NMC Health PLC Annual Report 2016

FY2016 Annual Report · NMC Health PLC

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Strong
operational
performance

NMC Health plc
Annual Report and Accounts 2016

NMC Health is the largest
private healthcare operator
in the UAE and one of the
largest product distribution
and wholesale companies
in the country.

Multi-speciality

For more information go to page 22 >>

Maternity & Fertility

For more information go to page 22 >>

Long-term & Home Care

For more information go to page 22 >>

Operation & Management

For more information go to page 23 >>

Products & Consumables

For more information go to page 23 >>

Overview

At a Glance

Chairman’s 2016 Report to Shareholders

2. Strategic Report

Executive Vice Chairman
& CEO’s Review

Financial Summary and Highlights

Our Business Model

Our Strategy

Business Overview

Financial Review

Corporate Social Responsibility

Risk Management

3. Governance

144

145

146

147

Corporate Governance Report

Directors’ Remuneration Report

Directors’ Report

Financial Statements

Directors’ Statements

Independent Auditor’s Report

Consolidated Income Statement

Consolidated Statement of 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

Statement of Financial Position

Statement of Changes in Equity

Statement of Cash Flows

Notes to the Financial Statements

5. Other Information

IBC

Shareholder Information

Read the annual report
and much more on our website:
www.nmchealth.com

NMC Health plc Annual Report and Accounts 2016

2. 3. 4. 5. 1. OverviewAt a Glance

Our verticals and brands

The company has completed strategic and value accretive acquisitions to date
that have all met NMC’s stringent investment criteria. These acquisitions, coupled
with NMC’s organic initiatives, have allowed the Group to establish new strategic
verticals within the broader healthcare delivery platform with specialization-
specific capabilities and brands. NMC has two lines of business – Healthcare
which owns and operates hospitals, day surgery centres, medical centres
and pharmacies, and Distribution which is the wholesale of pharmaceutical,
scientific equipment, FMCG, food, veterinary and education products.

4m+

Patients in 2016

7831

4062

205

Licensed beds (NMC Healthcare
& Dr. Sunny)

Licensed beds (ProVita, Americare
and two assets in Saudi Arabia)

Licensed beds (Sheikh Khalifa
Hospital in UAQ)

100

Licensed beds (Brightpoint Royal
Women’s Hospital, Clinica Eugin
and Fakih IVF)

c.97,600

Stock Keeping Units
(exclusive wholesaler of
mainly globally established
and branded healthcare
products and equipment)

1
2

Includes 154 beds of Al Zahra Hospital.
Includes 140, 120 and 26 beds of As Salama, Chronic
Care and Provita beds in NMC Royal respectively.

NMC Health plc Annual Report and Accounts 2016

For more information see our Business
Overview on pages 20 to 23

OverviewHealthcare

Multi-speciality

The addition of Al Zahra Hospital
further strengthens our portfolio, will
bring the total number of hospitals
to seven across the UAE. The unique
combination of NMC Royal Hospital
and Al Zahra Hospital will create a solid
platform for the robust growth of this
vertical. This platform is complemented
by a network of medical centers and
day surgeries to increase operational
reach and the addressable market
through cross-referrals. NMC also
has a network of 15 pharmacies.

Maternity &
Fertility

The blend of organic (i.e. Brightpoint
Royal Women’s Hospital) and strategic
value accretive acquisitions (i.e. Clinica
Eugin and Fakih IVF facilities) confirms
the Maternity & Fertility vertical’s global
market position, as one of the leading
and premium international providers
of fertility treatment services. The Group,
through its Spanish arm (i.e. Clinica
Eugin) extended its geographic coverage
during the year with acquisitions of
IVF facilities in Denmark and Brazil,
extending to 5 countries. Our Maternity
& fertility vertical has segment-leading
assets, and is now considered one
of the top three fertility services
providers globally based on cycles
performed annually.

Long-term &
Home Care

Operation &
Management

The blend of a leading provider of
in-home healthcare services in the UAE,
Americare, acquired by NMC in April 2015,
and ProVita, the UAE’s leading provider
of long-term medical care acquired by
the Group in August 2015, created a solid
foundation of our Long-term ad Home
care vertical. Meeting the under-serviced
demand for long-term care facilities,
ProVita fills a gap between the short-
term care offered by NMC’s existing
facilities and the in-home services
offered by Americare. ProVita, the
Group’s Long Term Care business
further extend the vertical with its
entry into the Saudi Arabian market.
In August 2016, the Group announced
the acquisition which consummated
early 2017, of a 70% stake in As Salama
Hospital, a leading general hospital
in Al Khobar, Saudi Arabia. In addition,
ProVita, invested in a start-up purpose-
built long-term care facility with a
licensed capacity of 120 beds in Jeddah
in Saudi Arabia’s western region.

Our experience in the Operation
& Management is leading us to
increasingly explore the prospects
of expanding this business regionally.
While this evaluation of the wider
market remains at initial stages,
our long experience of operating and
managing healthcare assets in the
region means we can contribute to
the evolution of healthcare delivery
outside our own assets.

Distribution

Products &
Consumables

NMC Health’s Product & Consumables
or product distribution and wholesale
business is one of the largest in
the UAE in terms of product portfolio
and sales. This portfolio of international
and regional brands, sold mainly
on exclusive basis by NMC to local
retailers, has been built over the
past 40 years across diverse product
areas, including key segments such
as FMCG, Pharmaceuticals and
Scientific Equipment.

NMC Health plc Annual Report and Accounts 2016

1. Overview2. 3. 4. 5. Chairman’s 2016 Report to Shareholders

Continued growth
and extension of reach

2016 saw the Company progress a number of acquisitions to continue
the execution of our growth strategy to put in place, and to grow, an integrated
multi-vertical and multi-brand healthcare network across several geographies.

Dear Shareholder,

I am writing to you at the end of another
year in which the Company has made
excellent progress both in the execution
of its growth strategy and in its
management of existing operations.

2016 has seen Group Revenue increase
from US$880.9m in 2015 to US$1,220.8m
in 2016. Consolidated EBITDA also
improved by 63.7% from US$150.3m to
US$246.1m in the last financial year. This
continued excellent performance has
resulted in the Group growing significantly
in size. We now employ 11,252 people
and have a market capitalisation as
of the end of February 2017 of £3.5bn.

STRATEGY AND ACQUISITIONS
2016 saw the Company progress a
number of acquisitions to continue the
execution of our growth strategy to put
in place, and to grow, an integrated
multi-vertical and multi-brand healthcare
network across several geographies.
The acquisitions which we have made in
2016, together with our continuing organic
expansion, and good performance from
operations, have enabled your Company,
as indicated above, to maintain sustained
growth in the 2016 financial year.

The largest acquisition we have made
to date, Al Zahra Hospital in Sharjah,
UAE, was announced in December 2016
and approved by shareholders at the
General Meeting held on 29 December
2016. As outlined to you in my letter of
14 December 2016, the acquisition of
Al Zahra Hospital provided the Company
with a unique opportunity to increase its
presence in the attractive Sharjah market.
Al Zahra Hospital is one of the largest
private hospitals in the UAE, a scarce
asset that is difficult to replicate and
considerably expands the Group’s
capacity in the region.

In addition to its own strong track record
of performance, the hospital will benefit
from the introduction of mandatory
insurance in Sharjah which is expected in
the near future and from referral business
from the Group’s existing medical facilities
in this Emirate.

Our IVF business, Clinica Eugin based in
Barcelona, Spain, extended its geographic
coverage during the year with
acquisitions of IVF facilities in Denmark
and Brazil, extending to 5 countries.
The acquisition of Fakih IVF early in
2016 resulted in the Group operating one
of the largest IVF businesses in the world.

During 2016, our geographic spread
was further strengthened with our entry
into the Saudi Arabian market. In August
2016 we announced the acquisition
consummated early 2017, of a 70% stake
in As Salama Hospital, a leading general
hospital in Al Khobar, Saudi Arabia.
In addition, ProVita, the Group’s Long
Term Care business, invested in a start-up
purpose-built long-term care facility
with a licensed capacity of 120 beds in
Jeddah in Saudi Arabia’s western region.
These two investment represent your
company’s first step into the largest
market in the GCC region.

ORGANIC EXPANSION
During the year, our new 250 licensed
bed flagship super specialty Hospital,
NMC Royal Hospital, in the Khalifa City
suburb of Abu Dhabi, opened for inpatient
services. NMC Royal Hospital has been
a vision of our founder and Executive
Vice Chairman and CEO, Dr B R Shetty,
for many years and the start of inpatient
services is a significant milestone for
the Group. This facility, and our other
facilities opened over the last two years,
Brightpoint Royal Women’s Hospital
in Abu Dhabi and NMC General Hospital
Dubai Investment Park, have been
ramping up better than anticipated,
which is a testament to the strategic
planning of our management team
and the hard work of our staff.

FINANCIAL STABILITY
The maintenance of financial stability
has been a very important concern
of your company during this period of
substantial growth. In 2016, the Board
have been keen to retain flexibility with
regards to financing, as well as ensuring
that the Group is well funded for both
general working capital purposes and
to facilitate strategic acquisitions.

In December 2016, to coincide with the
announcement of the acquisition of
Al Zahra Hospital, the Board decided
to utilise the authority given to them by
shareholders at the 2016 AGM, to carry out
a Share Placing amounting to 9.9% of the
Company’s existing issued share capital.
This Share Placing raised US$322.3m
which, alongside additional financing
facilities, meant that the Company
is now well financed for the future.

DIVIDEND
As a result of our continued growth,
good performance and financial stability,
your Board intends to retain its dividend
payment policy of distributing a dividend
of approximately 20% of profit after tax.
Therefore, the Board plans to submit
a resolution to shareholders at the
2017 Annual General Meeting authorising
payment of a cash dividend of 10.6 pence
per share, an increase of 70.9% compared
to the 2015 dividend payment.

BOARD
There have been no changes in board
structure over the last year. The Board
believes it is well structured and has a
good balance to cope with the increasing
governance demands placed on Board’s
of companies listed on the Premium
Segment of the London Stock Exchange.

The Board has a wide cultural and ethnic
mix, significant female representation
and a wide range of skills and operational
experience from different parts of the
world. Shareholders can therefore take
re-assurance that different viewpoints
are represented during board discussions.

NMC Health plc Annual Report and Accounts 2016

Overview “The Share Placing raised US$322.3m which,
alongside additional financing facilities, meant
that the Company is now well financed for
the future.”

EXECUTIVE REMUNERATION
As you will be aware, the Remuneration
Committee has increased the
remuneration paid to our Executive
team over the last two years. In addition,
in Q4, 2016, the Committee felt that it
was an appropriate time to put in place
a new Directors’ Remuneration Policy,
which included proposals to increase
the maximum opportunity of variable
remuneration paid to the Executive
Directors and the Senior Management
Team. The changes made in the
new policy, which was approved by
shareholders on 29 December 2016, were
set out in the circular to shareholders
circulated on 14 December 2016.

The Board is aware of the significant
focus on Executive Remuneration,
particularly in the UK where the Company
is listed. As set out in the December 2016
shareholder circular proposing the new
Directors’ Remuneration Policy, our
Executive remuneration was at
a low level compared to comparable
companies for a number of years
following the Company’s IPO. After the
completion of the initial phase of the
Group’s growth plan, the Committee,
supported by the Board, decided that
it would be an appropriate time to
reward management for their excellent
performance and to acknowledge the
fact that the size and complexity of the
Group had increased. These moves were
also intended to incentivise the team
in the implementation of the Group’s
acquisition strategy.

Shareholders have enjoyed significant
value accretion over the last few years
and the new remuneration structures
now in place incentivise management
to produce continuing good performance
which is expected to lead to further
accretion of shareholder value in the
future. The Remuneration Committee,
and the Board, appreciate shareholder
feedback on all matters, including
Executive Remuneration. We believe
that we took a correct approach on

remuneration which is appropriate to
NMC Health, and its strategy, during this
unique period of growth. We believe that
the initial delay in increasing Executive
Remuneration was appropriate for your
Company, but also that the recent
short term phasing of remuneration
increases to catch up to market levels was
opportune, appropriate and, we believe, in
the long term interests of all shareholders.
We look forward to your continued support
in relation to remuneration matters.

OUTLOOK
Economic conditions remain challenging
within some of the markets in which
we operate. However the price of oil has
stabilised and the anticipated growth
in private healthcare continues in the
UAE and the wider GCC. Against this
background, trading conditions in the
markets in which we operate continue
to be generally favourable and your Board
continues to view the outlook for your
Group with confidence.

H.J. MARK TOMPKINS
Non-Executive Chairman

MANAGEMENT AND STAFF
The Board is delighted with the excellent
progress that the Executive Directors and
Senior Management Team have made
in continuing to grow the Group in 2016
and also in pursuing an integration policy
to ensure that all acquired businesses are
integrated into the Group effectively and
at an appropriate pace. The Board also
acknowledges how difficult it can be to
produce excellent results from existing
Group businesses whilst also managing
an integration plan alongside continued
strategic growth. The Board would like to
thank Dr Shetty and his Executive Team
for the significant contribution made in
the last 12 months.

Across the Group, we continue to consider
the Company’s human capital as vital to
the success of your Company, particularly
during this period of significant change
and growth. Our doctor and employee
turnover remains low which we believe
is a testament to the loyalty of our staff
and the environment in which they work
and practice. We have welcomed new
businesses and employees to the NMC
family and both the Board and I would
like to thank them all, whether new or
long time employees, for their continued
commitment, contribution, energy and
goodwill during this continuing period
of change and growth.

NMC Health plc Annual Report and Accounts 2016

2. 3. 4. 5. 1. OverviewStrategic
Report

NMC Health plc Annual Report and Accounts 2016

Strategic ReportExtending
the reach
and footprint
of the Group

NMC expanded into Saudi Arabia in 2016
through the Long-term & Home care
vertical by announcing the acquisition
of As Salama Hospital, which was
subsequently consummated in early 2017.

Today NMC is the leading private sector
healthcare group in the UAE and one
of the most advanced and diversified
operators in the MENA (Middle East and
North Africa) region.

NMC Health plc Annual Report and Accounts 2016

2. Strategic Report5. 1. 3. 4. Executive Vice Chairman & CEO’s Review

Record growth in 2016

With further strategic progress in 2016, we have created a leading,
inter-connected, integrated multi-vertical and multi-brand private
healthcare network with the scalability and flexibility to sustain
strong growth into the future.

STRATEGY DELIVERING GROWTH
NMC Health delivered record growth in
2016 as we began to reap the long-term
rewards of several years of progress on
the two stages of our growth strategy.
In recent years NMC has expanded its
asset and brand portfolio organically and
inorganically into additional healthcare
services segments, extended our
presence across the continuum of care,
entered into higher growth and margin
specialties with very favourable regional
supply/demand dynamics, and selectively
entered new geographies to position the
Group at the intersection of multiple
growth channels to the ultimate benefit
of all our stakeholders.

With further strategic progress in 2016, we
have created a leading, inter-connected,
integrated multi-vertical and multi-brand
private healthcare network with the
scalability and flexibility to sustain strong
growth into the future.

CONTINUED STRATEGIC PROGRESS
Following our IPO in 2012, the Group
embarked upon the first stage of strategic
growth to enhance organic capacity,
resulting in three new hospitals and two
new medical centres, adding 410 licensed
beds – marking the largest ever private
sector expansion programme in the
UAE healthcare market. The first stage
of strategic growth has been completed,
and all new hospitals and medical centres
that opened in 2013 and 2014 achieved
breakeven ahead of initial guidance,
and NMC Royal Hospital which opened
outpatient services in September 2015
and inpatient services in March 2016 is
performing ahead of expectations.

The second stage of our growth strategy,
which was initiated at the beginning
of 2015, entails a shift in focus from
capacity to capabilities. NMC’s objective
is to accelerate its expansion into higher
medical complexity and thus higher value

added specialty healthcare segments
through the acquisition of leading global
and regional entities and the subsequent
establishment of new strategic multi-
brand verticals capable of unlocking
synergies within the enlarged group
and act as stand-alone platforms
spearheading the expansion beyond
the UAE into some of most accretive
healthcare market segments.

We have made significant progress in
achieving this objective/delivering on the
second stage of our growth strategy.
Since 2015 NMC has completed
acquisitions that have enhanced
our capabilities, added value and
been successfully integrated.

In addition, in December 2016 NMC
announced the proposed acquisition
of the Al Zahra Hospital in Sharjah, which
is due to complete in the first quarter of
2017. Al Zahra Hospital is a multispecialty
general hospital and one of the largest
private hospitals in the UAE, operating
137 active inpatient beds and serving
approximately 400,000 outpatients and
23,000 inpatient bed days per year. The
acquisition complements the Group’s
existing network of seven out-patient
medical centres in Sharjah, the third
most populous emirate in the UAE,
and is expected to be value accretive
in the first full year of ownership.

Above acquisition along with the Saudi
acquisition (As Salama), coupled with
NMC’s organic growth programmes,
have enabled the Group to establish and
further develop strategic verticals within
the broader healthcare delivery platform
with specialization-specific capabilities
and brands.

• Multi-specialty: 7831 licensed beds

(NMC Healthcare & Dr. Sunny)

• Maternity & fertility: 100 licensed beds
(Brightpoint Royal Women’s Hospital,
Clinica Eugin and Fakih IVF)

NMC Health plc Annual Report and Accounts 2016

• Long-term & Home care: 4062 licensed
beds (ProVita, Americare and two
assets in Saudi Arabia)

• Operation & management: 205
licensed beds (Sheikh Khalifa
Hospital in UAQ)

• Products & consumables: Around

97,600 Stock Keeping Units (exclusive
wholesaler of mainly globally
established and branded healthcare
products and equipment)

The progress we have made to date in
executing on our strategic growth plan
has enabled NMC’s healthcare asset
and brand portfolio to become even more
diversified with significantly enhanced
competitive advantages and substantially
augmented strategic optionality. This in
turn enables NMC to further expand its
growth horizons in what is an increasingly
challenging market for static market
actors. The combination of this progress
with a more optimised resource allocation
is leading to a substantially higher growth,
margin and return profile for the Group.

Today NMC is the leading private sector
healthcare group in the UAE and one
of the most advanced and diversified
operators in the MENA (Middle East
and North Africa) region. Our Maternity
& fertility vertical has segment-leading
assets, and is now considered one
of the top three fertility services
providers globally based on cycles
performed annually.

In the Long-term & Home care vertical
we expanded into Saudi Arabia in the
last year, firmly establishing our position
as the leading regional operator of
long-term care services and enhancing
the opportunities for future growth in this
segment and across the Group, as we
remain the only provider present along
the full continuum of care. In Operations
& management NMC was the first local
operator in the UAE to be awarded
a contract to manage a government

1
2

Includes 154 beds of Al Zahra Hospital.
Includes 140, 120 and 26 beds of As Salama,
Chronic Care and Provita beds in NMC
Royal respectively.

Strategic Report “We have made significant progress in delivering
on the second stage of our growth strategy.
Since 2015 NMC has completed acquisitions
that have enhanced our capabilities, added
value and been successfully integrated.”

hospital. In our distribution division, the
Products & consumables vertical, as
of year-end 2016 we offer around 97,600
SKUs and are seen as one of the top
three wholesalers in the UAE.

NMC now operates a total of 43 healthcare
services assets and 15 pharmacies,
including the 205 bed Sheikh Khalifa
General Hospital in Umm al Quwain.

GEOGRAPHICAL EXPANSION
Further to our strategic growth plan,
NMC expanded into Saudi Arabia in 2016
through the Long-term & Home care
vertical by announcing the acquisition
of As Salama Hospital, which was
subsequently consummated in early
2017, in Al Khobar and investing in a new
long-term care facility in Jeddah. Going
forward, NMC will continue to evaluate
further geographic expansion in the UAE,
GCC countries and selectively beyond,
as we see attractive market opportunities
with growing populations, favourable
demographic trends and undersupply
of healthcare services.

CONTINUOUS IMPROVEMENTS
In addition to making and integrating
value-enhancing acquisitions, we
have continued to make upgrades within
our existing hospital network to further
optimise service delivery and capacity
utilisation. As a result, at the end of 2016
the Group’s healthcare assets had a total
capacity of 1,135 licensed beds and with
the completion of the Al Zahra Hospital
and other acquisition this will rise to 1,289
licensed beds.

During the period, we continued to
advance our clinical capabilities and
offering throughout our key hospitals.
The addition of NMC Royal Hospital, which
commenced its inpatient services during
the period, was major step forward for
the group’s capabilities. We continued
to work on further improving the patient
experience at our facilities, from the
moment patients start their interaction

with NMC till they are discharged. Patient
satisfaction surveys and mystery shopper
exercises undertaken during the period
demonstrated very good progress.

During 2016 we continued the phased
roll out of our Hospital Information System
(HIS) in our new hospitals and within
some legacy assets, in order to increase
operational efficiency within our network.
We will continue to introduce and utilise
the HIS across our network of assets over
the coming year. In 2016 we also made
progress with the implementation of the
Company’s financial Enterprise Resource
Planning (ERP) system.

REGULATORY CHANGES
While regulatory changes and
improvements are part and parcel of an
evolving and advancing healthcare sector,
very few of those changes get the same
level of attention afforded to the abrupt
introduction of a blanket co-payment of
up to 20% on Thiqa insurance3 in late June
2016. This announcement took the equity
and healthcare markets by surprise.

However, our continuous efforts since
NMC’s establishment to build a business
seeking sustainable long-term growth
and competitive advantages by adhering
to the highest ethical standards combined
with the constant objective to deliver even
more effective services to both patients
and payors – shielded us from part of the
potential impact.

Furthermore, and in line with our strategy,
NMC’s diversification was also another
very important pre-existing mitigant.
Unlike most of the UAE healthcare private
sector, NMC operates across:

Insurance/market segments – from the
basic all the way up to Thiqa insurance.

2. Medical/clinical segments – with a

leading and rapidly advancing mix of
capabilities across the multi-specialty
vertical to specialist units in fertility
and long-term care.

3. Geographical/regulatory regions

– expanding presence, mainly across
the UAE, GCC4 and Europe.

4. Wholesale product distribution market
– products sold range from FMCG5
to pharmaceuticals and food across
the UAE.

Post the introduction of the 20% co-
payment, which was effective from 1st
of July 2016, the regulator has continued
to work with the operators to clarify and
where possible update the application in a
manner that serves the ultimate objective
– which is better and more sustainable
healthcare services to the patient. Most
recently, the Healthcare Authority of Abu
Dhabi (HAAD), announced the decision
to exempt long-term care patients from
the co-payment.

OPERATIONAL AND FINANCIAL
PERFORMANCE
Our healthcare assets continue to
perform very well and we have achieved
positive operational and financial results.

In total, we received 4.32m patients into
our facilities in 2016, representing 34.5%
year on year growth. Hospital occupancy
increased by 0.8% driven by the continually
high demand for quality services and we
enlarged our medical specialist teams
with the addition of 225 doctors during
the year.

3 Medical insurance cover provided by the

Government of the Abu Dhabi emirate to
UAE nationals. Citizens who are provided this
insurance do not pay an insurance premium.

4 Gulf Cooperation Council.
5 Fast moving consumer goods.

NMC Health plc Annual Report and Accounts 2016

1. 3. 4. 5. 2. Strategic ReportExecutive Vice Chairman & CEO’s Review continued

“We expect continued strong performance from our
enlarged network, its growing specialisms and the
further introduction of higher value added services
especially through our single specialty verticals.”

Group financial performance in 2016 was
once again strong, with reported revenues
increasing by 38.6% and Earnings Before
Interest, Depreciation and Amortisation
(EBITDA) increasing by 63.7% compared
with 2015. This was driven by the
increased utilisation of our organic
455 bed capacity expansion over the
past two years, recent acquisitions of
businesses in high growth segments,
and very good performance at the major
specialty hospitals and in particular
healthcare assets in Dubai which
benefitted from faster than expected
roll-out of mandatory healthcare
insurance. NMC continues to have a
strong capital structure, and even after
completing the US$560m acquisition
of Al Zahra Hospital in the first quarter
of 2017 we will remain well capitalised
to support and pursue further growth
opportunities.

We also continued to expand our
distribution vertical, Products &
consumables, this year with further
new product and brand introductions.
The number of SKUs increased to
around 97,600, an increase of 9.3%
compared to 2015.

OUTLOOK
I would like to thank my fellow members
of the Board of Directors, the senior
management team and our shareholders
for their continued support and dedication
throughout the year. Most importantly,
I would like to thank the employees
of NMC – both old and new – for their
tireless efforts to provide the United
Arab Emirates’ and the region’s growing
population with increased local access
to quality healthcare services and
products, as we have done so for
the last four decades.

Our transformation from a small
pharmacy and clinic into an internationally
recognised private healthcare services
provider would not have been possible
without the unparalleled support of
the UAE government and its residents,
and I extend my sincerest thanks to you
for your encouragement.

We expect another good year for the
UAE economy in 2017 supported by further
GDP growth of around 2.3% despite lower
oil prices, based on forecasts by leading
rating agencies. For the local healthcare
sector, one of the key drivers of growth
will be the increase in the patient volumes
with expected completion of mandatory
healthcare insurance in the Emirate of
Dubai by Q1 2017. For NMC in particular,
we expect continued strong performance
from our enlarged network, its growing
specialisms and the further introduction
of higher value added services especially
through our single specialty verticals.

Yours sincerely,

DR B.R. SHETTY
Executive Vice Chairman and CEO

For more information see Our Strategy
on pages 16 to 19

NMC Health plc Annual Report and Accounts 2016

Strategic ReportFinancial Summary and Highlights

US$m (unless stated)

Group
Revenue
EBITDA
EBITDA margin
Net Profit
Net Profit margin
Earnings per share (US$)-Basic
Adjusted Net Profit
Adjusted Earnings Per Share (US$)

Divisional performances
Healthcare revenue
Healthcare EBITDA
Healthcare EBITDA margin
Healthcare net profit
Healthcare occupancy

Distribution revenue
Distribution EBITDA
Distribution EBITDA margin
Distribution net profit

FY 2016

FY 2015

Growth %

1,220.8
246.1
20.2%
151.4
12.4%
0.711
165.2
0.785

823.3
241.1
29.3%
192.9
74.3%

431.9
47.1
10.9%
43.6

880.9
150.3
17.1%
85.8
9.7%
0.443
97.5
0.506

517.1
137.0
26.5%
108.0
73.5%

393.4
43.5
11.1%
40.7

38.6%
63.7%
309bps
76.5%
267bps
60.6%
69.4%
55.2%

59.2%
76.0%
280bps
78.6%
80bps

9.8%
8.3%
-15bps
7.0%

Notes:
• Net Profit equals profit after tax as shown in the Consolidated Income statement.
• Adjusted Net profit equals adjusted profit as shown in Note 16.
• EBITDA equals Profit from operations before depreciation, amortisation and one off items as shown

in the Consolidated Income statement.

• Healthcare and distribution numbers are before considering intra–group eliminations.

For more information see our Financial
Review on pages 24 to 25

NMC Health plc Annual Report and Accounts 2016

1. 3. 4. 5. 2. Strategic Report

Acquisition of the
Al Zahra Hospital

On 14 December 2016, the Board announced that the Company had agreed
terms with Gulf Medical Projects Company (“GMPC”) for the acquisition, subject
to certain conditions and approvals, of GMPC’s Al Zahra Hospital in Sharjah (the “Al
Zahra Hospital”), comprising the share capital of Al Zahra (Pvt.) Hospital Company
Limited and certain land and buildings currently used by the Al Zahra Hospital.

The Al Zahra Hospital was established
in 1981 by GMPC, a publicly listed company
on the Abu Dhabi Securities Exchange
(the “ADX”). The Al Zahra Hospital was one
of the first private general hospitals in
the UAE and provides both inpatient and
outpatient services of an international
standard, supported by state-of-the-art
facilities including cutting edge radiology
and laboratory practices.

The Al Zahra Hospital is the largest private
hospital in Sharjah and the Northern
Emirates and operates as a full service
multi-speciality hospital, with 137 active
inpatient beds and a current capacity

of 154 beds, serving approximately 400,000
outpatients and 23,000 inpatient bed days
per year. The Al Zahra Hospital has strong
relationships with a number of major
insurance providers in Sharjah with
approximately 85 per cent. of outpatients
referred through the insurance channel.
The Al Zahra Hospital is located on a
freehold site of approximately 80,000
square feet including approximately
502,000 square feet of floor space.
Certain land and buildings owned
by GMPC and currently used by the
Al Zahra Hospital will be sold to the
Group as part of the Acquisition.

AED 2,058m

Acquired for

NMC Health plc Annual Report and Accounts 2016

Strategic Report23,000

Inpatient bed days per year

154

Outpatient beds

137

Active inpatient beds

US$44m

EBITDA

400,000

Outpatient bed days per year

US$130m

2015 Revenue

NMC Health plc Annual Report and Accounts 2016

2. Strategic Report5. 1. 3. 4. Our Business Model

NMC currently operates or manages four strategic verticals within its
healthcare division. In addition, the Group is also a leading UAE supplier
of products and consumables across several key market segments,
through its distribution division, with the major contribution coming
from healthcare related products.

HEALTHCARE DIVISION
Through our healthcare division we
provide people with a range of high
quality outpatient and inpatient services
across our facilities. These facilities range
from the larger specialty hospitals to
medical centres, providing care along the
care pathway from emergency and short-
term health to long-term and in-home
care. Our major operational presence
is in the UAE market, however, we have
also established operations in Europe
and the Gulf region mainly through our
Long-term & Home Care and Maternity
& Fertility verticals.

Our network of retail pharmacies sells
pharmaceuticals mainly prescribed by
our doctors to our patients either within,
or in the immediate vicinity of, our
healthcare services facilities, as well as
numerous healthcare related products
supplied by our Products & consumables
vertical. Our comprehensive care
approach maximises patient
convenience and increases revenue
contribution to our business.

While we serve both insured and
self-paying patients, the overwhelming
majority of our healthcare division’s
revenue is generated through insured
patients. Usually insured patients have
to make a co-payment, which is the
proportion of the full price of services
rendered that the patient pays directly
to NMC when they receive services
at our facilities. NMC then submits
claims to insurance companies
to collect the remainder of our fees.

Pricing of our healthcare services is
typically negotiated on an annual basis
with the insurance companies we work
with and may differ between the various
insurance plans offered in the market.
In contrast, prices of the majority of
pharmaceutical products sold in our
pharmacies are regulated and set
by the UAE Ministry of Health.

NMC Hospitals are currently covered
by the majority of the approximately
51 insurance companies operating
in the UAE, including the largest market
participants. These companies have
either a direct relationship with us or
through Third Party Administrators
who currently provide private medical
insurance into the Abu Dhabi market.

Our Healthcare division also provides
operational and management services
to third party owned healthcare services
assets. In return for our services, we
receive a contracted management
fee by the asset owner. Typically, the
fee received is partially tied to a set
of pre-agreed performance metrics
incorporating either qualitative and/or
quantitative operational targets.
We currently have one management
contract with the UAE Ministry of
Presidential Affairs pertaining to
a general hospital in Umm al Quwain
in the Northern Emirates.

PRODUCT DISTRIBUTION
AND WHOLESALE
NMC’s distribution division, the Products
& consumables vertical, is now one of the
largest in the UAE and it offers products
across several segments including
Pharmaceuticals, FMCG, Scientific
Equipment and Food.

NMC counts among its clients UAE
Government entities, the largest UAE
retailers, pharmacies and hospital
operators. We supply our customers
with a portfolio of globally and locally
established brands and products with
end-user demand in the UAE. We ensure
our customers receive quality products
in a timely manner with the required
support services.

Our distribution capabilities are supported
by a network of strategically located
warehouses and a fleet of vehicles
ensuring timely delivery to our customers
across the country. Products are
predominantly sold on credit, with
payments collected based on agreed
terms. Our pricing of these products
includes a mark-up over the product
cost to generate profit margins and
cost of imports, duties, registration
and administration fees, distribution
expenses, credit costs and, in certain
cases, marketing costs. Pharmaceutical
is the only segment where pricing is
widely regulated by the UAE Ministry
of Health.

NMC Health plc Annual Report and Accounts 2016

Strategic ReportNMC procurement is on a principal basis.
In the vast majority of cases, NMC takes
the inventory and collection risk of the
product that it buys and sells. Acting
as a Principal rather than an agent
enhances NMC’s margins at the expense
of increasing the Group’s risk profile.
Our agreements are almost exclusively
operated on a credit basis, with the
number credit days agreed with
our Principals.

Only registered domestic distributors,
such as a locally established company
like NMC, are entitled by customs
authorities to import products into the
country. Principals (suppliers) contract
NMC as their distributor to gain access
to the UAE market through a reputable
partner with a long track-record,
established distribution channels
and infrastructure and strong financial
standing. Every individual brand and
product has to go through an approval
and registration process with local
authorities before being allowed to be
sold in the country. NMC facilitates this
process and ensures local requirements
are met. The majority of agreements
with our Principals are on exclusive
basis. All agreements are registered
with the government.

Product
Distribution

NMC Health plc Annual Report and Accounts 2016

Healthcare
Services

1. 3. 4. 5. 2. Strategic ReportOur Strategy

Second stage of growth

The second stage of our growth strategy, which was
initiated at the beginning of 2015, entails a shift in focus
from capacity to capabilities.

NMC’s IPO in 2012 reinforced the
Company’s strategic commitment
to expanding its capacity in the
undersupplied and fragmented private
UAE healthcare market. This was a
major milestone in establishing the first
integrated nationwide hub-and-spoke
healthcare network in the UAE private
sector with a primary, secondary and
tertiary care offering.

NMC successfully executed the organic
expansion plan outlined during its IPO,
by delivering strategic, well-positioned
and complementary healthcare assets
in the UAE market. The major organic
asset additions include:
1. Brightpoint Royal Women’s Hospital
– The first and leading maternity
hospital in the UAE private sector,
with 100 beds. Opened in H2 2014.

2. NMC General Hospital Dubai

Investment Park – Modern hospital
with 60 beds, extending NMC’s
presence into southern parts of Dubai
emirate ahead of mandatory medical
insurance roll-out. Opened in H2 2014.
3. NMC Royal Super Specialty Hospital
– Advanced super specialty hospital
with 250 bed capacity underpinned
by tertiary and quaternary care
capabilities, opened in H2 2015. Acts
as the hub for NMC’s national network
with referrals from across the network
and as the centre for NMC’s most
complex and advancing medical
capabilities. This hospital building
has the potentially to expand to 500
beds in the future with comparatively
limited capital expenditure.

Following the successful advance in
this capacity focused organic expansion
program, NMC initiated a capabilities
focused update to its strategy to
accelerate the expansion of the
Company’s clinical offering into higher
complexity and higher value specialties.
This new phase of growth was supported,
in February 2015, by a new financing facility
of up to US$825m, including US$475m
earmarked for inorganic expansion to
complement NMC’s existing capabilities.

To date the company has completed
several strategic and value accretive
acquisitions that complement the
Group’s offering, enhance its competitive
advantages and extend its growth
prospects. All acquisitions and
investments have met NMC’s stringent
investment criteria.

The major acquisitions include:
1. Clinica Eugin – A leading global

fertility treatment provider.

2. Fakih IVF – Middle Eastern fertility

services leader.

3. ProVita – Pioneering UAE based

long-term ventilated care provider

4. Americare – Top UAE provider

of home care services.

5. Dr Sunny Network – Highly reputable
UAE based primary care provider
in Sharjah.

6. Acquisition of As Salama Hospital and
investment in newly started long-term
care facility, both in Saudi Arabia –
Geographical expansion within the
Long-term & Home care vertical.
7. Proposed acquisition of the Al Zahra
Hospital (expected to be completed
in the first quarter of 2017).

- S T A G E STRATEGY

B uild i n g capa

cit

Vision

Delivering a continuum of care

uilding ca p a

bility

NMC Health plc Annual Report and Accounts 2016

Strategic ReportThe updated strategy and its subsequent
execution has meant that NMC’s
healthcare operations have evolved
from a single multi-specialty platform
operating under one brand, NMC, to
include additional higher complexity
and single specialty verticals operating
under a multi-brand and multi-
segment strategy.

These acquisitions, coupled with NMC’s
organic initiatives, have allowed the
Group to establish strategic verticals
within the broader healthcare delivery
platform with specialization-specific
capabilities and brands:
1. Multi-specialty – 7831 licensed beds

(NMC Healthcare & Dr. Sunny).

2. Maternity & fertility – 100 licensed beds
(Brightpoint Royal Women’s Hospital
& Clinica Eugin).

3. Long-term & home care – 4062

licensed beds (ProVita, Americare
and two assets in Saudi Arabia).
4. Operation & management – 205

licensed beds (Sheikh Khalifa Hospital
in UAQ).

5. Products & consumables – Around
97,600 SKUs (exclusive wholesaler
of mainly globally established
and branded healthcare products
and equipment).

1
2

Includes 154 beds of Al Zahra Hospital.
Includes 140, 120 and 26 beds of As Salama,
Chronic Care and Provita beds in NMC
Royal respectively.

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Healthcare

L I V E R I N G A CONTINUUM OF CAR

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NMC Health plc Annual Report and Accounts 2016

1. 3. 4. 5. 2. Strategic Report

Our Strategy continued

Our healthcare network
NMC’s healthcare operations
have evolved from a single
multi-specialty platform
operating under one brand
to include additional higher
complexity and single
specialty verticals operating
under a multi-brand and
multi-segment strategy.

C OMMUNITY

M B ZC Day Surgery

L O C AL / CITY

A b u D h a b i
S p e c i a li t y
H o s p i t a l

Al Ain
Speciality
Hospital

Provita

G I O NAL (UA

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NMC Royal
Super Speciality
Hospital

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Fakih
IVF

B r i g h t p o i n t
W o m e n ’ s
H o s p i t a l
A b u D h a b i

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Dubai IP
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BR Medical S

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American Surgec e n t e r

The Group now has a total capacity of
1,135 licensed beds, and with the
completion of the Al Zahra Hospital
acquisition this will rise to 1,289 licensed
beds. In addition, NMC has a network
of medical centres and day-surgeries,
and operates the 205 bed Sheikh
Khalifa Hospital on behalf of the UAE
government in the Emirate of Umm
al Quwain.

Having made significant strategic
progress in recent years, which has
resulted in strong operational and
financial performance, NMC reiterates
its commitment to the long-term
strategic growth plan and the following
key objectives:

• Accelerate development of Centres of
Excellence in key specialties within the
multi-specialty vertical (e.g. partnership
with Oxford University affiliate to
deliver in-hospital oncology therapy)
as well as in newly-established single
specialty verticals such as fertility
and long-term care through organic,
inorganic or partnership initiatives;

• Contribute towards increased

healthcare spend retention within
the UAE, through a broader and
higher complexity offering;

NMC Health plc Annual Report and Accounts 2016

Strategic Report

• Expand medical specialty offering to

• Further complement its market

the growing patient population within
the UAE whilst maximising cross-
referrals and operational synergies
between existing network assets
and verticals;

•

position through selective adoption
of a multi-brand approach under the
broader NMC Health umbrella brand;
Increase participation in the rapidly
growing medical tourism market
within the UAE by establishing its
facilities as a destination of choice for
medical tourists from the wider region;

• Selectively pursue in-vertical

consolidation opportunities to grow
market presence and cross-referral
capabilities and accelerate the
patient volume reliant drive towards
higher complexity/value added
healthcare services;

• Offer fully integrated healthcare

solutions within NMC’s system to the
benefit of patients and payors. This
includes a leading presence across the
continuum of care with the ability to
‘step-up’ and ‘step-down’ patients
based on their healthcare needs (e.g.
from super specialty hospital to/from
long-term care to/from home-care);

uite

BR Medical S

• Continue to selectively establish

a strategic presence outside the UAE
through the more scalable and less
capital expenditure intensive single
specialty verticals, thereby allowing
NMC to leverage its expertise and
the reputation behind its key brands
(such as Fakih IVF, Eugin and ProVita)
in attractive markets.

I N O R G A N I C CAPABILITIES FOCUS

A N I C C A PACITY GRO

Stage 1: 2012-2014

Stage 2: 2015-2018

DEVELOPMENT

Categories

Total

Male

Female

Male

Female

31 December 2016

Gender

Percentage

Board of Directors & Senior
Management Team

NMC Board of Directors

Senior Management Team

Grand Total

11,252

5,582

5,670

Corporate Office

Total – Corporate Office

Corporate Management*

Corporate Staff

Reliance Infotech

Total – Reliance Infotech

Healthcare

Distribution

R&D

Reliance Management

Reliance Staff

Total – Healthcare

Healthcare Management

Doctors

Staff Nurses

Technicians & Pharmacists

Healthcare – Others

Total – Distribution

Distribution Management

Distribution Staff

Eugin

419

109

310

8,686

155

1,030

3,014

1,119

3,369

2,059

187

1,872

273

188

146

122

3,456

5,230

107

619

531

454

1,745

1,781

164

1,617

411

2,483

665

1,625

278

255

67%

83%

50%

65%

78%

61%

88%

89%

88%

40%

69%

60%

18%

41%

52%

86%

88%

86%

30%

33%

17%

50%

35%

22%

39%

12%

11%

12%

60%

31%

40%

82%

59%

48%

14%

12%

14%

70%

* Corporate Management includes six Senior Management Personnel, two of whom were Executive Directors also, but excludes Non-Executive Directors.

NMC Health plc Annual Report and Accounts 2016

1. 3. 4. 5. 2. Strategic Report

Risk Management

NMC follows a conservative approach in risk taking
and has implemented controls and mitigation
strategies in order to reduce those risks.

IDENTIFICATION OF RISK
The Board consider the identification
and mitigation of material risks and
uncertainties faced by the Group as
a key issue to be monitored at all levels
of the organisation. The Board has
overall responsibility for the Group’s
risk management and internal control
systems. The Senior Management team
ensure that operational management
consider risk as part of their day to
day activities. This is considered to be
particularly key for NMC as a Group due
to both our current strategic expansion
program and the fact that our businesses
are operating in regulated environments.

As there are multiple risks associated
with our businesses, particularly the
healthcare sector, the process of Risk
Management is an essential mechanism
to enable a risk based decision making
process. NMC follows a conservative
approach in risk taking and has
implemented controls and mitigation
strategies in order to reduce those risks.

The Strategic Risk Register, which is the
basis for the list of principal risks and
uncertainties, was developed and is

maintained using both a bottom up and
top down assessment of business and
strategic risks. The register is reviewed
and considered in detail every six months.

of authorities and succession plans,
diversification in business and
revenue streams.

The initial production of the Strategic
Risk Register was by way of a bottom
up exercise of risk reviews conducted
through discussions in each of the
Group’s businesses. The top down
exercise included meetings of senior
executives. The output from the
aggregated results of these exercises
produced a list of principal risks that
were reviewed and agreed by the Senior
Management Team before being
presented to, and discussed by, the Board.

The Strategic Risk Register is now
reviewed and maintained regularly by
management, with the Board retaining
oversight and responsibility over the
Register and the risk management
process. The Board approved an
amended Strategic Risk Register in
both August 2016 and March 2017.

Depending on the nature of the risk
involved, a variety of risk mitigation
measures have been implemented
including, for example, insurance,
standardised processes, delegation

STRATEGIC RISKS AND UNCERTAINTIES
In the table of strategic risks below, the
Board have set out the Group’s strategic
risks and the mitigating actions and
controls taken against those risks. It
should be noted that the order that these
risks are expressed in the table does not
reflect an order of magnitude as regards
their potential impact on the Group. The
Board Oversight of the System of Internal
Control and Risk section on pages 51 to 54
also sets out additional details of the
governance framework and controls in
place within the Group’s businesses to
monitor and control risk.

There have been no material changes
made to the Group’s strategic risk register
in 2016. However, the Board has made
a number of minor changes to the list
of principal risks in the last 12 months,
particularly having regard to the
challenges faced by the Group in the
execution of its strategic growth plan
and integration of acquired businesses
into the Group, in particular given the
acquisitive nature of the Group and its
entry into new markets.

For more information see our Viability
Statement on pages 83 and 84

NMC Health plc Annual Report and Accounts 2016

Strategic ReportKEY THEMATIC RISKS
THE BIG PICTURE – 2016

CUSTOMER CENTRICITY
1. Bad decision in relation to either

acquisition or organic growth investments
or an inability to appropriately execute
integration or new facility ramp-up plans
may result in:
• Lower Return on Investment (ROI);
• Lower revenue than expected;
• Decreased margins and

market share;

• Potential for impairment of assets;
• Potential difficulty in raising

future finance.

U S T O M ER CENTRICIT

Investment

E
C
N
E
L
L
E
C
X
E

S
E

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C

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NMC
Strategy

Human Capital

PEOPLE ENA B L E M E

a
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n
a
n
F

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-
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r
c
a
M

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o
i
t
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t
e
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N
C

A
L
H
E
A
L
T
H

PEOPLE ENABLEMENT
10. Failure to retain/acquire key professionals
or inability to acquire sufficient Medical
staff could potentially lead to inability to
deliver required healthcare services and
execute growth strategy.

SERVICES EXCELLENCE
7. A Data Security (e.g. VVIP

patient records) breach due
to either intentional malicious
cyber-attack or unintentional
data or system loss resulting
in reputational damage,
operational disruption
or regulatory breach.

8. Failure to comply with multi
regulatory and standards
bodies’ requirements could
result in financial fines, inability
to renew licenses, as well
as NMC reputation damage.

9. Failure to comply with

internationally recognised
clinical care and quality
standards, clinical negligence,
the mis-diagnosis of medical
conditions or pharmaceuticals
and the supply of unfit
products across both divisions.
could result in regulatory
sanction, licence removal,
significant reputational
damage, loss of patient and
customer confidence and
potential criminal proceedings.

FINANCIAL HEALTH
2. Increased competition due
to high private and public
investments in the UAE
healthcare sector and
associated investments
coming from new entrants
or existing player partnerships
would lead to market share
loss and potential reduction
in access to future growth
in UAE healthcare spend.

3. Failing to innovate and

effectively deliver new services.
Inexperience of operating in
new markets/offerings leads
to missed opportunity or poor
service delivery.

4. Potential adverse effect
NMC’s margin as a result
of unexpected regulatory
or cultural changes affecting
the provision of healthcare,
the basis of the healthcare
insurance structure or
increases in medical inflation
and pricing pressure and
bargaining from key insurance
providers in the Group’s key
markets, would result in
less profitability.

5. Potential instability in

revenue impairing cash flow
and working capital health
as a result of global and
regional demographic,
macro economic and
geopolitical factors.

6. Failure to maximise the

opportunity or acquisitions
through successful integration
strategies or through
ineffective management
structure or operating model
may result in:
•

•

Increased market and
regulatory/legal obligations;
Increased culture
resistance and complexity
in shifting the governance
model from enterprise
to corporate structure;
Increased operational
exposure due to the
complexity of integrating
higher number of
spokes to centralised
hub of excellence;
Increased investment risk
due to weak due diligence
and other mitigates.

NMC Health plc Annual Report and Accounts 2016

1. 3. 4. 5. 2. Strategic Report

Risk Management continued

Risk Class

Investment

Competition

Financial

Macro-economic

Financial

Description and Potential Impact

Bad decisions in relation to either acquisition or
organic growth investments or an inability to
appropriately execute integration or new facility
ramp-up plans may result in:

Current Mitigations
• Board oversight in approving and monitoring

strategic projects.

• Project management controls.
• Detailed market and business appraisal

processes.

• Lower Return on Investment (ROI);
• Lower revenue than expected;
• Decreased margins and market share;
• Potential for impairment of assets;
• Potential difficulty in raising future finance.

• Focus on integration pathway to

improve Group revenue generation from
intra-group business referrals and multi-
brand facility sharing.

• Strategy to acquire international know-how

through acquisition plan.

• Re-alignment of existing assets within the
Group’s hub and spoke model (e.g. existing
specialty hospitals feeding the regional NMC
Royal Hospital, Khalifa City).

•
Integrated Hub-Spoke model.
• Growing healthcare network.
• Partnership with Government hospitals.
• The development of international

partnerships and use of increased know-
how gained through strategic growth plan.

• Diversification of patient base.
• Variety in service offerings.
• Frequent monitoring of both fixed and

variable cost.

• Synergy tracking and reporting.
• Acquiring the skills associated with the

M&A transactions.

• Diversification of the revenue streams.
•

Increased collaboration between different
group assets and businesses.

• Frequent monitoring of both fixed and

variable cost.

• Good relationships with insurance providers.
• Strategy to increase patient volumes and

focus on clinical specialisms.
• M&A Strategy in new markets.
• UAE is a stable and booming market to

operate in.

• Diverse business and revenue streams.
• Long Term debt facilities and unutilized

working capital limits.

• Strong banking and supplier relationships.
• Proper due diligence.
• Post-acquisition integration plan.
• Rigorous analysis of value of the acquisition.
• Focus on the corporate cultures involved.
• Executive committee reporting and targets.
• Synergy tracking and reporting.
• Acquiring the skills associated with the M&A

transactions.

Increased competition due to high private and
public investments in the UAE healthcare sector
and associated investments coming from new
entrants or existing player partnerships would
lead to market share loss and potential
reduction in access to future growth in UAE
healthcare spend.

Failing to innovate and effectively deliver new
services. Inexperience of operating in new
markets/offerings leads to missed opportunity
or poor service delivery.

Potential adverse effect NMC’s margin as a
result of unexpected regulatory or cultural
changes affecting the provision of healthcare,
the basis of the healthcare insurance structure
or increases in medical inflation and pricing
pressure and bargaining from key insurance
providers in the Group’s key markets, would
result in less profitability.

Potential instability in revenue impairing cash
flow and working capital health as a result
of global and regional demographic,
macro-economic and geopolitical factors.

Failure to maximize the opportunity of
acquisitions though successful integration
strategies or through ineffective management
structure or operating model may results in:

•

Increased market and regulatory/ legal
obligations;
Increased culture resistance and complexity
in shifting the governance model from
enterprise to corporate structure;
Increased operational exposure due to the
complexity of integrating higher number
of spokes to centralized hub of excellence;
Increased investment risk due to weak
due diligence and other mitigates.

NMC Health plc Annual Report and Accounts 2016

Strategic ReportRisk Class

Technology

Description and Potential Impact

A Data Security (e.g. VIP patient records) breach
due to either intentional malicious cyber-attack
or unintentional data or system loss resulting in
reputational damage, operational disruption or
regulatory breach.

Compliance & Regulation

Failure to comply with multi regulatory and
standards bodies’ requirements could result in
financial fines, inability to renew licenses, as well
as NMC reputation damage.

Product & Service

Failure to comply with internationally recognized
clinical care and quality standards, clinical
negligence, the misdiagnosis of medical
conditions or pharmaceuticals and the supply
of unfit products across both divisions could
result in regulatory sanction, licence removal,
significant reputational damage, loss of patient
and customer confidence and potential
criminal proceedings.

Human Capital

Failure to retain/acquire key professionals or
inability to acquire sufficient Medical staff
could potentially lead to inability to deliver
required healthcare services and execute
growth strategy.

Current Mitigations
•

ISO 27001 certified framework for IT policies
and controls.

• Strict measures towards clients’ data

and records.
•
Investment in new Hospital Information.
• System and ERP financial system approved
by the Board and implementation in progress.

• Quality & Standards Department monitors

regulatory changes.

• Partnership with government.
• Good relationships with regulators and

accrediting organizations.

• Continuous focus on delivering high levels

of service.

• Doctors subject to rigorous licensing

procedures which operate in the UAE.
• Healthcare division is a regulated business
and five of the Group’s principal hospitals
have achieved, or are in the process
of achieving, international quality
standards accreditation.

• Many aspects of the operation of the

Distribution division, including the sale of
pharmaceuticals, is regulated in the UAE.

• Board oversight and integrated

governance structure.

• Medical malpractice insurance to cover any

awards of financial damages.

• Continuous training and development

programs.

• Partnership with education institutes.
• Effective sourcing strategies & recruitment

campaigns.

• Ongoing review of senior management

resources and succession plans in place
for key positions.

• Competitive salary packages, growth and
good working conditions act as a good
retention tool.

• Clear career path for staff and continuous
training and development programs.

As recommended by provision C.2.2 of the UK Corporate Governance Code, the Directors have considered a formal long-term
assessment of the prospects and viability of the Group. As part of this assessment, the Board considered the potential impact
of three principal risk themes facing the Group. The Board’s viability statement is set out on pages 83 to 84.

The Group Strategic Report set out on pages 6 to 33 has been approved by the Board and is signed on its behalf by:

DR B.R. SHETTY
Executive Vice Chairman & CEO

NMC Health plc Annual Report and Accounts 2016

1. 3. 4. 5. 2. Strategic Report
Governance

NMC Health plc Annual Report and Accounts 2016

GovernanceGovernanceCorporate Governance Report

The Board, supported by its Committees and the Senior Management
team, have in place a governance and control environment which
they believe is appropriate for the NMC Group and which they believe
are consistent with the standards which would be expected of
a FTSE 250 Company listed on the Premium Segment of the
London Stock Exchange.

INTRODUCTION
The Board is responsible for, and committed to, ensuring that procedures are in place so that good standards of corporate
governance are operated at all levels in the Group in accordance with the guidance and principles set out in the UK Corporate
Governance Code published by the Financial Reporting Council (FRC) in September 2014 (the “Code”). The Code can be found
on the Financial Reporting Council website, frc.org.uk.

The Board, supported by its Committees and the Senior Management team, have in place a governance and control environment
which they believe is appropriate for the NMC Group and which they believe are consistent with the standards which would be
expected of a FTSE 250 Company listed on the Premium Segment of the London Stock Exchange. The Board ensures that
governance processes are documented and implemented and, where appropriate, continue to be improved.

The Board has reviewed the Company’s compliance against the provisions of the Code and believes that, with the exception
of provision E.2.4 in relation to the notice given at less than 14 working days for the General Meetings held on 29 December 2016,
the Company was compliant with the provisions of the Code for the 2016 Financial Year. The Board felt it necessary to give less
than 14 working days’ notice for the General Meeting in relation to the acquisition of Al Zahra Hospital, given the deadlines for this
transaction set in negotiations between the parties. The second General Meeting to approve the Company’s New Directors’
Remuneration Policy was held on the same day for the convenience of shareholders wishing to attend the Meetings.

This Governance section describes how the Board has applied Corporate Governance principles during the 2016 financial year.

GOVERNANCE FRAMEWORK
The Company operates within a traditional governance framework

CHAIRMAN

Board

Executive Vice Chairman &
CEO and senior management

Group Company
Secretary

Board
Committees

Senior Independent
Non-Executive Director

Audit Committee

Clinical Governance
Committee

Nominations
Committee

Remuneration
Committee

The roles and responsibilities of each of the individuals and groups above, and their role in the overall governance framework,
are set out below.

NMC Health plc Annual Report and Accounts 2016

1. 2. 4. 5. 3. Governance

Corporate Governance Report continued

THE BOARD
THE ROLE OF THE BOARD
The Board is responsible for the overall conduct of the Group’s business and:
•
• demonstrating leadership and focussing on matters that affect shareholder value;
• determining the strategic direction of the Group; and
•

for the long term success of the Company ensuring that it meets its responsibilities towards all stakeholders;

for ensuring the effectiveness of, and reporting on, the risks facing the Group and the systems of governance and internal
control in place in the Group.

The Board seeks at all times to ensure that there is an appropriate balance between short term and long term considerations and
objectives of the Group.

The Board has the powers and duties as set out in the Company’s Articles of Association and the relevant regulations applicable to
the Company as a public listed company registered in England and Wales. As part of the terms of their appointment, each director
agreed that they will act collectively with the rest of the Board to ensure the success of the Group.

The Company has agreed a formal schedule of matters reserved for the Board including:
• approval of strategic plans;
• approval of major capital projects, acquisitions and divestments;
• approval of long term financing plans;
• setting the annual budget;
•
• approving the half-year and annual results and financial statements.

risk management and internal control systems and processes to ensure that the Group is managed appropriately; and

Specific responsibilities are delegated to Board Committees, details of which are set out on pages 43 to 50 or to the Executive
Vice Chairman & CEO who is responsible for delivering the Company’s strategic objectives.

BOARD COMPOSITION AND INDEPENDENCE
The Board of the Company currently comprises eleven directors, all of whom have served throughout the year:
•
•
•
•

the Non-Executive Chairman who is considered to be Independent
two Executive Directors
five Independent Non-Executive Directors
three Non-Independent Non-Executive Directors

In addition, Heather Lawrence was an Independent Non-Executive Director until 12 January 2016.

The biographies of each of the Directors are set out on pages 38 and 39.

Provision B.1.1 of the Code suggests that length of tenure is a factor in determining the independence of non-executive directors.
The table below therefore shows how long each Director considered by the Board to be Independent Non-Executive Directors have
been members of the Board.

Date of appointment

Term in office to 2017 AGM (years)

H J Mark Tompkins

Dr Ayesha Abdullah

Jonathan Bomford

Lord Clanwilliam

Salma Hareb

Dr Nandini Tandon

7 March 2012

26 June 2014

27 June 2013

7 March 2012

26 June 2014

The other five Directors are either Executive Directors or connected to, or representing, the Company’s principal shareholders,
and are therefore not independent.

The Board considers that it is independent.

The Senior Independent Director is Jonathan Bomford, who is available to shareholders should they have any concerns that they
do not wish to raise with the Company or the Chairman directly. The Senior Independent Director can be contacted through the
UK corporate office, and registered office, of the Company.

NMC Health plc Annual Report and Accounts 2016

GovernanceBOARD DIVERSITY
The Board considers that the extensive and diverse business, cultural and operational experience of all the Directors, both
Independent and non-Independent, ensures a good balance in all aspects of Group decision making and control. The above
attributes also enable the Board to take account of diverse and independent judgement to bear on key issues of:
• strategy, including constructively challenging the strategic direction of the Group;
•
• scrutinising and challenging the performance of the Group;
• assessing risk and controls operating within the Group and in its decision making; and
• standards of conduct and governance and other matters presented to the Board.

the consideration of acquisition proposals and long term financing of the Group’s growth strategy;

Similar practices to ensure a diverse employee base are also operated within the Group’s businesses. The principles of employee
diversity in the Group are summarised in the Corporate Social Responsibility report on pages 26 to 29.

Therefore the Board is structured to ensure that:
• an appropriate cultural and ethnic mix is in place considering the Company’s listing in the UK and its diversified operations,

•

the vast majority of which are in the UAE, as well as global drivers and practice in healthcare related services;
the conclusions of the Davis Report on Women on Boards, and in particular the benefits of significant male and female
representation on the Board, are taken into account; and
the individual skills and experience that Directors bring to the Board are well balanced.

•
The Board will continue to consider appropriate skills, gender and cultural balance when reviewing future Board appointments.

Board diversity and composition as at the date of this report is as follows:

Executive/Non-Executive

Gender of Board

Executives
Non-Exectuives

18%
82%

Male
Female

73%
27%

Tenure of Non-Executive Directors

Nationality

3 years
4 years
5 years

67%
11%
22%

UAE
UK

Indian

18%
27%
37%

Kenyan 9%
9%
USA

NMC Health plc Annual Report and Accounts 2016

1. 2. 4. 5. 3. Governance
Board of Directors

MR H. J. MARK TOMPKINS (76)
Non-Executive Chairman 3

Nationality: British
Tenure: 5 years

Relevant Experience:
• Significant public company

experience on UK, US and French
listed company Boards

• Experience in investment banking,
international real estate and the
financing of small and medium
sized enterprises

• Director and Chairman of Allied

Healthcare International

• Non-Executive Director and Conseiller

Special aupres du Conseil
D’Administration of Sodexo S.A.

DR B. R. SHETTY (74)
Executive Vice-Chairman & Chief
Executive Officer

Nationality: Indian
Tenure: 6 years

Relevant Experience:
• Business Entrepreneur
• Founder, Director and principal
shareholder of NMC Health

• Pioneer in the development of the
private healthcare sector in the UAE
• Other Board positions and material
investments in financial, hospitality,
food and beverage, pharmaceuticals
and real estate sectors

MR PRASANTH MANGHAT (42)
Deputy Chief Executive Officer

Nationality: Indian
Tenure: 3 years

Relevant Experience:
• 20 years’ experience in accounting,
corporate finance, treasury and
banking, including 12 years’ in NMC
related businesses

• Chief Financial Officer of NMC Health

2011-2014

• Spearheaded NMC’s successful

IPO on the London Stock Exchange
in April 2012

• Chartered Accountant

DR AYESHA ABDULLAH (50)
Independent Non-Executive Director 1 2

MR ABDULRAHMAN BASADDIQ (68)
Non-Executive Director 3 4

Nationality: Emirati
Tenure: 3 years

Nationality: Kenyan
Tenure: 3 years

MR JONATHAN BOMFORD (68)
Senior Independent Non-Executive
Director 1 4

Nationality: British
Tenure: 4 years

Relevant Experience:
• Significant experience in development

Relevant Experience:
• Significant business experience across

and regulation of the healthcare
industry in the UAE

• Oversaw development of, and then

regulatory aspects of, Dubai Healthcare
City (DHCC)

• Previously, CEO of Dubai Healthcare

City (DHCC)

• Currently Executive Dean of Health
Sciences and Business at Higher
College of Technology (Dubai)

a number of GCC based Groups
operating in multiple jurisdictions and
business sectors, including two major
listed Groups

• Previously 25 years with EY in the UK
and GCC, including 15 years as an
equity partner

• Currently Non-Executive Director of
Abu Dhabi National Hotel Group,
Travelex and UAE Exchange

Relevant Experience:
• Accounting, financial and audit
experience gained principally in
the Middle East and East Africa

• Previously with EY (Middle East, East

Africa, Abu Dhabi & Riyadh) for 24 years
(15 years as a partner)

• EY clients included international clients
across healthcare, oil, banking and
construction sectors

• Currently Non-Executive Director

• UK qualified Chartered Accountant and

of Travelex

licensed auditor in the UAE

• UK qualified Chartered Accountant

NMC Health plc Annual Report and Accounts 2016

GovernanceLORD CLANWILLIAM (56)
Independent Non-Executive Director 4

MRS SALMA ALI SAID BIN HAREB
ALMHEIRI (51)
Independent Non-Executive Director 4

Nationality: British
Tenure: 5 years

Relevant Experience:
• Government and financial
communications specialist

• Extensive network of governmental
and institutional contacts across
Middle East, UK and Eastern Europe
• Founding Partner and Chairman of

Meade Hall Communications Limited
• Chairman of Eurasia Drilling Company

2007 to 2016

Nationality: Emirati
Tenure: 3 years

Relevant Experience:
• Significant business experience and

a recognised leading businesswoman
in the Middle East

•

• CEO of Economic Zones World (EZW)
and Jebel Ali Free Zone (Jafza) from
2005 to 2015
Instrumental in creation of Dubai
Logistics Corridor and oversaw EZW’s
expansion with development of
international logistics parks in UAE,
Europe, India, USA and Africa

MR KEYUR NAGORI (38)
Non-Executive Director

Nationality: Indian
Tenure: 3 years

Relevant Experience:
•

10 years’ of experience in international
audit firms including Deloitte
and KPMG

• Audit of multinational companies
based in both India and Abu Dhabi
10 years’ experience at KBBO Group

•

MR BINAY SHETTY (33)
Non-Executive Director 2

DR NANDINI TANDON (54)
Independent Non-Executive Director 1 2

Nationality: Indian
Tenure: 3 years

Nationality: USA
Tenure: 3 years

Relevant Experience:
• Operations and strategic experience
within a number of organisations
• 2010 to 2014 Chief Operating Officer,

NMC Group

• 2004 to 2010 Executive Director of NMC
responsible for strategic planning

• Director of UAE Exchange and

Travelex and Head of Shetty Family
Investment office

Relevant Experience:
•

Investment and Board experience in
healthcare and healthcare IT sectors
• Director and investment in numerous

high tech companies in the USA
• Delegate and speaker on a number
of high level global investment and
governmental and investor summits
and programs

• Board of Trustees, Bay Area Council
Economic Institute, Board Member,
SF-Bangalore Sister City Initiative and
TeleVital Real Time Telemedicine

Key to committees
1 Audit Committee
2 Clinical Governance
3 Nominations
4 Remuneration

Note: Full biographies can be viewed on
the Company’s Investor Relations website
at www.nmchealth.com

NMC Health plc Annual Report and Accounts 2016

1. 2. 4. 5. 3. GovernanceSenior Management Team
The Senior Management Team Consists of:

DR B. R. SHETTY
Executive Vice-Chairman & Chief
Executive Officer

Relevant Experience:
• Business Entrepreneur
• Founder, Director and principal
shareholder of NMC Health

MR PRASANTH MANGHAT
Deputy Chief Executive Officer

DR CHANDRAKUMARI R. SHETTY
Group Medical Director

Relevant Experience:
• 20 years’ experience in accounting,
corporate finance, treasury and
banking, including 12 years’ in NMC
related businesses

• Chief Financial Officer of NMC Health

2011-2014

• Spearheaded NMC’s successful IPO
on the London Stock Exchange in
April 2012

• Chartered Accountant

Relevant Experience:
• Over 40 years’ experience with NMC

Health and a pioneer in developing the
private healthcare sector in the UAE
Instrumental in establishing Centres
of Excellence in various NMC facilities

•

• Chairs a number of NMC business
committees covering Governance,
Infection Control, Patient Rights,
Quality and Facility Management

• Supervises NMC Healthcare’s

diversified multi-cultural workforce.

ROY CHERRY
Head of Strategy & Investor Relations

SURESH KRISHNAMOORTHY
Chief Financial Officer

SIMON WATKINS
Group Company Secretary

Relevant Experience:
•

13 years’ experience in financial
services and healthcare

• Assists Executive Vice Chairman

and CEO and Deputy CEO in relation
to NMC strategic matters

• Leads Group’s IR and played an

instrumental role in the re-rating
of NMC’s shares

• Formerly a Senior Consultant at PwC
Transaction Services providing advice
on transactions across several sectors
including healthcare

• Contributed to several regional

IPO’s including Saudi Catering, NMC
Health, Deyaar, DP World and Royal
Jordanian Airlines

• Previously headed the Equity Research
Departments at SHUAA Capital in Dubai
and Saudi Fransi Capital in Riyadh
• Holds a BSc in Management from
University of London and speaks
English, Arabic and Swedish fluently

Relevant Experience:
• Appointed as CFO in January 2015 and

Relevant Experience:
• Joined NMC in May 2012 shortly after

heads up NMC’s finance teams
• Joined NMC in December 2000 and

held a number of senior finance roles
in the Group

• Has had significant involvement in
the Company’s IPO in April 2012 and
subsequent fund raising initiatives

• Prior to joining NMC, worked as

Assistant Finance Manager in Kerala
Industrial Infrastructure Corporation
in India

• Qualified as a Chartered Accountant

in India in 1998

the Group’s IPO

• Responsible for Group’s listing
obligations and all governance
matters, assisting the Chairman with
ensuring effective and appropriate
Board processes

• Over 25 years’ of experience as

a Company Secretary in large and
medium sized UK public companies
across a number of sectors
• Significant experience within
Group’s focussed on strategic
and acquisitive growth

• Previous experience includes Deputy
Company Secretary of Rank Group plc
and Group Company Secretary of
lastminute.com

• Qualified as a Chartered Secretary

in the UK in 1987.

NMC Health plc Annual Report and Accounts 2016

GovernanceCorporate Governance Report continued

KEY ROLES AND RESPONSIBILITIES IN THE GOVERNANCE STRUCTURE
The roles of the Chairman and Chief Executive Officer are separate.

CHAIRMAN
The Chairman was appointed to the Board in March 2012 in anticipation of the Company’s IPO. He was independent at the time
of his appointment and is considered to be independent by the Board. The Chairman is responsible for the proper functioning
of the Company’s Board of directors including:
•
• setting the agenda and coordinating the style and tone of Board discussions

the effective operation and governance of the Board

EXECUTIVE VICE CHAIRMAN AND CHIEF EXECUTIVE OFFICER
The Executive Vice Chairman and Chief Executive Officer is responsible for identifying, with the Senior Management Team,
opportunities that are deemed appropriate and in line with the Board’s strategic objectives. He is also responsible for delivering
the key strategic objectives set by the Board. The Executive Vice Chairman and Chief Executive Officer is assisted in this task
by the Deputy Chief Executive Officer and the remainder of the Senior Management Team who meet regularly to discuss the
performance of the business, the progress of key capital projects, new development opportunities as well as other material
matters arising within the business.

SENIOR INDEPENDENT DIRECTOR
The Senior Independent Director acts as a sounding board for the Chairman and serves as an intermediary for the other Directors
as required. The Senior Independent Director is available to shareholders if they have concerns which they have not managed
to resolve through the normal channels of the Chairman or the Executive Directors, or who feel that such contact is inappropriate
for the concerns that they may have.

GROUP COMPANY SECRETARY
The Group Company Secretary acts as Secretary to the Board and to the Board Committees. He assists the Chairman in ensuring
that all Directors have full and timely access to all relevant information and in organising induction programmes for new Directors.
The Group Company Secretary is responsible for ensuring that the correct Board procedures are followed and advises the Board
on corporate governance matters. The appointment and removal of the Group Company Secretary is a matter for the Board as
a whole.

The biography of each individual holding the above positions is set out on pages 38 to 40.

BOARD MEETINGS
The Group Company Secretary supports the Chairman in finalising an agenda for each Board meeting and ensuring that
appropriate papers are provided from the management team in a timely manner for circulation in advance of Board and Board
Committee meetings. This is to ensure that fully informed decisions can be reached.

BOARD FOCUS IN 2016
Matters considered at all Board Meetings include:
• Operational and financial performance through management reports
• Potential acquisition or organic growth opportunities being considered in pursuance of the Group’s growth strategy
• Other development opportunities
• Board Committee updates
• Risk and risk management

During the course of the 2016 financial year the Board has also considered, as appropriate:
• The Group’s strategy with significant focus on potential organic and inorganic growth opportunities and the associated risks

of such strategy and opportunities

• Long term acquisition and working capital financing
• The key economic conditions and drivers and competitive environment in each of the Group’s primary markets
• The Group’s half-year and full-year results
• The proposed operating budget for the following financial year

BOARD AND BOARD COMMITTEE ATTENDANCE IN THE 2016 FINANCIAL YEAR
During the period under review, the Board met, as scheduled, on six occasions as scheduled as well as other ad-hoc meetings
normally called at very short notice on specific matters requiring board approval or consideration. During 2016, the majority of such
ad-hoc meetings were in relation to acquisitions or long term finance related discussions and approvals. Scheduled periodic Board
Meetings are planned in each financial year to be split, where possible, evenly between London and Abu Dhabi.

The attendance of the Directors at each of the scheduled Board meetings during the period is set out in the table below. Whilst
the ad-hoc meetings held are classified as formal meetings, given their brief nature and the fact that they were called at very short
notice, the attendance table excludes such meetings.

NMC Health plc Annual Report and Accounts 2016

1. 2. 4. 5. 3. GovernanceCorporate Governance Report continued

BOARD MEETINGS CONTINUED
BOARD AND BOARD COMMITTEE ATTENDANCE IN THE 2016 FINANCIAL YEAR CONTINUED

Board meeting attendance 2016

H.J. Mark Tompkins

Dr B.R. Shetty

Prasanth Manghat

Dr Ayesha Abdullah

Abdulrahman Basaddiq

Jonathan Bomford

Lord Clanwilliam

Salma Hareb

Keyur Nagori

Binay Shetty

Dr Nandini Tandon

Scheduled/Attended

5/6

6/6

BOARD EFFECTIVENESS
DIRECTOR INDUCTION
On appointment, directors have the benefit of a personalised induction programme which is undertaken during the
first few months of their tenure as a director. Each induction programme covers a number of different areas including:
• briefings and presentations from management to understand the business operations and financial drivers
•
• opportunities to visit the Group’s key facilities and new capital development project locations
• meetings with the Company’s key advisors

their legal and regulatory responsibilities as directors and the governance environment in which the Company operates

BOARD INFORMATION AND PROFESSIONAL DEVELOPMENT
The Directors maintain an appropriate dialogue amongst themselves and with senior management, which ensures that Non-
Executive Directors are kept up to date with major developments in the Group’s business.

Following an initial induction process, Non-Executive Directors meet with management and undertake visits to operational facilities
as required in order to further understand the way the business operates and any change within the business. The Board had
presentations from management during the year in relation to the Group’s material acquisitions and financing arrangements,
as well as market conditions drivers within the Group’s key markets.

As part of their overall training and development needs, some non-executive directors have attended externally provided seminars
and discussion forums relating to their general responsibilities as Directors or areas of specific responsibility, in particular in relation
to the Board Committees on which they serve. Such development opportunities are made available to all Directors on an
ongoing basis.

During the year, the Board approved the implementation of a new electronic Board Meeting system. In addition to the benefits
of reducing paper waste, the Board believes that distribution of papers utilising a specific Board pack system will ease
communication and distribution of Board information, making the Board process more efficient, and also increase security,
given that paper copies of board papers are being phased out.

NMC Health plc Annual Report and Accounts 2016

Governance
PERFORMANCE EVALUATION
During the year the Board undertook an evaluation of its own performance. This was undertaken by way of a questionnaire
developed internally by the Chairman and the Group Company Secretary which asked Directors to assess the effectiveness
of the Board and its committees and the Board and Board committee processes. The questionnaire included questions in
relation to the suitability of the Board’s discussions and whether the Directors felt able to be candid or raise matters of concern.

The evaluation questionnaire was completed confidentially by Directors and the results consolidated into a report by the Group
Company Secretary which was then reviewed by the Chairman and reported to the Board. No material action items arose from
the review.

The Board’s intention is to undertake such a Board evaluation each year and to conduct an externally facilitated performance
appraisal every three years in compliance with the Code, with the first external appraisal being conducted during the 2017
financial year.

RE-ELECTION OF DIRECTORS
All of the directors of the Company submit themselves for re-election at the annual general meeting of the Company to be held
on 23 May 2017. Each resolution for re-election or election of a retiring director will be proposed as a separate resolution. The Board
performance appraisal undertaken during the year has satisfied the Board that the contribution made by each director, and the
Board as a whole, to board deliberations continues to be effective and that the shareholders of the Company should support their
re-election.

OTHER BOARD DISCLOSURES
CONFLICTS OF INTEREST
The Board are aware of the interest that some Directors have in other businesses in which they have invested. Any conflicts
of interest and related party transactions that may arise are monitored by:
• A list of other relevant interests of each Director being circulated to the Board at each of its Board Meetings;
• Each of the Directors are asked to confirm that they have no other interests which would conflict them for the purposes
of any item to be discussed at the meeting; where such conflict is reported, the respective Director is not permitted
to take part in the consideration of that matter by the Board;

• Each Director discloses to the Board any related party transactions in which they are connected, and such transactions

are reported in the Group’s financial statements.

Whilst Directors on the Board have other business interests, the Board do not consider that these, nor the time commitment
that they require, affect the ability of such Directors to undertake their role or comply with their statutory obligations.

INDEPENDENT ADVICE
Each of the directors is permitted to obtain independent legal advice at the Company’s expense in the performance of their duties
as directors. This would normally be managed through the Group Company Secretary.

All directors, and the Board as a whole, also have access to the advice and services of the Group Company Secretary who, under
the Chairman’s direction, is responsible for ensuring that good Board procedures are followed.

INDEMNIFICATION OF DIRECTORS
The Company has put in place a Directors and Officers Liability Insurance policy which provides all Board members with insurance
cover in respect of liabilities that may arise against the Directors collectively or individually. The Directors do not benefit from any
form of qualifying third party indemnities made by the Company.

BOARD COMMITTEES
The Board has established an Audit Committee, a Clinical Governance Committee, a Nominations Committee and a Remuneration
Committee. The terms of reference for each committee clearly set out its authority and duties and have been approved by the
Board. The terms of reference for each committee are available on our website at www.nmchealth.com or available from the
Group Company Secretary.

NMC Health plc Annual Report and Accounts 2016

1. 2. 4. 5. 3. GovernanceCorporate Governance Report continued
Audit Committee

OVERVIEW PROVIDED BY THE CHAIR OF THE AUDIT COMMITTEE
The 2016 financial year continued in a similar vein to prior years and has been another busy year for the Audit Committee.
As UK listed company reporting and governance requirements continue to evolve, and as the Group grows, both management
and the audit committee have been committed to appropriate focus on finance, governance and controls across the Group.

This report sets out the work of the Committee, significant matters addressed by the Committee during the year and the
responsibilities of, and work undertaken by, the external and internal auditors. In addition, the Board asks the Audit Committee
to review various matters in relation to risk and internal control which, during a year of significant strategic activity and integration,
is a significant aspect of the Board and Audit Committee focus.

MEMBERSHIP AND ATTENDANCE
The Audit Committee has consisted entirely of independent non-executive directors during the year under review.

During the 2016 financial year, the following served as members of the Committee for the full financial year:

Chairman:

Jonathan Bomford

Committee members:

Dr Ayesha Abdullah

Dr Nandini Tandon

During the 2016 financial year, the Chairman of the Committee and the Committee’s financial expert was Mr Jonathan Bomford.
Mr Bomford is a Chartered Accountant and his brief biographical details and experience are set out on page 38 of the annual report.

The Audit Committee met four times during the year. The Meetings are scheduled to align with the Group’s reporting timetable
with planning meetings in advance of both the half-year review and full-year audit, and approving meetings shortly in advance
of the announcement of the Group’s half-year and full-year results.

Audit Committee attendance

Jonathan Bomford

Dr Ayesha Abdullah

Dr Nandini Tandon

Scheduled/Attended

4/4

Meetings are normally attended by the Deputy Chief Executive Officer and the Chief Financial Officer. The Chairman and some
other Non-Executive Directors also attend meetings. The Group Company Secretary acts as Secretary to the Committee. The
Committee also has the opportunity to meet separately with the external auditors and management with the other parties
not present.

KEY ROLE AND RESPONSIBILITIES
The key role of the Committee is to ensure that the integrity of published financial information by the Company, and the
effectiveness of both external and internal audit processes, are appropriate to ensure that the interests of all shareholders
are protected.

reviewing the Company’s financial results announcements, Annual Report and audited financial statements;

The Audit Committee assists the Board in:
• discharging its responsibilities with regard to financial reporting, external and internal audits and controls;
•
• monitoring the independence and extent of the non-audit work undertaken by the external auditors;
• making recommendations to the Board on the appointment of external auditors and the level of their remuneration;
•
• overseeing the Group’s compliance processes; and
• oversight of the Group’s internal controls and risk management systems although the Board retains control over these matters.

reviewing the effectiveness of the Company’s internal audit activities and internal policies;

Consideration of principal risks and the risk management process in place across the Group is a matter retained for discussion
and review by the Board. The Audit Committee is required to report regularly to the Board of Directors in relation to its findings on
the above and the discussions at each meeting. The ultimate responsibility for reviewing and approving the Company’s Annual
Report and audited financial statements and the half yearly reports remains with the Directors of the Company.

MAIN ACTIVITIES OF THE COMMITTEE DURING THE YEAR
During the year, the Committee has focussed significantly on areas relating to acquisition accounting. In addition to the main
activities on which the Committee focusses each year, being the Committee’s consideration, and approval, of the Interim Results
and the Annual Report, specific items which the Audit Committee discussed, and the significant issues considered by the
Committee in relation to the financial statements, during the year included:

NMC Health plc Annual Report and Accounts 2016

GovernanceACCOUNTING FOR MAJOR TRANSACTIONS.
There are a number of aspects in relation to the Group’s acquisition strategy which had an impact on accounting and audit
matters during 2016. These included accounting in relation to various aspects of each acquisition, including accounting for goodwill,
judgements in respect of contingent consideration, and specifically work on the purchase price allocation for each transaction,
including the identification of intangible assets, assessing the accounting policies within each business for consistency with NMC
accounting policies and also evaluating the internal control environment in the acquired businesses. These and related matters
took up significant audit committee time during the year.

ACCOUNTING FOR CAPITAL PROJECTS
During the year, the Company opened a significant proportion of its largest capital project to date, NMC Royal Hospital Khalifa City,
with the commencement of inpatient services. The accounting relating to this event, including the treatment of expenses and
capital costs, as well as reviewing the useful life of hospital assets, was reviewed by the committee.

THE INTERNAL AUDIT PROGRAM
Principal Internal Audit Reports are presented at Committee meetings twice a year with other updates from the Internal
Auditors as required. During 2016, in addition to ongoing work, the Internal Audit program has focussed on the acquired entities.
Both management and the Committee have been keen during this period of strategic growth, to assess in detail and review
the internal control measures operating in the acquired businesses and to enhance such controls and processes as necessary.
In addition, discussion focussed on rolling out the Internal Audit program to the IVF businesses, and an independent firm, Deloitte,
were chosen to provide these services, which commenced during the year.

OTHER CONSIDERATIONS AND ACTIVITIES OF THE COMMITTEE
INTERNAL CONTROL
The Committee has reviewed the process by which the Group evaluates its control environment across all of its businesses.
The Chief Financial Officer provides a report to the Audit Committee on the effectiveness of internal controls and confirms to the
Committee whether or not he is aware of any significant fraud that may have occurred within the business. The internal auditors
also undertake a review across a wide range of control areas to give the Audit Committee and the Board assurance on the internal
control environment.

The internal control environment and internal audit processes within the acquired entities have been scrutinized by group
management and the internal auditors. Where there is an identified need to enhance internal controls within these businesses to
bring them into line with Group standards and processes, an action plan has been developed and the Audit Committee is receiving
reports from the internal auditors as to the progress of implementation of such actions.

IT
The Audit Committee, with the Board, continues to monitor the implementation of new financial systems, the challenges in this
respect over the last two years and monitor and consider any effect that implementation delays may have on the control
environment.

OTHER
Other matters discussed and considered by the Committee during the year included setting expectations with the new audit
partner, consideration of the review of the effectiveness of the internal control environment across the Group, reviewing the Going
Concern and Long Term Viability assessments prepared by management and review the Group’s financial statements in advance
of the Board, including whether they consider the Annual Report to be fair, balanced and understandable. The Committee also has
significant engagement with the external auditor at each meeting.

EXTERNAL AUDIT AND AUDITOR INDEPENDENCE
EXTERNAL AUDIT EFFECTIVENESS
The Committee believes that the effectiveness of the external audit is dependent on the identification and consideration of key
risks by the Committee, management and, as part of their audit process, by the auditors during the financial year under review.
EY produces and discusses with the Committee a detailed audit plan identifying these key risks, the focus of audit procedures
and the work to be done to test management’s assumptions and accounting treatment in these areas.

The Committee has the option to meet separately with the External Auditors to ensure that an independent dialogue is
maintained in relation to monitoring key business and financial risks and to ensure that management have not restricted the
scope of their audit. The Audit Committee Chairman also meets with the lead audit partner on a number of occasions during
the year outside the formality of Audit Committee meetings.

The Committee did not commission an independent review of the effectiveness of the external audit during the year. However,
by the Committee, management and, as part of their audit process, by the auditors.

AUDITOR FEES AND APPOINTMENT
EY were appointed as auditor to the Company at the time of the Company’s IPO in April 2012. The level of audit fees paid in relation
to the 2016 financial year is set out in note 13 to the Consolidated Financial Statements.

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Audit Committee continued

EXTERNAL AUDIT AND AUDITOR INDEPENDENCE CONTINUED
NON-AUDIT FEES
During FY2016, the level of non-audit fees amounted to a total of US$2.16m, including fees of US$198.0k in relation to the half year
review. The remaining non-audit fees of US$1.96m related predominantly to fees as reporting accounting and associated services
relating to the Company’s acquisition of Al Zahra Hospital, approved by shareholders in December 2016.

The Audit Committee currently complies with regulations adopted by the FRC in their implementation of an EU directive in relation
to non-audit fees. The Company is in the process of reviewing its non-audit services policy and plans to adopt a new policy during
the 2017 financial year.

AUDITOR INDEPENDENCE
The Audit Committee formally reviewed the independence of the Company’s auditor, EY, during the period under review. The review
took account of the relationship between management and the audit team, the processes that EY have in place internally to
ensure objectivity and independence and also the level of non-audit fees incurred during the year.

As part of this review the Committee reviewed the potential threats to auditor independence as a result of:
• auditor self-interests, being those areas where the auditor may have a financial or other interest in the Company;
• auditor self-review, being areas where the results of non-audit services are reflected in the amounts included or disclosed

in the financial statements;

• management threats, which may occur if partners or employees of the auditor take decision on behalf of management; and
• other threats, such as familiarity and intimidation.

The Audit Committee is satisfied that in all areas sufficient safeguards were adopted by the auditor and that the independence of
EY and of the audit engagement partner had not been compromised. There is no limitation of liability in the terms of appointment
of the Auditor for the audit of the Company’s financial statements.

AUDIT RE-TENDER POLICY
In accordance with the requirements set out in the September 2014 Competition and Markets Authority Order, the Audit Committee
have considered its approach to audit tendering and have determined that:
•

it currently intends to undertake a competitive tender process in relation to statutory audit services provided to the Group
in 2020 with the chosen statutory auditor being appointed for the FY2021 audit; and
this approach is considered appropriate on the basis that partner rotation was undertaken by the Group’s current auditors, EY,
during the 2016 financial year which, in the Committee’s view, introduced an independent review of the Group audit strategy
and process.

•

However, between now and the planned competitive tender date during which the Group is expected to grow substantially through
execution of its organic and acquisitive growth strategy leading to transformational changes in the size and complexity of the NMC
Group, the Audit Committee is conscious of the need to keep the provision of audit services under continual review for the benefit
of both the Group and its Shareholders. The Audit Committee has therefore not ruled out that an earlier tender process may
be appropriate.

JONATHAN BOMFORD, FCA
On behalf of the Audit Committee

NMC Health plc Annual Report and Accounts 2016

GovernanceCorporate Governance Report continued
Clinical Governance Committee

OVERVIEW PROVIDED BY THE CHAIR OF THE CLINICAL GOVERNANCE COMMITTEE
This my second report to you as Chair of the Clinical Governance Committee.

The Clinical Governance Committee meets regularly to provide Board oversight in the key area of Clinical Governance. The
Committee works with management to ensure that the governance structure within the healthcare business is appropriate
to ensure that clinical care is enhanced and that clinical quality indicators are monitored and maintained at a high standard.
This oversight is designed to mitigate as far as possible the risks associated with operating a healthcare organisation.

In line with the experience of management, the Board and its other committees, a time of significant growth in the healthcare
business is both exciting and challenging from a quality and clinical governance perspective. Good progress has again been
made during a very busy year with the majority of key clinical care indicators remaining at a strong level or improving.

MEMBERSHIP AND ATTENDANCE
The Committee consists of a majority of Non-Executive Directors plus Dr C R Shetty, the Group Medical Director. Her experience
of governance structures operating in the Group, and the standards by which the Healthcare businesses are monitored, is very
important to the Committee’s ongoing monitoring of clinical care.

During the 2016 financial year, the following served as members of the Committee for the full financial year:

Chairman:

Dr Ayesha Abdullah

Committee members:

Binay Shetty

Dr C. R. Shetty

Dr Nandini Tandon

The Chair of the Clinical Governance Committee is also a member of the Audit Committee which assists in ensuring that
the two committees interact providing an overall control and governance framework to manage the Group’s key clinical risks.

Meetings of the Committee have been scheduled three times on each of the previous financial years, but given increasing
demands on the Committee, this will increase to four meetings in 2017. In addition to the Clinical Governance Committee members,
the Vice President – Quality and Standards attends each meeting. The Group Company Secretary is Secretary to the Committee.

Clinical Governance Committee attendance

Scheduled/Attended

Dr Ayesha Abdullah

Dr C R Shetty

Binay Shetty

Dr Nandini Tandon

3/3

KEY ROLE AND RESPONSIBILITIES
The establishment of the Clinical Governance Committee was undertaken as a result of an appreciation of the clinical risks faced
by the Group.

The key role of the Committee is to oversee governance structures, processes and controls in relation to Clinical matters in place
within the Group healthcare operations. This is to ensure that the risks associated with clinical care are mitigated in the interests
of the Company and its stakeholders, including shareholders. As a result the Committee is a key aspect of the Group’s internal
control environment.

MAIN ACTIVITIES OF THE COMMITTEE DURING THE YEAR
Specific responsibilities of the Committee, and work undertaken by it during the year, include:
• Ensuring processes and controls are in place across the NMC Healthcare hospitals to promote safety and excellence in patient
care and manage risks arising from clinical care on a continuing basis, including a review of Code Blue procedures in place
in the Group;

• Review the systems of clinical governance, monitoring that they operate effectively and that action is being taken to address

any areas of concern;

• Review clinical performance indicators quarterly;
• Reviewing the implications of new regulations and standards compliance implemented by our local health authority regulators;
• Commencement of reporting from the Group’s acquired businesses;
• Reviewing patient satisfaction data across all facilities;
• Review of surgical procedures to ensure these are in line with regional and international norms;
• Discussion in relation to the use and benefits IT systems for all aspects of patient care and information monitoring.

NMC Health plc Annual Report and Accounts 2016

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Clinical Governance Committee continued

PRINCIPAL MANAGEMENT ACTIVITIES ON CLINICAL GOVERNANCE MATTERS DURING THE YEAR
2016 has been a very busy year for management in relation to quality and clinical governance matters. In addition to ongoing
quality monitoring, Abu Dhabi Specialty Hospital completed its triennial JCI re-accreditation during the year with excellent results.
Both NMC General Hospital, DIP and Brightpoint Royal Women’s Hospital were surveyed and accredited by JCI during 2016, extending
the reach of external monitoring and accreditation for the Group’s facilities. In addition, preparatory work has already commenced
in advance of proposed surveys to seek JCI accreditation for our largest facility, NMC Royal Hospital Khalifa City, in 2017.

In addition, the committee has received reports from, and started to monitor standards in, the acquired businesses, including
IVF facilities. Reports received from the acquired businesses show how important quality metrics are considered across
those businesses.

The Committee is delighted with the dedication and determination of management, and all of our employees, to keep up to date
with regulatory changes and new standards, ensuring that the Group is well positioned in its compliance with its requirements
as well as offering an excellent and safe service to our patients.

The Quality and Clinical teams also continue their excellent work ensuring that clinical care monitoring within the business,
including the acquired businesses, has been further enhanced during the year, which gives assurance to management and
the Board that clinical risk is mitigated. Finally, I would like to thank my fellow Committee members for their contribution during
the year.

DR AYESHA ABDULLAH
For and on behalf of the Clinical Governance Committee

NMC Health plc Annual Report and Accounts 2016

GovernanceCorporate Governance Report continued
Remuneration Committee

MEMBERSHIP AND ATTENDANCE
The Remuneration Committee consists of four Non-Executive Directors, three of whom are Independent Non-Executive Directors,
with an Independent Non-Executive Director holding the chairmanship of the Committee. During the 2016 financial year, the
following served as members of the Committee for the full financial year:

Chairman:

Lord Clanwilliam

Committee members:

Abdulrahman Basaddiq

Jonathan Bomford

Salma Hareb

The Chairman of the Company is invited to attend Remuneration Committee meetings. The Executive Vice Chairman and Chief
Executive Officer and the Deputy Chief Executive Officer do attend some Remuneration Committee meetings and the Chairman
of the Committee discusses proposed remuneration policies with them during their formulation. No Director is present when their
own remuneration is discussed.

The Group Company Secretary acts as Secretary to the Remuneration Committee and, along with the Committee’s independent
advisors, provides advice to the Committee on Corporate Governance aspects relating to remuneration matters. He also provides
assistance to the Chairman of the Committee as required in discussions with the Remuneration Committee advisers and on
implementation of Committee decisions. The Group Company Secretary is not present when his own remuneration is discussed.

The Committee met five times during the financial year.

Remuneration Committee attendance

Lord Clanwilliam

Abdulrahman Basaddiq

Jonathan Bomford

Salma Hareb

Scheduled/Attended

5/5

KEY ROLE AND RESPONSIBILITIES
The Remuneration Committee assists the Board in:
• making recommendations to the Board on the Company’s Directors’ Remuneration Policy, the framework of executive

remuneration, including the use of incentive arrangements within that framework; and

• determining, on the Board’s behalf, the entire individual remuneration packages for each Executive Director and advising

the Chief Executive Officer in relation to the level of remuneration the Committee feel is appropriate for the Senior
Management Team.

All other recommendations must be referred to the Board for approval.

No Committee member is permitted to participate in any discussion or decision regarding his/her own remuneration.
The remuneration of non-executive directors is a matter for consideration by the Executive Directors, in discussion with
the Chairman of the Company.

MAIN ACTIVITIES OF THE COMMITTEE DURING THE YEAR
The principal activities of the Committee during 2016 and the Directors’ Remuneration Policy and Annual Remuneration Report,
are set out in the Directors’ Remuneration report on pages 56 to 78.

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Nominations Committee

The Nominations Committee consists of three Non-Executive Directors, two of whom are Independent Non-Executive Directors,
one of whom holds the chairmanship of the Committee. During the 2016 financial year, the following served as members of the
Committee for the full financial year:

Chairman:

H.J. Mark Tompkins

Committee members:

Abdulrahman Basaddiq

Lord Clanwilliam

The Nominations Committee has a role to assist the Board in:
•
•
• determining the appropriate skills and characteristics required of directors; identifying individuals qualified to become Board

reviewing and making recommendations to the Board in relation to its structure, size and composition;
reviewing succession planning in place for senior management;

•

members and recommending such individuals to the Board;
recommending individuals to be considered for election as Directors at the next Annual General Meeting of the Company
or to fill vacancies; and

• preparing a description of the experience and capabilities required for a particular Board appointment.

Following the significant changes to the Board and work undertaken on the Senior Management Team structure and succession
plan over the prior two years, and the fact that no material concerns arose from the Board appraisal undertaken in 2015, the
Committee did not meet during the year.

However, committee members held a number of informal discussions during the year on matters of interest to the role of the
Committee. The Committee would expect to meet to consider appropriate candidates to fill any vacancy created on the Board
should such a vacancy arise or be considered appropriate given other skills and experience on the Board.

The approach of the Committee, and of the Board, to the issue of diversity is set out in this Governance section on pages 35 to 80.

NMC Health plc Annual Report and Accounts 2016

GovernanceCorporate Governance Report continued

BOARD OVERSIGHT OF SYSTEM OF INTERNAL CONTROL AND RISK
OVERVIEW
Management is responsible for establishing and maintaining adequate internal controls over financial reporting and operational
matters across the Group. The Board is responsible for reviewing such internal controls and for ensuring that they are effective
to properly manage the Group’s businesses.

STRENGTHENING OF INTERNAL CONTROLS
In recent years, as the Group has progressed an organic and inorganic growth strategy, in order to strengthen the governance
and control structure further across the Group, management have progressively been:
•
•
• extending its Quality Team and the Group’s Quality and Clinical Governance processes;
• enhancing the Group’s Internal Audit function which independently reviews and monitors key business processes; and
• developing new financial and hospital management IT systems.

incorporating additional key internal controls into its financial and operational processes;
implementing new policies and procedures covering all aspects of the Group’s accounting policies and controls;

All of these changes are part of an overall process to improve the Governance structure within the Group and to improve further
the Group’s formal internal control processes.

CHALLENGES
New businesses
The businesses which have been acquired over the last two years, all operated under differing levels of control. Similar to the
NMC Group prior to preparation for its IPO in 2012, some of these businesses have a very centralised approach to control, with the
majority of the controls over all financial and operational aspects of each business resting with a small number of individuals
and, in some of the businesses, being manual in nature. We consider this to be a normal environment in which smaller privately
owned businesses are used to operating. In addition, the program to open new facilities since the Company’s IPO has resulted
in a significant level of growth in the Group. This increases further the challenge on the Company in relation to controls and risk.

Integration
Such transformational changes in the Group over the last 4 years inevitably results in different control environments operating
across group businesses. Measured integration, at a pace which is appropriate to each individual new business, and integration
of those businesses, is undertaken to align control processes.

IT environment
Management recognise that the Group’s IT systems are not fully integrated and that an element of manual control procedures are
still prevalent across the Group. The growth of the Group, organically and through acquisition, together with significant regulatory
changes in UAE healthcare businesses over the last 2 years, have hampered focussed efforts to develop integrated group IT
systems. Whilst this is still the case, the manual processes, supported by legacy IT systems in many of the Group’s businesses,
continues to provide a robust level of control.

PRINCIPAL RISKS
A new approach to the monitoring and control of risks within the Group has now been operating for two years.

The various layers of corporate, healthcare and distribution division management were involved in a program under which the
Group’s key risks were developed through a bottom up process and then reviewed alongside the macro-economic environment
within which the Group operates through a top down review process to establish a Strategic Risk Register. In Q1, 2016, assisted by
an independent review of the Strategic Risk Register, when the Board undertook a robust assessment of the principal risks facing
the Company, including those that would threaten its business model, future performance, solvency or liquidity.

This Strategic Risk Register is reviewed and updated regularly. A review in August 2016 led to a number of changes to the Strategic
Risk Register including recognising the risks of integration and consolidation of group businesses during significant growth periods
and also the effects of material regulatory or cultural changes in elements of healthcare provision.

Further details on the approach taken to assess risks, and of the Group’s strategic risks, are set out on pages 30 to 33. The board’s
appetite for risk, the internal controls and processes in place to mitigate business risks and the Board’s review of the effectiveness
of the control environment are set out below.

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BOARD OVERSIGHT OF SYSTEM OF INTERNAL CONTROL AND RISK CONTINUED
CONTROLS AND RISK MITIGATION
Financial and operational controls
The Group has, for over 40 years, grown into a substantial business and a leader in the provision of private healthcare, as well
as operating a substantial distribution business, in the United Arab Emirates. The Group is a regulated business operating many
regulatory, financial, clinical and quality control procedures.

In the past two years, the Group has expanded operations to a number of countries in Europe, South America and the GCC. During
this period of growth, the Group looks to integrate and structure financial and operational controls across all of its businesses.

The key elements of the Groups’ internal controls are as follows:
• An annual budget and updated long-term forecasts for the Group that identifies risks and opportunities which are reviewed and
approved by the Board. As part of these reviews, management and the Board have processes in place to consider appropriate
risks faced by the Group and also a formal review which considers the Group long term viability.

• As part of the annual budget process, budgetary goals are set by the corporate office and these goals are monitored on an

ongoing basis within each subsidiary by their accounting and finance teams. MIS teams monitor business performance. Within
each subsidiary, these teams provide relevant analyses to operational management which assists in prudent decision making.
Such information is also periodically reported to, and consolidated by, the corporate office teams, which analyses consolidated
performance against budget.

• Monthly meetings at which the Senior Management Team review Group financial and operational performance, progress on

capital projects and other principal functional areas of the business.

• A system of internal monthly operational and financial reporting which includes monthly comparison of results and against
budget and forecast, a review of KPIs, each discussed with additional management commentary and the reporting of key
matters arising within the business during the month under review. The Group has a very flat organisational hierarchy resulting
in an easy flow of information throughout the organisational structure. Communication of exceptional items happens naturally.
• A defined process for controlling capital expenditure, including appropriate authorisation levels, which is monitored and approved

by the Board as appropriate.

• The financial statements of each subsidiary are drawn up by relevant accounting departments, which ensure compliance with
local tax and regulatory requirements. These subsidiary company financial statements are subjected to a limited review for the
Group’s interim financial statements and a complete audit carried out by the auditors of significant subsidiaries for the Group’s
year-end financial statements.

• Reporting of accounting information, in standardised monthly reports, is carried out on the basis of a schedule established by

the Corporate Accounts department. Each subsidiary applies Group procedures for the recording of accounting data for inclusion
in the interim and annual financial statements.

• The reporting of subsidiaries is established according to the accounting policies of the Group, which are formalized in a Group

policies manual given to all the subsidiaries.

• A formal process through which approval for organic and inorganic expansion projects is given. A formal transaction request

paper is produced including details of the proposed transaction, how the transaction will be financed, market studies, strategic
benefits and longer term effects on the Group, due diligence and key transaction risks are considered.

• Medical Directors’ meetings to monitor clinical governance procedures.
• The production of quarterly and annual Quality reports.
• An appropriate approach to decentralisation and internal oversight within the Group.

– Each NMC healthcare facility has a Medical Director and Head of Administration who are accountable for the operation of

the facility. In relation to facilities in other Group businesses, or other business streams created as part of the Group’s growth
strategy, these are generally either smaller facilities and therefore managed by the lead clinician, or larger businesses having
their own management structure. Therefore both our larger and smaller facilities have an appropriate organisation to provide
effective and efficient management of both clinical and non-clinical areas.

– Within the Healthcare division structure, a number of multidisciplinary committees are in place to monitor guidelines in

respect of patient safety and quality, medication management, infection prevention and control, medical record
documentation and facility management.

– Both Healthcare and Distribution divisions have Financial Controllers and a finance team and are managed through

fundamental activities of planning, executing and checking. The strategic direction of all operations is governed by the
corporate office. With the exception of certain operations in some of the acquired businesses, which are in the process
of being integrated into group procedures, all banking, treasury, procurement and payment processing is centralised within
Group functions, but accounting for payments is decentralised.

– The Senior Management Team believes that these divisions of responsibility at both facility and corporate levels provide

a natural check and balance across all internal control areas.

• A delegation of authority which provides that very few individuals within the organisation have significant payment approval

authority. Access to cash is also restricted to very few individuals. All material payments, including within the acquired
businesses, are restricted to the senior management team.

• Group businesses hold very sensitive as well as personal information and data as part of their operations. To guard against

the material risk of a cyber threat, the Group businesses having varying controls and procedures in place to control such threats
and monitors developments in this area closely and makes adjustments and improvements in security as necessary.

• Specifically in relation to acquired businesses, initial primary controls are implemented following completion of each transaction.
The Group’s policies and procedures, covering both operational and financial aspects of each business, are incorporated into
each acquired business over an appropriate timeframe.

NMC Health plc Annual Report and Accounts 2016

GovernanceIndependent and regulatory controls
As a regulated business, the Group operates within a framework of managing all elements of risk which arise within the Group.
As a result there are a number of ways in which the Company both internally and independently monitors its keys risks.

Internal Audit
An effective externally provided Internal Audit program independently assists management in identifying key risks to business
operations and monitors those risks through an Internal Audit program agreed with both management and the Audit Committee.

The Internal Auditors report directly to the Chairman of the Audit Committee but work in conjunction with the CFO. Their reports
to the Audit Committee are received and discussed at Audit Committee meetings twice a year, usually in June and December.

Following the completion of each review, the internal auditors identify areas for remedial action and the required action plans are
discussed and agreed with management. All areas requiring remedial action are highlighted as high, medium or low risk areas.
The internal auditors present the reviews and the agreed management action plans for any remedies to the Audit Committee
and then monitor the implementation of any required changes on behalf of the Audit Committee.

The consideration by management of the key risks faced by the Group is crucial to the work to be undertaken by the Internal
Auditors. Management consider such risks before discussing with the internal auditors their planned areas of focus for reviews
in each financial year. The Internal Audit plan for each year is agreed with the Audit Committee.

Crowe Horwath have provided internal audit services to the Group for a number of years. Their program has been extended to, and
indeed focussed on, the acquired businesses in the non-IVF sectors of the Group. Deloitte were appointed in 2016 to provide internal
audit services in relation to the Group’s IVF businesses. They have commenced work within these facilities and will undertake
a full internal audit program in 2017. The internal audit services provided by external firms focus on key strategic areas of risk and
this program works alongside operational internal audit functions in place within Group businesses.

Quality and Regulatory oversight
Aside of financial risks, the Board is aware that as a significant healthcare and distribution business it is subject to a range of risks
related to clinical care, quality and product safety.

The Healthcare division, and elements of the Distribution division, are regulated by governmental and non-governmental
organisations. In summary:
• Each UAE Healthcare facility is licensed by one of four regulatory bodies which exist in the UAE. The regulatory bodies monitor

performance and clinical procedures against its regulations, key metrics and guidelines;

• Clinica Eugin is subject to local regulatory standards and laws applicable in each jurisdiction in which they operate;
• Each of the Group’s three Specialty Hospitals, as well as Brightpoint Royal Women’s Hospital, NMC Hospital DIP, the Sheikh

Khalifa Hospital in Umm al Quwain which is managed by the Group, and the clinical laboratory of Dr Sunny Medical Centres
are accredited by Joint Commission International, an internationally renowned organisation monitoring clinical metrics and
quality of patient care;

• The distribution of pharmaceuticals is controlled through the UAE Ministry of Health;
• The majority of the Group’s healthcare revenue results from medical insurance arrangements. The Group’s contractual

arrangements with insurance providers include the monitoring of claims processing and clinical outcomes.

The Group has a Quality Team which operates in both the Healthcare and Distribution divisions. Quarterly and annual Quality
reports monitor performance against a range of key KPIs based on clinical quality and safety metrics.

Board Committees
The Board and its committees provide independent oversight of management’s control systems, in particular the Audit
Committee in relation to finance related matters and the Clinical Governance Committee in relation to clinical matters.
The work and oversight of the board committees is set out on pages 43 to 50.

RISK APPETITE
As there are multiple risks associated with the healthcare and distribution sectors, the process of risk management is an essential
mechanism to enable risk based decision making process. The Board recognizes that complete risk control/avoidance is
impossible, but that risks can be reduced by putting the right controls and mitigations in place as well as agreeing on a threshold
for risk taking (risk appetite).

Risk appetite provides a structure within which opportunities can be pursued by setting out which, why and how much risk the
Group is willing to take. The Senior Management Team has approved a set of risk appetite statements covering different views
on the risk landscape surrounding NMC’s business environment whilst addressing various risk classes. For each risk class,
Key Risk Indicators (KRIs) were articulated to alert against unacceptable loss events.

The purpose of setting limits and triggers is to avoid concentrations of risk which would be out of line with internal or external
expectations and to:
• keep business activities aligned to the strategic goals of the Group;
• ensure activities remain of an appropriate scale relative to the underlying risk and reward;
• ensure risk-taking is supported by appropriate expertise and capabilities.

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BOARD OVERSIGHT OF SYSTEM OF INTERNAL CONTROL AND RISK CONTINUED
RISK APPETITE CONTINUED
General Risk Appetite Statement
The Company will not accept any risks that would cause losses due to:
• malpractice,
• significant decline in patient satisfaction rate,
• brand damages,
• hospital acquired infections,
• decrease in the utilization rate for outpatient clinics,
• uncontrolled discharge for inpatients,
• downtime of life saving/ sustaining systems,
•
• non-compliance with internal and/or external controls and standards/ regulatory bodies,
• sensitive information/ patient record confidentiality breach/ loss,
•
•
• acquisitions, which are expected to be accretive and not dilutive.

loss of sole distribution partnership agreement,
loss of key staff/ key specialities,

inaccuracy of patients’ records,

NMC Board of Directors has approved a set of thresholds presented by management which relate to multiple business dimensions
in the Healthcare and Distribution divisions to protect shareholders’ value. Any areas falling short of the agreed indicators will be
highlighted by management for action.

Effectiveness of Internal Controls
The Board has overall responsibility for the Group’s systems of internal control and on behalf of the Board, the Audit Committee has
been engaged in the process of ensuring that management have established continuous processes for identifying, evaluating and
managing the risks the Group faces. These processes include the reporting from the finance department on Group performance,
the work of the internal auditors and issues identified by the external auditors to the extent covered by their audit work. The Board
is responsible for monitoring the ongoing effectiveness of these systems and for conducting a formal annual review of the
effectiveness of the Group’s internal controls.

A system of internal controls is designed to manage, rather than eliminate, the risk of failure to meet business objectives and
is designed to provide reasonable, but not absolute, assurance against material misstatement or loss.

In reviewing the effectiveness of the internal controls in place during the year, the Audit Committee considered, amongst other
matters, manual controls in place, the independence of the separate operating units, the delegation of authority, the balance
of centralised and decentralised systems and the reporting process in relation to exceptional items.

The Audit Committee has noted that the Group does not operate under a fully integrated high end IT environment and therefore
an element of manual intervention is prevalent within the Group, including the businesses acquired in the last two financial years.
The Board has approved the implementation of a new Hospital Information System which, together with the implementation of
the new ERP financial system, will result in a new integrated IT system becoming fully functional across the Group.

The Board notes that the implementation of new IT systems will not change the level of controls inherent in the business, but
they will remove elements of manual intervention from financial and operational processes. Management have taken time to
ensure that all previous business processes are captured within the new IT systems. The roll out of the new ERP system into the
Healthcare division, whilst delayed during the initial execution of the Group’s strategic growth plan due to the challenges faced by
the group in the initial testing phase, and as a result of significant regulatory changes over the last two years, remains underway
and a focus across the Group. In addition to the growing nature and structure of the Group, there have also been challenges in
relation to the roll out of the ERP system into the Distribution division, and this has also been delayed.

The Audit Committee have also noted the challenges faced as the acquired businesses are integrated into the Group. Such
acquired businesses have differing levels of controls within their businesses. The Audit Committee have noted the initial primary
and delegated authority controls which are put in place in the acquired businesses following completion as well as the roll out
of financial and operational reporting requirements. The Committee has noted that some elements of the Group’s policies and
procedures have also been implemented in these businesses over a timescale appropriate to each acquired business, and this
will continue into 2017.

The Board has reviewed the effectiveness of the Group’s systems of internal controls for the 2016 financial year, in light of the key
elements of the Group’s internal controls outlined above. Given the additional internal controls that have been incorporated into
the Group’s financial and operational reporting process, such that sufficient internal controls were in place to monitor the Group’s
key risks, the Board believes, having evaluated the effectiveness of the internal controls and procedures, that these were effective
during the period covered by this report. The Board also believes that the process undertaken by the Board and its Committees
to monitor the internal control environment, accords with the guidance provided in the FRC’s Guidance on Risk Management,
Internal Control and Related Financial and Business Reporting.

NMC Health plc Annual Report and Accounts 2016

GovernanceSHAREHOLDER ENGAGEMENT
The Company is committed to communicating with shareholders and stakeholders and to be available to meet with shareholders
who require additional explanation of any matter which is of concern to them.

The Chairman and Senior Independent Non-Executive Director are also available, either through contacting the Company Secretary
or at the Company’s General Meetings, to discuss any matters within their areas of responsibility or where individuals do not feel
it is possible to discuss these matters with management.

During 2016, the Company has continued to focus on its formal program of investor interaction including one-to-one meetings
with institutional investors and attendance at investor conferences. Mr Roy Cherry, who is the Head of Strategy & Investor Relations
and a member of the Senior Management Team, leads these efforts.

During the financial year ended 31 December 2016, the Company issued its 2015 audited results and its 2016 half year unaudited
results. In addition, given the significant strategic activities during the year, the Company kept shareholders updated regularly
with regards to its long term financing and its material acquisitions, and the effect that these have on the Group.

Aside from direct shareholder meetings, the principal ongoing communication with shareholders will be through the publication
of the Company’s Annual report and audited financial statements and Interim Results as well as the opportunity to question
the Board and Committees at General Meetings. Shareholders are encouraged to attend General Meetings and if unable to
do so are encouraged to vote by proxy.

The Company has an investor relations section on its corporate website, www.nmchealth.com. This has been updated
regularly with information that the Company considers relevant to its investors. Additionally, the number of analysts monitoring
the Company and issuing notes in relation to their forecasts and expectations for the group continues to increase.

ETHICS
WHISTLEBLOWING POLICY
A confidential whistleblowing procedure is in operation to allow employees to raise concerns of possible improprieties in relation
to either operational or financial conduct.

BRIBERY ACT 2010
The Group has an Anti-Bribery and Anti-Corruption Policy which applies to all directors and employees of all Group Companies.
The Policy, which has been communicated to all employees, includes clear statements setting out the Group’s Anti-Bribery
measures and Anti-Corruption culture. Practical guidance has been issued in relation to specific circumstances considered
to be most relevant to Group employees. These include guidance notes for clinical staff attending pharmaceutical and training
and development conferences in relation to entertainment and other possible inducements, as well as guidance notes in relation
to the receipt of free products and equipment and how such products and incentives may affect clinical judgement. Specific
guidance has also been provided in relation to the provision of sales incentives to senior sales and marketing staff within our
Distribution division.

Employees have been provided with a copy of these policies and are aware of the significance of them. New employees receive
training on all company policies and procedures as part of their induction program. A copy of the policies is included on the
Company’s employee intranet.

The Corporate Governance Report set out on pages 35 to 55 has been approved by the Board and is signed on its behalf by:

H. J. MARK TOMPKINS
Chairman

NMC Health plc Annual Report and Accounts 2016

1. 2. 4. 5. 3. GovernanceDirectors’ Remuneration Report 2016
Letter from the Remuneration Committee Chairman

Dear Shareholder,

I am writing to you this year following a period of further growth and continued excellent performance by management during
a period of significant change for the Company. I also write on the back of the approval of a new Remuneration Policy which
shareholders approved at a General Meeting of the Company held on 29 December 2016.

TRANSFORMATION AND GROWTH
As I stated in my letter to you on 14 December 2016 setting out the new remuneration policy and the background to the changes
made, NMC Health plc has continued its journey of extraordinary growth since our IPO in 2012. During this time, our shareholders
have seen a six times increase in market capitalisation. More importantly, shareholders have also seen an increase in total
shareholder return of over 600 per cent. over the same period. This value creation has been achieved through organic and
acquisitive growth as well as significant improvements in operational efficiency across our business.

The Board and the Remuneration Committee recognise that management has achieved this growth and value accretion despite
the challenges associated with building and opening new facilities, including consequential pre-breakeven operating periods during
new facility ramp-up phases, and the commencement of integrating newly acquired businesses into the Group.

NEW DIRECTORS’ REMUNERATION POLICY AND INCREASES IN EXECUTIVE REMUNERATION
In this period of exceptional growth, we are aware of having to play ‘catch-up’ in terms of rewarding our key executives. The
Remuneration Committee believe that pay should be strongly linked to performance and had a number of ways in which
to approach Executive remuneration and reward. The Committee could have, as some companies do, pay significant salaries
and increase remuneration potential through incentives in advance of the delivery of growth and increase in shareholder value.
This approach was not taken. However, in light of the exceptional performance delivered by the executive team since the IPO
and the current size and growth profile of the Company, the Committee felt that it was appropriate to review the remuneration
arrangements during the course of 2016.

As set out in my letter on 14 December 2016, following the review, we proposed a number of changes to the remuneration policy,
which were underpinned by three key principles:
1. alignment between executives and long-term shareholders;
2. focus on long-term value creation; and
3. transparency in our approach to remuneration.

In line with these principles, the Committee presented a new remuneration policy for shareholder approval at the General Meeting
held on 29 December 2016, which included the following key changes for executive directors:
•

increase in the short-term incentive opportunity in normal circumstances from 150% of salary to 200% of salary (250% of salary
in exceptional circumstances);
increase in the long-term incentive opportunity in normal circumstances from 150% of salary to 250% of salary (300% of salary
in exceptional circumstances); and
increase in the shareholding requirement from 200% of salary to 300% of salary.

•

Adjustments were also made to the base salaries for the Executive directors.

Our new remuneration policy was approved by just over 70% of the 92% of shareholders who voted on our proposals.

In discussions with shareholders and Institutional shareholder bodies, questions have rightly been raised in relation to the phasing
of the increases we have made, given that the increases have been substantial. Whilst the Committee understands the feedback
that has been received, we believe that the arrangements going forward are appropriate for the following reasons:
• adjustments to salaries in the years following the IPO, during which our shareholders have seen a significant increase in

profitability and shareholder value, still resulted in total remuneration levels that lagged competitive practice given the size
and complexity of the Group;

• phasing the increases towards a competitive level of overall remuneration over an even longer period would not have been

creating the correct environment to motivate and reward management; and

• a significantly larger proportion of the package going forward is to be delivered through incentive based remuneration, as shown
in the following table, ensuring that the executives are only rewarded where strong operational performance and shareholder
returns continue to be delivered.

Current

New

32%

23%

10%

20%

11%

30%

11%

57%

65%

40%

50%

60%

70%

80%

90%

100%

Fixed

Short-term cash

Long-term (Deferred bonus and LTIP)

NMC Health plc Annual Report and Accounts 2016

GovernanceOUR PERFORMANCE IN 2016
2016 was another strong year for your Company. This is seen in our TSR performance against the broader market, our direct
competitors, as well as performance against our operational objectives. We completed the acquisition of the Al Zahra hospital,
continued the focus on ramping up of new facilities which has a direct impact on our profitability, at the same time as expanding
our geographic presence.

800

700

600

500

400

300

200

100

Mar
12

Jun
12

Sept
12

Dec
12

Mar
13

Jun
13

Sept
13

Dec
13

Mar
14

Jun
14

Sept
14

Dec
14

Mar
15

Jun
15

Sept
15

Dec
15

Mar
16

Jun
16

Sept
16

Dec
16

NMC Health

FTSE 250

TSR Bespoke Peer Group

We have successfully delivered EBITDA of US$246.1m, a key focus for the Board and management team, with is particularly
challenging given the Company’s recent acquisitions.

Quality measures are also key to a healthcare business, and we are proud that our performance in 2016 for the Group’s three
speciality hospitals achieved excellent ratings against JCI performance measures. The NMC Royal Hospital is the Group’s newest
and largest facility. The operational ramp-up of this facility has exceeded our expectations in terms of occupancy levels in 2016.
Finally, the Group has also been careful to ensure efficiencies through the ramp-up of a central laboratory for laboratory testing
requirements. We are pleased to report that significant progress has been made here as well.

Given the very strong performance delivered in 2016, further details of which are provided in the business overview and financial
review sections on pages 20 to 25 of this annual report, the Remuneration Committee has approved a bonus of 100% of the
maximum opportunity (150% of salary) for both Dr Shetty and Prasanth Manghat. The actual 2016 STIP targets are considered
commercially sensitive and therefore have not been disclosed in this report. They will be disclosed when they are no longer
considered commercially sensitive, which will be, at the earliest, in the Directors’ Remuneration Report following the year in
which the bonus is paid.

In light of our commitment to increased transparency, we have, however, disclosed the targets and our performance against
the targets for the 2015 STIP on page 70.

In respect of vesting under the 2014 LTIP, the first grant made to management under the LTIP, performance is assessed against
three-year relative TSR and three-year compound annual growth in EPS. Our TSR for this period was 281% (against a peer group
median of 47%) with compound annual growth in EPS of 24.8%. This strong level of performance will result in 100% of the 2014 LTIP
awards vesting in October 2017.

LOOKING FORWARD
The Committee is satisfied that we have, under the new Remuneration Policy, the right structure in place to reward the level
of outstanding performance shareholders expect of the Company.

The Committee does not subscribe to a generic approach to remuneration and believe that our remuneration structure is
appropriate for your Company. We hope shareholders will support our approach to Executive remuneration and our desire
to incentivise management now to produce stellar performance in the future.

In accordance with normal practice, our Annual Remuneration Report will be put to an advisory vote at the forthcoming
Annual General Meeting. I very much hope you will support our Annual Remuneration Report. I am, of course, available
at any time to answer any questions you may have on the Company’s approach to remuneration.

LORD CLANWILLIAM
Chairman of the Remuneration Committee

NMC Health plc Annual Report and Accounts 2016

1. 2. 4. 5. 3. GovernanceDirectors’ Remuneration Report 2016
Directors’ Remuneration Policy

INTRODUCTION
This Directors’ Remuneration Report is divided into two sections.

The first section relates to the Remuneration Policy which was approved by shareholders at the Company’s General Meeting held
on 29 December 2016. As this is the first Annual Report published since shareholder approval of the new policy table, we set out the
policy in full below. Explanatory notes used to explain aspects of the new policy, and the changes made from the previous Directors’
remuneration policy, can be found in the shareholder circular dated 14 December 2016 which can be viewed on the Company’s
investor relations website.

Secondly, the Annual Remuneration Report section details how our previous remuneration policy (approved by shareholders in
June 2014) was implemented in the year ended 31 December 2016, and what remuneration was paid to the Directors for that period.
The Annual Remuneration Report then sets out how we intend for the new policy to apply for the year ending 31 December 2017.

The Annual Remuneration Report will be subject to an advisory shareholder vote at the 2017 AGM.

Where the information is subject to audit in this Directors’ Remuneration Report this is identified in the relevant heading.

DIRECTORS’ REMUNERATION POLICY
In this remuneration policy section, we set out the remuneration policy for the Board which shareholders approved at the
Company’s General Meeting held on 29 December 2016.

EXECUTIVE DIRECTOR POLICY TABLE

Purpose and
link to strategy

Base salary

To attract and retain
management of the calibre
required to deliver the Group’s
strategy without paying more
than is necessary.

To reward executives for the
performance of their role.

Operation

Maximum opportunity

Performance measures

There is no maximum
salary level.

Individual performance will
be considered when reviewing
base salary levels.

Increases may be made above
this level at the Committee’s
discretion to take account
of individual circumstances,
for example: (i) An increase
in scope / responsibilities;
(ii) To reflect the individual’s
development in the role (e.g.
for a new appointment where
the salary may be increased
over time rather than set
directly at the level of the
previous incumbent / market);
(iii) Alignment to market level.

Salaries are normally reviewed
annually, with increases taking
effect following the review.
Salaries may be reviewed
at different intervals if
the Committee considers
it appropriate.

When setting base salaries,
consideration is given to:
(i) Remuneration levels at
companies of a comparable
size and complexity in the
FTSE, other similar UAE
companies and other
international healthcare
companies; (ii) Salary increases
elsewhere in the Group;
(iii) Business and individual
performance; (iv) The
experience of the individual;
(v) The external economic
climate and market conditions;
and (vi) Local market practice.

The Committee can also take
into account the tax treatment
of salaries for UAE based
management in setting
base salary levels.

NMC Health plc Annual Report and Accounts 2016

GovernancePurpose and
link to strategy

Benefits

To provide benefits that are
competitive relative to the
employee’s local market.

Operation

Maximum opportunity

Performance measures

None.

The cost of benefit provision
will depend on the cost to the
Company of providing
individual items and the
individual’s circumstances and
therefore there is no
maximum value.

Benefits are set at a level
which the Committee
considers is appropriate
taking into account: (i) Local
market practice; (ii) Practice
at companies of a similar
size and complexity, other
UAE companies and other
international healthcare
companies; and (iii) The
role and the individual’s
circumstances.

The Group provides a range
of benefits which reflect typical
benefits offered in the UAE
including, but not limited to:
(i) Employee / family
accommodation; (ii) Private
Medical Insurance (including
family cover); (iii) Company
provided transport facility
(iv) Annual family return flight
to home country; (v) 30 days’
holiday; (vi) End of service
benefit; (vii) Reimbursement
of reasonable personal
accommodation and travel
costs including any related
tax liability.

In the event that an Executive
is required to re-locate to
undertake their role, the
Committee may provide
additional benefits to reflect
the relevant circumstances
(on a one off or on-going basis).
Other benefits may be offered
if considered appropriate and
reasonable by the Committee.

Retirement benefits

To provide a market
competitive retirement
benefits and fixed pay package
to recruit and retain executive
talent.

None.

Unlike its peer companies,
the Company does not
currently operate any pension
arrangements, but an end
of service benefit, payable to
the employee when he leaves
the Group, is accrued annually
in accordance with local
UAE laws.

We would continue to honour
any legacy arrangements
agreed with an individual
prior to them being promoted
to an executive director role.

Whilst the Committee has
not set an absolute maximum
opportunity, the Committee
will determine the level of
benefit based on what is
appropriate taking into
account: (i) Local market
practice; (ii) Practice at
companies of a comparable
size and complexity, other
UAE companies and other
international healthcare
companies; and (iii) The
role and the individual’s
circumstances.

NMC Health plc Annual Report and Accounts 2016

1. 2. 4. 5. 3. GovernanceDirectors’ Remuneration Report 2016 continued
Directors’ Remuneration Policy continued

EXECUTIVE DIRECTOR POLICY TABLE CONTINUED

Purpose and
link to strategy

Operation

Maximum opportunity

Performance measures

Short-Term Incentive Plan (“Bonus plan”)

The maximum bonus
opportunity in respect of
a financial year is 200% of
base salary. In exceptional
circumstances, the Committee
may increase the maximum
limit to 250% of salary.

Normally, up to 50%
of the bonus pays-out
for target performance.

The specific measures may
vary from year to year in order
to remain focussed on key
drivers of our strategy.

Our business profitability is
closely aligned to operational
efficiencies across our facilities.
As such performance is
measured against a range
of key financial, operational/
strategic metrics and individual
key performance indicators
measured over one year.

The actual performance
targets set are not disclosed
prospectively as they are
commercially sensitive.

Where no longer commercially
sensitive, the measures and
the outcomes against these
measures will be disclosed
retrospectively.

To provide a structure to
attract, retain and motivate
senior executives of the
calibre required to manage
the business and to deliver
annual strategic objectives.

To provide an incentive
arrangement which is clearly
structured and transparent
for senior executives
and shareholders.

Bonus measures and targets
are set annually dependent on
the deemed strategic priorities
for that year.

Performance is determined
by the Committee after
the year-end based on
performance against targets.

The Committee has the
discretion to amend the bonus
pay-out should the formulaic
output not produce a result
which in the view of the
Committee fairly reflects
overall performance or
individual contribution.

Any annual bonus achieved
for a financial year is normally
delivered one-third in cash and
two-thirds in deferred shares.
Normally, 50% of the deferred
element vests one year from
award and the rest vests two
years from award subject to
continued employment. There
are no further performance
conditions or other conditions
which will apply to any
deferred shares awarded
(with the exception of
continued employment).

The Committee shall have the
discretion to determine that
a different balance of cash
and shares and / or a different
time horizon may apply.

Malus provisions apply. Awards
may be reduced, cancelled or
have further conditions applied
in certain circumstances
prior to vesting. These
include but are not limited
to, mis-statement of financial
results, a material failure
of risk management or
serious reputational damage
to the Company.

NMC Health plc Annual Report and Accounts 2016

GovernancePurpose and
link to strategy

Long-Term Incentive Plan (“LTIP”)

To incentivise the delivery
of long-term growth and
returns for shareholders.

To attract and retain
executives of the calibre
required to drive the
long-term strategy.

Operation

Maximum opportunity

Performance measures

The maximum award
opportunity in respect
of a financial year is
250% of base salary. In
exceptional circumstances,
the Committee may grant
awards of up to 300% of salary.

Up to 25% of the award pays
out for threshold performance.
Awards vest on a straight-line
between threshold and
maximum performance.

Awards vest based on
performance measured
over a three year period. The
Committee has the discretion
to apply a longer performance
period or to introduce a
holding period at the end
of a performance period.

Performance targets are
set annually for each three-
year cycle.

The Committee has the
discretion to amend the
final level of vesting of awards
if it does not consider that
it reflects the underlying
performance of the Group.

Awards are subject to malus
provisions. Awards may be
reduced, cancelled or have
further conditions applied
in certain circumstances
prior to vesting. These
include but are not limited
to mis-statement of results,
a material failure of risk
management or serious
reputational damage
to the Company.

Performance measures are
determined by the Committee
and are chosen to be aligned
with the long-term success
of the business.

The Committee believes a
measure linked to profitability
(e.g. earnings per share) and
a share price related measure
(e.g total shareholder return)
remain appropriate.

Accordingly, LTIP awards
for 2017 will be based on:
• Earnings Per Share (50%);

and

• Relative Total Shareholder
Return measured against
the 150 largest companies
within the FTSE 350 (50%).

The performance
measures for the LTIP
focus management on the
delivery of strong profit growth
(through the profitability
measure) and the delivery
of strong shareholder returns
(through the share price
related measure).

EPS has been chosen as
the profitability performance
measure for awards to be
made in 2017 to ensure that
pay-outs reflect the overall
shareholder experience.

The performance measures
selected by the Committee
may change from time to
time to reflect any change
in the Group strategy.

The Committee has the
discretion to:
• Change the overall
weighting of the
performance measures;
• Vary the measures and

their respective weightings
within each category.

The performance measures
will be disclosed in the
directors’ remuneration
report for the relevant year.

NMC Health plc Annual Report and Accounts 2016

1. 2. 4. 5. 3. GovernanceDirectors’ Remuneration Report 2016 continued
Directors’ Remuneration Policy continued

EXECUTIVE DIRECTOR POLICY TABLE CONTINUED

Purpose and
link to strategy

Share option plan (“SOP”)

To incentivise executive
directors to increase the
share price and deliver
value for shareholders.

Operation

Maximum opportunity

Performance measures

In the event that an award
was to be granted under
this plan in exceptional
circumstances the Committee
would determine appropriate
performance conditions at
that time.

It is intended that
awards would only be
made under this plan in
exceptional circumstances.

The maximum award
opportunity in respect
of a financial year is
200% of base salary.

Awards are granted in
the form of market value
options. Awards vest based
on performance measured
over a three year period.
Options may be exercised
until the 10th anniversary
of the date of grant.

Awards are subject to malus
provisions. Awards may be
reduced, cancelled or have
further conditions applied in
certain circumstances prior to
vesting. These include but are
not limited to mis-statement
of results, a material failure
of risk management
or serious reputational
damage to the Company.

Shareholding guidelines

To align the interests of the management team with shareholders, the company operates a shareholding guideline for Executive
directors of 300% of salary.

Remuneration policy on recruitment

Area

Principles

Policy and operation

The package should be market competitive to facilitate the recruitment of individuals of sufficient calibre
to lead the business. At the same time, the Committee would intend to pay no more than it believes is
necessary to secure the required talent.

The structure of the on-going remuneration package would normally include the components set out
in the policy table for Executive directors.

Base salary

Benefits and
pension

In the event that an internal candidate was promoted to the Board legacy terms and conditions would
normally be honoured, including pension entitlements and any outstanding incentive awards.

Set at a level to recruit the candidate with the required calibre, skills and experience to deliver the Group’s
strategy without paying more than is necessary.

To be provided in line with normal policy.

In the event that an Executive is required to re-locate to undertake the role, the Committee may provide
additional benefits to reflect the relevant circumstances (on a one off or on-going basis).

Incentive awards

Incentive awards would normally be made under the STIP, LTIP or SOP.

In addition, the Committee has the discretion to include any other remuneration component or award
which it feels is appropriate taking into account the specific commercial circumstances, and subject to
the limit on variable remuneration set out below. The key terms and rationale for any such component
would be appropriately disclosed.

In line with our policy, the maximum level of variable remuneration which may be awarded (excluding
any compensatory payments or awards referred to below) is 550% of salary.

NMC Health plc Annual Report and Accounts 2016

GovernanceArea

Policy and operation

Compensatory
awards

Where an individual forfeits outstanding variable pay opportunities or contractual rights at a previous
employer as a result of appointment, the Committee may offer compensatory payments or awards,
in such form as the Committee considers appropriate taking into account all relevant factors including
the form of awards, expected value and vesting timeframe of forfeited opportunities.

When determining such a ‘buy-out’ the guiding principle would be that awards would generally be on a ‘like
for like’ basis to those forfeited, unless this was not considered appropriate in the particular circumstances.

To facilitate awards outlined above, the Committee may make awards under company incentive plans or other
available structures as appropriate, including using listing rule 9.4.2 for the purpose of making ‘buy-out’ awards.

Non-executive
directors

The remuneration package for a newly appointed non-executive director would normally be in line with the
structure set out in the policy table for Non-executive directors. Remuneration for new hires may be paid in
the form of cash or shares.

Treatment of incentives on cessation of employment

STIP

There is no automatic entitlement to a bonus.

In the case of ill-health, injury, disability, death, sale of the employing company or business from the Group
or any other reason at the Committee’s discretion, executive directors may receive a bonus in respect of
the financial year of cessation. This payment will normally be pro-rated for time and subject to performance,
however the Committee retains the discretion to review overall business and individual performance and
determine that a different level of bonus payment is appropriate. This payment may be paid in such
proportions of cash or shares as the Committee considers appropriate.

In other circumstances the Committee may determine that a bonus payment may be due to reflect
performance and contribution to the point of cessation.

Unvested
deferred STIP
awards

In the case of ill-health, injury, disability, death, sale of the employing company or business from the Group
or any other reason at the Committee discretion, unvested awards would normally continue to vest at the
end of the normal deferral period. The Committee may determine, in appropriate circumstances that awards
should vest at cessation of employment.

LTIP

SOP

In other circumstances, awards would normally lapse.

In the case of ill-health, injury, disability, death, sale of the employing company or business from the Group
or any other reason at the Committee’s discretion, awards may vest at a level determined by the Committee
taking into account the extent to which the performance conditions have been met and, unless the
Committee determine otherwise, the time elapsed since grant.

Awards will normally carry on to the normal vesting date except in the case of death where awards may
vest immediately. The Committee may determine that awards should vest at cessation of employment.

Awards in the form of nil cost options may be exercised for a period of 6 months from vesting (12 months
in the cases of death). Participants have 6 months from cessation to exercise vested awards (12 months
in the case of death). The Committee may allow alternative exercise windows if it considers it appropriate.

In other circumstances, awards would normally lapse.

In the case of ill-health, injury, disability, death, sale of the employing company or business from the Group
or any other reason at the Committee’s discretion, options may vest at a level determined by the Committee
taking into account the extent to which the performance conditions have been met and, unless the
Committee determines otherwise, the time elapsed since grant.

Options vesting will normally carry on to the normal vesting date except in the case of death where awards
may vest immediately. The Committee may determine that awards should vest at cessation of employment.

Options may be exercised for a period of 6 months from vesting (12 months in the case of death). Participants
have 6 months from cessation to exercise vested awards (12 months in the case of death).

In other circumstances, unvested awards would normally lapse. Vested options may be exercised for
6 months from cessation.

Other information The Committee reserves the right to make any other payments in connection with a director’s cessation of

office or employment where the payments are made in good faith in discharge of an existing legal obligation
(or by way of damages for breach of such an obligation) or by way of settlement of any claim arising in
connection with the cessation of a director’s office or employment. Any such payments may include but
are not limited to paying any fees for outplacement assistance and/or the director’s legal and/or professional
advice fees in connection with his cessation of office or employment.

NMC Health plc Annual Report and Accounts 2016

1. 2. 4. 5. 3. GovernanceDirectors’ Remuneration Report 2016 continued
Directors’ Remuneration Policy continued

EXECUTIVE DIRECTOR POLICY TABLE CONTINUED
Treatment on a change of control
On a change of control, awards under the LTIP and SOP would normally vest to the extent determined by the Committee taking
into account the extent to which any performance conditions are satisfied at the date of the event, the time that has elapsed
since the grant of an award and any other factors it considers appropriate.

The executive directors may exchange their awards over Company shares for awards in shares of the acquiring company
if the terms of the offer allow this.

Any deferred STIP shares will normally vest in full upon a change of control.

In the event of a winding-up of the Company, demerger, delisting, special dividend or other event which in the opinion of the
Committee may affect the current or future share price, the Committee may allow LTIP, SOP and any deferred STIP awards
to vest on the same basis as set out above.

Non-Executive Director Policy table

Purpose and link to strategy

Operation

Maximum opportunity

To provide an
appropriate reward to
attract and retain
high-calibre individuals.

The remuneration of non-executive directors is approved
by the executive directors following recommendations
and discussions with the Chairman of the Company
and the Chairman of the Remuneration Committee,
as appropriate.

The maximum level of non-executive
director remuneration is set out in the
Company’s articles of association. This
may be amended from time to time
subject to shareholder approval.

Fees are structured as follows:
• The Non-Executive Chairman and Non-Executive

directors are paid a basic fee.

• Additional fees are also paid for additional

responsibilities (including the Senior Independent
Director and Chairmanship of a Committee).
Intercontinental travel allowances are paid,
where such travel is required.

•

Fees will be paid in an appropriate mix of cash
and shares.

Non-executive directors are also reimbursed for
travel and reasonable personal expenses (including
any related tax liability on such expenses).

Non-executive directors are eligible to receive annual
health checks. No other benefits are currently provided.
Other ad hoc benefits may be provided in the future
if this was considered appropriate.

Fees are set at a level which reflect the
commitment and contribution that is
expected from the Chairman and non-
executive directors and that are appropriately
positioned against comparable roles in
companies of a similar size and complexity.

Fee levels are disclosed in the Directors’
remuneration report for the relevant
financial year.

Additional fees may be payable to non-
executive directors from time to time for
additional board responsibilities. Additional
fees may also be paid where the time
commitment in a particular year was
significantly more than anticipated.

NMC Health plc Annual Report and Accounts 2016

GovernanceDirectors’ Remuneration Report 2016 continued
Annual Remuneration Report

THE REMUNERATION COMMITTEE IN 2016
Details of the members of the Committee during the 2016 financial year, and its role and responsibility within the Group’s Board
and governance structure, is set out on page 49 of the Governance report.

Principal matters considered in 2016
The Committee met formally five times during a busy year. Principal items discussed by the Committee included:
• Reviewed and approved the targets for incentive awards to be made in the year;
• A tender process in relation to the Committee’s independent external adviser. This process resulted in a number of meetings

and discussions leading to the decision set out below;

• A review and discussion in relation to the new Directors’ Remuneration policy which was put to, and approved by, shareholders

on 29 December 2016; and

• The review and setting of base salaries and maximum share plan incentive levels that will operate for Executive Directors in 2017.

Support and External Advice
The Remuneration Committee seeks and considers advice from independent remuneration advisers when discussing and setting
Executive Director and Senior Management salary levels. Deloitte was appointed by the Remuneration Committee and acted as
advisors to the Company since 2012. During the year, the Committee undertook a tender process with regards to the appointment
of this adviser.

The objective of the tender for this position was to ensure that, in advance of the renewal of the Directors’ Remuneration Policy,
the Committee was receiving advice and to have a new remuneration policy which is appropriate to the Group’s changing
circumstances and sufficient for the Group’s continuing growth strategy in the coming years. In addition to Deloitte re-tendering
for the role, represented by a new partner at the firm, the Committee also received presentations and formal tender submissions
from two other firms.

In addition to an initial presentation, a formal tender process was conducted. In addition to outlining how they would work with
the committee on an ongoing basis and a discussion on potential remuneration structures that the Group could employ, work
undertaken for similar structured organisations and potential fee levels of each firm were considered as part of the presentation
and tender process.

Following extensive discussions, it was agreed that Deloitte would be re-appointed as the Committee’s advisers on remuneration.
Deloitte then assisted the Committee in finalising the new remuneration policy approved by shareholders on 29 December 2017,
setting new base salary and maximum incentive levels for Executive Directors for 2017.

The Committee have reviewed and considered Deloitte’s independence, and consider them to be independent advisers to the
committee notwithstanding that Deloitte, as an international firm, provide the following services to the group:
• Some tax advisory services to the Group in Spain;
•
•

Internal Auditors to our IVF businesses, Clinica Eugin and Fakih IVF; and
transaction services and accounting advice to the Group in the UAE, both before and after some of the Group’s acquisitions.

It was noted that none of this advice has related to remuneration matters in the Group, all teams providing these services are
based in countries other than the UK where the remuneration advisory team are based and none of these teams have any
connection with the engagement partner and team advising the Remuneration Committee.

The Committee is satisfied that the advice they have received from Deloitte during the year has been objective and independent
and that the Deloitte LLP engagement partner and team, which provide remuneration advice to the Committee, do not have
connections with NMC that might impair their independence. The Committee reviewed the potential for conflicts of interest and
judged that there were appropriate safeguards against such conflicts. Deloitte are signatories to the remuneration consultants’
group code of conduct in relation to executive remuneration consulting in the UK.

The Remuneration Committee has direct access to Deloitte as and when required. The Group Company Secretary liaises
with Deloitte where necessary to ensure that all Committee requests and decisions are dealt with and implemented, but does
so under the guidance of the Remuneration Committee Chairman. Deloitte attend meetings of the Committee as required.

Deloitte received fees of £31,000 (charged on a time plus expenses basis) for advice received during the year.

NMC Health plc Annual Report and Accounts 2016

1. 2. 4. 5. 3. GovernanceDirectors’ Remuneration Report 2016 continued
Annual Remuneration Report continued

THE REMUNERATION COMMITTEE IN 2016 CONTINUED
Results of voting on Remuneration matters at General Meetings of the Company
The following summarises voting at the two General Meetings in 2016 at which resolutions relating to Directors remuneration were
put to shareholders:

Meeting Date

3 June 2016

29 December 2016

Resolution

Resolution type

For

Against

votes withheld

To approve the Directors’ Remuneration Report

Advisory

69.38%

30.62%

280,673

Number of

To approve the New Directors’ Remuneration
Policy

To approve Amendment to LTIP rules

Binding

N/A

70.24%

74.56%

29.76%

25.44%

618

The Committee takes note of the views of shareholders when reviewing Directors remuneration and appreciates that some
shareholders have a differing view of the correct approach to incentivise management. Whilst the Committee understands that
a number of shareholders were not supportive of the proposed changes to remuneration made in 2016, the Committee believes
that the arrangements going forward are appropriate for the following reasons:
• adjustments to salaries in the years following the IPO, during which our shareholders have seen a significant increase in

profitability and shareholder value, still resulted in total remuneration levels that lagged competitive practice given the size
and complexity of the Group;

• phasing the increases towards a competitive level of overall remuneration over an even longer period would not have been

creating the correct environment to motivate and reward management; and

• a significant proportion of the package going forward is to be delivered through incentive based remuneration, ensuring that
the executives are only rewarded where strong operational performance and shareholder returns continue to be delivered.

As always, the Committee is appreciative of the support which shareholders have given in relation to Directors
remuneration matters.

Remuneration arrangements throughout the Group
The remuneration philosophy is the same throughout NMC – that individuals should be remunerated based on their role,
responsibilities, experiences and market practice. NMC has a variety of different roles from senior executives, to doctors and nurses
and to administrators and support staff, and therefore remuneration levels and structures vary to reflect the different requirements,
expectations and locations of these roles.

The Committee does consider that it is important, however, that Executive Directors and senior executives as a group are
remunerated in a similar way to ensure that they are incentivised to collectively deliver the Group’s strategy and create long term
value for shareholders. Executive Directors and senior management therefore all participated in the STIP and LTIP arrangements
in 2016.

Shareholder views and consideration of employment conditions elsewhere in the Group
Communication with our Shareholders
The Committee is available to discuss remuneration matters concerning shareholders at any time and management and the
Chairman of the Committee have discussed remuneration changes with shareholders and institutional bodies during the year.

Consideration of pay and conditions of employees
The Committee considers the correlation between Executive Director remuneration and that of Senior Management, as well as
pay levels externally for similar roles, when determining individual remuneration levels. However, given the Group’s wide geographic
reach in relation to both its business interests and shareholders, and the significant corporate and public company responsibilities
which are not reflected in roles in the rest of the Group, the Committee do not feel that Executive Director and Senior Management
remuneration needs to be aligned with other remuneration within the business. The Committee did not consult with employees
when setting Executive Director pay.

NMC Health plc Annual Report and Accounts 2016

Governance2016 REMUNERATION – THIS SECTION IS SUBJECT TO AUDIT
This section outlines how the remuneration policy was applied in 2016, together with the outcomes for actual remuneration paid
in relation to the financial year under review. This is shown in two parts – Remuneration paid to Executive Directors and a separate
section in relation to Non-Executive Directors.

Executive Director Remuneration 2016
Remuneration paid in 2016 (single pay figure)
The table below sets out the remuneration paid to or received by each Executive Director of the Company who served during the
financial year ended 31 December 2016.

Salary
$’000

Benefits
$’000

STIP
$’000

LTIP awards
$’000

Pension
$’000

Total
$’000

Executive Director

2016

2015

Dr B R Shetty
Prasanth Manghat

1,061.8
898.4

544.5
473.7

2016

173.4
19.6

2015

2016

2015

165.3
20.2

1,592.7
1,347.6

544.5
473.7

2016

0.0
0.0

2015

0.0
0.0

2016

212.4
179.7

2015

0.0
0.0

2016

2015

3,040.3
2,445.3

1,254.3
967.6

Base salaries
The base salaries of the Executive Vice Chairman and CEO, AED 3.9m (US$1.1m) per annum, and the Deputy CEO, AED 3.3m (US$0.9m)
per annum, were set effective from 1 January 2016. There were no changes to base salaries during the 2016 financial year.

Benefits
There was no change to the structure of benefits available to the Executive Directors during the year. The Benefits paid included
the following items:

Executive Director

Dr B R Shetty
Prasanth Manghat

Provision of family
accommodation
$’000

Private medical
insurance
$’000

Life insurance
cover
$’000

Annual family return flights
to home country
$’000

2016

168.7
0.0

2015

160.6
0.0

2016

2.2
4.4

2015

2.2
4.4

2016

0.0
0.0

2015

0.0
0.6

2016

2.5
15.2

2015

2.5
15.2

Outcome of 2016 STIP
The Group once again made significant progress during the year. In addition to the continued execution of the Group’s strategic
plan through the opening and ramp-up of new facilities, the Group continued its acquisition program during 2016. In setting
targets for the 2016 STIP, the Committee considered the key focus required of management for the financial year, which of course
continued to be required alongside the significant proportion of time and commitment of the Executive Directors and Senior
Management in relation to the acquisition program (including the acquisition of Al Zahra hospital in Sharjah as announced in
December 2016, which is not directly included as a target for the STIP).

In addition to EBITDA achievement, one of the primary targets set was in relation to the ramp-up of NMC Royal Hospital, Khalifa
City. Although this is not directly a financial target, an accelerated ramp-up of new facilities provides better than expected EBITDA
performance in the medium term. In relation to NMC Royal Hospital, Khalifa City, which is the Group’s largest hospital, a focus on
an accelerated ramp-up provides strong financial benefits to the Group in the medium term. Other targets include the expansion
into new geographies, a link to the Group’s expansion program and operational targets relating to quality and efficiency.

The outcome of each target for the 2016 STIP is shown in the table below. The Executive Vice Chairman and CEO and the Deputy
CEO each received 150% of base salary as their annual bonus in respect of the 2016 financial year. As stated in the 2015 Directors’
Remuneration Report, the way in which the 2016 STIP Award is delivered to the executive team changed from previous years, with
a lower percentage of cash being delivered on granting of an award. For the 2016 STIP, one-third of the award achieved is being paid
in cash with two-thirds delivered in the form of a deferred share award, which vests equally after periods of one year and two years.

The actual financial performance targets used for the determination of the 2016 STIP have not been disclosed in the Directors’
Remuneration Report as the Board deems that the disclosure of the targets could prejudice the Group’s business. The financial
targets will be disclosed as soon as they are no longer deemed commercially sensitive, which will be, at the earliest, in the Directors’
Remuneration Report for the financial year following the year in which the bonus is paid.

NMC Health plc Annual Report and Accounts 2016

1. 2. 4. 5. 3. GovernanceDirectors’ Remuneration Report 2016 continued
Annual Remuneration Report continued

2016 REMUNERATION – THIS SECTION IS SUBJECT TO AUDIT CONTINUED
Outcome of 2016 STIP continued

Measure

EBITDA

Purpose and link to
remuneration strategy

Optimize cost
of services

JCI
Accreditation

Strengthen and
maintain NMC’s
corporate image

Description of measure

Target and performance

and CEO Deputy CEO

Weighting

Executive
Vice
Chairman

Outcome
(percentage
of
maximum)

25%

100%

25%

100%

The maintenance of good
levels of EBITDA are also
a key focus for the Board
and the management
team during a continuing
period of significant
acquisitive growth.
Business operations
collectively performed
above expectation,
including a better than
expected performance
by NMC Royal Hospital
following its opening
for inpatient services.

This strong performance,
detailed in the Business
overview and Financial
review sections on pages
20 to 25 of this annual
report, with EBITDA of
US$246.1m, resulted in a
maximum achievement
level for this measure
being achieved.

The Group’s three Specialty
Hospitals once again
achieved excellent quality
performance against set
JCI performance measures.

The Board has determined
that performance against
the JCI metrics is
commercially sensitive,
and will continue to be so,
and as such the detailed
performance against this
measure is not disclosed.
However, the Board can
confirm that the stretch
target was exceeded across
all individual facilities.

Achieve minimum
levels of EBITDA set by
the Committee (including
EBITDA from all Group
businesses as at 1 January
2016 plus Fakih IVF).

This target recognises that
minimum levels of EBITDA
must be achieved for the
financial year, ensuring that
new acquisitions in FY2015
and Q1, 2016 perform well
and that the new facilities
opened by the Company,
including NMC Royal
Hospital, Khalifa City,
ramp-up well after opening.

Additionally, a targeted
level of EBITDA must be
achieved before any STIP
entitlement is earned
in relation to FY2016.

NMC seeks to achieve
a high quality standard
in each of its facilities.
Quality standards are
seen as a key component
in relation to customer
service and monitoring
of such standards a key
clinical risk mitigation
factor and component
of the Group’s internal
control mechanism.

Achievement of set targets
in relation to the monitoring
of those clinical and quality
indicators which are
required to reach a certain
standard under the Joint
Commission International
accreditations for the
Group’s three Specialty
Hospitals having JCI
accreditation for the
whole of 2016.

NMC Health plc Annual Report and Accounts 2016

GovernancePurpose and link to
remuneration strategy

Strategic growth

Measure

Expansion
into new
geographies

Ramp-up of
NMC Royal
Hospital,
Khalifa City

New facility
performance and
EBITDA improvement

Establishment
of Central
Laboratory

Group efficiencies

Description of measure

Target and performance

and CEO Deputy CEO

Weighting

Executive
Vice
Chairman

Outcome
(percentage
of
maximum)

25%

100%

25%

100%

25%

100%

The Group continued
execution of its strategic
growth plan, including
plans to widen the Group’s
geographic reach outside
the previous focus on
the UAE.

The targets related to this
geographic expansion,
with acquisitions in
Saudi Arabia, Europe
and South America
announced in the year,
were met at maximum
achievement level.

The initial ramp-up of
this facility following
the commencement of
inpatient services in
2016, has exceeded
expectations. By the end
of the 2016 financial year,
the number of beds, and
occupancy of those beds,
exceeded the Committee’s
set target for maximum
achievement required for
this measure.

Central Laboratories have
been set up in the key hubs
across the Company’s key
markets in the UAE, with
these hubs servicing other
Group operating facilities
in those markets.

Part of the Strategic
growth plan agreed
by the Board includes
the expansion of the
Healthcare division into
new geographic locations,
principally other GCC
countries outside
of the UAE.

The Remuneration
Committee set
targets related to this
geographic expansion.

NMC Royal Hospital, Khalifa
City, is the Group’s newest
and largest facility, and will
be a regional flagship hub
for the Group’s Healthcare
division. The Committee
has set targets relating to
the number of operational
beds in this facility, and
average occupancy of
those beds, by the end
of 2016 as this will have
a direct impact on both
future revenue and EBITDA
levels for the Group.

This measure related to
plans to open a centralised
laboratory structure within
the Group’s Healthcare
division. This target was
set to ensure as many
facilities as possible are
using the central laboratory
for their laboratory
testing requirements
in the short term.

This target specifically
ensures that, during
this period of significant
acquisitive growth, there
is a continuing focus on
efficiencies within the
Healthcare division and
assists in maintaining
high laboratory standards.

NMC Health plc Annual Report and Accounts 2016

1. 2. 4. 5. 3. GovernanceDirectors’ Remuneration Report 2016 continued
Annual Remuneration Report continued

2016 REMUNERATION – THIS SECTION IS SUBJECT TO AUDIT CONTINUED
Outcome of 2015 STIP
Consistent with one of our core principles, transparency, we have provided detailed disclosure against our 2015 performance for the
first time below, where such measures are not held to be commercially sensitive.

Measure

Weighting

Executive Vice
Chairman and
CEO

Healthcare revenues

33.3%

Deputy CEO Description of 2015 Measures, Target and Performance

20% Achievement of a minimum level of healthcare revenues set by the
Committee (including revenues from existing facilities, Clinica Eugin
and new facilities opened in 2014).

Threshold
Stretch

US$400m
US$450m

Healthcare EBITDA
target and gateway
hurdle

33.3%

35% Achievement of minimum levels of EBITDA set by the Committee

Revenues of US$473.8m were achieved, in excess of the stretch target.

(including EBITDA from existing facilities, Clinica Eugin and new facilities
opened in 2014). Additionally, this targeted level of EBITDA had to be
achieved before any STIP entitlement could be earned in relation to FY2015.

JCI Accreditation

33.3%

Revenue per Patient

Patient Occupancy
Levels

Organisational
Capability

Human Capital

–

Threshold
Stretch

EBITDA
US$100m
US$110m

EBITDA of US$127.4m was achieved, in excess of the stretch target.

– The Board has determined that performance against the JCI metrics
is commercially sensitive, and will continue to be so, and as such the
detailed performance against this measure is not disclosed. However,
the Board can confirm that the stretch target was exceeded across all
individual facilities.

10% Revenue per patient is a principal financial driver for the Group. The

Committee set a stretch target of US$121 revenue per patient. Actual
performance was US$121.1 in revenue per patient.

This target was therefore met at the stretch level.

10% Utilisation of assets is key to performance and therefore achieving efficient

patient occupancy levels represents a continuing target for the business.
Target performance was set at 74% or greater with a stretch target of 75%
or greater. This target excludes any new facilities opened in 2014 as they
were considered to be in ramp–up phase with expected abnormally low
occupancy levels.

Occupancy achieved under this measure was 76% which the Committee
determined fulfilled the target at the stretch level.

15% Specific targeted milestones set by the Committee for capital and

technology enablement programs to be met.

This Committee determined that this measure was met at its stretch
level in light of the Group’s flagship NMC Royal Hospital Khalifa City
opening in 2015, and given the excellent ramp–up performance of other
new facilities opened.

10% Targets set by the Committee in relation to the enhancement of

succession planning capabilities within the Group given the Company’s
growth and acquisition plans for 2015.

The Committee wanted to ensure that up to five key management
positions had succession plans in place during 2015 and this was achieved.

NMC Health plc Annual Report and Accounts 2016

Governance

Long Term Incentive Plan
Performance in relation to LTIP Awards made in 2014
Awards for Executive Directors under the LTIP were granted for the first time in 2014 and therefore, to date, no LTIP grants have yet
reached their 3 year vesting point. However, the performance period in relation to the 2014 LTIP award (being the three financial
years 2014, 2015 and 2016) has now ended, and therefore the Committee is in a position to confirm the level of vesting which will
apply when the third anniversary of the date of grant of the award is reached on 29 October 2017.

50% of the award was subject to an Earnings Per Share (EPS) growth performance condition, whilst the remaining 50% of the
award was based on the Company’s Total Shareholder Return relative to a bespoke peer group.

Measure

Earnings Per Share1
Total Shareholder Return2,3

Threshold
(25% vesting)

Maximum
(100% vesting)

Actual performance

Level of vesting

6% p.a. growth
Median

15% p.a. growth
Upper quartile

24.84% p.a. growth
280.95% (100th percentile)

100%
100%

1 Straight line vesting between threshold and maximum.
2 Pro-rata vesting between median and lower quartile on a ranking basis.
3 Peer group – Korian Medica (France); Al Noor Hospitals GP (UK); Spire Healthcare GP (UK); Raffles Medical GP (Singapore); Banmedica (Chile); Synergy Health

(UK); KPJ Healthcare (Malaysia); NIB Holdings (Australia) Al-Maidan DNL. Clinic (Kuwait).

Given the strong level of relative TSR and EPS performance delivered over the three-year performance period, the Committee
determined that 100% of the awards will vest on 29 October 2017.

As the share price at the date of vesting was not known at the date of publication of this report, no value has been included within
the single figure table. This will be included in the following years report, based on the number of shares that vested multiplied
by the average share price over the quarter ending 31 December 2016, which is £14.23.

Awards made in 2016
During 2016, LTIP grants were made to the Executive Directors at 150% of base salary, in line with our approved Policy applying during
the 2016 financial year.

Performance targets
The following performance targets were used in relation to all LTIP awards granted in 2016.

Company’s Earnings per Share (EPS) growth
This measures the Company’s annual compound growth in EPS and represents 50% of the total award. The table below sets out
the EPS targets for the 2016 award and the corresponding level of vesting:

Annual compound growth in EPS over the three-year Performance Period

Vesting percentage of target

15% or more
Between 6% and 15%
6%
Less than 6%

100%
On a straight-line basis between 25% and 100%
25%
0%

Total Shareholder Return (TSR) growth
This measures the Company’s TSR compared against a comparator group of companies and represents 50% of the total award.
The table below sets out the TSR targets for the 2016 award and the corresponding level of vesting:

Company’s TSR over three-year performance period compared to the FTSE 250
(excluding investment trusts)

Vesting percentage of target

Upper quartile
Between median and upper quartile
Median
Below Median

100%
Pro-rata between 25% and 100% on a ranking basis
25%
0%

Pension contributions
There were no pension contributions in 2015. During 2016, the Committee considered its current policy not to provide executive
directors with a pension arrangement. The Committee considered that a one-off payment of 20% of salary for 2016 in lieu of
pension contributions was appropriate to compensate for a lack of an ongoing pension arrangement. The Committee considered
this appropriate in light of the normal practice of other UK listed companies of comparable size and scope.

NMC Health plc Annual Report and Accounts 2016

1. 2. 4. 5. 3. GovernanceDirectors’ Remuneration Report 2016 continued
Annual Remuneration Report continued

2016 REMUNERATION – THIS SECTION IS SUBJECT TO AUDIT CONTINUED
Non-Executive Director Remuneration 2016
Remuneration paid in 2016 (single pay figure)
The fee paid in cash to each Non-Executive Director during the year ended 31 December 2016 is set out in the following table:

Director

H. J. Mark Tompkins

Dr Ayesha Abdullah

Abdulrahman Basaddiq

Jonathan Bomford

Lord Clanwilliam

Salma Hareb

Keyur Nagori

Binay Shetty

Dr Nandini Tandon

Position

Independent Non-Executive Chairman

Independent Non-Executive Director

Non-Executive Director

Senior Independent Non-Executive Director

Independent Non-Executive Director

Non-Executive Director

Independent Non-Executive Director

FY2016
(£’000)

FY20151
(£’000)

215

100

215.0

85.0

100.0

85.0

1 As reported in the 2015 Directors’ Remuneration Report, given the extension of the Company’s growth strategy in 2015 and the complexity of business
challenges faced during the year, there was a significant increase in the time commitment required from our Non-Executive Directors. To reflect this
increase in the provision of services to the Group, each of the Non-Executive Directors received additional payments to reflect the time commitment
required. These amounts are included in the FY2015 Remuneration in the table above.

None of the Non–Executive directors received any benefits, pension, STIP or LTIP entitlements or payments during FY2015
and FY2016.

In 2016, the Executive Directors decided to re-base the fees of the Non-Executive Directors to take account of the continuing
increase in commitment encountered in 2016 and expected in future financial years. Therefore, with effective from 1 January 2016,
the annual fees of the Non-Executive Directors have been structured as follows:

• Base fees:

Chairman – £200k
Senior Independent Director – £85k
Non-Executive Director – £75k

• An additional fee of £5k per annum is paid to the Chair of each board committee.
• A fee of £5k is paid to each Non-Executive Director who attends meetings of the Board, in person, in a country

which is not their primary residence.

The above fee structure is reflected in the fees paid to each NED during 2016.

Payments to past directors
There were no payments made to past directors during the 2016 financial year.

Payments for loss of office
There were no payments made for loss of office to past directors during the 2016 financial year.

2017 REMUNERATION
EXECUTIVE REMUNERATION IN 2017
This section summarises the expected implementation of the Company’s new remuneration policy in 2017.

The approach to Executive Director Remuneration which the Remuneration Committee intends to take for 2017 was set out
in the circular to shareholders dated 14 December 2016, setting out details of the Company’s new Remuneration Policy. This is
summarised below:

Base salaries for 2017
Annual base salaries payable with effect from 1 January 2017 are as follows:
Executive Vice Chairman and CEO AED 4.485m
AED 3.795m
Deputy CEO

Benefits
There is no intended change to the structure of benefits in 2017 which will be paid in line with the arrangements in place
for the 2016 financial year.

NMC Health plc Annual Report and Accounts 2016

Governance

Operation of the STIP for 2016
In line with the structure set out in the Company’s Directors’ Remuneration policy approved by shareholders on 29 December 2016,
the maximum STIP opportunity for the Executive Directors in 2017 will be 200% of base salary. The way in which any award from the
2017 STIP will be delivered will be one-third of any STIP award being made in cash and two-thirds deferred into shares, half of which
will vest one year after any award is made and the other half two years after any award.

The performance targets that will apply for the 2017 financial year have been set after considering the Group’s priorities for the year.
The Remuneration Committee considers that the specific targets are commercially sensitive at this stage as they could disclose details
of budgeting and strategy for 2017 to the Company’s competitors. The Remuneration Committee will disclose details in respect of the
targets when it is satisfied that these are no longer commercially sensitive.

2017 STIP Targets
Targets for the 2017 STIP are outlined below. The specific targets are considered commercially sensitive. We will, however, disclose
the 2017 target and performance against target for measures the Board consider to be no longer commercially sensitive. This is
anticipated to be included in the 2018 annual report.

Measure

EBITDA

Purpose and link to remuneration strategy

The maintenance of healthy levels of EBITDA will remain a key focus for the Board and
the management team in 2017. Maintaining a focus on profitability as the Company
continues its organic and acquisitive growth has always been a key consideration for the
Company and as such EBITDA targets will be included in the 2017 STIP.

EBITDA Margin

Group EBITDA margin is a key metric in the Healthcare sector. The Company is committed
to delivering a competitive margin for shareholders and as such this metric is being
introduced into the STIP.

JCI Accreditation Performance against the JCI quality measures represent a key market indicator in

relation to clinical quality performance and has a demonstrable link to value creation. As
such this measure will continue to be included in the STIP for 2017.

Facility
Efficiency

Operational efficiency of our key facilities drives longer-term value creation. This metric
will include indicators of the efficiency and ramp up of the NMC Royal Hospital and the Al
Zahra Hospital.

Weighting for Executive
Directors (% of STIP
Opportunity)

25%

Operation of the LTIP for 2017
In line with the structure set out in the Company’s Directors’ Remuneration policy approved by shareholders on 29 December 2016,
the LTIP award levels for the Executive Directors in respect of 2017 were granted at a level of 250% of base salary. The minimum
vesting requirement under the EPS condition was increased to 8% compound annual growth while the comparator group for the
TSR component was changed to the largest 150 companies on the London Stock Exchange. The net effect of these changes will
ensure more challenging performance requirements for vesting.

The performance targets that apply for awards made under the plan in the 2017 financial year are as follows:

Measure

Total shareholder return
(TSR)

Purpose and link
to remuneration strategy

Performance measure

Target

To incentivise management
to deliver long term returns
to shareholders.

TSR growth compared
to a comparator group
of companies.

Earnings per share (EPS)

To incentivise management
to deliver bottom line
earnings growth.

The comparator group are
the companies making up
the 150 largest companies
within the London Stock
Exchange FTSE350 Index
(excluding investment
trusts and the Company).

Annual compound growth
in EPS between the base
year (i.e. 2016) and the end
of the performance period.

25% of this element
of the award will vest for
performance equal to the
median of the comparator
group with 100% vesting for
upper quartile performance
or better.

Vesting is on a straight line
basis between these points.

25% of this element of the
award vests for compound
EPS growth of 8% per
annum with 100% vesting
for EPS growth of 15%
per annum.

Vesting is on a straight line
basis between these points.

Percentage
Weighting for
relevant
individuals

50%

Awards under the LTIP for 2017 and beyond will be subject to a clawback provision, on top of the existing malus provision.

NMC Health plc Annual Report and Accounts 2016

1. 2. 4. 5. 3. GovernanceDirectors’ Remuneration Report 2016 continued
Annual Remuneration Report continued

2017 REMUNERATION CONTINUED
NON-EXECUTIVE DIRECTORS REMUNERATION IN 2017
The fees payable to the non-executive directors effective as at 1 January 2017 are as follows:

Chairman
Senior Independent Director
Non-executive director
Chairman of a Board Committee

(£’000)

210
85
75
10

Additional fees are payable for attendance at Board meetings outside the country of residence for each Board member.

Details of the remuneration paid to each of the non-executive directors who served during the year are included in the table
on page 72.

Non-executive directors do not participate in any bonus or incentive plan or other form or performance-related remuneration.
The Company does not provide any contribution to their pension arrangements.

OTHER INFORMATION
DIRECTORS’ SERVICE AGREEMENTS AND LETTERS OF APPOINTMENT
Executive Directors’ service agreement and employment contracts
Each of the following served as Executive Directors for all of the 2016 financial year and were subject to service agreements entered
into with NMC Healthcare LLC, one of the Company’s subsidiaries.

Dr B R Shetty
Prasanth Manghat

Date of agreement

19 March 2012
1 May 2011

Dr B R Shetty is employed by NMC Healthcare LLC pursuant to a service agreement dated 19 March 2012. The service agreement
provides for an indefinite term of employment unless terminated earlier in accordance with the terms of the service agreement.
The service agreement provided that, unless otherwise agreed between the parties, the service agreement can only be
terminated on twelve months’ prior written notice given by either Dr B R Shetty or NMC Healthcare LLC.

Mr Prasanth Manghat is employed by NMC Healthcare LLC pursuant to an employment contract dated 1 May 2011. The contract
provides for a renewable two year term of employment unless terminated earlier in accordance with the terms of the contract.
The Contract provides that, unless otherwise agreed between the parties, the contract can be terminated on one months’ prior
written notice given by either Prasanth Manghat or NMC Healthcare LLC.

Copies of the Service Agreement for Dr B R Shetty and employment contract for Mr Prasanth Manghat are available for inspection during
normal business hours at the Company’s Registered Office, and are available for inspection at the Company’s annual general meeting.

For future executives the Committee policy is that notice periods will not exceed 12 months. There are no matters for which the
Company requires approval of shareholders for the purposes of Chapter 4A of Part 10 of the Companies Act 2006.

Letters of appointment for Non-Executive Directors
The Non-Executive Directors do not have service agreements with the Company, but instead have letters of appointment.
The appointment of each of the Non-Executive Directors is stated for an initial term until the next annual general meeting of
the Company at which, and at subsequent annual general meetings, they need to submit themselves for re-election if they so
wish. Each of the Non-Executive Directors have a minimum time commitment that they need to give to the Company in any year.

The letters of appointment for each Non-Executive Director are summarised below:

Director

Position

H. J. Mark Tompkins
Dr Ayesha Abdullah
Abdulrahman Basaddiq
Jonathan Bomford
Lord Clanwilliam
Salma Hareb
Keyur Nagori
Binay Shetty
Dr Nandini Tandon

Non-Executive Chairman
Independent Non-Executive Director
Non-Executive Director
Senior Independent Director
Independent Non-Executive Director
Independent Non-Executive Director
Non-Executive Director
Non-Executive Director
Independent Non-Executive Director

Date of appointment

7 March 2012
26 June 2014
24 February 2014
27 June 2013
7 March 2012
26 June 2014
26 June 2014
1 January 2015
26 June 2014

Company and
Director
notice period

3 months
3 months
3 months
3 months
3 months
3 months
3 months
3 months
3 months

There is no compensation payable upon the early termination of a Non-Executive Directors’ appointment.

Copies of the above Non-Executive Directors’ Letters of Appointment are available for inspection during normal business hours
at the Company’s Registered Office, and available for inspection at the Company’s annual general meeting.

NMC Health plc Annual Report and Accounts 2016

GovernanceDIRECTORS’ SHAREHOLDINGS AND SHARE INTERESTS – SUBJECT TO AUDIT
Directors’ shareholdings and interests
The table below shows details of the Directors’ holdings of Ordinary Shares and interests in the Company as at 1 January 2016 and
at 31 December 2016.

Director

H. J. Mark Tompkins (note 1)
Dr B. R. Shetty (note 2)
Prasanth Manghat
Dr Ayesha Abdullah
Abdulrahman Basaddiq
Jonathan Bomford
Lord Clanwilliam
Salma Hareb
Keyur Nagori
Binay Shetty
Dr Nandini Tandon

Ordinary shares of 10p each

Share options over Ordinary shares of 10p each

1 January 2016

31 December 2016

1 January 2016

31 December 2016

25,083
47,749,250
8,308
–
–
12,000
–
–
–
6,842
–

25,083
51,756,893
8,308
–
–
17,000
–
–
–
6,842
–

–
259,833
139,859
–
–
–
–
–
–
21,464
–

–
444,671
217,130
–
–
–
–
–
–
21,464
–

Notes:
1. The interests of Mr H J Mark Tompkins in relation to the ordinary shares of the Company include the shares held in the name of his wife and by a family trust

of which he is considered a beneficiary. Mr Tompkins sold 1,000 Ordinary shares of the Company on 12 January 2017.

2. The interests in relation to both ordinary shares and options over ordinary shares of the Company for Dr B. R. Shetty include the shares and options in the

name of his wife, Dr C R Shetty. The interests over shares for Dr B. R. Shetty further changed on 26 January 2017, with the award of nil-cost options under the
terms of the Company’s LTIP to Dr B. R. Shetty and Dr C. R. Shetty totalling 230,358 options.

None of the Directors received any loans, advances or other form of credit granted by the Company, nor were any guarantees
of any kind provided by the Company on behalf of any Directors during the year ended 31 December 2016.

Except as stated above, none of the Directors who held office during the year held any Ordinary Shares or options over Ordinary
Shares of the Company during the year. Except as stated in the notes to the table above, there have been no changes in the above
interests between 31 December 2016 and the date of this Directors’ Remuneration Report.

Executive directors are expected to build a shareholding of 300% of base salary (increased from 200% as part of the new Directors’
Remuneration policy approved by shareholders on 29 December 2016) over a 5-year period. The first share incentive awards granted
to the Executive Directors do not vest until October 2017. The Executive Vice Chairman & CEO is a significant shareholder in the
Company and therefore already meets this shareholding requirement. The Deputy CEO holds shares valued at £127.8k (based
on the share price at 31 December 2016). These have a value of c. 23.2% of salary (based on salary at 31 December 2016).

NMC Health plc Annual Report and Accounts 2016

1. 2. 4. 5. 3. GovernanceDirectors’ Remuneration Report 2016 continued
Annual Remuneration Report continued

OTHER INFORMATION CONTINUED
DIRECTORS’ SHAREHOLDINGS AND SHARE INTERESTS – SUBJECT TO AUDIT CONTINUED
Directors’ interests in shares
The following tables show details of the share awards made to Executive Directors that have not yet vested.

Long Term Incentive Plan

Dr B R
Shetty

Type of interest

LTIP award
subject to
performance

Mr
Prasanth
Manghat

LTIP award
subject to
performance

Mr
Prasanth
Manghat

LTIP award
subject to
performance

Mr
Prasanth
Manghat

LTIP award
subject to
performance

Mr
Prasanth
Manghat

LTIP award
subject to
performance

Mr
Prasanth
Manghat

LTIP award
subject to
performance

Performance
period ending

Award Date

Market Price
at Date of
Award

Exercise
price

Shares
Awarded

Face value of
award

31 December
2016

29 October
2014

494.9p

50,923

£252,018

% vesting for
minimum
performance

25% of
award

Vesting Date

29 October
2017

31 December
2017

25 February
2015

520p

57,692

£300,000

31 December
2017

8 September
2015

760.5p

26,298

£200,000

31 December
2018

15 March
2016

967.5p

100,775

£975,000

31 December
2019

26 January
2017

1630.0p

148,250

£2,416,487

31 December
2016

29 October
2014

494.9p

40,738

£202,834

31 December
2017

25 February
2015

520p

50,000

£260,000

31 December
2017

8 September
2015

760.5p

23,011

£175,000

31 December
2018

15 March
2016

967.5p

85,271

£825,000

31 December
2019

26 January
2017

1630.0p

125,442

£2,044,720

25% of
award

25 February
2018

25% of
award

8 September
2018

25% of
award

15 March
2019

25% of
award

26 January
2020

25% of
award

29 October
2017

25% of
award

25 February
2018

25% of
award

8 September
2018

25% of
award

15 March
2019

25% of
award

26 January
2020

Details of the performance measures attached to the LTIP awards, and performance to date against these measures, are set out
on page 71.

Deferred Share Bonus Plan

Type of interest

Dr B R Shetty Deferred shares subject

to continued employment

Dr B R Shetty Deferred shares subject

to continued employment

Dr B R Shetty Deferred shares subject

to continued employment

Mr Prasanth
Manghat

Deferred shares subject
to continued employment

Mr Prasanth
Manghat

Deferred shares subject
to continued employment

Mr Prasanth
Manghat

Deferred shares subject
to continued employment

Mr Binay
Shetty

Deferred shares subject
to continued employment

Financial Year
Share Award
made in

respect of

2013

2014

2015

2013

2014

2015

2013

No options vested or were exercised during the year.

NMC Health plc Annual Report and Accounts 2016

Market Price
at Date of
Award

Exercise
price

Shares
Awarded

Face value of
award

494.9p

15,510

£76,759

520.0p

17,470

£90,844

967.5p

17,226

£166,662

494.9p

12,408

£61,407

520p

13,702

£71,250

967.5p

14,987

£145,000

494.9p

9,926

£49,123

Award Date

29 October
2014

25 February
2015

15 March
2016

29 October
2014

25 February
2015

15 March
2016

29 October
2014

Vesting Date

29 October
2017

25 February
2018

15 March
2019

29 October
2017

25 February
2018

15 March
2019

29 October
2017

GovernancePERFORMANCE GRAPH AND HISTORIC EXECUTIVE VICE CHAIRMAN & CEO REMUNERATION OUTCOMES
The following graph shows the Total Shareholder Return performance of NMC Health plc shares against the FTSE 250.

800

700

600

500

400

300

200

100

Mar
12

Jun
12

Sept
12

Dec
12

Mar
13

Jun
13

Sept
13

Dec
13

Mar
14

Jun
14

Sept
14

Dec
14

Mar
15

Jun
15

Sept
15

Dec
15

Mar
16

Jun
16

Sept
16

Dec
16

NMC Health

FTSE 250

TSR Bespoke Peer Group

The Committee believes that the FTSE 250 Index is an appropriate comparator index used to compare performance given
that the Company is a constituent of this Index and the lack of direct competitor comparators available in the London market.

The table below summarises the Executive Vice Chairman & CEO’s single figure for total remuneration since listing. This table is
also required to show the long-term incentive vesting as a percentage of the maximum for each year, however LTIP grants were
made for the first time in 2014 and none have yet vested.

Executive Vice Chairman & CEO – Dr B R Shetty

2012 (US$’000)

2013 (US$’000)

2014 (US$’000)

2015 (US$’000)

2016 (US$’000)

Single remuneration figure

STIP payout (% of maximum)

LTIP vesting (% of maximum)

550.6

n/a

787.4

75%

n/a

849.7

95%

n/a

1,254.3

3,040.3

100%

n/a

100%

n/a

The Company did not operate the STIP in respect of 2012.

PAY ACROSS THE GROUP
As required, the table below sets out the increase in total remuneration of the Executive Vice Chairman & CEO and that of all
employees during the 2016 financial year. However, for the reasons stated on page 67 above, the Committee do not reference
the salary or other elements of remuneration to all other employees of the Group.

Executive Vice Chairman & CEO
All-employees

Salary

Annual bonus

Benefits

95.0%
7.6%

192.5%
n/a*

4.9%
4.7%

*note: the Company does not operate bonus plans for all employees.

NMC Health plc Annual Report and Accounts 2016

1. 2. 4. 5. 3. GovernanceDirectors’ Remuneration Report 2016 continued
Annual Remuneration Report continued

OTHER INFORMATION CONTINUED
RELATIVE IMPORTANCE OF SPEND ON PAY
The graph below shows the total group-wide remuneration expenditure and dividends for the last two years.

400

350

300

250

200

150

100

371.1

239.2

132.7

82.2

15.3

16.4

2015

2016

Profit for the
financial year
attributable
to equity ($m)

Distributions to
shareholders
($m)

Total employee
pay ($m)

It is my pleasure to submit this report to shareholders. The Directors’ Remuneration Report has been approved by the Board
and is signed on its behalf by:

LORD CLANWILLIAM
Chairman of the Remuneration Committee

NMC Health plc Annual Report and Accounts 2016

GovernanceDirectors’ Report

The Directors of NMC Health plc are pleased to present their Annual Report including the audited consolidated financial statements
for the financial year ended 31 December 2016.

This report has been prepared in accordance with the requirements in The Large and Medium-sized Companies and Groups
(Accounts and Reports) Regulations 2008 and forms part of the management report as required under Disclosure & Transparency
Rule 4. Certain information required to be set out in this Directors’ Report can be found elsewhere in the 2016 Annual Report and
is referenced below. This information is incorporated into this Directors’ Report by reference.

DIRECTORS’ STATEMENTS
The Directors are required to make a statement regarding the preparation of the financial statements and also to provide details
regarding the disclosure of information to the Company’s auditor. The Code also requires the Board to review and make statements
in relation to management’s report on internal controls, the adoption of the Going Concern method of accounting and the long
term viability of the Group. All of these statements are set out on pages 82 to 84.

CORPORATE GOVERNANCE REPORT
The Corporate Governance Report set out on pages 35 to 55 is incorporated into this Directors’ Report by reference.

BUSINESS MODEL AND STRATEGY
The Strategic Report set out on pages 6 to 33 includes the Company’s business model and strategy.

DIRECTORS
The following served as directors of the Company during the 2016 financial year:

Director

H. J. Mark Tompkins
Dr B. R. Shetty
Prasanth Manghat
Dr Ayesha Abdullah
Abdulrahman Basaddiq
Jonathan Bomford
Lord Clanwilliam
Salma Hareb
Heather Lawrence (note 1)
Keyur Nagori
Binay Shetty
Dr Nandini Tandon

Mrs Lawrence resigned as a Director of the Company with effect from 12 January 2016.

CAPITAL STRUCTURE
All information relating to the Company’s capital structure, including changes to the Company’s share capital in the year, the rights
attaching to shares, details of the Company’s principal shareholders and other shareholder information is contained on the inside
back cover.

DIVIDENDS
Details of the Company’s dividend policy and proposed final dividend payment for the year ended 31 December 2016 is set out
in the Financial Review on page 25.

DISCLOSURE OF INFORMATION UNDER LISTING RULE 9.8.4 C
In accordance with the UK Financial Conduct Authority’s Listing Rules (LR 9.8.4C), the information to be included in the Annual
Report, where applicable, under LR 9.8.4, is set out in this Directors’ Report, with the exception of transactions with controlling
shareholders which is set out on pages 133 and 134 (note 31 to the Consolidated Financial Statements) and interest capitalised
which is set out on pages 126 and 127 (note 17 to the Consolidated Financial Statements).

GREENHOUSE GAS EMISSIONS
The Company’s disclosure in relation to its greenhouse gas emissions is included within the sustainability section of the Corporate
Social Responsibility report on page 28.

POLITICAL DONATIONS
Neither the Company nor any subsidiary company in the Group made any political donations during the year ended 31 December 2016.

Whilst the Company has no intention of making formal political donations in the future, the Board acknowledge that given the
wide interpretation of such donations, certain business events in which the Company or any of its subsidiaries, or the Board, may
wish to participate may be caught under the formal definition of political donations. The Company will therefore again be seeking
approval from shareholders at this year’s annual general meeting, for a small approved limit for “political donations”, for use in
such circumstances. If this is approved by shareholders, the Board will provide full details of any such payments made in the
next annual report.

NMC Health plc Annual Report and Accounts 2016

1. 2. 4. 5. 3. GovernanceDirectors’ Report continued

FINANCIAL INSTRUMENTS
The financial risk management objectives and policies of the Group, and the exposure of the Group to financial instruments,
are included in note 36 to the financial statements on pages 138 and 139.

SUBSEQUENT EVENTS
Details of any important and material events affecting the Group which have occurred since the end of the 2016 financial year,
are set out in note 40 to the consolidated financial statements on pages 141 to 143.

FUTURE DEVELOPMENTS
The Group’s strategy and potential future development are outlined in the Group Strategic Report on pages 6 to 33.

RESEARCH AND DEVELOPMENT
The Eugin Foundation, part of the Clinica Eugin business, carries out research and development focused on fertility and human
reproduction with particular regards to personal and social aspects as well as promotion of health.

BRANCHES
The Group normally operates across all jurisdictions where it has a business presence through the incorporation of registered
entities, but also operates through a number of branches where this is considered appropriate from an operational or regulatory
perspective. A detailed list of entities and branches in the Group is provided in section 2.2 of financial statements.

CONTRACTS OF SIGNIFICANCE AND CONTROLLING SHAREHOLDERS’ AGREEMENT
Under UAE law and regulations, with the exception of certain specific areas designated by the Government as such, all land
must be held legally by a UAE National. In addition, all healthcare facility and pharmacy operating licences may only be held legally
by a UAE National, and not a body corporate. As a result, some of the property owned beneficially by the Group and all the Group’s
medical facility and pharmacy licences, are held legally in the name of either H.E. Saeed Bin Butti or Mr Khalifa Bin Butti, both
previous Directors and continuing significant shareholders of the Company.

The Company has an agreement with Dr B R Shetty, H.E. Saeed Bin Butti and Khalifa Bin Butti (“Controlling Shareholders”) under
which the Controlling Shareholders agree to comply with the independence provisions of the UKLA Listing Rules. The Company
has complied with the independence provisions contained in that agreement and, as far as the Company are aware, the
Controlling Shareholders and any of their associates have also complied with such provisions and the procurement obligations
included in the agreement.

The Directors’ Report was approved by the Board on 7 March 2017 and is signed on behalf of the Board by:

SIMON WATKINS
Group Company Secretary

NMC Health plc (registered in England and Wales, number 7712220)
Level 1, Devonshire House, One Mayfair Place, London W1J 8AJ

NMC Health plc Annual Report and Accounts 2016

GovernanceFinancial Statements

Financial
Statements

NMC Health plc Annual Report and Accounts 2016

1. 2. 3. 5. 4. Financial StatementsDirectors’ Statements

STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report, the Directors’ Remuneration Report and the financial statements
in accordance with applicable law and regulations.

The Directors are required by Company Law to prepare financial statements for the Group and the Company in accordance
with the International Financial Reporting Standards as adopted by the European Union (“IFRS”).

The financial statements are required to present fairly for each financial period the Company’s financial position, financial
performance and cash flows. In preparing the Group and parent company financial statements the Directors are also required to:
• Properly select and consistently apply accounting policies;
• Present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable

information;

• Provide additional disclosures when compliance with the specific requirements in IFRS is insufficient to enable users
to understand the impact of particular transactions, other events and conditions on the entity’s financial position and
financial performance; and

• Make an assessment of the company’s ability to continue as a going concern.

The Directors confirm that they have complied with the above requirements in preparing the financial statements. The Directors
also confirm that they consider the annual report and accounts, taken as a whole, is fair, balanced and understandable and
provides the information necessary for shareholders to assess the Company’s performance, business model and strategy.

The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time the financial position of the Company and to enable them
to ensure that the financial statements comply with the Companies Act 2006. The Directors are also responsible for safeguarding
the assets and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities and for the
preparation of a Directors’ report and Directors’ remuneration report which comply with the requirements of the Companies
Act 2006.

The Directors are responsible for the maintenance and integrity of the Company’s website. Legislation in the United Kingdom
governing the preparation and dissemination of financial statements differs from legislation in other jurisdictions.

We confirm to the best of our knowledge:
• The financial statements, prepared in accordance with the International Financial Reporting Standards as adopted by the

EU, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings
included in the consolidation taken as a whole; and

• The Strategic 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 they face.

DISCLOSURE OF INFORMATION TO THE AUDITORS
Directors’ statement as to disclosure of information to auditors:

The Directors who were members of the Board at the time of approving the Directors’ Report are set out on pages 79 and 80.
Having made enquiries of fellow directors and of the Company’s Auditor, each of these Directors confirms that:
•

to the best of each Director’s knowledge and belief, there is no information (that is, information needed by the group’s Auditor
in connection with preparing their report) of which the Company’s Auditor is unaware; and

• each Director has taken all the steps a Director might reasonably be expected to have taken to be aware of relevant audit

information and to establish that the Company’s Auditor is aware of that information.

EY have confirmed that they are willing to be reappointed as auditor for the financial year ending 31 December 2016.

NMC Health plc Annual Report and Accounts 2016

Financial Statements

GOING CONCERN AND VIABILITY
GOING CONCERN
The Group has two diverse operating divisions, both of which operate in a growing market. Management have undertaken
an assessment of the future prospects of the Group and the wider risks that the Group is exposed to. In this assessment of
whether the Group should adopt the going concern basis in preparing its financial statements, management have considered:

Operating risk:
The management team prepare a Group budget for each financial year and a cashflow forecast for the following 18 months
which allows the Board to monitor the financial position of the Group and to consider appropriate risks which the business may
face from a financial perspective. Included in this review are future cashflow, both acquisition costs and subsequent cashflow
generation, associated with acquisitions agreed but not completed at the end of the 2016 financial year. The Board receives
monthly management reports covering key operational matters, monthly comparison to budget and updated forecasts on
a half yearly basis for the full financial year to ensure that the business is trading in line with its expectations.

Financing risk:
The Company has worked to structure its financing facilities for the medium and long term as well as utilising short term facilities
to meet the Group’s working capital requirements. The syndicated loan facility of US$825m entered into in 2015, comprising
US$350m of term debt and US$475m of delayed drawdown acquisition facilities, had been drawn down to the extent of US$350m
and US$464m respectively as at 31 December 2016. As part of the Al Zahra acquisition approved by shareholders on 29 December
2016, the Company finalised a new loan facility, amending and restating the existing syndicated facility, with JP Morgan Chase Bank
and Standard Chartered Bank, of a total of US$1.4bn, with US$825m of this replacing the existing syndicated loan facility and the
remainder available for the Al Zahra acquisition.

The Group has banking arrangements through a spread of local and international banking groups. Debt covenants are reviewed
by the board each month. The Board believes that the level of cash in the Group and the spread of bankers providing these
facilities mitigates the financing risks that the Group faces from both its acquisitive growth strategy and in relation to working
capital requirements.

Customer and Supplier risk:
Both the Healthcare and the Distribution divisions, and hence the Group as a whole, have delivered a robust performance in 2016.
All major financial and non-financial KPIs showed good improvement during the year. In the Healthcare division, trade receivables
are monitored regularly, provisions made where necessary and the Group has no history of significant bad debts. In the Distribution
division, the increase in revenue and product flow has again, as in prior years, had an adverse effect on the Group’s working capital
position, however the smaller percentage contribution of the division this year as part of the overall Group, lessens the effect of this
on overall Group working capital. In any event, trade receivables are monitored regularly and management maintain a close working
relationship with all major suppliers to monitor performance as well as signs of financial risk.

The Board has reviewed a high level budget for 2017 as well as considered growth forecasts for the healthcare sector in UAE,
in particular the continued positive impact from the introduction of mandatory healthcare insurance in Dubai, and from the
Group’s newly opened and newly acquired businesses, and considers the Group’s future forecasts to be reasonable.

Impairment risk:
The Board has considered the carrying value and useful economic lives of inventories, accounts receivable, property and equipment
and intangible assets and concluded that there are no indicators of material impairment of these items and therefore no material
cash flow impact associated with any loss in those areas.

In its review, management also considered other areas of potential risk, including regulatory risk, insurance and legal risks and
potential areas of material contingent liability and found no matters which are likely to affect the viability of the Group in the
medium term.

The Board has reviewed and considered management’s formal assessment of the going concern concept of accounting and
the cash flow forecast that has been prepared for the period to 30 June 2018 and has concluded that this assessment and
forecast indicates that the Group has positive cash flows with sufficient headroom and will comply with all debt covenants.

The Directors therefore continue to adopt the going concern basis in the preparation of the financial statements.

VIABILITY
In order to protect longer term shareholder value, the Board have always considered how Group performance and its strategic
decisions will affect the financial and operational prospects of the Group in the longer term. This year, as recommended by
provision C.2.2 of the UK Corporate Governance Code, the Directors have considered a formal assessment of the prospects
of the Group over a longer period than the 12 months review period required under the ‘Going Concern basis of accounting.

Management conducted a formal viability review looking forward for a period of three years. This period was selected as the
most appropriate timeframe over which the future prospects of the Group should be considered given the Group’s changing
nature and significant growth, the time taken to fully integrate acquired businesses and ramp-up newly opened facilities and
the maturity date of current debt obligations.

NMC Health plc Annual Report and Accounts 2016

1. 2. 3. 5. 4. Financial StatementsDirectors’ Statements continued

In its review, management considered the current position of the Group and the following principal financial risks associated
with the business:
• Risks associated with investments.
• The impact of market competition.
• Potential instability associated with the macroeconomic environment in which the Company operates.

The three year review considered the Group’s profitability, cash flows, banking covenants and other key financial ratios over the
period. The plan makes certain assumptions about the ability to refinance debt as it falls due and the acceptable performance
of the core revenue streams and market segments. The plan is stress tested using sensitivity analysis which reflects severe but
plausible combinations of the principal financial risks of the business and then the potential impact of each scenario, using certain
assumption on the following levers which were stress tested:
•
reductions in revenue per patient;
•
reduction in market share impacting the number of patients and occupancies;
increase manpower cost due to shortage of talent;
•
• cost escalation due to inflation and new tax regime;
•
•
• a larger increase in accounts receivable (debtor days) than expected; and
•

impact on revenue due to currency fluctuation on overseas acquisition;
increase in accounts receivable (debtor days) due to increase in insurance business;

increase in interest rate.

Where appropriate, an analysis was carried out to evaluate the potential impact of any of these principal risks actually occurring.

Based on the results of this formal assessment, the Directors have a reasonable expectation that the Group will be able to continue
in operation and meet its liabilities as they fall due over the three year period of the assessment.

By Order of the Board

SIMON WATKINS
Group Company Secretary

NMC Health plc Annual Report and Accounts 2016

Financial StatementsIndependent Auditor’s Report
To the Members of NMC Health Plc

OUR OPINION ON THE FINANCIAL STATEMENTS
In our opinion:
• NMC Health plc’s Group financial statements and Parent company financial statements (the “financial statements”) give a true
and fair view of the state of the group’s and of the parent company’s affairs as at 31 December 2016 and of the group’s profit
for the year then ended;
the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
the parent company financial statements have been properly prepared in accordance with IFRSs as adopted by the European
Union as applied in accordance with the provisions of the Companies Act 2006; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006, and, as regards
the Group financial statements, Article 4 of the IAS Regulation.

•
•

•

WHAT WE HAVE AUDITED
NMC Health plc’s financial statements comprise:

Group

Parent company

Consolidated statement of financial position as at 31 December 2016

Statement of financial position as at 31 December 2016

Consolidated income statement for the year then ended

Statement of changes in equity for the year then ended

Consolidated statement of comprehensive income for the year
then ended

Statement of cash flows for the year then ended

Consolidated statement of changes in equity for the year then ended

Related notes 1 to 15 to the financial statements

Consolidated statement of cash flows for the year then ended

Related notes 1 to 40 to the financial statements

The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting
Standards (IFRSs) as adopted by the European Union and, as regards the parent company financial statements, as applied in
accordance with the provisions of the Companies Act 2006.

OVERVIEW OF OUR AUDIT APPROACH

Risks of material
misstatement

• Revenue recognition, including the timing of revenue recognition and the determination

of whether the Group is acting in the capacity of an agent rather than principal.

• Accounting for major complex transactions primarily relating to acquisitions.

Audit scope

• We performed an audit of the complete financial information of eighteen components and audit

procedures on specific balances for a further four components.

• The components where we performed full or specific audit procedures including consolidation

adjustments accounted for 97% of adjusted Profit before tax, 96% of Revenue and 98% of Total assets.
Adjusted Profit before tax excludes one-off costs in respect of acquisitions.

Materiality

• Overall Group materiality of US$7.8m which represents 5% of adjusted Profit before tax.

OUR ASSESSMENT OF RISK OF MATERIAL MISSTATEMENT
We identified the risks of material misstatement described below as those that had the greatest effect on our overall audit
strategy, the allocation of resources in the audit and the direction of the efforts of the audit team. In addressing these risks,
we have performed the procedures below which were designed in the context of the financial statements as a whole and,
consequently, we do not express any opinion on these individual areas.

NMC Health plc Annual Report and Accounts 2016

1. 2. 3. 5. 4. Financial StatementsKey observations communicated
to the Audit Committee

Based on the audit
procedures performed, we
are satisfied that revenue
recognition is appropriate
and that the Group has
appropriately adhered to their
revenue recognition policies,
including the determination
of whether the Group is
acting as agent rather than
as principal.

The upcoming
implementation of a new
reporting standard on
revenue recognition IFRS 15,
will allow the company to
review existing accounting
policies on revenue
recognition and achieve
a greater consistency across
geographies and similar
business lines as immaterial
inconsistencies were noted.

Independent Auditor’s Report continued
To the Members of NMC Health Plc

Risk

Our response to the risk

Revenue recognition, including the
timing of revenue recognition and the
determination of whether the Group
is acting in the capacity of an agent
rather than principal

The Group has revenue of
US$1,220.8m (2015: US$880.9m).

The Group has a number of revenue
streams relating to its Healthcare and
Distribution segments including
pharmacy sales and sales of goods,
hospital and clinic revenues, over the
counter sales and In Vitro Fertilisation
(IVF). There is a risk of improper
revenue recognition, particularly
with regard to cut-off at period end
dates, in the healthcare business,
given the diversity of the Group’s
healthcare operations, and in the
distribution business.

We note a potential risk with respect
to material supplier agreements and
accounting for the supplier income
including fees and discounts.

Furthermore, there is a risk that
management may incorrectly
determine whether the Group is
acting as principal or agent in certain
arrangements such as distribution
agreements with key suppliers
and revenue sharing agreements
with doctors.

There is also a risk that revenue
recognition is impacted through
accounts receivable processing
as insurance providers may reject
the claims made which requires
management to assess the need
for a provision.

The risk has increased in the current
year due to acquisitions which
require alignment to group revenue
recognition policies.

We relied upon the controls tested over revenue
recognition, including the timing of revenue recognition.
Where we relied on the controls tested by internal audit
we satisfied ourselves about their objectivity, independence
and professional skills. We discussed the audit plan and
audit program with the internal auditors, reviewed their
testing of controls and re-performed a sample of their
work. We also independently tested an additional sample.

We performed substantive audit procedures including
testing a sample of transactions, analytical review
procedures including developments in patient numbers
per facility and cut-off tests (by selecting a sample of
transactions either side of year-end) to check that revenue
had been recognised in the appropriate accounting period.
For IVF revenues we tested management’s estimate
as to cut off of completed IVF phases. We also reviewed
material supplier agreements and accounting for the
supplier income including fees and discounts.

We obtained independent confirmation letters from key
customers including health insurance providers as well
as an additional representative sample. Reconciling items
were traced back to original documentation or corroborated
to resubmissions made by the company.

We obtained assurance over the recognition of revenue
through audit work on accounts receivable specifically by
reviewing the rejection rates based on historical experience
and have verified that receivable balances as at year end
are presented at their recoverable amount.

We inspected contractual arrangements to support
the recognition of fee income and considered the
appropriateness of the accounting through verification
to legal agreements and vouching the amounts
recognised to invoices and cash receipts.

We reviewed a sample of new distribution agreements
entered into during the year and revenue sharing contracts
with doctors in newly acquired businesses to verify that the
Group’s determination that they are acting in a capacity of
a principal rather than an agent is appropriate considering
the balance of risk and rewards.

We checked the Group’s adherence to their revenue
recognition policies and we agreed that these policies are in
accordance with IFRSs as adopted by the European Union.

We performed full and specific scope audit procedures over
this risk area in 22 locations, which covered 96% of the risk
amount after consolidation eliminations.

NMC Health plc Annual Report and Accounts 2016

Financial StatementsKey observations communicated
to the Audit Committee

Based upon the procedures
we have performed, we
concur with the Group’s
accounting for all acquisitions
above our performance
materiality including Fakih
IVF LLC, Copenhagen Fertility
Center and Huntington Centro
Medicina Reproductiva S.A
as at 31 December 2016.

We have reviewed the
business combinations
disclosures in respect of the
acquisitions which completed
in 2016 and we believe that
these are appropriate and
in compliance with the
requirements of IFRS 3
Business combinations.

We have also verified that
the business combinations,
notably Fakih, have been
recognised in the period in
which the Group obtained
control of the acquired
entities and where applicable
regulatory approvals were
obtained which allows the
Group to obtain rights for
variable returns from the
investee and has the ability
to affect those returns through
its power over the investee.

Risk

Our response to the risk

Accounting for major
complex transactions

The Group recognised
goodwill of US$233.9m
(2015: US$345.1m) and
intangible assets of
US$25.2m (2015: US$74.8m)
in respect of the acquisitions
made in the current year.

The Group made a number
of acquisitions during the year
including Fakih IVF LLC (UAE),
Copenhagen Fertility Center
(Denmark) and Huntington
Centro Medicina Reproductiva
S.A. (Brazil) which are included
as full audit scope. The
contractual arrangements
for such transactions can
be complex and require
management to apply
judgement in determining
whether a transaction
represents an acquisition
of an asset or a business
combination in accordance
with IFRS 3.

There is a risk that the
estimates and judgements
made in the recognition of
an acquisition as a business
combination may be
inappropriate and the
valuation of the assets
and liabilities acquired
may be misstated.

The complexity of the multiple
contractual arrangements in
respect of certain acquisitions
and related services, and the
different legal environments
in which acquisitions have
been undertaken, may lead
to inappropriate judgements
as to the basis of accounting.

Furthermore, there is a risk
that these acquisitions may
be recognised before the
Group is exposed, or has rights,
to variable returns from its
involvement with the investee
and has the ability to affect
those returns through its
power over the investee.

The risk has remained stable
in the current year due to
acquisitions occurring both last
year and in the current year.

We obtained and reviewed the sale and purchase agreements
entered into for the acquisitions which took place in the year
and other relevant documentation to understand the terms
and conditions of the agreements.

We assessed the judgements applied in determining whether
acquisitions in the year represented an acquisition of an asset
or a business combination. This involved assessing whether or
not the entities and the assets acquired constitute the carrying
on of a business, i.e., whether there are inputs and processes
applied to those inputs that have the ability to create outputs.

Where transactions met the definition of a business combination
we audited the Group’s assessment of the assets and liabilities
acquired and the allocation of the purchase consideration to
these and the resultant goodwill or gain on bargain purchase
recognised by performing the following procedures:

• We assessed the appropriateness of the recognition

of intangible assets and consideration of their valuation
inputs and have used a valuation specialist for assessing
the appropriateness of the valuation inputs and the
valuation methodology.
We verified that the consideration transferred, and
where relevant contingent consideration, in respect of each
transaction was appropriately calculated in accordance with
contractual arrangements.

•

• We assessed management’s judgements in respect of

what arrangements should be accounted for as part of the
business combination and those that should be accounted
for separately from the business combination.

We assessed whether the Group is exposed, or has rights,
to variable returns from its involvement with the investee
and has the ability to affect those returns through its power
over the investee as at the date upon which the acquisitions
were recognised.

We verified the appropriateness of the consolidation
adjustments in respect of accounting for these transactions.

We assessed the accounting for the acquisitions to verify that
they were appropriately accounted for. Also we verified where
appropriate, that disclosures in the financial statements are
in accordance with IFRS as adopted by the European Union.

The Group completed 6 acquisitions out of which 1 is de minimis.
For significant complex transactions in the current year including
Fakih IVF LLC, Copenhagen Fertility Center and Huntington Centro
Medicina Reproductiva S.A, the Group audit team reviewed the
Share Purchase Agreement, verified consideration payable,
audited the opening balance sheet, read the due diligence
reports and identified and addressed any divergence in the
accounting principles.

The Group audit team also performed audit procedures on the
purchase price allocation in respect of 3 out of 6 acquisitions
completed in 2016 which covered 90% of the goodwill and
intangible assets recognised. For the remaining goodwill
and intangible additions the Purchase price allocation
is being completed and will be audited in the following year.

In the prior year, our auditor’s report included the same risks of material misstatement as noted above.

NMC Health plc Annual Report and Accounts 2016

1. 2. 3. 5. 4. Financial StatementsIndependent Auditor’s Report continued
To the Members of NMC Health Plc

THE SCOPE OF OUR AUDIT
TAILORING THE SCOPE
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit
scope for each entity within the Group. Taken together, this enables us to form an opinion on the consolidated financial statements.
We take into account size, risk profile, the organisation of the group and effectiveness of group-wide controls, changes in the
business environment and other factors such as recent Internal audit results when assessing the level of work to be performed
at each entity.

In assessing the risk of material misstatement to the Group financial statements, and to ensure we had adequate quantitative
coverage of significant accounts in the financial statements, of the 34 reporting components of the Group, we selected 22
components covering entities within the United Arab Emirates (UAE), Denmark, Brazil, Italy and Spain, which represent the
principal business units within the Group.

Of the 22 components selected, we performed an audit of the complete financial information of 18 components (“full scope
components”) which were selected based on their size or risk characteristics. For the remaining 4 components (“specific scope
components”), we performed audit procedures on specific accounts within that component that we considered had the potential
for the greatest impact on the significant accounts in the financial statements either because of the size of these accounts
or their risk profile.

The reporting components where we performed audit procedures presented excluding consolidation adjustments accounted for
171% (2015: 139%) of the Group’s adjusted Profit before tax, 98% (2015: 97%) of the Group’s Revenue and 163% (2015: 154%) of the Group’s
Total assets.

For the current year, the full scope components excluding consolidation adjustments contributed 167% (2015: 139%) of the
Group’s adjusted Profit before tax, 92% (2015: 85%) of the Group’s Revenue and 160% (2015: 140%) of the Group’s Total assets.

The specific scope component excluding consolidation adjustments contributed 4% (2015: 0%) of the Group’s Adjusted Profit before
tax, 6% (2015: 12%) of the Group’s Revenue and 3% (2015: 14%) of the Group’s Total assets. The audit scope of these components may
not have included testing of all significant accounts of the component but will have contributed to the coverage of significant
accounts tested for the Group. Specific scope component testing is primarily focused on the significant risk in relation to revenue
recognition however it also included procedures on property and equipment balances.

Of the remaining 12 components, which are primarily located in the UAE, that together represent 3% of the Group’s adjusted Profit
before tax, none are individually greater than 2% of the Group’s adjusted Profit before tax. For these components, we performed
other procedures, including analytical review, testing of consolidation journals and intercompany eliminations to respond to any
potential risks of material misstatement to the Group financial statements.

The Group audit team also performed audit procedures over consolidation and foreign exchange adjustments, which were net
negative to Revenue and adjusted Profit before tax of 2% and 74%, respectively (2015: net negative to Revenue and adjusted Profit
before tax of 3% and 39% respectively), and reduced the calculated total overall percentage coverage to 96% (2015: 97%) and 97%
(2015: 100%) respectively.

The table below illustrates the coverage obtained from the work performed by our audit teams.

Group audit scope

Full

Specific

Remaining components (other procedures)

Consolidation adjustments audited by Group audit team

Total coverage

Number of
locations

% of
adjusted
PBT

% of
Revenue

% of Total
assets

167%

(74%)

100%

92%

(2%)

100%

160%

(65%)

100%

CHANGES FROM THE PRIOR YEAR
During the year the Group acquired six entities out of which Fakih IVF LLC, Copenhagen Fertility Center and Huntington Centro
Medicina Reproductiva S.A. were identified as full scope components. The other three acquired entities were not in scope this year
based on their respective size and risk characteristics. Furthermore, one component which was not in scope in the prior year was
a specific scope component this year and another component which was a specific scope component in the prior year was not
in scope this year based on their respective size and risk characteristics.

NMC Health plc Annual Report and Accounts 2016

Financial StatementsINTEGRATED TEAM STRUCTURE AND INVOLVEMENT WITH COMPONENT TEAMS
The overall audit strategy is determined by the Senior Statutory Auditor. The senior statutory auditor is based in the UK however,
since Group management and the majority of the operations reside in the UAE, the Group audit team includes members from
both the UK and the UAE. The Group audit team members from the UAE are also members of selected component teams.

In establishing our overall approach to the Group audit, we determined the type of work that needed to be undertaken at each
of the components by us, as the Group audit engagement team, or by component auditors from other EY global network firms
operating under our instruction. Of the 18 full scope components, audit procedures were performed on one of these directly
by the Group audit team and audit procedures were performed on the remaining 17 by the component audit teams. For these
components, we determined the appropriate level of involvement to enable us to determine that sufficient audit evidence had
been obtained as a basis for our opinion on the Group as a whole.

Given that the Group operates predominantly in the UAE the Senior Statutory Auditor with his UK based audit team members
travelled to the UAE for two periods to work in an integrated manner with the EY UAE audit team members. Members of the Group
audit team in both jurisdictions work together as an integrated team throughout the audit process. During the current year end
audit process the Senior partner also visited Spain, where the Luarmia S.L group of companies are based. Since the Senior audit
partner rotated on this audit cycle various introductory visits to both UAE and Spain were made during the prior year audit cycle.

Visits in the 2016 audit cycle involved discussing the audit approach with the component teams and any issues arising from their
work, meeting with local management attending planning and closing meetings, performing site visits to medical facilities,
reviewing key audit working papers on risk areas. The Group audit team also was involved in the audit procedures on significant
risk areas, primarily revenue recognition and accounting for major complex transactions. The Group audit team interacted regularly
with the component teams in the UAE and Spain as appropriate during various stages of the audit, reviewed key working papers
and were responsible for the scope and direction of the audit process. This, together with the additional procedures performed
at Group level by the Group audit team, gave us appropriate evidence for our opinion on the Group financial statements.

OUR APPLICATION OF MATERIALITY
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements
on the audit and in forming our audit opinion.

MATERIALITY
The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence
the economic decisions of the users of the financial statements. Materiality provides a basis for determining the nature and extent
of our audit procedures.

We initially determined materiality for the Group to be US$8.7m (2015: US$4.6m), which is 5% of forecast adjusted Profit before
tax (2015: 5% of adjusted Profit before tax). We believe that it is appropriate to use adjusted Profit before tax in order to exclude the
effects of non-recurring items. These related to the costs of US$4.6m in respect of the acquisitions which took place during the
year. We note that management have excluded these one-off items when assessing the performance of the Group, consistent
with prior year. We used a profit based measure for determining materiality as profit is one of the key performance indicators
of the business and a focus of users of the financial statements.

The increase in materiality from the prior year predominantly reflects the impact of the newly acquired entities on the Group’s profit.

During the course of our audit, we reassessed initial materiality and, as the actual adjusted profit before tax figure was lower than
that which we had used as the basis for determining materiality, we revised our materiality threshold to US$7.8m, which is 5% of
adjusted profit before tax.

Starting basis

Profit before tax – US$151.6m

Adjustments

One-off costs in respect of acquisitions – US$4.6m

Materiality

Adjusted Profit before tax US$156.2m
Materiality of US$7.8m (5% of adjusted Profit before tax)

NMC Health plc Annual Report and Accounts 2016

1. 2. 3. 5. 4. Financial StatementsIndependent Auditor’s Report continued
To the Members of NMC Health Plc

PERFORMANCE MATERIALITY
The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level
the probability that the aggregate of uncorrected and undetected misstatements exceeds materiality.

On the basis of our risk assessments, together with our assessment of the Group’s overall control environment, our judgement
was that performance materiality was 50% (2015: 50%) of our planning materiality, namely US$4.4m (2015: US$2.8m). We have set
performance materiality at this percentage due to our expectation of potential misstatements, our risk assessment and changes
in the organisation, particularly given the acquisitions which took place during the year. During the course of the audit, we revised
our performance materiality threshold to US$3.9m, which is 50% of our revised materiality threshold.

Audit work at component locations for the purpose of obtaining audit coverage over significant financial statement accounts
is undertaken based on a percentage of total performance materiality. The performance materiality set for each component is
based on the relative scale and risk of the component to the Group as a whole and our assessment of the risk of misstatement
at that component. In the current year, the range of performance materiality allocated to components was US$0.78m to US$2.34m
(2015: US$0.46m to US$1.50m).

REPORTING THRESHOLD
An amount below which identified misstatements are considered as being clearly trivial.

We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of US$0.44m
(2015: US$0.28m), which is set at 5% of planning materiality, as well as differences below that threshold that, in our view, warranted
reporting on qualitative grounds. Given the revision of materiality we reported all uncorrected audit differences in excess of US$0.39m.

We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light
of other relevant qualitative considerations in forming our opinion.

SCOPE OF THE AUDIT OF THE FINANCIAL STATEMENTS
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable
assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes
an assessment of: whether the accounting policies are appropriate to the group and the parent company’s circumstances
and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made
by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial
information in the annual report to identify material inconsistencies with the audited financial statements and to identify any
information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in
the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies, we consider
the implications for our report.

RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITOR
As explained more fully in the Directors’ Responsibilities Statement set out on page 82, the directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit
and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing
(UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to
state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for
the opinions we have formed.

OPINION ON OTHER MATTERS PRESCRIBED BY THE COMPANIES ACT 2006
In our opinion:
•

the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the
Companies Act 2006; and

• based on the work undertaken in the course of the audit:

— the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial

statements are prepared is consistent with the financial statements.

— the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.

NMC Health plc Annual Report and Accounts 2016

Financial StatementsMATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION

ISAs (UK and
Ireland) reporting

We are required to report to you if, in our opinion, financial and non-financial information
in the annual report is:
• materially inconsistent with the information in the audited financial statements; or
• apparently materially incorrect based on, or materially inconsistent with, our
knowledge of the Group acquired in the course of performing our audit; or

We have no
exceptions to report.

• otherwise misleading.

In particular, we are required to report whether we have identified any inconsistencies
between our knowledge acquired in the course of performing the audit and the directors’
statement that they consider the annual report and accounts taken as a whole is fair,
balanced and understandable and provides the information necessary for shareholders
to assess the entity’s performance, business model and strategy; and whether the
annual report appropriately addresses those matters that we communicated to the
audit committee that we consider should have been disclosed.

Companies Act
2006 reporting

In light of the knowledge and understanding of the Company and its environment
obtained in the course of the audit, we have identified no material misstatements
in the Strategic Report or Directors’ Report.

We have no
exceptions to report.

We are required to report to you if, in our opinion:
• adequate accounting records have not been kept by the parent company, or returns
adequate for our audit have not been received from branches not visited by us; or
the parent company financial statements and the part of the Directors’ Remuneration
Report to be audited are not in agreement with the accounting records and returns; or

•

• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.

We have no
exceptions to report.

We have nothing
material to add or
to draw attention to.

Listing Rules
review
requirements

We are required to review:
•

•

the directors’ statement in relation to going concern, set out on page 83 and
longer-term viability, set out on pages 83 and 84; and
the part of the Corporate Governance Statement relating to the company’s
compliance with the provisions of the UK Corporate Governance Code specified for
our review.

STATEMENT ON THE DIRECTORS’ ASSESSMENT OF THE PRINCIPAL RISKS THAT
WOULD THREATEN THE SOLVENCY OR LIQUIDITY OF THE ENTITY

ISAs (UK and
Ireland) reporting

We are required to give a statement as to whether we have anything material to add
or to draw attention to in relation to:
•

the directors’ confirmation in the annual report that they have carried out a robust
assessment of the principal risks facing the entity, including those that would
threaten its business model, future performance, solvency or liquidity;
the disclosures in the annual report that describe those risks and explain how they
are being managed or mitigated;
the directors’ statement in the financial statements about whether they considered
it appropriate to adopt the going concern basis of accounting in preparing them, and
their identification of any material uncertainties to the entity’s ability to continue to do
so over a period of at least twelve months from the date of approval of the financial
statements; and
the directors’ explanation in the annual report as to how they have assessed the
prospects of the entity, over what period they have done so and why they consider
that period to be appropriate, and their statement as to whether they have a
reasonable expectation that the entity will be able to continue in operation and meet
its liabilities as they fall due over the period of their assessment, including any related
disclosures drawing attention to any necessary qualifications or assumptions.

•

VICTOR VEGER (SENIOR STATUTORY AUDITOR)
for and on behalf of Ernst & Young LLP, Statutory Auditor
London
7 March 2017

Notes:
1. The maintenance and integrity of the NMC Health plc web site is the responsibility of the directors; the work carried out by the auditors does not involve

consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements
since they were initially presented on the web site.

2. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

NMC Health plc Annual Report and Accounts 2016

1. 2. 3. 5. 4. Financial Statements

Consolidated Income Statement
For the Year Ended 31 December 2016

Revenue
Direct costs

GROSS PROFIT

General and administrative expenses
Other income

PROFIT FROM OPERATIONS BEFORE DEPRECIATION, AMORTISATION AND TRANSACTION COSTS
Transaction costs in respect of business combinations
Depreciation
Amortisation
Impairment of property and equipment

PROFIT FROM OPERATIONS
Finance costs
Finance income
Unamortised finance fees written off

PROFIT FOR THE YEAR BEFORE TAX
Tax

PROFIT FOR THE YEAR

Profit for the year attributable to:
Equity holders of the Parent
Non-controlling interests

Profit for the year

Earnings per share for profit attributable to the equity holders of the Parent:
Basic EPS (US$)
Diluted EPS (US$)

Notes

2016
US$’000

2015
US$’000

7
8

1,220,835
(753,325)

880,870
(575,926)

467,510

304,944

8
9

(267,895)
46,466

(191,247)
36,649

246,081

150,346

5
17
18
17

10
11

12
15

(4,603)
(45,010)
(10,989)
(1,376)

184,103
(41,684)
9,157
–

151,576

(174)

(4,131)
(29,851)
(5,475)

–

110,889
(23,845)

925
(2,612)

85,357
403

151,402

85,760

132,689
18,713

82,215
3,545

151,402

85,760

16
16

0.711
0.707

0.443
0.442

NMC Health plc Annual Report and Accounts 2016

Financial StatementsConsolidated Statement of Other Comprehensive Income
For the Year Ended 31 December 2016

PROFIT FOR THE YEAR

Other comprehensive income
Other comprehensive income to be reclassified to income statement in subsequent periods

(net of tax)

Exchange difference on translation of foreign operations

Other comprehensive income not to be reclassified to income statement in subsequent periods

(net of tax)

Re-measurement (loss)/gains on defined benefit plans

Other comprehensive income for the year (net of tax)

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

Total comprehensive income attributable to:

Equity holders of the Parent
Non-controlling interests

Total comprehensive income

Notes

2016
US$’000

2015
US$’000

151,402

85,760

(4,050)

(5,342)

(147)

260

(4,197)

(5,082)

147,205

80,678

129,030
18,175

77,859
2,819

147,205

80,678

These results relate to continuing operations of the Group. There are no discontinued operations in the current and prior year.

The attached notes 1 to 40 form part of the consolidated financial statements.

NMC Health plc Annual Report and Accounts 2016

1. 2. 3. 5. 4. Financial StatementsConsolidated Statement of Financial Position
As at 31 December 2016

ASSETS
Non-current assets
Property and equipment
Intangible assets
Investment in Joint Venture
Deferred tax assets
Loan receivable
Advances paid for acquisitions
Other non-current assets

Current assets
Inventories
Accounts receivable and prepayments
Loan receivable
Amounts due from related parties
Income tax receivable
Bank deposits
Bank balances and cash

TOTAL ASSETS

EQUITY AND LIABILITIES
Equity
Share capital
Share premium
Group restructuring reserve
Foreign currency translation reserve
Option redemption reserves
Retained earnings

Equity attributable to equity holders of the Parent

Non-controlling interests

Total equity

Non-current liabilities
Term loans
Employees’ end of service benefits
Other payables
Option redemption payable
Deferred tax liabilities

Current liabilities
Accounts payable and accruals
Other payables
Amounts due to related parties
Bank overdrafts and other short term borrowings
Term loans
Employees’ end of service benefits
Income tax payable

Total liabilities

TOTAL EQUITY AND LIABILITIES

Notes

2016
US$’000

2015
US$’000

17
18
39
15
19
5
5

20
21
19
31

22
22

23
23
24

37
25

27
28
30
37
15

29
30
31
22
27
28

459,338
652,983
834
2,135
9,129
1,614
43,053

433,524
413,059
–
1,316
1,725
–
–

1,169,086

849,624

144,387
374,457
5,387
3,628
2,208
137,900
479,940

134,788
282,475
2,670
4,116
2,810
58,886
118,511

1,147,907

604,256

2,316,993 1,453,880

31,910
491,778
(10,001)
(8,128)
(35,027)
436,337

29,566
179,152
(10,001)
(4,616)
(24,496)
318,092

906,869

487,697

42,002

11,968

948,871

499,665

594,780
26,648
40,792
37,500
8,245

483,725
19,284
14,024
25,084
9,761

707,965

551,878

158,812
26,827
14,876
219,851
234,519
3,560
1,712

123,511
11,150
17,419
154,962
91,621
3,206
468

660,157

402,337

1,368,122

954,215

2,316,993 1,453,880

The consolidated financial statements were authorised for issue by the board of directors on 7 March 2017 and were signed on its
behalf by

DR B. R. SHETTY
Executive Vice Chairman & Chief Executive Officer

MR. SURESH KRISHNAMOORTHY
Chief Financial Officer

The attached notes 1 to 40 form part of the consolidated financial statements.

NMC Health plc Annual Report and Accounts 2016

Financial Statements

Consolidated Statement of Changes in Equity
For the Year Ended 31 December 2016

Attributable to the equity holders of the Parent

Share
capital
US$ ‘000

Share
premium
US$ ‘000

Group
restructuring
reserve
US$ ‘000

Retained
earnings
US$ ‘000

Foreign
currency
translation
reserve
US$ ‘000

Option
redemption
reserves
US$ ‘000

Non-
controlling
interest
US$ ‘000

Total
US$ ‘000

Balance as at 1 January 2016
Profit for the period
Other comprehensive income

29,566
–
–

179,152
–
–

(10,001)
–
–

318,092
132,689
(147)

Total comprehensive income

for the period
Dividend (note 26)
Option redemption reserve

(note 37)

Issue of shares – new (note 23)
Shares issue costs (note 23)
Acquisition of non-controlling

interest (note 2.2)

Settlement of put option

(note 37)

Acquisition of subsidiaries

(note 5)

Share based payments (note 32)

–
–

–
2,344
–

–
319,970
(7,344)

–

–
–

–

–
–

–
–
–

–

–
–

132,542
(16,350)

–
–
–

(587)

–

–
2,640

(4,616)
–
(3,512)

(3,512)
–

–
–
–

–

–
–

(24,496)
–
–

487,697
132,689
(3,659)

11,968
18,713
(538)

499,665
151,402
(4,197)

–
–

129,030
(16,350)

18,175
(5,300)

147,205
(21,650)

(12,801)
–
–

(12,801)
322,314
(7,344)

–
–
–

(12,801)
322,314
(7,344)

–

(587)

(1,365)

(1,952)

2,270

–

2,270

–
–

–
2,640

18,524
–

18,524
2,640

Balance as at 31 December 2016

31,910

491,778

(10,001)

436,337

(8,128)

(35,027)

906,869

42,002

948,871

Balance as at 1 January 2015
Profit for the period
Other comprehensive income

29,566
–
–

179,152
–
–

(10,001)
–
–

250,306
82,215
260

Total comprehensive income

for the period
Dividend (note 26)
Option redemption reserve
Acquisition of subsidiaries
Share based payments (note 32)

–
–
–
–
–

82,475
(15,866)
–
–
1,177

–
–
(4,616)

(4,616)
–
–
–
–

–
–
–

449,023
82,215
(4,356)

4,004
3,545
(726)

453,027
85,760
(5,082)

–
–
(24,496)
–
–

77,859
(15,866)
(24,496)
–
1,177

2,819
–
–
5,145
–

80,678
(15,866)
(24,496)
5,145
1,177

Balance as at 31 December 2015

29,566

179,152

(10,001)

318,092

(4,616)

(24,496)

487,697

11,968

499,665

The attached notes 1 to 40 form part of the consolidated financial statements.

NMC Health plc Annual Report and Accounts 2016

1. 2. 3. 5. 4. Financial StatementsConsolidated Statement of Cash Flows
For the Year Ended 31 December 2016

OPERATING ACTIVITIES
Profit for the year before tax
Adjustments for:
Depreciation
Employees’ end of service benefits
Amortisation of intangible assets
Finance income
Finance costs
Loss on disposal of property and equipment
Foreign exchange loss/(gain)
Non cash other income
Unamortised finance fees written off
Impairment of property and equipment
Share based payments expense

Working capital changes:

Inventories
Accounts receivable and prepayments
Amounts due from related parties
Accounts payable and accruals
Amounts due to related parties

Net cash from operations
Employees’ end of service benefits paid
Income tax paid

Net cash from operating activities

INVESTING ACTIVITIES
Purchase of property and equipment
Purchase of intangible assets
Proceeds from disposal of property and equipment
Acquisition of subsidiaries, net of cash acquired
Investment in Joint venture
Bank deposits maturing in over 3 months
Restricted cash
Finance income received
Advances paid for acquisitions
Loan receivable
Other non-current assets
Contingent consideration paid for acquisition

Net cash used in investing activities

FINANCING ACTIVITIES
New term loans and draw-downs
Repayment of term loans
Transaction cost of term loan
Receipts of short term borrowings
Repayment of short term borrowings
Dividend paid to shareholders
Dividend paid to non controlling interest
Finance costs paid
Acquisition of non-controlling interest
Proceed from new share issue – net

Net cash from financing activities

INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS
Cash and cash equivalents at 1 January

CASH AND CASH EQUIVALENTS AT 31 DECEMBER

The attached notes 1 to 40 form part of the consolidated financial statements.

NMC Health plc Annual Report and Accounts 2016

Notes

2016
US$’000

2015
US$’000

17
28
18
11
10

8
17
32

5
19

27
27

26
26

151,576

85,357

45,010
7,246
10,989
(9,157)
41,684
31
358
626
–
1,376
2,640

29,851
4,869
5,475
(925)
23,845
185
(536)
(418)
2,612
–
1,177

252,379

151,492

(8,630)
(78,638)
487
15,524
(2,539)

178,583
(1,546)
(666)

(19,139)
(59,969)
3,869
1,292
9,039

86,584
(1,133)
(1,367)

176,371

84,084

(59,571)
(473)
1,574
(236,328)
(928)
26,764
(84,473)
6,529
(1,614)
(10,505)
(1,768)
(9,567)

(79,281)
(561)
85
(375,505)
–
27,115
6,498
1,533
–
(4,395)
–
–

(370,360)

(424,511)

631,548
(378,660)
–
351,089
(319,556)
(16,350)
(5,300)
(32,421)
(1,952)
314,970

822,698
(472,796)
(10,789)
407,849
(422,629)
(15,866)
–
(20,335)
–
–

543,368

288,132

349,379
84,024

(52,295)
136,319

433,403

84,024

Financial StatementsNotes to the Consolidated Financial Statements
At 31 December 2016

1 CORPORATE INFORMATION
NMC Health plc (the “Company” or “Parent’’) is a Company which was incorporated in England and Wales on 20 July 2011. The
Company is a public limited company operating in the United Arab Emirates (“UAE”), Spain, Colombia, Italy and Denmark and
Brazil. The address of the registered office of the Company is Level 1, Devonshire House, One Mayfair Place, London, W1J 8AJ.
The registered number of the Company is 7712220. The Company’s immediate and ultimate controlling party is a group of three
individuals (H.E. Saeed Mohamed Butti Mohamed Al Qebaisi (H.E. Saeed Bin Butti), Dr BR Shetty and Mr Khalifa Butti Omair Yousif
Ahmad Al Muhairi (Mr. Khalifa Bin Butti) who are all shareholders and of whom one is a director of the Company and who together
have the ability to control the Company.

The Parent and its subsidiaries (collectively the “Group”) are engaged in providing professional medical services, home care services,
long term care services and the provision of all types of research and medical services in the field of gynaecology, obstetrics and
human reproduction, and the rendering of business management services to companies in the health care and hospital sector.
The Group is also engaged in wholesale of pharmaceutical goods, medical equipment, cosmetics, food, IT products and services.

The consolidated financial statements of the Group for the year ended 31 December 2016 were authorised for issue by the board
of directors on 7 March 2017 and the consolidated statement of financial position was signed on the Board’s behalf by Dr BR Shetty
and Mr Suresh Krishnamoorthy.

2.1 BASIS OF PREPARATION
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards
as adopted by the European Union as they apply to the financial statements of the Group for the year ended 31 December 2016
and applied in accordance with the Companies Act 2006.

The consolidated financial statements are prepared under the historical cost convention, except for derivative financial instruments
and contingent consideration payable which have been measured at fair value. The principal accounting policies adopted in the
preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all
periods, presented.

FUNCTIONAL AND REPORTING CURRENCY
The functional currency of the Company and its subsidiaries in the UAE is the UAE Dirham and the functional currency of the
subsidiaries operating outside UAE is the currency of those respective countries. The reporting currency of the Group is United
States of America Dollar (US$) as this is a more globally recognized currency. The UAE Dirham is pegged against the US Dollar
at a rate of 3.673 per US Dollar.

All values are rounded to the nearest thousand dollars ($000) except when otherwise indicated.

GOING CONCERN
The Group’s business activities, together with the factors likely to affect its future development, performance and position are set
out in the Strategic Review on pages 6 to 33. The financial position of the Group, its cash flows, liquidity position and borrowing
facilities are described in the Financial Review on pages 24 to 25.

The Group has two diverse operating divisions, Healthcare and Distribution, both of which operate in a growing market.

The directors have undertaken an assessment of the future prospects of the Group and the wider risks that the Group is exposed
to. In its assessment of whether the Group should adopt the going concern basis in preparing its financial statements, the directors
have considered the adequacy of financial resources in order to manage its business risks successfully, together with other areas
of potential risk such as regulatory, insurance and legal risks.

The Group has considerable financial resources including banking arrangements through a spread of local and international
banking groups and utilizes short and medium term working capital facilities to optimise business funding. Debt covenants are
reviewed by the Board each month. The Board believes that the level of cash in the Group, the spread of bankers and debt facilities
mitigates the financing risks that the Group faces from both its expansion through acquisitions and in relation to working capital
requirements.

The Group delivered a strong performance in 2016. Both the Healthcare and Distribution divisions have continued their positive
growth in revenue during 2016. Net profit and EBITDA of both healthcare and distribution divisions have increased in 2016. EBITDA
margin of Distribution is almost the same as last year whereas for Healthcare it increased slightly which is due to opening of new
facilities during the year. The directors have reviewed the business plan for 2017 and the five year cash flow, together with growth
forecasts for the healthcare sector in the UAE. The directors consider the Group’s future forecasts to be reasonable.

The directors have not identified any other matters that may impact the viability of the Group in the medium term and therefore
they continue to adopt the going concern basis in preparing the consolidated financial statements.

NMC Health plc Annual Report and Accounts 2016

1. 2. 3. 5. 4. Financial Statements2.2 BASIS OF CONSOLIDATION
The consolidated financial statements comprise the financial statements of the Group and its subsidiaries as at 31 December 2016.
Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has
the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if, and only if,
the Group has:
• Power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the investee).
• Exposure, or rights, to variable returns from its involvement with the investee.
• The ability to use its power over the investee to affect its returns.

Generally, there is a presumption that a majority of voting rights result in control. To support this presumption and when the Group
has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in
assessing whether it has power over an investee, including:
• The contractual arrangement with the other vote holders of the investee.
• Rights arising from other contractual arrangements.
• The Group’s voting rights and potential voting rights.

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or
more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and
ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed
of during the year are included in the consolidated financial statements from the date the Group gains control until the date the
Group ceases to control the subsidiary.

Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the parent of
the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When
necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the
Group’s accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions
between members of the Group are eliminated in full on consolidation.

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.

If the Group loses control over a subsidiary, it derecognises the related assets (including goodwill), liabilities, non-controlling interest
and other components of equity while any resultant gain or loss is recognised in profit or loss. Any investment retained is
recognised at fair value.

The consolidated financial statements include the financial statements of the Company and its subsidiaries listed below:

Direct subsidiaries:

NMC Holding Co LLC
NMC Health Holdco Limited

Indirect subsidiaries:

NMC Healthcare LLC
New Pharmacy Company Limited
New Medical Centre LLC-Dubai
NMC Specialty Hospital LLC-Abu Dhabi
NMC Specialty Hospital LLC-Dubai
New Medical Centre Trading LLC-Abu Dhabi
NMC Trading LLC-Dubai
Bait Al Shifaa Pharmacy LLC-Dubai
New Medical Centre LLC-Sharjah
New Medical Centre Specialty Hospital LLC-Al Ain
Reliance Information Technology LLC
BR Medical Suites FZ LLC
Brightpoint Royal Womens Hospital LLC
NMC Day Surgery Centre LLC
NMC Hospital LLC (DIP Hospital)
Medifertil, S.A
Centro de infertilidad y Reproduccion Humana SLU (CIRH)
Centro de Medicina della Riproduzione (Biogenesi)
EUVITRO, S.L.U
Copenhagen Fertility Center Holding Aps (DK)
Huntington Centro de Medicina Reproductive, S/A (BR)
ProVita International Medical Center LLC
Lifewise Home Healthcare LLC
NMC Royal Hospital LLC

NMC Health plc Annual Report and Accounts 2016

Percentage of holdings

Country of
incorporation

31 December
2016

31 December
2015

UAE
UK

UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
Columbia
Spain
Italy
Spain
Denmark
Brazil
UAE
UAE
UAE

100%
100%

100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
61.90%
88.40%
53.00%
88.40%
79.60%
53%
100%
100%
100%

100%
100%

100%
99%
99%
99%
99%
99%
99%
99%
99%
99%
99%
100%
99%
99%
99%
60.50%
86.40%
51.80%
86.40%
–
–
100%
–
99%

Financial StatementsNotes to the Consolidated Financial Statements continuedAt 31 December 20162.2 BASIS OF CONSOLIDATION CONTINUED

Percentage of holdings

Country of
incorporation

31 December
2016

31 December
2015

The American Surgecenter Pharmacy LLC
The American Surgecenter LLC
Americare LLC
Trans Arabia Drug Store LLC
Sunny Specialty Medical Centre LLC
Sunny Medical Centre LLC
New Sunny Medical Centre LLC
Sunny Al Buhairah Medical Centre LLC
Sunny Al Nadha Medical Centre LLC
Sunny Dental Care LLC
Grand Hamad Pharmacy LLC
Hamad Pharmacy LLC
Sharjah Pharmacy L.L.C
*Sunny Sharqan Medical Centre LLC
*NMC Royal Medical Centre LLC
*NMC Healthcare LLC
*Fulfil Trading LLC
Nadia Medical Centre LLC
Cooper Dermatology and Dentistry Clinic
Cooper Health Clinic
Fakih IVF Fertility Centre LLC
Fakih IVF LLC
Beiersdorf Cosmetics Trading LLC – Abu Dhabi branch
New Marketing & Trading Co. LLC
Beiersdorf Cosmetics Trading LLC – Al Ain branch
New Marketing & Trading Co LLC – Al Ain branch
New Medical Centre Trading LLC – branch 2
New Medical Centre Trading LLC – branch 3
Beiersdorf Cosmetics Trading LLC – branch
National Marketing & Trading Co. LLC
New Marketing & Trading Company LLC – branch
NMC Trading LLC-branch
Beiersdorf Cosmetics Trading Co. LLC
National Marketing & Trading Co. LLC – Dubai branch
New Marketing & Trading Co. LLC – Dubai branch
New Medical Centre Trading (Store) LLC
New Medical Centre Veterinary Medicine & Equipment Trading Co LLC
NMC Trading LLC branch
NMC Trading LLC – Fujairah branch
NMC Trading RAK – branch LLC
New Medical Centre
New Medical Centre LLC – branch (Al-Ain,Al wadi)
NMC Pharmacy
NMC Pharmacy – Branch
*PVHC KSA
*TVM KSA Acquisition 2 Ltd
*NMC Royal Medical Centre LLC – Branch
*Muscat Central Healthcare LLC
*NMC Healthcare India Pvt. Ltd
*NMC International Trading LLC
*Cooper Health Clinic – Branch
*New Reproductive Care Ltd

UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
Oman
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
KSA
Cyprus
UAE
Oman
India
UAE
UAE
Cayman

90%
90%
90%
75%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
51%
51%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
51%

90%
90%
90%
75%
100%
100%
100%
100%
100%
100%
100%
100%
100%
–
–
–
–
–
–
–
–
–
99%
99%
99%
99%
99%
99%
99%
99%
99%
99%
99%
99%
99%
99%
99%
99%
99%
99%
100%
100%
100%
100%
–
–
–
–
–
–
–
–

* These entities are established by NMC during the current year and accordingly are not disclosed as acquired entities in note 5.

NMC Health plc Annual Report and Accounts 2016

1. 2. 3. 5. 4. Financial Statements2.2 BASIS OF CONSOLIDATION CONTINUED
During the current period, the Group acquired 1% beneficial interest in certain subsidiaries, as listed below, for a consideration
of US$419,000. These subsidiaries are registered in the UAE. The Group previously had 99% shareholding in these entities.
The Group recorded a gain of US$536,000 on this in retained earnings.

NMC Specialty Hospital LLC – Abu Dhabi
NMC Specialty Hospital LLC – Dubai
New Medical Centre Specialty Hospital LLC – Al Ain
New Pharmacy Company Limited
Bait Al Shifaa Pharmacy LLC – Dubai
Reliance Information Technology LLC
New Medical Centre Hospital LLC – Dubai
New Medical Centre LLC – Sharjah
NMC Day Surgery Centre LLC
NMC Hospital LLC (DIP Hospital)
Bright point Hospital LLC
New Medical Centre Trading LLC – Abu Dhabi
NMC Trading LLC – Dubai

In addition, the Group acquired an additional 2.0% interest in Luarmia SL (“Luarmia”), increasing its ownership interest to 88.4%.
Cash consideration of US$1,533,000 was paid to the non-controlling shareholders. The Group recorded a loss of US$1,123,000
on this in retained earnings.

2.3 SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES
The key assumptions concerning the future, key sources of estimation uncertainty and critical judgements at the reporting
date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the
next financial year are discussed below:

SIGNIFICANT ESTIMATES
Impairment of inventories
Inventories are held at the lower of cost and net realisable value. When inventories become old or obsolete, an estimate is made
of their net realisable value. For individually significant amounts this estimation is performed on an individual basis. Amounts
which are not individually significant, but which are old or obsolete, are assessed collectively and a provision applied according to
the inventory type and the Group’s policy for inventory provisioning. The gross carrying amount of inventories at 31 December 2016
was US$145,565,000 (2015: US$136,176,000) and the provision for old and obsolete items at 31 December 2016 was US$1,178,000
(2015: US$1,388,000) (note 20).

Impairment of accounts receivable
An estimate of the collectible amount of trade accounts receivable is made when collection of the full amount is no longer
probable. For individually significant amounts, this estimation is performed on an individual basis. Amounts which are not
individually significant, but which are past due or claims which can potentially be rejected, are assessed collectively and
a provision applied according to the length of time past due, based on historical recovery rates.

A majority of the receivables that are past due but not impaired pertains to Group’s operations in UAE, these receivables are from
insurance companies and government-linked entities in the United Arab Emirates which are inherently slow payers due to their
long invoice verification and approval of payment procedures. Payments continue to be received from these customers and
accordingly the risk of non-recoverability is considered to be low.

Gross trade accounts receivable at 31 December 2016 were US$326,480,000 (2015: US$255,038,000) and the provision for doubtful
debts at 31 December 2016 was US$12,129,000 (2015: US$13,022,000) (note 21). Any difference between the amounts actually collected
in future periods and the amounts expected will be recognised in the consolidated income statement.

Impairment of non-financial assets
Impairment exists when the carrying value of an asset or cash generating unit (CGU) exceeds its recoverable amount, which
is the higher of its fair value less costs of disposal and its value in use. The fair value less costs of disposal calculation is based
on available data from binding sales transactions, conducted at arm’s length, for similar assets or observable market prices less
incremental costs for disposing of the asset. The value in use calculation is based on a DCF model. The cash flows are derived from
the budget for the next five years and do not include restructuring activities that the Group is not yet committed to or significant
future investments that will enhance the asset’s performance of the CGU being tested. The recoverable amount is sensitive to
the discount rate used for the DCF model as well as the expected future cash-inflows and the growth rate used for extrapolation
purposes. These estimates are most relevant to goodwill recognised by the Group. The key assumptions used to determine the
recoverable amount for the different CGUs are disclosed and further explained in note 18.

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Financial StatementsNotes to the Consolidated Financial Statements continuedAt 31 December 20162.3 SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES CONTINUED
SIGNIFICANT ESTIMATES CONTINUED
Impairment of Non-Financial Assets continued
In addition, the Group has work in progress in respect of Hospital Information System (HIS) and ERP amounting to US$4,345,000
(2015:US$3,991,000). This amount is included in capital work in progress in property and equipment and in software in intangible
assets (note 17 and note 18). As required by IAS 36 an impairment test is performed and no impairment was identified.

Valuation of intangibles assets
The Group measures its intangible assets acquired in a business combination as follows:

Brand
Database and software
Patient relationships
Non-compete agreements
Rental and private contracts

Relief from royalty
Replacement cost
Multi period excess earning method
Income approach-with or without method
Multi period excess earning method

Estimating the fair value of the brand requires determination of the most appropriate valuation method. This estimate also
requires determination of the most appropriate inputs to the valuation method including the base revenue, expected life of the
intangible assets, selecting an arm’s length royalty rate, discount rate and making assumptions about them. Similarly, estimating
the replacement cost of the database requires an estimate of the number of cycles that are recorded in the database along with
the best estimate of the hours dedicated by the staff (such as doctors, nurses, biologists, and other specialist technicians) to collect
the data, the useful life of the database, discount rate and an estimate of tax saving.

Estimating the fair value of patient relationships and the non-compete agreements requires an estimate of the expected revenue
over an appropriate period of time, a churn rate to account for the reduction in the number of patients over the years, discount rate,
rate of inflation and the useful life and the risk inherent in ownership of the asset or security interest being valued.

Useful economic lives of property and equipment and depreciation method
Depreciation is calculated on all property and equipment other than land and capital work in progress, at the following rates
calculated to write off the cost of each asset on a straight line basis over its expected useful life. Management has re-assessed the
useful economic lives of all asset categories with effect from 1 January 2016, following a review of the useful economic lives of the
Group’s assets and market research conducted on depreciation rates and methods in the industry:

Hospital building
Buildings
Leasehold improvements
Motor vehicles
Furniture, fixtures and fittings
Medical equipment

Rate applied
from
1 January
2016

2%-6%
6%
5.88%–20%
20%
12.5%–20%
10%–25%

Rate applied
up to
31 December
2015

6%
6%
10%–20%
20%
12.5%–20%
10%–25%

The impact of the re-assessment of useful economic lives and depreciation method is an increase in reported profit of
US$2,562,000 in the current year.

Useful economic lives of intangible assets and amortisation method
The useful lives of intangible assets are assessed as either finite or indefinite. Intangibles assets are amortised on straight line
basis over their useful life. The following useful lives have been determined for acquired intangible assets:

Brands – 5-20 years
Software – 5 years
Database – 15 years
Patient relationships – 7 years
Non-compete agreement – 3-4 years
Rental contracts – 7 years
Private contracts – 3 years

Contingent consideration on acquisitions
Contingent consideration, resulting from business combinations, is valued at fair value at the acquisition date as part of
the business combination. When the contingent consideration meets the definition of a financial liability, it is subsequently
re-measured to fair value at each reporting date. The change in the fair value at each reporting date is recorded in the
consolidated income statement. The determination of the fair value is based on discounted cash flows. The key assumptions
taken into consideration in determining the fair value are the probability of meeting relevant performance targets, securing
certain agreements, completing certain acquisitions and the discount factor (note 5).

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1. 2. 3. 5. 4. Financial Statements

2.3 SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES CONTINUED
Valuation of put option
The accounting for put options requires significant management judgment and is driven by the specific contract terms. Put
options were issued as part of the Luarmia SL, CFC and HCMR acquisitions. On the basis of the contract terms and interpretation
of relevant accounting standards and guidance, the judgment is that the Group does not have present ownership of the non-
controlling interest (NCI) on account of Luarmia SL, CFC and HCMR as at the date of acquisition. This judgment leads to the next
stage of the accounting decisions required. The Group has concluded that IFRS 10 takes precedence over IAS 32, and the permitted
policy choice is that there should be full recognition of NCI using the proportionate method.

The financial liability that is payable under put option is measured at fair value at each reporting date. The key assumptions taken
into consideration in determining the fair value are the probability of meeting relevant reproductive cycles, EBITDA and net debt
targets (note 37).

SIGNIFICANT JUDGEMENTS
Business combinations and goodwill
Management judgement is applied in determining whether the acquisition represents an acquisition of an asset or a business
combination. This involves assessing whether or not the entities and the assets acquired constitute the carrying on of a business,
i.e., whether there are inputs and processes applied to those inputs that have the ability to create outputs. When a business
combination occurs, the fair values of the identifiable assets and liabilities assumed, including intangible assets, are recognised.
The determination of the fair values of acquired assets and liabilities is based, to a considerable extent, on management’s
judgement. If the purchase consideration exceeds the fair value of the net assets acquired, then the difference is recognised
as goodwill. If the purchase price consideration is lower than the fair value of the assets acquired then a gain is recognised in
the consolidated income statement. Allocation of the purchase price between finite lived assets and indefinite lived assets such
as goodwill affects the results of the Group as finite lived intangible assets are amortised, whereas indefinite lived intangible
assets, including goodwill, are not amortised. The key judgements in respect of the contingent consideration recognised as part
of a business combination relate to the performance of the business, the discount rates used and the contractual arrangements
of ownership.

Functional currency
The UAE Dirham is determined to be the functional currency of the Company.

Judgement has been used to determine the functional currency of the Company that most appropriately represents the
economic effects of the Company’s transactions, events and conditions.

The primary economic environment influencing the Company’s income (dividends) is the UAE and the effect of the Companies
local environment is limited to expenses incurred within the UK. The ability of the Company to meet its obligations and pay
dividends to its shareholders is dependent on the economy of, and the operation of its subsidiaries in, the UAE.

Assets held in the name of the previous shareholder
In accordance with local laws, except in some specific locations in the UAE the registered title of land and buildings must be held
in the name of a UAE national. As a result, land and buildings of the Group are legally registered in the name of shareholders or
previous shareholders of the Group. As at 31 December 2016 certain land with a carrying amount of US$4,144,000 (2015: US$4,144,000)
are held in the name of a previous shareholder for the beneficial interest of the Group. As the beneficial interest of such land
and buildings resides with the Group, these assets are recorded within land and buildings in the Group consolidated financial
statements. The directors take into account this local legal registration requirement, the Group’s entitlement to the beneficial
interest arising from these assets, as well as other general business factors, when considering whether such assets are impaired
(note 17).

Leases for buildings and land
Generally our hospitals, day patient medical centres and hospital projects under development are located on land and in buildings
which are leased. As at 31 December 2016, the majority of the lease periods range from five to twenty seven years apart from the
leases for New Medical Centre Hospital LLC-Dubai (‘Dubai General Hospital) and the warehouse facilities, which had leases which
are renewable on an annual basis with a total value of US$801,000 (2015: US$778,000) included within property, and equipment as
at 31 December 2016 (note 17). If any such leases are terminated or expire and are not renewed, the Group could lose the investment,
including the hospital buildings and the warehouses on the leased sites which could have a material adverse effect on our
business, financial condition and results of operations. The directors have considered the following facts in determining the
likelihood that these leases will be renewed:

• Whilst some leases can be for long term durations, it is not unusual and can often be common practice throughout all of the
emirates in the United Arab Emirates for landlords to lease land and buildings to companies on annually renewable leases
of one year terms and for these
— leases to be renewed automatically. Throughout the Group’s over 43 year history it has never had a lease cancelled or not
renewed, and the Group enjoys a high degree of respect in the region and believes that it maintains strong relationships
with the landlords.

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— Both the Dubai General Hospital and the warehouse facilities have been occupied by the Group on annually

renewable leases, for a period of more than 16 years and each year these leases have been automatically renewed.

— The warehouse facilities have been built by the Group on land leased from government bodies in the Emirates of Dubai and

Abu Dhabi on the back of the policies of these governments to attract investment in warehousing in the United Arab Emirates.

Lease for NMC Royal Hospital LLC
NMC Royal Hospital LLC is constructed from land leased from Municipality of Abu Dhabi. Remaining period of lease as of
31 December 2016 is 24 years expiring in 2040. Management has determined the useful life of NMC Royal Hospital LLC building
50 years. Carrying amount of NMC Royal Hospital LLC building included in property and equipment as of 31 December 2016 is
US$122,463,000. Management believe that lease will be renewed for the full useful life of the building. The directors have considered
the facts that throughout the Group’s 43 year history it has never had a lease cancelled or not renewed, and the Group enjoys a
high degree of respect in the region and believes that it maintains strong relationships with the lessor in determining the likelihood
that lease will be renewed.

2.4 CHANGES IN ACCOUNTING POLICIES
NEW AND AMENDED STANDARDS AND INTERPRETATIONS
The Group applied for the first time certain standards and amendments which are effective for annual periods beginning
on or after 1 January 2016.

The new standards, amendments to IFRS, which are effective as of 1 January 2016 are listed below, have no impact on the Group.

• FRS 14 Regulatory Deferral Accounts
• Amendments to IFRS 11 Joint Arrangements: Accounting for Acquisition of Interests
• Amendments to IAS 16 and IAS 38: Clarification of Acceptable Methods of Depreciation and Amortisation
• Amendments to IAS 16 and IAS 41 Agriculture: Bearer Plants
• Amendments to IAS 27: Equity Method in Separate Financial Statements
• Annual Improvements 2012-2014 Cycle

— IFRS 5 Non-current Assets Held for Sale and Discontinued Operations
— IFRS 7 Financial Instruments: Disclosures

i. Servicing contracts
ii. Applicability of the amendments to IFRS 7 to condensed interim financial statements

— IAS 19 Employee Benefits
— IAS 34 Interim Financial Reporting
— Amendments to IAS 1 Disclosure Initiative
— Amendments to IFRS 10, IFRS 12 and IAS 28 Investment Entities: Applying the Consolidation Exception

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can
be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration
received or receivable, less discounts and rebates and taking into account contractually defined terms of payment and excluding
taxes or duties.

Revenue streams include clinic service revenues, sale of goods – Pharmacy, sale of goods –Distribution, Healthcare management
fees and revenue sharing arrangement with doctors.

The Group assesses its revenue arrangements against specific criteria in order to determine if it is acting as principal or agent.
The Group determines it is acting as principal when it has exposure to the significant risks and rewards associated with the
transaction and measures revenue as the gross amount received or receivable. When the Group does not retain the significant
risks and rewards, it deems that it is acting as an agent and measures revenue as the amount received or receivable in return
for its performance under the contract and excludes any amounts collected on behalf of a third party.

Clinic, homecare and long term care service revenues
Clinic, homecare and long term care service revenues represent the revenue which NMC generates from the provision of either
inpatient or outpatient medical services, homecare services or long term care services. The group primarily receives these
revenues from patients’ private /medical insurance schemes. Revenues are recognised when, and to the extent that, performance
of a medical service occurs, and is measured at the fair value of the consideration received or receivable. NMC has determined
that it is acting as Principal in these arrangements as it has the responsibility for providing the medical services to the patient,
it sets the prices for services which are provided, it bears the credit risk and it bears the risk of providing the medical service.

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103

1. 2. 3. 5. 4. Financial Statements3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
REVENUE RECOGNITION CONTINUED
Gynaecology, obstetrics and human reproduction
Revenue in respect of the different types of gynaecology, obstetrics and human reproduction services is recognized as follows:

·Donor IVF and Own IVF sales (In Vitro Fecundation)
Revenue in respect of gynaecology, obstetrics and human reproduction is mainly from In Vitro Fertilization (IVF) treatment.

Revenue from IVF treatment is recognized based on the stage of the treatment. The treatment is divided into three stages. Each
stage takes about 20 days. 24%-25% of revenue is booked in the first stage (at the beginning of the treatment), 50%-65% of revenue
is booked in the middle stage (at patient’s egg extraction in the case of the use of the patient’s own egg or in the case of the use of
a donor egg at the fertilization date) and 11%-25% of revenue is booked at the final stage (embryo implantation). These percentages
are based on an internal study of the costs incurred in the different streams performed in prior years.

Cryo transfer sales
Total cost of the treatment is split in two phases in terms of revenue recognition. 25% is recorded when the doctor agrees with
the patient to initialize the treatment and 75% at the embryo implantation. The time between both phases is about 2-3 weeks.

Intrauterine insemination
Revenue is recognized in full at the insemination date.

Sale of Goods – Pharmacy
The sales of goods from pharmacy relates to the sale of pharmaceutical and other products from hospitals and pharmacies.
Whilst the Group does not establish the prices for the pharmaceutical products sold as both the purchase and selling prices for
all pharmaceutical products are fixed by the Ministry of Health, UAE. NMC has determined that it is acting as Principal in respect
of these sales as it provides the goods for sale, it bears the inventory risk, and it bears the credit risk from customers. Revenue
from the sale of goods – Pharmacy is therefore recognised when the significant risks and rewards of ownership of the goods
have passed to the buyer. Significant risk for retail goods is passed to the buyer at the point of sale.

Sale of Goods – Distribution
Where the Group bears the inventory risk and the customer credit risk and has the ability to set the prices for the products sold
then the Group has determined that it is acting as Principal. Revenue from the sale of goods is therefore recognised when the
significant risks and rewards of ownership of the goods have passed to the buyer. Significant risk for retail goods is passed to
the buyer for wholesale goods at the time of delivery.

For agency relationships, the revenue earned is measured as the Group’s share of the revenue, as specified in the contract.
Any amounts collected on behalf of the third party are excluded from revenue and are recorded as a payable. There are currently
no material agency relationships.

Healthcare Management fees
Management fees represent fees earned for managing a hospital. Management fees are recognised when the services under
the contract are performed, and the service level criteria have been met, and are measured at the fair value of the consideration
received or receivable, in line with the terms of the management contract.

Revenue sharing arrangements with doctors
The Group enters into contracts with doctors whereby these doctors are employed to perform certain procedures or run outpatient
services using the facilities. In return the doctors obtain a share of the revenues that are generated from these facilities. Each
contractual arrangement with individual doctors is assessed against specific criteria to determine whether the Group is acting
as principal or agent in the arrangement with these doctors.

OTHER INCOME
Other income comprises revenue from suppliers for the reimbursement of advertising and promotion costs incurred by the Group.
Revenue is recognised following formal acceptance of the Group’s reimbursement claims by suppliers and is measured at the
confirmed amount receivable.

INTEREST INCOME
For all financial instruments measured at amortised cost, interest income or expense is recorded using the effective interest rate
(EIR), which is the rate that exactly discounts the estimated future cash payments or receipts through the expected life of the
financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or liability. Interest
income is included in finance income in the consolidated income statement.

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Financial StatementsNotes to the Consolidated Financial Statements continuedAt 31 December 20163 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
REBATES FROM SUPPLIERS
The Distribution business receives rebates in the ordinary course of business from a number of its suppliers of pharmaceutical
products, in accordance with contractual arrangements in place with specific suppliers. Rebates are accounted for once approval
has been received from the supplier following the negotiations which have taken place with them. Rebates receivable are
accounted for as a deduction from the cost of purchasing pharmaceutical goods, once the rebate has been approved by the
supplier on the basis under IAS 18 that the probability of inflow is not sufficiently certain and the amounts cannot be reliably
measured until that point. When rebates have been agreed in advance, for example when it has been agreed that a certain rebate
will be applied to the purchase of specific goods for a set period of time rather than just to a specific one off purchase, then the
rebate is recognised as a reduction in the purchase price as soon as the goods are purchased. When rebates are offered based
upon the volume purchased and it is probable that the rebate will be earned and the amount can be estimated reliably, then
the discount is recognised as a reduction in the purchase price when the goods are purchased and the assessment is reviewed
on an ongoing basis. Rebates receivable are accounted for on a net basis, being set off against the trade payables to which they
relate, as they are a reduction in the amount we owe to our suppliers in respect of pharmaceutical products purchased.

CURRENT INCOME TAX
Current income tax assets and liabilities arising from overseas operations for the current period are measured at the amount
expected to be recovered from or paid to the taxation authorities in the respective overseas jurisdictions. The tax rates and tax
laws used to compute the amount are those that are enacted or substantively enacted, at the reporting date in the countries
where the Group operates and generates taxable income.

Current income tax relating to items recognised directly in equity is recognised in equity and not in the consolidated income
statement. Management periodically evaluates positions taken in the tax returns with respect to situations in which applicable
tax regulations are subject to interpretation and establishes provisions where appropriate.

DEFERRED TAX
Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and
their carrying amounts for financial reporting purposes at the reporting date.

Deferred tax liabilities are recognised for all taxable temporary differences, except:
• When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in a transaction that is

•

not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss;
In respect of taxable temporary differences associated with investments in subsidiaries, when the timing of the reversal
of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the
foreseeable future.

Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused
tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which
the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised, except:
• When the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or
liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting
profit nor taxable profit or loss;
In respect of deductible temporary differences associated with investments in subsidiaries, deferred tax assets are recognised
only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will
be available against which the temporary differences can be utilised.

•

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 profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised
deferred tax assets are re-assessed at each reporting date and are recognised to the extent that it has become probable that
future taxable profits will allow the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised
or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date.

Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised
in correlation to the underlying transaction either in other comprehensive income or directly in equity. Deferred tax assets and
deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current income tax liabilities
and the deferred taxes relate to the same taxable entity and the same taxation authority.

Tax benefits acquired as part of a business combination, but not satisfying the criteria for separate recognition at that date,
are recognised subsequently if new information about facts and circumstances change. The adjustment is either treated
as a reduction in goodwill (as long as it does not exceed goodwill) if it was incurred during the measurement period or recognised
in profit or loss.

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105

1. 2. 3. 5. 4. Financial Statements3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
BUSINESS COMBINATIONS AND GOODWILL
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate
of the consideration transferred measured at acquisition date fair value and the amount of any non-controlling interests in the
acquiree. For each business combination, the Group elects whether to measure the non-controlling interests in the acquiree at
fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred
and disclosed separately in the consolidated income statement.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and
designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition
date. This includes the separation of embedded derivatives in host contracts by the acquiree.

Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Contingent
consideration classified as an asset or liability that is a financial instrument and within the scope of IAS 39 Financial Instruments:
Recognition and Measurement, is measured at fair value with the changes in fair value recognised in the consolidated income
statement.

Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount
recognised for non-controlling interests, and any previous interest held, over the net identifiable assets acquired and liabilities
assumed. If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the Group re-assesses
whether it has correctly identified all of the assets acquired and all of the liabilities assumed and reviews the procedures used
to measure the amounts to be recognised at the acquisition date. If the reassessment still results in an excess of the fair value
of net assets acquired over the aggregate consideration transferred, then the gain is recognised in profit or loss.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment
testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating
units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are
assigned to those units.

Where goodwill has been allocated to a cash-generating unit and part of the operation within that unit is disposed of, the goodwill
associated with the disposed operation is included in the carrying amount of the operation when determining the gain or loss on
disposal. Goodwill disposed in these circumstances is measured based on the relative values of the disposed operation and the
portion of the cash-generating unit retained.

RESTRUCTURING RESERVE
The group restructuring reserve arises on consolidation under the pooling of interest method used for the group restructuring
which took place on 1 April 2012. This represents the difference between the share capital of NMC Healthcare LLC, the previous
parent company of the Group, and the carrying amount of the investment in that company at the date of the restructure. This
reserve is non-distributable.

DEFERRED CONSIDERATION
Deferred consideration arises when settlement of all or any part of the cost of a business combination is deferred. It is stated at
fair value at the date of acquisition, which is determined by discounting the amount due to present value at that date. Interest is
imputed on the fair value of non-interest bearing deferred consideration at the discount rate and expensed within finance costs.
At each balance sheet date deferred consideration comprises the remaining deferred consideration valued at acquisition plus
unwinding of interest imputed on such amounts from acquisition to the balance sheet date.

PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation and any impairment in value. Depreciation is calculated
on all property and equipment other than land and capital work in progress, at the following rates calculated to write off the cost
of each asset on a straight line basis over its expected useful life:

Hospital building
Buildings
Leasehold improvements
Motor vehicles
Furniture, fixtures and fittings
Medical equipment

2%–6%
6%
5.88%–20%
20%
12.5%–20%
10%–25%

The carrying amounts of property and equipment are reviewed for impairment when events or changes in circumstances indicate
the carrying value may not be recoverable. If any such indication exists and where the carrying values exceed the estimated
recoverable amount, the assets are written down to their recoverable amount, being the higher of their fair value less cost to sell
and their value in use.

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Financial StatementsNotes to the Consolidated Financial Statements continuedAt 31 December 20163 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
PROPERTY AND EQUIPMENT CONTINUED
Capital work in progress is stated at cost and is not depreciated. Lease costs in respect of capital work in progress are capitalised
within capital work in progress during the period up until it is commissioned. When commissioned, capital work in progress is
transferred to the appropriate property and equipment asset category and depreciated in accordance with the Group’s policies.
The carrying amounts of capital work in progress are reviewed for impairment when events or changes in circumstances indicate
the carrying value may not be recoverable. If any such indication exists and where the carrying values exceed the estimated
recoverable amount, the assets are written down to their recoverable amount.

Expenditure incurred to replace a component of an item of property and equipment that is accounted for separately is capitalised
and the carrying amount of the component that is replaced is written off. Other subsequent expenditure is capitalised only when
it increases future economic benefits of the related item of property and equipment. All other expenditure is recognised in the
consolidated statement of comprehensive income as the expense is incurred.

INTANGIBLE ASSETS
Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a
business combination is their fair value at the date of acquisition. Following initial recognition, intangible assets are carried at cost
less any accumulated amortisation and accumulated impairment losses. Internally generated intangibles, excluding capitalised
development costs, are not capitalised and the related expenditure is reflected in consolidated statement of comprehensive
income in the period in which the expenditure is incurred.

The useful lives of intangible assets are assessed as either finite or indefinite. The following useful lives have been determined
for acquired intangible assets:

Brands – 5-20 years
Software – 5 years
Database – 15 years
Patient relationships – 7 years
Non-compete agreement – 3-4 years
Rental contracts – 7 years
Private contracts – 3 years

Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an
indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset
with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected
pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortisation period or
method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with
finite lives is recognised in the consolidated income statement in the expense category that is consistent with the function of the
intangible assets.

Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually, either individually or at the
cash-generating unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues
to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis.

Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal
proceeds and the carrying amount of the asset and are recognised in the consolidated income statement when the asset is
derecognised.

BORROWING COSTS
Borrowing costs that are directly attributable to the acquisition or construction of an asset are capitalised as part of the cost of
the asset until the asset is commissioned for use. Borrowing costs in respect of completed assets or not attributable to assets
are expensed in the period in which they are incurred.

PRE-OPERATING EXPENSES
Pre-operating expenses are the expenses incurred prior to start of operations of a new business unit. These are recognised
in the consolidated income statement in the year in which they occur.

INVENTORIES
Inventories are valued at the lower of cost and net realisable value after making due allowance for any obsolete or slow moving
items. Costs are those expenses incurred in bringing each product to its present location and condition and are determined on
a weighted average basis. Net realisable value is based on estimated selling price less any further costs expected to be incurred
to disposal.

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107

1. 2. 3. 5. 4. Financial Statements3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
ACCOUNTS RECEIVABLE
Accounts receivable are stated at original invoice amount less a provision for any uncollectible amounts. Accounts receivable
with no stated interest rates are measured at invoiced amounts when the effect of discounting is immaterial. An estimate
of doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written off when there is
no possibility of recovery.

LOANS RECEIVABLES
Loans receivables are initially recognised at fair value. After initial measurement, such financial assets are subsequently measured
at amortised cost using effective interest rate (EIR) method, less impairment. Amortised cost is calculated by taking into account
any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in
finance income in the statement of profit or loss. The losses arising from impairment are recognised in the statement of profit
or loss.

CASH AND CASH EQUIVALENTS
For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash in hand, bank balances
and short term deposits with an original maturity of three months or less, net of outstanding bank overdrafts.

EQUITY
The Group has issued ordinary shares that are classified as equity. The difference between the issue price and the par value
of ordinary share capital is allocated to share premium. The transaction costs incurred for the share issue are accounted for
as a deduction from share premium, net of any related income tax benefit, to the extent they are incremental costs directly
attributable to the share issue that would otherwise have been avoided.

ACCOUNTS PAYABLE AND ACCRUALS
Liabilities are recognised for amounts to be paid in the future for goods and services received whether billed by the supplier or not.
Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of
the business if longer). If not, they are presented as non-current liabilities. Accounts payable are recognised initially at fair value
and subsequently measured at amortised cost using the effective interest method.

PROVISIONS
Provisions are recognised when the Group has an obligation (legal or constructive) arising from a past event, and the costs to settle
the obligation are both probable and able to be reliably measured.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax
rate that reflects current market assessments of the time value of money and risks specific to the obligation. Increases in
provisions due to the passage of time are recognised in the consolidated income statement within ‘Finance costs’.

PUT OPTION – NON CONTROLLING INTEREST
In circumstances where the Group has determined that they do not have the present ownership interest in the shares subject
to a put option, the Group has concluded that IFRS 10 takes precedence over IAS 32 and accordingly a non-controlling interest (NCI)
is fully recognised at the date of acquisition, The Group recognises the full NCI using the proportionate share of net assets method.
The financial liability that may become payable under a put option in respect of the NCI is recognised at fair value within liabilities,
with the liability being treated as an immediate reduction to equity attributable to the parent (other reserves). The financial liability
is subsequently re-measured to fair value at each reporting date and the change in the fair value at each reporting date is recorded
in the consolidated income statement.

TERM LOANS
Term loans are initially recognised at the fair value of the consideration received less directly attributable transaction costs. After
initial recognition, term loans are subsequently measured at amortised cost using the effective interest method. Interest on term
loans is charged as an expense as it accrues, with unpaid amounts included in “accounts payable and accruals”.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an
existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability
and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the consolidated income
statement.

EMPLOYEES’ END OF SERVICE BENEFITS
The Group operates an un-funded post-employment benefit plan (employees’ end of service benefits) for its expatriate employees
in the UAE, in accordance with the labour laws of the UAE. The entitlement to these benefits is based upon the employees’ final
salary and length of service, subject to the completion of a minimum service period. Payment for employees’ end of service
benefits is made when an employee leaves, resigns or completes his service.

The cost of providing benefits under the post-employment benefit plan is determined using the projected unit credit method.
Re-measurements, comprising of actuarial gains and losses, are recognized immediately in the statement of financial position
with a corresponding debit or credit to retained earnings through other comprehensive income in the period in which they occur.
Re-measurements are not reclassified to profit or loss in subsequent periods.

108

NMC Health plc Annual Report and Accounts 2016

Financial StatementsNotes to the Consolidated Financial Statements continuedAt 31 December 20163 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
EMPLOYEES’ END OF SERVICE BENEFITS CONTINUED
Interest is calculated by applying the discount rate to the defined benefit liability. The rate used to discount the end of service
benefit obligation is determined by reference to market yields at the balance sheet date on high quality corporate bonds.
The current and non-current portions of the provision relating to employees’ end of service benefits are separately disclosed
in the consolidated statement of financial position.

The Group recognises the following changes in the employees’ end of service benefits under ‘direct costs’ and ‘general and
administrative expenses’ in the consolidated statement of comprehensive income:
• Service costs comprising current service costs
•

Interest expense

With respect to its UAE national employees, the Group makes contributions to the relevant UAE Government pension scheme
calculated as a percentage of the employees’ salaries. The obligations under these schemes are limited to these contributions,
which are expensed when due.

SHARE BASED PAYMENTS
Equity-settled share-based payments to employees (including executive directors) are measured at the fair value of the equity
instruments at the grant date. The fair value excludes the effect of non-market-based vesting conditions. Details regarding the
determination of the fair value of equity-settled share-based transactions are set out in note 32.

The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over
the vesting period, based on the Group’s estimate of equity instruments that will eventually vest. At each reporting date, the Group
revises its estimate of the number of equity instruments expected to vest as a result of the effect of non-market-based vesting
conditions. The impact of the revision of the original estimates, if any, is recognised in the consolidated statement of other
comprehensive income such that the cumulative expense reflects the revised estimate, with a corresponding adjustment
to equity reserves/other payables.

No expense is recognised for awards that do not ultimately vest, except for equity-settled transactions for which vesting are
conditional upon a market or non-vesting condition. These are treated as vesting irrespective of whether or not the market or
non-vesting condition is satisfied, provided that all other performance and/or service conditions are satisfied.

The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share
(see note 16).

FOREIGN CURRENCIES
Transactions in foreign currencies are recorded in UAE Dirhams at the exchange rate ruling at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date.
All differences are taken to the consolidated income statement.

TRANSLATION OF FOREIGN OPERATIONS
On consolidation, the assets and liabilities of foreign operations are translated into US Dollars at the rate of exchange prevailing at
the reporting date and their income statements are translated at average exchange rates (unless this average is not a reasonable
approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are
translated at the rate on the dates of the transactions). All resulting currency translation differences are recognised as a separate
component of equity.

The Group’s principal geographical segment is the United Arab Emirates. The UAE Dirham is pegged against the US Dollar so
a single rate of 3.673 per US Dollar is used to translate those assets and liabilities and balances in the consolidated income
statement.

When a foreign operation is partially disposed of or sold, exchange differences that were recorded in equity are recognised in the
consolidated income statement as part of the gain or loss on sale. Goodwill and fair value adjustments arising on the acquisition
of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate.

DERIVATIVE FINANCIAL INSTRUMENTS
The Group uses derivative financial instruments such as forward exchange contracts, put options and contingent consideration.
Such derivative financial instruments are initially recognised at fair value on the date on which a contract is entered into and are
subsequently remeasured at fair value. Derivatives with positive market values (unrealised gains) are recognised as assets and
derivatives with negative market values (unrealised losses) are recognised as liabilities in the consolidated statement of
financial position.

Any gains or losses arising from changes in fair value on derivatives during the year are taken directly to profit or loss.

NMC Health plc Annual Report and Accounts 2016

109

1. 2. 3. 5. 4. Financial Statements3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
FAIR VALUE MEASUREMENT
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the
asset or transfer the liability takes place either:
•
•

In the principal market for the asset or liability; or
In the absence of a principal market, in the most advantageous market for the asset or liability.

The principal or the most advantageous market must be accessible to by the Group.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the
asset or liability, assuming that market participants act in their economic best interest. A fair value measurement of a non-financial
asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use
or by selling it to another market participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available
to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair
value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

• Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities
• Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly

or indirectly observable

• Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable

For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether
transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that
is significant to the fair value measurement as a whole) at the end of each reporting period.

IMPAIRMENT OF FINANCIAL ASSETS
An assessment is made at each consolidated statement of financial position date to determine whether there is objective
evidence that a specific financial asset may be impaired. If such evidence exists, any impairment loss is recognised in the
consolidated income statement. Impairment is determined as the difference between carrying value and the present value
of future cash flows discounted at the current market rate of return for a similar financial asset.

LEASES
The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at inception
date, whether fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys
a right to use the asset, even if that right is not explicitly specified in an arrangement. Operating leases are recognised as an
operating expense in the consolidated income statement on a straight line basis. Lease incentives are recorded as a reduction
of rental expense over the lease term, on a straight-line basis.

JOINT VENTURE
A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the
net assets of the joint venture.

Joint ventures are accounted for using the equity method (equity accounted investees) and are initially recognized at cost. The
Group’s investment includes goodwill identified on acquisition, net of any accumulated impairment losses. The consolidated
financial statements include the Group’s share of the total comprehensive income and equity movements of equity accounted
investees, from the date that joint control commences until the date that joint control ceases. When the Group’s share of losses
exceeds its interest in an equity accounted investee, the Group’s carrying amount is reduced to nil and recognition of further losses
is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf
of an investee.

4 ACCOUNTING STANDARDS AND INTERPRETATIONS ISSUED BUT NOT EFFECTIVE
The standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Group’s financial
statements are listed below. The Group intends to adopt these standards, if applicable, when they become effective.

IFRS 15 REVENUE FROM CONTRACTS WITH CUSTOMERS
IFRS 15 was issued in May 2014 and establishes a five-step model to account for revenue arising from contracts with customers.
Under IFRS 15, revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in
exchange for transferring goods or services to a customer.

110

NMC Health plc Annual Report and Accounts 2016

Financial StatementsNotes to the Consolidated Financial Statements continuedAt 31 December 20164 ACCOUNTING STANDARDS AND INTERPRETATIONS ISSUED BUT NOT EFFECTIVE CONTINUED
IFRS 15 REVENUE FROM CONTRACTS WITH CUSTOMERS CONTINUED
The new revenue standard will supersede all current revenue recognition requirements under IFRS. Either a full retrospective
application or a modified retrospective application is required for annual periods beginning on or after 1 January 2018. Early adoption
is permitted. The Group plans to adopt the new standard on the required effective date using the Modified retrospective method.
During 2016, the Group performed a preliminary assessment of IFRS 15, which is subject to changes arising from a more detailed
ongoing analysis. Furthermore, the Group is considering the clarifications issued by the IASB in April 2016 and will monitor any
further developments.

The Group is a leading Healthcare service provider in UAE, Europe and South America and also a leading supplier of products
and consumables across several key market segments in UAE, through its distribution division.

i) Sale of goods
In distribution business, the Group doesn’t expect to have any impact on the Group’s profit or loss on adoption of IFRS 15, as the
Group recognizes the revenue at a point in time when control of the asset is transferred to the customer, generally on delivery
of the goods. Sale of goods has only one performance obligation.

In Healthcare business, the Group is considering the following in order to assess the potential impact of IFRS 15, if any:

ii) Various health packages:
All Healthcare packages except some gynaecology packages referred below have very short length of service. Services are
rendered within 1 to 7 days and therefore revenues recognized at a point in time services are rendered. Management is therefore
not expecting IFRS 15 implementation to have an impact on the revenue recognized during a period.

Two healthcare gynaecology packages i) Basic antenatal and ii) IVF business consist of several stages or cycles and hence
services are rendered over a longer period of time which varies from 1 month to 9 month. Management is currently assessing the
contractual conditions and its implication regarding the period when performance obligation is met. Revenue from basic antenatal
and IVF business in 2016 was less than 3% of healthcare revenue.

The Group continues to assess individual contracts to determine the final impact, if any of appropriate systems, internal controls,
policies and procedures necessary to collect and disclose the required information.

iii) Presentation and disclosure requirements
IFRS 15 provides presentation and disclosure requirements, which are more detailed than under current IFRS. The presentation
requirements represent a significant change from current practice and significantly increases the volume of disclosures required
in Group’s financial statements.

IFRS 16 LEASES
IFRS 16 was issued in January 2016, and specifies how an IFRS reporter will recognise, measure, present and disclose leases.
The standard provides a single lessee accounting model, requiring lessees to recognise assets and liabilities for all leases unless
the lease term is 12 months or less or the underlying asset has a low value. Lessors continue to classify leases as operating or
finance, with IFRS 16’s approach to lessor accounting substantially unchanged from its predecessor, IAS 17.

IFRS 16 applies to annual reporting periods beginning on or after 1 January 2019. The Group is currently assessing the impact
of IFRS 16 and plans to adopt the new standard on the required effective date.

IFRS 9 Financial Instruments

In addition, the standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Group’s
financial statements that are not expected to have any material impact on the Group are as follows:
•
• Amendments to IFRS 10 and IAS 28: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture
•
•
•

IAS 7 Disclosure Initiative – Amendments to IAS 7
IAS 12 Recognition of Deferred Tax Assets for Unrealised Losses – Amendments to IAS 12
IFRS 2 Classification and Measurement of Share-based Payment Transactions – Amendments to IFRS 2

NMC Health plc Annual Report and Accounts 2016

111

1. 2. 3. 5. 4. Financial Statements5 BUSINESS COMBINATIONS
The fair value of the identifiable assets and liabilities of entities acquired as at the date of acquisition are as follows:

Particulars

Assets
Intangible assets
Property and equipment
Inventories
Accounts receivable
Other receivables
Deferred tax asset
Cash and bank balances

Liabilities
Borrowings
Accounts payable
Other payable
Tax payable

Total identified net assets at fair value
Non-controlling interest
Goodwill arising on acquisition

Purchase consideration

Purchase consideration:
Payable in cash
Contingent consideration
Deferred consideration
Fair value measurement

Total consideration

Fakih IVF
US$’000

CFC
US$’000

HCMR
US$’000

Nadia
US$’000

Cooper
US$’000

Lifewise
US$’000

Total
US$’000

25,324
4,309
613
8,579
41,436
–
3,395

–
99
–
811
101
48
163

83,656

1,222

–
4,788
43,001
–

47,789

–
340
–
113

453

35,867
(17,575)
186,616

769
(77)
14,404

204,908

15,096

190,446
8,128
7,051
(717)

204,908

13,582
1,514
–
–

15,096

149
2,404
356
2,553
109
–
346

5,917

855
2,032
760
136

3,783

2,134
(872)
8,574

9,836

9,836
–
–
–

9,836

–
316
–
1,102
101
–
134

1,653

–
297
23
–

320

1,333
–
13,787

15,120

12,251
–
2,869
–

15,120

1
343
–
181
591
–
835

1,951

–
1,137
103
–

1,240

711
–
10,258

10,969

9,502
–
1,467
–

10,969

–
14
–
38
8
–
–

–
38
17
–

5
–
267

272

272
–
–
–

272

25,474
7,485
969
13,264
42,346
48
4,873

94,459

855
8,632
43,904
249

53,640

40,819
(18,524)
233,906

256,201

235,889
9,642
11,387
(717)

256,201

Analysis of cash flows on acquisitions is as follows:

Particulars

Cash paid
Deferred consideration paid
Net cash acquired with the subsidiaries
Transaction costs

Fakih IVF
US$’000

(190,446)
(3,410)
3,395
–

CFC
US$’000

(13,582)
–
163
(744)

HCMR
US$’000

Nadia
US$’000

Cooper
US$’000

Lifewise
US$’000

Total
US$’000

(9,836)
–
346
(259)

(12,251)
(435)
134
(106)

(9,502)
(1,467)
835
(136)

(272)
–
–
(14)

(235,889)
(5,312)
4,873
(1,259)

Net cash flow on acquisition

(190,461)

(14,163)

(9,749)

(12,658)

(10,270)

(286)

(237,587)

The transaction costs reported in the consolidated income statement comprise of the following:

Transaction costs for Fakih IVF
Transaction costs for the acquired entities
Transaction costs for acquisitions in progress

2016
US$‘000

–
1,259
3,344

4,603

2015
US$‘000

750
3,304
77

4,131

The fair value assessment of identifiable net assets is final except for CFC and HCMR.

The non-controlling interest in all acquired entities is measured at the proportionate share of net assets of subsidiaries.

112

NMC Health plc Annual Report and Accounts 2016

Financial StatementsNotes to the Consolidated Financial Statements continuedAt 31 December 2016

5 BUSINESS COMBINATIONS CONTINUED
Other financial information with respect to acquired entities is as follows:

Particulars

Revenue from the date of acquisition
Profit after tax from the date of acquisition
Revenue from 1 January to 31 December 2016

Fakih IVF
US$’000

65,171
35,293

CFC
US$’000

3,133
1,284

HCMR
US$’000

6,058
376

Nadia
US$’000

7,211
3,036

Cooper
US$’000

Lifewise
US$’000

3,441
430

38
(87)

Total
US$’000

85,052
40,332

(unaudited)

70,600

5,589

15,575

7,211

4,268

174

103,417

Profit after tax from 1 January to 31 December 2016

(unaudited)

Trade receivables gross value as of acquisition date
Trade receivables fair value as of acquisition date

38,101
8,579
8,579

1,506
951
811

794
2,657
2,553

3,036
1,102
1,102

626
181
181

(125)
38
38

43,938
13,508
13,264

ACQUISITION OF FAKIH IVF
On 24 November 2015, the Group agreed, subject to regulatory approval and legal formalities, to acquire a 51% controlling stake
in the voting shares of Fakih IVF, an unlisted group registered in Cayman Islands and operationally headquartered in Abu Dhabi,
UAE, which is the Middle East’s leader in the provision of IVF and fertility services. All controlling rights (i.e. voting, appointment
and removal of directors, dividend rights) vest with NMC. These rights cannot be relinquished.

The Group acquired the control of Fakih IVF on 8 February 2016, date on which regulatory approvals and legal formalities were
completed. The consolidated financial statements include the results of Fakih IVF for 11 month period from the acquisition date.

The goodwill recognised is attributable to the expected synergies and other benefits from combining the assets and activities of
Fakih IVF with those of the Group. Goodwill is allocated to the healthcare segment. None of the recognised goodwill is expected to
be deductible for income tax purposes as there is no corporation tax in the UAE. Synergistic benefits will arise in the following ways:
• Fakih is recognized as a leading Middle East market leader for IVF treatment. NMC plan to set up an IVF clinic in Brightpoint

Hospital and NMC Royal, Abu Dhabi will benefit directly from set-up, training and efficiency cost savings as a result of utilising
Fakih-IVF processes and procedures.

• NMC patients in UAE can be referred to Fakih clinics in UAE for IVF related treatments.
• The successful and swift launch of IVF clinics in the UAE under the NMC umbrella, and using proven Fakih technologies, is

expected to attract additional patients from within the UAE and the wider GCC area. There are only a small number of IVF clinics
in the UAE at present. This is a key growth area in the healthcare sector where NMC can use its substantial brand strength,
together with Fakih own specialised brand, to attract new customers that may previously have chosen alternative clinic.

At the date of the acquisition, the fair value assessment of identifiable net assets included brands amounting to US$25,214,000.
No deferred tax liability has been recognised as there is no corporation tax in UAE.

Deferred consideration is payable in three unequal instalments in a period of two years with last instalment due in 2017.

Purchase consideration includes contingent consideration of US$8,128,000. The full value of the contingent consideration is
US$9,030,000 and the present value as at 31 December 2016 is US$8,128,000. The contingent consideration relates to amounts
payable in the event that licenses to operate in certain other GCC countries are obtained. As of 31 December 2016, contingent
consideration remains payable and is included in other payables. Contingent consideration is expected to be payable by end of 2017.

The Group has incurred a contractual obligation to deliver cash or another financial asset by issuing the Post-dated cheques (those
were issued by a company prior to our acquisition and not connected to the unit acquired) and have met the definition of financial
liability, present value of such Post-dated cheques of US$38,029,000 was recorded as liability as of acquisition date. Further, the
Group has a contractual right to be compensated from the Seller by way of cash or other financial asset in case it suffers any
loss on account of those Post-dated cheques as the Group is indemnified by the Seller for any loss that may arise on account of
encashment of such issued Post-dated cheques before their replacement. Accordingly, a contra financial asset has been recorded
of the above same amount as of acquisition date.

As of 31 December 2016, present value of Post-dated cheques issued and corresponding receivable is US$36,929,000 and have been
recorded under non-current other payables (note 30) and other non-current financial assets.

ACQUISITION OF COPENHAGEN FERTILITY CENTER (“CFC”)’
On 10 June 2016, the Group acquired 90% of the voting shares of CFC, an unlisted company based in Denmark and specialising
in research and medical services in the fields of gynaecology, obstetrics and human reproduction. The consolidated financial
statements include the results of CFC for 7 month period from the acquisition date.

NMC Health plc Annual Report and Accounts 2016

113

1. 2. 3. 5. 4. Financial Statements5 BUSINESS COMBINATIONS CONTINUED
ACQUISITION OF COPENHAGEN FERTILITY CENTER (“CFC”)’ CONTINUED
The Group entered into separate shareholder agreement dated 10 June 2016 with the sellers relating to a put option on the minority
10% shareholdings that remains with the previous owner’s post-acquisition. The Group does not have ‘present ownership’ of this
10% minority shareholding due to the terms of the option agreements and will continue to account for the acquisition of CFC
on the basis of 90% equity stake, with full recognition of the 10% non-controlling interest. The put options are exercisable from the
fifth anniversary of the shareholder agreement. On exercise of the put options, cash will be paid. The value of the put option is
calculated based on the EBITDA multiple. A redemption liability for the value of the options at the acquisition date has been created
amounting to US$1,585,000 (being the present value of the redemption liability at the acquisition date), with an equal amount being
treated as a reduction in equity. As at 31 December 2016, the present value of the redemption liability is US$1,541,000 (Note 37).

The Group acquired CFC to enable Clinica Eugin to reinforce its presence in Europe and strengthen its brand and positioning at the
forefront of its market. All controlling rights (i.e. voting, appointment and removal of directors, dividend rights) vest with NMC. These
rights cannot be relinquished.

Goodwill represents future business potential and profit growth of CFC and it comprises all intangibles that cannot be individually
recognised such as the assembled workforce, customer service, future client relationships and presence in the geographical
market. Goodwill is allocated to the healthcare segment. None of the recognised goodwill is expected to be deductible for income
tax purposes.

ACQUISITION OF HUNTINGTON CENTRO DE MEDICINA REPRODUCTIVA S/A (“HCMR”)
On 12 September 2016, the Group acquired 60% of the voting shares of HCMR, an unlisted company based in Sao Paulo, Brazil and
specialising in research and medical services in the fields of gynaecology, obstetrics and human reproduction. The consolidated
financial statements include the results of HCMR for 4 month period from the acquisition date.

The Group entered into separate shareholder agreement dated 12 September 2016 with the sellers relating to put option on the
minority 40% shareholdings that remains with the previous owners post-acquisition. The Group does not have ‘present ownership’
of this 40% minority shareholding due to the terms of the option agreements and will continue to account for the acquisition of
HCMR on the basis of 60% equity stake, with full recognition of the 40% non-controlling interest. The put options are exercisable at
any time between the lock up period and 36 months thereafter (Liquidity period). Lock Up period is 3 years. On exercise of the put
options, cash will be paid. The value of the put option is calculated based on the EBITDA multiple. A redemption liability for the value
of the options at the acquisition date has been created amounting to US$11,216,000 (being the present value of the redemption
liability at the acquisition date), with an equal amount being treated as a reduction in equity. As at 31 December 2016, the present
value of the redemption liability is US$10,707,000 (Note 37).

The Group acquired HCMR to enable Clinica Eugin to reinforce its presence in South America and strengthen its brand and
positioning at the forefront of its market. All controlling rights (i.e. voting, appointment and removal of directors, dividend rights)
vest with NMC. These rights cannot be relinquished.

Goodwill represents future business potential and profit growth of HCMR and it comprises all intangibles that cannot be individually
recognised such as the assembled workforce, customer service, future client relationships and presence in the geographical
market. Goodwill is allocated to the healthcare segment. None of the recognised goodwill is expected to be deductible for income
tax purposes.

Purchase price allocation is not yet finalized. Goodwill has been recognized based on currently available information and is subject
to further adjustments as and if new information comes to managements awareness.

ACQUISITION OF NADIA MEDICAL CENTRE LLC (“NADIA”)
The Group acquired 100% of Nadia because this acquisition extends gynaecology and paediatric service offerings to complement
NMC’s growing IVF/women’s health franchise including Fakih, Clinica Eugin and Bright Point Royal. This medical centre is expected
to contribute to the patient cross-referral capabilities of NMC’s nation-wide and multi-specialty hub-and-spoke healthcare services
network. All controlling rights (i.e. voting, appointment and removal of directors, dividend rights) vest with NMC. These rights cannot
be relinquished.

The Group acquired the control of Nadia on 7 January 2016, date on which regulatory approvals and legal formalities were
completed. The consolidated financial statements include the results of Nadia for 12 month period from the acquisition date.

The goodwill recognised is attributable to the expected synergies and other benefits from combining the assets and activities
of Nadia with those of the Group. Goodwill is allocated to the healthcare segment. None of the recognised goodwill is expected to
be deductible for income tax purposes as there is no corporation tax in the UAE. Synergistic benefits will arise in the following ways:
• The ability to cross refer patients from Nadia to the nearby NMC Specialty Hospital and Bright Point Royal in Abu Dhabi.
• Nadia can utilise In Patient and Out Patient facilities at Bright point and NMC Royal for deliveries and other procedures.
• Synergies will arise from Nadia focus on gynaecology and paediatrics and NMC’s growth in IVF & women health segments.

Deferred consideration is payable in three unequal instalments in a period of three years with last instalment due in 2018.

114

NMC Health plc Annual Report and Accounts 2016

Financial StatementsNotes to the Consolidated Financial Statements continuedAt 31 December 20165 BUSINESS COMBINATIONS CONTINUED
ACQUISITION OF COOPER HEALTH CLINIC AND COOPER DERMATOLOGY & DENTAL CLINIC (“COOPER”)
On 30 December 2015, the Group agreed to acquire 100% of the business of Cooper because this business extends the
specialisation in the provision of obstetrics, gynaecology, paediatric and dental services in Dubai region. All controlling rights
(i.e. voting, appointment and removal of directors, dividend rights) vest with NMC. These rights cannot be relinquished.

The Group acquired the control of Cooper on 8 March 2016, date on which regulatory approvals and legal formalities were
completed. The consolidated financial statements include the results of Cooper for 10 month period from the acquisition date.

The goodwill recognised is attributable to the expected synergies and other benefits from combining the assets and activities of
Cooper with those of the Group. Goodwill is allocated to the healthcare segment. None of the recognised goodwill is expected to
be deductible for income tax purposes as there is no corporation tax in the UAE. Synergistic benefits will arise in the following ways:
• The acquisition of Cooper extends the healthcare segment’s market position within Dubai and the UAE as a whole.
• The ability to cross refer patients from Cooper to the nearby NMC Specialty Hospital in Dubai.

Full and final deferred consideration payable was paid in August 2016.

The fair value of the identifiable assets and liabilities of entities acquired in previous year at the dates of acquisition were as follows:

Particulars

Assets
Intangible assets
Property and equipment
Deferred tax asset
Inventories
Accounts receivable
Other receivables
Cash and bank balances

Liabilities
Current tax
Borrowings
Deferred tax
Accounts payable
Other payable

Total identified net assets at fair value
Non-controlling interest
Goodwill arising on acquisition

Purchase consideration

Purchase consideration:
Payable in cash
Contingent consideration

Total consideration

Luarmia SL
US$’000

CIRH
US$’000

Biogenesi
US$’000

TADS
US$’000

Americare
US$’000

Dr Sunny
US$’000

ProVita
US$’000

Total
US$’000

35,657
1,932
842
3,521
678
3,821
9,610

56,061

–
25,006
8,804
2,887
5,100

41,797

14,264
(1,940)
117,059

129,383

127,107
2,276

129,383

378
73
–
–
174
41
1,976

7,373
645
1
–
–
–
9

2,642

8,028

35
–
92
382
1,691

2,200

442
–
13,622

14,064

11,393
2,671

14,064

–
–
2,058
2
111

2,171

5,857
(2,343)
8,329

11,843

5,522
6,321

11,843

–
30
–
362
851
172
2,001

3,416

–
–
–
922
1,126

2,048

1,368
(342)
4,879

5,905

5,905
–

5,905

2,623
1,158
–
85
2,724
350
1,199

8,139

–
39
–
1,016
1,884

2,939

6,847
1,219
–
810
5,372
2,880
3,828

21,935
8,635
–
662
9,881
2,386
9,825

74,813
13,692
843
5,440
19,680
9,650
28,448

20,956

53,324

152,566

–
1,566
–
3,865
1,942

7,373

–
54
–
3,066
1,869

4,989

35
26,665
10,954
12,140
13,723

63,517

5,200
(520)
26,763

13,583
–
53,838

48,335
–
120,582

89,049
(5,145)
345,072

31,443

67,421

168,917

428,976

31,443
–

31,443

57,973
9,448

67,421

160,592
8,325

399,935
29,041

168,917

428,976

Purchase price allocation for Centro de Infertilidad y Reproduccion Humana SLU (CIRH), Centro de Medicina della Riproduzione
(Biogenesi), Trans Arabia Drug Store LLC (TADS), Dr Sunny Healthcare (Dr. Sunny), ProVita International Medical Centre LLC (ProVita)
were provisional as of 31 December 2015 and has been completed during the year. Purchase price allocation of all of these
acquisitions remain same except for Dr. Sunny for which fair value of contingent consideration has been updated by an amount
of US$2,126,000 and accordingly purchase consideration and goodwill are reduced by same amount. On the grounds of materiality
considerations the adjustment have been recorded in the current period.

NMC Health plc Annual Report and Accounts 2016

115

1. 2. 3. 5. 4. Financial Statements5 BUSINESS COMBINATIONS CONTINUED
ACQUISITION OF COOPER HEALTH CLINIC AND COOPER DERMATOLOGY & DENTAL CLINIC (“COOPER”) CONTINUED
Analysis of cash flows for acquisitions done in previous year disclosed in 2015 consolidated financial statements was as follows:

Particulars

Luarmia SL
US$’000

CIRH
US$’000

Biogenesi
US$’000

TADS
US$’000

Americare
US$’000

Dr Sunny
US$’000

ProVita
US$’000

Total
US$’000

Cash paid
Contingent consideration paid
Net cash acquired with the subsidiaries
Transaction costs

Net cash flow on acquisition

(127,107)
(2,276)
9,610
(1,745)

(121,518)

(11,393)
–
1,976
(87)

(9,504)

(5,522)
–
9
(96)

(5,609)

(5,905)
–
2,001
(81)

(31,443)
–
1,199
(313)

(57,973)
(1,742)
3,828
(374)

(160,592)
–
9,825
(608)

(399,935)
(4,018)
28,448
(3,304)

(3,985)

(30,557)

(56,261)

(151,375)

(378,809)

Other financial information with respect to entities acquired in previous year disclosed in 2015 consolidated financial statements
was as follows:

Particulars

Revenue from the date of acquisition
Profit after tax from the date of acquisition
Revenue from 1 January to

31 December 2015

Profit after tax from 1 January to

31 December 2015

Trade receivable s gross value as of

acquisition date

Trade receivables fair value as of

acquisition date

Luarmia SL
US$’000

CIRH
US$’000

Biogenesi
US$’000

TADS
US$’000

Americare
US$’000

Dr Sunny
US$’000

29,668
6,708

6,645
1,660

2,858
819

5,243
2,485

11,435
2,126

12,158
1,192

ProVita
US$’000

19,701
5,033

Total
US$’000

87,708
20,023

36,063

8,804

5,990

5,841

16,601

36,357

54,007

163,663

6,010

2,631

2,312

2,656

3,143

2,588

9,298

28,638

858

678

174

–

851

2,724

6,510

12,451

23,568

2,724

5,372

9,881

19,680

ADVANCES PAID FOR ACQUISITIONS
As of the reporting date, certain acquisitions are in progress for which the Group has paid an advance of US$1,614,000 (2015: US$ nil).

6 MATERIAL PARTLY-OWNED SUBSIDIARIES
The financial information in respect of subsidiaries that have material non-controlling interests is provided below:

PROPORTION OF EQUITY INTEREST HELD BY NMC

Indirect subsidiaries

Luarmia SL
Americare LLC
Fakih

Percentage of holdings

Country of
Incorporation

31 December
2016

31 December
2015

Spain
UAE
UAE

88.4%*
90%
51%

86.4%*
90%
–

* Shareholding disclosed is for Luarmia SL only. Within Luarmia SL there are certain other subsidiaries. The financial information provided below is for Luarmia

SL and its subsidiaries.

ACCUMULATED BALANCES OF MATERIAL NON-CONTROLLING INTEREST

Luarmia SL
Americare LLC
Fakih IVF LLC

PROFIT ALLOCATED TO MATERIAL NON-CONTROLLING INTEREST

Luarmia SL
Americare LLC
Fakih IVF LLC

2016
US$’000

5,836
1,062
34,160

2016
US$’000

1,251
357
16,586

2015
US$’000

4,298
704
–

2015
US$’000

15
184
–

The summarised financial information of these subsidiaries is provided below. This information is stated before inter-company
eliminations.

116

NMC Health plc Annual Report and Accounts 2016

Financial StatementsNotes to the Consolidated Financial Statements continuedAt 31 December 20166 MATERIAL PARTLY-OWNED SUBSIDIARIES CONTINUED
PROFIT ALLOCATED TO MATERIAL NON-CONTROLLING INTEREST CONTINUED

Summarised statement of profit or loss for 2016

Revenue
Direct cost
Administrative and other expenses
Depreciation and amortisation
Profit before tax
Income tax

Profit for the year

Other comprehensive loss

Total comprehensive income

Attributable to non-controlling interests

Summarised statement of profit or loss for 2015

Revenue
Direct cost
Administrative and other expenses
Depreciation and amortisation
Profit before tax
Income tax

Profit for the year

Other comprehensive loss

Total comprehensive (loss) income

Attributable to non-controlling interests

Summarised statement of financial position as at 31 December 2016

Inventories and cash and bank balance (current)
Account receivable and prepayment (current)
Property, plant and equipment and other non-current assets (non-current)
Accounts payable and accruals (current)
Interest-bearing loans (current)
Interest-bearing loans and deferred tax liabilities (non-current)
Other payable (non-current)

Total Equity

Attributable to:

Equity holders of parent
Non-controlling interest

Summarised statement of financial position as at 31 December 2015

Inventories & cash and bank balance (current)
Accounts receivable and prepayments (current)
Property and equipment and other non-current assets (non-current)
Accounts payable and accruals (current)
Interest-bearing loans (current)
Interest-bearing loans and deferred tax liabilities (non-current)
Other payable (non-current)

Total Equity

Attributable to:

Equity holders of parent
Non-controlling interest

Luarmia
US$’000

66,078
(23,597)
(26,812)
(6,000)
9,669
(174)

9,495

(3,955)

5,540

1,251

Luarmia
US$’000

17,449
8,934
135,570
(17,682)
(10,704)
(36,592)
(20,450)

76,525

70,689
5,836

Fakih
US$’000

65,171
(19,469)
(8,831)
(3,022)
33,849
–

33,849

–

33,849

16,586

Luarmia
US$’000

39,020
(16,205)
(14,116)
(3,823)
4,876
403

5,279

(5,342)

(63)

Fakih
US$’000

13,861
31,615
68,454
(5,113)
–
–
(39,102)

69,715

35,555
34,160

Luarmia
US$’000

17,831
5,163
108,265
(9,026)
(9,708)
(35,524)
(12,801)

64,200

59,902
4,298

Americare
US$’000

17,044
(10,377)
(2,281)
(813)
3,573
–

3,573

–

3,573

357

Americare
US$’000

11,435
(6,485)
(2,538)
(570)
1,842
–

1,842

–

1,842

184

Americare
US$’000

363
9,298
3,236
(1,843)
–
–
(437)

10,617

9,555
1,062

Americare
US$’000

1,180
4,194
3,333
(1,350)
–
–
(313)

7,044

6,339
705

NMC Health plc Annual Report and Accounts 2016

117

1. 2. 3. 5. 4. Financial Statements

6 MATERIAL PARTLY-OWNED SUBSIDIARIES CONTINUED
PROFIT ALLOCATED TO MATERIAL NON-CONTROLLING INTEREST CONTINUED

Summarised cash flow information for period ended 31 December 2016

Operating
Investing
Financing

Net Increase/(decrease) in cash and cash equivalents

Summarised cash flow information for period ended 31 December 2015

Operating
Investing
Financing

Net Increase/(decrease) in cash and cash equivalents

Luarmia
US$’000

15,593
(26,607)
10,398

(616)

Fakih
US$’000

15,003
(4,914)
–

10,089

Luarmia
US$’000

5,324
(18,440)
16,312

3,196

Americare
US$’000

(98)
(716)
–

(814)

Americare
US$’000

1,611
(121)
(1,595)

(105)

7 SEGMENT INFORMATION
For management purposes, the Group is organised into business units based on their products and services and has two
reportable segments as follows:
• The healthcare segment is engaged in providing professional medical services, comprising diagnostic services, in and outpatient
clinics, provision of all types of research and medical services in the field of gynaecology, obstetrics and human reproduction
and retailing of pharmaceutical goods. It also includes the provision of management services in respect of a hospital.

• The distribution & services segment is engaged in wholesale trading of pharmaceutical goods, medical equipment, cosmetics

and food.

No operating segments have been aggregated to form the above reportable operating segments.

The new acquired companies, Fakih IVF, Copenhagen Fertility Center, Huntington Centro de Medicina Reproductive, Nadia Medical
Centre, Cooper Health and Lifewise Home Healthcare LLC comes under the healthcare segment.

Management monitors the operating results of its business units separately for the purpose of making decisions about resource
allocation and performance assessment. Segment performance is evaluated based on EBITDA and profit or loss. These are
measured consistently with EBITDA and profit or loss excluding finance income and group administrative expenses, unallocated
depreciation and unallocated other income, in the consolidated financial statements.

Finance costs and finance income relating to UAE subsidiaries are not allocated to individual segments as they are managed on
a group basis. In addition Group overheads are also not allocated to individual segments as these are managed on a Group basis.

Transfer prices between operating segments are on an arm’s length basis in a manner similar to transactions with third parties.

118

NMC Health plc Annual Report and Accounts 2016

Financial StatementsNotes to the Consolidated Financial Statements continuedAt 31 December 20167 SEGMENT INFORMATION CONTINUED
The following tables present revenue and profit and certain asset and liability information regarding the Group’s business
segments for the years ended 31 December 2016 and 2015.

Year ended 31 December 2016
Revenue
External customers
Inter segment

Total

(Expenses)/Income
Depreciation and amortisation
Finance costs
Segment EBITDA

Segment profit

Segment assets

Segment liabilities

Other disclosures
Capital expenditure

Year ended 31 December 2015
Revenue
External customers
Inter segment

Total

(Expenses)/Income
Depreciation and amortisation
Finance costs
Segment EBITDA

Segment profit

Segment assets

Segment liabilities

Other disclosures
Capital expenditure

Healthcare
US$’000

Distribution and
services
US$’000

Total segments
US$’000

Adjustments
and eliminations
US$’000

Consolidated
US$’000

816,314
7,001

823,315

(43,320)
(5,834)
241,115

192,932

1,454,767

256,613

404,521
27,406

431,927

(3,248)
(9)
47,113

43,565

265,194

72,405

1,220,835
34,407

1,255,242

(46,568)
(5,843)
288,228

236,497

1,719,961

329,018

–
(34,407)

(34,407)

(9,431)
(35,841)
(42,147)

(85,095)

597,032

1,039,104

1,220,835
–

1,220,835

(55,999)
(41,684)
246,081

151,402

2,316,993

1,368,122

61,483

4,171

65,654

1,751

67,405

511,029
6,087

517,116

(27,887)
(1,154)
136,976

108,037

1,029,305

160,677

369,841
23,575

393,416

(2,705)
(4)
43,498

40,708

257,484

65,748

880,870
29,662

910,532

(30,592)
(1,158)
180,474

148,745

1,286,789

226,425

–
(29,662)

(29,662)

(4,734)
(22,687)
(30,128)

(62,985)

167,091

727,790

880,870
–

880,870

(35,326)
(23,845)
150,346

85,760

1,453,880

954,215

78,271

2,085

80,356

1,907

82,263

Inter-segment revenues are eliminated upon consolidation and reflected in the ‘adjustments and eliminations’ column. All other
adjustments and eliminations are part of detailed reconciliations presented further below.

ADJUSTMENTS AND ELIMINATIONS
Finance income and group overheads are not allocated to individual segments as they are managed on a group basis.

Term loans, bank overdraft and other short term borrowings and certain other assets and liabilities are not allocated to segments
as they are also managed on a group basis.

Capital expenditure consists of additions to property and equipment and intangible assets.

NMC Health plc Annual Report and Accounts 2016

119

1. 2. 3. 5. 4. Financial Statements7 SEGMENT INFORMATION CONTINUED
RECONCILIATION OF SEGMENT EBITDA TO GROUP PROFIT

Segment EBITDA
Unallocated group administrative expenses
Unallocated other income
Unallocated finance income
Unallocated unamortised finance fees written off
Finance costs
Depreciation
Amortisation
Impairment of assets
Transaction costs related to business combination
Tax

Group Profit

RECONCILIATION OF SEGMENT PROFIT TO GROUP PROFIT

Segment profit
Unallocated finance income
Unallocated finance costs
Unallocated group administrative expenses
Unallocated unamortised finance fees written off
Unallocated depreciation
Unallocated other income
Unallocated amortisation cost
Unallocated impairment of property and equipment
Unallocated transaction cost

Group Profit

RECONCILIATION OF GROUP ASSETS

Segment assets
Unallocated property and equipment
Unallocated inventory
Unallocated accounts receivable and prepayments
Unallocated bank balances and cash
Unallocated bank deposits
Unallocated intangible assets

Group assets

RECONCILIATION OF GROUP LIABILITIES

Segment liabilities
Unallocated term loans
Unallocated employees’ end of service benefits
Unallocated accounts payable and accruals
Unallocated bank overdraft and other short term borrowings
Unallocated amounts due to related parties
Unallocated option redemption liability

Group liabilities

120

NMC Health plc Annual Report and Accounts 2016

2016
US$’000

288,228
(42,202)
55
9,157
–
(41,684)
(45,010)
(10,989)
(1,376)
(4,603)
(174)

151,402

2016
US$’000

236,497
6,699
(35,841)
(42,202)
–
(1,034)
55
(8,398)
(1,030)
(3,344)

151,402

2016
US$’000

1,719,961
10,710
22
8,656
436,949
137,869
2,826

2015
US$’000

180,474
(31,153)
1,025
925
(2,612)
(23,845)
(29,851)
(5,475)
–
(4,131)
403

85,760

2015
US$’000

148,745
1,043
(22,687)
(31,153)
(2,612)
(624)
1,025
(4,110)
–
(3,867)

85,760

2015
US$’000

1,286,789
10,290
22
8,913
86,321
58,858
2,687

2,316,993

1,453,880

2016
US$’000

329,018
782,624
2,608
8,281
219,851
488
25,252

1,368,122

2015
US$’000

226,425
539,875
1,854
5,837
154,962
178
25,084

954,215

Financial StatementsNotes to the Consolidated Financial Statements continuedAt 31 December 20167 SEGMENT INFORMATION CONTINUED
OTHER INFORMATION
The following table provides information relating to Group’s major customers who contribute more than 10% towards the
Group’s revenues:

Year ended 31 December 2016

Customer 1

Year ended 31 December 2015

Customer 1
Customer 2

GEOGRAPHICAL INFORMATION

Revenue from external customers
United Arab Emirates
Spain
Others

Healthcare
US$’000

Distribution
and services
US$’000

324,285

154,772
47,083

201,855

–

–
–

–

2016
US$’000

1,154,757
55,361
10,717

Total
US$’000

324,285

154,772
47,083

201,855

2015
US$’000

841,851
34,994
4,025

Total revenue as per consolidated income statement

1,220,835

880,870

Non-current assets
United Arab Emirates
Spain
Others

Total non-current assets

Deferred tax assets
United Arab Emirates
Spain
Others

Total Deferred tax assets

ANALYSIS OF REVENUE BY CATEGORY

Revenue from services:
Healthcare – clinic
Healthcare – management fees

Sale of goods:
Distribution
Healthcare

Total

974,522
193,706
859

1,169,087

–
2,122
13

2,135

671,956
176,824
844

849,624

–
1,302
14

1,316

2016
US$’000

2015
US$’000

720,051
10,135

730,186

404,521
86,128

490,649

410,408
7,280

417,688

369,841
93,341

463,182

1,220,835

880,870

NMC Health plc Annual Report and Accounts 2016

121

1. 2. 3. 5. 4. Financial Statements8 EXPENSES BY NATURE

Cost of inventories recognised as an expense
Salary expenses
Rent expenses
Sales promotion expenses
Repair and maintenance expenses
Electricity expenses
Legal & licence fees
Motor vehicle expenses
Insurance expenses
Printing and stationery
Communication expenses
IT expenses
Others

Allocated to:
Direct costs
General and administrative expenses

2016
US$’000

457,276
371,075
65,549
50,695
13,408
6,652
8,134
3,773
8,338
3,169
3,724
1,656
27,771

1,021,220

753,325
267,895

1,021,220

The classifications of the remaining expenses by nature recognised in the consolidated income statement are:

Transaction costs in respect of business combinations
Depreciation
Amortisation
Finance costs
Impairment of property and equipment
Unamortised finance fees written off

2016
US$’000

4,603
45,010
10,989
41,684
1,376
–

103,662

2015
US$’000

389,702
239,139
44,859
43,882
9,891
4,927
3,561
3,292
2,688
2,560
2,393
1,193
19,086

767,173

575,926
191,247

767,173

2015
US$’000

4,131
29,851
5,475
23,845
–
2,612

65,914

9 OTHER INCOME
Other income includes US$43,644,000 (2015: US$35,256,000) relating to reimbursement of advertisement and promotional expenses
incurred by the Group. Revenue is recognised following the formal acceptance of the Group’s reimbursement claims by suppliers
and is measured at the confirmed amount receivable.

10 FINANCE COSTS

Bank interest
Bank charges
Financial instruments fair value adjustments
Amortisation and re-measurement of option redemption liability (note 37)

11 FINANCE INCOME

Bank and other interest income
Financial instruments fair value adjustments

2016
US$’000

31,648
3,594
4,282
2,160

41,684

2015
US$’000

18,106
2,489
1,793
1,457

23,845

2016
US$’000

2015
US$’000

1,418
7,739

9,157

925
–

925

122

NMC Health plc Annual Report and Accounts 2016

Financial StatementsNotes to the Consolidated Financial Statements continuedAt 31 December 201612 PROFIT FOR THE YEAR BEFORE TAX
The profit for the year before tax is stated after charging:

Cost of inventories recognised as an expense

Cost of inventories written off and provided (note 20)

Minimum lease payments recognised as operating lease expense

Depreciation (note 17)

Amortisation (note 18)

Net Impairment of accounts receivable (note 21)

Employees’ end of service benefits (note 28)

Net foreign exchange loss/(gain)

Loss on disposal of property and equipment

Share based payments expense (note 32)

2016
US$’000

457,276

1,869

65,549

45,010

10,989

2,957

7,246

490

2,640

2015
US$’000

389,702

1,678

44,859

29,851

5,475

1,740

4,869

(593)

185

1,177

13 AUDITOR’S REMUNERATION
The Group paid the following amounts to its auditor and its associates in respect of the audit of the financial statements and for
other services provided to the Group.

Fees payable to the Company’s auditor for the audit of the Company’s annual accounts
Fees payable to the Company’s auditor and its associates for other services:

– the audit of the company’s subsidiaries pursuant to legislation
– audit related assurance services
– other assurance services
– Tax compliances services
– Tax advisory services
– non audit services

2016
US$’000

984

727
198
11
–
–
1,960

3,880

2015
US$’000

1,300

453
233
–
12
–
115

2,113

Included in the fees payable to the Company’s auditor for the audit of the Company’s annual accounts is US$ nil (2015: US$12,000)
which was under-accrued in respect of the prior year audit of the Company’s annual accounts.

The fees paid to the auditor includes US$61,000 (2015: US$115,000) in respect of out of pocket expenses. There were no benefits
in kind provided to the auditor or its associates in either 2016 or 2015.

Non-audit services relate to a Class 1 transaction (significant acquisition) combined with an equity placement and are
non-recurring in nature. This includes Reporting Accountants Report on the Historical financial information of the acquired
company as well as working capital and Pro-forma financial information report, issuing of Comfort and Consent Letters and
the Bring down Public Report.

14 STAFF COSTS AND DIRECTORS’ EMOLUMENTS
(A) STAFF COSTS

Wages and salaries
Employees’ end of service benefits (note 28)
Share based payments expense (note 32)
Others

2016
US$’000

334,976
7,246
2,640
26,213

371,075

2015
US$’000

217,439
4,869
1,177
15,654

239,139

Staff costs include amounts paid to directors, disclosed in part (b) below. The average number of monthly employees during the
year was made up as follows:

Healthcare
Distribution & services
Administration

2016

7,392
3,166
263

10,821

2015

5,495
2,456
230

8,181

NMC Health plc Annual Report and Accounts 2016

123

1. 2. 3. 5. 4. Financial Statements14 STAFF COSTS AND DIRECTORS’ EMOLUMENTS CONTINUED
(B) DIRECTORS’ REMUNERATION

Directors’ remuneration

2016
US$’000

7,166

2015
US$’000

4,623

Some of the executive directors are entitled to end of service benefits and to participate in share option plans as disclosed in
note 32. Further information in respect of this compensation paid to directors is disclosed in the Directors’ Remuneration Report.

15 TAX
The Group operates in the United Arab Emirates and Spain and certain other countries. As there is no corporation tax in the
United Arab Emirates, no taxes are recognised or payable on the operations in the UAE. There is no taxable income in the UK
accordingly there is no tax liability arising in the UK. The unused tax losses amount to US$25,549,000 as at 31 December 2016
(2015: US$13,049,000).

With respect to Group operations in Europe and South America the tax disclosures are as follows:

Consolidated income statement

Current income tax:
Charge for the year
Adjustment in respect of charge for the year

Deferred tax:
Charge on profit origination and reversal of temporary differences in the current year

Income tax charge/(credit) reported in the income statement

No tax is included in other comprehensive income (2015: US$NIL).

2016
US$’000

2015
US$’000

2,305
(5)

2,300

(2,126)

174

753
(163)

590

(993)

(403)

Given that there is no tax payable in respect of operations in the UAE and no UK corporation tax payable, the Group has used the
Spanish tax rate for the purpose of the preparation of the tax reconciliation presented below as all the taxable profits have been
generated by Luarmia S.L. group of companies. The corporation tax rate in Spain is 25% (2015: 28%).

Reconciliation of tax expense and the accounting profit multiplied by the Spanish domestic tax rate of 25% (2015: 28%) is
represented below:

Group accounting profit before tax from continuing operations for the year
Less: Accounting profit before tax from continuing operations (not subject to tax)

Accounting profit before tax from continuing operations (subject to tax)

Tax at the rate of 25% (2015: 28%)
Non-taxable dividend income
Tax saved on amortisation of intangibles
Adjustment in respect of prior period income tax
Different tax rates on overseas earnings
Expenses not deductible for tax purposes and other permanent differences
Deductible expenses for tax purpose:
R&D and IT
Accelerated depreciation
Other deductible expenses

Income tax charged/(credit) reported in the income statement

The effective tax rate of the Group is 0.11% (2015: -0.47%).

2016
US$’000

151,575
139,594

11,981

2,995
(1,774)
(1,198)
(5)
233
72

(382)
–
233

174

2015
US$’000

85,357
78,558

6,799

1,904
(1,032)
(480)
(163)
16
–

(609)
(39)
–

(403)

124

NMC Health plc Annual Report and Accounts 2016

Financial StatementsNotes to the Consolidated Financial Statements continuedAt 31 December 201615 TAX CONTINUED
DEFERRED TAX ASSETS AND LIABILITIES COMPRISE OF:
Deferred tax assets:

Tax credit for R&D expenses
Limit on tax deductibility of depreciation and amortisation

Total deferred tax assets

Deferred tax liabilities:

Depreciation and amortisation

Total deferred tax liabilities

Reconciliation of deferred tax liabilities, net

As of 1 January
Tax charge/(credit) for the year
Foreign exchange adjustments
Acquired with business during the year

As at 31 December

2016
US$’000

1,126
1,009

2,135

2016
US$’000

8,245

2016
US$’000

8,445
(2,127)
(208)
–

6,110

2015
US$’000

1,235
81

1,316

2015
US$’000

9,761

2015
US$’000

–
(993)
(673)
10,111

8,445

Deferred tax assets are recognised to the extent that it is probable as supported by forecasts that future taxable profits will be
available against which the temporary differences can be utilised.

16 EARNINGS PER SHARE (EPS)
Basic EPS amounts are calculated by dividing net profit for the year attributable to ordinary equity holders of the Parent Company
by the weighted average number of ordinary shares outstanding during the year.

Diluted EPS amounts are calculated by dividing the profit attributable to ordinary equity holders of the parent by the weighted
average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that
would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares.

The following reflects the income and share data used in the basic and diluted earnings per share computations:

Profit attributable to equity holders of the Parent (US$’000)

Weighted average number of ordinary shares in issue (‘000) for basic EPS
Effect of dilution from share based payments (‘000)

Weighted average number of ordinary shares (‘000) for diluted EPS

Basic earnings per share (US$)
Diluted earnings per share (US$)

2016

132,689

186,627
922

187,549

0.711
0.707

2015

82,215

185,714
484

186,198

0.443
0.442

The table below reflects the income and share data used in the adjusted earnings per share computations. All one off expense
and amortisation of acquired intangible assets, have been adjusted from the profit attributable to the equity holders of the parent
to arrive at the adjusted earnings per share:

Profit attributable to equity holders of the Parent
Unamortised finance fees written off
Transaction costs in respect of business combination
Amortisation of acquired intangible assets (net of tax)
Impairment of property and equipment

Adjusted profit attributable to equity holders of the Parent

Weighted average number of ordinary shares (‘000)
Diluted adjusted earnings per share (US$)

2016
US$’000

132,689
–
4,603
7,819
1,376

146,487

187,549
0.781

2015
US$’000

82,215
2,612
4,131
4,995
–

93,953

186,198
0.505

NMC Health plc Annual Report and Accounts 2016

125

1. 2. 3. 5. 4. Financial Statements16 EARNINGS PER SHARE (EPS) CONTINUED
Adjusted profit for the year of the Group is calculated as follows:

Profit for the year
Unamortised finance fees written off
Transaction costs in respect of business combination
Amortisation of acquired intangible assets (net of tax)
Impairment of property and equipment

Adjusted profit

17 PROPERTY AND EQUIPMENT
Property and equipment consists of the following:

Property and equipment

Freehold
land
US$’000

Hospital
building
US$’000

Buildings
US$’000

Leasehold
improvements
US$’000

Motor
vehicles
US$’000

31 December 2016
Cost:
At 1 January 2016
Additions
Relating to acquisition of subsidiaries
Disposals
Transfer from CWIP
Reclassification
Transfer to Intangible
Impairments
Exchange difference

At 31 December 2016

Depreciation:
At 1 January 2016
Charge for the year
Reclassification
Exchange difference
Relating to disposals

At 31 December 2016

Net carrying amount: At 31 December 2016

19,206

126,810

19,206
–
–
–
–
–
–
–
–

19,206

12,343
970
–
–
124,046
–
–
–
(38)

26,300
–
–
–
691
–
–
–
–

137,321

26,991

–
–
–
–
–

–

8,424
2,032
–
55
–

10,511

7,339
1,454
–
–
–

8,793

18,198

157,888
4,072
2,228
(498)
9,000
(78)
–
–
–

172,612

26,784
17,429
(40)
–
(80)

44,093

128,519

9,322
1,751
35
(370)
370
–
–
–
–

11,108

5,779
1,345
–
–
(369)

6,755

4,353

Freehold
land
US$’000

Hospital
building
US$’000

Buildings
US$’000

Leasehold
improvements
US$’000

Motor
vehicles
US$’000

2016
US$’000

151,402
–
4,603
7,819
1,376

165,200

2016
US$’000

459,338

2015
US$’000

85,760
2,612
4,131
4,995
–

97,498

2015
US$’000

433,524

Furniture,
fixtures
fittings and
medical
equipment
US$’000

Capital work
in progress
US$’000

Total
US$’000

180,342
21,190
5,222
(2,239)
41,915
78
–
–
(395)

161,744
38,949
–
–
(176,022)

(318)
(1,376)
4

567,145
66,932
7,485
(3,107)
–
–
(318)
(1,376)
(429)

246,113

22,981

636,332

85,295
22,750
40
(190)
(1,053)

106,842

–
–

–

133,621
45,010
–
(135)
(1,502)

176,994

139,271

22,981

459,338

Furniture,
fixtures
fittings and
medical
equipment
US$’000

Capital work
in progress
US$’000

Total
US$’000

31 December 2015
Cost:
At 1 January 2015
Additions
Relating to acquisition of subsidiaries
Disposals
Transfer from CWIP
Exchange difference

At 31 December 2015

Depreciation:
At 1 January 2015
Charge for the year
Exchange difference
Disposals

At 31 December 2015

19,206
–
–
–
–
–

19,206

–
–
–
–

–

Net carrying amount: At 31 December 2015

19,206

126

NMC Health plc Annual Report and Accounts 2016

12,343
–
–
–
–
–

12,343

8,114
310
–
–

8,424

3,919

26,300
–
–
–
–
–

26,300

5,920
1,419
–
–

7,339

18,961

51,859
2,317
2,268
–
101,444
–

7,421
1,564
571
(234)
–
–

143,488
14,088
7,222
(2,231)
17,893
(118)

213,758
63,733
3,631
(33)
(119,337)
(8)

474,375
81,702
13,692
(2,498)
–
(126)

157,888

9,322

180,342

161,744

567,145

13,730
13,054
–
–

26,784

131,104

5,185
800
–
(206)

5,779

3,543

73,069
14,268
(20)
(2,022)

85,295

95,047

–
–
–
–

–

106,018
29,851
(20)
(2,228)

133,621

161,744

433,524

Financial StatementsNotes to the Consolidated Financial Statements continuedAt 31 December 201617 PROPERTY AND EQUIPMENT CONTINUED
As part of the Group’s capital expenditure programme, borrowing costs of US$357,000 (2015: US$1,691,000) have been capitalised
during the year. The rate used to determine the amount of borrowing costs eligible for capitalisation was 1.9% (2015: 2.1%) which
is the effective rate of the borrowings used to finance the capital expenditure. Companies in the UAE are not subject to taxation
and as such there is no tax relief in respect of capitalised interest.

Total capital expenditure during the year ended 31 December 2016 was US$66,932,000 (2015: US$81,702,000). Of the total capital
expenditure spend during the year, US$38,949,000 (2015: US$63,733,000) related to new capital projects and US$27,983,000
(2015: US$17,969,000) related to further capital investment in our existing facilities.

Generally hospital and distribution operations are carried out on land and buildings which are leased from Government authorities
or certain private parties. The majority of the lease periods range from five to twenty seven years apart from New Medical Centre
Hospital LLC-Dubai (“Dubai General Hospital”), and the warehouse facilities which have leases renewable on an annual basis
(note 2.3). As at 31 December 2016 US$801,000 (2015: US$778,000) of the amounts included in property and equipment related
to assets with annually renewable leases.

In accordance with the local laws, except in some specific locations in the UAE the registered title of land and buildings must be
held in the name of a UAE national. As a result, land and buildings of the Group are legally registered in the name of shareholders
or previous shareholders of the Group. land with a carrying amount of US$4,144,000 (31 December 2015: US$4,144,000) are held in the
name of a previous shareholder for the beneficial interest of the Group. As the beneficial interest of such land and buildings resides
with the Group, these assets are recorded within land and buildings in the Group’s consolidated financial statements. The directors
take into account this local legal registration requirement, the Group’s entitlement to the beneficial interest arising from these
assets, as well as other general business factors, when considering whether such assets are impaired.

18 INTANGIBLE ASSETS

31 December 2016
Cost:
At 1 January 2016
Additions
Relating to acquisition of subsidiaries
Transfer from tangible
PPA Adjustment Dr. Sunny (note 5)
Exchange difference

At 31 December 2016

Amortisation:
At 1 January 2016
Charge for the year
Exchange difference

At 31 December 2016

Net carrying amount: At 31 December 2016

Software
US$’000

Brands
US$’000

6,841
473
258
318
–
(167)

7,723

1,078
819
(39)

1,858

5,865

40,129
–
25,214
–
–
(630)

64,713

1,588
4,614
–

6,202

58,511

Software
US$’000

Brands
US$’000

31 December 2015
Cost:
At 1 January 2015
Additions
Relating to acquisition of subsidiaries
Exchange difference

At 31 December 2015

Amortisation:
At 1 January 2015
Charge for the year
Exchange difference

At 31 December 2015

Net carrying amount: At 31 December 2015

3,220
548
3,217
(144)

6,841

–
1,099
(21)

1,078

5,763

–
–
40,914
(785)

40,129

–
1,588
–

1,588

Patient
relationship
and
Database
US$’000

19,638
–
–
–
–
(356)

19,282

1,270
2,681
–

3,951

15,331

Patient
relationship
and
Database
US$’000

–
–
20,098
(460)

19,638

–
1,270
–

1,270

Goodwill
US$’000

Others
US$’000

Total
US$’000

341,420
–
233,906
–
(2,126)
(5,862)

567,338

–
–
–

–

567,338

10,475
–
2
–
–
(308)

10,169

1,508
2,875
(152)

4,231

5,938

418,503
473
259,380
318
(2,126)
(7,323)

669,225

5,444
10,989
(191)

16,242

652,983

Goodwill
US$’000

Others
US$’000

Total
US$’000

1,016
–
345,072
(4,668)

341,420

–
–
–

–

–
13
10,584
(122)

10,475

–
1,518
(10)

1,508

8,967

4,236
561
419,885
(6,179)

418,503

–
5,475
(31)

5,444

413,059

38,541

18,368

341,420

Others include intellectual property, rental contracts, private contracts and non-compete arrangements.

NMC Health plc Annual Report and Accounts 2016

127

1. 2. 3. 5. 4. Financial Statements18 INTANGIBLE ASSETS CONTINUED
GOODWILL
Additions to goodwill in the year relate to goodwill measured in respect of the acquisitions of Fakih IVF, Copenhagen Fertility Center
Holding, Huntington Centro de Medicina Reproductive, Nadia Medical Centre, Cooper Health and Lifewise Home Healthcare LLC.

Goodwill is not amortised, but is reviewed annually for assessment of impairment in accordance with IAS 36. The Group performed
its annual goodwill impairment test in December 2016 and 2015. Goodwill acquired through business combinations is allocated to
the following operating segments representing a group of cash generating units (CGUs), which are also operating and reportable
segments, for impairment testing:
• Healthcare
• Distribution and services

The healthcare CGU has goodwill allocated to it of US$562,459,000 at the year-end (2015: US$336,541,000). The distribution and
services CGU has goodwill allocated to it of US$4,879,000 at the year-end (2015: US$4,879,000).

The recoverable amounts for both CGUs are based on value in use, which has been calculated using cash flow projections
from financial budgets approved by senior management covering a five year period. Cash flows beyond the five year period are
extrapolated using a 3% growth rate (2015: 3.0%) which is significantly lower than the current annual growth rate of both CGUs. The
pre-tax discount rate applied to the cash flows of both CGUs is 8.45% (2015: 7.7%), which is based on the Group’s weighted average
cost of capital (WACC) and takes into account such measures as risk free rates of return, the Group’s debt/equity ratio, cost of debt
and local risk premiums specific to the CGUs. As a result of the analysis, there is headroom in both CGUs and no impairment has
been identified. Reasonable sensitivities have been applied to each CGU’s cash flows and the discount rates used, and in all cases
the value in use continues to exceed the carrying amount of CGU goodwill.

The key assumptions on which management has based its cash flow projections for the five year period covered by the most
recent forecasts are those related to growth in available beds, patient numbers for the healthcare segment and revenue from the
distribution of products for the distribution and services segment. The assumptions made reflect past experience and are based
on management’s best estimate and judgment.

OTHER ACQUIRED INTANGIBLE ASSETS
Assets in this class are amortised over their estimated useful lives on a straight line basis. All amortisation charges for the year
have been charged against operating profits.

Other than goodwill, the Group does not hold any intangible assets with an indefinite life.

Included in software are HIS and ERP projects amounting to US$3,349,000 (2015: US$2,995,000) which are work-in-progress as of
year-end. Management is currently in the process of estimating the useful economic life of the HIS and ERP projects. Amortisation
of the software will commence once it is implemented and goes live.

19 LOAN RECEIVABLE

Loan receivable

Classification of loan receivable into current and non-current is as follows:
Current
Non-current

2016
US$’000

14,516

5,387
9,129

14,516

2015
US$’000

4,395

2,670
1,725

4,395

In 2015, the Group entered into a loan arrangement, with a third party (Borrower), to finance certain payables in connection with
a hospital facility, for an aggregate amount not to exceeding US$8,848,000 with the repayment of the first trance US$2,720,000 on
10 November 2016, second trance US$2,720,000 on 10 November 2017 and the remaining final trance payment by 10 November 2018.

During the year ended 31 December 2016, the loan agreement was amended in respect of first trance repayment date and total
loan facility amount. First trance loan repayment date was revised as 10 April 2017 and the loan facility ceiling was increased to
US$18,513,000.

The Group believes that the amount is fully recoverable. Loan is secured by obtaining personal guarantees of shareholders
of borrower. The fair value of the loan receivable as on 31 December 2016 was US$14,516,000 (full value US$14,900,000).

The loan is interest-free, however, any unpaid loan receivable as of due date shall bear commission at the rate of 15% per annum
starting from due date till date of payment.

128

NMC Health plc Annual Report and Accounts 2016

Financial StatementsNotes to the Consolidated Financial Statements continuedAt 31 December 201620 INVENTORIES

Pharmaceuticals and cosmetics
Scientific equipment
Consumer products
Food
Egg bank
Consumables
Opticals
Goods in transit
Other

Less: provision for slow moving and obsolete inventories

2016
US$’000

75,657
13,404
42,568
7,087
2,656
855
309
1,636
1,393

145,565
(1,178)

144,387

2015
US$’000

65,166
14,093
40,766
9,118
2,622
783
315
2,087
1,226

136,176
(1,388)

134,788

The amount of write down of inventories recognised as an expense for the year ended 31 December 2016 is US$1,869,000
(2015: US$1,678,000). This is recognised in direct costs.

Trust receipts issued by banks amounting to US$81,671,000 (2015: US$21,370,000) are secured against the inventories.

21 ACCOUNTS RECEIVABLE AND PREPAYMENTS

Accounts receivable
Receivable from suppliers for promotional expenses
Other receivables
Prepayments

2016
US$’000

314,351
13,164
27,179
19,763

2015
US$’000

242,016
10,690
12,225
17,544

374,457

282,475

Receivables from suppliers relate to advertising and promotional expenses incurred by the Group. Accounts receivable are
stated net of provision for doubtful debts of US$12,129,000 (2015: US$13,022,000). Movements in the provision for doubtful debts
are as follows:

At 1 January
Written off
Written back (note 12)
Charge for the year (note 12)
Addition from business combinations
Exchange difference

At 31 December

The ageing of unimpaired accounts receivable is as follows:

2016
US$’000

13,022
(4,377)
(1,843)
4,800
549
(22)

12,129

2015
US$’000

8,996
(1,595)
(1,295)
3,035
3,888
(7)

13,022

31 December 2016

Accounts receivable

31 December 2015

Accounts receivable

Total
US$’000

Neither past
due nor
impaired
US$’000

Past due but not impaired

<90 days
US$’000

91-180 days
US$’000

181-365 days
US$’000

>365 days
US$’000

314,351

210,592

70,940

19,070

8,944

4,805

242,016

168,747

49,460

12,466

7,016

4,327

Unimpaired receivables are expected, on the basis of past experience, to be fully recoverable. It is not the practice of Group to
obtain collateral over receivables and they are therefore unsecured. As at 31 December 2016 accounts receivables of US$12,129,000
(2015: US$13,022,000) were impaired and fully provided for.

Credit risk is managed through the Group’s established policy, procedures and controls relating to credit risk management (note 33).
A majority of the receivables that are past due but not impaired are from insurance companies and government-linked entities
in the United Arab Emirates which are inherently slow payers due to their long invoice verification and approval of payment
procedures. Payments continue to be received from these customers and accordingly the risk of non-recoverability is considered
to be low.

NMC Health plc Annual Report and Accounts 2016

129

1. 2. 3. 5. 4. Financial Statements21 ACCOUNTS RECEIVABLE AND PREPAYMENTS CONTINUED
Of the net trade receivables balance of US$314,351,000 (2015: US$242,016,000) amount of US$159,922,000 is receivables from five
customers (2015: US$108,936,000 is receivables from five customers).

The Group’s terms require receivables to be repaid within 90-120 days depending on the type of customer, which is in line with
local practice in the UAE. Due to the long credit period offered to customers, a significant amount of trade accounts receivable
are neither past due nor impaired.

Amounts due from related parties amounting to US$3,628,000 (31 December 2015: US$4,116,000) as disclosed on the face of the
consolidated statement of financial position are trading in nature and arise in the normal course of business.

Included in other receivables is an amount of US$7,679,000 (2015: US$ nil) receivable from entities owned by a non-controlling interest.

22 CASH AND CASH EQUIVALENTS
Cash and cash equivalents included in the consolidated statement of cash flows comprise of the following:

Bank deposits
Bank balances and cash
Bank overdrafts and other short term borrowings

Adjustments for:
Short term borrowings
Bank deposits maturing in over 3 months
Restricted cash

Cash and cash equivalents

2016
US$’000

137,900
479,940
(219,851)

397,989

160,628
(28,329)
(96,885)

433,403

2015
US$’000

58,886
118,511
(154,962)

22,435

129,095
(55,094)
(12,412)

84,024

Bank deposits of US$137,900,000 (2015: US$58,886,000) are with commercial banks in the United Arab Emirates and Spain. These are
mainly denominated in the UAE Dirhams and Euro and earn interest at the respective deposit rates. These deposits have original
maturity between 1 to 12 months (2015: 3 to 12 months).

Short term borrowings include trust receipts and invoice discounting facilities which mature between 90 and 180 days. Trust
receipts are short term borrowings to finance imports. The bank overdrafts and short term borrowings are secured by assets
of the Group up to the amount of the respective borrowings and personal guarantees of the shareholders (H.E. Saeed Bin Butti,
Dr BR Shetty and Mr Khalifa Bin Butti) and carry interest at EIBOR plus margin rates ranging from 1% to 4% (2015: 1% to 4%) per annum.

At 31 December 2016, the Group had US$59,715,000 (2015: US$42,356,000) of undrawn bank overdraft facilities, which are
renewable annually.

Restricted cash mainly represents funds held by a bank in respect of upcoming loan repayment and payment for acquisitions.

23 SHARE CAPITAL
31 DECEMBER 2016

Issued and fully paid
(nominal value 10 pence sterling each)

31 DECEMBER 2015

Issued and fully paid
(nominal value 10 pence sterling each)

Issued share capital and share premium movement

At 1 January 2016
Issue of new shares – IPO
Share issue costs

At 31 December 2016

130

NMC Health plc Annual Report and Accounts 2016

Number of
shares
(thousands)

Ordinary
shares
US$’000

Share
premium
US$’000

Total
US$’000

204,285

31,910

491,778

523,688

Number of
shares
(thousands)

Ordinary
shares
US$’000

Share
premium
US$’000

Total
US$’000

185,714

29,566

179,152

208,718

Number of
shares
(thousands)

185,714
18,571
–

204,285

Ordinary
shares
US$’000

29,566
2,344
–

31,910

Share
premium
US$’000

179,152
319,970
(7,344)

491,778

Total
US$’000

208,718
322,314
(7,344)

523,688

Financial StatementsNotes to the Consolidated Financial Statements continuedAt 31 December 201623 SHARE CAPITAL CONTINUED
On 14 December 2016, NMC Health plc had public offering on the London Stock Exchange and raised US$322,314,000, of which
US$170,000,000 (9,732,847 shares) was subscribed collectively by Dr. B R Shetty, H.E Saeed Bin Butti and Khalifa Bin Butti and Infinite
Investment LLC. Infinite Investment LLC is an associate of H.E Saeed Bin Butti and Khalifa Bin Butti.

24 GROUP RESTRUCTURING RESERVE
The group restructuring reserve arises on consolidation under the pooling of interests method used for group restructuring, which
took place on 28 March 2012 when the Company became the holding company of NMC Healthcare LLC through its wholly owned
subsidiaries, NMC Holding LLC and NMC Health Holdco Limited. Under this method, the group is treated as a continuation of the
NMC Healthcare LLC group. The difference between the share capital of NMC Healthcare LLC (US$27,226,000) and the carrying
amount of the investment in that company (US$37,227,000), which equates to the net assets of NMC Healthcare LLC at the date
of reorganisation (28 March 2012), amounting to US$10,001,000(debit), is recorded on consolidation as a group restructuring reserve.
This reserve is non-distributable.

25 RETAINED EARNINGS
As at 31 December 2016, retained earnings of US$18,009,000 (2015: US$17,590,000) are not distributable. This relates to a UAE
Companies Law requirement to set aside 10% of annual profit of all UAE subsidiaries until their respective reserves equal 50%
of their paid up share capital. The subsidiaries discontinue such annual transfers once this requirement has been met.

26 DIVIDEND
In the AGM on 3 June 2016 the shareholders approved a dividend of 6.2 pence per share, amounting to GBP 11,514,000 (US$16,350,000)
to be paid to shareholders on the Company’s share register on 20 May 2016. The dividend amount was paid to the shareholders
on 14 June 2016 (30 June 2015: a dividend of GBP 10,028,000 equivalent to US$15,866,000 was approved on 16 June 2015 and paid on
18 June 2015). No interim dividend was declared during the year. Subject to shareholder’ approval at the Annual General Meeting on
23 May 2017, a final dividend of 10.6 pence per share, GBP 21,753,000 (US$26,538,000) will be paid to shareholders on the Company’s
share register on 12 May 2017.

An amount of US$5,300,000 (2015: US$ nil) is paid as dividend to non-controlling interests during the year ended 31 December 2016.

27 TERM LOANS

Current portion
Non-current portion

Amounts are repayable as follows:
Within 1 year
Between 1–2 years
Between 2–5 years

2016
US$’000

234,519
594,780

829,299

234,519
243,115
351,665

829,299

2015
US$’000

91,621
483,725

575,346

91,621
98,355
385,370

575,346

During the year ended 31 December 2015, the Group agreed a syndicated loan facility, of US$825,000,000 (US$350,000,000 of term
debt and US$475,000,000 of delayed drawdown acquisition facility). The loan facility is repayable over 60 monthly instalments with
a grace period of twelve months. The applicable interest rate is dependent upon the respective leverages. Based upon the leverage
at the time of initial drawdown, the initial margin was 100bps/70bps over 1 month LIBOR/EIBOR per annum.

During the year ended 31 December 2016, the Group drew down term loans of US$631,548,000 (2015: US$822,698,000) and repaid
term loans of US$378,660,000 (2015: US$472,796,000).

The Group has utilised an amount of US$350,000,000 (2015: US$350,000,000) against the syndicated loan facility as well as
US$463,527,000 (2015: US$163,679,000) of the delayed drawdown acquisition finance as of 31 December 2016.

This syndicated loan is guaranteed by corporate guarantees provided by NMC Health plc and operating subsidiaries of the Group.
The syndicated loan is secured against a collateral package which includes assignment of some insurance company receivables
and their proceeds by the Group and a pledge over certain bank accounts within the Group and pledge of shares of the entities
acquired using the proceeds of the loan.

In addition to the syndicated loan facility, term loans also include other short term revolving loans which get drawn down and
repaid over the period.

NMC Health plc Annual Report and Accounts 2016

131

1. 2. 3. 5. 4. Financial Statements28 EMPLOYEES’ END OF SERVICE BENEFITS
Movements in the provision recognised in the consolidated statement of financial position are as follows:

Balance at 1 January
Charge for the year
Actuarial loss/(gain)
Transfer from related party
Employees’ end of service benefits paid
Addition from business combinations

Balance at 31 December

Current
Non–current

Balance at 31 December

Charge for the year comprise of the following:
Current service cost
Interest cost

Balance at 31 December

2016
US$‘000

22,490
7,246
147
4
(1,546)
1,867

30,208

3,560
26,648

30,208

6,525
721

7,246

2015
US$‘000

14,934
4,869
(260)
–
(1,133)
4,080

22,490

3,206
19,284

22,490

4,234
635

4,869

In accordance with the provisions of IAS 19 – ‘Employee Benefits’, management has carried out an exercise to assess the present
value of its obligation at 31 December 2016 and 2015, using the projected unit credit method, in respect of employees’ end of service
benefits payable under the UAE Labour Law.

During the current year, the Group has recognised an actuarial loss of US$147,000 (31 December 2015: gain of US$260,000) in other
comprehensive income. Management has assumed an average length of service of 5 years (2015: 5 years) and increment/
promotion costs of 1.5% (2015: 2.25%). The expected liability at the date of employees’ leaving service has been discounted to its
net present value using a discount rate of 2.5% (2015: 3.25%). Management also performed a sensitivity analysis for changes in
discount rate and increment costs; the results of this analysis showed that none of the factors had any material impact on the
actuarial valuation.

29 ACCOUNTS PAYABLE AND ACCRUALS

Trade accounts payable
Accrued interest
Accrued expenses
Others

Trade and other payables are non-interest bearing and are normally settled on 50-60 day terms.

30 OTHER PAYABLES

Contingent consideration payable for acquisitions (note 36)
Deferred consideration payable for acquisitions
Other payable (note 5)

Classification of other payables into current and non-current is as follows:
Current
Non-current

2016
US$’000

108,202
2,691
7,362
40,557

158,812

2016
US$’000

24,139
6,551
36,929

67,619

26,827
40,792

67,619

2015
US$’000

87,029
1,014
7,536
27,932

123,511

2015
US$’000

25,016
–
158

25,174

11,150
14,024

25,174

132

NMC Health plc Annual Report and Accounts 2016

Financial StatementsNotes to the Consolidated Financial Statements continuedAt 31 December 201631 RELATED PARTY TRANSACTIONS
These represent transactions with related parties, including major shareholders and senior management of the Group, and entities
controlled, jointly controlled or significantly influenced by such parties, or where such parties are members of the key management
personnel of the entities. Pricing policies and terms of all transactions are approved by the management of the Group.

The Company’s immediate and ultimate controlling party is a group of three individuals (H.E. Saeed Bin Butti, Dr BR Shetty and
Mr Khalifa Bin Butti) who are all shareholders and of whom one is a director of the Company and who together have the ability
to control the company. As the immediate and ultimate controlling party is a group of individuals, it does not produce consolidated
financial statements.

RELATIONSHIP AGREEMENT
The Controlling Shareholders and the Company have entered into a relationship agreement, the principal purpose of which
is to ensure that the Company is capable of carrying out its business independently of the Controlling Shareholders and that
transactions and relationships with the Controlling Shareholders are at arm’s length and on a normal commercial basis.

In accordance with the terms of the relationship agreement, the Controlling Shareholders have a collective right to appoint
a number of Directors to the Board depending upon the level of their respective shareholdings. This entitlement reduces or
is removed as the collective shareholdings reduce. The relationship agreement includes provisions to ensure that the Board
remains independent.

Transactions with related parties included in the consolidated income statement are as follows:

Entities significantly influenced by a shareholder who is a key management personnel in NMC
Sales
Purchases
Rent charged
Other income
Entities where a shareholder of NMC is a key member of management personnel of such entity
Management fees received from such entity by NMC
Sales

2016
US$’000

14
59,370
451
1,435

6,303
296

2015
US$’000

699
54,252
440
1,195

6,003
438

Amounts due from and due to related parties disclosed in the consolidated statement of financial position are as follows:

Entities significantly influenced by a shareholder who is a key management personnel in NMC
Amounts due from related parties
Amounts due to related parties
Entities where a shareholder of NMC is a key member of management personnel of the entity
Amounts due from related parties

2016
US$’000

2015
US$’000

–
14,876

3,628

328
17,419

3,788

Outstanding balances with related parties at 31 December 2016 and 31 December 2015 were unsecured, payable on 50-60 days term
and carried interest at 0% (31 December 2015: 0%) per annum. Settlement occurs in cash. As at 31 December 2016 US$1,576,000 of the
amounts due from related parties were past due but not impaired (31 December 2015: US$1,778,000).

The Group has incurred expenses and recharged back an amount of US$2,097,000 (31 December 2015: US$1,854,000) made on behalf
of a related party where a shareholder who has significant influence over the Group is a key management personnel of that entity.

Out of total term loans outstanding as of 31 December 2016, term loans of US$51,561,000 (2015: US$28,372,000) are secured by joint
and several personal guarantees of the Shareholders (HE Saeed Bin Butti, Dr BR Shetty and Mr Khalifa Bin Butti).

Pharmacy licenses in UAE under which the Group sells its products, are granted to the shareholders or directors of the Company,
who are UAE nationals. No payments are made in respect of these licenses to shareholders or directors.

During the current period, the Group acquired 1% beneficial interest in certain subsidiaries, as listed in note 2.2, for a consideration
of US$419,000. These subsidiaries are registered in the UAE. The Group previously had 99% shareholding in these entities. The Group
recorded a gain of US$536,000 on this in retained earnings.

NMC Health plc Annual Report and Accounts 2016

133

1. 2. 3. 5. 4. Financial Statements31 RELATED PARTY TRANSACTIONS CONTINUED
COMPENSATION OF KEY MANAGEMENT PERSONNEL

Short term benefits
Employees’ end of service benefits

2016
US$’000

10,236
16

10,252

2015
US$’000

6,469
16

6,485

The key management personnel include all the Non-Executive Directors, the two (31 December 2015: two) Executive Directors
and four (31 December 2015: four) senior management personnel.

During the year additional shares of 451,868 (2015: 345,649) were granted to Executive Directors and other senior management
in the form of share options.

One individual (31 December 2015: One) who is a related party of one of the shareholders is employed by the Group. The total
compensation for employment received by that related party in the year ended 31 December 2016 amounts to US$1,303,000
(2015: US$786,000).

32 SHARE BASED PAYMENTS
The Group currently operates two share option schemes:

LONG TERM INCENTIVE PLAN (LTIP)
Options awarded under the LTIP are made annually to Executive Directors and other senior management. The exercise prices are
nil. Options have a life of ten years and a vesting period of three years. The LTIP is subject to performance conditions which can
be found in the Directors’ Remuneration Report on page 71.

SHORT TERM INCENTIVE PLAN (STIP)
Options awarded under the STIP are made annually to Executive Directors and other senior management. The exercise prices are
nil. Options have a life of ten years and a vesting period of three years.

Fair values are determined using the Black-Scholes model. Expected volatility has been based on historical volatility over the period
since the Company’s shares have been publically traded.

Administrative expenses include a charge of US$2,640,000 (2015: US$1,177,000) in respect of the cost of providing share options.
The cost is calculated by estimating the fair value of the option at grant date and spreading that amount over the vesting period
after adjusting for an expectation of non-vesting.

For options granted in the years ended 31 December 2015 and 2016, the fair value per option granted and the assumptions used
in the calculation are as follows:

2016
STIP

£9.675
£9.520
£nil
40%
3 years
0.54%
1.05%

2015
LTIP 1

£5.200
£5.060
£nil
40%
3 years
0.91%
0.98%

2015
STIP

£5.200
£5.060
£nil
40%
3 years
0.91%
0.98%

2015
LTIP 2

£7.650
£7.377
£nil
40%
3 years
1.21%
1.05%

2016
LTIP

£9.675
£9.520
£nil
40%
3 years
0.54%
1.05%

Share price at grant date
Fair value at measurement date
Exercise price
Expected volatility
Expected option life
Expected dividend yield
Risk free interest rate

LTIP represent long term incentive plans issued in March 2016.

134

NMC Health plc Annual Report and Accounts 2016

Financial StatementsNotes to the Consolidated Financial Statements continuedAt 31 December 201632 SHARE BASED PAYMENTS CONTINUED
SHORT TERM INCENTIVE PLAN (STIP) CONTINUED
The options existing at the year-end were as follows:

Long term incentive plan (LTIP)
October 2014
Short term incentive plan (STIP)
October 2014
Long term incentive plan (LTIP)
February 2015
Short term incentive plan (STIP)
February 2015
Long term incentive plan (LTIP)
September 2015
Long term incentive plan (LTIP)
March 2016
Short term incentive plan (STIP)
March 2016

Total options subsisting on existing ordinary shares

Percentage of issued share capital

Movement of share options during the year is as follows:

At 1 January
Granted during the year

Outstanding at 31 December

Number of
shares

2016
Exercise
price

Period when exercisable

2015
Number of
shares

160,778

55,527

221,539

74,801

49,309

383,717

68,151

1,013,822

0.5%

£nil

29/10/17 to 28/10/24

160,778

29/10/17 to 28/10/24

55,527

25/02/18 to 24/02/25

221,539

25/02/18 to 24/02/25

74,801

09/09/18 to 08/09/25

49,309

15/03/19 to 14/03/26

–

561,954

0.3%

2016

2015

561,954
451,868

1,013,822

216,305
345,649

561,954

No options expired, were exercised or forfeited during the year (2015: nil).

33 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group’s principal financial liabilities comprise loans and borrowings, contingent consideration on acquisition of subsidiaries,
put option redemption liability and trade and other payables. In addition to these financial liabilities the Group has forward exchange
contract as of 31 December 2016. The main purpose of these financial liabilities is to finance the Group’s operations. The Group has
accounts and other receivables, and cash and short-term deposits that arise directly from its operations.

The Group is exposed to interest rate risk, credit risk, liquidity risk and foreign currency risk. These risks and the Group’s financial risk
management objectives and policies are consistent with last year. The Group’s exposure to foreign currency risk includes risk on
the Group’s net investment in foreign subsidiaries in Spain and certain other countries.

The Group’s senior management oversees the management of these risks. The Board of Directors reviews and agrees policies
for managing each of these risks which are summarised below.

INTEREST RATE RISK
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in
market interest rates. The Group is exposed to interest rate risk on its interest bearing assets and liabilities (bank deposits, bank
overdrafts and other short term borrowings and term loans). Management is of the opinion that the Group’s exposure to interest
rate risk is limited.

The following table demonstrates the sensitivity of the consolidated income statement to reasonably possible changes in interest
rates, with all other variables held constant. The sensitivity of the consolidated income statement is the effect of the assumed
changes in interest rates on the Group’s profit for the year based on the floating rate financial assets and financial liabilities as
of the respective year end.

Increase/(decrease) in basis points

100
(100)

Effect on profit at
31 December 2016
US$’000

(9,112)
9,112

Effect on profit at
31 December 2015
US$’000

(6,714)
6,714

NMC Health plc Annual Report and Accounts 2016

135

1. 2. 3. 5. 4. Financial Statements33 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES CONTINUED
CREDIT RISK
Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a
financial loss. The Group limits its credit risk with respect to customers due to the nature of the customers that it has dealings with.
Within the Healthcare business in the UAE, the majority of the Group’s customers are insurance companies. The largest insurance
company in UAE is fully backed by Sovereign wealth funding from Abu Dhabi. All other insurance companies in the UAE are required
to be listed on a stock exchange and therefore are governed by the regulations of their respective markets. The Group limits its
credit risk with respect to healthcare customers in markets other than UAE by requesting certain percentage of advance payments
from customers and obtaining final payments before completion of treatment. Within the distribution business the Group deals
primarily with large reputable multinational retail companies. The Group further seeks to limit its credit risk by setting credit limits
for individual customers and monitoring outstanding receivables.

The Group limits its credit risk with regard to bank deposits by only dealing with reputable banks. The external credit ratings for the
banks at which the bank deposits and cash at bank are held are as follows:

AA-/A-1/Aa3
A+/A1
A/A2
A+/A-1
A3/A-
AA+
AAA/A-1+
A2/P-1
A3/P-2
B1
BB
BB+
Baa3
BBB
BBB-
BBB+/Baa1/Baa1/P-2
Without external credit rating

Total bank deposit and cash at bank

2016
US$’000

11,903
5,494
219,787
4,273
5,865
–
6,164
140
19
1,629
4,196
562
163,491
1,938
42,172
120,627
28,633

616,893

2015
US$’000

18,038
722
19,426
419
4,352
4
–
–
–
1,145
2,496
812
109,728
2,609
7,941
5,769
2,895

176,356

With respect to credit risk arising from cash and cash equivalents, the Group’s exposure to credit risk arises from default of the
counterparty, with a maximum exposure equal to the carrying amount of these instruments.

LIQUIDITY RISK
The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of banking facilities.
The Group limits its liquidity risk by raising funds from its operations and ensuring bank facilities are available. Trade payables are
normally settled within 50-60 days of the date of purchase.

The table below summarises the maturities of the Group’s undiscounted financial liabilities, based on contractual payment dates
and current market interest rates.

At 31 December 2016
Trade accounts payable
Amounts due to related parties
Other payables
Option redemption payable
Terms loans
Bank overdrafts and other short term borrowings
Financial guarantees

Total

On demand
US$’000

Less than 3
months
US$’000

3 to 12 months
US$’000

1 to 5 years
US$’000

Total
US$’000

–
–
–
–
–
60,154
11,764

71,918

108,202
14,876
–
–
79,560
107,170
–

–
–
28,391
–
174,085
56,957
–

–
–
81,592
42,605
615,769
–
–

108,202
14,876
109,983
42,605
869,414
224,281
11,764

309,808

259,433

739,966

1,381,125

136

NMC Health plc Annual Report and Accounts 2016

Financial StatementsNotes to the Consolidated Financial Statements continuedAt 31 December 201633 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES CONTINUED
LIQUIDITY RISK CONTINUED

At 31 December 2015
Trade accounts payable
Amounts due to related parties
Other payables
Option redemption payable
Terms loans
Bank overdrafts and other short term borrowings
Financial guarantees

Total

On demand
US$’000

Less than 3
months
US$’000

3 to 12 months
US$’000

1 to 5 years
US$’000

Total
US$’000

–
–
–
–
–
26,325
9,069

35,394

87,029
17,419
32,932
–
46,612
58,350
–

242,342

–
–
4,194
–
54,889
74,189
–

133,272

–
–
18,321
30,163
506,722
–
–

555,206

87,029
17,419
55,447
30,163
608,223
158,864
9,069

966,214

The Group also has future capital commitments for the completion of ongoing capital projects of US$9,048,000 (2015: US$30,230,000)
(note 35). These are to be financed from the fixed deposits held by the Group.

During the time of acquisition of Al Zahra Hospital in order to pay the consideration and as a back stop of existing US$ 825,000,000
long term debt facility, the Group has finalised a new loan facility with JP Morgan Chase Bank and Standard Chartered Bank as
mandated lead arrangers for US$1,400,000,000 in the month of December 2016. Of this an amount of US$ 325,000,000 has been
cancelled after raising equity on 14 December 2016. The balance facility of US$ 1,075,000,000 remains unutilized as of 31 December
2016. From this an amount of US$825,000,000 will be utilized to replace existing long term debt facility and remaining, if needed,
will be utilized to fund the Al Zahra Hospital acquisition.

FOREIGN CURRENCY RISK
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes
in foreign exchange rates. Foreign currency risk comprises of transaction risk, statement of financial position risk and the Group’s
net investment in foreign subsidiaries. Transaction risk relates to the Group’s cash flow being adversely affected by a change in the
exchange rates of foreign currencies against the UAE Dirham. Statement of financial position risk relates to the risk of the Group’s
monetary assets and liabilities in foreign currencies acquiring a lower or higher value, when translated into UAE Dirhams, as a result
of currency movements.

The Group is exposed to currency risk on its trade accounts payable, put option redemption payable and certain other payables
denominated in foreign currencies, mainly in Euros and Saudi Riyal. As the US Dollar is pegged to the UAE Dirham, balances in
US Dollars are not considered to represent significant currency risk.

The table below indicates the impact of Group’s foreign currency monetary liabilities and assets at 31 December, on its profit
before tax.

2016
US$’000

2015
US$’000

+5%
-5%

(2,113)
2,113

(1,690)
1,690

The Group is exposed to foreign currency risk on net investment in foreign subsidiaries. During the year ended 31 December 2016 the
Group has recorded a foreign currency exchange loss of US$4,050,000 (2015: US$5,342,000) on the translation of foreign subsidiaries
in other comprehensive income.

CAPITAL MANAGEMENT
The primary objective of the Group’s capital management is to ensure that it maintains healthy capital ratios in order to support
its business and maximise shareholders’ value.

The Group manages its capital structure and makes adjustments to it in light of changes in business conditions. Capital comprises
share capital, share premium, reserves and retained earnings and is measured at US$906,869,000 as at 31 December 2016
(2015: US$487,697,000). In order to maintain or adjust the capital structure, the group may adjust the amount of dividends paid
to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. Certain banking facilities may
also impose covenant requirements on the Group with respect to capital management.

NMC Health plc Annual Report and Accounts 2016

137

1. 2. 3. 5. 4. Financial Statements33 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES CONTINUED
CAPITAL MANAGEMENT CONTINUED
The Group monitors capital using a gearing ratio, which is net debt divided by capital plus net debt. The Group includes within
net debt, interest bearing loans and borrowings, accounts payable and accruals and other payables less bank deposits and bank
balances and cash.

Interest bearing loans and borrowings
Accounts payable and accruals
Other payable
Option redemption payable
Less: bank deposits, bank balances and cash

Net debt
Capital

Capital and net debt

Gearing ratio

2016
US$’000

1,049,150
158,812
67,619
37,500
(617,840)

695,241
906,869

1,602,110

43%

2015
US$’000

730,308
123,511
25,174
25,084
(177,397)

726,680
487,697

1,214,377

60%

34 CONTINGENT LIABILITIES
The Group had contingent liabilities in respect of bank and other guarantees and other matters arising in the ordinary course of
business from which it is anticipated that no material liabilities will arise at 31 December 2016 of US$11,764,000 (2015: US$9,069,000).

35 COMMITMENTS
CAPITAL COMMITMENTS
The Group had future capital commitments of US$9,048,000 at 31 December 2016 (2015: US$30,230,000) principally relating to the
completion of ongoing capital projects.

OTHER COMMITMENTS

Future minimum rentals payable under non-cancellable operating leases
Within one year
After one year but not more than five years
More than five years

Total

2016
US$’000

11,354
53,896
74,080

139,330

2015
US$’000

12,846
53,943
84,407

151,196

36 FINANCIAL INSTRUMENTS CARRIED AT FAIR VALUE
FORWARD EXCHANGE CONTRACT
The Group holds a forward exchange contract to manage foreign exchange exposure. The forward contract has a principal value
of US$15,000,000 and is denominated in Qatari Riyal. This contract has not been designated as a cash flow hedge and the increase
in the fair value during 2016 of US$1,249,000 (2015: decrease in fair value of US$1,200,000 has been included in finance costs and the
corresponding receivable is included in the ‘others’ category within other receivable (note 21). This is a level 2 derivative financial
instrument.

CONTINGENT CONSIDERATION
Contingent consideration relates to acquisitions done in current and prior year. Movements in contingent consideration payable
are as follows:

Balance at 1 January
Contingent consideration recognised at acquisition (note 5)
Fair value measurement
Purchase price allocation adjustment (note 5)
Exchange gain
Payments made

Balance at 31 December

2016
US$’000

25,016
9,642
1,549
(2,126)
(375)
(9,567)

24,139

2015
US$’000

–
29,041
49
–
(56)
(4,018)

25,016

138

NMC Health plc Annual Report and Accounts 2016

Financial StatementsNotes to the Consolidated Financial Statements continuedAt 31 December 201636 FINANCIAL INSTRUMENTS CARRIED AT FAIR VALUE CONTINUED
CONTINGENT CONSIDERATION CONTINUED
In accordance with the fair value hierarchy under IFRS 13, contingent consideration is classified as a level 3 derivative financial
instrument. The fair value of outstanding contingent consideration as at the reporting date is US$24,139,000. The valuation
technique used for measurement of contingent consideration is the weighted average probability method and then
applying discounting.

Contingent consideration payable as of 31 December 2016 comprises of following:

CIRH
Biogenesi
Dr Sunny Healthcare
ProVita
Fakih
CFC

2016
US$’000

2,912
4,741
3,644
3,298
8,128
1,416

24,139

2015
US$’000

2,768
6,578
7,345
8,325
–
–

25,016

CIRH
Contingent consideration is payable subject to attainment of revenue or reproductive cycle targets. Management believes that
these targets will be met. Full value of contingent consideration payable is US$3,156,000 (2015: US$3,255,000) and its present value
is US$2,912,000 (2015: US$2,768,000). This is due for payment in 2017. Significant unobservable input used is discount rate (9.2%).
A 1% increase in discount rate would result in decrease in fair value of the contingent consideration by US$24,000 and a 1% decrease
in discount rate would result in increase in fair value by US$49,000.

Biogenesi
Contingent consideration is payable subject to attainment of profit before tax target. Significant unobservable inputs used are
profit before tax and discount rate (10.7%). Full value of contingent consideration payable is US$5,260,000 (2015: US$7,700,000) and its
present value is US$4,741,000 (2015: US$6,578,000). Contingent consideration amounting to US$2,212,000 on achieving 2016 EBITDA
target has been paid during the year. Outstanding contingent consideration is payable in the period from 2017 to 2019. A 1% increase
in discount rate would result in decrease in fair value of the contingent consideration by US$42,000 and a 1% decrease in discount
rate would result in increase in fair value by US$43,000. Management believe profit before tax targets for FY 2017–FY 2019 will be met
and accordingly not considered sensitive to fair value measurement.

Dr. Sunny Healthcare
The contingent consideration relates to amounts payable on achieving 2016 EBITDA target amount. Target EBITDA has been
achieved and accordingly this contingent consideration becomes payable. Contingent consideration amounting to US$2,328,000
on achieving 2015 EBITDA has been paid during the year.

ProVita
The contingent consideration relates to amounts payable in the event that licenses to operate in certain other GCC countries
are obtained. Management believes that it is highly probable that these licenses will be obtained. One of the licenses has
been obtained and an amount of US$5,027,000 has been paid. Full value of contingent consideration payable is US$3,500,000
(2015: US$8,500,000) and its present value is US$3,298,000 (2015: US$8,325,000).

Fakih
The contingent consideration relates to amounts payable in the event that licenses to operate in certain other GCC countries are
obtained. Management believes that it is highly probable that these licenses will be obtained (Note 5). Full value of contingent
consideration payable is US$9,031,000 (2015: US$nil) and its present value is US$8,128,000 (2015: US$nil).

CFC
The contingent consideration relates to amounts payable on achieving 2016 EBITDA target amount. Target EBITDA has been
achieved and accordingly this contingent consideration becomes payable.

NMC Health plc Annual Report and Accounts 2016

139

1. 2. 3. 5. 4. Financial Statements37 OPTION REDEMPTION PAYABLE
Option redemption payable comprise of the following:

Luarmia
CFC and HCMR

Movement in option redemption payable is as follows:

Balance at 1 January
Addition
Amortisation and re-measurement adjustment (note 10)
Exchange gain
Settlement of put option

Balance at 31 December

2016
US$’000

25,252
12,248

37,500

2016
US$’000

25,084
12,801
2,160
(275)
(2,270)

37,500

2015
US$’000

25,084
–

25,084

2015
US$’000

–
24,496
1,457
(869)
–

25,084

LUARMIA
As part of acquisition of Luarmia SL (“Luarmia”) in 2015, the Group entered into separate co-investment / shareholder agreements
dated 23 February 2015 with the sellers relating to put & call options on the minority 13.6% shareholdings that remains with the
previous owners post-acquisition. The Group does not have ‘present ownership’ of this 11.6% (2015: 13.6%) minority shareholding
due to the terms of the option agreements and continue to account for the acquisition of Luarmia on the basis of an 88.4%
(2015: 86.4%) equity stake, with full recognition of the 11.6% (2015: 13.6%) non-controlling interest. The put options are exercisable
between 1 & 30 June 2018, 1 & 30 June 2019 and 1 & 30 June 2020 (three exercisable windows). On exercise of the put options,
cash will be paid. The value of the put option is calculated based on the multiple of purchase price and further multiples are
measured on the number of reproductive cycles specified in the agreement. A redemption liability for the value of the options
at the acquisition date was created amounting to US$24,496,000 (being the present value of the redemption liability at the
acquisition date), with an equal amount being treated as a reduction in equity. As at 31 December 2016, the present value
of the redemption liability is US$25,252,000 (2015: US$25,084,000).

On 28 November 2016, the Group acquired an additional 2.0% interest in the voting shares of Luarmia, increasing its ownership
interest to 88.4% for cash consideration of US$1,533,000. As the ownership interest increased by 2%, the Group derecognizes the
financial liability of US$2,270,400 in relation to such 2% put option and recognizes an offsetting credit in the same component
of equity recorded on initial recognition (i.e. put option redemption reserve).

The key assumption in estimating the expected amount is the multiple of purchase price and reproductive cycle’s projections.
The financial liability is sensitive to changes in these assumptions for example a 10% increase in reproductive cycles will result
in an increase in the financial liability with US$3,268,830 (2015: US$28,290,000), while a 10% decrease would result in a decrease
in the financial liability with US$3,101,800 (2015: US$22,039,000).

CFC and HCMR
During the year, Luarmia SL entered into put option agreements with the minority shareholders of Brazil and Denmark entities.
A redemption liability for the value of the options at the acquisition date was created amounting to US$11,216,000 and US$1,585,000
(being the present value of the redemption liability at the acquisition date), with an equal amount being treated as a reduction
in equity. As at 31 December 2016, the present value of the redemption liability is US$10,707,000 and US$1,541,000 respectively.

The put option of HCMR is exercisable any time starting from the third anniversary and 36 months thereafter. The earliest date
of exercise is September 2019. The key assumption in estimating the liability amount is the forecasted EBITDA of the year 2018 and
2019 and projected net debt of 2019. The financial liability is sensitive to changes in the forecasted EBITDA and Net Debt. For example
a 10% simultaneous increase in EBITDA and Net debt will result in an increase in the financial liability with US$876,000 while a 10%
decrease would result in a decrease in the financial liability with US$876,000.

The put option for CFC is exercisable from the fifth anniversary of the date of the agreement. With respect to this, the earliest month
of exercise is June 2021. The key assumption in estimating the liability amount is the forecasted EBITDA of the entity for 2020. The
financial liability is sensitive to changes in the forecasted EBITDA. For example a 10% increase in EBITDA will result in an increase
in the financial liability with US$154,000, while a 10% decrease would result in a decrease in the financial liability with US$154,000.

140

NMC Health plc Annual Report and Accounts 2016

Financial StatementsNotes to the Consolidated Financial Statements continuedAt 31 December 201638 FAIR VALUES OF FINANCIAL INSTRUMENTS
The fair values of the Group’s financial instruments are not materially different from their carrying values at the statement
of financial position date.

The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities.

Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either
directly or indirectly.

Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable
market data.

Financial assets and liabilities carried at fair value are disclosed in note 36.

During the years ended 31 December 2016 and 31 December 2015, there were no transfers between Level 1 and Level 2 fair value
measurements, and no transfers into or out of Level 3 fair value measurements.

39 INVESTMENT IN JOINT VENTURE
The Group has a 45.83% interest in Egyptian International Company (“EIC”), a joint venture involved in the field of providing extensive
expertise services Healthcare and hospital management. The Group’s interest in EIC amounting US$834,000 is accounted for using
the equity method in the consolidated financial statements. EIC has not started its operations and accordingly, no share of profit
or loss is recognised in consolidated statement of comprehensive income.

40 SUBSEQUENT EVENTS
ACQUISITION OF AS SALAMA HOSPITAL LLC (“ASH”)
On 28 August 2016, the Group agreed to acquire a 70% controlling stake in the voting shares of As Salama Hospital LLC (“ASH”), an
unlisted private general hospital which exists to serve the healthcare needs of all people in Al-Khobar, Kingdom of Saudi Arabia
and surrounding areas by providing acute and long-term care. ASH accomplishes this through dedicated, competent staff providing
accessible patient-focused care, guided by a commitment to continuous improvement. ASH is a leader in Long Term Care service
provider (Over Long Term Care, it also provides its patients with other comprehensive healthcare services due to lack of healthcare
facilities in the vicinity) in Al Khobar, Eastern province of Saudi Arabia. ASH is the fifth largest hospital in the Eastern province of
Saudi Arabia and account for 10% of market share, with occupancy rate stands at 84.8% in 2015. Regulatory approvals and legal
formalities completed on 02 January 2017, meaning that control has passed to the Group and full consolidation of results will
commence from that date.

The agreed purchase consideration for the business was US$28m. There is no deferred and contingent consideration payable.

The fair value assessment of identifiable net assets at the acquisition date remains in progress and therefore the fair value of the
identifiable net assets is preliminary. The Group has a 1 year timeframe from the date of acquisition to finalise the measurement
of the net assets acquired. The net assets identified to date are those existing at the acquisition date, those forming part of the
acquisition, and those that meet the recognition criteria for assets and liabilities. No acquisition date contingent liabilities requiring
full recognition have been noted as yet.

Provisional goodwill has been calculated being the difference between the fair value of the consideration paid and payable, and the
fair value of the net assets acquired. For convenience, the closest available balance sheet date has been used for the purposes
of measuring net assets acquired. This date is 31 December 2016, with full consolidation commencing on 1 January 2017.

NMC Health plc Annual Report and Accounts 2016

141

1. 2. 3. 5. 4. Financial Statements40 SUBSEQUENT EVENTS CONTINUED
ACQUISITION OF AS SALAMA HOSPITAL LLC (“ASH”) CONTINUED

Details of the provisional goodwill calculated as of 31 December 2016 are as follows

Assets
Property, plant and equipment
Inventories
Accounts receivable
Other receivables
Cash and bank balances

Liabilities
Borrowings
Accounts payable
Other payables

Total identifiable net assets at fair value
Non-controlling interests
Goodwill arising on acquisition

Purchase consideration transferred

Fair value
recognised on
acquisition
US$’000

3,433
1,446
12,242
800
1,298

19,219

1,334
4,929
4,030

10,293

8,926
(2,678)
21,767

28,015

The acquisition of ASH has resulted in a provisional goodwill of US$21.8m The Group has elected to measure the non-controlling
interests in the acquiree using the proportionate method, resulting in an NCI on acquisition of US$2.7m (being 30% of the identifiable
net assets at fair value).

The transaction costs of US$142,000 have been expensed and are included under transaction costs in respect of business
combinations in the consolidated income statement.

ACQUISITION OF AL ZAHRA HOSPITAL (“AL ZAHRA”)
On 14 December 2016, the Group agreed to acquire a 100% controlling stake in the voting shares of Al Zahra, subject to the completion
of all the conditions precedent referred in SPA. Al Zahra is one of the largest private hospitals in the UAE, operating 137 active
inpatient beds, serving approximately 400,000 outpatients and 23,000 inpatient bed days per year. This asset would be difficult
to replicate and considerably expands NMC’s capacity in the region. It complements NMC’s existing network of seven out-patient
medical centers in Sharjah, the third most populous emirate in the UAE, and further strengthens its position as the largest private
healthcare provider in the UAE and GCC region.

NMC acquired control of Al Zahra on 13 February 2017, the date on which all the conditions precedent were met, meaning that
control has passed to the Group and full consolidation of results will commence from that date. For convenience, the closest
available balance sheet date has been used for the purposes of measuring net assets acquired. This date is 31 January 2017,
with full consolidation commencing on 1 February 2017. We are not aware of any material transactions in the period between
01 February 2017 and 13 February 2017.

The total purchase consideration was US$560.9m including the Real Estate (Land and Building) amounting to US$100m. Total
consideration for the transaction has been done under consideration of the acquired business and the Real Estate. There is no
deferred and contingent consideration payable.

The fair value assessment of identifiable net assets at the acquisition date remains in progress and therefore the fair value of the
identifiable net assets is preliminary. Based on the preliminary fair value exercise, provisional Brand of US$3.5m has been identified.
The Group has a 1 year timeframe from the date of acquisition to finalise the measurement of the net assets acquired. The net
assets identified to date are those existing at the acquisition date, those forming part of the acquisition, and those that meet the
recognition criteria for assets and liabilities. No acquisition date contingent liabilities requiring full recognition have been noted as yet.

Provisional goodwill has been calculated being the difference between the fair value of the consideration paid and payable, and the
fair value of the net assets acquired.

142

NMC Health plc Annual Report and Accounts 2016

Financial StatementsNotes to the Consolidated Financial Statements continuedAt 31 December 2016
40 SUBSEQUENT EVENTS CONTINUED
ACQUISITION OF AL ZAHRA HOSPITAL (“AL ZAHRA”) CONTINUED

Details of the provisional goodwill calculated as of 31 January 2017, are as follows

Assets
Intangible assets
Property, plant and equipment
Inventories
Accounts receivable
Other receivables
Cash and bank balances

Liabilities
Accounts payable
Other payables

Total identifiable net assets at fair value
Goodwill arising on acquisition

Purchase consideration transferred

Fair value
recognised on
acquisition
US$’000

3,539
115,027
6,668
42,129
1,017
6,095

174,475

22,750
5,826

28,576

145,899
414,950

560,849

The acquisition of Al Zahra has resulted in a provisional goodwill of US$415.0m. No other fair value adjustments relating to other
assets or liabilities have been noted. Their fair values have provisionally been assessed as equalling their book values at the
acquisition date.

Goodwill represents the future business potential and profit growth of the Al Zahra. It comprises all of the intangibles that cannot
be individually recognised such as the assembled workforce, the customer service, future client relationships, the presence in
geographic markets, the synergies that Al Zahra & NMC will obtain.

The transaction costs of US$3,173,000 have been expensed and are included under transaction costs in respect of business
combinations in the consolidated income statement.

NMC Health plc Annual Report and Accounts 2016

143

1. 2. 3. 5. 4. Financial StatementsStatement of Financial Position
As at 31 December 2016

ASSETS
Non-current assets
Investment in subsidiary

Current assets
Other receivables and prepayments
Amounts due from a related party
Bank balances and cash

TOTAL ASSETS

EQUITY AND LIABILITIES
Equity
Share capital
Share premium
Retained earnings /(Accumulated losses)

Total equity

Non-current liabilities
Other payables

Current liabilities
Other payables and accruals

Total liabilities

TOTAL EQUITY AND LIABILITIES

Notes

2016
US$’000

2015
US$’000

5
6

7
7
9

204,127

131
343,441
220

343,792

547,919

31,910
491,778
23,488

547,176

–

743

114
610
600

1,324

205,451

29,566
179,152
(3,495)

205,223

207

228

547,919

205,451

No profit and loss account is presented by the Company as permitted by Section 408 of the Companies Act 2006.

The financial statements were authorised for issue by the board of directors on 7 March 2017 and were signed on its behalf by

DR B. R. SHETTY
Executive Vice Chairman and Chief Executive Officer

MR SURESH KRISHNAMOORTHY
Chief Financial Officer

The attached notes 1 to 15 form part of the financial statements.

144

NMC Health plc Annual Report and Accounts 2016

Financial Statements

Statement of Changes in Equity
For the Year Ended 31 December 2016

Balance as at 1 January 2016
Total (other) comprehensive income for the year (note 9)
Share based payments
Dividends paid (note 14)
Issuance of share capital – new
Share issue costs

Balance as at 31 December 2016

Balance as at 1 January 2015
Total (other) comprehensive income for the year (note 9)
Share based payments
Dividends paid (note 14)

Balance as at 31 December 2015

The attached notes 1 to 15 form part of the financial statements.

Share
Capital
US$’000

29,566
–
–
–
2,344
–

31,910

29,566
–
–
–

29,566

Share
premium
US$’000

179,152
–
–
–
319,970
(7,344)

491,778

179,152
–
–
–

179,152

Retained
earnings/
(Accumulated
losses)
US$’000

(3,495)
40,693
2,640
(16,350)
–
–

23,488

(12,029)
23,223
1,177
(15,866)

(3,495)

Total
US$’000

205,223
40,693
2,640
(16,350)
322,314
(7,344)

547,176

196,689
23,223
1,177
(15,866)

205,223

NMC Health plc Annual Report and Accounts 2016

145

1. 2. 3. 5. 4. Financial StatementsStatement of Cash Flows
For the Year Ended 31 December 2016

OPERATING ACTIVITIES
Profit for the year before tax
Adjustments for:

Share based payments
Dividends payment

Working capital changes:

Amounts due from a related party
Other receivables and prepayments
Amounts due to a related party
Other payables and accruals

Net cash (used in)/from operations

(DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS
Cash and cash equivalents at 1 January

CASH AND CASH EQUIVALENTS AT 31 DECEMBER

Notes

2016
US$’000

2015
US$’000

12
14

40,693

23,223

2,640
(16,350)

26,983

(27,861)
(17)
–
515

(380)

(380)
600

220

1,177
(15,866)

8,534

(610)
176
(7,577)
(54)

469

469
131

600

Note: Proceeds of US$314,970,000 raised from issuance of equity were directly received in NMC Healthcare LLC bank account. For the purpose of statement
of cash flows these proceeds are adjusted from amounts due from a related party.

The attached notes 1 to 15 form part of the financial statements.

146

NMC Health plc Annual Report and Accounts 2016

Financial StatementsNotes to the Financial Statements
At 31 December 2016

1 CORPORATE INFORMATION
NMC Health plc (the “Company” or “Parent’’) is a Company which was incorporated in England and Wales on 20 July 2011. The
Company is a public limited company. The address of the registered office of the Company is Level 1, Devonshire House, One
Mayfair Place, London, W1J 8AJ. The registered number of the Company is 7712220. The Company’s immediate and ultimate
controlling party is a group of three individuals (H.E. Saeed Mohamed Butti Mohamed Al Qebaisi (H.E Saeed Bin Butti), Dr BR Shetty
and Mr Khalifa Butti Omair Yousif Ahmad Al Muhairi (Mr Khalifa Bin Butti) who are all shareholders and of whom one is a director
of the company and who together have the ability to control the company.

The Parent and its subsidiaries (collectively the “Group”) are engaged in providing professional medical services and the provision
of all types of research and medical services in the field of gynaecology, obstetrics and human reproduction, and the rendering
of business management services to companies in the health care and hospital sector. The Group is also engaged in wholesale
of pharmaceutical goods, medical equipment, cosmetics, food, IT products and services.

The financial statements of the Company for the year ended 31 December 2016 were authorised for issue by the board of directors on
7 March 2017 and the statement of financial position was signed on the Board’s behalf by Dr BR Shetty and Mr Suresh Krishnamoorthy.

2.1 BASIS OF PREPARATION
The financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by
the European Union as they apply to the financial statements of the Company for the year ended 31 December 2016 and applied
in accordance with the Companies Act 2006.

The financial statements are prepared under the historical cost convention. The principal accounting policies adopted in the
preparation of these financial statements are set out below.

No profit and loss account is presented by the Company as permitted by Section 408 of the Companies Act 2006.

The Profit for the year in the financial statements of the Company is US$40,693,000 (2015: US$23,223,000).

FUNCTIONAL CURRENCY
The UAE Dirham is determined to be the functional currency of the Company. The reporting currency of the Company is United
States of America Dollar (US$) as this is a more globally recognised currency. The UAE Dirham is pegged against the US Dollar
at a rate of 3.673 per US Dollar.

2.2 SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES
All values are rounded to the nearest thousand dollars ($000) except when otherwise indicated.

GOING CONCERN
These financial statements have been prepared on a going concern basis. The Company has made a profit of US$40,693,000
(2015: US$23,223,000) and has equity of US$547,176,000 (2015: US$205,223,000).

The Company is the parent of NMC Health plc group and is solely a holding company with no business activities of its own. The
Company earned a dividend and reported a net profit during the year. The Group’s business activities, together with the factors
likely to affect its future development, performance and position are set out in the Strategic Review on pages 6 to 33. The financial
position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Financial Review on pages 24 to 25.

The Group has considerable financial resources including bank facilities. As a consequence, the directors believe that the Group
is well placed to manage its business risks successfully. The directors expect that the Group has adequate resources to continue
in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis in preparing the financial
statements.

The key assumptions concerning the future, key sources of estimation uncertainty and critical judgements at the statement of
financial position date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities
within the next financial year are discussed below:

SIGNIFICANT JUDGEMENTS
Functional currency
The UAE Dirham is determined to be the functional currency of the Company.

Judgement has been used to determine the functional currency of the Company that most appropriately represents the
economic effects of the Company’s transactions, events and conditions. As part of this assessment, the following information
has been taken into account:

The primary economic environment influencing the Company’s income (dividends) is the UAE and the effect of the local
environment is limited to expenses incurred within the UK. The ability of the Company to meet its obligations and pay dividends
to its shareholders is dependent on the economy of, and the operation of its subsidiaries in, the UAE.

NMC Health plc Annual Report and Accounts 2016

147

1. 2. 3. 5. 4. Financial StatementsNotes to the Financial Statements continued
At 31 December 2016

2.3 CHANGES IN ACCOUNTING POLICIES
The accounting policies adopted are consistent with those of the previous financial period.

NEW AND AMENDED STANDARDS AND INTERPRETATIONS
The Company applied for the first time certain standards and amendments which are effective for annual periods beginning
on or after 1 January 2016.

The new standards, amendments to IFRS, which are effective as of 1 January 2016, are listed below, have no impact on the Company.

IFRS 14 Regulatory Deferral Accounts

•
• Amendments to IFRS 11 Joint Arrangements: Accounting for Acquisition of Interests
• Amendments to IAS 16 and IAS 38: Clarification of Acceptable Methods of Depreciation and Amortisation
• Amendments to IAS 16 and IAS 41 Agriculture: Bearer Plants
• Amendments to IAS 27: Equity Method in Separate Financial Statements
• Annual Improvements 2012-2014 Cycle

— IFRS 5 Non-current Assets Held for Sale and Discontinued Operations
— IFRS 7 Financial Instruments: Disclosures

iii. Servicing contracts
iv. Applicability of the amendments to IFRS 7 to condensed interim financial statements

2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVESTMENT IN SUBSIDIARIES
Subsidiaries are entities which are controlled by the Company. Control is achieved when 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. Specifically, the Company controls an investee if, and only if, the Company has:
• Power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the investee).
• Exposure, or rights, to variable returns from its involvement with the investee.
• The ability to use its power over the investee to affect its returns.

Investments in subsidiaries are recognised at acquisition cost less any provision for impairment.

When the Company incurs increases in or return of share capital, to/from its subsidiaries, such movements are recognised within
the cost of investment in subsidiaries.

At each reporting date, an assessment is made to determine whether there are any indicators of impairment. Where an indicator
of impairment exists, a formal estimate of the recoverable amount of the investment in subsidiary is made, which is considered to
be the higher of the fair value less costs to sell and the value in use. Fair value is determined as the amount that would be obtained
from the sale of the investment in an arm’s length transaction between knowledgeable and willing parties. When this information
is not available the fair value is determined based on the net present value of the future cash flows related to its subsidiaries, using
a discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. If the
carrying amount of an investment exceeds the recoverable amount, a provision is recorded in the income statement to reflect
the investment at the recoverable amount.

Where an impairment charge has previously been recognised, an assessment is made at the end of each reporting period as to
whether there is any indication that the impairment loss may no longer exist or may have decreased. If any such indication exists,
an estimate of the recoverable amount is made. An impairment loss is reversed to the income statement to the extent that the
increased carrying value of the investment in subsidiary does not exceed the carrying value that would have been determined
had no impairment loss been recognised for the asset in prior years.

Acquisition of subsidiary under common control
When the Company acquires a subsidiary under common control, the cost of the investment is deemed to be the Company’s
share of the net assets of the subsidiary at the date of acquisition.

CASH AND CASH EQUIVALENTS
For the purpose of the statement of cash flows, cash and cash equivalents consists of cash in hand and bank balances.

EQUITY
The Company has issued ordinary shares that are classified as equity. The difference between the issue price and the par value
of ordinary share capital is allocated to share premium. The transaction costs incurred for the share issue are accounted for as a
deduction from share premium, net of any related income tax benefit, to the extent they are incremental costs directly attributable
to the share issue that would otherwise have been avoided.

148

NMC Health plc Annual Report and Accounts 2016

Financial Statements2.4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONTINUED
ACCOUNTS PAYABLE AND ACCRUALS
Liabilities are recognised for amounts to be paid in the future for goods and services received whether billed by the supplier or
not. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle
of the business if longer). If not, they are presented as non-current liabilities. Accounts payable are recognised initially at fair value
and subsequently measured at amortised cost using the effective interest method.

PROVISIONS
Provisions are recognised when the Company has an obligation (legal or constructive) arising from a past event, and the costs
to settle the obligation are both probable and able to be reliably measured.

SHARE BASED PAYMENTS
Equity-settled share-based payments to employees are measured at the fair value of the equity instruments at the grant date.
The fair value excludes the effect of non-market-based vesting conditions. Details regarding the determination of the fair value
of equity-settled share-based transactions are set out in note 12.

The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over
the vesting period, based on the Group’s estimate of equity instruments that will eventually vest. At each reporting date, the Group
revises its estimate of the number of equity instruments expected to vest as a result of the effect of non-market-based vesting
conditions. The impact of the revision of the original estimates, if any, is recognised in the statement of comprehensive income
such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to equity reserves / other
payables.

IMPAIRMENT OF FINANCIAL ASSETS
An assessment is made at each statement of financial position date to determine whether there is objective evidence that
a specific financial asset may be impaired. If such evidence exists, any impairment loss is recognised in the statement of
comprehensive income. Impairment is determined as the difference between carrying value and the present value of future
cash flows discounted at the current market rate of return for a similar financial asset.

FINANCIAL GUARANTEE CONTRACTS
Financial guarantee contracts issued by the Company are those contracts that require a payment to be made to reimburse the
holder for a loss it incurs because the specified debtor fails to make a payment when due in accordance with the terms of a debt
instrument. Financial guarantee contracts are recognised initially as a liability at fair value, adjusted for transaction costs that are
directly attributable to the issuance of the guarantee. Subsequently, the liability is measured at the higher of the best estimate
of the expenditure required to settle the present obligation at the reporting date and the amount recognised less cumulative
amortisation.

DIVIDEND INCOME
Revenue is recognised when the Company’s right to receive the payment is established, which is generally when shareholders
approve the dividend.

NMC Health plc Annual Report and Accounts 2016

149

1. 2. 3. 5. 4. Financial StatementsNotes to the Financial Statements continued
At 31 December 2016

3 ACCOUNTING STANDARDS AND INTERPRETATIONS ISSUED BUT NOT EFFECTIVE
The standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Company’s financial
statements are disclosed below. The Company intends to adopt these standards, if applicable, when they become effective.

IFRS 15 REVENUE FROM CONTRACTS WITH CUSTOMERS
IFRS 15 was issued in May 2014 and establishes a new five-step model that will apply to revenue arising from contracts with
customers. Under IFRS 15 revenue is recognised at an amount that reflects the consideration to which an entity expects to be
entitled in exchange for transferring goods or services to a customer. The principles in IFRS 15 provide a more structured approach
to measuring and recognising revenue. The new revenue standard is applicable to all entities and will supersede all current revenue
recognition requirements under IFRS. Either a full or modified retrospective application is required for annual periods beginning on
or after 1 January 2018 with early adoption permitted. The Company is currently assessing the impact of IFRS 15 and plans to adopt
the new standard on the required effective date.

IFRS 16 applies to annual reporting periods beginning on or after 1 January 2019. The Company is currently assessing the impact
of IFRS 16 and plans to adopt the new standard on the required effective date.

IFRS 9 Financial Instruments

In addition, the standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Company’s
financial statements that are not expected to have any material impact on the Company are as follows:
•
• Amendments to IFRS 10 and IAS 28: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture
•
•
•

INVESTMENT IN SUBSIDIARY

As at 1 January and 31 December

2016
US$’000

204,127

2015
US$’000

204,127

This represents the cost of the investment in NMC Healthcare LLC (previous parent company), a wholly owned subsidiary held
through the holding company subsidiaries NMC Health Holdco Limited and NMC Holding Co LLC. NMC Healthcare LLC, is registered
and operates in United Arab Emirates.

150

NMC Health plc Annual Report and Accounts 2016

Financial StatementsINVESTMENT IN SUBSIDIARY CONTINUED

4
The subsidiaries held by NMC Heath plc are as follows:

Direct subsidiaries:

NMC Holding Co LLC
NMC Health Holdco Limited

Indirect subsidiaries:

NMC Healthcare LLC
New Pharmacy Company Limited
New Medical Centre LLC – Dubai
NMC Specialty Hospital LLC – Abu Dhabi
NMC Specialty Hospital LLC – Dubai
New Medical Centre Trading LLC – Abu Dhabi
NMC Trading LLC – Dubai
Bait Al Shifaa Pharmacy LLC – Dubai
New Medical Centre LLC – Sharjah
New Medical Centre Specialty Hospital LLC – Al Ain
Reliance Information Technology LLC
BR Medical Suites FZ LLC
Bright Point Royal Womens Hospital LLC
NMC Day Surgery Centre LLC
NMC Hospital LLC (DIP Hospital)
Medifertil, S.A
Centro de infertilidad y Reproduccion Humana SLU (CIRH)
Centro de Medicina della Riproduzione (Biogenesi)
EUVITRO, S.L.U
Copenhagen Fertility Center Holding Aps (DK)
Huntington Centro de Medicina Reproductive, S/A (BR)
ProVita International Medical Center LLC
Lifewise Home Healthcare LLC
NMC Royal Hospital LLC
The American Surgecenter Pharmacy LLC
The American Surgecenter LLC
Americare LLC
Trans Arabia Drug Store LLC
Sunny Specialty Medical Centre LLC
Sunny Medical Centre LLC
New Sunny Medical Centre LLC
Sunny Al Buhairah Medical Centre LLC
Sunny Al Nadha Medical Centre LLC
Sunny Dental Care LLC
Grand Hamad Pharmacy LLC
Hamad Pharmacy LLC
Sharjah Pharmacy L.L.C
*Sunny Sharqan Medical Centre LLC
*NMC Royal Medical Centre LLC
*NMC Healthcare LLC
*Fulfil Trading LLC
Nadia Medical Centre LLC
Cooper Dermatology and Dentistry Clinic
Cooper Health Clinic
Fakih IVF Fertility Centre LLC
Fakih IVF LLC
Beiersdorf Cosmetics Trading LLC–Abu Dhabi branch.
New Marketing & Trading Co. LLC
Beiersdorf Cosmetics Trading LLC – Al Ain branch
New Marketing & Trading Co–LLC – Al Ain branch.
New Medical Centre Trading LLC – branch 2
New Medical Centre Trading LLC – branch 3
Beiersdorf Cosmetics Trading LLC – branch
National Marketing & Trading Co. LLC
New Marketing & Trading Company LLC – branch
NMC Trading LLC – branch
Beiersdorf Cosmetics Trading Co. LLC
National Marketing & Trading Co. LLC – Dubai branch
New Marketing & Trading Co. LLC – Dubai branch
New Medical Centre Trading (Store) LLC
New Medical Centre Veterinary Medicine & Equipment Trading Co LLC

Percentage of holdings

Country of
incorporation

31 December
2016

31 December
2015

UAE
UK

UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
Columbia
Spain
Italy
Spain
Denmark
Brazil
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
Oman
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE

100%
100%

100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
61.90%
88.40%
53.00%
88.40%
79.60%
53%
100%
100%
100%
90%
90%
90%
75%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
51%
51%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%

100%
100%

100%
99%
99%
99%
99%
99%
99%
99%
99%
99%
99%
100%
99%
99%
99%
60.50%
86.40%
51.80%
86.40%
–
–
100%
–
99%
90%
90%
90%
75%
100%
100%
100%
100%
100%
100%
100%
100%
100%
–
–
–
–
–
–
–
–
–
99%
99%
99%
99%
99%
99%
99%
99%
99%
99%
99%
99%
99%
99%
99%

NMC Health plc Annual Report and Accounts 2016

151

1. 2. 3. 5. 4. Financial StatementsNotes to the Financial Statements continued
At 31 December 2016

INVESTMENT IN SUBSIDIARY CONTINUED

NMC Trading LLC branch
NMC Trading LLC – Fujairah branch
NMC Trading RAK – branch LLC
New Medical Centre
New Medical Centre LLC – branch (Al – Ain,Al wadi)
NMC Pharmacy
NMC Pharmacy – Branch
*PVHC KSA
*TVM KSA Acquisition 2 Ltd
*NMC Royal Medical Centre LLC – Branch
*Muscat Central Healthcare LLC
*NMC Healthcare India Pvt. Ltd
*NMC International Trading LLC
*Cooper Health Clinic – Branch
*New Reproductive Care Ltd

Percentage of holdings

Country of
incorporation

31 December
2016

31 December
2015

UAE
UAE
UAE
UAE
UAE
UAE
UAE
KSA
Cyprus
UAE
Oman
India
UAE
UAE
Cayman

100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
51%

99%
99%
99%
100%
100%
100%
100%
–
–
–
–
–
–
–
–

These entities are established by NMC during the current year and accordingly are not disclosed as acquired entities in note 5.

5 OTHER RECEIVABLE AND PREPAYMENTS

Other receivables
Prepayments

2016
US$’000

2015
US$’000

83
48

131

83
31

114

6 RELATED PARTY TRANSACTIONS
These represent transactions with related parties, i.e. major shareholders and senior management of the Company, and entities
controlled, jointly controlled or significantly influenced by such parties. Pricing policies and terms of all transactions are approved
by the management of the Company.

The Company’s immediate and ultimate controlling party is a group of three individuals (H.E. Saeed Bin Butti, Dr BR Shetty and
Mr Khalifa Bin Butti) who are all shareholders and of whom one is a director of the Company and who together have the ability
to control the Company. As the immediate and ultimate controlling party is a group of individuals, it does not produce consolidated
financial statements.

During the year, the Company was charged a management fees of US$2,869,000 (2015: US$1,914,000) by NMC Healthcare LLC.

Dividend amount of US$16,350,000 (2015: US$15,866,000) was paid, on behalf of the Company, by a subsidiary to the shareholders
of the Company.

Amounts due from Subsidiary
Amounts due from a related party

2016
US$’000

2015
US$’000

343,441

610

The increase in related party balance was predominantly due to proceeds of US$314,970,000 raised from issuance of equity
which was directly received in NMC Healthcare LLC bank account.

The Company is a guarantor along with other fellow subsidiary undertakings for the US$825,000,000 (2015: US$825,000,000)
syndicated loan facility raised by its subsidiary NMC Healthcare LLC.

COMPENSATION OF KEY MANAGEMENT PERSONNEL

Short term benefits

2016
US$’000

3,359

2015
US$’000

3,037

Key management personnel include all the Non-Executives Directors (2015: all) and two senior management personnel (2015: two).

152

NMC Health plc Annual Report and Accounts 2016

Financial Statements7 SHARE CAPITAL AND SHARE PREMIUM
31 DECEMBER 2016

Issued and fully paid
(nominal value 10 pence sterling each)

31 DECEMBER 2015

Issued and fully paid
(nominal value 10 pence sterling each)

Issued share capital and share premium movement

At 1 January 2016
Issue of new shares – IPO
Share issue costs

At 31 December 2016

Number of
shares
(thousands)

Ordinary
shares
US$’000

Share
premium
US$’000

Total
US$’000

204,285

31,910

491,778

523,688

Number of
shares
(thousands)

Ordinary
shares
US$’000

Share
premium
US$’000

Total
US$’000

185,714

29,566

179,152

208,718

Number of
shares
(thousands)

185,714
18,571
–

204,285

Ordinary
shares
US$’000

29,566
2,344
–

31,910

Share
premium
US$’000

179,152
319,970
(7,344)

491,778

Total
US$’000

208,718
322,314
(7,344)

523,688

On 14 December 2016, NMC Health plc had public offering on the London Stock Exchange and raised US$322,314,000, of which
US$170,000,000 (9,732,847 shares) was subscribed collectively by Dr. B R Shetty, H.E Saeed Bin Butti and Khalifa Bin Butti and Infinite
Investment LLC. Infinite Investment LLC is an associate of H.E Saeed Bin Butti and Khalifa Bin Butti.

8 OTHER PAYABLES AND ACCRUALS

Other payables
Accrued expenses

2016
US$’000

2015
US$’000

688
55

743

104
103

207

9 PROFIT ATTRIBUTABLE TO MEMBERS OF THE PARENT COMPANY
The Profit for the year in the financial statements of the Company is US$40,693,000 (2015: US$23,223,000).

10 AUDITOR’S REMUNERATION
The Company paid US$984,000 to its auditor in respect of the audit of the Company’s annual accounts for the year ended
31 December 2016 (2015: US$1,300,000), which includes a portion in respect of the audit of the financial statements of the Company.

Fees paid to Ernst & Young LLP and its associates for non-audit services to the Company itself are not disclosed in the individual
accounts of NMC Health plc because group financial statements are prepared which are required to disclose such fees on
a consolidated basis.

11 DIRECTORS’ REMUNERATION

Directors’ remuneration

2016
US$’000

1,435

2015
US$’000

1,754

Further information in respect of this compensation paid to directors is disclosed in the Directors’ Remuneration Report.

NMC Health plc Annual Report and Accounts 2016

153

1. 2. 3. 5. 4. Financial StatementsNotes to the Financial Statements continued
At 31 December 2016

12 SHARE BASED PAYMENTS
The Company currently operates two share option schemes:

LONG TERM INCENTIVE PLAN (LTIP)
Options awarded under the LTIP are made annually to Executive Directors and other senior management. The exercise prices
are nil. Options have a life of ten years and a vesting period of three years. The LTIP is subject to performance conditions which
can be found in the Directors’ Remuneration Report on page 71.

SHORT TERM INCENTIVE PLAN (STIP)
Options awarded under the STIP are made annually to Executive Directors and other senior management. The exercise prices
are nil. Options have a life of ten years and a vesting period of three years.

Fair values are determined using the Black-Scholes model. Expected volatility has been based on historical volatility over the
period since the Company’s shares have been publically traded.

The cost is calculated by estimating the fair value of the option at grant date and spreading that amount over the vesting period
after adjusting for an expectation of non-vesting.

For options granted in the years ended 31 December 2015 and 2016, the fair value per option granted and the assumptions used
in the calculation are as follows:

2016
STIP

£9.675
£9.520
£nil
40%
3 years
0.54%
1.05%

2015
LTIP 1

£5.200
£5.060
£nil
40%
3 years
0.91%
0.98%

2015
STIP

£5.200
£5.060
£nil
40%
3 years
0.91%
0.98%

2015
LTIP 2

£7.650
£7.377
£nil
40%
3 years
1.21%
1.05%

2016
LTIP

£9.675
£9.520
£nil
40%
3 years
0.54%
1.05%

Number of
shares

2016
Exercise
price

Period when exercisable

2015
Number of
shares

160,778

55,527

221,539

74,801

49,309

383,717

68,151

1,013,822

0.5%

£nil

29/10/17 to 28/10/24

160,778

29/10/17 to 28/10/24

55,527

25/02/18 to 24/02/25

221,539

25/02/18 to 24/02/25

74,801

09/09/18 to 08/09/25

49,309

15/03/19 to 14/03/26

–

561,954

0.3%

Share price at grant date
Fair value at measurement date
Exercise price
Expected volatility
Expected option life
Expected dividend yield
Risk free interest rate

LTIP represent long term incentive plans issued in March 2016.

The options existing at the year-end were as follows:

Total options subsisting on existing ordinary shares

Percentage of issued share capital

154

NMC Health plc Annual Report and Accounts 2016

Financial Statements12 SHARE BASED PAYMENTS CONTINUED
SHORT TERM INCENTIVE PLAN (STIP) CONTINUED
Movement of share options during the year is as follows:

At 1 January
Granted during the year

Outstanding at 31 December

2016

2015

561,954
451,868

1,013,822

216,305
345,649

561,954

No options expired, were exercised or forfeited during the year (2015: nil).

13 FINANCIAL RISK MANAGEMENT
The Company’s principal financial liabilities are other payables, arising in the normal course of business. The Company’s financial
assets include an amount due from a related party and bank balances. The company’s activities expose it to a variety of financial
risks: interest rate risk, credit risk, liquidity risk and foreign currency risk.

INTEREST RATE RISK
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in
market interest rates. The Company is exposed to interest rate risk on its bank balances only, as the balance due from a related
party is interest free, and therefore the Company’s exposure to interest rate risk is limited.

CREDIT RISK
Credit risk is the risk that counterparty will not meet its obligations under a financial instrument, leading to a financial loss.
The Company’s credit risk arises from amounts due from a related party and bank balances.

The directors assess the credit quality of the related party by taking into account their financial position, past experience and other
factors. Management does not expect any losses from non-performance by this counterparty, which is a subsidiary of the Company.

The Company limits its credit risk with regard to bank balances by only dealing with reputable banks. The credit rating of the bank
at which the cash at bank is held is AA+.

The Company’s credit risk exposure against a corporate guarantee provided to NMC Healthcare LLC in respect of the syndicate
loan is US$825,000,000 (2015:US$825,000,000).

LIQUIDITY RISK
The Company’s objective is to maintain sufficient funding to meet its obligations as they fall due.

The table below analyses the Company’s undiscounted financial liabilities into relevant maturity groupings based on the
contractual payment dates.

Balances due within 12 months equal their carrying balances as the impact of discounting is not significant.

At 31 December 2016
Other payables

Total

At 31 December 2015
Other payables

Total

On demand
US$’000

Less than 3
months
US$’000

3 to 12 months
US$’000

1 to 5 years
US$’000

Total
US$’000

–

688

104

–

688

125

In addition to the above financial liabilities, the Company has provided a corporate guarantee of US$825,000,000
(2015: US$825,000,000) to NMC Healthcare LLC in respect of the syndicate loan. The fair value of the corporate guarantee
is US$nil as at 31 December 2016 (2015: US$nil).

FOREIGN CURRENCY RISK
Foreign currency risk arises when future commercial transactions or recognised assets or liabilities are denominated in a currency
that is not the entity’s functional currency.

The Company is exposed to currency risk on its other payables denominated in Pound Sterling. Foreign currency payable balances
included in the statement of financial position denominated in Pound Sterling are US$680,000 (2015: US$170,000). The impact of
possible of foreign currency movement is not significant.

NMC Health plc Annual Report and Accounts 2016

155

1. 2. 3. 5. 4. Financial StatementsNotes to the Financial Statements continued
At 31 December 2016

13 FINANCIAL RISK MANAGEMENT CONTINUED
FAIR VALUE ESTIMATION
The fair values of the Company’s financial instruments are not materially different from their carrying values at the statement
of financial position date.

FINANCIAL GUARANTEES
The Company is a guarantor along with other fellow subsidiary undertakings for US$825,000,000 (2015: US$825,000,000)
of a syndicated bank loan raised by its subsidiary NMC Healthcare LLC.

14 DIVIDENDS
In the AGM on 3 June 2016 the shareholders approved a dividend of 6.2 pence per share, amounting to GBP11,514,000 (US$16,350,000)
to be paid to shareholders on the Company’s share register on 20 May 2016. The dividend amount was paid to the shareholders
on 14 June 2016 (30 June 2015: a dividend of GBP10,028,000 equivalent to US$15,866,000 was approved on 16 June 2015 and paid on
18 June 2015). No interim dividend was declared during the year. Subject to shareholder’ approval at the Annual General Meeting
on 23 May 2017, a final dividend of 10.6 pence per share, GBP21,753,000 (US$26,538,000) will be paid to shareholders on the Company’s
share register on 12 May 2017.

15 TAX
The Group operates in the United Arab Emirates and Spain and certain other countries. There is no taxable income in the UK
and accordingly there is no tax liability arising in the UK. The unused tax losses amount to US$25,549,000 as at 31 December 2016
(2015: US$13,049,000).

156

NMC Health plc Annual Report and Accounts 2016

Financial StatementsOther Information

Shareholder Information

AGM AND DIVIDEND DATES
Ex-dividend date for final dividend
Record date for final dividend
Annual General Meeting
Final dividend payment

11 May 2017
12 May 2017
23 May 2017
2 June 2017

DIVIDENDS
Information in relation to the Company’s dividend policy and the proposed dividend payment per share is set out
in the Financial Review on page 25 and in Note 26 to the Consolidated Financial Statements on page 131.

SHARE CAPITAL
The issued share capital as at 1 January 2016 was £18,571,428 divided into 185,714,286 Ordinary shares of 10p each.
On 16 December 2016, the Company issued 18,714,286 new Ordinary shares. No other changes to the share capital
of the Company were made during the year.

The issued share capital of the Company as at 31 December 2016 was £20,428,571 divided into 204,285,714 Ordinary shares
of 10p each. Options and share awards granted by the Company over its share capital are set out in the Directors’
Remuneration Report on pages 56 to 78.

Under the articles of association of the Company, all Ordinary shares have equal rights to dividends and capital and to vote
at general meetings of the Company. The directors are not aware of any agreements between holders of the Company’s
shares that may result in restrictions on the transfer of securities or in voting rights.

ANNUAL GENERAL MEETING
The annual general meeting of NMC Health plc will be held at Allen & Overy LLP, One Bishops Square, London E1 6AD
on 23 May 2017 at 2.00 pm.

Further details of the resolutions to be proposed at the annual general meeting is set out in the Notice of Annual
General Meeting circular which is included in a separate document enclosed with this annual report.

SHARE REGISTRAR
Our Registrars are Capita Asset Services who can be contacted as follows:
Address:
Email:
Telephone:

The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU
shareholderenquiries@capita.co.uk
0871 664 0300
International: +44 (0) 208 639 3399

Calls cost 12p per minute plus your phone company’s access charge. Calls outside the United Kingdom
will be charged at the applicable international rate. Lines are open between 09:00–17:30, Monday to Friday
excluding public holidays in England and Wales.

PRINCIPAL SHAREHOLDERS
As at 7 March 2017, the Company is aware of the following significant shareholdings in the Ordinary shares of the Company:

Shareholder

Dr B.R. Shetty
H.E. Saeed Bin Butti
Khalifa Bin Butti
Infinite Investment LLC

Number of

51,750,052
36,419,091
20,696,561
15,280,426

% of
issued
share
capital held

25.33
17.83
10.13
7.48

Nature of
holding

Direct
Direct
Direct
Direct

Our Facilities

Main image: NMC Royal Medical Centre, Abu Dhabi, UAE

NMC Royal Hospital, Abu Dhabi, UAE

NMC Provita, Abu Dhabi

NMC Hospital, DIP, UAE

NMC Trading Warehouse, Dubai, UAE

NMC Clinica Eugin, Madrid, Spain

NMC Chronic Care Specialist Center, Jeddah, Saudi Arabia

NMC AL-Zahra Hospital, Sharjah, UAE

NMC Health plc
Level 1 Devonshire House
One Mayfair Place,
Mayfair
London W1J 8AJ