Advancing
Advancing
the excellence
the excellence
of healthcare
ANNUAL
120
2
REPORT
Annual Report 2
120
3
2
Contents
STRATEGIC
REPORT
CORPORATE
GOVERNANCE
REPORT AND
CONSOLIDATED
FINANCIAL
STATEMENTS
REPORT
AND FINANCIAL
STATEMENTS
SUSTAINABLE
DEVELOPMENT
ANNEXES
52
56
60
62
64
Corporate Governance Report
66
Risk management
Board of Directors
Report of the Board of Directors
Management Board
Report and consolidated financial
statements
120
Report and financial statements
156
158
Corporate social responsibility
174
Annexes
Sustainable development
4
6
8
10
12
14
16
18
Strong investment case
Strong sustainable growth
Multidisciplinary leadership
Financial overview in 2021
Nationwide healthcare network
Business model
Delivering on our strategic goals
Continuous expansion to increase
client base
20
Delivering a comprehensive high-
tech healthcare
22
Expanding a leading nationwide
24
32
38
44
48
network
Hospitals in Moscow
Out-patient Clinics in Moscow and
Moscow Region
Hospitals in regions
Out-patient Clinics in regions
Shareholder’s equity and report on
dividend
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5
4
Strong
investment
case
ONE OF THE LARGEST
HEALTHCARE COMPANIES
IN RUSSIA
MDMG is the first publicly listed healthcare company in Russia
operating in the emerging market of private medical services
with possibilities for strong future growth.
CLEAR
AND BALANCED
GROWTH STRATEGY
• Proven regional expansion strategy with well-defined
objectives and a track record of successful investments
• Since its founding, the MDMG has constantly extended
its medical products to satisfy market demand, and it has
now evolved into a vertically integrated company that
covers all human health needs from birth to old age
• 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 expansion based
on competences and available resources
1 › As of publication date
BEST-IN-CLASS
NETWORK
ACROSS RUSSIA
• Comprehensive knowledge of the Russian private
healthcare market
• Projects led by highly skilled doctors
and executives with extensive experience
building and launching multifunctional hospitals
from the ground up
• A well-known brand with largest regional medical
network, with 27 cities and 25 regions*
• The Company's ability to operate well in unusual
situations was proved by its highly effective
performance during the pandemic
CONSISTENTLY ONE
OF THE HIGHEST REVENUES
AMONG RUSSIAN
HEALTHCARE COMPANIES
32%
YoY Revenue
increase in 2021
ATTRACTIVE
MARKET FUNDAMENTALS
IN RUSSIA
• Consolidation and saturation
are at a low level, particularly in the regions
• Still a developing market with significant growth
potential
• State support for private healthcare companies
is provided by a favourable regulatory environment,
which includes a 0% income tax rate, a perpetual
medical licence, and participation in the Mandatory
Health Insurance programme
• High entry barriers
33%
EBITDA margin
in 2021
SINCE THE IPO, OUR KEY
FINANCIAL AND OPERATING
METRICS HAVE GROWN
STEADILY
Out-patient treatments
IVF cycles
+18%
CAGR
2012–2021
430,914
‘21
‘12
1,858,633
+18%
CAGR
2012–2021
3,863
‘21
‘12
In-patient days
Deliveries
+24%
CAGR
2012–2021
22,351
‘21
‘12
152,621
‘21
‘12
+11%
CAGR
2012–2021
3,253
16,526
8,397
StrongStrategic report Annual Report 2
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6
growth
Strong
sustainable
I would like to express
my gratitude to our whole
team – it is thanks to them
that the Group achieved
such strong results in what
was a challenging year
in 2021. I firmly believe that
together we will continue
to raise the bar in 2022.
Our business saw a successful year in 2021:
our effective response to the challenges
associated with COVID-19 enabled
us to demonstrate excellent financial
results. I am particularly pleased to note
our excellent performance in areas not related
to healthcare for women and children. This
segment accounted for 51% of our total
revenue in 2021, up from 45% a year earlier.
At the same time, we continued to grow
in those areas that have historically been
our main focus, with revenues from healthcare
for women and children increasing by 16%.
We believe that our diversification strategy
is being implemented successfully, and we
continue to unlock the huge potential of our
business.
Overall in 2021, we saw the demand for our
services begin to recover. The number
of in-patient and out-patient visits across
the Group not only increased year-on-year
but exceeded the level of 2019, before
the pandemic. We believe that the demand
for private medical care will continue
to recover in 2022 as the COVID situation
stabilises.
2021 was a record year for us despite the continuing
challenges posed by the pandemic. We demonstrated
strong growth in total revenue by 32%, and by 44%
at our hospitals in Moscow. Performance in women’s
and children’s health services also continues to increase
despite the pandemic, the growth in respective revenue
was 16%. The strong results for the Group as a whole
were also due to the robust operational performance of our
medical centres across the whole network in Russia.
The first full year of operations at the Lapino-2 surgical
facility, which specialises in oncology, saw revenue
of RUB 1,798 mln and utilisation rate of 40%, while
the facility continues to have significant potential for future
growth. At the same time, the Lapino-4 infectious
diseases facility, which we opened last February, ramped
up to full capacity. Lapino-4 is continuing to expand out-
patient services for COVID-19 patients, including thanks
to telemedicine services, which support a significant
increase in patient flows. For COVID-19 patients we also
offered high-quality emergency support and had deliveries
in specially designated ‘red zones’, as well as carried out
complex cardiological and oncological operations.
This new hospital will temporarily focus on treating COVID
patients, and in due course will offer a full range of services
for the whole family.
Moreover, in February 2022, in line with previously
announced plans, we opened our second multi-
disciplinary hospital in Tyumen, with 100 beds. In addition,
we continued to develop our new business segment
under the brand MD Lab and have already opened two
laboratory test collection points.
Overall in 2021 we saw the demand for our services begin
to recover. Among other metrics, the number of in-patient
and out-patient visits across the Group not only increased
year-on-year but exceeded the level of 2019, before
the pandemic. We believe that the demand for private
medical care will continue to recover in 2022 as the COVID
situation stabilises.
Growth in the number of out-patient visits to 1,858,633
also confirms that we offer a nationally accessible network
with high levels of coverage. Moreover, we are achieving
this while maintaining robust margins.
I am pleased to note that in addition to our Moscow
hospitals our regional facilities also recorded robust results.
In particular, our Tyumen-1 hospital demonstrated strong
growth in revenue by 49% to RUB 1,287 mln in 2021, while
its utilisation rate amounted to 60%.
This shows that our diversified business model is driving
the sustainable development of our business. This factor,
along with low debt of RUB 1,924 mln and a strong cash
position, is evidence of our stable position even in the face
of challenging external conditions.
Given this success we are continuing to develop
our regional network. In January 2022, we opened
the 150- bed MD Lakhta multi-disciplinary hospital
in St Petersburg, Russia’s second-largest market.
I would like to express my gratitude to our whole team –
it is thanks to them that the Group achieved such strong
results in what was a challenging year in 2021. I firmly believe
that together we will continue to raise the bar in 2022.
Dr Mark KURTSER,
CEO
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Multi-
disciplinary
disciplinary
Year after year,
our operational
and financial
performance illustrates
our company’s consistent
growth and potential
for additional expansion.
leadership
The Lapino complex, has been a crucial factor in our continued
growth with its recent expansion and operational growth. Our regional
hospitals and clinics also had strong results in 2021, finishing the year
with a record number of in- and out-patient visits, deliveries, and IVF
cycles.
We were able to quickly adapt
to the new reality, which allowed us
to improve the group’s financial
and operational performance while
also diversifying our businesses
Dr Mark KURTSER,
CEO
OPERATIONAL KPIs
Out-patient treatments
Out-patient treatments
In-patient days
In-patient days
1,527,425
1,618,277
1,745,133
1,613,644
1,858,633
+5%
CAGR
2017–2021
61,344
70,113
79,689
117,514
152,621
+26%
CAGR
2017–2021
IVF cycles
Deliveries
8,397
16,806
16,636
18,004
15,264
16,526
+0%
CAGR
2017–2021
7,277
7,446
7,759
6,808
8,397
+5%
CAGR
2017-2021
‘17
‘17
‘18
‘18
‘19
‘19
‘20
‘20
‘21
‘21
‘17
‘17
‘18
‘18
‘19
‘19
‘20
‘20
‘21
‘21
‘17
‘17
‘18
‘18
‘19
‘19
‘20
‘20
‘21
‘21
‘17
‘17
‘18
‘18
‘19
‘19
‘20
‘20
‘21
‘21
FINANCIAL KPIs RUB mln
Revenue
EBITDA and EBITDA margin
EPS, (RUB/GDR)
Net debt
Net debt
19,133
16,160
13,755
14,937
25,220
+16%
CAGR
2017–2021
30%
28%
29%
33%
31%
4,165
4,197
4,635
6,008
8,276
+19%
CAGR
2017–2021
56
79
+24%
CAGR
2017-2021
33
36
35
3,530
2,950
2,943
2,065
1,924
‘17
‘17
‘18
‘18
‘19
‘19
‘20
‘20
‘21
‘21
‘17
‘17
‘18
‘18
‘19
‘19
‘20
‘20
‘21
‘21
‘17
‘17
‘18
‘18
‘19
‘19
‘20
‘20
‘21
‘21
‘17
‘17
‘18
‘18
‘19
‘19
‘20
‘20
‘21
‘21
Strategic report Financial
overview in 2021
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10
NET INCOME
Net income and Net income margin
As a result, the Company’s net income in 2021 increased
by 42% year-on-year and amounted to RUB 6,143 mln thanks
to the growth in the scale of our business and positive EBITDA
trend. Net profit margin increased by 1.7 p.p. to 24%.
20%
19%
17%
23%
24%
6,143
4,333
2,704
2,831
2,787
‘17
‘17
‘18
‘18
‘19
‘19
‘20
‘20
‘21
‘21
6,143
+23%
CAGR
2017–2021
RUB mln
REVENUE
Revenue
CAPEX
CAPEX
CAPEX
The Group's revenue for 2021 grew by 32% to RUB 25.2 bln.
Moscow hospitals were the main growth driver, its total revenue
grew by 44% bringing it up to RUB 14.0 bln. It saw a growth
in oncology, surgery and traumatology as well as opening
of new facilities. Regional hospitals, in addition to our Moscow
hospitals, saw excellent revenue growth of 26% to a total
of RUB 5.8 bln thankfully to Tyumen-1 and Samara strong
results.
19,133
16,160
13,755
14,937
25,220
+16%
CAGR
2017–2021
‘17
‘17
‘18
‘18
‘19
‘19
‘20
‘20
‘21
‘21
Total capital expenditures in 2021 decreased by 3% year-on-
year to RUB 3,8 bln. The main share of capital expenditures
is in the hospital segment (85%), while the construction of new
clinics and renovations account for 15% of the total costs.
The Lapino-3 nuclear medical centre with commissioning
in 2024 and the Lapino-5* psycho-neurological centre
with a launch date in Q3 2023 are at the design stage.
Both medical institutions will be part of the Lapino cluster.
The planned volume of capital expenditures for the construction
of centres is about RUB 6 bln. In addition, in Q4 2023,
the Domodedovo* multifunctional hospital will be put into
operation with a planned cost of RUB 4 bln.
3,463
3,694
3,992
3,904
3,790
‘17
‘17
‘18
‘18
‘19
‘19
‘20
‘20
‘21
‘21
In the first half of 2022, the launch of two out-patient
clinics in the Moscow Region is expected, and 3 clinics
are under construction in Lipetsk, Belgorod and Yekaterinburg*
with a planned launch date in 2022.
EBITDA
EBITDA and EBITDA margin
DEBT
Net debt and Net debt / EBITDA ratio
In 2021, we managed to increase our EBITDA to RUB 8.3 bln,
up 38% from the previous year. EBITDA margin also increased
and reached 33%. These results became possible thanks
to the Lapino-4 hospital opened at the beginning of the year
and our hard work to diversify the list of services provided,
adding more and more value-added medical services to it,
such as surgery, traumatology and cardiology.
30%
28%
29%
33%
31%
4,165
4,197
4,635
6,008
8,276
+19%
CAGR
2017–2021
Net debt as of December 31, 2021 decreased
by RUB 1,019 mln compared to December 31, 2020 to RUB
1,924 mln. Net Debt / EBITDA as of end of 2021 was 0.2. This
positions the company well, and gives us both the flexibility
to choose a strategy for further growth and the ability
to increase debt if necessary.
0.5x
2,066
0.8x
3,530
0.7x
2,950
0.5x
2,943
0.2x
1,924
‘17
‘17
‘18
‘18
‘19
‘19
‘20
‘20
‘21
‘21
‘17
‘17
‘18
‘18
‘19
‘19
‘20
‘20
‘21
‘21
*temporarily frozen
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Nationwide
healthcare
network
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.
7
FEDERAL
DISTRICTS
47
FACILITIES*
27
CITIES
25
REGIONS
207k m2
TOTAL
AREA
1,528
BEDS
*as of publication date
8
37
2
HOSPITALS CLINICS
MD LABS
Central Federal District
Moscow
1
Moscow Region
Vladimir
Voronezh
Kostroma
Ryazan
Tula
Yaroslavl
Siberia
Barnaul
Irkutsk
Krasnoyarsk
Novokuznetsk
Novosibirsk
Omsk
Far Eastern Federal District
Vladivostok
Southern Federal District
Volgograd
Krasnodar
Rostov-on-Don
Volga Federal District
Nizhny Novgorod
Kazan
Perm
Ufa
Tolyatti
Samara
Novokuibyshevsk
Northwestern Federal District
St Petersburg
Ural Federal District
Tyumen
2
2
6
3
2
3
3
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Business
model
MD Medical Group has
a vertically integrated system supported
by technological and educational initiatives
SCIENCE
Participation in clinical
research
EDUCATION
Establishing a medical university in Lapino as
a joint venture with the MGIMO institute
(MGIMO MED)
HEALTHCARE
SERVICE
Development of Lapino as a medical cluster
Development of an out-patient network
Development of vertically integrated
business processes
HOSPITALS
15,000 – 40,000 sq. m
Out patient visits
Diagnostics
Surgery operations
In-patient care
Post treatment rehabilitation
CONSULTATIVE
AND DIAGNOSTIC
CENTRES
1,500 – 3,000 sq. m
Out-patient visits general practice
Diagnostics
Medical manipulations
OUT-PATIENT CLINICS
“CLOSE TO HOME”
150 – 300 sq. m
Out-patient visits
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16
Delivering on our
strategic
goals
STRATEGIC GOALS
OUR PROGRESS IN 2021
STRATEGIC GOALS
OUR PROGRESS IN 2021
Provide the highest quality of care
to patients and achieve a high level of customer satisfaction
Roll out our proven business model
We are strongly committed to maintaining the highest
possible quality of our services and not only meeting but also
exceeding our patients’ expectations. We focus on ensuring
that all of our facilities – both existing and new ones – adhere
to MD Medical Group’s customary high standards of medical
care.
We received a lot of good experience working with infectious
diseases as a result of the challenges we faced in 2020.
And in 2021, we continued to adapt to new realities
and deliver the finest level of care to our patients,
especially in the treatment of COVID-19. Tyumen
and St Petersburg’s newly opened hospitals were called
to help us in this effort.
Recruit and retain the best and the most qualified personnel
As one of the largest employers in the sector, we pay specific
attention to ensure optimal working conditions and incentives
for our personnel. We are constantly improving
the professionalism 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 2021, we continued to hire, retain, and train new members
of our staff of over 8,500 people. In addition to the existing
facilities, our new Tyumen-2 and MD Lakhta hospitals have
become major employers of medical staff in the region,
employing both local professionals and current MDMG
employees relocated from Moscow and other hospitals.
Throughout the year, we continued to provide our employees
with training and other opportunities for professional
development.
Deliver value to our stakeholders
Ultimately, we want to ensure that all our actions
and decisions will benefit all our stakeholders. As the first
public healthcare company in Russia, we strive to deliver
the best performance and achieve strong results which
translate into high long-term value for our investors,
which is impossible without providing the best possible
service to our patients, creating the best conditions
for our employees and maintaining our high business
reputation in interaction with our corporate counterparties
and the state.
We believe that our consistent investment in 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 shareholders by paying interim dividends
which amounted to 50% of net profit for the half-year.
We are pleased that our MOEX listing increased liquidity
for our shares, which was a key role in our share price
soaring by more than 75% in the previous year.
With the largest regional medical network in Russia
comprised of 47 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 the regions
of our presence to expand the range of services offered.
In 2021, we further expanded and improved our vast network
in Russia. The company continued to expand its network
of out-patient clinics and is also started to introduce a new
format – a network of test collection stations in the Moscow
and Moscow Region under the “MD Lab” brand.
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 which
provides a full range of services for the whole family both
young and mature.
*as of publication date
Additionally, in early 2022, we opened two new
multifunctional hospitals in Tyumen and St Petersburg which
will currently focus on treating patients with COVID-19
2021 marked the continued expansion of our service offering.
With the addition of Lapino-4 in 2021 and MD Lakhta,
Tyumen-2 hospitals in 2022, we are now providing full
COVID-19 treatment in 5 regions.
Following our strategy to ensure full coverage of oncology
and make our services more convenient for our patients,
we have launched an oncological clinic in Mozhaisk.
Our state of the art oncological centre – Lapino-2 began
treating patients in its core area after focusing on COVID-19
in 2020. In 2021, it has already reached a 40% level
of utilisation.
The popularity of our services beyond women’s
and children’s health is growing. Surgery, cardiology
and traumatology services we provide across all
of our hospitals have already reached 8% of revenue,
with oncology accounting for another 8%.
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18
Continuous
expansion
to increase
client base
In 2021, we continued to enhance our network of state-of-
the-art medical facilities across Russia. We opened Lapino-4
our COVID-centre located in the Lapino Cluster, one new
oncology clinic, and launched a new format MD Lab. In early
2022, we have also inaugurated MD Lakhta and Tyumen-2
multifunctional hospitals.
Acquisition of clinics
in Samara Region
and Irkutsk
Opening
of out-patient clinic
in Ryazan
Launch
of construction
of a new in-
patient wing
to expand hospital
in Novosibirsk
Acquisition
of the Medica Clinic
in Novokuznetsk
Opening of a clinic
in Yaroslavl
Opening of
the Group’s first
regional self-
constructed hospital
in Ufa
Acquisition
of Avicenna
Medical Centre
in Novosibirsk
(1 hospital
and 3 clinics)
HOSPITALS
CLINICS
MD LABS
Opening of our first Hospital –
MD Group (formerly, Perinatal
Medical Centre)
Acquisition of out-patient clinics
Successful IPO of the Group
on the London Stock Exchange
18
Opening of Lapino hospital
20
Acquisition
of ARTMedGroup
chain comprising
five clinics
in Krasnoyarsk,
Omsk, Novosibirsk
and Barnaul
Opening of a clinic
in Vladimir
Expansion
and modernisation
of the clinic in
St Petersburg
Opening of a new
in-patient wing
in Novosibirsk
30
Opening of a new
clinic in Voronezh
Opening of a new
clinic in Tyumen
Opening of a new
clinic in Kostroma
Opening of a new
Mother&Child
Khodynskoe Pole
clinic in Moscow
27
Launch
of construction
of a new hospital
in Samara
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
Opening of a new
clinic Mother&Child
Lefortovo
Opening of a new
clinic in Vladimir,
Nizhny Novgorod,
Volgograd, Kazan
and Tula
35
34
Opening
of a new clinic
in Rostov-on-Don
Opening of
a paediatric clinic
in the Moscow
Region (Mother&Child
Novaya Riga)
36
Opening
of the Samara
hospital
Expansion
of the Mother&Child
Yugo-Zapad clinic
and Kostroma clinic
Start of construction
of the Lapino-2
hospital
Opening of a new
clinic in Vladivostok
Openingof a new
multidisciplinary
hospital in Tyumen
Completion
of renovation
of MD Group Clinical
Hospital and start
of rebranding
the Group’s hospitals
Opening of a new
clinic in Krasnodar
Opening
of the Lapino-2
Hospital
Company’s
shares are listed
on the Moscow
Exchange
(MOEX)
4
4
4
4
5
6
6
8
2
1
43
44
Opening
of Domodedovo
multifunctional
hospital***
Opening of Lapino-5
Psychoneurological
centre***
Opening
of Lapino-3
Nuclear
medicine
centre
42
Tyumen-2 launch*
37
MD Lakhta launch*
Lapino-4 launch
Mozhaisk clinic
opened
10 new MD Lab
collection points
First enrollment
of students
at MGIMO Med
Introduced a novel
format – MD Lab
test collection points
Opening of 5 new
clinics in Moscow
Region and other
regions**
10
2
13
10
13
10
*** Temporary frozen
12
10
* Hospitals MD Lakh-
ta and Tyumen-2 were
launched in January
and February 2022,
respectively
**Temporary fro zen,
exluding the clinic
in Ekaterinburg
2006
2012
2006
2013-2014
2012
2015
2013-2014
2016
2015
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2021
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Delivering
a comprehensive
high-tech
healthcare
ADVANCED TECHNIQUES
FOR TREATING PATIENTS IN VARIOUS
MEDICAL AREAS
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 functioning as centres of competencies in different
regions of Russia.
ONCOLOGY
• Oncourology
• Oncogynaecology
• Thoracoabdominal coloproctology
• General oncology
• Head and neck tumors
• Chemotherapy
• Oncohematology
A new oncological
care centre
DIAGNOSTICS
• Ultrasound diagnostics
• Lab diagnostics
• Radiation diagnostics
WOMEN'S
AND CHILDREN'S
HEALTHCARE
• IVF
• Pregnancy
management
• Deliveries
• Operative gynaecology
• Children’s intensive care
• Perinatal diagnostics
• Older children care
COVID-19
TREATMENT AND REHABILITATION
• Deliveries for COVID-19 positive patients
• Post-COVID check-up and rehabilitation
• COVID lab
• In-patient COVID treatment
Lapino-4 centre for infectious
diseases, including COVID-19
SURGERY
• Neurosurgery
• Urology
• General surgery
• Plastic surgery
• Cardiology
• Traumatology
and orthopedics
First in Russia endovascular
heart surgery performed on
a newborn
NEW HEALTHCARE
NEW HEALTHCARE
COMPETENCIES
COMPETENCIES
• Telemedicine
• Nuclear medicine centre (under construction)
• Psychoneurological centre (in preparation)
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Expanding
a leading
nationwide
network
207K M2
TOTAL AREA
OF HOSPITALS
I
S
C
N
L
C
I
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22
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5
6
1
2
3
I
S
L
A
T
P
S
O
H
1 › Q1 2022
2 › Q1 2022
27.3
THOUSAND M2
TOTAL AREA
OF CLINICS
In 2021, the Company continued actively implementing its development strategy
across Russia. By the end of the year, we were managing 44 modern healthcare
facilities, including 6 hospitals and 37 out-patient clinics and 1 MD Lab.
MDMG’s 2021 development was marked by the opening of Lapino-4 – a 2-storey
multifunctional hospital on the Lapino medical complex grounds that is currently
specialising in treating COVID-19 patients. We have also expanded our clinics’
network in the Moscow Region, by opening a new oncological clinic in Mozhaisk.
This is the continuation of our efforts to enter the oncological market allowing
our patients to have a more comfortable experience visiting us near home.
Additionally, 2021 was marked by the opening of a new format MD Lab, which
is a network of collections points where our patients can not only take medical
tests but also visit some of our doctors.
We are continuously growing, and at the beginning of 2022, we have already
opened two new hospitals in St Petersburg and Tyumen. Both are multifunctional
medical centres, which currently focus on treating COVID patients. After
the pandemic passes, both will continue their operations as multifunctional
hospitals offering services for mother and child health as well as traumatology,
oncology and others.
3 › 2 clinics in Krasnoyarsk, Omsk, Novosibirsk, Barnaul
MD Group clinical hospital (foremerly PMC)27,600 M2Lapino hospital42,000 M2Lapino-44,200 M2Lapino-218,500 M2Tyumen-224,750 M2Tyumen-1 hospital15,000 M2Mother and child Novosibisk Hospital (Avicenna+ new wing)10,260 M2Ufa hospital33,000 M2Samara hospital (IDK hospital)15,000 M2MD Lakhta19,000 M2M&C Odintsovo142 M2M&C Kuntsevo770 M2M&C Savelovskaya2,048 M2M&C Yugo-Zapad801 M2M&C Khodynskoe Pole465 M2M&C Lefortovo392 M2M&C Novogereevo397 M2M&C Novaya riga117 M2M&C Saint Petersburg893 M2M&C Perm800 M2M&C Irkutsk600 M2 M&C Ryazan1,400 M2M&C Vladimir354 M2M&C Kostroma209 M2M&C Yaroslavl822 M2IDK MedicalCompany (4 clinics)3,860 M2ARTMedGroup (5 clinics3)2,846 M2Avicenna (3 clinics)2,755 M2M&C Novokuznetsk800 M2M&C Voronezh343 M2M&C Nizhny Novgorod600 M2M&C Volgograd 380 M2M&C Tula 541 M2M&C Kazan 677 M2M&C Vladivostok358 M2M&C Krasnodar360 M2M&C Rostov-on-Don422 M2HospitalsOwnedLapino-2ClinicsOwnedRentedStrategic report
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24
Hospitals
in Moscow
MULTIFUNCTIONAL HOSPITALS
FOR THE WHOLE FAMILY OFFERING FULL
CYCLE MEDICAL CARE ON A HIGH LEVEL
Hospitals in Moscow include two business units – Medical Cluster
Lapino and MD Group Clinical Hospital. 2021 was a record
year for the Company despite the ongoing challenges posed
by the pandemic. Performance in women’s and children’s health
services continues to grow despite the pandemic, as well as recovery
in medical health care in general – the utilisation rate of out-patient
visits grew by 7 p.p. to 49%. In 2021, the Company continued
to diversify the specialisations of services offered to patients, such
as surgery, traumatology and cardiology.
MOSCOW REGION
Odintsovo district,
Lapino
Moscow
MD GROUP
LAPINO-1
LAPINO-2
LAPINO-4
Beds
261
191
120
100
Area, m2
27,600
42,000
18,500
4,200
Focus
Multifunctional
hospital
Multifunctional
hospital
Oncology
centre
COVID
therapy
Patient-days 34,000
28,500
40,000
36,500
Out-patient
treatments 355,000
640,000
180,000
IVF cycles 3,000
Deliveries 3,500
1,000
3,000
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26
Hospitals
in Moscow
FINANCIAL INDICATORS
% as of total revenue
Revenue structure, 2021, %
56%
Out-patient visits 18
In-patient days
IVF cycles
Deliveries
49
4
16
Other revenue
13(cid:3)
The 191-bed Lapino-1 multifunctional hospital is capable of providing
639,540 out-patient treatments and 3,000 deliveries per year.
In 2021, the demand for deliveries (+5% y-o-y) and IVF (+12%
y-o-y) recovered to the pre-pandemic levels. Growth in revenue
in the reporting period was also driven by a higher utilisation rate
at in-patient facilities for such services as traumatology (+34% y-o-y)
and surgery (+17% y-o-y): the number of in-patient days increased
to 1,862 and 3,450 in surgery and traumatology, respectively.
Originally, Lapino-2 was launched in September 2020 with CAPEX
of RUB 3.9 bln. By opening this large scale centre and its new
departments, the Lapino medical cluster has become a major
multifunctional medical centre, ready to provide medical help
to patients with a variety of problems around the clock. The opening
of the oncological centre confirms the Company’s dedication
to the company’s strategy aimed at diversification of medical services
provided to patients. In connection with the COVID-19 pandemic,
in 2020, the Lapino-2 almost immediately repurposed to treat patients
with COVID-19 and returned to its normal state in early 2021. The first
full year of operations at the Lapino-2 oncology centre saw revenue
of RUB 1,798 mln and a utilisation rate of 40%, while the facility
continues to have significant potential for future growth. In the reporting
period, we performed 475 oncological operations and increased
our utilisation rate by 69% to 17,709 in-patient treatments.
The launch of the Lapino-4 was dictated by the new realities
in which the pandemic has placed us. The Group saw
a great demand for the treatment of coronavirus and decided
to separate this area into a new hospital. The hospital is able
to provide the full range of medical services due to its location
on the territory of the Lapino medical cluster. For COVID-19
patients we also offered high-quality emergency support
and have had deliveries in specially designated ‘red zones’,
as well as carried out complex cardiological and oncological
operations. In 2021, therapy, which is almost entirely
represented by coronavirus treatment, accounted for 14%
of revenue and was the second-largest share in revenue after
women’s and children’s health.
In 2020, the Company completed a large-scale renovation
of PMC – the first private maternity hospital in Russia. Investment
in the project amounted to around RUB 600 mln. Previously,
the hospital specialised in the Group’s core services: deliveries,
OBGYN, paediatrics and IVF. Today, as a result of a largescale
revamp, 5 new departments (surgery, urology, trauma, cardiology
and endovascular x-ray diagnostics and treatment) have been
added to expand the offering of the hospital, which has been
rebranded as MD Group Clinical Hospital.
In 2021, revenue in Moscow hospitals grew by 44% y-o-y to RUB 14,013 mln.
Moscow hospitals account for 56% of MDMG’s total revenue. This significant growth
was mainly due to the Lapino-4 hospital, focused on treating COVID-19 patients,
reaching a utilisation rate of 70% over less than one year, as well as the strong
ramping up at the oncology centre Lapino-2, where revenue grew to RUB 1,798 mln.
For the past year, we had a significant increase in the average ticket for in-patient
treatments by 23%, which was due to the expansion in the range of services offered
in surgery, traumatology and cardiology.
STRONG
GROWTH
DRIVEN BY OUR
EXCELENT
STRATEGY
Revenue
‘21
‘20
+44%
growth
9,721
14,013
430
478
+11%
growth
4.2
+3%
growth
4.1
‘20
‘21
83
+23%
growth
68
‘20
‘21
239
252
+5%
growth
‘20
‘21
‘20
‘21
Out-patient visits
In-patient days
IVF cycles
Deliveries
OPERATIONAL AND FINANCIAL OVERVIEW
Average ticket, RUB thousand
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28
Hospitals
in Moscow
OPERATING INDICATORS
Out-patient visits
In-patient days
Utilisation
+9 p.p.
growth
+27%
growth
Utilisation
−2 p.p.
growth
+31%
growth
51%
594,344
42%
467,257
‘21
‘20
59%
82,517
61%
62,965
IVF cycles
Deliveries
Utilisation
+7 p.p.
growth
+12%
growth
Utilisation
+4 p.p.
growth
+5%
growth
61%
2,438
54%
2,172
‘21
‘20
73%
4,722
69%
4,482
‘21
‘20
‘21
‘20
In 2021, we managed to increase the capacity due
to the opening of the new Lapino-4 hospital, which entered
the planned utlisation in less than a year. The opening
of this hospital made it possible to resume the activities
of Lapino-2 in the oncological profile there.
Capacity, %
Out-patient visits
Capacity, %
In-patient days
+5%
growth
1,174,540
1,114,540
‘21
‘20
+36%
growth
102,470
138,970
Capacity, %
IVF cycles
Capacity, %
Deliveries
+0%
growth
4,000
4,000
‘21
‘20
+0%
growth
6,500
6,500
‘21
‘20
‘21
‘20
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30
Hospitals
in Moscow
INVESTMENT STRATEGY
KEY EVENTS IN 2021
In August 2021, the MD Group Clinical hospital’s specialists
successfully performed an operation to close the arterial duct
of a newborn (30 weeks gestation) with a weight of 880 grams
on the 13th day after birth. The unique feature of the surgery
is that it was performed without incisions by puncturing
a vessel in the thigh area of the newborn who was implanted
with a special occluder (device for closing the duct), measuring
4.0 mm. This successful operation will also further enlarge
our possibilities in the sphere of paediatrics.
In June 2021, Lapino clinical hospital doctors performed
a coronary artery bypass shunting on a patient with massive
coronary artery damage. This operation was performed
on an open heart using a heart-lung machine. After the launch
of the cardiovascular surgery department at the Lapino hospital
and the start of operations under cardiopulmonary bypass
surgeons will perform hybrid surgery. The launch will enable
endovascular implantation of heart valves, endoprosthetics
of the abdominal aortic aneurysm with the support of cardiac
surgeons.
In 2023 and 2024, we are planning to further expand
our Lapino medical cluster. We are currently planning two more
hospitals, Lapino-3 and Lapino-5*. The first one is a nuclear
medicine centre, which makes it possible to carry out full-cycle
oncology treatment with PET CT, radiotherapy, theranostics
equipment. We are planning to launch Lapino-3 in 2024 and we
currently estimate the CAPEX of this project to be RUB 4 bln.
Lapino-5* will be a psychoneurological centre with a planned
CAPEX of RUB 1–1.5 bln with 100 beds available to our
patients.
We also plan to enter a new market segment for us, mass-
market with the opening of a hospital in Domodedovo*.
The hospital will be built according to the project of already
launched hospitals in Samara and Tyumen. This hospital will
accommodate 164 beds and our investments will amount
to approximately RUB 4 bln.
In September 2022, we plan to start training the first
50 students in our joint venture with MGIMO. MGIMO Med
was registered in mid-2021, and we expect it to become
a platform for training first-class personnel for our hospitals.
As we expect to significantly expand our operations in the next
few years, we will need to hire a large number of new doctors.
We believe that on our own we will prepare them better than
anyone to work in our hospitals. In addition to gaining skills
in medicine, young doctors will already have knowledge
of our corporate culture and the high level of competencies
we demand from all of our doctors and nurses.
*temporarily frozen
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32
Out-patient
Clinics
in Moscow and Moscow Region
HIGH-END MEDICAL SERVICES
FOR YOUR CHECKS AND TREATMENTS
"CLOSE TO HOME"
INSTALLED
CAPACITY
5,600
IN-PATIENT DAYS
456,000
OUT-PATIENT VISITS
AVERAGE
SIZE, m2
620
OUT-PATIENT CLINIC
80
MD LAB
MOSCOW REGION
Novaya Riga
Moscow
Odintsovo district,
Lapino
5,742 m2
TOTAL AREA
9
NUMBER
OF CLINICS
2
NUMBER
OF MD LABS*
*One MD Lab was opened in February 2022
Clinics in Moscow
and the Moscow Region
include 11 business
units – 9 out-patient clinics
and 2 MD Labs. In 2021,
thanks to the opening
of Lapino-2, based on its
laboratory, we are starting
to create a network of medical
analysis collection points –
MD Lab.
Out-patient clinics in Moscow
and Moscow Region account
for 10% of MDMG’s total
revenue.
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34
Out-patient
Clinics
in Moscow and Moscow Region
In 2021, revenue at Moscow and Moscow Region
clinics increased by 8% y-o-y and amounted
to RUB 2,418 mln. Growth in revenue was mainly due
to a higher utilisation rate in IVF reaching 69%, and partly
because of the gradual recovery in demand for elective
medical services – growth in out-patient visits amounted
to 6% y-o-y.
INVESTMENT STRATEGY
In 2021, the Group has also expanded its clinics’ network
in the Moscow Region, by opening a new oncological
clinic in Mozhaisk with total area of 450 sq. m. This
is the continuation of our efforts to enter the oncological market
allowing our patients to have a more comfortable experience
visiting us near home. Total investment in the project amounts
to RUB 60 mln. Planned admission – 60 patients per shift.
At the end of 2021, the Company launched a new format
of medical centres – the network of mini-laboratories
in the Moscow and Moscow Region. We opened the first
such lab in 2021 and the second at the beginning of 2022.
The surface of the first lab is around 80 metres. It is fully
equipped with modern equipment that allows providing
patients with a wide range of analyses. All analyses
will be processed in the multifunctional laboratory that
was opened in the Lapino-2 hospital and possesses huge
diagnostic resources. In 2022, we are planning to raise
this number to almost 10. These collection points will allow
us to be closer to our patients providing them not only
with medical tests but also with out-patient treatments near
their homes.
FINANCIAL INDICATORS
% as of total revenue
Revenue structure, 2021, %
10%
Out-patient visits 50
IVF cycles
Other revenue
40
10
ROBUST
GROWTH
BACKED
BY GRADUAL
RECOVERY
IN DEMAND
FOR ELECTIVE
MEDICAL SERVICES
Revenue
‘21
‘20
+8%
growth
2,418
2,246
Average ticket, RUB thousand
6.9
‘20
‘21
6.8
-2%
growth
Out-patient visits
233
251
+8%
growth
‘20
‘21
IVF cycles
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36
Out-patient
Clinics
in Moscow and Moscow Region
OPERATING INDICATORS
Out-patient visits
IVF cycles
Utilisation
−1 p.p.
growth
+6%
growth
176,270
40%
166,956
39%
‘21
‘20
Utilisation
+4 p.p.
growth
+6%
growth
‘21
‘20
69%
3,868
65%
3,654
Capacity, %
Out-patient visits
Capacity, %
IVF cycles
‘21
‘20
+9%
growth
456,000
420,000
‘21
‘20
+0%
growth
5,600
5,600
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38
Hospitals
in regions
WIDE RANGE OF FIRST CLASS
OUT-PATIENT MEDICAL SERVICES IN REGIONS
Hospitals in regions include six business units –
MD Novosibirsk, MD Samara, MD Tyumen-1,
MD Tyumen-2, MD Ufa, and MD Lakhta in St Petersburg.
MD
NOVOSIBIRSK
MD
SAMARA
MD
TYUMEN-1
St Petersburg
In 2021, regional facilities recorded robust
operational performance across the whole network
in Russia – revenue of the Group’s regional hospitals
increased by 26% y-o-y to RUB 5,803 mln.
At the beginning of 2022, the Group opened
two new multifunctional hospitals: MD Lakhta
in St Petersburg and MD Tyumen-2.
Samara
Ufa
Tyumen
Novosibirsk
MD
UFA
185
MD
LAKHTA
MD
TYUMEN-2
150
80
Beds
93
164
164
Beds
Area, m2
10,260
15,000
15,000
Area, m2
33,000
9,000
4,750
Focus
Multifunctional
hospital
Multifunctional
hospital
Currently functions
as Covid-centre
Multifunctional
hospital
Focus
Multifunctional
hospital
Multifunctional
hospital
Currently functions
as Covid-centre
Multifunctional
hospital
Currently functions
as Covid-centre
Patient-days
22,630
30,000
30,000
Patient-days
30,295
54,750
29,200
Out-patient
treatments
228,900
220,000
220,000
IVF cycles
Deliveries
1,800
1,000
1,200
2,500
1,200
2,500
Out-patient
treatments
290,800
IVF cycles
Deliveries
1,100
2,000
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40
Hospitals
in regions
FINANCIAL INDICATORS
% as of total revenue
Revenue structure, 2021, %
23%
Out-patient visits 25
In-patient days
IVF cycles
Deliveries
41
12
10
Other revenue
12(cid:4)
In 2021, revenue growth in the Group’s regional hospitals was thanks to the increase
in the utilisation rate of out-patient treatments from 47% to 52% (+10% y-o-y
in the number of in-patient days) and in-patient treatments from 46% to 59%
(+30% y-o-y in the number of in-patient days). Hospitals in regions account
for 23% of MDMG’s total revenue. The strongest growth in in-patient utilisation
rates was seen at clinical hospitals in Tyumen-1 (+45% y-o-y in the number of in-
patient days) and Samara (+38% y-o-y in the number of in-patient days). Growth
in the average ticket for in-patient treatments by 10% was due to the expansion
in the range of services offered in surgery, traumatology and cardiology.
EXCELENT
PERFORMANCE
BASED ON OUR WIDE
REGIONAL
PRESENCE
Revenue
‘21
‘20
+26%
growth
5,803
4,602
OPERATIONAL AND FINANCIAL OVERVIEW
Average ticket, RUB thousand
Since the acquisition of Avicenna – the largest regional private
healthcare chain in Russia outside of Moscow and St Petersburg –
in Q4 2014, the Novosibirsk hospital has seen strong demand
for its high-quality services from the residents of Novosibirsk
and nearby regions. As the existing facility approached maximum
capacity, MDMG commissioned a new state-of-the-art wing
in February 2017, creating the largest private healthcare facility
in Siberia. Core services offered at Novosibirsk are OBGYN,
surgery, urology, oncology, traumatology 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.
most of the time during the difficult period of the pandemic,
the centre showed a high quality of medical care and a steady
increase in operational and financial results. In 2021,
the hospital’s revenue reached RUB 1.3 bln with an increase
of 49% year-on-year, 560 deliveries were accepted, more than
8,000 surgical interventions were performed, and 128,000
out-patient visits were made by hospital patients. The hospital
has the necessary capabilities to carry out unique organ-sparing
surgeries, using endovascular technologies and is developing
a range of foetal treatments, including foetal surgery.
With the opening of the Tyumen-1 hospital, we are bringing
the use of modern medical technologies to the region, creating
new jobs and contributing to improving the quality of life.
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.
In 2021, Samara hospital demonstrated significant growth
in utilisation rate, increasing by 38% y-o-y to 17,616 in-patient days.
In 2019, we successfully opened the Tyumen-1 multidisciplinary
clinical hospital. In just two full years of operation, having worked
Our first regional hospital operates in the capital
of Bashkortostan – Ufa, 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 investment of RUB 4.4 bln. MD Ufa offers services
for the whole family – from deliveries, IVF, gynaecology
and obstetrics, paediatrics and neonatology to surgery,
urology, plastic surgery and diagnostic services. It includes
Bashkortostan’s first private maternity hospital and stem-cell
bank.
1.9
‘20
‘21
2.1
+8%
growth
35
+10%
growth
32,0
‘20
‘21
215
243
+13%
growth
154
‘20
‘21
‘20
‘21
165
+7%
growth
Out-patient visits
In-patient days
IVF cycles
Deliveries
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42
Hospitals
in regions
OPERATING INDICATORS
Out-patient visits
In-patient days
Utilisation
+5 p.p.
growth
+10%
growth
Utilisation
+14 p.p.
growth
+29%
growth
‘21
‘20
52%
678,577
47%
615,950
‘21
‘20
59%
68,267
46%
52,727
IVF cycles
Deliveries
Utilisation
−2 p.p.
growth
-4%
growth
2,796
53%
‘21
‘20
55%
2,908
Utilisation
+5 p.p.
growth
+12%
growth
‘21
‘20
49%
3,675
44%
3,277
INVESTMENT STRATEGY
We are continuously expanding the geography of our services,
and at the beginning of 2022, we have already opened two
new hospitals in St Petersburg and Tyumen. Total investments
in MD Lakhta and Tyumen-2 hospitals amount to RUB 2
and 1 bln, respectively. Both are multifunctional medical centres,
which currently focus on treating COVID patients. The COVID-19
pandemic has given us a unique experience in the fight against
infectious diseases, and we believe there is a great demand
for the services provided for the treatment of infectious diseases.
The medical centre in Tyumen was built to provide high
quality general medical care. The construction of the centre
was implemented with the support of the Government
of the Tyumen Region and the investment agency of the Tyumen
Region. The total area of the centre is 4,750 sq. m. It will have
100 beds, including 12 in the emergency room.
We are continuing to expand our medical network
in St Petersburg, the second-largest healthcare market
in Russia. The new two-story medical centre is a part
of the Strategic Investment Project in St Petersburg.
MD Lakhta in St Petersburg provides the following high-
quality medical services – obstetrics and gynaecology,
paediatrics, surgery, therapy, X-ray and laboratory
diagnostics. The total area of the centre is 9,000 sq. m.
The in-patient facility has 150 beds, including 12
in the emergency room. Patient treatment is treated
under the VHI programme, as well as MHI.
After the pandemic passes, both hospitals will continue
their operations as multifunctional hospitals offering services
for mother and child health as well as traumatology, oncology
and others.
Capacity, %
Out-patient visits
Capacity, %
In-patient days
+0%
growth
1,313,700
1,313,700
‘21
‘20
Capacity, %
IVF cycles
Capacity, %
Deliveries
+0%
growth
5,300
5,300
‘21
‘20
‘21
‘20
‘21
‘20
+0%
growth
114,925
114,925
+0%
growth
7,500
7,500
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44
Out-patient
Clinics
in regions
HIGH-END MEDICAL SERVICES
FOR YOUR CHECKS AND TREATMENTS
‘CLOSE TO HOME’
St Petersburg
Yaroslavl
Kostroma
Vladimir
Nizhny Novgorod
Tula
Ryazan
Kazan
Voronezh
Tolyatti
Perm
Rostov-on-Don
Krasnodar
Volgograd
Samara
Novokuibyshevsk
21,765 m2
TOTAL AREA
780
AVERAGE
SIZE, M2
Omsk
Novosibirsk
Krasnoyarsk
Barnaul
Novokuznetsk
Irkutsk
Out-patient clinics in regions include 28 business units in 23 cities
of the Russian Federation. As part of our business model, clinics are the starting
point of contact with patients. Here they receive an initial consultation
and then, if necessary, are referred to our larger medical centres in the region,
or, to Lapino, where we provide a full range of medical services in many areas.
Out-patient clinics in regions account for 12% of MDMG’s total revenue.
28 CLINICS
Central Federal District
Vladimir
Voronezh
Kostroma
Ryazan
Tula
Yaroslavl
Siberia
Barnaul
Irkutsk
Krasnoyarsk
Novokuznetsk
Novosibirsk
1
2
3
Omsk
Far Eastern Federal District
Vladivostok
Southern Federal District
Volgograd
Krasnodar
Rostov-on-Don
Volga Federal District
Nizhny Novgorod
Kazan
Perm
Ufa
Tolyatti
Samara
3
Vladivostok
Novokuibyshevsk
Northwestern Federal District
St Petersburg
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Out-patient
Clinics
in regions
In 2021, revenue at regional clinics increased by 17%
y-o-y to RUB 2,972 mln. This growth was due
to the recovery in demand for elective medical
services – growth out-patient number amounted
to 13% y-o-y, the number of IVF cycles grew
by 14% y-o-y. Along with an increase in the number
of visits, utilisation rate also increased – utilisation
rate at out-patient visits increased from 42% to 48%
and at IVF increased from 35% to 45%.
FINANCIAL INDICATORS
% as of total revenue
Revenue structure, 2021, %
Out-patient visits 30
In-patient days
IVF cycles
Other revenue
2
56
12
(cid:4)
+17%
growth
2,972
2,548
12%
SIGNIFICANT
IMPROVEMENT
AFTER TURBULENT
TIMES
Average ticket, RUB thousand
Revenue
‘21
‘20
223
2.2
+6%
growth
2.1
‘20
‘21
23
27
+16%
growth
‘20
‘21
‘20
‘21
Out-patient visits
In-patient days
IVF cycles
225
+1%
growth
INVESTMENT STRATEGY
We are continuously expanding the geography of our service
and currently have plans to open three new clinics in 2022.
They will be located in Lipetsk, Belgorod and Ekaterinburg*.
We estimate our investments at about RUB 40–50 mln for each.
These clinics will focus on providing IVF treatment. Entering
new regions will allow us to expand our TAM and increase
our brand awareness, which is directly in line with our strategy
and positioning as a vertically integrated company.
*temporarily frozen
OPERATING INDICATORS
Out-patient visits
In-patient days
Utilisation
+6 p.p.
growth
+13%
growth
48%
409,442
42%
363,481
IVF cycles
Utilisation
+5 p.p.
growth
+14%
growth
40%
7,424
35%
6,530
Capacity, %
In-patient days
+0%
growth
3,700
3,700
‘21
‘20
‘21
‘20
‘21
‘20
Utilisation
Capacity, %
Out-patient visits
Capacity, %
IVF cycles
‘21
‘20
‘21
‘20
‘21
‘20
+1%
growth
1,837
1,822
+0%
growth
860,300
860,300
+0%
growth
18,400
18,400
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Shareholder’s
equity
and report on dividend
75,125,010
NUMBER
OF SHARES
Holder Name
Number
of shares
as of 31.12.2021
Percentage
of shares
outstanding
Number
of shares
as of 31.12.2020
Percentage
of shares
outstanding
Russian Direct Investment Fund*
Russia Partners Advisors
4,166,667
3,235,000
NORGES BANK INVESTMENT MANAGEMENT
3,037,606
EAST CAPITAL FINANCIAL SERVICES AB
PROSPERITY CAPITAL MANAGEMENT LTD.
(RUSSIA)
BARING ASSET MANAGEMENT LTD.
JPMORGAN ASSET MANAGEMENT (UK) LTD.
HOLBERG FONDSFORVALTNING AS
HANDELSBANKEN FONDER AB
ABERDEEN STANDARD INVESTMENTS (ASIA)
LTD.
ABERDEEN ASSET MANAGERS LTD.
LSV ASSET MANAGEMENT
SEI INVESTMENTS MANAGEMENT CORP.
JPMORGAN INVESTMENT MANAGEMENT, INC.
SCHRODER INVESTMENT MANAGEMENT LTD.
SCHRODER INVESTMENT MANAGEMENT NORTH
AMERICA, INC.
1,338,479
995,809
898,204
798,394
240,000
163,393
155,694
117,232
97,109
29,105
23,429
10,691
418
5.5%
4.3%
4.0%
1.8%
1.3%
1.2%
1.1%
0.3%
0.2%
0.2%
0.2%
0.1%
0.0%
0.0%
0.0%
0.0%
4,166,667
3,235,000
2,087,168
1,338,479
1,100,262
898,204
798,394
240,000
163,393
155,694
117,232
97,109
41,105
49,221
10,691
418
5.5%
4.3%
2.8%
1.8%
1.5%
1.2%
1.1%
0.3%
0.2%
0.2%
0.2%
0.1%
0.1%
0.1%
0.0%
0.0%
* Shares managed by RDIF Managing company LLC, including co-investors’ shares managed by RDIF Managing company LLC
Effective 24 February 2022, MD Medical Group GDRs are suspended on the Moscow Exchange indefinitely. Also from 3 March 2022,
trading in MDMG GDRs on the London Stock Exchange has been suspended.
Since October 2012, MD Medical Group’s shares have been
listed on the London Stock Exchange under the ticker MDMG
in the form of Global Depositary Receipts (GDRs). Each GDR
represents an interest in one ordinary share. MD Medical Group
has a free float of approximately 32.1%, with the remaining
67.9% owned by MD Medical Holding Limited, which
is beneficially owned by Dr Mark Kurtser. Since 9 November
2020, the Company’s GDRs have also been traded
on the Moscow Exchange. The quotation is done in Russian
Roubles. The investor portfolio is represented by a number
of global institutional investors.
FLOAT
32% FREE
50%
OF NET PROFIT PAID
OUT AS DIVIDENDS
FOR H1 2021
DIVIDENDS
MD Medical Group is adhere to its unofficial dividend policy
to pay out at least 50% of a year’s net profit as dividend.
Currently, the payment of dividends for the H2 2021 have been
put on hold, until The Group has more clarity on the situation.
The Company is closely monitoring situation and does not rule
out the possibility of paying out dividends before the end
of the year.
ANALYST COVERAGE
DIVIDEND TAXATION
As of 31 December 2021, MDMG was covered by equity
research analysts representing leading banks such
as Renaissance Capital, Goldman Sachs, VTB Capital,
and JP Morgan.
Since 1 January 2015, MD Medical Group has been a Russian
tax resident and pays dividends in line with the Russian
Tax Code, according to which dividends paid by Russian
companies are generally subject to a tax rate of 15%.
A reduced rate may be applied in the case of Russian
tax residents and residents of foreign jurisdictions whose
governments have signed a double taxation treaty (DTT)
with the Government of Russia. MD Medical Group acts
as a tax agent and withholds tax in order to transfer
it to the Russian tax authorities when paying dividends.
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Shareholder’s
equity
and report on dividend
INVESTOR RELATIONS
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 2021, we held numerous
meetings with investors, including 6 international investor
conferences.
MD Medical Group’s dividend history
Dividend approval
02.09.2016
21.04.2017
08.09.2017
17.04.2018
23.04.2019
03.09.2020
04.09.2020
22.04.2021
06.09.2021
H1 2016
2016
H1 2017
2017
2018
2019
H1 2020
2020
H1 2021
Record date
Payout date
09.09.2016
28.04.2017
19.09.2017
25.04.2018
24.05.2019
16.09.2020
18.09.2020
05.05.2021
24.09.2021
18.10.2016
23.05.2017
24.10.2017
22.05.2018
25.06.2019
13.10.2020
20.10.2020
25.05.2021
26.10.2021
Total dividends, RUB thousand
285,475
338,063
350,833
450,750
800,081
1,389,813
736,225
1,427,375
1,352,250
Dividends per GDR, RUB*
3.8
4.5
4.67
6
10.65
18.5
9.8
19
18
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52
Corporate
Governance
Report*
CORPORATE
GOVERNANCE
AND CONTROL
STRUCTURE
Since its London IPO, the Company has
maintained full compliance with the UK
Corporate Governance Code. It has
established the Remuneration Committee,
the Audit Committee and the Nomination
Committee with formally delegated duties
and responsibilities and written terms
of reference.
All of the Committees perform their duties
on behalf of the Board of Directors, which
is responsible for constituting, assigning,
co-opting and fixing the terms of service
for the committee members.
GENERAL
MEETING OF
SHARE-
HOLDERS
BOARD OF
DIRECTORS
CEO
Internal auditor reports
to Audit Committee
BOARD
COMMITTEES
• Audit
• Nomination
• Remuneration
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
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.
AUDIT COMMITTEE
The Audit Committee was comprised of 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 being other two
members the other members.*
In March 2022, new members were elected. The Audit
Committee as of the date of publication is represented
by Tatiana Lukina as the Chairman of the Committee, Sergey
Kalugin and Vitaly Ustimenko.
The Audit Committee meets at least four times each year
and is responsible for considering:
the reliability and appropriateness of disclosures in the financial
statements and external financial communication
the maintenance of an effective system of internal controls
including financial, operational and compliance controls
and risk management system
preparation of recommendations to the shareholders
for approval in general meetings in relation
to the appointment, reappointment and removal
of the external auditors;
approval of the remuneration and terms of engagement
of the external auditors in respect of audit services provided
the audit process, including the monitoring and the review
of the external auditors’ performance, independence
and objectivity
the development of and implementation of the policy on non-
audit services provided by the external auditors
and monitoring compliance with laws and regulations
and standard of corporate governance
The Audit Committee assists the Board of Directors in its
oversight of the performance and leadership of the internal
audit activity.
Where the Audit Committee’s monitoring and review activities
reveal cause for concern or scope for improvement, it shall
make recommendation to the Board of Directors for actions
needed to address the issues or to make improvements.
*as of 31.12.2021
*As of publication date, Mr Dmitriev and Rowlands have stepped down as a member of the Company's Board of Directors
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NOMINATION COMMITTEE
The Nomination Committee comprised 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.
In March 2022, Sergey Kalugin was elected to the Nomination
Committee.
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 CEO, First Deputy CEO
and CFO of the Company.
The main objective of the Nomination Committee is to lead
the process for the Board of Directors’ appointments
and make respective recommendation to the Board
of Directors, ensuring that the Board of Directors remains
balanced and that its members possess the necessary
qualifications.
The Nomination Committee also considers the composition
of the Audit and Remuneration Committees.
REMUNERATION COMMITTEE
The Remuneration Committee comprised two non-executive
directors and one executive director. The Remuneration
Committee is chaired by senior independent non-executive
director Mr Simon Rowlands*. The two other members
are Dr Mark Kurtser and Mr Vladimir Mekler.
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.
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
In March 2022, new members were elected.
The Remuneration Committee as of the date of publication
is represented by Vladimir Mekler as the Chairman
of the Committee, Mark Kurtser and Sergey Kalugin.
INTERNAL AUDITOR
The Audit Committee is responsible for monitoring and reviewing
the effectiveness of the Company’s internal audit service.
In this respect, the Audit Committee may require investigations
by, or under the authority of, the Head of Internal Audit Service
into any activities of the Group which may be of interest
or concern to the Audit Committee. The Company’s internal
auditor is responsible for recommending an audit plan
to the Audit Committee. The internal auditor carries out auditing
assignments in accordance with 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.
*As of publication date, Mr Rowlands has stepped down as a member of the Company's Board of Directors
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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.
POTENTIAL IMPACT
MITIGATION
REPUTATION RISK POTENTIAL IMPACT
Тhe key danger of this risk is that it can be caused
by a number of different factors. Therefore, it is closely related
to other risks mentioned below. We endeavour to maintain
a low level of reputation risk by updating information sources,
launching new system controls and improving constantly ways
to protect personal information. In 2022, 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 achievement of our goals. Our
reputation is based on our work, patient satisfaction
with our services, and the safety of our customers. Given
the development of business and the introduction of new
activities, this risk requires constant monitoring and the ability
to respond as quickly as possible.
In 2021, we reinforced our work on dealing with risks,
which we did not manage to reduce significantly in 2020.
We achieved a significant effect in terms of control
and effectiveness risks, compliance risk and reputation
risk. The work on further reduction of the recruitment
risk and of the risk to Medical Services was also carried
out. In 2021, we have significantly improved the personal
data protection system. We have significantly increased
the share of internal electronic document management,
with external contractors, patients and government
regulators. We have introduced electronic signatures
for staff. As a result, this has led to a reduction
in reputational risk.
To reduce this risk, we need the newest and most
advanced equipment, medicine and medical supplies
that will allow us to minimise the likelihood of errors.
We continue to place high demands on our medical staff
in terms of qualification and continue to provide them
with the opportunity to develop and specialise 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 2021, patient complaints
led to the introduction of improvements in our work.
In medium and complex medical cases, recommendations
were carefully analysed, discussed and agreed upon
by all key members of the Company. We have worked
on introducing new guidelines in the treatment of patients,
for example, in oncology and in dealing with Covid-19.
POTENTIAL IMPACT
MITIGATION
COMPLIANCE RISK
The political and regulatory environment with respect
to the development of private medicine in Russia is currently
relatively favourable. However, there is always a risk that
governmental attitudes and policies with respect to private
medicine could change. That could create difficulties for us
in terms of realising our strategic objectives, including
the implementation of our investment programme.
MACROECONOMIC RISK
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.
We maintain constructive relations with the Government
at both the federal and regional level, and we work
continually to make them even stronger. We participate
in a variety of public committees on relevant health issues,
including the development of the Russian healthcare
sector as a whole. We also actively support the authorities
and provide expert advice on relevant laws. At times,
we actively advocate for laws aimed at supporting
the development of the medical sector. We also cooperate
with the UK regulatory bodies for the requirements
of the London Stock Exchange. We constantly review
the updates in the UK and EU legislation and update
our internal standards to match. We have made efforts
to ensure we comply with the requirements of state
regulators in terms of the accounting treatment for medical
equipment and medicine turnover.
Given the unstable foreign policy situation in 2021,
our team paid special attention to monitoring
trends in the Russian economy with an assessment
of the potential impact on the business. Our strategy
has been designed so that we can adapt, as necessary,
to changes in the overall economic environment.
CONTROL & EFFICIENCY RISK POTENTIAL IMPACT
The risk is closely related to the size of the business, which
was significantly increased in 2021. Dealing with this risk
requires significant resources, as well as a certain level
of competence of the Company’s management. Quality
control gives us the opportunity to avoid adverse events
and additional costs, and quality management gives
us the opportunity to continuously develop.
In 2021, we achieved significant success in reducing
this risk by introducing new control measures
and improving existing ones. Constant business growth
requires us to take new decisions and use new control
technologies that allow us to control the activities
of Company employees at all sites, so we use international
practice, constantly developing mechanisms to increase
the effectiveness of control over all processes (budgeting,
financial control, treasury, accounting, procurement, legal
support, personnel management, security and IT). In 2021,
to achieve maximum management efficiency, additional
managerial positions were introduced with control
functions. We carefully interact and take into account
the recommendations of world-renowned consultants.
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POTENTIAL IMPACT
MITIGATION
POTENTIAL IMPACT
MITIGATION
INVESTMENT PROJECT EXECUTION RISK
FINANCIAL RISK
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.
RECRUITMENT RISK
The risk arises in the presence of factors leading to the inability
to attract or retain highly qualified personnel in the Company.
In the regions, this risk is particularly relevant due to the shortage
of doctors and medical staff with the necessary qualifications,
as well as the presence of competing employers, such
as government agencies or other commercial organisations.
The risk is also associated with the possible rotation of qualified
medical and managerial personnel between employers. This
risk is aggravated by the general standard of medical education
in Russia, which often does not meet the standards set
by private clinics, whose reputation largely depends on the quality
of the services they provide. The risk requires constant activity
from the HR service and Company Management.
We have a number of small clinics in regions across Russia.
These operations give us an opportunity to understand
the local market dynamics, including average ticket size
and overall level of demand, before undertaking a major
project such as the construction of a new hospital
or a sizeable acquisition. We prioritise those regions where
we already have out-patient clinics and/or Russia’s largest
regions where we can have a higher degree of certainty
about the local market. We also benefit from a relative lack
of competition in the regions, as currently we are practically
the only sizeable provider of high quality private medical
services. In 2021, we opened new hospitals and clinic,
expanding our presence. We have increased the number
of patients receiving treatment under the government-
funding programme. The number of contracts
with insurance companies has also increased.
When treating patients with COVID-19, we were guided
by the advanced developments of the world medical
community, recommendations of 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
programmes for patients who have had COVID-19.
Best practices have been adopted and proprietary patient
care programmes have been developed.
Currently, hospitals have been opened in St Petersburg,
Tyumen and the Moscow Region specialising in It is based
on the treatment of COVID-19.
In 2021, 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 programmes
for specialists that we conduct in Moscow for new
employees in the regions.
The Company’s Management controls constantly
the cash flow within the Company, as well as the quality
of execution of its instructions in relation to any issues
related to the Company’s finances and assets. Continuous
professional development of employees of the Financial
Department is one of the priority requirements
of Management. We centralise our procurement
and conduct tenders, having, as a result, the reduction
of costs on procuring services, equipment and medicine.
New software was introduced for the registration
of medicines and the calculation of wages, which made
it possible to set up and maintain the most complete
and transparent accounting. Additional tools have been
developed to facilitate the implementation of a system
of payment by patients. In 2021, the Company did
a second listing on the Moscow stock exchange, which
facilitates attracting potential additional investment.
Currently, the Bank of Russia, the Moscow Exchange
and the Company are actively working to resume trading.
Financial risk includes significant risks such as: Credit risk –
the risk arising from the likelihood that the debtors will
not make the promised payments either on time or in full.
Operational risk – conditional losses of the Company due
to technical failures, intentional and accidental human errors.
Liquidity risk – the likelihood of loss arising in a situation where
(1) there is not enough cash and/or cash equivalents to meet
the needs of savers and borrowers, (2) the sale of illiquid
assets is lower than their fair value, or (3) illiquid assets will
not be sold at the desired time due to the lack of buyers.
LISTING RISK
In February 2022, following the recognition of self-proclaimed
republics of Donetsk and Lugansk by the Russian Federation,
additional sanctions were introduced by the United States
of America, the European Union and some other countries.
On 3 March 2022, in connection with events in Ukraine, in light
of market conditions, and in order to maintain orderly markets,
the London Stock Exchange suspended the admission
to trading of the Global Depository Receipts (GDRs)
of the Company listed on the London Stock Exchange.
Additional information in Notes 25 and 29 to the consolidated
financial statements.
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.
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Board
of Directors*
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 Gynecologists of the City
of Moscow. He holds a degree
in Medicine from Pirogov Medical
University in addition to a postdoctoral
degree in Medicine. Dr Kurtser remains
actively involved in the Group’s
healthcare practice and day-to-day
operations.
Mr Simon
ROWLANDS
Senior Independent Member
of the Board of Directors
Mr Simon Rowlands was appointed
as an independent non-executive
director in September 2012.
Mr Rowlands was a Co-Founding
Partner of the private equity firm Cinven
until 2013, establishing and leading
its healthcare team, and then served
as a Senior Adviser until 2017.
Simon founded a new private equity
firm in 2016 focused on healthcare
and consumer sectors of Sub-
Saharan Africa. His other current
appointments include non-executive
directorship at Spire Healthcare Plc
and is Chairman of the Advisory Board
of Cranfield School of Management.
Prior to Cinven, Mr Rowlands worked
with an international consulting firm
on multidisciplinary engineering projects
in the UK and Southern Africa.
He has an MBA in Business, a BSc
in Engineering and is a chartered
engineer.
Mr Vladimir
MEKLER
Chairman
of the Board of Directors
Mr Vladimir Mekler became Chairman
of the Board of Directors in June 2016.
Mr Mekler was appointed as Non-
Executive Director in February 2015.
He is a senior and managing partner
of Mekler & Partners. Mr Mekler
specialises in corporate law, including
supporting and structuring complex
and cross-border contracts; creating
systems of corporate governance; legal
structuring development; optimisation
of criminal and antitrust legislation; legal
support of mergers and acquisitions;
settling corporate disputes;
and organising and coordinating legal
representation and defense 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
*As of 31.12.2021
As of publication date, Mr Dmitriev and Rowlands have stepped down as a member of the Company's Board of Directors
Mr Kirill
DMITRIEV
Member
of the Board of Directors
Mr Vitaly
USTIMENKO
PhD, Independent Member
of the Board of Directors
Ms Tatiana
LUKINA
Independent 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.
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 coinvestor alongside
major international investors, playing
the role of a catalyst in attracting
direct investment into Russia. RDIF
has successfully invested with foreign
partners in more than 70 projects
totalling more than RUB 1,4 trln
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 USD 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
restructuring and project management
in a wide range of industries.
Since 2016, Ms Lukina has been working
as a CFO at GAME INSIGHT, a global mobile
game developing company. Tatiana’s career
has begun 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 Licence.
Corporate Governance Annual Report 2
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62
Report
of the board
of directors*
PARTICIPATION OF THE DIRECTORS
IN THE BOARD MEETINGS
DURING 2021
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 2021
BOARD
MEMBER
Vladimir Mekler
Mark Kurtser
Simon Rowlands
Kirill Dmitriev
Vitaly Ustimenko
Tatyana Lukina
Nikolay Ishmetov**
NUMBER OF BOARD
MEETINGS
ATTENDED VIA PHONE
NUMBER OF MEETINGS HELD
ATTENDED IN PERSON
BOARD MEMBER
TOTAL AMOUNT
PAID
BOARD MEMBER
TOTAL AMOUNT PAID
(BEFORE TAXES), RUB
Simon Rowlands
4,500,000
Vitaly Ustimenko
Tatyana Lukina
944,000
944,000
* As of publication date, Mr Dmitriev and Rowlands have stepped down as a member of the Company's Board of Directors
** alternate director for Kirill Dmitriev
27
AGENDA ITEMS
WERE DISCUSSED IN 2021
4
BOARD MEETINGS
HELD IN 2021
Corporate Governance
Annual Report 2
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65
64
Management
board*
Mr Andrey
KHOPERSKIY
First Deputy CEO
Mr Vadim
VLASOV
Deputy CEO for Development
Mr Andrey Khopersky joined the Group
in 2013 as Head of Financial Control
and Treasury. In 2016, he was appointed
Deputy CEO for Economy and Finance
of the Group, where he oversaw
the financial, legal, and IR areas.
Since 2022, he has been holding
the position of First Deputy CEO,
where he is responsible for the general
management of the MD Medical Group.
Before joining the Group, Andrey
worked at Rusagro Group and Sukhoi
as a financial manager, and as an auditor
at the BDO Russia.
Andrey Khopersky graduated
from the Moscow State University
of Economics, Statistics and Informatics
with a degree in Economics.
Mr Vadim Vlasov has joined
the Company as deputy CEO in charge
of development. Vadim Vlasov
has graduated from the Moscow
Aviation Institute, held various
posts in the aerospace industry,
was head of the representative office
of the Airbus corporation in Russia,
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).
Dr Yulia
KUTAKOVA
PhD – Medical Director
for Organisational
and Scientific-educational Work
Dr Yulia Kutakova joined the Group
in 2012. She has over eleven years
of practice experience in obstetrics
and gynaecology. Before joining
the Group, Dr Kutakova was Chief
of Maternity in the Organisational
and Tutorial Department of Public
Healthcare of the City of Moscow.
She holds a degree in medicine from
Pirogov Medical University, a degree
in management from the Moscow
Institute of Management and a PhD
in medical science.
Dr 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.
*as of publication date
Dr Sergey
ARABADZHYAN
PhD, Assoc. Prof. –
Medical Director
for Technology Innovation
Dr Arabadzhyan joined the Group
in 2010. He was appointed
to the position of Medical Director
for innovative technologies
of MD Medical Group in 2020. From
2018 to 2020, he held the position
of the Chief Physician of the MD Medical
Hospital in Samara, and a 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 MD Medical
group. Mr Arabadzhyan graduated
from the Pirogov Russian National
Research Medical University. A practising
physician, he holds a PhD in Medicine.
Dr Natalia
YAKUNINA
PhD, Deputy CEO,
Director of MD Medical Centre
Dr Boris
KONOPLEV
Medical Director of MD Medical,
Head of Hospital Group
Dr Natalia Yakunina joined the Group
in 2011. In 2019, she was appointed
the Deputy CEO and the Director
of MD Medical Centre.
Dr Boris Konoplev joined the Group
in 2010. In 2017, he was appointed
the Medical Director and the Head
of Hospital Group of MDMG.
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 MD Savelovskaya clinic in Moscow.
Before that, from 2012 to 2014 she
was the Head of the OBGYN out-patient
department at MD Group hospital.
Natalia joined the Group in 2011
as the Chief Doctor at MD 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
and gynaecology. She graduated from
Turkmen State Medical University
with a degree in General Medicine
and also holds a PhD degree.
Prior to that, from 2014 to 2017,
Dr Konoplev was the Chief
Doctor of MD Ufa hospital. Earlier,
from 2012 to 2014, he was the Head
of the Obstetrics Department
at Lapino Hospital. Between 2010-
2012, Dr Konoplev was the obstetric
gynaecologist of the 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 practising obstetrician-gynaecologist
and has undertaken a wide range
of training in leading European clinics.
Corporate Governance Annual Report 2
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67
66
Report
and consolidated
financial statements
MD MEDICAL GROUP INVESTMENTS PLC
FOR THE YEAR ENDED 31 DECEMBER 2021
Contents
PAGE
67
68
73
74
80
81
82
86
88
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
OFFICERS, PROFESSIONAL ADVISORS
AND REGISTERED OFFICE
BOARD OF DIRECTORS
• Vladimir Mekler – Chairman
• Mark Kurtser
• Vitaly Ustimenko
• Kirill Dmitriev (resigned on 5 March 2022)
• Nikolay Ishmetov
(alternate director to Kirill Dmitriev –
resigned on 5 March 2022)
• Africa Platforms Capital LLP
(appointed as a director on 22 April 2021
and represented by Simon Rowlands;
resigned on 9 March 2022)
• Tatiana Lukina
• Sergey Kalugin (appointed on 2 March 2022)
• Tony Maher (resigned on 21 April 2021)
• Simon Rowlands (resigned on 21 April 2021)
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
Report and consolidated financial statements Annual Report 2
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69
68
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 2021.
DIVIDENDS
In accordance with the Company’s Articles of Association
dividends may be paid out of its profits. To the extent that
the Company declares and pays dividends, owners of GDRs
on the relevant record date will be entitled to receive dividends
in respect of ordinary shares underlying the GDRs.
INCORPORATION
MD Medical Group Investments Plc was incorporated in Cyprus
on 5 August 2010 as a private limited liability company
under the provisions of the Cyprus Companies Law, Cap. 113.
On 22 August 2012 following special resolution passed
by the shareholder, the name of the Company was changed
from “MD Medical Group Investments Ltd” to “MD Medical
Group Investments Plc” and the Company was converted
into a public limited liability company in accordance
with the provisions of the Cyprus Companies Law, Cap. 113.
PRINCIPAL ACTIVITY
The principal activity of the Company is that of an investment
holding company and, for that purpose, to acquire and hold
controlling and other interests in the share or loan capital
of any company or companies of any nature, but primarily
in the healthcare industry. Note 4 to these consolidated financial
statements gives more detailed information about the service
provided by the Group`s medical centres.
FINANCIAL RESULTS
The Group’s results of operations are affected by a number
of factors, including acquisitions, regulatory conditions, demand
for private healthcare services, patient capacity and utilisation
rate, pricing and volume, staff costs, capital expenditure
programmes and currency exchange fluctuations.
The Group’s financial results for the year ended 31 December 2021
and its financial position at that date are set out in the consolidated
statement of profit or loss and other comprehensive income
on page 74 and in the consolidated statement of financial position
on page 75 of these consolidated financial statements.
Profit for the year ended 31 December 2021 amounted
to RUB 6,143,026 thousand (for the year ended 31 December
2020: RUB 4,333,300 thousand). The total assets of the Group
as at 31 December 2021 were RUB 34,282,277 thousand
(31 December 2020: RUB 31,994,491 thousand) and the net
assets were RUB 23,097,192 thousand (31 December 2020:
RUB 19,952,581 thousand).
The Company is a holding company and thus its ability
to pay dividends depends on the ability of its subsidiaries
to pay dividends to the Company in accordance
with relevant legislation in the country of their incorporation
and any contractual restrictions. The payment of such dividends
by its subsidiaries is contingent upon the sufficiency of their
earnings, cash flows and distributable reserves.
On 3 September 2021 the Board of Directors recommended
the payment of RUB 1,352,249 thousand as interim dividends
which corresponds to RUB 18 per share. The dividends
were paid on 26 October 2021.
On 19 March 2021, Board of Directors recommended
the payment of RUB 1,427,375 thousand as final dividends
for the year 2020 which corresponds to RUB 19 per share.
The dividends were paid on 25 May 2021.
On 4 September 2020, the Board of Directors recommended
the payment of RUB 736,225 thousand as interim dividends
which corresponds to RUB 9.8 per share. The dividends
were paid on 20 October 2020.
On 11 August 2020, the Board of Directors recommended
the payment of RUB 1,389,813 thousand as final dividends
for the year 2019 which corresponds to RUB 18.5 per share.
The dividend distribution was approved by the Extraordinary
General Meeting of the shareholders on 3 September 2020.
The dividends were paid on 13 October 2020.
EXAMINATION OF THE DEVELOPMENT, POSITION
AND PERFORMANCE OF THE ACTIVITIES
OF THE GROUP
The current financial position and performance of the Group
as presented in these consolidated financial statements
is considered satisfactory.
The Group has developed its growth strategy to meet
the increasing demand for high-quality private healthcare
services in Russia. The Group has grown significantly through
strategic acquisitions and expansion through the construction
of new facilities.
The Group has one of the largest nationwide private
healthcare regional networks for its core services
and is expanding into new services. It has significant
experience in the provision of full-service private maternity
healthcare services. The Group has secured leading
positions in the Russian private healthcare market across
a range of services including obstetrics and gynaecology,
fertility and IVF treatments, and paediatrics. It has also
been diversifying its offering by adding other medical
services for all family members, such as surgery, urology,
traumatology, cardiology, and oncology, etc. The recently
opened facilities have been multi-disciplinary from the very
beginning.
The Group’s principal objective is to use its strong existing
platform and experience in the regions to create a scalable
concept of establishing new regional hospitals and other
medical facilities, utilising rigorous investment decision-making
process and targeting the most attractive regions and ensuring
seamless execution.
The Group believes the experience, depth and diversity of its
management team to be a distinct competitive advantage
in the complex and rapidly growing healthcare industry in which
it operates.
PRINCIPAL RISKS AND UNCERTAINTIES
The Group operates in a highly regulated industry
and is a subject to supervision by federal and local authorities.
As a result, the Group would be significantly affected
by material changes to the existing, or implementation
of additional government regulations in Russia.
The Board of Directors has the overall responsibility
for the establishment and supervision of the Company’s risk
management framework.
DIRECTORS’ INTEREST
The direct and indirect interests of the members
of the Board in titles of the Company as at 31 December
2021, 31 December 2020 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
Kirill Dmitriev
(resigned on
5 March 2022)
Simon Rowlands
(resigned on
9 March 2022)
Vitaly Ustimenko
Indirect ownership
of shares
Indirect interest
in shares
Direct ownership
of shares
Direct ownership
of shares
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.
Member of the Board of Directors Vitaly Ustimenko
acquired GDRs on 24 January 2022, as a result the share
of his ownership increased from 0.0048% to 0.0053%
of the Сompany's share capital.
The calculation of effective interest is based on the total amount
of issued and fully paid shares, including treasury shares
acquired by the Company.
FUTURE DEVELOPMENTS
Details in relation to principal risks and uncertainties and steps
taken to manage these risks and uncertainties are presented
in Notes 23, 25 and 29, ‘Events after the reporting period’ –
Military operations in Ukraine’, of these consolidated financial
statements.
The Group’s goal is to continually diversify its medical
services by expanding its range of services, maintaining its
leading position in the field of high-quality women’s health
and paediatrics, as well as addressing the increasing demand
for private healthcare services in Russia and beyond.
The reputation, expertise and professionalism of the Group’s
medical personnel are instrumental to the Group’s ability
to attract new and repeat patients. The Group’s operating
success depends on its medical personnel providing high-
quality healthcare services throughout the Group’s medical
network.
As the Group will be growing it intends to expand its portfolio
of hospital and out-patient facilities, broaden its service
offerings by providing patients with the most up-to-date
treatment procedures and medical technology available
on the market, expand its services in Moscow and other
regions, exploit the value of its integrated healthcare network
by making effective use of services across its facilities,
optimising the benefits for patients and the Group as a whole.
Report and consolidated financial statements Annual Report 2
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71
70
SHARE CAPITAL
There were no changes in the share capital of the Company
during the year.
BOARD OF DIRECTORS
The Board of Directors leads the process in making new
Board member appointments and makes recommendations
on appointments to shareholders. In accordance
with the Appointment Policy for the Board of Directors
and Committees, all directors are subject to appointment
or approval of appointment by shareholders at the first
Annual General Meeting after their appointment, and to re-
appointment at intervals of no more than three years.
Any term beyond six years (e.g. two three-year terms)
for a non-executive director is subject to particularly rigorous
review, and takes into account the need for progressive
refreshing of the Board of Directors.
Simon Rowlands's appointment as a member of the Board
of Directors ended on 21 April 2021. On 22 April 2021,
Africa Platforms Capital LLP was appointed as a director.
On the same date, Africa Platforms Capital LLP was approved
to be represented on the Board by Simon Rowlands.
Sergey Kalugin was appointed as an independent director
in March 2022. Tony Maher, Kirill Dmitriev and Africa Platforms
Capital LLP (represented by Simon Rowlands) stepped down
as members of the Board of Directors on 21 April 2021,
5 March 2022 and 9 March 2022 respectively.
Following the resignation of Mr Simon Rowlands and Mr Kirill
Dmitriev on 5 March 2022 and 9 March 2022, respectively,
Mr Vitaly Ustimenko and Mr Sergey Kalugin were appointed
as other members of the audit committee on 14 March 2022.
The Audit Committee meets at least four times each year
and is responsible for considering:
• The reliability and appropriateness of disclosures
in the financial statements and external financial
communication
• The maintenance of an effective system of internal controls
including financial, operational and compliance controls
and risk management system
• Preparation of recommendations to the shareholders
for approval in General Meetings in relation to the appointment,
reappointment and removal of the external auditors
• Approval of the remuneration and terms of engagement
of the external auditors in respect of audit services provided
• The audit process, including monitoring and review
of the external auditors’ performance, independence
and objectivity
• Development and implementation of the policy on non-audit
services provided by the external auditors
• Monitoring compliance with laws and regulations and standard
of corporate governance
The Audit Committee assists the Board of Directors in its oversight
of the performance and leadership of the internal audit activity.
Where the Audit Committee’s monitoring and review activities
reveal cause for concern or scope for improvement, it shall make
recommendation to the Board of Directors on actions needed
to address the issues or to make improvements.
The members of the Board of Directors who served
as at the date of signing of these consolidated financial
statements, are presented on the pages 60-61.
Internal audit
Refer to Note 22 of these consolidated financial statements
for the remuneration of the directors and other key
management personnel.
THE BOARD COMMITTEES
Since September 2012, the Board of Directors established
the operation of the following three committees: the Audit
Committee, the Nomination Committee and the Remuneration
Committee.
Audit Committee
The Audit Committee is responsible for monitoring and review
the effectiveness of the Company’s internal audit function.
In this respect, the Audit Committee may require investigations
by, or under the authority of, the head of Internal Audit
into any activities of the Group which may be of interest
or concern to the Audit Committee.
The Company`s internal auditor is responsible
for the recommendation of an audit plan to the Audit Committee.
The internal auditor carries out auditing assignments in accordance
with such plan and oversees the Company`s compliance
with the plan`s recommendations. The internal auditor files a quarterly
report with his findings to the Audit Committee.
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 6 December 2019, Mr Kirill Dmitriev and Mr Simon
Rowlands were the other members.
Nomination Committee
The Nomination Committee comprises one executive and two
non-executive directors, one of whom is independent.
The Nomination Committee is chaired by non-executive director
Mr Vladimir Mekler (since June 2016). Mr Mark Kurtser
and Mr Simon Rowlands were the other members. Following
the resignation of Mr Simon Rowlands on 9 March 2022,
Mr Sergey Kalugin was appointed as other member of the audit
committee on 14 March 2022.
The Nomination Committee meets at least once a year
and is responsible for assisting the Board of Directors
in discharging its corporate governance responsibilities
in relation to appointment of all executive and non-executive
directors, as well as the CEO and CFO of the Company.
The main objective of the Nomination Committee is to lead
the process for the Board of Directors’ appointments
and make respective recommendation to the Board
of Directors, ensuring proper balance of the Board
of Directors and qualification of its members. The Nomination
Committee also considers the composition of the Audit
and Remuneration Committees.
Remuneration Committee
The Remuneration Committee comprises two non-executive
directors and one executive director. The Remuneration
Committee was chaired by an independent non-executive
director Mr Simon Rowlands, who stepped down on 5 March
2022. Mr Sergey Kalugin was appointed as the chairman
of the Remuneration Committee on 14 March 2022. The two
other members are Dr Mark Kurtser and Mr Vladimir Mekler.
The Remuneration Committee meets at least once a year
and is responsible for assisting the Board of Directors
in discharging its corporate governance responsibilities
in relation to remuneration of all executive directors
and the chairman of the Board of Directors. The main
objective of the Remuneration Committee is to determine
the framework and policy for the remuneration
of the executive directors, the chairman of the Board
of Directors and senior executives, and the specific
remuneration of each executive director and the chairman
of the Board of Directors and any compensation payments.
CORPORATE GOVERNANCE
Since 2012, the Company has maintained full compliance
with the UK Corporate Governance Code. The Company
is committed to the highest standards of corporate
governance and transparency. The Board of Directors
recognises that good governance is a strategic asset
that helps it to deliver consistent long term value to its
shareholders. By running the Company in an open way,
the Board of Directors enables shareholders to understand
how it has been able to deliver consistently strong results.
The Board of Directors believes that corporate responsibility
is an essential part of good governance and makes sound
business sense, as well as being crucial to the appropriate
management of risk within the Company.
Improving its corporate governance structure in accordance
with the internationally recognised best practices
the Company adopted important policies and procedures.
The Company’s corporate governance policies and practices
are designed to ensure that the Company is focused
on upholding its responsibilities to the shareholders.
The Company’s corporate governance policies and practices
include, inter alia:
• Appointment policy for the Board of Directors
and Committees
• Terms of reference of the Audit Committee, Nomination
Committee and Remuneration Committee
• Code of Ethics and Conduct
• 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 Statements
from RAS to IFRS
• Methodology for the Consolidation of IFRS Financial
Statements
• 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 consolidated financial statements of the Group.
The procedure should be reviewed for compliance
with International Financial Reporting Standards
as well as current conditions and planned changes
in the Group’s business activities at least once a year. When
necessary, amendments and additions to this Procedure should
be adopted.
MEETINGS OF SHAREHOLDERS
The Company shall in each year hold a general meeting as its
annual general meeting in addition to any other meetings in that
year. An annual general meeting and any other shareholders’
meeting called to pass a special resolution can be convened
by the Board of Directors by a notice, specifying the matters
to be discussed, issued at least 21 days before the meeting.
Any other meetings shall be convened by the Board
Report and consolidated financial statements Annual Report 2
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72
of Directors by a notice, specifying the matters to be discussed,
issued at least 14 days before the meeting. If the notice period
is less than 21 days or 14 days as applicable, the meeting will
be deemed to have been duly called if it is so agreed:
• in the case of a meeting called as the annual general
meeting, by all the shareholders entitled to attend and vote;
and
• in the case of any other meeting, by a majority in number
of the members having a right to attend and vote
at the meeting, being a majority together holding not less
than 95 percent 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 representative at any meeting of the Company.
BRANCHES
TREASURY SHARES
During the year ended 31 December 2021 the Company did
not acquire any treasury shares.
EVENTS AFTER THE REPORTING PERIOD
The events after the reporting date are disclosed in Note 29
to the consolidated financial statements.
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,
Vladimir Mekler
Chairman of the Board of Directors
Mark Kurtser
Managing Director, member of the Board of Directors
MD Medical Group Investments Plc has a branch in Moscow.
Moscow, 25 March 2022
DIRECTORS’ RESPONSIBILITY STATEMENT
The Company’s Board of Directors is responsible for the prepara-
tion of consolidated financial statements that give a true and fair
view in accordance with International Financial Reporting Stan-
dards as adopted by the European Union and the requirements
of the Cyprus Companies Law, Cap.113, and for such internal
control as the Board of Directors determines is necessary to en-
able the preparation of consolidated financial statements that
are free from material misstatement, whether due to fraud or error.
This responsibility includes selecting appropriate account-
ing policies and applying them consistently; and making ac-
counting estimates and judgements that are reasonable
in the circumstances.
In preparing the consolidated financial statements, the Board
of Directors is also responsible for assessing the Group’s abil-
ity to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern
basis of accounting unless the Board of Directors either intends
to liquidate the Company or to cease operations, or has no re-
alistic alternative but to do so.
Those charged with governance are responsible for overseeing
the Group’s financial reporting process.
THE BOARD OF DIRECTORS’ CONFIRMATIONS
The Board of Directors confirms that, to the best of its
knowledge:
a. the consolidated financial statements, which are presented
on pages 67 to 88, which have been prepared in accordance
with International Financial Reporting Standards as adopted
by the European Union and the requirements of the Cyprus
Companies Law, Cap.113, give a true and fair view
of the assets, liabilities, financial position and profit
or loss of the Company and the undertakings included
in the consolidation taken as a whole; and
b. the management report includes a fair review
of the development and performance of the business
and the position of the Company and the undertakings
included in the consolidation taken as a whole, together
with a description of the principal risks and uncertainties that
it faces/they face.
Further, the Board of Directors confirms that, to the best
of its knowledge:
I. Adequate accounting records have been maintained
which disclose with reasonable accuracy
the financial position of the Group and explain its
transactions
ii. All information of which it is aware that is relevant
to the preparation of the consolidated financial
statements, such as accounting records and all
other relevant records and documentation, has been
made available to the Company’s auditors
iii. The consolidated financial statements disclose
the information required by the Cyprus Companies
Law, Cap.113 in the manner so required
iv. The Consolidated Management Report has been
prepared in accordance with the requirements
of the Cyprus Companies Law, Cap.113,
and the information given therein is consistent
with the consolidated financial statements
v. The information included in the corporate
governance statement in accordance
with the requirements of subparagraphs (iv) and (v)
of paragraph 2(a) of Article 151 of the Cyprus
Companies Law, Cap. 113, and which is included
as a specific section of the Consolidated
Management Report, have been prepared
in accordance with the requirements of the Cyprus
Companies Law, Cap. 113, and is consistent
with the consolidated financial statements
vi. 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 Cyprus Companies Law, Cap. 113.
By order of the Board of Directors,
Vladimir Mekler
Chairman of the Board of Directors
Mark Kurtser
Managing Director, member of the Board of Directors
Moscow, 25 March 2022
Report and consolidated financial statements Annual Report 2
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74
KPMG Limited
Chartered Accountants
11, June 16th 1943 Street, 3022 Limassol, Cyprus
P.O.Box 50161, 3601 Limassol, Cyprus
T: +357 25 869000, F: +357 25 363842
INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS
OF MD MEDICAL GROUP INVESTMENTS PLC
REPORT ON THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS
Opinion
Basis for opinion
We have audited the accompanying consolidated financial
statements of MD Medical Group Investments Pic
(the “Company”) and its subsidiaries (the “Group”),
which are presented on pages 18 to 57 and comprise
the consolidated statement of financial position
as at 31 December 2021, and the consolidated statements
of profit or loss and other comprehensive income, changes
in equity and cash flows for the year then ended, and notes
to the consolidated financial statements, including a summary
of significant accounting policies.
In our opinion, the accompanying consolidated financial
statements give a true and fair view of the consolidated financial
position of the Group as at 31 December 2021, and of its
consolidated financial performance and its consolidated cash
flows for the year then ended in accordance with International
Financial Reporting Standards as adopted by the European
Union (“IFRS-EU”) and the requirements of the Cyprus
Companies Law, Cap. 113, as amended from time to time
(the “Companies Law, Cap.113”).
We conducted our audit in accordance with International
Standards on Auditing (“ISAs”). Our responsibilities
under those standards are further described in the “Auditors’
responsibilities for the audit of the consolidated financial
statements’” section of our report. We are independent
of the Group in accordance with the International Code
of Ethics (Including International Independence Standards)
for Professional Accountants of the International 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 appropriate
to provide a basis for our opinion.
KPMG Limited. a private company limited by shares.
registered in Cyprus under registration number
HE 132822 with its registered office at 14, Esperidon Street,
1087, Nicosia, Cyprus.
Nicosia
P.O. Box 21121, 1502
T: +357 22 209000
F: +357 22 678200
Paphos
P.O. Box 60288, 8101
T: +357 26 943050
F: +357 26 943062
Polis Chrysochous
P.O. Box 66014, 8330
T: +357 26 322098
F: +357 26 322722
Larnaca
P.O. Box 40075, 6300
T: +357 24 200000
F: +357 24 200200
Paralimni / Ayia Napa
P.O. Box 33200, 5311
T; +357 23 820080 F:
+357 23 820084
Emphasis of matter-Subsequent Event
Key audit matters
We draw attention to Note 29 to the consolidated financial
statements which describes the recent developments
in Russia’s operating environment, as a result of the military
operations in Ukraine and the associated risks for the Group.
In addition to the matter described in Emphasis of matter -
Subsequent Event paragraph above, we have determined
the matters described below to be the key audit matters
to be communicated in our report.
Our opinion is not modified in respect of this matter.
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit
of the consolidated financial statements of the current
period. These matters were addressed in the context of our
audit of the consolidated financial statements as a whole,
and in forming our opinion thereon, and we do not provide
a separate opinion on these matters.
Goodwill impairment
Refer to Note 14 of the consolidated financial statements (RUB 2,032,320 thousand)
Key audit matter
How the key audit matter was addressed in our audit
The annual impairment testing of goodwill is considered
to be a key audit matter due to the complexity
of the accounting requirements and the significant judgement
required in determining the assumptions to be used
to estimate the recoverable amount. The recoverable amount
of the Group’s Cash Generating Units (CGUS’), which
is determined to represent the value in use, has been derived
from discounted forecast cash flow models. These models use
several key assumptions, including estimates of future sales
volumes and prices, operating costs, terminal growth rates
and the weighted-average cost of capital (discount rate).
Our audit procedures in this area included, among others:
We assessed whether the recoverable amount calculations
were performed at the appropriate level of CGU and we
evaluated the appropriateness of the methodologies
and calculations used by the Company.
We evaluated the appropriateness of the key valuation inputs
and assumptions applied such us estimated revenue growth
rates, EBITDA estimated rates, terminal growth, after-tax
profitability comparing them to historical results and forecasts.
Involved our own valuation specialists to assist in evaluating
the appropriateness of the weighted-average cost of capital
(discount rate), CAPEX in terminal value used, long term growth
rate, length of the projection period;
Evaluated the adequacy of the financial statement’s disclosures,
including disclosures of key assumptions, judgements
and sensitivities.
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76
Refer to Note 4 of the consolidated financial statements (RUB 25,219,683 thousand).
Refer to Note 10 of the consolidated financial statements.
Key audit matter
How the key audit matter was addressed in our audit
Key audit matter
How the key audit matter was addressed in our audit
Revenue recognition
Taxation
Our audit procedures in this area included, among others:
Involved our tax specialist to challenge significant assumptions/
judgements relating to meeting the conditions for applying 0%
income tax rate and simplified tax regime 15% rate.
- Tested the mathematical accuracy of the Company’s
calculations over the applicable monetary criteria for applying
0% and 15% (i.e. percentage of revenue from medical activities
to total revenue, percentage of employees holding medical
certificates to total number of employees)
For a sample of employees which according to the Company
represent holders of medical certificates review those medical
certificates.
The taxation system in the Russian Federation continues
to evolve and currently the tax authorities are taking a more
assertive and substance-based approach to their interpretation
and enforcement of tax legislation.
Group Companies offering medical services, operating
in Russian Federation and meeting the conditions specified
in Federal law 395-N (“Law”), apply 0% corporate
income tax rate. There is a risk that certain entities may
not meet the eligibility criteria to apply the 0% tax rate
given the interpretation and or the practice to be applied
by the Russian Tax Office in assessing compliance
with exemption criteria.
Group Companies, offering administrative/ support services
to group subsidiaries and meeting the conditions specified
in Federal law 395-N (“Law”)/ apply 15% corporate income
tax rate (Simplified Tax System). There is a risk of abolishing
the simplified tax system/regime applied by those group
companies given the interpretation and or the practice
to be applied by the Russian Tax Office in assessing
compliance with criteria.
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 long 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 in this area included among others:
- Assessing the design and implementation and test general
IT controls and IT application controls relevant to revenue
recognition. Our IRM specialist were involved and carried out
the following;
a. Tested that the granting of access rights to Medialog
system was 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. Tested 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. Tested that access to input and modification of prices
and discounts already ‘built’ in Medialog is limited
to employees with appropriate job responsibilities.
e. 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. 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.
Obtained 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).
Obtained confirmation letters from a sample of debtors (legal
entities) to confirm balances and turnover.
Performed analytical procedures.
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78
Other information
Auditors’ responsibilities for the audit
of the consolidated financial statements
The Board of Directors is responsible for the other information.
The other information comprises the Management Report
and the Annual Report but does not include the consolidated
financial statements and our auditor’s report thereon.
Our opinion on the consolidated financial statements does
not cover the other information and we do not express
any form of assurance conclusion thereon, except as required
by the Companies Law, Cap.113.
In connection with our audit of the consolidated financial
statements, our responsibility is to read the other information
and, in doing so, consider whether the other information
is materially inconsistent with the consolidated financial
statements or our knowledge obtained in the audit or otherwise
appears to be materially misstated. If, based on the work
we have performed, we conclude that there is a material
misstatement of this other information, we are required to report
that fact.
With regards to the management report, our report in this
regard is presented in the “Report on other legal requirements”
section.
Responsibilities of the Board of Directors
and those charged with governance
for the consolidated financial statements
The Board of Directors is responsible for the preparation
of consolidated financial statements that give a true and fair
view in accordance with IFRS-EU and the requirements
of the Companies Law, Cap. 113, and for such internal control
as the Board of Directors determines is necessary to enable
the preparation of consolidated financial statements that
are free from material misstatement, whether due to fraud
or error.
In preparing the consolidated financial statements, the Board
of Directors is responsible for assessing the Group’s ability
to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern
basis of accounting, unless there is an intention to either
liquidate the 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 responsible for overseeing the Group’s financial reporting
process.
Our objectives are to obtain reasonable assurance
about whether the consolidated financial statements
as a whole are free from material misstatement, whether due
to fraud or error, and to issue an auditors’ report that includes
our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance
with ISAs will always detect a material misstatement when
it exists. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic
decisions of users taken on the basis of these consolidated
financial statements.
As part of an audit in accordance with ISAs, we exercise
professional judgment and maintain professional skepticism
throughout the audit. We also:
• Identify and assess the risks of material misstatement
of the consolidated financial statements, whether due
to fraud or error, design and perform audit procedures
responsive to those risks, and obtain audit evidence that
is sufficient and appropriate to provide a basis for our
opinion. The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal
control.
• Obtain an understanding of internal control relevant
to the audit in order to design audit procedures
that are appropriate in the circumstances,
but not for the purpose of expressing an opinion
on the effectiveness of the Group’s internal control.
• Evaluate the appropriateness of accounting policies used
and the reasonableness of accounting estimates and related
disclosures made by the Board of Directors.
Conclude on the appropriateness of the Board of Directors’
use of the going concern basis of accounting and, based
on the audit evidence obtained, whether a material uncertainty
exists related to events or conditions that may cast significant
doubt on the Group’s ability to continue as a going concern. If
we conclude that a material uncertainty exists, we are required
to draw attention in our auditors’ report to the related
disclosures in the consolidated financial statements or, if
such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up
to the date of our auditors’ report. However, future events
or conditions may cause the Group to cease to continue
as a going concern.
Evaluate the overall presentation, structure and content
of the consolidated financial statements, including
the disclosures, and whether the consolidated financial
statements represent the underlying transactions and events
in a manner that achieves a true and fair view.
REPORT ON 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:
• Obtain sufficient appropriate audit evidence regarding
the financial information of the entities or business activities
of the Group to express an opinion on the consolidated
financial statements. We are responsible for the direction,
supervision and performance of the Group audit. We remain
solely responsible for our audit opinion.
We communicate with those charged with governance
regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including
any significant deficiencies in internal control that we identify
during our audit.
We also provide those charged with governance
with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate
with them all relationships and other matters that may
reasonably be thought to bear on our independence,
and where applicable, actions taken to eliminate threats
or safeguards applied.
From the matters communicated with those charged
with governance, we determine those matters that
were of most significance in the audit of the consolidated
financial statements of the current period and are therefore
the key audit matters. We describe these matters in our
auditors’ report.
• In our opinion, the management report the preparation
of which is the responsibility of the Board of Directors,
has been prepared in accordance with the requirements
of the Companies Law, Cap 113, and the information given
is consistent with the consolidated financial statements.
• In the light of the knowledge and understanding
of the business and the Group’s environment obtained
in the course of the audit, we have not identified material
misstatements in the management report.
Other Matter
This report, including the opinion, has been prepared
for and only for the Company’s members as a body
in accordance with Section 69 of Law L.53(I)/2017 and for no
other purpose. We do not, in giving this opinion, accept
or assume responsibility for any other purpose or to any other
person to whose knowledge this report may come to.
The engagement partner on the audit resulting in this
independent auditors’ report is George S.
Certified Public Accountant and Registered Auditor
for and on behalf of
KPMG Limited
Certified Public Accountants and Registered Auditors
11, June 16th 1943 Street
3022 Limassol
Cyprus
25 March 2022
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80
CONSOLIDATED STATEMENT OF PROFIT
OR LOSS AND OTHER COMPREHENSIVE INCOME
CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
For the year ended 31 December 2021
As at 31 December 2021
Note
2021
RUB’000
2020
RUB’000
Note
31 December 2021
RUB’000
31 December 2020
RUB’000
4
5
8
6
8
9
9
9
9
10
Revenue
Cost of sales
Gross profit
Other income
Selling, general and administrative expenses
Other expenses
Operating profit
Finance income
Finance expenses
Net foreign exchange transactions (loss) / gain
Net finance expenses
Profit before tax
Income tax expense
Profit for the year
Total comprehensive income for the year
Profit for the year attributable to:
Owners of the Company
Non-controlling interests
TOTAL COMPREHENSIVE INCOME FOR THE YEAR ATTRIBUTABLE TO:
Owners of the Company
Non-controlling interests
Earnings per share (RUB)
11
The Notes on pages 88 to 119 are an integral part of these consolidated financial statements
25,219,683
19,133,499
(15,231,775)
(12,006,620)
9,987,908
104,424
7,126,879
226,391
(3,402,362)
(2,806,793)
(68,007)
6,621,963
93,683
(549,361)
(8,017)
(463,695)
6,158,268
(15,242)
6,143,026
6,143,026
6,003,486
139,540
6,143,026
6,003,486
139,540
6,143,026
79.91
(42,279)
4,504,198
248,582
(537,238)
122,532
(166,124)
4,338,074
(4,774)
4,333,300
4,333,300
4,196,463
136,837
4,333,300
4,196,463
136,837
4,333,300
55.86
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
LIABILITIES
Loans and borrowings
Trade and other payables
Deferred tax liabilities
Contract liabilities
Total non-current liabilities
Loans and borrowings
Trade and other payables
Contract liabilities
Total current liabilities
Total liabilities
13
14
15
15
16
16
17
18
18
18
26
19
21
20
19
21
20
TOTAL EQUITY AND LIABILITIES
On 25 March 2022, the Board of Directors of MD Medical Group Investments Plc
approved and authorised these consolidated financial statements for issue.
26,070,398
2,141,945
339,909
4,300
28,556,552
1,164,761
971,341
−
3,589,623
5,725,725
34,282,277
180,585
5,243,319
(655,352)
18,064,135
22,832,687
264,505
23,097,192
3,726,707
624,808
6,234
460,420
4,818,169
1,786,326
3,010,232
1,570,358
6,366,916
11,185,085
34,282,277
23,296,538
2,205,655
630,626
4,959
26,137,778
973,877
1,007,973
746,145
3,128,718
5,856,713
31,994,491
180,585
5,243,319
(655,352)
14,840,273
19,608,825
343,756
19,952,581
5,230,477
679,843
4,540
483,026
6,397,886
1,587,521
2,630,288
1,426,215
5,644,024
12,041,910
31,994,491
Vladimir Mekler
Chairman of the Board of Directors
Mark Kurtser
Managing Director
Andrey Khoperskiy
First Deputy CEO
Chief Financial Officer (until 31.12.2021)
The Notes on pages 88 to 119 are an integral part of these consolidated financial statements
Report and consolidated financial statements Annual Report 2
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82
CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
For the year ended 31 December 2021
Note
Share capital
RUB’000
Share premium
RUB’000
Reserves
RUB’000
Retained earnings
RUB’000
Total
RUB’000
Non-controlling
interests
RUB’000
Attributable to owners of the Company
Total equity
RUB’000
Balance at 1 January 2021
180,585
5,243,319
(655,352)
14,840,273
19,608,825
Profit and total comprehensive income for the year
CONTRIBUTIONS AND DISTRIBUTIONS
Dividends declared
Other changes
Total contributions and distributions
12
−
−
−
−
−
−
−
−
−
−
−
−
6,003,486
6,003,486
343,756
139,540
19,952,581
6,143,026
(2,779,624)
(2,779,624)
(219,222)
(2,998,846)
−
−
431
431
(2,779,624)
(2,779,624)
(218,791)
(2,998,415)
Balance at 31 December 2021
180,585
5,243,319
(655,352)
18,064,135
22,832,687
264,505
23,097,192
Share premium is not available for distribution.
The Notes on pages 88 to 119 are an integral part of these consolidated financial statements
Report and consolidated financial statements Annual Report 2
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84
CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
For the year ended 31 December 2020
Note
Attributable to owners of the Company
Attributable to owners of the Company
Total equity
RUB’000
Share capital
RUB’000
Share premium
RUB’000
Reserves
RUB’000
Retained earnings
RUB’000
Total
RUB’000
Non-controlling
interests
RUB’000
Balance at 1 January 2020
180,585
5,243,319
(655,352)
12,769,848
17,538,400
Profit and total comprehensive income for the year
CONTRIBUTIONS AND DISTRIBUTIONS
Dividends declared
12
Total contributions and distributions
−
−
−
−
−
−
−
−
−
4,196,463
4,196,463
341,742
136,837
17,880,142
4,333,300
(2,126,038)
(2,126,038)
(134,823)
(2,260,861)
(2,126,038)
(2,126,038)
(134,823)
(2,260,861)
Balance at 31 December 2020
180,585
5,243,319
(655,352)
14,840,273
19,608,825
343,756
19,952,581
Share premium is not available for distribution.
The Notes on pages 88 to 119 are an integral part of these consolidated financial statements
Report and consolidated financial statements Annual Report 2
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86
CONSOLIDATED STATEMENT OF CASH FLOWS
Note
2021
RUB’000
2020
RUB’000
Note
2021
RUB’000
2020
RUB’000
For the year ended 31 December 2021
CASH FLOWS FROM OPERATING ACTIVITIES
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 of trade and other receivables
Finance income
Finance expenses (excluding impairment)
Impairment of trade and other receivables
Net foreign exchange transactions loss / (gain)
Income tax expense
Increase in inventories
Increase in trade and other receivables
Increase in trade and other payables
Increase in contract liabilities
Cash flows from operations
Tax paid
13
14
9
9
9
9
10
6,143,026
4,333,300
1,577,042
122,176
(2,162)
27,189
−
(93,683)
517,714
31,647
8,017
15,242
8,346,208
(190,884)
(7,912)
276,341
80,278
1,413,323
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
480,384
8,504,031
6,524,851
(4,635)
(9,438)
Net cash flows from operating activities
8,499,396
6,515,413
The Notes on pages 88 to 119 are an integral part of these consolidated financial statements
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition/construction of property, plant
and equipment
Proceeds from sale of property, plant and equipment
Acquisition of intangible assets
Proceeds from government grant
Placing short-term bank deposits
Proceeds from short-term bank deposits return
Bank interest received
Loans returned from third parties
(3,734,757)
(3,778,215)
2,724
(55,466)
−
(866,831)
1,648,623
93,683
−
13,092
(126,234)
139,182
(2,097,704)
1,858,475
110,796
1,000
13
9
Net cash flows used in investing activities
(2,912,024)
(3,879,608)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from loans and borrowings
Repayment of loans and borrowings
Payments of lease liabilities
Finance expenses paid
Proceeds from reimbursed VAT
Repayment of reimbursed VAT
−
1,193,493
(1,490,806)
(1,319,275)
(152,470)
(363,727)
33,138
(152,123)
(158,086)
(375,047)
337,378
(111,351)
Dividends paid to the owners of the Company
(2,726,685)
(2,211,202)
Dividends paid to non-controlling interests
(178,177)
(134,823)
Net cash flows used in financing activities
(5,030,850)
(2,778,913)
Net increase /
(decrease) 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
556,522
(143,108)
3,128,718
3,061,448
(95,617)
3,589,623
210,378
3,128,718
16
16
Report and consolidated financial statements Annual Report 2
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89
88
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
Name
Country
of incorporation
Activities
31 December
2021
Effective
holding
%
31 December
2020
Effective
holding
%
For the year ended 31 December 2021
1. INCORPORATION AND PRINCIPAL ACTIVITIES
MD Medical Group Investments Plc (the “Company”)
was incorporated in Cyprus on 5 August 2010 as a private
limited liability company under the provisions of the Cyprus
Companies Law, Cap. 113. In August 2012, following
the special resolution passed by the shareholder, the Company
was converted into a public limited liability company
in accordance with the provisions of the Cyprus Companies
Law, Cap. 113. Its Registered Office is at Dimitriou Karatasou
15, Anastasio Building, 6th floor, office 601, Strovolos, 2024,
Nicosia, Cyprus.
The principal activity of the Company is that of an investment
holding company and, for that purpose, to acquire and hold
controlling and other interests in the share or loan capital
of any company or companies of any nature, but primarily
in the healthcare industry. Refer to Note 4 for more detailed
information about the services provided by the Group’s medical
centres.
The details of the directly and indirectly owned subsidiaries
are as follows:
Name
Country
of incorporation
Activities
31 December
2021
Effective
holding
%
31 December
2020
Effective
holding
%
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
LLC UsticECO
Russian Federation
Medical services
Russian Federation
Medical services
Russian Federation
Medical services
LLC Mother and Child Perm
Russian Federation
Medical services
LLC Mother and Child Ufa
Russian Federation
Medical services
LLC Mother and Child Saint Petersburg
Russian Federation
Medical services
LLC MD Project 2010
Russian Federation
Medical services
LLC Mother and Child Ugo-Zapad
Russian Federation
Medical services
LLC MD Service
Russian Federation
Pharmaceutics retail
LLC Mother and Child Nizhny Novgorod
Russian Federation
Medical services
LLC Mother and Child Yekaterinburg
Russian Federation
Medical services
LLC Mother and Child Tyumen
Russian Federation
Medical services
CJSC MK IDK
LLC Apteka IDK
Russian Federation
Medical services
Russian Federation
Pharmaceutics retail
95
100
90
95
−
100
80
100
100
−
95
95
85
100
90
95
100
100
100
100
100
95
100
90
95
90
100
80
100
100
70
95
95
85
100
90
95
100
100
100
100
100
LLC CSR
LLC MD Assistance
Russian Federation
Medical services
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 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 Krasnoyarskii centre of Reproductive
Medicine
LLC Novosibirskii centre of Reproductive
Medicine
Russian Federation
Medical services
Russian Federation
Medical services
LLC Omskii centre of Reproductive Medicine Russian Federation
Medical services
LLC Barnaulskii centre of Reproductive
Medicine
Russian Federation
Medical 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 MD Belgorod
LLC MD Lipetsk
NFP MGIMO-MED
Russian Federation
Medical services
Russian Federation
Medical services
Russian Federation
Medical university
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
80
80
80
100
100
100
100
100
100
100
100
100
100
100
−
100
100
−
100
100
90
100
100
67
−
−
−
−
−
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 2021, 67.9% of the Company’s
share capital is owned by MD Medical Holding Limited,
a company beneficially owned by Dr Mark Kurtser. The 32.1%
of the Company’s share capital is owned by Guarantee
Nominee Limited, which holds the shares on behalf of the GDR
holders.
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2. BASIS OF PREPARATION
(a) Statement of compliance
These consolidated financial statements have been prepared
in accordance with International Financial Reporting
Standards as adopted by the European Union (IFRS-EU)
and the requirements of the Cyprus Companies Law, Cap.113.
These consolidated financial statements were approved by the Board
of Directors and were authorised for issue on 25 March 2022.
(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.
These consolidated financial statements of the Group
are presented in RUB, all amounts have been rounded
to the nearest thousand, unless otherwise indicated.
(d) Use of estimates and judgements
Preparing these consolidated financial statements in accordance
with IFRSs requires management to exercise their judgement
to make estimates and assumptions that affect the application
of accounting policies and the reported amounts of assets
and liabilities, income and expenses.
The estimates and underlying assumptions are based on historical
experience and various other factors that are deemed reasonable
based on knowledge available at that time. Actual results may differ
from these estimates.
The estimates and underlying assumptions are reviewed
and where necessary revised on an ongoing basis. Revisions
to estimates are recognised prospectively.
In particular, information about significant areas of estimation,
uncertainty and critical judgments in applying accounting policies
that have the most significant effect on the amount recognised
in the consolidated financial statements are described below:
Going concern
Impairment of intangible assets and property, plant
and equipment
Intangible assets and property, plant and equipment are initially
recorded at acquisition cost and are amortised on a straight
line basis over their useful economic life. Intangible assets
and property, plant and equipment that are acquired through
a business combination are initially recorded at fair value
at the date of acquisition. Intangible assets with indefinite useful
life are reviewed for impairment at least annually.
The impairment test is performed using the discounted cash flows
expected to be generated through the use of the intangible assets
and property, plant and equipment, using a discount rate that
reflects the current market estimations and the risks associated
with the asset. When it is impractical to estimate the recoverable
amount of an asset, the Group estimates the recoverable amount
of the cash generating unit to which the asset belongs.
Impairment of goodwill
Determining whether goodwill is impaired requires an estimation
of the value in use of the cash generating units of the Group
to which the goodwill has been allocated.
Other
Information about judgements, assumptions and estimation
uncertainties regarding revenue recognition, deferred taxes
assets, provisions, leases and ECL allowance for trade receivables
and contract assets as at 31 December 2021 is described in Note 3.
COVID-19
In December 2019, the emergence of a new strain of coronavirus
(COVID-19) was reported in China and has subsequently
spread globally. On 11 March 2020, the World Health Organisa-
tion declared the COVID-19 outbreak a pandemic. Mobility
restrictions, quarantines and similar lockdown measures
implemented 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 taken
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 environment
in the healthcare industry resulted in a number of consequences
on operational and financial performance of the Group.
Determining whether there are material uncertainties that may
cast significant doubt on the Group`s ability to continue as a going
concern.
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 temporary mode. Surgery, cardiology, traumatology 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 proceed 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 December 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
2-storey multifunctional medical centre intended to treat patients
with infections, including coronavirus patients, was achieved
in short time using rapid construction technology.
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
assumptions 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 impairment have been identified.
The value in use of each CGU tested for impairment
is calculated 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 committed initiatives. The cash flows
include ongoing capital expenditure 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 scenario. This
assumes an impact on 2021/22 revenues and profits.
The key assumptions in the value in use calculations
are the growth rates of sales and gross profit margins, changes
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 pricing 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 14% to 15%.
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 average
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, unemployment,
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.
3. SIGNIFICANT ACCOUNTING POLICIES
The accounting policies applied in these consolidated financial
statements are consistent with those followed in the Group’s
consolidated financial statements as at 31 December 2020
and for the year then ended.
New standards and amendments applied for the first time
in 2021 did not impact these consolidated financial statements
of the Group.
Basis of consolidation
These consolidated financial statements incorporate
the financial statements of the Company and entities controlled
by the Company (its subsidiaries). The Group controls an entity
when it is exposed to, or has rights to, variable returns
from its involvement with the entity and has the ability to affect
those returns through its power over the entity. The financial
statements of subsidiaries are included in the consolidated
financial statements from the date on which control
commences until the date on which control ceases.
The financial statements of all the Group companies
are prepared using uniform accounting policies.
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Business combinations
Non-controlling interests
Acquisitions of businesses are accounted for using
the acquisition method when control is transferred to the Group.
The consideration transferred in the acquisition is generally
measured at fair value, as are the identifiable net assets acquired.
Any goodwill that arises is tested annually for impairment.
Any gain on a bargain purchase is recognised in profit or loss
immediately. Transaction costs are expensed as incurred, except
if related to the issue of debt or equity securities.
The consideration transferred does not include amounts related
to the settlement of pre-existing relationships. Such amounts
are generally recognised in profit or loss.
Any contingent consideration is measured at fair value
at the date of acquisition. If an obligation to pay contingent
consideration that meets the definition of a financial instrument
is classified as equity, then it is not remeasured and settlement
is accounted for within equity. Otherwise, other contingent
consideration is remeasured at fair value at each reporting date
and subsequent changes in the fair value of the contingent
consideration are recognised in profit or loss.
Acquisitions from entities under common control
Business combinations arising from transfers of interests
in entities that are under the control of the shareholder that
controls the Group are accounted for as if the acquisition
had occurred at the beginning of the earliest comparative
period presented or, if later, at the date that common
control was established or, if later, at the date the Company
was incorporated. The assets and liabilities acquired
are recognised at their book values. Any difference between
the consideration paid and the book values is recognised
directly in equity.
Non-controlling interests are measured at their proportionate
share of the acquirer’s identifiable net assets at the date
of acquisition.
Changes in the Group’s interest in a subsidiary that do
not result in a loss of control are accounted for as equity
transactions.
Loss of control
When the Group losses control over a subsidiary,
it derecognises the assets and liabilities of the subsidiary,
and any related non-controlling interest and other components
of equity. Any resulting gain or loss is recognised in profit
or loss. Any interest retained in the former subsidiary
is measured at fair value when control is lost.
Transactions eliminated on consolidation
Intra-group balances and transactions and any unrealised
income and expenses arising from intra-group transactions
are eliminated. Unrealised losses are eliminated in the same
way as unrealised gains, but only to the extent that there is no
evidence of impairment.
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 provided to the customer. Determining the timing
of the services rendering – at a point in time or over time –
requires judgement. The details are described below.
Type of product/service
Nature, timing of satisfaction of performance obligations, significant payment terms
Rendering of services (except
storage of stem cells and long-term
contracts described below)
Sales of services are recognised at point in time in which the services are rendered
by reference to completion of the actual service provided. Payments from patients
for agreements are usually fully prepaid, one-off services are paid right after the service
is rendered. Mandatory Health Insurance (MHI), insurance and other companies usually pay
in up to two months after the services are provided.
Sales of goods
Sales of goods are recognised when control over the goods has been transferred
to the customer, which is usually when the Group has sold or delivered goods
to the customer, the customer has accepted the goods and collectability of the related
receivable is reasonably assured. The payments are usually made at the moment
of sale.
Type of product/service
Nature, timing of satisfaction of performance obligations, significant payment terms
Storage of stem cells
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.
Rendering of services (long-term
contracts)
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.
Finance income
Tax
Finance income includes:
• interest income which is recognised as it accrues in profit
or loss using the effective interest method;
• income from initial recognition of other payables to tax
authorities at a market interest rate.
Finance expenses
Finance expenses include interest expense and other borrowing
costs and are recognised in profit or loss using the effective
interest method.
The ‘effective interest rate’ is the rate that exactly discounts
estimated future cash payments or receipts through
the expected life of the financial instrument to:
• the gross carrying amount of the financial asset; or
• the amortised cost of the financial liability.
In calculating interest income and expense, the effective
interest rate is applied to the gross carrying amount
of the asset (when the asset is not credit-impaired)
or to the amortised cost of the liability. However, for financial
assets that have become credit-impaired subsequent
to initial recognition, interest income is calculated by applying
the effective interest rate to the amortised cost of the financial
asset. If the asset is no longer credit-impaired, then
the calculation of interest income reverts to the gross basis.
Foreign currency translation
Foreign currency transactions are translated
into the functional currency using the exchange rates
prevailing at the dates of the transactions. Foreign exchange
gains and losses resulting from the settlement of such
transactions and from the translation at year end exchange
rates of monetary assets and liabilities denominated
in foreign currencies are recognised in profit or loss.
The tax currently payable is based on taxable profit
for the year. Taxable profit differs from profit as reported
in profit or loss because it excludes items of income
or expense that are taxable or deductible in other years and it
further excludes items that are never taxable or deductible.
The Group’s liability for current tax is calculated using tax
rates that have been enacted or substantively enacted
at the reporting date.
Deferred tax is recognised on differences between the carrying
amounts of assets and liabilities in the financial statements
and the corresponding tax bases used in the computation
of taxable profit, and is accounted for using the statement
of financial position liability method. Deferred tax liabilities
are generally recognised for all taxable temporary differences
and deferred tax assets are recognised to the extent that
it is probable that taxable profits will be available against
which deductible temporary differences can be utilised. Such
assets and liabilities are not recognised if the temporary
difference arises from goodwill or from the initial recognition
(other than in a business combination) of other assets
and liabilities in a transaction that affects neither the taxable
profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary
differences arising on investments in subsidiaries
and associates, and interests in joint ventures, except where
the Group is able to control the reversal of the temporary
difference and it is probable that the temporary difference will
not reverse in the foreseeable future.
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.
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Deferred tax is calculated at the tax rates that are expected
to apply in the period when the liability is settled or the asset
realised. Deferred tax is charged or credited to profit or loss,
except when it relates to items charged or credited directly
to other comprehensive income or equity, in which case
the deferred tax is also dealt with in other comprehensive
income or equity.
Freehold buildings
Leasehold improvements
Plant and equipment
No depreciation is provided on land.
Years
50
10–20
5–10
Deferred tax assets and liabilities are offset when there
is a legally enforceable right to set off current tax assets against
current tax liabilities and when they relate to income taxes
levied by the same taxation authority and the Group intends
to settle its current tax assets and liabilities on a net basis.
Assets under construction are not depreciated until they
are completed and available for use. At that moment they
are reclassified in the relevant class of property, plant
and equipment and depreciated accordingly.
Dividends declared
Dividend distribution to the Company’s shareholders
is recognised in the Group’s financial statements when
the shareholders’ right to receive the dividends is established,
either through Board resolution (for interim dividends)
or by the Group’s shareholders in the Annual General Meeting
(for final dividends).
Government grants
Government grants are recognised where there is reasonable
assurance that the grant will be received and all attached
conditions will be complied with. When the grant relates
to an expense item, it is deducted in reporting from the related
expense. When the grant relates to an asset, it reduces
the carrying amount of the asset. The grant is then recognised
in profit or loss over the useful life of the depreciable asset
by way of a reduced depreciation charge.
Property, plant and equipment
Property, plant and equipment are measured at cost less
accumulated depreciation and impairment losses.
Properties in the course of construction for production, rental
or administrative purposes, or for purposes not yet determined,
are carried at cost, less any recognised impairment loss. Cost
includes professional fees and, for qualifying assets, borrowing
costs capitalised in accordance with the Group’s accounting
policy. Depreciation of these assets, on the same basis as other
property assets, commences when the assets are ready
for their intended use.
Depreciation is recognised in profit or loss on the straight
line method over the useful lives of each part of an item
of property, plant and equipment. The annual depreciation
rates for the current and comparative periods are based
on the following estimations of useful lives:
Depreciation methods, useful lives and residual values
are reassessed at the reporting date.
Where the carrying amount of an asset is greater than
its estimated recoverable amount, the asset is impaired
immediately to its recoverable amount.
Expenditure for repairs and maintenance of property, plant
and equipment is charged to profit or loss for the year
in which it is incurred. The cost of major renovations and other
subsequent expenditure is included in the carrying amount
of the asset when it is probable that future economic benefits
in excess of the originally assessed standard of performance
of the existing asset will flow to the Group. Major renovations
are depreciated over the remaining useful life of the related asset.
An item of property, plant and equipment is derecognised upon
disposal or when no future economic benefits are expected
to arise from the continued use of the asset. Any gain or loss
arising on the disposal or retirement of an item of property,
plant and equipment is determined as the difference between
the sales proceeds and the carrying amount of the asset
and is recognised in profit or loss.
Intangible assets
(i) Goodwill
Goodwill represents the difference between the cost
of an acquisition and the fair value of the Group’s share
of the net identifiable assets of the acquired undertaking
at the date of acquisition. Positive goodwill on acquisition
of subsidiaries is included in intangible assets.
The excess of the Group’s interest in the fair value of the new
subsidiaries’ net assets over the consideration paid for their
acquisition (a bargain purchase gain) is recognised in profit
or loss in the year of acquisition of the relevant subsidiary.
Positive goodwill is tested annually for impairment and is carried
at cost less accumulated impairment losses. Gains and losses
on the disposal of an undertaking include the carrying amount
of goodwill relating to the undertaking sold. For the purpose
of impairment testing goodwill is allocated to cash generating
units that are expected to benefit from the synergies
of the combinations.
(ii) Patents and trademarks
Patents and trademarks are measured initially at purchase cost
and are amortised on a straight line basis over their estimated
useful lives. Their estimated useful life is from five to seven
years.
(iii) Software and web site costs
External costs that are directly associated with website
controlled by the Group and that will probably generate
economic benefits exceeding costs beyond one year
are recognised as intangible assets. Subsequently website
costs are carried at cost less any accumulated amortisation
and any accumulated impairment losses. Website costs
are amortised using the straight line method over their useful
lives, not exceeding a period of five years. Amortisation
commences when the site is available for use and is included
within administrative expenses.
An intangible asset is derecognised on disposal, or when
no future economic benefits are expected from use. Gains
or losses arising from derecognition of an intangible asset,
measured as the difference between the net disposal proceeds
and the carrying amount of the asset, are recognised in profit
or loss when the asset is derecognised.
Inventories
Inventories include medicines and medical material
and are stated at the lower of cost and net realisable value.
The cost is determined using the weighted average method.
Net realisable value is the estimated selling price in the ordinary
course of business, less the costs to completion and selling
expenses.
Provisions
Provisions are recognised when the Group has a present
legal or constructive obligation as a result of past events,
it is probable that an outflow of resources will be required
to settle the obligation, and a reliable estimate of the amount
can be made. Where the Group expects a provision
to be reimbursed, for example under an insurance contract,
the reimbursement is recognised as a separate asset but only
when the reimbursement is virtually certain.
Financial instruments
Recognition
The Group recognises financial assets and financial liabilities
when, and only when, it becomes a party of the contractual
provisions of the financial instrument. Trade receivables
and debt securities issued are initially recognised when they
are originated.
Classification
The Group classifies financial assets on the basis of both:
the Group`s business model for managing financial assets,
as well as the contractual cash flow characteristics of the financial
assets.
The Group’s financial assets comprise of trade and other
receivables, as well as 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 business
model in which a financial asset is held at a portfolio level
because this best reflects the way the business is managed
and information is provided to management. The information
considered includes:
• The stated policies and objectives for the portfolio
and the operation of those policies in practice. These
include whether management’s strategy focuses on earning
contractual interest income, maintaining a particular interest
rate profile, matching the duration of the financial assets
to the duration of any related liabilities or expected cash
outflows or realising cash flows through the sale of the assets
• How the performance of the portfolio is evaluated
and reported to the Group’s management
• The risks that affect the performance of the business model
(and the financial assets held within that business model)
and how those risks are managed
• How managers of the business are compensated – e.g.
whether compensation is based on the fair value of the assets
managed or the contractual cash flows collected,
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• The frequency, volume and timing of sales of financial assets
in prior periods, the reasons for such sales and expectations
about future sales activity
Transfers of financial assets to third parties in transactions that
do not qualify for derecognition are not considered sales for this
purpose, consistent with the Group’s continuing recognition
of the assets.
Financial assets – Assessment whether contractual
cash flows are solely payments of principal
and interest
For the purposes of this assessment, ‘principal’ is defined
as the fair value of the financial asset on initial recognition.
‘Interest’ is defined as consideration for the time value
of money and for the credit risk associated with the principal
amount outstanding during a particular period of time
and for other basic lending risks and costs (e.g. liquidity risk
and administrative costs), as well as a profit margin.
In assessing whether the contractual cash flows are solely
payments of principal and interest, the Group considers
the contractual terms of the instrument. This includes assessing
whether the financial asset contains a contractual term that
could change the timing or amount of contractual cash
flows such that it would not meet this condition. In making
this assessment, the Group considers:
• Сontingent events that would change the amount or timing
Initial measurement
Financial assets and financial liabilities are initially measured
at fair value plus or minus correspondingly of 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 reduced 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.
of cash flows
Financial liabilities at amortised cost:
• Terms that may adjust the contractual coupon rate, including
variablerate features
• Prepayment and extension features
• Terms that limit the Group’s claim to cash flows
from specified assets (e.g. nonrecourse features)
A prepayment feature is consistent with the solely payments
of principal and interest criterion if the prepayment amount
substantially represents unpaid amounts of principal
and interest on the principal amount outstanding, which may
include reasonable compensation for early termination
of the contract. Additionally, for a financial asset acquired
at a discount or premium to its contractual par amount,
a feature that permits or requires prepayment at an amount
that substantially represents the contractual par amount
plus accrued (but unpaid) contractual interest (which may
also include reasonable compensation for early termination)
is treated as consistent with this criterion if the fair value
of the prepayment feature is insignificant at initial recognition.
The Group’s financial liabilities comprise of trade and other
payables and borrowings. They are 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.
Other financial liabilities are subsequently measured
at amortised 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
allowance for expected credit losses on financial assets
measured at amortised cost.
The loss allowance for financial assets at amortised cost
is recognised in profit or loss in respondence with a balance
sheet account reducing the carrying amount of the financial
asset. Expected credit losses for counterparties, including
banks, are determined based on historical data of relevant
probability of default and loss given default. Impairment
on cash and cash equivalents is measured on a 12-month
expected loss basis and reflects the short maturities
of the exposures. The Group considers that its cash and cash
equivalents have low credit risk based on the external credit
ratings of the counterparties.
Individually significant financial assets are tested
for impairment on an individual basis. The remaining financial
assets are assessed collectively in groups that share
similar credit risk characteristics. The Group measures loss
allowances at an amount equal to lifetime ECLs.
When determining whether the credit risk of a financial
asset has increased significantly since initial recognition
and when estimating ECLs, the Group considers
reasonable and supportable information that is relevant
and available without undue cost or effort. This includes both
quantitative and qualitative information and analysis, based
on the Group’s historical experience and informed credit
assessment, that includes forward-looking information.
The Group 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 are credit-impaired.
A financial asset is credit-impaired. when one or more events
that have a detrimental impact on the estimated future cash
flows of the financial asset have occurred.
Evidence that a financial asset is credit-impaired includes
the following observable data:
• Significant financial difficulty of the debtor
• It is probable that the debtor will enter bankruptcy
or other financial reorganisation or
• The disappearance of an active market for a security
because of financial difficulties
Write-off
The gross carrying amount of a financial asset is written
off when the Group has no reasonable expectations
of recovering a financial asset in its entirety or a portion
thereof. For individual customers, the Group has
a policy of writing off the gross carrying amount when
the financial asset is 3 years without movements past due
based on Russian legislation. For corporate customers,
the Group individually makes an assessment with respect
to the timing and amount of writeoff 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
asset or part of a group of similar financial assets)
is derecognised when:
• The rights to receive cash flows from the asset have
expired
• The Group retains the right to receive cash flows
from the asset, but has assumed an obligation to pay
them in full without material delay to a third party
under a “pass through” arrangement, or
• The Group has transferred its rights to receive cash
flows from the asset and either (a) has transferred
substantially all the risks and rewards of the asset, or (b)
has neither transferred nor retained substantially all
the risks and rewards of the asset, but has transferred
control of the asset
Any interest in such derecognised financial assets
that is created or retained by the Group, is recognised
as a separate asset or liability.
Derecognition of financial liabilities
A financial liability is derecognised when the obligation
under the liability is discharged or cancelled or expires.
When an existing financial liability is replaced by another
from the same lender on substantially different terms,
or the terms of an existing liability are substantially
modified, such an exchange or modification is treated
as a derecognition of the original liability and the recognition
of a new liability, and the difference in the respective carrying
amounts is recognised in profit or loss.
Changes in cash flows on existing financial liabilities
are not considered as modification, if they result
from existing contractual terms, e.g. changes in fixed
interest rates initiated by banks due to changes in the CBR
key rate, if the loan contract entitles banks to do so
and the Group has an option to either accept the revised
rate or redeem the loan at par without penalty. The Group
treats the modification of an interest rate to a current
market rate using the guidance on floating-rate financial
instruments. This means that the effective interest rate
is adjusted prospectively.
Report and consolidated financial statements Annual Report 2
120
99
98
Offsetting financial instruments
in progress and until the resulting properties are put
into operation.
sources and makes certain adjustments to reflect the terms
of the lease and type of the asset leased.
COVID-19-related rent concessions
Financial assets and financial liabilities are offset and the net
amount reported in the consolidated statement of financial
position if, and only if, there is a currently enforceable
legal right to offset the recognised amounts and there
is an intention to settle on a net basis, or to realise the asset
and settle the liability simultaneously. This is not generally
the case with master netting agreements, and the related
assets and liabilities are presented gross in the consolidated
statement of financial position.
Impairment of non-financial assets
Assets that have an indefinite useful life are not subject
to amortisation and are tested annually for impairment.
Assets that are subject to depreciation or amortisation
are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount may
not be recoverable. An impairment loss is recognised
for the amount by which the asset’s carrying amount
exceeds its recoverable amount. The recoverable amount
is the higher of an asset’s fair value less costs to sell
and value in use. For the purposes of assessing impairment,
assets are grouped at the lowest levels for which there
are separately identifiable cash flows (cash generating units).
Share capital
Proceeds from the issue of ordinary shares are classified
as equity. The difference between the issue price
of the shares and their nominal value is taken to the share
premium account.
Incremental costs directly attributable to the issue of new
shares are recognised as a deduction from share premium
net of any tax effect.
Earnings per share
The Group presents earnings per share (“EPS”) data
for its ordinary shares. EPS is calculated by dividing
the profit or loss attributable to the owners of the Company
by the weighted average number of ordinary shares in issue
during the period, adjusted for own shares held.
Capitalised interest
Interest expense on borrowed funds used for capital
construction projects and the acquisition of property, plant
and equipment is capitalised provided that the interest
expense could have been avoided if the Group had
not made capital investments. Interest is capitalised only
during the period when construction activities are actually
Leases
At inception of a contract, the Group assesses whether
a contract is, or contains, a lease. A contract is, or contains,
a lease if the contract conveys the right to control the use
of an identified asset for a period of time in exchange
for consideration.
Leases in which the Group is a lessee
At commencement or on modification of a contract
that contains a lease component, the Group allocates
the consideration in the contract to each lease component
on the basis of its relative standalone prices. However,
for the leases of property the Group has elected
not to separate nonlease components and account
for the lease and nonlease components as a single lease
component.
The Group recognises a right-of-use asset and a lease
liability at the lease commencement date. The right-of-use
asset is initially measured at cost, which comprises the initial
amount of the lease liability adjusted for any lease payments
made at or before the commencement date, plus any initial
direct costs incurred and an estimate of costs to dismantle
and remove the underlying asset or to restore the underlying
asset or the site on which it is located, less any lease
incentives received.
The right-of-use asset is subsequently depreciated using
the straight-line method from the commencement date
to the end of the lease term, unless the lease transfers
ownership of the underlying asset to the Group by the end
of the lease term or the cost of the right-of-use asset reflects
that the Group will exercise a purchase option. In that case,
the right-of-use asset will be depreciated over the useful life
of the underlying asset, which is determined on the same
basis as those of property and equipment. In addition,
the right-of-use asset is periodically reduced by impairment
losses, if any, and adjusted for certain remeasurements
of the lease liability.
The lease liability is initially measured at the present value
of the lease payments that are not paid at the commencement
date, discounted using the interest rate implicit in the lease
or, if that rate cannot be readily determined, the Group’s
incremental borrowing rate. Generally, the Group uses its
incremental borrowing rate as the discount rate.
The Group determines its incremental borrowing rate
by obtaining interest rates from various external financing
Lease payments included in the measurement of the lease
liability comprise the following:
• Fixed payments, including insubstance fixed payments
• Variable lease payments that depend on an index
or a rate, initially measured using the index or rate
as at the commencement date
• Amounts expected to be payable under a residual value
guarantee
• The exercise price under a purchase option that the Group
is reasonably certain to exercise, lease payments
in an optional renewal period if the Group is reasonably
certain to exercise an extension option, and penalties
for early termination of a lease unless the Group
is reasonably certain not to terminate early
The lease liability is measured at amortised cost using
the effective interest method. It is remeasured when there
is a change in future lease payments arising from a change
in an index or rate, if there is a change in the Group’s estimate
of the amount expected to be payable under a residual value
guarantee, if the Group changes its assessment of whether
it will exercise a purchase, extension or termination option or if
there is a revised insubstance fixed lease payment.
When the lease liability is remeasured in this way,
a corresponding adjustment is made to the carrying amount
of the right-o f-use asset, or is recorded in profit or loss if
the carrying amount of the rightofuse 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 consolidated statement of financial position.
Short-term leases and leases of low-value assets
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.
The Group has applied COVID-19-Related Rent
Concessions – Amendment to IFRS 16. The Group 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 Group applies the practical expedient 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 issued but not yet effective:
The following new and amended standards are not expected
to have a significant impact on the Group’s consolidated
financial statements.
• Onerous contracts – Cost of Fulfilling a Contract
(Amendments to IAS 37);
• Annual Improvements to IFRS Standards 2018–2020;
• 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;
• Disclosure of Accounting Policies (Amendments to IAS 1
and IFRS Practice Statement 2);
• Deferred Tax related to Assets and Liabilities arising
from a Single Transaction (Amendments to IAS 12);
• Definition of Accounting Estimates (Amendments
to IAS 8).
Report and consolidated financial statements Annual Report 2
120
101
100
4. REVENUE
Therapy, surgery and other in-patient medical services
In vitro fertilisation (IVF)
Deliveries
Laboratory examinations and other medical services
Obstetrics and gynaecology out-patient treatments
Diagnostic centre and other out-patient medical services
Oncology
Paediatrics out-patient treatments
Obstetrics and gynaecology in-patient treatments
Paediatrics in-patient treatments
Sales of goods
Storage of stem cells
Other income
2021
RUB’000
5,486,629
3,939,363
2,863,685
2,493,346
2,217,946
2,180,239
2,131,922
1,588,170
1,031,978
676,330
251,654
162,643
195,778
2020
RUB’000
3,262,000
3,452,087
2,433,703
1,750,231
1,941,813
1,735,677
1,271,597
1,289,708
988,114
490,325
236,429
144,576
137,239
TOTAL REVENUE FROM CONTRACTS WITH CUSTOMERS
25,219,683
19,133,499
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
(77% of total revenue); some services are rendered through
the governmental and non-governmental insurance companies
and legal entities. All the contracts are fixed-price and short-
term except for the contracts for the storage of stem cells
and the contract for offering medical services to one of the biggest
Russian oil companies such contracts are fully prepaid.
All the Group’s revenue except for the revenue from the storage
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 recognised over the time of the contract.
The contract liabilities primarily relate to the advance
consideration received from patients. The amount
of RUB 717,705 thousand recognised in short-term contract
liabilities at the beginning of the year was recognised
as revenue during the year ended 31 December 2021
(31 December 2020: RUB 777,742 thousand). The amount
of RUB 67,932 thousand was returned to the patients
and the amount of RUB 271,001 thousand was transferred
to the other contracts during the year ended 31 December
2021 (31 December 2020: RUB 35,059 thousand
and RUB 239,654 thousand respectively).
Revenue of the Group increased by 31.8% as a result
of the expansion of Lapino medical cluster and growth
in utilisation rate for such services as therapy, oncology,
surgery and traumatology. Therapy increased mainly due
to performance of Lapino-4 hospital which was launched
for the treatment of patients with coronavirus.
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
2021
RUB’000
7,517,576
5,477,791
1,367,565
334,712
269,316
148,058
88,513
28,244
2020
RUB’000
6,052,868
3,771,140
1,240,335
398,160
221,117
190,102
101,046
31,852
15,231,775
12,006,620
During the year ended 31 December 2021 the Government
granted RUB 4,526 thousand to cover the additional payroll
costs paid to doctors and other medical staff as a result
of COVID-19. This amount reduced the staff costs
accordingly.
During the year ended 31 December 2020 the Government
granted RUB 108,915 thousand to cover extra payments
to doctors and other medical staff and RUB 7,535 thousand
in respect of materials used as a result of COVID-19. These
amounts reduced the staff and materials costs accordingly.
6. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Payroll and related social taxes
Utilities and materials
Depreciation
Acquiring and encashment
Advertising
Other professional services
Amortisation
Commission fees
Communication costs
Independent auditors’ remuneration
Learning and development
IT support
Other expenses
TOTAL SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES
2021
RUB’000
2,022,217
270,838
209,477
172,536
161,968
134,770
122,176
90,232
39,630
22,964
23,433
20,913
111,208
3,402,362
2020
RUB’000
1,619,580
249,588
172,988
127,240
142,865
142,740
110,450
45,336
45,413
25,078
30,356
40,088
55,071
2,806,793
During the year ended 31 December 2021 the remuneration
of the independent auditors included an amount
of RUB 21,334 thousand regarding audit services
and an amount of RUB 1,630 thousand regarding tax services
(the year ended 31 December 2020: RUB 22,812 thousand
and RUB 2,266 thousand respectively).
Report and consolidated financial statements Annual Report 2
120
103
102
7. STAFF COSTS
Wages and salaries
Social insurance contributions and other taxes
TOTAL STAFF COSTS
The number of employees as at 31 December 2021 was 8,461
(31 December 2020: 8,274).
8. OTHER INCOME AND EXPENSES
2021
RUB’000
7,592,490
1,947,303
9,539,793
2020
RUB’000
6,091,278
1,581,170
7,672,448
During the year ended 31 December 2021 the Group received
other income of RUB 104,424 thousand. This income arose
mostly from the property tax refund amounted to RUB
44,966 thousand by MD Project 2010. During the year ended
31 December 2020 the Group received other income of RUB
226,391 thousand. This income arose mostly from the receipt
of the compensation of costs caused by COVID-19 pandemic
amounted to RUB 134,999 thousand and property tax refund
amounted to RUB 41,868 thousand by Lapino hospital.
The Group incurred other expenses amounted
to RUB 68,007 thousand in the reporting year. These expenses
arose mostly due to fixed assets written-off amounted
to RUB 26,753 thousand. During 2020 the Group incurred
other expenses amounted to RUB 42,279 thousand. These
expenses arose mostly due to an impairment of construction
in progress in LLC Mother and Child Kazan amounted
to RUB 21,146 thousand as the Group abandoned the hospital
construction in this city.
Note
2021
RUB’000
9. NET FINANCE EXPENSES
FINANCE INCOME
Bank interest received
Initial recognition of other payables to tax authorities
at market rate
Other finance income
Finance income
FINANCE EXPENSES
Interest on bank loans
Unwinding of discount on other payables to tax
authorities
Interest on leases
Other interest expenses
Other finance expense
Impairment of trade and other receivables
15
Bank charges
Other impairment provision
Finance expenses
Net foreign exchange transactions (loss) / gain
Net finance expenses
2020
RUB’000
110 796
137 645
141
248 582
(337 014)
(66 011)
(53 962)
(23 770)
(30 959)
(25 522)
−
(537 238)
122 532
(166 124)
93 683
−
−
93 683
(339 240)
(63 950)
(49 033)
(41 259)
(31 647)
(23 650)
(582)
(549 361)
(8 017)
(463 695)
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
TOTAL INCOME TAX EXPENSE
2021
RUB’000
6 158 268
(6 447 365)
(289 097)
57 819
99
(20 086)
(53 074)
(15 242)
2020
RUB’000
4 338 074
(4 435 091)
(97 017)
19 403
259
(8 010)
(16 426)
(4 774)
On 26 July 2019 changes in Tax Code of the Russian
Federation 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% income 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 at 31 December 2021 deferred tax assets relating to tax
losses carried forward in the amount of RUB 333,285 thousand
(31 December 2020: RUB 280,211 thousand) have not been
recognised. Deferred tax assets have not been recognised in respect
of these tax losses because it is not probable that future taxable
profit will be available for utilisation against the benefits therefrom.
As at 31 December 2021, there were temporary differences
(before calculating tax effect) of RUB 9,965,811 thousand
(31 December 2020: RUB 7,595,057 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
2021
6,003,486
2020
4,196,463
75,125,010
75,125,010
Basic and fully diluted earnings per share (RUB)
79.91
55.86
12. DIVIDENDS
On 3 September 2021, the Board of Directors recommended
the payment of RUB 1,352,249 thousand as interim dividends
which corresponds to RUB 18 per share. The dividends
were paid on 26 October 2021.
On 4 September 2020, the Board of Directors recommended
the payment of RUB 736,225 thousand as interim dividends
which corresponds to RUB 9.8 per share. The dividends
were paid on 20 October 2020.
On 19 March 2021, Board of Directors recommended
the payment of RUB 1,427,375 thousand as final dividends
for the year 2020 which corresponds to RUB 19 per share.
The dividends were paid on 25 May 2021.
On 11 August 2020, the Board of Directors recommended
the payment of RUB 1,389,813 thousand as final dividends
for the year 2019 which corresponds to RUB 18.5 per share.
The dividend distribution was approved by the Extraordinary
General Meeting of the shareholders on 3 September 2020.
The dividends were paid on 13 October 2020.
Report and consolidated financial statements Annual Report 2
120
105
104
13. PROPERTY, PLANT AND EQUIPMENT
14. INTANGIBLE ASSETS
8,136,162
759,192
27,796,637
Balance at 31 December 2020
2,032,320
564,812
85,863
3,725,191
Additions
−
−
Freehold
land
and buildings
RUB’000
Property
under
construction
RUB’000
Plant
and equipment
RUB’000
Total
RUB’000
Right-of-use
of freehold
land, build-
ings and plant
and equipment
RUB’000
INITIAL COST
Balance at 1 January 2020
Additions
Disposals
Impairment loss
Transfer from construction
in progress
16,772,921
1,027,126
(5,438)
−
2,128,362
2,002,553
(2,362)
(22,308)
609,649
(45,797)
−
3,488,931
(3,947,493)
458,562
Balance at 31 December 2020
21,283,540
158,752
9,158,576
Additions
Disposals
Transfer from construction
in progress
53,044
(10,390)
749,169
3,696,801
(436)
(1,398,872)
327,992
(159,485)
649,703
(121,978)
−
−
723,077
331,199
(53,168)
−
(175,575)
(22,308)
−
31,323,945
4,409,036
(223,479)
−
Balance at 31 December 2021
22,075,363
2,456,245
9,976,786
1,001,108
35,509,502
DEPRECIATION
Balance at 1 January 2020
(1,839,883)
Depreciation during the year
Accumulated depreciation
on disposals
(395,250)
3,618
Balance at 31 December 2020
(2,231,515)
Depreciation during the year
Accumulated depreciation
on disposals
(461,155)
5,133
Balance at 31 December 2021
(2,687,537)
CARRYING AMOUNTS
−
−
−
−
−
−
−
(4,704,324)
(122,048)
(6,666,255)
(891,312)
32,774
(126,761)
(1,413,323)
15,779
52,171
(5,562,862)
(233,030)
(8,027,407)
(991,882)
137,427
(124,005)
(1,577,042)
22,785
165,345
(6,417,317)
(334,250)
(9,439,104)
Balance at 1 January 2020
14,933,038
2,128,362
Balance at 31 December 2020
19,052,025
158,752
Balance at 31 December 2021
19,387,826
2 456,245
3,431,838
3,595,714
3,559,469
637,144
490,047
666,858
21,130,382
23,296,538
26,070,398
In 2019, the Government granted RUB 500,000 thousand
as support for the construction of Tyumen hospital, while
RUB 360,818 thousand was received in cash. The remaining
amount of RUB 139,182 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 predominantly
relates to the buildings construction through the use
of sub-contractors.
As at 31 December 2021, construction in progress mainly
includes construction costs of Saint Petersburg hospital
amounting to RUB 1,825,075 thousand and Tyumen hospital
amounting to RUB 564,720 thousand.
The amount of borrowing costs capitalised during the year
ended 31 December 2021 was nil (RUB 131,779 thousand
for the year ended 31 December 2020). Capitalisation rate
for loans was 7.19% for the year ended 31 December 2020.
On 31 August 2020, the Group released all collateral
of property, plant and equipment. So 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 2021
and 31 December 2020.
Goodwill
RUB’000
Patents
and trademarks
RUB’000
Software
and website
RUB’000
Total
RUB’000
INITIAL COST
Balance at 1 January 2020
2,032,320
564,812
Additions
−
−
Balance at 31 December 2021
2,032,320
564,812
AMORTISATION
Balance at 1 January 2020
Amortisation during the year
Balance at 31 December 2020
Amortisation during the year
Balance at 31 December 2021
CARRYING AMOUNTS
Balance at 1 January 2020
Balance at 31 December 2020
Balance at 31 December 2021
−
−
−
−
−
2,032,320
2,032,320
2,032,320
(440,146)
(71,238)
(511,384)
(53,426)
(564,810)
124,666
53,428
2
129,598
123,474
253,072
58,466
311,538
(93,953)
(39,212)
(133,165)
(68,750)
(201,915)
35,645
119,907
109,623
2,726,730
123,474
2,850,204
58,466
2,908,670
(534,099)
(110,450)
(644,549)
(122,176)
(766,725)
2,192,631
2,205,655
2,141,945
Goodwill is allocated to each cash-generating unit (CGU),
which is defined as each individual subsidiary or group
of subsidiaries acquired operating as one business in one
particular location.
JSC MC Avicenna
ARTMed Group (Centres of Reproductive Medicine,
located in Krasnoyarsk, Omsk, Novosibirsk and Barnaul)
LLC Medica-2
CJSC MK IDK
LLC Centre of Reproductive Medicine
Subsidiaries acquired in 2011
31 December 2021
RUB’000
31 December 2020
RUB’000
1,055,593
360,154
248,250
211,303
142,193
14,827
2,032,320
1,055,593
360,154
248,250
211,303
142,193
14,827
2,032,320
Goodwill has been allocated for impairment testing purposes
to 6 groups of cash generating units.
In order to assess any impairment in the value of goodwill,
the Group performed a test of the estimated recoverable
amount of the CGUs compared to their carrying value.
The 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.
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 14.8%. The values
assigned to the key assumptions represent management’s
assessment of future trends and have been based on historical
data from both external and internal sources.
No impairment of goodwill was recognised in 2021 and in 2020.
Report and consolidated financial statements Annual Report 2
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106
15. TRADE, OTHER RECEIVABLES AND DEFERRED EXPENSES
Trade receivables net of impairment provision
CAPEX prepayments
Advances paid to suppliers
Property tax to be reimbursed
Deferred expenses
Other receivables
Non-current portion
Current portion
Ageing analysis of trade receivables:
31 December 2021
RUB’000
31 December 2020
RUB’000
751,604
339,909
119,336
59,735
4,866
35,800
1,311,250
339,909
971,341
1,311,250
836,756
630,626
116,807
−
6,081
48,329
1,638,599
630,626
1,007,973
1,638,599
Not past due
Past due
Gross amount
31 December
2021
RUB’000
Impairment
31 December
2021
RUB’000
Gross amount
31 December
2020
RUB’000
Impairment
31 December
2020
RUB’000
572,052
320,647
892,699
(9,434)
(131,661)
(141,095)
717,114
231,113
948,227
(3,188)
(108,283)
(111,471)
In addition to the bad debt provision accrued
as at 31 December 2021 the accounts receivable in the amount
of RUB 2,023 thousand were written-off during the year
ended 31 December 2021 (year ended 31 December 2020:
RUB 15,849 thousand).
The Group performed the calculation of ECL rates separately
for patients, legal entities and insurance companies, meanwhile
ECL rates for the insurance companies were calculated based
on their ratings.
The following table provides information about the exposure
to credit risk and ECLs for trade receivables for patients
as at 31 December 2021.
Ageing
Status
past due
past due
past due
past due
0–30 days
31–60 days
61–90 days
more than 91
days
TOTAL
Weighted-
average
loss rate
Gross
carrying
amount 2021
RUB’000
Loss
allowance
2021
RUB’000
Gross
carrying
amount 2020
RUB’000
Loss
allowance
2020
RUB’000
16%
27%
30%
45%
48,317
17,740
19,251
(7,685)
(4,757)
(5,840)
187,059
(83,542)
55,940
16,781
12,254
96,870
(8,837)
(5,558)
(6,770)
(56,077)
272,367
(101,824)
181,845
(77,242)
The following table provides information about the expo-
sure 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 2021.
Ageing
Status
0–30 days
not past due
past due
past due
past due
31–60 days
61–90 days
more than 91
days
TOTAL
Weighted-
average loss
rate
Gross
carrying
amount 2021
RUB’000
Loss
allowance
2021
RUB’000
Gross
carrying
amount 2020
RUB’000
Loss
allowance
2020
RUB’000
25%
29%
41%
77%
37,383
(9,434)
30,971
(3,188)
17,187
1,553
29,540
(5,001)
(630)
(22,833)
13,952
6,173
29,143
(2,074)
(1,147)
(26,300)
85,663
(37,898)
80,239
(32,709)
Based on the analysis of the historical data for accounts
receivable from related parties amounted to RUB
37,344 thousand no provision is accrued. For accounts
receivable from insurance companies amounted to RUB
497,325 thousand provision is accrued only for those
whose licences had been revoked (as the most part relates
to accounts receivable for MHI services provided whose
payments are guaranteed by the Government). Such provision
of RUB 1,373 thousand was accrued as at 31 December 2021
(31 December 2020: RUB 1,520 thousand).
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.
Report and consolidated financial statements Annual Report 2
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108
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
Other short-term bank deposits with maturity more than 3 months
TOTAL CASH AND CASH EQUIVALENTS
AND SHORT-TERM DEPOSITS
31 December 2021
RUB’000
31 December 2020
RUB’000
1,536,457
2,053,166
3,589,623
−
3,589,623
921,812
2,206,906
3,128,718
746,145
3,874,863
Currency:
RUB
USD
EUR
31 December 2021
RUB’000
31 December 2020
RUB’000
2,869,105
720,518
−
3,589,623
2,822,660
1,052,197
6
3,874,863
The exposure of the Group to credit risk and currency risk
in relation to cash and cash equivalents is reported in Note 23
of these consolidated financial statements.
17. SHARE CAPITAL
Authorised
Issued and fully paid ordinary shares 1 January /
31 December
Number
of shares
Nominal value
USD
Share capital
RUB’000
Share capital
USD’000
125,250,000
75,125,010
0.08
0.08
−
180,585
10,020
6,010
18. SHARE PREMIUM, RESERVES AND RETAINED EARNINGS
Share premium
Reserves
Share premium includes the total amount received in ex-
cess of the total nominal value of the new share capital is-
sued. Incremental costs directly attributable to the issue of new
shares are recognised as a deduction from equity (share
premium) net of any tax effect.
Retained earnings
Reserves include negative common control transactions reserve
in the amount of RUB 682,873 thousand and positive capital
contribution reserve in the amount of RUB 27,521 thousand.
Common control transactions reserve includes differences
between the carrying amount of net assets acquired through
purchases of subsidiaries from parties under common control
and the consideration paid for their acquisition.
LONG-TERM LIABILITIES
Bank loans
Lease liabilities
SHORT-TERM LIABILITIES
Bank loans
Lease liabilities
TOTAL LOANS AND BORROWINGS
Maturity of loans and borrowings:
Within one year
Between one and five years
More than 5 years
31 December 2021
RUB’000
31 December 2020
RUB’000
3,129,443
597,264
1,688,878
97,448
5,513,033
4,801,332
429,145
1,508,632
78,889
6,817,998
31 December 2021
RUB’000
31 December 2020
RUB’000
1,786,326
3,515,922
210,785
5,513,033
1,587,521
4,626,670
603,807
6,817,998
No property, plant and equipment is held as collateral
for the bank loans. More information is disclosed in Note 13.
The terms and debt repayment schedule of loans and lease liabilities are as follows:
Currency
Maturity
31 December 2021
31 December 2020
Unsecured bank
loan
Unsecured bank
loan
Unsecured bank
loan
Unsecured bank
loan
Current lease
liabilities
Non-current
lease liabilities
Face value
RUB’000
Carrying
amount
RUB’000
Face value
RUB’000
Carrying
amount
RUB’000
2023
1,012,859
1,012,859
1,551,652
1,551,652
2024
1,128,830
1,128,830
1,373,737
1,373,737
2022
210,247
210,247
420,490
420,490
2026
2,466,385
2,466,385
2,964,085
2,964,085
2022
97,448
97,448
78,889
78,889
RUB
RUB
RUB
RUB
RUB
RUB
2023–2031
597,264
597,264
429,145
429,145
5,513,033
5,513,033
6,817,998
6,817,998
Retained earnings include accumulated profits and losses
incurred by the Group.
There were no changes during 2021.
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.
Report and consolidated financial statements Annual Report 2
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110
Reconciliation of movements of financial liabilities to cash flows arising from financing activities
21. TRADE AND OTHER PAYABLES
Balance at 1 January
CHANGES IN CASH FLOWS
Proceeds from loans and borrowings
Repayment of loans and borrowings
Payments of lease liabilities
31 December 2021
31 December 2020
Bank loans
RUB’000
Lease liabilities
RUB’000
Bank loans
RUB’000
Lease
liabilities
RUB’000
6,309,964
508,034
6,448,257
649,990
−
(1,490,806)
−
−
1,193,493
(1,319,275)
−
−
−
(152,470)
−
(158,086)
Interest paid included in financing cash flows
Interest paid included in investment cash flows
(340,077)
−
−
−
(349,525)
(131,779)
−
−
Total changes in cash flows
(1,830,883)
(152,470)
(607,086)
(158,086)
LIABILITY-RELATED CHANGES
Discounts on lease agreements
Additions of lease liabilities
Leases terminated
Finance expenses accrued in PL
Finance expenses capitalised in PPE
Total liability-related other changes
Balance at 31 December
20. CONTRACT LIABILITIES
Patient advances
including:
Contract liabilities after more than one year
Contract liabilities within one year
−
−
−
339,240
−
339,240
4,818,321
−
331,199
(41,084)
49,033
−
339,148
694,712
−
−
−
337,014
131,779
468,793
6,309,964
(10,216)
85,863
(113,479)
53,962
−
16,130
508,034
31 December 2021
RUB’000
31 December 2020
RUB’000
2,030,778
1,909,241
460,420
1,570,358
483,026
1,426,215
Contract liabilities that relate to long-term client advances
represent money received from patients on stem cells storage
contracts lasting from 1 to 30 years and long-term contracts
for offering medical services lasting from 1 to 5 years. Contract
liabilities that relate to short-term client advances represent
money received from patients on stem cells storage contracts,
childbirth management contracts lasting from 1 to 9 months,
and other contracts valid up to 1 year.
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
31 December 2021
RUB’000
31 December 2020
RUB’000
1,080,420
1,058,858
785,084
686,820
462,495
278,294
268,879
1,813
71,235
3,635,040
624,808
3,010,232
3,635,040
840,119
561,839
418,204
204,962
193,731
1,384
31,034
3,310,131
679,843
2,630,288
3,310,131
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 is reported in Note 23 of these
consolidated financial statements.
22. RELATED PARTY TRANSACTIONS
The following transactions were carried out with related parties:
31 December 2021 (for the year ended 31 December 2020:
RUB 15,379 thousand).
22.1. Balances and transactions with related parties
The remuneration of the members of the key management
personnel and non-executive directors for the year ended
31 December 2021 was RUB 142,277 thousand (for the year
ended 31 December 2020: RUB 132,290 thousand).
The remuneration of the members of the key management
personnel which remained unpaid as at 31 December
2021 was RUB 25,338 thousand (31 December 2020:
RUB 32,365 thousand).
The Group provided medical informational services to related
parties amounted to RUB 310,438 thousand for the year ended
31 December 2021 (for the year ended 31 December 2020:
RUB 158,321 thousand) and received commission services
from related parties amounted to RUB 41,620 thousand
for the year ended 31 December 2021 (for the year ended
31 December 2020: RUB 15,609 thousand).
The receivables from medical informational services
which remained unpaid as at 31 December 2021
was RUB 36,795 thousand (31 December 2020:
RUB 31,132 thousand).
The Group purchased medical materials from related
parties amounted to RUB 55,251 thousand for year ended
The prepayments for medical materials as at 31 December 2021
were RUB 10,768 thousand (the payables as at 31 December
2020: RUB 45,626 thousand).
The Group received medical services from related parties amounted
to RUB 71,819 thousand for the year ended 31 December 2021
(for the year ended 31 December 2020: RUB 60,627 thousand).
The payables from medical services which remained unpaid
as at 31 December 2021 was RUB 17,769 thousand (31 December
2020: RUB 8,523 thousand).
The Group provided services to the key management personnel
under non-exclusive commercial concession agreement for the year
ended 31 December 2021 amounted to RUB 1,527 thousand
(for the year ended 31 December 2020: RUB 1,220 thousand).
The receivables services under non-exclusive commercial
concession agreements which remained unpaid as at 31 December
2021 was RUB 549 thousand (as at 31 December 2020:
RUB 496 thousand).
The Group purchased intangible assets from related parties
amounted to RUB 5,010 thousand for the year ended
31 December 2021 (for the year ended 31 December 2020:
RUB 967 thousand).
Report and consolidated financial statements Annual Report 2
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112
22.2. Directors’ interests
The direct and indirect interests of the members of the Board
in titles of the Company as at 31 December 2021,
31 December 2020 and as at the date of signing these
consolidated financial statements are as follows, except
for Vitaly Ustimenko:
Name
Mark Kurtser
Type of interest
Effective interest %
Indirect ownership of shares
Kirill Dmitriev (resigned on 5 March 2022)
Indirect interest in shares
Simon Rowlands (resigned on 9 March 2022)
Direct ownership of shares
Vitaly Ustimenko
Direct ownership of shares
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 Board of Directors has the overall responsibility
for the establishment and supervision of the Company’s risk
management framework.
The Group’s risk management policies are established
to identify and analyse the risks faced by the Group
to set appropriate risk limits and controls and monitor
risks and adherence to limits. Risk management policies
and systems are reviewed regularly to reflect changes
in market conditions and in the Group’s activities.
i. Credit risk
Credit risk arises when a failure by counterparties
to discharge their obligations could reduce the amount
of future cash inflows from financial assets on hand
at the reporting date. The Group has no significant
concentration of credit risk. The Group has policies in place
to ensure that sales of products and services are made
to customers with an appropriate credit history and monitors
on a continuous basis the ageing profile of its receivables.
Cash balances are held with various financial institutions.
Member of the Board of Directors Vitaly Ustimenko
acquired GDRs on 24 January 2022, as a result the share
of his ownership increased from 0.0048% to 0.0053%
of the Сompany's share capital.
The calculation of effective interest is based on the total
amount of issued and fully paid shares, including treasury
shares acquired by the Company.
22.3. Dividends declared to related parties
Dividends declared to the parent company MD Medical
Holding Limited amounted to RUB 1,887,866 thousand
for the year ended 31 December 2021 (31 December 2020:
RUB 1,443,963 thousand).
23. FINANCIAL RISK MANAGEMENT
Financial risk factors
The Group is exposed to the following risks from its use
of financial instruments:
• Credit risk
• Liquidity risk
• Market risk
Exposure to credit risk
The carrying amount of financial assets represents
the maximum credit exposure. The maximum exposure to credit
risk at the reporting date was:
Trade and other receivables
Cash and cash equivalents and short-term bank deposits excluding
cash in hand
31 December 2021
RUB’000
31 December 2020
RUB’000
846,706
3,578,216
4,424,922
879,759
3,863,592
4,743,351
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.
Furthermore, according to the internal policy, clients usually pay
in advance except for some particular case.
Cash and cash equivalents and short-term bank
deposits
The Group held cash and cash equivalents and short-term
bank deposits excluding cash in hand of RUB 3,578,216
thousand as at 31 December 2021 (31 December 2020:
RUB 3,863,592 thousand) which represents its maximum credit
exposure on these assets. The cash and cash equivalents
and short-term bank deposits are mostly held with bank
and financial institution counterparties, which are rated Baa3-A1,
based on rating agency Moody’s Investors Service ratings.
Number of banks
External credit rating
Carrying amount
2
1
2
TOTAL
Baa3
A2
A1
The carrying amounts as of 31 Dcember 2020
and external ratings of 2020 were as follows:
2,883,927
394,682
299,607
3,578,216
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
Report and consolidated financial statements Annual Report 2
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114
ii. Liquidity risk
Liquidity risk is the risk that arises when the maturity of assets
and liabilities does not match. An unmatched position
potentially enhances profitability, but can also increase the risk
of losses. The Group has procedures to minimise such losses
including maintaining sufficient cash and other highly liquid
current assets. The following are the contractual maturities
of financial liabilities including estimated interest payments:
31 December
2021
Note
Carrying
amounts
RUB’000
Contrac-
tual cash
flows
RUB’000
2 months
or less
RUB’000
Between
2–12
months
RUB’000
Between
1–2 years
RUB’000
Between
2–5 years
RUB’000
More than
5 years
RUB’000
Bank loans
Lease liabilities
CAPEX
payables
Trade payables
Other payables
and accrued
expenses
19
19
21
21
21
4,818,321
5,327,905
333,966
1,580,779
1,548,275
1,864,885
−
694,712
886,444
24,670
120,691
143,298
361,691
236,094
268,879
268,879
123,820
145,059
1,080,420
1,080,420
1,080,420
−
−
−
−
−
−
−
2,283,928
2,560,592
1,020,010
637,417
161,843
379,765
361,557
9,146,260
10,124,240
2,582,886
2,483,946
1,853,416
2,606,341
597,651
31 December
2020
Note
Carrying
amounts
RUB’000
Contrac-
tual cash
flows
RUB’000
2 months
or less
RUB’000
Between
2–12
months
RUB’000
Between
1–2 years
RUB’000
Between
2–5 years
RUB’000
More than
5 years
RUB’000
Bank loans
Lease liabilities
CAPEX
payables
Trade payables
Other payables
and accrued
expenses
19
19
21
21
21
6,309,964
7,157,141
271,119
1,558,626
1,914,552
2,942,898
469,946
508,034
667,037
193,731
193,731
21,571
59,067
134,664
97,677
104,856
277,474
165,459
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
−
−
−
−
−
−
The Group has bank loans all of which contain debt covenants.
The breach of covenants may require the Group to repay
the loans earlier than indicated in the above table.
iii. Market risk
Market risk is the risk that changes in market prices, such
as foreign exchange rates and interest rates, may affect
the Group’s income or the value of its holdings of financial
instruments.
Interest rate risk
Interest rate risk is the risk that the value of financial
instruments will fluctuate due to changes in market interest
rates. Borrowings issued at variable rates expose the Group
to cash flow interest rate risk. Borrowings issued at fixed
rates expose the Group to fair value interest rate risk.
The Group’s management monitors the interest rate fluctuations
on an ongoing basis and acts accordingly.
As at the reporting date the interest rate profile of interest
bearing financial instruments was as follows:
Fixed rate instruments
Financial assets
Financial liabilities
31 December 2021
RUB’000
31 December 2020
RUB’000
2,053,166
(5,513,033)
(3,459,867)
2,953,051
(6,817,998)
(3,864,947)
In particular, fixed-rate financial liabilities include fixed interest
rate bank loans amounted to RUB 4,818,321 thousand
for which the banks have the option to revise the interest rate
following the change of key rate set by the CBR and the Group
has an option to either accept the revised rate or redeem
the loan at par without penalty.
The Group does not account for any fixed interest rate
instruments at fair value through profit or loss and does not have
any derivative financial instruments, therefore a change in interest
rates at the reporting date would not affect profit or loss or equity.
Currency risk
Currency risk is the risk that the value of financial instruments
will fluctuate due to changes in foreign exchange rates.
Currency risk arises when future commercial transactions
and recognised assets and liabilities are denominated
in a currency that is not the Group’s functional currency.
The Group is exposed to foreign exchange risk arising
from various currency exposures primarily with respect
to the United States Dollar and the Euro. The Group’s
management monitors the exchange rate fluctuations
on an ongoing basis and acts accordingly.
The Group’s exposure to foreign currency risk was as follows:
31 December 2021
31 December 2020
USD
EUR
USD
EUR
Assets
Cash at bank
Short-term bank deposits
Trade and other receivables
Liabilities
CAPEX payables
Trade and other payables and accruals
720,518
−
464
(59,813)
−
−
−
−
(22,227)
(40)
306,052
746,145
330
(1,748)
(531)
Net exposure
661,169
(22,267)
1,050,248
6
−
38
(6,700)
(706)
(7,362)
The following significant exchange rates applied during the year:
USD
EUR
GBP
Average rate
Reporting date spot rate
2021
73,6541
87,1877
101,3437
2020
72,1464
82,4488
92,5689
2021
74,2926
84,0695
2020
73,8757
90,6824
100,0573
100,0425
Report and consolidated financial statements Annual Report 2
120
117
116
Sensitivity analysis
A 10% weakening of the Russian Rouble against
the above currencies will result in the increase in profit
and equity of RUB 63,890 thousand as at 31 December
2021 (31 December 2020: RUB 104,289 thousand).
A 10% strengthening of the Russian Rouble would have
an opposite impact.
Capital management
The Group’s objectives in managing capital are to safeguard
the Group’s ability to continue as a going concern in order
to provide returns to owners and to maintain an optimal capital
structure to reduce the cost of capital.
In order to maintain or adjust the capital structure the Group may
adjust the amount of dividends paid to shareholders, return
capital to owners or issue of new shares.
The Group monitors capital on the basis of the net debt to equity
ratio. This ratio is calculated as net debt divided by total equity.
Net debt is calculated as total loans and borrowings less cash
and cash equivalents. Total equity is calculated as “equity”
shown in the consolidated statement of financial position.
Note
31 December 2021
RUB’000
31 December 2020
RUB’000
19
16
5,513,033
(3,589,623)
1,923,410
23,097,192
8.33%
6,817,998
(3,128,718)
3,689,280
19,952,581
18.49%
Financial liabilities
Less: cash and cash equivalents
Net debt
Total equity
Net debt to equity ratio
The net debt including short-term bank deposits equals
to RUB 1,923,410 thousand as at 31 December 2021 (31 December
2020: RUB 2,943,135 thousand). The net debt ratio adjusted by short-
term bank deposits is 8.33% (31 December 2020: 14.75%)
24. FAIR VALUES
As at 31 December 2021 and 31 December 2020 the Group
had no significant financial assets or liabilities measured at fair
value.
The financial assets of the Group include cash and cash
equivalents and trade and other receivables. The financial
liabilities of the Group include loans and borrowings
and trade and other payables. The fair value of these financial
instruments is classified as Level 3 of fair value class hierarchy
and is estimated only for disclosure purposes using discounted
cash flows taking interest rates adequate to the relevant risk.
The fair values of the Group’s financial assets and liabilities
approximate their carrying amounts at the reporting date.
25. OPERATING ENVIRONMENT
(a) Insurance
As per current legislation in Russian Federation medical clinics
are not required to insure their activities. There is a draft Law
regarding obligatory insurance of medical clinics as from 2013.
The Law has not yet been enacted. At present the Group does
not insure its operational activities but has obtained insurance
cover for some property, plant and equipment. Until the Group
obtains adequate insurance coverage there is a risk of material
adverse effect on operations and statement of financial
position.
(b) Russian business environment
The Group’s operations are primarily located in the Russian
Federation. Consequently, the Group is exposed
to the economic and financial markets of the Russian
Federation, which display the characteristics of an emerging
market. The legal, tax and regulatory frameworks continue
development, but are subject to varying interpretations
and frequent changes which contribute together with other
legal and fiscal impediments to the challenges faced by entities
operating in the Russian Federation.
Starting in 2014, the United States of America, the European
Union and some other countries have imposed and gradually
expanded economic sanctions against a number of Russian
individuals and legal entities. The imposition of the sanctions has
led to increased economic uncertainty, including more volatile
equity markets, a depreciation of the Russian rouble, a reduction
in both local and foreign direct investment inflows and a significant
tightening in the availability of credit. As a result, some Russian
entities may experience difficulties accessing the international
equity and debt markets and may become increasingly dependent
on state support for their operations. The longer-term effects
of the imposed and possible additional sanctions are difficult
to determine. Refer to Note 29 of these consolidated financial
statements for current situation.
Also, the COVID-19 coronavirus pandemic has continued
to create additional 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 environment
on the operations and the financial position
of the Group. The future business environment may
differ from management’s assessment.
(c) Russian tax environment
The taxation system in the Russian Federation continues
to evolve and is characterised by frequent changes
in legislation, official pronouncements and court
decisions, which are sometimes contradictory
and subject to varying interpretation by different
tax authorities. The tax authorities have the power
to impose fines and penalties for tax arrears. A tax year
is generally open for review by the tax authorities during
three subsequent calendar years. Currently the tax
authorities are taking a more assertive and substance-
based approach to their interpretation and enforcement
of tax legislation.
26. NON-CONTROLLING INTERESTS
The only material non-controlling interest in the Group
is related to JSC MD Project 2000. The information
about the subsidiary before any intra-group eliminations
is presented below.
Most of the turnovers are cash based.
Revenue
Profit and total comprehensive income
Profit and other comprehensive income allocated
to non-controlling interests
Dividends paid to non-controlling interests
Non-controlling interests percentage
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Net assets
Carrying amount of non-controlling interests
Other non-controlling interests
2021
RUB’000
3,569,840
1,310,622
65,531
129,150
5%
2020
RUB’000
3,535,701
1,428,837
71,442
65,000
5%
31 December 2021
RUB’000
31 December 2020
RUB’000
3,613,194
1,022,314
(269,557)
(1,193,958)
3,171,993
158,600
105,905
264,505
4,300,934
1,067,896
(221,840)
(702,619)
4,444,371
222,219
121,537
343,756
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Although most of the Group`s operational costs are incurred
in RUB, the management expects that due to high volatility
of foreign currency exchange rates operating expenses
of the Group will increase in 2022. Also, due to restrictions
introduced by various countries, the Group is likely to face
difficulties in supply of some medical inventories necessary
for the treatment services. The Group is currently in search
of potential alternatives.
Other consequences
On 3 March 2022, in connection with events in Ukraine, in light
of market conditions, and in order to maintain orderly markets,
the London Stock Exchange suspended the admission
to trading of the Global Depository Receipts (GDRs) listed
on the London Stock Exchange.
Sergey Kalugin was appointed as an Independent
Non-Executive Director of the Board of Directors.
The changes came into force on 2 March 2022.
Kirill Dmitriev and Simon Rowlands decided to step down
as a member of the Board of Directors. The changes
came into effect on 5 March 2022 and 9 March 2022
respectively.
Other events after reporting period
In January 2022, MD Medical Group opened the clinical
hospital for patients in Lakhta area, a historical district
of St Petersburg.
On 11 February 2022 the Group launched a new
multifunctional hospital Tyumen-2 in Tyumen.
On 21 February 2022, the Group opened the second medical
office of the MD Lab laboratory network in the North-Eastern
Administrative District of Moscow.
27. CAPITAL COMMITMENTS
Capital commitments mostly comprise of the obligations
under construction and equipment purchase contracts
in the amount of RUB 1,037,548 thousand as at 31 December
2021 (31 December 2020: RUB 456,013 thousand).
28. SEGMENT REPORTING
The Group operates in Russian Federation and has one
primary reporting segment: provision of medical services.
The Group evaluates the performance and makes investments
and strategic decisions based upon a review of profitability
for the Group as a whole and does not group subsidiaries
by geography and service lines during the analysis of their
performance.
29. EVENTS AFTER THE REPORTING PERIOD
Military operations in Ukraine
In February 2022, following the recognition of self-proclaimed
republics of Donetsk and Lugansk by the Russian Federation,
additional sanctions were introduced by the United States
of America, the European Union and some other countries.
This may have significant adverse impact on Russia’s economy.
In recent days and weeks, following the commencement
of military operations in Ukraine by the Russian Federation,
additional severe sanctions were imposed by the United
States of America, the European Union and some other
countries on the Russian Government, as well as major
financial institutions and certain other entities and individuals
in Russia. In addition, restrictions were introduced on supply
of various goods and services to Russian entities. In response
to the sanctions described above, the Russian Government
introduced certain currency control measures while the Russian
Central Bank increased the key rate to 20%.
Moreover, the Group presents a significant amount due
from the Government – MHI services. A deterioration
of the economy could result in delays for the Government
to repay the particular debt.
Currency risk
Significant depreciation of the Russian Rouble has resulted
in upward revaluation of USD denominated cash and cash
equivalents. The net effect on profit or loss (before the effect
of income taxes) in case of a 50% weakening of the Russian
Rouble against USD will be RUB 330,585 thousand (based
on currency exposure as at 31 December 2021).
Interest rate risk
A large portion of borrowings, amounting
to RUB 4,818,321 thousand as at 31 December 2021,
are linked to Russian Central Bank’s key rate. The increase
in the key rate to 20% will result in interest expense being
increased by RUB 624,424 thousand on an annualised basis,
assuming balances remain consistent with those outstanding
at 31 December 2021.
Credit risk
The sanctions imposed are likely to have a direct impact
on the ability of certain customers to repay the outstanding
receivables amounting to RUB 840,079 thousand
as at 31 December 2021.
The negative impact on the Russian economy is also likely
to increase the credit risk for many customers and result
in significant additional amount of expected credit losses
being recognised; however, the financial effect is not possible
to quantify.
Impairment
These events have led to depreciation of the Russian rouble,
increased volatility of financial markets and significantly
increased the level of economic uncertainty in the Russian
business environment.
The events described are likely to reduce the Group’s
revenue, and also increase the discount rate. This may result
in impairment of the Group’s CGUs; however, the financial
effect is not possible to quantify.
Liquidity risk
Revenue
As at 31 December 2021 the Group has capital commitments
in USD of RUB 597,382 thousand, CAPEX Payables
in USD of RUB 59,813 thousand and cash at bank
in USD of RUB 720,518 thousand. The Group may face
difficulties to access foreign currency that could result in liquidity
risk in relation to foreign currency needs. The Group maintains
cash with banks that are subject to sanctions.
Already imposed and potential future sanctions are likely
to have an adverse effect on the Russian economy which
is likely to have a negative impact on the Group’s sales.
However, the financial effect is not possible to quantify.
Operating expenses
Report and consolidated financial statements Annual Report 2
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Report
and financial statements
MD MEDICAL GROUP INVESTMENTS PLC
FOR THE YEAR ENDED 31 DECEMBER 2021
OFFICERS, PROFESSIONAL ADVISORS
AND REGISTERED OFFICE
Contents
PAGE
121
122
126
127
131
132
133
134
136
Officers, Professional Advisors and Registered Office
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
BOARD OF DIRECTORS
• Vladimir Mekler – Chairman
• Mark Kurtser
• Vitaly Ustimenko
• Kirill Dmitriev (resigned on 5 March 2022)
• Nikolay Ishmetov
(alternate director to Kirill Dmitriev –
resigned on 5 March 2022)
• Africa Platforms Capital LLP
(appointed as a director on 22 April 2021
and represented by Simon Rowlands;
resigned on 9 March 2022)
• Tatiana Lukina
• Sergey Kalugin (appointed on 2 March 2022)
• Tony Maher (resigned on 21 April 2021)
• Simon Rowlands (resigned on 21 April 2021)
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
Report and financial statements Annual Report 2
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122
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 separate financial
statements of the Company for the year ended 31 December
2021.
INCORPORATION
MD Medical Group Investments Plc was incorporated in Cyprus
on 5 August 2010 as a private limited liability company
under the provisions of the Cyprus Companies Law, Cap. 113.
On 22 August 2012 following special resolution passed
by the shareholder, the name of the Company was changed
from “MD Medical Group Investments Ltd” to “MD Medical
Group Investments Plc” and the Company was converted
into a public limited liability company in accordance
with the provisions of the Cyprus Companies Law, Cap. 113.
PRINCIPAL ACTIVITY
The principal activity of the Company is that of an investment
holding company and, for that purpose, to acquire and hold
controlling and other interests in the share or loan capital
of any company or companies of any nature, but primarily
in the healthcare industry.
FINANCIAL RESULTS
The Company’s financial results for the year ended
31 December 2021 and its financial position as at that
date are set out in the statement of profit or loss and other
comprehensive income on page 14 and in the statement
of financial position on page 15 of these financial
statements.
Profit for the year ended 31 December 2021 amounted
to RUB 3,703,469 thousand (2020: RUB 2,866,548 thousand).
The total assets of the Company as at 31 December
2021 were RUB 12,599,310 thousand (31 December
2020: RUB 11,722,264 thousand) and the net assets
were RUB 12,528,646 thousand (31 December 2020:
RUB 11,604,801 thousand).
DIVIDENDS
In accordance with the Company’s Articles of Association
dividends may be paid out of its profits. To the extent that
the Company declares and pays dividends, owners of GDRs
on the relevant record date will be entitled to receive
dividends in respect of ordinary shares underlying the GDRs.
The Company is a holding company and thus its ability
to pay dividends depends on the ability of its subsidiaries
to pay dividends to the Company in accordance
with relevant legislation in the country of their incorporation
and any contractual restrictions. The payment of such
dividends by its subsidiaries is contingent upon the sufficiency
of their earnings, cash flows and distributable reserves.
On 3 September 2021, the Board of Directors recommended
the payment of RUB 1,352,249 thousand as interim dividends
which corresponds to RUB 18 per share. The dividends
were paid on 26 October 2021.
On 19 March 2021, Board of Directors recommended
the payment of RUB 1,427,375 thousand as final dividends
for the year 2020 which corresponds to RUB 19 per share.
The dividends were paid on 25 May 2021.
On 4 September 2020, the Board of Directors recommended
the payment of RUB 736,225 thousand as interim dividends
which corresponds to RUB 9.8 per share. The dividends
were paid on 20 October 2020.
On 11 August 2020, the Board of Directors recommended
the payment of RUB 1,389,813 thousand as final dividends
for the year 2019 which corresponds to RUB 18.5 per share.
The dividend distribution was approved by the Extraordinary
General Meeting of the shareholders on 3 September 2020.
The dividends were paid on 13 October 2020.
EXAMINATION OF THE DEVELOPMENT, POSITION
AND PERFORMANCE OF THE ACTIVITIES
OF THE COMPANY
The current financial position and performance of the Company
as presented in these financial statements is considered
satisfactory.
The Company through its subsidiaries has one of the largest
nationwide private healthcare regional networks for its core
services and is expanding into new services. It has significant
experience in the provision of full-service private maternity
healthcare services. The Company has secured leading
positions in the Russian private healthcare market across
a range of services including obstetrics and gynaecology,
fertility and IVF treatments, and paediatrics. It has also been
diversifying its offering by adding other medical services for all
family members, such as surgery, urology, traumatology,
cardiology, and oncology, etc. The recently opened facilities
have been multi-disciplinary from the very beginning.
PRINCIPAL RISKS AND UNCERTAINTIES
Details in relation to principal risks and uncertainties and steps
taken to manage these risks and uncertainties are presented
in Notes 17 and 20 ‘Events after the reporting period – Military
operations in Ukraine’ of these financial statements.
The Board of Directors has the overall responsibility
for the establishment and supervision of the Company’s risk
management framework.
DIRECTORS’ INTEREST
The direct and indirect interests of the members of the Board
in titles of the Company as at 31 December 2021, 31 December
2020 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
Kirill Dmitriev (resigned
on 5 March 2022)
Indirect interest
in shares
Simon Rowlands (resigned
on 9 March 2022)
Direct ownership
of shares
Vitaly Ustimenko
Direct ownership
of shares
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.
Member of the Board of Directors Vitaly Ustimenko
acquired GDRs on 24 January 2022, as a result the share
of his ownership increased from 0.0048% to 0.0053%
of the Сompany's share capital.
The calculation of effective interest is based on the total amount
of issued and fully paid shares, including treasury shares acquired
by the Company.
The Company intends through its subsidiaries to expand
its portfolio of hospital and out-patient facilities, broaden its
service offerings by providing patients with the most up-to-
date treatment procedures and medical technology available
on the market, expand its services in Moscow and other
regions, exploit the value of its integrated healthcare network
by making effective use of services across its facilities, optimising
the benefits for patients and its subsidiaries as a whole.
SHARE CAPITAL
There were no changes in the share capital of the Company during
the year.
BOARD OF DIRECTORS
The Board of Directors leads the process in making new
Board member appointments and makes recommendations
on appointments to shareholders. In accordance
with the Appointment Policy for the Board of Directors
and Committees, all directors are subject to appointment
or approval of appointment by shareholders at the first
Annual General Meeting after their appointment, and to re-
appointment at intervals of no more than three years.
Any term beyond six years (e.g. two three-year terms)
for a non-executive director is subject to particularly rigorous
review, and takes into account the need for progressive
refreshing of the Board of Directors.
Simon Rowlands’s appointment as a member of the Board
of Directors ended on 21 April 2021. On 22 April 2021,
Africa Platforms Capital LLP was appointed as a director.
On the same date, Africa Platforms Capital LLP was approved
to be represented on the Board by Simon Rowlands.
Sergey Kalugin was appointed as an independent director
in March 2022. Tony Maher, Kirill Dmitriev and Africa Platforms
Capital LLP (represented by Simon Rowlands) stepped down
as members of the Board of Directors on 21 April 2021,
5 March 2022 and 9 March 2022 respectively.
The members of the Board of Directors who served as at the date
of signing of these financial statements, are presented on page 1.
Refer to Note 16.1. of these financial statements
for the remuneration of the directors and other key
management personnel.
FUTURE DEVELOPMENTS
The Company’s goal is to continually diversify its medical services
through its subsidiaries by expanding its range of services,
maintaining its leading position in the field of high-quality women’s
health and paediatrics, as well as addressing the increasing
demand for private healthcare services in Russia and beyond.
THE BOARD COMMITTEES
Since September 2012, the Board of Directors established
the operation of the following three committees: the Audit
Committee, the Nomination Committee and the Remuneration
Committee.
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124
Audit Committee
Nomination 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 6 December 2019, Mr Kirill Dmitriev and Mr Simon
Rowlands were the other members.
Following the resignation of Mr Simon Rowlands and Mr Kirill
Dmitriev on 5 March 2022 and 9 March 2022, respectively,
Mr Vitaly Ustimenko and Mr Sergey Kalugin were appointed
as other members of the audit committee on 14 March 2022.
The Audit Committee meets at least four times each year
and is responsible for considering:
• The reliability and appropriateness of disclosures in the financial
statements and external financial communication
• The maintenance of an effective system of internal controls
including financial, operational and compliance controls
and risk management system
• Preparation of recommendations to the shareholders
for approval in General Meetings in relation to the appointment,
reappointment and removal of the external auditors
• Approval of the remuneration and terms of engagement
of the external auditors in respect of audit services provided
• The audit process, including monitoring and review
of the external auditors’ performance, independence
and objectivity
• Development and implementation of the policy on non-audit
services provided by the external auditors
• Monitoring compliance with laws and regulations and standard
of corporate governance
The Audit Committee assists the Board of Directors in its oversight
of the performance and leadership of the internal audit activity.
Where the Audit Committee’s monitoring and review activities
reveal cause for concern or scope for improvement, it shall make
recommendation to the Board of Directors on actions needed
to address the issues or to make improvements.
Internal audit
The Audit Committee is responsible for monitoring and review
the effectiveness of the Company’s internal audit function.
In this respect, the Audit Committee may require investigations
by, or under the authority of, the head of Internal Audit
into any activities of the Company which may be of interest
or concern to the Audit Committee.
The Company`s internal auditor is responsible
for the recommendation of an audit plan to the Audit
Committee. The internal auditor carries out auditing assignments
in accordance with such plan and oversees the Company`s
compliance with the plan`s recommendations. The internal auditor
files a quarterly report with his findings to the Audit Committee.
The Nomination Committee comprises one executive and two
non-executive directors, one of whom is independent.
The Nomination Committee is chaired by non-executive
director Mr Vladimir Mekler (since June 2016). Mr Mark Kurtser
and Mr Simon Rowlands were the other members. Following
the resignation of Mr Simon Rowlands on 9 March 2022,
Mr Sergey Kalugin was appointed as other member of the audit
committee on 14 March 2022.
The Nomination Committee meets at least once a year
and is responsible for assisting the Board of Directors
in discharging its corporate governance responsibilities in relation
to appointment of all executive and non-executive directors,
as well as the CEO and CFO of the Company. The main objective
of the Nomination Committee is to lead the process for the Board
of Directors’ appointments and make respective recommendation
to the Board of Directors, ensuring proper balance of the Board
of Directors and qualification of its members. The Nomination
Committee also considers the composition of the Audit
and Remuneration Committees.
Remuneration Committee
The Remuneration Committee comprises two non-executive
directors and one executive director. The Remuneration
Committee was chaired by an independent non-executive
director Mr Simon Rowlands, who stepped down on 5 March
2022. Mr Sergey Kalugin was appointed as the chairman
of the Remuneration Committee on 14 March 2022. The two other
members are Dr Mark Kurtser and Mr Vladimir Mekler.
The Remuneration Committee meets at least once a year
and is responsible for assisting the Board of Directors
in discharging its corporate governance responsibilities in relation
to remuneration of all executive directors and the chairman
of the Board of Directors.
The main objective of the Remuneration Committee
is to determine the framework and policy for the remuneration
of the executive directors, the chairman of the Board of Directors
and senior executives, and the specific remuneration of each
executive director and the chairman of the Board of Directors
and any compensation payments.
CORPORATE GOVERNANCE
Since 2012, the Company has maintained full compliance
with the UK Corporate Governance Code. The Company
is committed to the highest standards of corporate
governance and transparency. The Board of Directors
recognises that good governance is a strategic asset
that helps it to deliver consistent long term value to its
shareholders. By running the Company in an open way,
the Board of Directors enables shareholders to understand
how it has been able to deliver consistently strong results.
The Board of Directors believes that corporate responsibility
is an essential part of good governance and makes sound
business sense, as well as being crucial to the appropriate
management of risk within the Company.
Improving its corporate governance structure in accordance
with the internationally recognised best practices the Company
adopted important policies and procedures.
The Company’s corporate governance policies and practices
are designed to ensure that the Company is focused on upholding
its responsibilities to the shareholders.
The Company’s corporate governance policies and practices
include, inter alia:
• Appointment policy for the Board of Directors and Committees
• Terms of reference of the Audit Committee, Nomination
Committee and Remuneration Committee
• Code of Ethics and Conduct
• 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 Company has set formal policies and written term of reference
in relation to the financial reporting process that include:
• Corporate Accounting policy Guidelines
• Methodology for the Transformation of Financial Statements
from RAS to IFRS
• Financial Reporting Preparation Procedure
• The Group’s structure
The objective of this policу is to establish uniform procedures
and to implement requirements for the preparation
of the financial statements of the Company. The procedure
should be reviewed for compliance with International Financial
Reporting Standards as well as current conditions and planned
changes in the Company’s business activities annually. When
necessary, amendments and additions to this Procedure should
be adopted.
by the Board of Directors by a notice, specifying the matters
to be discussed, issued at least 14 days before the meeting.
If the notice period is less than 21 days or 14 days
as applicable, the meeting will be deemed to have been duly
called if it is so agreed:
• In the case of a meeting called as the annual general
meeting, by all the shareholders entitled to attend and vote,
and
• In the case of any other meeting, by a majority in number
of the members having a right to attend and at the meeting,
being a majority together holding not less than 95 percent
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 representative at any meeting
of the Company.
BRANCHES
MD Medical Group Investments Plc has a branch in Moscow.
TREASURY SHARES
During the year ended 31 December 2021 the Company did
not acquire any treasury shares.
EVENTS AFTER THE REPORTING PERIOD
The events after the reporting date are disclosed in Note 20
to these financial statements.
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.
MEETINGS OF SHAREHOLDERS
By order of the Board of Directors,
The Company shall in each year hold a general meeting as its
annual general meeting in addition to any other meetings
in that year. An annual general meeting and any other
shareholders’ meeting called to pass a special resolution can
be convened by the Board of Directors by a notice, specifying
the matters to be discussed, issued at least 21 days
before the meeting. Any other meetings shall be convened
Vladimir Mekler
Chairman of the Board of Directors
Mark Kurtser
Managing Director, member of the Board of Directors
Moscow, 25 March 2022
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DIRECTORS’ RESPONSIBILITY STATEMENT
The Company’s Board of Directors is responsible
for the preparation of separate financial statements that
give a true and fair view in accordance with International
Financial Reporting Standards as adopted by the European
Union and the requirements of the Cyprus Companies Law,
Cap.113, and for such internal control as the Board of Directors
determines is necessary to enable the preparation of separate
financial statements that are free from material misstatement,
whether due to fraud or error.
This responsibility includes selecting appropriate accounting
policies and applying them consistently; and making
accounting estimates and judgements that are reasonable
in the circumstances.
In preparing the separate financial statements, the Board
of Directors is also responsible for assessing the Company’s
ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern
basis of accounting unless the Board of Directors either intends
to liquidate the Company or to cease operations, or has no
realistic alternative but to do so.
Those charged with governance are responsible for overseeing
the Company’s financial reporting process.
THE BOARD OF DIRECTORS’ CONFIRMATIONS
The Board of Directors confirms that, to the best of its
knowledge:
a. The financial statements, which are presented on pages
121 to 136, which have been prepared in accordance
with International Financial Reporting Standards as adopted
by the European Union and the requirements of the Cyprus
Companies Law, Cap.113, give a true and fair view
of the assets, liabilities, financial position and profit or loss
of the Company.
b. The management report includes a fair review
of the development and performance of the business
and the position of the Company, together with a description
of the principal risks and uncertainties that it faces.
Further, the Board of Directors confirms that, to the best
of its knowledge:
i. Adequate accounting records have been maintained
which disclose with reasonable accuracy
the financial position of the Company and explain its
transactions
ii. All information of which it is aware that is relevant
to the preparation of the financial statements, such
as accounting records and all other relevant records
and documentation, has been made available
to the Company’s auditors
iii. The financial statements disclose the information
required by the Cyprus Companies Law, Cap.113
in the manner so required
iv. The Management Report has been prepared
in accordance with the requirements of the Cyprus
Companies Law, Cap.113, and the information given
therein is consistent with the financial statements
v. The information included in the corporate
governance statement in accordance
with the requirements of subparagraphs (iv) and (v)
of paragraph 2(a) of Article 151 of the Cyprus
Companies Law, Cap. 113, and which is included
as a specific section of the Management
Report, have been prepared in accordance
with the requirements of the Cyprus Companies
Law, Cap, 113, and is consistent with the financial
statements
vi. 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 Cyprus Companies Law, Cap. 113.
By order of the Board of Directors,
Vladimir Mekler
Chairman of the Board of Directors
Mark Kurtser
Managing Director, member of the Board of Directors
Moscow, 25 March 2022
KPMG Limited
Chartered Accountants
11, June 16th 1943 Street, 3022 Limassol, Cyprus
P.O.Box 50161, 3601 Limassol, Cyprus
T: +357 25 869000, F: +357 25 363842
INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS
OF MD MEDICAL GROUP INVESTMENTS PLC
REPORT ON THE AUDIT OF THE SEPARATE FINANCIAL STATEMENTS
Opinion
We have audited the accompanying separate financial
statements of the parent company MD Medical Group
Investments Pic (the “Company”), which are presented
on pages 14 to 40 and comprise the statement of financial
position as at 31 December 2021, 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 separate financial statements, including a summary
of significant accounting policies.
In our opinion, the accompanying separate financial
statements give a true and fair view of the financial position
of the parent Company MD Medical Group Investments Pic
as at 31 December 2021, and of its financial performance
and its cash flows for the year then ended in accordance
with International Financial Reporting Standards as adopted
by the European Union (“IFRS-EU”) and the requirements
of the Cyprus Companies Law, Cap. 113, as amended
from time to time (the “Companies Law, Cap.113”).
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (“ISAs”). Our responsibilities under those
standards are further described in the “Auditors’ responsibilities
for the audit of the separate financial statements” section of our
report. We are independent of the Company in accordance
with the International Code of Ethics (Including International
Independence Standards) for Professional Accountants
of the International Ethics Standards Board for Accountants
(“IESBA Code”) together with the ethical requirements
in Cyprus that are relevant to our audit of the separate
financial statements, and we have fulfilled our other ethical
responsibilities in accordance with these requirements
and the IESBA Code. We believe that the audit evidence
we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Emphasis of matter- Subsequent Event
We draw attention to Note 20 to the separate financial
statements which describes the recent developments
in Russia’s operating environment, as a result of the military
operations in Ukraine and the associated risks
for the Company.
Our opinion is not modified in respect of this matter.
Key audit matters
In addition to the matter described in Emphasis of matter -
Subsequent Event paragraph, above, we have determined
the matters described below to be the key audit matters
to be communicated in our report.
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the separate
financial statements of the current period. These matters
were addressed in the context of our audit of the separate
financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these
matters.
Report and financial statements Annual Report 2
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128
KPMG Limited. a private company limited by shares.
registered in Cyprus under registration number
HE 132822 with its registered office at 14, Esperidon Street,
1087, Nicosia, Cyprus.
Nicosia
P.O. Box 21121, 1502
T: +357 22 209000
F: +357 22 678200
Paphos
P.O. Box 60288, 8101
T: +357 26 943050
F: +357 26 943062
Polis Chrysochous
P.O. Box 66014, 8330
T: +357 26 322098
F: +357 26 322722
Larnaca
P.O. Box 40075, 6300
T: +357 24 200000
F: +357 24 200200
Paralimni / Ayia Napa
P.O. Box 33200, 5311
T; +357 23 820080 F:
+357 23 820084
Investment in subsidiaries
Refer to Note 8 of the separate financial statements (RUB 11,245,257 thousand)
Key audit matter
How the key audit matter was addressed in our audit
The carrying value of the investments in subsidiaries amounts
to RUB 11,245,257 thousand and accounts for more than 89%
of the Company’s total assets as at 31 December 2021.
Significant judgement is required by the management
of the Company in determining whether there are any indica-
tions for impairment and, where such indications exist, in as-
sessing 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 separate financial state-
ments and because inherent uncertainty and subjectivity is in-
volved 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 separate financial statements.
Our audit procedures included among others the following:
Made inquiries of management regarding the indicators they
assess as possible indicators of impairment for relevant assets/
CGUs
Inspected management’s assessment and consider wheth-
er further indicators should have been assessed based on our
knowledge of the business, its operating environment, indus-
try knowledge, current market conditions and other information
obtained during the audit
Verified the accuracy of management’s calculations for those
assets/CGUs subject to impairment testing and consider
whether the assets/CGUs tested are complete
Evaluated the valuation techniques, assumptions and data used
by management to make their accounting estimates (and range
thereof) used for value in use/fair value less costs of disposal.
Evaluated the completeness, accuracy and relevance of disclo-
sures required by IAS 36, including disclosures.
Other information
The Board of Directors is responsible for the other information.
The other information comprises the Management Report.
Our opinion on the separate financial statements does
not cover the other information and we do not express
any form of assurance conclusion thereon, except as required
by the Companies Law, Cap.113.
In connection with our audit of the separate financial
statements, our responsibility is to read the other information
and, in doing so, consider whether the other information
is materially inconsistent with the separate 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 management report, our report in this
regard is presented in the “Report on other legal requirements
“ section.
Responsibilities of the Board of Directors
and those charged with governance
for the separate financial statements
The Board of Directors is responsible for the preparation
of separate financial statements that give a true and fair
view in accordance with IFRS-EU and the requirements
of the Companies Law, Cap. 113, and for such internal control
as the Board of Directors determines is necessary to enable
the preparation of separate financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the separate financial statements, the Board
of Directors is responsible for assessing the Company’s ability
to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern
basis of accounting, unless there is an intention to either
liquidate the Company or to cease 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
reporting process.
Auditors’ responsibilities for the audit
of the separate financial statements
Our objectives are to obtain reasonable assurance
about whether the separate financial statements as a whole
are free from material misstatement, whether due to fraud
or error, and to issue an auditors’ report that includes
our opinion. Reasonable assurance is a high level of assurance
but is not a guarantee that an audit conducted in accordance
with ISAs will always detect a material misstatement when
it exists. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic
decisions of users taken on the basis of these separate financial
statements.
Auditors’ responsibilities for the audit
of the separate financial statements (continued)
As part of an audit in accordance with ISAs, we exercise
professional judgment and maintain professional skepticism
throughout the audit. We also:
• Identify and assess the risks of material misstatement
of the separate financial statements, whether due to fraud
or error, design and perform audit procedures responsive
to those risks, and obtain audit evidence that is sufficient
and appropriate to provide a basis for our opinion.
The risk of not detecting a material misstatement resulting
from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant
to the audit in order to design audit procedures
that are appropriate in the circumstances,
but not for the purpose of expressing an opinion
on the effectiveness of the Company’s internal control.
• Evaluate the appropriateness of accounting policies used
and the reasonableness of accounting estimates and related
disclosures made by the Board of Directors.
• Conclude on the appropriateness of the Board of Directors’
use of the going concern basis of accounting and, based
on the audit evidence obtained, whether a material
uncertainty exists related to events or conditions that may
cast significant doubt on the Company’s ability to continue
as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in our
auditors’ report to the related disclosures in the separate
financial statements or, if such disclosures are inadequate,
to modify our opinion. Our conclusions are based
on the audit evidence obtained up to the date of our
auditors’ report. However, future events or conditions may
cause the Company to cease to continue as a going
concern.
• Evaluate the overall presentation, structure and content
of the separate financial statements, including
the disclosures, and whether the separate financial
statements represent the underlying transactions and events
in a manner that achieves a true and fair view.
We communicate with those charged with governance
regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including
Report and financial statements Annual Report 2
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130
any significant deficiencies in internal control that we identify
during our audit.
We also provide those charged with governance
with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate
with them all relationships and other matters that may
reasonably be thought to bear on our independence,
and where applicable, actions taken to eliminate threats
or safeguards applied.
From the matters communicated with those charged
with governance, we determine those matters that
were of most significance in the audit of the separate financial
statements of the current period and are therefore the key audit
matters. We describe these matters in our auditors’ report.
REPORT ON OTHER LEGAL 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 separate 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.
Other Matter
Reporting responsibilities
This report, including the opinion, has been prepared
for and only for the Company’s members as a body
in accordance with Section 69 of Law L.53(I)/2017 and for no
other purpose. We do not, in giving this opinion, accept
or assume responsibility for any other purpose or to any other
person to whose knowledge this report may come to.
Consolidated financial statements
We have reported separately on the consolidated financial
statements of the Company and its subsidiaries for the year
ended 31 December 2021.
The engagement partner on the audit resulting in this
independent auditors’ report is George S.
Certified Public Accountant and Registered Auditor7
for and on behalf of
KPMG Limited
Certified Public Accountants and Registered Auditors
11, June 16th 1943 Street
3022 Limassol
Cyprus
25 March 2022
STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
For the year ended 31 December 2021
Dividend income
Revenue from recharging of expenses
Revenue from advertising
Total revenue
Other income
Other expenses
Selling, general and administrative expenses
Operating profit
Finance income
Finance expenses
Net foreign exchange transactions (loss) / gain
Net finance (expenses) / income
Profit before tax
Income tax
Profit for the year
TOTAL COMPREHENSIVE INCOME FOR THE YEAR
Note
16.2
16.3
4
5
5
5
5
6
2021
RUB’000
2020
RUB’000
3,993,512
3,028,184
98,886
16,199
150,968
15,455
4,108,597
3,194,607
8,126
(5,503)
(405,752)
3,705,468
5,949
(1,022)
(6,926)
(1,999)
9,195
(54,793)
(411,188)
2,737,821
8,901
(1,764)
121,590
128,727
3,703,469
2,866,548
−
3,703,469
3,703,469
−
2,866,548
2,866,548
The Notes on pages 136 to 155 are an integral part
of this report and the financial statements
Report and financial statements Annual Report 2
120
133
132
STATEMENT OF FINANCIAL POSITION
STATEMENT OF CHANGES IN EQUITY
As at 31 December 2021
For the year ended 31 December 2021
ASSETS
Property, plant and equipment
Intangible assets
Investments in subsidiaries
Total non-current assets
Inventories
Trade and other receivables
Current tax assets
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 2021
RUB’000
31 December 2020
RUB’000
9
10
8
11
12
12
13
15
7,592
15,130
11,245,257
11,267,979
3,396
563,400
4,919
−
759,616
1,331,331
12,599,310
180,585
5,243,319
328,510
6,776,232
9,702
7,023
10,497,717
10,514,442
1,479
70,025
4,919
746,145
385,254
1,207,822
11,722,264
180,585
5,243,319
328,510
5,852,387
12,528,646
11,604,801
70,664
70,664
117,463
117,463
12,599,310
11,722,264
On 25 March 2022, 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
First Deputy CEO
Chief Financial Officer (until 31.12.2021)
Note
Share
capital
RUB’000
Share
premium
RUB’000
Other
reserves
RUB’000
Retained
earnings
RUB’000
Total
RUB’000
Balance at 1 January 2021
180,585
5,243,319
328,510
5,852,387
11,604,801
TOTAL COMPREHENSIVE INCOME
Profit and other comprehensive
income for the year
CONTRIBUTIONS BY
AND DISTRIBUTIONS TO OWNERS
Dividends declared
7
−
−
−
−
−
3,703,469
3,703,469
−
(2,779,624)
(2,779,624)
Balance at 31 December 2021
180,585
5,243,319
328,510
6,776,232
12,528,646
Share premium is not available for distribution.
STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2020
Note
Share
capital
RUB’000
Share
premium
RUB’000
Other
reserves
RUB’000
Retained
earnings
RUB’000
Total
RUB’000
Balance at 1 January 2020
180,585
5,243,319
328,510
5,111,877
10,864,291
TOTAL COMPREHENSIVE INCOME
Profit and other comprehensive
income for the year
CONTRIBUTIONS BY
AND DISTRIBUTIONS TO OWNERS
Dividends declared
7
−
−
−
−
−
2,866,548
2,866,548
−
(2,126,038)
(2,126,038)
Balance at 31 December 2020
180,585
5,243,319
328,510
5,852,387
11,604,801
The Notes on pages 136 to 155 are an integral part of these
report and financial statements
The Notes on pages 136 to 155 are an integral part of these
report and financial statements
Report and financial statements Annual Report 2
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135
134
STATEMENT OF CASH FLOWS
For the year ended 31 December 2021
CASH FLOWS FROM OPERATING ACTIVITIES
Profit for the year
Adjustments for:
Depreciation
Amortisation
Dividend income
Finance expenses
Finance income
Net foreign exchange loss / (gain)
Disposal of investments in subsidiaries due
to liquidation
Impairment of investments in subsidiaries
Cash flows used in operations before working
capital changes
Decrease / (increase) in trade and other receivables
Increase in inventories
(Decrease) / increase in trade and other payables
Cash flows used in operations
Dividends received
Tax paid
Net cash flows from operating activities
Note
2021
RUB’000
2020
RUB’000
Note
2021
RUB’000
2020
RUB’000
4
4
16.2
5
5
5
8
8
16.2
3,703,469
2,866,548
5,710
5,351
7,862
5,107
(3,993,512)
(3,028,184)
1,022
(5,949)
6,926
−
3,920
(273,063)
50,277
(1,917)
(29,762)
(254,465)
3,449,830
−
3,195,365
1,764
(8,901)
(121,590)
15,156
38,930
(223,308)
(45,293)
(310)
31,647
(237,264)
3,028,184
(4,919)
2,786,001
CASH FLOWS FROM INVESTING ACTIVITIES
Capital contributions to subsidiaries
Acquisition of property, plant and equipment
Acquisition of intangible assets
Placing short-term bank deposits
Proceeds from short-term bank deposits return
Interest received
5
Net cash flows from / (used in) investing
activities
CASH FLOWS USED IN FINANCING ACTIVITIES
Finance expenses paid
Payments of lease liabilities
(768,460)
(496)
(13,458)
(866,831)
1,648,623
5,769
5,147
(908)
(2,940)
(294,338)
(1,369)
(4,456)
(2,097,704)
1,845,257
9,917
(542,693)
(1,570)
(5,440)
Dividends paid to owners of the Company
(2,726,685)
(2,211,202)
Net cash flows used in financing activities
(2,730,533)
(2,218,212)
Net increase 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
12
12
469,979
385,254
(95,617)
759,616
25,096
153,339
206,819
385,254
The Notes on pages 136 to 155 are an integral part of these
report and financial statements
The Notes on pages 136 to 155 are an integral part of these
report and financial statements
Report and financial statements Annual Report 2
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137
136
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2021
1. INCORPORATION AND PRINCIPAL
ACTIVITIES
MD Medical Group Investments Plc (the “Company”)
was incorporated in Cyprus on 5 August 2010 as a private
limited liability company under the provisions of the Cyprus
Companies Law, Cap. 113. The Company is domiciled
in Russia.
In August 2012, following the special resolution passed
by the shareholder, the Company was converted into a public
limited liability company in accordance with the provisions
of the Cyprus Companies Law, Cap. 113.
Its Registered Office is at Dimitriou Karatasou 15, Anastasio
Building, 6th floor, office 601, Strovolos, 2024, Nicosia,
Cyprus.
The principal activity of the Company is that of an investment
holding company and, for that purpose, to acquire and hold
controlling and other interests in the share or loan capital
of any company or companies of any nature, but primarily
in the healthcare industry.
2. BASIS OF PREPARATION
(a) Statement of compliance
These financial statements have been prepared
in accordance with International Financial Reporting
Standards as adopted by the European Union (IFRS-
EU) and the requirements of the Cyprus Companies Law,
Cap.113.
These are the separate financial statements of the Company.
The Company has also prepared consolidated financial
statements in accordance with IFRS as adopted by the EU
for the Company and its subsidiaries (“the Group”).
The consolidated financial statements are available at 15
Dimitriou Karatasou street, Anastasio Building, 6th floor,
office 601, 2024 Nicosia, Cyprus.
Users of these parent’s separate financial statements should
read them together with the Group’s consolidated financial
statements as at and for the year ended 31 December 2021
in order to obtain a proper understanding of the financial
position, the financial performance and the cash flows
of the Company and the Group.
(b) Basis of measurement
This report and the financial statements have been prepared
under the historical cost convention.
(c) Functional and presentation currency
This report and the financial statements are presented
in Russian Roubles (RUB’000) which is the functional currency
of the Company. Financial information presented in Russian
Roubles has been rounded to the nearest thousand except
when otherwise indicated.
(d) Use of estimates and judgements
Preparing these financial statements in accordance with IFRSs
requires management to exercise their judgement to make
estimates and assumptions that affect the application
of accounting policies and the reported amounts of assets
and liabilities, income and expenses.
The estimates and underlying assumptions are based
on historical experience and various other factors that
are deemed reasonable based on knowledge available at that
time. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed
and where necessary revised on an ongoing basis. Revisions
to estimates are recognised prospectively.
In particular, information about significant areas of estimation,
uncertainty and critical judgments in applying accounting
policies that have the most significant effect on the amount
recognised in the financial statements are described below:
Impairment of investments in subsidiaries
The Company periodically evaluates the recoverability
of investments in subsidiaries whenever indicators
of impairment are present. Indicators of impairment include
such items as declines in revenues, earnings or cash flows
or material adverse changes in the economic or political
stability of a particular country, which may indicate that
the carrying amount of an asset is not recoverable. If facts
and circumstances indicate that investment in subsidiaries may
be impaired, the estimated future discounted cash flows
associated with these subsidiaries would be compared to their
carrying amounts to determine if a write down to fair value
is necessary. As at the reporting date, there were no indicators
of impairment.
create additional estimation uncertainties and impact certain
key assumptions in the valuation of assets used for preparation
of these financial statements.
Measurement of fair values
A number of the Company’s accounting policies
and disclosures require the measurement of fair values, for both
financial and non financial assets and liabilities.
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 impairment have been identified.
When measuring the fair value of an asset or a liability,
the Company uses observable market data as far as possible.
Fair values are categorised into different levels in a fair value
hierarchy based on the inputs used in the valuation techniques
as follows:
• Level–1 quoted prices (unadjusted) in active markets
for identical assets or liabilities.
• Level–2 inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either
directly (i.e. as prices) or indirectly (i.e. derived from prices).
• Level–3 inputs for the asset or liability that are not based
on observable market data (unobservable inputs).
If the inputs used to measure the fair value of an asset
or a liability fall into different levels of the fair value hierarchy,
then the fair value measurement is categorised in its entirety
in the same level of the fair value hierarchy as the lowest level
input that is significant to the entire measurement.
COVID-19
In December 2019, the emergence of a new strain
of coronavirus (COVID-19) was reported in China and has
subsequently spread globally. On 11 March 2020, the World
Health Organisation declared the COVID-19 outbreak
a pandemic. Mobility restrictions, quarantines and similar
lockdown measures implemented 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 pandemic on its operations with a special focus
on protection of the health of employees and uninterrupted
business processes.
The major impact of COVID-19 on the macroeconomic
environment in the healthcare industry resulted in a number
of consequences on operational and financial performance
of the Company.
The value in use of each CGU tested for impairment
is calculated 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 committed initiatives.
The cash flows include ongoing capital expenditure 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 scenario. This assumes an impact on 2021/22
revenues and profits.
As a result, an impairment loss amounting
to RUB 3,920 thousand was recognised during the year ended
31 December 2021.
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 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.
3. SIGNIFICANT ACCOUNTING POLICIES
The accounting policies applied in these financial statements
are consistent with those followed in the Company’s financial
statements as at 31 December 2020 and for the year then
ended.
Impairment of non-financial assets
Management has considered the impact of COVID-19
on the business of the Company. Current market conditions
New standards and amendments applied for the first
time in 2021 did not impact these financial statements
of the Company.
Report and financial statements Annual Report 2
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139
138
Subsidiary companies
Subsidiaries are entities controlled by the Company. Control
exists where the Company is exposed, or has rights, to variable
returns from its involvement with the investee and has the ability
to affect those returns through its power over the investee.
Investments in subsidiary companies are stated at cost
less provision for impairment in value, which is recognised
as an expense in the period in which the impairment
is identified.
Dividend income
Dividend income is recognised in the statement of profit or loss
and other comprehensive income when the right to receive
payment is established.
Revenue
Revenue represents the amount of consideration to which
the Company expects to be entitled in exchange for transferring
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. The Company recharges to subsidiaries IT,
advertising, call centre and other expenses, relating to services
that are provided by third parties for the benefit of a number
of subsidiaries. Recharging is made over time as the services
are transferred by third parties to subsidiaries on the basis
of a cost plus margin arrangement.
Finance income
Finance income includes interest income which is recognised
as it accrues in profit or loss using the effective interest method.
Finance expenses
Finance expenses include bank charges and interest expense.
Bank charges are recognised as expenses in the period
in which they fall due and interest expense is recognised as it
accrues in profit or loss using the effective interest method.
The ‘effective interest rate’ is the rate that exactly discounts
estimated future cash payments or receipts through
the expected life of the financial instrument to:
• The gross carrying amount of the financial asset, or
• The amortised cost of the financial liability
In calculating interest income and expense, the effective interest
rate is applied to the gross carrying amount of the asset (when
the asset is not credit-impaired) or to the amortised cost
of the liability. However, for financial assets that have become
credit-impaired subsequent to initial recognition, interest
income is calculated by applying the effective interest rate
to the amortised cost of the financial asset. If the asset is no
longer credit-impaired, then the calculation of interest income
reverts to the gross basis.
Foreign currency transactions
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates
of the transactions. Foreign exchange gains and losses resulting
from the settlement of such transactions and from the translation
at year end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in profit or loss
under the category finance income or finance expenses.
Tax
The tax currently payable is based on taxable profit for the year.
Taxable profit differs from profit as reported in profit
or loss because it excludes items of income or expense that
are taxable or deductible in other years and it further excludes
items that are never taxable or deductible. The Company’s
liability for current tax is calculated using tax rates that have
been enacted or substantively enacted at the reporting date.
Deferred tax is recognised on differences between the carrying
amounts of assets and liabilities in the financial statements
and the corresponding tax bases used in the computation
of taxable profit, and is accounted for using the statement
of financial position liability method. Deferred tax liabilities
are generally recognised for all taxable temporary differences
and deferred tax assets are recognised to the extent that
it is probable that taxable profits will be available against which
deductible temporary differences can be utilised.
Deferred tax liabilities are recognised for taxable temporary
differences arising on investments in subsidiaries, except where
the Company is able to control the reversal of the temporary
difference and it is probable that the temporary difference will
not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each
reporting date and reduced to the extent that it is no longer
probable that sufficient taxable profits will be available to allow
all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected
to apply in the period when the liability is settled or the asset
realised. Deferred tax is charged or credited to profit or loss,
except when it relates to items charged or credited directly
to other comprehensive income or equity, in which case
the deferred tax is also dealt with in other comprehensive
income or equity.
Deferred tax assets and liabilities are offset when there
is a legally enforceable right to set off current tax assets against
current tax liabilities and when they relate to income taxes
levied by the same taxation authority and the Company intends
to settle its current tax assets and liabilities on a net basis.
The measurement of deferred tax reflects the tax consequences
that would follow from the manner in which the Company
expects, at the reporting date, to recover or settle the carrying
amount of its assets and liabilities.
Dividends declared
Interim dividend distributions to the Company's shareholders
are recognised as a liability when it is both appropriately
authorised and no longer at the Company’s discretion (i.e.
when the Company has an obligation to pay). Final dividend
distributions to the Company's shareholders are recognised
in the Company's financial statements in the year in which they
are approved by the Company's shareholder.
Financial instruments
Recognition
The Company recognises financial assets and financial liabilities
when, and only when, it becomes a party of the contractual
provisions of the financial instrument. Trade receivables
and debt securities issued are initially recognised when they
are originated.
Classification
The Company classifies financial assets on the basis of both:
the Company`s business model for managing financial
assets, as well as the contractual cash flow characteristics
of the financial assets.
The Company’s financial assets comprise of trade and other
receivables and cash and cash equivalents. They are non-
derivative financial assets with fixed or determinable payments
that are not quoted in an active market and for which there
is no intention of trading the receivable. All of the Company’s
financial 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 portfolio level because this best reflects the way
the business is managed and information is provided
to management. The information considered includes:
• The stated policies and objectives for the portfolio
and the operation of those policies in practice. These
include whether management’s strategy focuses on earning
contractual interest income, maintaining a particular interest
rate profile, matching the duration of the financial assets
to the duration of any related liabilities or expected cash
outflows or realising cash flows through the sale of the assets
• How the performance of the portfolio is evaluated
and reported to the Company’s management
• The risks that affect the performance of the business model
(and the financial assets held within that business model)
and how those risks are managed
• How managers of the business are compensated –
e.g. whether compensation is based on the fair value
of the assets managed or the contractual cash flows
collected
• The frequency, volume and timing of sales of financial assets
in prior periods, the reasons for such sales and expectations
about future sales activity
Transfers of financial assets to third parties in transactions that
do not qualify for derecognition are not considered sales for this
purpose, consistent with the Company’s continuing recognition
of the assets.
Financial assets – Assessment whether contractual
cash flows are solely payments of principal
and interest
For the purposes of this assessment, ‘principal’ is defined
as the fair value of the financial asset on initial recognition.
‘Interest’ is defined as consideration for the time value
of money and for the credit risk associated with the principal
amount outstanding during a particular period of time
and for other basic lending risks and costs (e.g. liquidity risk
and administrative costs), as well as a profit margin.
In assessing whether the contractual cash flows are solely
payments of principal and interest, the Company considers
the contractual terms of the instrument. This includes assessing
whether the financial asset contains a contractual term that
could change the timing or amount of contractual cash
flows such that it would not meet this condition. In making
this assessment, the Company considers:
Report and financial statements Annual Report 2
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• Contingent events that would change the amount or timing
Financial liabilities at amortised cost:
of cash flows
• Terms that may adjust the contractual coupon rate, including
variablerate features
• Prepayment and extension features
• Terms that limit the Company’s claim to cash flows
from specified assets (e.g. nonrecourse features)
A prepayment feature is consistent with the solely payments
of principal and interest criterion if the prepayment amount
substantially represents unpaid amounts of principal
and interest on the principal amount outstanding, which may
include reasonable compensation for early termination
of the contract. Additionally, for a financial asset acquired
at a discount or premium to its contractual par amount,
a feature that permits or requires prepayment at an amount
that substantially represents the contractual par amount
plus accrued (but unpaid) contractual interest (which may
also include reasonable compensation for early termination)
is treated as consistent with this criterion if the fair value
of the prepayment feature is insignificant at initial recognition.
The Company’s financial liabilities comprise of trade and other
payables. 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 reduced
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 Company
in the management of its short-term investments.
Other financial liabilities are subsequently measured
at amortised 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
measured at amortised cost.
The loss allowance for financial assets at amortised cost
is recognised in profit or loss in respondence with a balance
sheet account reducing the carrying amount of the financial
asset. Expected credit losses for counterparties, including
banks, are determined based on historical data of relevant
probability of default and loss given default. Impairment on cash
and cash equivalents is measured on a 12-month expected
loss basis and reflects the short maturities of the exposures.
The Company considers that its cash and cash equivalents
have low credit risk based on the external credit ratings
of the counterparties.
Individually significant financial assets are tested for impairment
on an individual basis. The remaining financial assets
are assessed collectively in groups that share similar credit
risk characteristics. 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 without 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 includes 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 Company 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
financial assets carried at amortised cost are credit-impaired.
A financial asset is ‘credit-impaired’ when one or more events
that have a detrimental impact on the estimated future cash
flows of the financial asset have occurred.
Evidence that a financial asset is credit-impaired includes
the following observable data:
• Significant financial difficulty of the debtor
• It is probable that the debtor will enter bankruptcy or other
financial reorganisation or
• The disappearance of an active market for a security
because of financial difficulties
An impairment loss is reversed if the reversal can be related
objectively to an event occurring after the impairment loss
was recognised. For financial assets measured at amortised
cost the reversal is recognised in profit or loss.
Based on the analysis of the historical data the accounts
receivable mainly represents by receivable from related parties
and no provision is accrued.
Derecognition of financial assets
A financial asset (or, where applicable a part of a financial
asset or part of a group of similar financial assets)
is derecognised when:
• The rights to receive cash flows from the asset have
expired
• The Company retains the right to receive cash flows
from the asset, but has assumed an obligation to pay them
in full without material delay to a third party under a “pass
through” arrangement or
• The Company has transferred its rights to receive cash
flows from the asset and either (a) has transferred
substantially all the risks and rewards of the asset,
or (b) has neither transferred nor retained substantially all
the risks and rewards of the asset, but has transferred
control of the asset
Any interest in such derecognised financial assets that
is created or retained by the Company, is recognised
as a separate asset or liability.
Derecognition of financial liabilities
A financial liability is derecognised when the obligation
under the liability is discharged or cancelled or expires.
When an existing financial liability is replaced by another
from the same lender on substantially different terms,
or the terms of an existing liability are substantially modified,
such an exchange or modification is treated as a derecognition
of the original liability and the recognition of a new liability,
and the difference in the respective carrying amounts
is recognised in profit or loss.
Offsetting financial instruments
Financial assets and financial liabilities are offset and the net
amount reported in the statement of financial position
if, and only if, there is a currently enforceable legal right
to offset the recognised amounts and there is an intention
to settle on a net basis, or to realise the asset and settle
the liability simultaneously. This is not generally the case
with master netting agreements, and the related assets
and liabilities are presented gross in the statement
of financial position.
Impairment of non-financial assets
Assets that have an indefinite useful life are not subject
to amortisation and are tested annually for impairment.
Assets that are subject to depreciation or amortisation
are reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount may
not be recoverable. An impairment loss is recognised
for the amount by which the asset’s carrying amount
exceeds its recoverable amount. The recoverable amount
is the higher of an asset’s fair value less costs to sell
and value in use. For the purposes of assessing impairment,
assets are grouped at the lowest levels for which there
are separately identifiable cash flows (cash generating
units).
Share capital
Proceeds from the issue of ordinary shares are classified
as equity. The difference between the issue price
of the shares and their nominal value is taken to the share
premium account.
Incremental costs directly attributable to the issue of new
shares are recognised as a deduction from share premium
net of any tax effect.
Provisions
Provisions are recognised when the Company has a present
legal or constructive obligation as a result of past events,
it is probable that an outflow of resources will be required
to settle the obligation, and a reliable estimate of the amount
can be made. Where the Company expects a provision
to be reimbursed, for example under an insurance contract,
the reimbursement is recognised as a separate asset
but only when the reimbursement is virtually certain.
Comparatives
Where necessary, comparative figures have been adjusted
to conform to changes in presentation in the current period.
Report and financial statements Annual Report 2
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142
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.
Leases in which the Company is a lessor
The Company does not have significant contracts where
it is a lessor.
Standards issued but not yet effective:
The following new and amended standards are not expected
to have a significant impact on the Company’s financial
statements.
• Onerous contracts – Cost of Fulfilling a Contract
(Amendments to IAS 37)
• Annual Improvements to IFRS Standards 2018–2020
• 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
• Disclosure of Accounting Policies (Amendments to IAS 1
and IFRS Practice Statement 2)
• Deferred Tax related to Assets and Liabilities arising
from a Single Transaction (Amendments to IAS 12)
• Definition of Accounting Estimates (Amendments to IAS 8)
Leases
At inception of a contract, the Company assesses whether
a contract is, or contains, a lease. A contract is, or contains,
a lease if the contract conveys the right to control the use
of an identified asset for a period of time in exchange
for consideration.
Leases in which the Company is a lessee
At commencement or on modification of a contract that
contains a lease component, the Company allocates
the consideration in the contract to each lease component
on the basis of its relative stand-alone prices. However,
for the leases of property the Company has elected
not to separate non-lease components and account
for the lease and non-lease components as a single lease
component.
The Company recognises a right-of-use asset and a lease
liability at the lease commencement date. The right-of-use
asset is initially measured at cost, which comprises the initial
amount of the lease liability adjusted for any lease payments
made at or before the commencement date, plus any initial
direct costs incurred and an estimate of costs to dismantle
and remove the underlying asset or to restore the underlying
asset or the site on which it is located, less any lease
incentives received.
The right-of-use asset is subsequently depreciated using
the straight-line method from the commencement date
to the end of the lease term, unless the lease transfers
ownership of the underlying asset to the Company
by the end of the lease term or the cost of the right-
of-use asset reflects that the Company will exercise
a purchase option. In that case, the right-of-use asset
will be depreciated over the useful life of the underlying
asset, which is determined on the same basis as those
of property and equipment. In addition, the right-of-use
asset is periodically reduced by impairment losses, if any,
and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present
value of the lease payments that are not paid
at the commencement date, discounted using the interest
rate implicit in the lease or, if that rate cannot be readily
determined, the Company’s incremental borrowing rate.
Generally, the Company uses its incremental borrowing rate
as the discount rate.
The Company determines its incremental borrowing rate
by obtaining interest rates from various external financing
sources and makes certain adjustments to reflect the terms
of the lease and type of the asset leased.
Lease payments included in the measurement of the lease
liability comprise the following:
• Fixed payments, including in-substance fixed payments
• Variable lease payments that depend on an index
or a rate, initially measured using the index or rate
as at the commencement date
• Amounts expected to be payable under a residual value
guarantee
• The exercise price under a purchase option that
the Company is reasonably certain to exercise, lease
payments in an optional renewal period if the Company
is reasonably certain to exercise an extension option,
and penalties for early termination of a lease unless
the Company is reasonably certain not to terminate early
The lease liability is measured at amortised cost using
the effective interest method. It is remeasured when there
is a change in future lease payments arising from a change
in an index or rate, if there is a change in the Company’s
estimate of the amount expected to be payable
under a residual value guarantee, if the Company changes its
assessment of whether it will exercise a purchase, extension
or termination option or if there is a revised in-substance
fixed lease payment.
When the lease liability is remeasured in this way,
a corresponding adjustment is made to the carrying amount
of the right-of-use asset, or is recorded in profit or loss
if the carrying amount of the right-of-use asset has been
reduced to zero.
The Company presents right-of-use assets that do not meet
the definition of investment property in ‘property, plant
and equipment’ and lease liabilities in ‘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
Concessions – 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 Company applies the practical expedient
consistently to contracts with similar characteristics
and in similar circumstances. For rent concessions in leases
Report and financial statements Annual Report 2
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4. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Reconciliation between profit before taxation and income tax expense:
Payroll and related social taxes
Advertising
Legal and professional expenses
Independent auditors’ remuneration
IT support
Depreciation
Amortisation
Call centre services
Licences
Other expenses
TOTAL SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES
2021
RUB’000
229,267
71,186
37,205
20,129
8,873
5,710
5,351
3,660
−
24,371
405,752
2020
RUB’000
199,703
59,410
29,072
20,244
24,004
7,862
5,107
6,000
45,106
14,680
411,188
During the year ended 31 December 2021 the remuneration
of the independent auditors included an amount
of RUB 19,359 thousand regarding audit services
and an amount of RUB 770 thousand regarding tax services
(the year ended 31 December 2020: RUB 20,114 thousand
and RUB 130 thousand respectively).
The number of employees as at 31 December 2021 was 113
(31 December 2020: 107).
5. NET FINANCE (EXPENSES) / INCOME
FINANCE INCOME
Bank interest received
Finance expenses
Bank charges
Interest on leases
Net foreign exchange transactions (loss) / gain
Net finance (expenses) / income
6. INCOME TAX
Current tax
Deferred tax
Charge for the year
2021
RUB’000
2020
RUB’000
5,949
(908)
(114)
(6,926)
(1,999)
2021
RUB’000
−
−
−
8,901
(1,570)
(194)
121,590
128,727
2020
RUB’000
(4,919)
4,919
−
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
2021
RUB’000
3,703,469
(740,694)
791,269
(50,575)
−
2020
RUB’000
2,866,548
(573,310)
590,293
(16,983)
−
The corporation tax rate is 20% (2020: 20%).
The Company in 2015 changed its tax residency from Cyprus
to Russian and opened a branch in Moscow.
As a result the Company is taxable under Russian Tax Code
which impose corporation tax at the rate of 20%.
which corresponds to RUB 18 per share. The dividends
were paid on 26 October 2021.
On 19 March 2021, Board of Directors recommended
the payment of RUB 1,427,375 thousand as final dividends
for the year 2020 which corresponds to RUB 19 per share.
The dividends were paid on 25 May 2021.
As at 31 December 2021, deferred tax asset relating to tax
losses carried forward in the amount of RUB 287,136 thousand
(31 December 2020: RUB 236,561 thousand) has not been
recognised in the financial statements since it is expected
that no sufficient taxable profits will be available to allow
it to be recovered.
7. DIVIDENDS
On 3 September 2021, the Board of Directors recommended
the payment of RUB 1,352,249 thousand as interim dividends
On 4 September 2020, the Board of Directors recommended
the payment of RUB 736,225 thousand as interim dividends
which corresponds to RUB 9.8 per share. The dividends
were paid on 20 October 2020.
On 11 August 2020, the Board of Directors recommended
the payment of RUB 1,389,813 thousand as final dividends
for the year 2019 which corresponds to RUB 18.5 per share.
The dividend distribution was approved by the Extraordinary
General Meeting of the shareholders on 3 September 2020.
The dividends were paid on 13 October 2020.
8. INVESTMENTS IN SUBSIDIARIES
Balance at 1 January
Capital contribution
Disposal of investments in subsidiaries due to liquidation
Impairment of investments in subsidiaries
Decrease of investment
Balance at 31 December
31 December 2021
RUB’000
31 December 2020
RUB’000
10,497,717
763,920
−
(3,920)
(12,460)
10,240,465
311,338
(15,156)
(38,930)
−
11,245,257
10,497,717
Report and financial statements Annual Report 2
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The details of the subsidiaries are as follows:
Name
Country
of incorporation
Activities
31 December
2021
Effective
holding, %
31 December
2020
Effective
holding, %
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
LLC UsticECO
Russian Federation
Medical services
Russian Federation
Medical services
Russian Federation
Medical services
LLC Mother and Child Perm
Russian Federation
Medical services
LLC Mother and Child Ufa
Russian Federation
Medical services
LLC Mother and Child Saint Petersburg
Russian Federation
Medical services
LLC MD PROJECT 2010
Russian Federation
Medical services
LLC Mother and Child Ugo-Zapad
Russian Federation
Medical services
LLC MD Service
Russian Federation
Pharmaceutics retail
LLC Mother and Child Nizhny Novgorod
Russian Federation
Medical services
LLC Mother and Child Yekaterinburg
Russian Federation
Medical services
LLC Mother and Child Tyumen
Russian Federation
Medical services
CJSC MK IDK
LLC Apteka IDK
LLC CSR
Russian Federation
Medical services
Russian Federation
Pharmaceutics retail
Russian Federation
Medical services
LLC MD Assistance
Russian Federation
Assistance services
LLC Mother and Child Yaroslavl
Russian Federation
Medical services
LLC Mother and Child Kostroma
Russian Federation
Medical services
LLC Mother and Child Vladimir
Russian Federation
Medical services
LLC 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
LLC Krasnoyarskii centre of Reproductive
Medicine
LLC Novosibirskii centre of Reproductive
Medicine
Russian Federation
Medical services
Russian Federation
Medical services
Russian Federation
Medical services
LLC Omskii centre of Reproductive Medicine Russian Federation
Medical services
LLC Barnaulskii centre of Reproductive
Medicine
Russian Federation
Medical services
95
100
90
95
−
100
80
100
100
−
95
95
85
100
90
95
100
100
100
100
100
100
100
80
80
80
100
100
100
100
100
100
100
100
100
100
95
100
90
95
90
100
80
100
100
70
95
95
85
100
90
95
100
100
100
100
100
100
100
80
80
80
100
100
100
100
100
100
100
100
100
100
Name
Country
of incorporation
Activities
31 December
2021
Effective
holding, %
31 December
2020
Effective
holding, %
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 MD Belgorod
LLC MD Lipetsk
NFP MGIMO-MED
Russian Federation
Medical services
Russian Federation
Medical services
Russian Federation
Medical university
LLC Siberia service company
Russian Federation
Service company
LLC TechMedCom
Russian Federation
Service company
LLC Service Hospital Company
Russian Federation
Service company
LLC Elleprof
Russian Federation
Service company
LLC Medtechnoservice
Russian Federation
Service company
100
−
100
100
−
100
100
90
100
100
67
−
−
−
−
−
100
100
100
100
100
100
100
90
−
−
−
−
−
−
−
−
The Company increased capital contribution of it subsidiary
LLC Khaven in the amount of RUB 650,000 thousand
in September 2021. The Company made the capital
contribution in its subsidiary CJSC MK IDK
in the amount of RUB 50,000 thousand in January 2021
and RUB 60,000 thousand in May 2021.
The capital contributions in LLC Dilamed in the amount
of RUB 2,885 thousand, in LLC Mother and Child Yekaterinburg
in the amount of RUB 1,000 thousand and in LLC FimedLab
in the amount of RUB 35 thousand made during the year
ended 31 December 2021 were impaired. The impairment
is recognised in other expenses.
The Company decreased capital contribution of it
subsidiary LLC Mother and Child Kazan in the amount
of RUB 12,460 thousand in March 2021.
The Company increased the authorized and issued
capital of its subsidiaries LLC Mother and Child Ryazan
in the amount of RUB 94,600 thousand and LLC Mother
and Child Kazan in the amount of RUB 6,000 thousand
in March 2020, LLC Mother and Child Nizhny Novgorod
in the amount of RUB 63,800 thousand and LLC
MD PROJECT 2010 in the amount of RUB 8 thousand
in April 2020, LLC Mother and Child Volga in the amount
of RUB 8,000 thousand in June 2020. The company made
the capital contribution in its subsidiary CJSC MK IDK
in the amount of RUB 50,000 thousand in April 2020
and RUB 50,000 thousand in October 2020.
The capital contributions in LLC Mother and Child
Yekaterinburg in the amount of RUB 28,600 thousand
and in LLC Dilamed in the amount of RUB 10,330 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 December 2020. LLC MD Management and CJSC Listom
were liquidated on 26 May 2020 and 16 March 2020
accordingly.
Report and financial statements Annual Report 2
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9. PROPERTY, PLANT AND EQUIPMENT
11. TRADE, OTHER RECEIVABLES AND DEFERRED EXPENSES
INITIAL COST
Balance at 1 January 2020
Additions
Disposals
Balance at 31 December 2020
Additions
Disposals
Balance at 31 December 2021
DEPRECIATION
Balance at 1 January 2020
Depreciation during the year
Accumulated depreciation on disposals
Balance at 31 December 2020
Depreciation during the year
Accumulated depreciation on disposals
Balance at 31 December 2021
CARRYING AMOUNTS
Balance at 1 January 2020
Balance at 31 December 2020
Balance at 31 December 2021
10. INTANGIBLE ASSETS
INITIAL COST
Balance at 1 January 2020
Additions
Balance at 31 December 2020
Additions
Balance at 31 December 2021
AMORTISATION
Balance at 1 January 2020
Amortisation during the year
Balance at 31 December 2020
Amortisation during the year
Balance at 31 December 2021
CARRYING AMOUNTS
Balance at 1 January 2020
Balance at 31 December 2020
Balance at 31 December 2021
Plant
and equipment
RUB’000
Right-of-use
of freehold
buildings
RUB’000
Total
RUB’000
11,258
1,537
(222)
12,573
936
(1,299)
12,210
(3,665)
(2,122)
53
(5,734)
(2,331)
859
(7,206)
7,593
6,839
5,004
12,954
4,767
−
17,721
3,104
−
20,825
(9,118)
(5,740)
−
(14,858)
(3,379)
−
(18,237)
3,836
2,863
2,588
24,212
6,304
(222)
30,294
4,040
(1,299)
33,035
(12,783)
(7,862)
53
(20,592)
(5,710)
859
(25,443)
11,429
9,702
7,592
Software and website
RUB’000
Total
RUB’000
21,378
4,456
25,834
13,458
39,292
(13,704)
(5,107)
(18,811)
(5,351)
(24,162)
7,674
7,023
15,130
21,378
4,456
25,834
13,458
39,292
(13,704)
(5,107)
(18,811)
(5,351)
(24,162)
7,674
7,023
15,130
Receivables from related parties
Other receivables
31 December 2021
31 December 2020
559,206
4,194
563,400
59,973
10,052
70,025
12. CASH AND CASH EQUIVALENTS AND SHORT-TERM DEPOSITS
31 December 2021
RUB’000
31 December 2020
RUB’000
730,616
29,000
759,616
-
759,616
310,754
74,500
385,254
746,145
1,131,399
31 December 2021
RUB’000
31 December 2020
RUB’000
720,532
39,104
(20)
759,616
1,052,192
79,201
6
1,131,399
Current bank accounts
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 17 of the financial statements.
13. SHARE CAPITAL
Authorised
Issued and fully paid ordinary shares 1 January /
31 December
Number
of shares
Nominal value
USD
Share capital
RUB’000
Share capital
USD’000
125,250,000
75,125,010
0.08
0.08
−
180,585
10,020
6,010
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14. 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.
Incremental costs directly attributable to the issue of new
shares are recognised as a deduction from equity (share
premium) net of any tax effect.
Exchange differences relating to the translation of the net
assets of the Company from its functional currency
to the presentation currency before changing the functional
currency from the United States Dollar to the Russian Rouble
were recognised directly in other comprehensive income
and accumulated in the other reserves.
Retained earnings
Retained earnings include accumulated profits and losses
incurred by the Company.
Other reserves also include the results of common control
transactions recognised in equity and the ‘gains/loss’
from mergers.
15. TRADE AND OTHER PAYABLES
Accruals
Lease payables
Other payables
The exposure of the Company to liquidity risk in relation to trade
and other payables is reported in Note 17 of the financial
statements.
31 December 2021
RUB’000
31 December 2020
RUB’000
22,507
2,724
45,433
70,664
22,009
2,857
92,597
117,463
16. RELATED PARTY TRANSACTIONS
16.1. Operations with key management personnel
As at 31 December 2021, 67.9% of the Company’s
share capital is owned by MD Medical Holding Limited,
a company beneficially owned by Dr Mark Kurtser. The 32.1%
of the Company’s share capital is owned by Guarantee
Nominee Limited, who holds the shares on behalf of the GDR
holders.
The following transactions were carried out with related
parties:
The remuneration of the members of the key management
personnel and non-executive directors for the year ended
31 December 2021 was RUB 52,163 thousand (for the year
ended 31 December 2020: RUB 61,535 thousand).
The remuneration of the members of the key management
personnel which remained unpaid as at 31 December
2021 was RUB 7,550 thousand (31 December 2020:
RUB 6,405 thousand).
16.2. Transactions with subsidiary companies
Dividends received
2021
RUB’000
3,993,512
3,993,512
2020
RUB’000
3,028,184
3,028,184
LLC Mother and Child Siberia, LLC Nika and LLC Stroy Vector
Pluss were merged to LLC Khaven during the year ended
31 December 2020. The relevant information is disclosured
in Note 8.
16.3. Revenue from subsidiaries for branch
operations
During the year the Company received revenue from
recharging of expenses amounted to RUB 98,886 thousand
(2020: RUB 150,968 thousand) which relates to licences,
advertising, IT support and call centre expenses recharged
to its subsidiaries. The relevant expenses are presented
in Note 4.
16.4. Receivables from / (Payables to) subsidiary companies
Receivables from subsidiary companies – Dividend receivable
Receivables from subsidiary companies – Trade receivables
Payables to subsidiary companies – Other payables
2021
RUB’000
543,682
15,524
(186)
2020
RUB’000
−
59,973
(17,014)
16.5. Directors’ interests
The direct and indirect interests of the members of the Board
in titles of the Company as at 31 December 2021,
31 December 2020 and as at the date of signing these financial
statements are as follows, except for Vitaly Ustimenko:
Name
Mark Kurtser
Kirill Dmitriev (resigned on 5 March 2022)
Simon Rowlands (resigned on 9 March 2022)
Vitaly Ustimenko
Type of interest
Effective interest %
Indirect ownership of shares
Indirect interest in shares
Direct ownership of shares
Direct ownership of shares
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.
17. FINANCIAL RISK MANAGEMENT
Financial risk factor
The calculation of effective interest is based on the total amount
of issued and fully paid shares, including treasury shares
acquired by the Company.
Member of the Board of Directors Vitaly Ustimenko
acquired GDRs on 24 January 2022, as a result the share
of his ownership increased from 0.0048% to 0.0053%
of the Сompany's share capital.
16.6. Dividends declared to related parties
Dividends declared to the parent company MD Medical
Holding Limited amounted to RUB 1,887,866 thousand
for the year ended 31 December 2021 (31 December 2020:
RUB 1,443,963 thousand).
The Company is exposed to the following risks from its use
of financial instruments:
• Credit risk
• Liquidity risk
• Market risk
The Board of Directors has the overall responsibility
for the establishment and supervision of the Company’s risk
management framework.
The Company’s risk management policies are established
to identify and analyse the risks faced by the Company
to set appropriate risk limits and controls and monitor
risks and adherence to limits. Risk management policies
and systems are reviewed regularly to reflect changes in market
conditions and in the Company’s activities.
(i) Credit risk
Credit risk arises when a failure by counterparties to discharge
their obligations could reduce the amount of future cash inflows
from financial assets on hand at the reporting date. Cash balances
are held with various financial institutions.
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Exposure to credit risk
The carrying amount of financial assets represents
the maximum credit exposure. The maximum exposure
to credit risk at the reporting date was:
Trade and other receivables
Cash and cash equivalents and short-term bank deposits
31 December 2021
RUB’000
31 December 2020
RUB’000
560,898
759,616
1,320,514
64,198
1,131,399
1,195,597
The Company held cash and cash equivalents
and short-term bank deposits excluding cash in hand
of RUB 759,616 thousand at 31 December 2021
(31 December 2020: RUB 1,131,399 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-A1, based on rating agency Moody’s Investors
Service ratings:
Number of banks
External credit rating
Carrying amount
31 December
2020
Note
Carrying
amounts
RUB’000
Contrac-
tual cash
flows
RUB’000
2 months
or less
RUB’000
Between
2–12
months
RUB’000
Between
1–2 years
RUB’000
Between
2–5 years
RUB’000
More than
5 years
RUB’000
Lease liabilities
Trade and
other payables
15
15
2,857
2,940
560
2,380
114,606
114,606
114,606
−
−
−
−
−
−
−
(iii) Market risk
Interest rate risk
Market risk is the risk that changes in market prices,
such as foreign exchange rates, interest rates and equity
prices may affect the Company’s income or the value of its
holdings of financial instruments.
Interest rate risk is the risk that the value of financial instruments will
fluctuate due to changes in market interest rates. Borrowings issued
at variable rates expose the Company to cash flow interest rate risk.
Borrowings issued at fixed rates expose the Company to fair value
interest rate risk. The Company’s management monitors the interest
rate fluctuations on an ongoing basis and acts accordingly.
As at the reporting date the interest rate profile of interest
bearing financial instruments was as follows:
1
1
1
TOTAL
Baa3
A2
A1
The carrying amounts as of 31 Dcember 2020
and external ratings of 2020 were as follows:
70,292
390,970
298,354
759,616
Fixed rate instruments
Financial assets
Financial liabilities
Note
12
15
2021
RUB’000
29,000
(2,724)
26,276
2020
RUB’000
820,645
(2,857)
817,788
Number of banks
External credit rating
Carrying amount
1
1
1
TOTAL
Baa3
A3
Aa3
15,915
818,619
296,865
1,131,399
(ii) Liquidity risk
Liquidity risk is the risk that arises when the maturity of assets
and liabilities does not match. An unmatched position potentially
enhances profitability, but can also increase the risk of losses.
The Company has procedures to minimise such losses including
maintaining sufficient cash and other highly liquid current assets.
The following are the contractual maturities of financial liabilities
including estimated interest payments:
31 December
2021
Note
Carrying
amounts
RUB’000
Contrac-
tual cash
flows
RUB’000
2 months
or less
RUB’000
Between
2–12
months
RUB’000
Between
1–2 years
RUB’000
Between
2–5 years
RUB’000
More than
5 years
RUB’000
Lease liabilities
Trade and
other payables
15
15
2,724
67,940
2,800
67,940
560
59,525
2,240
8,414
−
−
−
−
−
−
The Company does not account for any fixed rate
instruments at fair value through profit or loss and does
not have any derivative financial instruments, therefore
a change in interest rates at the reporting date would
not affect profit or loss or equity.
Currency risk
exchange rates. Currency risk arises when future
commercial transactions and recognised assets
and liabilities are denominated in a currency that is not
the Company’s functional currency. The Company
is exposed to foreign exchange risk arising from various
currency exposures primarily with respect to the United
States Dollar.
Currency risk is the risk that the value of financial
instruments will fluctuate due to changes in foreign
The Company’s management monitors the exchange rate
fluctuations on a continuous basis and acts accordingly.
The Company’s exposure to foreign currency risk was as follows:
ASSETS
Cash at bank
Short-term bank deposits
Trade and other receivables
Net exposure
31 December 2021
31 December 2020
USD
EUR
USD
EUR
720,532
−
−
(20)
−
−
306,047
746,145
294
720,532
(20)
1,052,486
6
−
−
6
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The following significant exchange rates applied during the year:
20. EVENTS AFTER THE REPORTING PERIOD
Average rate
Reporting date spot rate
Military operations in Ukraine
Impairment
USD
EUR
GBP
2021
73.6541
87.1877
101.3437
2020
72.1464
82.4488
92.5689
2021
74.2926
84.0695
100.0573
2020
73.8757
90.6824
100.0425
Sensitivity analysis
A 10% weakening of the Russian Rouble against the above
currencies will result in the increase in profit and equity
of RUB 72,051 thousand as at 31 December 2021
(31 December 2020: RUB 105,249 thousand).
tax and regulatory frameworks continue development,
but are subject to varying interpretations and frequent
changes which contribute together with other legal and fiscal
impediments to the challenges faced by entities operating
in the Russian Federation.
A 10% stengthening of the Russian Rouble would have
an opposite impact.
Capital management
The Company’s objectives in managing capital are to safeguard
the Company’s ability to continue as a going concern in order
to provide returns to owners and to maintain an optimal capital
structure to reduce the cost of capital.
In order to maintain or adjust the capital structure
the Company may adjust the amount of dividends paid
to shareholders, return capital to owners or issue of new
shares.
18. FAIR VALUES
As at 31 December 2021 and 31 December 2020
the Company had no financial assets or liabilities measured
at fair value.
The fair values of the Company’s financial assets and liabilities
approximate their carrying amounts at the reporting date
except the investments in subsidiaries which are presented
at cost less impairment.
19. OPERATING ENVIRONMENT
(a) Russian business environment
The operations of the Company`s subsidiaries are primarily
located in the Russian Federation. Consequently,
the Company is exposed to the economic and financial
markets of the Russian Federation, which display
the characteristics of an emerging market. The legal,
Starting in 2014, the United States of America, the European
Union and some other countries have imposed and gradually
expanded economic sanctions against a number of Russian
individuals and legal entities. The imposition of the sanctions
has led to increased economic uncertainty, including more
volatile equity markets, a depreciation of the Russian rouble,
a reduction in both local and foreign direct investment
inflows and a significant tightening in the availability of credit.
As a result, some Russian entities may experience difficulties
accessing the international equity and debt markets
and may become increasingly dependent on state support
for their operations. The longer-term effects of the imposed
and possible additional sanctions are difficult to determine.
Also, the COVID-19 coronavirus pandemic has continued
to create additional uncertainty in the business environment.
The financial statements reflect management’s
assessment of the impact of the Russian business
environment on the operations and the financial position
of the Company. The future business environment may differ
from management’s assessment.
(b) Russian tax environment
The taxation system in the Russian Federation continues
to evolve and is characterised by frequent changes
in legislation, official pronouncements and court decisions,
which are sometimes contradictory and subject to varying
interpretation by different tax authorities. The tax authorities have
the power to impose fines and penalties for tax arrears. A tax
year is generally open for review by the tax authorities during
three subsequent calendar years. Currently the tax authorities
are taking a more assertive and substance-based approach
to their interpretation and enforcement of tax legislation.
In February 2022, following the recognition of self-proclaimed
republics of Donetsk and Lugansk by the Russian Federation,
additional sanctions were introduced by the United States
of America, the European Union and some other countries.
The events described are likely to reduce the Company’s
revenue, and also increase the discount rate. This may result
in impairment of the Company’s CGUs; however, the financial
effect is not possible to quantify.
In recent days and weeks, following the commencement
of military operations in Ukraine by the Russian Federation,
additional severe sanctions were imposed by the United
States of America, the European Union and some other
countries on the Russian Government, as well as major
financial institutions and certain other entities and individuals
in Russia. In addition, restrictions were introduced on supply
of various goods and services to Russian entities. In response
to the sanctions described above, the Russian Government
introduced certain currency control measures while the Russian
Central Bank increased the key rate to 20%.
Liquidity risk
Revenue
Already imposed and potential future sanctions are likely
to have an adverse effect on the Russian economy which
is likely to have a negative impact on the Company’s results.
However, the financial effect is not possible to quantify.
Operating expenses
Although the Comany’s operational costs are incurred in RUB,
the management expects that due to high volatility of foreign
currency exchange rates operating expenses of the Company
will increase in 2022.
The Company maintains cash with banks that are subject
to sanctions.
Other consequences
Currency risk
Significant depreciation of the Russian Rouble has resulted
in upward revaluation of USD denominated cash and cash
equivalents. The net effect on profit or loss (before the effect
of income taxes) in case of a 50% weakening of the Russian
Rouble against USD will be RUB 360,266 thousand (based
on currency exposure as at 31 December 2021).
Credit risk
The negative impact on the Russian economy is also likely
to increase the credit risk for many customers and result
in significant additional amount of expected credit losses
being recognised; however, the financial effect is not possible
to quantify.
Sergey Kalugin was appointed as an Independent Non-
Executive Director of the Board of Directors. The changes came
into force on 2 March 2022.
On 3 March 2022 in connection with events in Ukraine, in light
of market conditions, and in order to maintain orderly markets,
the London Stock Exchange suspended the admission
to trading of the Global Depository Receipts (GDRs) listed
on the London Stock Exchange of the Company.
Kirill Dmitriev and Simon Rowlands decided to step down
as a member of the Board of Directors. The changes came
into effect on 5 March 2022 and 9 March 2022 respectively.
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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 utilising its resources, time and expertise.
OUR MISSION
OUR PROFESSION
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.
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
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.
KEY CSR ACTIVITIES IN 2021
In 2021, the pandemic still was an obstacle in holding
public events. However, in spite of restrictions,
the medical centres of the Group’s did everything
in their means to safely continue charity and social work
in various areas. The following events were particularly
noteworthy.
Donor’s Day in Ufa
Charity events
Donor’s Day in January 2021 in the MD Ufa. Together
with the blood service of the Republic of Bashkortostan,
an action was held in the hospital. More than 100 people
volunteered and donated blood.
Various educational events
Conference of reproductive specialists were held in 2021
at the MD hospitals and other locations. Among others, such
conferences were held in Lapino, Ufa, Samara and Volgograd.
Fertility doctors, gynecologists of our hospitals and regional
specialists came together to exchange knowledge
and experience.
We constantly support various organizations that help
children with special needs. In 2021, in particular, we helped
to purchase necessary equipment for kindergarten
364 in Novosibirsk. New equipment will give teachers
and children new opportunities for development, allow
them to better prepare for school and socialize in society,
as well as increase the number of children in the kindergarten
as well as the effectiveness of classes.
Annual Christmas and New Year events
Traditionally, on the eve of the New Year and Christmas,
we organize various events for children, last year was no
exception, and a Christmas tree and sweet gifts were waiting
for our little patients.
In addition, we traditionally organize a Wish Tree, in which
the Group and our employees collect gifts for children
with disabilities in various regions. This year, such events
were held in the city of Ob, the villages of the Novosibirsk
and Kochenevsky districts, we collected more than 400 gifts
and organized celebrations for the kids.
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Sustainable
development
Sustainable development at MD Medical
Group goes beyond individual activities.
It is an organisation-wide culture that reflects
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 2016 (Core option) and the 2014/95/
EU directive. Here we outline key benchmarks and activity
results of our hospitals and clinics in sustainable development,
with a focus on their social and environmental performance.
The key indicators we track each year are electricity use,
heating, and water consumption. The information provided
in this section covers the period 1 January to 31 December
2021. The clinics and hospitals that contributed information
to this sustainability report did so according to the IFRS 10
requirements unless stated otherwise.
IDENTIFYING MATERIAL TOPICS
Material topics were identified for the previous year’s annual
report in a robust, coherent manner, and the same approach
was taken with regards to the MD Medical Group’s Annual
Report 2021. Benchmarking against major companies
in the industry has upheld this approach. As a result, the matrix
of material topics created in 2020 was continued in 2021.
The material topics that feature in this graph are disclosed
in the sustainable development section and referred
to elsewhere in the Annual Report 2021. The sustainable
development section discloses one material 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
priority for MD Medical Group. Therefore, the report
discloses several indicators that MD Medical Group included
in its previous Annual Reports, including Development
and extension of the list of services (MD1), Annual capacity
of the hospitals (MD2), Development of hi-tech medical
care (MD3), Highly-qualified personnel (MD4), Dialogue
with patients (MD5).
INTERACTION WITH STAKEHOLDERS
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 impacts were evaluated. The following
stakeholder list, as defined in previous annual reports,
continues to apply:
• Patients and their families
• Employees
• Suppliers
• Shareholders and investors
• Government authorities
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 ensure the quality of the services provided is under constant
scrutiny and to improve the effectiveness of its business
activities.
Training and education
Anti-corruption
Service quality
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
i
i
s
n
o
s
c
e
d
&
s
t
n
e
m
s
s
e
s
s
a
l
r
e
d
o
h
e
k
a
t
s
n
o
6.5
e
c
n
e
u
n
6I
l
f
6
6.5
7
7.5
8
8.5
9
9.5
10
10.5
Significance of economic, environmental, & social impacts
economic
impactgh
high-quality
medical care
social
impact
environmental
impact
Sustainable development
Annual Report 2
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STAKEHOLDER NEEDS ANALYSIS FOR MD MEDICAL GROUP
Clients (entire
families)
Employees
Suppliers
• Quick and easy access
to high quality medical
services
• Proffesional growth
• Career opportunities
• Lucrative compensation
• Business sustainbility
• Procurement
transparency
Shareholders
and investors
• Transparent and open
information
• Positive impact
of business
• Business sustainabillty
• Financial results
Government
authorities
• Compliance
• Patient satisfaction
with care
Insurers
Mass media
• 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
• Quallity hotline
for patients
• Feedback
• Replies to inquiries
• Annual report
• Promotional material
• Publications
• Corporate magazine
OUR PATIENTS
The company adheres to the highest standards of service
to provide our patients with state-of-the-art treatment.
PATIENT SERVICE
Patients are at the heart of everything that MD Medical Group
does. We are committed to continuously improving the service
we provide to patients: from the quality of medical care they
receive to the user journey on the website, and the ease
of confirming, changing, booking, or cancelling appointments.
movement. Older facilities, which were not originally built
with these principles in mind, have been upgraded to provide
easier access for people with reduced mobility. In addition, all
the clinics and hospitals of MD Medical Group are equipped
with Braille signs.
We pay special attention to increasing the accessibility
of clinics. All of our new facilities are being built as a barrier-free
environment. There are no steps or other obstacles that hinder
To increase the financial availability of our services, we work
both on a commercial basis and under the programme
of Mandatory Health Insurance (MHI). Medical assistance
under the MHI programme is provided in 31 clinics, including 6
in-patient clinical hospitals providing high-tech medical care.
In 2021, 137,543 patients were treated under the MHI
programme, with 3,202 patients receiving high-tech medical
services. Infertility is also treated with the help of assisted
reproductive technologies (IVF) under the MHI programme.
In 2021, 12,275 patients underwent IVF cycles within
this framework.
In 2021, our oncological clinics received additional support
from the MHI Fund. 9,720 patients received treatment
for cancer under the MHI programmes, including 223 cases
of high-tech treatment.
We constantly update our equipment and improve
the skills of our personnel so that our patients receive
the best treatment. In 2021, one of the most striking
examples was endovascular heart surgery on a premature
newborn, performed by specialists from the MD Group
Clinical Hospital. A unique operation was performed
without incisions by puncturing a vessel in the thigh area
of a newborn, who was implanted with a special occluder
with a diameter of 4.0 mm (a device for closing the duct).
On the day of the operation, the patient’s weight was only
1,050 grams.
In June 2021, for the first time in the practice of the Lapino
Clinical Hospital, a patient with massive coronary artery
damage underwent a coronary bypass shunting. This
operation was performed on an open heart using a heart-
lung machine (AIC). The successful operation on a beating
heart opened a new page in our work and strengthened
the interdisciplinary skills of the Lapino hospital team. Today,
as all of our hospitals are developed as large multifunctional
centres, we continue to introduce advanced treatments
for patients of all ages in various fields of medicine.
PATIENT ENGAGEMENT
To increase patient engagement, we are using Digital Medical
Operations (Doctis) telemedicine consultation platform.
As of January 2022, more than 1,000 doctors were connected
to Doctis. The demand for the platform has doubled since
2020 to reach 50,000 remote consultations. The online
format has become especially popular during the COVID-19
pandemic, allowing patients to stay in touch with their doctors.
The introduction of telemedicine consultations, among other
things, made it possible to provide some medical services
remotely, e.g. to patients planning IVF cycles.
MD Medical Group continues to take a data-driven approach
to its website, constantly reviewing it for changes that can
be made and improvements that can positively impact user
experience. A comprehensive approach is taken to assessing
and responding to patient feedback, ensuring all internal
parties are involved.
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
These indicators are recorded and analysed regularly,
as a patient might leave their feedback at any stage
of a consultation 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@mcclinics.ru or via the contact centre.
In 2020, MD Medical Group rolled out the strategy that
underpins robust and responsive feedback 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 2021.
The mobile app is performing well
in ensuring patients can make contact
with relevant MD Medical Group
personnel, and also continues to play
a productive role in raising brand
recognition. The mobile app is designed
to enable patients to:
• Quickly contact members of staff at any clinic
• Book a doctor’s appointment online
• Receive results of medical tests online
• Make payments
Each year, MD Medical Group holds several events
to raise public awareness of health issues, inform patients
of the range of healthcare support available, and 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.
https://mamadeti.ru/news/
mobile-app-mother-and-child-in-your-mobile-phone/
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OUR PEOPLE
HR MANAGEMENT STRUCTURE
MD Medical Group 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, MD Medical Group employees
are driving the Company to reach new heights year
after year.
EMPLOYEE ENGAGEMENT
MD Medical Group’s market-leading status relies
on the outstanding professionals who make up our staff.
We invest in our employees 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. They work
hard to ensure the long-term success of our business. In return,
we provide our staff with a comfortable and supportive
working environment, competitive wages and social packages,
as well as broad possibilities for further professional growth.
Our HR Policy focuses on:
• Retaining existing staff and searching for new highly skilled
employees
• Developing our personnel management system
• Selecting talented students and inviting them to study
with residence at our facilities.
• 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
• Providing better working conditions to ensure low staff
turnover
• Providing incentive programmes for employees
• Offering training programmes in a range of fields, as part
of our corporate education system
As an employer, MD Medical Group prioritises further
professional development for all its employees. Key company
values, such as transparency, innovation, and adherence
to best practices – 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
features of the industry, specific aspects of key business
functions, type of facilities and geographic location of hospitals
and clinics. The Company’s corporate culture and business
goals are also reflected in the HR management structure,
presented in the chart below.
CEO
Head of HR
Regional HR Directors
MD Medical
Centre
MD Medical
Urals
MD Medical
Volga
MD Medical
Siberia
MD Medical
Tyumen
HR managers in clinics and hospitals
Personnel management at MD Medical Group focuses on:
• Attracting high-qualified, talented, and motivated
professionals 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
education 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
Motivating members of the team to perform at their best at all
times while with MD Medical Group is an essential feature
of the Group’s HR management landscape. MD Medical Group
has a bonus system in place, including:
• Monthly performance bonus (70/30 system)
• Bonus for achieving KPIs
• Awards for individual achievements
• Incentive payments for the qualification category
• State and medical community awards and diplomas
In 2021, more than 50 employees of the Company
were awarded state awards and commendations for their
fight against COVID-19.
MD Medical Group’s corporate culture is based on positive
engagement and encouragement. The compulsion of any kind
is not permitted. Key principles of our corporate culture are set
out in the MD Medical Group Code of Corporate Ethics
and Employee Conduct.
Any employee who has suspicions of potentially illegal
or unethical activities may report to her immediate supervisor,
the head of department, or the head of the Internal Audit
Department. The most complex cases are reported to the CEO,
the Chairman of the Audit Committee, or the Chairman
of the Board of Directors.
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PERSONNEL FIGURES (AS OF 31 DECEMBER 2021)
Total number of employees
Total number of doctors (FTE)
7,349
7,752
7,153
7,587
8,274
8,461
7,756
6,801
6,842
6,302
Headcount
FTE
2,746
2,849
2,521
3,097
3,093
‘17
‘18
‘19
‘20
‘21
‘17
‘18
‘19
‘20
‘21
Employees by gender (as of 31 December 2021)
Personnel structure (as of 31 December 2021)
Doctors by speciality (FTE, as of 31 December 2021)
81%
Women
19%
Men
8,461
Doctors
Other staff
37
30
Other medical staff 33
Obstetrician
Pediatrician
15
11
Reproductologist 11
Surgeon
9
Other speciality
54(cid:5)
Employees by employment type
Doctor’s qualifications (as of 31 December 2021)
Payroll structure
5,545
5,350
1,393
1,348
936
972
595
596
Women (full-time)
Women (part-time)
Men (full-time)
Men (part-time)
2021Y
2020Y
703
PhD
Professors
92
8
Doctors
Other staff
50
26
Other medical staff 24
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PROFESSIONAL DEVELOPMENT
As an employer, MD Medical Group prioritises further
professional development for all its employees. Key company
values, such as transparency, innovation, and adherence
to best practices – 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.
• a full-time training course with master classes (14 days)
on ultrasound diagnostics in obstetrics, in the MDG
Clinical Hospital;
• a conference on rehabilitation and monitoring
of children born prematurely, in the Avicenna Clinical
Hospital;
• offline conferences on OBGYN problems, in Samara,
Tyumen. and Ufa Clinical Hospitals;
• several international scientific and practical conferences
on OBGYN, urology, paediatrics, and so on;
We are always striving to improve an already exceptional
level of knowledge that our doctors and other staff have. All
the training and courses are fully paid for by the Company.
• masterclasses in hospitals on OBGYN, reproductive
medicine, surgery, including bariatric surgery, urology
and traumatology.
Over the last 10 years, our physicians have completed
residency training in OBGYN, neonatology, and oncology.
Competition for residency training is widely announced
each year, resulting in more than 100 applications
from participants from all regions of the country.
The competition takes place in several stages; the finalists
are carefully selected and trained at the clinical facilities
of the Lapino Central Hospital and the MD Group Central
Hospital.
In 2021, seven participants won the competition
and entered the programme, and four participants
graduated. Upon completion of their residency, doctors
are employed by the Group’s clinics and hospitals,
including those in the regions. In this way, by training
doctors from their student benches, we maintain continuity
in the level of qualification and quality of medical care
inherent in the GC.
Continuous training and professional development of doctors
and nursing staff take place both offline and online.
On a regular basis throughout the year, leading specialists
give lectures to doctors, share their experience and highlight
current trends in medicine.
At MD Medical Group, staff are encouraged to learn
from each other. In 2021, among our training programmes
we have provided staff with:
• 13 lectures for nurses, with more than 350 participants
each, on the topics of monitoring the patient in various
conditions, an overview of changes in sanitary rules
and regulations, requirements for the safe handling
of medical waste, professional mistakes and responsibility
of nurses, etc.;
• 48 lectures for doctors on OBGYN, reproductive
medicine, surgery, oncology, etc.;
• 3 webinars on genetic pathology;
• 3 offline conferences in Lapino Clinical Hospital
on reproductology and oncology;
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;
• participation in international forums, conferences,
exhibitions, where possible, and training centre support
for improving soft skills and knowledge acquisition across
different areas and competencies.
In 2022, we are going to increase the number of areas
in our residency programme, including OBGYN, oncology,
anesthesiology, surgery, and therapy. We are also planning
to centralise our distance learning programmes in nurse
training and OBGYN.
The Company enhances its cooperation with higher
education facilities. In September 2022, the first admission
to MGIMO Medicine Institute is planned within the joint
project between MGIMO and MD Medical Group.
WORKPLACE SAFETY
Medical and non-medical employees at MD Medical Group
are offered courses in occupational safety and related
areas as specified under Article 225 of the Russian
Federation Labour Code. Every three years each employee
must pass the relevant occupational safety test and each
year non-medical staff members complete first-aid
courses.
To guarantee that MD Medical Group facilities are safe
for patients, staff, and third parties, the following training
is also provided on-site: fire-safety, heating and energy
supply systems, servicing high-pressure equipment, safe
lift usage and maintenance, gas and water heating system
safety.
SUPPLY CHAIN DEVELOPMENT
Effective supply chain management is essential to patient
safety and the economic stability of MD Medical Group’s
operations. The Group benefits from a robust and resilient
supply chain. At its core is the analysis of material
and equipment demand 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 candidate’s
experience and the quality of the product or service they
offer. Successful candidates must be able to demonstrate
a significant 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 as MD Medical Group.
In 2021, MD Medical Group cooperated with over 3,200
supply companies, among which 199 provide medical
expendables, 2,710 are suppliers of medications, and 350
are suppliers of medical equipment. The total number
of companies involved in the supply chain in every area is kept
to under two (as the diagram 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.
Centralisation plays an important role in supply chain
management at MD Medical Group. Every year
the procurement department establishes a list of procurement
categories that will be handled centrally. Suppliers are identified
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.
In addition to centralisation, 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
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
opportunity to supply the Group. This means MD Medical
Group actively seeks to stimulate competition for each supply
opportunity and is always open to new entities. As this
is a fast-growing 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 adopting these innovations at its centres. Before adopting
them, rigorous performance and quality reviews are 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 2021, MD Medical Group collaborated with more than
3,000 suppliers. The purchasing department aims to reduce
the number of levels in the supply chain to a maximum of two
for maximum efficiency. It primarily focuses on large distributors
that can meet the complex needs of MD Medical Group.
Suppliers by category (2021), %
3,259
Consumables
Medications
Equipment
83
6
11
Centralisation plays an important role in supply chain
management at MD Medical Group. Every year, the purchasing
department establishes a list of categories that will be handled
centrally. Suppliers are identified and selected in a transparent
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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.
In addition to centralisation, supply chain management goals
are:
• To identify alternative materials which would deliver
In 2021, a unified procurement regulation of MD Medical
Group was developed and approved. This regulation
defines a unified procedure for all procurement activities,
the rights and obligations of their participants, the scope
of responsibility, etc. The regulation goals are:
1. Timely replenishment of the material and technical base
necessary to ensure its functioning.
2. Improving the required quality of supplies and efficiency
in the use of funds.
the same high quality at a lower price point
3. Ensuring transparency of procurement procedures
• To conclude supply contracts directly with producers
and objectivity of decisions made.
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 opportunity to supply the Group. This means
MD Medical Group actively seeks to stimulate competition
for each supply opportunity and is always open to new
entities. As this is a fast-growing 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 adopting these innovations at its centres.
Before adopting them, rigorous performance and quality
reviews are 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.
4. Ensuring the mandatory requirements of an open tender,
preventing a conflict of interest among procurement
participants.
Due to the emergence of new areas of activity (oncology,
treatment of COVID-19, etc.), the volume of purchases
of medications has significantly increased (by 55% compared
to 2020). Centralised procurement procedures cover 92%
of the volume. 100% of purchases are made locally, which
makes it possible to significantly improve the operation
of the supply chain by monitoring the fulfilment of contractual
obligations. Direct contracts have been signed with Pfizer,
Biocad, Medisorb, Pharmasyntez.
66% of consumables were also purchased through
centralised purchasing procedures. In 2021, MD Medical
Group became one of the first companies in Russia to sign
direct contracts with major manufacturers of medical
equipment and consumables, including Johnson & Johnson
and Medtronic. Partnerships have also been expanded
with B. Braun, Karl Storz, Olympus, Origio, Roche, Beckman
Coulter, Abbott and others. In the category of consumables,
40% of the range is purchased under direct contracts
with manufacturers
SUPPLY CHAIN OF MEDICATIONS AND EQUIPMENT
Producers
• Inventory of medications
and in clinics’ warehouses
• Generation of a request
to manufactures
• Analysis of demand in the market
of medication and medical
equipment
• Production of various medicines
• Dispatch manufactured medications
and equipment to warehouses
Clinics
Medications, equipment
Federal level
• Medications are sent to regional
dealers (pharmacies)
• Equipment is sent to the clinics’
warehouses
• Receipt of goods
• Storage of medications
and equipment
• Sending goods to regional
warehouses and regional
transport companies
Regional level
SUPPLY CHAIN OF MEDICAL EXPENDABLES
• Generation of a request
to manufactures
Producers
• Order depleted items
• Marketing
of the products
• Send goods
to the warehouses
Clinics
Medical expendables
Federal level
• If good are in stock,
send them
• If goods are in stock, send
them
• Inventory of supplies and remainders
in clinics’ warehouses
• Determining procurement plans
• Generation of an order
• Generation of aggregated
orders ship
• Necessary materials
Regional level
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ENVIRONMENTAL MANAGEMENT
Heating energy consumption by MD Medical Groups clinics and hospitals, GJ
Reducing environmental impact is essential for MD
Medical Group for several 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 local communities.
Second, it goes hand in hand with MD Medical Group’s stated
commitment to being an innovative leader in healthcare. Third,
it shows the communities, where MD Medical Group has
a presence, that it is dedicated to being a good partner in all
respects.
The compliance with applicable federal, regional, and local
environmental legislation is as essential to MD Medical
Group’s successful operations as is its compliance
with other rules, regulations, and benchmarked best
practices. The Company’s management system meets
the international requirement ISO 14001-2004 Environmental
management systems and ISO 50001:2011 Energy
management systems.
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
supply 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, and supports the communities in which
it has operations by setting an example for other entities
of responsible resource and facilities management.
Electricity consumption by MD Medical Group’s clinics and hospitals, GJ (gigajoule)
Clinics
Hospitals
TOTAL
2020
13,564
96,321
109,885
2021
11,269
110,519
121,788
Change
-17%
15%
11%
Clinics
Hospitals
TOTAL
Clinics
Hospitals
TOTAL
PETROL
Clinics
Hospitals
TOTAL
DIESEL
Clinics
Hospitals
TOTAL
2020
22,715
182,126
204,841
2021
35,352
211,893
247,245
Change
56%
16%
21%
Total energy consumption by MD Medical Groups clinics and hospitals, GJ
2020
36,279
278,447
314,726
2021
46,621
322,413
357,764
Change
29%
16%
14%
Fuel consumption by MD Medical Group’s clinics and hospitals, litres
2020
2021
Change
14,512
115,279
129,790
44,020
90,241
134,261
15,736
119,878
135,614
55,508
81,689
137,198
8%
4%
4%
26%
-9%
2%
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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 component 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.
Clinics
Hospitals
TOTAL
Water consumption by MD Medical Group, cubic metres
2020
30,772
190,538
221,310
2021
29,435
245,776
275,211
Change
-4%
29%
24%
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 decontamination 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 landfills for non-hazardous
waste or incineration for hazardous waste.
WASTE MANAGEMENT
MD Medical Group takes a responsible approach to managing
medical waste, following the applicable legislation.
The waste disposal procedures and practices in place in MD
Medical Group hospitals and clinics fall under the Sanitary
and Epidemiological Requirements for Treating Medical Waste
(SanPin 2.1.7.2790-10). Waste is categorised as hazardous
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.
WASTE MANAGEMENT IN HOSPITALS
Contractors
Landfill
Incineration
Disposed of by contractors
Disposed of by contractors
Type
Non-hazardous
Waste
Hazardous
Own level
Composting
Decontamination
and pulping
Non-hazardous
Landfill
Bulk incineration
Hazardous
Landfill
Bulk incineration
TOTAL
Non-hazardous
Landfill
Bulk incineration
Hazardous
Landfill
Bulk incineration
TOTAL
Waste by disposal method (hospitals), metric tonnes
2020
4,703
4,703
0
79
0
79
2021
4,954
4,954
0
241
184
56
4,782
5,195
Change
5%
5%
—
205%
—
-29%
9%
Waste by disposal method (clinics), metric tonnes
2020
985
862
123
112
3
109
2021
1,215
1,110
105
59
20
39
1,097
1,274
Change
23%
29%
-15%
-47%
580%
-65%
16%
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Annexes
ANNEX 1.
GRI INDEX DISCLOSURES
This report has been prepared in accordance with the GRI Standards: Core option.
Number
Title
Page in the Report and/or Reference
GRI 102: GENERAL DISCLOSURES
102-1
102-2
102-3
102-4
102-5
102-6
102-7
102-8
102-9
102-10
102-11
102-12
102-13
Name of the organisation
Activities, brands, products, and services
Location of headquarters
Location of operations
Ownership and legal form
Markets served
Scale of the organisation
Strong investment case
Strong investment case
Nationwide healthcare network
Nationwide healthcare network
Shareholder’s equity and report on dividend
Private healthcare market in Russia
Our people, Financial overview in 2021,
Multidisciplinary leadership
Information on employees and other workers
Our people
Supply chain
Significant changes to the organisation
and its supply chain
Supply chain development
Supply chain development
Precautionary Principle or approach
Risk management
External initiatives
Membership of associations
Sustainable development
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
102-14
102-15
102-16
102-18
Statement from senior decision-maker
Statement from the CEO
Key impacts, risks, and opportunities
Delivering on our strategic goals, Risk management
Values, principles, standards, and norms of behaviour
Our people
Governance structure
Corporate governance report
Number
Title
Page in the Report and/or Reference
102-19
102-20
102-21
102-22
102-23
102-24
102-25
102-26
102-27
102-28
102-29
102-30
102-31
102-32
102-33
102-34
102-35
102-36
102-37
102-38
102-39
102-40
102-41
102-42
102-43
102-44
102-45
102-46
102-47
102-48
102-49
102-50
102-51
102-52
102-53
102-54
102-55
102-56
Delegating authority
Executive-level responsibility for economic,
environmental, and social topics
Consulting stakeholders on economic, environmental,
and social topics
Corporate governance report
Corporate governance report
Interaction with stakeholders, Identifying material topics
Composition of the highest governance body
and its committees
Board of Directors
Chair of the highest governance body
Board of Directors
Appointing and selecting the highest governance body
Board of Directors
Conflicts of interest
Information unavailable
Role of highest governance body in setting purpose,
values, and strategy
Collective knowledge of highest governance body
Board of Directors
Evaluating the highest governance body’s performance
Board of Directors
Identifying and managing economic, environmental,
and social impacts
Effectiveness of risk management processes
Risk management
Review of economic, environmental, and social topics
Sustainable development
Highest governance body’s role in sustainability reporting
Communicating critical concerns
Nature and total number of critical concerns
Remuneration policies
Remuneration committee
Process for determining remuneration
Stakeholders’ involvement in remuneration
Annual total compensation ratio
Board of Directors report
Percentage increase in annual total compensation ratio
List of stakeholder groups
Collective bargaining agreements
Identifying and selecting stakeholders
Approach to stakeholder engagement
Key topics and concerns raised
Interaction with stakeholders
There are no collective bargaining agreements within
the organisation.
Interaction with stakeholders
Interaction with stakeholders
Identifying material topics
Entities included in the consolidated financial statements Consolidated financial statements
Defining the report’s content and topic boundaries
About this report
List of material topics
Restatements of information
Changes in reporting
Reporting period
Date of the most recent report
Reporting cycle
Identifying material topics
There were no restatements in the reporting period.
There were no significant changes
2021
Annual cycle
Contact point for questions regarding the report
Contacts
Claims of reporting in accordance with GRI Standards
This report has been prepared in accordance with
GRI Standards: Core option
GRI content index
External assurance
Annex 1
None
Annexes Annual Report 2
120
177
176
Number
Title
Page in the Report and/or Reference
ANNEX 2.
GRI 103: MANAGEMENT APPROACH
103-1
103-2
103-3
Explanation of the material topic and its boundary
Identifying material topics
The management approach and its components
Sustainable development
Evaluation of the management approach
Information unavailable
GRI 204: PROCUREMENT PRACTICES
204-1
Proportion of spending on local suppliers
Supply chain development
GRI 205: ANTI-CORRUPTION
205-1
Operations assessed for risks related to corruption
Risk management
GRI 302: ENERGY
302-1
302-2
302-3
302-4
302-5
Energy consumption within the organisation
Environmental management
Energy consumption outside of the organisation
N/a
Energy intensity
Reduction of energy consumption
Reductions in energy requirements of products
and services
Information unavailable
Environmental management
Environmental management
GRI 303: WATER
303-1
Water withdrawal by source
Environmental management
GRI 306: WASTE
306-1
306-2
306-3
Waste generation and significant waste-related impacts
Environmental management
Management of significant waste-related impacts
Environmental management
Waste generated
Environmental management
GRI 404: TRAINING AND EDUCATION
404-2
Programmes for upgrading employee skills
and transition assistance programmes
Our people
GRI 405: DIVERSITY AND EQUAL OPPORTUNITY
405-1
Diversity of governance bodies and employees
Our people, Board of Directors
GRI 416: CUSTOMER HEALTH AND SAFETY
416-1
Assessment of the health and safety impacts
of product and service categories
Our patients
GRI 417: MARKETING AND LABELLING
417-2
Incidents of non-compliance concerning product
and service information and labelling
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
CEO, marketing) and the legal department.
SUSTAINABLE DEVELOPMENT RISK
MANAGEMENT AT MD MEDICAL GROUP IN 2021
In line with a clearly defined and robust long-term strategy,
MD Medical Group acts to minimise risks related to sustainable
development. It achieves this by regularly reviewing its risk
management 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 identified 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
MD Medical Group has implemented targeted preventive
measures 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
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.
Substantial increase in water consumption
MD Medical Group closely monitors the condition of water
and heat supply pipelines.
Increase in paper consumption
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.
Annexes Annual Report 2
120
179
178
TYPE OF RISK
RELEVANT RISK MANAGEMENT MECHANISM
TYPE OF RISK
RELEVANT RISK MANAGEMENT MECHANISM
SOCIAL AND EMPLOYMENT RISKS
CORRUPTION AND BRIBERY RISKS
Statutory restrictions related to employment
MD Medical Group monitors changes in relevant legislation
and reacts promptly.
Insufficient availability of Company’s care services facilities
Deterioration of the Group’s relations with staff
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.
HUMAN RIGHTS RISKS
Discrimination
MD Medical Group does not tolerate any form of discrimination.
Work under compulsion
Remuneration 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.
Risk of corrupt actions and payments to government authorities MD Medical Group ensures that any interaction with supervisory
Risk of bribery of the Group’s employees for the benefit of third
parties
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.
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 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.
Annexes Annual Report 2
120
181
180
ANNEX 3.
INFORMATION ON THE GENDER
AND AGE OF THE BOARD OF DIRECTORS
AS OF 31 DECEMBER 2021
ANNEX 5.
INFORMATION ON STAFF
Mother & Child
Centre
Mother & Child
Urals
Mother & Child
Siberia
Mother & Child
Volga
Total
%
Gender:
Men — 85%; Women — 15%
Age:
30–50 years of age — 40%
Over 50 years of age — 60%
ANNEX 4.
884
3,603
4,487
921
3,691
4,612
297
1,127
1,242
204
1,178
1,382
148
1,080
1,228
293
1,062
1,355
297
933
1,230
150
962
1,112
1,531
6,743
8,280
1,568
6,893
8,461
18.6
81.4
100
18.5
81.5
100
2020
Male
Female
TOTAL
2021
Male
Female
TOTAL
ANNEX 6.
INFORMATION ON THE GENDER AND AGE
OF EMPLOYEES AS OF 31 DECEMBER 2021
SANPIN 2.1.7.2790-10 SANITARY
AND EPIDEMIOLOGICAL REQUIREMENTS
FOR TREATING MEDICAL WASTE
Gender:
Men — 19%; Women — 81%
Age:
Under 30 years of age — 13%;
30–50 years of age — 61%;
Over 50 years of age — 26%.
SanPin 2.1.7.2790-10 Sanitary and Epidemiological
Requirements for Treating Medical Waste is a regulatory
legal act, registered by the Ministry of Justice of the Russian
Federation on February 17, 2011 (registration number: 19871).
According to this document, there are five major classes
of medical waste:
• Class A (А) – epidemiologically non-hazardous waste close
in composition to municipal solid waste (packaging, paper,
cardboard, etc.)
• Class B (Б) – epidemiologically hazardous waste. This class
includes human blood and blood products as well as other
biological liquids
• Class V (В) – extremely epidemiologically hazardous waste
(materials that were in contact with patients with infectious
diseases)
• Class G (Г) – toxicologically hazardous waste of classes
from 1 to 4. This class includes medicines, diagnostics,
and disinfectants that cannot be used, namely those
medical supplies that have been damaged or expired
• Class D (Д) – radioactive waste
Annexes Annual Report 2
120
183
182
ANNEX 7.
MAIN METHODS FOR OBTAINING INFORMATION
Most of the data is originated from the clinics’
and hospitals’own records of actual water use,
energy, and fuel consumption. However, for several
clinics and hospitals some indicators were calculated,
due to the fact that a number of facilities are located
in rented premises; and because of the lack
of detailed accounting data or non-relevance of such
information for decision-making by the MD Group
or stakeholders.
All calculations were made by applying some of the following
indicators:
• Water consumption – average water consumption per square
metre for clinics and hospitals.
• Electricity and heating – the amount of money spent on utilities
and average heating energy consumption per square metre
for clinics. Regional tariffs were used for the calculations.
The share of data on water, energy and fuel consumption, obtained
from calculations was insignificant in the overall dataset.
Electricity
2020
2021
change
Clinics
Hospital
TOTAL
13,564
96,321
109,885
11,269
110,519
121,788
-17%
15%
1%
Water
Clinics
Hospital
TOTAL
2020
2021
change
30,772
29,435
190,538
245,776
221,310
275,211
-4%
29%
24%
Heating
Clinics
Hospital
TOTAL
2020
2021
change
22,715
35,352
182,126
211,893
204,841
247,245
56%
16%
21%
Waste
Hospitals
Non-hazardous
Landfill
Bulk incineration
Hazardous
Landfill
Bulk incineration
2020
2021
change
4,703
4,703
0
79
0
79
4,954
4,954
0
241
184
56
5%
5%
205%
-29%
9%
Petrol
Clinics
Hospital
TOTAL
Diesel
Clinics
Hospital
TOTAL
2020
2021
change
TOTAL
4,782
5,195
14,512
15,736
115,279
119,878
129,790
135,614
8%
4%
4%
2020
2021
change
44,020
90,241
55,508
81,689
134,261
137,198
26%
-9%
2%
Waste Clinics
2020
2021
change
Non-hazardous
Landfill
Bulk incineration
Hazardous
Landfill
Bulk incineration
985
862
123
112
3
109
1,215
1,110
105
59
20
39
TOTAL
1,097
1,274
23%
29%
-15%
-47%
580%
-65%
16%
Appendix
Electricity
Clinics
Hospital
MD Group
Lapino
Ufa
Avicenna
Samara
Tyumen
Heating
Clinics
Hospital
MD Group
Lapino
Ufa
Avicenna
Samara
Tyumen
Petrol
Clinics
Hospital
MD Group
Lapino
Ufa
Avicenna
Samara
Tyumen
Diesel
Clinics
Hospital
MD Group
Lapino
Ufa
Avicenna
Samara
Tyumen
2020
13,564
96,321
17,494
33,717
13,667
9,189
10,122
12,132
2020
22,715
182,126
20,992
49,692
49,055
11,071
18,021
33,296
2020
14,512
115,279
21,697
34,300
7,539
12,506
35,934
3,303
2020
44,020
90,241
18,724
49,997
3,032
7,162
4,260
7,066
2021
11,269
110,519
16,769
43,145
16,961
9,963
11,159
12,522
2021
35,352
211,893
22,354
65,916
54,747
12,627
21,525
34,725
2021
15,736
119,878
22,087
45,521
4,747
17,023
30,500
0
2021
55,508
81,689
19,340
47,016
503
10,631
3,000
1,200
change
-17%
16%
-4%
28%
24%
8%
10%
3%
change
56%
16%
6%
33%
12%
14%
19%
4%
change
8%
4%
2%
33%
-37%
36%
-15%
-100%
change
26%
-9%
3%
-6%
-83%
48%
-30%
-83%
Annexes