NMC.L Regulatory News (NMC)

NMC Health Plc

London, 24 February 2015: 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 2014.

Financial summary and highlights

Financial Summary

Notes:

· Net Profit is a non-IFRS term which is the same as profit before tax as shown in the Consolidated Statement of Comprehensive Income.

· EBITDA is the same as Profit from operations before depreciation and impairment as shown in the Consolidated Statement of Comprehensive Income.

· Net cash from operating activities is equivalent to Net cash from operating activities as shown in the Consolidated Statement of Cash Flows.

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

· Total debt is a non-IFRS line item and includes term loans and bank overdrafts and other short term borrowings shown on the face of the Consolidated Statement of Financial Position.

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

FY2014 Financial Highlights

· Group revenues increased by 16.9% to US$643.9m

· Healthcare division revenue increased by 14.8% to US$332.2m1

· Distribution division revenue grew by 12.9% to US$338.9m2

· EBITDA increased by 10.2% to US$102.5m

· EBITDA margin declined by 96bps to 15.9%

· Net profits increased by 12.1% to US$77.5m

· Net profit margins declined by 51bps to 12.0%

· Earnings per share (EPS) amounted to US$0.412

· Proposed dividend pay-out ratio is maintained at 20% of profit after tax, amounting to GBP3 5.4 pence per share

· Total capital expenditure for the year reached US$112.3m, 35.8% higher compared to FY20134

· Net debt reached US$113.0m as the Group continued to advance its on-going healthcare projects

FY2014 Business Highlights - A year on year (YOY) comparison

· Healthcare division's patients increased by 15.6% to 2.4m

· Revenue per patient from healthcare services increased by 2.6% to reach US$114.5

· Hospital bed occupancy rates reached 71.3%, an improvement of 660bps, despite a 10.0% increase in operational beds to 287

· Doctors' employed reached 603, an increase of 19.9%

· Distribution division increased its product portfolio by 17.4% to 83,635 stock keeping units (SKU)

· Sales and marketing personnel at the Distribution division grew 6.1% to 642

· NMC General Hospital in Dubai Investment Park and Brightpoint Royal Women's Hospital in Abu Dhabi commenced operations in July 2014

· NMC Medical Centre in Al Ain commenced operations in Dec 2014

· Dubai Emirate rolled out the first phase of mandatory healthcare insurance in October 2014

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

"2014 was a good year for NMC, where both divisions performed well. I am particularly proud of the three new healthcare assets we opened, including the first private sector women's hospital in Abu Dhabi. The Group delivered double digit EBITDA growth and set the stage for accelerated growth in the future supported by its growing network and the new US$825m financing facility announced in February 2015."

Outlook

The macro-economic outlook for 2015 in the UAE and the gulf region remains positive and is expected to continue supporting the growth of our business divisions.

The Emirate of Dubai's started rolling-out mandatory medical insurance in Q4 2014 in a phased approach over the following two years, starting with the largest employers. Dubai Health Authority (DHA) estimates around 66% of the Emirate's residents are without healthcare insurance. With the addition of the NMC General Hospital in Dubai Investment Park in 2014, NMC Health increased its bed capacity in Dubai by 55% and now has three hospitals and a day surgery in the Emirate. In addition, NMC is a leading distributor of pharmaceuticals, a segment expected to grow as a result of increased medical insurance penetration.

The flagship 250 bed NMC Super Specialty Hospital in Khalifa City, Abu Dhabi is expected to join our portfolio of operational healthcare assets in 2015 and contribute towards the Group's growth in future periods.

Additional key products are expected to be added to our Distribution division portfolio.

The new US$825m financing facility will reduce like-for-like cost of debt on the existing loans it is replacing. The facility includes a US$475m delayed drawdown tranche which we expect to support the next stage of NMC's growth by expanding our inorganic growth capabilities.

Analyst and investor conference call

A conference call and webcast for analysts and investors will take place today, Tuesday 24 February 2015 at 14:00 GMT/ 18:00 UAE / 10:00 EST.

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

Contacts

Investors

NMC Health

Prasanth Manghat, Deputy Chief Executive Officer +971 50 522 5648

Suresh Krishnamoorthy, Chief Financial Officer +971 50 591 5365

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

Media

FTI Consulting, London

Matthew Cole +44 (0)20 3727 1101

FTI Consulting, Gulf

Shane Dolan +971 (0)4 437 2100

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 23 February 2015. 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.nmchealth.com) 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.

Statement of Directors' Responsibilities

Responsibility statement of the directors on the Annual Report & Accounts

The Group's Annual Report & Accounts for the year ended 31 December 2014 includes the following responsibility statement.

Each of the directors confirms that, to the best of their knowledge:

The financial statements, prepared in accordance with the International Financial Reporting Standards as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and

The Strategic Report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties they face.

On behalf of the Board

Simon Watkins

Group Company Secretary

23 February 2015

About NMC

NMC Health plc group is the leading 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 seven hospitals, two day-care patient centres, two medical centres and eleven pharmacies. The company received almost 2.4m patients in 2014. 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$ 643.9m in 2014.

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

Business Overview

Operational review

NMC Health's business spans across the UAE through its healthcare and distribution divisions. The Group reported consolidated revenues of US$643.9m in FY2014 (+16.9% YOY)) with approximately 49.5% (49.1% FY2013) coming from its healthcare business and 50.5% (50.9% FY2013) from the wholesale product distribution.

In contrast, the healthcare division accounted for 72% (73% FY2013) of Group EBITDA with the balance of 28% (27% FY2013) coming from the comparatively lower margin distribution business. With the expansion in NMC's healthcare network, healthcare revenue growth will continue to outpace the distribution division to eventually exceed its top-line contribution, however, the short-to-medium term effect of the new hospital openings will be negative on the divisional margin.

Consolidated group EBITDA reached US$102.5m with a year-on-year growth of 10.2%. The group EBITDA margin retreated to 15.9% and was down by 96bps year-on-year due to the initial negative impact from new hospital openings. If we adjust group revenue and EBITDA by excluding the impact from recent healthcare asset openings, EBITDA growth would be 15.6% and the margin 17.1% (FY2013 margin: 17.1%).

Depending on a number of variables, reaching EBITDA breakeven for the group's new healthcare assets is estimated to take:

§ 12-18 months for medical centres and day surgeries

§ 18-24 months for hospitals

Healthcare division

Our healthcare division operates in the major emirates and cities of the UAE including Abu Dhabi, Al Ain, Dubai, Sharjah and Umm Al Quwain. Together these Emirates and cities account for nearly 85% of UAE residents. We operate six hospitals, two day surgeries, two medical centre and eleven in-hospital pharmacies. In addition, the Group operates a seventh 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 with a five year duration.

This division reported revenues of US$332.2m in FY2014 (+14.8% YoY), including US$273.7m from healthcare services, US$52.8m from hospital pharmacies and US$5.7m from the operation and management of third-party healthcare assets.

A total of 2.4m patients visited our healthcare network in FY2014, an increase of 15.6% compared to FY2013.

The average revenue per patient from healthcare services amounted to US$114.5, 2.6% higher than FY2013 with growth derived from a combination of price increase and service mix. This figure was slightly subdued due to the initial out-patient only operations of Brightpoint Royal Women's Hospital and the NMC General Hospital in DIP. A further factor was the relative exhaustion of inpatient capacity at Abu Dhabi Specialty Hospital due to the near full occupancy at the facility. We typically guide on full occupancy equivalent in the UAE of around 75%, Abu Dhabi Specialty reached 81% during 2014. We also highlight that NMC's occupancy calculation is based on overnight stay only, in other words, day patient surgery without overnight stay is not accounted for in the occupancy rates.

Table with per asset indicators

N.B. Table continued below: 

Note: Revenue per patient is based on contribution from our healthcare services, excluding the contribution from the operation & management contract on the Sheikh Khalifa Hospital in UAQ. It also excludes the contribution from four out of our eleven pharmacies, specifically those located around the hospitals rather than within them.

Abu Dhabi Emirate

NMC treated a total of 1.59m patients in 2014 (+16.2% YoY) within the Abu Dhabi Emirate across its facilities in both Abu Dhabi City and Al Ain City. As of year-end 2014, the Group had a total licensed capacity of 300 hospital beds, a 50% increase year-on-year resulting from the addition of Brightpoint Royal Women's Hospital during the period.

1. Abu Dhabi Specialty Hospital

Despite being the longest serving and most mature asset within our healthcare portfolio, Abu Dhabi Specialty Hospital had another strong year in 2014 - delivering relatively high growth in revenues, patients, occupancy and revenue per patient. This remains the largest patient recipient within the NMC network. The facility continues to provide a wide range of specialties and has Joint Commission International (JCI) accreditation for its service levels. It is located in the densely populated centre of Abu Dhabi City.

Revenues reached US$111.1m, with a year on year growth of 10.1%, on 8.7% growth in patients compared to 2013 and with the total number of patients received rising to 1.02m. The revenue per patient increased by 1.3% to reach US$109, with the growth diluted by the near full occupancy on the higher revenue inpatient services. The utilisation of this 100 bed facility, in terms of bed occupancy, amounted to 81% during the year compared to 79% in 2013.

2. Al Ain Specialty Hospital

NMC Health inaugurated the Al Ain Specialty Hospital in the second largest city within the emirate of Abu Dhabi in 2008. This expansion was encouraged by the adoption of mandatory healthcare insurance in Abu Dhabi Emirate 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.

This hospital has 100 licensed beds, but started its inpatient operations in 2008 with 12 operational beds. As of FY2014 year end the number of operational beds had increased to 83 beds. Despite a 38% rise in operational beds YoY, occupancy increased by 876bps to 69% in 2014.

Al Ain Specialty Hospital has continued to deliver strong growth since opening, with 2014 revenues reaching US$58.0m (+20.5% YoY) on 0.48m patients (+16.8% YoY). Revenue per patient amounted to US$121 (+3.2% YoY).

3. Brightpoint Royal Women's Hospital

Brightpoint Royal Women's Hospital opened its doors to the first patients in July 2014 with the intention to gradually introduce its service capacity to market. We commenced operations with outpatient services and plan to open our inpatient services in Q1 2015. In the first few months of 'soft' start outpatient operations, our focus was on ensuring the best possible patient experience with priority to initial patient feedback as opposed to volume and business ramp-up. This patient feedback has overwhelmingly confirmed our strategic direction and positioning of this premium women's hospital, and as a result we have recently launched our marketing campaign and expect to commence a higher ramp-up in business and patient volumes from 2015 onwards.

During the same period we accelerated the hiring of medical professionals with international experience to meet the anticipated growth in demand from the Abu Dhabi market, which currently has only one maternity hospital. Brightpoint is the first private sector women's hospital in the Emirate of Abu Dhabi. We also plan to seek JCI accreditation for Brightpoint and will commence preparations for this in 2015.

Revenues from the initial months of operations reached US$0.93m on 7,636 out patients. The revenue per patient was US$122.

4. Mohammad bin Zayed City Day Surgery

NMC Day Surgery in Mohammad bin Zayed City is strategically located on the peripheries of Abu Dhabi City close to both the Mussafah industrial area and the Khalifa City suburb. In addition to serving the growing population in its surroundings it is also a strong referral base to existing and upcoming NMC hospitals.

This day surgery opened in July 2013 and subsequently gradually ramped up its operations, with FY2014 being the first full year of operations. Revenues reached US$5.3m, with a year on year growth of 490%, on 333% growth in patients compared to 2013 and with the total number of patients received rising to 82,372. The revenue per patient increased by 36.3% to reach US$65.

5. Al Ain Medical Centre

Al Ain Medical Centre opened in December 2014, in line with our guidance, and received a few patients from the surrounding areas in the city. The centre is located in the Sanaiya area in Al Ain City, an area with considerable concentration of businesses and industries with surrounding residential areas. This facility will serve the primary healthcare needs of people working and living in the area and act as a referral point for secondary and tertiary care needs to the NMC Al Ain Specialty Hospital located in the city centre.

While the revenue contribution of this facility was immaterial in 2014 given the opening in December, this facility is expected to deliver considerable growth in future periods on full year operations and as we ramp up patient flow to the facility from the surrounding area - where NMC is a highly recognised and reputable name in the minds of residents and the work force.

Dubai Emirate

NMC treated a total of 0.63m patients in 2014 (+14.9% YoY) across its facilities in the Dubai Emirate. As of year-end 2014, the Group had a total licensed capacity of 170 hospital beds, a 55% increase year-on-year resulting from the addition of NMC General Hospital in DIP in July 2014.

6. Dubai Specialty Hospital

Opened in 2004, the 100 bed Dubai Specialty Hospital is located in the growing residential area of Al Nahda on the Dubai-Sharjah border, which enables the hospital to take advantage of referrals from NMC's assets in Dubai and our Medical Centre in Sharjah. 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.

NMC owns a connected land plot to this hospital which could house a building with up to 100 bed additional capacity. Should the growth in demand in Dubai from the mandatory insurance adoption require us to add further capacity in the Emirate we are well positioned to organically scale-up our capacity with limited exposure to the sharp rise in real estate prices in recent years.

Revenues reached US$65.6m, with a year on year growth of 17.3%, on 10.1% growth in patients compared to 2013 and with the total number of patients received rising to 0.38m. The revenue per patient increased by 6.5% to reach US$175. The utilisation of this 100 bed facility, in terms of bed occupancy, amounted to 66% during the year compared to 54% in 2013.

7. 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.

Revenues reached US$13.9m, with a year on year growth of 13.7%, on 8.6% growth in patients compared to 2013 and with the total number of patients received rising to 0.21m. The revenue per patient increased by 4.7% to reach US$65. The utilisation of this 10 bed facility, in terms of bed occupancy, amounted to 45% during the year compared to 44% in 2013.

8. NMC General Hospital, DIP

NMC General Hospital in DIP opened in July 2014 and has a licensed bed capacity of 60 beds. Initial operations started with outpatient services. The first phase of inpatient services will commence in Q1 2015 and it consists of 30 beds out of the total available capacity in the facility. We plan to roll-out the rest of the bed capacity over future periods along with the growth in demand for this hospital's services from the surrounding area. We plan to seek JCI accreditation for NMC General Hospital, DIP, and will commence preparations for this in 2015.

This asset is located in a strategic region of Dubai within a key investment park with substantial presence of large companies, in the vicinity of Dubai's new Al Maktoum Airport, the Dubai Expo area not too far from Jebel Ali Port and Freezone.

Revenues from the initial months of operations reached US$2.5m on 26,044 patients. The revenue per patient was US$96.

9. 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 surgeons from around the world to carry out minimally invasive surgery and other highly specialised procedures with limited availability in the UAE. Increasingly over the past two years we have worked to diversify the business model of this facility to include NMC clinics and allow for improved utilisation of the facility. This has had a very positive impact on both the top-line and patients figures; however, this growth is partially offset by a decline in revenue per patient. The Group acquired BR Medical Suites for a consideration of US$9m paid in cash on 1 July 2012.

Revenues reached US$3.6m, with a year on year growth of 40.0%, on 43.6% growth in patients compared to 2013 and with the total number of patients received rising to 13,760. The revenue per patient decreased by 2.5% to become US$262.

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

Sharjah Emirate

10. 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. Revenues reached US$12.8m, with a year on year growth of 24.2%. The number of patients reached 0.17m, 12% higher than 2013. The revenue per patient increased by 11% to reach US$75.

Umm Al Quwain Emirate

11. Sheikh Khalifa General Hospital

Since Q4 2012 NMC Health has operated and managed on behalf of the UAE Ministry of Presidential Affairs this 205-bed hospital in Umm Al Quwain. The agreement is based on a five year contract in return for an annual management fee based on qualitative 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 confidence in NMC's significant healthcare experience and capabilities.

Distribution Division

NMC has over the past 40 years amassed one of the largest product portfolios in the UAE with 83,635 SKU's (+17.4% YoY). Our distribution division operates across the entire UAE through a network of five warehouses and three sales and marketing offices strategically located in the major cities and a fleet of 207 vehicles ensuring timely distribution.

Division revenues reached US$338.9m in 2014, 12.9% higher than the preceding year. Meanwhile, EBITDA increased by 14.1% to US$34.1m with a resulting EBITDA margin of 10.1%.

The FMCG segment (+11.7% year on year) remained the largest contributor to the distribution division, however, the fastest growth came from the Food and Catering (+32.4% year on year) and Education material (+29.3% year on year) segments. Pharmaceutical revenue increased by 15.7%, in contrast, Scientific Equipment sales declined by 7.3%.

Recent additions to our product portfolio include SuperMax, one of the leading disposable razor blade manufacturers in the world and a very well established brand in India, Everyuth fairness creams, Anchor toothpaste and Kuwait Danish Dairy (KDD) juices.

IT

The Group has operated in recent years with legacy IT systems which, as a smaller private company, were appropriate for the needs of the Group. Following a review of the Group's IT requirements, the Board agreed capital investment in two new primary Group systems:

a. Hospital Information System (HIS).

The current HIS system operating within NMC is a home-grown system which has been operating successfully over many years. Continuing developments in the regulatory framework in the UAE healthcare system, as well as additional monitoring and reporting requirements which the Group feels that it requires as the business grows, has resulted in a decision to implement a new HIS.

The Group has chosen to implement a third party system which is already operating successfully within the UAE regulatory structure. The new system has been implemented in the three new facilities which commenced operations during the year as part of the plan for a phased implementation before rolling out in the major facilities. The new system requires customisation and integration of certain modules before being rolled out completely, which is expected to be completed by early 2016. The Company feels that the new system will be robust enough to deal with the demands of significant growth of the business.

b. Enterprise Resources Planning (ERP) financial system.

It was reported in the 2013 Annual Report that the Company planned to implement a new financial IT system in the first half of 2014. Implementation of the new system was delayed following challenges in the integration and customisation of the modules. The company has put in place a new project management team and now expects the implementation of the new ERP system to be completed in 2015.

The Company has been aware of the need to improve its IT infrastructure. The implementation of new IT systems always presents organisations with a significant challenge, and implementing two new primary systems within the Group, especially with two divergent business models, will be no different.

However, the management team and the Board realises the importance of implementing a new IT infrastructure as the Group prepares for significant growth in the coming years. This investment in new technology will help to reduce an element of manual intervention and improve reporting and therefore the company's internal control environment.

The company has spent a total amount of US$3.2m as of 31 December 2014 on the Enterprise Resources Planning (ERP) financial system and the Hospital Information System (HIS).

Financial review

NMC Health delivered a strong performance in 2014 at both the Group and divisional level. Consolidated Group Revenues increased from US$550.9m in FY2013 to US$643.9m in FY2014, a growth of 16.9%. After elimination of US$27.2m of intra-group trading revenue, Consolidated Group EBITDA improved from US$92.9m in FY2013 to US$102.5m in FY2014, a growth of 10.2%.

Group Net profit reached US$77.5m in FY2014, yielding Earnings per share (EPS) of US$0.412 compared to US$0.367 for the same period in 2013.

Healthcare division

Revenue in the Healthcare division increased from US$289.3m in FY2013 to US$332.2m in FY2014, a growth of 14.8%. EBITDA increased from US$81.7m in FY2013 to US$88.2m in FY2014, a growth of 8.0%. EBITDA margin declined from 28.2% in FY2013 to 26.6% in FY2014, as a result of the losses from the three new facilities opened during the year.

Distribution division

Within the Distribution division, revenues increased from US$300.2m in FY2013 to US$338.9m in FY2014, a growth of 12.9%. EBITDA increased from US$29.9m in FY2013 to US$34.1m in FY2014, a growth of 14.1%. EBITDA margin was at 10.1% in FY2014 (10.0% during FY2013).

Capital Expenditure

Capital expenditure incurred for the year was US$112.3m (FY2013: US$82.7m). This encompassed US$96.0m on the Group's capital projects. The Group also incurred US$13.5m 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 2014, we expect a small level of pre-operating costs which will be expensed in the 2015 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 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.

Apart from the projects mentioned above, the Group had spent US$9m on the acquisition of BR Medical Suites during 2012 as part of the projects announced during the IPO.

In addition to the above, the Group has spent US$7.7m from its internal funds towards the development of the Al Ain Medical Centre which commenced operations on 07 December 2014.

The company has spent a total amount of US$3.2m as of 31 December 2014 on the Enterprise Resources Planning (ERP) financial system and Hospital Information System (HIS).

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 2014 financial year was US$85.7m, compared with US$85.1m for the comparative period in 2013. This was mainly due to the improved performance of the Group and effective management of working capital, despite an increase in the revenues.

Including funds held on deposit, cash as at 31 December 2014 was at US$263.2m compared to US$268.7m at the end of FY2013. 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$113.0m at 31 December 2014 compared with US$63.7m at 31 December 2013. 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 FY2015.

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 2014 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 2015 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

In 2013, the Group had raised a five year debt facility of up to US$300m through 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.

The total debt of the Group, excluding accounts payable and accruals, was US$376.1m as at 31 December 2014 compared to US$332.4m as at 31 December 2013.

Finance costs and income

Total finance costs for 2014 were US$14.4m compared to US$14.3m in 2013. This was mainly on account of the savings from the JP Morgan facility which carried a relatively lower finance charge as the LIBOR rate softened during the year. Apart from this the efficient utilization of working capital lines also contributed to the savings.

As part of the Group's capital expenditure programme, borrowing costs of US$ 4,068,000 (2013: US$ 4,886,000) net of finance income of US$ NIL (2013: US$ 54,000) have been capitalised during the year. The rate used to determine the amount of borrowing costs eligible for capitalisation was 3.15% (2013: 3.40%) which is the effective rate of the borrowings used to finance the capital expenditure.

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 5.4 pence per share be paid in cash in respect of the year ended 31 December 2014 (FY2013: 4.4 pence per share).

NMC Health plc

2014 ANNUAL REPORT

NMC Health plc

Consolidated financial statements

Year ended 31 December 2014

NMC Health plc

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2014

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 2014

The consolidated financial statements were authorised for issue by the board of directors on 23 February 2015 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 2014

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 2014

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 2014

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 23 Hanover Square London, W1S 1JB. The registered number of the Company is 7712220. The Company's immediate and ultimate controlling party is a group of three individuals (H.E. Saeed Bin Butti, Dr BR Shetty and Mr Khalifa Bin Butti) who are all shareholders and of whom one is a director of the company and who together have the ability to control the company.

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 2014 were authorised for issue by the board of directors on 23 February 2015 and the consolidated statement of financial position was signed on the Board's behalf by Dr BR Shetty and Mr Suresh Krishnamoorthy.

2.1 BASIS OF PREPARATION

The consolidated financial statements have been prepared in accordance 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 2014 and applied in accordance with the Companies Act 2006.

The consolidated financial statements are prepared under the historical cost convention, except for derivative financial instrument 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 Group has two diverse operating divisions, Healthcare and Distribution, both of which operate in a growing market.

The directors have undertaken an assessment of the future prospects of the Group and the wider risks that the Group is exposed to. In its assessment of whether the Group should adopt the going concern basis in preparing its financial statements, the directors have considered the adequacy of financial resources in order to manage its business risks successfully, together with other areas of potential risk such as regulatory, insurance and legal risks.

NMC Health plc

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At 31 December 2014

2.1 BASIS OF PREPARATION continued

The Group has considerable financial resources including banking arrangements through a spread of local and international banking groups and utilizes short and medium term working capital facilities to optimise business funding. Debt covenants are reviewed by the board each month. The Board believes that the level of cash in the Group, the spread of bankers and debt facilities mitigates the financing risks that the Group faces from both its capital expenditure program and in relation to working capital requirements.

Group delivered a strong performance in 2014. Both the Healthcare and Distribution divisions have continued their positive growth in revenue during 2014. Net profit and EBITDA of both healthcare and distribution divisions have increased in 2014. EBITDA margin of Distribution is almost same as last year whereas for Healthcare it decreased slightly which is due to opening of new facilities during the year. The directors have reviewed the business plan for 2015 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.

2.2 BASIS OF CONSOLIDATION

The consolidated financial statements comprise the financial statements of the Group and its subsidiaries as at 31 December 2014. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if, and only if, the Group has:

· Power over the investee (i.e., existing rights that give it the current ability to direct the relevant activities of the investee)

· Exposure, or rights, to variable returns from its involvement with the investee

· The ability to use its power over the investee to affect its returns

Generally, there is a presumption that a majority of voting rights result in control. To support this presumption and when the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:

· The contractual arrangement with the other vote holders of the investee

· Rights arising from other contractual arrangements

· The Group's voting rights and potential voting rights

The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. Assets, liabilities, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated financial statements from the date the Group gains control until the date the Group ceases to control the subsidiary.

Profit or loss and each component of other comprehensive income (OCI) are attributed to the equity holders of the parent of the Group and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group's accounting policies. All intra-group assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

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

NMC Health plc

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At 31 December 2014

2.2 BASIS OF CONSOLIDATION continued

If the Group loses control over a subsidiary, it derecognises the related assets (including goodwill), liabilities, non-controlling interest and other components of equity while any resultant gain or loss is recognised in profit or loss. Any investment retained is recognised at fair value.

The consolidated financial statements include the financial statements of the Company and its 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 2014 was US$ 111,597,000 (2013: US$ 94,839,000) and the provision for old and obsolete items at 31 December 2014 was US$ 1,388,000 (2013: US$ 716,000).

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

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2.3 SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES continued

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

A majority of the receivables that are past due but not impaired 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 2014 were US$ 177,203,000 (2013: US$ 154,234,000) and the provision for doubtful debts at 31 December 2014 was US$ 8,996,000 (2013: US$ 8,241,000). 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.

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 2014 certain land and buildings with a carrying amount of US$ 9,321,000 (2013: US$ 9,648,000) 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. Subsequent to year end US$ 5,177,000 ofthe land and buildings which were held in the name of a previous shareholder for the beneficial interest of the Group were transferred into the name of a current UAE national shareholder.

NMC Health plc

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At 31 December 2014

2.3 SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES continued

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 2014, the majority of the lease periods range from five to twenty seven years apart from the leases for New Medical Centre Hospital LLC-Dubai ('Dubai General Hospital) and the warehouse facilities, which had leases which are renewable on an annual basis with a total value of US$ 1,015,000 included within property, and equipment as at 31 December 2014. 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 41 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 14 years and each year these leases have been automatically renewed.

· The warehouse facilities have been built by the Group on land leased from government bodies in the Emirates of Dubai and Abu Dhabi on the back of the policies of these governments to attract investment in warehousing in the United Arab Emirates.

2.4 CHANGES IN ACCOUNTING POLICIES

New and amended standards and interpretations:

The Group applied for the first time certain standards and amendments which are effective for annual periods beginning on or after 1 January 2014.

The amendments to IFRS, which are effective as of 1 January 2014 and are described in more detail below, have no impact on the Group.

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

These amendments provide an exception to the consolidation requirement for entities that meet the definition of an investment entity under IFRS 10 Consolidated Financial Statements. The exception to consolidation requires investment entities to account for subsidiaries at fair value through profit or loss. These amendments have no impact on the Group, since none of the entities in the Group qualifies to be an investment entity under IFRS 10.

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 amendments have no impact on the Group, since none of the entities in the Group has any offsetting arrangements.

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At 31 December 2014

2.4 CHANGES IN ACCOUNTING POLICIES continued

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

These amendments provide relief from discontinuing hedge accounting when novation of a derivative designated as a hedging instrument meets certain criteria and retrospective application is required. These amendments have no impact on the Group as the Group has no derivatives as of 31 December 2014.

Recoverable Amount Disclosures for Non-Financial Assets-Amendments to IAS 36

These amendments remove the unintended consequences of IFRS 13 Fair Value Measurement on the disclosures required under IAS 36 Impairment of Assets. In addition, these amendments require disclosure of the recoverable amounts for the assets or cash-generating units (CGUs) for which an impairment loss has been recognised or reversed during the period. These amendments have no impact on the Group as the Group has not recognised or reversed any impairment loss during the period.

IFRIC 21 Levies

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. This interpretation has no impact on the Group.

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured, regardless of when the payment is being made. Revenue is measured at the fair value of the consideration received or receivable, less discounts and rebates and 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.

NMC Health plc

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At 31 December 2014

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued

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.

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.

NMC Health plc

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At 31 December 2014

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued

Rebates from Suppliers

The Distribution business receives rebates in the ordinary course of business from a number of its suppliers of pharmaceutical products, in accordance with contractual arrangements in place with specific suppliers. Rebates are accounted for once approval has been received from the supplier following the negotiations which have taken place with them. Rebates receivable are accounted for as a deduction from the cost of purchasing pharmaceutical goods, once the rebate has been approved by the supplier on the basis under IAS 18 that the probability of inflow is not sufficiently certain and the amounts cannot be reliably measured until that point. When rebates have been agreed in advance, for example when it has been agreed that a certain rebate will be applied to the purchase of specific goods for a set period of time rather than just to a specific one off purchase, then the rebate is recognised as a reduction in the purchase price as soon as the goods are purchased. When rebates are offered based upon the volume purchased and it is probable that the rebate will be earned and the amount can be estimated reliably, then the discount is recognised as a reduction in the purchase price when the goods are purchased and the assessment is reviewed on an ongoing basis. Rebates receivable are accounted for on a net basis, being set off against the trade payables to which they relate, as they are a reduction in the amount we owe to our suppliers in respect of pharmaceutical products purchased.

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.

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.

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At 31 December 2014

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued

Business combinations and goodwill continued

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%

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.

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Intangible assets

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses. Internally generated intangibles, excluding capitalised development costs, are not capitalised and the related expenditure is reflected in consolidated statement of comprehensive income in the period in which the expenditure is incurred.

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

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 consolidated comprehensive income in the expense category that is consistent with the function of the intangible assets.

Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually, either individually or at the cash-generating unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis.

Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the consolidated statement of comprehensive income when the asset is derecognised.

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. Accounts receivable with no stated interest rates are measured at invoiced amounts when the effect of discounting is immaterial. An estimate of doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written off when there is no possibility of recovery.

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Cash and cash equivalents

For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash in hand, bank balances and short term deposits with an original maturity of three months or less, net of outstanding bank overdrafts.

Equity

The Group has issued ordinary shares that are classified as equity. The difference between the issue price and the par value of ordinary share capital is allocated to share premium. The transaction costs incurred for the share issue are accounted for as a deduction from share premium, net of any related income tax benefit, to the extent they are incremental costs directly attributable to the share issue that would otherwise have been avoided.

Accounts payable and accruals

Liabilities are recognised for amounts to be paid in the future for goods and services received whether billed by the supplier or not. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. Accounts payable are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

Provisions

Provisions are recognised when the Group has an obligation (legal or constructive) arising from a past event, and the costs to settle the obligation are both probable and able to be reliably measured.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and risks specific to the obligation. Increases in provisions due to the passage of time are recognised in the consolidated income statement within 'Finance costs'.

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.

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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

With respect to its UAE national employees, the Group makes contributions to the relevant UAE Government pension scheme calculated as a percentage of the employees' salaries. The obligations under these schemes are limited to these contributions, which are expensed when due.

Share based payments

Equity-settled share-based payments to employees (including executive directors) are measured at the fair value of the equity instruments at the grant date. The fair value excludes the effect of non-market-based vesting conditions. Details regarding the determination of the fair value of equity-settled share-based transactions are set out in note 28

The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group's estimate of equity instruments that will eventually vest. At each reporting date, the Group revises its estimate of the number of equity instruments expected to vest as a result of the effect of non-market-based vesting conditions. The impact of the revision of the original estimates, if any, is recognised in the consolidated statement of comprehensive income such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to equity reserves / other payables.

No expense is recognised for awards that do not ultimately vest, except for equity-settled transactions for which vesting is conditional upon a market or non-vesting condition. These are treated as vesting irrespective of whether or not the market or non-vesting condition is satisfied, provided that all other performance and/or service conditions are satisfied.

The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share (see note 14).

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

NMC Health plc

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At 31 December 2014

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued

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 used derivative financial instruments such as interest rate swaps and caps to hedge its interest rate risks. Such derivative financial instruments were initially recognised at fair value on the date on which a contract is entered into and were subsequently remeasured at fair value. The fair value of interest rate swaps were determined by reference to market values for similar instruments. Derivatives with positive market values (unrealised gains) were included in other assets and derivatives with negative market values (unrealised losses) were 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 were taken directly to profit or loss. Whilst the policy of the Group is not to apply hedge accounting, the derivatives were 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.

Fair value measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

· In the principal market for the asset or liability, or

· In the absence of a principal market, in the most advantageous market for the asset or liability

The principal or the most advantageous market must be accessible to by the Group.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

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

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

· Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable

For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

NMC Health plc

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

At 31 December 2014

3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued

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 consolidated statement of comprehensive income on a straight line basis.

4 ACCOUNTING STANDARDS AND INTERPRETATIONS ISSUED BUT NOT EFFECTIVE

The standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Group's financial statements are listed below. The Group intends to adopt these standards, if applicable, when they become effective.

IFRS 15 Revenue from Contracts with Customers

IFRS 15 was issued in May 2014 and establishes a new five-step model that will apply to revenue arising from contracts with customers. Under IFRS 15 revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The principles in IFRS 15 provide a more structured approach to measuring and recognising revenue. The new revenue standard is applicable to all entities and will supersede all current revenue recognition requirements under IFRS. Either a full or modified retrospective application is required for annual periods beginning on or after 1 January 2017 with early adoption permitted. The Group is currently assessing the impact of IFRS 15 and plans to adopt the new standard on the required effective date.

The standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Group's financial statements and not expected to have any impact on the Group are as follows:

· IFRS 9 Financial Instruments

· IFRS 14 Regulatory Deferral Accounts

· Amendments to IAS 19 Defined Benefit Plans: Employee Contributions

· Annual improvements 2010-2012 Cycle:

§ IFRS 3 Business Combinations

§ IFRS 8 Operating Segments

§ IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets

§ IAS 24 Related Party Disclosures

· Annual improvements 2011-2013 Cycle:

§ IFRS 3 Business Combinations

§ IFRS 13 Fair Value Measurement

§ IAS 40 Investment Property

· Amendments to IFRS 11 Joint Arrangements: Accounting for Acquisitions of Interests

· Amendments to IAS 16 and IAS 38: Clarification of Acceptable Methods of Depreciation and Amortisation

· Amendments to IAS 16 and IAS 41 Agriculture: Bearer Plants

· Amendments to IAS 27: Equity Method in Separate Financial Statements

NMC Health plc

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

At 31 December 2014

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 EBITDA and profit or loss. These are measured consistently with EBITDA and profit or loss excluding finance income and group administrative expenses, unallocated depreciation and unallocated other income, in the consolidated financial statements. From the current year, the Group has started allocating its finance costs and IT costs to its segments.

Group financing and investments (including finance costs and finance income) are managed on a group basis and are not allocated to operating segments.

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 2014 and 2013.

NMC Health plc

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

At 31 December 2014

5 SEGMENT INFORMATION continued