousand as at the date of the payment.
Indirect interest in shares by Kirill Dmitriev arises through
his capacity as key management personnel of indirect shareholder.
The calculation of effective interest is based on the total amount
of issued and fully paid shares, including treasury shares acquired
by the Company.
During 2018 year the Company has acquired indirectly (through its
subsidiary LLC Khaven) additional 30% share in LLC Mother and
Child Ugo-Zapad and 15% share in LLC Mother and Child Ufa and
LLC Mother and Child Saint- Petersburg for USD4,003 thousand
which corresponds to RUB256,478 thousand as at the date
of the transfer of shares and RUB250,795 thousand as at the date
of the payment.
The Company through its subsidiaries has one of the largest
nationwide private healthcare regional networks for its core services
and is expanding into new services. It has significant experience
in the provision of full-service private maternity healthcare services.
The Company has secured leading positions in the Russian private
healthcare market across a range of services including obstetrics and
gynaecology, fertility and IVF treatments, and paediatrics. It has also
been diversifying its offering by adding other medical services for all
family members, such as surgery, urology, traumatology, cardiology,
and oncology, etc. The recently opened facilities have been multi-
disciplinary from the very beginning.
PRINCIPAL RISKS AND UNCERTAINTIES
Details in relation to principal risks and uncertainties and steps
taken to manage these risks and uncertainties are presented
in Notes 15 and 17 of these financial statements.
The Board of Directors has the overall responsibility for
the establishment and supervision of the Company’s risk
management framework.
DIRECTORS’ INTEREST
The direct and indirect interests of the members of the Board
in titles of the Company as at 31 December 2018, 31 December
2017 and as at the date of signing these financial statements are as
follows:
FUTURE DEVELOPMENTS
The Company’s goal is to maintain its leading position in high-
quality women’s health and pediatrics, addressing the increasing
demand for private healthcare services in Russia and beyond.
The Company intends through its subsidiaries to expand its
portfolio of hospital and outpatient facilities, broaden its service
offerings by providing patients with the most up-to-date
treatment procedures and medical technology available on
the market, expand its services in Moscow and other regions,
exploit the value of its integrated healthcare network by making
effective use of services across its facilities, optimizing the benefits
for patients and its subsidiaries as a whole.
SHARE CAPITAL
There were no changes in the share capital of the Company during
the year.
BOARD OF DIRECTORS
The Board of Directors leads the process in making new Board
member appointments and makes recommendations on
appointments to shareholders. In accordance with the Appointment
Policy for the Board of Directors and Committees, all directors are
subject to appointment or approval of appointment by shareholders
at the first Annual General Meeting after their appointment, and to
re-appointment at intervals of no more than three years. Any term
beyond six years (e.g. two three-year terms) for a non-executive
director is subject to particularly rigorous review, and takes into
account the need for progressive refreshing of the Board of Directors.
The members of the Board of Directors who served as at the date
of signing of these financial statements, are presented on page 118.
NAME
TYPE OF INTEREST
EFFECTIVE
INTEREST %
Refer to Note 14.1. of these financial statements for
the remuneration of the directors and other key management
personnel.
Mark Kurtser
Kirill Dmitriev
Simon Rowlands
Indirect ownership
of shares
Indirect interest
in shares
Direct ownership
of shares
67.90
5.55
0.33
THE BOARD COMMITTEES
Since September 2012, the Board of Directors established
the operation of the following three committees:
the Audit Committee, the Nomination Committee and
the Remuneration Committee.
120 121
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
AUDIT COMMITTEE
The Audit Committee comprises of three non-executive directors,
two of whom are independent. The Audit Committee is chaired by
independent non-executive director Liubov Malyarevskaya since
19 February 2015, Mr. Kirill Dmitriev and Mr. Simon Rowlands are
the other members.
The Audit Committee meets at least four times each year and
is responsible for considering:
• the reliability and appropriateness of disclosures in the financial
statements and external financial communication;
• the maintenance of an effective system of internal controls
including financial, operational and compliance controls and risk
management system;
• preparation of recommendations to the shareholders for
approval in General Meetings in relation to the appointment,
reappointment and removal of the external auditors;
• approval of the remuneration and terms of engagement
of the external auditors in respect of audit services provided;
• the audit process, including monitoring and review of the external
auditors’ performance, independence and objectivity;
• development and implementation of the policy on non-
audit services provided by the external auditors; and
• monitoring compliance with laws and regulations and standard
of corporate governance.
The Audit Committee assists the Board of Directors in its oversight
of the performance and leadership of the internal audit activity.
Where the Audit Committee’s monitoring and review activities
reveal cause for concern or scope for improvement, it shall make
recommendation to the Board of Directors on actions needed to
address the issues or to make improvements.
INTERNAL AUDIT
The Audit Committee is responsible for monitoring and review
the effectiveness of the Company’s internal audit function.
In this respect, the Audit Committee may require investigations
by, or under the authority of, the head of Internal Audit into any
activities of the Company which may be of interest or concern to
the Audit Committee.
The Company`s internal auditor is responsible for
the recommendation of an audit plan to the Audit Committee.
The internal auditor carries out auditing assignments in accordance
with such plan and oversees the Company`s compliance with
the plan`s recommendations. The internal auditor files a quarterly
report with his findings to the Audit Committee.
NOMINATION COMMITTEE
The Nomination Committee comprises of one executive and
two non-executive directors, one of whom is independent.
The Nomination Committee is chaired by non-executive director
Mr. Vladimir Mekler (since June 2016), non-executive director Mr.
Simon Rowlands and executive director Dr. Mark Kurtser are other
members since September 2015.
The Nomination Committee meets at least once a year and
is responsible for assisting the Board of Directors in discharging its
corporate governance responsibilities in relation to appointment of all
executive and non-executive directors, as well as the CEO and CFO
of the Company. The main objective of the Nomination Committee
is to lead the process for the Board of Directors’ appointments and
make respective recommendation to the Board of Directors, ensuring
proper balance of the Board of Directors and qualification of its
members. The Nomination Committee also considers the composition
of the Audit and Remuneration Committees.
REMUNERATION COMMITTEE
The Remuneration Committee comprises of two non-executive
directors and one executive director. The Remuneration Committee
is chaired by an independent non-executive director Mr. Simon
Rowlands. The two other members are Dr. Mark Kurtser and
Mr. Vladimir Mekler.
The Remuneration Committee meets at least once a year and
is responsible for assisting the Board of Directors in discharging its
corporate governance responsibilities in relation to remuneration
of all executive directors and the chairman of the Board
of Directors. The main objective of the Remuneration Committee
is to determine the framework and policy for the remuneration
of the executive directors, the chairman of the Board of Directors
and senior executives, and the specific remuneration of each
executive director and the chairman of the Board of Directors and
any compensation payments.
CORPORATE GOVERNANCE
Since 2012, the Company has maintained full compliance with
the UK Corporate Governance Code. The Company is committed to
the highest standards of corporate governance and transparency.
The Board of Directors recognises that good governance is a strategic
asset that helps it to deliver consistent long term value to its
shareholders. By running the Company in an open way, the Board
of Directors enables shareholders to understand how it has been
able to deliver consistently strong results. The Board of Directors
believes that corporate responsibility is an essential part of good
governance and makes sound business sense, as well as being crucial
to the appropriate management of risk within the Company.
Improving its corporate governance structure in accordance with
the internationally recognised best practices the Company adopted
important policies and procedures.
The Company’s corporate governance policies and practices are
designed to ensure that the Company is focused on upholding
its responsibilities to the shareholders. The Company’s corporate
governance policies and practices include, inter alia:
• Appointment policy for the Board of Directors and Committees;
• Terms of reference of the Audit Committee, Nomination
Committee and Remuneration Committee;
• Code of Ethics and Conduct;
Audited Financial Statements 122 123
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
Directors’ Responsibility
Statement
Each of the directors, whose names are listed below, confirms that, to the best of their knowledge:
• the financial statements, prepared in accordance with IFRS as adopted by the EU and the requirements of the Cyprus Companies Law,
Cap.113, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings includ-
ed in the report taken as a whole;
• the adoption of the going concern basis for the preparation of the financial statements continues to be appropriate based on the forego-
ing and having reviewed the forecast financial position of the Company; and
• the Management report includes a fair review of the development and performance of the business and the position of the Company and
the undertakings included in the report taken as a whole, together with a description of the principal risks and uncertainties that they face.
The Directors of the Company responsible for reporting as
at the date of this announcement are set out below:
Vladimir Mekler
Mark Kurtser
Vitaly Ustimenko
Alsu Nazyrova
Kirill Dmitriev
Simon Rowlands
Liubov Malyarevskaya
Chairman, non-executive director
Executive director
Non-executive director
Executive director
Non-executive director
Non-executive independent director
Non-executive independent director
• Business Continuity Policy;
• Disclosure Policy;
• Regulations on Insider Information;
• Risk Management Policy; and
• Anti-Fraud Policy.
INTERNAL CONTROL IN RELATION TO
THE FINANCIAL REPORTING PROCESS
The Company has set formal policies and written term of reference
in relation to the financial reporting process that include:
• Corporate Accounting policy Guidelines;
• Methodology for the Transformation of Financial Statements
from RAS to IFRS;
• Financial Reporting Preparation Procedure; and
• The Group’s structure.
The objective of this policу is to establish uniform procedures and
to implement requirements for the preparation of the financial
statements of the Company. The procedure should be reviewed
for compliance with International Financial Reporting Standards as
well as current conditions and planned changes in the Company’s
business activities annually. When necessary, amendments and
additions to this Procedure should be adopted.
All shareholders are entitled to attend the general meeting or
be represented by a proxy authorised in writing. In the general
meeting, on a poll, every share gives the holder the right to cast
one vote, whereas, on a show of hands, each member has one vote.
A corporate member may, by resolution of its directors or other
governing body, authorise a person to act as representative at any
meeting of the Company.
BRANCHES
MD Medical Group Investments Plc has a branch in Moscow.
TREASURY SHARES
During the year ended 31 December 2018, the Company distributed
the GDRs earlier acquired by the Company to the participants
of Long-term Management Incentive Plan (LTIP) signed in 2014. No
additional treasury shares were acquired.
EVENTS AFTER THE REPORTING PERIOD
No significant events occurred after the reporting period.
MEETINGS OF SHAREHOLDERS
INDEPENDENT AUDITORS
The Company shall in each year hold a general meeting as its annual
general meeting in addition to any other meetings in that year. An
annual general meeting and any other shareholders’ meeting called to
pass a special resolution can be convened by the Board of Directors
by a notice, specifying the matters to be discussed, issued at least
21 days before the meeting. Any other meetings shall be convened
by the Board of Directors by a notice, specifying the matters to be
discussed, issued at least 14 days before the meeting. If the notice
period is less than 21 days or 14 days as applicable, the meeting will be
deemed to have been duly called if it is so agreed:
•
in the case of a meeting called as the annual general meeting, by
all the shareholders entitled to attend and vote; and
in the case of any other meeting, by a majority in number
of the members having a right to attend and vote at the meeting,
being a majority together holding not less than 95 per cent
in nominal value of the shares giving that right.
•
A notice convening a general meeting must be sent to each
of the shareholders.
The independent auditors of the Company Messrs. KPMG Limited
have expressed their willingness to continue in office. A resolution
giving authority to the Board of Directors to fix their remuneration
will be submitted to the Annual General Meeting.
By order of the Board of Directors,
Mark Kurtser
Managing Director,
member of the Board of Directors
Moscow, 22 March 2019
Audited Financial Statements Independent Auditors’ Report
to the Members of MD Medical
Group Investments plc
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS
OPINION
We have audited the financial statements of the parent company
MD Medical Group Investments Plc (the “Company’’) which are
presented on pages 128 to 148 and comprise the statement
of financial position as at 31 December 2018, and the statements
of profit or loss and other comprehensive income, changes in equity
and cash flows for the year then ended, and notes to the financial
statements, including a summary of significant accounting policies.
In our opinion, the financial statements of the parent company give
a true and fair view of the financial position of the Company as at 31
December 2018, and of its financial performance and its cash flows
for the year then ended in accordance with International Financial
Reporting Standards as adopted by the European Union (“IFRS-
EU”) and the requirements of the Cyprus Companies Law, Cap. 113,
as amended from time to time (the “Companies Law, Cap. 113”).
BASIS FOR OPINION
We conducted our audit in accordance with International
Standards on Auditing (“ISAs”). Our responsibilities under those
standards are further described in the “Auditors’ responsibilities
for the audit of the financial statements” section of our report.
We remained independent of the Company in accordance with
the Code of Ethics for Professional Accountants of the International
Ethics Standards Board for Accountants (“IESBA Code”) and
the ethical requirements in Cyprus that are relevant to our
audit of the financial statements, and we have fulfilled our other
ethical responsibilities in accordance with these requirements
and the IESBA Code. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our
opinion.
KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the financial
statements of the current period. These matters were addressed
in the context of our audit of the financial statements as a whole,
and in forming our opinion thereon, and we do not provide
a separate opinion on these matters.
124 125
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
INVESTMENTS IN SUBSIDIARIES
Please refer to Notes 2(d) and 9 of the financial statements (RUB10,169,345 thousand).
The key audit matter
How the matter was addressed in our audit
The carrying value of the investments in subsidiaries
amounts to RUB10,169,345 thousand and accounts
for more than 90% of the Company’s total assets as at
31 December 2018.
Among others, our audit procedures included the following:
• Evaluating the assessment of the management with regards to
indications of impairment by:
— assessing the industry in which the subsidiaries are operating to
Significant judgement is required by the management
of the Company in determining whether there are any
indications of impairment and, where such indications exist,
in assessing the recoverable amount of the investments.
We focused on this area because of the significance
of the carrying amount of the investments in the financial
statements and because inherent uncertainty and
subjectivity is involved in forecasting and discounting
future cash flows, which are the basis of the assessment
of the recoverable amount of the investments and hence
their carrying amount recorded in the financial statements.
obtain an understanding of growth rates and outlook.
— examining the subsidiaries’ historical and current performance.
This examination was made with reference to the most recent
audited financial information and/or management accounts at
the reporting date. We also held discussions with management to
understand future expectations.
• In the cases where indications of impairment were present, we as-
sessed the principles and integrity of the model used by the man-
agement to estimate the recoverable amount of the investments.
This included evaluating the assumptions and methodologies used
by the management of the Company based on which the forecasted
cash flows were prepared. We challenged management’s assumptions
on the forecasted revenues, growth rates, profit margins, tax rates and
discount rates by:
— comparing them to our expectations based on our knowledge
of the subsidiaries operations, historical trends and the results
of the operations of other group entities that operate in the same
industry.
— using our internal valuation specialists to assess the discount rates,
the assumptions used and the appropriateness of the valuation
models used.
OTHER INFORMATION
The Board of Directors is responsible for the other information.
The other information comprises the management report,
the corporate governance statement and the corporate social
responsibility statement, but does not include the financial
statements and our auditors’ report thereon.
Our opinion on the financial statements does not cover the other
information and we do not express any form of assurance
conclusion thereon, except as required by the Companies Law,
Cap. 113.
In connection with our audit of the financial statements, our
responsibility is to read the other information identified above 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, 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.
With regards to the corporate social responsibility statement, we
have nothing to report.
Audited Financial Statements 126 127
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
OTHER LEGAL REQUIREMENTS
Pursuant to the additional requirements of law L. 53(I)/2017, and
based on the work undertaken in the course of our audit, we report
the following:
• In our opinion, the management report, the preparation of which
is the responsibility of the Board of Directors, has been prepared
in accordance with the requirements of the Companies Law, Cap.
113, and the information given is consistent with the financial
statements.
• In the light of the knowledge and understanding of the Compa-
ny’s business and environment obtained in the course of the au-
dit, we have not identified material misstatements in the man-
agement report.
• In our opinion, the information included in the corporate govern-
ance statement in accordance with the requirements of subpara-
graphs (iv) and (v) of paragraph 2(a) of Article 151 of the Com-
panies Law, Cap. 113, and which is included as a specific section
of the annual report, has been prepared in accordance with
the requirements of the Companies Law, Cap, 113, and is consist-
ent with the financial statements.
• In our opinion, the corporate governance statement includes all
information referred to in subparagraphs (i), (ii), (iii), (vi) and (vii)
of paragraph 2(a) of Article 151 of the Companies Law, Cap. 113.
• In our opinion, based on the work undertaken in the course of our
audit, the corporate governance statement includes all informa-
tion referred to in subparagraphs (i), (ii), (iii), (vi) and (vii) of para-
graph 2(a) of Article 151 of the Cyprus Companies Law, Cap. 113.3
• In light of the knowledge and understanding of the Group and its
environment obtained in the course of the audit, we are required
to report if we have identified material misstatements in the cor-
porate governance statement in relation to the information
disclosed for items (iv) and (v) of subparagraph 2(a) of Article
151 of the Cyprus Companies Law, Cap. 113. We have nothing to
report in this respect.
OTHER MATTER
This report, including the opinion, has been prepared for and only
for the Company’s members as a body in accordance with Section
69 of Law L. 53(I)/2017 and for no other purpose. We do not,
in giving this opinion, accept or assume responsibility for any other
purpose or to any other person to whose knowledge this report
may come.
The engagement partner on the audit resulting
in this independent auditors’ report is Zakis E. Hadjizacharias.
Zakis E. Hadjizacharias, CA
Certified Public Accountant and Registered Auditor
for and on behalf of
KPMG Limited
Certified Public Accountants and Registered Auditors
No. 11, June 16th 1943 Street,
3022 Limassol,
Cyprus.
22 March 2019
With regards to the management report and the corporate
governance statement, our report is presented in the “Report on
other legal and regulatory requirements” section.
RESPONSIBILITIES OF THE BOARD OF DIRECTORS AND THOSE
CHARGED WITH GOVERNANCE FOR THE FINANCIAL STATEMENTS
The Board of Directors is responsible for the preparation of financial
statements that give a true and fair view in accordance with IFRS-
EU and the requirements of the Companies Law, Cap. 113, and for
such internal controls as the Board of Directors determines are
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 Board of Directors
is responsible for assessing the Company’s ability to continue as
a going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless
there is an intention to either liquidate the Company or to cease
operations, or there is no realistic alternative but to do so.
The Board of Directors is responsible for overseeing the Company’s
financial reporting process.
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 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.
As part of an audit in accordance with ISAs, we exercise
professional judgment and maintain professional skepticism
throughout the audit. We also:
• Identify and assess the risks of material misstatement
of the financial statements, whether due to fraud or error,
design and perform audit procedures responsive to those risks,
and obtain audit evidence that is sufficient and appropriate
to provide a basis for our opinion. The risk of not detecting
a material misstatement resulting from fraud is higher than for
one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override
of internal controls.
• Obtain an understanding of internal controls relevant to
the audit in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company’s internal controls.
• Evaluate the appropriateness of accounting policies used
and the reasonableness of accounting estimates and related
disclosures made by the Board of Directors
• Conclude on the appropriateness of the Board of Directors’
use of the going concern basis of accounting and, based on
the audit evidence obtained, whether a material uncertainty
exists related to events or conditions that may cast significant
doubt on the Company’s ability to continue as a going concern.
If we conclude that a material uncertainty exists, we are
required to draw attention in our auditors’ report to the related
disclosures in the financial statements or, if such disclosures
are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our
auditors’ report. However, future events or conditions may cause
the Company to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content
of the financial statements, including the disclosures, and whether
the financial statements represent the underlying transactions and
events in a manner that achieves a true and fair view.
We communicate with those charged with Governance
regarding, among other matters, the planned scope and timing
of the audit and significant audit findings, including any significant
deficiencies in internal controls that we identify during our audit.
We also provide those charged with governance with a statement
that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships
and other matters that may reasonably be thought to bear on our
independence, and where applicable, related safeguards.
From the matters communicated with those charged with
governance, we determine those matters that were of most
significance in the audit of the financial statements of the current
period and are therefore the key audit matters.
REPORT ON OTHER LEGAL AND
REGULATORY REQUIREMENTS
OTHER REGULATORY REQUIREMENTS
Pursuant to the requirements of Article 10(2) of EU Regulation
537/2014 we provide the following information in our Independent
Auditors’ Report, which is required in addition to the requirements
of ISAs.
• Date of our appointment and period of engagement
We were first appointed auditors of the Company by the General
Meeting of the Company’s members on 10 July 2012. Our
appointment has been renewed annually by shareholders’
resolutions. Our total uninterrupted period of engagement is 10
years covering the periods ending 31 December 2009 to 31
December 2018.
• Consistency of the additional report to the Audit Committee with
the Independent Auditors’ Report
Our audit opinion is consistent with the additional report
presented to the Audit Committee, dated 22 March 2019.
• Provision of non-audit services (“NAS”)
We have not provided any prohibited NAS referred to in Article 5
of EU Regulation 537/2014 as applied by Section 72 of the Auditors
Law of 2017, L.53(I)2017, as amended from time to time (“Law
L53(I)/2017”).
Audited Financial Statements 128 129
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
Statement of Profit or Loss
and Other Comprehensive
Income
Statement
of Financial Position
For the year ended 31 December 2018
As at 31 December 2018
Dividend income
Revenue from branch operations
Revenue from advertising
Gross profit
Other income
Other expense
Administrative expenses
Operating profit
Finance income
Finance expenses
Net foreign exchange gain / (loss)
Net finance income / (expenses)
Profit before tax
Income tax
Profit for the year
NOTE
14.2
14.3
6
4
5
5
5
5
7
2018
RUB’000
2017
RUB’000
1,065,937
1,380,400
168,931
7,151
108,715
733
1,242,019
1,489,848
921
(11,940)
(387,774)
843,226
5,000
(1,551)
77,145
80,594
96,601
(9,510)
(378,924)
1,198,015
4,453
(1,237)
(46,262)
(43,046)
923,820
1,154,969
(16,438)
12,917
907,382
1,167,886
TOTAL COMPREHENSIVE INCOME FOR THE YEAR
907,382
1,167,886
ASSETS
Property, plant and equipment
Intangible assets
Deferred tax assets
Investments in subsidiaries
TOTAL NON-CURRENT ASSETS
Inventories
Trade, other receivables and deferred expenses
Cash and cash equivalents
TOTAL CURRENT ASSETS
TOTAL ASSETS
EQUITY
Share capital
Share premium
Reserves
Retained earnings
TOTAL EQUITY
LIABILITIES
Trade and other payables
Tax liability
TOTAL CURRENT LIABILITIES
TOTAL EQUITY AND LIABILITIES
31 DECEMBER
2018
RUB’000
31 DECEMBER
2017
RUB’000
NOTE
7
9
10
11
13
7
7,845
8,537
4,846
10,169,345
10,190,573
739
48,563
498,459
547,761
4,019
6,406
40,637
9,277,456
9,328,518
478
32,567
931,791
964,836
10,738,334
10,293,354
180,585
5,243,319
304,254
4,911,777
180,585
5,243,319
303,407
4,470,690
10,639,935
10,198,001
98,399
-
98,399
75,999
19,354
95,353
10,738,334
10,293,354
On 22 March 2019 the Board of Directors of MD Medical Group Investments Plc approved and authorised these report
and financial statements for issue.
Vladimir Mekler
Chairman of the Board
of Directors
Mark Kurtser
Managing Director
Andrey Khoperskiy
Chief Financial Officer
The Notes on pages 136 to 148 are an integral part of these report and financial statements.
The Notes on pages 136 to 148 are an integral part of these report and financial statements.
Audited Financial Statements 130 131
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
Statement
of Сhanges in Equity
For the year ended 31 December 2018
Balance at 1 January 2018
Total comprehensive income
Profit and other comprehensive income for the year
Contributions by and distributions to owners
Equity-settled share-based payment
Other movements
Dividends declared
TOTAL TRANSACTIONS WITH OWNERS
BALANCE AT 31 DECEMBER 2018
Share premium and other reserves are not available for distribution.
ATTRIBUTABLE TO OWNERS
OF THE COMPANY
ATTRIBUTABLE TO OWNERS
OF THE COMPANY
NOTE
SHARE
CAPITAL
RUB’000
TREASURY
SHARES
RUB’000
SHARE
PREMIUM
RUB’000
OTHER
RESERVES
RUB’000
RETAINED
EARNINGS
RUB’000
TOTAL
RUB’000
180,585
(4,544)
5,243,319
307,951
4,470,690
10,198,001
-
-
-
-
-
180,585
-
847
-
-
847
(3,697)
8
-
-
-
-
-
-
-
-
-
-
907,382
907,382
-
(15,545)
(450,750)
(466,295)
847
(15,545)
(450,750)
(465,448)
5,243,319
307,951
4,911,777
10,639,935
The Notes on pages 136 to 148 are an integral part of these report and financial statements.
Audited Financial Statements 132 133
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
Statement
of Сhanges in Equity
For the year ended 31 December 2017
Balance at 1 January 2017
Total comprehensive income
Profit and other comprehensive income for the year
Contributions by and distributions to owners
Equity-settled share-based payment
Closing of motivation program
Dividends declared
TOTAL TRANSACTIONS WITH OWNERS
BALANCE AT 31 DECEMBER 2017
Share premium and other reserves are not available for distribution.
ATTRIBUTABLE TO OWNERS
OF THE COMPANY
ATTRIBUTABLE TO OWNERS
OF THE COMPANY
NOTE
SHARE
CAPITAL
RUB’000
TREASURY
SHARES
RUB’000
SHARE
PREMIUM
RUB’000
OTHER
RESERVES
RUB’000
RETAINED
EARNINGS
RUB’000
TOTAL
RUB’000
180,585
(18,737)
5,243,319
307,951
3,971,139
9,684,257
-
-
-
-
-
180,585
-
34,754
(20,561)
-
14,193
(4,544)
8
-
-
-
-
-
-
-
-
-
-
1,167,886
1,167,886
-
20,561
(688,896)
(668,335)
34,754
-
(688,896)
(654,142)
5,243,319
307,951
4,470,690
10,198,001
The Notes on pages 136 to 148 are an integral part of these report and financial statements.
Audited Financial Statements 134 135
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
Statement of Cash Flows
For the year ended 31 December 2018
Cash flows from operating activities
Profit for the year
Adjustments for:
Equity-settled share-based payment transaction
Depreciation of property, plant and equipment
Amortisation of intangible assets
Dividend income
Finance expenses
Interest income
Net foreign exchange (gain) / loss
Gain under Escrow Agreement
Income tax
Impairment of investments in subsidiaries
NOTE
2018
RUB’000
2017
RUB’000
NOTE
2018
RUB’000
2017
RUB’000
907,382
1,167,886
847
1,330
3,121
34,754
194
1,439
Cash flows from investing activities
Capital contributions to subsidiaries
Payment for acquisition/contstruction of property, plant and equipment
Payment for acquisition of intangible assets
Acquisition of non-controlling interest
Interest received
14.2
(1,065,937)
(1,380,400)
Proceeds from Escrow Agreement
5
5
5
6
7
9
1,551
1,237
(5,000)
(77,145)
(4,453)
46,262
-
(96,592)
16,438
(12,917)
6,874
7,855
Net cash flows used in investing activities
Cash flows used in financing activities
Finance expenses paid
Dividends paid
Net cash flows used in financing activities
(325,000)
(211,882)
(5,156)
(5,251)
(2,869)
(2,323)
(517,440)
(53,000)
5,000
4,453
-
96,592
(847,847)
(169,029)
(1,551)
(1,237)
(494,339)
(680,791)
(495,890)
(682,028)
(539,438)
282,885
931,791
703,343
106,106
(54,437)
Net (decrease) / increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Effect of exchange rate changes on cash and cash equivalents
Cash and cash equivalents as at the end of the year
10
498,459
931,791
The Notes on pages 136 to 148 are an integral part of these report and financial statements.
Cash flows used in operations before working capital changes
(210,539)
(234,735)
Increase in trade and other receivables
Increase in inventories
Decrease in trade and other payables
Cash flows used in operations
Dividends received
Net cash flows from operating activities
(15,978)
(10,549)
(261)
(34,860)
(118)
(1,056)
(261,638)
(246,458)
1,065,937
1,380,400
804,299
1,133,942
Audited Financial Statements Notes to the Financial
Statements
For the year ended 31 December 2018
1. INCORPORATION AND PRINCIPAL
ACTIVITIES
MD Medical Group Investments Plc (the “Company”) was incorporated
in Cyprus on 5 August 2010 as a private limited liability company
under the provisions of the Cyprus Companies Law, Cap. 113. In August
2012, following the special resolution passed by the shareholder,
the Company was converted into a public limited liability company
in accordance with the provisions of the Cyprus Companies Law,
Cap. 113. Its Registered Office is at Dimitriou Karatasou 15, Anastasio
Building, 6th floor, office 601, Strovolos, 2024, Nicosia, Cyprus.
The principal activity of the Company is that of an investment
holding company and, for that purpose, to acquire and hold
controlling and other interests in the share or loan capital
of any company or companies of any nature, but primarily
in the healthcare industry.
2. BASIS OF PREPARATION
(A) STATEMENT OF COMPLIANCE
These report and financial statements have been prepared
in accordance with International Financial Reporting Standards as
adopted by the European Union (IFRS-EU) and the requirements
of the Cyprus Companies Law, Cap.113.
These are the separate financial statements of the Company.
The Company has also prepared consolidated financial statements
in accordance with IFRS as adopted by the EU for the Company and
its subsidiary (“the Group”). The consolidated financial statements
are available at 15 Dimitriou Karatasou street, Anastasio Building, 6th
floor, office 601, 2024 Nicosia, Cyprus.
Users of these parent’s separate financial statements should read
them together with the Group’s consolidated financial statements
as at and for the year ended 31 December 2018 in order to
obtain a proper understanding of the financial position, the financial
performance and the cash flows of the Company and the Group.
(B) BASIS OF MEASUREMENT
These report and financial statements have been prepared under
the historical cost convention.
(C) ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL
REPORTING STANDARDS AND INTERPRETATIONS
As from 1 January 2018, the Company adopted all changes to
International Financial Reporting Standards (IFRSs) which are relevant
to its operations. This adoption did not have a material effect on
the financial statements of the Company.
The following Standards, Amendments to Standards and
Interpretations have been issued by International Accounting
Standard Board, but are not yet effective for annual periods
beginning on 1 January 2018. Those which may be relevant to
the Company are set out below. The Company does not plan to adopt
these Standards early.
STANDARDS AND INTERPRETATIONS ADOPTED BY THE EU
AS AT 1 JANUARY 2019:
• IFRS 16 Leases (effective for annual periods beginning on or after
1 January 2019);
• IFRIC 23 Uncertainty over Income Tax Treatments (effective for
annual periods beginning on or after 1 January 2019);
• Amendments to IFRS 9: Prepayment Features with Negative
Compensation (effective for annual periods beginning on or after
1 January 2019);
• Amendments to IAS 28: Long-term Interests in Associates and
Joint Ventures (effective for annual periods beginning on or after
1 January 2019).
STANDARDS AND INTERPRETATIONS NOT YET ADOPTED
BY THE EU AS AT 1 JANUARY 2019:
• IFRS 17 Insurance Contracts (effective for annual periods beginning
on or after 1 January 2021);
• Annual Improvements to IFRS Standarts 2015–2017 Cycle (effec-
tive for annual periods beginning on or after 1 January 2019);
• Amendments to IAS 19: Plan Amendment, Curtailment or Settlement
(effective for annual periods beginning on or after 1 January 2019);
• Amendments to References to the Conceptual Framework in IFRS
Standards (effective for annual periods beginning on or after
1 January 2020);
• Amendments to IFRS 3: Business Combinations (effective for
annual periods beginning on or after 1 January 2020);
136 137
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
• Amendments to IAS 1 and IAS 8: Definition of Material (effective for
annual periods beginning on or after 1 January 2020).
Management expects that the adoption of these standards in future
periods will not have a material effect on the financial statements
of the Company.
(D) USE OF ESTIMATES AND JUDGEMENTS
Preparing these financial statements in accordance with IFRSs
requires management to exercise their judgement to make estimates
and assumptions that affect the application of accounting policies
and the reported amounts of assets and liabilities, income and
expenses.
The estimates and underlying assumptions are based on historical
experience and various other factors that are deemed reasonable
based on knowledge available at that time. Actual results may differ
from these estimates.
The estimates and underlying assumptions are reviewed and where
necessary revised on an ongoing basis. Revisions to estimates are
recognised prospectively.
In particular, information about significant areas of estimation,
uncertainty and critical judgments in applying accounting policies
that have the most significant effect on the amount recognised
in the financial statements are described below:
Income taxes
Significant judgment is required in determining the provision for
income taxes. There are transactions and calculations for which
the ultimate tax determination is uncertain during the ordinary course
of business. The Company recognises liabilities for anticipated tax
audit issues based on estimates of whether additional taxes will be
due. Where the final tax outcome of these matters is different from
the amounts that were initially recorded, such differences will impact
the income tax and deferred tax provisions in the period in which such
determination is made.
Impairment of investments in subsidiaries
The Company periodically evaluates the recoverability of investments
in subsidiaries whenever indicators of impairment are present. Indicators
of impairment include such items as declines in revenues, earnings or
cash flows or material adverse changes in the economic or political
stability of a particular country, which may indicate that the carrying
amount of an asset is not recoverable. If facts and circumstances indicate
that investment in subsidiaries may be impaired, the estimated future
discounted cash flows associated with these subsidiaries/associates
would be compared to their carrying amounts to determine if a write
down to fair value is necessary.
Equity- settled share-based arrangements
For the calculation of the fair value of equity-settled share-based
program, the market price of shares (Level 1 input) as at the grant
date is being used.
Measurement of fair values
A number of the Company’s accounting policies and disclosures
require the measurement of fair values, for both financial and non
financial assets and liabilities.
When measuring the fair value of an asset or a liability, the Compa-
ny uses observable market data as far as possible. Fair values are
categorised into different levels in a fair value hierarchy based on
the inputs used in the valuation techniques as follows:
• Level–1 quoted prices (unadjusted) in active markets for identical
assets or liabilities.
• Level–2 inputs other than quoted prices included within Level 1
that are observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived from prices).
• Level–3 inputs for the asset or liability that are not based on ob-
servable market data (unobservable inputs).
If the inputs used to measure the fair value of an asset or a liability
fall into different levels of the fair value hierarchy, then the fair
value measurement is categorised in its entirety in the same level
of the fair value hierarchy as the lowest level input that is significant
to the entire measurement.
Impairment of intangible assets and property, plant and equipment
Intangible assets and property, plant and equipment are initially
recorded at acquisition cost and are amortised on a straight
line basis over their useful economic life. Intangible assets
and property, plant and equipment that are acquired through
a business combination are initially recorded at fair value at the date
of acquisition. Intangible assets with indefinite useful life are reviewed
for impairment at least annually.
The impairment test is performed using the discounted cash flows
expected to be generated through the use of the intangible assets
and property, plant and equipment, using a discount rate that
reflects the current market estimations and the risks associated
with the asset. When it is impractical to estimate the recoverable
amount of an asset, the Company estimates the recoverable amount
of the cash generating unit to which the asset belongs.
E) FUNCTIONAL AND PRESENTATION CURRENCY
These report and financial statements are presented in Russian
Rubles (RUB’000) which is the functional currency of the Company.
Financial information presented in Russian Rubles has been rounded
to the nearest thousand except when otherwise indicated.
3. SIGNIFICANT ACCOUNTING POLICIES
The following accounting policies have been applied consistently for
all the years presented in these financial statements and in stating
the financial position of the Company.
FINANCIAL STATEMENTS
The Company has subsidiary undertakings for which section 142(1)
(b) of the Cyprus Companies Law Cap. 113 requires consolidated
Audited Financial Statements financial statements to be prepared and laid before the Company at
the Annual General Meeting. Consolidated financial statements are
presented separately. These are the Company’s standalone financial
statements.
SUBSIDIARY COMPANIES
Subsidiaries are entities controlled by the Company. Control exists
where the Company 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.
Investments in subsidiary companies are stated at cost less
provision for impairment in value, which is recognised as an expense
in the period in which the impairment is identified.
DIVIDEND INCOME
Dividend income is recognised in the statement of profit or loss and
other comprehensive income when the right to receive payment
is established.
REVENUE
Revenue is measured based on the consideration specified in a con-
tract with a customer and comprises the invoiced amount for servic-
es. The Company recognises revenue when it transfers control over
service to a customer.
The Company has initially applied IFRS 15 from 1 January 2018. There
was no significant effect on these report and financial statements.
FINANCE INCOME
Finance income includes interest income which is recognised as
it accrues in profit or loss using the effective interest method.
FINANCE EXPENSES
Finance expenses include bank charges and interest expense. Bank
charges are recognised as expenses in the period in which they fall
due and interest expense is recognised as it accrues in profit or loss
using the effective interest method.
FOREIGN CURRENCY TRANSACTIONS
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates
of the transactions. Foreign exchange gains and losses resulting
from the settlement of such transactions and from the translation
at year end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in profit or loss
under the category finance income or finance expenses.
TAX
The tax currently payable is based on taxable profit for the year. Taxable
profit differs from profit as reported in profit or loss because it excludes
items of income or expense that are taxable or deductible in other
years and it further excludes items that are never taxable or deductible.
The Company’s liability for current tax is calculated using tax rates that
have been enacted or substantively enacted by the reporting date.
Deferred tax is recognised on differences between the carrying
amounts of assets and liabilities in the financial statements and
the corresponding tax bases used in the computation of taxable
profit, and is accounted for using the statement of financial position
liability method. Deferred tax liabilities are generally recognised for all
taxable temporary differences and deferred tax assets are recognised
to the extent that it is probable that taxable profits will be available
against which deductible temporary differences can be utilised. Such
assets and liabilities are not recognised if the temporary difference aris-
es from goodwill or from the initial recognition (other than in a business
combination) of other assets and liabilities in a transaction that affects
neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences
arising on investments in subsidiaries and associates, and interests
in joint ventures, except where the Company is able to control
the reversal of the temporary difference and it is probable that
the temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each
reporting date and reduced to the extent that it is no longer probable
that sufficient taxable profits will be available to allow all or part
of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled or the asset realised.
Deferred tax is charged or credited to profit or loss, except when
it relates to items charged or credited directly to other comprehensive
income or equity, in which case the deferred tax is also dealt with
in other comprehensive income or equity.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to set off current tax assets against current tax
liabilities and when they relate to income taxes levied by the same
taxation authority and the Company intends to settle its current tax
assets and liabilities on a net basis.
DIVIDENDS DECLARED
Dividend distribution to the Company’s shareholders is recognised
in the Company’s financial statements when the shareholders`
right to receive the dividens is established, either through Board
resolution (for interim dividends) or by the Company’s shareholders
in the Annual General Meeting (for final dividends).
FINANCIAL INSTRUMENTS
Recognition
The Company recognises financial assets and financial liabilities when,
and only when, it becomes a party of the contractual provisions
of the financial instrument.
Classification
The Company classifies financial assets on the basis of both:
the Company`s business model for managing financial assets, as well as
the contractual cash flow characteristics of the financial assets.
The Company’s financial assets comprise of trade and other
receivables and cash and cash equivalents. They are non-derivative
138 139
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
financial assets with fixed or determinable payments that are not
quoted in an active market and for which there is no intention
of trading the receivable. They are classified as current assets unless
the Company has an unconditional responsibility to accept deferral
of receipt for at least twelve months after the balance sheet date,
in which case they are classified as non-current assets.
The Company’s financial liabilities comprise of trade and other payables
and borrowings. They are non- derivatives that are either designated
in this category or not classified in any of the other categories. They are
classified as current liabilities unless there is an unconditional right to
defer settlement for at least twelve months after the balance sheet date,
in which case they are classified as long term liabilities.
Measurement
Financial assets and financial liabilities are initially measured at fair
value plus any directly attributable transaction costs.
Trade and other receivables are amounts due from customers for
services performed in the ordinary course of business and are stated
after deducting the appropriate allowances for any impairment.
For the purpose of the statement of cash flows, cash and cash
equivalents include cash in hand, cash at bank and short term
highly liquid investments with maturity of three months or less from
the acquisition date that are subject to an insignificant risk of changes
in their fair value and are used by the Company in the management
of its short term investments.
Impairment of non-derivative financial assets
At each balance sheet date the Company recognises a loss allowance for
expected credit losses on financial assets measured at amortised cost.
The loss allowance for financial assets at amortised cost is recognised
in profit or loss in respondance with a balance sheet account reducing
the carrying amount of the financial asset. Expected credit losses are
determined based on historical data of relevant probability of default.
Individually significant financial assets are tested for impairment
on an individual basis. The remaining financial assets are assessed
collectively in groups that share similar credit risk characteristics.
An impairment loss is reversed if the reversal can be related
objectively to an event occurring after the impairment loss was
recognised. For financial assets measured at amortised cost
the reversal is recognised in profit or loss.
The Company has initially applied IFRS 9 from 1 January 2018. There
was no significant effect on these report and financial statements.
Derecognition of financial assets
A financial asset (or, where applicable a part of a financial asset or part
of a group of similar financial assets) is derecognised when:
• the rights to receive cash flows from the asset have expired;
• the Company retains the right to receive cash flows from the asset,
but has assumed an obligation to pay them in full without material
delay to a third party under a “pass through” arrangement; or
• the Company has transferred its rights to receive cash flows from
the asset and either (a) has transferred substantially all the risks
and rewards of the asset, or (b) has neither transferred nor retained
substantially all the risks and rewards of the asset, but has trans-
ferred control of the asset.
Any interest in such derecognised financial assets that is created or
retained by the Company, is recognised as a separate asset or liability.
Derecognition of financial liabilities
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 a derecognition of the original liability and the recognition of a new
liability, and the difference in the respective carrying amounts
is recognised in profit or loss.
Offsetting financial instruments
Financial assets and financial liabilities are offset and the net amount
reported in the statement of financial position if, and only if, there
is a currently enforceable legal right to offset the recognised amounts
and there is an intention to settle on a net basis, or to realise the asset
and settle the liability simultaneously. This is not generally the case
with master netting agreements, and the related assets and liabilities
are presented gross in the statement of financial position.
IMPAIRMENT OF NON-FINANCIAL ASSETS
Assets that have an indefinite useful life are not subject to
amortisation and are tested annually for impairment. Assets
that are subject to depreciation or amortisation are reviewed for
impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. An impairment
loss is recognised for the amount by which the asset’s carrying
amount exceeds its recoverable amount. The recoverable amount
is the higher of an asset’s fair value less costs to sell and value in use.
For the purposes of assessing impairment, assets are grouped at
the lowest levels for which there are separately identifiable cash flows
(cash generating units).
SHARE CAPITAL
Proceeds from the issue of ordinary shares are classified as equity.
The difference between the issue price of the shares and their
nominal value is taken to the share premium account.
Incremental costs directly attributable to the issue of new shares are
recognised as a deduction from share premium net of any tax effect.
TREASURY SHARES
When shares recognised as equity are repurchased, the amount
of the consideration paid, which includes directly attributable
costs, net of any tax effects, is recognised as a deduction from
equity. Repurchased shares are classified as treasury shares and are
presented in the treasury share reserve. When treasury shares are
sold or reissued subsequently, the amount received is recognised
as an increase in equity, and the resulting surplus or deficit on
the transaction is presented in additional paid-in capital.
Audited Financial Statements 140 141
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
Reconciliation between profit before taxation and income tax
expense:
8. DIVIDENDS
2018
RUB’000
2017
RUB’000
EQUITY-SETTLED SHARE-BASED PAYMENT ARRANGEMENTS
Fair value of equity-settled share-based payment arrangements with
employees is measured at the grant date based on the market price
of the shares. Service and non-market vesting conditions are not
taken into account when estimating the fair value at the grant date.
The grant date is the date on which the Company and its employees
agree the terms and conditions of the share-based payment
arrangement. Fair value is not remeasured subsequent to the grant
date.
Annually the number of shares which are expected to vest is true-up
for the differences between the number of shares initially expected to
vest and the actual number of shares vested, based on the fulfilment
of service and non-market conditions.
Within the vesting period, fair value of the equity-settled share-
based payment arrangement with employees adjusted to reflect
the true-up of the instruments which will not vest, is recognised as
staff costs with the corresponding increase recognised in equity.
PROVISIONS
Provisions are recognised when the Company has a present legal or
constructive obligation as a result of past events, it is probable that
an outflow of resources will be required to settle the obligation, and
a reliable estimate of the amount can be made. Where the Company
expects 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.
COMPARATIVES
Where necessary, comparative figures have been adjusted to
conform to changes in presentation in the current period.
4. ADMINISTRATIVE EXPENSES
The remuneration of the independent auditors includes an amount
of RUB17,784 thousand regarding audit services, RUB375 thousand
regarding audit related services and an amount of RUB362
thousand regarding tax services.
5. NET FINANCE INCOME / (EXPENSES)
Accounting profit before tax
923,820
1,154,969
Finance income
Bank interest received
Net foreign exchange gain
Finance expenses
Bank charges
2018
RUB’000
2017
RUB’000
5,000
77,145
4,453
-
(1,551)
(1,237)
Net foreign exchange loss
-
(46,262)
NET FINANCE INCOME /
(EXPENSES)
80,594
(43,046)
6. OTHER INCOME
During 2017 year the Company received other income
of RUB96,601 thousand. This income arose mostly from the Escrow
Deed approved on 26 September 2014, under which the Company
received RUB96,592 thousand (USD1,575 thousand) from Escrow
Agent in March 2017 as a result of negotiations with the seller
of Ivicend Holding Ltd.
Tax calculated at the applicable tax
rates
(184,764)
(230,994)
Reversal of tax provision
19,354
-
Tax effect of allowances and income
not subject to tax
213,187
276,080
Current-year losses for which no
deferred tax asset is recognised
(64,216)
(32,169)
TAX AS PER STATEMENT
OF COMPREHENSIVE
INCOME - CHARGE
(16,438)
12,917
The corporation tax rate is 20% (2017: 20%).
The Company in 2015 changed its tax residency from Cyprus to
Russian and opened a branch in Moscow. As a result the Company
is taxable under Russian Tax Code which impose corporation tax at
the rate of 20%.
As at 31 December 2018 deferred tax asset relating to tax losses
carried forward in the amount of RUB157,586 thousand (31
December 2017: RUB93,370 thousand) has not been recognised
in the financial statements since it is expected that no sufficient
taxable profits will be available to allow it to be recovered.
On 17 March 2017 the Board of Directors declared final dividends for
the year 2016 attributable to the owners of the Company amounting
to RUB338,063 thousand (USD5,804 thousand), which corresponds
to RUB4.5 (USD0.08) per share. The dividend distribution was
approved by the Annual General Meeting of the shareholders on 21
April 2017. The dividends were paid on 23 May 2017.
On 8 September 2017 the Board of Directors declared interim
dividends for the six months ended 30 June 2017 attributable to
the owners of the Company amounting to RUB350,833 thousand
(USD6,140 thousand), which corresponds to RUB4.67 (USD0.08)
per share. The dividends were paid on 24 October 2017.
On 16 March 2018 the Board of Directors declared final dividends
for the year 2017 attributable to the owners of the Company
amounting to RUB450,750 thousand (USD7,905 thousand),
which corresponds to RUB6.0 (USD0.11) per share. The dividend
distribution was approved by the Annual General Meeting
of the shareholders on 17 April 2018. The dividends were paid on
22 May 2018.
On 22 March 2019 the Board of Directors recommended
the payment of RUB800,081 thousand as final dividends for
the year 2018 which corresponds to RUB10.65 per share.
2018
RUB’000
2017
RUB’000
7. INCOME TAX
9. INVESTMENTS IN SUBSIDIARIES
Payroll and related social taxes
166,634
177,989
Call center services
68,957
54,548
Legal and professional expenses
35,202
59,104
IT support
Advertising
Licences
32,198
27,570
24,336
23,182
18,554
–
Independent auditors’ remuneration
18,521
18,224
Other expenses
23,372
18,307
387,774
378,924
Income tax
Reversal of tax provision
Deferred tax
CHARGE FOR THE YEAR
2018
RUB’000
2017
RUB’000
-
19,354
(35,792)
(16,438)
-
-
12,917
12,917
Balance at 1 January
Purchase of NCI
Capital contribution
Impairment of investments in subsidiaries
BALANCE AT 31 DECEMBER
31 DECEMBER
2018
RUB’000
31 DECEMBER
2017
RUB’000
9,277,456
9,020,429
533,753
365,010
(6,874)
53,000
211,882
(7,855)
10,169,345
9,277,456
Audited Financial Statements The details of the subsidiaries are as follows:
NAME
COUNTRY
OF INCORPORATION ACTIVITIES
CJSC MD PROJECT 2000
Russian Federation
Medical services
LLC Khaven
LLC Velum
LLC Capital Group
LLC FimedLab1
Russian Federation
Medical services
Russian Federation
Medical services
Russian Federation
Pharmaceutics retail
Russian Federation
Medical services
LLC Clinic Mother and Child
Russian Federation
Holding of trademarks
LLC Clinica Zdorovia
Russian Federation
Medical services
LLC Ivamed
LLC Dilamed
CJSC Listom
LLC Ustic-ECO
Russian Federation
Medical services
Russian Federation
Medical services
Russian Federation
Service company
Russian Federation
Medical services
LLC Mother and Child Perm
Russian Federation
Medical services
LLC Mother and Child Ufa
Russian Federation
Medical services
LLC Mother and Child Saint-
Petersburg
Russian Federation
Medical services
LLC MD PROJECT 2010
Russian Federation
Medical services
LLC Mother and Child Ugo-Zapad
Russian Federation
Medical services
LLC MD Service
Russian Federation
Pharmaceutics retail
LLC Mother and Child Nizhny
Novgorod
Russian Federation
Medical services
LLC Mother and Child Yekaterinburg
Russian Federation
Medical services
LLC Mother and Child Tyumen
Russian Federation
Medical services
CJSC MK IDK
LLC Apteka IDK
LLC CSR
Russian Federation
Medical services
Russian Federation
Pharmaceutics retail
Russian Federation
Medical services
LLC MD Assistance
Russian Federation
Assistance services
LLC Mother and Child Yaroslavl
Russian Federation
Medical services
LLC Mother and Child Kostroma
Russian Federation
Medical services
LLC Mother and Child Vladimir
Russian Federation
Medical services
LLC MD Management
Russian Federation
Management
company
LLC Mother and Child Ryazan
Russian Federation
Medical services
LLC Mother and Child Kazan
Russian Federation
Medical services
31 DECEMBER 2018
EFFECTIVE
HOLDING, %
31 DECEMBER 2017
EFFECTIVE
HOLDING, %
95
100
90
95
90
100
80
100
100
100
70
95
95
85
100
90
95
100
100
100
100
100
100
100
80
80
80
100
100
100
95
100
64
80
60
100
60
100
100
100
70
80
80
70
100
60
95
100
100
100
100
100
100
100
80
80
80
100
100
100
142 143
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
NAME
Ivicend Holding Ltd
JSC MC Avicenna
COUNTRY
OF INCORPORATION ACTIVITIES
Cyprus
Holding
of investments
Russian Federation
Medical services
LLC H&C Medical Group
Russian Federation
Medical services
LLC Centre of Reproductive Medicine
Russian Federation
Medical services
LLC Medica-2
Russian Federation
Medical services
LLC Mother and Child Siberia
Russian Federation
Medical services
LLC Krasnoyarskii center
of Reproductive Medicine
LLC Novosibirskii center
of Reproductive Medicine
LLC Omskii center of Reproductive
Medicine
LLC Barnaulskii center
of Reproductive Medicine
Russian Federation
Medical services
Russian Federation
Medical services
Russian Federation
Medical services
Russian Federation
Medical services
LLC Nika
Russian Federation
Holding of land
LLC Stroy Vector Pluss
Russian Federation
Rental services
LLC Mother and Child Vladivostok
Russian Federation
Medical services
LLC Irkutsk Clinical Hospital
Russian Federation
Medical services
LLC Mother and Child Volga
Russian Federation
Management
company
31 DECEMBER 2018
EFFECTIVE
HOLDING, %
31 DECEMBER 2017
EFFECTIVE
HOLDING, %
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-
1 Following a small re-organisation of the MDMG group that took place in 2017 and continued in 2018, the investment in LLC Fimedlab was impaired because its
carrying amount exceeded its recoverable amount. As such, an impairment loss of RUB6,874 thousand was charged to the statement of profit or loss and other
comprehensive income under “Other expenses”. (An impairment loss took place in 2017 in the amount of RUB7,855 thousand which was also charged to the
statement of profit or loss and other comprehensive income under “Other expenses”.)
During 2018 year the Company has incorporated LLC Mother and
Child Volga.
During 2018 year the Company has acquired directly additional
30% share in LLC Fimedlab, 26% share in LLC Velum, 20% share
in LLC Clinica Zdorovia and 15% share in LLC Capital Group, LLC
Mother and Child Perm for USD8,332 thousand which corresponds
to RUB533,753 thousand as at the date of the transfer of shares
and RUB517,440 thousand as at the date of the payment.
During 2018 year the Company has acquired indirectly (through its
subsidiary LLC Khaven) additional 30% share in LLC Mother and Child
Ugo-Zapad and 15% share in LLC Mother and Child Ufa and LLC
Mother and Child Saint- Petersburg for USD4,003 thousand which
corresponds to RUB256,478 thousand as at the date of the transfer
of shares and RUB250,795 thousand as at the date of the payment.
During 2017 year the Company indirectly (through its subsidiary
Ivicend Holding Limited) acquired 2 entities LLC Nika and LLC Stroy
Vector Pluss and incorporated LLC Mother and Child Vladivostok,
LLC Mother and Child Kazan and LLC Irkutsk Clinical Hospital.
The Company in 2017 indirectly acquired 10% of non-controlling
interest in LLC Mother and Child Saint- Petersburg and 15%
of non-controlling interest in LLC Centre of Reproductive Medicine
for RUB53,000 thousand.
Vitanostra Limited, a subsidiary of the Company was entered into
members` voluntary liquidation in 2017 and the investments that
were previously held by Vitanostra Limited were distributed to
the Company.
Audited Financial Statements 144 145
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
10. CASH AND CASH EQUIVALENTS
31 DECEMBER
2018
RUB’000
31 DECEMBER
2017
RUB’000
Cash at bank and in hand
1,970
4,988
Bank deposits with
maturity less than
3 months
496,489
498,459
926,803
931,791
Currency:
USD
RUB
EUR
31 DECEMBER
2018
RUB’000
31 DECEMBER
2017
RUB’000
385,000
113,436
23
895,992
35,795
4
498,459
931,791
14.1 OPERATIONS WITH KEY MANAGEMENT PERSONNEL
The remuneration of the members of the key management
personnel and non-executive directors for the year ended
31 December 2018 was RUB48,920 thousand (31 December 2017:
RUB26,723 thousand).
The remuneration of the members of the key management
personnel which remained unpaid as at 31 December 2018 was
RUB11,497 thousand (31 December 2017: RUB14,511 thousand).
The Company provided advertising services to the key
management personnel for the year ended 31 December 2018
amounted to RUB1,329 thousand (for the year ended 31 December
2017: RUB762 thousand).
Indirect interest in shares by Kirill Dmitriev arises through
his capacity as key management personnel of indirect shareholder.
The calculation of effective interest is based on the total amount
of issued and fully paid shares, including treasury shares acquired
by the Company (Note 12).
14.5 RECEIVABLES FROM / (PAYABLES TO) SUBSIDIARY COMPANIES
2018
RUB’000
2017
RUB’000
Receivables from subsidiary
companies
39,731
20,426
Payables to subsidiary companies
(40,042)
-
The exposure of the Company to credit risk, currency risk and impairment losses in relation to cash and cash equivalents is reported in Note
15 of the financial statements.
14.2 TRANSACTIONS WITH SUBSIDIARY COMPANIES
11. SHARE CAPITAL
Authorised share capital
Issued and fully paid ordinary shares
1 January / 31 December
NUMBER
OF SHARES
125,250,000
75,125,010
NOMINAL
VALUE
USD
SHARE
CAPITAL
RUB’000
SHARE
CAPITAL
USD’000
0.08
0.08
-
10,020
180,585
6,010
12. SHARE PREMIUM, RESERVES
AND RETAINED EARNINGS
SHARE PREMIUM
Share premium includes the total amount received in excess
of the total nominal value of the new share capital issued. Incremental
costs directly attributable to the issue of new shares are recognised as
a deduction from equity (share premium) net of any tax effect.
RETAINED EARNINGS
Retained earnings include accumulated profits and losses incurred
by the Company.
OTHER RESERVES
Exchange differences relating to the translation of the net assets
of the Company from its functional currency to the presentation
currency before changing the functional currency from the United
States Dollar to the Russian Ruble were recognised directly in other
comprehensive income and accumulated in the other reserves.
Other reserves include common control transactions reserve, capital
contribution reserve and treasury shares.
There were no significant changes during 2018.
13. TRADE AND OTHER PAYABLES
Accruals
Other payables
31 DECEMBER
2018
RUB’000
31 DECEMBER
2017
RUB’000
30,561
67,838
46,883
29,116
98,399
75,999
The exposure of the Company to liquidity risk in relation to
trade and other payables is reported in Note 15 of the financial
statements.
14. RELATED PARTY TRANSACTIONS
As at 31 December 2018, 67.9% of the Company’s share capital
is owned by MD Medical Holding Limited, a company beneficially
owned by Dr. Mark Kurtser. The 32.1% of the Company’s share
capital is owned by Guarantee Nominee Limited, who holds
the shares on behalf of the GDR holders. The following transactions
were carried out with related parties:
2018
RUB’000
2017
RUB’000
Dividends received
1,065,937
1,380,400
1,065,937
1,380,400
The Company recognised the impairment of LLC Fimedlab.
The relevant information is shown in Note 9.
Vitanostra Limited, a subsidiary of the Company, was entered into
members` voluntary liquidation in 2017 and the investments that
were previously held by Vitanostra Limited were distributed to
the Company. The relevant information is disclosured in Note 9.
14.3 REVENUE FROM SUBSIDIARIES FOR BRANCH OPERATIONS
During the year the Company received revenue from subsidiaries
for branch operations amounted to RUB168,931 thousand (2017:
RUB108,715 thousand) which relates to licences, advertising, IT
support and call center expenses recharged to its subsidiaries.
The relevant expenses are presented in Note 4.
14.4 DIRECTORS’ INTERESTS
The direct and indirect interests of the members of the Board in titles
of the Company as at 31 December 2018, 31 December 2017 and as
at the date of signing these financial statements are as follows:
NAME
TYPE OF INTEREST
EFFECTIVE
INTEREST %
Mark Kurtser
Kirill Dmitriev
Simon Rowlands
Indirect ownership
of shares
Indirect interest
in shares
Direct ownership
of shares
67.90
5.55
0.33
14.6 DIVIDENDS DECLARED TO RELATED PARTIES
Dividends declared to the parent company MD Medical Holding
Limited amounted to RUB306,140 thousand for the year ended
31 December 2018 (31 December 2017: RUB467,885 thousand).
15. FINANCIAL RISK MANAGEMENT
FINANCIAL RISK FACTOR
The Company is exposed to the following risks from its use of fi-
nancial instruments:
• Credit risk
• Liquidity risk
• Market risk
The Board of Directors has the overall responsibility for
the establishment and supervision of the Company’s risk
management framework.
The Company’s risk management policies are established to
identify and analyse the risks faced by the Company to set
appropriate risk limits and controls and monitor risks and
adherence to limits. Risk management policies and systems are
reviewed regularly to reflect changes in market conditions and
in the Company’s activities.
(i) Credit risk
Credit risk arises when a failure by counterparties to discharge their
obligations could reduce the amount of future cash inflows from
financial assets on hand at the reporting date. Cash balances are
held with various financial institutions.
Audited Financial Statements Exposure to credit risk
The carrying amount of financial assets represents the maximum
credit exposure. The maximum exposure to credit risk at
the reporting date was:
Trade, other receivables
and deferred expenses
Cash at bank
31 DECEMBER
2018
RUB’000
31 DECEMBER
2017
RUB’000
43,747
498,459
542,206
28,569
931,791
960,360
The Company held cash and cash equivalents excluding cash
in hand of RUB498,459 thousand at 31 December 2018 (31
December 2017: RUB931,791 thousand) which represents its
maximum credit exposure on these assets. The cash and cash
equivalents are mostly held with bank and financial institution
counterparties, which are rated Baа3 A3, based on rating agency
Moody’s Investors Service ratings.
(ii) Liquidity risk
Liquidity risk is the risk that arises when the maturity of assets and liabilities does not match. An unmatched position potentially enhances
profitability, but can also increase the risk of losses. The Company has procedures to minimise such losses including maintaining sufficient
cash and other highly liquid current assets. The following are the contractual maturities of financial liabilities including estimated interest
payments:
31
DECEMBER
2018
Trade
and other
payables
31
DECEMBER
2017
Trade
and other
payables
CARRYING
AMOUNTS
RUB’000
CONTRACTUAL
CASH
FLOWS
RUB’000
2 MONTHS
OR LESS
RUB’000
BETWEEN
2-12
MONTHS
RUB’000
NOTE
BETWEEN
1-2 YEARS
RUB’000
BETWEEN
2-5 YEARS
RUB’000
MORE
THAN
5 YEARS
RUB’000
13
98,399
98,399
98,399
-
-
-
-
CARRYING
AMOUNTS
RUB’000
CONTRACTUAL
CASH
FLOWS
RUB’000
2 MONTHS
OR LESS
RUB’000
BETWEEN
2-12
MONTHS
RUB’000
BETWEEN
1-2 YEARS
RUB’000
BETWEEN
2-5 YEARS
RUB’000
MORE
THAN
5 YEARS
RUB’000
13
75,999
75,999
75,999
-
-
-
-
(iii) Market risk
Market risk is the risk that changes in market prices, such as foreign
exchange rates, interest rates and equity prices which affects
the Company’s income or the value of its holdings of financial
instruments.
Interest rate risk
Interest rate risk is the risk that the value of financial instruments will
fluctuate due to changes in market interest rates. Borrowings issued
at variable rates expose the Company to cash flow interest rate risk.
Borrowings issued at fixed rates expose the Company to fair value
interest rate risk. The Company’s management monitors the interest
rate fluctuations on an ongoing basis and acts accordingly.
As at the reporting date the interest rate profile of interest bearing
financial instruments was as follows:
NOTE
2018
RUB’000
2017
RUB’000
Fixed rate financial assets
10
496,489
926,803
The Company does not account for any fixed rate instruments at
fair value through profit or loss and does not have any derivative
financial instruments, therefore a change in interest rates at
the reporting date would not affect profit or loss or equity.
146 147
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
Currency risk
Currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates. Currency risk arises
when future commercial transactions and recognised assets and liabilities are denominated in a currency that is not the Company’s
functional currency. The Company is exposed to foreign exchange risk arising from various currency exposures primarily with respect to
the United States Dollar. The Company’s management monitors the exchange rate fluctuations on a continuous basis and acts accordingly.
The Company’s exposure to foreign currency risk was as follows:
31 DECEMBER 2018
31 DECEMBER 2017
USD’000
EUR’000
GBP’000
USD’000
EUR’000
GBP’000
Assets
Cash at bank
Trade and other receivables
Liabilities
Trade and other payables and accruals
NET EXPOSURE
385,000
318
-
385,318
23
-
-
23
-
-
895,992
-
4
-
(373)
(373)
(737)
895,255
(327)
(323)
-
-
-
-
The following significant exchange rates applied during the year:
USD
EUR
GBP
AVERAGE RATE
REPORTING DATE SPOT RATE
2018
62.7078
73.9546
83.5756
2017
58.3529
65.9014
75.2379
2018
69.4706
79.4605
88.2832
2017
57.6002
68.8668
77.6739
SENSITIVITY ANALYSIS
A 10% weakening of the Russian Ruble against the above
currencies will result in the increase in profit and equity
of RUB38,496 thousand as at 31 December 2018 (31 December
2017: RUB89,493 thousand). A 10% stengthening of the Russian
Ruble would have an opposite impact.
CAPITAL MANAGEMENT
The Company’s objectives in managing capital are to safeguard
the Company’s ability to continue as a going concern in order
to provide returns to owners and to maintain an optimal capital
structure to reduce the cost of capital.
In order to maintain or adjust the capital structure the Company
may adjust the amount of dividends paid to shareholders, return
capital to owners or issue of new shares.
16. FAIR VALUES
As at 31 December 2018 and 31 December 2017 the Company had
no financial assets or liabilities measured at fair value.
The fair values of the Company’s financial assets and liabilities
approximate their carrying amounts at the reporting date except
the investments in subsidiaries which are presented at cost less
impairment.
17. CONTINGENT LIABILITIES
(A) INSURANCE
As per current legislation in Russian Federation medical clinics are
not required to insure their activities. There is a draft Law regarding
obligatory insurance of medical clinics as from 2013. The Law has
not yet been enacted. At present the Company does not insure
its operational activities but has obtained insurance cover for
some property, plant and equipment. Until the Company obtains
Audited Financial Statements adequate insurance coverage there is a risk of material adverse
effect on operations and statement of financial position.
(B) RUSSIAN BUSINESS ENVIRONMENT
The operations of the Company`s subsidiaries are primarily
located in the Russian Federation. Consequently, the Company
is exposed to the economic and financial markets of the Russian
Federation which display characteristics of an emerging market.
The legal, tax and regulatory frameworks continue development
but are subject to varying interpretations and frequent changes
which together with other legal and fiscal impediments contribute
to the challenges faced by entities operating in the Russian
Federation.
The conflict in Ukraine and related events has increased
the perceived risks of doing business in the Russian Federation.
The imposition of economic sanctions on Russian individuals and
legal entities by the European Union, the United States of America,
Japan, Canada, Australia and others, as well as retaliatory sanctions
imposed by the Russian government, has resulted in increased
economic uncertainty including more volatile equity markets,
a depreciation of the Russian Rouble, a reduction in both local
and foreign direct investment inflows and a significant tightening
in the availability of credit. In particular, some Russian entities
may be experiencing difficulties in accessing international equity
and debt markets and may become increasingly dependent on
Russian state banks to finance their operations. The longer term
effects of recently implemented sanctions, as well as the threat
of additional future sanctions, are difficult to determine.
The financial statements reflect management’s assessment
of the impact of the Russian business environment on
the operations and the financial position of the Company.
The future business environment may differ from management’s
assessment.
(C) RUSSIAN TAX ENVIRONMENT
The taxation system in the Russian Federation continues to
evolve and is characterised by frequent changes in legislation,
official pronouncements and court decisions, which are sometimes
contradictory and subject to varying interpretation by different
tax authorities. Taxes are subject to review and investigation by
a number of authorities, which have the authority to impose severe
fines, penalties and interest charges. A tax year generally remains
open for review by the tax authorities during the three subsequent
calendar years; however, under certain circumstances a tax
year may remain open longer. Recent events within the Russian
Federation suggest that the tax authorities are taking a more
assertive and substance-based position in their interpretation and
enforcement of tax legislation. These circumstances may create
tax risks in the Russian Federation that are substantially more
significant than in other countries. Management believes that it has
provided adequately for tax liabilities based on its interpretations
of applicable Russian tax legislation, official pronouncements and
court decisions. However, the interpretations of the tax authorities
and courts, especially due to reform of the supreme courts that are
resolving tax disputes, could differ and the effect on these financial
statements, if the authorities were successful in enforcing their
interpretations, could be significant.
Currently, the Russian Government focuses on the ways to combat
offshore structures which historically were widely used by Russian
businesses and tighten the tax anti-avoidance regulations. Recent
new Russian legislation is aimed at regulating transactions with
offshore companies and their activities, which may potentially
impact the Company’s tax position.
18. EVENTS AFTER
THE REPORTING PERIOD
No significant events occurred after the reporting period.
Sustainable
development
For the year ended 31 December 2018
Contents
159 Annex 1.GRI Index Disclosure
162 Annex 2. Sustainale Development Risk Management
164 Annex 3. Information on the gender and age of the Board of Directors
as of 31 December 2018.
164 Annex 4. Information on the gender and age of employees
as of 31 December 2018:
165 Annex 5. Information on the staff
166 Annex 6. SanPin 2.1.7.2790-10 Sanitary
and Epidemiological Requirements for Treating Medical Waste
167 Annex 7. Main methods for obtaining information
Audited Financial Statements 150 151
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
Sustainable development
INTERACTION WITH STAKEHOLDERS
In order to identify key stakeholders, an analysis of all business functions of MD Medical Group was held.
Given the fact that MD Medical Group understands the importance
of being a socially responsible Company and following the prin-
ciples of sustainable development, the Company committed to
include a sustainable development section in its annual reporting
cycle, namely in its Annual Reports, in 2017.
That’s why this year the Company’s Annual Report also includes
a section on sustainable development. This section was prepared
in accordance with the GRI Sustainability Reporting Guidelines,
Core option and the EU’s 2014/95/EU directive.
The section provides key benchmarks and the results in the field
of sustainable development for the time period from 1 January to
31 December 2018. In order to analyze current trends in the sphere
of sustainable development in the Company, a comparison
of the key indicators, such as electricity, heating energy and water
consumption by MD Medical Group’s clinics and hospitals, etc.
with similar data for the previous reporting period is presented
in the Section1.
The companies whose performance is reflected in the Section were
consolidated in accordance with IFRS principles (IFRS 10 — Consoli-
dated Financial Statements), unless otherwise stated.
Matrix of material topics
10.5
10
9.5
9
8.5
8
7,5
7
6,5
6
6
10
4
7
6
5
9
8
32
1
Economic impact
Social impact
Environmental impact
High-quality medical care
6,5
7
7,5
8
8,5
9
9,5
10
10.5
i
i
s
n
o
s
c
e
d
d
n
a
s
t
n
e
m
s
s
e
s
s
a
r
e
d
o
h
e
k
a
t
s
n
o
e
c
n
e
u
l
f
n
l
I
Significance of economic, environmental and social impacts
1. Water
2. Energy
3. Waste
management
4. Anti-corruption
5. Non-discrimination
6. Diversity and equal
8. Employment
9. Training
opportunities
7. Product and service
and education
10. Service quality
labelling
The Sustainable Development Section for 2018 is a part of the An-
nual Report for the year 2018 and is available on the MD Medical
Group’s official website (www.mcclinics.com).
conducted in order to identify “best practices” in this industry and,
thus, to understand which indicators are disclosed by companies
in their reports and how, in general, the reports are compiled.
IDENTIFYING MATERIAL TOPICS
The materiality identification process included three main steps:
Firstly, an analysis of 2017 material topics was carried out, as well
as of the changes that have occurred at MD Medical Group during
the reporting period. Major emphasis was placed on interaction
with stakeholders, further improvement of the supply chain and
business development in general. During the preparation of the re-
port, a dedicated team of specialists was formed. The team
actively interacted with employees of various functional divisions
of the Company to include their opinions and all required informa-
tion in the Section.
Secondly, a benchmark analysis of global sustainable development
practices employed by the largest companies in the industry was
Thirdly, a reconciliation procedure was carried out. The experts
compiled the list of disclosures in the Annual Report, in particular,
in the Section. Then, selected topics were evaluated using quantita-
tive methods. Thus, the matrix of material topics was compiled.
All material topics are disclosed in the Sustainable Development
Section and other chapters of the Annual Report.
The current version of the GRI Standards does not cover one
of the most important material topics “Quality of Service Provi-
sion”. Stakeholders both within and outside the Company have
highlighted that this topic is of high importance for them, because
it reflects the level of customer satisfaction. Besides, the provision
of patients with the Highest Quality of Care is one the key priorities
for MD Medical Group. Thus, in order to disclose this information
in a proper way the Company uses its own indicators. MD Medical
Group introduced a number of indicators MD 1-MD 5 in the previ-
ous Annual Report2.
1 Annex 7 Main Methods for obtaining the information
2 2017 Annual Report, p. 142
In addition to this, a benchmark of medical health care practices, and the impact of the business on people, both inside and outside
the Company, was conducted. As a result, the following list of stakeholders was compiled:
• patients and their families;
• employees;
• suppliers;
• shareholders and investors;
• government authorities;
• mass media.
MD Medical Group pays great attention and attaches great importance to the interests of its stakeholders. The Company regularly inter-
acts with all stakeholders in order to improve the effectiveness of its business and quality of the services provided.
Stakeholders and their expectations
CLIENTS
(ENTIRE FAMILIES)
EMPLOYEES
SUPPLIERS
SHAREHOLDERS
AND INVESTORS
GOVERNMENT
AUTHORITIES
MASS MEDIA
• Quick and easy
access to high
quality services
• Professional
growth
• Career
opportunities
• Lucrative
compensation
• Business
sustainability
• Procurement
transparency
• Transparent
and open
information
• Positive
contribution of
business
• Business
sustainability
• Financial results
• Compliance
• Willingness
to cooperate
• Availability
of information
• Transparency
and clarity
of information
Main communication channels
ONLINE FACILITIES
OFFLINE FACILITIES
SPECIAL FACILITIES
EVENTS
• Corporate website
• Intranet portal
• Clinics’ official website on
social networks
• Mobile application
• Media
• Annual report
• Corporate magazine
• Information stands/screens
• Publications
• Written replies to enquiries
• Quality hot-line for patients
• Comprehensive feedback
• Hot-line for employees
• Internal corporate magazine
“Indicator” for employees
• Meetings with employees
• Conferences
• Company representatives’
public speeches
INTERACTION WITH PATIENTS
MD Medical Group is particularly focused on interaction with
its patients, as they are of the greatest value to the Company.
This year, the Company continued to develop interaction mech-
anisms. Thus, all the clinics and hospitals arrange topical events
in order to increase patients’ awareness of health matters, to inform
patients of MD Medical Group’s services, to enhance the availability
of services and to improve access to them. These events are ded-
icated to various topics including obstetrics (pregnancy planning
and management; delivery); treatment for infertility and IVF; and
paediatrics. And it is important to highlight that the speakers are
MD Medical Group’s leading professionals.
During the reporting period the Company held approximately
290 open days at all facilities of the group, hosting more than
8,100 visitors. In addition to this, MD Medical took part in more
than 31 events held by our partners, attended by more than 3,600
people. MD Medical Group continues to develop modern channels
of communication with patients. So approximately 63 webinars and
on-line events were conducted.
Events like this gives the opportunity for a large number of people
to consult specialists and obtain necessary health services. Moreo-
ver, MD Medical Group performed 8,387 IVF’s under MHI (Manda-
tory Health Insurance) last year and gave 510 patients high-tech-
nology medical assistance.
The Company continues to expand the list of medical care ser-
vices, including high-tech health care services. The development
of a mobile application was started in 2018 in order to increase
the effectiveness and speed of interaction with the Company’s cli-
ents, as well as to increase their awareness. The mobile application
will provide users with the following features:
• to contact the clinic staff quickly (has already been implemented);
• to make an appointment to see a doctor (has already been
implemented);
• to see the results of medical analyses in the patient’s online ac-
count (this initiative will be fully implemented by March 2019);
• to make payments (prepayments), to replenish deposit agree-
ments (at the development stage);
MD Medical Group is going to expand the method of informing
its clients by email. For instance, MD Medical Group plans to send
a letter to its clients with a guide to prepare for the medical proce-
dure for which they have an appointment.
Besides the mobile application, a web version of this application will
also be created1. The site will begin to work in 2019.
The Company continues to use mechanisms which were developed
and implemented in 2017 to obtain patient feedback on the qual-
ity of services, namely a customer satisfaction (CSAT) score on
phone-in consultations and a quality hot-line.
In order to measure CSAT, employees of the Company process
feedback received from customers, which includes three main indi-
cators:
• speed and convenience of the consultation;
• completeness and ease of understanding;
• the consulting employee’s politeness and friendliness.
The Company monitors and analyzes this indicator on a regular
basis, because the clients can leave their feedback at any stage
of a consultation.
The second mechanism for receiving feedback from the client
is the hot-line. Patients may leave comprehensive feedback through
any convenient channel, such as using the form on the website,
sending an e-mail to quality@mcclinics.ru, or through the operator
of the single contact center2.
INTERACTION WITH EMPLOYEES
The Company fully understands the importance of maintaining
effective communication with all types of employees. That is why
the Company has expressed its commitment to holding five-min-
ute daily conferences in the Group’s hospitals where doctors
participate. The main purpose of these conferences is to discuss all
the events that happened the previous day. In addition, there are
a number of other activities, such as doctors’ weekly conferences,
head nurses’ weekly conferences, and weekly conferences with
the Group’s general directors. The Company is introducing and
using digital technologies, namely, calls on Skype, to build effective
interaction with its regional divisions. The staff also hold five-min-
ute daily conferences.
Understanding the importance of protecting data of the Company
and its clients, as well as the importance of creating a way to effec-
tively and quickly interact within the Company, MD Medical Group
has developed an in-house corporate intranet portal, which is used
daily by Company employees.
Moreover, the Company introduced a whistle-blowing policy
in 2012, which is still in use today. According to this policy every
employee can write to hotline@mcclinics.ru. This network is used to
detect employee fraud and other misconduct. If any violation has
been identified, an internal investigation is conducted.
1 The Company works with general and personal data in compliance with
Federal Law No. 152-FZ On Personal Data dated 27 July 2006
2 2017 Annual Report, p. 144
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
152 153
PERSONNEL
HR MANAGEMENT
MD Medical Group is fully aware of the importance of hiring, developing, training and communicating with human resources as one
of the key determinants of success. Given the specifics of the industry, the specific aspects of the Group’s key business functions, type of fa-
cilities, geography of hospitals and clinics, and the Company’s corporate culture and goals, the HR management structure is as follows:
HR management structure
CEO
HR Director
Regional HR Directors
Mother & Child Centre
Mother & Child Urals
Mother & Child Volga
Mother & Child Siberia
HR managers in the clinics and hospitals
To improve the effectiveness of the HR system and MD Medical Group as a whole the Company developed and implemented a number
of regulations and rules in 20171.
OBJECTIVES IN HR MANAGEMENT
In 2018, the Company set a number of objectives in the field of personnel management and successfully attained them during the reporting
period.
OBJECTIVE
RESULTS
Expanding the geographical scope
of business
MD Medical Group opened new clinics (Lefortovo, Tula, Volgograd, Nizhniy Novgorod,
Kazan) as well as hospitals (Samara), and expanded clinics (Vladimir and Kostroma). All
of the above-mentioned facilities were staffed in a timely manner in 2018.
Hiring new staff
The interns were transferred to the Company’s staff after the internship, and Company
employees were promoted according to plan.
Organizational and personnel audit
All audits were completed with no significant comments.
Webinars and conferences on organizational,
research and educational matters
Timely organization of employee
qualification upgrading
Ratio of medical staff to non-medical staff
for treatment-and-prophylactic institutions
with preferential taxation
1 2017 Annual Report, p. 145
25 webinars and 18 conferences were held on a wide range of topics in 2018.
Staff development was carried out in a timely manner. More than 1,100 medical staff
completed mandatory and additional professional development programs in 2018.
In addition to this, the employees were trained in occupational health and industrial
safety on a scheduled basis, as required by law.
The average number of training hours per employee was 45.6.
Compliance of this indicator with the norm of 50%.
PROFESSIONAL DEVELOPMENT
DEVELOPMENT OF THE SUPPLY CHAIN
In addition to this, MD Medical Group continues to develop residen-
cy training programs. There is a possibility to choose one of two
fields of study in residency:
• obstetrics and gynaecology;
• neonatology.
28 students were trained in residency in 2018 (11 first-year students
and 17 second-year students) and 8 students fully completed
the course that year.
The Company has established the following goals in the field
of personnel management for 2019:
• providing clinics and hospitals with personnel in view of the in-
crease in the range of services provided;
• training of medical residents, internships for future employees /
managers;
• compliance with the ratio of medical staff to non-medical staff
for treatment-and-prophylactic institutions with preferential
taxation (50%);
• subsequent development and expansion of business.
MD Medical Group is particularly focused on employees’ profes-
sional development, because, as noted earlier, the Company con-
siders human resources as one of the key determinants of success.
The Group conducted mandatory and additional professional
development programs attended by 1,100 people in the reporting
period. The Company continues to develop and introduce digital
technologies, and the number of webinars thus increased by 13.6%
compared with the previous reporting period.
In addition to this, MD Medical Group is focused on the creation
of publications on various subjects; thus, Company employees
regularly publish articles in leading international and Russian pro-
fessional journals.
Moreover, a distinctive feature of the MICE conducted by MD Med-
ical Group is that outside professionals are free to take part in these
events along with the Group’s staff. Accordingly, the Company held
18 conferences in 2018 for mixed professional groups including its
own and third-party specialists.
Special focus is on new hospital personnel. New employees are
seconded on internships at already-existing facilities of the Group
in order to familiarize themselves with the Company’s key activi-
ties, to study the work rules and standards of the Company and to
train for future work. The staff of existing MD Medical Group facili-
ties are promoted to senior managers at new facilities of the group.
154 155
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
THE GROUP’S APPROACH TOWARDS SUPPLY CHAIN MANAGEMENT
An effective supply chain is an important condition for the success
of MD Medical Group and ensures patients’ safety and the eco-
nomic sustainability of the Company. The Group has a full and
well-developed supply chain, which begins with analysis of demand
for materials and equipment within all its facilities and ends with
a wide range of services provided by the Company to its clients1.
Given the specific features of the industry in general, the Company
purchases many different materials. The Company tries to diversify
suppliers as much as possible in order to achieve better product
quality and sustainability. That is why MD Medical Group is fo-
cused on working both with Russian and international suppliers.
Supply chain of medications and equipment
It is important to note that the Group offers equal opportunities for
participation in tenders, including small businesses. The principles
that guide the Company in conducting business, and in particu-
lar when interacting with stakeholders within the supply chain,
are the following ones: good faith, transparency, impartiality and
fairness. There are three main types of supply chain: medications,
medical expendables and equipment.
There were a number of changes in the supply chain in 2018,
namely:
• medicines and medications began to be procured centrally;
• the special electronic trading platform was used to procure
items;
• strict control of procurement activities “on the ground” was intro-
duced in accordance with regulations;
• a clear consistent format was used when entering into contracts.
Inventory of medications and in-clinics’ warehouses
•
• Generation of a request to manufacturers
PRODUCERS
• Analysis of demand in the market of
medication and medical eqiupment
• Production of various medicines
• Dispatch manufactured medications and
equipment to warehouses
CLINICS
MEDICATIONS, EQUIPMENT
FEDERAL LEVEL
• Medications are sent to regional dealers (pharmacies)
• Equipment is sent to the clinics’ warehouses
REGIONAL LEVEL
• Reciept of goods
• Storage of medications and equipment
• Sending goods to regional warehouses and
regional transport companies
Supply chain of medical expendables
• Generation of a request
to manufacturers
PRODUCERS
• Order depleted items
Marketing of
the products
Send goods to
the warehouses
CLINICS
MEDICATIONS EXPENDABLES
FEDERAL LEVEL
•
Inventory of supplies and
remainders in clinics warehouses
• Determinig procurement plans
• Generation of an order
If goods are in
stock, send them
If goods are in
stock, send them
REGIONAL LEVEL
• Generation of aggregated
orders ship necessary materials
1 2017 Annual Report, p. 147
156 157
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
Thus, there were changes in the number of companies involved
in sypply of medications and expendables.
Number of companies involved
in different types of supply chain
Supply
of medications
Supply
of expendables
Supply
of equipment
BEFORE
01.09.2018
Not more
than 6
Not more
than 3
Not more
than 2
AFTER
01.09.2018
Not more
than 1 or 2
Not more
than 2
Not more
than 2
ENVIRONMENT AND WORKPLACE
SAFETY
ENVIRONMENTAL MANAGEMENT:
MD Medical Group is fully aware of the importance of preserving
the environment. The Group is doing its utmost to increase resource
efficiency, to optimize business processes and to reduce to a min-
imum the negative environmental impact. The use of electricity,
heating, and cooling is a necessary requirement of patient care.
MD Medical Group is taking measures to optimize the process and
lower energy usage.
Environmental impact management on the Group’s level
is within the scope of the CEO’s competence, and, in the hospitals
and clinics, within the scope of responsibility of the CEO and chief
technical director. The hospitals and clinics supervise compliance
with legislative environmental safety requirements.
The management systems meet the requirements of international
certificates ISO 14001-2004 Environmental management systems
and ISO 50001:2011 Energy management systems.
The reporting boundaries for environment indicators include all
hospitals and clinics1.
ENERGY EFFICIENCY
Given the fact that MD Medical Group continues to actively
develop and expand its business, energy efficiency remains one
of the main priorities of MD Medical Group. Thus, the Company
is doing its utmost to increase energy efficiency by adoption of en-
ergy efficient technologies, and by continuously improving energy
management as well as the distribution system.
The increase in consumption of electricity and energy for heating
by hospitals occurred due to the construction works and opening
of a new hospital in Samara in February 2018. Several clinics also
had started their work in 2018. The detailed information about
the electricity and heating consumption is presented at the Annex
7 of the Report.
MD Medical Group’s facilities essentially receive energy for heating
from municipal central heating utilities and networks. The Company
is also focused on equipping group facilities with a backup power
supply, for instance diesel generators, in order to use them in case
of an emergency.
Electricity consumption by MD Medical Group’s
clinics and hospitals, GJ (GigaJoule)
Fuel consumption by MD Medical Group’s
clinics and hospitals, litres
2017
2018
CHANGE
Petrol
CLINICS
HOSPITALS
TOTAL
Diesel
CLINICS
HOSPITALS
76,699
91,261
71,502
98,003
167,960
169,505
42,782
58,692
44,714
55,949
-7%
7%
1%
5%
-5%
-1%
2017
2018
CHANGE
TOTAL
101,474
100,663
CLINICS
HOSPITALS
TOTAL
9,688
69,750
79,438
10,732
79,991
90,723
11%
15%
14%
Heating energy consumption by MD Medical Group’s
clinics and hospitals, GJ
2017
2018
CHANGE
CLINICS
HOSPITALS
25,560
131,478
25,974
157,728
TOTAL
157,038
183,702
2%
20%
17%
Total energy consumption by MD Medical Group’s
clinics and hospitals, GJ
2017
2018
CHANGE
CLINICS
HOSPITALS
35,248
201,228
36,706
237,720
TOTAL
236,476
274,426
4%
18%
16%
RATIONAL USE OF WATER
Given the need for efficient use of water resources, MD Medical
Group monitors its water consumption on a regular basis and con-
stantly improves the water management system. All the facilities
of the Company use water from municipal water supply networks
under State Standard GOST Р 51232-98 (2002).
Water consumption by MD Medical Group1, cub. M
2017
2018
CHANGE
CLINICS
25,927
26,334
HOSPITALS
144,447
163,463
Perinatal Centre
33,600
34,147
Lapino Clinical
Hospital
Ufa Clinical
Hospital
Avicenna
Samara Hospital
68,358
67,403
30,173
12,316
n/a
33,119
17,328
11,466
TOTAL
170,374
189,797
2%
13%
2%
-1%
10%
41%
n/a
11%
Last year, the Company decided to publish its first report under
the GRI standards and, thus, to define the boundaries of disclosure
of waste management due to the specific nature of the record-
keeping. This year MD Medical Group discloses this aspect in more
detail.
The Group’s clinics and hospitals dispose of their regulated waste
as required by SanPin 2.1.7.2790-10 Sanitary and Epidemiological
Requirements for Treating Medical Waste2. Each clinic and hos-
pital can produce medical waste of a different class. It depends
on the list of services provided by the MD Medical Group facility.
Consequently, the structure of produced medical waste may differ
among Company facilities.
Waste management chain in hospitals
Landfill
Incineration
CONTRACTORS
Disposed of by
the contractors
Disposed of by
the contractors
TYPE
Non hazardous
Waste
Hazardous
OWN LEVEL
Composting
Decontamination
and pulping
WASTE MANAGEMENT
MD Medical Group fully complies with legislation of the Russian
Federation in the field of waste management for the medical in-
dustry. The Company does its best to reduce its potential negative
impact.
The process of waste management depends on what class of waste
is disposed of and on the location of the MD Medical Group facility.
In order to dispose of class A waste, the Company concludes an
agreement with a contractor which provides services to the entire
facility where the Company’s clinic or hospital is located. To dispose
1 Annex 7. Main Methods for obtaining the information.
1 Annex 7. Main Methods for obtaining the information.
2 Read more about SanPin 2.1.7.2790-10 Sanitary and Epidemiological
Requirements for Treating Medical Waste in Annex 6.
of the other classes of medical waste MD Medical Group signs
agreements with contractors.
Several hospitals participate directly in the recycling process by
using a special apparatus to decontaminate and treat medical
wastes by heat, and after medical wastes begin to be classified
as non-hazardous household solids that can be safely disposed
of in a conventional manner. All Company facilities have containers
for the temporary storage of mercury-vapor bulbs.
Waste by disposal method (hospitals), metric tonnes
2017
2018
CHANGE
Landfilling
(non-hazardous
wastes)
Composting
(non-hazardous
wastes)
Bulk incineration
(hazardous wastes)
2,698
3,098
15%
0.5
4.1
1.8
2.9
260%
-30%
15%
TOTAL
2,707.9
3,102.7
Waste by disposal method (clinics), metric tonnes
2017
2018
CHANGE
Landfilling
(non-hazardous
wastes)
Composting
(non-hazardous
wastes)
Bulk incineration
(hazardous wastes)
TOTAL
382
424
11%
-
36
418
-
40
464
-
12%
11%
WORK, FIRE AND INDUSTRIAL SAFETY EDUCATION
MD Medical Group attaches great importance to the process of ed-
ucation in the field of work, fire and industrial safety. Every member
of the Company is aware of the necessity to comply with all work,
fire and industrial safety requirements. Thus, the Company has de-
veloped and adopted a range of training programs based on best
practices and aimed at creating a culture of safety in the Company.
There are several types of training program, designed in accordance
with employee competencies: for managers, professionals, mid-lev-
el medical and clerical staff, menial workers, electricians, operators
of pressurized equipment, heating installations, lift controllers, etc.
All employees, without exception, are trained in safe working meth-
ods within their establishments and are tested for their knowledge
at least once every three years. MD Medical Group attaches great
importance to training auxiliary and unskilled staff in first aid at
work at least once a year as prescribed by article 225 of the Russian
Labour Code. In addition to this, MD Medical Group hospitals have
designed and apply instructions to provide first aid to victims
in case of accidents at work.
158 159
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
Annex 1.
GRI Index Disclosure
GRI STANDARDS DISCLOSURE
NUMBER
TITLE
PAGE IN THE REPORT AND/OR REFERENCE
GRI 102: GENERAL DISCLOSURES
102-1
102-2
102-3
102-4
102-5
102-6
102-7
102-8
102-9
102-10
102-11
102-12
Name of the organization
71
Activities, brands, products, and services
18-19, 42-45
Location of headquarters
Location of operations
Ownership and legal form
Markets served
70
22-23
70-71
22-23
Scale of the organization
49, 42-45, 5
Information on employees and other workers
164-165
Supply chain
155-156
Significant changes to the organization and
its supply chain
14-17, 22-23, 155-156
Precautionary Principle or approach
The Group has not adopted the Precautionary Principle or approach.
External initiatives
n/a
102-13
Membership of associations
The clinics of the Group as well as staff are members of the following
national and international organizations:
• Russian Association of Human Reproduction;
• Russian Association of Obstetricians and Gynecologists;
• Chamber of Commerce and Industry of the Samara Region;
• Chamber of Commerce and Industry of the Urban District of Togliatti,
Samara Region;
• European Society of Human Reproduction and Embryology;
• Association of Obstetricians and Gynecologists of Endocrinologists
of the Perm Region;
• Moscow Society of Obstetricians and Gynecologists;
• Association of Obstetricians and Gynecologists of the Irkutsk Region;
• Association of Gynecologist-Endoscopists of Russia.
• International Academy of Perinatal Medicine.
Statement from the senior decision-maker
10-11
Key impacts, risks, and opportunities
Annex 2. Sustainable Development Risk Management
102-14
102-15
102-16
Values, principles, standards, and norms
of behaviour
102-18
Governance structure
102-22
Composition of the highest governance
body and its committees
19, 52
62-68
62-65
160 161
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
GRI STANDARDS DISCLOSURE
GRI STANDARDS DISCLOSURE
NUMBER
TITLE
PAGE IN THE REPORT AND/OR REFERENCE
NUMBER
TITLE
PAGE IN THE REPORT AND/OR REFERENCE
102-24
Appointing and selecting the highest
governance body
58-59, 62-65
102-40
List of stakeholder groups
151
Collective bargaining agreements
There is no signed collective bargaining agreement.
Identifying and selecting stakeholders
2017 Annual Report, p.142-143
Approach to stakeholder engagement
151-152
Key topics and concerns raised
150
Entities included in the consolidated financial
statements
90-92
GRI 404: TRAINING AND EDUCATION
404-2
Programmes for upgrading employee skills
and transition assistance programs
GRI 405: DIVERSITY AND EQUAL OPPORTUNITY
154
164
Defining the report’s content and topic
boundaries
102-47
List of material topics
102-48
Restatements of information
Changes in reporting
Reporting period
151-152
151-152
This Report does not contain restatements of information provided
in previous reports.
No changes have occurred.
405-1
Diversity of governance bodies
and employees
102-41
102-42
102-43
102-44
102-45
102-46
102-49
102-50
102-51
102-52
102-53
102-54
102-55
102-56
Date of the most recent report
The last Annual Report was published in March 2017.
Reporting cycle
Annual cycle.
Contact point for questions regarding
the report
168
Claims of reporting in accordance with GRI
Standards
This report has been prepared in accordance with GRI Standards: Core
option.
GRI content index
External assurance
159-161
No external assurance for the Group’s Sustainability Report was sought.
GRI 103: MANAGEMENT APPROACH
103-1
103-2
Explanation of the material topic and its
boundary
151
The management approach and its
components
14-15, 50, 150, 153-154, 156-158
103-3
Evaluation of the management approach
14-15, 50, 150, 153-154, 156-158
GRI 205: ANTI-CORRUPTION
205-3
Confirmed incidents of corruption and
actions taken
No incidents of corruption were detected in the reporting period. See
p. 163 for more about the prevention of corruption and bribery risks
GRI 302: ENERGY
302-1
Energy consumption within the organization
156, Annex 7. Main methods for obtaining information
GRI 303: WATER
303-1
Water withdrawal by source
157
GRI 306: EFFLUENTS AND WASTE
306-2
Waste by type and disposal method
158-159
Despite the absence of an established diversity policy, the Board of Directors
is sufficiently diversified. For instance, directors who are specialists in various
fields such as audit, finance, law, medicine, investments, etc. are members
of the Board. The sufficient diversity of the skills of the Board’s members
contributes to a qualified discussion, with the voicing of different points
of view, reflecting different ways of thinking.
In our understanding, the term “diversity” of the Board of Directors means
that its members should be specialists with:
• a broad vision of management and development processes;
• successful management experience;
• a deep understanding of business processes, especially in such aspects
as designing a development strategy and monitoring its implementa-
tion, the system of internal control and audit, risk management, the spe-
cifics of the particular business, and the motivation of top management.
Greater diversity enables the Board to consider issues from different
perspectives and develop more balanced business strategies.
GRI 406: NON-DISCRIMINATION
406-1
Incidents of discrimination and corrective
actions taken
The Group did not detect any incidents of discrimination in the reporting
period.
GRI 417: MARKETING AND LABELLING
417-2
Incidents of non-compliance concerning
product and service information and
labelling
The Group prepares its marketing communications in compliance with Federal
Law No. 38-FZ On Advertising dated 13 March 2006 and Law No. 2300-1
of the Russian Federation On Protection of Consumer Rights dated 7 February
1992 (as amended on 1 May 2017). As part of measures to monitor compliance
with the statutory requirements for products and services information and
labelling, all advertising contracts are initialled by the marketing director
(deputy general director, marketing) and the legal department.
No confirmed incidents of non-compliance concerning product and service
information and labelling occurred in the reporting period.
417-3
Incidents of non-compliance concerning
marketing communications
No confirmed incidents of non-compliance concerning marketing
communications occurred in the reporting period.
QUALITY MEDICAL ASSISTANCE TO PATIENTS
MD1
MD2
MD3
MD4
MD5
Development and extension of the list
of services
Annual capacity of the hospitals
Development of hi-tech medical care
Highly-qualified personnel
Dialogue with patients
42-45
24-37
18-19
50, 152
152
162 163
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
HUMAN RIGHTS RISKS
Discrimination
The Group permits no discrimination against any minorities. There have been no discrimination
claims or legal action over the whole history of the Company.
Work under compulsion
MD Medical Group’s corporate culture and ethics exclude any compulsion.
Remuneration discrimination
Bonuses and rewards in the Group are economically substantiated and paid on the basis of per-
formance and attainment of targets set by the Company. There is no remuneration discrimina-
tion in the Company.
CORRUPTION AND BRIBERY RISKS
Risk of corrupt actions and pay-
ments to government authorities
In order to avoid any offenses MD Medical Group makes sure that any interaction with superviso-
ry and regulatory authorities is duly documented. The Company’s CEO and shareholders are im-
mediately notified of any disputes or differences arising between the Company and supervisors
or regulators. All financial operations in the Group are reflected in appropriate financial records
which are subject to financial audit
Risk of bribery of the Group’s
employees for the benefit of third
parties
MD Medical Group’s procurement procedures are sufficiently transparent to reduce the risk
of corruption and fraud. Moreover, the Company has developed and uses an efficient and trans-
parent procedure for selecting suppliers.
Annex 2.
Sustainable Development Risk
Management
MD Medical Group continues to actively update its sustainable development risk management mechanisms.
Given the complexity of business processes, special features of the industry, the current economic situation in the country and all
of the above mentioned facts, the risk management department has identified the following groups of sustainable development risks:
• environmental impact risks;
• social and employment risks;
• human rights risks;
• corruption and bribery risks.
Although MD Medical Group assesses the probability of these risks occurring as low, the Company has developed and applied a series
of preventive measures.
RISK GROUPS
RISK MANAGEMENT MECHANISMS
ENVIRONMENTAL IMPACT RISKS
Incorrect hazardous waste disposal MD Medical Group has developed and continues to constantly improve the procedure for
selecting contractors, who are required to have all the necessary resources and skills to dispose
of hazardous medical wastes in a proper way.
Substantial increase in energy con-
sumption and decrease in energy
efficiency
MD Medical Group is aware of the importance of using a modern high-performance power sup-
ply system. MD Medical Group applies various energy saving measures in accordance with inter-
nal standards and procedures. In addition to this, the Company installs energy-saving equipment
at all facilities of the Group.
Substantial increase in water con-
sumption
Increase in paper consumption
SOCIAL AND EMPLOYMENT RISKS
The Groups monitors the condition of water and heat supply pipelines.
MD Medical Group fulfills the requirements of the official Electronic Government program cur-
rently implemented in Russia in order to switch to electronic external document flow.
Statutory restrictions related to
employment
The Group monitors appropriate changes in relevant legislation on a regular basis and promptly
reacts to them.
Insufficient availability of Compa-
ny’s care services facilities
Deterioration of the Group’s rela-
tions with staff
MD Medical Group is expanding the geography of its presence, opening new Group facilities
in order to increase access to the Company’s services for a large number of patients. The Com-
pany sets prices for its services taking into account the income level of the population of each
specific region of presence.
In addition, the Group is committed to meeting the requirements of the federal IVF program
under obligatory health insurance policies.
MD Medical Group monitors its personnel’s satisfaction by conducting regular surveys and
creates conditions for the development and realization of its employees’ professional poten-
tial. The Group maintains employee health care and maternity support programs, programs for
the organization of employees’ leisure and recreation, and professional development programs.
164 165
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
Annex 5.
Information on the staff
2017
Male
Female
TOTAL
2018
Male
Female
TOTAL
MOTHER &
CHILD CENTRE
MOTHER &
CHILD URALS
MOTHER &
CHILD SIBERIA
MOTHER &
CHILD VOLGA
701
3,183
3,884
135
753
888
284
1,037
1,321
84
624
708
MOTHER &
CHILD CENTRE
MOTHER &
CHILD URALS
MOTHER &
CHILD SIBERIA
MOTHER &
CHILD VOLGA
737
3,254
3,991
151
839
990
291
1,072
1,363
151
854
1,005
TOTAL
1,204
5,597
6,801
TOTAL
1,330
6,019
7,349
%
18
82
100
%
18
82
100
The staffing data is set forth above for the entire scope of the 2017 and 2018 consolidated financial reporting as per the records maintained
on a permanent basis.
The Group had no automated records with respect to the terms of effect of employment agreements in 2017 and 2018, because
of the planned transition to the new accounting system.
Annex 3.
Information
on the gender and age
of the Board of Directors
as of 31 December 2018.
Men — 70%; Women — 30%; 30–50 years of age — 60%;
Older than 50 years of age — 40%.
Annex 4.
Information
on the gender and age
of employees
as of 31 December 2018:
Men — 18%; Women — 82%; Younger than 30 — 13%;
30–50 years of age — 62%; Older than 50 years of age — 25%.
Annex 6.
SanPin 2.1.7.2790-10
Sanitary and Epidemiological
Requirements for Treating
Medical Waste
SanPin 2.1.7.2790-10 Sanitary and Epidemiological Requirements for Treating Medical Waste is a regulatory legal act, registered by the Min-
istry of Justice of the Russian Federation on February 17, 2011 (registration number: 19871). According to this document, there are five major
classes of medical waste:
• Class A (А) - epidemiologically non-hazardous waste close in composition to municipal solid waste (packaging, paper, cardboard, etc.);
• Class B (Б) - epidemiologically hazardous waste. This class includes human blood and blood products as well as other biological liquids;
• Class V (В) - extremely epidemiologically hazardous waste (materials that were in contact with patients with infectious diseases);
• Class G (Г) - toxicologically hazardous waste of classes from 1 to 4. This class includes medicines, diagnostics, and disinfectants that can-
not be used, namely those medical supplies that have been damaged or expired;
• Class D (Д) - radioactive waste.
166 167
1. OVERVIEW
2. STRATEGY
3. INVESTING IN STRATEGIC EXPANSION
4. CONTINUED STRONG PERFORMANCE
5. CORPORATE SOCIAL RESPONSIBILITY
6. CORPORATE GOVERNANCE AND RISK
MANAGEMENT
7. REPORT AND CONSOLIDATED FINANCIAL
STATEMENTS
8. REPORT AND SEPARATE FINANCIAL STATEMENTS
9. SUSTAINABLE DEVELOPMENT
10. CONTACTS AND ADVISERS
Annex 7.
Main methods for obtaining
information
For a number of indicators the forecast technique method was used due to the lack of detailed accounting data, either for reasons pertain-
ing to specific facilities, in particular due to the fact that a number of facilities are located in rented premises, or due to the non-relevance
of such information for decision-making by the MD Group or stakeholders. When forecasts are made, the calculations are based applying
some of the following indicators:
• for waste – the average amount of waste that is generated per day;
• for fuel – the amount of money spent on the purchase of fuel divided by the cost of one liter of gasoline;
• for water, electricity and heating – the amount of money spent on utilities and rent. Regional rates were used in the calculations;
The total amount of data obtained by the forecast method does not represent a significant share of the consolidated sum.
Electricity consumption by MD Medical
Group’s clinics and hospitals, KWh
Fuel Consumption by MD Medical Group’s
clinics and hospitals, litres
2017
2018
CHANGE
CLINICS
HOSPITALS
2,691,062
2,981,110
19,374,924
22,219,777
Perinatal Centre
4,407,515
4,396,895
Lapino Clinical Hospital
6,769,872
7,478,484
Ufa Clinical Hospital
4,669,425
4,673,587
Avicenna
2,357,342
2,624,086
Samara Hospital
1,170,770
3,046,725
TOTAL
22,065,986
25,200,887
11%
15%
0%
10%
0%
11%
160%
14%
Heating energy consumption by MD Medical
Group’s clinics and hospitals, Gcal
CLINICS
HOSPITALS
2018
CHANGE
2017
6,109
6,208
31,424
37,968
Perinatal Centre
5,893
5,864
Lapino Clinical Hospital
10,467
10,458
Ufa Clinical Hospital
12,274
12,799
Avicenna
Samara Hospital
2,790
-
4,667
3,910
TOTAL
37,533
43,906
Petrol
CLINICS
HOSPITALS
Perinatal Centre
Lapino Clinical Hospital
Ufa Clinical Hospital
Avicenna
Samara Hospital
2017
2018
CHANGE
76,699
71,502
91,261
30,718
30,594
13,039
16,910
-
98,003
25,488
34,490
13,356
15,773
8,896
-7%
7%
-17%
13%
2%
-7%
n/a
1%
TOTAL
167,960
169,505
Diesel
CLINICS
HOSPITALS
Perinatal Centre
Lapino Clinical Hospital
Ufa Clinical Hospital
Avicenna
Samara Hospital
2017
2018
CHANGE
42,782
58,692
10,204
33,825
5,966
8,697
-
44,714
55,949
13,954
26,215
5,802
9,978
-
5%
-5%
37%
-22%
-3%
15%
TOTAL
101,474
100,663
-1%
2%
20%
0%
0%
4%
67%
n/a
17%
Contacts
and Advisers
REGISTERED OFFICE
STOCK EXCHANGE
FROM OUTSIDE THE US
tel: +1 651 453-2128
GLOBAL INVEST DIRECT
tel: +1 800 428-4237
www.mcclinics.com
Dimitriou Karatasou, 15, Anastasio
building,6th floor, Flat/Office 601,
Strovolos, 2024, Nicosia, Cyprus
info@mcclinics.ru
tel: +357 22 50 40 00
fax: +357 22 50 41 00
INDEPENDENT AUDITORS
KPMG Ltd
11, 16th June 1943 Street
3022 Limassol — Cyprus
limassol@kpmg.com.cy
tel: +357 25 86 90 00
fax: +357 25 36 38 42
DEPOSITARY BANKS
JPMorgan Chase Bank, NA.
1 Chase Manhattan Plaza, Floor 58
New York, NY, 10005-1401 USA
tel: (800) 990-1135
London Stock Exchange Plc
10 Paternoster Square
London EC4M 7LS UK
tel: +44 20 7797 1000
www.londonstockexchange.com
INVESTOR RELATIONS
Dmitry Yakushkin
Head of Investor Relations
ir@mcclinics.ru
tel: +7 495 331 4120
MEDIA RELATIONS
EM
MDMG@em-comms.com
tel:+7 495 363 2849