© design by just design
Annual Report 2020
Developing a strong
multifunctional medical network
Contents
4
4
6
8
1. Overview
Multidisciplinary leadership
Strong investment case
Nationwide healthcare network
10
Statement from the CEO
20
22
3. Investing
in strategic
expansion
Expanding a leading nationwide
network
5. Sustainable
results
Operational review
42
44
12
14
16
18
24
26
28
30
32
34
36
38
2. Strategy
Delivering on our strategic goals
Continuous expansion
to increase client base
Wide range of high-tech medical
services
4. Six hospitals
across Russia
Lapino-2 hospital
Lapino hospital complex
Interview with the Head of
the Oncology centre of Lapino-2
Lapino-1 hospital,
Ufa hospital
Novosibirsk hospital,
Samara hospital
Tyumen hospital,
MD Group clinical hospital
Rostov-on-Don clinic,
Novaya Riga clinic
40
Lapino-4 medical centre
46
48
6. Market trends
in Russia
Lucrative market with further
growth potential
2
50
52
54
56
72
7. Social
responsibility
Our people
Corporate social responsibility
Shareholder equity
9. Report and
consolidated financial
statements
74
75
80
81
87
88
90
94
96
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
164
11. Sustainable
development
176
179
181
181
182
183
Annex 1. GRI Index Disclosures
Annex 2. Sustainable Development Risk
Management at MD Medical Group in 2020
Annex 3. Information on the gender and age of
the Board of Directors as of 31 December 2020
Annex 4. Information on the gender and age
of employees as of 31 December 2020
Annex 5. Information on staff
Annex 6. SanPin 2.1.7.2790-10 Sanitary and
Epidemiological Requirements for Treating
Medical Waste
184
Annex 7. Main methods for obtaining
information
58
60
62
66
68
70
126
8. Corporate
governance and
risk management
Corporate governance report
Risk management
Board of directors
Board of directors activity in 2020
Senior management
10. Report and
separаte financial
statements
128
Officers, professional advisors and
registered office
129
133
134
138
139
140
144
146
Management report
Directors' responsibility statement
Independent auditors' report
Statement of profit or loss and other
comprehensive Income
Statement of financial position
Statement of changes in equity
Statement of cash flows
Notes to the financial statements
187
12. Contacts
and advisers
3
OVERVIEW
Multidisciplinary
leadership
One of the key aspects driving our
In 2020, despite the effects
growth has been the Lapino complex,
the COVID-19 pandemic had on our
which we have significantly expanded
industry, MD Medical Group was
to now include three multidisciplinary
able to achieve sustainable results
buildings. Our other hospitals and clinics
thanks to its proven business model
across Russia have demonstrated
and strong medical team.
The Company continues to deliver on its strategic diversification
similarly sustainable results in 2020.
Dr Mark KURTSER, CEO
initiative creating a solid foundation for further growth.
Deliveries
IVF cycles
Revenue
EPS (RUB/GDR)
56
56
56
56
56
56
56
56
6,656
6,656
6,656
6,656
6,808
6,808
6,656
6,656
6,656
6,656
6,808
6,808
7,277
7,277
6,808
6,808
6,808
6,808
7,277
7,277
7,446 7,759
7,446 7,759
7,277
7,277
7,446 7,759
7,446 7,759
7,446 7,759
7,446 7,759
7,446 7,759
7,446 7,759
7,277
7,277
14,004
14,004
14,004
14,004
16,806
16,806
14,004
14,004
14,004
14,004
16,806
16,806
16,636
16,806
16,636
16,806
16,806
16,806
16,636
16,636
18,004 15,264
18,004 15,264
16,636
16,636
18,004 15,264
18,004 15,264
18,004 15,264
18,004 15,264
18,004 15,264
18,004 15,264
16,636
16,636
5,535
5,535
5,535
5,535
5,535
5,535
5,535
5,535
9,289
9,289
9,289
9,289
9,289
9,289
9,289
9,289
9,507
9,507
9,507
9,507
9,507
9,507
9,507
9,507
12,179
12,179
12,179
12,179
13,755
13,755
12,179
12,179
12,179
12,179
13,755
13,755
14,937
14,937
13,755
13,755
13,755
13,755
14,937
14,937
16,160
16,160
14,937
14,937
14,937
14,937
16,160
16,160
19,133
19,133
19,133
19,133
19,133
19,133
19,133
19,133
16,160
16,160
16,160
16,160
15
15
15
15
2016
2016
15
15
15
15
2016
2016
17
2016
17
17
2016
2016
17
2016
2018
17
2018
17
17
17
2018
2018
19
19
2018
19
2018
2018
19
2018
2020
19
2020
19
19
19
2020
2020
2020
2020
+7%
+7%
+7%
+7%
+7%
+7%
+7%
+7%
CAGR 2015–2020
CAGR 2015–2020
CAGR 2015–2020
CAGR 2015–2020
CAGR 2015–2020
CAGR 2015–2020
CAGR 2015–2020
CAGR 2015–2020
2020
2020
15
15
15
15
2016
15
2016
15
15
15
2016
2016
17
17
2016
2016
2016
17
2016
17
+10%
+10%
+10%
+10%
+10%
+10%
+10%
+10%
CAGR 2015–2020
CAGR 2015–2020
CAGR 2015–2020
CAGR 2015–2020
CAGR 2015–2020
CAGR 2015–2020
CAGR 2015–2020
CAGR 2015–2020
2018
2018
17
2018
17
17
2018
17
2018
19
19
2018
2018
2018
19
19
2020
2020
19
19
19
2020
19
2020
2020
2020
2020
2020
15
15
15
15
2016
15
2016
15
15
15
2016
2016
17
17
2016
2016
17
2016
2016
17
2018
2018
17
2018
17
17
2018
17
19
2018
19
2018
2018
2018
19
19
2020
2020
19
19
2020
19
19
2020
2020
2020
2020
2020
15
15
15
15
2016
15
2016
15
15
15
2016
2016
17
17
2016
2016
17
2016
2016
17
2018
2018
17
2018
17
17
2018
17
19
2018
19
2018
2018
2018
19
19
2020
2020
19
19
2020
19
19
2020
2020
2020
2020
2020
28
28
28
28
33
33
33
33
28
28
28
28
21
21
21
21
21
21
21
21
+15%
+15%
+15%
+15%
+15%
+15%
+15%
+15%
CAGR 2015–2020
CAGR 2015–2020
CAGR 2015–2020
CAGR 2015–2020
CAGR 2015–2020
CAGR 2015–2020
CAGR 2015–2020
CAGR 2015–2020
36
36
36
36
33
33
33
33
35
35
36
36
35
35
36
36
35
35
35
35
+22%
+22%
+22%
+22%
+22%
+22%
+22%
+22%
CAGR 2015–2020
CAGR 2015–2020
CAGR 2015–2020
CAGR 2015–2020
CAGR 2015–2020
CAGR 2015–2020
CAGR 2015–2020
CAGR 2015–2020
In-patient days
Out-patient treatments
EBITDA and EBITDA margin
Net debt and Net debt / EBITDA ratio
31%
31%
31%
31%
31%
31%
31%
31%
116,417
116,417
116,417
116,417
116,417
116,417
116,417
116,417
29%
29%
28%
28%
28%
28%
28%
28%
28%
28%
29%
29%
29%
29%
29%
29%
6,008
6,008
6,008
6,008
6,008
6,008
6,008
6,008
53,142
53,142
53,142
53,142
61,344
61,344
61,344
61,344
53,142
53,142
53,142
53,142
79,689
79,689
79,689
79,689
79,689
79,689
79,689
79,689
70,113
70,113
70,113
70,113
70,113
70,113
61,344
61,344
61,344
61,344
70,113
70,113
1,388,995
1,388,995
1,388,995
1,388,995
1,527,425
1,527,425
1,527,425
1,527,425
1,388,995
1,388,995
1,388,995
1,388,995
1,618,277
1,618,277
1,618,277
1,618,277
1,527,425
1,527,425
1,527,425
1,527,425
1,745,133
1,745,133
1,618,277
1,618,277
1,618,277
1,618,277
1,745,133
1,745,133
1,745,133
1,745,133
1,745,133
1,745,133
1,613,630
1,613,630
1,613,630
1,613,630
1,613,630
1,613,630
1,613,630
1,613,630
47,917
47,917
47,917
47,917
47,917
47,917
47,917
47,917
1,176,630
1,176,630
1,176,630
1,176,630
1,176,630
1,176,630
1,176,630
1,176,630
28%
28%
30%
30%
30%
30%
30%
30%
30%
30%
4,635
4,635
4,635
4,635
4,635
4,635
4,635
4,635
4,197
4,197
4,197
4,197
4,197
4,197
4,197
4,197
30%
30%
30%
30%
28%
28%
28%
28%
28%
28%
30%
30%
30%
30%
4,165
4,165
4,165
4,165
4,165
4,165
4,165
4,165
1,680
1,680
1,680
1,680
1,680
1,680
1,680
1,680
15
15
15
15
2016
15
2016
15
15
15
2016
2016
17
17
2016
2016
17
2016
2016
17
2018
17
2018
17
17
17
2018
2018
19
19
2018
2018
19
2018
2018
19
2020
19
2020
19
19
19
2020
2020
2020
2020
2020
2020
15
15
15
15
2016
15
2016
15
15
15
2016
2016
17
17
2016
2016
2016
17
2016
17
2018
2018
17
2018
17
17
2018
17
19
2018
19
2018
2018
2018
19
19
2020
2020
19
19
19
2020
19
2020
2020
2020
2020
2020
15
15
15
15
15
2016
2016
15
15
15
2016
2016
17
17
2016
2016
2016
17
2016
17
+19%
+19%
+19%
+19%
+19%
+19%
+19%
+19%
CAGR 2015–2020
CAGR 2015–2020
CAGR 2015–2020
CAGR 2015–2020
CAGR 2015–2020
CAGR 2015–2020
CAGR 2015–2020
CAGR 2015–2020
+7%
+7%
+7%
+7%
+7%
+7%
+7%
+7%
CAGR 2015–2020
CAGR 2015–2020
CAGR 2015–2020
CAGR 2015–2020
CAGR 2015–2020
CAGR 2015–2020
CAGR 2015–2020
CAGR 2015–2020
2,675
2,675
2,675
2,675
3,670
3,670
3,670
3,670
3,670
3,670
3,670
3,670
2,675
2,675
2,675
2,675
+18%
+18%
+18%
+18%
+18%
+18%
+18%
+18%
CAGR 2015–2020
CAGR 2015–2020
CAGR 2015–2020
CAGR 2015–2020
CAGR 2015–2020
CAGR 2015–2020
CAGR 2015–2020
CAGR 2015–2020
17
2018
2018
2018
17
17
2018
17
2018
19
19
2018
2018
2018
19
19
2020
2020
19
19
19
2020
19
2020
2020
2020
2020
2020
15
15
15
15
15
2016
2016
15
15
15
2016
2016
17
17
2016
2016
2016
17
2016
17
0.4x
0.4x
0.4x
0.4x
0.6x
0.6x
0.6x
0.6x
0.6x
0.6x
0.6x
0.6x
0.5x
0.5x
0.4x
0.4x
0.4x
0.4x
0.5x
0.5x
0.7x
0.7x
0.5x
0.5x
0.5x
0.5x
0.7x
0.7x
0.8x
0.8x
0.7x
0.7x
0.7x
0.7x
0.8x
0.8x
0.8x
0.8x
0.8x
0.8x
0.5x
0.5x
0.5x
0.5x
0.5x
0.5x
0.5x
0.5x
1,640
1,640
1,640
1,640
2,065
2,065
1,640
1,640
1,640
1,640
2,065
2,065
2,950
2,950
2,065
2,065
2,065
2,065
2,950
2,950
3,530
3,530
2,950
2,950
2,950
2,950
3,530
3,530
3,530
3,530
3,530
3,530
2,943
2,943
2,943
2,943
2,943
2,943
2,943
2,943
17
2018
2018
2018
17
17
2018
17
2018
19
19
2018
2018
2018
19
19
2020
2020
19
19
19
2020
19
2020
2020
2020
2020
2020
Operational KPIs
4
Financial KPIs (mln rubles)
5
OVERVIEW
Strong
investment
case
One of the leading healthcare companies in Russia
MDMG is the first and only publicly listed healthcare company in Russia operating in
the developing private medical services market with possibilities for strong future growth.
Since its IPO, MDMG has demonstrated solid and sustainable growth in its key financial
and operational indicators.
Best-in-class
network across Russia
Clear and balanced
growth strategy
Attractive market
fundamentals in Russia
• Comprehensive experience and deep
understanding of the Russian private
healthcare market
• Largest regional medical network
in Russia covering 27 cities and
25 regions*
• Projects led by teams of highly quali-
fied doctors and managers with com-
prehensive experience in construct-
ing and
launching mutlifunctional
hospitals from scratch.
• Well-established brand with strong
national status
• Highly effective performance dur-
ing the pandemic demonstrated
Company’s readiness to operate
success fully in extraordinary situations
• Proven regional expansion strategy
with clearly designated targets and
a solid track record of successful
investments
• Since starting with OBGYN and IVF,
the Company has constantly expand-
ed its offering of medical services in
response to market demand
• Balanced strategy: combining large
greenfield hospital projects with a
wide network of clinics that provide
core services and benefit from an
economy of scale
• Ready to use blueprint for further ex-
pansion based on competences and
available resources
And yet the stock remains undervalued vs EM peers
• Low level of consolidation and satura-
tion, specifically in the regions
• Still an underdeveloped market with
strong potential for growth
• Favourable regulatory environment –
state support of private healthcare
companies including 0% income tax
rate, perpetual medical licence, and
participation in the Mandatory Health
Insurance programme
• High barriers to entry
Deliveries
3,253
7,759
+11%
CAGR 2012–2020
IVF cycles
3,863
15,264
+19%
CAGR 2012–2020
Consistently one of the highest revenues
among Russian healthcare companies
+18%
YoY increase in 2020
Solid and sustainable growth in key financial
and operating indicators since IPO
31.4%
EBITDA margin in 2020
2012
2020
In-patient days
22,351
116,417
+23%
CAGR 2012–2020
Out-patient treatments
430,914
1,613,630
+18%
CAGR 2012–2020
6
7
* As of publication date
OVERVIEW
Nationwide
healthcare
network
Kostroma
St. Petersburg
Moscow
Yaroslavl
Krasnoyarsk
With hospitals and clinics located in various cities
and regions of Russia*, MD Medical Group operates
the largest regional private network of healthcare
facilities in the country. Today patients from
25 Russian regions have access to medical
care at the Mother&Child
hospitals and clinics.
Vladivostok
Kazan
Novosibirsk
Irkutsk
Rostov-on-Don
Tula
Krasnodar
1
1
1
1
1
10
1
1
1
1
1
1
1
1
5
1
Vladimir
Nizhniy
Novgorod
Volgograd
Ryazan
Voronezh
1
1
5
1
Omsk
Tumen
Barnaul
Novokuznetsk
Perm
Ufa
Samara
2
1
1
1
192 thousand m2
total area
25
8
regions
42
Multifunctional
healthcare facilities
36
Out-patient clinics
27
Cities
6
Hospitals
* As of publication date
9
OVERVIEW Statement
from
the CEO
Our strong performance was made
possible by our resilient business
model and a great team of highly-
skilled, seasoned professionals,
who quickly adapted to
the changing
environment.
Dr Mark KURTSER, CEO
10
We have demonstrated
strong sustainable
growth
2020 was a year like no other, with
nearly every aspect of our lives and every
industry affected by the COVID-19
pandemic. Nevertheless, MD Medical
Group was able to achieve sustainable
results amid these headwinds.
In 2020, we significantly grew our
revenue by 18% YoY to 19,133 mln
rubles – another record year in our
history – while EBITDA increased 30%
YoY to 6,008 mln rubles.
These strong financial results were
supported by overall solid operational
performance. We grew in-patient days
by 46% YoY, primarily
in oncology,
internal medicine and traumatology, and
increased deliveries by 4% YoY despite
the continued challenging demographic
situation in Russia. While IVF and out-
patient treatments declined during the
year due to the pandemic, in Q4 2020
we already saw improved dynamics for
these indicators.
In 2020, we continued to consistently
enhance our network of state-of-the-
art medical facilities across Russia.
We started the year with the opening
of our first clinic
in Rostov-on-Don,
which marked our entry into the 14th
city in Russia with a population of more
than 1 mln residents and brought us
closer to delivering on our strategic
goal of operating in all 15 such cities
in the country. Next, we completed
the renovation of our first hospital
and indeed the first private maternity
hospital in Russia – the Perinatal Medical
Centre – by transforming it into a truly
multidisciplinary facility. It also became
our first facility to undergo a rebranding
and is now called MD Group Clinical
Hospital. In March, we opened a new
paediatric clinic in a popular residential
area outside of Moscow, which acts as
a branch of the Lapino hospital.
In the second half of the year, we completed
our largest investment project in recent
years by opening the Lapino-2 surgery
centre. The new building transformed
our Lapino complex into the foremost
multifunctional medical centre in Russia
that provides 24/7 medical help to patients
with various needs. The new building also
houses a state-of-the-art oncology centre
that offers a full cycle of medical services
in line with modern international protocols.
As part of the Lapino-2 project, we made
new additions to our team, including a
number of prominent oncologists who
specialise across a variety of areas.
The pandemic which hit the entire world
posed a challenge for all of us at MD
Medical Group. Beginning in mid-March,
our team was on the frontline of the fight
against COVID-19. We managed to
quickly convert our Lapino-1 hospital for
the exclusive treatment of patients with
coronavirus, while all other patients were
transferred to the renovated MD Group
Clinical Hospital in Moscow. Not only
have we achieved strong results in patient
recovery, but we have also gained valuable
experience in the efficient admission and
treatment of a large inflow of COVID-19
patients, including pregnant women, and
have further expanded our competencies.
By demonstrating our ability to quickly
adapt and offer new, in-demand medical
services, we further strengthened our
customer loyalty and reputation.
Our team has emerged from this
challenging period more prepared to face
similar extraordinary situations. This
helped us to act without delay when the
country was hit by the second wave of
COVID-19 in the autumln, shortly after
we opened the new Lapino-2 building.
Amid
the deteriorating pandemic
fully
environment, we decided
convert the new centre into a treatment
facility for COVID-19 patients starting
from October 2020. In addition, at the
end of 2020, we began construction
of the new 100-bed Lapino-4 hospital,
which is primarily designed to treat
coronavirus patients, using
rapid
construction technology. We opened
the facility in Q1 2021, while Lapino-2
has now resumed its original operations
as a surgery centre.
While our
facilities across Russia
were under pressure from temporary
restrictions on a number of activities –
including elective medical procedures –
to
imposed by local authorities to limit
the spread of COVID-19, our hospitals
and clinics managed to demonstrate
solid performance for the year.
Our sustainable performance over
this unprecedented year would have
been impossible without our team of
doctors, composed of leading experts in
Russia across various medical spheres.
I want to thank each and every one
of our doctors who treated patients
with coronavirus from the first days of
the outbreak, often risking their own
lives, many of whom relocated from
the regions to help their colleagues in
Moscow cope with the large inflow of
patients. I would also like to thank all of
our doctors and staff who continued to
care for our regular patients amid these
difficult times.
In November, we reached a major
milestone by listing our GDRs on Moscow
Exchange, in addition to our listing on
the London Stock Exchange. We believe
this was an important step in expanding
and diversifying our shareholder pool,
which should also help attract new
Russian institutional and retail investors
who know our Mother&Child brand
well. We also expect that our dual
listing will contribute to promoting
the liquidity of our GDRs on both trading
platforms. While our stock price grew
22.5% during 2020, we believe that it
remains undervalued and lags behind
the progress our business has been
delivering.
While the past year certainly put pressure
on our performance, we demonstrated
the resilience of our business model and
delivered solid financial results. In line
with our approach, we shared the results
of our work with our shareholders and paid
736.225 mln rubles in interim dividends
for the half-year in 2020.
I would
letter by
like to end my
expressing my sincere gratitude to all
of our doctors and management team,
as well as to our shareholders and other
stakeholders who have supported us
during these turbulent times.
We emerged from 2020 even stronger
and are well-positioned to continue
unlocking the significant potential of
our business.
11
OVERVIEW “
In 2020, we continued to deliver on
our strategic goals. In particular, we
successfully expanded our service
offering and world-class chain
of hospitals and clinics
across Russia.
2. Strategy
14 Delivering on our
strategic goals
16
Continuous expansion
to increase client base
18 Wide range of high-tech
medical services
Natalia BUTKEVICH, Lapino hospital
12
13
Delivering on our
strategic goals
45
% share of other medical
services* in the group’s
revenue for 2020
4
new medical centres
opened
Strategic goals
Our progress in 2020
Strategic goals
Our progress in 2020
Provide the highest quality of care to patients and achieve a high level of customer satisfaction
Roll out our proven business model
are
strongly
committed
We
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 facili ties – both existing and
new – adhere to MD Medical Group’s
high standards of medical care.
Amid the challenges of 2020, we demonstrated our professionalism and
commitment to providing high-quality services that saw high demand
throughout the year.
When the pandemic hit Russia, we reacted quickly and converted our Lapino
hospital to solely treat patients with COVID-19.
Over several months, we achieved solid medical results in patient recovery.
This has proven that we can quickly adopt new services to meet changing
demands in medical care, which has further strengthened our reputation in
the eyes of patients.
We have also ensured adherence to rigorous safety standards – both for our
customers and our staff.
largest
With the
regional medical
network in Russia comprised of 42
facilities in 27 cities*, 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.
In 2020, we further expanded and improved our vast network in Russia.
We completed our biggest investment project – and indeed one of the biggest
projects of its kind in the country – by launching the Lapino-2 surgery centre
with a strong focus on oncology. This new facility supplements the existing
Lapino-1 hospital, and together they create a large-scale diversified medical
complex strategi cally located in an area near to the capital – the largest
healthcare market in the country. It has been further expanded with the Lapino-4
building focusing on treating COVID-19 patients, which we commissioned in
the beginning of 2021.
In addition, early in 2020, we opened a paediatric clinic not far from Lapino that
serves as a new hospital branch.
Also in 2020, we completed the renovation of our Perinatal Medical Centre
(PMC) in Moscow. Russia’s first private maternity hospital has been transformed
into a truly multidisciplinary facility, as reflected in its new name – MD Group
Clinical Hospital.
We believe that these new additions and upgrades to our network reflect
the current trends in demand among our patients.
Recruit and retain the best and the most qualified personnel
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 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.
In 2020, we continued to hire new people, as well as retain and train our existing
staff. Following our team expansion, at the end of the year we employed about
8,300 employees.
In particular, as part of the opening of the Lapino-2 surgery centre, we hired
a team of experienced oncologists specialising in a wide range of oncological
areas. These new additions will be instrumental in strengthening our performance
in medical services beyond our traditional focus on OBGYN and paediatrics.
Throughout the year, we continued to provide training and other professional
growth opportunities for our staff. We also worked to ensure safe working
conditions during the COVID-19 pandemic by providing personal protective
equipment (PPE) for all staff and taking the necessary precautionary measures.
Deliver value to our shareholders
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 deliver the best performan-
ce and achieve strong results which
translate into high long-term value for
our investors.
14
We believe that our consistent investment into the business supports the creation
of long-term value for our shareholders.
In the reporting year, we continued to share the results of our success with share-
holders by paying interim dividends which amounted to 50% of net profit for
the half-year.
We also made it easier and more convenient for Russian retail and institutional
investors to invest in the company by listing our GDRs on the domestic Moscow
Exchange in November. We benefit from strong brand recognition in Russia and
believe that this major step should allow more people and funds to become part
of our success story.
Provide balanced services structure including core and other medical services
While we initially focused solely on
women and children's healthcare, once
we were 100% confident that we were
able to maintain our high level of service,
we began to add other medical services
to our offering to cover all family
members. Today, MDMG is a diversified
healthcare provider with OBGYN
remaining our core focus.
2020 marked the continued expansion of our service offering.
Most notably, thanks to the opening of Lapino-2 we increased our surgery
capabili ties and made significant progress in treating oncology.
We have also come closer to cementing our position as a multidisciplinary play-
er with the completed renovation of our first hospital, the MD Group Clinical
Hospital (previously PMC). The revamped hospital now features five new units:
general surgery, urology, traumatology, cardiology and endovascular surgery
departments.
We believe that the perception of MD Medical Group in the eyes of our patients
has also been changing, and many of them view us as a diversified provider of
various medical services with a legacy focus on OBGYN.
This long-term transformation is reflected in our revenue structure – in 2020 the
share of other medical services accounted for 45% of the Group’s total revenue.
* Includes surgery, cardiology and traumatology,
therapy, oncology, diagnostics, laboratory
examinations and other services.
15
STRATEGY Continuous
expansion
to increase
client
base
Acquisition of
clinics in Samara
Region and Irkutsk
Opening of a clinic
in Yaroslavl
Opening of
the Group’s first
regional self-
constructed
hospital in Ufa
Opening of
out-patient clinic
in Ryazan
Launch of
constructionbof
a new in-patient
wing to expand
hospital in
Novosibirsk
Clinics
Hospitals
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
Acquisition
of Avicenna
Medical Centre
in Novosibirsk
(1 hospital and
3 clinics)
Opening of our first Hospital – MD Group
(formerly, Perinatal Medical Centre)
18
Acquisition of out-patient clinics
Successful IPO of the Group
on the London Stock Exchange
Opening of Lapino hospital
Acquisition of
the Medica Clinic
in Novokuznetsk
27
20
Signing of
a Memorandum of
Understanding with
the Tyumen Region
government
Opening of
a cardiology
department at Lapino
hospital
Opening of a new
clinic in Odintsovo
8
2
1
In 2020, we continued to enhance our
network of state-of-the-art medical
facilities across Russia. We opened two
new clinics and completed our largest
investment project in recent years –
the Lapino-2 surgery centre. Early in 2021
we launched Lapino-4 – a new 100-bed
multifunctional hospital, primarily
designed to treat coronavirus patients.
Opening of
a new clinic in
Vladivostok
Openingof a new
multidisciplinary
hospital in
Tyumen
Opening of a new
clinic in Krasnodar
35
34
30
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 Tyumen
Opening of
a new clinic
Mother&Child
Lefortovo
Opening of
Samara
hospital
Opening of a new
clinic in Vladimir,
Nizhny Novgorod,
Volgograd, Kazan
and Tula
Expansion of
the Mother&Child
Yugo-Zapad clinic
and Kostroma
clinic
Start of
construction of
the Lapino-2
hospital
5
39
Opening of
the Lapino-4
hospital
3 out-patient
clinics
36
Opening of a new
clinic in Rostov-
on-Don
Completion of
renovation of
MD Group Clinical
Hospital and start
of rebranding
Group’s hospitals
Opening of
a paediatric clinic
in the Moscow
region
(Mother&Child
Novaya Riga)
Opening
of the Lapino-2
Hospital
Company’s shares
are listed on
Moscow
Exchange
(MOEX)
4
4
4
4
6
6
6
2006
2012
2013–2014
2015
2016
2017
2018
2019
2020
2021
16
17
STRATEGY
Wide range
of high-tech
medical services
MDMG's strategic goal is to constantly diversify its medical services to provide high-
quality, personalised healthcare to members of the whole family. This objective is
achieved by the creation and expansion of a network of multifunctional hospitals
operating in different regions of Russia.
MD Medical Group started by providing
specialised healthcare for women and
children and soon earned recognition as
the leader in the sector of deliveries and
IVF cycles. With its reputation on the
rise as well as its increasing popularity
among patients, MDMG decided to
broaden the scope of medical services
that it offered. In response to growing
demand for other types of healthcare
outside of OBGYN and paediatrics,
and in order to accommodate members
of the whole family, the Company
introducing new
started gradually
services, while making sure that
it
always delivered them in line with its
customary high standards.
The companies facilities across Russia
currently offer a full range of healthcare
services for patients, covering their full
life cycle. By starting with pregnancy care
(preceded by fertility and IVF treatment
if needed), we are able to 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. MDMG’s offering
for adult patients includes a wide range
of services outside of reproductive care,
such as surgeries and cancer treatment.
Patient comfort and high service levels
remain the Company's top priorities.
In 2020, we opened the Lapino-2 centre
specifically designed to receive patients
with various oncology problems, including
those covered under the state mandatory
health
insurance programmes. There,
patients are treated by a team of highly
reputed oncologists specialising
in
different fields such as chemotherapy,
oncourology, oncogynaecology and etc.
Ultrasound
diagnostics
Traumatology
and
orthopedics
Neurosurgery
Urology
Diagnostics
Laboratory
diagnostics
Onco-
gynaecology
Thoracoab -
dominal colo-
proctology
Radiation
diagnostics
Plastic surgery
General
surgery
Surgery
Oncourology
Cardiology
Children’s
intensive care
Operative
gynaecology
Oncology
Full cycle of cancer
treatment
Department
of older
children
Pregnancy
management
Deliveries
Annual capacity of MD Medical Group:
Оnco-
hematology
IVF
Deliveries
7,446
7,759
IVF cycles
18,004
15,264
In-patient days
Out-patient treatments
79,689
116,417
18
1,745,133
1,613,630
2019
2020
General
oncology
Chemotherapy
Surgical
treatment
of infertility
Women's
and Children's
Healthcare
Head
and neck
tumors
Preim-
plantation
genetic
diagnosis
Paediatric’s
clinic
Miscarriage
treatment
19
STRATEGY 3. Investing
in strategic
expansion
22 Expanding a leading
nationwide network
“
2020 marked the completion of our
biggest investment project in recent
years – and one of the biggest
projects of its kind in the country –
the launch of the Lapino-2
surgery centre which
has a strong focus
on oncology.
Andrey PODTETENEV, Samara hospital
Expanding
a leading
nationwide
network
In 2020, the Company continued
active ly implementing its development
strategy across Russia. By the end
of the year, we were managing 42
modern healthcare facilities, including
6 hospitals and 36 out-patient clinics.
MDMG’s 2020 development was marked
by the opening of Lapino-2 – a 6-storey
state-of-the-art hospital on the Lapino
medical complex grounds specialising in
oncology and surgery. These two services
are rapidly developing within the company
and already contribute substantially to its
growth in terms of revenue and operational
results. The construction of Lapino-2
constituted the Company’s largest invest-
ment project in recent years.
M&C
Khodynskoe Pole
465 m2
M&C Savelovskaya
2,048 m2
42,000 m2
Lapino hospital
4,200 m2
Lapino-4
A large group of professionally renown-
ed well-known oncologists joined the
Company’s medical team in order to set
up and run the new oncology centre in-
side Lapino-2 and respond to growing
patient demand among our patients.
The launch of Lapino-2 was followed by
the completion of another centre inside
the Lapino complex – Lapino-4, which
began treating COVID-19 patients in
February 2021.
At the same time, the Company continu-
ed to focus on expanding its network
of clinics across Russia. At the start of
2020, we opened a clinic in Rostov-
on-Don, a city at the heart of a rapidly
developing region in southern Russia
with a population of over 1 million
expanded
residents.The Company
launching
its network
further by
in the Moscow
a paediatric clinic
region. The location for the new clinic
was specifically chosen in a popular
countryside area. The clinic operates as
a branch of the Lapino hospital and is
easily accessible for clients living nearby
to make regular doctor's appointments.
Finally, the renovation of the Perinatal
Medical Centre (the Company’s first
hospital) was completed at the begin-
ning of the year and now it operates as
a full multidisciplinary facility.
M&C Irkutsk
600 m2
442 m2
Rostov-on-Don
15,000 m2
Tyumen hospital
M&C Kostroma
800 m2
209 m2
M&C Perm
1,400 m2
M&C Ryazan
Vladivostok
358 m2
677 m2
M&C Kazan
10,260 m2
Novosibisk
hospital
893 m2
15,000 m2
Samara hospital
(IDK hospital)
33,000 m2
Ufa hospital
M&C St. Petersburg
M&C
Novokuznetsk
800 m2
343 m2
18,500 m2
Lapino-2 hospital
360 m2
M&C Krasnodar
M&C
Novogireevo
801 m2
117 m2
600 m2
5 clinics
2,846 m2
M&C Volgograd
M&C Voronezh
380 m2
Avicenna clinics
Novosibirsk
IDK Medical
Company
27,600 m2
MD Group clinical hospital
(formerly Perinatal Medical
397 m2
Centre)
M&C
Yugo-Zapad
770 m2
M&C
Novaya Riga
392 m2
M&C
Lefortovo
142 m2
M&C Odintsovo
Moscow and Moscow region
22
M&C Kuntsevo
Hospitals
Clinics
Owned
Lapino-2
Owned
Rented
M&C
Nizhny Novgorod
M&C Vladimir
ARTMedGroup
354 m2
M&C Yaroslavl
3 clinics
2,755 m2
4 clinics
3,860 m2
Regions
822 m2
401 m2
M&C Tula
23
INVESTING IN STRATEGIC EXPANSION “
In 2020, we continued to expand
and modernise our leading network
of hospitals into attractive markets,
with each hospital providing a wide
range of medical services.
4.Six hospitals
across Russia
26 Lapino-2 hospital
28 Lapino hospital complex
30
Interwiew with the Head of
the Oncology Centre of Lapino-2
32 Lapino-1 hospital, Ufa hospital
34 Novosibirsk hospital,
Samara hospital
36 Tyumen hospital, MD Group
clinical hospital
38 Rostov-on-Don clinic,
Novaya Riga clinic
40 Lapino-4 medical centre
Polina KORSHIKOVA, Ufa hospital
Lapino-2
hospital
Multifunctional hospital Lapino-2 inagurated in September 2020
Between October 2020 and January 2021, Lapino-2
was fully converted into a Covid-19 treatment centre.
Here, our medical staff have demonstrated their high
level of professionalism and strong medical skills when
treating patients afflicted with the novel coronavirus.
The launch of the Lapino-2 surgery
centre represents an important step
in the Company's development. After
operating successfully for many years
and acquiring the trust and gratitude
of thousands of patients, the Lapino
hospital has now reached a new level
in providing planned and emergency
medical help. By launching this large scale
centre and its new departments, Lapino
has become a major multifunctional
medical centre ready to provide 24/7
medical help to patients with a variety of
problems.
Dr Mark KURTSER, CEO
180,000
Out-patient treatments
* including administrative and service staff
** FTE – actual full-time equivalent
as of 31 December 2020
27
Surgical building Lapino-2 includes:
Annual capacity of Lapino-2 hospital:
State-of-the-art oncology centre which
provides:
• Full cycle medical service, including
chemotherapy,
oncohematology,
general oncology, thoracoabdomi-
nal oncology, coloproctology, onco-
geneacology, oncourology, head and
neck tumors
• 250 admissions per shift
• 18,000 cycles of chemotherapy
• 6 operating theatres for planned
per year
surgeries
• Patients will be treated on a commer -
the MHI
cial basis and under
programme
• 2 operating theatres for emergency
surgeries
• Stomatology,
including oral and
• Diagnostical and in-patient depart-
maxillofacial surgery
ments
• Hemodialysis department
•
Intensive care unit with 13 beds
• A state-of-the-art microbiological
laboratory offering a full range of
diagnostic testing
26
120
Beds
380*
FTE**
40,000
In-patient days
12,000
Surgical operations
3.9 bln rubles
CAPEX
SIX HOSPITALS ACROSS RUSSIA Lapino hospital
complex
Cosmetic and
rehabilitation
department
Treatment and
diagnosis centre
Obstetrics
Cardiology centre
Women’s centre
Surgery
Cosmetic and rehabilitation
department
Offers cosmetology, dermatology, SPA
and anti-aging treatments. Provides
support in preparation for pregnancy and
IVF. Supports women’s health and well-
being both during and post pregnancy.
Treatment and diagnosis
centre
Facilitates the diagnosis, prevention
and treatment of almost all illnesses,
diseases and afflictions. Provides routine
individual check-ups for both men and
women, regardless of age.
Radiation diagnosis centre
Makes use of top-of-the-range scanning
technology, including MRI, MSCT, 3D
mammography and X-ray. The centre
is also equipped with both open and
closed type tomographs accompanied
by vital signs monitors and anaesthesia
and respiratory machines.
Traumatology
and orthopaedics
Offers a complete range of surgical
procedures in both in- and out- patient
settings. These include minimally inva-
sive and laparoscopic surgery, as well as
both routine and urgent general surgery.
Lapino-1
Radiation
diagnosis centre
Traumatology
and orthopaedics
Oncology centre
Diagnostic
department
Dentistry
department
Obstetrics
Women’s centre
The department consists of a profession-
al team of obstetricians, gynaecologists,
anaesthesiologists,
neonatologists,
paediatricians and other specialists. Makes
use of innovative methods of anaesthesia
(including vertical epidural anaesthesia).
Offers family planning, including genetic
counselling. Also provides ongoing
assistance to women throughout their
pregnancy and early diagnosis and
treatment for miscarriages,
if such
a situation should arise. Makes use
of high-level ultrasound scans with
dopplerometry and CTG scans.
Cardiology centre
Provides treatment for cardiovascular
diseases such as hypertension, coronary
heart disease, acute myocardial infarc-
tion, heart failure, etc.
Paediatric clinical
diagnosis centre
Microbiological
laboratory
Dialysis
department
Lapino-2
Surgery
Offers a complete range of surgical
procedures in both in- and out- patient
settings. These include minimally inva-
sive and laparoscopic surgery, as well as
both routine and urgent general surgery.
Paediatric clinical
diagnosis centre
Provides treatment for newborns and chil-
dren under 18 against all manner of illness-
es, including therapeutic and infectious
diseases. Performs routine and emergency
operations and takes care of post-injury
and post-surgery rehabilitation.
Oncology centre
Dialysis department
Dentistry department
Microbiological laboratory
Diagnostic department
Provides a full range of high-quality mod-
ern healthcare services, ranging from
screening and diagnosis to high-tech
oncological treatment, chemotherapy
and rehabilitation.
Treats patients suffering from serious
pathologies. The department uses two
of the most advanced blood purification
methods – haemodialysis and hemodia-
filtration.
Offers interdisciplinary paediatric and adult
dentistry, as well as dentistry for pregnant
women. The department is equipped with
its own digital dental laboratory, allowing it
to provide digital diagnostics of the entire
dentoalveolar system.
Offers a full range of diagnostic testing, with time-of-flight
mass metering and flow cytometry to exa mine the patient's
immune status, as well as an infectious serology unit.
The PCR laboratory conducts studies to analyse the impact
of various virus pathogens (including COVID-19), which
assists the vaccine testing process.
A state-of-the-art department offering a full range of diagnos-
tic testing. Provides 24/7 medical assistance to patients with
various problems. This is facilitated by high-tech medical services,
such as computer tomography (CT), magnetic resonance,
X-ray, mammography and digital breast tomosynthesis (DBT),
supersonic rays and laboratory diagnosis.
28
29
SIX HOSPITALS ACROSS RUSSIA Interview with the Head
of the Oncology Centre
of Lapino-2
Biography
PhD, Professor, Member
of the Russian Academy
of Sciences, Head of Oncology
at Sechenov First Moscow
State Medical University,
Director of the MDMG’s
Lapino Oncology Centre.
Dr Mikhail Davydov
How did you become an oncologist?
– I was born into a family of oncologists.
My mother worked in molecular genet-
ics, and my father, Mikhail Ivanovich
Davydov, is one of the most famous
oncological surgeons in both Russia and
the world. It seems that my career was
determined long before I was born.
What inspired you to create
the Lapino Oncology Centre?
– The idea was the brainchild of Mark
Kurtser, Founder and CEO of MD Medical
Group. Early in 2020, he came up with
a proposal to create an oncology centre
within the Company. He was determined
to make it a high-tech centre with the very
best equipment, built in accordance with
the high professional standards and
corporate culture of MD Medical Group.
The idea immediately took off. We now
have 120 surgical beds and intensive care
unit with 13 beds at this centre.
What’s the key to your approach?
– The core philosophy of our approach
is centralisation. Patients can receive
of
precise diagnoses,
types
all
Education
2007 – Graduated from Pirogov Russian
National Medical Research University,
before completing his residency and
postgraduate studies at Blokhin National
Medical Research Centre of Oncology.
Successfully defended his PhD and
Doctoral dissertations.
2016 – Headed the Research Institute
of Clinical Oncology – the main surgical
department at the National Medical
Research Centre of Oncology.
2016 – Was elected as a correspond-
ing member of the Russian Academy of
Sciences. Dr Davydov is the author of
51 scientific papers, and the co-author
of 4 monographs.
as introduce an ultramodern radiation
therapy centre.
What treatment methods
do you currently use?
– At present, we use a wide range
of methods – mini-invasive surgery,
laser surgery, microsurgery, as well
as all the usual oncological methods
that are currently are applied all over
the world. We only use original drugs
for our immuno- and targeted therapy.
Our quality of care for cancer patients,
as well as those patients with other
diseases, is on par with Western and
Asian standards, and in many cases
even exceeds them.
How did you put your team together?
– Oncology is a complex field that
requires specific knowledge. This meant
that we had to carefully select specialists
to lead Lapino-2’s key departments.
This has required a lot of work. For
example, our department of Oncological
Coloproctology is headed by Professor
leading
Arsen Rasulov, one of the
minds in this field. Ali Mudunov, one of
the most well-known specialists in his
field, leads the department dealing with
tumours of the Head and neck. Another
leading international specialist, Pervin
Zeynalova, runs the Oncohematology
department. Alexander Fedenko is the
Head of Antitumour Drug Treatment.
He has an enormous amount of
experience and is very highly regarded
amongst the
international scientific
community. Experienced and highly
skilled specialists can be found across
all our departments.
Could you tell us about your
first year results?
– In almost six months, (from September
2020 to February 2021), the Lapino-2
centre performed more
than 300
surgeries across various disciplines.
On top of this, around 1,000 patients
received drug treatment. In such a short
time, Lapino has hit its current maximum
capacity – more than 600 cycles per
month. The task, now, is to expand our
staffing levels for our anti-tumour drug
treatment department. For FY 2020,
revenue for our oncology service for the
whole group of companies was up to
648%. This demonstrates the scale of
our approach in developing this sphere of
medical help.
How do you plan to develop further?
– We intend to not only develop our
clinical capacity, but also to increase our
scientific focus. The centre currently
publishes three Scopus journals. We
have big plans in terms of education,
where we want to create a residency
position, train new specialists and open
our own medical school.
What’s the key to dealing with
patients?
– I strongly believe that all doctors
should be as attentive, professional
and ethical as possible when dealing
with patients. Patients are often
battling psychological trauma when
they come to the oncology centre. It is
very important, then, that we treat our
patients with care, compassion and
understanding, not only as professional
as human beings
doctors, but
ourselves. It is important to understand
how to communicate with the patient,
knowing what to say and what not
to say. Sometimes, we must break
difficult news, but we must always do
so in a sensitive way to avoid upsetting
the patient and their relatives. On the
other hand, we sometimes need to
speak frankly to patients, in order to
shock them to their senses. This tough
love approach is necessary for some
patients who refuse to accept their
diagnosis or treatment.
What’s the most important aspect of
a doctor's work?
– Results. Results are always the key.
The benefits of any treatment must always
exceed the potential risks. That is to say,
we must only act in the patient’s interest.
What would you like to wish your
patients?
– First of all – good health… and in fact
to never become our patients. And if
one falls ill, he or she needs to gather
all the courage and strength possible.
Listen to the doctors and never ever give
up. A person can overcome anything!
neoadjuvant chemotherapy, and surgical
treatment with
immediate post-op
reconstructive work and rehabilitation,
all in one place. We perform a full range
interventions, with work
of surgical
in areas
including general oncology,
thoracoabdominal surgery, gynaecologic
oncology, oncourology, haematology-
oncology, oncological coloproctology
and oncology of the bone, soft tissue,
skin, head and neck.
We also have a haemodialysis unit,
which can be used by patients suffering
from serious pathologies. The depart-
ment uses two of the most advanced
blood purification methods – haemo-
dialysis and hemodiafiltration. For both
is purified outside
methods, blood
of the body by machines that mimic
the work of the kidneys.
Does the centre cover all areas
of oncology?
– Lapino-2 covers almost all areas,
with the exception of neuro-oncology,
radiation
paediatric
oncology. The centre will expand to
cover these areas in the future, as well
therapy
and
30
31
SIX HOSPITALS ACROSS RUSSIA Lapino-1
hospital
Lapino or Lapino-1, our
flagship
hospital, is located in a green suburban
area outside of Moscow. It provides
patients with great comfort and high-
quality services. The 191-beds hospital
is capable of providing 639,540
out-patient treatments and 3,000
deliveries per year.
The Company has invested 5.2 bln
rubles in the Lapino hospital, making
it one of the largest private healthcare
investments in the history of Russia.
The 42,000 m2 hospital offers a wide
range of services in the areas of obstet-
rics and gynaecology, IVF, paediatrics,
as well as diagnostics, urology, surgery,
trauma and rehabilitation for all mem-
bers of the family.
From March to June 2020 more
than 1,100 patients with COVID-19
symptoms received medical treat-
ment in the Lapino hospital
• The Lapino hospital was quickly
converted into a COVID treatment
centre after transferring all other
patients to the MD Group Clinical
Hospital in Moscow
• The Company achieved strong
rates among patients
recovery
COVID-19,
infected
demonstrating
advantages
of having a competent team of
doctor's, nurses and personnel
with
the
Ufa
hospital
Our first regional hospital operates in
the capital of Bashkortostan, one of
Russia’s leading regions in terms of
gross regional product.
This 33,000 m2 hospital was funded
mainly by the proceeds of our successful
IPO in 2012. The project was completed
on time in late 2014 following an invest-
ment of 4.4 bln rubles.
Mother&Child Ufa offers services for
the whole family – from deliveries, IVF,
gynaecology and obstetrics, paediat-
rics and neonatology to surgery, urology,
plastic surgery and diagnostic services.
It includes Bashkortostan’s first private
maternity hospital and stem-cell bank.
• Gained valuable experience in treating
a large inflow of patients of all ages,
including pregnant women, further
expanding its medical competen ces
• Strengthened customer loyalty and
brand reputation by performing in-
demand medical services to a high
level
Annual capacity of Lapino hospital:
Annual capacity of Mother&Child Ufa:
191
Beds
1,011*
FTE**
1,000
IVF
3,000
Deliveries
28,470
In-patient days
639,540
Out-patient treatments
185
Beds
740*
FTE**
1,100
IVF
2,000
Deliveries
30,295
In-patient days
290,800
Out-patient treatments
5.2 bln rubles
CAPEX
32
* including administrative and service staff
** FTE – actual full-time equivalent
as of 31 December 2020
4.4 bln rubles
CAPEX
* including administrative and service staff
** FTE – actual full-time equivalent
as of 31 December 2020
33
SIX HOSPITALS ACROSS RUSSIA Novosibirsk
hospital
Since the acquisition of Avicenna – the
largest regional private healthcare chain in
Russia outside of Moscow and St. Peters-
burg – 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 approached max-
imum capacity, MDMG commissioned
a new state-of-the-art wing in February
2017, creating the largest private health-
care facility in Siberia.
Core services offered at Mother&Child
Novosibirsk are obstetrics and gynaecol-
ogy, surgery, urology, oncology, trauma-
thology and ophthalmology. The hospital
also offers out-patient and diagnostics
services in nearly all therapeutic areas,
including those not previously available
in the city or the region.
Samara
hospital
Opened in March 2018, the Samara
hospital is the foremost the leading
facility of its kind in the Volga region –
an
important and growing market.
The new hospital provides our core
services
for women and children
alongside other diverse medical services
suitable for the whole family.
The hospital is equipped with 8 high-
tech operating rooms, including one with
the capacity to host online calls between
doctors operating in different hospitals
of the Group.
Annual capacity of Mother&Child Novosibirsk:
Annual capacity of Mother&Child Samara:
93
Beds
830*
FTE**
1,800
IVF
1,000
Deliveries
22,630
In-patient days
228,900
Out-patient treatments
164
Beds
1,070*
FTE**
1,200
IVF
2,500
Deliveries
30,000
In-patient days
220,000
Out-patient treatments
1.2 bln rubles
CAPEX
34
* including administrative and service staff
** FTE – actual full-time equivalent
as of 31 December 2020
3.2 bln rubles
CAPEX
* including administrative and service staff
** FTE – actual full-time equivalent
as of 31 December 2020
35
SIX HOSPITALS ACROSS RUSSIA Tyumen
hospital
By opening its sixth hospital, the Com-
pany has expanded its footprint to one of
Russia’s most developed regions, where
a Mother&Child clinic has been operat-
ing since 2017.
The hospital has the necessary capabil-
ities to carry out unique organ-sparing
surgeries using endovascular technologi-
es and is developing a range of foetal
treatments, including foetal surgery.
With the opening of the Tyumen hospital,
we are bringing the use of modern
medical technologies to the region,
creating new jobs and contributing to
improving the quality of life.
MD Group
clinical hospital
(formerly Perinatal Medical Centre)
The Company completed its large-scale
renovation of PMC – the first private
maternity hospital in Russia. Investment
in the project amounted to around 600
mln rubles. Previously, the hospital
specialized 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, which has been rebranded
as MD Group Clinical Hospital. These
departments are:
• General surgery department
• Urology department
• Traumatology department
• Cardiology department
• Department of endovascular x-ray
diagnostics and treatment
The capacity of the surgical department
has been increased to 3,250 operations.
It operat es both on a commercial
basis and under the Mandatory Health
In surance (MHI) programme.
The hospital also opened a new IVF
depart ment with updated state-of-the-
art equipment capable of taking the
quality of medical services to the next
level. The capacity of the new depart-
ment is 1,000 IVF cycles per year. It will
operate only on a commercial basis.
As part of the company's rebranding
campaign,
the modernized, multi-
functional hospital, which provides patients
with a full range of highly professional
medical services
in one place, has
become the first hospital to carry the name
MD Group Clinical Hospital.
Annual capacity of Mother&Child Tyumen:
Annual capacity of MD Group Clinical Hospital:
164
Beds
460*
FTE**
1,200
IVF
2,500
Deliveries
8,500
Surgical operations
220,000
Out-patient treatments
261
Beds
916*
FTE**
3,000
IVF
3,500
Deliveries
34,000
In-patient days
3,250
Surgical operations
295,000
Out-patient treatments
3.2 bln rubles
CAPEX
36
* including administrative and service staff
** FTE – actual full-time equivalent
as of 31 December 2020
600 mln rubles
investment in renovation
* including administrative
and service staff
** FTE – actual full-time
equivalent as of
31 December 2020
37
SIX HOSPITALS ACROSS RUSSIA Rostov-on-Don
clinic
Novaya Riga
clinic
The opening of the new clinic in Rostov-on-Don is marks the continuation of our
Our new clinic is located outside of Moscow with a well-developed infrastructure.
strategic goal to operate in all 15 Russian cities with a population of over 1 mln
Conveniently situated next to the existing various recreational and commercial facilities,
residents. Today, our doctors provide highly professional medical services in almost all
this highly qualified clinic has experienced pediatricians from the Lapino hospital.
major administrative and economic centres of Russia.
The new clinic, actually a branch of the Lapino hospital in the Novaya Riga area, will help
Mother&Child Rostov-on-Don clinic has a total area of 422 m2
and is the third of the Group's medical facilities of the Group
located in the Southern Federal district of Russia. The clinic offers
a wide range of services for women including IVF, ultrasound,
gynaecological treatments and antenatal care. Patients are
offered medical consultations with highly qualified obstetricians/
gynaecologists, reproductologists, endocrinologists, urologists,
andrologists and other specialists.
The clinic has an annual capacity of up to 400 minor
gynaecological operations; up to 1,000 IVF cycles, including
under the Mandatory Health Insurance (MHI) programme; and
more than 26,000 out-patient treatments per year.
The Rostov-on-Don clinic has been created in line with
MD Medical Group’s customary high standards of medical care
and is fitted with world-class equipment produced by KARL
STORZ, Nikon, GE healthcare, Olympus, Origio.
enhance further the reputation of the hospital.
Mother&Child Novaya Riga clinic provides pediatric care to
patients starting from birth and care to children up to the age
of 18. The new clinic has a capacity to treat more than 20,000
patients per year and has a total area of 117m2. Investment in
the project amounted to around 2 mln rubles. The new clinic
has been created in line with MD Medical Group’s customary
high standards of medical care. It is the Group’s second clinic
in the Moscow region.
Annual capacity of Mother&Child Rostov-on-Don:
Annual capacity of Mother&Child Novaya Riga:
422
m2
1,000
IVF
26,000
Out-patient treatments
117
m2
20,000
In-patient days
50 mln rubles
CAPEX
38
2 mln rubles
CAPEX
39
SIX HOSPITALS ACROSS RUSSIA Lapino-4
medical centre
Launch of new multifunctional medical centre Lapino-4 in February 2021
Multifunctional medical centre highlights:
We are continuing to expand the Lapino medical complex in line with the Company’s
strategic aim to diversify the scope of medical services provided to our patients.
Currently, three medical centres located inside the Lapino complex provide
multidisciplinary healthcare to patients with different needs and of all ages.
• New 2-storey multifunctional medi-
cal centre intended to treat patients
with infections, including corona-
virus patients
• Highly professional medical care,
including patients with surgical
pathology complicated by COVID-19
and maternity patients
• CT department in place
• 100 beds, including 12 in the emer-
gency room
• All wards fitted with equipment to
provide patients with oxygen
• An efficient and safe flow of patients
due to carefully planned logistics
outside and inside the building
• World-class equipment produced by
GE, Hamilton, B. Braun, Olympus
Annual capacity of Mother&Child Lapino-4 medical centre:
The newest Lapino-4 has been focused on treating COVID-19 and other infectious
100
Beds (incl. 12 intensive care beds)
130*
FTE
diseases, further demonstrating that MDMG has strong competencies in a wide
range of medical services.
4,200
m2
40
* including administrative and service staff
695
mln rubles
CAPEX
41
SIX HOSPITALS ACROSS RUSSIA 5. Sustainable
results
44 Operational review
“
Since our IPO
in 2012, we
have continued
sustainably to
improve our
performance and
raise the bar further
each year. 2020 was
no exception.
Diana KIM, Novosibirsk hospital
Operational
review
Our revenue grew significantly by
+18%
YoY in 2020
7,759
number of deliveries
in 2020
128%
was growth in other
medical services in-patient
days for 2020
In-patient days
In 2020, the total number of in-patient days grew by 46% YoY
to 116,417.
Total LFL in-patient treatments increased by 43% YoY to
113,991.
Revenue from in-patient treatments grew by 97% YoY to
6,012 mln rubles, or 31% of the Group’s total revenue. This
growth was mainly driven by the Lapino clinical hospital.
The average check for in-patient treatments amounted to
67,300 rubles (up by 37% YoY) in Moscow and the Moscow
Region and 33,000 rubles in other regions (up by 10% YoY).
Growth in the average check was due to introduction of
new services in oncology and surgery – both in Moscow and
regional hospitals. The average check was also supported by
treatment of COVID-19 patients.
OBGYN
• Total number of OBGYN in-patient days decreased by 8%
YoY to 21,001.
• Revenue for the division decreased by 10% YoY.
Out-patient treatments
Paediatrics
• Total number of paediatrics in-patient days decreased by
19% YoY to 18,659.
• Revenue for the division decreased by 3% YoY.
Other medical services
• The total number of other medical in-patient days grew sig-
nificantly by 128% YoY to 76,757. Key drivers included:
– A 77% increase in traumatology in-patient treatments;
– A 327%
in-patient
treatments, mainly due to the service adjustment at
Lapino hospital to treat COVID-19 patients;
– A 405% increase in oncology in-patient treatments,
mainly due to the Lapino clinical hospital, as well as
Mother&Child hospitals in Tyumen and Ufa.
internal medicine
increase
in
• The Company’s position in the other medical services seg-
ment were further strengthened by opening of the Lapino-2
surgery centre and completion of PMC renovation in 2020.
enabled us to grow the number of deliveries we perform year
by year, despite decreases in the total delivery rate across
Russia as a whole.
Bringing high-quality services to the regions
We have continued expanding 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 2020 grew by 21% and 16% YoY, respectively.
Revenue from IVF cycles declined by 10% YoY to 3,452 mln
rubles, or 18% of the Group’s total revenue for 2020.
MHI services accounted for 36% of revenue from IVF,
unchanged YoY.
The average check for commercial IVF cycles increased
by 5% YoY to 316,000 rubles, while the average check for
IVF cycles under the Mandatory Health Insurance (MHI)
programme increased by 6% YoY to 149,000 rubles.
In 2020, the total number of out-patient treatments decreased
by 8% YoY to 1,613,630. The decline in the number of visits
to medical facilities was mainly tied to temporary restrictions
amid the COVID-19 pandemic and concerns among some
patients about visiting public spaces.
Total LFL out-patient treatments declined by 9% YoY to
1,583,631.
Revenue from out-patient treatments declined by 2% YoY to
RUB 4,967 million, or 26% of the Group’s total revenue.
The average check for out-patient treatments amounted to
3,100 rubles (up by 6% YoY).
Paediatrics
• Total number of paediatrics outpatient
decreased by 16% to 381,247 treatments.
• Revenue for the division decreased by 10% YoY.
treatments
Other medical services
• The total number of other out-patient treatments
decreased by 3% YoY to 692,279.
OBGYN
• Total number of OBGYN out-patient treatments decreased
by 6% YoY to 540,104.
• Revenue for the division decreased by 2% YoY.
45
In 2020, we continued to deliver on
our strategic diversification initiative by
significantly strengthening our positions in
oncology, surgery and infectious disease
treatment.
Deliveries
In 2020, the number of deliveries grew by 4% YoY to 7,759,
despite challenging demographics in Russia and a 3.3% YoY
decline in total deliveries across the country.
Total like-for-like (LFL) deliveries grew by 3% YoY.
Revenue from deliveries grew 6% YoY and amounted to
2,434 mln rubles, or 13% of the Group’s total revenue.
The average check for deliveries amounted to 430,000 rubles
(up by 6% YoY) in Moscow and the Moscow Region, and
154,000 rubles in the regions (up by 4% YoY).
Weathering the demographics storm
MD Medical Group is well known in Russia for its uniquely
high standard of delivery quality, comfort and care. This has
IVF cycles
In 2020, the total number of IVF cycles decreased by 15%
YoY to 15,264, while total LFL IVF cycles declined by 15%
YoY and amounted to 14,860. This was mainly due to
the temporary ban on IVF in a number of the regions where
the Group operates amid the COVID-19 pandemic.
At the same time, in Q4 2020 the number of cycles grew by
12% compared to Q4 2019 and by 13% compared to Q3 2020,
which reflects a recovery in the dynamics of this service line.
Cycles completed under the Mandatory Health Insurance
(MHI) programme accounted for 54% of the total number of
cycles for FY 2020.
44
SUSTAINABLE RESULTS
“
Russia’s healthcare market has
demonstrated its resilience and
continues to have solid growth
potential which MD Medical Group
is well-positioned
to unlock.
6.Market
trends in Russia
48
Lucrative market
with further growth potential
Ilya STRAZHNIKOV, Tyumen hospital
Lucrative market
with further
growth potential
State economy and healthcare sector overview
The COVID-19 pandemic had a major
influence on the Russian economy, as
restrictive measures aimed at combating
the coronavirusinfection, the fall
in
global demand for energy resources and
a decrease in final domestic demand
(5.0%) led to a GDP decline of 3.1%1.
To
the Russian economy,
the government signalled its intention
to spend 2 tln rubles on infrastructure
restore
development in 2020-2021, including
extrabudgetary funds2. In addition, in
2021, 90 bln rubles will be allocated
towards a modernisation programme
for the primary health care sector, as
the government is aiming to execute
financial projects scheduled prior to
the COVID-19 pandemic3.
Against the backdrop of a turbulent
investment climate, the healthcare industry
saw the highest increase in investments
among all sectors of
the Russian
economy – fixed capital investments in
healthcare and social services went up by
58.1% in first half of 20204.
In 2020, the overall demand for paid
services among Russian consumers
decreased by 17.3% YoY. However, Russia’s
healthcare sector saw a lower-than-
average decrease in demand of 10%5.
Fixed investments dynamic (excluding small businesses) in different sectors
of the economy, H1 FY 2020 (%, YoY)
Healthcare and social services
Public administration
Education
Finance and insurance services
Culture and sports
Water supply and environmental services
Agriculture, forestry, hunting, fishing and fish farming
Utility services
Manufacturing
Construction
Mining
Hospitality and food services
IT and telecommunications
Wholesale and retail; vehicles repair
Logistics and storage
Real estate
Administrative activities
-2.0
-2.4
-8.6
-10.0
-15.3
-16.5
-18.3
-43.6
58.1
50.4
23.1
20.2
13.3
7.6
3.3
3
2.3
Source:
Federal State Statistic Service
Private healthcare trends in 2020
Clients’ solvency
80%
10% 10%
Demand for medical services
40%
40%
Demand for remote consultations
80%
Demand for in-patient services
30%
60%
Demand for in-person consultations
60%
20%
Demand for telemedicine
70%
Demand for voluntary health insurance (VHI)
services
50%
Demand for mandatory health insurance (MHI)
services
10%
70%
Participation in public-private
partnership programmes
20%
10%
Other
10%
Private healthcare sector
pandemic
COVID-19
has
The
influenced consumers’ approach to
their lifestyle and introduced changes
to how people take care of their health.
71% of Russians surveyed by PwC for
the “Transformation of the consumer”
report said that they started paying
closer attention to their physical health
and wellness – an 18 p.p. increase since
the beginning of the pandemic6.
According to PwC analysists, in the next
four years the private healthcare market
will continue growing at an up to 9.6%
annual rate. If the market lives up to its
potential, its volume will exceed 1 tln
rubles by 20257.
Sustained interest in healthcare services
in combination with state clinics’
prioritisation of COVID-19 treatment
led to Russian patients turning to
private healthcare organisations more
frequently.
In 2020, the volume of
the Russian private healthcare market
grew to 811 bln rubles, according to
PwC8, with 40% of private clinics
reporting an increase in patient visits9.
The structure of demand for private
medical services also changed in 2020.
30% more patients were seeking out
private medical services of oncologists,
while 26% more women saw private
gynaecologists than in 201910. In certain
regions, the volume of oncological services
increased despite the pandemic – in
Moscow it went up by 25%11. Thus,
in FY 2020, MDMG’s profit from the set
of oncological services has increased by
648%12.
In 2021, clinics that offer oncological
services are expected to receive addi-
tional support from the MHI fund. It is
planned to spend more than 300 bln
rubles on oncology – 11.8% more than
in 2020,
increasing the availability
of private oncology services for more
patients13.
Deсrease
Increase
Remained the same
No data
20%
20%
10%
20%
30%
50%
20%
60%
10%
90%
Source:
“Russian commercial
healthcare after COVID-19”
report, Ernst & Young,
February 2021
remote
increase
the COVID-19
of
Circumstances
pandemic caused an unprecedented
growth
in popularity of telemedical
and remote services – 80% of private
clinics saw an
in demand
consultations14. Thus,
for
telemedicine service Doctis used by
MDMG to remotely serve its patients saw
a twentyfold increase in consultations
since March 2020 and later signed a
strategic partner ship with Mail.ru Group.
In FY 2020, the number of births
in Russia went down by 3.3% YoY.
Yet according to the Deputy Labour
Minister Olga Batalina, the birth rate
decline was slowed down closer to the
end of the year. In contrast, MDMG saw
its deliveries increase by 4% YoY14 in FY
2020 and by 12% YoY in Q4.
60% of private medical companies saw
their 2020 earnings grow by 9-17%15,
with MDMG growing the Group’s revenue
by 18% YoY to 19,133 mln rubles.
1 Federal State Statistic Service, February 2021 (https://www.rosstat.gov.ru/folder/313/document/113015)
2 Vedomosti, September 2020 (https://www.vedomosti.ru/economics/articles/2020/09/15/840059-rossii-predskazali)
3 Vademecum, February 2021 (https://vademec.ru/news/2021/02/10)
4 Vademecum, February 2021 (https://vademec.ru/news/2021/02/10/putin-poruchil-ne-napravlyat-na-kakie-to-drugie-tseli-vydelennye-na-modernizatsi-
yu-pervichnogo-zvena)
5 “Current trends in the Russian economy,” Analytical Center for the Government of the Russian Federation, November 2020 (https://ac.gov.ru/uploads/2-Publications)
6 “Paid services market” report, Federal State Statistics Service, 2020 (https://rosstat.gov.ru/bgd/regl/b09_01/IssWWW.exe/Stg/d06/2-2-3.htm)
7 “Transformation of the consumer” report, PwC, November 2020 (https://www.pwc.ru/ru/retail-consumer/publications/assets/pwc-global-customer-insights-sur-
vey-2020-russia-ru.pdf)
48
8 “Russian commercial healthcare after COVID-19” report, Ernst & Young, February 2021 (https://www.ey.com/ru_ru/health/ey-russian-commercial-health-
care-after-covid-19)
9 “Medvestnik”, June 2020 (https://medvestnik.ru/content/news/Analitiki-prognoziruut-rekordnyi-spros-na-uslugi-chastnyh-klinik-v-2020-godu.html)
10 “The volume of paid medical services in Russia grew,” Sberbank, October 2020 (https://www.sberbank.com/ru/news-and-media/press-releases)
11 Vademecum, September 2020 (https://vademec.ru/news/2020/06/26/rakova-v-period-pandemii-koronavirusa-obemy-onkopomoshchi-v-moskve-uveli-
chilis-na-25)
12 Company data
13 Vademecum, January 2021 (https://vademec.ru/news/2021/01/15/v-2021-godu-na-onkopomoshch-po-oms-planiruetsya-napravit-bolee-300-mlrd-rubley)
14 Federal State Statistics Service, 2020
15 Kommersant, December 2020 (https://www.kommersant.ru/doc/4595758)
49
MARKET TRENDS IN RUSSIA “
In addition to achieving our
business goals, we prioritise taking
care of our people and giving
back to the communities in which
we operate.
7.Social
responsibility
52 Our people
54 Corporate social responsibility
56 Shareholder equity
Valeria GOHMAN, MD Group
Our
people
MDMG wouldn't be a market leader
without the exceptionally competent
professionals who work at the Company.
By continuously improving their expertise
both in and out of the office, MDMG
employees are driving the Company
to reach new heights year after year.
• Developing
our
management system
personnel
• Selecting talented students and
invit ing them to study with residen-
ce at our facilities. To enable this, we
have been running a special project
since 2015. In 2020, 11 people
completed their residency studies as
part of this project
• Creating opportunities for personal
and career growth
• Constantly monitoring and adopting
the best available technologies
• Regularly updating our equipment
so it remains state-of-the-art
• Ensuring our best employees are in
key positions to maximise potential
and stimulate internal growth
Among our training
programmes we have
provided staff with:
• Webinars featuring online training –
in 2020, MDMG doctors carried
out 12 webinars for their colleagues
focusing on relevant topics within
OBGYN and prenatal diagnosis,
urology and IVF
• Career enhancement courses
• Short-term
training
thematic advanced
• Business trips for specialists from
Moscow
in
the regions take over the leadership
of regional hospitals
to help specialists
• Providing better working conditions
• Participation in international forums,
to ensure low staff turnover
conferences, and exhibitions
• Providing incentive programmes for
employees
• A training centre, a system of
improving soft skills and knowledge
acquisition across different areas
Our people are the key to our continu ed
growth and to maintaining our market
leadership. Our highly qualified and
talented personnel, from doctors to
the management team, work hard to
ensure the long-term success of our
business. In return, we provide our staff
with a comfortable and supporting
working
competitive
wages and social packages, as well
further
as broad possibilities
professional growth.
environment,
for
Personnel
We are always striving to
improve
the already exceptional level of expertise
possessed by our doctors and other
employees. We primarily accomplish
this thanks to our personnel training and
development structure.
Our HR Policy focuses on:
• Retaining existing staff and searching
for new highly skilled employees
• Offering training programmes
in
a range of fields, as part of our
corporate education system
52
Personnel figures (as of 31 December 2020)
Total number of employees
6,346
5,807
6,801
6,302
7,349
6,842
7,752
7,153
7,587
8,274
Employees
24%
8,274
76%
2016
2017
2018
2019
2020
FTE
Headcount
Part-timer – 1,988
Full-timer – 6,286
Total number of doctors
2,746
2,849
3,097
2,092
2,141
2,276
2,378
2,521
1,792
1,897
2016
2017
2018
2019
2020
FTE
Headcount
Personnel structure
30%
37%
8,274
33%
Doctors – 3,097
Other staff – 2,456
Other medical staff – 2,721
Doctors by speciality (FTE)
Doctor’s qualifications
Payroll structure
61%
16%
93%
7%
24%
49%
12%
2,276
630
11%
27%
Other doctors –
1,395
Reproductologist –
257
Pediatrician – 265
Obstetrician – 359
PhD – 588
Professors – 42
Doctors
Other staff
Other medical staff
53
SOCIAL RESPONSIBILITY Corporate
social
responsibility
Our focus on caring expands far beyond the daily business operations of our 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 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 creation, and we
recognise and reward this dedication by
creating an environment that encourages
professional and personal growth.
Our technology
Our profession
We aim to maximise efficiency and
minimise patient stress by constantly
updating our technology and using the
most innovative procedures. For example,
several years ago the Company started
performing foetal surgery 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.
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.
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
and easily accessible healthcare, but also
encourage every employee to contribute
to their own communities.
Key CSR activities in 2020
inspite of
In 2020, the pandemic made it almost
impossible to hold public events.
restrictions,
However,
the medical centres of the Group's
medical centres did everything
in
their means to safely continue charity
and social work
in various areas.
The following events were particularly
noteworthy.
Annual Wish Tree New
Year charity events in MD Group
Clinical Hospital (PMC) and
Mother&Child hospital in Samara
In December 2020, MD Group Clinical
Hospital employees organized a charity
event Wish Tree, where employees
brought gifts
to developmentally
challenged children at the Uvarovsky
orphanage, as well as to children from
a outh rehabilitation centre.
Employees from the Samara hospital
and clinics based in the Samara region
also organised a gift-giving event for
local orphaned children.
Donor’s Day at MD Group
Clinical Hospital (PMC)
In 2020, MD Group Clinical Hospital
hosted an annual donor event attended by
16 donors who donated 7,200 milliliters of
blood. A Donor’s Day was also organised
at the Mother&Child hospital in Tyumen,
which resulted in donations of 12,600
milliliters of blood by 28 people.
Various educational events
Doctors at MD Group Clinical Hospital took
part in hosting an action against women’s
breast cancer and other educational and
lecturing activities to which future mothers
were invited. Two medical conferences
were sponsored by the Samara hospital,
held respectively at the Samara Medical
University and at the Russian Association
of Human Reproduction. Video material
on how to protect yourself from the
coronavirus was produced by doctors at
the Tyumen hospital.
Charity events
The Samara hospital regularly provides
financial help to the Samara hospice and
the local association of doctors. At the Ufa
hospital, financial help was provided to
disabled children – medical equipment was
purchased and rehabili tation procedures
were organised. Just before the New Year
celebrations, a charity event for disabled
children was hosted at the Tyumen
hospital.
The Novosibirsk hospital provided a
donation to the city zoo, popular among
youngsters, which encountered financial
restrictions
difficulties due
because of the pandemic.
to visit
54
55
SOCIAL RESPONSIBILITY 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
in one
GDR represents an
interest
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
Since November 9, 2020
Kurtser.
the Company's GDRs have also been
traded on the Moscow Exchange.
Quotation is done in Russian Rubles.
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*
Russia Partners Advisors
Norges Bank
JP Morgan Asset Management
East Capital
Prosperity Capital
Baring Asset Management
Alfred Berg
Aberdeen Standard
Holberg Fondsforvaltning AS
Handelsbanken
BlnP Paribas Asset Management
SEI Investments Management Corporation
Raiffeisen Capital Asset Management
Trigon Capital AS
Number of shares
as of 31.12.2019
Share of shares
outstanding
Number of shares
as of 31.12.2020
Share of shares
outstanding
4,166,667
3,235,000
1,026,064
2,585,693
692,400
2,130,262
898,204
300,000
653,886
608,551
556,234
300,000
—
190,772
44,000
5.5%
4.3%
2.8%
2.5%
0.9%
2.8%
1.2%
0.4%
0.9%
0.8%
0.6%
0.4%
—
0.3%
0.1%
4,169,438
3,235,000
2,087,169
1,581,507
1,259,900
995,809
898,204
720,042
469,366
421,491
304,229
240,169
181,438
110,564
45,000
5.5%
4.3%
2.8%
2.1%
1.7%
1.3%
1.2%
1.0%
0.6%
0.6%
0,4%
0.3%
0.2%
0.1%
0.1%
Our investors represent
various geographies
32.1%
50%
1%
20%
50%
Free float
50% of net profit payed out
as dividends for H1 2020
Dividend taxation
Investor relations
29%
Russia
Continental Europe
UK
US
Source: Bloomberg,
as of 31 December 2020
Analyst coverage
As of 31 December 2020, MDMG was
covered by equity research analysts
representing
leading banks such as
Renaissance Capital, Goldman Sachs,
VTB Capital, and JP Morgan.
Dividends
MD Medical Group has been adhering to its
unofficial dividend policy to pay out at least
50% of a year’s net profit as dividends.
Since 1 January 2015, MD Medical
tax
Group has been a Russian
resident and pays dividends
line
in
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.
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 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 2020, we held numerous meetings
with investors, including 7 international
investor conferences.
MD Medical Group’s dividend history
Dividend
approval
Record date
Payout date
Total
dividends,
thousand RUB
Dividends
per GDR, RUB*
H1 2016
2016
H1 2017
2017
2018
2019
H1 2020
02.09.2016
21.04.2017
08.09.2017
17.04.2018
23.04.2019
03.09.2020
04.09.2020
09.09.2016
28.04.2017
19.09.2017
25.04.2018
24.05.2019
16.09.2020
18.092020
18.10.2016
23.05.2017
24.10.2017
22.05.2018
25.06.2019
13.10.2020
20.10.2020
285,475
338,063
350,833
450,750
800,081
1,389,813
736,225
3.8
4.5
4.67
6
10.65
18.5
9.8
* Shares managed by RDIF Managing company Llc., including co-investors’ shares managed by RDIF Managing company Llc
* At the exchange rate as of the date of the Annual General Meeting of Shareholders or Board meeting
56
57
SOCIAL RESPONSIBILITY “
We are committed to strong
corporate governance
standards in line with
international best practices.
We also constantly assess
potential risks
to ensure we have all
the tools necessary
to mitigate them.
Anastasia KOLGANOVA, Rostov-on-Don hospital
8.Corporate
governance and risk
management
60 Corporate governance report
62 Risk management
66 Board of Directors
68 Board of Directors
activity in 2020
70 Senior management
Corporate
governance
report
At MD Medical Group, we understand clearly that there is a direct link between
best-practice corporate governance and successful operational performance.
The Board of Directors aims to uphold the highest standards in its interaction with
all stakeholders.
Since its London IPO, the Company
has maintained full compliance with
the UK Corporate Governance Code.
It has establish ed 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
is responsible for
Directors, which
constituting,
co-opting
and fixing the terms of service for the
committee members.
assign ing,
Audit Committee
The Audit Committee comprises three
non-executive directors, two of whom
are independent. The Audit Committee
has been chaired by independent non-
executive director Tatiana Lukina since
December 2019, and Mr Kirill Dmitriev and
Mr Simon Rowlands are other members.
The Audit Committee meets at least four
times each year and is responsible for
considering:
•
the
the reliability and appropriateness
of disclosures
financial
in
statements and external financial
communication
the maintenance of an effective
system
controls
including
operational
financial,
and compliance controls and risk
management system
internal
of
•
Corporate governance
and control structure
General meeting of shareholders
Board of Directors
CEO
Board Committees
• Audit
• Nomination
• Remuneration
Internal auditor reports to Audit Committee
• preparation of
recommendations
to the shareholders for approval
in general meetings in relation to
the appoint ment,
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 the
monitoring and the review of the
auditors’ performance,
external
independence and objectivity
•
Our Board’s priority is to ensure the Group's
continued success, while also adhering to
the highest corporate governance standards
Mr Vladimir MEKLER
Chairman of the Board of Directors
•
development
the
and
implementation of the policy on
non-audit services provided by the
external auditors
of
• and monitoring compliance with
laws and regulations and standard
of corporate governance
in
The Audit Committee assists the Board
of Directors
its oversight of
the perform ance 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 for 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 has been
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 who have been
present on the board since 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 the appointment of all executive
and non-executive directors, as well as
the EO 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
that the Board of Directors remains
balanc ed and that its members possess
the necessa ry qualifications.
The Nomination Committee
also
considers the composition of the Audit
and Remuneration Committees.
Remuneration Сommittee
two
Remuneration
Committee
The
non-executive
compris es
directors and one executive director.
The Remunera tion 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.
reviewing
Internal auditor
The Audit Committee is responsible
for monitoring and
the
effectiveness of the Company’s internal
audit service. In this respect, the Audit
Committee may require investigations
by, or under the authority of, the Head of
Internal Audit Service into any activities
of the Group which may be of interest or
concern to the Audit Committee.
is
The Company’s
responsible for recommending an audit
plan to the Audit Committee. The internal
auditor carries out auditing assignments
in accordance with this 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.
internal auditor
60
61
CORPORATE GOVERNANCE AND RISK MANAGEMENT Risk
management
MD Medical Group’s Board of Directors carefully identifies and manages
key potential risks to ensure the long-term sustainable development
of the business.
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.
Potential impact
Reputation risk
Тhe key danger of this risk is that it can be
caused by a number of different factors. It
is, therefore, 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 constantly improving our means
of protecting personal information. In 2021, we
will implement a range of measures to reduce
the level of reputational risk.
Medical service risk
Medical risk is one of the main risks affecting
the Company’s reputation, as well as the achieve-
ment of our goals. Our reputation is based on our
work, patient satisfaction with our services, and
the safety of our customers. Given the develop-
ment the business and the introduction of new
activities, this risk requires constant monitoring
and the ability to respond as quickly as possible.
Compliance risk
The political and regulatory environment with re-
spect 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.
Mitigation
In 2020, we reinforced our work on dealing with risks, which we did not
manage to reduce significantly in 2019. we achieved significant success
in terms of control and effectiveness risks, compliance risk and reputation
risk. The work on further reduction of recruitment risk and of the risk to
Medical Services was also carried out. We improved the personal data
security system significantly in 2020. We have organized our data storage
and processing centre in accordance with the requirements of Russian
legislation. As a result, this led to a decrease in reputational risk.
To reduce this risk, we need the newest and most advanced equipment,
medicine 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 specialize further in their respective fields. The Company’s management
conducts seminars and scientific conferences for doctors, as well as evaluating
the effectiveness of key medical staff within the Company. In 2020, patient
complaints led to the introduction of improvements in our work. In medium
and complex medical cases, recommendations were carefully analyzed,
discussed and agreed upon by all key members of the Company. We have
worked on introducing new guidelines for in the treatment of patients, for
example, for oncology and for dealing with COVID-19.
We maintain constructive relations with the government at both the federal and
regional level, and we work continually to make them even stronger. We par-
ticipate 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 development of the medical
sector. We also cooperate with the UK regulatory bodies for the requirements
of the London Stock Exchange. We constantly review updates in UK and EU
legislation and update our internal standards to match. We have made efforts
to ensure we comply with state regulators' requirements in terms of accounting
treatment for medical equipment and medicine turnover.
62
63
CORPORATE GOVERNANCE AND RISK MANAGEMENT Potential impact
Mitigation
Investment project execution risk
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 prioritize those regions where we already have out-patient clinics and/
or Russia’s largest regions where we can have a higher degree of certainty
about the local market. We also benefit from a relative lack of competition
in the regions, as currently we are practically the only sizeable provider of
high quality private medical services. In 2020, we opened new hospitals and
clinics, expanding our presence. We have increased the number of patients
receiving treatment under the government-funding program. The number of
services under the voluntary health insurance system has been increased.
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.
Epidemiological risk
Epidemiological risk is determined by the potential
aggravation of the epidemiological situation; it
means a higher degree of risk of infectious diseases
among the medical personnel associated with
the provision of medical care to patients with
COVID-19. There is a high likelihood of inappropriate
treatment for COVID-19 patients, which could have
a negative impact on their health and the company's
reputation.
We have taken steps to protect medical personnel with personal protective
equipment, closed air ventilation circuits, and ongoing testing for COVID-19.
When treating patients with COVID-19, we were guided by the advanced
developments of the world medical community, recommendations by the WHO
and the Ministry of Health of the Russian Federation, as well as the experience
of leading Russian clinics. We have developed our own methods of treatment
and implemented rehabilitation programs for patients who have had COVID-19.
A hospital located on separate grounds of the Lapino medical complex is
current ly open to treat patients with COVID-19.
Macroeconomic risk
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 2020, our team paid special
atten tion 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.
64
Potential impact
Mitigation
Control & efficiency risk
The risk is closely related to the size of the business, which
significantly increased in 2020. Dealing with this risk
requires significant resources, as well as a certain level
of competence amongst 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 2020, we achieved significant success in reducing this risk by
introducing new control measures and improving existing ones.
Constant business growth requires us to make new decisions
and use new control technologies that allow us to control the
activities of Company employees across all sites. We, therefore,
use international best practices to constantly develop mechanisms
that increase the effectiveness of our control over all processes
(budgeting, financial control, treasury, accounting, procurement,
legal support, personnel management, security and IT). In 2020, to
achieve maximum management efficiency, additional managerial
positions were introduced with control functions. We carefully
interact and take into account recommendations from world-
renowned consultants.
Recruitment risk
The risk arises in the presence of factors leading to
the inab ility to attract or retain highly qualified personnel.
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 organizations. 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 monitoring
by the HR service and Company Management.
Financial risk
Financial risk includes significant risks such as: credit
risk – the risk arising from the likelihood that 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 from 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.
In 2020, 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 cooperate
actively 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
programs for regional specialists conducted in Moscow.
The Company’s Management controls constantly monitors the cash
flow within the Company, as well as the execution of its instructions
in relation to any issues related to the Company’s financ es and
assets. The continuous development of employees of the Financial
Department remains a key priority for the Company's Management.
We centralize our procurement and conduct tenders, which results
in a reduction in costs for procuring services, equipment and
medicine. A new software was introduced to register medicines
and calculate wages, which made it possible to set up and maintain
a complete and transparent accounting. Additional tools have
been developed to facilitate the implementation of a system of
a payments system for patients. In 2020, the Company held an
SPO on the Moscow stock exchange, which helps attract potential
additional investment.
65
CORPORATE GOVERNANCE AND RISK MANAGEMENT Board
of Directors
Mr Vladimir MEKLER
Chairman of the Board of Directors
Mr Simon ROWLANDS
Independent member of the Board of Directors
Mr Vladimir Mekler became Chairman
of the Board of Directors in June 2016.
Mr Mekler was appointed as Non-
Executive Director in February 2015.
He is a senior and managing partner of
Mekler & Partners. Mr Mekler specialises
in corporate law, including supporting
and structuring complex and cross-border contracts;
creating systems of corporate governance; legal structuring
development; optimisation of criminal and antitrust legislation;
legal support of mergers and acquisitions; settling corporate
disputes; and organising and coordinating legal representation
and defence in complex economic and property crimes.
Mr Mekler has been a member of the Moscow City Bar since
1980 and is listed in the Moscow Bar’s Book of Honours. He
also acted as Vice Chairman of the Presidium of the Moscow
City Bar Association from 2003 to 2010. He graduated from
Lomonosov Moscow State University.
Mr 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 multidisciplinary engineering
projects in the UK and Southern Africa.
He has an MBA in Business, a BSc in Engineering and is
a charter ed engineer.
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 the 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 Vitaly USTIMENKO
PhD, member of the Board of Directors
Mr Vitaly Ustimenko was the Group’s
Chief Financial Officer from 2012 to
2016. He was elected to the Board of
Directors in February 2015.
Mr Ustimenko has more than 20 years
of experience in finance. He was CFO of
Solnechnye Produkty Holding Company
from 2017 to 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.
The Directors of the MDMG Board
are highly qualified professionals who,
thanks to their vast experience, can
contribute effectively to the realization of
the Company's strategic aims.
Mr Vladimir MEKLER
Chairman of the Board of Directors
Ms Tatiana LUKINA
Independent Director
Mr Tony MAHER
Independent Director
Mr Tony Maher was appointed as
an independent non-executive director in
December 2019 and brings to the Group
more than 40 years of experience in
the consumer sector.
His 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 BA (Honours) degree in Management from
The National Council for Education in Ireland.
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 tln rubles 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 bln.
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.
Ms Tatiana Lukina was appointed as an
independent non-executive director in
December 2019, bringing her 19 years
of experience in finance, business re-
structuring 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 began at KPMG, where she spent
10 years participating and running projects in auditing, capital
market transactions (IPO, SPO, Eurobonds) in international
and stock exchanges, debt restructuring for major Russian
companies, M&A transaction services in different countries.
After that, Tatiana worked in the portfolio Asset Management
department at ALFA Group, represented shareholders on
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 honours degree in
Finance, Business Appraisal and Turnaround Management and
then finished her PhD there.
Since 2006, Tatiana has been a member of the Association of
Certified Chartered Accountants (ACCA) in the UK, and has
successfully passed exams for a Russian Audit License.
66
67
CORPORATE GOVERNANCE AND RISK MANAGEMENT Board
of Directors
activity in 2020
Our strong and experienced Board
of Directors is focused on ensuring
the long-term successful development
of MD Medical Group and sustained
returns to our shareholders.
Remuneration paid to members of the Board in 2020
Director participation in board meetings in 2020
Board member
Board member total amount paid (before taxes), RUB
Board member
Number of board meetings attended
Simon ROWLANDS
Vitaly USTIMENKO
Tatyana LUKINA
Tony MAHER
4,500,000
944,000
615,000
4,000,000
Vladimir MEKLER
Mark KURTSER
Simon ROWLANDS
Kirill DMITRIEV
Vitaly USTIMENKO
Tatyana LUKINA
Tony MAHER
Nikolay ISHMETOV*
* Alternate director for Kirill Dmitriev
Meetings attended in person
Meetings attended via phone
10 Board meetings
held in 2020
68
35 Agenda items
discussed in 2020
69
CORPORATE GOVERNANCE AND RISK MANAGEMENT Senior
Management
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 the Head of
the Centre for Family Planning and Reproduction, the largest public obstetrics hospital in Moscow.
From 2003 to 2013, Dr Kurtser was the Chief Obstetrician and Gynaecologist of the City of Moscow. He holds a degree in
Medicine from Pirogov Medical University in addition to a postdoctoral degree in Medicine. Dr Kurtser remains actively involved
in the Group’s healthcare practice and day-to-day operations.
Dr Pavel BOGOMOLOV
PhD, First Deputy General Director
Mr Vadim VLASOV
Deputy CEO for Development
Pavel Bogomolov joined the Group as
Deputy CEO in 2020. Since 2018, he has
been Chairman of the Board of Directors
of the OMS Group. Earlier, from 2016 to
2018, he was member of the Board and
medical director of the Medsi Group of
companies. From 2014 to 2016, he was
the Deputy Chief Doctor, and from 2004 to 2014, the Head
of the Hepatology department of M.F. Vladimirsky Moscow
Regional Research Clinical Institute. Also, from 2004 to 2018,
Pavel Bogomolov was the Chief Hepatologist of the Ministry of
Health of the Moscow Region.
Mr Bogomolov graduated from the Kirov Military Medical
Academy with a degree in General Medicine, internship in
therapy, and then completed a medical residency in gastroen-
terology at the Central Research Institute of Gastroenterolo-
gy. Pavel Bogomolov has a PhD in Medicine.
Vlasov
graduated
Mr Vadim Vlasov joined the Company
as deputy CEO in charge of develop-
ment in 2019.
Vadim
from
the Moscow Aviation Institute, has held
various posts in the aerospace industry,
was the Head of the representative
office of the Airbus corporation in Russia, and later acquired
vast experience in the medical and pharmaceutical businesses.
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).
Mr Andrey KHOPERSKIY
Deputy CEO for Economics and Finance
Mr Andrey Khoperskiy joined the Group
as the Head of Finance Controlling and
Treasury in 2013, and was appointed to
the position of the Director for Finance
of the Group in 2016.
Previously, Andrey worked for Rusagro
Group and Sukhoi Aviation Holding
Company as a Finance manager and before that 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 ACCA
Advanced Diploma in Accounting and Business and ACCA
Diploma in International Financial Reporting.
Dr Yulia KUTAKOVA
PhD, Medical Director for Organisational and
Scientific-Educational Work
Dr Yulia Kutakova joined the Group
in 2012. She has over 13 years of
practical experience in obstetrics and
gynaecology.
Prior
the Group, Dr
Kutakova was the Chief of Maternity
in the Organisa tional and Tutorial
joining
to
department of Public Healthcare of the City of Moscow.
She holds a degree
University, a degree
Institute of Management and a PhD in Medical Science.
in Medicine from Pirogov Medical
in Management from the Moscow
Dr Sergey ARABADZHYAN
PhD, Medical Director for Technology Innovation
Dr Natalia YAKUNINA
PhD, Deputy CEO, Director of Mother&Child Centre
for
Dr Arabadzhyan joined the Group in 2010.
He was appointed to the position of Medical
Director
technologies
innovative
of MD Medical Group in 2020. From
2018 to 2020, he held the position of
the Chief Physician of the DK Mother
in Samara, and a
&Child Hospital
year earlier, held the position of Deputy General Director for
Business Development of the IDK Hospital. From 2012 to 2014,
Dr Arabadzhyan worked as the Commercial Director and from
2012 to 2018, was the Head of the Obstetric Physiological
department No. 2 of the Lapino Clinical Hospital. Until 2012, he
worked as a doctor in the pregnancy pathology department No. 2
at the Perinatal Medical Centre of the Mother&Child group.
Mr. Arabadzhyan graduated from the Pirogov Russian National
Research Medical University. A practicing physician, he holds a
PhD in Medicine.
Dr Natalia Yakunina joined the Group
in 2011. In 2019, she was appointed
the Deputy CEO and the Director of
Mother&Child Centre.
From 2016 to2018, Dr Yakunina was
Deputy CEO for Patient Care and
from 2014 to 2016, she worked as the
Chief Doctor and CEO of Mother&Child Savelovskaya clinic
in Moscow. Before that, from 2012 to 2014 she was the
Head of the OBGYN out-patient department at PMC. Natalia
joined the Group in 2011 as the 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 24 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 Boris KONOPLEV
Medical Director of Mother&Child, Head of Hospital Group
Mrs Maria NECHAEVA
Deputy CEO for Operations
Dr Boris Konoplev joined the Group
in 2010. In 2017, he was appointed
the Medical Director and the Head of
Hospital Group of Mother&Child.
Prior to that, from 2014 to 2017, Dr
Konoplev was the Chief Doctor of
Mother&Child Ufa hospital. Earlier, from
2012 to 2014, he was the Head of Obstetrics department
at Lapino Hospital. Between 2010-2012, Dr Konoplev was
the 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 specialised
training in Immunology at Bashkir State Medical University. Dr
Konoplev is a practicing obstetrician-gynaecologist and has
undertaken a wide range of training in leading European clinics.
Mrs Maria Nechaeva joined the Group
in 2018.
Prior to joining the Group, Maria was
the Head of Sales at Medipal Onco
in 2012–2018. Before that, she held
vario us positions at pharmaceutical
companies such as Abbott Laboratori es
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.
70
71
CORPORATE GOVERNANCE AND RISK MANAGEMENT 9. Report
and consolidated
financial statements
74
Officers, professional
advisors and registered office
75
Management report
80
Directors'
responsibility statement
81
Independent auditors' report
87
88
90
94
96
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
For the year ended 31 December 2020
Officers,
professional advisors
and registered office
Board of Directors
• Vladimir Mekler — Chairman
• Mark Kurtser
• Vitaly Ustimenko
• Kirill Dmitriev
• Nikolay Ishmetov (alternate director to Kirill Dmitriev)
• Simon Rowlands
• Tatiana Lukina
• Tony Maher
Secretary
Menustrust Limited
Secretary assistant
Darya Aleksandrova
Independent auditors
KPMG Limited
Registered office
15 Dimitriou Karatasou street, Anastasio Building,
6th floor, office 601, Strovolos,
2024, Nicosia, Cyprus
Management
report
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 2020.
Incorporation
MD Medical Group Investments Plc was incorporated in Cy-
prus 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 pro-
grammes and currency exchange fluctuations.
The Group's financial results for the year ended 31 December
2020 and its financial position at that date are set out in the con-
solidated statement of profit or loss and other comprehensive in-
come on page 87 and in the consolidated statement of financial
position on page 88 of these consolidated financial statements.
Profit for the year ended 31 December 2020 amounted to
RUB4,333,300 thousand (for the year ended 31 December
2019: RUB2,786,625 thousand). The total assets of the Group
as at 31 December 2020 were RUB31,994,491 thousand
(31 December 2019: RUB28,670,534 thousand) and the net
assets were RUB19,952,581 thousand (31 December 2019:
RUB17,880,142 thousand).
The revenue significantly increased by 18% year-on-year,
mainly thanks to the development of in-patient treatment of-
fering. The prime growth was in oncology and internal medi-
cine (therapy, surgery and other-inpatient medical services)
which helped the Group to increase the revenue for this busi-
ness line in 2020.
Dividends
In accordance with the Company's Articles of Association divi-
dends may be paid out of its profits. To the extent that the Com-
pany declares and pays dividends, owners of GDRs on the rele-
vant 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 div-
idends to the Company in accordance with relevant legislation
in the country of their incorporation and any contractual restric-
tions. The payment of such dividends by its subsidiaries is con-
tingent upon the sufficiency of their earnings, cash flows and
distributable reserves.
On 4 September 2020 the Board of Directors declared interim
dividends attributable to the owners of the Company amount-
ing to RUB736,225 thousand (USD9,755 thousand), which
corresponds to RUB9.8 (USD0.13) per share. The dividends
were paid on 20 October 2020.
On 11 August 2020 the Board of Directors declared final divi-
dends for the year 2019 attributable to the owners of the Com-
pany amounting to RUB1,389,813 thousand (USD18,839
thousand), which corresponds to RUB18.5 (USD0.25) per
share. The dividend distribution was approved by the Extraor-
dinary General Meeting of the shareholders on 3 September
2020. The dividends were paid on 13 October 2020.
74
75
REPORT AND CONSOLIDATED FINANCIAL STATEMENTS On 22 March 2019, the Board of Directors declared final divi-
dends for the year 2018 attributable to the owners of the Com-
pany amounting to RUB800,081 thousand (USD12,552 thou-
sand), 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.
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 consid-
ered satisfactory.
The Group has developed its growth strategy to meet the increas-
ing 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 gy-
naecology, fertility and IVF treatments, and paediatrics. It has
also been diversifying its offering by adding other medical ser-
vices for all family members, such as surgery, urology, trauma-
tology, cardiology, and oncology, etc. The recently opened facil-
ities have been multidisciplinary from the very beginning.
The Group's principal objective is to use its strong existing plat-
form 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 target-
ing 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 a sub-
ject to supervision by federal and local authorities. As a result,
the Group would be significantly affected by material changes
to the existing, or implementation of additional government
regulations in Russia.
The Board of Directors has the overall responsibility for the es-
tablishment and supervision of the Company's risk manage-
ment 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.
Details in relation to uncertainties over COVID-19 are present-
ed in Note 2 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 suc-
cess 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 2020, 31 December
2019, and as at the date of signing these consolidated financial
statements are as follows, except for Vitaly Ustimenko:
Name
Type of interest
Effective
interest, %
Mark Kurtser
Indirect ownership of shares
67.90
Kirill Dmitriev
Indirect interest in shares
5.55
Simon Rowlands
Direct ownership of shares
0.33
Vitaly Ustimenko
Direct ownership of shares
0.005
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 ac-
quired by the Company.
Member of the Board of Directors Vitaly Ustimenko acquired
GDRs on 10 November 2020, as a result, the share of his own-
ership increased from 0.0035% to 0.005% 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 posi-
tion in the field of high-quality women's health and paediatrics,
as well as addressing the increasing demand for private health-
care 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 offer-
ings by providing patients with the most up-to-date treatment
procedures and medical technology available on the market, ex-
pand 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 ap-
pointments to shareholders. In accordance with the Appoint-
ment Policy for the Board of Directors and Committees, all di-
rectors 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 particular-
ly rigorous review, and takes into account the need for progres-
sive refreshing of the Board of Directors.
The members of the Board of Directors who served as at
the date of signing of these consolidated financial statements,
are presented on page 74.
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: Audit Com-
mittee, Nomination Committee, and Remuneration Committee.
Audit Committee
The Audit Committee comprises of three non-executive direc-
tors, 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 Si-
mon 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 fi-
nancial statements and external financial communication;
the maintenance of an effective system of internal controls
including financial, operational and compliance controls and
risk management system;
•
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 recom-
mendation of an audit plan to the Audit Committee. The inter-
nal 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 direc-
tor Mr Vladimir Mekler (since June 2016); non-executive direc-
tor 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 appoint-
ment of all executive and non-executive directors, as well as the
CEO and CFO of the Company. The main objective of the Nom-
ination Committee is to lead the process for the Board of Di-
rectors' 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 Re-
muneration Committees.
Remuneration Committee
• 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;
• audit process, including monitoring and review of the exter-
nal 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
standards of corporate governance.
The Remuneration Committee comprises of two non-executive
directors and one executive director. The Remuneration Com-
mittee is chaired by an independent non-executive director
Mr Simon Rowlands. The two other members are Dr Mark Kurt-
ser 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 remuner-
ation of all executive directors and the chairman of the Board of
Directors. The main objective of the Remuneration Committee
76
77
REPORT AND CONSOLIDATED FINANCIAL STATEMENTS Events after the reporting period
The Group launched a new multifunctional medical centre
(“Lapino-4”) on the Lapino medical complex grounds on 1 Feb-
ruary 2021. The centre will provide highly professional medical
care, including patients with surgical pathology complicated by
COVID-19 and maternity patients.
16 February 2021 Khaven reimbursed VAT in the amount of
RUB33,138 thousand in cash for Lapino-2 construction.
On 19 March 2021 Board of Directors recommended the pay-
ment of RUB1,427,375 thousand as final dividends for the year
2020 which corresponds to RUB19.00 per share.
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, 19 March 2021
is to determine the framework and policy for the remuneration
of the executive directors, the chairman of the Board of Direc-
tors and senior executives, and the specific remuneration of
each executive director and the chairman of the Board of Direc-
tors and any compensation payments.
Corporate governance
Since 2012, the Company has maintained full compliance with
the UK Corporate Governance Code. The Company is com-
mitted to the highest standards of corporate governance and
transparency. The Board of Directors recognises that good gov-
ernance 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 respon-
sibility is an essential part of good governance and makes sound
business sense, and is crucial to the appropriate management
of risk within the Company.
Improving its corporate governance structure in accordance
with the internationally recognised best practices, the Compa-
ny adopted important policies and procedures.
The Company's corporate governance policies and practices
are designed to ensure that the Company is focused on uphold-
ing its responsibilities to the shareholders.
The Company's corporate governance policies and practices
include, inter alia:
• Appointment Policy for the Board of Directors and Com-
mittees;
• 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;
• 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 State-
ments from RAS to IFRS;
• Methodology for the Consolidation of IFRS Financial Sta-
tements;
• Financial Reporting Preparation Procedure;
• The Group's structure.
The objective of this policу is to establish uniform procedures
and to implement requirements for the preparation of the con-
solidated 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 sharehold-
ers' 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 meet-
ing, 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 meet-
ing, being a majority together holding not less than 95% in
nominal value of the shares giving that right.
•
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 represent-
ative 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 2020, the Company did
not acquire any treasury shares.
78
79
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 ac-
cordance with IFRS as adopted by the EU and the require-
ments 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 devel-
opment and performance of the business and the position
of the Company and the undertakings included in the con-
solidation 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:
Name
Vladimir Mekler
Mark Kurtser
Vitaly Ustimenko
Kirill Dmitriev
Simon Rowlands
Tatiana Lukina
Tony Maher
Type of interest
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 ''Com-
pany'') and its subsidiaries (the ''Group''), which are presented
on pages 87 to 125 and comprise the consolidated statement
of financial position as at 31 December 2020, and the consoli-
dated statements of profit or loss and other comprehensive in-
come, 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 state-
ments give a true and fair view of the consolidated financial
position of the Group as at 31 December 2020, and of its
consolidated financial performance and its consolidated cash
flows for the year then ended in accordance with Internation-
al Financial Reporting Standards as adopted by the Europe-
an 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' re-
sponsibilities for the audit of the consolidated financial state-
ments''' section of our report. We remained independent of the
Group throughout the period of our appointment in accord-
ance with the International Code of Ethics (Including Interna-
tional Independence Standards) for Professional Accountants
of the International Ethics Standards Board for Accountants
(''IESBA Code'') together with the ethical requirements in Cy-
prus that are relevant to our audit of the financial statements,
and we have fulfilled our other ethical responsibilities in ac-
cordance 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 con-
solidated financial statements of the current period. These
matters were addressed in the context of our audit of the con-
solidated financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on
these matters.
80
81
REPORT AND CONSOLIDATED FINANCIAL STATEMENTS Goodwill impairment
Revenue recognition
Refer to Note 14 of the consolidated financial statements (RUB 2,032,320 thousand)
Refer to Note 4 of the consolidated financial statements (RUB 19,133,499 thousand)
Key audit matter
How the matter was addressed in our audit
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 carrying amount of
goodwill and the need for an impairment provision. 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 man-
agement of the Group based on which the forecasted cash
flows were prepared. Particular attention was given to
the assumptions relating to estimated revenue growth rates
and EBITDA estimated rates, terminal growth, after-tax
profitability and discount rates/WACC.
• Assessing whether the disclosures in Notes 14 of
the consolidated financial statements relating to key inputs
in the impairment assessment model are consistent with
those employed in the model.
PPE impairment
Refer to Note 13 of the consolidated financial statements (RUB 23,296,538 thousand)
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 (RUB 19,052,025). On an annual
basis the Management performs a review for impairment
indicators. In case impairment indicators are present,
Management determines the recoverable amount of the relevant
entities/CGUs to identify whether impairment is required.
Inherent uncertainty and subjectivity is involved in forecasting and
discounting future cash flows expected to be generated, which
are used on the basis of a Discounted Cash Flow Technique to
determine the recoverable amount of PPE. 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 man-
agement 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.
• 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.
Prices to be charged per service and discount rates offered are
‘built’ into the system. 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:
• Assessing the design and implementation and test general
IT controls and IT application controls relevant to revenue
recognition. Our IRM specialist were involved;
a. Testing that granting of access rights to Medialog system
based on the approved duties and role/position of each
employee. (segregation of duties) and that for employees
discharged access rights to Medialog system is blocked.
b. Verifying that users with granted administrative access
to Medialog system (database level, application level and
operating system) are included in the approved list of
system administrators.
c. Evaluated password settings process in Medialog.
d. We verified that access to input and modification of prices
and discounts already ‘built’ in Medialog is limited to
employees with appropriate job responsibilities.
e. We tested Medialog automatic functioning of linking
tickets issued for the provision of services to invoice and
payments, including its function to link tickets to particular
service contracts formed or to recognize tickets as one-off
service related.
f. We tested that Revenue data is accurately transferred
from Medialog system to 1C system.
• Assessing the design and implementation and test manual
application controls;
a. Test that Chief cashier reconciled cash received per
Z-report to encashment signed schedules and to
accounting record made in 1C.
b. Test that Manager checks that Medialog records agree to
final signed acts and that acts are signed by patients and
Manager.
c. We selected cash count acts and ensured that the acts
have been signed by the responsible employees.
We reconciled the cash balances indicated in the cash
count acts with the data per accounting records.
d. We verified that cash in hand per cashier do not exceed
the specified/approved limits.
• Obtaining external confirmations from banks and compared
annual cash receipts and cash balances on bank accounts
to the data recorded in the accounting systems (sales, cash
received and bank balances).
• Agree advances from Medialog to 1 C.
• Sending confirmation letters to a sample of debtors
(legal entities) to confirm balances and turnover.
• Recalculation of revenue for stem cells, including recalculation
of finance component in finance expenses. Recalculation of
ST and LT portion of contract liabilities as at 31.12.2020.
• Performing substantive analytical procedures and
recalculations to assess contract liabilities recognized at
the year-end.
82
83
REPORT AND CONSOLIDATED FINANCIAL STATEMENTS Recognition of right-of-use asset and corresponding liability
in line with provisions of IFRS 16 leases
Refer to Notes 13 and 19 of the consolidated financial statements (RUB 490,047 thousand and RUB 508,034 thousand)
Key audit matter
How the matter was addressed in our audit
The Group has a significant number of lease contracts.
The new IFRS 16 requires a lessee to recognize a right-of-use
asset representing its right to use the underlying leased asset,
and a lease liability representing its obligation to make lease
payments.
Management has applied significant judgement in assessing
whether arrangements with suppliers contain a lease as defined by
IFRS 16, as well as in determining enforceability of lease contracts,
the lease term and the discount rate for identified leases.
Other information
The Board of Directors is responsible for the other informa-
tion. The other information comprises the consolidated Man-
agement Report, the Corporate Governance Statement, and
the corporate social responsibility statement but does not in-
clude 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 Com-
panies Law, Cap.113.
In connection with our audit of the consolidated financial state-
ments, our responsibility is to read the other information and,
in doing so, consider whether the other information is materi-
ally inconsistent with the consolidated financial statements or
our knowledge obtained in the audit or otherwise appears to be
materially misstated. If, based on the work we have performed,
we conclude that there is a material misstatement of this other
information, we are required to report that fact.
With regards to the corporate social responsibility statement
we have nothings to report.
With regards to the management report, our report in this re-
gard is presented in the ''Report on other legal and regulatory
requirements'' section.
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;
• Assessment of completeness of management’s listing of
the lease contracts in place.
• Testing of the accuracy of the lease data compiled by man-
agement by agreeing key inputs, including commencement
date and lease payments, to the underlying lease arrange-
ments 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.
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 con-
solidated financial statements that give a true and fair view in
accordance with IFRS-EU and the requirements of the Compa-
nies 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 Company or to cease the Group’s operations, or there is no
realistic alternative but to do so.
The Board of Directors and those charged with governance are re-
sponsible 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 er-
ror, 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. Mis-
statements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reason-
ably be expected to influence the economic decisions of users
taken on the basis of these consolidated financial statements.
As part of an audit in accordance with ISAs, we exercise profes-
sional judgment and maintain professional skepticism through-
out 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, misrepresenta-
tions, or the override of internal control.
• Obtain an understanding of internal control relevant to
the audit in order to design audit procedures that are ap-
propriate 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 relat-
ed 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 uncertain-
ty exists related to events or conditions that may cast sig-
nificant 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 state-
ments 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, fu-
ture events or conditions may cause the Group to cease to
continue as a going concern.
• Evaluate the overall presentation, structure and content of
the consolidated financial statements, including the disclo-
sures, and whether the consolidated financial statements
represent the underlying transactions and events in a man-
ner that achieves a true and fair view.
• Obtain sufficient appropriate audit evidence regarding
the financial information of the entities or business activi-
ties 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 re-
garding, among other matters, the planned scope and timing
of the audit and significant audit findings, including any sig-
nificant deficiencies in internal control that we identify during
our audit.
We also provide those charged with governance with a state-
ment that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all re-
lationships and other matters that may reasonably be thought
to bear on our independence, and where applicable, actions tak-
en to eliminate threats or safeguards applied.
•
From the matters communicated with those charged with gov-
ernance, we determine those matters that were of most signif-
icance 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 regulatory and
legal requirements
Other regulatory requirements
Pursuant to the requirements of Article 10(2) of European Un-
ion (EU) Regulation 537/2014 we provide the following infor-
mation 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 De-
cember 2009. Our total uninterrupted period of engagement
having been renewed annually by shareholders' resolution is
12 years covering the periods ending 31 December 2009 to
31 December 2020.
Consistency of auditors' report to the additional
report to the Audit Committee
We confirm that our audit opinion on the consolidated financial
statements expressed in this report is consistent with the ad-
ditional report presented to the Audit Committee of the Com-
pany, which is dated 19 March 2021.
Provision of Non-audit Services ('NAS')
We have not provided any prohibited NAS referred to in Arti-
cle 5 of EU Regulation 537/2014 as applied by Section 72 of
the Auditors Law of 2017, L.53(I)2017, as amended from time
to time (''Law L53(I)/2017'').
Other legal requirements
Pursuant to the additional requirements of law L.53(I)/2017,
and based on the work undertaken in the course of our audit, we
report the following:
•
In our opinion, the consolidated management report,
the preparation of which is the responsibility of the Board
of Directors, has been prepared in accordance with the re-
quirements of the Companies Law, Cap 113, and the infor-
mation given is consistent with the consolidated financial
statements.
In the light of the knowledge and understanding of the busi-
ness and the Group's environment obtained in the course
of the audit, we have not identified material misstatements
in the consolidated management report.
84
85
REPORT AND CONSOLIDATED FINANCIAL STATEMENTS •
•
•
In our opinion, based on the work undertaken in the course
of our audit, the information included in the corporate gov-
ernance statement in accordance with the requirements
of subparagraphs (iv) and (v) of paragraph 2(a) of Article
151 of the Companies Law, Cap. 113, have been prepared
in accordance with the requirements of the Companies
Law, Cap, 113, and is consistent with the consolidated fi-
nancial 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 mis-
statements in the corporate governance statement in re-
lation 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 any material mis-
statements in this respect.
In our opinion, based on the work undertaken in 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.
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 oth-
er purpose or to any other person to whose knowledge this re-
port may come to.
The engagement partner on the audit resulting in this inde-
pendent 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
19 March 2021
Consolidated statement
of profit or loss and other
comprehensive income
For the year ended 31 December 2020
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 gain/(loss)
Net finance expenses
Profit before tax
Income tax (expense)/benefit
Profit for the year
Total comprehensive income for the year
Profit for the year attributable to:
Owners of the Company
Non-controlling interests
Total comprehensive income for the year attributable to:
Owners of the Company
Non-controlling interests
Note
2020
RUB'000
2019
RUB'000
4
5
8
6
8
9
9
9
9
10
19,133,499
16,159,861
(12,006,620)
(10,376,218)
7,126,879
5,783,643
226,391
60,343
(2,806,793)
(2,640,755)
(42,279)
(68,885)
4,504,198
3,134,346
248,582
(537,238)
122,532
(166,124)
4,338,074
(4,774)
4,333,300
4,333,300
214,704
(538,671)
(53,333)
(377,300)
2,757,046
29,579
2,786,625
2,786,625
4,196,463
2,637,638
136,837
148,987
4,333,300
2,786,625
4,196,463
2,637,638
136,837
148,987
4,333,300
2,786,625
Earnings per share (RUB)
11
55.86
35.11
86
87
The Notes on pages 96 to 125 are an integral part of these consolidated financial statements.
REPORT AND CONSOLIDATED FINANCIAL STATEMENTS Consolidated statement
of financial position
As at 31 December 2020
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
13
14
15
15
16
16
17
18
18
18
26
Note
31 December
2020
RUB'000
31 December
2019
RUB'000
23,296,538
21,130,382
2,205,655
2,192,631
630,626
4,959
394,016
5,442
LIABILITIES
Loans and borrowings
Trade and other payables
Deferred tax liabilities
Contract liabilities
26,137,778
23,722,471
Total non-current liabilities
973,877
1,007,973
746,145
719,962
659,737
506,916
3,128,718
3,061,448
Loans and borrowings
Trade and other payables
Contract liabilities
Total current liabilities
5,856,713
4,948,063
Total liabilities
31,994,491
28,670,534
Total equity and liabilities
Note
19
21
20
19
21
20
31 December
2020
RUB'000
31 December
2019
RUB'000
5,230,477
5,864,344
679,843
4,540
483,026
6,397,886
1,587,521
2,630,288
1,426,215
547,014
4,681
205,527
6,621,566
1,233,903
1,735,363
1,199,560
5,644,024
4,168,826
12,041,910
10,790,392
31,994,491
28,670,534
180,585
5,243,319
(655,352)
180,585
5,243,319
(655,352)
14,840,273
12,769,848
19,608,825
17,538,400
343,756
341,742
19,952,581
17,880,142
On 19 March 2021, the Board of Directors of MD Medical Group Investments Plc approved
and authorised these consolidated financial statements for issue.
Vladimir Mekler
Chairman of the Board of Directors
Mark Kurtser
Managing director
Andrey Khoperskiy
Chief financial officer
The Notes on pages 96 to 125 are an integral part of these consolidated financial statements.
The Notes on pages 96 to 125 are an integral part of these consolidated financial statements.
88
89
REPORT AND CONSOLIDATED FINANCIAL STATEMENTS Consolidated statement
of changes in equity
For the year ended 31 December 2020
Balance at 1 January 2020
Profit and total comprehensive income for the year
Contributions and distributions
Dividends declared
Total contributions and distributions
Balance at 31 December 2020
Share premium is not available for distribution.
Attributable to owners of the Company
Attributable to owners of the Company
Note
Share capital
RUB'000
Share premium
RUB'000
Reserves
RUB'000
Retained earnings
RUB'000
Total
RUB'000
Non-controlling interests
RUB'000
180,585
5,243,319
(655,352)
12,769,848
17,538,400
12
—
—
—
—
—
—
—
—
—
180,585
5,243,319
(655,352)
4,196,463
4,196,463
(2,126,038)
(2,126,038)
14,840,273
(2,126,038)
(2,126,038)
19,608,825
341,742
136,837
(134,823)
(134,823)
343,756
Total equity
RUB'000
17,880,142
4,333,300
(2,260,861)
(2,260,861)
19,952,581
The Notes on pages 96 to 125 are an integral part of these consolidated financial statements.
The Notes on pages 96 to 125 are an integral part of these consolidated financial statements.
90
91
REPORT AND CONSOLIDATED FINANCIAL STATEMENTS Consolidated statement
of changes in equity
For the year ended 31 December 2019
Note
12
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.
Share capital
RUB'000
180,585
—
—
—
—
180,585
Attributable to owners of the Company
Treasury shares
RUB'000
Share premium
RUB'000
(3,697)
—
3,697
—
3,697
—
5,243,319
—
—
—
—
Attributable to owners of the Company
Retained earnings
RUB'000
Total
RUB'000
Non-controlling interests
RUB'000
Reserves
RUB'000
(655,352)
—
—
—
—
10,932,291
2,637,638
15,697,146
2,637,638
—
(800,081)
(800,081)
3,697
(800,081)
(796,384)
Total equity
RUB'000
15,998,948
2,786,625
3,697
(909,128)
(905,431)
17,880,142
301,802
148,987
—
(109,047)
(109,047)
341,742
5,243,319
(655,352)
12,769,848
17,538,400
The Notes on pages 96 to 125 are an integral part of these consolidated financial statements.
The Notes on pages 96 to 125 are an integral part of these consolidated financial statements.
92
93
REPORT AND CONSOLIDATED FINANCIAL STATEMENTS Consolidated statement
of cash flows
For the year ended 31 December 2020
Cash flows from operating activities
Cash flows from investing activities
Note
2020
RUB'000
2019
RUB'000
Note
2020
RUB'000
2019
RUB'000
4,333,300
2,786,625
Acquisition/construction of property, plant and equipment
(3,778,215)
(3,957,530)
1,413,323
1,408,553
Acquisition of intangible assets
Proceeds from sale of property, plant and equipment
Profit for the year
Adjustments for:
Depreciation
Amortisation
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 (gain)/loss
Income tax expense/(benefit)
Increase in inventories
(Increase)/decrease in trade and other receivables
Increase in trade and other payables
Increase in contract liabilities
Cash flows from operations
Tax paid
13
14
9
9
9
9
10
110,450
(6,674)
7,229
22,308
(248,582)
506,279
30,959
(122,532)
4,774
6,050,834
(253,915)
(523,507)
771,055
480,383
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
6,524,850
4,949,708
(9,438)
(3,956)
Proceeds from government grant
Placing short-term bank deposits
Proceeds from short-term bank deposits return
Bank interest received
Loans issued to third parties
Loans returned from third parties
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
Proceeds from reimbursed VAT
Repayment of reimbursed VAT
Net cash flows from operating activities
6,515,412
4,945,752
Dividends paid to the owners of the Company
Dividends paid to non-controlling interests
Net cash flows used in financing activities
Net (decrease)/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
16
16
13
9
13,092
(126,234)
139,182
6,416
(34,728)
360,818
(2,097,704)
(506,916)
1,858,475
110,796
—
1,000
—
111,734
(5,000)
4,000
1,193,493
1,831,205
(1,319,275)
(1,051,367)
(158,086)
(375,047)
—
—
337,378
(111,351)
(2,211,202)
(134,823)
(2,778,913)
(143,109)
3,061,448
210,379
(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)
3,128,718
3,061,448
Net cash flows used in investing activities
(3,879,608)
(4,021,206)
The Notes on pages 96 to 125 are an integral part of these consolidated financial statements.
The Notes on pages 96 to 125 are an integral part of these consolidated financial statements.
94
95
REPORT AND CONSOLIDATED FINANCIAL STATEMENTS Notes
to the consolidated
financial statements
For the year ended 31 December 2020
1. Incorporation and principal activities
MD Medical Group Investments Plc (the “Company”) was in-
corporated in Cyprus on 5 August 2010 as a private limited li-
ability 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 provi-
sions 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 in-
formation 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
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
96
31 December
2020
Effective
holding %
31 December
2019
Effective
holding %
95
100
90
95
90
100
80
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
31 December
2020
Effective
holding %
31 December
2019
Effective
holding %
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
JSC MC Avicenna
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 Russian Federation
Medical services
LLC Novosibirskii center of Reproductive Medicine Russian Federation
Medical services
LLC Omskii center of Reproductive Medicine
Russian Federation
Medical services
LLC Barnaulskii center of Reproductive Medicine Russian Federation
Medical services
LLC Nika
Russian Federation
Holding of land
LLC Stroy Vector Pluss
Russian Federation
Rental services
LLC Mother and Child Vladivostok
Russian Federation
Medical services
LLC Irkutsk Clinical Hospital
Russian Federation
Medical services
LLC Mother and Child Volga
Russian Federation
Management company
LLC 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 MD Group Krasnogorsk
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
80
80
80
—
100
100
100
100
100
100
—
100
100
100
100
—
—
100
100
100
100
100
100
100
90
—
—
—
—
—
As at 31 December 2020, 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 Guar-
antee Nominee Limited, which holds the shares on behalf of the GDR holders.
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
—
—
—
—
—
—
97
REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 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 require-
ments of the Cyprus Companies Law, Cap.113.
These consolidated financial statements were approved
by the Board of Directors and were authorised for issue on
19 March 2021.
(b) Basis of measurement
These consolidated financial statements have been prepared
under the historical cost convention.
(c) Functional and presentation currency
All of the operational Group entities are located in the Russian
Federation. The Company and all its operating subsidiaries
have RUB as their functional currency.
Impairment of intangible assets and property,
plant and equipment
Intangible assets and property, plant and equipment are initial-
ly 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 associ-
ated with the asset. When it is impractical to estimate the recov-
erable amount of an asset, the Group estimates the recoverable
amount of the cash generating unit to which the asset belongs.
Impairment of goodwill
Determining whether goodwill is impaired requires an estima-
tion of the value in use of the cash generating units of the Group
to which the goodwill has been allocated.
These consolidated financial statements of the Group are pre-
sented in RUB, rounded to the nearest thousand.
Other
(d) Use of estimates and judgements
Preparing these consolidated financial statements in accord-
ance with IFRSs requires management to exercise their judge-
ment to make estimates and assumptions that affect the ap-
plication of accounting policies and the reported amounts of
assets and liabilities, income and expenses.
The estimates and underlying assumptions are based on his-
torical 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 es-
timates are recognised prospectively.
In particular, information about significant areas of estima-
tion, uncertainty and critical judgments in applying ac-
counting policies that have the most significant effect on
the amount recognised in the consolidated financial state-
ments are described below:
Going concern
Determining whether there are material uncertainties that
may cast significant doubt on the Group's ability to continue
as a going concern.
Information about judgements, assumptions and estimation un-
certainties regarding revenue recognition, deferred taxes assets,
provisions, leases and ECL allowance for trade receivables and
contract assets as at 31 December 2020 is described in Note 3.
COVID-19
In December 2019, the emergence of a new strain of coronavi-
rus (COVID-19) was reported in China and has subsequently
spread globally. On 11 March 2020, the World Health Organ-
ization declared the COVID-19 outbreak a pandemic. Mobility
restrictions, quarantines and similar lockdown measures imple-
mented in different countries to cope with the pandemic had
a significant negative impact on the global economy.
From the beginning of COVID-19 pandemic, the Group has tak-
en necessary measures to avoid direct impact of the pandemic
on its operations with a special focus on protection of the health
of employees and clients and uninterrupted business processes.
The major impact of COVID-19 on the macroeconomic environ-
ment in the healthcare industry resulted in a number of conse-
quences on operational and financial performance of the Group.
In response to the needs of patients, the management of
the Company took the decision to start treating patients with
symptoms of pneumonia, including patients with symptoms
of coronavirus, at its clinical hospital Lapino, from 30 March
2020, in a temporary mode. Surgery, cardiology, traumatol-
ogy, and urology departments of the Lapino Clinical Hospital
remained open to receive emergency patients. Other patients
were relocated to MD Group Clinical Hospital (PMC) to pro-
ceed with contracts. Amid the decreased inflow of patients
with coronavirus, from 8 June 2020, Lapino hospital returned
to its normal format. All the Company's other medical centres
continued business as usual.
The Group started a construction of a new hospital on 29 De-
cember 2020 and launched of the new multifunctional medical
centre (“Lapino-4”) on the Lapino medical complex grounds
on 1 February 2021. The construction of the new two-storey
multifunctional medical centre intended to treat patients with
infections, including coronavirus patients, was achieved in
short time using rapid construction technology.
Going concern basis of accounting
Management continues to have a reasonable expectation
that the Group has adequate resources to continue in oper-
ation for at least the next 12 months and that the going con-
cern basis of accounting remains appropriate. The outbreak
of the COVID-19 pandemic and the measures adopted by the
government in the Russian Federation to mitigate its spread
have impacted the Group. The Group was able to continue to
provide healthcare services in hospitals (albeit with social-dis-
tancing rules in place), clinics were unable to operate fully due
to these measures.
There is still uncertainty over how the future development of
the outbreak will impact the Group's business and custom-
er demand for its services. The appropriateness of the going
concern basis of accounting is dependent on the continued
availability of borrowings by compliance with loan covenants.
The Group has loans of RUB6,309,964 thousand requiring
compliance with covenants. As at the date of authorisation of
the financial statements, the Group had sufficient headroom
on its facilities.
To respond to a severe downside scenario, management has
the ability to take the following mitigating actions to reduce
costs, optimise the Group's cash flow and preserve liquidity:
•
reducing non-essential capital expenditure and deferring or
cancelling discretionary spend;
freezing non-essential recruitment; and
reducing marketing spend.
•
•
Based on these factors, management has a reasonable expec-
tation that the Group has adequate resources and sufficient
loan facility headroom.
Impairment of property, plant and equipment,
goodwill and right-of-use assets
Management has considered the impact of COVID-19 on
the business of the Group. Current market conditions create
additional estimation uncertainties and impact certain key as-
sumptions in the valuation of assets used for preparation of
these consolidated financial statements.
For impairment testing purposes, the Group has determined
that each subsidiary is a separate CGU. Each CGU is tested for
impairment at the balance sheet date if any indicators of im-
pairment have been identified. The COVID 19 pandemic was
considered as an impairment trigger and, as a result, subsidiar-
ies with significant impact of lockdown on financial results have
been tested for impairment.
The value in use of each CGU tested for impairment is calcu-
lated based on the Group's latest forecast cash flows, covering
a five-year period, which have regard to historic performance
and knowledge of the current market, together with the Group's
views on the future achievable growth and the impact of com-
mitted initiatives. The cash flows include ongoing capital ex-
penditure required to maintain the healthcare network but ex-
clude any growth capital initiatives not committed.
Cash flows beyond this five-year period are extrapolated using
a long-term growth rate based on management's future expec-
tations, with reference to forecast GDP growth. The forecasts
used to calculate the value in use have been updated to take
into account the COVID-19 scenario. This assumes an impact
on 2020/21 revenues and profits.
The key assumptions in the value in use calculations are
the growth rates of sales and gross profit margins, chang-
es in the operating cost base, long-term growth rates and
the risk-adjusted pre-tax discount rate. The pre-tax discount
rates are derived from the Group's weighted average cost of
capital, which has been calculated using the capital asset pric-
ing model, the inputs of which include a country risk-free rate,
equity risk premium, Group size premium and a risk adjustment
(beta). The pre-tax discount rates range from 13% to 14%.
As a result, no impairment loss is recognised.
Impairment of financial assets
The Company's allowance for doubtful accounts as at the date
of signing these consolidated financial statements, reflects
the Company's best estimate of the expected future losses
for its accounts receivables based on the current economic
conditions; however, as a result of the uncertainty caused by
COVID-19 pandemic and other factors, these estimates may
change and future actual losses may differ from the Company's
estimates. The Company will continue to monitor economic
conditions and will revise the estimates of the expected future
losses for accounts receivable as necessary.
The expected loss rates are determined based on the aver-
age write-offs as a proportion of average debt over a period of
12 months prior to the reporting date. The historical loss rates
are adjusted for current and forward-looking information,
where significant. The Group considers GDP growth, unem-
ployment, sales growth and bankruptcy rates to be the most
relevant factors and, where the impact of these is significant,
adjusts the historical loss rates based on expected changes in
these factors.
98
99
REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 3. Significant accounting policies
Acquisitions from entities under common control
Type of product/service
Nature, timing of satisfaction of performance obligations, significant payment terms
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 2019
and for the year then ended.
New standards and amendments applied for the first time in
2020 did not impact these consolidated financial statements
of the Group.
Business combinations arising from transfers of interests in en-
tities 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.
Basis of consolidation
These consolidated financial statements incorporate the fi-
nancial 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 state-
ments of subsidiaries are included in the consolidated financial
statements from the date on which control commences until
the date on which control ceases.
The financial statements of all the Group companies are pre-
pared using uniform accounting policies.
Business combinations
Acquisitions of businesses are accounted for using the acquisi-
tion method when control is transferred to the Group. The con-
sideration 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 immediate-
ly. 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 consid-
eration 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 con-
sideration are recognised in profit or loss.
Non-controlling interests
Non-controlling interests are measured at their proportionate
share of the acquirer's identifiable net assets at the date of
acquisition.
Changes in the Group's interest in a subsidiary that do not re-
sult in a loss of control are accounted for as equity transactions.
Loss of control
When the Group losses control over a subsidiary, it derecognis-
es 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 in-
come 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.
Revenue
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 pro-
vided to the customer. Determining the timing of the services
rendering — at a point in time or over time — requires judge-
ment. The details are described below.
Rendering of services
(except storage of stem cells
and long-term contracts
described below)
Sales of services are recognised at the point in time when 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 are 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 has been transferred to the customer,
which usually occurs 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 and recognised 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.
Long-term contracts for offering medical services that last from 1 to 5 years with performance
obligations satisfied via passage of time. Payments from legal entities are usually fully prepaid.
Revenue is accrued monthly during the whole period of contract.
Sales of goods
Storage of stem cells
Rendering of services
(long-term contracts)
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 borrow-
ing costs and are recognised in profit or loss using the effective
interest method.
Foreign currency translation
Foreign currency transactions are translated into the function-
al 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 trans-
lation at year end exchange rates of monetary assets and li-
abilities 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 be-
cause 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 substan-
tively enacted by the reporting date.
profit and is accounted for using the statement of financial po-
sition liability method. Deferred tax liabilities are generally rec-
ognised for all taxable temporary differences and deferred tax
assets are recognised to the extent that it is probable that taxa-
ble 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 combina-
tion) 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 differ-
ences arising on investments in subsidiaries and associates, and
interests in joint ventures, except where the Group is able to con-
trol 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 real-
ised. 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 le-
gally enforceable right to set off current tax assets against cur-
rent 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.
100
101
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
Dividend distribution to the Company's shareholders is recog-
nised in the Group's financial statements when the shareholders'
Dividends declared
REPORT AND CONSOLIDATED FINANCIAL STATEMENTS right to receive the dividends is established, either through
a board resolution (for interim dividends) or by the Group's
shareholders in the Annual General Meeting (for final dividends).
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.
Government grants
Government grants are recognised where there is reasona-
ble 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 ex-
pense. When the grant relates to an asset, it reduces the carry-
ing 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 accu-
mulated 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 capi-
talised in accordance with the Group's accounting policy. Depreci-
ation 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 proper-
ty, plant and equipment. The annual depreciation rates for the
current and comparative periods are based on the following es-
timations of useful lives:
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 aris-
ing 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 rec-
ognised 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 sub-
sidiaries' net assets over the consideration paid for their acquisi-
tion (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 accu-
mulated 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.
Freehold buildings
Leasehold improvements
Plant and equipment
Years
50
10–20
5–10
(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.
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 re-
classified in the relevant class of property, plant and equipment
and depreciated accordingly.
Depreciation methods, useful lives and residual values are reas-
sessed at the reporting date.
Where the carrying amount of an asset is greater than its esti-
mated 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
External costs that are directly associated with web site
controlled by the Group and that will probably generate eco-
nomic benefits exceeding costs beyond one year are recog-
nised as intangible assets. Subsequently web site costs are
carried at cost less any accumulated amortisation and any
accumulated impairment losses. Web site costs are amor-
tised using the straight line method over their useful lives,
not exceeding a period of five years. Amortisation com-
mences when the site is available for use and is included
within administrative expenses.
An intangible asset is derecognised on disposal, or when no fu-
ture 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 car-
rying amount of the asset, are recognised in profit or loss when
the asset is derecognised.
102
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 realis-
able 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 le-
gal 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 reim-
bursement 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 provi-
sions of the financial instrument. Trade receivables and debt se-
curities 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.
The Group's financial assets comprise of trade and other re-
ceivables, loan receivable and cash and cash equivalents. 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
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.
•
Financial assets — Business model assessment
The Group makes an assessment of the objective of the busi-
ness model in which a financial asset is held at a portfolio level,
because this best reflects the way the business is managed,
and the information is provided to management. The informa-
tion 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 con-
tractual 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 out-
flows or realising cash flows through the sale of the assets;
• how the performance of the portfolio is evaluated and re-
•
ported 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 as-
sets 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
purp ose, 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. “In-
terest” is defined as consideration for the time value of money
and for the credit risk associated with the principal amount out-
standing 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 as-
sessment, the Group considers:
• Contingent events that would change the amount or timing
of cash flows;
• Terms that may adjust the contractual coupon rate, includ-
ing variable-rate features;
• Prepayment and extension features;
• Terms that limit the Group's claim to cash flows from spec-
ified assets (e.g., non-recourse features).
A prepayment feature is consistent with the solely payments of
principal and interest criterion if the prepayment amount sub-
stantially represents unpaid amounts of principal and interest on
the principal amount outstanding, which may include reasonable
compensation for early termination of the contract. Additional-
ly, for a financial asset acquired at a discount or premium to its
contractual par amount, a feature that permits or requires pre-
payment at an amount that substantially represents the con-
tractual par amount plus accrued (but unpaid) contractual inter-
est (which may also include reasonable compensation for early
103
REPORT AND CONSOLIDATED FINANCIAL STATEMENTS termination) is treated as consistent with this criterion if the fair val-
ue of the prepayment feature is insignificant at initial recognition.
The Group's financial liabilities comprise of trade and other
payables and borrowings. They are classified as current liabil-
ities 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.
Initial measurement
Financial assets and financial liabilities are initially measured at
fair value plus or minus correspondingly of any directly attribut-
able transaction costs.
Subsequent Measurement
Financial assets at amortised cost:
These assets are subsequently measured at amortised cost
using the effective interest method. The amortised cost is re-
duced by impairment losses. Interest income, foreign exchange
gain and losses and impairment are recognised in profit or loss.
Any gain or loss on derecognition is recognised in profit or loss.
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.
Financial liabilities at amortised cost:
Other financial liabilities are subsequently measured at amor-
tised cost using the effective interest method. Interest expense
and foreign exchange gains and losses are recognised in profit
or loss. Any gain or loss on derecognition is also recognised in
profit or loss.
Impairment of non-derivative financial assets
At each balance sheet date, the Group recognises a loss allow-
ance 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 accordance 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.
104
Individually significant financial assets are tested for impair-
ment 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 sup-
portable information that is relevant and available without un-
due cost or effort. This includes both quantitative and qualita-
tive information and analysis, based on the Group's historical
experience and informed credit assessment, that includes for-
ward-looking information.
The Group assumes that the credit risk on a financial asset has
increased significantly if it is more than 90 days past due.
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 are credit-impaired. A fi-
nancial 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 be-
cause of financial difficulties.
•
Write-off
The gross carrying amount of a financial asset is written off
when the Group has no reasonable expectations of recover-
ing a financial asset in its entirety or a portion thereof. For in-
dividual customers, the Group has a policy of writing off the
gross carrying amount when the financial asset is three years
without movements past due based on Russian legislation.
For corporate customers, the Group individually makes an as-
sessment 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.
Derecognition of financial assets
A financial asset (or, where applicable a part of a financial as-
set or part of a group of similar financial assets) is derecog-
nised when:
•
•
the rights to receive cash flows from the asset have expired;
the Group retains the right to receive cash flows from the as-
set, but has assumed an obligation to pay them in full with-
out 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 substantial-
ly all the risks and rewards of the asset, or (b) has neither
transferred nor retained substantially all the risks and re-
wards of the asset but has transferred control of the asset.
•
Any interest in such derecognised financial assets that is creat-
ed 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 lia-
bility and the recognition of a new liability, and the difference in
the respective carrying amounts is recognised in profit or loss.
Changes in cash flows on existing financial liabilities are not con-
sidered 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 re-
vised 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.
Offsetting financial instruments
Financial assets and financial liabilities are offset, and the net
amount reported in the consolidated statement of financial po-
sition if, and only if, there is a currently enforceable legal right to
offset the recognised amounts and there is an intention to set-
tle on a net basis, or to realise the asset and settle the liability si-
multaneously. 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.
dicate that the carrying amount may not be recoverable. An im-
pairment loss is recognised for the amount by which the asset's
carrying amount exceeds its recoverable amount. The recover-
able 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 sep-
arately identifiable cash flows (cash generating units).
Share capital
Proceeds from the issue of ordinary shares are classified as eq-
uity. 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 recog-
nised as an increase in equity, and the resulting surplus or deficit
on the transaction is presented in additional paid-in capital.
Equity-settled share-based payment
arrangements
Fair value of equity-settled share-based payment arrange-
ments with employees is measured at the grant date based on
the market price of the shares. Service and non-market vesting
conditions are not taken into account when estimating the fair
value at the grant date. The grant date is the date on which the
Group and its employees agree the terms and conditions of the
share-based payment arrangement. Fair value is not remeas-
ured 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 ini-
tially 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.
Impairment of non-financial assets
Earnings per share
Assets that have an indefinite useful life are not subject to am-
ortisation and are tested annually for impairment. Assets that
are subject to depreciation or amortisation are reviewed for
impairment whenever events or changes in circumstances in-
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 av-
erage number of ordinary shares in issue during the period, ad-
justed for own shares held.
105
REPORT AND CONSOLIDATED FINANCIAL STATEMENTS Capitalised interest
Interest expense on borrowed funds used for capital construc-
tion projects and the acquisition of property, plant and equip-
ment is capitalised provided that the interest expense could
have been avoided if the Group had not made capital invest-
ments. Interest is capitalised only during the period when con-
struction activities are actually in progress and until the result-
ing properties are put into operation.
Leases
At inception of a contract, the Group assesses whether a con-
tract is, or contains, a lease. A contract is, or contains, a lease if
the contract conveys the right to control the use of an identified
asset for a period of time in exchange for consideration.
Leases in which the Group is a lessee
At commencement or on modification of a contract that con-
tains a lease component, the Group allocates the consideration
in the contract to each lease component on the basis of its rel-
ative 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 sin-
gle lease component.
The Group recognises a right-of-use asset and a lease liabili-
ty 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 re-
move the underlying asset or to restore the underlying asset or
the site on which it is located, less any lease incentives received.
The right-of-use asset is subsequently depreciated using
the straight line method from the commencement date to
the end of the lease term, unless the lease transfers ownership
of the underlying asset to the Group by the end of the lease term
or the cost of the right-of-use asset reflects that the Group will
exercise a purchase option. In that case, the right-of-use asset
will be depreciated over the useful life of the underlying asset,
which is determined on the same basis as those of property and
equipment. In addition, the right-of-use asset is periodically
reduced by impairment losses, if any, and adjusted for certain
remeasurements of the lease liability.
The lease liability is initially measured at the present value of
the lease payments that are not paid at the 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 bor-
rowing rate as the discount rate.
The Group determines its incremental borrowing rate by ob-
taining interest rates from various external financing sources
and makes certain adjustments to reflect the terms of the lease
and type of the asset leased.
106
Lease payments included in the measurement of the lease lia-
bility 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 com-
mencement 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 op-
tional renewal period if the Group is reasonably certain to
exercise an extension option, and penalties for early termi-
nation of a lease unless the Group is reasonably certain not
to terminate early.
The lease liability is measured at amortised cost using the ef-
fective 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 re-
vised in-substance fixed lease payment.
When the lease liability is remeasured in this way, a corre-
sponding adjustment is made to the carrying amount of
the right-of-use asset, or is recorded in profit or loss if the carry-
ing 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 has elected not to recognise right-of-use assets
and lease liabilities for leases of low-value assets and short-
term leases, including IT equipment. The Group recognises
the lease payments associated with these leases as an expense
on a straight line basis over the lease term.
COVID-19-related rent concessions
The Group has applied COVID-19-Related Rent Concessions —
Amendment to IFRS 16. The Group applies the practical expe-
dient allowing it not to assess whether eligible rent concessions
that are a direct consequence of the COVID-19 pandemic are
lease modifications. The Group applies the practical expedi-
ent consistently to contracts with similar characteristics and in
similar circumstances. For rent concessions in leases to which
the Group chooses not to apply the practical expedient, or that
do not qualify for the practical expedient, the Group assesses
whether there is a lease modification.
Leases in which the Group is a lessor
The Group does not have significant contracts where it is a lessor.
Standards and Interpretations not adopted
by the EU as at 1 January 2020:
• Onerous Contracts — Cost of Fulfilling a Contract (Amend-
•
ments to IAS 37);
Interest Rate Benchmark Reform — Phase 2 (Amendments
to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16);
• Property, Plant and Equipment: Proceeds before Intended
Use (Amendments to IAS 16);
• Reference to Conceptual Framework (Amendments to
IFRS 3);
• Classification of Liabilities as Current or Non-current (Amend-
•
ments to IAS 1);
IFRS 17 Insurance Contracts and amendments to IFRS 17
Insurance Contracts.
Management expects that the adoption of these standards in
future periods will not have a material effect on the consolidat-
ed financial statements of the Group.
Adoption of new and revised International
Financial Reporting Standards and
Interpretations
New currently effective requirements
The Group has early adopted COVID-19-Related Rent Con-
cessions — Amendment to IFRS 16 issued on 28 May 2020.
The amendment introduces an optional practical expedient for
leases in which the Group is a lessee — i.e., for leases to which
the Group applies the practical expedient, the Group is not
required to assess whether eligible rent concessions that are
a direct consequence of the COVID-19 coronavirus pandemic
are lease modifications. The Group has applied the amendment
retrospectively. The amendment has no impact on retained
earnings as at 1 January 2020.
4. Revenue
In vitro fertilisation (IVF)
Therapy, surgery and other in-patient medical services
Deliveries
Obstetrics and gynaecology out-patient treatments
Laboratory examinations and other medical services
Diagnostic centre and other out-patient medical services
Oncology
Obstetrics and gynaecology in-patient treatments
Paediatrics in-patient treatments
Sales of goods
Storage of stem cells
Other income
2020
RUB'000
3,452,087
3,262,000
2,433,703
1,941,813
1,750,231
1,735,677
1,289,708
1,271,597
988,114
490,325
236,429
144,576
137,239
2019
RUB'000
3,842,793
1,268,790
2,304,996
1,974,579
1,318,986
1,664,544
1,430,112
170,125
1,100,765
506,612
254,567
140,291
182,701
Total revenue from contracts with customers
19,133,499
16,159,861
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
(78% of the 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 and
the contract for offering medical services to one of the biggest
Russian oil companies.
All the Group's revenue, except for the revenue from the stor-
age of stem cells and long-term contracts, is recognised at
the point of time when the services are provided; the revenue
from the storage of stem cells and long-term contracts is rec-
ognised over the time of the contract.
The contract liabilities primarily relate to the advance consid-
eration received from patients. The amount of RUB777,742
thousand recognised
liabilities at
the beginning of the year was recognised as revenue dur-
ing the year ended 31 December 2020 (31 December 2019:
in short-term contract
107
Short-term leases and leases of low-value assets
Paediatrics out-patient treatments
REPORT AND CONSOLIDATED FINANCIAL STATEMENTS RUB734,282 thousand). The amount of RUB35,059 thousand
was returned to the patients and the amount of RUB239,654
thousand was transferred to the other contracts during the year
ended 31 December 2020 (31 December 2019: RUB37,165
thousand and RUB204,224 thousand respectively).
The increase in therapy, surgery and other in-patient medical
services was due to performance of Lapino hospital which was
quickly converted for the treatment of patients with coronavirus.
The decrease in In vitro fertilisation (IVF) was due to tempo-
rary govement's ban on IVF services in most regions where
the Group operates in order to prevent the spread of COVID-19.
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
2020
RUB'000
2019
RUB'000
6,052,868
5,644,082
3,771,140
1,240,335
398,160
221,117
190,102
101,046
31,852
2,701,302
1,223,131
330,345
207,499
121,271
118,157
30,431
12,006,620
10,376,218
7. Staff costs
Wages and salaries
Social insurance contributions and other taxes
Total staff costs
2020
RUB'000
2019
RUB'000
6,091,278
5,641,520
1,581,170
1,489,669
7,672,448
7,131,189
The number of employees as at 31 December 2020 was 8,274 (31 December 2019: 7,752).
8. Other income and expenses
During the year ended 31 December 2020 the Group received
other income of RUB226,391 thousand. This income arose
mostly from the receipt of the compensation of costs caused
by COVID-19 pandemic amounted to RUB134,999 thousand
and property tax refund amounted to RUB41,868 thousand by
Lapino hospital.
The Group incurred other expenses amounted to RUB42,279
thousand in the reporting year. These expenses arose mostly
due to an impairment of construction in progress in LLC Moth-
er and Child Kazan amounted to RUB21,146 thousand as
the Group abandoned the hospital construction in this city.
During the year ended 31 December 2020 the government
granted RUB108,915 thousand to cover extra payments to
doctors and other medical staff and RUB7,535 thousand in
respect of materials used as a result of COVID-19 (for the year
ended 31 December 2019: nil). These amounts reduced
the staff and materials costs accordingly.
9. Net finance expenses
6. Selling, general and administrative expenses
Payroll and related social taxes
Utilities and materials
Depreciation
Advertising
Other professional services
Acquiring and encashment
Amortisation
Communication costs
Comission fees
IT support
Learning and development
Independent auditors' remuneration
Other expenses
2020
RUB'000
1,619,580
249,588
172,988
142,865
142,740
127,240
110,450
45,413
45,336
40,088
30,356
25,078
55,071
2019
RUB'000
1,487,107
209,312
185,422
99,506
162,681
133,681
100,610
40,307
39,754
42,331
30,134
21,458
88,452
Total selling, general and administrative expenses
2,806,793
2,640,755
Net finance expenses
The remuneration of independent auditors includes an amount of
RUB22,812 thousand regarding audit services and an amount of
RUB2,266 thousand regarding tax services.
108
Finance income
Initial recognition of other payables to tax authorities at market rate
Bank interest received
Other finance income
Finance income
Finance expenses
Interest on bank loans
Note
2020
RUB'000
2019
RUB'000
137,645
110,796
141
93,855
111,734
9,115
248,582
214,704
(337,014)
(389,241)
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 gain/(loss)
(66,011)
(53,962)
(23,770)
(25,522)
—
(30,959)
(537,238)
122,532
(166,124)
(54,889)
(41,931)
(19,535)
(19,292)
(11,426)
(2,357)
(538,671)
(53,333)
(377,300)
109
REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 10. Income tax
Reconciliation between profit before tax and income tax expense:
Profit before tax
Less profit before tax of non-taxable subsidiaries
Loss before tax excluding not-taxable subsidiaries
Tax using the Group's domestic tax rate
Effect of subsidiaries taxable at lower tax rates
Non-deductible expenses
Current-year losses for which no deferred tax asset is recognised
Written-off temporary differences of medical companies due to
change in Tax Code in 2019
Total income tax (expense)/benefit
On 26 July 2019 changes in Tax Code of the Russian Feder-
ation came into force through changes in Federal law 395-N
("Law"). According to these changes medical companies which
meet the conditions specified in the Law are subject to 0% in-
come tax rate in perpetuity (previously 0% income tax rate was
for the period up to 5 years until 1 January 2020). As a result,
all Group companies, that are offering medical services and are
operating in the Russian Federation and meet the conditions
specified in the Law, apply 0% corporate income tax rate. Other
companies apply standard income tax rate of 20% or 15%.
As the result of changes in the Tax Code, the Group recognised
additional tax benefit amounted to RUB49,316 thousand dur-
ing the year ended 31 December 2019. 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.
2020
RUB'000
2019
RUB'000
4,338,074
2,757,046
(4,435,091)
(3,049,226)
(97,017)
19,403
259
(8,010)
(16,426)
—
(4,774)
(292,180)
58,436
820
(6,636)
(72,357)
49,316
29,579
As at 31 December 2020, deferred tax assets relating to tax
losses carried forward in the amount of RUB280,211 thou-
sand (31 December 2019: RUB263,785 thousand) have not
been recognised. Deferred tax assets have not been recog-
nised 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 2020, there were temporary differences
(before calculating tax effect) of RUB7,595,057 thousand
(31 December 2019: RUB6,543,395 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
2020
RUB'000
4,196,463
75,125,010
2019
RUB'000
2,637,638
75,120,211
Basic and fully diluted earnings per share (RUB)
55.86
35.11
12. Dividends
On 4 September 2020, the Board of Directors declared interim
dividends attributable to the owners of the Company amount-
ing to RUB736,225 thousand (USD9,755 thousand), which
corresponds to RUB9.8 (USD0.13) per share. The dividends
were paid on 20 October 2020.
On 11 August 2020, the Board of Directors declared final divi-
dends for the year 2019 attributable to the owners of the Com-
pany amounting to RUB1,389,813 thousand (USD18,839
thousand), which corresponds to RUB18.5 (USD0.25) per
share. The dividend distribution was approved by the Extraor-
dinary General Meeting of the shareholders on 3 September
2020. The dividends were paid on 13 October 2020.
On 22 March 2019, the Board of Directors declared final divi-
dends for the year 2018 attributable to the owners of the Com-
pany amounting to RUB800,081 thousand (USD12,552 thou-
sand), 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.
110
111
REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 13. Property, plant and equipment
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
Total
RUB'000
Initial cost
Balance at 1 January 2019
13,923,642
2,367,674
7,182,479
—
23,473,795
The amount of borrowing costs capitalised during the year
ended 31 December 2020 was RUB131,779 thousand
(RUB148,986 thousand for the year ended 31 Decem-
ber 2019). Capitalisation rate for loans was 7.19% for the year
ended 31 December 2020 (10.3% for the year ended 31 De-
cember 2019).
As at 31 December 2020, construction in progress mainly in-
cludes construction costs of Lapino hospitals amounting to
RUB68,417 thousand and Saint-Petersburg hospital amount-
ing to RUB85,923 thousand.
On 31 August 2020, the Group released all collateral of prop-
erty, plant and equipment. Therefore, the total net book value
of property, plant and equipment which is held as collateral
for the loans and borrowings was nil as at 31 December 2020
(31 December 2019: RUB10,086,859 thousand).
Recognition of right-of-use
asset on initial application
of IFRS 16
Effect of IFRIC agenda decision
Additions
Government grant
Disposals
Impairment loss
Transfer from construction
in progress
—
—
—
—
—
—
826,584
2,057,815
1,290,688
329,591
329,591
276,461
174,706
276,461
4,349,793
—
(500,000)
—
(500,000)
(4,138)
(34,769)
(65,867)
(21,566)
—
(98,234)
(34,769)
—
—
—
2,029,358
(2,258,220)
228,862
—
(6,663)
—
Balance at 31 December 2019
16,772,921
2,128,362
8,136,162
759,192
27,796,637
Additions
Disposals
Impairment loss
Transfer from construction
in progress
1,027,126
2,002,553
(5,438)
—
(2,362)
(22,308)
609,649
(45,797)
—
3,488,931
(3,947,493)
458,562
85,863
(121,978)
—
—
3,725,191
(175,575)
(22,308)
—
Balance at 31 December 2020
21,283,540
158,752
9,158,576
723,077
31,323,945
Depreciation
Balance at 1 January 2019
(1,488,612)
Depreciation during the year
(352,764)
Accumulated depreciation
on disposals
1,493
Balance at 31 December 2019
(1,839,883)
Depreciation during the year
(395,250)
Accumulated depreciation
on disposals
3,618
Balance at 31 December 2020
(2,231,515)
Carrying amounts
—
—
—
—
—
—
—
(3,827,505)
—
(5,316,117)
(929,957)
(125,831)
(1,408,552)
53,138
3,783
58,414
(4,704,324)
(122,048)
(6,666,255)
(891,312)
(126,761)
(1,413,323)
32,774
15,779
52,171
(5,562,862)
(233,030)
(8,027,407)
14. Intangible assets
Initial cost
Goodwill
RUB'000
Patents and
trademarks
RUB'000
Software
and web site
RUB'000
Balance at 1 January 2019
2,032,320
564,812
Additions
—
—
Balance at 31 December 2019
2,032,320
564,812
Additions
—
—
94,870
34,728
129,598
123,474
Total
RUB'000
2,692,002
34,728
2,726,730
123,474
Balance at 31 December 2020
2,032,320
564,812
253,072
2,850,204
Amortisation
Balance at 1 January 2019
Amortisation during the year
Balance at 31 December 2019
Amortisation during the year
Balance at 31 December 2020
Carrying amounts
Balance at 1 January 2019
Balance at 31 December 2019
Balance at 31 December 2020
—
—
—
—
—
(368,940)
(71,206)
(64,549)
(29,404)
(433,489)
(100,610)
(440,146)
(93,953)
(534,099)
(71,238)
(39,212)
(110,450)
(511,384)
(133,165)
(644,549)
2,032,320
2,032,320
2,032,320
195,872
124,666
30,321
35,645
2,258,513
2,192,631
53,428
119,907
2,205,655
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.
Balance at 1 January 2019
12,435,030
2,367,674
3,354,974
—
18,157,678
JSC MC Avicenna
Balance at 31 December 2019
14,933,038
2,128,362
3,431,838
637,144
21,130,382
Balance at 31 December 2020
19,052,025
158,752
3,595,714
490,047
23,296,538
ARTMed Group (Centres of Reproductive Medicine,
located in Krasnoyarsk, Omsk, Novosibirsk and Barnaul)
In 2019, the government granted RUB500,000 thousand
as support for the construction of Tyumen hospital, while
RUB360,818 thousand were received in cash. The remaining
amount of RUB139,182 thousand was received in 2020.
Construction in progress includes machinery and equipment,
X-ray equipment, tomographs and other items of property,
plant and equipment not yet available for use and predomi-
nantly relates to the buildings construction through the use of
sub-contractors.
LLC Medica-2
CJSC MK IDK
LLC Centre of Reproductive Medicine
Subsidiaries acquired in 2011
112
31 December 2020
RUB'000
31 December 2019
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
113
REPORT AND CONSOLIDATED FINANCIAL STATEMENTS Goodwill has been allocated for impairment testing purposes to
six 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 for the calculation of
the terminal value is estimated to be 4%. Discount after-tax
rate applied to the cash flow projections is 13.7%. The values
assigned to the key assumptions represent management's
assessment of future trends and have been based on histori-
cal 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 2020 and in
2019. 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 re-
coverable amounts materially.
15. Trade, other receivables and deferred expenses
In addition to the bad debt provision accrued as at 31 De-
cember 2020 the accounts receivable in the amount of
RUB15,849 thousand were written-off during the year end-
ed 31 December 2020 (year ended 31 December 2019:
RUB1,375 thousand).
The Group performed the calculation of ECL rates separately
for patients, legal entities and insurance companies, mean-
while 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 2020.
Note
13
31 December
2020
RUB'000
31 December
2019
RUB'000
630,626
836,756
—
116,807
6,081
—
48,329
394,016
375,852
139,182
101,851
3,588
1,000
38,264
1,638,599
1,053,753
630,626
1,007,973
394,016
659,737
1,638,599
1,053,753
CAPEX prepayments
Trade receivables net of impairment provision
Government grant receivable
Advances paid to suppliers
Deferred expenses
Loans receivable
Other receivables
Non-current portion
Current portion
CAPEX prepayments represent capital expenditure prepay-
ments under contracts for construction works and acquisition
of plant and equipment.
The advance paid for PPE in the amount of RUB24,196 thou-
sand was received back in full by the Group during the year
ended 31 December 2020 due to cancellation of the hospital
construction in Kazan.
Ageing analysis of trade receivables:
Gross amount
31 December
2020
RUB'000
Impairment
31 December
2020
RUB'000
Gross amount
31 December
2019
RUB'000
Impairment
31 December
2019
RUB'000
717,114
231,113
(3,188)
(108,283)
948,227
(111,471)
308,174
164,039
472,213
(1,347)
(95,014)
(96,361)
Not past due
Past due
114
Ageing
0–30 days
31–60 days
61–90 days
Status
past due
past due
past due
more than 91 days
past due
Weighted
average
loss rate
Gross
carrying amount
2020
RUB'000
Loss
allowance
2020
RUB'000
Gross
carrying amount
2019
RUB'000
Loss
allowance
2019
RUB'000
Credit-
impaired
16%
33%
55%
58%
55,940
(8,837)
27,413
(2,297)
16,781
(5,558)
12,254
(6,770)
4,997
4,291
(1,849)
(2,801)
96,870
(56,077)
90,915
(64,748)
partly
partly
partly
partly
Total
181,845
(77,242)
127,616
(71,695)
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 2020.
Ageing
Status
0–30 days
31–60 days
61–90 days
not past due
past due
past due
more than 91 days
past due
Total
Weighted
average
loss rate
Gross
carrying amount
2020
RUB'000
Loss
allowance
2020
RUB'000
Gross
carrying amount
2019
RUB'000
Loss
allowance
2019
RUB'000
Credit-
impaired
10%
15%
19%
90%
30,971
13,952
(3,188)
(2,074)
6,173
(1,147)
17,368
9,396
3,983
(1,347)
(1,026)
(846)
29,143
(26,300)
23,044
(19,714)
80,239
(32,709)
53,791
(22,933)
partly
partly
partly
partly
Based on the analysis of the historical data for accounts re-
ceivable from related parties amounted to RUB31,628 thou-
sand no provision is accrued. For accounts receivable from
insurance companies amounted to RUB654,515 thousand
provision is accrued only for those which licences had been
revoked (as the most part relates to accounts receivable for
MHI services provided which payments are guaranteed by
the government). Such provision of RUB1,520 thousand was
accrued as at 31 December 2020.
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.
115
REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 16. Cash and cash equivalents and short-term deposits
19. Loans and borrowings
Current bank accounts and cash in hand
Bank deposits with maturity less than 3 months
TOTAL CASH AND CASH EQUIVALENTS
921,812
569,399
Long-term liabilities
2,206,906
2,492,049
3,128,718
3,061,448
Bank loans
Lease liabilities
Other short-term bank deposits with maturity more than 3 months
746,145
506,916
Short-term liabilities
31 December
2020
RUB'000
31 December
2019
RUB'000
TOTAL CASH AND CASH EQUIVALENTS AND SHORT-TERM DEPOSITS
3,874,863
3,568,364
Currency:
RUB
USD
EUR
31 December
2020
RUB'000
2,822,660
1,052,197
31 December
2019
RUB'000
3,053,314
515,002
6
48
3,874,863
3,568,364
The exposure of the Group to credit risk and currency risk in re-
lation to cash and cash equivalents is reported in Note 23 of
these consolidated financial statements.
17. Share capital
Ageing
Authorised
Issued and fully paid ordinary shares
1 January/31 December
Number of shares
125,250,000
75,125,010
Nominal value
USD
Share capital
RUB'000
Share capital
USD'000
0.08
0.08
—
180,585
10,020
6,010
18. Share premium, reserves and retained earnings
Share premium
Reserves
Share premium includes the total amount received in excess of
the total nominal value of the new share capital issued. Incre-
mental 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
Reserves include common control transactions reserve in
the amount of RUB682,873 thousand and capital contribution
reserve in the amount of RUB27,521 thousand.
Common control transactions reserve includes differences be-
tween the carrying amount of net assets acquired through pur-
chases of subsidiaries from parties under common control and
the consideration paid for their acquisition.
Retained earnings include accumulated profits and losses in-
curred by the Group.
There were no changes during 2020.
31 December
2020
RUB'000
31 December
2019
RUB'000
4,801,332
429,145
1,508,632
78,889
5,297,081
567,263
1,151,176
82,727
6,817,998
7,098,247
31 December
2020
RUB'000
31 December
2019
RUB'000
1,587,521
4,626,670
603,807
1,233,903
5,012,000
852,344
6,817,998
7,098,247
Bank loans
Lease liabilities
Total loans and borrowings
Maturity of loans and borrowings:
Within one year
Between one and five years
More than five years
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:
Currency
Effective
interest rate
Maturity
Face value
RUB'000
31 December
2020
Carrying
amount
RUB'000
31 December
2019
Carrying
amount
RUB'000
Face value
RUB'000
Unsecured bank loan
Unsecured 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
7.58%
7.52%
7.60%
7.09%
10.74%
8.29%
2023
2024
2022
1,551,652
1,551,652
2,091,946
2,091,946
1,373,737
1,373,737
1,902,384
1,902,384
420,490
420,490
631,556
631,556
2026
2,964,085
2,964,085
1,815,638
1,815,638
2020
2021
—
—
78,889
78,889
6,733
82,727
6,733
82,727
8.58% 2022– 2028
429,145
429,145
567,263
567,263
6,817,998
6,817,998
7,098,247
7,098,247
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.
116
117
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
2020
31 December
2019
Bank loans
RUB'000
Lease liabilities
RUB'000
Bank loans
RUB'000
Lease liabilities
RUB'000
Balance at 1 January before adjustment
6,448,257
649,990
5,665,275
Adjustment on OB IFRS 16 Leases
—
—
—
Balance at 1 January adjusted
6,448,257
649,990
5,665,275
Changes in cash flows
Proceeds from loans and borrowings
Repayment of loans and borrowings
1,193,493
(1,319,275)
—
—
1,831,205
(1,051,367)
—
329,591
329,591
—
—
Payments of lease liabilities
—
(158,086)
—
(158,281)
Interest paid included in financing cash flows
Interest paid included in investment cash flows
(349,525)
(131,779)
—
—
Total changes in cash flows
Liability-related changes
Effect of IFRIC agenda decision
Discounts on lease agreements
Additions of lease liabilities
Lease terminated
Finance expenses accrued in PL
Finance expenses capitalised in PPE
Total liability-related other changes
(607,086)
(158,086)
—
—
—
—
337,014
131,779
468,793
—
(10,216)
85,863
(113,479)
53,962
—
16,130
(386,097)
(148,986)
244,755
—
—
—
—
389,241
148,986
538,227
Balance at 31 December
6,309,964
508,034
6,448,257
—
—
(158,281)
276,461
—
174,706
(14,418)
41,931
—
478,680
649,990
20. Contract liabilities
Patient advances
including:
Contract liabilities after more than one year
Contract liabilities within one year
Contract liabilities that relate to long term client advances rep-
resent money received from patients on stem cells storage con-
tracts lasting from one to thirty years and long-term contracts
for offering medical services lasting from one to five 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 one
to nine months, and other contracts valid up to one year.
31 December
2020
RUB'000
31 December
2019
RUB'000
1,909,241
1,405,087
483,026
1,426,215
205,527
1,199,560
31 December
2020
RUB'000
1,058,858
840,119
561,839
418,204
204,962
193,731
1,384
31,034
31 December
2019
RUB'000
498,006
657,233
439,689
355,715
175,621
123,762
1,929
30,422
3,310,131
2,282,377
679,843
547,014
2,630,288
1,735,363
3,310,131
2,282,377
Trade payables
Other payables to tax authorities
Accruals
Payables to employees
Taxes payable
CAPEX payables
Income tax liability
Other payables
Non-current portion
Current portion
The contractual cash flows (except for income tax liability) and
the exposure of the Group to liquidity risk in relation to trade
and other payables are reported in Note 23 of these consolidat-
ed financial statements.
22. Related party transactions
The following transactions were carried out with related parties:
22.1. Balances and transactions
with related parties
The remuneration of the members of the key management per-
sonnel and non-executive directors for the year ended 31 De-
cember 2020 was RUB132,290 thousand (for the year ended
31 December 2019: RUB95,694 thousand).
The remuneration of the members of key management per-
sonnel which remained unpaid as at 31 December 2020 was
RUB32,365 thousand (31 December 2019: RUB23,208
thousand).
The Group provided medical informational services to relat-
ed parties amounted to RUB158,321 thousand for the year
ended 31 December 2020 (for the year ended 31 December
2019: RUB51,922 thousand)and received commission ser-
vices from related parties amounted to RUB15,609 thousand
for the year ended 31 December 2020 (for the year ended
31 December 2019: nil).
The receivables from medical informational services, which
remained unpaid as at 31 December 2020, was RUB31,132
thousand (31 December 2019: RUB11,269 thousand).
The Group received medical services from related par-
ties amounted to RUB60,627 thousand for the year ended
31 December 2020 (for the year ended 31 December 2019:
RUB30,118 thousand).
The payables from medical services, which remained unpaid as
at 31 December 2020, was RUB54,149 thousand (31 Decem-
ber 2019: RUB4,064 thousand).
The Group provided services to the key management person-
nel under non-exclusive commercial concession agreement for
the year ended 31 December 2020 amounted to RUB1,220
thousand (for the year ended 31 December 2019: RUB1,247
thousand).
The receivables services under non-exclusive commercial con-
cession agreements, which remained unpaid as at 31 Decem-
ber 2020, was RUB496 thousand (as at 31 December 2019:
RUB302 thousand).
The Group purchased intangible assets from related parties
amounted to RUB967 thousand for the year ended 31 Decem-
ber 2020 (for the year ended 31 December 2019: RUB4,508
thousand).
118
119
REPORT AND CONSOLIDATED FINANCIAL STATEMENTS
22.2. Directors' interests
23. Financial risk management
Cash and cash equivalents and short-term bank deposits
The direct and indirect interests of the members of the Board in
titles of the Company as at 31 December 2020, 31 December
2019, and as at the date of signing these consolidated financial
statements are as follows, except for Vitaly Ustimenko:
Name
Type of interest
Mark Kurtser
Kirill Dmitriev
Simon Rowlands
Vitaly Ustimenko
Indirect ownership
of shares
Indirect interest
in shares
Direct ownership
of shares
Direct ownership
of shares
Effective
interest, %
67.90
5.55
0.33
0.005
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 ac-
quired by the Company.
Member of the Board of Directors Vitaly Ustimenko acquired
GDRs on 10 November 2020, as a result, the share of his own-
ership increased from 0.0035% to 0.005% of the Сompany's
share capital.
22.3. Dividends declared to related parties
Dividends declared to the parent company MD Medical Hold-
ing Limited amounted to RUB1,443,963 thousand for the year
ended 31 December 2020 (31 December 2019: RUB543,399
thousand).
Trade and other receivables
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 es-
tablishment and supervision of the Company's risk manage-
ment framework.
The Group's risk management policies are established to
identify and analyse the risks faced by the Group to set appro-
priate risk limits and control 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 in-
flows 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 prod-
ucts 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 maxi-
mum credit exposure. The maximum exposure to credit risk at
the reporting date was:
31 December
2020
RUB'000
31 December
2019
RUB'000
879,759
551,089
Cash and cash equivalents and short-term bank deposits excluding cash in hand
3,863,592
3,559,098
4,743,351
4,110,187
Trade and other receivables
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. Further-
more, according to the internal policy, clients usually pay in ad-
vance, except for some particular cases.
The Group held cash and cash equivalents and short-term bank
deposits excluding cash in hand of RUB3,863,592 thousand
as at 31 December 2020 (31 December 2019: RUB3,559,098
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 institu-
tion counterparties, which are rated Baa3–Aa3 based on rating
agency Moody's Investors Service ratings.
Number of banks
External credit rating
Carrying amount
2
1
2
Total
Baa3
A3
Aa3
2,720,022
846,628
296,942
3,863,592
(ii) Liquidity risk
Liquidity risk is the risk that arises when the maturity of assets
and liabilities does not match. An unmatched position poten-
tially 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
2020
Note
Bank loans
Lease liabilities
CAPEX payables
Trade payables
Other payables and
accrued expenses
19
19
21
21
21
Carrying
amounts
RUB'000
Contractual
cash flows
RUB'000
2 months
or less
RUB'000
Between
2–12 months
RUB'000
Between
1–2 years
RUB'000
Between
2–5 years
RUB'000
More than
5 years
RUB'000
6,309,964
7,157,141
271,119
1,558,626
1,914,552
2,942,898
469,946
508,034
667,037
21,571
97,677
104,856
277,474
165,459
193,731
193,731
59,067
134,664
1,058,858
1,058,858
1,058,858
—
—
—
—
—
—
—
2,056,158
2,396,695
827,452
505,481
162,012
431,156
470,594
10,126,745
11,473,462
2,238,067
2,296,448
2,181,420
3,651,528
1,105,999
31 December
2019
Note
Bank loans
Lease liabilities
CAPEX payables
Trade payables
Other payables and
accrued expenses
19
19
21
21
21
Carrying
amounts
RUB'000
Contractual
cash flows
RUB'000
2 months
or less
RUB'000
Between
2–12 months
RUB'000
Between
1–2 years
RUB'000
Between
2–5 years
RUB'000
More than
5 years
RUB'000
6,448,257
7,828,558
267,768
1,355,763
1,857,487
3,724,021
623,519
649,990
897,866
22,770
112,725
117,341
320,940
324,090
123,762
123,762
45,537
78,225
498,006
498,006
498,006
—
—
—
—
—
—
—
1,658,680
1,894,014
712,288
393,785
122,518
363,672
301,751
9,378,695
11,242,206
1,546,369
1,940,498
2,097,346
4,408,633
1,249,360
The Group has bank loans all of which contain debt cove-
nants. The breach of covenants may require the Group to repay
the loans earlier than indicated in the above table.
120
121
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 for-
eign exchange rates and interest rates, may affect the Group's
income or the value of its holdings of financial instruments.
Interest rate risk is the risk that the value of financial instru-
ments 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 manage-
ment monitors the interest rate fluctuations on an ongoing ba-
sis and acts accordingly.
As at the reporting date the interest rate profile of interest bear-
ing financial instruments was as follows:
USD
EUR
GBP
Average rate
Reporting date spot rate
2020
72.1464
82.4488
92.5689
2019
64.4435
72.2409
82.3666
2020
73.8757
90.6824
100.0425
2019
61.9057
69.3406
81.1460
Fixed rate instruments
Financial assets
Financial liabilities
31 December
2020
RUB'000
31 December
2019
RUB'000
2,953,051
2,999,965
(6,817,998)
(7,098,247)
(3,864,947)
(4,098,282)
Sensitivity analysis
A 10% weakening of the Russian ruble against the above
currencies will result in the increase in profit and equity of
RUB104,289 thousand as at 31 December 2020 (31 De-
cember 2019: RUB51,389 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, re-
turn 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 bor-
rowings less cash and cash equivalents. Total equity is cal-
culated as ‘equity' shown in the consolidated statement of
financial position.
In particular, fixed-rate financial liabilities include fixed inter-
est rate bank loans amounted to RUB6,309,964 thousand for
which the banks have the option to revise the interest rate fol-
lowing 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 deriva-
tive 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. Curren-
cy risk arises when future commercial transactions and recog-
nised 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 fluctua-
tions on an ongoing basis and acts accordingly.
The Group's exposure to foreign currency risk was as follows:
31 December
2020
31 December
2019
USD'000
EUR'000
GBP'000
USD'000
EUR'000
GBP'000
Assets
Cash in bank
Short-term bank deposits
Trade and other receivables
Liabilities
306,052
746,145
330
6
—
38
CAPEX payables
(1,748)
(6,700)
Trade and other payables and
accruals
(531)
(706)
Net exposure
1,050,248
(7,362)
122
—
—
—
—
—
—
21,304
493,698
3,035
48
—
113
(1,933)
(1,226)
—
(1,074)
516,104
(2,139)
—
—
—
(75)
(75)
Financial liabilities
Less: cash and cash equivalents
Net debt
Total equity
Net debt to equity ratio
Note
19
16
31 December
2020
RUB'000
31 December
2019
RUB'000
6,817,998
7,098,247
(3,128,718)
(3,061,448)
3,689,280
4,036,799
19,952,581
17,880,142
18.49%
22.58%
The net debt including short-term bank deposits equals to
RUB2,943,135 thousand as at 31 December 2020 (31 De-
cember 2019: RUB3,529,883 thousand). The net debt ratio
adjusted by short-term bank deposits is 14.75% (31 December
2019: 19.74%)
25. Operating environment
(a) Insurance
24. Fair values
As at 31 December 2020 and 31 December 2019, the Group had
no significant financial assets or liabilities measured at fair value.
The financial assets of the Group include cash and cash equiv-
alents and trade and other receivables. The financial liabilities
of the Group include loans and borrowings and trade and other
payables. The fair value of these financial instruments is clas-
sified as Level 3 of fair value class hierarchy and is estimated
only for disclosure purposes using discounted cash flows tak-
ing 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.
As per current legislation in the Russian Federation, medi-
cal clinics are not required to insure their activities. There is
a draft law regarding obligatory insurance of medical clinics as
from 2013. The draft law has not yet been enacted. At present
the Group does not insure its operational activities but has ob-
tained insurance cover for some property, plant and equipment.
Until the Group obtains adequate insurance coverage there is
a risk of material adverse effect on operations and statement of
financial position.
(b) Russian business environment
The Group's operations are primarily located in the Russian
Federation. Consequently, the Group is exposed to the eco-
nomic and financial markets of the Russian Federation, which
123
REPORT AND CONSOLIDATED FINANCIAL STATEMENTS 27. Capital commitments
Capital commitments mostly comprise of the obligations under
construction contracts in the amount of RUB456,013 thousand
as at 31 December 2020 (31 December 2019: RUB1,229,503
thousand).
28. Segment reporting
The Group operates in Russian Federation and has one prima-
ry reporting segment: provision of medical services. The Group
evaluates the performance and makes investments and strate-
gic 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 launched a new multifunctional medical centre
(“Lapino-4”) on the Lapino medical complex grounds on 1 Feb-
ruary 2021. The centre will provide highly professional medical
care, including patients with surgical pathology complicated by
COVID-19 and maternity patients.
On 16 February 2021 Khaven reimbursed VAT in the amount of
RUB33,138 thousand in cash for Lapino-2 construction.
On 19 March 2021 Board of Directors recommended the pay-
ment of RUB1,427,375 thousand as final dividends for the year
2020 which corresponds to RUB19.00 per share.
display the characteristics of an emerging market. The legal,
tax and regulatory frameworks continue to be developed but
are subject to varying interpretations and frequent chang-
es which, together with other legal and fiscal impediments,
contribute 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 sanctions has
led to increased economic uncertainty, including more volatile
equity markets, a depreciation of the Russian ruble, a reduc-
tion 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 access-
ing 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 addi-
tional sanctions are difficult to determine. The COVID-19
coronavirus pandemic has further increased uncertainty in
the business environment.
The Group primarily operates in Russian healthcare system
which is subject to a specific regulatory regime and has its own
peculiarities. A part of the Group's operations are covered by
the Mandatory Health Insurance that require compliance with
certain requirements.
The consolidated financial statements reflect management's
assessment of the impact of the Russian business environ-
ment on the operations and the financial position of the Group.
The future business environment may differ from manage-
ment'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 some-
times 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 relat-
ed to JSC MD PROJECT 2000. The information about the sub-
sidiary 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
2020
RUB'000
3,535,701
1,428,837
71,442
65,000
5%
2019
RUB'000
3,050,292
1,212,761
60,638
31,000
5%
2020
RUB'000
2019
RUB'000
4,300,934
4,326,689
1,067,896
(221,840)
(702,619)
869,148
(186,413)
(693,891)
4,444,371
4,315,533
222,219
121,537
343,756
215,777
125,965
341,742
124
125
REPORT AND CONSOLIDATED FINANCIAL STATEMENTS
10. Report
and separаte
financial
statements
128
Officers, professional
advisors and registered office
129
Management report
133
Directors'
responsibility statement
134
Independent auditors' report
138
Statement
of profit or loss and other
comprehensive income
139
Statement of financial position
140
Statement of changes in equity
144
Statement of cash flows
146
Notes to the financial statements
For the year ended 31 December 2020
Officers,
professional advisors
and registered office
Board of Directors
• Vladimir Mekler — Chairman
• Mark Kurtser
• Vitaly Ustimenko
• Kirill Dmitriev
• Nikolay Ishmetov (alternate director to Kirill Dmitriev)
• Simon Rowlands
• Tatyana Lukina
• Tony Maher
Secretary
Menustrust Limited
Secretary assistant
Darya Aleksandrova
Independent auditors
KPMG Limited
Registered office
15 Dimitriou Karatasou street, Anastasio Building,
6th floor, office 601, Strovolos,
2024, Nicosia, Cyprus
Management
report
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 2020.
Incorporation
MD Medical Group Investments Plc was incorporated in Cy-
prus 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 invest-
ment 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 Decem-
ber 2020 and its financial position as at that date are set out in
the statement of profit or loss and other comprehensive income
on page 138 and in the statement of financial position on page
139 of these financial statements.
Profit for the year ended 31 December 2020 amounted to
RUB2,866,548 thousand (2019: RUB1,035,820 thou-
sand). The total assets of the Company as at 31 Decem-
ber 2020 were RUB11,722,264 thousand (31 Decem-
ber 2019: RUB10,938,589 thousand) and the net assets
were RUB11,604,801 thousand (31 December 2019:
RUB10,864,291 thousand).
Dividends
In accordance with the Company's Articles of Association div-
idends 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 div-
idends to the Company in accordance with relevant legislation
in the country of their incorporation and any contractual restric-
tions. The payment of such dividends by its subsidiaries is con-
tingent upon the sufficiency of their earnings, cash flows and
distributable reserves.
On 4 September 2020 the Board of Directors declared interim
dividend attributable to the owners of the Company amounting
to RUB736,225 thousand (USD9,755 thousand), which cor-
responds to RUB9.8 (USD0.13) per share. The dividends were
paid on 20 October 2020.
On 11 August 2020 the Board of Directors declared final divi-
dend for the year 2019 attributable to the owners of the Com-
pany amounting to RUB1,389,813 thousand (USD18,839
thousand), which corresponds to RUB18.5 (USD0.25) per
share. The dividend distribution was approved by the Extraor-
dinary General Meeting of the shareholders on 3 September
2020. The dividends were paid on 13 October 2020.
On 22 March 2019 the Board of Directors declared final divi-
dend for the year 2018 attributable to the owners of the Com-
pany amounting to RUB800,081 thousand (USD12,552 thou-
sand), 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.
128
129
REPORT AND FINANCIAL STATEMENTS Examination of the development,
position and performance of
the activities of the company
The current financial position and performance of the Com-
pany 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 posi-
tions 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 of-
fering by adding other medical services for all family members,
such as surgery, urology, traumatology, cardiology, and oncolo-
gy, etc. The recently opened facilities have been multi-discipli-
nary 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 es-
tablishment and supervision of the Company's risk manage-
ment framework.
Directors' interest
The direct and indirect interests of the members of the Board in
titles of the Company as at 31 December 2020, 31 December
2019 and as at the date of signing these financial statements
are as follows, except for Vitaly Ustimenko:
Name
Type of interest
Effective
interest, %
Mark Kurtser
Indirect ownership of shares
67.90
Kirill Dmitriev
Indirect interest in shares
5.55
Simon Rowlands
Direct ownership of shares
0.33
Vitaly Ustimenko
Direct ownership of shares
0.005
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 ac-
quired by the Company.
Member of the Board of Directors Vitaly Ustimenko acquired
GDRs on 10 November 2020, as a result the share of his own-
ership increased from 0.0035% to 0.005% of the Сompany's
share capital.
130
Future developments
The Company's goal is to continually diversify its medical ser-
vices by expanding its range of services, maintaining its leading
position in the field of high-quality women's health and paedi-
atrics, as well as 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 treat-
ment procedures and medical technology available on the mar-
ket, expand its services in Moscow and other regions, exploit
the value of its integrated healthcare network by making effec-
tive 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 ap-
pointments to shareholders. In accordance with the Appoint-
ment Policy for the Board of Directors and Committees, all di-
rectors 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 rig-
orous review, and takes into account the need for progressive
refreshing of the Board of Directors.
The members of the Board of Directors who served as at
the date of signing of these financial statements, are present-
ed on page 128.
Refer to Note 13.1. of these financial statements for the remu-
neration of the directors and other key management personnel.
The Audit Committee meets at least four times each year and is
responsible for considering:
•
the reliability and appropriateness of disclosures in the fi-
nancial 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 ex-
ternal 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 over-
sight 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 recom-
mendation of an audit plan to the Audit Committee. The in-
ternal 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 quar-
terly report with his findings to the Audit Committee.
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 di-
rectors, two of whom are independent. The Audit Committee
has been chaired by independent non-executive director Ta-
tiana Lukina since 6 December 2019, Mr. Kirill Dmitriev and
Mr. Simon Rowlands are the other members.
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 direc-
tor Mr. Vladimir Mekler (since June 2016), non-executive direc-
tor 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 discharg-
ing its corporate governance responsibilities in relation to ap-
pointment 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 recommen-
dation 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 Com-
mittee is chaired by an independent non-executive direc-
tor 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 dis-
charging 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 deter-
mine the framework and policy for the remuneration of the ex-
ecutive directors, the chairman of the Board of Directors and
senior executives, and the specific remuneration of each execu-
tive 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 com-
mitted to the highest standards of corporate governance and
transparency. The Board of Directors recognises that good gov-
ernance 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 respon-
sibility is an essential part of good governance and makes sound
business sense, as well as being crucial to the appropriate man-
agement 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 uphold-
ing 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.
131
REPORT AND FINANCIAL STATEMENTS
Branches
MD Medical Group Investments Plc has a branch in Moscow.
Treasury shares
During the year ended 31 December 2020 the Company did
not acquire any treasury shares.
Events after the reporting period
On 19 March 2021 Board of Directors recommended the pay-
ment of RUB1,427,375 thousand as final dividends for the year
2020 which corresponds to RUB19.00 per share.
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, 19 March 2021
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 Cy-
prus 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
based on the foregoing and having reviewed the forecast
financial position of the Company; and
the Management report includes a fair review of the devel-
opment and performance of the business and the position
of the Company and the undertakings included in the report
taken as a whole, together with a description of the principal
risks and uncertainties that they face.
The Directors of the Company responsible for reporting as at
the date of this announcement are set out below:
Name
Vladimir Mekler
Mark Kurtser
Vitaly Ustimenko
Kirill Dmitriev
Simon Rowlands
Tatiana Lukina
Tony Maher
Type of interest
Chairman, non-executive Director
Executive Director
Non-executive Director
Non-executive Director
Non-executive Independent Director
Non-executive Independent Director
Non-executive Independent Director
Internal control in relation to
the financial reporting process
The Company has set formal policies and written term of refer-
ence in relation to the financial reporting process that include:
• Corporate Accounting policy Guidelines;
• Methodology for the Transformation of Financial State-
ments 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 fi-
nancial 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.
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 sharehold-
ers' 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 meet-
ing, 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.
•
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 represent-
ative at any meeting of the Company.
132
133
REPORT AND 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 separate financial state-
ments of the parent company MD Medical Group Investments
Plc (the ''Company''), which are presented on pages 138 and
163 and comprise the statement of financial position as at
31 December 2020, 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 state-
ments, 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 parent com-
pany MD Medical Group Investments Plc as at 31 December
2020, and of its financial performance and its cash flows for
the year then ended in accordance with International Finan-
cial 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 ''Compa-
nies 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' re-
sponsibilities for the audit of the financial statements''' sec-
tion of our report. We remained independent of the Company
throughout the period of our appointment in accordance with
the International Code of Ethics (Including International Inde-
pendence Standards) for Professional Accountants of the In-
ternational Ethics Standards Board for Accountants (''IESBA
Code'') together with the ethical requirements in Cyprus that
are relevant to our audit of the financial statements, and we
have fulfilled our other ethical responsibilities in accordance
with these requirements and the IESBA Code. We believe that
the audit evidence we have obtained is sufficient and appropri-
ate 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 finan-
cial statements of the current period. These matters were ad-
dressed 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.
134
Investment in subsidiaries
Refer to Note 8 of the financial statements (RUB 10,497,717 thousand)
Key audit matter
How the matter was addressed in our audit
The carrying value of the investments in subsidiaries amounts to
RUB10,497,717 thousand and accounts for more than 90% of
the Company’s total assets as at 31 December 2020.
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 car-
rying 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 so-
cial 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 as-
surance conclusion thereon, except as required by the Com-
panies 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 inconsist-
ent 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 re-
quired to report that fact.
With regards to the corporate social responsibility statement
we have nothings to report.
With regards to the management report, our report in this re-
gard 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 fi-
nancial statements that give a true and fair view in accordance
with IFRS-EU and the requirements of the Companies Law,
Our audit procedures included among others the following:
• Assessing the reasonableness of the assumptions and
appropriateness of the methodologies used by the manage-
ment of the Company 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.
• Preparing our own sensitivity analysis around the key
assumptions.
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.
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 account-
ing, unless there is an intention to either liquidate the Company
or to cease the Company’s 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 re-
porting 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 ma-
terial misstatement, whether due to fraud or error, and to issue
an auditors' report that includes our opinion. Reasonable as-
surance 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, individ-
ually 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 profes-
sional judgment and maintain professional skepticism through-
out the audit. We also:
•
Identify and assess the risks of material misstatement
of the financial statements, whether due to fraud or error,
135
REPORT AND FINANCIAL STATEMENTS design and perform audit procedures responsive to those
risks, and obtain audit evidence that is sufficient and ap-
propriate 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, misrepresenta-
tions, or the override of internal control.
• Obtain an understanding of internal control relevant to
the audit in order to design audit procedures that are appro-
priate in the circumstances, but not for the purpose of ex-
pressing 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 relat-
ed 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 signifi-
cant 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 re-
lated disclosures in the financial statements or, if such disclo-
sures 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 regard-
ing, 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.
We also provide those charged with governance with a state-
ment that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all re-
lationships and other matters that may reasonably be thought to
bear on our independence, and where applicable, actions taken
to eliminate threats or safeguards applied.
From the matters communicated with those charged with gov-
ernance, we determine those matters that were of most signifi-
cance in the audit of the financial statements of the current pe-
riod and are therefore the key audit matters. We describe these
matters in our auditors' report.
Report on other regulatory and
legal requirements
Other regulatory requirements
Pursuant to the requirements of Article 10(2) of European Un-
ion (EU) Regulation 537/2014 we provide the following infor-
mation in our Independent Auditors' Report, which is required
in addition to the requirements of ISAs.
136
Date of appointment and period of engagement
Other Matter
We were appointed auditors on 10 July 2012 by the Gener-
al 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 hav-
ing been renewed annually by shareholders’ resolution, is
12 years covering the periods ending 31 December 2009 to
31 December 2020.
Consistency of auditors' report to the additional
report to the Audit Committee
We confirm that our audit opinion is consistent with the ad-
ditional report presented to the Audit Committee dated
19 March 2021.
Provision of Non-audit Services ('NAS')
We have not provided any prohibited NAS referred to in Arti-
cle 5 of EU Regulation 537/2014 as applied by Section 72 of
the Auditors Law of 2017, L.53(I)2017, as amended from time
to time (''Law L53(I)/2017'').
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, based on the work undertaken in the course
of our audit, the information included in the corporate
governance statement in accordance with the require-
ments of subparagraphs (iv) and (v) of paragraph 2(a)
of Article 151 of the Companies Law, Cap. 113, have
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 Com-
pany and its environment obtained in the course of the au-
dit, 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 any material mis-
statements in this respect.
In our opinion, based on the work undertaken in 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 Com-
panies Law, Cap.113.
•
•
•
•
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 oth-
er purpose or to any other person to whose knowledge this re-
port may come to.
The engagement partner on the audit resulting in this inde-
pendent auditors' report is George S. Prodromou.
We have reported separately on the consolidated financial
statements of the Company and its subsidiaries for the year
ended 31 December 2020.
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
19 March 2021
137
REPORT AND FINANCIAL STATEMENTS Statement
of profit or loss and other
comprehensive income
Statement
of financial position
For the year ended 31 December 2020
As at 31 December 2020
Dividend income
Revenue from branch operations
Revenue from advertising
Total revenue
Other income
Other expenses
Selling, general and administrative expenses
Operating profit
Finance income
Finance expenses
Net foreign exchange transactions gain / (loss)
Net finance income / (expenses)
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
2020
RUB'000
2019
RUB'000
3,028,184
1,326,401
150,968
15,455
129,920
5,599
3,194,607
1,461,920
9,195
(54,793)
(411,188)
2,737,821
8,901
(1,764)
121,590
128,727
687
(1,350)
(375,556)
1,085,701
18,934
(13,296)
(50,674)
(45,036)
2,866,548
1,040,665
—
2,866,548
2,866,548
(4,845)
1,035,820
1,035,820
ASSETS
Property, plant and equipment
Intangible 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
Other reserves
Retained earnings
Total equity
LIABILITIES
Trade and other payables
Total current liabilities
Total equity and liabilities
Note
31 December
2020
RUB'000
31 December
2019
RUB'000
8
9
9
10
12
9,702
7,023
11,428
7,674
10,497,717
10,240,465
10,514,442
10,259,567
1,479
74,944
746,145
385,254
1,207,822
1,169
30,816
493,698
153,339
679,022
11,722,264
10,938,589
180,585
5,243,319
328,510
5,852,387
180,585
5,243,319
328,510
5,111,877
11,604,801
10,864,291
117,463
117,463
74,298
74,298
11,722,264
10,938,589
On 19 March 2021 the Board of Directors of MD Medical Group Investments Plc approved and
authorised these report and financial statements for issue.
Vladimir Mekler
Chairman of the Board of Directors
Mark Kurtser
Managing director
Andrey Khoperskiy
Chief financial officer
The Notes on pages 146 to 163 are an integral part of these report and financial statements.
The Notes on pages 146 to 163 are an integral part of these report and financial statements.
138
139
REPORT AND FINANCIAL STATEMENTS Statement
of changes in equity
For the year ended 31 December 2020
Balance at 1 January 2020
Total comprehensive income
Profit and other comprehensive income for the year
Contributions by and distributions to owners
Dividends declared
Total transactions with owners
Balance at 31 December 2020
Share premium is not available for distribution.
Attributable to owners of the Company
Attributable to owners of the Company
Note
Share capital
RUB'000
Share premium
RUB'000
Other reserves
RUB'000
Retained earnings
RUB'000
Total
RUB'000
180,585
5,243,319
328,510
5,111,877
10,864,291
7
—
—
—
—
—
—
—
—
—
2,866,548
2,866,548
(2,126,038)
(2,126,038)
(2,126,038)
(2,126,038)
180,585
5,243,319
328,510
5,852,387
11,604,801
The Notes on pages 146 to 163 are an integral part of these report and financial statements.
The Notes on pages 146 to 163 are an integral part of these report and financial statements.
140
141
REPORT AND 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
Share capital
RUB'000
Treasury shares
RUB'000
Share premium
RUB'000
Other reserves
RUB'000
Retained earnings
RUB'000
Total
RUB'000
180,585
(3,697)
5,243,319
307,951
4,911,777
10,639,935
8
7
—
—
—
—
—
180,585
—
3,697
—
—
3,697
—
—
—
—
—
—
5,243,319
—
—
20,559
—
20,559
328,510
1,035,820
1,035,820
—
(35,639)
(800,081)
(835,720)
5,111,877
3,697
(15,080)
(800,081)
(811,464)
10,864,291
The Notes on pages 146 to 163 are an integral part of these report and financial statements.
The Notes on pages 146 to 163 are an integral part of these report and financial statements.
142
143
REPORT AND FINANCIAL STATEMENTS Statement
of cash flows
For the year ended 31 December 2020
Cash flows from operating activities
Profit for the year
Adjustments for:
Depreciation
Amortisation
Dividend income
Finance expenses
Finance income
Other expense
Net foreign exchange (gain) / loss
Income tax expense
Disposal of investments in subsidiaries due to liquidation
Impairment of investments in subsidiaries
Note
4
4
13.2
5
5
5
6
8
8
2020
RUB'000
2019
RUB'000
Note
2020
RUB'000
2019
RUB'000
2,866,548
1,035,820
Capital contributions to subsidiaries
Cash flows from investing activities
7,862
5,107
10,981
8,330
Acquisition of property, plant and equipment
Acquisition of intangible assets
Placing short-term bank deposits
(3,028,184)
(1,326,401)
Proceeds from short-term bank deposits return
1,764
(8,901)
-
(121,590)
-
15,156
38,930
13,296
(18,934)
1,350
50,674
4,845
-
-
Interest received
Net cash flows used in investing activities
Cash flows used in financing activities
Finance expenses paid
Payments of lease liabilities
Payments on settlement of derivative
Proceeds from sale of treasury shares
(294,338)
(126,210)
(1,369)
(4,456)
(1,610)
(7,467)
(2,097,704)
(493,698)
1,845,257
9,917
-
10,023
(542,693)
(618,962)
(1,570)
(5,440)
-
-
(2,211,202)
(2,218,212)
25,096
153,339
206,819
385,254
(1,870)
(9,333)
(11,426)
11,862
(788,977)
(799,744)
(280,177)
498,459
(64,943)
153,339
5
9
9
Cash flows used in operations before working capital changes
(223,308)
(220,039)
Dividends paid to owners of the Company
(Increase) / decrease in trade and other receivables
Increase in inventories
Increase in trade and other payables
Cash flows used in operations
Dividends received
Tax paid
(45,293)
(310)
31,647
(237,264)
3,028,184
(4,919)
20,639
(430)
11,958
(187,872)
1,326,401
-
13.2
Net cash flows from operating activities
2,786,001
1,138,529
Net cash flows used in financing activities
Net increase / (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Effect of movements in exchange rates on cash held
Cash and cash equivalents as at the end of the year
The Notes on pages 146 to 163 are an integral part of these report and financial statements.
The Notes on pages 146 to 163 are an integral part of these report and financial statements.
144
145
REPORT AND FINANCIAL STATEMENTS Notes to the
financial statements
For the year ended 31 December 2020
1. Incorporation and principal activities
(b) Basis of measurement
MD Medical Group Investments Plc (the “Company”) was in-
corporated in Cyprus on 5 August 2010 as a private limited li-
ability 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 invest-
ment 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 require-
ments of the Cyprus Companies Law, Cap.113.
These are the separate financial statements of the Compa-
ny. The Company has also prepared consolidated financial
statements in accordance with IFRS as adopted by the EU for
the Company and its subsidiaries (“the Group”). The consoli-
dated financial statements are available at 15 Dimitriou Karata-
sou street, Anastasio Building, 6th floor, office 601, 2024 Nic-
osia, Cyprus.
These report and financial statements have been prepared un-
der the historical cost convention.
(c) Functional and presentation currency
These report and financial statements are presented in Rus-
sian Rubles (RUB'000) which is the functional currency of
the Company. Financial information presented in Russian Ru-
bles 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 esti-
mates and assumptions that affect the application of account-
ing policies and the reported amounts of assets and liabilities,
income and expenses.
The estimates and underlying assumptions are based on his-
torical 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 esti-
mates are recognised prospectively.
In particular, information about significant areas of estimation,
uncertainty and critical judgments in applying accounting poli-
cies that have the most significant effect on the amount recog-
nised 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 2020 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 antic-
ipated 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 provi-
sions in the period in which such determination is made.
consequences on operational and financial performance of
the Company.
Impairment of investments in subsidiaries
The Company periodically evaluates the recoverability of in-
vestments in subsidiaries whenever indicators of impairment
are present. Indicators of impairment include such items as de-
clines 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 as-
set is not recoverable. If facts and circumstances indicate that
investment in subsidiaries may be impaired, the estimated fu-
ture discounted cash flows associated with these subsidiaries
would be compared to their carrying amounts to determine if
a write down to fair value is necessary.
Measurement of fair values
A number of the Company's accounting policies and disclo-
sures 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 Com-
pany uses observable market data as far as possible. Fair val-
ues 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.
The Company reduced the permanent part of the payroll:
the administrative staff was transferred to a 3-day working
week online.
Going concern basis of accounting
Management continues to have a reasonable expectation that
the Company has adequate resources to continue in oper-
ation for at least the next 12 months and that the going con-
cern basis of accounting remains appropriate. The outbreak
of the COVID-19 pandemic and the measures adopted by
the government in Russian Federation to mitigate its spread
have impacted the operations of the Company's subsidiaries.
To respond to a severe downside scenario, management has
the ability to take the following mitigating actions to reduce
costs, optimise the Company's cash flow and preserve liquidity:
reducing non-essential capital expenditure and deferring or
•
cancelling discretionary spend;
freezing non-essential recruitment; and
reducing marketing spend.
•
•
Based on these factors, management has a reasonable expec-
tation that the Company has adequate resources.
Impairment of non-financial assets
• 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).
Management has considered the impact of COVID-19 on
the business of the Company. Current market conditions cre-
ate additional estimation uncertainties and impact certain key
assumptions in the valuation of assets used for preparation of
these financial statements.
If the inputs used to measure the fair value of an asset or a liabil-
ity 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.
COVID-19
In December 2019, the emergence of a new strain of coronavi-
rus (COVID-19) was reported in China and has subsequently
spread globally. On 11 March 2020, the World Health Organ-
ization declared the COVID-19 outbreak a pandemic. Mobility
restrictions, quarantines and similar lockdown measures imple-
mented in different countries to cope with the pandemic had
a significant negative impact on the global economy.
From the beginning of COVID-19 pandemic the Company has
taken necessary measures to avoid direct impact of the pan-
demic on its operations with a special focus on protection of
the health of employees and uninterrupted business processes.
For impairment testing purposes, the Company has determined
that each subsidiary is a separate CGU. Each CGU is tested for
impairment at the balance sheet date if any indicators of im-
pairment have been identified. The COVID-19 pandemic was
considered as an impairment trigger and as a result subsidiar-
ies with significant impact of lockdown on financial results have
been tested for impairment.
The value in use of each CGU tested for impairment is calculat-
ed based on the Company's latest forecast cash flows, covering
a five-year period, which have regard to historic performance and
knowledge of the current market, together with the Company's
views on the future achievable growth and the impact of commit-
ted initiatives. The cash flows include ongoing capital expendi-
ture required to maintain the healthcare network, but exclude any
growth capital initiatives not committed. Cash flows beyond this
five-year period are extrapolated using a long-term growth rate
based on management's future expectations, with reference to
forecast GDP growth. The forecasts used to calculate the value in
use have been updated to take into account the COVID-19 sce-
nario. This assumes an impact on 2020/21 revenues and profits.
The major impact of COVID-19 on the macroeconomic en-
vironment in the healthcare industry resulted in a number of
The key assumptions in the value in use calculations are
the growth rates of sales and gross profit margins, changes in
146
147
REPORT AND FINANCIAL STATEMENTS the operating cost base, long-term growth rates and the risk-ad-
justed pre-tax discount rate. The pre- tax discount rates are
derived from the Company's weighted average cost of capital,
which has been calculated using the capital asset pricing model,
the inputs of which include a country risk-free rate, equity risk
premium, Company size premium and a risk adjustment (beta).
The pre-tax discount rates range from 13% to 14%.
As a result, an impairment loss amounted to RUB38,930
thousand was recognised during the year ended 31 December
2020.
Impairment of financial assets
The Company's allowance for doubtful accounts as of the date
of signing these financial statements reflects the Company's
best estimate of the expected future losses for its accounts re-
ceivables based on the current economic conditions; however,
as a result of the uncertainty caused by COVID-19 pandemic
and other factors, these estimates may change and future actu-
al losses may differ from the Company's estimates. The Com-
pany will continue to monitor economic conditions and will re-
vise the estimates of the expected future losses for accounts
receivable as necessary.
by the same party or parties both before and after the combi-
nation and the control is not transitory. Assets or liabilities ac-
quired under a common control transaction are recognised at
their book values (book value accounting). Any difference be-
tween the consideration paid and the book values is recognised
directly in equity.
Dividend income
Dividend income is recognised in the statement of profit or loss
and other comprehensive income when the right to receive pay-
ment is established.
Revenue
Revenue represents the amount of consideration to which
the Company expects to be entitled in exchange for transfer-
ring the promised services to the customer excluding amounts
collected on behalf of third parties (for example, value added
tax). The Company transfers control over its services at a point
in time.
Finance income
3. Significant accounting policies
Finance income includes interest income which is recognised
as it accrues in profit or loss using the effective interest method.
The accounting policies applied in these financial statements
are consistent with those followed in the Company's financial
statements as at 31 December 2019 and for the year then
ended.
Finance expenses
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 be-
fore the Company at the Annual General Meeting. Consolidat-
ed 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 abil-
ity 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 ex-
pense in the period in which the impairment is identified.
Common control transactions
A business combination involving entities or businesses un-
der common control is a business combination in which all of
the combining entities or businesses are ultimately controlled
148
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 function-
al 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 transla-
tion at year end exchange rates of monetary assets and liabili-
ties denominated in foreign currencies are recognised in profit
or loss under the category finance income or finance expenses.
Tax
The tax currently payable is based on taxable profit for the year.
Taxable profit differs from profit as reported in profit or loss be-
cause 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 sub-
stantively enacted by the reporting date.
the corresponding tax bases used in the computation of taxable
profit, and is accounted for using the statement of financial po-
sition liability method. Deferred tax liabilities are generally rec-
ognised for all taxable temporary differences and deferred tax
assets are recognised to the extent that it is probable that taxa-
ble 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 com-
bination) of other assets and liabilities in a transaction that af-
fects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary dif-
ferences arising on investments in subsidiaries, except where
the Company is able to control the reversal of the temporary dif-
ference 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 real-
ised. 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 le-
gally enforceable right to set off current tax assets against cur-
rent 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 recog-
nised in the Company's financial statements when the sharehold-
ers' 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).
Financial instruments
Recognition
The Company recognises financial assets and financial liabili-
ties 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
as well as the contractual cash flow characteristics of the fi-
nancial assets.
The Company's financial assets comprise of trade and other
receivables and cash and cash equivalents. They are non-de-
rivative 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 Company's finan-
cial assets are measured at amortised cost. 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.
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.
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 portfo-
lio level because this best reflects the way the business is man-
aged and information is provided to management. The informa-
tion 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 con-
tractual 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 out-
flows or realising cash flows through the sale of the assets;
• how the performance of the portfolio is evaluated and re-
•
ported 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 as-
sets 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 recogni-
tion 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. ‘In-
terest' is defined as consideration for the time value of mon-
ey and for the credit risk associated with the principal amount
149
Deferred tax is recognised on differences between the carrying
amounts of assets and liabilities in the financial statements and
The Company classifies financial assets on the basis of both:
the Company's business model for managing financial assets,
REPORT AND FINANCIAL STATEMENTS outstanding during a particular period of time and for other ba-
sic lending risks and costs (e.g. liquidity risk and administrative
costs), as well as a profit margin.
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.
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 assess-
ing 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 as-
sessment, the Company considers:
• contingent events that would change the amount or timing
•
of cash flows;
terms that may adjust the contractual coupon rate, includ-
ing 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).
A prepayment feature is consistent with the solely payments of
principal and interest criterion if the prepayment amount sub-
stantially represents unpaid amounts of principal and interest on
the principal amount outstanding, which may include reasonable
compensation for early termination of the contract. Additional-
ly, for a financial asset acquired at a discount or premium to its
contractual par amount, a feature that permits or requires pre-
payment at an amount that substantially represents the contrac-
tual par amount plus accrued (but unpaid) contractual interest
(which may also include reasonable compensation for early ter-
mination) is treated as consistent with this criterion if the fair val-
ue of the prepayment feature is insignificant at initial recognition.
The Company's financial liabilities comprise of trade and other
payables. 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.
Initial measurement
Financial assets and financial liabilities are initially measured at
fair value plus any directly attributable transaction costs.
Subsequent measurement
Financial assets at amortised cost:
These assets are subsequently measured at amortised cost
using the effective interest method. The amortised cost is re-
duced by impairment losses. Interest income, foreign exchange
gain and losses and impairment are recognised in profit or loss.
Any gain or loss on derecognition is recognised in profit or loss.
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
150
Financial liabilities at amortised cost:
Other financial liabilities are subsequently measured at amor-
tised cost using the effective interest method. Interest expense
and foreign exchange gains and losses are recognised in profit
or loss. Any gain or loss on derecognition is also recognised in
profit or loss.
Impairment of non-derivative financial assets
At each balance sheet date the Company recognises a loss
allowance for expected credit losses on financial assets meas-
ured at amortised cost.
The loss allowance for financial assets at amortised cost is rec-
ognised 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 Compa-
ny 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 impair-
ment on an individual basis. The remaining financial assets are
assessed collectively in groups that share similar credit risk
characteristics. The Company 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 Company considers reasonable and
supportable information that is relevant and available with-
out undue cost or effort. This includes both quantitative and
qualitative information and analysis, based on the Company's
historical experience and informed credit assessment, that in-
cludes forward-looking information.
The Company assumes that the credit risk on a financial asset
has increased significantly if it is more than 30 days past due.
The Company considers a financial asset to be in default when
the debtor is unlikely to pay its credit obligations to the Compa-
ny in full, without recourse by the Company to actions such as
realising security (if any is held).
Credit-impaired financial assets
At each reporting date, the Company assesses whether finan-
cial assets carried at amortised cost are credit-impaired. A fi-
nancial 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 be-
cause of financial difficulties.
•
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.
Impairment of non-financial assets
Assets that have an indefinite useful life are not subject to am-
ortisation and are tested annually for impairment. Assets that
are subject to depreciation or amortisation are reviewed for
impairment whenever events or changes in circumstances in-
dicate that the carrying amount may not be recoverable. An im-
pairment loss is recognised for the amount by which the asset's
carrying amount exceeds its recoverable amount. The recover-
able 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 sep-
arately identifiable cash flows (cash generating units).
Based on the analysis of the historical data the accounts receiv-
able is presented by receivable from related parties and no pro-
vision is accrued.
Share capital
Derecognition of financial assets
A financial asset (or, where applicable a part of a financial as-
set or part of a group of similar financial assets) is derecog-
nised 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 trans-
ferred 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 cre-
ated or retained by the Company, is recognised as a separate
asset or liability.
Derecognition of financial liabilities
A financial liability is derecognised when the obligation under
the liability is discharged or cancelled or expires.
When an existing financial liability is replaced by another from
the same lender on substantially different terms, or the terms of
an existing liability are substantially modified, such an exchange
or modification is treated as a derecognition of the original lia-
bility and the recognition of a new liability, and the difference in
the respective carrying amounts is recognised in profit or loss.
Offsetting financial instruments
Financial assets and financial liabilities are offset and the net
amount reported in the statement of financial position if, and
only if, there is a currently enforceable legal right to offset
the recognised amounts and there is an intention to settle on
a net basis, or to realise the asset and settle the liability simul-
taneously. 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.
Proceeds from the issue of ordinary shares are classified as eq-
uity. 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 recog-
nised as an increase in equity, and the resulting surplus or deficit
on the transaction is presented in additional paid-in capital.
Equity-settled share-based payment
arrangements
Fair value of equity-settled share-based payment arrange-
ments 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 condi-
tions 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 ini-
tially 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 rec-
ognised in equity.
151
REPORT AND FINANCIAL STATEMENTS 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 set-
tle the obligation, and a reliable estimate of the amount can
be made. Where the Company expects a provision to be re-
imbursed, for example under an insurance contract, the reim-
bursement 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.
Leases
At inception of a contract, the Company assesses wheth-
er a contract is, or contains, a lease. A contract is, or contains,
a lease if the contract conveys the right to control the use of an
identified asset for a period of time in exchange for consideration.
Leases in which the Company is a lessee
At commencement or on modification of a contract that con-
tains a lease component, the Company allocates the consider-
ation 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 compo-
nents 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 incen-
tives 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 Com-
pany will exercise a purchase option. In that case, the right-of-
use asset will be depreciated over the useful life of the under-
lying 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 incre-
152
mental borrowing rate. Generally, the Company uses its incre-
mental 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 lia-
bility 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 com-
mencement date;
• amounts expected to be payable under a residual value
•
guarantee; and
the exercise price under a purchase option that the Compa-
ny is reasonably certain to exercise, lease payments in an
optional renewal period if the Company is reasonably cer-
tain 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 effec-
tive 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 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 exer-
cise 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 correspond-
ing 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 ‘trade and other payables' in
the statement of financial position.
Short-term leases and leases
of low-value assets
The Company has elected not to recognise right-of-use assets
and lease liabilities for leases of low-value assets and short-
term leases, including IT equipment. The Company recognises
the lease payments associated with these leases as an expense
on a straight-line basis over the lease term.
COVID-19-related rent concessions
The Company has applied COVID-19-Related Rent Con-
cessions — Amendment to IFRS 16. The Company applies
the practical expedient allowing it not to assess whether
eligible rent concessions that are a direct consequence of
the COVID-19 pandemic are lease modifications. The Com-
pany applies the practical expedient consistently to contracts
with similar characteristics and in similar circumstances.
For rent concessions in leases to which the Company chooses
not to apply the practical expedient, or that do not qualify for
the practical expedient, the Company assesses whether there
is a lease modification.
Adoption of new and revised
International Financial Reporting Standards
and Interpretations
New currently effective requirements
The Company has early adopted COVID-19-Related Rent Con-
cessions — Amendment to IFRS 16 issued on 28 May 2020.
The amendment introduces an optional practical expedient
for leases in which the Company is a lessee — i.e. for leases to
which the Company applies the practical expedient, the Com-
pany is not required to assess whether eligible rent concessions
that are a direct consequence of the COVID-19 coronavirus
pandemic are lease modifications. The Company has applied
the amendment retrospectively. The amendment has no im-
pact on retained earnings at 1 January 2020.
Leases in which the Company is a lessor
The Company does not have significant contracts where it is
a lessor.
Standards and Interpretations not adopted
by the EU as at 1 January 2020:
• Onerous contracts — Cost of Fulfilling a Contract (Amend-
•
ments to IAS 37);
Interest Rate Benchmark Reform — Phase 2 (Amendments
to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16);
• Property, Plant and Equipment: Proceeds before Intended
Use (Amendments to IAS 16);
• Reference to Conceptual Framework (Amendments to
IFRS 3);
• Classification of Liabilities as Current or Non-current
•
(Amendments to IAS 1);
IFRS 17 Insurance Contracts and amendments to IFRS 17
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.
4. Selling, general and administrative expenses
Payroll and related social taxes
Advertising
Licences
Legal and professional expenses
IT support
Independent auditors' remuneration
Depreciation
Call center services
Amortisation
Other expenses
Total selling, general and administrative expenses
2020
RUB'000
2019
RUB'000
199,703
195,534
59,410
45,106
29,072
24,004
20,244
7,862
6,000
5,107
14,680
411,188
31,956
12,912
24,714
24,389
19,238
10,981
37,412
8,330
10,090
375,556
The remuneration of the
includes
an amount of RUB20,114 thousand regarding audit services
and an amount of RUB130 thousand regarding tax services.
independent auditors
The number of employees as at 31 December 2020 was 107
(31 December 2019: 95).
153
REPORT AND FINANCIAL STATEMENTS 5. Net finance income / (expenses)
Finance income
Bank interest received
Other finance income
Finance expenses
Bank charges
Interest on leases
Impairment of trade and other receivables
Other finance expenses
Net foreign exchange transactions gain / (loss)
Net finance income / (expenses)
6. Income tax
Current tax
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
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
2020
RUB'000
2019
RUB'000
8,901
—
(1,570)
(194)
—
—
121,590
128,727
2020
RUB'000
(4,919)
4,919
—
2020
RUB'000
2,866,548
(573,310)
590,293
(16,983)
—
10,023
8,911
(1,409)
(435)
(26)
(11,426)
(50,674)
(45,036)
2019
RUB'000
—
(4,845)
(4,845)
2019
RUB'000
1,040,665
(208,133)
265,280
(61,992)
(4,845)
The corporation tax rate is 20% (2019: 20%).
7. Dividends
The Company in 2015 changed its tax residency from Cy-
prus 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 2020 deferred tax asset relating to tax
losses carried forward in the amount of RUB236,561 thou-
sand (31 December 2019: RUB219,578 thousand) has not
been recognised in the financial statements since it is expect-
ed that no sufficient taxable profits will be available to allow it
to be recovered.
On 4 September 2020 the Board of Directors declared interim
dividend attributable to the owners of the Company amounting
to RUB736,225 thousand (USD9,755 thousand), which cor-
responds to RUB9.8 (USD0.13) per share. The dividends were
paid on 20 October 2020.
On 11 August 2020 the Board of Directors declared final divi-
dend for the year 2019 attributable to the owners of the Com-
pany amounting to RUB1,389,813 thousand (USD18,839
thousand), which corresponds to RUB18.5 (USD0.25) per
share. The dividend distribution was approved by the Extraor-
dinary General Meeting of the shareholders on 3 September
2020. The dividends were paid on 13 October 2020.
154
On 22 March 2019 the Board of Directors declared final divi-
dend for the year 2018 attributable to the owners of the Com-
pany amounting to RUB800,081 thousand (USD12,552 thou-
sand), 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.
8. Investments in subsidiaries
Balance at 1 January
Capital contribution
Disposal of investments in subsidiaries due to liquidation
Impairment of investments in subsidiaries
Effect of transfer of shares of LLC MD Project 2010 to LLC Khaven
as a capital contribution
Effect of Ivicend liquidation
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
31 December
2020
RUB'000
31 December
2019
RUB'000
10,240,465
10,169,345
311,338
(15,156)
(38,930)
—
—
86,200
—
—
457,062
(472,142)
10,497,717
10,240,465
31 December
2020
Effective
holding %
31 December
2019
Effective
holding %
95
100
90
95
90
100
80
100
100
—
70
95
95
85
100
90
95
100
100
95
100
90
95
90
100
80
100
100
100
70
95
95
85
100
90
95
100
100
155
REPORT AND FINANCIAL STATEMENTS Name
Country
of incorporation
Activities
LLC Mother and Child Tyumen
Russian Federation Medical services
CJSC MK IDK
LLC Apteka IDK
LLC CSR
Russian Federation Medical services
Russian Federation
Pharmaceutics retail
Russian Federation Medical services
LLC MD Assistance
Russian Federation
Assistance services
LLC Mother and Child Yaroslavl
Russian Federation Medical services
LLC Mother and Child Kostroma
Russian Federation Medical services
LLC Mother and Child Vladimir
Russian Federation Medical services
LLC MD Management
Russian Federation Management company
LLC Mother and Child Ryazan
Russian Federation Medical services
LLC Mother and Child Kazan
Russian Federation Medical services
JSC MC Avicenna
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 MD Group Krasnogorsk
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
2020
Effective
holding %
31 December
2019
Effective
holding %
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
90
—
—
—
—
—
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
100
100
100
—
—
—
—
—
—
The Company increased the authorised capital of its subsidiar-
ies LLC Mother and Child Ryazan in the amount of RUB94,600
thousand and LLC Mother and Child Kazan in the amount of
RUB6,000 thousand in March 2020, LLC Mother and Child
Nizhny Novgorod in the amount of RUB63,800 thousand and
LLC MD PROJECT 2010 in the amount of RUB8 thousand
in April 2020, LLC Mother and Child Volga in the amount of
RUB8,000 thousand in June 2020. The company made the
capital contribution in its subsidiary CJSC MK IDK in the amount
of RUB50,000 thousand in April 2020 and RUB50,000 thou-
sand in October 2020.
The capital contributions in LLC Mother and Child Yekaterin-
burg in the amount of RUB28,600 thousand and in LLC Dil-
amed in the amount of RUB10,330 thousand made during the
year ended 31 December 2020 were impaired.
LLC Mother and Child Siberia, LLC Nika and LLC Stroy Vector
Pluss were merged to LLC Khaven during the year ended 31 De-
cember 2020. LLC MD Management and CJSC Listom were
liquidated on 26 May 2020 and 16 March 2020 accordingly.
The Company was merged with its subsidiary Ivicend Holding
Ltd as of 1st April 2019 with the surviving entity being the par-
ent. The following table summarises the impacts on the Com-
pany's financial statements.
Statement of financial position
RUB'000
Impact of merge
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
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
(472,142)
(2,813,293)
2,157,822
162,614
20,715
4,261
1,470
1,470
30
962,240
1,417,311
(35,639)
—
—
(433,712)
(35,639)
The Company increased the authorised capital of its subsidiar-
ies 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 author-
ised/issued share capital allocating new share capital issued
to the Company. Company's liability for the new shares is-
sued and allotted was settled in full by means of contribu-
tion of the 99.99% of LLC MD Project 2010 to LLC Khav-
en. The amount of share capital issued per resolution was
RUB4,567,891 thousand and the carrying amount of the in-
vestment in LLC MD Project 2010 was RUB4,110,829 thou-
sand. 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 ulti-
mately 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 contrib-
uted to settle in full the aforementioned liability amounted of
RUB457,062 thousand is recognised in equity.
156
157
REPORT AND FINANCIAL STATEMENTS 9. Cash and cash equivalents and short-term deposits
12. Trade and other payables
Current bank accounts and cash in hand
Bank deposits with maturity less than 3 months
TOTAL CASH AND CASH EQUIVALENTS
Other short-term bank deposits (with maturity more than 3 months)
TOTAL CASH AND CASH EQUIVALENTS AND SHORT-TERM DEPOSITS
Currency:
USD
RUB
EUR
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
31 December
2020
RUB'000
31 December
2019
RUB'000
310,754
74,500
385,254
746,145
1,131,399
16,339
137,000
153,339
493,698
647,037
31 December
2020
RUB'000
31 December
2019
RUB'000
1,052,192
79,201
6
501,781
145,208
48
1,131,399
647,037
Accruals
Lease payables
Other payables
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 2020, 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 Com-
pany'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.
Number
of shares
Nominal value
USD
Share capital
RUB'000
Share capital
RUB'000
13.2. Transactions with subsidiary companies
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
11. Share premium, reserves and retained earnings
Share premium
Other reserves
Share premium includes the total amount received in excess of
the total nominal value of the new share capital issued. Incre-
mental 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 in-
curred by the Company.
Exchange differences relating to the translation of the net as-
sets of the Company from its functional currency to the pres-
entation 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.
Dividends received
LLC Mother and Child Siberia, LLC Nika and LLC Stroy Vec-
tor Pluss were merged to LLC Khaven during the year ended
31 December 2020. The relevant information is disclosured
in Note 8.
Ivicend Holding Ltd, a subsidiary of the Company, was entered
into members' voluntary liquidation in 2019 and the invest-
ments that were previously held by Ivicend Holding Ltd were
distributed to the Company. The relevant information is dis-
closured 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.
31 December
2020
RUB'000
31 December
2019
RUB'000
22,009
2,857
92,597
117,463
37,634
4,056
32,608
74,298
13.1. Operations with key management
personnel
The remuneration of the members of the key management per-
sonnel and non-executive directors for the year ended 31 De-
cember 2020 was RUB53,171 thousand (for the year ended
31 December 2019: RUB61,535 thousand).
The remuneration of the members of the key management
personnel which remained unpaid as at 31 December 2020
was RUB6,405 thousand (31 December 2019: RUB17,967
thousand).
2020
RUB'000
2019
RUB'000
3,028,184
1,326,401
3,028,184
1,326,401
13.3. Revenue from subsidiaries for branch
operations
During the year the Company received revenue from sub-
sidiaries for branch operations amounted to RUB150,968
thousand (2019: RUB129,920 thousand) which relates to
licences, advertising, IT support and call center expenses
recharged to its subsidiaries. The relevant expenses are pre-
sented in Note 4.
158
159
REPORT AND FINANCIAL STATEMENTS 13.4. Receivables from / (payables to) subsidiary companies
Receivables from subsidiary companies
Payables to subsidiary companies
2020
RUB'000
59,973
(17,014)
2019
RUB'000
24,585
(78)
The Company held cash and cash equivalents and short-
term bank deposits excluding cash in hand of RUB1,131,399
thousand at 31 December 2020 (31 December 2019:
RUB647,037 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.
Number of banks
External credit rating
Carrying amount
1
1
1
Total
Baa3
A3
Aa3
15,915
818,619
296,865
1,131,399
13.5. Directors' interests
14. Financial risk management
(ii) Liquidity risk
The direct and indirect interests of the members of the Board in
titles of the Company as at 31 December 2020, 31 December
2019 and as at the date of signing these financial statements
are as follows, except for Vitaly Ustimenko:
Name
Type of interest
Effective
interest, %
Mark Kurtser
Indirect ownership of shares
67.90
Financial risk factor
The Company is exposed to the following risks from its use of
financial instruments:
• Credit risk;
• Liquidity risk;
• Market risk.
Kirill Dmitriev
Indirect interest in shares
5.55
Simon Rowlands
Direct ownership of shares
0.33
The Board of Directors has the overall responsibility for the es-
tablishment and supervision of the Company's risk manage-
ment framework.
Vitaly Ustimenko
Direct ownership of shares
0.005
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 ac-
quired by the Company.
Member of the Board of Directors Vitaly Ustimenko acquired
GDRs on 10 November 2020, as a result the share of his own-
ership increased from 0.0035% to 0.005% of the Сompany's
share capital.
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 ad-
herence to limits. Risk management policies and systems are
reviewed regularly to reflect changes in market conditions and
in the Company's activities.
(i) Credit risk
Credit risk arises when a failure by counterparties to discharge
their obligations could reduce the amount of future cash in-
flows from financial assets on hand at the reporting date. Cash
balances are held with various financial institutions.
13.6. Dividends declared to related parties
Exposure to credit risk
Dividends declared to the parent company MD Medical Hold-
ing Limited amounted to RUB1,443,963 thousand for the year
ended 31 December 2020 (31 December 2019: RUB543,399
thousand).
The carrying amount of financial assets represents the maxi-
mum credit exposure. The maximum exposure to credit risk at
the reporting date was:
Liquidity risk is the risk that arises when the maturity of assets
and liabilities does not match. An unmatched position poten-
tially 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:
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
2,857
2,940
560
2,380
114,606
114,606
114,606
—
—
—
—
—
—
—
Carrying
amounts
RUB'000
Contractual
cash flows
RUB'000
2 months
or less
RUB'000
Between
2–12 months
RUB'000
Between
1–2 years
RUB'000
Between
2–5 years
RUB'000
More than
5 years
RUB'000
4,056
4,200
1,120
3,080
70,242
70,242
70,242
—
—
—
—
—
—
—
31 December
2020
Lease liabilities
Trade and other
payables
31 December
2019
Lease liabilities
Trade and other
payables
Note
12
12
Note
12
12
(iii) Market risk
Market risk is the risk that changes in market prices, such as for-
eign exchange rates, interest rates and equity prices may affect
the Company's income or the value of its holdings of financial in-
struments.
cash flow interest rate risk. Borrowings issued at fixed rates ex-
pose the Company to fair value interest rate risk. The Compa-
ny's management monitors the interest rate fluctuations on an
ongoing basis and acts accordingly.
Interest rate risk
As at the reporting date the interest rate profile of interest bear-
ing financial instruments was as follows:
Interest rate risk is the risk that the value of financial instru-
ments will fluctuate due to changes in market interest rates.
Borrowings issued at variable rates expose the Company to
Note
9
12
31 December
2020
RUB'000
31 December
2019
RUB'000
820,645
(2,857)
630,698
(4,056)
817,788
626,642
Trade, other receivables and deferred expenses
Cash and cash equivalents and short-term bank deposits excluding cash in hand
31 December
2020
RUB'000
31 December
2019
RUB'000
64,198
1,131,399
1,195,597
27,094
647,037
674,131
Fixed rate instruments
Financial assets
Financial liabilities
The Company does not account for any fixed rate instruments
at fair value through profit or loss and does not have any deriva-
tive financial instruments, therefore a change in interest rates
at the reporting date would not affect profit or loss or equity.
160
161
REPORT AND FINANCIAL STATEMENTS 15. Fair values
As at 31 December 2020 and 31 December 2019 the Compa-
ny had no financial assets or liabilities measured at fair value.
The fair values of the Company's financial assets and liabili-
ties approximate their carrying amounts at the reporting date
except the investments in subsidiaries which are presented at
cost less impairment.
16. Operating environment
icant tightening in the availability of credit. As a result, some
Russian entities may experience difficulties accessing the inter-
national 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 COVID-19 coronavirus pandemic
has further increased uncertainty in the business environment.
The financial statements reflect management's assessment of
the impact of the Russian business environment on the opera-
tions and the financial position of the Company. The future busi-
ness environment may differ from management's assessment.
(a) Russian business environment
(b) Russian tax environment
The operations of the Company's subsidiaries are primarily lo-
cated in the Russian Federation. Consequently, the Company 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 de-
velopment, but are subject to varying interpretations and fre-
quent changes which contribute together with other legal and
fiscal impediments to the challenges faced by entities operat-
ing 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 in-
dividuals 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 signif-
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 some-
times 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 19 March 2021 Board of Directors recommended the pay-
ment of RUB1,427,375 thousand as final dividends for the year
2020 which corresponds to RUB19.00 per share.
Currency risk
Currency risk is the risk that the value of financial instruments
will fluctuate due to changes in foreign exchange rates. Cur-
rency 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 fluc-
tuations on a continuous basis and acts accordingly.
The Company's exposure to foreign currency risk was as follows:
31 December
2020
31 December
2019
USD'000
EUR'000
GBP'000
USD'000
EUR'000
GBP'000
Assets
Cash in bank
Short-term bank deposits
Trade and other receivables
Liabilities
306,047
746,145
294
Trade and other payables and
accruals
—
Net exposure
1,052,486
6
—
—
—
6
—
—
—
—
—
8,083
493,698
1,326
—
503,107
48
—
338
—
386
—
—
—
(75)
(75)
The following significant exchange rates applied during the year:
USD
EUR
GBP
Average rate
Reporting date spot rate
2020
72.1464
82.4488
92.5689
2019
64.4435
72.2409
82.3666
2020
73.8757
90.6824
100.0425
2019
61.9057
69.3406
81.1460
Sensitivity analysis
Capital management
A 10% weakening of the Russian Ruble against the above
currencies will result in the increase in profit and equity of
RUB105,249 thousand as at 31 December 2020 (31 Decem-
ber 2019: RUB50,342 thousand).
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.
A 10% stengthening of the Russian Ruble would have an oppo-
site impact.
In order to maintain or adjust the capital structure the Company
may adjust the amount of dividends paid to shareholders, re-
turn capital to owners or issue of new shares.
162
163
REPORT AND FINANCIAL STATEMENTS 11. Sustainable
development
176
Annex 1. GRI Index Disclosures
179
181
181
Annex 2.
Sustainable Development
Risk Management at MD Medical
Group in 2020
Annex 3.
Information on the gender and age
of the Board of Directors
as of 31 December 2020
Annex 4.
Information on the gender and age
of employees as of 31 December
2020
182
Annex 5.Information on staff
183
Annex 6.
SanPin 2.1.7.2790-10 Sanitary
and Epidemiological Requirements
for Treating Medical Waste
184
Annex 7.
Main methods
for obtaining information
For the year ended 31 December 2020
Sustainable development
Sustainable development at MD Medical Group goes beyond
individual activities. It is an organization-wide culture and re-
flects the fundamental identity of MD Medical Group as both
innovative and socially responsible.
Since 2017, sustainable development has had its own section
of the Annual Report and is prepared in accordance with the
GRI Standards (Core option) and the 2014/95/EU directive1.
Here we outline key benchmarks and activity results of our hos-
pitals and clinics in sustainable development, with a clear focus
on their social and environmental performance.
The key indicators we track each year are electricity use, heat-
ing and water consumption. The information provided in this
section covers the period 1 January to 31 December 2020.
The clinics and hospitals that contributed information to this
sustainability report did so according to the IFRS 10 require-
ments2, unless stated otherwise.
Identifying material topics
Material topics were identified for the previous year's annual re-
port in a robust, coherent manner, and the same approach was
taken with regards to the MD Medical Group's Annual Report
2020 . Benchmarking against major companies in the industry
has upheld this approach. As the result the matrix of material
topics created in 2019 was continued in 2020.
Matrix of material subjects
The material topics that feature in this graph are disclosed in
the sustainable development section and referred to elsewhere
in the Annual Report 2020.
The sustainable development section discloses one materi-
al topic, Quality of Service Provision, that is not covered by
the GRI Standards but is considered essential at MD Medical
Group. Both internal and external stakeholders identified this
topic as highly important since it reflects the level of customer
satisfaction.
Ensuring patients receive the highest quality of care is a key pri-
ority for MD Medical Group. Therefore, the report discloses sev-
eral indicators that MD Medical Group included in its previous
Annual Reports3, 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).
i
i
s
n
o
s
c
e
d
&
s
t
n
e
m
s
s
e
s
s
a
r
e
d
o
h
e
k
a
t
s
n
o
e
c
n
e
u
l
f
n
l
I
Training and education
Service quality
Anti-corruption
Product and service labelling
Diversity and equal opportunities
Employment
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
Interaction with stakeholders
All business functions of MD Medical Group were analysed
to identify key stakeholders for this Annual Report. Medical
health care practices were benchmarked, and the Company's
internal and external impact were evaluated. The following
stakeholder list, as defined in previous annual reports, contin-
ues to apply:
• Patients and their families;
• Employees;
• Suppliers;
• Shareholders and investors;
• Government authorities;
• Mass media.
In addition, MD Medical Group adds the following category of
stakeholder, whose interests are broadly aligned with those of
the other two stakeholder groups – patients and authorities:
•
Insurers.
MD Medical Group regularly interacts with all stakeholders to en-
sure the quality of the services provided is under constant scru-
tiny and to improve the effectiveness of its business activities.
1 Please note that the sustainable development section of
the Annual Report 2020 is available online on the MD Medi-
cal Group official website: www.mcclinics.com.
2 International Financial Reporting Standards 10 — Consoli-
dated Financial Statements
3 2018 Annual Report, p. 161 and 2019 Annual Report, p. 165
Stakeholder needs analysis for MD Medical Group
Clients (entire families)
Employees
Suppliers
Shareholders and investors
• Quick and easy access
to high quality medical
services
• Professional growth
• Career opportunities
• Lucrative compensation
• Business sustainability
• Procurement
transparency
• Transparent and open
information
• Positive impact of
business
• Business sustainability
• Financial results
Government authorities
Insurers
Mass media
• Compliance
• Patient satisfaction
with care
• Compliance
• Patient satisfaction
with care
• Willingness to cooperate
• Availability
of information
• Transparency and clarity
of information
Main communication channels
Online
Internal
Direct
Print
• Corporate website
• Clinics' individual
websites
• Mobile app
• Webinars
• Intranet
• Employee hotline
• Corporate magazine
• Quality hotline
for patients
• Feedback
• Replies to inquiries
• Annual report
• Promotional material
• Publications
• Corporate magazine
Interaction with patients
Patients are at the heart of everything that MD Medical Group does.
Each year, MD Medical Group holds a number of events to
raise public awareness of health issues, to inform patients
of the range of healthcare support available, and to increase
the accessibility of medical services.
Subjects such as obstetrics (pregnancy planning and delivery),
infertility treatment, IVF, and paediatrics , are areas where MD
Medical Group truly excels. Its medically trained staff regularly
take part in events, initiatives, and public outreach projects on
these, and related, topics.
The COVID-19 pandemic had a dramatic impact on the ease
and frequency with which people were able to move around for
non-essential medical reasons. MD Medical Group's feedback
and inquiry strategy was designed as a mobile-first initiative,
and its cornerstone is a loyalty programme that rests on SMS
and e-mail messages.
MD Medical Group has continued to take a data-driven ap-
proach to its website, constantly reviewing it for changes that
can be made and improvements that can positively impact
user experience. Consequently, and in reflection of MD Medical
Group's commitment to being an open and transparent, pub-
lic-facing entity, new feedback forms have been introduced on
the websites of all MD Medical Group clinics and hospitals.
In 2020, MD Medical Group rolled-out the strategy it devel-
oped in 2019 that underpins a robust and responsive feed-
back and enquiry processing system. Despite the challenges
presented by the COVID-19 pandemic, MD Medical Group
is pleased to report that the key goals of this strategy were
achieved, as planned, in 2020.
A comprehensive approach is taken to assessing and respond-
ing to patient feedback – ensuring all internal parties are in-
volved. MD Medical Group is committed to continuously im-
proving the service it provides to patients: from the quality of
medical care they received, to the user journey on the website,
and the ease of confirming, changing, booking, or cancelling
166
167
SUSTAINABLE DEVELOPMENT
appointments. In the year under review, all patient feedback
was processed and acted upon as needed.
The emergence of novel coronavirus in 2020 transformed
many of the plans MD Medical Group had for the year. Whereas
we had anticipated further expansion of range of public-facing
events we could offer, instead, we re-focused our activity.
As the severity of the threat that COVID-19 represented became
clear, we understood that prioritising the health and well-being
of our staff, our medical professionals, support staff, and, cru-
cially, of our patients was paramount . Where possible, we were
able to pivot our planned public engagement, and ensure we
continued to offer webinars on a range of subjects in 2020.
As part of MD Medical Group's commitment to improving ac-
cess to high-quality healthcare and accurate information about
common health issues, its representatives take part a variety
of events. However, in 2020, due to the COVID-19 pandemic,
these events were not going ahead as usual. Already commit-
ted to enhancing its online offerings, and bringing more com-
munications online, this digital transformation was further ac-
celerated by the response to COVID-19.
In 2020, MD Medical Group further developed the online com-
munications resources, both internal and external, that it makes
available to its key stakeholders. In particular, we continued to
make progress in 2020 towards our goal of making it easier for
patients to learn about, identify, select, and access treatment
in our clinics.
The mobile app is performing well in ensuring patients are able
to make contact with relevant MD Medical Group personnel,
and also continues to play a productive role in raising public
awareness4. The mobile app is designed to enable patients to:
• quickly contact members of staff at any clinic;
• book a doctor's appointment online;
•
• make payments.
receive results of medical tests online; and
in 2020 made further progress
MD Medical Group
in
introducing email newsletters and notifications as an additional
way to communicate essential information, such as how to
prepare for a planned medical procedure, with its patients.
Feedback mechanisms that monitor patients' perception of
the quality of service provided by MD Medical Group have been
in place since 2017. Central to this is the customer satisfaction
score (CSAT) for consultations over the telephone and hotline
performance, which seeks customer input on:
• Speed and convenience of a consultation
• Completeness and comprehensiveness
• Politeness of an employee during a consultation.
4 In addition, a web version of the mobile application was
developed. See Annual Report 2019, p. 165
5 2018 Annual Report, p. 152 and 2019 Annual Report p. 166
168
These indicators are recorded and analysed on a regular basis,
as a patient might leave their feedback at any stage of a consul-
tation process. Patients can also use the hotline to share their
feedback on services received at MD Medical Group, by filling
out a form on the website, sending an email to quality@mcclin-
ics.ru or via the single contact centre5.
Our people
Employee engagement
MD Medical Group's market-leading status relies on the outstand-
ing professionals who make up our staff. We invest in our employ-
ees and offer diverse opportunities for professional development
for all members of staff, whatever their role within the company.
Our people are essential in driving our ongoing success. MD
Medical Group's employees are highly qualified and talented in
all fields: from medically qualified healthcare professionals to
management and administrative support teams.
Our employees enjoy an inclusive and supportive working envi-
ronment, competitive wages and employee benefits, in addition
to a broad range of opportunities for further professional edu-
cation and career growth.
Personnel
Personnel management at MD Medical Group focuses on:
• attracting high-qualified, talented, and motivated profes-
sionals into the workforce;
• developing a talent pool of qualified medical professionals
and managers;
• offering them a supportive, inclusive environment in which
•
they can further develop their skills;
incentivising and motivating staff to grow their skills and
achieve more;
• adopting lean management practices and processes across
the Group;
• providing continuous access to further professional educa-
tion for staff in all areas at MD Medical Group;
• ensuring all members of staff are valued equally and have
equal opportunities to speak up about issues that affect
them in their workplace.
As an employer, MD Medical Group prioritises further profession-
al development for all its employees. Key company values, such
as transparency, innovation, and adherence to best practice – in
the real world mean that we carry out regular training sessions for
employees in clinics across the country. These training sessions
help ensure that, at each MD Medical Group location, patients
and staff can expect the same high-quality level of operation.
MD Medical Group's HR management structure reflects fea-
tures of the industry, specific aspects of key business func-
tions, 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 below.
In 2020, the COVID-19 pandemic placed particular pressure
on personnel management systems and structures. MD Med-
ical Group delivered a pandemic response plan across its fa-
cilities to protect its employees and patients. This included
health and safety updates and training for all members of staff
on-site, and increased flexibility with working from home reg-
ulations where possible.
MD Medical Group's HR policy prioritises the following:
• Retaining existing staff and identifying additional highly
skilled employees.
• Continuously improving the personnel management system.
• Selecting the most talented students for education in resi-
dence at our facilities.
• Providing avenues for career growth.
• Adopting the best available technologies.
• Ensuring equipment used is state-of-the art and updated
regularly.
• Promoting the best members of staff to leadership posi-
tions at the right time to maximise potential and encourage
personal growth.
• Reducing staff turnover by improving working conditions.
• Developing and expanding employee incentive programmes.
• Wide-ranging corporate education programmes open to all
members of staff.
In 2020, people completed their education in residence training
at our facilities, under a dedicated project focusing on this area,
which we launched in 2015. At MD Medical Group, staff are en-
couraged to learn from each other, and our leading healthcare
professionals in 2020 held 12 webinars for their colleagues fo-
cusing on diverse subjects, including current issues in OBGYN
practice, prenatal diagnosis, urology, and IVF.
In addition, MD Medical Group provided:
• career development courses;
• short-term thematic advanced training;
•
interaction between healthcare professionals in Moscow
and those in the regions to ensure one consistently high
quality of care at all MD Medical Group facilities;
• Adopting a points-based system of education and qualification.
• Adhering to the regulatory requirement to have a 50:50 ra-
tio at least of medical:non-medical staff (MD Medical Group
has well over this, currently 70:30).
Motivating members of the team to perform at their best at all
times while with MD Medical Group is an essential feature on
the Group's HR management landscape.
As part of this, MD Medical Group in 2020 issued workplace
recognition and bonuses based on monthly output, meeting
KPIs, delivering strategically important projects, qualification
level, in addition to recognising qualification levels, state and
other official awards.
HR management structure
General Director
HR Director
Regional HR Directors
Mother and Child
Centre
Mother and Child
Urals
Mother and Child
Volga
Mother and Child
Siberia
Mother and Child
Tyumen
HR managers in clinics and hospitals
• participation in international forums, conferences, exhibi-
•
tions, where possible, and
training centre support for improving soft-skills and knowl-
edge acquisition across different areas and competencies.
The Company developed and implemented several regulations
and rules aimed to improve the effectiveness of the HR sys-
tem and business operations of MD Medical Group as a whole,
which are in force since 20176.
In order to guarantee that MD Medical Group facilities are safe
environments for patients, staff, and third parties, the following
training was also provided on-site: fire-safety, heating and ener-
gy supply systems, servicing high-pressure equipment, safe lift
usage and maintenance, gas and water heating system safety.
In 2020, the MD Medical Group committed to the following
for 2021:
•
Increasing the range of services offered at new clinics and
hospitals, and ensuring staffing levels rise accordingly.
• Continuing the medical residency and traineeship pro-
grammes for future members of staff and managers.
• Continuing to provide partly funded traineeships for health-
care professionals.
• Ensuring medically trained members of staff complete
the appropriate continuing education and further profes-
sional development qualifications.
Due to the impact of COVID-19, 2020 was a ”stress-test” in
many ways for MD Medical Group's operations. MD Medical
Group performed well under these highly complex and chal-
lenging circumstances and was able to adapt its pandemic re-
sponse measures into processes that deliver long-term organ-
isational and operational resilience.
6 Annual Report 2017, p. 145
169
SUSTAINABLE DEVELOPMENT HR management objectives
Objective
Results
Expanding the geographic scope
of business operations
Increase in recruitment
In 2020 MD Medical Group opened a new oncological centre.
MD Medical Group's talent acquisition, talent development, and promotion programmes were
implemented successfully.
Organisational and personnel audit
All personnel audits were completed with no significant comments.
During 2020, MD Medical Group held 12 events focused on continuing professional education
and employee education. Due to the COVID-19 pandemic, training for healthcare profession-
als moved from face-to-face to online.
As an employer at the forefront of innovation in our fields, MD Medical Group was well-placed
to complete this pivot from offline to online education.
Further education for healthcare professionals and other staff at MD Medical Group in 2020
included additional COVID-19 training.
Over 90% of key healthcare professionals completed professional education courses, includ-
ing certificate extension, and additional COVID-19 training.
Agreement concluded to provide partly funded medical traineeships to staff located in Samara
and Novokuznetsk facilities, due to begin in 2021.
The MD Medical Group facility in Perm adopted the recognised workplace remuneration policy.
In 2020, 11 people completed clinical residency programmes at MD Medical Group, and other
five people were accepted into residency programmes.
12 webinars were held for staff.
Educational and training
programmes
Timely organisation
of advanced trainings
Ratio of medical staff
to non-medical staff
(staff for treatment-and-prevention)
subject to preferential taxation
Over the reporting year the company was compliant with the requirement of the 50% ratio
between medical staff and non-medical staff, subject to preferential taxation. In 2020, the
breakdown was: Doctors 37%, other medical staff 33%, other staff 30% - a clear split of
70/30 medical to non-medical staff.
In 2020, MD Medical Group covered good ground in achieving
the HR management targets set the previous year:
•
to meet the extending range of services by ensuring highly
professional employees at MD Medical Group hospitals and
clinics;
to provide training to new medical residents and interns.
Prepare future employees and managers of MD Medical
Group;
to develop the system of continuous medical education
score accounting; and
to ensure timely organisation of advanced training pro-
grammes for medical employees.
•
•
•
In the year under review, MD Medical Group strengthened
oversight of its healthcare operations, in particular the identi-
fication, adoption, and rollout of innovative technologies. De-
spite the challenges related to the COVID-19 pandemic, MD
Medical Group was able to go ahead with the opening of a new
oncological centre, demonstrating the Group's commitment
to making high-quality care accessible to the patients who
need it the most.
Professional development
In response to the pandemic, all healthcare professionals un-
derwent comprehensive professional further training in best
practices used to treat patients with COVID-19. Relevant
170
training was also provided to other, non-medical, staff on-site
at MD Medical Group locations, and support for staff working
from home in adopting best practices in COVID safety was
also delivered.
Professional further education and development are essential
features of employment at MD Medical Group. In 2020, due to
the pandemic, provision of these resources pivoted from face-
to-face training to online training. Whereas areas that MD Med-
ical Group excels in, particularly reproductive medicine, usually
account for the majority of specialist training offered, in 2020
COVID-19 was a central part of the professional education we
provided to members of staff.
MD Medical Group in 2020 also prepared staff for the transi-
tion from a system of certification (once every five years) to an
annual appraisal.
12 webinars were held in 2020. This is less than in each of
the preceding two years, however the reasons for this were
the pivot to pandemic response across all MD Medical Group
facilities, while maintaining outstanding quality of care for
non-COVID patients.
Over 90% of the healthcare professionals employed in MD
Medical Group facilities, completed further education qualifi-
cation courses, including certificate extension, and additional
COVID-19 education courses.
Five members of staff are currently enrolled in a one-year
OBGYN course, and four more members of staff are enrolled
in a two-year OBGYN course. 11 people completed their res-
idency programmes at MD Medical Group facilities in 2020.
MD Medical Groups contributes to the development of medical
science across Russia and internationally and encourages its
members of staff to produce publications in respected Russian
and international peer-reviewed medical journals.
Supply chain development
Effective supply chain management is essential to patient
safety and the economic stability of MD Medical Group's op-
erations. The Group benefits from a robust and resilient supply
chain. At its core: the analysis of material and equipment de-
mand at all facilities.
MD Medical Group's core values of good faith, transparency,
impartiality and fairness permeate all dealings with suppliers
and other stakeholders in the supply chain.
In supplier selection, particular emphasis is placed on a candi-
date's experience and quality of the product or service they offer.
Successful candidates must be able to demonstrate a signifi-
cant and successful track-record in providing medical products
and services, particularly for international-level private medical
facilities. They must also share the same values, principles and
work ethics (outlined above) as MD Medical Group.
Centralisation plays an important role in supply chain man-
agement at MD Medical Group, which comprises 42 medical
enterprises active across the Russian Federation. Every year
the procurement department establishes a list of procurement
categories which will be handled centrally. Suppliers are iden-
tified and selected in a transparent selection process, which
ensures a continuum of high-quality care between the different
locations in MD Medical Group's structure.
The working environment, conditions, and equipment are
therefore brought up to a shared level across all MD Medical
Group entities: from Lapino to Vladivostok. In addition to cen-
tralisation, stated supply chain management goals are:
• To
identify alternative materials which would deliver
the same high quality at a lower price point.
• To conclude supply contracts directly with producers in or-
der to exclude middle parties that would inflate the costs of
any purchase contract.
The purchase of medications and medical equipment is carried
out under this centralised approach. The goal here is to ensure
competing producers are invited to participate in any single op-
portunity to supply the Group. This means MD Medical Group
actively seeks to stimulate competition for each supply oppor-
tunity and is always open to new entities. As this is a fast-grow-
ing area, in which innovative products appear on the market
regularly, it is essential to MD Medical Group's standing as an
innovation driver in its field that it is open to adopt these inno-
vations at its centres. Prior to adopting them, a rigorous perfor-
mance and quality review is carried out.
MD Medical Group also works directly with producers to gain
access to the latest unique developments which are not already
on the market, but which meet specific and identified needs.
In 2020, in addition to its wide-ranging COVID-19 response,
MD Medical Group opened a new hospital, Lapino-2. Ensuring
this facility was adequately equipped was one of the main chal-
lenges of 2020 from a supply management perspective.
The Lapino-2 facility is a specialist oncology centre. As such,
its procurement and supply requirements differed significantly
from those of other MD Medical Group operations. New agree-
ments with new producers (Pharmstandard, Biocade) were
required, and competitive offers from other suppliers were
sought.
In 2020, the COVID-19 pandemic placed particular strain on
the supply chain for particular items directly related to the pan-
demic response. Thanks to its partners, MD Medical Group was
able to ensure one Lapino facility was re-designated the Group's
COVID-19 specialist centre, able to accept and treat COVID-19
patients in both the first and second wave of the pandemic.
Supply chain of medications 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
Regional level
• Receipt of goods
• Storage of medications and equipment
• Sending goods to regional warehouses
and regional transport companies
171
SUSTAINABLE DEVELOPMENT 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
• Inventory of supplies and
remainders in clinics' warehouses
• Determining procurement plans
• Generation of an order
• If goods are in stock,
send them
• If goods are in stock,
send them
• Generation of aggregated orders ship
• necessary materials
Regional level
In 2020, MD Medical Group cooperated with over 3,000
supply companies, among which 2,680 provide medical ex-
pendables, 194 suppliers of medications and 350 suppliers of
medical equipment. The total number of companies involved in
the supply chain in every area is kept to under two (as the dia-
gram above explains).
The procurement and supply department seeks to reduce
the number of entities in the supply chain to ensure maximum
efficiency and is primarily focused on major distributors able to
meet MD Medical Group's complex needs.
Environment and workplace safety
Environmental management
Reducing environmental impact is essential for MD Medical
Group for a number of business-critical reasons. First, it allows
more resources to be re-focused on the Group's core business,
enabling increased reinvestment in its healthcare facilities
across the Russian Federation, and benefiting patients and lo-
cal communities. Second, it goes hand in hand with MD Medi-
cal Group's stated commitment to being an innovative leader in
healthcare. Third, it shows the communities, where MD Medi-
cal Group has a presence, that it is dedicated to being a good
partner in all respects.
In the year under review, MD Medical Group saw continued roll-
out of the transition to energy-saving and resource-conserving
operations. However, the response to COVID-19 and the oper-
ation of six hospitals full capacity, resulted in a slight increase in
resource consumption.
The compliance with applicable federal, regional, and local en-
vironmental legislation is as essential to MD Medical Group's
successful operations as is its compliance with other rules,
regulations, and benchmarked best practice. The Company's
management system meets the international requirement ISO
14001-2004 Environmental management systems and ISO
50001:2011 Energy management systems.
Here MD Medical Group gives an overview of its performance in
this field, using key indicators of these areas for environmental
management:
• Energy efficiency;
• Rational water use;
• Effective waste management.
As referred to above in sections on continuing education and
training in the workplace, medical and non-medical employees
at MD Medical Group are offered courses in occupational safe-
ty and related areas as specified under Article 225 of the Rus-
sian Federation Labor Code. Every three years each employee
must pass the relevant occupational safety test and each year
non-medical staff members complete first-aid courses.
In the period under review, in some key indicators an increase
of resource usage was recorded. This can be accounted for by
several factors: increased resource consumption due to COV-
ID-19 safety requirements, and the fact that two new clinics
and one hospital came online in the year under review.
Energy efficiency
Heating at MD Medical Group facilities primarily draws on
the electricity supply. However, clinics and hospitals are also
equipped with diesel generators, to serve as backup power sup-
ply units in case of unforeseen electricity outages.
Common energysaving practices among both clinics and
hospitals include ensuring, wherever possible, energy-efficient
settings on general (non-medically critical) equipment and
devices are used such as air-conditioning and motion-responsive
lighting. In addition, clinics adopt halogen and fluorescent lamps
with LED energy-saving light sources.
By adopting energy-saving practices MD Medical Group ensures
more resources are directed to those operationally critical areas,
172
and supports the communities in which it has operations by
setting an example for other entities of responsible resource and
facilities management.
Although the focus year-to-year is on reducing consumption
of resources in this area at MD Medical Group facilities, the
situation in 2020 was altered by the COVID-19 pandemic. Part
of a medically responsible adjustment to ensure workplaces are
safe for staff and patients during COVID-19 involved altering
patterns of ventilation, and increasing the frequency with which
water supplies would be used in washing hands and other
essentials. COVID-19 safety measures also result in a greater
volume of medical waste. Other contributing factors to a rise in
resource use in 2020 include the ramp-up of patient treatment
offerings at Tyumen, in the year following its opening, and the
fact that ambulances were operating 24./7.
Facilities management at all MD Medical Group locations in
2020 prioritised the pandemic response over the pre-existing
drive to reduce resource consumption wherever possible.
Electricity consumption by MD Medical Group's clinics and hospitals, GJ (gigajoule)
CLINICS
HOSPITALS
TOTAL
2019
12,867
89,821
2020
13,564
96,321
102,688
109,884
Change, %
+5 %
+7 %
+7%
Heating energy consumption by MD Medical Groups clinics and hospitals, GJ
CLINICS
HOSPITALS
TOTAL
2019
22,622
177,187
199,809
2020
Change, %
22,715
182,126
204,842
0 %
+3 %
+3 %
Total energy consumption by MD Medical Groups clinics and hospitals, GJ
CLINICS
HOSPITALS
TOTAL
2019
35,489
267,008
302,497
2020
Change, %
36,279
278,447
314,726
+2 %
+4 %
+4 %
Fuel consumption by MD Medical Group's clinics and hospitals, Litres
Petrol
CLINICS
HOSPITALS
TOTAL
Diesel
CLINICS
HOSPITALS
TOTAL
2019
2020
Change, %
68,947
71,943
140,890
48,880
69,103
117,983
64,810
68,346
133,156
44,020
90,241
134,261
–6 %
−5 %
−5 %
–10 %
+31 %
+14 %
173
SUSTAINABLE DEVELOPMENT Rational water consumption
MD Medical Group clinics and hospitals receive water from
municipal water supply systems, which meets State Standard
GOST Р 51232-98 (2002). Efficient water use is a key com-
ponent in MD Medical Group’s approach towards sustainable
operations. The Company is dedicated to improving its water
management system as shown by the individual facilities.
Water consumption by MD Medical Group7, 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
Waste management
MD Medical Group takes a responsible approach to managing
medical waste, fully in accordance with the applicable legisla-
tion. The waste disposal procedures and practices in place in
MD Medical Group hospitals and clinics falls under the Sani-
tary and Epidemiological Requirements for Treating Medical
Waste (SanPin 2.1.7.2790-10). Waste is categorised as haz-
ardous or non-hazardous, and subject to treatment as defined
below. The necessary response to the COVID-19 pandemic,
such as the introduction of additional protective measures
for staff and patients, meant that all medical facilities saw
a greater volume of waste.
Hazardous waste is either treated in-house and disposed of using
special equipment, or this is done by external contractors. Where
this is handled in-house, hazardous waste undergoes decontam-
ination processes to remove harmful substances or render them
inert, until it becomes non-hazardous, whereupon it is processed
as non-hazardous waste. External contractors use landfill for
non-hazardous waste or incineration for hazardous waste.
In 2020, adequate health and safety regulations in place in
response to the COVID-19 pandemic meant that more water
was used for COVID-19 health-and-safety measures among
patients and personnel.
Contractors
Landfill
Incineration
Disposed of by contractors
Disposed of by contractors
Waste management in hospitals
2020
Change, %
Own level
Composting
Decontamination and pulping
Type
Non-hazardous
Waste
Hazardous
2019
32,736
176,262
32,543
63,800
34,838
16,223
17,397
11,461
30,772
190,538
31,957
81,524
31,703
14,985
15,899
14,470
208,998
221,310
–6 %
+8 %
−2 %
+28 %
−9 %
−8 %
−9 %
+26 %
+6 %
Waste by disposal method (hospitals), metric tonnes:
Non-hazardous
Landfill
Bulk incineration
Hazardous
Landfill
Bulk incineration
Total
The increase in waste volume results from the fact that MD Med-
ical Group had six hospitals operating at full capacity in 2020,
and was further boosted by the COVID-19 safety measures.
Clinics were closed for three months of the year due to pandemic
response measures.
Waste by disposal method (clinics), metric tonnes:
2019
3,037
3,037
—
59
—
59
2020
4,703
4,703
—
62
—
79
3,096
4,764
Change, %
+55 %
+55 %
—
+5 %
—
+34 %
+54 %
2019
2020
Change, %
Non-hazardous
Landfill
Bulk incineration
Hazardous
Landfill
Bulk incineration
Total
964
844
120
106
3
103
985
862
123
112
3
109
1,070
1,097
+2 %
+2 %
+3 %
+6 %
0 %
+6 %
+3 %
175
7 See Annex 7 for more information regarding the methodology underlying the production of these statistics.
174
SUSTAINABLE DEVELOPMENT Annex 1.
GRI Index Disclosures
Number
Title
Page in the Report and/or Reference
GRI 102: GENERAL DISCLOSURES
102-1
Name of the organisation
102-2
Activities, brands, products, and services
102-3
Location of headquarters
102-4
Location of operations
102-5
Ownership and legal form
102-6
Markets served
102-7
Scale of the organisation
102-8
Information on employees and other workers
102-9
Supply chain
102-10
Significant changes to the organisation
and its supply chain
102-11
Precautionary Principle or approach
102-12
External initiatives
102-13
Membership of associations
Number
Title
Page in the Report and/or Reference
102-14
Statement from the senior decision-maker
102-15
Key impacts, risks, and opportunities
Annex 2. Sustainable Development Risk Management
102-16
Values, principles, standards, and norms of behavior
102-18
Governance structure
102-22
102-24
Composition of the highest governance body
and its committees
Appointing and selecting the highest
governance body
102-40
List of stakeholder groups
102-41
Collective bargaining agreements
102-42
Identifying and selecting stakeholders
102-43
Approach to stakeholder engagement
102-44
Key topics and concerns raised
102-45
Entities included in the consolidated financial
statements
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
102-51
Date of the most recent report
102-52
Reporting cycle
Annual cycle
102-53
Contact point for questions regarding the report
102-54
Claims of reporting in accordance
with GRI Standards
This report has been prepared in accordance with GRI
Standards: Core option.
Clinics of the Group and their employees are members of
the following national and international organisations:
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
102-55
GRI content index
102-56
External assurance
GRI 103: MANAGEMENT APPROACH
103-1
Explanation of the material topic and its boundary
103-2
The management approach and its components
103-3
Evaluation of the management approach
GRI 205: ANTI-CORRUPTION
205-3
Confirmed incidents of corruption
and actions taken
GRI 302: ENERGY
302-1
Energy consumption within the organisation
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 programmes
176
177
SUSTAINABLE DEVELOPMENT
Number
Title
Page in the Report and/or Reference
GRI 405: DIVERSITY AND EQUAL OPPORTUNITY
405-1
Diversity of governance bodies and employees
GRI 406: NON-DISCRIMINATION
406-1
Incidents of discrimination and corrective actions taken
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 labelling and product and services information
identified in the reporting period.
Annex 2.
Sustainable Development
Risk Management
at MD Medical Group in 2020
In line with a clearly defined and robust long-term strategy, MD
Medical Group acts to minimise risks related to sustainable de-
velopment. It achieves this by regularly reviewing its risk man-
agement approaches.
Corporate governance and effective management are essential
elements in MD Medical Group’s continued success. The Board
of Directors is committed to upholding the highest standards in
all interaction with stakeholders.
As in previous Annual Reports, MD Medical Group has identi-
fied four types of sustainable development risk, related to its
business operations and the broader healthcare sector.
These general risks are:
• Environmental impact risks;
• Social and employment risks;
• Human rights risks;
• Corruption and bribery risks.
In 2020, based on the experience of previous years and in re-
sponse to the impact of COVID-19, this list was expanded to
include:
• Epidemiological risk.
MD Medical Group has implemented targeted preventive meas-
ures regarding all identified risks, and notes that there is a low
likelihood that any of these risks will transpire as real events.
Type of risk
Relevant risk management mechanism
ENVIRONMENTAL IMPACT RISKS
Incorrect hazardous waste disposal
Substantial increase in energy consumption and decrease
in energy efficiency
Substantial increase in water consumption
Increase in paper consumption
SOCIAL AND EMPLOYMENT RISKS
Statutory restrictions related to employment
MD Medical Group continuously 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 a number of energy-saving measures in accordance with
internal standards and procedures. Energy-saving equipment
are installed and operational at all Group facilities.
MD Medical Group closely monitors the condition of water and
heat supply pipelines.
MD Medical Group fulfils the requirements of the official
Electronic Government programme in Russia focused on
supporting the move to electronic external document flow.
MD Medical Group actively develops online, digital, and mobile
first forms of record keeping and information exchange with key
stakeholders.
MD Medical Group monitors changes in relevant legislation and
reacts promptly.
178
179
SUSTAINABLE DEVELOPMENT Type of risk
Relevant risk management mechanism
Insufficient availability of Company’s care services facilities
Deterioration of the Group’s relations with staff
HUMAN RIGHTS RISKS
Discrimination
Work under compulsion
Remuneration discrimination
CORRUPTION AND BRIBERY RISKS
Risk of corrupt actions and payments to government authorities
Risk of bribery of the Group’s employees for the benefit of third
parties
COVID-19 AND EPIDEMIOLOGICAL RISK
Risk of deteriorating epidemiological situation, increased risk of
infectious disease transmission among medical personnel as a result
of their patient treatment duties.
Risk of external factors impacting the ability of MD Medical Group
facilities and staff being able to provide treatment to COVID-19
patients at the required level.
MD Medical Group is expanding the geography of its presence,
opening new facilities to boost accessibility and expand patient
reach. MD Medical Group’s price points in each new location are
selected factoring in the income level of the local population.
In addition, the Group is committed to meeting the requirements
of the federal IVF programme under obligatory health insurance
policies.
MD Medical Group monitors employee engagement and
satisfaction levels in regular surveys and creates conditions for
the development and realisation of its employees’ professional
potential. Employee development and retention were clear
focus areas in the period under review, and MD Medical Group
continued to cooperate actively with department heads in
leading universities on recruitment drives. MD Medical Group
has continued to develop the continuous medical education it
offers its people – in particular training in Moscow for regional
employees.
MD Medical Group does not tolerate any form of discrimination.
MD Medical Group’s corporate culture and ethics are based on
positive engagement and encouragement. Compulsion of any
kind is not permitted.
MD Medical Group has a strict policy on bonuses and rewards
as performance based, corresponding to clearly set and
agreed KPIs.
MD Medical Group ensures that any interaction with supervisory
and regulatory authorities is fully 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 which are subject to financial audit.
MD Medical Group has a clear zero-tolerance policy on any form
of bribery and corruption.
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.
MD Medical Group provided its healthcare professionals and
essential workers with personal protective equipment that meet
the standards required.
MD Medical Group opened a new healthcare facility on-site at
Lapino, specifically for patients with COVID-19.
When treating COVID-19 patients, MD Medical Group
ensured it acted in line with developing international best
practice and healthcare authority (WHO, Russian Federation
Ministry of Health) guidance, and expertise shared by leading
Russian clinics.
Annex 3.
Information on the gender and age
of the Board of Directors
as of 31 December 2020
Gender:
Men — 90%; Women — 10%;
Age:
30–50 years of age — 40%;
Over 50 years of age — 60%.
Annex 4.
Information on the gender and age
of employees
as of 31 December 2020
Gender:
Men — 14%; Women — 86%;
In the period under review there was no change in the proportion of employees in the following age groups.
Age:
Under 30 years of age — 13%;
30–50 years of age — 61%;
Over 50 years of age — 26%.
180
181
SUSTAINABLE DEVELOPMENT Annex 5.
Information on staff
Annex 6.
SanPin 2.1.7.2790-10 Sanitary
and Epidemiological Requirements
for Treating Medical Waste
2019
Male
Female
TOTAL
2020
Male
Female
TOTAL
MOTHER
& CHILD
CENTRE
MOTHER
& CHILD
URALS
MOTHER
& CHILD
SIBERIA
MOTHER
& CHILD
VOLGA
726
3,249
3,975
213
1,117
1,330
305
1,087
1,392
148
907
1,055
MOTHER
& CHILD
CENTRE
MOTHER
& CHILD
URALS
MOTHER
& CHILD
SIBERIA
MOTHER
& CHILD
VOLGA
884
3,603
4,487
297
1,127
1,242
148
1,080
1,228
297
933
1,230
TOTAL
1,392
6,360
7,752
TOTAL
1,531
6,743
8,280
%
18.0
82.0
100
%
18.56
81.44
100
SanPin 2.1.7.2790-10 Sanitary and Epidemiological Require-
ments for Treating Medical Waste is a regulatory legal act, reg-
istered 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.
In 2020, the Group worked to rectify technical issues in pre-
vious reporting periods that prevented us from distinguishing
between employees move between part-time and FTE status.
As yet, this issue remains. Further attention will be shown to
this matter in 2021. The tables below show that the total head-
count at MD Medical Group facilities increased in the period
from 2019 to 2020.
182
183
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 consump-
tion. 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 deci-
sion-making by the MD Group or stakeholders.
All calculations were made by applying some of the following
indicators:
• Water consumption — average water consumption per
square meter for clinics and hospitals.
• Electricity and heating — the amount of money spent on utili-
ties and average heating energy consumption per square me-
ter for clinics. Regional tariffs were used for the calculations.
The share of data on water, energy and fuel consumption, ob-
tained from calculations was insignificant in the overall dataset.
Electricity consumption by MD Medical Group’s clinics and hospitals, KWh
CLINICS
HOSPITALS, including
Perinatal Medical Centre
Lapino Clinical Hospital
Ufa Clinical Hospital
Clinical Hospital “Avicenna”, Novosibirsk
Samara Clinical Hospital
Tyumen Clinical Hospital
TOTAL
2019
2020
Change, %
3,574,196
3,767,673
24,950,320
26,755,719
4,541,075
8,346,660
4,259,589
2,491,946
2,998,635
2,312,415
4,859,405
9,365,870
3,796,371
2,552,530
2,811,568
3,369,976
28,524,516
30,523,392
+5 %
+7 %
+7 %
+12 %
–11 %
+2 %
–6 %
+46 %
+7 %
184
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
2019
5,407
42,349
4,753
9,983
11,996
4,140
4,877
6,600
47,755
Fuel Consumption by MD Medical Group’s clinics and hospitals, litres
2020
5,425
43,498
5,038
11,926
11,561
2,657
4,325
7,991
48,923
Change, %
0 %
+3 %
+6 %
+19 %
–4 %
–36 %
–11 %
+21 %
+2 %
2020
Change, %
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
140,890
133,156
2020
Change, %
2019
68,947
71,943
22,350
35,123
10,224
1,160
n/a
3,087
2019
48,880
69,103
13,576
29,945
4,129
7,895
5,528
8,030
64,810
68,346
21,698
34,300
7,626
1,148
272
3,303
44,020
90,241
18,724
49,997
3,032
7,162
4,260
7,066
117,983
134,261
–6 %
–5 %
–3 %
–2 %
–25 %
–1 %
+100 %
+7 %
–5%
–10 %
+31 %
+38 %
+67 %
–27 %
–9 %
–23 %
–12 %
+14 %
185
SUSTAINABLE DEVELOPMENT 12. Contacts
and advisers
Registered office
MOEX
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
Public Joint-Stock Company
"Moscow Exchange MICEX-RTS"
Russian Federation, Moscow, 125009
Bolshoy Kislovsky per, 13
+7(495) 363-32-32;
+7 (495) 232-3363
www.moex.com
Independent auditors
Investor relations
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
Dmitry Yakushkin
Head of Investor Relations
ir@mcclinics.ru
tel: +7 495 139 87 40 ext. 16329
Elena Ivleva
Investor Relations manager
ir@mcclinics.ru
tel: +7 495 139 87 40 ext. 16353
Media relations
EM
Sergii Pershyn
MDMG@em-comms.com
tel:+7 495 363 2844
Global invest direct
tel: +1 800 428-4237
www.mcclinics.com
187