Int Diag Hld Regulatory News (IDHC)

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Integrated Diagnostics Holdings Plc

Final Results

Tuesday, 29 March 2016

Integrated Diagnostics Holdings Plc Results for the year ended 31 December 2015

(Jersey) Integrated Diagnostics Holdings ("IDH" or "the Group"), IDHC on the London Stock Exchange, Egypt's largest fully integrated private-sector provider of medical diagnostics services, announced today its results for the year ended 31 December 2015.

Financial & Operational Highlights

Commenting on the year's performance and the company's outlook, IDH's Chief Executive Officer Dr. Hend El-Sherbini said: 

"Born of a merger in 2012 between Al Mokhtabar and Al Borg Laboratories, Integrated Diagnostics Holding (IDH) is one of the largest diagnostics groups in emerging markets. Today, we offer more than 1,000 international standard diagnostic tests, and in the year ended 31 December 2015 we performed more than 23.8 million tests for over 5.8 million patients. That represents 7% annual growth in total tests and 4% annual growth in patients served. This is reflected in an increase in revenue of 18% to EGP 1,014.8 million. Careful attention to our cost structure saw this top line performance carry to our bottom line despite incurring expenses related to our listing on the London Stock Exchange and expenses related to the ramp-up of operations at the Mega Lab. Net profit for 2015 rose 9.4% on the previous year to close at EGP 155.0 million.

1The adjustments to 2015 EBITDA are IPO costs of EGP 125.1 million and the write-off of costs of EGP 6.0 million relating to plans to set up operations in Qatar which are now not being pursued, the closure of Molecular Diagnostics Centre in Cairo, and surplus stationery included within inventory. 2014 figure adjusted for one-time IPO expenses of EGP 8.4 million. A detailed breakdown of non-recurring expenses is provided in the Financial Review.

"2015 was a milestone year on multiple fronts. In May of 2015, we began the next stage of our growth as we transitioned from being a privately owned company into a public corporation. Our IPO on the London Stock Exchange was 11.2 times oversubscribed, indicating heavy institutional investment appetite for a leading healthcare business with an expanding Middle East and North Africa (MENA) footprint," added El-Sherbini. "2015 was key for our growth with the inauguration of the Mega Lab, our new state of the art central laboratory, which nearly doubles our existing capacity and offers cost saving opportunities."

Outlook

IDH's forward looking strategy rests on leveraging its established business model to achieve five key strategic goals, namely: (1) continue to expand customer reach; (2) increase the number of test per patient by expanding the group's services portfolio; (3) use the Mega Lab's enlarged capacity to provide services to third party labs and hospitals; (4) introduce new medical services by leveraging the Group's network and reputable brand position; and (5) expand into new geographic markets through selective, value accretive acquisitions.

About Integrated Diagnostics Holdings (IDH)

IDH is the largest fully integrated private-sector medical diagnostics services provider in Egypt, comprehensively offering pathology and molecular diagnostics, genetics testing and basic radiology. IDH's core brands include Al Borg and Al Mokhtabar in Egypt, as well as Biolab (Jordan), Ultralab and Al Mokhtabar Sudan (both in Sudan) and the Medical Genetics Center, which operates in Egypt. IDH is listed on the London Stock Exchange (ticker: IDHC) and was founded in 2012 by the merger of Al Borg and Al Mokhtabar, the most established diagnostics services brands in Egypt. Learn more at idhcorp.com.

Shareholder Information

LSE: IDHC.L

Bloomberg: IDHC:LN

Listed: May 2015

Shares Outstanding: 150 million

Contact

Mr. Sherif El-Ghamrawi

Investor Relations Director

T: +20 (0)2 3345 5530 | M: +20 (0)10 0447 8699 | sherif.elghamrawi@idhcorp.com

Cautionary Statement

These Year-End Results have been prepared solely to provide additional information to shareholders to assess the Group's performance in relation to its operations and growth potential. These Year-End Results should not be relied upon by any other party or for any other reason. This communication contains certain forward-looking statements. A forward-looking statement is any statement that does not relate to historical facts and events, and can be identified by the use of such words and phrases as "according to estimates", "aims", "anticipates", "assumes", "believes", "could", "estimates", "expects", "forecasts", "intends", "is of the opinion", "may", "plans", "potential", "predicts", "projects", "should", "to the knowledge of", "will", "would" or, in each case their negatives or other similar expressions, which are intended to identify a statement as forward-looking. This applies, in particular, to statements containing information on future financial results, plans, or expectations regarding business and management, future growth or profitability and general economic and regulatory conditions and other matters affecting the Group.

Forward-looking statements reflect the current views of the Group's management ("Management") on future events, which are based on the assumptions of the Management and involve known and unknown risks, uncertainties and other factors that may cause the Group's actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. The occurrence or non-occurrence of an assumption could cause the Group's actual financial condition and results of operations to differ materially from, or fail to meet expectations expressed or implied by, such forward-looking statements.

The Group's business is subject to a number of risks and uncertainties that could also cause a forward-looking statement, estimate or prediction to differ materially from those expressed or implied by the forward-looking statements contained in this prospectus. The information, opinions and forward-looking statements contained in this communication speak only as at its date and are subject to change without notice. The Group does not undertake any obligation to review, update, confirm or to release publicly any revisions to any forward-looking statements to reflect events that occur or circumstances that arise in relation to the content of this communication.

Chairman's Statement

Under my chairmanship, the Board has been resolute in providing oversight and guidance to the Group's management as the Group began its first year as a corporation listed on the London Stock Exchange.

Deutsche Bank and EFG Hermes Investment Banking were joint global coordinators and joint bookrunners, while and Citigroup Global Markets were joint bookrunners on the transaction, which saw IDH admitted to trading on 11 May 2015 after an extensive roadshow. The Group's entire issued share capital of 150,000,000 ordinary shares was admitted to the standard listing segment of the Official List of the UK Listing Authority and to trading on London Stock Exchange's main market for listed securities under the ticker symbol IDHC.

IDH has a standard listing on the London Stock Exchange and is thus not required to comply with the requirements of the 2014 U.K. Corporate Governance Code ("the Code") as issued by the Financial Reporting Council. However, we are resolute in our belief in the importance of good governance practices and we aim to voluntarily comply with aspects of the code while continuously working to close the gap with premium listed entities. We strongly believe that adopting best industry practices in governance will assist us in building a profitable and sustainable business as well as safeguarding shareholder interests.

We are in compliance with Financial Conduct Authority Disclosure and Transparency Rule (DTR) subchapters 7.1 and 7.2, which set out certain mandatory disclosures: 7.1 concerns audit committees and bodies carrying out equivalent functions; 7.2 concerns corporate governance standards that are included in the Directors Report or, in this case, as part of the Strategic Review (DTR 7.2.1).

In the year just ended, we have established the division of roles and responsibilities between myself and the Chief Executive Officer. We met four times as a board during the course of 2015 (in January, April, August and November), and I was delighted to have had the opportunity to visit IDH's main base of operations in Cairo, Egypt, in summer 2015. Whilst in Egypt, I held meetings at corporate offices and toured the recently opened Mega Lab (IDH's centralized and fully automated testing facility) and collector facilities. During the visit, I engaged directly with senior management to discuss both the Group's strategic plans and how management (including our chief executive) is evolving the policies and procedures necessary to continue the full institutionalisation of the business.

As part of this institutionalisation process, IDH retained PricewaterhouseCoopers Dubai to perform a comprehensive gap analysis of IDH's finance function post-listing. The Group's senior management received the PwC report during the fourth quarter of 2015 and is now assessing its findings and developing a plan for implementation. The Group and the Board are also reviewing the outcome of the internal audit conducted in 2015 by Ernst & Young Egypt.

The Board has invested significant time discussing and evaluating the Group's strategy and prospects for future growth. We are accordingly confident that we have in place the right strategy and the right management team to deliver shareholder returns going forward.

Throughout this process, I have had the pleasure of working with Dr. Hend El Sherbini, our chief executive and sole executive director. The Group owes its success to the senior management team that leads it on a daily basis, and to Dr. El Sherbini in particular.

Lord Anthony St. John, Chairman

Chief Executive Officer's Report

Born of a merger in 2012 between Al Mokhtabar and Al Borg Laboratories, Integrated Diagnostics Holding (IDH) is one of the largest diagnostics groups in emerging markets. From modest beginnings over 35 years ago, we have grown to become the largest private sector and fully integrated diagnostics service provider in Egypt, with our share of the private chain market totalling more than 50% by revenue as per the latest data available2. We also operate in Jordan and Sudan and are considering additional opportunities to expand beyond our present geography.

2 Most recent data available according to Frost & Sullivan Analysis conducted in 2013.

Today, we offer more than 1,000 international standard diagnostic tests, and in the year ended 31 December 2015 we performed more than 23.8 million tests for over 5.8 million patients. That represents 7% annual growth in total tests and 4% annual growth in patients served. This is reflected in an increase in revenue of 18% to EGP 1,014.8 million. Careful attention to our cost structure saw this top line performance carry to our bottom line despite incurring expenses related to our listing on the London Stock Exchange and expenses related to the ramp-up of operations at the Mega Lab. Net profit for 2015 rose 9.4% on the previous year to close at EGP 155.0 million. Normalising for one-off expenses related to the Group's listing on the LSE and for write-offs relating to plans to establish operations in Qatar, normalised net profit would have risen 18.4% to EGP 286.1 million in 2015.

2015 was a milestone year on multiple fronts. In May of 2015, we began the next stage of our growth as we transitioned from being a privately owned company into a public corporation. Our IPO on the London Stock Exchange was 11.2 times oversubscribed, indicating heavy institutional investment appetite for a leading healthcare business with an expanding Middle East and North Africa (MENA) footprint. The IPO, which offered 50% of IDH shares, was the first ever listing of an Egyptian healthcare business on the LSE.

We have begun our journey as a quoted company with a solid legacy: A financially sound business with good opportunities to grow, governed by a newly formed board. This board will take the business forward and develop our governance, reporting and other systems that we will continue to develop in the years ahead. Our goal in doing so is to become voluntarily compliant with such aspects of the 2014 U.K. Corporate Governance Code as are appropriate to the size of our business and our state of development.

Operationally, 2015 was key for our growth with the inauguration of the Mega Lab, our new state of the art central laboratory, which nearly doubles our existing capacity and offers cost saving opportunities. Mega Lab enables us to efficiently deploy our Hub, Spoke, and Spike business model, allowing us to expand with comparatively low capital costs and continue to improve our operational efficiency. We are now seeking accreditation from the College of American Pathologists (CAP) for Mega Lab; the "A" labs Mega Lab replaces were previously the only such facilities in Egypt with CAP accreditation.

Critically, the Mega Lab will support IDH's growth by allowing us to roll out capital efficient "C" Labs more rapidly. Effective cost management and the simultaneous expansion of our diagnostic services will also drive growth going forward. This strategy is already starting to bear fruit, with our throughput capacity nearly doubling with the inauguration of the Mega Lab.

Whilst we recognize the importance of global standard technologies and laboratory procedures, continued investment in our people is a key driver of sustainable growth. Our employees engage in ongoing professional education, and the quality of our services is ensured by our quality assurance function. As we expand as a Group, so do our numbers: Our headcount swelled 7% to 4,323 in 2015, and 30% of our staff are women. We also extend bonuses, healthcare and other insurance, and benefits to all members of our staff across the Group.

Governance

Whilst our Chairman, Lord Anthony St. John, touches on this in some detail in his Chairman's Report in this document, I would like to stress that management is very supportive of the Board's view that IDH should aim to voluntarily comply with elements of the 2014 U.K. Corporate Governance Code ("the Code"). We have begun implementing a framework that is leading us to this objective. I further note that our Directors bring IDH a wealth of experience in healthcare, investments and MENA markets.

Proposed Dividend and Dividend Policy

We are delighted to propose paying a final dividend of six (6) U.S. cents per share (totalling US$ 9 million in aggregate) to shareholders in respect of the financial year ending 31 December 2015. The amount of the dividend has been calculated with reference to three important factors: historical profit for the year, anticipated financial needs agreed in the current budget, and the availability of U.S. dollars for payment depending on market conditions in IDH's markets from time to time. Having assessed what the IDH Board of Directors considers to be excess cash, we will look to declare the majority of that surplus.

Our dividend policy is driven by the strong cash generative nature of our business and its asset-light strategy. We believe that the fundamentals of our business will enable us to have a consistent and growing dividend strategy in the future. As this is our first year as a quoted company, we intend to declare a final dividend only and not to declare an interim dividend. We will, however, review this policy in the future.

Outlook

Going forward, our goal is to enhance our market position across our current suite of diagnostic services and geographies. In particular, we believe the excess capacity afforded by the Mega Lab will allow us to further penetrate the corporate (B2B) market in Egypt. In parallel, we see significant opportunity to write a similar success story by penetrating the very fragmented radiology market. This would effectively transform IDH into a one stop shop diagnostics provider.

Securing hospital business is another key target for 2016. Hospitals carry out some 40 million tests per year and we see opportunities in both outsourcing contracts for tests to be performed at the Mega Lab as well as opportunities to win management contracts and concessions.

We expect our businesses in our non-Egyptian markets to continue to grow (albeit at lower rates than in Egypt) and we are looking at other expansion opportunities in MENA.

Innovation and efficiency lie at the heart of our continued business success. By investing in the training of our people, continuously updating technology in our labs, expanding into underdeveloped markets, and maintaining our diligent cost management culture, we will grow our business and continue to provide high quality, cost efficient medical laboratory services.

Dr. Hend El Sherbini, Chief Executive Officer

Operational Review

The Group delivered strong operational and financial performances in the year ending 31 December 2015, with improvement in both the top and bottom lines, a continued investment in the rollout of an additional 28 capital efficient branches and the inauguration of the central Mega Lab facility.

Mega Lab is a state of the art central laboratory. It opened in May 2015 and is now fully operational, nearly doubling our existing capacity and offering an opportunity for cost savings.

During 2015, IDH brought into operation a total of 28 new labs, including 14 new branches for Al Mokhtabar (Egypt), 12 new branches for Al Borg (Egypt) and one branch each for Ultralab branch and MK Sudan both of which operate in Sudan. Total IDH branches reached 314 as of 31 December 2015, up from 288 branches the previous year. (Two branches were closed and replaced with new locations during the course of the year.)

IDH also recorded rises in total patients served (up 4% to 5.6 million) and total tests performed (up 7% to 22.3 million).

Contract clients

IDH's contract clients, who in 2015 represented 61% of the Group's revenues, include institutions such as unions, private insurance companies and corporations who enter into one year, renewable contracts at agreed rates per test and on a per client basis. During 2015, IDH served approximately 4.1 million patients under those contracts, performing a total of 18.2 million tests, with no single contract client contributing more than 5% of revenue.

Within the contract segment, IDH also provides lab to lab services for hospitals and other laboratories that are not able to process certain tests in house. IDH views the lab to lab business as a potential growth area for the future.

Breakdown of total revenue

Walk-in Clients

IDH derived 39% of its revenue in 2015 from walk-in clients, representing 30% of total patients served (or 1.8 million walk-in clients). As expected, number of walk-in patients declined in 2015 as more patients shift to corporate arrangements, in line with the long-term market trend. Nevertheless, IDH has successively increased walk-in revenues by growing its average revenue per test, driven by a both price increases and a better mix of test types. As IDH's markets develop and become more institutional markets, more patients will be performing pathology tests under corporate agreements or health insurance.

A key strategy of the Group is to continue to target walk-in clients through marketing campaigns focused on the Group's brands as well as educational campaigns aimed at increasing awareness of the importance of medical testing and preventive medicine. Additionally, the Group also offers a number of check-up packages and promotions aimed at increasing the number of tests per patient and encouraging repeat visits. These packages and promotions include a diabetes treatment program, pregnancy check-up program and weight management program among others.

Financial Review

The results for the year are set out in summary form below:

In respect of this summary, the Group notes:

· Normalised net profit is defined as net profit plus amortisation and non-recurring expenditure (the non-recurring expenditure is assumed to be non-tax deductible).

· Normalised EBITDA is defined as EBITDA plus non-recurring expenditure, while normalised gross margin is defined as Gross Margin plus amortisation.

· The IPO costs were incurred by the business over a period from November 2014 until the Group was admitted to trading on 11 May 2015 and therefore are shown in two financial years.

· The costs of closure of the Molecular Diagnostic Centre are seen to non-recurring expenditure in nature as the business is being liquidated.

· The write-off of the costs of setting up the Qatar office is seen as non-recurring expenditure as the market in Qatar was not seen as a market where the IDH brand and business would work successfully on scale which would justify the investment necessary to make it viable.

· The write off of the surplus stationery stock was identified following a detailed review of the stationary holdings and it was found that this had built up over a number of years and was of little on going value to the group.

Revenue Analysis

Consolidated revenues rose 18% year on year to EGP 1,014.8 million. Revenue growth was delivered by existing branches (75% of revenue growth in the year), better pricing and service mix (17.3% of growth) and the opening of new branches (7.7%).

Contract based clients contributed 61% to IDH's top line in 2015, growing 31% on 2014. IDH signed 312 new corporate contracts with insurers in 2015. Meanwhile, walk-in clients contributed 39% to total revenues, up 2% in EGP terms from 2014, but down 7% in terms of share of overall revenue. The comparatively rapid growth of contract based revenues is driven by IDH's focused sales strategy and the continued expected market trend of migration from walk-in to contract based clients as more customers join medical coverage arrangements and more corporates sign group contracts.

In absolute terms, IDH served 4.1 million contract clients in 2015 (up 13% from the previous year), while the total number of walk-in patients served fell to 1.7 million (down 13.0% from 2014). Walk-in revenues rose compared to 2014 on the back of better pricing and better test mix despite the slight downtick in patient numbers.

Egypt continued to contribute 90% of Group revenues recorded during 2015 followed by Jordan (7%) and Sudan (3%). In 2014, Egypt accounted for 89%, Jordan for 7% and Sudan for 4%.

Continued successful advertising and marketing activities saw total patients served rise 4% in 2015 to 5.8 million as the growing number of patients served on contracts offset the decline in walk-in patients. Key metrics also continued their growth trajectory, including revenue per patient (up +14%), revenue per test (+10%) and tests per patient (+3%).

Cost of Sales

IDH's cost of sales declined slightly in 2015 to EGP 467.5 million compared to EGP 479.5 million in 2014. Cost of sales in 2014 included the final amortisation charge relating to customer and supplier lists and non-compete agreements from historical acquisitions of EGP 91.5 million that, when factored out, would see 2015 cost of sales increase by 20.5%. Material prices for chemicals and supplies, which make up 37% of cost of sales, increased 5% over 2014.

Cost of materials as a percentage of sales reduced by 2% on 2014 as a result of operational efficiencies in running the Mega Lab rather than the two A Labs as previously. Wages increased 25% on 2014 after the opening of a further 26 net new branches and wage increases of 20%. Newly leased machinery for the Mega Lab resulted in an increased depreciation cost of EGP 6.1 million.

Gross Profit

The Group produced a gross profit for the year of EGP 547.3 million, up 16% compared to the normalised 2014 figure of EGP 472.2 million. Normalised gross margin eased slightly to 54% in 2015 compared to 55% the previous year as a result of higher materials costs, depreciation on new machines for Mega Lab and an increase in the employees' share of profits.

Operating Expenses

Below the gross profit line, operating costs came in at EGP 279.9 million in 2015, up 115% on 2014 as the 2015 figure includes non-recurring expenses of some EGP 131.1 million primarily related to the Group's successful listing on the London Stock Exchange and other non-recurring expenses. Normalising for these expenses, operating costs would have come in at EGP 148.6 million, up 22% on 2014. The increase came on the back of an 8.6% rise in marketing and advertising expenses, reflecting IDH's continued investment in marketing in a competitive landscape.

EBITDA

Normalised EBITDA for the year increased 16% to EGP 434.8 million, with Egyptian operations contributing 94% of normalised EBITDA; Jordan contributed 4% and Sudan 2%. The EBITDA figure for 2015 has been normalised for one-time IPO expenses of EGP 125.1 million and the non-recurring expenditure of EGP 6.0 million. The comparable figure for 2014 has been adjusted for one-time IPO expenses of EGP 8.4 million.

IDH's normalised EBITDA margin in the first three quarters of 2015 stood at 45% against a final full year figure of 43%. The decline reflects the impact of a 38% EBITDA margin in the fourth quarter as result of the Group's accounting policy in 2015, which was to book certain provisions and costs only in the final quarter of the year. Examples include regular provisions on debtor accounts as well as annual employee bonuses. Accounting policies in place for 2016 will see these expenses accrue instead on a quarterly basis.

Taxation

Income tax expenses recorded in the income statement in 2015 totalled EGP 119.5 million during 2015 compared to EGP 105.6 million in 2014. The total tax expense included a current tax charge for the year of EGP 108.1 million (2014: EGP 121.9 million) and a deferred tax charge of EGP 11.4 million (2014: credit of EGP 16.4 million). There is no tax payable in the two IDH holding companies (Jersey and Cayman). All tax is paid within the operating companies in Egypt, Jordan and Sudan.

There has been a reduction in the Egyptian corporation tax rate to 22.5% in 2015 from 30% in 2014. However, the full benefit of this reduction in tax rate in calculating the tax charge for 2015 is offset by the fact that the Group's IPO costs were incurred in the Jersey entity where profits and losses are taxed at zero percent, thereby increasing the overall group effective tax rate by around 10% in 2015. Looking ahead to 2016, the Group expects the full benefit of the reduced corporation tax rate to flow through.

During 2015, a deferred tax liability has been recognised and a charge made for EGP 11.4 million for tax on the undistributed reserves held within the IDH Group. As the Group's dividend policy is to distribute any excess cash after taking into consideration all business cash requirements and potential acquisition considerations, a deferred tax liability has been recognised for the taxes expected to be incurred from the future distribution of reserves within the Group. Egyptian tax legislation now imposes a 5% tax on dividends distributed from Egyptian entities and the deferred tax charge has been calculated using this rate.

Net Earnings

Net profit for the year was EGP 155.0 million, up 9.4% compared to the EGP 141.7 million recorded in 2014. Normalised net profit for 2015 was EGP 286.1 million, up 18.4% on 2014 partly owing to increased net financing income which stood at EGP 7 million in 2015 versus a net financing expense of EGP 3.2 million the previous year.

Balance Sheet

On the assets side of the balance sheet: Property, plant and equipment on the balance sheet rose to EGP 337.9 million in 2015 from EGP 243.9 million the previous year due to the capitalisation of leased medical equipment and other capital expenditure at 28 new branches.

Trade debts and other receivables increased to EGP 117.2 million from EGP 90.1 million as a result of a 35% increase in accounts receivable arising from a 31 % increase in corporate sales. Cash increased significantly to EGP 387.7 million from EGP 252.1 million in 2014 due to good credit control and extended payment terms with suppliers.

On the liabilities side, notable variances from 2014 include a rise in long-term financial leases that increased to EGP 60.3 million from EGP 51 million the previous year. The sharp rise is attributable to the laboratory equipment supplied in the year to the Mega Lab facility for which the arrangement has been deemed to be a finance lease in nature. Furthermore, long-term deferred tax liabilities and provisions rose year-on-year for two reasons: The impact of the reduction in deferred tax rates as a result of the headline drop in tax rates to 22.5% from 30% as well as a change in the basis of taxing dividends. The net movement is an EGP 11.4 million increase in deferred tax. Trade payables also rose as supplier payment terms changed to 60-90 days from 45 days.

Following a detailed review of the sale and purchase agreements relating to the operations in Jordan and Sudan, a technical point was noted which meant there is a need to account for put option in the agreements. This has the effect of including a liability on the balance sheet and a corresponding entry into equity for the present value of the expected value of the option. This has been included in the balance sheets for 2014 and 2015. More details relating to this and three other prior year adjustments can be found in Note 2 to the accounts.

Dividend

Proposed dividends for ordinary shares are subject to the approval of the Annual General Meeting and are not recognised as a liability as at 31 December 2015. The Board of Directors have recommended that a final dividend of US$ 0.06 (six U.S. cents) per share should be paid to shareholders of record as at 8 April 2016, with an ex-dividend date of 7 April 2016. The payment date for the dividend is 13 May 2016.

Going concern

Having made inquiries, the Directors have a reasonable expectation that the Group has adequate resources to meet its liabilities as they fall due for at least 12 months from the date of approval of these consolidated financial statements. Thus, they continue to adopt the going concern basis in preparing the financial information. 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. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the financial statements and notes thereon.

Principal Risks, Uncertainties and Their Mitigation

As in any corporation, IDH has exposure to risks and uncertainties that may adversely affect its performance. IDH Chairman Lord Anthony St. John has emphasized that ownership of the risk matrix is sufficiently important to the Group's long term success that it must be equally shared by the Board and by senior management.

While no system can mitigate every risk - and some risks, as at the country level, are largely without potential mitigants - the Group has in place processes, procedures and baseline assumptions that provide mitigation. The Board and senior management agree that the principal risks and uncertainties facing the Group include:

Statement of Directors' Responsibilities

The directors are responsible for preparing the annual report and the financial statements in accordance with International Financial Reporting Standards as adopted by the EU ("IFRS as adopted by the EU"), interpretations from the International Financial Reporting Interpretations Committee ("IFRIC") and Companies (Jersey) Law 1991 (as amended). Jersey Law requires the directors to prepare financial statements for each financial year, which give a true and fair view of the state of affairs of the Group and of the assets, liabilities, financial position and profit or loss of the Group for that year.

In preparing the financial statements, the directors are required to:

● select suitable accounting policies and then apply them consistently;

● make judgements and estimates that are reasonable, comparable, understandable and prudent;

● ensure that the financial statements comply with IFRS as adopted by the EU; and

● prepare the financial statements on the going concern basis, unless it is inappropriate to presume that the Group will continue in business.

The directors are responsible for maintaining proper accounting records that disclose with reasonable accuracy at any time the financial position of the parent company and to enable them to ensure that the financial statements comply with the Jersey Law. The directors are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The directors are also responsible for the maintenance and integrity of the Group's website on the internet. However, information is accessible in many different countries where legislation governing the preparation and dissemination of financial statements may differ from that applicable in the United Kingdom and Jersey.

The Directors of the Group confirm that to the best of their knowledge that:

· The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards, including International Accounting Standards and Interpretations adopted by the International Accounting Standards Board gives 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 sections of this Report, including the Chairman's Statement, Development Manager's Review, Financial Review and Principal Risks and Uncertainties, which constitute the management report include a fair review of the development and performance of the business and the position of the issuer and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face

By order of the Board

Dr. Hend El Sherbini

Executive Director

Balance sheet

Income statement

Comprehensive income

Cashflows

Changes in shareholder equity

* Under Egyptian Law each subsidiary must set aside at least 5% of its annual net profit into a legal reserve until such time

that this represents 50% of each subsidiary's issued capital. This reserve is not distributable to the owners of the Company.

** Dividends paid in the period were from subsidiary companies to NCI within the period. No dividends were paid from IDH plc to shareholders

Integrated Diagnostics Holdings plc - "IDH" and its subsidiaries

Annual report and Consolidated Financial Statements

for the year ended 31 December 2015

1. Corporate information

The consolidated financial statements of Integrated Diagnostics Holdings plc and its subsidiaries (collectively, the Group) for the year ended 31 December 2015 were authorized for issue in accordance with a resolution of the directors on 24 March 2016. Integrated Diagnostics Holdings plc "IDH" or "the company" has been established according to the provisions of the Companies (Jersey) law 1991 under No. 117257.

IDH's purpose is not restricted and the group has full authority to do any activity as long as it is not banned by the Companies law unless amended from time to time or depending on the Companies (Jersey) law.

The Group's financial year starts on 1 January and ends on 31 December each year. The Group's main activity is concentrated in the field of medical diagnostics.

2. Basis of accounting

2.1. Basis of preparation

The financial information presented for the comparative year ended 31 December 2014 essentially represents the financial performance and position of the same continuing business albeit that the Parent Company of the Group changed in 2014 as a result of group reorganisation.

On 23 December 2014, as a necessary step to its Initial Public Offering on 06 May 2015, the Company (i.e. Integrated Diagnostics Holdings plc), issued 150 million shares to the shareholders of the previous Parent Company of the Group, Integrated Diagnostics Holdings LLC ("Caymans"), in exchange for 100% of the issued shares of Caymans.

The effect of this was to add a new parent company on top of the existing group - this being the only change - prior to its flotation and gave rise to reverse acquisition accounting by the new parent company. In considering the requirements of IFRS 3, consideration was given as to whether this was a business combination. The conclusion reached by the Directors was that this was not a business combination by the new parent company merely the addition of a new holding company to a continuing business, i.e., a group reorganisation. The impact, for accounting purposes, of the transaction on 23 December 2014 was to present the Company as if it had always been the Parent Company of the Group with the consequent continuation of the book values and history previously reported by Caymans, save for alteration of the equity section of the prior year's statement of consolidated financial position to reflect that of the new Parent Company.

Statement of compliance

The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (adopted IFRS) issued by the International Accounting Standards Board (IASB) and the Jersey Law 1991 an amendment to which means separate company financial statements are not required.

Basis of measurement

The consolidated financial statements have been prepared on a historical cost basis, except where adopted IFRS mandates that fair value accounting is required.

Functional and presentation currency

Each of the Group's entities is using the currency of the primary economic environment in which the entity operates ('the functional currency'). The Group's consolidated financial statements are presented in Egyptian Pounds, being the reporting currency of the main Egyptian trading subsidiaries within the Group and the primary economic environment in which the Group operates. For each entity, the Group determines the functional currency and items included in the financial statements of each entity are measured using that functional currency. The Group uses the direct method of consolidation and on disposal of a foreign operation; the gain or loss that is reclassified to profit or loss reflects the amount that arises from using this method.

Going concern

These consolidated financial statements have been prepared on the going concern basis. At 31 December 2015, the Group had net assets amounting to EGP 1,942,473K. The Group is profitable and cash generative and the Directors have considered the Group's cash forecasts for a period of 12 months from the signing of the balance sheet. The Directors have a reasonable expectation that the Group has adequate resources to meet its liabilities as they fall due for at least 12 months from the date of approval of these condensed consolidated interim financial statements. Thus, they continue to adopt the going concern basis in preparing the financial information.

2.2. Basis of consolidation

The consolidated financial statements comprise the financial statements of the Group and its subsidiaries as at 31 December 2015. 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.

On 23 December 2014 the entire share capital of Integrated Diagnostics Holdings LLC (IDH Caymans) or "the previous parent company", was acquired by Integrated Diagnostics Holdings plc "IDH" funded by an issue of the equity instruments of IDH in exchange for these equity instruments.

There were no changes in rights or proportions of control in (IDH Caymans and its consolidated subsidiaries and subsidiary undertakings from time to time "the group", and after 23 December 2014 (the date after which IDH Caymans ceased to be the parent of the group), IDH and its consolidated subsidiaries and subsidiary undertakings from time to time "the group") as a result of this transaction.

Whilst, the equity instruments of IDH Caymans were legally acquired, in substance the Directors have determined that IDH Caymans is the accounting acquirer of IDH. As such, this transaction has been accounted for as a reverse acquisition.

Accordingly, these consolidated financial statements are issued in the name of the new legal parent, IDH, but are a continuation of the consolidated financial statements of IDH Caymans. In accordance with the requirements of IFRS 3: 'Business Combinations', the consolidated financial statements of IDH Caymans, including comparative information, have been retroactively adjusted to transfer EGP 2,099,888,000 from capital reserve to reflect the legal capital position of IDH as shown in the consolidated statement of changes in equity. No other adjustments have arisen in respect of this reverse acquisition accounting.

Various restatements have been made to the balance sheets as at 1january 2014 and 31 December 2014 and for the income statement and statement in changes in equity for the year ended 31 December 2014.

i. As disclosed in the consolidated statement of changes in equity, the individual amounts within equity as at 1 January 2014 has been restated. There are three main reasons for these changes being:

a. The push back of the capital structure of IDH to retroactively account for its share capital structure to be that of the Group as required by IFRS 3. Previously these changes had mostly been reported as changes in equity during the year ended 31 December 2014.

b. To adjust the share premium to reflect the accounting required in the individual financial statements of IDH as required by IAS 27 for its cost of investment in IDH Caymans.

c. The accounting of the put options in the Group see note (iii) below.

Only point (c) results in a change in the total amount of the equity as at 1 January 2014 as all others are reallocations within equity.

ii. Certain reclassifications of the 31 December 2014 balance sheet have been retroactively adjusted, which are not material to the overall financial statements. A prepayment of EGP 1,088,000 had been included in Property, Plant and Equipment which has been re-allocated to trade and other receivables. Certain income tax balances included within trade debtors and other receivables of EGP 4,247,000 and other provisions of EGP 9,492,000 have been reallocated to current tax liabilities. Included in provisions was an accrual for holiday leave of EGP 729,000 which has been reallocated to trade and other payables.

These reclassifications to the 31 December 2014 balance sheet do not result in a change to the total equity as at 31 December 2014.

iii. In addition there has been restatements made to the balance sheets as at 31 December 2013 and 31 December 2014 and to the statement in changes in equity for the year ended 31 December 2014 due the existence of NCI put options.

Through Al Borg the Group made two separate acquisitions in 2011 of Al Makhbariyoun Al Arab and Golden Care Medical Services.

Under both the sale and purchase agreement for the two acquisitions the vendors have a put option allowing them to force Al Borg to purchase all the remaining equity interest for a formulae agreed e equity value price. The option is exercisable in whole from the fifth anniversary of completion of the original purchase agreement being 30 June 2016.

At the date of the agreement the put option and the associated liability was not accounted for within the Group financial statements or on the conversion to IFRS on the 1 September 2012.

An adjustment has been made to 1 January 2014 position to correctly reflect this transactions within the Group financial statements. An initial liability has been recognised for the net present value at 1 January 2014 for the exercise price of the option with the corresponding amount recognized as equity within the put option reserve of the Group. The initial entry for the put option in Al Makhbariyoun Al Arab being EGP 30,148k and for the put option in Golden Care Medical Services being EGP 10,834k with the total liability being EGP 40,982k upon initial recognition.

The accounting policy for put options after initial recognition is to recognise all changes in the carrying value of the put liability within equity. The put liability recognised at 31 December 2014 and at 31 December 2015 year end were as follows:

iv. Finally a reclassification of tax related expenses from other expenses to income tax expenses of EGP 5,391,108. This reclassification is to present all tax related expenses and credits within income tax expense.

i. Subsidiaries

Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. In assessing control, the Group takes into consideration potential voting rights that are currently exercisable. The acquisition date is the date on which control is transferred to the acquirer. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance.

ii. Change in subsidiary ownership and loss of control

Changes in the Group's interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. Where the group loses control of a subsidiary, the assets and liabilities are derecognised along with any related NCI and other components of equity. Any resulting gain or loss is recognised in profit or loss. Any interest retained in the former subsidiary is measured at fair value when control is lost.

Transactions eliminated on consolidation of Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated. Unrealised gains arising from transactions with equity-accounted investees are eliminated against the investment to the extent of the Group's interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

2.3. Significant accounting policies

Except for the changes below, the accounting policies set out below have been applied consistently applied to all the years presented in these consolidated financial statements.

The Group has adopted the following new standard, including any inconsequential amendments to other standards, with a date of initial application of 1 January 2015.

· Annual Improvements to IFRSs - 2010-2012 Cycle

This new standard had a non-material impact on these consolidated financial statements.

a) 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, which is 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 included in administrative expenses.

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 acquirer will be 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 statement of profit or loss.

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 (CGU) 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.

b) Fair value measurement

The Group measures financial instruments such as non-derivative financial instruments, available-for-sale financial assets and contingent consideration assumed in a business combination, at fair value at each balance sheet date.

When measuring the fair value of an asset or a liability, the Group uses observable market data as far as possible. Fair value is categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:

Ø Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities

Ø Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable

Ø 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 at fair value 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.

For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy, as explained above.

The fair value less any estimated credit adjustments for financial assets and liabilities with maturity dates less than one year is assumed to approximate their carrying value. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contracted cash flows at the current market interest rate that is available to the Group for similar transactions.

c) Revenue recognition

Revenue represents the medical value of medical diagnostic services rendered in the year, and is stated net of discounts. The Company has two types of customers: Walk-in patients and patients served under contract. For patients under contract, rates are agreed in advance on a per-test, client-by-client basis. For both types of customers, revenue is recognized on completion of the services rendered. 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 received. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty.

d) Leases

i. Determining whether an arrangement contains a lease

At inception of an arrangement, the Group determines whether the arrangement is or contains a lease.

At inception or on reassessment of an arrangement that contains a lease, the Group separates out payments and other consideration required by the arrangement into those for the lease and those for other elements on the basis of their relative fair values. If the Group concludes for a finance lease that it is impractical to separate the payments reliably, then an asset and a liability are recognized at an amount equal to the fair value of the underlying asset; subsequently, the liability is reduced as payments are made and an imputed finance cost on the liability is recognised using the Group's incremental borrowing rate.

ii. Leased assets

Assets held by the Group under leases that transfer to the Group substantially all of the risks and rewards of ownership are classified as finance leases. The leased assets are measured initially at an amount equal to the lower of their fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the assets are accounted for in accordance with the accounting policy applicable to that asset. Assets held under other leases are classified as operating leases and are not recognised in the Group's statement of financial position.

iii. Lease payments

Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease.

Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.

e) Income Taxes

Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

i. Current tax

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

ii. 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 is recognized on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements.

However, deferred tax liabilities are not recognized if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination and differences relating to investments in subsidiaries to the extent that they will probably 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.

Deferred tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the reporting date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.

f) Foreign currency

Transactions in foreign currencies are initially recorded by the Group's entities at their respective functional currency spot rates at the date the transaction first qualifies for recognition. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date.

Differences arising on settlement or translation of monetary items are recognised in the income statement.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined.

On consolidation, the assets and liabilities of foreign operations are translated into Egyptian Pounds at the rate of exchange prevailing at the reporting date and their statements of profit or loss are translated at average rate (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). The exchange differences arising on translation for consolidation are recognised in other comprehensive income and accumulated in the translation reserve or NCI as the case may be. On disposal of a foreign operation, the component of other comprehensive income relating to that particular foreign operation is recognised in profit or loss.

Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition are treated as assets and liabilities of the foreign operation and translated at the spot rate of exchange at the reporting date.

g) Property, plant and equipment

All property and equipment are stated at historical cost less accumulated depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset's carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the consolidated statement of income during the financial period in which they are incurred.

Land is not depreciated.

Laboratory Equipment held to perform the 'Hub spoke' at the Mega Lab and provided under finance lease arrangements are depreciated under a unit of production method as this most closely reflects the consumption of benefits from the equipment.

Depreciation on other assets is calculated using the straight-line method to allocate their cost or revalued amounts to their residual value over their estimated useful lives, as follows:

Buildings 50 years

Medical, electric and information systems equipment 4-10 years

Leasehold improvements 4-5 years

Fixtures, fittings & vehicles 4-16 years

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized within 'Other (losses)/gains - net' in the consolidated statement of income.

h) 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 profit or loss in the period in which the expenditure is incurred.

The useful lives of intangible assets are assessed as either finite or indefinite.

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 statement of profit or loss 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.

Goodwill

Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred over interest in net fair value of the net identifiable assets, liabilities and contingent liabilities of the acquiree and the fair value of the non-controlling interest in the acquiree.

Goodwill is stated at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash-generating units (CGUs), or groups of CGUs, that is expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes.

Brand

Brands acquired in a business combination are recognized at fair value at the acquisition date and have an indefinite useful life.

Customer list

Customer lists acquired in a business combination are recognized at fair value at the acquisition date and have finite useful life. Amortization method on a straight-line basis and the estimated useful live is 4 years, as determined by management.

i) Financial instruments - initial recognition and subsequent measurement

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

i. Financial assets

Initial recognition and measurement

Financial assets are classified, at initial recognition, as financial assets at fair value through profit or loss, loans and receivables, AFS financial assets, as appropriate. All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset.

Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Group commits to purchase or sell the asset.

Subsequent measurement

For purposes of subsequent measurement, financial assets are classified in three categories:

Ø Financial assets at fair value through profit or loss

Ø Loans and receivables

Ø AFS financial assets

The Group did not hold financial assets classified as financial assets at fair value through the profit or loss or AFS financial assets at 31 December 2015 and 31 December 2014.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest method ("EIR"), 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 in finance costs for loans and in cost of sales or other operating expenses for receivables.

Derecognition

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e. removed from the Group's consolidated statement of financial position) when:

Ø The rights to receive cash flows from the asset have expired

Or

Ø The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a 'pass-through' arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass- through arrangement, it evaluates if, and to what extent, it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Group continues to recognise the transferred asset to the extent of its continuing involvement. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

Impairment of financial assets

Further disclosures relating to impairment of financial assets are also provided in the following notes:

Ø Disclosures for significant estimates and assumptions Note 2

Ø Financial assets Note 15

Ø Trade receivables Note 17

The Group assesses, at each reporting date, whether there is objective evidence that a financial asset or a group of financial assets is impaired. An impairment exists if one or more events that has occurred since the initial recognition of the asset (an incurred 'loss event'), has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and observable data indicating that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

ii. Financial liabilities

Initial recognition and measurement

All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.

All of the Group's financial liabilities are classified as financial liabilities carried at amortised cost using the effective interest method. The Group does not use derivative financial instruments or hedge account for any transactions. Unless otherwise indicated, the carrying amounts of the Group's financial liabilities are a reasonable approximation of their fair values.

The Group's financial liabilities include trade and other payables, finance lease liabilities and loans and borrowings including bank overdrafts.

Derecognition

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.

iii. Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.

j) Impairment of non-financial assets

Further disclosures relating to impairment of non-financial assets are also provided in the following notes:

Ø Disclosures for significant assumptions and estimates Note 2

Ø Goodwill and intangible assets with indefinite lives Note 14

The Group assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or CGU's fair value less costs of disposal and its value in use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators.

The Group bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for each of the Group's CGUs to which the individual assets are allocated. These budgets and forecast calculations generally cover a period of five years. A long-term growth rate is calculated and applied to project future cash flows after the fifth year.

Impairment losses of continuing operations are recognised in the statement of profit or loss in expense categories consistent with the function of the impaired asset, except for properties previously revalued with the revaluation taken to OCI. For such properties, the impairment is recognised in OCI up to the amount of any previous revaluation.

For assets excluding goodwill, an assessment is made at each reporting date to determine whether there is an indication that previously recognised impairment losses no longer exist or have decreased.

If such indication exists, the Group estimates the asset's or CGU's recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset's recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the statement of profit or loss unless the asset is carried at a revalued amount, in which case, the reversal is treated as a revaluation increase.

Goodwill is tested for impairment annually as at 31 October and when circumstances indicate that the carrying value may be impaired.

Impairment is determined for goodwill by assessing the recoverable amount of each CGU (or group of CGUs) to which the goodwill relates. When the recoverable amount of the CGU is less than its carrying amount, an impairment loss is recognised. Impairment losses relating to goodwill cannot be reversed in future periods.

Intangible assets with indefinite useful lives are tested for impairment annually as at 31 October at the CGU level, as appropriate, and when circumstances indicate that the carrying value may be impaired.

Intangible assets that have an indefinite useful life or intangible assets not ready to use are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely independent cash inflows (CGU). Prior impairments of non-financial assets (other than goodwill) are reviewed for possible reversal at each reporting date.

k) Inventories

Inventories are stated at the lower of cost and net realizable value. Cost is determined using the weighted average method. Net realizable value is the estimated selling price in the ordinary course of business, less estimated selling and distribution expenses.

l) Cash and short-term deposits

Cash and short-term deposits in the statement of financial position comprise cash at banks and on hand and short-term deposits with a maturity of three months or less, which are subject to an insignificant risk of changes in value.

For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash and short-term deposits, as defined above, net of outstanding bank overdrafts as they are considered an integral part of the Group's cash management. 

m) Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Group expects some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain. The expense relating to a provision is presented in the statement of profit or loss net of any reimbursement.

If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

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 the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense. 

n) Pensions and other post-employment benefits

A defined contribution plan is a pension plan under which the group pays fixed contributions into a separate entity. The group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. Obligations for contributions to defined contribution pension plans are recognized as an expense in the income statement in the periods during which services are rendered by employees.

o) Share-based payment transactions

The grant-date fair value of equity-settled share-based payment awards granted to employees is generally recognized as an expense, with a corresponding increase in equity, over the vesting period of the awards. The amount recognized as an expense is adjusted to reflect the number of awards for which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognized is based on the number of awards that meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with non-vesting conditions, the grant-date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.

p) Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the steering committee that makes strategic decisions.

The Group has not early adopted any other standard, interpretation or amendments that have been issued but not yet effective for the year ended 31 December 2015. None of these are expected to have a material effect on these consolidated financial statements of the Group, except for the following which could change the classification and measurements of financial assets.

· IFRS 9 "Financial instruments" (expected effective date of January 2018).

· Annual improvements to IFRSs - 2012 - 2014 cycle (effective date of January 2016)

IFRS 16 'Leases' (effective date of January 2019) introduces an on balance sheet accounting model for operating leases. The Group has significant operating lease commitments through the lease of branches and is anticipated to have a material effect when these arrangements are required to be brought on balance sheet.

3. Significant accounting judgments, estimates and assumptions

The preparation of the Group's consolidated financial statements in conformity with adopted IFRSs requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

Other disclosures relating to the Group's exposure to risks and uncertainties includes:

Ø Capital management Note 5

Ø Financial instruments risk management and policies Note 15

Ø Sensitivity analyses disclosures Notes 15

Judgments

In preparing these consolidated financial statements, management have made a material judgment, that affect the application of the Group's lease accounting policy and the reported amounts of assets, liabilities, and expenses. Information about judgment, estimate and assumptions relating to finance leases are set out in note 25.

Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty 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 described below. The Group based its assumptions and estimates on parameters available when the consolidated financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Group. Such changes are reflected in the assumptions when they occur.

Impairment of intangible assets

The Group tests annually whether goodwill and other intangibles with indefinite lives have suffered any impairment. Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The recoverable amounts of cash generating units have been determined based on value in use. 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.

Impairment of trade and notes receivables

The requirement for impairment of trade receivables is made through monitoring the debts aging and reviewing customer's credit position and their ability to make payment as they fall due. An impairment is recorded against receivables for the irrecoverable amount estimated by management. At the year end, the provision for impairment of trade receivables was EGP 17,030k (31 December 2014: EGP 12,138k).

4. Segment information

The group is viewed as a single operating segment, as the Group's Chief Operating Decision Maker (CODM) reviews the internal management reports and KPIs of the group as whole and not at a further aggregated level.

The group operates in three geographic areas, Egypt, Sudan and Jordan. Each area offers similar services and the KPIs of each are viewed to be the same and they are not viewed as individual operating segments. The revenue split between the three regions is set out below, the combined Sudan and Jordan operations make up less than 10% of the Group's total revenue.

The operating segment profit measure reported to the CODM is Normalised EBITDA, as follows:

The operating segment assets and liabilities measure reported to the CODM is in accordance with IFRS as shown in the Group's Consolidated Statement of Financial Position.

5. Capital management

The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

The repatriation of a declared dividend is subject to regulation by Egyptian authorities. The outcome of an Ordinary General Meeting of Shareholders declaring a dividend is first certified by the General Authority for Investment and Free Zones (GAFI). Approval is subsequently transmitted to Misr for Central Clearing, Depository and Registry (MCDR) to distribute dividends to all shareholders, regardless of their domicile, following notification of shareholders via publication in two national newspapers.

The Group monitors capital on the basis of the net debt to equity ratio. This ratio is calculated as net debt divided by total equity. Net debt is calculated as total liabilities (being total current liabilities plus long-term financial obligations) less cash and cash equivalents.

No changes were made in the objectives, policies or processes for managing capital during the years ended 31 December 2015 and 2014.

Although Sudan sanctions impose restrictions on the distribution of dividends within one year, the amount of undistributed dividends is not significant to the Group total capital management. Total equity, is as shown in the statements of financial position. No funds will be remitted from Sudan in the form of cash payments for services provided or dividends from the company until such a time as the sanctions imposed on Sudan are clarified or released. The total of profits that could be distributed from Sudan is EGP 4,720K and the amount of cash in Sudan is EGP 16,166K.

6. Group information

Information about subsidiaries

The consolidated financial statements of the Group include:

Full details of the historic acquisitions of the group can be found in the prospectus for the initial public offering by the Company dated 6 May 2015 and available at www.idhcorp.com.

7. Business combinations and acquisition of non-controlling interests

Acquisition of Integrated Medical Analysis Company (IMA)

At 21 December 2014 and in accordance with Al Mokhtabar Company's board of directors' resolution, the company acquired 33.33% of the share capital of Integrated Medical Analysis Company (S.A.E). Integrated Medical Analysis Company (S.A.E) was considered a subsidiary of Al Mokhtabar Company even though Al Mokhtabar Company had only a 33.33% ownership interest. The remaining 66.67% was allocated equally between Dr. Momena Kamel (the Chairman of Al Mokhtaber), and Mr Amr Helal of Abraaj Group. Dr. Momena Kamel had waived her rights in the ownership and voting in relation to the shares of 83,333 shares held in Integrated Company for Medical Analysis, which accounted for 33.33% of the capital paid and Al Mokhtabar shall be considered as the beneficiary owner of these shares until it is completely transferred before all the authorities.

As a result the directors of the company consider Al Mokhtabar Company has control over Integrated Medical Analysis Company (S.A.E). Al Mokhtabar Company has the practical ability to direct the relevant activities of Integrated Medical Analysis Company (S.A.E) unilaterally.

During the current year, Al Mokhtabar Company increased its share equity of the acquiree by 66.25%, as a result, the percentage of total shares of the company in Integrated Medical Analysis Company (S.A.E) became 99.58%.

8. Non-Controlling interest

Financial information of subsidiaries that have material non-controlling interests is provided below:

Proportion of equity interest held by non-controlling interests:

The summarised financial information of these subsidiaries is provided below. This information is based on amounts before inter-company eliminations.

9. Expenses and other income

Included in profit and loss are the following:

* In the year professional and advisory fees included EGP 125 million relating to the costs for the IPO. No shares were issued on IPO and so all costs have been expensed.

9.1. Auditor's remuneration

The group paid or accrued 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

9.2. Net finance costs

9.3. Employee numbers and costs

The average number of persons employed by the Group (including directors) during the year and the aggregate payroll costs of these persons, analysed by category, were as follows:

Details of Directors' and Key Management remuneration and share incentives are disclosed in the Remuneration Report and note 26.

10. Income tax

a) Amounts recognised in profit or loss