NMC.L Regulatory News (NMC)

London, 25 February 2014: NMC Health Plc (LSE:NMC) ('NMC'), the leading integrated private sector healthcare operator in the United Arab Emirates, announces its results for the full year ended 31 December 2013.

Financial Summary

Notes:

· Normalised operating cash flow is a non-IFRS line item and is equivalent to Net cash from operating activities.

· Total cash is represented by bank deposits and bank balances and cash.

· Total debt is a non-IFRS line item and includes short term and revolving working capital facilities required for the operation of the Distribution division but excludes accounts payables and accruals, amounts due to related parties, Employee end of service benefit and other payable.

· Net Debt is a non-IFRS line item and is total cash less total debt, both as defined above.

FY2013 Financial Highlights - A year on year comparison

· Group Revenues increased by 12.4% to US$550.9m

· Healthcare division revenue increased by 15.0% to US$289.3m[1]

· Distribution division revenue grew by 10.7% to US$300.2m[2]

· EBITDA increased by 16.7% to US$92.9m

· EBITDA margin improved by 62bps to 16.9%

· Net profit increased by 15.7% to US$69.1m

· Net profit margins appreciated by 36bps to 12.6%

· Earnings per share (EPS) amounted to US$0.367

· Proposed dividend pay-out ratio is maintained at 20% of profit after tax, amounting to GBP[3] 4.4 pence per share

· Total capital expenditure reached US$82.7m, 30.5% lower[4]

· Net debt reached US$63.7m as the Group continued to advance its on-going healthcare projects

· Replacement of Term Loan Facility during the period will result in an average estimated annual saving of US$2m during the five year term of the new facility, net of a one-off charge of US$3.4m in relation to the previous JP Morgan syndicated loan, fully provided for in 2013.

FY2013 Business Highlights - A year on year comparison

· Healthcare division's patients increased by 9.5% to 2.1m

· Revenue per patient from healthcare services increased by 5.6% to reach US$ 111.6

· Hospital bed occupancy rates reached 64.7%, an improvement of 420bps, despite a 13.5% increase in operational beds to 261

· Doctors employed reached 503, an increase of 19.8%

· Distribution division increased its product portfolio by 8.7% to 71,215 stock keeping units (SKU)

· Sales and marketing personnel at the Distribution division grew 14.4% to 605

· NMC Day Surgery in Mohamad bin Zayed City commenced operations in July 2013

· Dubai authorities adopted mandatory healthcare insurance in November 2013 with implementation starting in 2014.

Dr B.R. Shetty, Chief Executive Officer, commented:

"A positive UAE macro environment, clear strategy and dedicated management efforts meant strong progress across both our business divisions during 2013. In the Healthcare division we achieved increased patient numbers, occupancy levels, and revenue per patient. Our Distribution division continued to deliver excellent results, with positive growth across its increased range of products.

Our expansion strategy in the Healthcare division, through the addition of a total of three new hospitals and a medical centre in 2014 and 2015, has been reinforced by the strong population and economic growth seen in the UAE over the past year and the recent adoption of mandatory healthcare insurance in Dubai. Consequently, I look forward to a rewarding 2014 for NMC and its shareholders"

Outlook

The UAE macro-economic outlook for 2014 remains positive with the expected GDP and population growth anticipated to continue supporting the growth of our business divisions across the country.

The Emirate of Dubai's decision in late 2013 to begin rolling-out mandatory healthcare insurance for all its residents is very positive for both our business divisions, as the Dubai Health Authority (DHA) estimates around 66% of the Emirate's residents are without healthcare insurance. NMC Health already has two hospitals and a day surgery in Dubai. In addition, NMC is a leading distributor of pharmaceuticals. Our market position in Dubai will be strengthened with the DIP General Hospital which we plan to open later this year.

Two additional hospitals and a medical centre will join our portfolio of operational healthcare assets in 2014.

New products are expected to be added to our Distribution division portfolio.

Analyst and investor conference call

A conference call and webcast for analysts and investors will take place today, Tuesday 25 February 2014 at 14:00 GMT/ 18:00 UAE / 09:00 EST. Please contact Roy Cherry for further details.

A copy of this report will be available on the Company's Investor Relations website which can be accessed from www.nmc.ae.

Contacts

Investors

NMC Health

Prasanth Manghat, Chief Financial Officer +971 50 522 5648

Roy Cherry, Head of Strategy and Investor Relations +971 50 667 0184

Media

Brunswick London

Justine McIlroy / Azadeh Varzi

+44 20 7404 5959

Brunswick Gulf

Steve Martin Wajih Halawa

+971 5 6696 9232 +971 5 0100 9207

Cautionary statement

These Preliminary 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 Preliminary Results should not be relied upon by any other party or for any other reason. Any forward looking statements made in this document are done so by the directors in good faith based on the information available to them up to the time of their approval of this report. However, such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.

The listing rules of the UK Listing Authority (LR 9.7A.1) require that preliminary statements of annual results must be agreed with the listed company's auditor prior to publication. In addition the Listing Rules require such statements to give details of the nature of any likely modifications that may be contained in the auditor's report to be included with the Annual Report and whether any audit report has been issued on the statutory accounts. NMC Health plc confirms that it has agreed this preliminary announcement of annual results with Ernst & Young LLP. The financial information presented in this preliminary announcement was authorised for issue by the Board of Directors on 25 February 2014. The auditor's report on those financial statements was unqualified and did not contain a statement under section 498 of the Companies Act 2006. The audited financial statements will be delivered to the Registrar of Companies and a copy will also be available on the Company's website (www.nmc.ae) in due course. The financial information contained in this document does not constitute statutory accounts as defined in section 435 of the Companies Act 2006.

This constitutes regulated information for the purposes of the Disclosure and Transparency Rules.

About NMC

NMC Health plc group is the leading integrated private sector healthcare operator in the United Arab Emirates, with a nation-wide network of hospitals and operations in the country since 1975. The Healthcare division currently operates or manages five hospitals, two day-care patient centres, one medical centre and eight pharmacies. The company received 2.1m patients in 2013. The group also operates a significant UAE wide Distribution business supplying product lines across several key market segments, including: Pharmaceutical, FMCG, Food and Scientific and Medical Equipment. NMC Health plc group reported revenues of US$ 550.9m in 2013.

In April 2012 NMC Health plc was listed on the Premium Segment of the London Stock Exchange. At the time of its IPO, the group raised funds to enable it to pursue a further growth plan with a number of capital projects for new healthcare facilities in Abu Dhabi and Dubai. NMC Health plc is a constituent of the FTSE 250 Index.

Business and Financial Review

In 2013 NMC Health continued to build on the success of 2012, experiencing growth across the entire business as our strategy delivers. This is reflected in the strong performance which continued across the two main business lines with a 15.0% revenue growth in the Healthcare division (for the second year in a row) and 10.7% revenue growth in the Distribution division. We are well placed to capitalise on the decision by Dubai authorities to initiate the roll out of mandatory healthcare insurance, starting 2014.

Business review

Healthcare division

NMC Health's healthcare services operations span Abu Dhabi, Al Ain, Dubai, Sharjah and Umm Al Quwain. Together these Emirates and cities account for nearly 85% of UAE residents. We operate four hospitals, two day surgeries, a medical centre and eight in-hospital pharmacies. In addition, the Group operates a fifth hospital on behalf of the UAE Ministry of Presidential Affairs, the 205 bed Sheikh Khalifa General Hospital in Umm Al Quwain, under an operations and management contract initiated in Q4 2012.

Healthcare division operations in 2013

The UAE's strong GDP growth, coupled with the increased population due to the continued influx of expatriates to the growing economy, had a positive effect on the performance of the healthcare division.

In addition we have sought to increase referrals from community clinics towards our specialty hospitals. Our marketing team launched several initiatives to engage with the residential community/corporates, including holding health awareness sessions and lectures. We have also worked to increase our engagement with the medical community to showcase our capabilities.

Keeping in mind that a large proportion of outpatients in the UAE visit stand-alone private sector clinics lacking inpatient capacity, we have sought to encourage these third-party operators to refer patients to our hospitals. Meanwhile, we have continued to invest in new equipment and technologies to complement our service offering and medical staff efforts.

In July 2013 we also supplemented our healthcare assets with the opening of the NMC Day Surgery Centre in Mohammed Bin Zayed City, one of the fastest growing suburbs of Abu Dhabi City. This facility began receiving its first patients in July 2013 and will act as a referral centre to our growing Abu Dhabi network, thus extending the operational reach and addressable market of Abu Dhabi Specialty Hospital initially, and eventually also Brightpoint Women's Hospital and Khalifa City Hospital.

Operational gearing, our continued drive to enhance our service offering with new higher value added sub-specialties, supported by our growing volumes, and the entry into third party hospital operation and management, are additional contributing factors to the strong performance of the Healthcare division in 2013.

The Healthcare division reported US$289.3m of revenues in 2013 (+15.0% year on year). Division EBITDA amounted to US$81.7m (+19.8% year on year), with an EBITDA margin of 28.2% (+113bps year on year). Average revenue per patient reached US$112 (+6% year on year), supported by a combination of price increases and improved service mix effect, as we continue to enhance our offering of higher value added sub-specialties.

Excluding the government hospital managed by NMC, the division had a total of 261 operational beds (+13.5%, year on year) out of an unchanged 310 licensed beds, as we continued to phase-in beds mainly in our Dubai Specialty and Al Ain Specialty Hospitals.

We have a 15.8% spare system capacity, measured in beds, which we expect to gradually phase into our operations in 2014 and 2015. Out of 49 beds yet to become operational, 40 are in our most recent hospital, Al Ain Specialty Hospital, and nine are in Dubai Specialty Hospital. We expect the continued growth in Al Ain, as demonstrated by the hospital's performance to date, to absorb the remainder of our spare bed capacity in the next couple of years. Mandatory healthcare insurance adoption in Dubai this year, coupled with growing network referrals from our existing and new healthcare facilities in Dubai, should allow Dubai Specialty Hospital to increase its operational beds.

As our revenue continued to grow at rapid pace, we enhanced our service ability and revenue generating capacity through the increase in total Healthcare division staff by 18.3% in FY 2013 to 3,400. We increased the number of doctors to 503 by year end 2013 (+19.8% year on year).

Division-wide bed occupancy reached 64.7% (+420bps year on year), despite the rise in operational beds during the year by 13.5%. The main reasons behind the improvement in occupancy rates at our hospitals include:

· patient count increase to almost 2.1m (+9.5% year on year);

· expansion in the proportion of our total patients who are Inpatients to 3.1% (+8bps, year on year); and

· higher average length of stay (ALOS).

A like for like comparison based on last year's deployed operational bed capacity and FY2013 utilisation, would have yielded an occupancy rate well above the 70% level compared to the 60.5% in FY2012.

We continue to regard full bed occupancy for medical facilities in the UAE to be around 75%, as opposed to 90-95% often experienced in other countries. The population leveraged reality in the UAE, with around 85% of residents being expatriates, does create higher resident seasonal volatility. This is typically manifested through extended departures/holidays to home country for working expatriates (up to one month) and even longer for non-working family members particularly during the summer season. In addition, we highlight that our occupancy figures exclude day surgery patients, as the occupancy calculation we adopt only includes patients staying overnight. Consequently, we are rapidly approaching full occupancy, even before the effects from further roll-out of universal medical insurance beyond the emirate of Abu Dhabi, hence our investment in new capacity.

Abu Dhabi Specialty Hospital

Abu Dhabi Specialty Hospital, the Group's first ever hospital, has evolved from being a very small building in the 1970's to a tower on the same land plot with adjacent buildings. It is located in the densely populated centre of Abu Dhabi City. This remains the largest patient recipient within the NMC network. The facility continues to provide a wide range of specialties and had its Joint Commission International (JCI) accreditation renewed in 2013. With nearly 40 years of service in the very same area of the city, this hospital has built a noteworthy reputation for quality amongst the Abu Dhabi population.

Reported revenues increased by 12% to US$101m in 2013 compared to the preceding year. The total number of patients reached 937k (+5%, year on year) with an average revenue per patient amounting to US$108 (+7%, year on year). Occupancy increased by 1,060bps year on year to reach 79% - the highest amongst all NMC healthcare assets.

Al Ain Specialty Hospital

NMC Health inaugurated the Al Ain Specialty Hospital in the second largest city within the emirate of Abu Dhabi in 2009. This expansion was encouraged by the adoption of mandatory healthcare insurance in Abu Dhabi in the immediately preceding years. Al Ain Specialty Hospital had the JCI accreditation of its quality and service levels renewed for a further three year period in 2012.

Being our most recent hospital addition, we have been gradually introducing this facility's capacity - starting with 12 operational beds, moving up to 45 in 2012 and with 60 beds as of year-end 2013. As part of our organic expansion and capital projects programme, we are also in the process of developing a medical centre in Al Ain's Sanaiya area, which holds a high concentration of industrial establishments. We believe this will further expand the operational reach and market of the hospital by bringing NMC closer to high population areas and increasing referrals to the specialty hospital.

Al Ain Specialty Hospital's performance has been continuously improving with revenues reaching US$48m in 2013 (+21% year on year), revenue per patient increased to US$117 (+8% year on year) and occupancy rose to 60% (+430bps year on year) despite the 33% increase during the year in operational beds.

Dubai Specialty Hospital

Opened in 2004, the Dubai Specialty Hospital is well situated in the growing residential area of Al Nahda on the Dubai-Sharjah border, which enables the hospital to take advantage of referrals, not only from both the Dubai General Hospital and Sharjah Medical Centre, but also from certain targeted sections of the population of the northern emirates. This location has helped the hospital grow significantly since opening. The facility continues to provide a wide range of specialties. Dubai Specialty Hospital had its JCI accreditation for its quality and service levels renewed for a further three year period in 2012.

The recent decision by Dubai authorities to initiate the roll out of mandatory healthcare insurance, starting early 2014, is expected to further support the growth of this facility in the coming years. Dubai Health Authority (DHA) has reported that nearly two thirds of Dubai residents are uninsured, suggesting a potential phased growth of up to 200% in insured residents over the coming years. Dubai Specialty Hospital will soon see further support from the NMC DIP General Hospital located on the other side of Dubai.

Dubai Specialty Hospital's performance has been continuously improving with revenues reaching US$56m in 2013 (+16% year on year), revenue per patient increased to US$164 (+4% year on year) and occupancy declined to 54% (-160bps year on year) slightly effected by the increase in operational beds at the facility from 75 to 91 beds (+21% year on year).

Dubai General Hospital

Dubai General Hospital was established in 1999, this 10 bed facility is located in the highly populated area of Deira. The hospital acts as a referral centre to the NMC Dubai Specialty Hospital which is a short distance away.

Dubai General Hospital's revenues reached US$12.2m in 2013 (+5% year on year), revenue per patient increased to US$62 (+6% year on year) and occupancy reached 44% (+580bps year on year).

Sharjah Medical Centre

This multi specialist medical centre was opened in 1996 and is located on the busy commuter route along the Corniche in Sharjah. Since the facility was upgraded in 2010 from a clinic to a medical centre offering increased specialities such as radiology and minor procedures, revenue has increased significantly. The Group also benefits from referrals made from this facility to the Dubai Specialty Hospital.

This medical centre saw a 26% year on year increase in patients, with revenues reaching US$ 10.3m (+16% year on year). Meanwhile revenue per patient declined to US$67.0 (-8% year on year) as we expanded our services by offering lower fee procedures.

BR Medical Suites

BR Medical Suites is a high-end specialty day surgery, located in Dubai Healthcare City. It is specifically designed to attract highly experienced doctors from around the world to carry out minimally invasive surgery and other procedures within its modern international standard facility. The Group acquired BR Medical Suites for a consideration of US$9m paid in cash on 1 July 2012.

During FY 2013 the facility generated revenues of US$ 2.6m and received 9,582 patients (+480% year on year). Revenue per patient was around US$ 269. While the facility's total revenues increased, revenue per patient declined by 17%, mainly due to the introduction of new services. Historically, this day surgery has been focused on high-complexity and high value procedures. As we widened the service offering, the revenue per patient has declined.

Unlike our other healthcare assets, this day surgery is overwhelmingly focused on utilisation by external doctors. Consequently, its revenues were accounted for net of the external doctor's share.

NMC Day Surgery Centre in Mohammed Bin Zayed City

This facility in the rapidly growing Abu Dhabi suburb known as Mohammed Bin Zayed City (MBZC) began receiving its first outpatients in July 2013. NMC Day Surgery Centre in Mohammed Bin Zayed City will act as a referral centre to our growing Abu Dhabi hospital network, thus extending the operational reach and addressable market of Abu Dhabi Specialty Hospital initially and eventually also Brightpoint Women's Hospital and Khalifa City Hospital

The facility has seen strong monthly growth in patient numbers since opening and, we expect this trend to continue as we open new sections of the day surgery centre. In addition, we expect to open a pharmacy in the same building in 2014 which should support revenue growth.

Revenue amounted to just under US$1m with over 19,000 patients and US$48 in revenue per patient.

Third party hospital operations & management

NMC Health provides operation and management services to third party healthcare asset owners and developers. Our management service contract to date is for the 205 bed Sheikh Khalifa General Hospital in Umm Al Quwain, which we are managing on behalf of the UAE Ministry of Presidential Affairs since Q4 2012. This is a five year contract in return for an annual management fee based on qualitative as opposed to financial metrics. We believe this is the first such contract to manage a large Government healthcare facility awarded by a Government Department to a local UAE business. This demonstrates the confidence in NMC's significant healthcare experience and capabilities.

Capital projects

NMC Health's expansion plans, as announced during the IPO in 2012, included five new healthcare assets. Three of the assets, which included the lease, redesign and equipping of existing buildings are:

· Brightpoint Women's Hospital (100 bed) in Abu Dhabi;

· NMC Day Surgery Centre in the Mohammed Bin Zayed City Suburb of Abu Dhabi (opened in July 2013); and

· Dubai Investment Park (DIP) General Hospital (60 bed).

In addition, a fourth medical facility is being developed the 250 bed Hospital in the Khalifa City suburb of Abu Dhabi. However, in this case the building is an entirely new development, owned and contracted by NMC Health. Finally, the plans also included the acquisition of BR Medical Suites (completed in 2012), a specialist day surgery centre in Dubai Health Care City (DHCC).

The Group faced significant challenges in 2013 to progress the construction of certain of its new facilities, particularly those requiring the re-design and fit-out of existing buildings.

The Brightpoint Women's Hospital, which was originally planned to open in August 2012, has been particularly complex refit and construction slower than expected. Following a number of delays we are now expecting the facility to open in H1, 2014. Similarly the DIP General Hospital, construction has been delayed on several occasions and we have also had licensing delays. We are now expecting the facility to open in H1, 2014.

As a result of the delays experienced, we have introduced new processes for future projects including:

· appointment of an external project manager for our larger future projects; and

· enhanced our tendering process, to ensure that appropriately experienced contractors are appointed in the future.

We are also reviewing our internal project management structure and will be making changes to further enhance quality in this area.

The construction of Khalifa City Hospital is progressing well, with the concrete structure of the building now complete. We continue to target receiving the first patients at this facility starting H1 2015. The Sanaiya Day Surgery Centre in Al Ain is on track to open in H2, 2014, in-line with our previous guidance on this project. The building is being adapted internally and equipped for healthcare services with good progress so far.

As a result of the delays in the opening of certain facilities, additional costs in respect of loan interest and leases have been capitalised. Had these facilities opened in line with original plan these costs would have been expensed. Other than these items the delays have not resulted in an increase in budgeted capital costs.

Distribution division

Top-line growth in the Distribution division accelerated to 10.7% year on year in 2013, compared to 7% year on year growth between 2011 and 2012, demonstrating the positive impact by the:

· expansion of the UAE economy;

· growing population;

· rise in tourism;

· substantial increase in retail space;

· addition of new products to our offering; and

· positive efforts of the Distribution division team in growing product sales.

The division generated revenues of US$ 300.2m (+10.7% year on year) in FY2013 with 71,215 SKU's[5] (+8.7% year on year). EBITDA margins continued to expand on operational gearing, increased efficiencies and economies of scale. EBITDA reached US$ 29.9m in 2013 (+14.1% year on year) with EBITDA margins exceeding last year by 30bps to reach 10.0% as of year-end 2013.

FMCG remained the largest segment with 39% of the distribution division's 2013 revenues, a two percentage point reduction in proportional contribution compared to 2012. Food & Catering delivered the strongest segmental growth and increased its proportional contribution to 11.8% of the division's revenues, almost three percentage points higher than in 2012.

Financial review

NMC Health delivered a strong performance in 2013 at both the Group and divisional level. Consolidated Group Revenues increased from US$490.1m in FY2012 to US$550.9m in FY2013, a growth of 12.4%. After elimination of US$38.6m of intra-group trading revenue, Consolidated Group EBITDA improved from US$79.6m in FY2012 to US$92.9m in FY2013, a growth of 16.7%.

Group Net profit reached US$69.1m in FY2013, yielding Earnings per share (EPS) of US$ 0.367 compared to US$0.343 for the same period in 2012. Excluding the effects of one-off items; IPO costs of US$3.4m in 2012 and writeoff of unamortised finance fees of US$3.4m in 2013, the increase in EPS would have been US$ 0.390 in 2013, representing an adjusted increase of 13.7%.

Healthcare division

Revenue in the Healthcare division increased from US$ 251.6m in FY2012 to US$289.3m in FY2013, a growth of 15.0%. EBITDA increased from US$ 68.2m in FY2012 to US$81.7m in FY2013, a growth of 19.8%. EBITDA margin improved from 27.1% in FY2012 to 28.2% in FY2013.

Distribution division

Within the Distribution division, revenues increased from US$271.1m in FY2012 to US$ 300.2m in FY2013, a growth of 10.7%. EBITDA increased from US$26.2m in FY2012 to US$29.9m in FY2013, a growth of 14.1%. EBITDA margin improved from 9.7% in FY2012 to 10.0% in FY2013.

Capital expenditure

Capital expenditure incurred for the year was US$82.7m (FY2012: US$118.9m). This encompassed US$72.2m on the Group's capital projects. The Group also incurred US$7.3m on equipment required across the existing operations.

The Company was able to capitalise certain expenses, in accordance with IFRS and the Company's accounting policies. We expect this to continue in relation to costs (for example lease costs) arising during the construction of future projects. Although pre-operating expenses were nil in the year to 31 December 2013, we expect a small level of pre-operating costs which will be expensed in the 2014 financial year as a result of the opening of new facilities.

As a result of the delays in the opening of certain facilities discussed in "Business overview", additional costs in respect of loan interest and leases have been capitalised. Had these facilities opened in line with original plan these costs would have been expensed. Other than these items the delays have not resulted in an increase in budgeted capital costs.

A table outlining original estimated capital expenditure and other budgeted costs for each of our current development projects, and a further table setting out costs to date on these projects is set out below.

Notes

1: Prior to commencement of development of the existing four capital projects, management had an expectation that there would be an element of expense incurred before the new facilities were opened which would be written off through the Income Statement. Following a review certain of these costs have been capitalised in line with the Company's accounting policies (for example lease rent paid and finance costs). The Group expects such costs will continue to be capitalised on these projects during the construction phase.

2: The lease in respect of Brightpoint contains a rent free period as well as specified rent increases. In line with IFRS and the Company's accounting policies, the rental cost of the lease has been adjusted to appropriately account for these items over the length of the lease. Accounting policies stipulate that the total lease value for the full lease period is divided evenly over the years.

3. Apart from the projects mentioned above, the Group had spent US$9m on the acquisition of BR Medical Suites during the last financial year as part of the projects announced during the IPO.

4. The Group has not spent any amount towards the development of the Al Ain Medical Centre as at 31 December-2013.

The company has reviewed all significant capital expenditure projects including the delayed projects for impairments and have concluded that the projects have sufficient headroom and concluded that none of the assets are impaired.

Cash

Net cash inflow from operating activities for the 2013 financial year was US$85.1m, compared with US$35.3m for the comparative period in 2012. This was mainly due to:

· improved performance of the Group; and

· effective management of working capital

Including funds held on deposit, cash as at 31 December 2013 was at US$268.7m compared to US$ 257.5m at the end of FY 2012. The company had allocated the funds raised through the IPO as well as through the JP Morgan syndicated loan against the capital cost of the five expansion projects announced during the IPO. As a result, together with positive operating cashflow, the Company is well financed to complete its capital expenditure program.

As expected, the Group had a net debt position of US$63.7m at 31 December 2013 compared with US$46.1m at 31 December 2012. As the Group continues with its capital project development program, and the Company's cash is committed to such projects, the level of net debt is expected to increase during FY 2014.

Movement in net debt

The movement in cash and the level of capital expenditure have had a significant effect on the movement in net debt during the 2013 financial year. A summary of the principal drivers is shown as follows:

Working capital

Working capital for our two operating business divisions is funded differently due to the nature of their business models. The Group is able to fund its working capital requirements for its Healthcare division from operational cash flow, and we do not expect this position to change in the 2014 financial year.

In relation to our Distribution division, the working capital requirement is dependent on a number of factors including the timing of receipt of debtors and the timing of payment of creditors as well as inventory flow during the year and the timing of re-imbursement of promotional expenses agreed with our Principals in relation to the sale and marketing of their products. The Distribution division requires external working capital facilities throughout the year, the level of which is dependent on business seasonality. These working capital facilities are arranged through a number of banking providers and in general terms the level of working capital required is between 30%-40% of the Group's total debt facilities.

Long term debt facilities

A five year debt facility of up to US$ 300m was made available to the Group during the year by a syndicate of lenders led by J.P. Morgan Chase Bank, to refinance high interest bearing credit lines. A total of US$ 225m has been drawn down from this facility to date. The cost of funds for this facility is 3.0% over one month LIBOR. This rate is substantially lower than the credit lines replaced. We expect this change to yield a total saving of around US$ 10m over the five year tenure of the loan compared to the previous arrangement, net of the one off of US$3.4m written off in the current year of unamortised finance costs,

The total debt of the Group, excluding accounts payable and accruals, was US$332.4m as at 31 December 2013 compared to US$303.6m on 31 December 2012.

Finance costs and income

Total finance costs for 2013 were US$14.3m compared to US$ 13.7m in 2012. This was mainly on account of the increased utilization of working capital lines commensurate with the increase in the activity levels in both the Group's operating segments. The Group's replacement of high interest bearing credit lines during the year limited, to some extent, the increase in finance costs.

Dividend

The Board is proposing to continue with its policy of annual dividend payments of between 20% and 30% of Profit After Tax, outlined in the Company's IPO prospectus in 2012. The Board is therefore recommending that a final dividend of 4.4 pence per share be paid in cash in respect of the year ended 31 December 2013 (FY2012: 4.1 pence per share).

Basis of preparation and forward-looking statements

This business and financial review has been prepared solely to provide additional information to shareholders to assess the Group's performance in relation to its operations and growth potential. It should not be relied upon by any other party or for any other reason. Any forward looking statements made in this document are done so by the Directors in good faith based on the information available to them up to the time of their approval of this report. However, such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information. These risks, uncertainties or assumptions could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements, and should be treated with caution.

Except as required by law, the Company is under no obligation to update or keep current the forward-looking statements contained in this review or to correct any inaccuracies which may become apparent in such forward-looking statements.

Statement of Directors responsibilities

I confirm on behalf of the Board that to the best of my knowledge;

a) the financial information presented in this preliminary announcement, prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union, gives a true and fair view of the assets, liabilities, financial position and profit and loss of the Group; and

b) the Management Report includes a fair review of the development and performance of the business, and the principal risks and uncertainties that they face.

For and on behalf of the Board

Dr B. R. Shetty

Chief Executive Officer

NMC Health plc

Consolidated financial statements

Year ended 31 December 2013

NMC Health plc

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2013

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 34 form part of the consolidated financial statements.

NMC Health plc

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 December 2013

The consolidated financial statements were authorised for issue by the board of directors on 24 February 2014 and were signed

The attached notes 1 to 34 form part of the consolidated financial statements.

NMC Health plc

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2013

The attached notes 1 to 34 form part of the consolidated financial statements.

NMC Health plc

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 31 December 2013

The attached notes 1 to 34 form part of the consolidated financial statements.

NMC Health plc

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

At 31 December 2013

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 solely in the United Arab Emirates ("UAE"). The address of the registered office of the Company is Suite 23 Hanover Square London, W1S 1JB. The registered number of the Company is 7712220. There is no ultimate controlling party.

The Company completed its Premium Listing on the London Stock Exchange on 5 April 2012.

The Parent and its subsidiaries (collectively the "Group") are engaged in providing professional medical services, wholesale of pharmaceutical goods, medical equipment, cosmetics, food and IT products and services in the United Arab Emirates.

The consolidated financial statements of the Group for the year ended 31 December 2013 were authorised for issue by the board of directors on 24 February 2014 and the consolidated statement of financial position was signed on the Board's behalf by Dr B. R. Shetty and Mr Khalifa Bin Butti.

2.1 BASIS OF PREPARATION

The consolidated financial statements have been prepared in accordance withInternational 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 2013 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 that 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 is UAE Dirham. The reporting currency of the Group 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.

All values are rounded to the nearest thousand dollars ($000) except when otherwise indicated.

Going concern

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.

NMC Health plc

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

At 31 December 2013

2.1 BASIS OF PREPARATION continued

Going concern continued

The Group has 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 capital expenditure program and in relation to working capital requirements.

Both the Healthcare and Distribution divisions have continued their positive growth trends and all major financial and non-financial KPIs showed good improvement during 2013. The directors have reviewed the business plan for 2014 and the five year cash flow, together with growth forecasts for the healthcare sector in 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.

Comparative information

Reclassifications

The Group has made following reclassifications in respect of the comparatives to conform to the current period presentation. These reclassifications are made to correct the presentation of the consolidated financial statements.

· Amounts of US$ 1,746,000 as of 31 December 2012 and US$ 1,161,000 as of 31 December 2011 in respect of employees' end of service benefits have been reclassified from non-current liabilities to current liabilities (note 26).

· An amount of U$ 3,402,000 in respect of flotation costs has been reclassified from financing activities to operating activities in the consolidated statement of cash flows.

These reclassifications have no impact on previously reported equity or profit of the Group.

2.2 BASIS OF CONSOLIDATION

Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date when such control ceases. The financial statements of the subsidiaries are prepared for the same reporting period as the Parent, using consistent accounting policies. All intra-group balances, transactions, unrealised gains and losses resulting from intra-group transactions and dividends are eliminated in full.

Total comprehensive income within a subsidiary is attributed to the non-controlling interest even if that results in a deficit balance. Non-controlling interests represent the portion of profit or loss and net assets not held by the Group and are presented separately in the statement of comprehensive income and within equity in the consolidated statement of financial position, separately from shareholders' equity.

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.

When the Group loses control of a subsidiary, a gain or loss is recognized in profit or loss and is calculated as the difference between (i) the aggregate of the fair value of consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests.

NMC Health plc

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

At 31 December 2013

2.2 BASIS OF CONSOLIDATION continued

The consolidated financial statements include the financial statements of the Company and its principal subsidiaries listed below:

All the above subsidiaries are incorporated in the UAE except for NMC Health Holdco Limited, which is incorporated in England and Wales.

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 2013 was US$ 94,839,000 (2012: US$ 72,574,000) and the provision for old and obsolete items at 31 December 2013 was US$ 716,000 (2012: US$ 116,000).

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, are assessed collectively and a provision applied according to the length of time past due, based on historical recovery rates.

NMC Health plc

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

At 31 December 2013

2.3 SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES continued

Impairment of accounts receivable continued

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.

Gross trade accounts receivable at 31 December 2013 were US$ 154,234,000 (2012: US$ 164,907,000) and the provision for doubtful debts at 31 December 2013 was US$ 8,241,000 (2012: US$ 6,444,000). Any difference between the amounts actually collected in future periods and the amounts expected will be recognised in the consolidated statement of comprehensive income.

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.

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.

Refinancing of JP Morgan loan

Judgement has been used to determine that the terms and conditions of the new JP Morgan syndicated loan are substantially different from the previous loan and accordingly the previous JP Morgan syndicated loan has been derecognised (note 25). Management used the following basis for determining that the terms and conditions are substantially different:

· The principal amount of the loan changed from US$ 150 million to US$ 225 million

· The interest risk profile on the loan changed as the interest rate decreased from 3.5% plus margin to 3% plus margin.

· The securities and guarantees of the loan changed as the personal guarantees of shareholders have been removed in the new loan.

· The loan covenants changed; and

· The repayment terms changed as the new loan had an initial repayment grace period of six months.

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 2013 certain land and buildings with a carrying amount of US$ 9,648,000 (2012: US$ 9,974,000) 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.

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 2013, the majority of the lease periods range from five to twenty years apart from the leases for New Medical Centre Hospital LLC-Dubai ('Dubai General Hospital) the land on which the Khalifa City Specialty Hospital is being constructed and the warehouse facilities, which had leases which are renewable on an annual basis with a total value of US$

NMC Health plc

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

At 31 December 2013

2.3 SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES continued

Leases for buildings and land continued

50,244,600 included within Property, Plant and Equipment as at 31 December 2103. Of this US$ 49,696,000 pertains to Khalifa City Specialty Hospital. 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 40 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.

· 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 13 years and each year these leases have been automatically renewed.

· The warehouse facilities have been built by the company 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.

· At 31 December 2013 the land on which the Khalifa City Specialty Hospital is being constructed is being leased to NMC from the Municipality of Abu Dhabi and was on a one year annually renewable basis. Subsequent to year end, the lease has been renewed and extended so that it is now a 27 year lease expiring in the year 2040. The total carrying amounts included within Property Plant and Equipment in respect of Khalifa City Specialty Hospital as at 31 December 2013 is US$ 49,696,000.

2.4 CHANGES IN ACCOUNTING POLICIES

Changes in accounting policies:

The accounting policies adopted are consistent with those of the previous financial year except for employees' end of service benefits as discussed below:

Employees' end of service benefits:

The Group has reassessed its accounting policy with respect to employees' end of service benefits. In previous years the Group was treating these as other long term benefits and has now assessed these to be treated as post-employment benefits. This change in accounting treatment did not materially impact the previously reported profit or equity of the group as the actuarial gain/loss as a result of the actuarial valuation is not material to the Group.

New and amended standards and interpretations:

The Group applies IFRS (as adopted in the European Union), the European Union endorsement states that IFRS 10, IFRS 11 and IFRS 12 must be applied at the latest with an effective date of 1 January 2014 although earlier adoption is permitted. Accordingly, the Group has early adopted IFRS 10, IFRS 11 and IFRS 12 with effect from 1 January 2013.

The amendments to IFRS, which are effective as of 1 January 2013 and are described in more detail below, have no impact on the Group.

NMC Health plc

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

At 31 December 2013

2.4 CHANGES IN ACCOUNTING POLICIES continued

New and amended standards and interpretations continued:

The following amendments to IFRS are effective as of 1 January 2013:

IFRS 10 Consolidated Financial Statements and IAS 27 Separate Financial Statements

IFRS 10 establishes a single control model that applies to all entities including special purpose entities.

IFRS 10 replaces the parts of previously existing IAS 27 Consolidated and Separate Financial Statements that dealt with consolidated financial statements and SIC-12 Consolidation - Special Purpose Entities. IFRS 10 changes the definition of control such that an investor controls an investee when it 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. IFRS 10 had no impact on the consolidation of investments held by the Group 

IFRS 11 Joint Arrangements and IAS 28 Investment in Associates and Joint Ventures

IFRS 11 replaces IAS 31 Interests in Joint Ventures and SIC-13 Jointly-controlled Entities - Non-monetary Contributions by Ventures. IFRS 11 removes the option to account for jointly controlled entities (JCEs) using proportionate consolidation. Instead, JCEs that meet the definition of a joint venture under IFRS 11 must be accounted for using the equity method.

IFRS 11 had no impact on the financial position or performance of the Group as it does not have any JCEs.

IFRS 12 Disclosure of Interests in Other Entities

IFRS 12 sets out the requirements for disclosures relating to an entity's interests in subsidiaries, joint arrangements, associates and structured entities. The requirements in IFRS 12 are more comprehensive than the previously existing disclosure requirements for subsidiaries. For example, when a subsidiary is controlled with less than the majority of voting rights. None of these disclosure requirements are applicable for consolidated financial statements. Accordingly, the Group has not made such disclosures.

IFRS 13 Fair Value Measurement

IFRS 13 establishes a single source of guidance under IFRS for all fair value measurements. IFRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under IFRS when fair value is required or permitted. The application of IFRS 13 has not materially impacted the fair value measurements carried out by the Group.

IAS 1 Financial Statements Presentation - Presentation of items of Other Comprehensive Income- Amendments to IAS 1

The amendments to IAS 1 introduce a grouping of items presented in Other Comprehensive Income. Items that will be reclassified ('recycled') to profit or loss at a future point in time (e.g. Net loss or gain on available for sale financial assets) have to be presented separately from items that will not be reclassified (e.g., revaluation of land and buildings). The amendments affect presentation only and have no impact on the Group's financial position or performance.

IAS 1 Clarification of the requirement for comparative information (Amendment)

The amendments specify that a third statement of financial position is required when a) an entity applies an accounting policy retrospectively, or makes a retrospective restatement or reclassification of items in its financial statements, and b) the retrospective application, restatement or reclassification has a material effect on the information in the third statement of financial position. The amendments specify that related notes are not required to accompany the third statement of financial position. The amendments affect presentation only and have no impact on the Group's financial position or performance.

IAS 19 Employee Benefits (Revised 2011)

IAS 19 (revised 2011) changes the accounting for defined benefit plans and termination benefits. The most significant change relates to the accounting for changes in defined benefits obligation and plan assets. The amendments require the recognition of changes in defined benefit obligation and in the fair value of the plan assets when they occur, and hence eliminate the 'corridor approach' permitted under the

NMC Health plc

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

At 31 December 2013

2.4 CHANGES IN ACCOUNTING POLICIES continued

IAS 19 Employee Benefits continued

previous version of IAS 19 and accelerate the recognition of past service costs. All actuarial gain and losses are recognized immediately through other comprehensive income in order for the net provision asset or liability recognized in the consolidated statement of financial position to reflect the full value of the plan deficit or surplus. Furthermore, the interest cost and the expected return on plan assets used in the previous version of IAS 19 are replaced with a 'net interest' amount under IAS19 (as revised in 2011),which is calculated by applying the discount rate to the net defined benefit liability or asset. These changes have no material impact on the amounts recognised in the prior years.

2.5 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 talking 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 from BR Medical Suites.

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 service revenues:

Clinic service revenues represent the revenue which NMC generates from the provision of either inpatient or outpatient medical services. The group primarily receives clinic service revenues from patients' private / medical insurance schemes. Clinic 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 the clinic services which are provided, it bears the credit risk and it bears the risk of providing the medical service.

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, 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.

NMC Health plc

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

At 31 December 2013

2.5 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued

Revenue recognition continued

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 from BR Medical Suites:

BR Medical Suites enters into contracts with doctors whereby these doctors are employed to perform certain procedures or run outpatient services using the facilities at BR Medical Suites. 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 statement of comprehensive income.

Rebate 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.

Business combinations and goodwill

The Group applies the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest's proportionate share of the recognised amounts of acquiree's identifiable net assets. Acquisition-related costs are expensed as incurred.

NMC Health plc

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

At 31 December 2013

2.5 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued

Business combinations and goodwill continued

If the business combination is achieved in stages, the acquisition date fair value of the acquirer's previously held equity interest in the acquiree is remeasured to fair value at the acquisition date through profit or loss.

Any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IAS 39 either in profit or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not remeasured, and its subsequent settlement is accounted for within equity.

Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interest 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 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 acquire 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.

Business combinations involving entities under common control

Business combinations involving entities under common control do not fall under the scope of IFRS 3 Revised 'Business Combinations'. The transfer of companies under common control is therefore accounted for using the pooling of interests method. Under this method there is no requirement to fair value the assets and liabilities of the transferred entities and hence no goodwill is created upon transfer of ownership as the balances remain at book value. The consolidated income statement, consolidated balance sheet and the consolidated statement of cash flows comparative figures are also presented as if the Company had been the parent undertaking of the Group throughout the current and previous year. The consolidated financial statements are therefore presented as though the Group had always existed in its current form.

Restructuring reserve

The group restructuring reserve arises on consolidation under the pooling of interests 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.

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 6%

Buildings 6%

Leasehold improvements 20%

Motor vehicles 20%

Furniture, fixtures and fittings 12.5% - 20%

Medical equipment 10% - 25%

NMC Health plc

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

At 31 December 2013

2.5 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued

Property and equipment continued

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.

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.

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.

Accounts receivable

Accounts receivable are stated at original invoice amount less a provision for any uncollectible amounts. 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.

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.

NMC Health plc

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

At 31 December 2013

2.5 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued

Listing transaction costs

Transaction costs of the IPO are accounted for as a deduction from equity, net of any related income tax benefit. Transaction costs arising on the issue of equity instruments, however, do not include indirect costs, such as the costs of management time and administrative overheads, or allocations of internal costs that would have been incurred had the shares not been issued. Marketing costs for the IPO do not meet the definition of directly attributable expenses and are therefore expensed through the statement of comprehensive income, together with the indirect costs related to the IPO.

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'.

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 statement of comprehensive income.

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 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.

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

NMC Health plc

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

At 31 December 2013

2.5 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued

Employees' end of service benefits continued

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.

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 statement of comprehensive income.

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 exchange rates prevailing at the dates of the transactions. Since the UAE Dirham is pegged against the US Dollar a single rate of 3.673 per US Dollar is used to translate assets and liabilities and balances in the income statement.

Derivative financial instruments

The Group uses derivative financial instruments such as interest rate swaps and caps to hedge its interest rate risks. 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. The fair value of interest rate swaps are determined by reference to market values for similar instruments. Derivatives with positive market values (unrealised gains) are included in other assets and derivatives with negative market values (unrealised losses) are included in other 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. Whilst the policy of the group is not to apply hedge accounting, the derivatives are economic hedges of liabilities in issue and it is therefore considered appropriate to show the changes in fair value of derivatives in finance costs in the consolidated statement of comprehensive income.

Financial instruments

Financial instruments comprise cash and bank balances, receivables, payables, bank overdrafts, term loans and certain other assets and liabilities. The fair value of these financial instruments are based on estimated fair values calculated using methods such as the quoted market prices and net present value of future cash flows. The fair value of interest bearing items is estimated based on discounted cash flows using interest rates for items with similar terms and characteristics. The fair value of investments traded in organised markets is determined by reference to quoted market bid prices.

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 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.

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 statement of comprehensive income on a straight line basis.

NMC Health plc

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

At 31 December 2013

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 Group's financial statements are disclosed below. The Group intends to adopt these standards, if applicable, when they become effective.

IFRS 9 Financial Instruments

IFRS 9, as issued, reflects the first phase of the IASB's work on the replacement of IAS 39 and applies to classification and measurement of financial assets and financial liabilities as defined in IAS 39. The standard was initially effective for annual periods beginning on or after 1 January 2013, but amendments to IFRS 9 Mandatory Effective Date of IFRS 9 and Transition disclosures, issued in December 2011, moved the mandatory effective date to 1 January 2015. In subsequent phases, the IASB is addressing hedge accounting and impairment of financial assets. The adoption of the first phase of IFRS 9 will not have a significant impact on the classification and measurement of the Group's financial assets and financial liabilities.

Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27)

These amendments are effective for annual periods beginning on or after 1 January 2014 provide an exception to the consolidation requirement for entities that meet the definition of an investment entity under IFRS 10.The exception to consolidation requires investment entities to account for subsidiaries at fair value through profit or loss. It is not expected that this amendment would be relevant to the Group, since none of the entities in the Group would qualify to be an investment entity under IFRS 10.

IAS 32 Offsetting Financial Assets and Financial Liabilities-Amendments to IAS 32

These amendments clarify the meaning of 'currently has a legally enforceable right to set-off' and the criteria for non-simultaneous settlement mechanisms of clearing houses to qualify for offsetting. These are effective for annual periods beginning on or after 1 January 2014. These amendments are not expected to be relevant to the Group.

IFRIC Interpretation 21 Levies (IFRIC 21)

IFRIC 21 clarifies that an entity recognises a liability for a levy when the activity that triggers payment, as identified by the relevant legislation, occurs. For a levy that is triggered upon reaching a minimum threshold, the interpretation clarifies that no liability should be anticipated before the specified minimum threshold is reached. IFRIC 21 is effective for annual periods beginning on or after 1 January 2014. The Group does not expect that IFRIC 21 will have any material financial impact in future financial statements.

IAS 39 Novation of Derivatives and Continuation of Hedge Accounting-Amendments to IAS 39

These amendments provide relief from discounting hedge accounting when novation of a derivative designated as a hedge instrument meets certain criteria. These amendments are effective for annual periods beginning on or after 1 January 2014. These amendments have no impact on the Group.

4 BUSINESS COMBINATION UNDER COMMON CONTROL

On 28 March 2012 the Company became the holding company of NMC Healthcare LLC through its wholly owned subsidiaries, NMC Holding LLC and NMC Health Holdco Limited. This transaction falls outside the scope of IFRS 3 - Business Combinations, so the pooling of interests method is applied and the consolidated financial statements of the Group are presented as a continuation of the existing group. The following accounting treatment was applied:

a) the assets and liabilities of the previous parent company, NMC Healthcare LLC, were recognised and measured in the consolidated financial statements at the pre-combination carrying amounts, without restatement to fair value; and

b) the retained earnings and other equity balances of NMC Healthcare LLC immediately before the business combination, and the results of the period from 1 January 2012 to the date of the business combination are those of NMC Healthcare LLC as the Company did not trade prior to

the transaction.

NMC Health plc

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

At 31 December 2013

4 BUSINESS COMBINATION UNDER COMMON CONTROL continued

The Company had no significant assets or liabilities immediately prior to the time of the acquisition. As part of the acquisition, 130,000,000 new 10 pence shares were issued to the shareholders of NMC Healthcare LLC. A group restructuring reserve of US$ 10,001,000 (debit) arose on consolidation being the difference between the share capital of NMC Healthcare LLC and the carrying amount of the investment in the books of the Company. This has been classified as part of the equity within the consolidated statement of financial position (note 22).

5 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 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.

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 profit or loss and is measured consistently with profit or loss, excluding finance income and finance costs, group administrative expenses, unallocated depreciation and unallocated other income, in the consolidated financial statements.

Group financing and investments (including finance costs and finance income) are managed on a group basis and are not allocated to operating segments. This also includes the flotation costs incurred in 2012.

Transfer prices between operating segments are on an arm's length basis in a manner similar to transactions with third parties.

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 2013 and 2012.

NMC Health plc

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

At 31 December 2013

5 SEGMENT INFORMATION continued

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.

NMC Health plc

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

At 31 December 2013

5 SEGMENT INFORMATION continued

Adjustments and eliminations

Finance income and costs, group overheads and fair value gains and losses on derivative financial instruments are not allocated to individual segments as the underlying instruments are managed on a group basis.

Term loans, bank overdraft and other short term borrowings and certain other assets and liabilities are substantially not allocated to segments as they are also managed on a group basis.

Capital expenditure consists of additions to property and equipment.