MD Medical Group
2019
ANNUAL
REPORT
AND
ACCOUNTS
investing in
THE
CONTENTS
2
10
18
42
48
56
OVERVIEW
STRATEGY
INVESTING IN STRATEGIC
EXPANSION
CONTINUED STRONG
PERFORMANCE
CORPORATE SOCIAL
RESPONSIBILITY
CORPORATE GOVERNANCE
AND RISK MANAGEMENT
2
4
6
8
MULTI-DISCIPLINARY
LEADERSHIP
STRONG INVESTMENT
CASE
NATIONWIDE
HEALTHCARE
NETWORK
CEO STATEMENT
12
OUR STRATEGIC
GOALS
14
UNRIVALLED GROWTH
16 WIDE RANGE
OF HIGH-TECH
MEDICAL SERVICES
70
124
REPORT
AND CONSOLIDATED
FINANCIAL
STATEMENTS
REPORT
AND SEPARATE
FINANCIAL
STATEMENTS
20
22
34
EXPANDING A LEADING
NATIONWIDE
NETWORK
HOSPITALS IN FOCUS
INTERVIEW
WITH CHIEF DOCTOR
OF TYUMEN HOSPITAL
38 MARKET TRENDS
IN RUSSIA
162
SUSTAINABLE
DEVELOPMENT
44
OPERATIONAL
REVIEW
50
52
54
OUR PEOPLE
CORPORATE SOCIAL
RESPONSIBILITY
SHAREHOLDERS’
EQUITY
58
60
64
66
68
CORPORATE
GOVERNANCE
REPORT
RISK MANAGEMENT
BOARD
OF DIRECTORS
BOARD
OF DIRECTORS
ACTIVITY IN 2019
SENIOR
MANAGEMENT
182
CONTACTS
AND ADVISERS
ToC overview
Multi-Disciplinary
LEADER
SHIP
Year after year, our operational and financial performance demonstrates
the sustainable development of our business with steady potential for further
growth.
OPERATIONAL KPI’s
THANKS TO THE HARD WORK
ACROSS THE GROUP,
WE SUCCESSFULLY COMPLETED
2019 BY FURTHER BOOSTING KEY
OPERATIONAL AND FINANCIAL RESULTS.
Dr Mark Kurtser
CEO
Key drivers of our growth included further capacity utilisation growth at our hospitals
in Novosibirsk and Samara – the latter increased the number of deliveries by 37%
during the second year of its operation. Remarkable growth of in-patient treatments
was secured by the PMC and Samara hospitals.
DELIVERIES
IVF CYCLES
IN-PATIENT DAYS
OUT-PATIENT TREATMENTS
6,656
6,808
7,277 7,446
5,535
+8%
CAGR
2015–2019
16,806
16,636
18,004
+18%
CAGR
2015–2019
14,004
9,289
70,113
61,344
79,689
+14%
CAGR
2015–2019
47,917
53,142
1,527,425
1,388,995
1,176,630
1,745,133
1,618,277
+10%
CAGR
2015–2019
`15
`16
`17
`18
`19
`15
`16
`17
`18
`19
`15
`16
`17
`18
`19
`15
`16
`17
`18
`19
FINANCIAL KPI’s (RUB MLN)
Revenue
REVENUE
EBITDA AND EBITDA MARGIN
NET DEBT AND NET DEBT / EBITDA RATIO
EPS1 (RUB/GDR)2
14,937
13,755
16,160
+14%
CAGR
2015–2019
12,179
9,507
28%
2,675
30%
30%
28%
29%
4,165
4,197
4,635
3,670
+15%
CAGR
2015–2019
0.6x
0.4x
0.5x
0.7x
0.8х
3,530
2,950
1,680
1,640
2,065
21
33
28
36
35
+14%
CAGR
2015–2019
`15
`16
`17
`18
`19
`15
`16
`17
`18
`19
`15
`16
`17
`18
`19
`15
`16
`17
`18
`19
2
3
1 EPS change rate calculated by dividing rounded amounts for years
2 Basic and fully diluted earnings per share calculated as profit
2019 and 2018.
for the year attributable to owners of the Company divided by weighted
average number of ordinary shares in issue during the year.
// OVERVIEW ToC_Strong Investment Case
Strong
HEALTHCARE COMPANY
CASE
IN RUSSIA
Largest healthcare company in Russia
First and only publicly listed healthcare company in Russia –
gateway to an attractive market with solid growth potential
REVENUE (RUB MLN)
EBITDA (RUB MLN)
IVF CYCLES
16,160
+22%
CAGR
2012–2019
4,635
+15%
CAGR
2012–2019
18,004
+25%
CAGR
2012–2019
4,061
1,694
3,863
`12
`19
`12
`19
`12
`19
Consistently one of the highest
revenues among Russian healthcare
companies
Solid sustainable growth of key
financial and operational metrics
since IPO
Leader in IVF segment
in Russia
+8%
YEAR-ON-YEAR
INCREASE IN 2019
4,635
18,004
7,446
EBITDA IN 2019
IVF CYCLES IN 2019
DELIVERIES IN 2019
BEST-IN-CLASS NETWORK
ACROSS RUSSIA
• Deep understanding of the Russian private healthcare market
• Widespread medical network in Russia covering 27 cities1
CLEAR BALANCED GROWTH
STRATEGY
• 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 a growing range of other
medical services that demonstrate strong growth
• Combination of major greenfield hospital projects
with a wide network of clinics that provide core services
and benefit from economies of scale
• Ready to use blueprint for further expansion based
on competence and available resources
ATTRACTIVE MARKET
FUNDAMENTALS
• Low level of consolidation and saturation, specifically
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, perpetual medical licence, and participation
in the Mandatory Health Insurance programme
• High barriers to entry
AND YET THE STOCK REMAINS
UNDERVALUED VS EM PEERS
1 As of publication date
4
5
// OVERVIEW ToC_Nationwide Healthcare Network
Nationwide
CARE NETWORK
With hospitals and clinics in 25 regions of Russia1, we operate
the most widespread private network of healthcare facilities
in the country.
1
St Petersburg
Moscow 10
Tula 1
Ryazan 1
1
Voronezh
1 Yaroslavl
1 Kostroma
1 Vladimir
1 Nizhny
Novgorod
1 Kazan
1 Perm
1
Rostov on Don
1
Krasnodar
1
Volgograd
5 Samara
1 Ufa
1 Tyumen
Omsk 1
We help our
patients in
25
regions1
Novosibirsk 5
Barnaul 1
2
Krasnoyarsk
1
Novokuznetsk
Irkutsk
1
1 As of publication date
1
Vladivostok
7
// OVERVIEW ToC_Statements from the SEO
Statement from the
CEO
Dr Mark Kurtser // CEO
Photo “DNA Health”
WE HAVE DEMONSTRATED
STRONG
SUSTAINABLE
GROWTH
In 2019, we continued the sustainable
development of our business. We
demonstrated further growth of financial
and operational indicators, despite
the complicated demographic situation
in the country, as well as boosted
our ability to compete with both private
and public healthcare facilities.
Moreover, we continued to expand
our federal network of hospitals
and clinics across Russia, which
currently covers an unparalleled number
of regions in the market – 25 regions.
In the reporting year, we continued
to improve our financial performance that
aligns with the company’s positive
development trend since our IPO in 2012.
We increased our revenue by 8%
to RUB 16,160 mln, while EBITDA grew
10% year-on-year to RUB 4,635 mln.
Our financial performance was backed
by solid operating results. We had a good
performance of number of deliveries during
the year, representing a 2% year-on-year
increase, despite the 7.5% nationwide
decrease in deliveries. We have confirmed
our IVF leadership status in Russia,
as we increased the number of performed
cycles by 8% to 18,004 – an unrivalled
result in the market. We also increased
in-patient and out-patient treatments
by 14% and 8% year-on-year, respectively.
Since the founding of the business,
we have been systematically
and successfully following the regional
development strategy that enabled
us to create the largest and most extensive
medical network in Russia and to ensure
the sustainable growth of our business.
2019 was no exception, as we have
achieved a significant success
in expanding the network. In particular,
we opened a multi-disciplinary
hospital in the oil-producing capital
of Russia – Tyumen, which will allow
us to provide medical services not only
to the residents of this city, but also
to a wide range of patients in oil-producing
and gas-producing regions in the north
of Russia. By opening the hospital
in Tyumen – our sixth diversified hospital –
we became the company with the largest
number of hospitals in the Russian private
healthcare sector. We also carried out
a large-scale renovation of our first medical
centre, PMC, transforming it into
a multi-disciplinary hospital for all family
members. PMC also laid the foundation
for the rebranding of the company’s entire
group of hospitals. Additionally, we have
been continuously focused on expanding
our out-patient offering – we opened
clinics in four new cities: the first clinic
in the Russian Far East – in Vladivostok,
as well as two clinics in the south
of the country – in Krasnodar and
in the million-plus city of Rostov-on-Don
and the paediatric clinic in the Moscow
region (two of them have been opened
in early 2020). Thus, today we are
operating in 13 of the 15 million-plus cities
in Russia. Such large cities with solvent
demand for our medical services
are our target market. In total, at the end
of 2019, our largest network in Russia
included 40 medical facilities – 6 hospitals
and 34 clinics.
Throughout 2019, we also continued
the second construction phase
of the Lapino hospital in accordance
with the schedule. Lapino-2 hospital,
scheduled to open in 2020, will operate
in the fields of neurosurgery, cardiac
surgery, chemotherapy and a number
of other areas. It will also become
an important driver for the further
development of our medical operations
not limited to female health
and paediatrics. While obstetrics/
gynaecology and paediatrics remain
our key service areas. Other medical
services constituted 28% of the Group’s
total revenue in 2019. In the future,
we are considering the possibility
of further expansion of Lapino –
the construction of Lapino-3 – with
a focus on radiology to treat patients
with oncological issues.
The Group currently employs
over 7,700 people. These are highly
skilled professionals specially selected
both in Moscow and in the regions.
We are a responsible employer and
strive to provide competitive working
conditions and remuneration in order
to successfully retain talented
and experienced personnel. In addition,
we pay great attention to the education
and training of our medical staff
in order to maintain the state-of-art level
of care.
The Group envisions the principles
of sustainable development as one
of the core elements of its activities.
It is not only because we understand
the value of sustainable practices
for our stakeholders as an important
factor of compliance with best international
experience, but also because we aim
to improve working and living conditions
of our employees and communities
we impact. For that reason, we make
sure that all aspects of sustainable
development – social, environmental
and economic – are equally addressed
in our business values and long-term
strategy, as well as our everyday life.
In addition, we ensure transparent
communication with our stakeholders
and aim to receive a constructive
feedback in order to improve the quality
of our medical services and increase
the effectiveness of our interactions
with patients.
Our business continuously expands
and steadily demonstrates strong financial
and operational performance from year
to year, allowing us to consistently
pay dividends to our shareholders.
Dividend payments for 2019 will amount
to RUB 639 mln, or 23% of net profit
for the year. We remain the largest network
of private hospitals and clinics and the only
public company in the growing healthcare
market in Russia that retains a high
potential for further growth. In the reporting
year, we were able to successfully deliver
on such potential by significantly
strengthening our network.
I want to sincerely congratulate my
colleagues at MD Medical Group and all
shareholders on another successful year
for our business and would like to thank
them for their support and contribution
to this success. There are many more joint
victories ahead of us!
9
// OVERVIEW STRATEGY
3 new facilities
OPENED IN 2019
10
Trust02 ToC_Our Strategic Goals
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
RECRUIT AND RETAIN
THE BEST AND
MOST WELL-QUALIFIED
PERSONNEL
DELIVER VALUE
TO OUR SHAREHOLDERS
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 largest in Russia medical
network comprising 42 facilities
in 25 regions 1, we have a deep
understanding of the Russian market
and a strong track-record. We continue
to open new facilities in both existing
and new promising regions.
OUR ACHIEVEMENTS
IN 2019
In 2019, we opened and modernised
a number of medical institutions
across Russia, offering a diverse range
of high-quality medical services.
In particular, our new Tyumen hospital
brought some unique services
to the Tyumen Region, such as organ-
sparing surgeries using endovascular
technologies.
We also completed the reconstruction
and rebranding of the PMC, turning
it into a truly multi-disciplinary hospital
that offers a wide range of high-tech
services in a comfortable environment
for all family members.
In 2019, we continued to expand
our network in Russia. We opened
a multi-disciplinary hospital in Tyumen
and two new clinics, both in new
regions – Vladivostok and Krasnodar –
and continued to make progress
on the construction
of new clinics in Rostov-on-Don
and in the Moscow region. We also
continued work on the construction
of our Lapino-2 and St Petersburg
hospitals, scheduled for completion
in 2020 and in 2022, respectively.
While maintaining a sharp focus
on our current projects, we will be
further expanding our network to reach
out to even more patients.
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.
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.
28%
2 new regions
SHARE OF OTHER MEDICAL SERVICES
IN THE GROUP’S REVENUE FOR 2019
ADDED IN 2019
In the reporting year, we continued
to expand our offering and added
new services at both existing
and new medical facilities. As a result
of our continued efforts to expand
the services offering, in 2019
our revenue from Other medical
and Other non-medical services grew
by 1 p.p. year-on-year and accounted
for 31% of the Group’s total revenue.
In addition to opening a multi-disciplinary
hospital in Tyumen, we completed
renovation of the PMC and expanded
the range of services it offers.
In 2019, we continued to hire,
retain and train new additions
to our staff of more than 7,700
employees. In addition to the existing
facilities, our new Tyumen 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 2019, 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.
In the reporting year, we continued
to share the results of our success
with shareholders by paying dividends
which amounted to 23% from net profit
for the year.
12
13
1 as of publication date
// STRATEGY Unrivalled
GROWTH
In 2019, we opened 2 clinics and 1 hospital, as well as expanded and renovated
the PMC hospital. In addition, in 2020 the Group has already opened two other
clinics. Such continuous expansion enables us to deliver high-quality medical
services to a country-wide client base.
ROLL OUT OF SUCCESSFUL
BUSINESS MODEL
REGIONAL EXPANSION
Acquisition of out-patient
clinics
Acquisition of clinics in
Samara Region and Irkutsk
Successful IPO
of the Group
on the London
Stock Exchange
Opening of Lapino
hospital
Opening of a clinic
in Yaroslavl
Opening of the Group’s first
regional self-constructed
hospital in Ufa
Acquisition
of Avicenna Medical
Centre
in Novosibirsk
(1 hospital
and 3 clinics)
Opening of out-patient
clinic in Ryazan
Launch of construction
of a new in-patient wing
to expand hospital
in Novosibirsk
Acquisition of the Medica
Clinic in Novokuznetsk
Acquisition of ARTMedGroup
chain comprising five clinics
in Krasnoyarsk, Omsk,
Novosibirsk and Barnaul
Opening of a new clinic
in Kostroma
Opening of a new
Mother&Child
Khodynskoe Pole clinic
in Moscow
Launch of construction
of a new hospital
in Samara
Clinics Hospitals
8
2
18
4
20
4
I
I
L
A
T
P
S
O
H
T
S
R
F
R
U
O
F
O
G
N
N
E
P
O
I
1
Opening of a new clinic
in Vladimir
Opening of Samara
hospital
Opening of a new clinic
in Nizhny Novgorod
Expansion
of the Mother&Child
Yugo-Zapad clinic
Expansion
of the Mother& Child
Kostroma clinic
Start of construction
of the Lapino-2 hospital
Opening of a new clinic
Mother&Child Lefortovo
Opening of a new
clinic in Volgograd
Opening of a clinic
in Vladimir
Expansion
and modernisation
of the clinic
in St Petersburg
Opening of a new
in-patient wing
in Novosibirsk
Opening of a new clinic
in Voronezh
Opening of a new
clinic in Tula
Opening of a new clinic
in Tyumen
Opening of a new
clinic in Kazan
Signing
of a Memorandum
of Understanding
with the Tyumen
Region
government
Opening
of a cardiology
department
at Lapino hospital
Opening of a new
out-patient
medical centre
in the Moscow
Region
27
30
4
4
Opening
of a new clinic
in Vladivostok
Opening
of a new
multi-disciplinary
hospital
in Tyumen
Opening
of a new clinic
in Krasnodar
Opening
of a new clinic
in Rostov-on-Don
Completion
of renovation
of PMC and start
of rebranding
Group’s hospitals
Opening
of a paediatric
clinic
in the Moscow
region
(Mother&Child
Novaya Riga)
Lapino-2 Hospital
Mother&Child
Vladikavkaz
clinic
35
5
34
6
2006
2012
2013–2014
2015
2016
2017
2018
2019
2020
37
7
15
// STRATEGY
ToC_Wide Range of High-tech Medical Services
DELIVERING HIGH-QUALITY MEDICAL SERVICES
THROUGHOUT RUSSIA
MDMG specialises in providing medical assistance to a growing
number of Russian families, focusing on the diverse needs of its
patient demographics. The company places its priority on high-
quality personalised care that achieves equally high results.
MD Medical Group is a leading private
healthcare provider in Russia. We started
by providing specialised healthcare
for women and children and soon earned
a reputation as a sector leader in deliveries
and IVF cycles.
To respond to an increasing demand
for additional medical services outside
OBGYN and paediatrics, we started gradually
introducing new services, while making sure
that we could deliver in line with our high
standards.
Today, we have facilities all over Russia that
offer a full range of healthcare services
for our patients, covering their full life cycle.
By starting with pregnancy care (preceded
by fertility and IVF treatment if needed),
we later expanded the number of delivery
options at one of our six hospitals.
We also provide a wide variety of treatments
for babies from the first minutes of their
lives (including complex cardiologic
procedures). Our paediatricians take care
of children until they are 18 years old,
providing healthcare services in dozens
of hospitals and clinics. MDMG’s offering
for adult patients includes a wide range
of services outside of reproductive care,
such as surgeries and cancer treatment.
Our key objective is to provide for the
patients’ comfort and offer a premium level
of service.
In 2019, we opened a hospital in Tyumen
and clinics across the country that aim
to specifically prioritise medical services
in accordance with the demand patterns
of the respective locations.
INNOVATION
SURGERY
Medical Genetic Center
Cardiology
Stem Cell Bank
Fetal surgery
Modern methods for cancer
diagnosis
Traumatology and orthopedics
general surgery
Urology
Neurosurgery
Oncology
Plastic surgery
DIAGNOSTICS
Radiation diagnostics
Ultrasound diagnostics
Radiology
Laboratory diagnostics
OTHER MEDICAL SERVICES
Deliveries
IVF
Pregnancy
management
Operative
gynaecology
Miscarriage
treatment
Adult Clinic
Preimplantation
genetic diagnosis
Paediatric’s clinic
Surgical treatment
of infertility
Children's
intensive care
Department
of older
children
Ambulance
at home
16
17
// STRATEGY Investing in
EXPANSION
15,000 SQ M
TOTAL AREA OF THE NEW
TYUMEN HOSPITAL
18
Growth03 Expanding a
Expanding a
LEADING
LEADING
NATIONWIDE NETWORK
NATIONWIDE NETWORK
HOSPITALS
CLINICS
Owned
In progress
Owned
Rented
Moscow
Regions
42,000 m2
Lapino Hospital
397 m2
M&C Novogereevo
18,500 m2
Lapino-2 Hospital
117 m2
M&C Novaya Riga
range of other medical services for all family
members, including surgery, orthopaedics,
cardiology, plastic surgery, laboratory
diagnostics, and more. The Tyumen hospital
is equipped with 10 high-tech operating
theatres, including an integrated facility
that allows for remote consultations
with doctors at other MDMG facilities
to take place, as well as state-of-the-art
diagnostics equipment.
The Vladivostok clinic is able to carry out
up to 500 IVF cycles, including
under the Mandatory Health Insurance
(MHI) programme, and more than
20,000 out-patient treatments per year.
The new Krasnodar clinic has annual
capacities of up to 1,000 minor
gynaecological operations, 500 IVF cycles,
and more than 26,000 out-patient
treatments per year.
Throughout the reporting year, we
kick-started the operations of two new
clinics in Krasnodar and Vladivostok.
2020 started with the opening of two new
clinics in Rostov-on-Don and the Moscow
region.
358 m2
Vladivostok
33,000 m2
Ufa Hospital
442 m2
Rostov-on-Don
13,000 m2
St Petersburg
Hospital
15,000 m2
Tyumen Hospital
1,400 m2
M&C Ryazan
2019 became another year for the successful
implementation of our development strategy
across Russia. Thanks to our efforts
and investments, we are now managing
42 modern healthcare facilities, including
6 hospitals and 36 out-patient clinics.
The key benchmark in MDMG’s 2019
development was the opening of a new
multi-disciplinary hospital in Tyumen in April.
It demonstrates the Group’s continued
commitment to building multi-functional
medical centres based on its standard
design model in the Russian regions.
The new 15,000 sq m hospital offers both
MDMG’s core services as well as a wide
2,846 m2
ARTMedGroup
2
Novosibisk Hospital
600 m2
M&C Irkutsk
209 m2
M&C Kostroma
5 clinics
3 clinics
4 clinics
770 m2
M&C Kuntsevo
27,600 m2
MD Group Clinical Hospital
(formerly, Perinatal Medical Centre)
2,048 m2
M&C Savelovskaya
801 m2
M&C Yugo-Zapad
465 m2
M&C
Khodynskoe Pole
392 m2
M&C Lefortovo
354 m2
M&C Vladimir
800 m2
M&C Novokuznetsk
2,755 m2
Avicenna clinics
893 m2
M&C St Petersburg
380 m2
343 m2
M&C Voronezh
600 m2
M&C Nizhny Novgorod
800 m2
M&C Perm
15,000 m2
Samara Hospital
(IDK Hospital)
3,860 m2
IDK Medical Company
822 m2
M&C Yaroslavl
360 m2
M&C Krasnodar
677 m2
401 m2
20
21
Odintsovo142 m2// INVESTING IN STRATEGIC EXPANSION ToC_Hospitals in Focus
In 2019, we continued expanding our leading chain
of multi-disciplinary hospitals in Russia.
MD GROUP CLINICAL HOSPITAL
(FORMERLY PERINATAL MEDICAL CENTRE)
27,600 M2
LAPINO HOSPITAL
LAPINO-2 HOSPITAL
42,000 M2
18,500 M2
WHEN OPENING A HOSPITAL, WE FOCUS
ON MAJOR CITIES WITH STRONG DEMAND
FOR OUR HIGH-TECH MEDICAL SERVICES.
Dr Mark Kurtser
CEO
#1
HEALTHCARE PROVIDER IN TERMS
OF THE NUMBER OF HOSPITALS
IN RUSSIA
TYUMEN HOSPITAL
15,000 M2
SAMARA HOSPITAL
UFA HOSPITAL
15,000 M2
33,000 M2
NOVOSIBIRSK
HOSPITAL
10,260 M2
22
23
// INVESTING IN STRATEGIC EXPANSION LAPINO HOSPITAL
5.2
RUB BLN
CAPEX
UFA HOSPITAL
4.4
RUB BLN
CAPEX
Lapino, our largest
hospital, is located near
Moscow. It provides
patients with high quality
services and great comfort.
Located in the countryside
and surrounded by green
space, this 191-bed hospital
is capable of providing
639,540 out-patient
treatments and 3,000
deliveries per year.
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.
The 42,000 square-metre hospital offers
a wide range of services in the areas
of obstetrics and gynaecology, IVF,
paediatrics, as well as diagnostics,
urology, surgery, trauma
and rehabilitation not only for mothers
and their children, but for everyone.
In 2019, 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.
Ufa hospital 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.
ANNUAL CAPACITY OF LAPINO HOSPITAL:
ANNUAL CAPACITY OF UFA HOSPITAL:
191
BEDS
1,000
IVF
1,2671
FTE 2
28,470
IN-PATIENT
DAYS
3,000
DELIVERIES
639,540
OUT-PATIENT
TREATMENTS
185
BEDS
1,100
IVF
7521
FTE 2
30,295
IN-PATIENT
DAYS
2,000
DELIVERIES
290,800
OUT-PATIENT
TREATMENTS
1 including administrative and service staff
2 FTE – actual full-time equivalent as of 31 December 2019
24
1 including administrative and service staff
2 FTE – actual full-time equivalent as of 31 December 2019
25
// INVESTING IN STRATEGIC EXPANSION NOVOSIBIRSK HOSPITAL
1.2
RUB BLN
CAPEX
SAMARA HOSPITAL
3.2
RUB BLN
CAPEX
Since the acquisition
of Avicenna, the largest private
hospital 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 Novosibirsk
hospital are obstetrics and gynaecology,
surgery, urology and ophthalmology.
The hospital also offers out-patient
and diagnostics services in nearly all
therapeutic areas, including those
not currently available in the city
or the region.
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.
The hospital is equipped with 8 high-
tech operating rooms, one of which
is integrated and allows for remote
consultation with doctors from other
hospitals of the Company.
ANNUAL CAPACITY OF MOTHER&CHILD NOVOSIBIRSK:
ANNUAL CAPACITY OF SAMARA HOSPITAL:
93
BEDS
1,800
IVF
764 1
FTE 2
22,630
IN-PATIENT
DAYS
1,000
DELIVERIES
228,900
OUT-PATIENT
TREATMENTS
164
BEDS
1,200
IVF
747 1
FTE 2
30,000
IN-PATIENT
DAYS
2,500
DELIVERIES
220,000
OUT-PATIENT
TREATMENTS
1 including administrative and service staff
2 FTE – actual full-time equivalent as of 31 December 2019
26
1 including administrative and service staff
2 FTE – actual full-time equivalent as of 31 December 2019
27
// INVESTING IN STRATEGIC EXPANSION MD Group
HOSPITAL
formerly,
Perinatal Medical Centre
ANNUAL CAPACITY OF MD GROUP CLINICAL HOSPITAL:
261
BEDS
34,000
IN-PATIENT
DAYS
3,500
DELIVERIES
295,000
OUT-PATIENT
TREATMENTS
1,014 1
3,000
FTE 2
IVF
3,250
SURGICAL
OPERATIONS
600
RUB MLN
INVESTMENT IN RENOVATION
In 2019, MDMG completed
renovating the PMC –
the first private maternity
hospital in Russia. Investment
in the project amounted
to around RUB 600 million.
Previously, the hospital specialised
in the Group’s core services: childbirth,
gynaecology, paediatrics and IVF. Today,
as a result of a large-scale revamp,
5 new departments have been added
to expand the offering of the hospital
rebranded as MD Group Clinical
Hospital:
• General surgery department
• Urology department
• Traumatology department
• Cardiology department
• Department of endovascular x-ray
diagnostics and treatment
The capacity of the surgical department
increased to 3,250 operations.
It will operate both on a commercial
basis and under the Mandatory Health
Insurance (MHI) programme.
The hospital also opened a new
IVF department with updated
state-of-the-art equipment capable
of taking the quality of medical services
to the next level. The capacity of the new
department is 1,000 IVF cycles per year.
It will operate only on a commercial
basis.
Having become multifunctional,
the modernised PMC, which provides
patients with a full range of highly
professional medical services
in one place, becomes the Company’s
first hospital carrying the name
“MD Group Clinical Hospital” as part
of the Company’s rebranding campaign.
1 including administrative and service staff
2 FTE – actual full-time equivalent as of 31 December 2019
29
// INVESTING IN STRATEGIC EXPANSION Mother&Child
HOSPITAL
4.2
RUB BLN
CAPEX
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.
Surgical building Lapino-2 will include:
• Diagnostic department
• In-patient department
• Hemodialysis department
• 4 operating theatres for planned
surgeries
• 2 operating theatres for emergency
sergeries
• Intensive care unit with 13 beds
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
ANNUAL CAPACITY OF LAPINO-2 HOSPITAL:
88
BEDS
200,000
OUT-PATIENT
TREATMENTS
380 1
FTE 2
15,000
SURGICAL
OPERATIONS
27,000
IN-PATIENT
DAYS
1 including administrative and service staff
2 Planning FTE
31
// INVESTING IN STRATEGIC EXPANSION
Mother&Child
Mother&Child
HOSPITAL
HOSPITAL
2.6
3.2
RUB BLN
RUB BLN
CAPEX
CAPEX
The highlight of 2019 was
the opening of a new
multi-disciplinary hospital
in Tyumen in April.
By opening our sixth hospital, we have
expanded our footprint to one
of Russia’s most developed regions,
where our clinic operated since 2017.
The hospital is capable of carrying out
unique organ-sparing surgeries
using endovascular technologies
and will be developing its capacity
in foetal medicine, including foetal
surgery.
WITH THE OPENING OF THIS NEW HOSPITAL,
WE ARE EXPANDING THE USE OF MODERN MEDICAL
TECHNOLOGIES, CREATING NEW JOBS,
CONTRIBUTING TO IMPROVING THE QUALITY
OF LIFE AND BUILDING THE FOUNDATION
FOR OUR FUTURE GROWTH.
Dr Mark Kurtser
CEO
ANNUAL CAPACITY OF TYUMEN HOSPITAL:
164
164
BEDS
BEDS
1,200
1,200
IVF
IVF
3841
384
FTE2
FTE
220,000
OUT-PATIENT
TREATMENTS
2,500
2,500
DELIVERIES
DELIVERIES
8,500
8,500
SURGICAL
SURGICAL
OPERATIONS
OPERATIONS
1 including administrative and service staff
2 FTE – actual full-time equivalent as of 31 December 2019
33
// INVESTING IN STRATEGIC EXPANSION ToC Interview
Could you tell us a bit about
how your career led you to
MD Medical Group?
Back in 2017, I was the Deputy Chief Doctor
of the local perinatal centre in Tyumen
and had more than 10 years of experience
as an obstetrician-gynaecologist. At that time,
I was offered the position of Chief Doctor
at a newly opening MDMG hospital here
in the city. As such, my work with the Tyumen
hospital began with the laying of the first
stone.
I took an active role in getting the project
off the ground, from procuring medical
equipment to adjusting the project
design where necessary – as you know,
the Tyumen hospital is the ‘younger brother’
of our hospital in Samara and has a similar
structure.
While construction was going on, I worked
at the Lapino hospital, where I immersed
myself in the Group’s corporate culture
and philosophy and remotely supervised
the project in Tyumen.
As Chief Doctor, what tasks do you set
for yourself?
My main task is to introduce the highest level
of medical technologies, quality of care
and comfort across all MD Medical Group
locations in my home town.
I want to make world-class medicine available
to residents of Tyumen and the surrounding
area, so that they can receive state-of-the-art
medical care locally, without going to Moscow
or abroad.
Who uses the hospital, and what
regions do they come from?
Do you have entire families coming
in for medical care?
We have patients from Tyumen
and the Tyumen region, as well as patients
from the neighbouring regions.
We perform a number of rare and unique
operations here, and we are located closer
to neighbouring regions than Moscow,
so people often come to us.
As for families, yes, of course. It’s often
the case that someone gives birth here, they
return home satisfied with the services
we provided, they then find out that we work
in a wide range of areas and proceed
to recommend us to other family members.
Or vice versa: someone might come
34
in for a surgery, and later on they will choose
us when giving birth.
That is to say, patients regard
the hospital as a truly multifunctional
institution?
Yes, we’ve been able to successfully establish
this reputation. Since the beginning back
in 2017, we’ve been running a reproductive
clinic here in Tyumen – this is a standard
practice for the Group when entering a new
region, when we start with the opening
of an out-patient unit.
However, the new hospital is not only
targeted at IVF and gynaecology. Thanks
to the successful efforts of our marketing
department and word-of-mouth, patients
know that we perform complex surgical
operations and provide many other services
here as well.
Can you expand on some of these
services?
We have a good flow of surgical patients:
we carry out both planned and emergency
operations, and patients who are brought
to us by ambulance are brought from across
the city.
Thanks to a well-established endovascular
care service, we successfully treat patients
with acute coronary syndrome.
We work with patients who have a myocardial
infarction, thanks to the modern equipment
we have installed in our angiographic
operating rooms.
But let’s not forget the principal service
provided by the Group – MDMG is the leader
in the field of IVF in Russia. And here,
in Tyumen, we have reached a 50% share
of the IVF market. At the same time,
pregnancy rates are very high, at 42%.
What is the advantage of this particular
MDMG hospital versus other local
hospitals?
First and foremost, it is the talent of the
doctors, because we always focus on people
first. We employ a combination of local
doctors and MDMG doctors who have moved
here from other cities.
What’s more, the hospital is fitted out
with the latest technology – much
of the equipment here has no equivalent
within the region.
In addition, we have the experience
amassed by the Group over the course
of more than 10 years in the industry.
For example, we were the first
in the region to conduct early diagnosis
of cervical cancer using liquid
oncocytology, which increases
the probability of early detection
by 30%.
And finally, there is our well-recognised
patient comfort, which is a priority
across all of the Group’s facilities.
How have you built your
relationship with the regional
health authorities?
We have a supportive and constructive
relationship with health authorities.
We provide a wide range of services
under the Mandatory Health Insurance
(MHI) program – this increases the flow
of patients to the hospital and reduces
the time that patients wait for their turn.
In other words, we reduce the strain
on other hospitals in the city and region,
which improves the regional healthcare
statistics.
OPENED IN APRIL 2019,
THE HOSPITAL IN TYUMEN
IS THE GROUP’S SIXTH
HOSPITAL
Tatyana Erbaktanova // PhD, Chief Doctor of Tyumen hospital
BIOGRAPHY
EDUCATION
March 2019 – Present – Chief Doctor and Obstetrician
Gynaecologist at Mother&Child Tyumen hospital
2017–2019 – Obstetrician Gynaecologist at Mother&Child
Lapino hospital
2016–2017 – Deputy Chief Doctor at Tyumen Perinatal Centre
2015–2017 – Assistant and later Associate Professor in OBGYN
at Tyumen State Medical University
2011–2016 – Head of Obstetric Pathologic Pregnancy Department
at Tyumen Perinatal Centre
2005–2011 – Obstetrician Gynaecologist at Obstetric Department
at Tyumen Perinatal Centre
2000–2001 – Paramedic at a first-aid station in Tyumen
2008 – Received a degree in General Medicine from Pirogov
Medical University
2016 – Received an MBA degree from Stockholm School
of Economics
2003 – Graduated from Tyumen State Medical Academy
2003–2005 – Residency in OBGYN at Tyumen State Medical
Academy
2010–2012 – Residency in Healthcare Management and
Public Healthcare at Tyumen State Medical Academy
35
// INVESTING IN STRATEGIC EXPANSION IT’S A UNIQUE
ADVANTAGE,
A HUGE PLUS,
THAT WE CAN CALL
ON OTHER MDMG
INSTITUTIONS
AND REQUEST HELP
AT ANY TIME.
As I mentioned earlier, we also bring
the Group’s in-house know-how
to the local market, thus raising
the standard of healthcare in the region.
We are committed to performing
minimally invasive and organ-preserving
operations, which is not a possibility
at the most of the hospitals in the region.
We also stage hold a number
of theoretical and practical conferences
at the hospital. With our advanced
equipment, we’re able to broadcast
live video from the operating room
to the conference room, where
doctors from other clinics can discuss
and learn.
36
It sounds like you share
your experience with other
practitioners and carry out
educational activities.
Do you do this in partnership
with other institutions
in the Group?
Indeed, it’s a key principle of the Group’s
work! It’s a unique advantage, a huge
plus, that we can call on other MDMG
institutions and request help at any time.
Our colleagues from other cities helped
us launch various departments.
For example, we consult with Avicenna
for surgery. And our colleagues
from Samara helped us start urology
and paediatrics units, which was very
helpful, given that our hospital structures
are so similar.
In complex medical cases,
our colleagues sometimes come
to Tyumen to perform operations.
For example, we performed a complex
operation when the placenta grew
into the uterus – an endovascular
surgeon and an anaesthesiologist
from Lapino came here to Tyumen.
Everything went well and our doctors
received an invaluable experience.
We have since successfully completed
a second, very similar operation
on our own.
We also have colleagues come
to us to conduct master classes –
for example, the head of the Avicenna
Surgery Department has twice held
master classes here on the use
of minimally invasive technologies.
And the Ufa hospital has a Stem Cell
Bank where we send our patients’
stem cells.
It has been a successful start. The hospital
opened on time, and within a few
months we had already established
a good name for ourselves. People know
about us and want to be treated here.
They come here not only for childbirth
but for the other services as well,
including diagnostics, traumatology
and surgery. Our patients appreciate
that they can access a wide range
of high-quality services within a single
medical institution.
The hospital opened
in April. How would you sum up
the results of the year so far?
We successfully work within
the Mandatory Health Insurance
system and cooperate with a number
of companies, particularly in the oil
and gas sector, to develop insurance
products.
We have already completed a number
of complex and unique surgeries
in the region and are gradually changing
people’s approach to medicine
in the region. In particular,
we are reinforcing the habit of attending
annual preventive medical examinations,
or so-called check-ups.
To sum up, we have successfully
launched the hospital and we’re focused
on achieving further dynamic growth.
37
// INVESTING IN STRATEGIC EXPANSION Market
IN RUSSIA
STATE ECONOMY OVERVIEW
• In 2019, in Russia, softer-than-expected investment
and trade, together with a continuation
of international economic sanctions, resulted
in a GDP growth slowdown to an estimated 1.2% 1.
However, the growth rate of the Russian economy
later increased in Q3.
• An increase was registered in investment activity,
among other things, on the back of a rise in budget
capital expenditure 2. Russia also became one
of Europe’s top performing stock markets in 2019,
with Moscow Exchange’s main index rising 29%
year-on-year in 2019.
• On 13 December 2019, the Bank of Russia decided
to cut the key rate by 25 bp to 6.25% per annum 2,
benefiting many private enterprises.
• In the second half of 2019, fiscal policy started
to encourage economic growth on the back
of, among other things, the implementation
of national projects planned by the Government.
National projects – which are partly funded
by the 2019 VAT hike and include investment
in infrastructure and human capital – are expected
to buoy growth over the forecast horizon 2.
• Russia’s consumer confidence index rose in Q3
of 2019, compared to the previous period, due
to an improvement in expectations over the next 12
months regarding the economy and financial
situation. Also, consumers felt less pessimistic
about making large purchases 3.
ATTRACTIVE MACROECONOMIC FUNDAMENTALS
GROWING RUSSIAN ECONOMY…
REAL GDP GROWTH, %
2.5
1.8
1.7
2.0
1.9
1.2
0.3
(2.0)
`15
`16
`17
`18
`19E
`20E
`21E
`22E
…WITH RECORD LOW INFLATION RATES…
YEAR-END CPI, %
12.9
5.4
4.3
4.2
4.4
4.5
2.5
3.0
`15
`16
`17
`18
`19E
`20E
`21E
`22E
…RESULTS IN HIGHER HOUSEHOLD DISPOSABLE REAL INCOME.
HOUSEHOLD DISPOSABLE REAL INCOME GROUTH, %
1.8
1.8
1.9
0.8
0.1
(0.5)
(2.4)
`15
(4.5)
`16
`17
`18
`19E
`20E
`21E
`22E
1 «Global Economic Prospects: Slow Growth, Policy Challenges», report
by The World Bank, January 2020
3 Trading Economic (www.tradingeconomics.com/russia/
2 The Central Bank of the Russian Federation, press release, December 2019
consumer-confidence)
38
39
// INVESTING IN STRATEGIC EXPANSION PRIVATE HEALTHCARE SECTOR
KEY SECTOR TRENDS:
• ATTRACTIVE MACROECONOMIC FUNDAMENTALS
• INCREASING HEALTHCARE EXPENDITURES PER CAPITA
• DECREASING SCOPE AND AVAILABILITY OF STATE –
FUNDED MEDICAL SERVICES
• AGING POPULATION AND A LONGER LIFE EXPECTANCY
• REGULATOR’S SUPPORT AND STATE INITIATIVES
• HIGHLY FRAGMENTED PRIVATE HEALTHCARE MARKET
WITH CONSOLIDATION POTENTIAL
• Healthcare services are among
the top four service groups
with the highest consumption volume
in Russia. In addition, Russian
consumers have increased
their consumption of sports
and wellness services by 52%
since 2012, which demonstrates
the growing health consciousness
trend that the healthcare sector
can benefit from in the future 1.
Almost half of Russian patients now
use private healthcare services.
In 73% of those cases patients pay
for care out-of-pocket, with patients’
spending on medical services growing
every year 1.
1 «Paid Services Market in Russia», report by Federal State Statistic Service, May 2019
2 Source: “Paid Services Market in Russia” report by Federal State Statistic Service
40
• 8.6% of surveyed 2 patients turned
to private OBGYN professionals 2, yet
almost 70% of women see
an obstetrician or a gynaecologist
on a yearly basis or more frequently 3 –
a sign of unrealised market potential
for MDMG’s core service offering.
• Only 8.1% of patients across
the country are dissatisfied
with the quality of private healthcare
services, yet 24.4% of patients
have notable complaints about
public healthcare providers 4.
The statistic illustrates that patients’
perception of private medicine
is overall positive, which can support
the sector’s future expansion.
• The government’s initiatives are also
supportive of the private medicine
sector. Among beneficial government
initiatives is the state assignment
for the provision of high-tech medical
care with a RUB 2.5 billion budget
for private providers including MDMG.
In addition, it is worth noting that
The Global Competitiveness Report
states that Russia has improved
its general Innovation capability pillar
by 2.2 points thanks to increased
quality of its research institutions
and constant R&D expenditure
(1.1% of GDP) 5.
• The President has also ordered
to improve the demographic situation
in the country by stimulating birth rate
via monetary incentives:
• He suggested to expand
the “Maternity capital” programme
(monetary compensation
of childcare-related expenses)
to include firstborn children
(formerly, it only covered families
with two or more children);
• Welfare benefits will also
be paid for children aged
three to seven in low-income
families, and free school meals
will be provided for the first
four years of school.
• Such incentives are expected to have
a positive influence on the number
of births in Russia in the next years,
resulting in higher demand
for obstetric and paediatric care.
• The private healthcare service market
in Russia remains highly fragmented,
yet MDMG’s market share keeps
growing, as the Company continues
to expand its national footprint
and service offering.
1 “RBC Market Research» («Medical services:
survey of Russian consumers 2019»), survey
by RBC, 2019
2 «Paid Services Market in Russia», report
by Federal State Statistic Service, May 2019
3 «Health care in Russia – Statistics and Facts»,
report by Statista, January 2020
4 «Selective monitoring of the state of public
health», survey by Federal State Statistic Service,
January 2020
5 “The Global Competitiveness Report”,
report by World Economic Forum, 2019
41
// INVESTING IN STRATEGIC EXPANSION Continued
PERFORMANCE
10%
GROWTH IN EBITDA IN 2019
In 2019, we strengthened and expanded our network throughout
Russia, achieved significant growth in operating performance,
and as a result delivered record revenue in the history
of the Group.
42
Care04 TOC_Operational Review
DELIVERIES
In 2019, the number of deliveries grew 2% year-on-year to 7,446, despite challenging
demographics in Russia and 7.5% year-on-year decline in deliveries across the country.
WEATHERING
THE DEMOGRAPHICS STORM
SETTING A STANDARD
IN THE MARKET
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 Novosibirsk
and Samara, the number of deliveries
at the facilities in 2019 grew 24%
and 37% year-on-year, respectively.
• Avicenna hospital in Novosibirsk has
been successfully implementing
a multidisciplinary leadership model
focused on service diversification –
58% of its 2019 revenue came
from surgeries and laboratory
examinations.
We 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 to also
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” service in our luxury
in-hospital apartments.
WIDE CHOICE OF DELIVERY
OPTIONS
We 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-like 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.
WE GREW OUR DELIVERIES IN 2019
THANKS TO THE FURTHER IMPROVEMENTS
IN THE PERFORMANCE OF OUR EXPANDING
REGIONAL HOSPITAL CHAIN.
7,446
THE NUMBER
OF DELIVERIES IN 2019
DELIVERIES
IVF
IN-PATIENT
DAYS
OUT-PATIENT
TREATMENTS
44
45
// CONTINUED STRONG PERFORMANCE
IVF
IN-PATIENT DAYS
In 2019, the total number of IVF cycles increased by 8% year-on-year
to 18,004.
In 2019, the total number of in-patient days increased by 14% year-on-year to 79,689
which made up 19% of the Group’s revenue for the year.
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 children 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.
As a result, MDMG remains the number
one IVF player in Russia and covers
more regions than any other private
healthcare player in the country.
Total like-for-like IVF cycles increased
by 3% year-on-year to 17,073.
The share of cycles carried out
under the Mandatory Health Insurance
(MHI) programme amounted to 54%
in 2019.
Revenue from IVF grew 10% year-
on-year to RUB 3,843 mln, or 24%
of the Group’s total revenue.
MHI services accounted for 36%
of revenue from IVF, up 4 p.p.
year-on-year.
The average check for commercial
IVF cycles increased by 5% year-on-
year to RUB 300 ths, while the average
check for IVF cycles under MHI
increased by 5% year-on-year
to RUB 140 ths.
18,004
THE NUMBER
OF IVF CYCLES
CARRIED OUT
IN 2019
OBGYN
• Total number of OBGYN in-patient
days slightly decreased by 3%
year-on-year to 22,945.
• However, revenue for the division
increased by 7% year-on-year.
• Division accounted for 7%
of the total revenue of the Group
for 2019.
• Drivers of growth were PMC
(rebranded as MD Group Clinical
Hospital) and the hospitals
in Samara and Tyumen.
PAEDIATRICS
• Total number of paediatrics in-patient
days increased by 12% year-on-year
to 23,038.
• Revenue for the division increased
by 4.5% year-on-year.
• Division accounted for 3%
of the total revenue of the Group
for 2019.
• Drivers of growth were regional
hospitals.
OTHER MEDICAL SERVICES
• The total number of other medical
in-patient days grew significantly
by 30% year-on-year to 33,706.
• Revenue from other in-patient
medical days increased by 37%
year-on-year.
• Division accounted for 9%
of the total revenue of the Group
for 2019.
• Lapino continued ramping up
departments of interventional
cardiology and cardiovascular
surgery, traumatology and therapy.
• MD Medical hospital’s general surgery
department has demonstrated
notable growth.
• Further advances in reaching design
capacity at our Ufa hospital were
driven by improvements in surgery
and oncology.
• Novosibirsk hospital saw
improvements in traumatology,
cardiology, urology and oncology.
• Samara demonstrated strong
performance in cardiology,
plastic surgery, therapy, oncology
and traumatology.
OUT-PATIENT TREATMENTS
In 2019, the total number of out-patient treatments increased by 8% year-on-year to 1,745,133
which made up 31% of the Group’s revenue for the year.
OBGYN
PAEDIATRICS
OTHER MEDICAL SERVICES
• Total number of OBGYN out-patient
treatments increased by 5% year-
on-year to 585,557.
• Total number of paediatrics out-
• The total number of other out-patient
patient treatments increased by 6%
to 455,835 treatments.
treatments increased by 11%
year-on-year to 703,741.
• Revenue for the division increased
• Revenue for the division increased
• Revenue for the division increased
by 8% year-on-year.
by 8% year-on-year.
by 7% year-on-year.
• Division accounted for 12%
• Division accounted for 9% of the total
• Division accounted for 10%
of the total revenue.
• Drivers of growth were regional
hospitals.
revenue.
• Key growth triggers were performance
of Lapino and our regional hospitals.
14%
GROWTH OF IN-PATIENT DAYS IN 2019
of the total revenue.
• The largest share in other medical
out-patient growth was related
to the 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.
46
47
// CONTINUED STRONG PERFORMANCE
Corporate
RESPONSIBILITY
7,700
NUMBER OF OUR EMPLOYEES
48
VALUE05 ToC_Our People
MDMG would not be able to achieve the status of the market
leader without the exceptionally competent professionals who work
at the Company. By continuously improving their expertise inside
and outside our facilities, MDMG employees are driving the Company
to reach new heights year after year.
PERSONNEL FIGURES (AS OF 31 DECEMBER 2019)
TOTAL NUMBER OF EMPLOYEES
TOTAL NUMBER OF DOCTORS
FTE
Headcount
6,346
5,673
5,807
5,254
6,801
6,302
7,752
7,349
6,842
7,153
FTE
Headcount
2,378
2,062
1,792
1,575
2,746
2,521
2,092
1,897
2,849
2,141
At the centre of our continued growth
and strengthening of our market leadership
are our people. Our highly qualified
and talented personnel, from doctors
to the management team, are truly committed
to securing the long-term success
of our business. In return, we provide our staff
with a comfortable and supportive working
environment, competitive wages and social
packages, as well as broad possibilities
for further professional growth. Following
employers’ best practices is particularly
important for retaining experienced
and skilled medical professionals at a time
when the skills base of Russia’s labour force
is declining. Not to mention that our patients’
satisfaction with our services is also
dependent on our employees’ satisfaction
with their work environment.
PERSONNEL
In 2019, 16 people completed their
studies in residency within the framework
of the project
• 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:
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
• Webinars, featuring online training –
in 2019, MDMG doctors carried out
16 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 forums,
• Selection of the most talented students
conferences, and exhibitions
for education in residence at our facilities.
For this purpose, since 2015 we have
implemented a special project.
• Training centre, a system of improving soft
skills and knowledge acquisition across
different areas
`15
`16
`17
`18
`19
`15
`16
`17
`18
`19
EMPLOYEES
PERSONNEL STRUCTURE
DOCTORS BY SPECIALITY
24 %
30 %
37 %
7,752
7,752
2,141
60 %
16 %
12 %
12 %
76 %
33 %
Full-timer
Part-timer
5,910
1,842
Doctors
Other medical staff
Other staff
2,849
2,563
2,340
Obstetricians
Pediatricians
Reproductologists
Other doctors
337
256
256
1,292
DOCTORS QUALIFICATION
PAYROLL STRUCTURE
4 %
616
96 %
24 %
26 %
50 %
PhD
Professors
589
27
Doctors
Other medical staff
Other staff
50
51
// CORPORATE SOCIAL RESPONSIBILITY ToC_Corporate Social Responsibility
Our focus on caring expands far beyond daily business operations of the clinics
and hospitals. As a responsible corporate citizen, the Group aims to regularly contribute
to the communities of medical professionals, local patients and people in need
by utilizing its resources, time and expertise.
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 often bring
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.
KEY CSR ACTIVITIES IN 2019
EDUCATIONAL TOUR
IN PERM CLINIC
MDMG organised an educational tour
for high school students of Solikamsk,
Perm Krai, who demonstrated
their achievements in biology. The head
physician of the clinic gave the students
a tour of the clinic. During the tour,
the reproductologist gave a lecture
on IVF and causes of infertility, while
the clinic’s embryologist conducted
a virtual tour of the laboratory and spoke
about the embryological stage of IVF.
During the event, the students also
learned about future employment
opportunities in the healthcare sector.
OTHER EDUCATIONAL INITIATIVES
• “Local injection therapy of pain
syndromes” workshop for local
trauma orthopedists, also
broadcasted online
• Lecture on medication against female
genital diseases for obstetrician-
gynaecologists, in partnership
with Besis Healthcare
• Lecture on surgery for local surgeons,
broadcasted as a part of “University
Clinic” conference from an integrated
operating room OR-1.
The new Vladivostok clinic also
participated in a number of open days
and conferences, including “Russia
Pacific – the territory of health”
conference and “Export of tourism
services of the Primorsky Krai” forum.
Hospital in Tyumen hosted a number
of educational events for medical
students of the Tyumen State Medical
University specialising in dentistry
and obstetrics and gynaecology.
In addition, the hospital organised:
ANNUAL “WISH TREE” NEW YEAR
CHARITY EVENTS IN MDMG
In December 2019, MD Group Clinical
Hospital employees organised a charity
event “Wish tree” by purchasing gifts
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.
and books for three children’s shelters
and kids from troubled families.
They also installed a widescreen
TV for children of the shelter to watch
educational shows and cartoons.
Samara employees and Voronezh
staff members joined their colleagues
at MD Group Clinical Hospital and
also organised the gift-giving event
for local orphaned children.
DONOR’S DAY AT LAPINO
AND MD GROUP CLINICAL
HOSPITAL (PMC)
In 2019, Lapino Hospital hosted
two annual donor events attended
by dozens of donors who donated
36 litres of blood. MD Group Clinical
Hospital’s two donor events resulted
in the donation of 33 litres of blood
by 73 people.
52
53
// CORPORATE SOCIAL RESPONSIBILITY
ToC_Shareholder Equity
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
TOP SHAREHOLDERS
SHAREHOLDER
NAME
Russian Direct
Investment Fund 1
Russia Partners
Advisors
JP Morgan Asset
Management
Prosperity Capital
Norges Bank
Massachusetts
Mutual Life
Insurance
Baring Asset
Management
M&G Investment
Management
Comgest
East Capital
Aberdeen Standard
Holberg
Fondsforvaltning AS
Handelsbanken
NUMBER
OF SHARES
AS OF 31.12.2018
SHARE
OF SHARES
OUTSTANDING
NUMBER
OF SHARES
AS OF 31.12.2019
SHARE
OF SHARES
OUTSTANDING
4,166,667
3,235,000
2,585,693
1,917,175
1,026,064
948,211
1,120,197
849,622
764,600
–
724,855
668,551
656,234
5.5%
4.3%
3.4%
2.6%
1.4%
1.3%
1.5%
1.1%
1.0%
–
1.0%
0.9%
0.9%
4,166,667
3,235,000
2,585,693
2,130,262
1,026,064
948,211
898,204
849,622
764,600
692,400
652,737
608,551
556 234
5.5%
4.3%
3.4%
2.8%
1.4%
1.3%
1.2%
1.1%
1.0%
0.9%
0.9%
0.8%
0.7%
OUR INVESTORS REPRESENT
VARIOUS GEOGRAPHIES 1
ANALYST COVERAGE
INVESTOR RELATIONS
5 %
17 %
25 %
53 %
Russia 2
UK
Continental Europe
and other countries
US
53%
25%
17%
5%
32.1%
SHARES REPRESENT
FREE FLOAT
As of 31 December 2019, MDMG was
covered by equity research analysts
representing leading banks such as
Goldman Sachs, JP Morgan, Renaissance
Capital, and VTB Capital.
DIVIDEND TAXATION
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 taxation 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
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
meetings decisions, as well as other
important corporate developments.
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 2019, we held 95 meetings
with investors, attended 3 investor
conferences in Russia, UK, and USA.
23%
OF NET PROFIT DECLARED
AS DIVIDENDS FOR 2019
MD MEDICAL GROUP’S DIVIDEND HISTORY
2015
H1 2016
2016
H1 2017
2017
2018
2019
Dividend approval
15.04.2016
02.09.2016
21.04.2017
08.09.2017
17.04.2018
23.04.2019
23.04.2020
Record date
Payout date
Total dividends paid,
ths USD
Dividends per share, USD 3
22.04.2016
09.09.2016
28.04.2017
19.09.2017
25.04.2018
24.05.2019
30.04.2020
20.05.2016
18.10.2016
23.05.2017
24.10.2017
22.05.2018
25.06.2019
26.05.2020
7,310
0.10
4,325
0.06
5,060
0.08
5,311
0.08
6,838
0.09
10,858
0.14
6,892
0.09
1 Shares managed by RDIF Managing company Llc., including co-investors’ shares
managed by RDIF Managing company Llc
1 Source: Bloomberg, as of 12/31/2019
2 includ. RDIF and Russia Partners
3 dividends net of tax withheld by MDMG as tax agent; at the exchange rate as of the date of the Annual General Meeting of Shareholders or Board meeting
54
55
// CORPORATE SOCIAL RESPONSIBILITY
Corporate
& RISK MANAGEMENT
3
NUMBER OF INDEPENDENT NON-EXECUTIVE
DIRECTORS ON OUR BOARD
We have been continuously focused on ensuring we have
a strong Board to support our business growth.
56
Power06 ToC_Corporate Governance Report
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.
NOMINATION COMMITTEE
The Nomination Committee comprises
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
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 function. 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 recommendingof
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.
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 Tatiana Lukina since
6 December 2019, 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;
• monitoring compliance with laws
and regulations and standard
of corporate governance.
At MD Medical Group, we believe 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.
OUR BOARD’S PRIORITY IS TO ENSURE
WE ADHERE TO 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
CEO
Board Committees
Audit (Internal auditor)
Nomination
Remuneration
58
59
// CORPORATE GOVERNANCE AND RISK MANAGEMENT
ToC_Risk Management
REPUTATION RISK
POTENTIAL IMPACT
MITIGATION
Тhe key danger of this risk is that it can be caused by a number
of different factors. Therefore, it is closely related to other risks
mentioned below. We endeavor to maintain a low level
of reputation risk by updating information sources, launching
new system controls and improving the method of protection
personal information. In 2020, we will provide a range
of measures to reduce the level of reputational risk, all based
on the Company’s development strategy.
In 2019, we strengthened our work on risks, which we did
not manage to significantly reduce in 2018. 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. Work with the media was optimized in terms
of the correctness of information and its sources, and new
measures to protect information were introduced.
We significantly improved the personal data security system
in 2019. In particular, we installed new equipment to enhance
information network protection and data transmission
encryption.
As a result, this led to a decrease in reputational risk.
MEDICAL SERVICE RISK
POTENTIAL IMPACT
MITIGATION
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.
To reduce this risk, we need the newest and most advanced
equipment, medicines and medical supplies that will allow
us to minimize 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 2019, 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.
COMPLIANCE RISK
POTENTIAL IMPACT
MITIGATION
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 realizing our strategic objectives, including
the implementation of our investment program.
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 UK
regulatory bodies 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.
We have made efforts to ensure we comply with requirements
of state regulators in terms of accounting treatment for medical
equipment and medicine turnover.
60
61
// CORPORATE GOVERNANCE AND RISK MANAGEMENT
MACROECONOMIC RISK
RECRUITMENT RISK
POTENTIAL IMPACT
MITIGATION
POTENTIAL IMPACT
MITIGATION
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.
Given the unstable foreign policy situation in 2019, 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.
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
organisations. 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.
In 2019, 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 programme for horizontal
rotation of personnel within the Company in order to cover
the shortage of personnel in the regions.
CONTROL & EFFICIENCY RISK
FINANCIAL RISK
POTENTIAL IMPACT
MITIGATION
POTENTIAL IMPACT
MITIGATION
The risk is closely related to the size of the business
and the coverage area, which was significantly increased
in 2019. 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 2019, 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 2019, to achieve maximum management efficiency,
additional managerial positions were introduced with control
functions. We carefully interact and take into account
reccommendations of world-renowned consultants.
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.
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 2019, 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.
We centralise our procurement and conduct tenders, as a result
cutting costs on procuring services, equipment and medicine.
INVESTMENT PROJECT EXECUTION RISK
POTENTIAL IMPACT
MITIGATION
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 payback period or even fail to deliver a profit
entirely.
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.
WE ARE CONTINUOUSLY IMPROVING OUR RISK MANAGEMENT
SYSTEMS, WHICH ENABLES US TO QUICKLY IDENTIFY
POTENTIAL RISKS TO OUR OPERATIONS AND FIND THE MOST
EFFICIENT WAYS TO MITIGATE THEM.
62
63
// CORPORATE GOVERNANCE AND RISK MANAGEMENT
ToC_Board of Directors
Mr Vladimir Mekler
Chairman 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.
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.
Dr Mark Kurtser
Member of Russian Academy of Sciences, CEO
and 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 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.
Mr Simon Rowlands
Independent Member of the Board of Directors
Mr Simon Rowlands was appointed as an Independent Non-Executive
Director in September 2012.
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, BS in Engineering and is a chartered
engineer.
Mr Kirill Dmitriev
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 totaling 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 Vitaly Ustimenko
PhD, Member of the Board of Directors
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 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 Tony Maher
Independent Member of the Board of Directors
Mr Tony Maher was appointed as an Independent Non-Executive Directorin December 2019 and brings
to the Group more than 40 years of experience in the consumer sector.
Mr Maher’s other current appointments include the positions of Chairman at Progress, Russia’s largest
baby food company, since 2012; Chairman at LPQ Russia Limited, a restaurant chain operator, since
2015; Board member at Detsky Mir, the largest children’s goods retailer in Russia and the CIS, since
2018; and Director of Da Vinci Capital, a leading independent investment manager, since 2012.
Mr Maher previously served as CEO of Wimm-Bill-Dann, the leading producer of dairy, baby food
and beverage products in Russia, and held various positions at Coca-Cola in a number of countries.
Mr Maher holds a B. A. Honours degree in Management from The National Council for Education
in Ireland.
Ms Tatiana Lukina
Independent Member of the Board of Directors
Ms Tatiana Lukina was appointed as an Independent Non-Executive Director in December 2019 bringing
her 18 years of experience in finance, business restructuring and project management in a wide range
of industries.
Since 2016, Ms Lukina has been working as a CFO at GAME INSIGHT, a global mobile game developing
company. Tatiana’s career has commenced in KPMG, where during 10 years she participated and led
projects in audit, capital markets transactions (IPO, SPO, Eurobonds) in international stock exchanges,
debt restructuring for major Russian companies, M&A transaction services in different countries.
After that Tatiana worked in Portfolio Asset Management department at ALFA Group, represented
shareholders in Boards and Committees of ALFA bank (Russia, Ukraine, Kazakhstan) and Rosvodokanal.
In 2015–2016 Tatiana as a co-leader of finance function headed an IPO preparatory project at OZON.ru,
a leading on-line retailer in Russia.
Ms Lukina graduated from the Financial Academy of the Russian Government with a first-class honour
degree in Finance, Business Appraisal and Turnaround Management and then finished her PhD there.
Since 2006 Tatiana is a member of the Association of Certified Chartered Accountants (ACCA) in the UK,
successfully passed exams for a Russian Audit License.
64
65
// CORPORATE GOVERNANCE AND RISK MANAGEMENT
ToC_Board of Directors Activity in 2019
CHANGES IN THE COMPOSITION
OF THE BOARD OF DIRECTORS IN 2019
Dr Alsou Nazyrova stepped down as Board
Member on 7 May 2019.
Mrs Liubov Malyarevskaya stepped down
as an Independent Non-Executive Director
on 9 September 2019.
PARTICIPATION OF THE DIRECTORS
IN THE BOARD MEETINGS DURING 2019
BOARD MEMBER
Vladimir Mekler
Mark Kurtser
Simon Rowlands
Kirill Dmitriev
Vitaly Ustimenko
Liubov Malyarevskaya
Alsou Nazyrova
Tatyana Lukina
Tony Maher
Nikolay Ishmetov 1
5
5
5
5
4
5
3
1
1
0
5
31
BOARD MEETINGS
HELD IN 2019
AGENDA ITEMS
DISCUSSED IN 2019
1 alternate director for Kirill Dmitriev
66
Mrs Tatyana Lukina and Mr Tony Maher were
appointed as Independent Non-Executive
Directors on 6 December 2019.
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)
REMUNERATION PAID TO MEMBERS
OF THE BOARD IN 2019
5
5
5
5
5
3
1
1
1
5
RUB 4,500,000
RUB 944,000
RUB 615,000
RUB 21,900 (since 6 December 2019)
RUB 284,900 (since 6 December 2019)
OUR GOAL IS TO MAKE SURE THE BOARD COMPRISES DIRECTORS
WHO BOTH KNOW OUR BUSINESS EXTREMELY WELL AND HAVE
AN EXCELLENT TRACK RECORD AND THE SKILLS TO SUCCESSFULLY
IMPLEMENT THE COMPANY’S STRATEGY.
Mr Vladimir Mekler
Chairman of the
Board of Directors
67
// CORPORATE GOVERNANCE AND RISK MANAGEMENT
ToC_Senior Management
Dr Boris Konoplev
Medical Director of Mother&Child, Head of Hospital Group
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 Yulia Kutakova
PhD, Medical Director for Organisational and Scientific-Educational Work
Dr Yulia Kutakova joined the Group in 2012. She has over 12 years of practical experience in obstetrics
and gynaecology.
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.
Dr Natalia Yakunina
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 23 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 Mark Kurtser
Member of Russian Academy of Sciences, CEO
and 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 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.
Mr Andrey Khoperskiy
Deputy CEO for Economics and Finance
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.
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. He also holds an ACCA Advanced Diploma in Accounting
and Business and ACCA Diploma in International Financial Reporting.
Mrs Maria Nechaeva
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.
Mr Vadim Vlasov
Deputy CEO for development
Mr Vadim Vlasov joined the Company as deputy CEO in charge
of development in 2019.
Vadim Vlasov graduated from the Moscow Aviation Institute, Mr Vlasov
has held various posts in the aerospace industry and was head
of the representative office of Airbus in Russia. He has also acquired
vast experience in the medical and pharmaceutical industries..
From 2010 to 2019, Vadim Vlasov served as Country President
of Novartis Group of Companies in Russia, Regional Director Country
Management CEE and CIS, Chairman of the Board of Directors
of Association of International Pharmaceutical Manufacturers (AIPM).
68
69
// CORPORATE GOVERNANCE AND RISK MANAGEMENT
ToC_Report and Consolidated Financial Statement
Report and consolidated
STATEMENTS
FINANCIAL
FOR THE YEAR ENDED 31 DECEMBER 2019
CONTENTS
72
73
78
79
85
86
88
92
94
OFFICERS, PROFESSIONAL ADVISORS AND REGISTERED OFFICE
MANAGEMENT REPORT
DIRECTORS’ RESPONSIBILITY STATEMENT
INDEPENDENT AUDITORS’ REPORT
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
CONSOLIDATED STATEMENT OF CASH FLOWS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
70
71
// REPORT AND CONSOLIDATED FINANCIAL STATEMENTS OFFICERS, PROFESSIONAL
ADVISORS AND REGISTERED
OFFICE
MANAGEMENT
REPORT
Board of Directors
Secretary
Secretary assistant
Independent Auditors
Registered Office
72
• Vladimir Mekler – Chairman
• Mark Kurtser
• Vitaly Ustimenko
• Kirill Dmitriev
• Nikolay Ishmetov (alternate director to Kirill Dmitriev)
• Simon Rowlands
• Tatyana Lukina (appointed on 6 December 2019)
• Tony Maher (appointed on 6 December 2019)
• Alsu Nazyrova (resigned on 7 May 2019)
• Liubov Malyarevskaya (resigned on 9 September 2019)
Menustrust Limited
Darya Alekseeva
KPMG Limited
15 Dimitriou Karatasou street, Anastasio Building,
6th floor, office 601, Strovolos,
2024, Nicosia, Cyprus
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 2019.
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
2019 and its financial position at that date are set out
in the consolidated statement of profit or loss and other
comprehensive income on page 85 and in the consolidated
statement of financial position on page 86 of these
consolidated financial statements.
Profit for the year ended 31 December 2019 amounted
to RUB2,786,625 thousand (for the year ended 31 December
2018: RUB2,831,043 thousand). The total assets of the Group
as at 31 December 2019 were RUB28,670,534 thousand
(31 December 2018: RUB25,078,137 thousand) and the
net assets were RUB17,880,142 thousand (31 December 2018:
RUB15,998,948 thousand).
The main reason for the decreased profit was the foreign
exchange transactions loss and the increased depreciation
due to the opening of the new multi-disciplinar hospital
in Tyumen in April 2019.
Moreover, the deferred tax assets and liabilities were written off
due to changes in Tax Code of the Russian Federation which
came into force through changes in Federal law 395-N on 26
July 2019. According to these changes medical companies
are subject to 0% income tax rate in perpetuity (previously 0%
income tax rate for the period up to 5 years until 1 January
2020). The main reason for increase in total assets was
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 20 March 2020 the Board of Directors recommended
the payment of RUB638,563 thousand as final dividends
for the year 2019 which corresponds to RUB8.5 per share.
On 22 March 2019 the Board of Directors declared final
dividends for the year 2018 attributable to the owners
of the Company amounting to RUB800,081 thousand
(USD12,552 thousand), which corresponds to RUB10.65
73
// REPORT AND CONSOLIDATED FINANCIAL STATEMENTS (USD0.17) per share. The dividend distribution was approved
by the Annual General Meeting of the shareholders on
23 April 2019. The dividends were paid on 25 June 2019.
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.
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.
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
74
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 2019,
31 December 2018 and as at the date of signing these
consolidated financial statements are as follows, except
for Vitaly Ustimenko:
NAME
Mark Kurtser
Kirill Dmitriev
Simon Rowlands
TYPE
OF INTEREST
EFFECTIVE
INTEREST %
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.
Member of the Board of Directors Vitaly Ustimenko acquired
GDRs on 17 July 2019 and on 19 September 2019,
as a result the share of his ownership increased to 0.0035%
of the Сompany’s share capital.
FUTURE DEVELOPMENTS
The Group’s goal is to continually diversify its medical
services by expanding its range of services, maintaining its
leading position 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.
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.
Dr Alsu Nazyrova and Mrs Liubov Malyarevskaya stepped
down as members of the Board of Directors on 7 May 2019
and 9 September 2019 respectively.
Tatyana Lukina and Tony Maher were appointed
as Independent Non-Executive Directors for the vacant
positions in the Board of Directors. The changes came into
force on 6 December 2019.
The members of the Board of Directors who served
as at the date of signing of these consolidated financial
statements, are presented on page 72.
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
has been chaired by independent non-executive director
Tatiana Lukina since 6 December 2019, 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;
• 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
75
// REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 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.
On 20 March 2020 the Board of Directors recommended
the payment of RUB638,563 thousand as final dividends
for the year 2019 which corresponds to RUB8.5 per share.
BRANCHES
MD Medical Group Investments Plc has a branch in Moscow.
TREASURY SHARES
In addition, the first months of 2020 have seen significant
global market turmoil triggered by the outbreak
of the coronavirus. Together with other factors, this has
resulted in a sharp decrease in the oil price and the stock
market indices, as well as a depreciation of the Russian
Rouble. These developments are further increasing the level
of uncertainty in the Russian business environment.
The Group is now in the process of analysing the effect.
During the year ended 31 December 2019, the Company
distributed the GDRs earlier acquired by the Company to the
third parties. No additional treasury shares were acquired.
No other significant events occurred after the reporting
period.
EVENTS AFTER
THE REPORTING PERIOD
The Group opened a new clinic in Rostov-on-Don
on 15 January 2020 and in Moscow region on 2 March 2020.
On 31 January 2020 the Group completed renovation of PMC
and started rebranding its other hospitals.
On 15 January 2020 LLC Mother and Child Tyumen made
an early repayment of the VTB bank loan amounted
to RUB360,818 thousand.
On 17 March 2020 the Group received the part of government
grant of RUB83,479 thousand in cash which had been
previously recognised in other receivables as support
for the construction of Tyumen hospital (Note 15). As a result
at the date of signing these consolidated financial statements
the government grant received by the Group amounted
to RUB444,297 thousand.
INDEPENDENT AUDITORS
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, 20 March 2020
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;
• 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:
• 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.
• Terms of reference of the Audit Committee, Nomination
Committee and Remuneration Committee;
• Code of Ethics and Conduct;
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
76
77
// REPORT AND CONSOLIDATED 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; and
• 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
Kirill Dmitriev
Simon Rowlands
Tatiana Lukina
Tony Maher
Chairman, non-executive Director
Executive Director
Non-executive Director
Non-executive Director
Non-executive Independent Director
Non-executive Independent Director
Non-executive Independent Director
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 accompanying consolidated financial
statements of MD Medical Group Investments Plc
(the “Company”) and its subsidiaries (the “Group”),
which are presented on pages 85–123 and comprise
the consolidated statement of financial position as at
31 December 2019, and the consolidated statements of profit
or loss and other comprehensive 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 accompanying consolidated financial
statements give a true and fair view of the consolidated
financial position of the Group as at 31 December 2019,
and of its consolidated financial performance 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
Standards on Auditing (“ISAs”). Our responsibilities under those
standards 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
throughout the period of our appointment in accordance
with the International Ethics Standards Board for Accountants’
International Code of Ethics for Professional Accountants
(Including International Independence Standards)
(“IESBA Code”) together with the ethical requirements
in Cyprus that are relevant to our audit of the consolidated
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 INCORPORATING
THE MOST SIGNIFICANT RISKS OF MATERIAL
MISSTATEMENTS, INCLUDING ASSESSED
RISK OF MATERIAL MISSTATEMENTS DUE
TO FRAUD
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit
of the consolidated 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.
78
79
// REPORT AND CONSOLIDATED FINANCIAL STATEMENTS GOODWILL IMPAIRMENT
REVENUE RECOGNITION
Refer to Note 14 of the consolidated financial statements (RUB2,032,320 thousand)
Refer to Note 4 of the consolidated financial statements (RUB16,159,861 thousand).
The key audit matter
How the matter was addressed in our audit
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 PPE and hence the 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 revenue estimated growth rates and EBITDA estimated rates,
terminal growth, after-tax profitability and discount rates/WACC.
Our own valuation specialists were also utilized within this process.
• Comparing the Group’s assumptions on revenue growth and after-
tax profitability margins with actual results, equivalent medical
centers of the Group in nearby regions 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 relating to Goodwill are consistent with those
employed in the model.
PPE IMPAIRMENT
Refer to Note 13 of the consolidated financial statements (RUB21,139,382 thousand)
The key audit matter
How the matter was addressed in our audit
Considering the nature of its operations, the Group has a significant
amount of PPE, which is mainly represented by freehold land
and buildings (RUB14,933,038). On an annual basis the Management
performs a review for impairment indicators. In case impairment
indicators are present for entities/Cash Generating Units (‘CGU’),
the management determines the recoverable amount of the entities/
GCUs to identify whether impairment is required.
Inherent uncertainty and subjectivity is involved in forecasting
and discounting future cash flows, which are the basis
of the assessment of the recoverability of PPE 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 revenue estimated growth rates and EBITDA estimated
rates, terminal growth, after-tax profitability and discount rates/
WACC.
Our own valuation specialists were also utilized within this process.
• Comparing the Group’s assumptions on revenue growth and
after-tax profitability margins with actual results, equivalent
medical centers of the Group in nearby regions as well as our own
assessment in relation to key inputs into the models.
• Preparing our own sensitivity analysis around the key assumptions.
The Group has a number of revenue streams with different revenue
recognition policies.
The major part 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 during the period of the contract.
The number of visits in all medical centres 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 contract
liability in the consolidated statement of financial position.
As such, revenue recognition is an area that our audit is focused on.
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.
• Performing substantive analytical procedures to assess contract
liabilities recognized at the year-end.
• Sending confirmation letters to a sample of debtors to confirm
balances and turnover.
RECOGNITION OF RIGHT-OF-USE ASSET AND CORRESPONDING LIABILITY
IN LINE WITH PROVISIONS OF IFRS16 LEASES
Refer to notes 13 and 19 of the consolidated financial statements (RUB637,144 thousand and RUB649,990 thousand)
The key audit matter
How the matter was addressed in our audit
The Group has a significant number of lease contracts, which
were previously classified as operating leases under IAS17. The new
IFRS16 requires a lessee to recognise a right-of-use asset representing
its right to use the underlying leased asset, and a lease liability
representing its obligation to make lease payments.
Our audit procedures included among others the following:
• Recalculation of the right-of-use asset, lease liability, depreciation
charge and interest on the lease liability and comparing results
to the client’s calculations;
• Evaluation of the mathematical accuracy of the management’s
The first-time adoption of the standard resulted in the recognition
as of 1 January 2019 of a right-of-use asset amounting to RUB329,591
thousand and additional lease liabilities of the same amount.
Management has applied significant judgement in assessing whether
arrangements with suppliers contain a lease as defined by IFRS16,
as well as in determining enforceability of lease contracts, the lease
term and the discount rate for identified leases.
calculations;
• Assessment of completeness of management’s listing of the lease
contracts in place.
• Testing of the accuracy of the lease data compiled by management
by agreeing key inputs, including commencement date
and lease payments, to the underlying lease arrangements
selected on a sample basis to ensure the accuracy of key data
points used in determining the amounts of right-of-use assets
and the corresponding lease liability.
• Assessment whether judgements applied by management
are reasonable and supportable, including judgement with respect
to the discount rate applied, enforceability of the lease contracts
and determination of the lease term.
80
81
// REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 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 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 assurance conclusion thereon, except as required
by the Companies Law, Cap.113.
In connection with our audit of the consolidated financial
statements, our responsibility is to read the other information
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, {insert if there is other information that
will be obtained after the date of the auditors’ report} [on
the other information obtained prior to the date of the auditors’
report,] 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.
With regards to the management report and the corporate
governance statement, our report in this regard 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 consolidated 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 control
as the Board of Directors determines is necessary to enable
the preparation of consolidated financial statements that
are free from material misstatement, whether due to fraud
or error.
In preparing the consolidated financial statements, the Board
of Directors 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 and those charged with governance
are 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 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 consolidated
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 consolidated 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 control.
• Obtain an understanding of internal control 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 Group’s internal control.
• 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 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’ report. 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 disclosures, and whether the consolidated financial
statements represent the underlying transactions and events
in a manner that achieves a true and fair view.
• Obtain sufficient appropriate audit evidence regarding
the financial information of the entities or 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 audit and significant audit findings, including any
significant deficiencies in internal control that we identify
during our audit.
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 L.53(I)/2017”).
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 consolidated financial
statements of the current period and are therefore
the key audit matters. We describe these matters
in our auditors’ report.
REPORT ON OTHER LEGAL
AND REGULATORY REQUIREMENTS
OTHER REGULATORY REQUIREMENTS
Pursuant to the requirements of Article 10(2) of European
Union (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 APPOINTMENT AND PERIOD
OF ENGAGEMENT
We were appointed auditors on 10 July 2012 by the
General Meeting of the Company’s members to audit
the consolidated financial statements of the Group
for the year ended 31 December 2009. Our total uninterrupted
period of engagement having been renewed annually
by shareholders’ resolution, is 11 years covering the periods
ending 31 December 2009 to 31 December 2019.
CONSISTENCY OF AUDITORS’ REPORT
TO THE ADDITIONAL REPORT TO THE AUDIT
COMMITTEE
We confirm that our audit opinion is consistent with the
additional report presented to the Audit Committee dated
20 March 2020.
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 consolidated financial statements.
• In the light of the knowledge and understanding
of the business and the Group’s environment obtained
in the course of the audit, we have not identified material
misstatements in the consolidated management report.
• In our opinion, based on the work undertaken during
the course of our audit, the information included
in the corporate governance statement in accordance
with the requirements of subparagraphs (iv) and (v)
of paragraph 2(a) of Article 151 of the Companies Law,
Cap. 113, has been prepared in accordance
with the requirements of the Companies Law, Cap, 113,
and is consistent with the consolidated financial statements.
• 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 corporate governance statement
in relation to the information disclosed for items (iv) and (v)
of the subparagraph 2(a) of Article 151 of the Companies
Law, Cap. 113. We have not identified material
misstatements in this respect.
• In our opinion, based on the work undertaken during
the course of our audit, 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.
82
83
// REPORT AND CONSOLIDATED FINANCIAL STATEMENTS OTHER MATTER
This report, including the opinion, has been prepared
for and only for the Company’s members as a body
in accordance with Article 10(1) of the EU Regulation 537/2014
and 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 to.
The engagement partner on the audit resulting
in this independent auditors’ report is George S. Prodromou.
George S. Prodromou, ACA
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
20 March 2020
CONSOLIDATED STATEMENT
OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
For the year ended 31 December 2019
Revenue
Cost of sales
Gross profit
Other income
Selling, general and administrative expenses
Other expenses
Operating profit
Finance income
Finance expenses
Net foreign exchange transactions (loss) / gain
Net finance expenses
Profit before tax
Income tax benefit / (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
Earnings per share (RUB)
NOTE
4
5
8
6
8
9
9
9
9
10
11
2019
RUB’000
16,159,861
(10,376,218)
5,783,643
60,343
(2,640,755)
(68,885)
3,134,346
214,704
(538,671)
(53,333)
(377,300)
2,757,046
29,579
2,786,625
2,786,625
2,637,638
148,987
2,786,625
2,637,638
148,987
2,786,625
35.11
2018
RUB’000
14,937,366
(9,387,499)
5,549,867
26,831
(2,533,213)
(36,895)
3,006,590
173,685
(428,916)
105,823
(149,408)
2,857,182
(26,139)
2,831,043
2,831,043
2,671,350
159,693
2,831,043
2,671,350
159,693
2,831,043
35.61
84
85
The Notes on pages 94 to 123 are an integral part of these consolidated financial statements.
// REPORT AND CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
As at 31 December 2019
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
Short-term bank deposits
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
2019
RUB’000
31 DECEMBER
2018
RUB’000
21,130,382
2,192,631
394,016
5,442
18,157,678
2,258,513
592,416
232,159
LIABILITIES
Loans and borrowings
Trade and other payables
Deferred tax liabilities
Contract liabilities
23,722,471
21,240,766
Total non-current liabilities
13
14
15
10
15
16
16
17
18
18
18
26
719,962
659,737
506,916
3,061,448
4,948,063
28,670,534
180,585
5,243,319
(655,352)
12,769,848
17,538,400
341,742
17,880,142
666,122
455,768
–
2,715,481
3,837,371
25,078,137
180,585
5,243,319
(659,049)
10,932,291
15,697,146
301,802
15,998,948
Loans and borrowings
Trade and other payables
Contract liabilities
Total current liabilities
TOTAL LIABILITIES
TOTAL EQUITY AND LIABILITIES
NOTE
31 DECEMBER
2019
RUB’000
31 DECEMBER
2018
RUB’000
19
21
10
20
19
21
20
5,864,344
4,586,532
547,014
4,681
205,527
6,621,566
1,233,903
1,735,363
1,199,560
4,168,826
10,790,392
28,670,534
435,809
272,565
143,773
5,438,679
1,078,743
1,385,628
1,176,139
3,640,510
9,079,189
25,078,137
On 20 March 2020 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
86
87
// REPORT AND CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
For the year ended 31 December 2019
Balance at 1 January 2019
Profit and total comprehensive income for the year
Contributions and distributions
Treasury shares sold
Dividends declared
Total contributions and distributions
Balance at 31 December 2019
Share premium is not available for distribution.
ATTRIBUTABLE TO OWNERS OF THE COMPANY
ATTRIBUTABLE TO OWNERS OF THE COMPANY
NOTE
12
SHARE
CAPITAL
RUB’000
180,585
-
-
-
-
180,585
TREASURY
SHARES
RUB’000
(3,697)
-
3,697
-
3,697
-
SHARE
PREMIUM
RUB’000
5,243,319
-
-
-
-
OTHER
RESERVES
RUB’000
(655,352)
-
-
-
-
5,243,319
(655,352)
RETAINED
EARNINGS
RUB’000
10,932,291
2,637,638
-
(800,081)
(800,081)
12,769,848
TOTAL
RUB’000
15,697,146
2,637,638
3,697
(800,081)
(796,384)
17,538,400
NON-CONTROLLING
INTERESTS
RUB’000
301,802
148,987
-
(109,047)
(109,047)
341,742
TOTAL
EQUITY
RUB’000
15,998,948
2,786,625
3,697
(909,128)
(905,431)
17,880,142
88
89
// REPORT AND CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
For the year ended 31 December 2018
Balance at 1 January 2018
Adjustment on initial application of IFRS 9 (net of tax)
Adjusted balance at 1 January 2018 1
Profit and total comprehensive income for the year
Contributions and distributions
Equity-settled share-based payment
Other movements
Dividends declared
Total transactions with owners
Change in ownership interests
Acquisition of non-controlling interests
without a change in control
Total changes in ownership interests
Balance at 31 December 2018
Share premium is not available for distribution.
ATTRIBUTABLE TO OWNERS OF THE COMPANY
ATTRIBUTABLE TO OWNERS OF THE COMPANY
NOTE
12
SHARE
CAPITAL
RUB’000
180,585
-
180,585
-
-
-
-
-
-
-
TREASURY
SHARES
RUB’000
(4,544)
-
(4,544)
-
847
-
-
847
-
-
SHARE
PREMIUM
RUB’000
5,243,319
-
5,243,319
-
-
-
-
-
-
-
OTHER
RESERVES
RUB’000
(655,352)
-
(655,352)
-
-
-
-
-
-
-
180,585
(3,697)
5,243,319
(655,352)
RETAINED
EARNINGS
RUB’000
9,377,710
(30,935)
9,346,775
2,671,350
-
(15,545)
(450,750)
(466,295)
TOTAL
RUB’000
14,141,718
(30,935)
14,110,783
2,671,350
847
(15,545)
(450,750)
(465,448)
(619,539)
(619,539)
(619,539)
10,932,291
(619,539)
15,697,146
NON-CONTROLLING
INTERESTS
RUB’000
425,947
(2,956)
422,991
159,693
-
-
(110,190)
(110,190)
(170,692)
(170,692)
301,802
1 The Group has initially applied IFRS 15 and IFRS 9 at 1 January 2018.
90
TOTAL
EQUITY
RUB’000
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
91
// REPORT AND CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT
OF CASH FLOWS
For the year ended 31 December 2019
Cash flows from operating activities
Cash flows from investing activities
NOTE
2019
RUB’000
2018
RUB’000
NOTE
2019
RUB’000
2018
RUB’000
Profit for the year
Adjustments for:
Depreciation
Amortisation
Equity-settled share-based payment
Gain from the sale of property, plant and equipment
Write-off of property, plant and equipment
Impairment losses on construction in progress
Finance income
Finance expenses (excluding impairment)
Impairment losses on other assets
Net foreign exchange transactions loss / (gain)
Income tax (benefit) / expense
Increase in inventories
Decrease / (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
92
2,786,625
2,831,043
Acquisition/construction of property, plant and equipment
(3,957,530)
(3,669,078)
13
14
9
9
9
9
10
1,408,553
100,610
-
(1,530)
17,149
34,769
(214,704)
524,888
13,783
53,333
(29,579)
4,693,897
(53,840)
21,673
222,337
65,641
4,949,708
(3,956)
4,945,752
1,089,720
100,275
847
(152)
5,711
-
(173,685)
406,464
22,452
(105,823)
26,139
4,202,991
(140,766)
(158,822)
33,501
125,222
4,062,126
(8,945)
4,053,181
Proceeds from sale of property, plant and equipment
Acquisition of intangible assets
Loans returned from third parties
Proceeds from government grant
Placing short-term bank deposits
Loans issues to third parties
Interest received
Net cash flows used in investing activities
Cash flows from financing activities
Proceeds from loans and borrowings
Repayment of loans and borrowings
Payments of lease liabilities
Finance expenses paid
Payments on settlement of derivative
Proceeds from sale of treasury shares
Acquisition of NCI
Proceeds from reimbursed VAT
Repayment of reimbursed VAT
Dividends paid to the owners of the Company
Dividends paid to non-controlling interests
Net cash flows used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents as at the beginning of the year
Effect of movements in exchange rates on cash held
Cash and cash equivalents as at the end of the year
6,416
(34,728)
4,000
360,818
(506,916)
(5,000)
111,734
(4,021,206)
1,831,205
(1,051,367)
(158,281)
(405,389)
(11,426)
11,862
-
263,953
(94,302)
(788,976)
(108,616)
(511,337)
413,209
2,715,481
(67,242)
3,061,448
13
16
18
16
16
36,389
(25,011)
-
-
-
-
76,701
(3,580,999)
2,055,583
(955,202)
-
(361,539)
-
-
(768,235)
307,043
(64,338)
(494,339)
(109,759)
(390,786)
81,396
2,504,602
129,483
2,715,481
93
// REPORT AND CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
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
JSC 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
LLC MD Service
LLC Mother and Child
Nizhny Novgorod
LLC Mother and Child
Yekaterinburg
Russian Federation
Pharmaceutics retail
Russian Federation
Medical services
Russian Federation
Medical services
LLC Mother and Child Tyumen
Russian Federation
Medical services
31 DECEMBER
2019
EFFECTIVE
HOLDING %
31 DECEMBER
2018
EFFECTIVE
HOLDING %
95
100
90
95
90
100
80
100
100
100
70
95
95
85
100
90
95
100
100
100
95
100
90
95
90
100
80
100
100
100
70
95
95
85
100
90
95
100
100
100
NAME
CJSC MK IDK
LLC Apteka IDK
LLC CSR
COUNTRY
OF INCORPORATION
ACTIVITIES
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
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
LLC MD Finance
Russian Federation
Management company
LLC Mother and Child Vladikavkaz
Russian Federation
Medical services
LLC Mother and Child Krasnodar
Russian Federation
Medical services
LLC Mother and Child Rostov-on-Don
Russian Federation
Medical services
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
31 DECEMBER
2019
EFFECTIVE
HOLDING %
31 DECEMBER
2018
EFFECTIVE
HOLDING %
100
100
100
100
80
80
80
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
80
80
80
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-
-
-
-
-
-
-
-
-
As at 31 December 2019, 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.
94
95
// REPORT AND CONSOLIDATED FINANCIAL STATEMENTS IMPAIRMENT OF INTANGIBLE ASSETS
AND PROPERTY, PLANT AND EQUIPMENT
The financial statements of all the Group companies
are prepared using uniform accounting policies.
NON-CONTROLLING INTERESTS
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 20 March 2020.
This is the first set of the Group’s annual financial statements
in which IFRS 16 Leases has been applied. Changes
to significant accounting policies are described in Note 3.
(B) BASIS OF MEASUREMENT
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 Group estimates the recoverable amount of the cash
generating unit to which the asset belongs.
These consolidated financial statements have been prepared
under the historical cost convention.
IMPAIRMENT OF GOODWILL
(C) FUNCTIONAL AND PRESENTATION
CURRENCY
All of the operational Group entities are located in the Russian
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.
(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:
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, leases and ECL allowance for trade
receivables and contract assets as at 31 December 2019
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 2018
and for the year then ended, except for initial application
of IFRS 16 Leases.
Other new standards and amendments applied for the first time
in 2019 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.
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 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.
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.
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.
ACQUISITIONS FROM ENTITIES UNDER
COMMON CONTROL
REVENUE
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.
The Group has two main types of revenue: rendering
of services and sales of goods.
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 are described below.
TYPE OF PRODUCT/SERVICE
NATURE, TIMING OF SATISFACTION OF PERFORMANCE OBLIGATIONS,
SIGNIFICANT PAYMENT TERMS
Rendering of services
(except storage of stem cells)
Sales of goods
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. Payments from patients for agreements are usually fully
prepaid, one-off services are paid right after the service rendered. MHI, insurance and other companies
usually pay in up to two months after the services were provided.
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. The payments are usually
made at the moment of sale.
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.
Revenue from storage is accrued monthly during the whole period of contract.
96
97
// REPORT AND CONSOLIDATED FINANCIAL STATEMENTS FINANCE INCOME
Finance income includes:
• 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 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.
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:
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.
Freehold buildings
Leasehold improvements
Plant and equipment
YEARS
50
10–20
5–10
No depreciation is provided on land.
(III) SOFTWARE AND WEB SITE COSTS
Assets under construction are not depreciated until they
are completed and available for 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.
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. Trade receivables
and debt securities issued are initially recognised when they
are originated.
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.
98
99
// REPORT AND CONSOLIDATED FINANCIAL STATEMENTS The Group’s financial assets comprise of trade and other
receivables, loan receivable 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 of trading
the receivable. All of the Group financial assets are measured
at amortised cost. 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.
A financial asset is measured at amortised cost if it meets both
of the following conditions and is not designated as at FVTPL:
• it is held within a business model whose objective is to hold
amount outstanding during a particular period of time
and for other basic lending risks and costs (e.g. liquidity risk
and administrative costs), as well as a profit margin.
In assessing whether the contractual cash flows are solely
payments of principal and interest, the Group considers
the contractual terms of the instrument. This includes
assessing whether the financial asset contains a contractual
term that could change the timing or amount of contractual
cash flows such that it would not meet this condition.
In making this assessment, the Group considers:
• contingent events that would change the amount or timing
of cash flows;
• terms that may adjust the contractual coupon rate,
assets to collect contractual cash flows; and
including variable-rate features;
• its contractual terms give rise on specified dates to cash
flows that are solely payments of principal and interest
on the principal amount outstanding.
• prepayment and extension features; and
• terms that limit the Group’s claim to cash flows
from specified assets (e.g. non-recourse features).
FINANCIAL ASSETS – BUSINESS MODEL
ASSESSMENT
The Group makes an assessment of the objective
of the business model in which a financial asset is held
at a portfolio level А because this best reflects the way
the business is managed and information is provided
to management. The information considered includes:
• the stated policies and objectives for the portfolio
and the operation of those policies in practice. These
include whether management’s strategy focuses on earning
contractual interest income, maintaining a particular interest
rate profile, matching the duration of the financial assets
to the duration of any related liabilities or expected cash
outflows or realising cash flows through the sale
of the assets;
• how the performance of the portfolio is evaluated
and reported to the Group’s management;
• the risks that affect the performance of the business model
(and the financial assets held within that business model)
and how those risks are managed;
• how managers of the business are compensated –
e.g. whether compensation is based on the fair value
of the assets managed or the contractual cash flows
collected; and
• the frequency, volume and timing of sales of financial assets
in prior periods, the reasons for such sales and expectations
about future sales activity.
Transfers of financial assets to third parties in transactions that
do not qualify for derecognition are not considered sales
for this purpose, consistent with the Group’s continuing
recognition of the assets.
FINANCIAL ASSETS – ASSESSMENT WHETHER
CONTRACTUAL CASH FLOWS ARE SOLELY
PAYMENTS OF PRINCIPAL AND INTEREST
For the purposes of this assessment, ‘principal’ is defined
as the fair value of the financial asset on initial recognition.
‘Interest’ is defined as consideration for the time value
of money and for the credit risk associated with the principal
100
A prepayment feature is consistent with the solely payments
of principal and interest criterion if the prepayment amount
substantially represents unpaid amounts of principal
and interest on the principal amount outstanding, which may
include reasonable compensation for early termination
of the contract. Additionally, for a financial asset acquired
at a discount or premium to its contractual par amount,
a feature that permits or requires prepayment at an amount that
substantially represents the contractual par amount plus
accrued (but unpaid) contractual interest (which may also
include reasonable compensation for early termination)
is treated as consistent with this criterion if the fair value
of the prepayment feature is insignificant at initial recognition.
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.
MEASUREMENT
Financial assets and financial liabilities are initially measured
at fair value plus or minus correspondingly of 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 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 for counterparties, including
banks, are determined based on historical data of relevant
probability of default and loss given default. Impairment
on cash and cash equivalents is measured on a 12-month
expected loss basis and reflects the short maturities
of the exposures. The Group considers that its cash and cash
equivalents have low credit risk based on the external credit
ratings of the counterparties.
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. The Group measures loss
allowances at an amount equal to lifetime ECLs.
When determining whether the credit risk of a financial asset
has increased significantly since initial recognition and when
estimating ECLs, the Group considers reasonable
and supportable information that is relevant and available
without undue cost or effort. This includes both quantitative
and qualitative information and analysis, based on the Group’s
historical experience and informed credit assessment, that
includes forward-looking information.
The Group considers a financial asset to be in default when
the debtor is unlikely to pay its credit obligations to the Group
in full, without recourse by the Group to actions such
as realising security (if any is held).
CREDIT-IMPAIRED FINANCIAL ASSETS
At each reporting date, the Group assesses whether financial
assets carried at amortised cost and debt securities at FVOCI
are credit-impaired. A financial asset is ‘credit-impaired’
when one or more events that have a detrimental impact
on the estimated future cash flows of the financial asset have
occurred.
Evidence that a financial asset is credit-impaired includes
the following observable data:
• significant financial difficulty of the debtor;
• it is probable that the debtor will enter bankruptcy or other
financial reorganisation; or
• the disappearance of an active market for a security
because of financial difficulties.
WRITE-OFF
The gross carrying amount of a financial asset is written off
when the Group has no reasonable expectations of recovering
a financial asset in its entirety or a portion thereof.
For individual customers, the Group has a policy of writing off
the gross carrying amount when the financial asset is 3 years
without movements past due based on russian legislation.
For corporate customers, the Group individually makes
an assessment with respect to the timing and amount
of write-off based on whether there is a reasonable expectation
of recovery. The Group expects no significant recovery
from the amount written off. However, financial assets that
are written off could still be subject to enforcement activities
in order to comply with the Group’s procedures for recovery
of amounts due.
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.
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.
Any interest in such derecognised financial assets that
is created or retained by the Group, 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 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
101
// REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 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 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.
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.
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.
CAPITALISED INTEREST
Interest expense on borrowed funds used for capital
construction projects and the acquisition of property, plant
and equipment is capitalised provided that the interest expense
could have been avoided if the Group had not made capital
investments. Interest is capitalised only during the period when
construction activities are actually in progress and until
the resulting properties are put into operation.
STANDARDS AND INTERPRETATIONS NOT ADOPTED
BY THE EU AS AT 1 JANUARY 2019:
• Amendments to References to Conceptual Framework
in IFRS Standards;
• Definition of a Business (Amendments to IFRS 3);
• Definition of Material (Amendments to IAS 1 and IAS 8);
• IFRS 17 Insurance Contracts.
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.
ADOPTION OF NEW AND REVISED
INTERNATIONAL FINANCIAL REPORTING
STANDARDS AND INTERPRETATIONS
EQUITY-SETTLED SHARE-BASED PAYMENT
ARRANGEMENTS
NEW CURRENTLY EFFECTIVE REQUIREMENTS
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
The details of new significant accounting policies
and the nature and effect of the changes to previous
accounting policies are set out below.
102
The Group voluntarily changed its accounting policy
on presentation of acquiring and encashment operations
from 1 January 2019. Previously the fees charged for acquiring
and encashment operations were presented as finance
expenses in the Statement of profit or loss and other
comprehensive income and the Statement of cash flows.
Since 1 January 2019 these operations are presented
as operating expenses within “Selling, general
and administrative expenses” in the Statement of profit or loss,
a presentation that is more aligned to the nature of those
expenses improving the transparency of these consolidated
financial statements. The comparative information
for the immediately preceding financial year was adjusted
to reflect the aforementioned change. As a result
of the adjustment “Selling, general and administrative
expenses” for the year ended 31 December 2018 increased
by RUB117,598 thousand while “Finance expenses”
were decreased by the same amount. The “Net cash flows
from operating activities” and “Net cash flows used
in the financing activities” in the Statement of cash flows
for the year ended 31 December 2018 were also adjusted
to reflect the aforementioned reclassification in the Statement
of profit or loss and other comprehensive income.
IFRS 16 LEASES
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.
IFRS 16 replaced 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 recognises new assets and liabilities for its
operating leases of clinics and land plots. The nature
of expenses related to those leases has changed because
the Group has recognised 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 no longer recognises provisions
for operating leases that it assesses to be onerous.
Instead, the Group includes the payments due under
the lease in its lease liability.
There was no significant impact on the Group’s finance
leases.
On 26 November 2019 the IFRS Interpretations Committee
made an agenda decision on Lease Terms of cancellable
or renewable leases.
Previously, the Group recognised lease the assets and liabilities
for agreements concluded for 11-month period as having
a lease term of 11 months.
After the IFRIC agenda decision the Group recognises
the lease assets and liabilities for the term which reflects
the Group’s reasonable expectation of the period during which
the underlying asset will be used using the broader economics
of the contract. The Group recognises the contracts
as enforceable for at least the period of expected utility
of the leasehold improvements.
Non-recoverable VAT is excluded from lease accounting as
VAT payments are not made to lessor in exchange for the right
to use an underlying asset. Instead, they are levies imposed
by the government and are in the scope of IFRIC 21 Levies
and are recognised when they are due under the tax law
(when the invoice is issued). They are expensed in Statement
of profit or loss and other comprehensive income immediately
at the moment they are recognised.
As the result in the condensed interim financial statement
for the six-month period ended 30 June 2019 the Group
recognised additional lease liabilities RUB329,591 thousand
as at 1 January 2019. The effect of IFRIC agenda decision
on the opening balance of right-of-use asset in the amount
of RUB276,461 thousand as at 1 January 2019 was reflected
in this financial statement.
At commencement or on modification of a contract that
contains a lease component, the Group allocates
the consideration in the contract to each lease component
on the basis of its relative stand-alone prices. However,
for the leases of property the Group has elected not to separate
non-lease components and account for the lease
and non-lease components as a single lease component.
The Group recognises a right-of-use asset and a lease liability
at the lease commencement date. The right-of-use asset
is initially measured at cost, which comprises the initial amount
of the lease liability adjusted for any lease payments made
at or before the commencement date, plus any initial direct
costs incurred and an estimate of costs to dismantle
and remove the underlying asset or to restore the underlying
asset or the site on which it is located, less any lease incentives
received.
The right-of-use asset is subsequently depreciated using
the straight-line method from the commencement date
to the end of the lease term, unless the lease transfers
ownership of the underlying asset to the Group by the end
of the lease term or the cost of the right-of-use asset reflects
that the Group will exercise a purchase option. In that case
the right-of-use asset will be depreciated over the useful life
of the underlying asset, which is determined on the same
basis as those of property and equipment. In addition,
the right-of-use asset is periodically reduced by impairment
losses, if any, and adjusted for certain remeasurements
of the lease liability.
103
// REPORT AND CONSOLIDATED FINANCIAL STATEMENTS The lease liability is initially measured at the present value
of the lease payments that are not paid at the commencement
date, discounted using the interest rate implicit in the lease
or, if that rate cannot be readily determined, the Group’s
incremental borrowing rate. Generally, the Group uses
its incremental borrowing rate as the discount rate.
The Group determines its incremental borrowing rate
by obtaining interest rates from various external financing
sources and makes certain adjustments to reflect the terms
of the lease and type of the asset leased.
Lease payments included in the measurement of the lease
liability comprise the following:
• fixed payments, including in-substance fixed payments;
• variable lease payments that depend on an index
or a rate, initially measured using the index or rate
as at the commencement date;
• amounts expected to be payable under a residual value
guarantee; and
• the exercise price under a purchase option that the Group
is reasonably certain to exercise, lease payments
in an optional renewal period if the Group is reasonably
certain to exercise an extension option, and penalties
for early termination of a lease unless the Group
is reasonably certain not to terminate early.
The lease liability is measured at amortised cost using
the effective interest method. It is remeasured when there
is a change in future lease payments arising from a change
in an index or rate, if there is a change in the Group’s estimate
of the amount expected to be payable under a residual value
guarantee, if the Group changes its assessment of whether
it will exercise a purchase, extension or termination option
or if there is a revised in-substance fixed lease payment.
When the lease liability is remeasured in this way,
a corresponding adjustment is made to the carrying amount
of the right-of-use asset, or is recorded in profit or loss
if the carrying amount of the right-of-use asset has been
reduced to zero.
The Group presents right-of-use assets that do not meet
the definition of investment property in ‘property, plant
and equipment’ and lease liabilities in ‘loans and borrowings’
in the statement of financial position.
The Group used a recognition exеmption 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
The Group does not have significant contracts where
it is a lessor. So there is no material impact applying
IFRS 16 Leases.
TRANSITION
4. REVENUE
The Group applied IFRS 16 using the modified retrospective
approach, under which the cumulative effect of initial
application is recognised at 1 January 2019 without any effects
on retained earnings in accordance with paragraph C5 (b).
The Group recognised a lease liability at the date of initial
application for leases previously classified as an operating
lease applying IAS 17. The Group measured 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 is recognised as an adjustment
to the opening balance of assets and liabilities at 1 January
2019, with no restatement of comparative information.
IMPACT
ON TRANSITION
1 JANUARY 2019
RUB’000
Right-of-use assets – property,
plant and equipment
Lease liabilities
329,591
(329,591)
AMENDMENTS TO IAS 23 BORROWING COSTS
The Group has adopted amendments to IAS 23 Borrowing
Costs issued by the International Accounting Standards
Board as part of Annual Improvements to IFRS Standards
2015–2017 Cycle from 1 January 2019 and apply them
to borrowing costs incurred on or after that date.
The amendments clarify that the general borrowings pool used
to calculate eligible borrowing costs excludes only borrowings
that specifically finance qualifying assets that are still
under development or construction. Therefore, the Group
treats as part of general borrowings any borrowing originally
made to develop a qualifying asset when substantially
all of the activities necessary to prepare that asset for its
intended use or sale are complete. Borrowings that were
intended to specifically finance qualifying assets which
are now ready for their intended use or sale – or any non-
qualifying assets – the Group includes in its general pool.
During 2019, the Group capitalised an additional amount
of borrowing costs of RUB7,124 thousand as a result
of this revised approach.
A number of other new standards and amendments
to the existing standards are effective from 1 January 2019
but they do not have a material effect on the Group’s financial
statements, except those described above.
In vitro fertilisation (IVF)
Deliveries
Obstetrics and gynaecology out-patient treatments
Other out-patient medical services
Other in-patient medical services
Paediatrics out-patient treatments
Other medical services
Obstetrics and gynaecology in-patient treatments
Paediatrics in-patient treatments
Sales of goods
Storage of stem cells
Other income
2019
RUB’000
3,842,793
2,304,996
1,974,579
1,664,544
1,438,915
1,430,112
1,318,986
1,100,765
506,612
254,567
140,291
182,701
2018
RUB’000
3,487,749
2,211,035
1,827,137
1,552,796
1,048,047
1,322,959
1,366,391
1,027,306
484,977
290,013
138,240
180,716
Total revenue from contracts with customers
16,159,861
14,937,366
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
(84% of total revenue); some services are rendered through
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 patients. The amount
of RUB734,282 thousand recognised in short-term contract
liabilities at the beginning of the year has been recognised
as revenue during the year ended 31 December 2019
(31 December 2018: RUB757,285 thousand). The amount
of RUB37,165 thousand was returned to the patients
and the amount of RUB204,224 thousand was transferred
to the other contracts during the year ended 31 December
2019 (31 December 2018: RUB30,210 thousand
and RUB172,450 thousand respectively).
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
Total cost of sales
2019
RUB’000
5,644,082
2,701,302
1,223,131
330,345
207,499
121,271
118,157
30,431
2018
RUB’000
5,118,404
2,514,088
946,862
256,301
183,167
129,321
110,491
128,865
10,376,218
9,387,499
104
105
// REPORT AND CONSOLIDATED FINANCIAL STATEMENTS
6. SELLING, GENERAL
AND ADMINISTRATIVE EXPENSES
Payroll and related social taxes
Utilities and materials
Depreciation
Other professional services
Acquiring and encashment
Amortisation
Advertising
IT support
Communication costs
Comission fees
Learning and development
Independent auditors’ remuneration
Other expenses
Total selling, general and administrative expenses
The remuneration of the independent auditors includes
an amount of RUB20,464 thousand regarding audit services,
RUB495 thousand regarding audit related services
and an amount of RUB499 thousand regarding tax services.
7. STAFF COSTS
Wages and salaries
Social insurance contributions and other taxes
Total staff costs
The number of employees as at 31 December 2019 was 7,752
(31 December 2018: 7,349).
2019
RUB’000
1,487,107
209,312
185,422
162,681
133,681
100,610
99,506
42,331
40,307
39,754
30,134
21,458
88,452
2,640,755
2018
RUB’000
1,375,815
193,443
142,858
202,868
122,270
100,275
96,256
58,872
33,902
40,265
28,385
21,259
116,745
2,533,213
2019
RUB’000
5,641,520
1,489,669
7,131,189
2018
RUB’000
5,140,455
1,353,764
6,494,219
8. OTHER INCOME AND EXPENSES
During 2019 the Group received other income
of RUB60,343 thousand. This income arose mostly
from the receipt of property tax benefit amounted
to RUB43,468 thousand by Lapino hospital.
9. NET FINANCE EXPENSES
Finance income
Bank interest received
Initial recognition of other payables to tax authorities at market rate
Other finance income
Finance income
Finance expenses
Interest on bank loans
Unwinding of discount on other payables to tax authorities
Interest on leases
Other interest expenses
Other finance expense
Bank charges
Other finance expenses
Impairment of trade and other receivables
15
Finance expenses
Net foreign exchange transactions (loss) / gain
Net finance expenses
The Group incurred other expenses amounted
to RUB68,885 thousand in the reporting year. These expenses
arose mostly due to impairment of construction in progress
in LLC Mother and Child Nizhny Novgorod as the Group
abandoned the hospital construction in this city.
NOTE
2019
RUB’000
111,734
93,855
9,115
214,704
(389,241)
(54,889)
(41,931)
(19,535)
(19,292)
(11,426)
(2,357)
(538,671)
(53,333)
(377,300)
2018
RUB’000
76,308
96,984
393
173,685
(323,586)
(42,713)
-
(18,484)
(21,681)
(11,421)
(11,031)
(428,916)
105,823
(149,408)
106
107
// REPORT AND CONSOLIDATED FINANCIAL STATEMENTS
10. INCOME TAX
On 26 July 2019 changes in Tax Code of Russian Federation
came into force through changes in Federal law 395-N.
According to these changes medical companies are subject
to 0% income tax rate (previously 0% income tax rate was
for the period up to 5 years until 1 January 2020) in perpetuioty.
As a result, all 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 provision for probable tax risk
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
Written-off temporary differences of medical companies
due to change in Tax Code in 2019
Total income tax benefit / (expense)
2019
RUB’000
2,757,046
(3,049,226)
(292,180)
58,436
820
(6,636)
-
(72,357)
-
49,316
29,579
2018
RUB’000
2,857,182
(3,221,948)
(364,766)
72,953
717
(6,879)
19,354
(83,868)
(28,416)
-
(26,139)
As the result of changes in Tax Code the Group recognised
additional tax benefit amounted of RUB49,316 thousand
in the reporting period. This amount composed of written-off
deferred tax assets of RUB427,295 thousand (mostly related
to tax loss carried forward of MD Project 2010 and deferred
tax assets on VAT reimbursed) and RUB476,611 thousand
of deferred tax liabilities mostly related to Property, plant
and equipment.
As at 31 December 2019 deferred tax assets relating to tax
losses carried forward in the amount of RUB253,785 thousand
(31 December 2018: RUB191,428 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 2019, there were temporary differences
(before calculating tax effect) of RUB6,543,395 thousand
(31 December 2018: RUB6,123,534 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
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 20 March 2020 the Board of Directors recommended
the payment of RUB638,563 thousand as final dividends
for the year 2019 which corresponds to RUB8.5 per share.
On 22 March 2019 the Board of Directors declared final
dividends for the year 2018 attributable to the owners
of the Company amounting to RUB800,081 thousand
(USD12,552 thousand), which corresponds to RUB10.65
(USD0.17) per share. The dividend distribution was
approved by the Annual General Meeting of the shareholders
on 23 April 2019. The dividends were paid on 25 June 2019.
2019
2018
2,637,638
75,120,211
35.11
2,671,350
75,022,526
35.61
On 16 March 2018 the Board of Directors declared final
dividends or 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.
108
109
// REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 13. PROPERTY, PLANT
AND EQUIPMENT
14. INTANGIBLE ASSETS
FREEHOLD LAND
AND BUILDINGS
RUB’000
PROPERTY
UNDER
CONSTRUCTION
RUB’000
PLANT AND
EQUIPMENT
RUB’000
RIGHT-OF-USE
OF FREEHOLD
LAND AND
BUILDINGS
RUB’000
Initial cost
Balance at 1 January 2018
Additions
Disposals
Impairment loss
Transfer from construction in progress
Balance at 31 December 2018
Recognition of right-of-use asset
on initial application of IFRS 16
Effect of IFRIC agenda decision (Note 3)
Additions
Government grant
Disposals
Impairment loss
11,691,195
694,390
(27,357)
(3,891)
1,569,305
13,923,642
-
-
826,584
-
(6,663)
-
2,293,936
2,251,427
(454)
-
(2,177,235)
2,367,674
-
-
2,057,815
-
(4,138)
(34,769)
5,607,419
1,013,072
(45,942)
-
607,930
7,182,479
-
-
1,290,688
(500,000)
(65,867)
-
Transfer from construction in progress
2,029,358
(2,258,220)
228,862
TOTAL
RUB’000
19,592,550
3,958,889
(73,753)
(3,891)
-
23,473,795
-
-
-
-
-
-
329,591
329,591
276,461
174,706
-
(21,566)
-
-
276,461
4,349,793
(500,000)
(98,234)
(34,769)
-
Initial cost
Balance at 1 January 2018
Additions
Balance at 31 December 2018
Additions
Balance at 31 December 2019
Amortisation
Balance at 1 January 2018
Amortisation during the year
Balance at 31 December 2018
Amortisation during the year
Balance at 31 December 2019
Carrying amounts
Balance at 1 January 2018
Balance at 31 December 2018
Balance at 31 December 2019
GOODWILL
RUB’000
PATENTS AND
TRADEMARKS
RUB’000
SOFTWARE
AND WEBSITE
RUB’000
2,032,320
-
2,032,320
-
2,032,320
-
-
-
-
-
2,032,320
2,032,320
2,032,320
564,812
-
564,812
-
564,812
(294,265)
(74,675)
(368,940)
(71,206)
(440,146)
270,547
195,872
124,666
71,559
23,311
94,870
34,728
129,598
(38,949)
(25,600)
(64,549)
(29,404)
(93,953)
32,610
30,321
35,645
TOTAL
RUB’000
2,668,691
23,311
2,692,002
34,728
2,726,730
(333,214)
(100,275)
(433,489)
(100,610)
(534,099)
2,335,477
2,258,513
2,192,631
Balance at 31 December 2019
16,772,921
2,128,362
8,136,162
759,192
27,796,637
Depreciation
Balance at 1 January 2018
Depreciation during the year
Accumulated depreciation on disposals
Balance at 31 December 2018
Depreciation during the year
Accumulated depreciation on disposals
Balance at 31 December 2019
Carrying amounts
Balance at 1 January 2018
Balance at 31 December 2018
(1,190,198)
(302,981)
4,567
(1,488,612)
(352,764)
1,493
(1,839,883)
10,500,997
12,435,030
-
-
-
-
-
-
-
(3,078,703)
(786,739)
37,937
(3,827,505)
(929,957)
53,138
-
-
-
-
(4,268,901)
(1,089,720)
42,504
(5,316,117)
(125,831)
(1,408,552)
3,783
58,414
(4,704,324)
(122,048)
(6,666,255)
2,293,936
2,367,674
2,528,716
3,354,974
-
-
15,323,649
18,157,678
Balance at 31 December 2019
14,933,038
2,128,362
3,431,838
637,144
21,130,382
The government granted RUB500,000 thousand as support
for the construction of Tyumen hospital, while
RUB360,818 thousand was received in cash and the remaining
amount of RUB139,182 thousand was recognised as other
receivables (Note 15).
The amount of borrowing costs capitalised during the year
ended 31 December 2019 was RUB148,986 thousand
(RUB160,027 thousand for the year ended 31 December 2018).
Capitalisation rate for loans varied from 8.25% to 10.15%
for the year ended 31 December 2019 (from 8.25% to 10.15%
for the year ended 31 December 2018).
As at 31 December 2019 construction in progress mainly
includes construction costs of Lapino-2 hospital amounting
to RUB1,995,319 thousand.
The total net book value of property, plant and equipment
which is held as collateral for the loans and borrowings
amounted RUB10,086,859 thousand as at 31 December 2019
(31 December 2018: RUB8,756,360 thousand).
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.
JSC MC Avicenna
ARTMed Group (Centres of Reproductive Medicine,
located in Krasnoyarsk, Omsk, Novosibirsk and Barnaul)
LLC Medica-2
CJSC MK IDK
LLC Centre of Reproductive Medicine
Subsidiaries acquired in 2011
31 DECEMBER
2019
RUB’000
31 DECEMBER
2018
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
Goodwill has been allocated for impairment testing purposes
to 6 groups of cash generating units.
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.
The growth rate in terminal period is estimated to be 4%.
Discount after-tax rate applied to the cash flow projections
is 14%. The values assigned to the key assumptions represent
management’s assessment of future trends in the relevant
industry and have been based on historical data from both
external and internal sources.
The recoverable amount is determined as value in use.
The calculation of the fair 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.
No impairment of goodwill was recognised in 2019
and in 2018. 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.
110
111
// REPORT AND CONSOLIDATED FINANCIAL STATEMENTS
15. TRADE, OTHER RECEIVABLES
AND DEFERRED EXPENSES
CAPEX prepayments
Trade receivables net of impairment provision
Advances paid to suppliers
Deferred expenses
Loans receivable
Government grant receivable
Other receivables
Non-current portion
Current portion
NOTE
31 DECEMBER
2019
RUB’000
31 DECEMBER
2018
RUB’000
13
394,016
375,852
101,851
3,588
1,000
139,182
38,264
1,053,753
394,016
659,737
1,053,753
592,416
279,644
99,818
10,777
-
-
65,529
1,048,184
592,416
455,768
1,048,184
CAPEX prepayments represent capital expenditure
prepayments under contracts for construction works
and acquisition of plant and equipment.
Ageing analysis of trade receivables:
Not past due
Past due
GROSS AMOUNT
31 DECEMBER
2019
RUB’000
IMPAIRMENT
31 DECEMBER
2019
RUB’000
GROSS AMOUNT
31 DECEMBER
2018
RUB’000
IMPAIRMENT
31 DECEMBER
2018
RUB’000
308,174
164,039
472,213
(1,347)
(95,014)
(96,361)
259,657
115,366
375,023
-
(95,379)
(95,379)
In addition to the bad debt provision accrued as at
31 December 2019 the accounts receivable in the amount
of RUB1,375 thousand were written-off during the year
ended 31 December 2019 (year ended 31 December 2018:
RUB5,449 thousand).
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 2019.
WEIGHTED-
AVERAGE
LOSS RATE
8%
37%
65%
71%
GROSS
CARRYING
AMOUNT
RUB’000
27,413
4,997
4,291
90,915
127,616
LOSS
ALLOWANCE
RUB’000
(2,297)
(1,849)
(2,801)
(64,748)
(71,695)
CREDIT-
IMPAIRED
partly
partly
partly
partly
0-30 days past due
31-60 days past due
61-90 days past due
more than 91 days past due
Total
112
The following table provides information about the exposure
to credit risk and ECLs for trade and other receivables for legal
entities except insurance companies and amounts receivable
from related parties as at 31 December 2019.
0-30 days not past due
31-60 days past due
61-90 days past due
more than 91 days past due
Total
WEIGHTED-
AVERAGE
LOSS RATE
8%
11%
21%
86%
GROSS
CARRYING
AMOUNT
RUB’000
17,368
9,396
3,983
23,044
53,791
LOSS
ALLOWANCE
RUB’000
(1,347)
(1,026)
(846)
(19,714)
(22,933)
CREDIT-
IMPAIRED
partly
partly
partly
partly
Based on the analysis of the historical data for accounts
receivable from related parties amounted to RUB11,571
thousand and for accounts receivable from insurance
companies amounted to RUB279,235 thousand no provision
is accrued (the most part relates to accounts receivable
from government funds amounted to RUB145,721 thousand
for MHI services provided), due to it is not past due
and the credit risk is low, except for those which licences
had been revoked. Such provision of RUB1,733 thousand
was accrued as at 31 December 2019.
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.
16. CASH AND CASH EQUIVALENTS
AND SHORT-TERM DEPOSITS
Cash at bank and in hand
Bank deposits with maturity less than 3 months
TOTAL CASH AND CASH EQUIVALENTS
Other short-term bank deposits
TOTAL CASH AND CASH EQUIVALENTS AND SHORT-TERM DEPOSITS
CURRENCY:
RUB
USD
EUR
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.
31 DECEMBER
2019
RUB’000
31 DECEMBER
2018
RUB’000
569,399
2,492,049
3,061,448
506,916
3,568,364
476,530
2,238,951
2,715,481
-
2,715,481
31 DECEMBER
2019
RUB’000
31 DECEMBER
2018
RUB’000
3,053,314
515,002
48
3,568,364
2,307,350
406,983
1,148
2,715,481
113
// REPORT AND CONSOLIDATED FINANCIAL STATEMENTS
17. SHARE CAPITAL
Maturity of loans and borrowings:
NUMBER
OF SHARES
NOMINAL VALUE
USD
SHARE CAPITAL
RUB’000
SHARE CAPITAL
USD’000
Authorised
Issued and fully paid ordinary shares
1 January / 31 December
125,250,000
75,125,010
0.08
0.08
-
180,585
10,020
6,010
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.
RETAINED EARNINGS
Retained earnings include accumulated profits and losses
incurred by the Group.
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
19. LOANS AND BORROWINGS
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.
OTHER RESERVES
Other reserves include common control transactions reserve,
in the amount of RUB 682,873 thousand and capital
contribution reserve in the amount of RUB27,521 thousand.
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 2019.
Long-term liabilities
Bank loans
Lease liabilities
Short-term liabilities
Bank loans
Lease liabilities
Total loans and borrowings
31 DECEMBER
2019
RUB’000
31 DECEMBER
2018
RUB’000
5,297,081
567,263
1,151,176
82,727
7,098,247
4,586,532
-
1,078,743
-
5,665,275
Within one year
Between one and five years
More than 5 years
31 DECEMBER
2019
RUB’000
31 DECEMBER
2018
RUB’000
1,233,903
5,012,000
852,344
7,098,247
1,078,743
4,306,546
279,986
5,665,275
The total net book value of property, plant and equipment
which is held as collateral for the bank loans is disclosed
in Note 13.
The terms and debt repayment schedule of loans
are as follows:
EFFECTIVE
INTEREST
RATE
CURRENCY
MATURITY
FACE
VALUE
RUB’000
CARRYING
AMOUNT
RUB’000
FACE
VALUE
RUB’000
CARRYING
AMOUNT
RUB’000
31 DECEMBER
2019
31 DECEMBER
2018
Secured bank loan
Secured bank loan
Secured bank loan
Secured bank loan
Unsecured bank loan
Unsecured bank loan
Unsecured bank loan
Current lease liabilities
Non-current lease liabilities
RUB
RUB
RUB
RUB
RUB
RUB
RUB
RUB
RUB
8.45%
9.00%
8.25%
8.25%
8.45%
9.15%
14.20%
8.77%
2023
2024
2022
2026
2019
2020
2019
2020
8.83% 2021-2028
2,091,946
2,091,946
2,482,210
2,482,210
1,902,384
1,902,384
1,940,094
1,940,094
631,556
631,556
1,815,638
1,815,638
-
6,733
-
82,727
567,263
-
6,733
-
82,727
567,263
989,831
38,954
189,150
16,084
8,952
-
-
989,831
38,954
189,150
16,084
8,952
-
-
7,098,247
7,098,247
5,665,275
5,665,275
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.
114
115
// REPORT AND CONSOLIDATED FINANCIAL STATEMENTS RECONCILIATION OF MOVEMENTS
OF FINANCIAL LIABILITIES TO CASH FLOWS
ARISING FROM FINANCING ACTIVITIES
21. TRADE AND OTHER PAYABLES
31 DECEMBER
2019
31 DECEMBER
2018
Other payables to tax authorities
BANK LOANS
RUB’000
LEASE LIABILITIES
RUB’000
BANK LOANS
RUB’000
LEASE LIABILITIES
RUB’000
Balance at 1 January before adjustment
Adjustment on OB IFRS 16 Leases
Balance at 1 January adjusted
Proceeds from loans and borrowings
Repayment of loans and borrowings
Effect of IFRIC agenda decision (Note 3)
Additions of lease liabilities
Disposals of lease liabilities
Finance expenses accrued in PL
Finance expenses capitalised in PPE
Interest paid included in financing cash flows
Interest paid included in investment cash flows
Payments of lease liabilities
Balance at 31 December
5,665,275
-
5,665,275
1,831,205
(1,051,367)
-
-
-
389,241
148,986
(386,097)
(148,986)
-
6,448,257
-
329,591
329,591
-
-
276,461
174,706
(14,418)
41,931
-
-
-
(158,281)
649,990
4,570,447
-
4,570,447
2,055,583
(955,202)
-
-
-
323,586
160,027
(339,858)
(149,308)
-
5,665,275
-
-
-
-
-
-
-
-
-
-
-
-
-
-
20. CONTRACT LIABILITIES
Patient advances
including:
Contract liabilities after more than one year
Contract liabilities within one year
31 DECEMBER
2019
RUB’000
31 DECEMBER
2018
RUB’000
1,405,087
1,319,912
205,527
1,199,560
143,773
1,176,139
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
Accruals
Payables to employees
Taxes payable
CAPEX payables
Income tax liability
Other payables
Non-current portion
Current portion
31 DECEMBER
2019
RUB’000
31 DECEMBER
2018
RUB’000
657,233
498,006
439,689
355,715
175,621
123,762
1,929
30,422
2,282,377
547,014
1,735,363
2,282,377
526,548
285,042
390,810
320,940
159,591
101,933
2,191
34,382
1,821,437
435,809
1,385,628
1,821,437
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.
22. RELATED PARTY TRANSACTIONS
The following transactions were carried out with related parties:
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 2019 was RUB95,694 thousand (for the year
ended 31 December 2018: RUB74,416 thousand).
The remuneration of the members of the key management
personnel which remained unpaid as at 31 December 2019
was RUB23,208 thousand (31 December 2018:
RUB16,475 thousand).
The Group provided medical informational services to related
parties amounted to RUB51,922 thousand for the year ended
31 December 2019 (for the year ended 31 December 2018:
RUB1,364 thousand).
The receivables from medical informational services which
remained unpaid as at 31 December 2019 was RUB11,269
thousand (the payables as at 31 December 2018:
RUB939 thousand).
The Group received medical services from related parties
amounted to RUB30,118 thousand for the year ended
31 December 2019 (for the year ended 31 December 2018: nil).
The payables from medical services which remained
unpaid as at 31 December 2019 was RUB4,064 thousand
(as at 31 December 2018: nil).
The Group provided services to the key management
personnel under non-exclusive commercial concession
agreement for the year ended 31 December 2019 amounted
to RUB1,247 thousand (for the year ended 31 December 2018:
RUB1,329 thousand).
The receivables for the services under non-exclusive
commercial concession agreements which remained
unpaid as at 31 December 2019 was RUB302 thousand
(as at 31 December 2018: RUB336 thousand).
The Group purchased intangible assets from related parties
amounted to RUB4,508 thousand for the year ended
31 December 2019 (for the year ended 31 December 2018:
RUB3,900 thousand).
116
117
// REPORT AND CONSOLIDATED FINANCIAL STATEMENTS
22.2. DIRECTORS’ INTERESTS
23. FINANCIAL RISK MANAGEMENT
Trade and other receivables
The direct and indirect interests of the members of the
Board in titles of the Company as at 31 December 2019,
31 December 2018 and as at the date of signing these
consolidated financial statements are as follows, except
for Vitaly Ustimenko:
NAME
Mark Kurtser
Kirill Dmitriev
Simon Rowlands
TYPE
OF INTEREST
EFFECTIVE
INTEREST %
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.
Member of the Board of Directors Vitaly Ustimenko acquired
GDRs on 17 July 2019 and on 19 September 2019, as a result
the share of ownership increased to 0.0035%
of the Сompany’s share capital.
22.3. DIVIDENDS DECLARED TO RELATED
PARTIES
Dividends declared to the parent company MD Medical
Holding Limited amounted to RUB543,399 thousand
for the year ended 31 December 2019 (31 December 2018:
RUB306,140 thousand).
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:
Trade and other receivables
Cash and cash equivalents and short-term bank deposits excluding cash in hand
31 DECEMBER
2019
RUB’000
31 DECEMBER
2018
RUB’000
551,089
3,559,098
4,110,187
345,578
2,703,965
3,049,543
The Group’s exposure to credit risk is influenced mainly
by the individual 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.
Cash and cash equivalents and short-term
bank deposits
The Group held cash and cash equivalents and short-term
bank deposits excluding cash in hand of RUB3,559,098
thousand as at 31 December 2019 (31 December 2018:
RUB2,703,965 thousand) which represents its maximum credit
exposure on these assets. The cash and cash equivalents
and short-term bank deposits 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
2019
NOTE
RUB’000
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
Bank loans
Lease liabilities
CAPEX payables
Trade payables
Other payables
and accrued
expenses
19
19
21
21
649,990
123,762
498,006
1,658,680
9,378,695
6,448,257
7,828,558
267,768
1,355,763
1,857,487
3,724,021
897,866
123,762
498,006
22,770
45,537
498,006
112,725
117,341
320,940
78,225
-
-
-
-
-
623,519
324,090
-
-
1,894,014
712,288
393,785
122,518
363,672
301,751
11,242,206
1,546,369
1,940,498
2,097,346
4,408,633
1,249,360
31 DECEMBER
2018
NOTE
RUB’000
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
Bank loans
CAPEX payables
Trade payables
Other payables
and accrued
expenses
19
21
21
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
285,042
67,473
285,042
34,460
-
-
-
-
-
-
-
1,432,271
7,484,521
1,630,945
644,298
344,702
97,752
341,517
9,014,884
1,240,443
1,664,706
1,568,442
4,047,863
202,676
493,430
The Group has bank loans all of which contain debt covenants.
The breach of covenants may require the Group to repay
the loans earlier than indicated in the above table.
118
119
// REPORT AND CONSOLIDATED FINANCIAL STATEMENTS (III) MARKET RISK
Interest rate risk
The following significant exchange rates applied during the year:
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 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:
USD
EUR
GBP
AVERAGE RATE
REPORTING DATE SPOT RATE
2019
64.4435
72.2409
82.3666
2018
62.7078
73.9546
83.5756
2019
61.9057
69.3406
81.1460
2018
69.4706
79.4605
88.2832
Fixed rate instruments
Financial assets
Financial liabilities
31 DECEMBER
2019
RUB’000
31 DECEMBER
2018
RUB’000
2,999,965
(7,098,247)
(4,098,282)
2,238,951
(5,665,275)
(3,426,324)
Sensitivity analysis
A 10% weakening of the Russian Ruble against the above
currencies will result in the increase in profit and equity
of RUB51,389 thousand as at 31 December 2019 (31
December 2018: RUB40,416 thousand). A 10% strengthening
of the Russian Ruble would have an opposite impact.
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.
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.
In particular, fixed-rate financial liabilities include fixed rate
bank loans amounted to RUB6,448,257 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 an ongoing basis and acts accordingly.
The Group’s exposure to foreign currency risk was
as follows:
USD’000
EUR’000
GBP’000
USD’000
EUR’000
GBP’000
31 DECEMBER
2019
31 DECEMBER
2018
Assets
Cash in bank
Short-term bank
deposits
Trade and other
receivables
Liabilities
21,304
493,698
3,035
48
-
113
CAPEX payables
(1,933)
(1,226)
Trade and other
payables and accruals
Net exposure
-
516,104
(1,074)
(2,139)
-
-
-
-
(75)
(75)
406,983
1,148
-
1,904
-
168
(1,227)
(1,080)
-
-
-
-
(634)
407,026
(2,732)
(2,496)
(373)
(373)
Financial liabilities
Less: cash and cash equivalents
Net debt
Total equity
Net debt to equity ratio
NOTE
19
16
31 DECEMBER
2019
RUB’000
31 DECEMBER
2018
RUB’000
7,098,247
(3,061,448)
4,036,799
17,880,142
22.58%
5,665,275
(2,715,481)
2,949,794
15,998,948
18.44%
Following the adoption of IFRS 16 Leases net debt to adjusted
equity has increased from 18.44% to 22.58%. This is due
to the recognition of right-of-use assets and lease liabilities
on 1 January 2019. The comparative information has not been
restated.
The net debt including short-term bank deposits equals
to RUB3,529,883 thousand as at 31 December 2019
(31 December 2018: RUB2,949,794 thousand). The net
debt ratio adjusted by short-term bank deposits is 19.74%
(31 December 2018: 18.44%).
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
24. FAIR VALUES
As at 31 December 2019 and 31 December 2018 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
(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
120
121
// REPORT AND CONSOLIDATED FINANCIAL STATEMENTS
27. CAPITAL COMMITMENTS
Capital commitments mostly comprise of the obligations
under construction contracts in the amount of RUB1,229,503
thousand as at 31 December 2019 (31 December 2018:
RUB3,808,490 thousand).
28. SEGMENT REPORTING
The Group has one primary reporting segment: provision
of medical services. The Group evaluates the performance
and makes investments and strategic decisions based upon
a review of profitability for the Group as a whole and does
not group subsidiaries by geography and service lines during
the analysis of their performance.
29. EVENTS AFTER
THE REPORTING PERIOD
The Group opened a new clinic in Rostov-on-Don
on 15 January 2020 and in Moscow region on 2 March 2020.
On 15 January 2020 LLC Mother and Child Tyumen made
an early repayment of the VTB bank loan amounted
to RUB360,818 thousand.
On 17 March 2020 the Group received the part of government
grant of RUB83,479 thousand in cash which had been
previously recognised in other receivables as support
for the construction of Tyumen hospital (Note 15). As a result
at the date of signing these consolidated financial statements
the government grant received by the Group amounted
to RUB444,297 thousand.
On 20 March 2020 the Board of Directors recommended
the payment of RUB638,563 thousand as final dividends
for the year 2019 which corresponds to RUB8.5 per share.
In addition, the first months of 2020 have seen significant
global market turmoil triggered by the outbreak
of the coronavirus. Together with other factors, this has
resulted in a sharp decrease in the oil price and the stock
market indices, as well as a depreciation of the Russian
Rouble. These developments are further increasing the level
of uncertainty in the Russian business environment. The Group
is now in the process of analysing the effect.
On 31 January 2020 the Group completed renovation of PMC
and started rebranding its other hospitals.
No other significant events occurred after the reporting
period.
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 the characteristics of an emerging
market. The legal, tax and regulatory frameworks continue
development, but are subject to varying interpretations
and frequent changes which contribute together with other
legal and fiscal impediments to the challenges faced by entities
operating in the Russian Federation.
Starting in 2014, the United States of America, the European
Union and some other countries have imposed and
gradually expanded economic sanctions against a number
of Russian individuals and legal entities. The imposition
of the sanctions has led to 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. As a result, some Russian entities
may experience difficulties accessing the international
equity and debt markets and may become increasingly
dependent on state support for their operations. The longer-
term effects of the imposed and possible additional 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. The tax authorities
have the power to impose fines and penalties for tax arrears.
A tax year is generally open for review by the tax authorities
during three subsequent calendar years. Currently the tax
authorities are taking a more assertive and substance-based
approach to their interpretation and enforcement of tax
legislation.
26. NON-CONTROLLING INTERESTS
The only material non-controlling interest in the Group
is related to JSC 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 total 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
2019
RUB’000
3,050,292
1,212,761
60,638
31,000
5%
2018
RUB’000
3,082,997
1,218,074
60,904
40,000
5%
31 DECEMBER
2019
RUB’000
31 DECEMBER
2018
RUB’000
4,326,689
869,148
(186,413)
(693,891)
4,315,533
215,777
125,965
341,742
3,799,467
735,668
(164,094)
(667,382)
3,703,659
185,183
116,619
301,802
122
123
// REPORT AND CONSOLIDATED FINANCIAL STATEMENTS ToC_Report and Sparate Financial Statement
Report and separate
STATEMENTS
FINANCIAL
FOR THE YEAR ENDED 31 DECEMBER 2019
CONTENTS
126
OFFICERS, PROFESSIONAL ADVISORS AND REGISTERED OFFICE
127
MANAGEMENT REPORT
131
DIRECTORS’ RESPONSIBILITY STATEMENT
132
INDEPENDENT AUDITORS’ REPORT
136
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
137
STATEMENT OF FINANCIAL POSITION
138
STATEMENT OF CHANGES IN EQUITY
142
STATEMENT OF CASH FLOWS
144
NOTES TO THE FINANCIAL STATEMENTS
124
OFFICERS, PROFESSIONAL
ADVISORS AND REGISTERED
OFFICE
MANAGEMENT
REPORT
Board of Directors
Secretary
Secretary assistant
Independent Auditors
Registered Office
• Vladimir Mekler – Chairman
• Mark Kurtser
• Vitaly Ustimenko
• Kirill Dmitriev
• Nikolay Ishmetov (alternate director to Kirill Dmitriev)
• Simon Rowlands
• Tatyana Lukina (appointed on 6 December 2019)
• Tony Maher (appointed on 6 December 2019)
• Alsu Nazyrova (resigned on 7 May 2019)
• Liubov Malyarevskaya (resigned on 9 September 2019)
Menustrust Limited
Darya Alekseeva
KPMG Limited
15 Dimitriou Karatasou street, Anastasio Building,
6th floor, office 601, Strovolos,
2024, Nicosia, Cyprus
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 2019.
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 2019 and its financial position as at that date
are set out in the statement of profit or loss and other
comprehensive income on page 136 and in the statement
of financial position on page 137 of these financial statements.
Profit for the year ended 31 December 2019 amounted
to RUB1,035,820 thousand (2018: RUB907,382 thousand).
The total assets of the Company as at 31 December 2019 were
RUB10,938,589 thousand (31 December 2018: RUB10,738,334
thousand) and the net assets were RUB10,864,291 thousand
(31 December 2018: RUB10,639,935 thousand).
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 20 March 2020 the Board of Directors recommended
the payment of RUB638,563 thousand as final dividends
for the year 2019 which corresponds to RUB8.5 per share.
On 22 March 2019 the Board of Directors declared final
dividends for the year 2018 attributable to the owners
of the Company amounting to RUB800,081 thousand
(USD12,552 thousand), which corresponds to RUB10.65
(USD0.17) per share. The dividend distribution was
approved by the Annual General Meeting of the shareholders
on 23 April 2019. The dividends were paid on 25 June 2019.
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.
126
127
// REPORT AND SEPARATE FINANCIAL STATEMENTS
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.
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 14 and 16 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 2019, 31
December 2018 and as at the date of signing these financial
statements are as follows, except for Vitaly Ustimenko:
Member of the Board of Directors Vitaly Ustimenko acquired
GDRs on 17 July 2019 and on 19 September 2019, as a result
the share of ownership increased to 0.0035%
of the Сompany’s share capital.
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.
TYPE
OF INTEREST
EFFECTIVE
INTEREST %
Dr Alsu Nazyrova and Mrs Liubov Malyarevskaya stepped
down as members of the Board of Directors on 7 May 2019
and 9 September 2019 respectively.
NAME
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.
128
Tatyana Lukina and Tony Maher were appointed as Independent
Non-Executive Directors for the vacant positions in the Board
of Directors. The changes came into force on 6 December 2019.
The members of the Board of Directors who served
as at the date of signing of these financial statements,
are presented on page 126.
Refer to Note 13.1. of these financial statements
for the remuneration of the directors and other key
management personnel.
THE BOARD COMMITTEES
NOMINATION COMMITTEE
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
has been chaired by independent non-executive director
Tatiana Lukina since 6 December 2019, 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;
• aproval 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;
• 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.
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.
129
// REPORT AND SEPARATE FINANCIAL STATEMENTS DIRECTORS’ RESPONSIBILITY
STATEMENT
Each of the directors, whose names are listed below,
confirms that, to the best of their knowledge
• these 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 report taken as a whole;
• the adoption of the going concern basis for the preparation
of the financial statements continues to be appropriate
The Directors of the company responsible
for reporting as at the date of this announcement
are set out below:
based on the foregoing 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.
Vladimir Mekler
Mark Kurtser
Vitaly Ustimenko
Kirill Dmitriev
Simon Rowlands
Tatiana Lukina
Tony Maher
Chairman, non-executive Director
Executive Director
Non-executive Director
Non-executive Director
Non-executive Independent Director
Non-executive Independent Director
Non-executive Independent Director
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;
• 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.
A notice convening a general meeting must be sent to each
of the shareholders.
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.
TREASURY SHARES
During the year ended 31 December 2019, the Company
distributed the GDRs earlier acquired by the Company
to the third parties. No additional treasury shares were acquired.
EVENTS AFTER
THE REPORTING PERIOD
On 20 March 2020 the Board of Directors recommended
the payment of RUB638,563 thousand as final dividends
for the year 2019 which corresponds to RUB8.5 per share
In addition, the first months of 2020 have seen significant
global market turmoil triggered by the outbreak
of the coronavirus. Together with other factors, this has
resulted in a sharp decrease in the oil price and the stock
market indices, as well as a depreciation of the Russian
Rouble. These developments are further increasing the level
of uncertainty in the Russian business environment.
MEETINGS OF SHAREHOLDERS
No other significant events occurred after the reporting period.
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 at the meeting,
being a majority together holding not less than 95 per cent
in nominal value of the shares giving that right.
INDEPENDENT AUDITORS
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, 20 March 2020
130
131
// REPORT AND SEPARATE 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 accompanying financial statements
of the parent company MD Medical Group Investments Plc
(the “Company”)), which are presented on pages 136-161
and comprise the statement of financial position
as at 31 December 2019, 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 accompanying financial statements give
a true and fair view of the financial position of the Company
as at 31 December 2019, 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 throughout the period of our appointment
in accordance with the International Ethics Standards Board
for Accountants’ International Code of Ethics for Professional
Accountants (Including International Independence Standards)
(“IESBA Code”) together with the ethical requirements
in Cyprus that are relevant to our audit of the consolidated
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 INCORPORATING
THE MOST SIGNIFICANT RISKS OF MATERIAL
MISSTATEMENTS, INCLUDING ASSESSED
RISK OF MATERIAL MISSTATEMENTS DUE
TO FRAUD
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.
INVESTMENTS IN SUBSIDIARIES
Please refer to Note 8 of the financial statements (RUB10.240.465 thousand).
The key audit matter
How the matter was addressed in our audit
The carrying value of the investments in subsidiaries amounts
to RUB10.240.465 thousand and accounts for more than 90%
of the Company’s total assets as at 31 December 2019.
Significant judgement is required by the management
of the Company in determining whether there are any indications
for 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.
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 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.
With regards to the management report and the corporate
governance statement, our report in this regard 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 control
as the Board of Directors determines is necessary to enable
the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
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 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 prepared a challenger model using the market approach
of valuation to calculate the recoverable amount of investments
and compare the calculated amount to the carrying amount
to ensure that investment is not impaired as at the reporting date.
The model included such inputs as the Group enterprise multiple,
subsidiaries’ EBIDTA, net debt, cash and cash equivalents.
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 and those charged with governance
are 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
control.
132
133
// REPORT AND SEPARATE FINANCIAL STATEMENTS
• Obtain an understanding of internal control 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 control.
• 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 an
y significant deficiencies in internal control 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.
We describe these matters in our auditors’ report.
REPORT ON OTHER LEGAL
AND REGULATORY REQUIREMENTS
OTHER REGULATORY REQUIREMENTS
Pursuant to the requirements of Article 10(2) of European
Union (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 APPOINTMENT AND PERIOD OF ENGAGEMENT
OTHER MATTER
This report, including the opinion, has been prepared
for and only for the Company’s members as a body
in accordance with Article 10(1) of the EU Regulation 537/2014
and 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 to.
The engagement partner on the audit resulting
in this independent auditors’ report is George S. Prodromou.
George S. Prodromou, ACA
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
20 March 2020
We were appointed auditors on 10 July 2012 by the General
Meeting of the Company’s members to audit the financial
statements of the Company for the year ended 31 December
2009. Our total uninterrupted period of engagement having
been renewed annually by shareholders’ resolution, is 11 years
covering the periods ending 31 December 2009 to 31
December 2019.
CONSISTENCY OF AUDITORS’ REPORT
TO THE ADDITIONAL REPORT TO THE AUDIT COMMITTEE
We confirm that our audit opinion is consistent
with the additional report presented to the Audit Committee
dated 20 March 2020.
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 L.53(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 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 business and the Company’s environment obtained
in the course of the audit, we have not identified material
misstatements in the management report.
• In our opinion, the information included in the corporate
governance statement in accordance with the requirements
of subparagraphs (iv) and (v) of paragraph 2(a) of Article 151
of the Companies Law, Cap. 113, has been prepared
in accordance with the requirements of the Companies Law,
Cap, 113, and is consistent with the financial statements.
• In light of the knowledge and understanding of the Company
and its environment obtained in the course of the audit,
we are required to report if we have identified material
misstatements in the corporate governance statement
in relation to the information disclosed for items (iv) and (v)
of the subparagraph 2(a) of Article 151 of the Companies
Law, Cap. 113. We have not identified material
misstatements in this respect.
• 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.
134
135
// REPORT AND SEPARATE FINANCIAL STATEMENTS
STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE
INCOME
STATEMENT
OF FINANCIAL POSITION
For the year ended 31 December 2019
As at 31 December 2019
Dividend income
Revenue from branch operations
Revenue from advertising
Gross profit
Other income
Other expenses
Selling, general and administrative expenses
Operating profit
Finance income
Finance expenses
Net foreign exchange (loss) / gain
Net finance (expenses) / income
Profit before tax
Income tax
Profit for the year
Total comprehensive income for the year
NOTE
13.2
13.3
4
5
5
5
5
6
2019
RUB’000
1,326,401
129,920
5,599
1,461,920
687
(1,350)
(375,556)
1,085,701
18,934
(13,296)
(50,674)
(45,036)
1,040,665
(4,845)
1,035,820
1,035,820
2018
RUB’000
1,065,937
168,931
7,151
1,242,019
921
(11,940)
(387,774)
843,226
5,000
(1,551)
77,145
80,594
923,820
(16,438)
907,382
907,382
ASSETS
Property, plant and equipment
Intangible assets
Deferred tax assets
Investments in subsidiaries
Total non-current assets
Inventories
Trade, other receivables and deferred expenses
Short-term bank deposits
Cash and cash equivalents
Total current assets
Total assets
EQUITY
Share capital
Share premium
Reserves
Retained earnings
Total equity
LIABILITIES
Trade and other payables
Total current liabilities
Total equity and liabilities
NOTE
31 DECEMBER
2019
RUB’000
31 DECEMBER
2018
RUB’000
6
8
9
9
10
12
11,428
7,674
-
10,240,465
10,259,567
1,169
30,816
493,698
153,339
679,022
7,845
8,537
4,846
10,169,345
10,190,573
739
48,563
-
498,459
547,761
10,938,589
10,738,334
180,585
5,243,319
328,510
5,111,877
180,585
5,243,319
304,254
4,911,777
10,864,291
10,639,935
74,298
74,298
98,399
98,399
10,938,589
10,738,334
On 20 March 2020 the Board of Directors of MD Medical Group Investments Plc approved and authorised these report
and financial statements for issue.
The Notes on pages 144 to 161 are an integral part of these report and financial statements.
136
Vladimir Mekler
Chairman of the Board
of Directors
Mark Kurtser
Managing Director
Andrey Khoperskiy
Chief Financial Officer
137
// REPORT AND SEPARATE FINANCIAL STATEMENTS
STATEMENT
OF CHANGES IN EQUITY
For the year ended 31 December 2019
Balance at 1 January 2019
Total comprehensive income
Profit and other comprehensive income for the year
Contributions by and distributions to owners
Own shares sold
Other movements
Dividends declared
Total transactions with owners
Balance at 31 December 2019
Share premium is not available for distribution.
ATTRIBUTABLE TO OWNERS OF THE COMPANY
ATTRIBUTABLE TO OWNERS OF THE COMPANY
NOTE
8
7
SHARE
CAPITAL
RUB’000
180,585
-
-
-
-
-
180,585
TREASURY
SHARES
RUB’000
(3,697)
-
3,697
-
-
3,697
-
SHARE
PREMIUM
RUB’000
5,243,319
-
-
-
-
-
5,243,319
OTHER
RESERVES
RUB’000
307,951
-
-
20,559
-
20,559
328,510
RETAINED
EARNINGS
RUB’000
4,911,777
TOTAL
RUB’000
10,639,935
1,035,820
1,035,820
-
(35,639)
(800,081)
(835,720)
5,111,877
-
(15,080)
(800,081)
(811,464)
10,864,291
138
139
// REPORT AND SEPARATE FINANCIAL STATEMENTS
STATEMENT
OF CHANGES 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 is not available for distribution.
ATTRIBUTABLE TO OWNERS OF THE COMPANY
ATTRIBUTABLE TO OWNERS OF THE COMPANY
NOTE
7
SHARE
CAPITAL
RUB’000
180,585
-
-
-
-
-
180,585
TREASURY
SHARES
RUB’000
(4,544)
-
847
-
-
847
(3,697)
SHARE
PREMIUM
RUB’000
5,243,319
-
-
-
-
-
OTHER
RESERVES
RUB’000
RETAINED
EARNINGS
RUB’000
TOTAL
RUB’000
307,951
4,470,690
10,198,001
-
-
-
-
-
907,382
907,382
-
(15,545)
(450,750)
(466,295)
4,911,777
847
(15,545)
(450,750)
(465,448)
10,639,935
5,243,319
307,951
140
141
// REPORT AND SEPARATE FINANCIAL STATEMENTS
STATEMENT
OF CASH FLOWS
For the year ended 31 December 2019
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
Finance income
Other expense
Net foreign exchange loss / (gain)
Income tax
Impairment of investments in subsidiaries
Cash flows used in operations before working capital changes
Decrease / (increase) in trade and other receivables
Increase in inventories
Increase / (decrease) in trade and other payables
Cash flows used in operations
Dividends received
Net cash flows from operating activities
NOTE
2019
RUB’000
2018
RUB’000
1,035,820
907,382
-
10,981
8,330
847
1,330
3,121
13.2
(1,326,401)
(1,065,937)
5
5
5
6
8
13,296
(18,934)
1,350
50,674
4,845
-
(220,039)
20,639
(430)
11,958
(187,872)
1,326,401
1,138,529
1,551
(5,000)
-
(77,145)
16,438
6,874
(210,539)
(15,978)
(261)
(34,860)
(261,638)
1,065,937
804,299
NOTE
Cash flows from investing activities
Capital contributions to subsidiaries
Acquisition/construction of property, plant and equipment
Acquisition of intangible assets
Placing short-term bank deposits
Acquisition of NCI
Interest received
Net cash flows used in investing activities
Cash flows used in financing activities
Finance expenses paid
Lease payments
Payments on settlement of derivative
Proceeds from sale of treasury shares
Dividends paid
Net cash flows used in financing activities
Net decrease 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
9
9
2019
RUB’000
(126,210)
(1,610)
(7,467)
(493,698)
-
10,023
(618,962)
(1,870)
(9,333)
(11,426)
11,862
(788,977)
(799,744)
(280,177)
498,459
(64,943)
153,339
2018
RUB’000
(325,000)
(5,156)
(5,251)
-
(517,440)
5,000
(847,847)
(1,551)
-
-
-
(494,339)
(495,890)
(539,438)
931,791
106,106
498,459
142
143
// REPORT AND SEPARATE FINANCIAL STATEMENTS
NOTES TO THE
FINANCIAL STATEMENTS
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.
(B) BASIS OF MEASUREMENT
These report and financial statements have been prepared
under the historical cost convention.
(C) 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.
(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
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 2019
in order to obtain a proper understanding of the financial
position, the financial performance and the cash flows
of the Company and the Group.
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.
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.
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 Company 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 observable 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
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.
3. SIGNIFICANT ACCOUNTING
POLICIES
The accounting policies applied in these financial statements
are consistent with those followed in the Company’s financial
statements as at 31 December 2018 and for the year then
ended, except for initial application of IFRS16 Leases.
Other new standards and amendments applied for the first time
in 2019 did not impact these financial statements
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 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.
COMMON CONTROL TRANSACTIONS
A business combination involving entities or businesses
under common control is a business combination in which
all of the combining entities or businesses are ultimately
controlled by the same party or parties both before and after
the combination and the control is not transitory. Assets
or liabilities acquired under a common control transaction
are recognized at their book values (book value accounting).
Any difference between the consideration paid and the book
values is recognized directly in equity.
144
145
// REPORT AND SEPARATE FINANCIAL STATEMENTS
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 contract with a customer and comprises the invoiced
amount for services. The Company recognises revenue when
it transfers control over service to a customer.
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.
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 dividends is established,
either through Board resolution (for interim dividends)
or by the Company’s shareholders in the Annual General
Meeting (for final dividends).
TAX
FINANCIAL INSTRUMENTS
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
arises from goodwill or from the initial recognition (other than
146
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.
Trade receivables and debt securities issued are initially
recognised when they are originated.
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 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.
In assessing whether the contractual cash flows are solely
payments of principal and interest, the Company considers
the contractual terms of the instrument. This includes
assessing whether the financial asset contains a contractual
term that could change the timing or amount of contractual
cash flows such that it would not meet this condition.
In making this assessment, the Company considers:
A financial asset is measured at amortised cost if it meets
both of the following conditions and is not designated
as at FVTPL:
• it is held within a business model whose objective is to hold
assets to collect contractual cash flows; and
• its contractual terms give rise on specified dates to cash
flows that are solely payments of principal and interest
on the principal amount outstanding.
• contingent events that would change the amount
or timing of cash flows;
• terms that may adjust the contractual coupon rate,
including variable-rate features;
• prepayment and extension features; and
• terms that limit the Company’s claim to cash flows
from specified assets (e.g. non-recourse features).
FINANCIAL ASSETS – BUSINESS MODEL ASSESSMENT
The Company makes an assessment of the objective
of the business model in which a financial asset is held
at a portfolio level A because this best reflects the way
the business is managed and information is provided
to management. The information considered includes:
• the stated policies and objectives for the portfolio
and the operation of those policies in practice. These
include whether management’s strategy focuses on earning
contractual interest income, maintaining a particular interest
rate profile, matching the duration of the financial assets
to the duration of any related liabilities or expected cash
outflows or realising cash flows through the sale
of the assets;
• how the performance of the portfolio is evaluated
and reported to the Company’s management;
• the risks that affect the performance of the business model
(and the financial assets held within that business model)
and how those risks are managed;
• how managers of the business are compensated –
e.g. whether compensation is based on the fair value
of the assets managed or the contractual cash flows
collected; and
• the frequency, volume and timing of sales of financial assets
in prior periods, the reasons for such sales and expectations
about future sales activity.
Transfers of financial assets to third parties in transactions
that do not qualify for derecognition are not considered sales
for this purpose, consistent with the Company’s continuing
recognition of the assets.
FINANCIAL ASSETS – ASSESSMENT WHETHER
CONTRACTUAL CASH FLOWS ARE SOLELY PAYMENTS
OF PRINCIPAL AND INTEREST
For the purposes of this assessment, ‘principal’ is defined
as the fair value of the financial asset on initial recognition.
‘Interest’ is defined as consideration for the time value
of money and for the credit risk associated with the principal
amount outstanding during a particular period of time
and for other basic lending risks and costs (e.g. liquidity risk
and administrative costs), as well as a profit margin.
A prepayment feature is consistent with the solely payments
of principal and interest criterion if the prepayment amount
substantially represents unpaid amounts of principal
and interest on the principal amount outstanding, which may
include reasonable compensation for early termination
of the contract. Additionally, for a financial asset acquired
at a discount or premium to its contractual par amount,
a feature that permits or requires prepayment at an amount
that substantially represents the contractual par amount plus
accrued (but unpaid) contractual interest (which may also
include reasonable compensation for early termination)
is treated as consistent with this criterion if the fair value
of the prepayment feature is insignificant at initial recognition.
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.
147
// REPORT AND SEPARATE FINANCIAL STATEMENTS 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 for counterparties, including
banks, are determined based on historical data of relevant
probability of default and loss given default. Impairment
on cash and cash equivalents is measured on a 12-month
expected loss basis and reflects the short maturities
of the exposures. The Company considers that its cash
and cash equivalents have low credit risk based on the external
credit ratings of the counterparties.
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.
Based on the analysis of the historical data the accounts
receivable is presented by receivable from related parties
and no provision is accrued.
The Company has initially applied IFRS9 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 transferred 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.
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.
EQUITY-SETTLED SHARE-BASED PAYMENT
ARRANGEMENTS
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,
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.
STANDARDS AND INTERPRETATIONS NOT ADOPTED
BY THE EU AS AT 1 JANUARY 2019:
• Amendments to References to Conceptual Framework
in IFRS Standards;
• Definition of a Business (Amendments to IFRS3);
• Definition of Material (Amendments to IAS1 and IAS8);
• IFRS17 Insurance Contracts.
Management expects that the adoption of these standards
in future periods will not have a material effect on the financial
statements of the Company.
ADOPTION OF NEW AND REVISED INTERNATIONAL
FINANCIAL REPORTING STANDARDS
AND INTERPRETATIONS
NEW CURRENTLY EFFECTIVE REQUIREMENTS
The details of new significant accounting policies
and the nature and effect of the changes to previous
accounting policies are set out below.
IFRS16 LEASES
IFRS16 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.
IFRS16 replaced existing leases guidance, including IAS17
Leases, IFRIC4 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 COMPANY IS A LESSEE
The Company recognises new assets and liabilities for its
operating leases. The nature of expenses related to those
leases has changed because the Company has recognised
a depreciation charge for right-of-use assets and interest
expense on lease liabilities.
Previously, the Company 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 Company no longer recognises provisions
for operating leases that it assesses to be onerous. Instead,
the Company includes the payments due under the lease
in its lease liability.
There was no significant impact on the Company’s finance
leases.
On 26 November 2019 the IFRS Interpretations Committee
issued the IFRIC Update where Lease Terms of cancellable
or renewable leases had been discussed.
Previously, the Company used to recognise the assets
and liabilities for agreements concluded for 11-month period
as 11 months-long.
After the IFRIC Update the Company recognises the lease
assets and liabilities for the term which reflects the Company’s
reasonable expectation of the period during which
the underlying asset will be used using the broader economics
of the contract. The Company recognises the contracts
as enforceable for at least the period of expected utility
of the leasehold improvements.
Non-recoverable VAT is excluded from lease accounting as VAT
payments are not made to lessor in exchange for the right
to use an underlying asset. Instead, they are levies imposed
by the government and are in the scope of IFRIC21 Levies
and are recognised when they are due under the tax law (when
the invoice is issued). They are expensed in Statement of profit
or loss and other comprehensive income immediately
at the moment they are recognised.
148
149
// REPORT AND SEPARATE FINANCIAL STATEMENTS The Company recognised additional lease liabilities
RUB6,820 thousand as at 1 January 2019.
At commencement or on modification of a contract that
contains a lease component, the Company allocates
the consideration in the contract to each lease component
on the basis of its relative stand-alone prices. However,
for the leases of property the Company has elected
not to separate non-lease components and account
for the lease and non-lease components as a single lease
component.
The Company recognises a right-of-use asset and a lease
liability at the lease commencement date. The right-of-use
asset is initially measured at cost, which comprises the initial
amount of the lease liability adjusted for any lease payments
made at or before the commencement date, plus any initial
direct costs incurred and an estimate of costs to dismantle
and remove the underlying asset or to restore the underlying
asset or the site on which it is located, less any lease incentives
received.
The right-of-use asset is subsequently depreciated using
the straight-line method from the commencement date
to the end of the lease term, unless the lease transfers
ownership of the underlying asset to the Company by the end
of the lease term or the cost of the right-of-use asset reflects
that the Company will exercise a purchase option. In that case
the right-of-use asset will be depreciated over the useful life
of the underlying asset, which is determined on the same basis
as those of property and equipment. In addition, the right-of-
use asset is periodically reduced by impairment losses, if any,
and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value
of the lease payments that are not paid at the commencement
date, discounted using the interest rate implicit in the lease
or, if that rate cannot be readily determined, the Company’s
incremental borrowing rate. Generally, the Company uses its
incremental borrowing rate as the discount rate.
The Company determines its incremental borrowing rate
by obtaining interest rates from various external financing
sources and makes certain adjustments to reflect the terms
of the lease and type of the asset leased.
Lease payments included in the measurement of the lease
liability comprise the following:
• fixed payments, including in-substance fixed payments;
• variable lease payments that depend on an index
or a rate, initially measured using the index or rate
as at the commencement date;
• amounts expected to be payable under a residual value
guarantee; and
• the exercise price under a purchase option that
the Company is reasonably certain to exercise, lease
payments in an optional renewal period if the Company
is reasonably certain to exercise an extension option,
and penalties for early termination of a lease unless
the Company is reasonably certain not to terminate early.
The lease liability is measured at amortised cost using
the effective interest method. It is remeasured when there
150
is a change in future lease payments arising from a change
in an index or rate, if there is a change in the Company’s
estimate of the amount expected to be payable under
a residual value guarantee, if the Company changes its
assessment of whether it will exercise a purchase, extension
or termination option or if there is a revised in-substance
fixed lease payment.
When the lease liability is remeasured in this way,
a corresponding adjustment is made to the carrying amount
of the right-of-use asset, or is recorded in profit or loss
if the carrying amount of the right-of-use asset has been
reduced to zero.
The Company presents right-of-use assets that do not meet
the definition of investment property in ‘property, plant
and equipment’ and lease liabilities in ‘loans and borrowings’
in the statement of financial position.
The Company used a recognition exеmption 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 COMPANY IS A LESSOR
There was no significant impact on other leases in which
the Company is a lessor.
TRANSITION
The Company applied IFRS16 using the modified retrospective
approach, under which the cumulative effect of initial
application is recognised in retained earnings at 1 January
2019 without any effects on retained earnings in accordance
with paragraph C8 (b) (ii). The Company recognised a lease
liability at the date of initial application for leases previously
classified as an operating lease applying IAS17. The Company
measured 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 IFRS16
is recognised as an adjustment to the opening balance
of assets and liabilities at 1 January 2019, with no restatement
of comparative information.
IMPACT
ON TRANSITION
Right-of-use assets – property,
plant and equipment
Lease liabilities
1 JANUARY 2019
RUB’000
6,820
(6,820)
A number of other new standards and amendments
to the existing standards are effective from 1 January 2019
but they do not have a material effect on the Company’s
financial statements, except those described above.
4. SELLING, GENERAL
AND ADMINISTRATIVE EXPENSES
Payroll and related social taxes
Call center services
Legal and professional expenses
IT support
Advertising
Licences
Independent auditors’ remuneration
Depreciation
Other expenses
The remuneration of the independent auditors includes
an amount of RUB18,244 thousand regarding audit services,
RUB495 thousand regarding audit related services
and an amount of RUB499 thousand regarding tax services.
5. NET FINANCE (EXPENSES) /
INCOME
Finance income
Bank interest received
Other finance income
Net foreign exchange gain
Finance expenses
Bank charges
Interest on leases
Impairment of trade and other receivables
Other impairment provision
Net foreign exchange loss
Net finance (expenses) / income
2019
RUB’000
195,534
37,412
24,714
24,389
31,956
12,912
19,238
10,981
18,420
2018
RUB’000
166,634
68,957
35,202
32,198
24,336
18,554
18,521
1,373
21,999
375,556
387,774
2019
RUB’000
2018
RUB’000
10,023
8,911
-
(1,409)
(435)
(26)
(11,426)
(50,674)
(45,036)
5,000
-
77,145
(1,551)
-
-
-
-
80,594
151
// REPORT AND SEPARATE FINANCIAL STATEMENTS
6. INCOME TAX
Reversal of tax provision
Deferred tax
Charge for the year
Reconciliation between profit before taxation and income tax expense:
Accounting profit before tax
Tax calculated at the applicable tax rates
Reversal of tax provision
Tax effect of allowances and income not subject to tax
Current-year losses for which no deferred tax asset is recognised
Tax as per statement of comprehensive income – charge
2019
RUB’000
-
(4,845)
(4,845)
2019
RUB’000
1,040,665
(208,133)
-
265,280
(61,992)
(4,845)
2018
RUB’000
19,354
(35,792)
(16,438)
2018
RUB’000
923,820
(184,764)
19,354
213,187
(64,216)
(16,438)
The corporation tax rate is 20% (2018: 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 2019 deferred tax asset relating to tax
losses carried forward in the amount of RUB219,578 thousand
(31 December 2018: RUB157,586 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.
7. DIVIDENDS
On 20 March 2020 the Board of Directors recommended
the payment of RUB638,563 thousand as final dividends
for the year 2019 which corresponds to RUB8.5 per share.
On 22 March 2019 the Board of Directors declared final
dividends for the year 2018 attributable to the owners
of the Company amounting to RUB800,081 thousand
(USD12,552 thousand), which corresponds to RUB10.65
(USD0.17) per share. The dividend distribution was
approved by the Annual General Meeting of the shareholders
on 23 April 2019. The dividends were paid on 25 June 2019.
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.
152
8. INVESTMENTS IN SUBSIDIARIES
Balance at 1 January
Purchase of NCI
Capital contribution
Effect of transfer of shares of LLC MD Project 2010
to LLC Khaven as a capital contribution
Effect of Ivicend liquidation
Impairment of investments in subsidiaries
Balance at 31 December
The details of the subsidiaries are as follows:
NAME
COUNTRY
OF INCORPORATION
ACTIVITIES
JSC 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
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 ompany
31 DECEMBER
2019
RUB’000
31 DECEMBER
2018
RUB’000
10,169,345
-
86,200
457,062
(472,142)
-
9,277,456
533,753
365,010
-
-
(6,874)
10,240,465
10 ,169,345
31 DECEMBER
2019
EFFECTIVE
HOLDING%
31 DECEMBER
2018
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
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
153
// REPORT AND SEPARATE FINANCIAL STATEMENTS
31 DECEMBER
2019
EFFECTIVE
HOLDING%
31 DECEMBER
2018
EFFECTIVE
HOLDING%
The Company was merged with its subsidiary Ivicend Holding
Ltd as of 1st April 2019 with the surviving entity being
the parent. The following table summarises the impacts
on the Company’s financial statements.
NAME
COUNTRY
OF INCORPORATION
ACTIVITIES
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
оf 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
LLC MD Finance
Russian Federation
Management company
LLC Mother and Child Vladikavkaz
Russian Federation
Medical services
LLC Mother and Child Krasnodar
Russian Federation
Medical services
LLC Mother and Child Rostov-on-Don
Russian Federation
Medical services
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
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
-
-
-
-
-
-
-
-
-
INVESTMENT
OF MD MEDICAL GROUP
INVESTMENT PLC
IN IVICEND HOLDING LTD
BALANCE
OF IVICEND
HOLDING LTD
ADJUSTMENT
TO MD MEDICAL GROUP
INVESTMENT PLC
2,813,293
2,813,293
-
-
-
-
-
-
-
-
-
2,341,151
-
2,157,822
162,614
20,715
4,261
1,470
30
962,240
1,417,311
(35,639)
(472,142)
(2,813,293)
2,157,822
162,614
20,715
4,261
1,470
-
-
(433,712)
(35,639)
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” for the year ended 31 December 2018.
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 tr ansfer of shares
and RUB517,440 thousand as at the date of the payment.
1 APRIL 2019
TOTAL ASSETS
Investments in subsidiaries
Ivicend Holding Ltd.
LLC Mother and Child Siberia
LLC Nika
LLC Stroy Vector Pluss
Cash and cash equivalents
TOTAL LIABILITIES
Trade and other payables
TOTAL EQUITY
Share capital
Share premium
Other reserves
Retained Earnings
The Company increased the authorised capital of its
subsidiaries LLC Mother and Child Kazan in the amount
of RUB85,000 thousand in June 2019 and LLC Mother
and Child Yaroslavl in the amount of RUB1,200 thousand
in October 2019.
During 2019 the Company LLC Khaven increased its
authorised/issued share capital allocating new share capital
issued to the Company. Company’s liability for the new shares
issued and allotted was settled in full by means of contribution
of the 99.99% of LLC MD Project 2010 to LLC Khaven.
The amount of share capital issued per resolution was
RUB4,567,891 thousand and the carrying amount
of the investment in LLC MD Project 2010 was RUB4,110,829
thousand. The transfer of 99.99% of the share capital
of LLC MD Project 2010 to LLC Khaven represents a common
control transaction as both, the Company and LLC Khaven,
are ultimately controlled by the same party.
On this basis the difference between the liability for the issue
of the share capital and the carrying amount/book value
contributed to settlesin full the aforementioned liability,
of RUB457,062 thousand, is recognised in equity.
154
155
// REPORT AND SEPARATE FINANCIAL STATEMENTS
9. CASH AND CASH EQUIVALENTS
AND SHORT-TERM DEPOSITS
12. TRADE AND OTHER PAYABLES
Cash at bank and in hand
Bank deposits with maturity less than 3 months
TOTAL CASH AND CASH EQUIVALENTS
Other short-term bank deposits
TOTAL CASH AND CASH EQUIVALENTS AND SHORT-TERM DEPOSITS
CURRENCY:
USD
RUB
EUR
31 DECEMBER
2019
RUB’000
31 DECEMBER
2018
RUB’000
16,339
137,000
153,339
493,698
647,037
1,970
496,489
498,459
-
498,459
31 DECEMBER
2019
RUB’000
31 DECEMBER
2018
RUB’000
501,781
145,208
48
647,037
385,000
113,436
23
498,459
The exposure of the Company to credit risk, currency risk
and impairment losses in relation to cash and cash equivalents
is reported in Note 14 of the financial statements.
10. SHARE CAPITAL
Authorised
125,250,000
Issued and fully paid ordinary shares 1 January / 31 December
75,125,010
0.08
0.08
-
180,585
10,020
6,010
NUMBER
OF SHARES
NOMINAL VALUE
USD
SHARE CAPITAL
RUB’000
SHARE CAPITAL
USD’000
11. 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.
156
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 also include the results of common control
transactions recognised in equity and the ‘gains/loss’
from mergers.
Accruals
Lease payables
Other payables
Other payables
31 DECEMBER
2019
RUB’000
31 DECEMBER
2018
RUB’000
37,634
4,056
32,608
74,298
30,561
-
67,838
98,399
The exposure of the Company to liquidity risk in relation to trade and other payables is reported in Note 14 of the financial
statements.
13. RELATED PARTY TRANSACTIONS
As at 31 December 2019, 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:
13.1. 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 2019 was RUB61,535 thousand (for the year
ended 31 December 2018: RUB48,920 thousand).
The remuneration of the members of the key management
personnel which remained unpaid as at 31 December 2019
was RUB17,967 thousand (31 December 2018: RUB11,497
thousand).
The Company did not provide advertising services to the key
management personnel during the year ended 31 December
2019 amounted (for the year ended 31 December 2018:
RUB1,329 thousand).
13.2. TRANSACTIONS WITH SUBSIDIARY COMPANIES
Dividends received
2019
RUB’000
1,326,401
1,326,401
2018
RUB’000
1,065,937
1,065,937
Ivicend Holding Ltd, a subsidiary of the Company, was
entered into members’ voluntary liquidation in 2019
and the investments that were previously held by Ivicend
Holding Ltd were distributed to the Company. The relevant
information is disclosured in Note 8.
During 2019 there was the transfer of 99.99% of the share
capital of LLC MD Project 2010 to LLC Khaven. The relevant
information is disclosured in Note 8.
The Company recognised the impairment of LLC Fimedlab
during 2018. The relevant information is shown in Note 8.
13.3. REVENUE FROM SUBSIDIARIES FOR BRANCH
OPERATIONS
During the year the Company received revenue from
subsidiaries for branch operations amounted to RUB129,920
thousand (2018: RUB168,931 thousand) which relates
to licences, advertising, IT support and call center expenses
recharged to its subsidiaries. The relevant expenses
are presented in Note 4.
157
// REPORT AND SEPARATE FINANCIAL STATEMENTS
13.4. DIRECTORS’ INTERESTS
The direct and indirect interests of the members of the
Board in titles of the Company as at 31 December 2019,
31 December 2018 and as at the date of signing these financial
statements are as follows, except for Vitaly Ustimenko:
NAME
Mark Kurtser
Kirill Dmitriev
Simon Rowlands
TYPE
OF INTEREST
EFFECTIVE
INTEREST %
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.
Member of the Board of Directors Vitaly Ustimenko acquired
GDRs on 17 July 2019 and on 19 September 2019,
as a result the share of ownership increased to 0.0035%
of the Сompany’s share capital.
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 11).
13.5. RECEIVABLES FROM / (PAYABLES TO) SUBSIDIARY COMPANIES
Receivables from subsidiary companies
Payables to subsidiary companies
2019
RUB’000
24,585
(78)
2018
RUB’000
39,731
(40,042)
13.6. DIVIDENDS DECLARED TO RELATED PARTIES
Dividends declared to the parent company MD Medical
Holding Limited amounted to RUB543,399 thousand
for the year ended 31 December 2019 (31 December 2018:
RUB306,140 thousand).
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.
14. FINANCIAL RISK MANAGEMENT
(I) CREDIT RISK
FINANCIAL RISK FACTOR
The Company 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.
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.
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 and cash equivalents and short-term bank deposits excluding cash in hand
31 DECEMBER
2019
RUB’000
31 DECEMBER
2018
RUB’000
27,094
647,037
674,131
43,747
498,459
542,206
The Company held cash and cash equivalents and short-term
bank deposits excluding cash in hand of RUB647,037
thousand at 31 December 2019 (31 December 2018:
RUB498,459 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
2019
NOTE
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
Lease liabilities
Trade and other
payables
4,056
4,200
1,120
3,080
13
74,298
74,298
74,298
-
-
-
-
-
-
-
31 DECEMBER
2018
NOTE
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
Trade and other
payables
13
98,399
98,399
98,399
-
-
-
-
(III) MARKET RISK
Interest rate 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.
Fixed rate financial assets
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.
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
9
2019
RUB’000
784,037
2018
RUB’000
496,489
158
159
// REPORT AND SEPARATE FINANCIAL STATEMENTS
Until the Company obtains 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 to the challenges faced
by entities operating in the Russian Federation.
Starting in 2014, the United States of America, the European
Union and some other countries have imposed and gradually
expanded economic sanctions against a number of Russian
individuals and legal entities. The imposition of the sanctions
has led to 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.
As a result, some Russian entities may experience difficulties
accessing the international equity and debt markets and may
become increasingly dependent on state support
for their operations. The longer-term effects of the imposed
and possible additional 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. The tax authorities have
the power to impose fines and penalties for tax arrears. A tax
year is generally open for review by the tax authorities during
three subsequent calendar years. Currently the tax authorities
are taking a more assertive and substance-based approach
to their interpretation and enforcement of tax legislation.
17. EVENTS AFTER
THE REPORTING PERIOD
On 20 March 2020 the Board of Directors recommended
the payment of RUB638,563 thousand as final dividends
for the year 2019 which corresponds to RUB8.5 per share.
In addition, the first months of 2020 have seen significant
global market turmoil triggered by the outbreak
of the coronavirus. Together with other factors, this has
resulted in a sharp decrease in the oil price and the stock
market indices, as well as a depreciation of the Russian
Rouble. These developments are further increasing the level
of uncertainty in the Russian business environment.
No other significant events occurred after the reporting period.
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:
USD’000
EUR’000
GBP’000
USD’000
EUR’000
GBP’000
31 DECEMBER
2019
31 DECEMBER
2018
8,083
493,698
1,326
-
503,107
48
-
338
-
386
-
-
-
385,000
-
318
(75)
(75)
-
385,318
23
-
-
-
23
-
-
-
(373)
(373)
Assets
Cash at bank
Short-term bank
deposits
Trade and other
receivables
Liabilities
Trade and other
payables and accruals
Net exposure
The following significant exchange rates applied during the year:
USD
EUR
GBP
AVERAGE RATE
REPORTING DATE SPOT RATE
2019
64.4435
72.2409
82.3666
2018
62.7078
73.9546
83.5756
2019
61.9057
69.3406
81.1460
2018
69.4706
79.4605
88.2832
SENSITIVITY ANALYSIS
15. FAIR VALUES
A 10% weakening of the Russian Ruble against the above
currencies will result in the increase in profit and equity
of RUB50,341 thousand as at 31 December 2019
(31 December 2018: RUB38,496 thousand).
A 10% strengthening of the Russian Ruble would have
an opposite impact.
As at 31 December 2019 and 31 December 2018 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.
CAPITAL MANAGEMENT
16. CONTINGENT LIABILITIES
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.
(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.
160
161
// REPORT AND SEPARATE FINANCIAL STATEMENTS
sustainable
DEVELOPMENT
Sustainable
DEVELOPMENT
FOR THE YEAR ENDED 31 DECEMBER 2019
CONTENTS
172
ANNEX 1. GRI STANDARD DISCLOSURE
175
ANNEX 2. SUSTAINABLE DEVELOPMENT RISK MANAGEMENT
177
177
ANNEX 3. INFORMATION ON THE GENDER AND AGE OF THE BOARD OF DIRECTORS
AS OF 31 DECEMBER 2019
ANNEX 4. INFORMATION ON THE GENDER AND AGE OF EMPLOYEES
AS OF 31 DECEMBER 2019
178
ANNEX 5. INFORMATION ON THE STAFF
179
ANNEX 6. SANPIN 2.1.7.2790–10 SANITARY AND EPIDEMIOLOGICAL REQUIREMENTS
FOR TREATING MEDICAL WASTE
180
ANNEX 7. MAIN METHODS FOR OBTAINING INFORMATION
162
SUSTAINABLE DEVELOPMENT
MATRIX OF MATERIAL TOPICS
MD MEDICAL GROUP’S STAKEHOLDERS AND THEIR EXPECTATIONS
MD MEDICAL GROUP’S STAKEHOLDERS AND THEIR EXPECTATIONS
Understanding the importance and value of social
responsibility, the Company strives to integrate the principles
of sustainable development in the long-term business strategy
and everyday activity. For that reason, since 2017, MD Medical
Group’s Annual Report includes a separate section
on sustainable development, and this year report is no
exception. The Company’s Annual Report 2019, particularly
the sustainable development section, was prepared
in accordance to the GRI Standards (Core option) and
the EU’s 2014/95/EU directive 1.
This section of the report outlines key benchmarks and activity
results of the MD Medical Group’s hospitals and clinics
in sustainable development practices, specifically highlighting
their social and environmental performance. Additionally,
the report compares the key indicators of electricity use,
heating and water consumption with the respective indicators
of the previous reporting period to demonstrate and analyze
trends in the Company’s environmental performance 2.
The information provided in the sustainable development
section covers the reporting timeframe from 1 January
to 31 December 2019. The clinics and hospitals,
the performance indicators of which are reflected
in the sustainable development section, were consolidated
according to the IFRS 10 requirements 3 unless stated
otherwise.
IDENTIFYING MATERIAL TOPICS
The process of materiality identification for the Annual Report
2019 took place in three steps.
First, any significant changes that happened at the
MD Medical Group over the 2019 reporting period were
examined. Furthermore, material topics applied in the
Annual Report 2018 were analyzed with focus on interaction
with stakeholders, supply chain and environment.
When preparing the report, a group of experts was formed.
The responsibility of the team was to interact with employees
of the Company’s functional divisions, recording their opinions
about material topics and relevant information, that were
further included in this section of the report.
Second, a benchmark analysis of best practices in sustainable
development among the largest companies in the industry was
carried out. The purpose of this exercise was to identify
indicators that companies disclose in their annual reports
and understand common approaches to the report structuring.
Third, a group of experts carried out the consolidation
of collected information and analysis of disclosers selected
for the sustainable development section and further evaluated
them using quantitative methods. As the result the matrix
of material topics was created.
i
i
s
n
o
s
c
e
d
&
s
t
n
e
m
s
s
e
s
s
a
l
r
e
d
o
h
e
k
a
t
s
n
o
e
c
n
e
u
l
f
n
I
Diversity and equal
opportunities
Training and
education
Employment
Service quality
Anti-corruption
Product and service
labelling
Non-discrimination
Energy
Waste management
Water
10,5
10
9,5
9
8,5
8
7,5
7
6,5
6
6
6,5
7
7,5
8
8,5
9
9,5
10
10,5
Significance of economic, environmental, & social impacts
economic
impact
high-quality
medical care
social
impact
environmental
impact
The material topics presented at the graph are disclosed
in the sustainable development section and throughout other
chapters of the Annual Report 2019.
The sustainable development section discloses one material
topic, Quality of Service Provision, that is not covered
by the GRI Standards but is considered critical for MD Medical
Group. Both internal and external stakeholders identified
this topic as highly important since it reflects the level
of costumer satisfaction. Indeed, ensuring that patients receive
the Highest Quality of Care is one of the key priorities within
the MD Medical Group. Therefore, the report discloses several
indicators that MD Medical Group introduced in its previous
Annual Report 4, including Development and extension
of the list of services (MD1), Annual capacity of the hospitals
(MD2), Development of hi-tech medical care (MD3), Highly-
qualified personnel (MD4), Dialogue with patients (MD5).
INTERACTION WITH STAKEHOLDERS
During the preparation of the report all business functions
of MD Medical Group were analyzed to identify key
stakeholders. Furthermore, benchmark analysis of medical
health care practices was carried out, as well as the Company’s
both internal and external impact were evaluated.
As the outcome of such exercise, the following list of key
stakeholders was compiled:
• Patients and their families
• Employees
• Suppliers
• Shareholders and investors
• Government authorities
• Mass media
MD Medical Group interacts with all stakeholders on a regular
basis to ensure constant monitoring of quality of provided
services and improve the effectiveness of its business
activities.
1 Please note that the sustainable development section of the Annual Report 2019 is available online on the MD Medical Group official website, www.mcclinics.com
2 Annex 7 ‘Main methods for obtaining the information’
3 International Financial Reporting Standards 10 – Consolidated Financial Statements
4 2018 Annual Report, p. 161
Clients
(entire families)
Employees
Suppliers
• Quick and
• Professional
easy access
to high quality
services
growth
• Career
opportunities
• Lucrative
compensation
• Business
sustainability
• Procurement
transparency
Shareholders
and Investors
• Transparent
and openess
• Positive
contribution
of business
• Business
sustainability
• Financial
results
Government
authorities
• Compliance
•
Mass media
• 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
Interactions with patients take central place within MD Medical
Group activities. For that reason, during 2019 MD Medical
Group traditionally arranged a significant number of topical
events aimed to increase social awareness about various
health issues, inform potential patients of the range of medical
services and increase their availability. Indeed, such public
events are dedicated to draw attention to topics
and procedures like obstetrics (pregnancy planning
and delivery), treatment of infertility and IVF, and pediatrics.
Importantly, the role of speakers at such events is played
by professionals and doctors of MD Medical Group.
Although the patients feedback system did not undergo
significant changes in 2019, MD Medical Group developed
a Strategy on the feedback system maintenance.
The Company has already started realizing goals
of the Strategy and intends to fully achieve them in 2020.
Indeed, the Company has initiated the development
of the loyalty program through SMS messages and emails.
In addition, the Company embarked the broader development
of MD Medical Group’s web-site by starting to introduce
the feedback (contact) form on web pages of all clinics
and hospitals and establishing the operating procedure
for the patients’ feedbacks processing the way that all
the target facilities can be involved. Over the reporting periods,
all feedback and complaints received from patients, were
processed and taken into account, patients received responses
when were required.
During the 2019 reporting period the Company organized
approximately 122 Open Days for the public at hospitals
and clinics of the group, which were attended by more than
4,462 visitors overall. Additionally, MD Medical Group
participated in more than 35 events organized by the company’s
partners covering more than 1,549 attendees. Furthermore,
striving to extend the application of digital communication
channels and increase access to the information, MD Medical
Group held 11 webinars online events in 2019. Public events
arranged by MD Medical Group serve as an opportunity
for people to bring their concerns and consult with specialists
and receive needed medical assistance.
Throughout 2019, MD Medical Group performed 9,760 IVF
procedures under the Mandatory Health Insurance (MHI)
and provided around 1,003 patients with high-technology
medical assistance.
The Company is keeping a strong trajectory towards improving
medical care services, including application of high technology.
In 2019 MD Medical Group continued developing
and improving the practice of services distribution via its
mobile application and official web-site, launched in 2018.
The purpose of the mobile app is to accelerate and increase
the interaction of patients with the Company’s personnel,
as well as increase social awareness about its services 1.
The list of the functions provided by the mobile application
are as follows:
• Quickly contact a clinic’s employees
• Book a doctor appointment online
1 In addition, a web version of the mobile application was developed
164
165
// SUSTAINABLE DEVELOPMENT
• Receive results of medical tests
• Make payments (prepayments) and replenish deposit
agreements
Another achievement in 2019 was the introduction of email
newsletters and notifications as an additional way to inform
MD Medical Group’s patients. That way, patients can receive
guidelines and instructions on how to prepare for a medical
procedure they booked.
Finally, since 2017 MD Medical Group has been employing
several feedback mechanisms aimed to monitor patients’
perception of services quality, particularly a customer
satisfaction score (CSAT) of consultations over the telephone
and hot line performance. CSAT is measured by processing
three main indicators of customers’ feedback:
• Speed and convenience of a consultation
• Completeness and comprehensiveness
• Politeness of an employee providing consultation
These indicators are recorded and analyzed on a regular basis,
as a patient might leave their feedback at any stage
of a consultation process.
Hot line is another mechanism a patient can use to leave
their feedback about services received at MD Medical Group,
either by filling a form on the website, sending an email
to quality@ mcclinics.ru or through an operator of the contact
center 1.
INTERACTION WITH EMPLOYEES
Effective communication with employees on all organizational
levels is one of the key priorities of MD Medical Group.
As an expression of its commitment to maintain the culture
of active interactions with personnel, clinics and hospitals hold
HR MANAGEMENT STRUCTURE
five-minute conferences every day. The purpose of such
all-staff meetings is to discuss events and results of the
previous day. Separate categories of the Group’s professionals
organize additional meetings during a the week, such
as doctors’ conferences, head nurses’ conferences and weekly
meetings with directors general. The Company is also
expanding a communication mechanism to apply various
online platforms such as Skype to build an effective interaction
system with its regional divisions.
MD Medical Group envisions patients’ data security
and protection as an integral part of its activities and, thus, has
developed an in-house corporate intranet portal to ensure
effective and secure communication. In addition, since 2012
the Company has been executing whistle-blower policy
aimed to monitor and improve transparency of its operations.
According to the policy provisions, any employee has
an opportunity to report about any incidents of fraud or other
misconduct by sending an email to hotline@mcclinics.ru.
In case any violations are detected, an internal investigation
would be launched.
PERSONNEL
HR MANAGEMENT
Successful human resources management through the talent
employment, effective communications and trainings is one
of the MD Medical Group’s long-term business priorities.
The HR management structure of the Group reflects features
of the industry, specific aspects of key business functions, type
of facilities and geographic location of hospitals and clinics.
The Company’s corporate culture and business goals are also
reflected in the HR management structure, presented
in the chart herein.
Deputy General Director Operations
HR Director
Regional HR Directors
Mother & Child Centre
Mother & Child Urals
Mother & Child Volga
Mother & Child Siberia
HR managers in the clinics and hospitals
The Company developed and implemented several regulations
and rules aimed to improve the effectiveness of the HR system
and business operations of MD Medical Group as a whole,
which are in force since 2017 1.
OBJECTIVES IN HR MANAGEMENT
OBJECTIVE
RESULTS
Expanding the geographic scope
of business operations
Increase in recruitment
In 2019 MD Medical Group opened new clinics in Krasnodar, Vladivostok and a clinical hospital
in Tyumen. These facilities have been successfully staffed to meet demand in professionals
over the reporting period.
MD Medical Group’s interns were accepted as staff members after completing the internship
program. With regards to current employees, the promotion plan was fully executed
Organizational and personnel audit
All personnel audits were completed with no significant comments
Educational and training programs
During 2019, MD Medical Group held 16 educational webinars and 31 conferences. Additionally,
122 people completed the Company organized medical internship program. Upon completing
the program, interns were accepted as full-time employees at the Company’s facilities
in accordance with the plan. Furthermore, MD Medical Group introduced an online course
on personal data maintenance.
Timely organization of advanced
trainings
Overall, 16 people completed clinical residency at MD Medical Group, in 2019. In addition,
6 people were accepted to the residency program.
More than 1,000 medical employees completed advanced trainings
Ratio of medical staff to non-medical
staff (staff for treatment-and-prevention)
subject to preferential taxation
Over the whole year the company was compliant with the requirement of the 50% ratio between
medical staff and non-medical staff, subject to preferential taxation
Looking ahead to 2020, MD Medical Group has established
following goals in relation to its HR management practices:
• Meet the extending range of services by ensuring highly
professional employees at MD Medical Group hospitals
and clinics;
• Provide training to new medical residents and interns.
Prepare future employees and managers of MD Medical
Group;
• Develop the system of continuous medical education score
accounting
• Ensure timely organization of advanced training programs
for medical employees.
PROFESSIONAL DEVELOPMENT
Residency programs for medical students and further training
for medical personnel are key priorities for MD Medical Group
in the area of professional development. The Company
regularly holds trainings and educational programs for current
and prospective employees. Indeed, over the period a total
of 17 people were enrolled in 2 medical residency program
‘Obstetrics and gynecology’ and ‘Neonatology’ (6 first-year
residents and 11 second-year residents) at MD Medical Group.
In addition, in 2019 there were 16 medical residents who
successfully completed their program and 122 people who
finished their internship at MD Medical Group.
Internship program allows prospective employees to become
familiar with the Company’s key activities, its rules and ethics
standards and obtain training for the future work.
The Group also conducted offline mandatory and additional
professional development programs, including trainings
on interaction with patients, for more than 1,000 employees.
MD Medical Group also continued the practice of online
training program in the form of webinars, having organized
16 webinars in 2019. In addition, the Group provide educational
opportunities to the outside circle of specialists and colleagues
from other medical institutions. During 2019, the Company
held 31 conferences for professionals of various backgrounds,
which is 72% more than in 2018.
Furthermore, MD Medical Groups also aims to contribute
to the development of medical science and encourage
publications. The Company professionals regularly publish
their papers in leading Russian and international medical
journals.
1 2018 Annual Report, p. 152
166
1 2017 Annual Report, p. 145
167
// SUSTAINABLE DEVELOPMENT
DEVELOPMENT
OF THE SUPPLY CHAIN
THE GROUP’S APPROACH TOWARDS
SUPPLY CHAIN MANAGEMENT
Effective supply chain management is a keystone to patients’
safety and economic stability of MD Medical Group.
The Groups exploits a well-developed supply chain, which
begins with the analysis of material and equipment demand
at all facilities. When interacting with suppliers and other
stakeholders through the supply chain, the Company follows
its core values, such as good faith, transparency, impartiality
and fairness.
SUPPLY CHAIN OF MEDICATIONS AND EQUIPMENT
The specific features of MD Medical Group’s operations,
the variety of products and materials that the Company
purchases is large. The company aims to diversify its supply
sources to minimize risks and ensure best possible quality
of products. For that reason, besides local suppliers,
MD Medical Group also collaborates with international
providers. The overall pool of the Company’s suppliers includes
small businesses, which are given equal opportunities
to participate in tender competitions. Depending
on the product, there are three types of the supply chain
within the Group: medications, medical expendables
and equipment.
•
Inventory of medications
and in clinics’ warehouses
• Generation of a request
to manufactures
Producers
• Analysis of demand in the market
of medication and medical equipment
• 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
• Receipt of goods
• Storage of medications and equipment
• Sending goods to regional
warehouses and regional transport
companies
Regional level
SUPPLY CHAIN OF MEDICAL EXPENDABLES
• Generation of a request
to manufactures
Producers
• Order depleted items
• Marketing
of the products
• Send goods
to the warehouses
Clinics
Medical expendables
Federal level
•
If goods are in stock,
send them
•
If goods are in stock,
send them
•
Inventory of supplies
and remainders
in clinics’ warehouses
• Determining procurement plans
• Generation of an order
Regional level
• Generation of aggregated
orders ship
necessary materials
ENVIRONMENT AND
WORKPLACE SAFETY
ENVIRONMENTAL MANAGEMENT
In its everyday activities as well as a part of a long-term
business strategy MD Medical Group aims to increase
efficiency of its resources consumption and optimize business
operations in the way that would minimize negative impact
on the environment. Energy consumption reduction
is the central focus of the Company’s environment protecting
measures, given specific patient care requirements in terms
of electricity, heating and cooling usage.
Environmental impact management at the level
of the Group is under the jurisdiction of the CEO, whilst
director general and chief technical director are responsible
for this matter on a separate level at each hospital and clinic.
From the perspective of regulations, clinics and hospital
align their operations with environmental safety requirements
and therefore, comply with the national environmental
legislation. Furthermore, the Company’s management system
meets the international requirement ISO 14001-2004
Environmental management systems and ISO 50001:2011
Energy management systems.
This report summarizes environmental performance
of MD Medical Group by disclosing indicators of the three
key areas of environmental management, such as energy
efficiency, rational use of water, effective waste management
ELECTRICITY CONSUMPTION
BY MD MEDICAL GROUP’S CLINICS
AND HOSPITALS 1, GJ (GIGAJOULE)
Clinics
Hospitals
Total
HEATING ENERGY CONSUMPTION
BY MD MEDICAL GROUP’S CLINICS
AND HOSPITALS 1, GJ
Clinics
Hospitals
Total
in the Group’s hospitals and clinics. This section of the report
also covers MD Medical Group’s practices in work, fire
and industrial education.
ENERGY EFFICIENCY
MD Medical Group is constantly extending the geographic
scope of its services by opening new clinics and hospitals.
Indeed, new clinics in Krasnodar, Vladivostok and a new
clinical hospital in Tyumen were opened in 2019, which
is the primary reason for the Group’s overall increase in energy
consumption.
Central district heating system is the main source of heating
energy for all MD Medical Group’s facilities. However, each
clinic and hospital also equip their buildings with their own
diesel generators, which serve as backup power supply units
in case of unforeseen electricity shortages.
Common energy saving practices among both clinics
and hospitals include adjusting equipment work schedule
to allow the most effective energy usage. For example,
the Company’s facilities turn off general ventilations during
non-working hours, switch air-supply units to a lower rotational
frequency mode, where possible, and install motion sensors
in buildings to ensure energy-saving lighting system.
In addition, some clinics exercise the practice of replacing
halogen and fluorescent lamps with LED energy-saving light
sources.
2018
10,746
79,564
90,310
2018
20,110
159,100
179,210
2019
CHANGE, %
12,867
94,494
107,361
+20%
+19%
+19%
2019
CHANGE, %
22,622
177,187
199,809
+12%
+11%
+11%
168
169
1 Data on individual clinics and hospitals for 2018 disclosure in previous report were clarified and corrected
// SUSTAINABLE DEVELOPMENT
TOTAL ENERGY CONSUMPTION
BY MD MEDICAL GROUP’S CLINICS
AND HOSPITALS 1, GJ
Clinics
Hospitals
Total
FUEL CONSUMPTION
BY MD MEDICAL GROUP’S CLINICS
AND HOSPITALS 1, LITRES
Petrol
Clinics
Hospitals
Total
Diesel
Clinics
Hospital
Total
RATIONAL WATER CONSUMPTION
WATER CONSUMPTION
BY MD MEDICAL GROUP 1, 2, CUB. M
CLINICS
HOSPITALS, including
Perinatal Medical Centre
Lapino Clinical Hospital
Ufa Clinical Hospital
Clinical Hospital “Avicenna”, Novosibirsk
Samara Clinical Hospital
Tyumen Clinical Hospital
Total
2018
30,856
238,664
269,520
2019
CHANGE, %
35,489
271,681
307,170
+15%
+14%
+14%
2018
2019
CHANGE, %
82,732
74,569
157,301
51,017
46,971
97,988
2018
28,899
162,515
34,147
67,495
33,119
16,288
11,466
n/a
68,947
71,943
140,890
48,880
58,009
106,889
-17%
-4%
-10%
-4%
+24%
+9%
2019
CHANGE, %
32,736
176,262
32,543
63,800
34,838
16,223
17,397
11,461
+13%
+8%
-5%
-5%
+5%
0%
+52%
n/a
+9%
191,414
208,998
WASTE MANAGEMENT
MD Medical Group’s approach to management of medical
waste is aligned with the requirements of the Russian
legislation. The procedure of waste disposal, exercised
by hospitals and clinics, is regulated by the Sanitary
and Epidemiological Requirements for Treating Medical Waste
(SanPin 2.1.7.2790-10). Depending on the type of services,
provided by clinics or hospitals, the resulting waste can be
categorized as hazardous and non-hazardous. The overall
structure of waste treatment, performed by the Company
is presented in the сhart herein.
Treatment of waste, produced by medical facilities of MD
Medical Group can follow two possible way: in-house disposal,
using special equipment or disposal by external contractors.
In case of in-house waste-treatment, hazardous waste first
goes through decontamination (for example, demercuration
of lightbulbs and medical thermometers) until it becomes
non-hazardous, followed by composting with the rest of
non-hazardous waste. When disposed by external contractors,
waste is going through landfill operations in case of non-
hazardous waste or utilized by incineration if hazardous.
WASTE MANAGEMENT CHAIN IN HOSPITALS
Contractors
Type
Own level
Landfill
Incineration
Disposed of by contractors
Disposed of by contractors
Non-hazardous
Waste
Hazardous
Composting
Decontamination and pulping
WASTE BY DISPOSAL METHOD (HOSPITALS) 1,
METRIC TONNES
Non-hazardous
Landfilling
Bulk incineration
Hazardous
Landfilling
Bulk incineration
Total
WASTE BY DISPOSAL METHOD (HOSPITALS) 1,
METRIC TONNES
Non-hazardous
Landfilling
Bulk incineration
Hazardous
Landfilling
Bulk incineration
Total
2018
3,642
3,642
-
57
-
57
2019
3,037
3,037
-
59
-
59
3,699
3,096
CHANGE, %
-17%
-17%
-
+3%
-
+3%
-16%
2018
946
821
125
95
2.0
93
1,041
2019
CHANGE, %
964
844
119
106
3.0
103
1,070
+2%
+3%
-5%
+12%
+52%
+11%
+3%
171
1 Data on individual clinics and hospitals for 2018 disclosure in previous report were clarified and corrected
2 Annex 7 Main Methods for obtaining the information.
1 Data on individual clinics and hospitals for 2018 disclosure in previous report were clarified and corrected
170
// SUSTAINABLE DEVELOPMENT
ANNEX 1.
GRI STANDARD DISCLOSURE
NUMBER TITLE
PAGE IN THE REPORT AND/OR REFERENCE
102-42
Identifying and selecting stakeholders
2018 Annual Report, p.151
102-43
Approach to stakeholder engagement
102-44
Key topics and concerns raised
164-165
164
102-45
Entities included in the consolidated financial statements
153-155
102-46
Defining the report’s content and topic boundaries
102-47
List of material topics
102-48
Restatements of information
102-49
Changes in reporting
102-50
Reporting period
164
164
This Report does not contain restatement of information
from previous reports
No changes took place
Financial Year 2019
NUMBER TITLE
PAGE IN THE REPORT AND/OR REFERENCE
102-51
Date of the most recent report
The most recent Report was published in March 2018
GRI 102: GENERAL DISCLOSURES
102-1
102-2
102-3
102-4
102-5
102-6
102-7
102-8
102-9
Name of the organization
Activities, brands, products, and services
Location of headquarters
Location of operations
Ownership and legal form
Markets served
Scale of the organization
Information on employees and other workers
Supply chain
73
16-17, 44-47
73
20-23
73-74
20-23
2-3, 44-47, 51
177-178
168
102-10
Significant changes to the organization and its supply chain
12-15, 20-21,168
102-11
Precautionary Principle or approach
The Group has not adopted the Precautionary principle or approach
102-12
External initiatives
102-13
Membership of associations
n/a
Clinics of the Group and their employees 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.
102-14
Statement from the senior decision-maker
8-9
102-15
Key impacts, risks, and opportunities
Annex 2. Sustainable Development Risk Management
102-16
Values, principles, standards, and norms of behavior
53
102-18
Governance structure
102-22
Composition of the highest governance body
and its committees
102-24
Appointing and selecting the highest governance body
102-40
List of stakeholder groups
102-41
Collective bargaining agreements
58-59, 64-69
59, 64-65
58-59
164-165
There were no collective bargaining agreements signed
in the reporting period
102-52
Reporting cycle
Annual cycle
102-53
Contact point for questions regarding the report
182
102-54
Claims of reporting in accordance with GRI Standards
This report has been prepared in accordance with GRI Standards:
Core option.
102-55
GRI content index
102-56
External assurance
GRI 103: MANAGEMENT APPROACH
172-174
No External Assurance for the Group’s Sustainability Report
was obtained
103-1
103-2
103-3
Explanation of the material topic and its boundary
164
The management approach and its components
12-13, 50, 166-167, 175
Evaluation of the management approach
12-13, 50, 166-167, 175
GRI 205: ANTI-CORRUPTION
205-3
Confirmed incidents of corruption and actions taken
GRI 302: ENERGY
No incidents of corruption were detected in the reporting period.
See p.176 for more information about preventive measures
302-1
Energy consumption within the organization
159, Annex 7 ‘Main methods for obtaining information’
GRI 303: WATER
303-1
Water withdrawal by source
GRI 306: EFFLUENTS AND WASTE
306-2
Waste by type and disposal method
GRI 404: TRAINING AND EDUCATION
404-2
Programmes for upgrading employee skills
and transition assistance programs
GRI 405: DIVERSITY AND EQUAL OPPORTUNITY
405-1
Diversity of governance bodies and employees
170
171
167
177
We identify the term ‘diversity’ of the Board of Directors in a way
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
of aspects like designing a development strategy and monitoring
its implementation, the system of internal control and audit,
risk management, the specifics 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.
Although MD Medical Group does not exercise an established
diversity policy, the Board of Directors membership is sufficiently
diversified. Board members are specialist of different areas, such
as audit, finance, law, investments, etc. The diversity of skills
of the Board members contributes to a qualified discussion, reflecting
different perspectives and opinions.
172
173
// SUSTAINABLE DEVELOPMENT NUMBER TITLE
PAGE IN THE REPORT AND/OR REFERENCE
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
417-3
Incidents of non-compliance concerning
marketing communications
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
When preparing marketing and communication materials, MD Medical
Group complies with the provisions of the Federal Law N 383-FZ
“On Advertising” dated 30.10.2018 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 signed by the marketing director (deputy general director,
marketing) and the legal department.
There were no cases of non-compliance with requirements on product
and service information and labelling in the reporting period.
There were no cases of non-compliance with requirements
on marketing communications in the reporting period.
44-47
24-33
46-47
50-51, 167
165-166
ANNEX 2.
SUSTAINABLE DEVELOPMENT
RISK MANAGEMENT
As part of its everyday activity and the long-term strategy,
MD Medical Group is dedicated to minimizing sustainable
development related risks and, thus, regularly review its risk
management approaches.
• environmental impact risks;
• social and employment risks;
• human rights risks;
• corruption and bribery risks.
The risk management department identifies four groups
of sustainable development risks relevant to MD Medical
Group, stemming from the specific features of its business
operations and the healthcare sector overall. These groups
of risks are as follows:
The Company has implemented a number of preventive
measures, despite that the occurrence of these risks
is considered to be of low likelihood.
RISK GROUPS
RISK MANAGEMENT MECHANISMS
ENVIRONMENTAL IMPACT RISKS
Incorrect hazardous waste disposal
Substantial increase in energy consumption
and decrease in energy efficiency
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.
MD Medical Group is aware of the importance of using a modern high-performance power
supply system. MD Medical Group applies various energy saving measures in accordance
with internal standards and procedures. In addition to this, the Company installs energy-saving
equipment at all facilities of the Group.
Substantial increase in water consumption
The Groups monitors the condition of water and heat supply pipelines.
Increase in paper consumption
MD Medical Group fulfills the requirements of the official Electronic Government program
currently implemented in Russia in order to switch to electronic external document flow.
SOCIAL AND EMPLOYMENT RISKS
Statutory restrictions related to employment
Insufficient availability of Company’s
care services facilities
Deterioration of the Group’s relations
with staff
The Group monitors appropriate changes in relevant legislation on a regular basis and promptly
reacts to them.
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 Company 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
potential. The Group maintains employee health care and maternity support programs,
programs for the organization of employees’ leisure and recreation, and professional
development programs.
174
175
// SUSTAINABLE DEVELOPMENT
RISK GROUPS
RISK MANAGEMENT MECHANISMS
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
CORRUPTION AND BRIBERY RISKS
Risk of corrupt actions and payments
to government authorities
Bonuses and rewards in the Group are economically substantiated and paid on the basis
of performance and attainment of targets set by the Company.
There is no remuneration discrimination in the Company.
In order to avoid any offenses MD Medical Group makes sure that any interaction
with supervisory and regulatory authorities is duly documented. The Company’s CEO
and shareholders are immediately 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 whichare 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 transparent procedure for selecting suppliers.
ANNEX 3.
INFORMATION
ON THE GENDER AND AGE
OF THE BOARD OF DIRECTORS
AS OF 31 DECEMBER 2019
GENDER:
Men – 90 %;
Women – 10 %;
AGE:
30–50 years – 40 %;
Older than 50 – 60 %.
ANNEX 4.
INFORMATION
ON THE GENDER AND AGE
OF EMPLOYEES
AS OF 31 DECEMBER 2019
GENDER:
Men – 14 %;
Women – 86 %;
AGE:
Younger than 30 – 13 %;
30–50 years of age – 61 %;
Older than 50 years of age – 26 %.
176
177
// SUSTAINABLE DEVELOPMENT
ANNEX 5.
INFORMATION ON THE STAFF
2018
Male
Female
TOTAL
2019
Male
Female
TOTAL
MOTHER
& CHILD
CENTRE
737
3,254
3,991
MOTHER
& CHILD
CENTRE
726
3,249
3,975
MOTHER
& CHILD
URALS
151
839
990
MOTHER
& CHILD
SIBERIA
291
1,072
1,363
MOTHER
& CHILD
VOLGA
151
854
1,005
TOTAL
1,330
6,019
7,349
MOTHER
& CHILD
URALS
213
1,117
1,330
MOTHER
& CHILD
SIBERIA
305
1,087
1,392
MOTHER
& CHILD
VOLGA
148
907
1,055
TOTAL
1,392
6,360
7,752
%
18.1
81.9
100
%
18.0
82.0
100
As of 2018, the Group has launched the automated record
of new hires. Due to technical reasons, it was not feasible
to take records when an employee switches from a part-time
to a full-time agreement. The Group intends to address these
issues and add this option in the future.
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 Ministry 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 cannot be used, namely those
medical supplies that have been damaged or expired;
• Class D (Д) – radioactive waste.
178
179
// SUSTAINABLE DEVELOPMENT
ANNEX 7.
MAIN METHODS FOR OBTAINING
INFORMATION
Most of the data is originated from the clinics’ and hospitals’
own records of actual water use, energy and fuel
consumption. However, for several clinics and hospitals some
indicators were calculated due to the fact that a number
of facilities are located in rented premises; and, because
of the lack of detailed accounting data or non-relevance
of such information for decision-making by the MD Group
or stakeholders. All calculations were made by applying
some of the following indicators:
• for water consumption – average water consumption
per square meter for clinics and hospitals;
• for electricity and heating – the amount of money spent
on utilities and average heating energy consumption per
square meter for clinics. Regional tariffs were used
for the calculations
• The share of data on water, energy and fuel consumption,
obtained from calculations was insignificant in the overall
dataset.
ELECTRICITY CONSUMPTION
BY MD MEDICAL GROUP’S CLINICS
AND HOSPITALS 1, KWH
CLINICS
HOSPITALS,
including:
Perinatal Medical Centre
Lapino Clinical Hospital
Ufa Clinical Hospital
Clinical Hospital “Avicenna”, Novosibirsk
Samara Clinical Hospital
Tyumen Clinical Hospital
TOTAL
2018
2019
CHANGE,%
2,985,063
22,100,990
4,396,895
7,478,484
4,673,587
2,505,299
3,046,725
n/a
3,574,196
26,248,317
4,541,075
8,346,660
4,259,589
2,491,946
2,998,635
3,610,412
25,086,053
29,822,513
+20 %
+19 %
+3 %
+12 %
-9 %
-1 %
-2 %
n/a
+19 %
1 Data in this annex on individual clinics and hospitals for 2018 disclosure in previous report were clarified and corrected
180
HEATING ENERGY CONSUMPTION
BY MD MEDICAL GROUP’S CLINICS
AND HOSPITALS, GCAL
CLINICS
HOSPITALS,
including:
Perinatal Medical Centre
Lapino Clinical Hospital
Ufa Clinical Hospital
Clinical Hospital “Avicenna”, Novosibirsk
Samara Clinical Hospital
Tyumen Clinical Hospital
TOTAL
FUEL CONSUMPTION
BY MD MEDICAL GROUP’S CLINICS
AND HOSPITALS, LITRES
PETROL
CLINICS
HOSPITALS,
including:
Perinatal Medical Centre
Lapino Clinical Hospital
Ufa Clinical Hospital
Clinical Hospital “Avicenna”, Novosibirsk
Samara Clinical Hospital
Tyumen Clinical Hospital
TOTAL
DIESEL
CLINICS
HOSPITALS,
including:
Perinatal Medical Centre
Lapino Clinical Hospital
Ufa Clinical Hospital
Clinical Hospital “Avicenna”, Novosibirsk
Samara Clinical Hospital
Tyumen Clinical Hospital
TOTAL
2018
4,806
38,026
5,864
10,458
12,719
5,075
3,910
n/a
42,832
2018
82,732
74,569
25,488
34,490
13,356
1,235
n/a
n/a
2019
5,407
42,349
4,753
9,983
11,996
4,140
4,877
6,600
47,755
2019
68,947
71,943
22,350
35,123
10,224
1,160
n/a
3,087
157,301
140,890
2018
51,017
46,971
13,954
26,215
5,802
1,000
n/a
n/a
97,988
2019
48,880
58,009
13,576
29,945
4,129
1,579
750
8,030
106,889
CHANGE,%
+12 %
+11 %
-19 %
-5 %
-6 %
-18 %
+25 %
n/a
+11 %
CHANGE,%
-17 %
-4 %
-12 %
2 %
-23 %
-6 %
n/a
n/a
-10 %
CHANGE,%
-4 %
24 %
-3 %
14 %
-29 %
58 %
n/a
n/a
9 %
181
// SUSTAINABLE DEVELOPMENT
ToC_Contacts and Advisers
INVESTOR
RELATIONS
Dmitry Yakushkin
Head of Investor Relations
ir@mcclinics.ru
tel: +7 495 332 2011
Sofia Denisova
Deputy Head of IR
ir@mcclinics.ru
tel: +7 495 937 39 02 ext. 15143
MEDIA
RELATIONS
EM
MDMG@em-comms.com
tel:+7 495 363 2849
From outside the US
tel: +1 651 453-2128
GLOBAL
INVEST DIRECT
tel: +1 800 428-4237
www.mcclinics.com
REGISTERED
OFFICE
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
STOCK
EXCHANGE
London Stock Exchange Plc
10 Paternoster Square
London EC4M 7LS UK
tel: +44 20 7797 1000
www.londonstockexchange.com
182