NMC.L Regulatory News (NMC)

London, 23 August 2017: NMC Health plc (LSE:NMC) ('NMC'), the leading integrated private healthcare network operator in the GCC region including United Arab Emirates and one of the leading global providers of fertility treatments through its European, South American and Middle Eastern subsidiaries, today announces its interim results for the six months ended 30 June 2017.

· Reported revenues increased by 34.0% year-on-year (compared to H1, 2016) to reach US$775.2m in H1, 2017 (US$ 578.3m in H1, 2016).

· EBITDA reached US$170.7m (+47.3% YoY), resulting in a Group EBITDA margin of 22.0% (+200bps YoY); Healthcare business verticals contributed 86.9% of Group EBITDA in the period, up from 84.7% in H1, 2016.

· Adjusted Net profits attributable to shareholders increased to US$105.7m (+56.0% YoY).

· Basic EPS reported at US$ 0.429 (H1, 2016: 0.336); Diluted EPS at US$0.426 (H1, 2016: US$0. 334); Adjusted EPS at US$0.514 (H1, 2016: US$0.363).

· New Management Structure announced to ensure a solid management foundation for further strategic growth

Business review

NMC Health produced strong performance in H1, 2017 with good progress seen across all parts of the Group. Our newly opened facilities continue to ramp-up well and the Group's acquired businesses are benefitting from both improved performance and the commencement of planned integration projects. 

Our long-term growth strategy, predicated on capacity and then capability focussed growth, continues to accelerate our expansion into more complex medical, and thus higher value added, specialty healthcare segments. The subsequent establishment of new strategic multi-brand verticals is enabling us to unlock synergies within the enlarged group, delivering significantly improved growth for the Group despite the continuing more moderate macro environment in our primary market of the UAE.

Over the past 12 months, NMC has focussed on continuing its strategic growth through geographic diversification, organic expansion and the commencement of projects to both release synergies from acquisitions as well as create revenue enhancements from operating initiatives between our various Group businesses. Our increasingly diversified and enhanced Group healthcare asset and brand portfolio is providing the Group with increased competitive advantages across our five specialised strategic verticals in what is an increasingly competitive market and, together with a more optimised asset utilisation, is leading to a higher growth, margin and return profile.

Al Zahra Hospital in Sharjah has performed well and in line with our expectations during the first five months of the Group's ownership. Initial integration projects have been completed smoothly. Our other acquired facilities in Sharjah, Dr Sunny clinics, also performed well and the Group believes it is now well placed to benefit from the anticipated future roll-out of mandatory insurance in the Sharjah market.

In neighbouring Dubai, our assets continue to benefit from market growth resulting from the introduction of mandatory health insurance. In Abu Dhabi, the ramp-up of our largest facility, NMC Royal Hospital in Khalifa City, continues to exceed expectations and the removal of Thiqa co-payment requirements by the Health Authority of Abu Dhabi in April 2017 is expected to positively impact in particular this facility, Al Zahra Hospital and Fakih IVF in H2, 2017 and beyond.

The Group's initial move into new geographies in the GCC is proceeding well with good performance experienced in our new assets in both Oman and Saudi Arabia, both of which are trading in-line with management expectations.

During H1, 2017, total patient visits to Group assets were 2.88m, an increase of 36.2% YoY. Revenue per patient in multi-specialty increased by 15.3% to reach US$ 134.4 and overall revenue per patient increased 8.2% YoY to US$ 183.5. This growth resulted from continuing focus on higher value procedures and specialties, increasing volumes and contribution in NMC Royal Hospital as well as good revenue per patient contributions from our newly acquired facilities.

In our operations and Management vertical, our contract to manage the Sheikh Khalifa General Hospital in Umm al Quwain was extended for a further 5 year term. Additionally, we have signed a number of new contracts and the Group will now be managing multiple private and public sector healthcare facilities across varied geographies.

Our Distribution division has continued its good growth trend of recent years with revenue growth of 14.7% YoY, driven principally through the acquisition of new brands and products across its portfolio during the period. Whilst we believe that the Distribution business is well placed to return continued solid performance, consolidated Group margins continue to benefit from the strategic aim of relative dilution of the Distribution vertical with Healthcare division businesses contributing 70.5% of Group revenues compared to 65.5% in H1, 2016 and 48% at the time of IPO in 2012.

As a result, Group EBITDA reached US$170.7m (+47.3% YoY) with a Group EBITDA margin of 22.0% (+200bps YoY) and we expect full-year EBITDA to be towards the top end of the current guidance range of US$335m to US$350m. The healthcare division margins increased by 60bps YoY to reach 30.2% during the period. Meanwhile, margins of the distribution division improved to 10.8%.

Table: Summary of Reported Income Statement

― Adjusted net profit and EPS numbers exclude non-recurring and one-off expenses. This refers to incurred business combination costs, amortisation of acquired intangibles and unamortised finance fees.

Net debt increased to US$ 1,049.9m in line with management expectations. Cash and short term bank deposits amounted to US$ 294.9m (2016: 617.8m) with a total debt balance at US$ 1,344.8m (2016: 1,049.1m).

Table: Summary Divisional performance

Note: This table shows individual Divisional performance and will not reconcile to Group financial information above which is consolidated after eliminating intra-group trading

Healthcare division

Total Revenues across our four Healthcare business verticals reached US$ 561.1m (up by US$171.3m or 43.9% YoY). Revenue growth was achieved across the Group's assets with good performance delivered within the acquired assets, strong ramp up of our newly opened facilities as well as continued revenue growth across our three more mature specialty Hospitals.

Multi-specialty vertical

The multi-specialty vertical's exceptional growth in H1, 2017 resulted from the continued push towards developing and optimising NMC's service offering, focus on increased asset utilisation, continuing benefits from the roll-out of mandatory healthcare insurance in Dubai and the contribution from our newly acquired assets. Total patient visits increased to 2.73m (+38.4% YoY) with a revenue per patient of US$134.4. As at 30 June 2017, the licensed bed capacity increased to 912 beds (+257 beds YOY) out of which 769 beds (+336 beds YOY) were operational. Excluding the Omani assets, the overall occupancy was stable at 68.5%, in line with the level seen last year. Omani bed capacity added during the year has skewed the overall occupancy rate to 62.1%.

Our newly acquired Al Zahra Hospital in Sharjah was consolidated from February 2017 and contributed revenue of US$52m during the H1, 2017, in line with management's expectations. The facility now has an upgraded fully fledged emergency department and in July 2017 bed capacity was increased from 137 to 154 active inpatient beds with the addition of a new Long Term Acute Care unit operating with specialist knowledge provided by our ProVita business. Al Zahra Hospital is now the second largest hospital in the NMC group on a bed capacity basis.

Our largest facility, NMC Royal Hospital, Khalifa City, which commenced full service operations in March 2016, continues to ramp up ahead of expectations contributing US$55m of revenue in H1, 2017.

In Dubai, both our Dubai Specialty Hospital and DIP General Hospital performed well, with BR Medical Suites, providing high end treatments and surgeries, achieving excellent growth well above management expectations.

Maternity & fertility vertical

The maternity & fertility vertical delivered good YoY growth across all its assets. Clinica Eugin reported very strong growth compared to the first half of 2016, with good performance from the existing assets and contribution from our new IVF assets in Denmark and Brazil.

Fakih IVF has performed well in the period and is expected to benefit from H2, 2017 onwards as a result of the removal of restrictions in April 2017 on IVF treatment for Thiqa patients in Abu Dhabi as well as an increase in patient numbers and cycles achieved following improved success rates arising from the sharing of clinical knowledge between our two IVF businesses. In addition, the enhanced cross-utilisation of assets continues with the roll out of Fakih clinics into other NMC Healthcare facilities.

Brightpoint Royal Women's Hospital continues to ramp up well and is proving to be a location of choice for expectant mother's in the local market.

Revenues for the Maternity and Fertility vertical reached US$ 104.1m (+20.7% YoY), with total patient visits of 142k (+4.8% YoY) and revenue per patient of US$ 733.1. The licensed & operational bed capacity remained at 100 with an occupancy rate of 64.5% (+3.9% YoY).

Long-term & home care vertical

There continues to be a shortage of Long-term acute care provision across the GCC generally, and ProVita is showing very strong growth across its UAE business and also in our first Saudi Arabian operation, our newly acquired As Salama Hospital, which contributed US$11.8m of revenue in its first six months of operations. ProVita Abu Dhabi operations continue to perform well, with revenue growth helped by a higher than anticipated level of ventilated patients being cared for in ProVita's new unit within NMC Royal Hospital.

Revenues reached US$ 57.4m with licensed bed capacity increased to 260 beds, of which all 260 beds were operational with an occupancy rate of 90%.

Operation & management vertical

NMC continues to operate and manage the 205 bed Sheikh Khalifa General Hospital in Umm Al Quwain on behalf of the UAE ministry of presidential affairs, with the management contract recently extended for a further five years beyond the initial term of the contract which commenced in 2012. The total revenue contribution from this contract reached US$3.30m in H1, 2017 (+5% YoY).

Management anticipate additional focus in this business vertical to gain management contracts where NMC can bring its significant operational and clinical expertise to manage third party facilities.

Distribution division

Distribution division revenues grew by 14.7% YoY to reach US$ 235.3m. The distribution division's growth was supported by new product introductions and increased sales effort with stock keeping units (SKU's) near to105,600.

The healthcare segment (pharmaceuticals and laboratory equipment) was the leading contributor (43.7%). The fast moving consumer goods segment (FMCG) occupied the second position, in terms of total contribution to divisional revenues, at 37.7%.

During the period sales staff expanded to 1,174 staff (PY 1,163). We also added 19 (+8% YoY) new distribution vehicles compared to the same period last year, for a total of 258.

Integration initiatives

Alongside an aggressive strategic growth plan, management recognise the need for a smooth integration plan to ensure good utilisation of all Group assets and maximise operational efficiency. Our acquisition program has introduced an increasing pool of employee talent into the Group giving management and staff better career enhancement opportunities across NMC's businesses and enabling the Group to restructure the organisation at various levels and improve overall management expertise and experience across our business verticals.

The Group is taking a partnering approach to integration recognising the existing value and successful nature of each acquired business as well as the benefits that can be achieved to capitalise on scale synergies across the Group. Our approach to integration is to proceed with initial selective coordination on key activities and then to undertake a phased and appropriate approach to other operational synergy and revenue enhancement initiatives. This, we believe, is an appropriate and balanced approach creating the most effective value accretion and optimised business structure in the longer term.

To date, cost synergy programs have focussed on procurement and management integration. Of more significance in 2016 and H1, 2017 have been a number of revenue enhancement projects which have resulted in increasing patient cross referrals and various business partnerships between group entities resulting in increased revenue in parts of the Group.

More details will be provided in relation to our integration activities as part of the Group's 2017 full year results.

Management structure update

Following the decision by Dr B. R. Shetty to step down from his Executive position of CEO and Executive Vice Chairman with the Group in March 2017, and the Board changes announced by the Company in June 2017, the Company is now pleased to confirm details of an updated management structure for the Group.

Dr B. R. Shetty took up the role of Joint Non-Executive Chairman in March 2017 and continues in this role providing advice in relation to the strategic development of the Group whilst also focussing on development of his other business interests. Mr Khalifa Bin Butti re-joined the Board in June 2017 as Executive Vice-Chairman, and alongside his role as a Director of the Company, has a particular focus in assisting the Board and management through his significant strategic connections and partnerships in the Middle East.

In addition to the above board changes, the revised Management structure for the Group reporting to Mr Prasanth Manghat, Chief Executive Officer, is as follows:

Ø Chief Financial Officer

Prashanth Shenoy is promoted to the position of CFO with effect from 1 September 2017. Prashanth joined the Group in 2016 and has been Deputy CFO and an integral member of the Group's M&A and projects team. He has played an instrumental role in NMC's acquisition of Al Zahra Hospital, fund raising and equity placing and closely involved with NMC's strategic entry into the Saudi Arabian market. Prashanth has 16 years of experience, predominantly in pharmaceutical and healthcare businesses, with significant international exposure.

Suresh Krishnamoorthy is stepping down from his position as CFO for personal family reasons and will be taking sabbatical leave from the Group. When he returns following this period of leave, Suresh will take up a new Group role focussing on strategic financial initiatives.

Ø Chief Investment Officer

Hani Buttikhi was appointed an Executive Director of the Company on 28 June 2017 in the role of Chief Investment Officer. In addition to assisting the CEO in relation to Group Strategy, Mr Buttikhi takes responsibility for the M&A, Corporate Development and Investor Relations functions which previously reported to the Deputy CEO. Asjad Yahya, who is managing our Investor Relations activity, will report to Mr Buttikhi.

Ø Chief Operations Officer, Healthcare

Michael Davis is COO, Healthcare with responsibility for all Healthcare operations of the Group. Michael previously reported to the Deputy CEO as CEO of ProVita, joining the Group as part of the acquisition of that business in August 2015. Michael has over 30 years of experience within large acute and post-acute listed hospital businesses in the US and has been living and working in the UAE since 2013.

Both the existing positions of Group Medical Director and Chief Operating Officer, Distribution, will continue to report to the CEO. Roy Cherry, who was previously responsible for Investor Relations and certain other investment functions, remains on extended leave to continue recovery from his illness.

In addition to the above, three new positions for growth have been created reporting directly to the CEO:

Ø Director of Employee Engagement

The retention of our excellent staff has always been a high priority for NMC Healthcare. Given the significant growth of the Group in recent years, this new position focussing on Group-wide employee initiatives has been created to ensure that the enlarged Group continues to be well placed to retain highly motivated and trained staff across its various corporate and operating businesses.

Ø Head of IVF

The IVF business vertical has become a material business for the Group and together the Fakih IVF and Clinica Eugin businesses are one of the largest providers of IVF treatments in the World. Given the scale and distinct nature of this business vertical, a new position of Head of IVF has been created taking day to day corporate responsibility for management of these businesses.

Ø Head of Saudi Arabian Operations

Following the commencement of operations in Saudi Arabia announced in December 2016, this new role has been created to take specific responsibility for managing the Group's day to day activities in Saudi Arabia. Saudi Arabia is a significant and strategically important market in the Middle East, and is seen as a key future market for growth for the Group.

Mr Prasanth Manghat, Chief Executive Officer, commented:

"H1, 2017 has seen strong performance from our acquired businesses, newly opened facilities as well as continuing growth in our more mature facilities. Our acquisitions in Sharjah are performing well and we are very pleased with initial performance from our new Saudi Arabian and Oman operations, as we start to diversify operations from our primary UAE market into the GCC and beyond.

NMC's focus in recent years has been to deliver a capacity and capability growth strategy which has enabled us to achieve improved margins and diversify revenue channels setting a solid platform for long term sustained growth. We have also started phased integration initiatives aimed at extracting synergies from Group operations, maximising asset utilisation and achieving revenue enhancements between complementary Group businesses. We are very pleased with the progress of these initiatives which, together with our ongoing strategic plan to further grow and diversify operations both organically and through acquisition, gives us confidence for the future.

The new management structure has been developed following our significant growth over the last two years and is designed to ensure a solid management foundation for our future strategic growth. I wish all my management colleagues very best wishes in their new roles. I would like to thank Suresh Krishnamoorthy for his significant contribution to the Group over the last 17 years and we look forward to his return to the Group in his new role. We also send our best wishes Roy Cherry for a quick and full recovery following his recent illness.

Such sustained periods of significant change and growth can be difficult for our employees. Our continuing performance improvement during this period has been achieved through the efforts and dedication of all of our management and staff and I would personally like to thank all of them for their continuing hard work and commitment in maintaining our high-quality service and patient care."

Principal risks and uncertainties

The Board considers the risks and uncertainties associated with its business, with the risks connected with the Group's expansion program being some of the key risks faced by the Group.

The detailed list of the principal risks and uncertainties faced by the Group, and the mitigation of those risks, are listed on pages 10 to 12.

Summary and outlook

The overall macro-economic outlook in the principal countries in which we operate remains stable. The ongoing insurance reform in Dubai continues to increase medical insurance penetration rates and expand the UAE healthcare market size. The increased focus of healthcare privatisation initiatives in our new markets of Saudi Arabia and Oman are also encouraging.

The management team will continue to assess potentially attractive and accretive opportunities for further business expansion and diversification.

The Board view the outlook for the remainder of FY 2017, and FY 2018, with confidence.

Analyst and investor meeting

A conference call and webcast for analysts and investors will take place today, Wednesday 23 August 2017, at 14.00 BST.

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

Contacts

Cautionary statement

These Interim 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 Interim 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.

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 Group currently operates or manages eight hospitals, two day-care patient centres, nine medical centres and fifteen pharmacies. In addition, the Group owns and operates Clinica Eugin in Barcelona, Spain - one of the leading fertility treatment centres globally. NMC also owns a 51% shareholding in Fakih IVF Group, the Middle East market leader for in-vitro fertilisation ('IVF') services. Moreover, NMC also owns and operates Americare Group, the leading home care provider in the UAE as well as ProVita, the pioneering provider of long-term medical care, also in the UAE. The enlarged company received almost 4.3m patients in 2016. The group is also a leading UAE supplier of products and consumables across several key market segments, with the major contribution coming from healthcare related products. NMC Health plc group reported revenues of US$1,220.8m in 2016.

In April 2012 NMC Health plc was listed on the Premium Segment of the London Stock Exchange. NMC Health plc is a constituent of the FTSE 250 Index.

Financial review

During the first half of the 2017 financial year, the Group continued to demonstrate strong growth at both the Group and divisional level. Group revenues increased by 34 % to US$775.2m (H1, 2016: US$578.3m). Group EBITDA improved by 47.3% to US$170.7m (H1, 2016: US$115.9m).

Revenue in the Healthcare division for the first half of 2017 increased by 43.9% to US$561.1m (H1, 2016: US$389.8m). Healthcare division EBITDA was US$169.3m for the first half of the year, which represented growth of 46.8% compared to same period last year (H1, 2016: US$115.3m). EBITDA margins were at 30.2%, which is a 60bps growth over the comparative period in 2017 (29.6% for H1, 2016) due to improved margins and value added services offered in the assets acquired.

Revenue in the Distribution division grew by 14.7% to US$235.3m (H1, 2016: US$205.1m) compared to the same period last year. Distribution division EBITDA was US$25.5m (H1, 2016: US$20.9m), with an EBITDA margin of 10.8% (H1, 2016: 10.2%).

Adjusted Earnings per share were US$ 0.514 (H1, 2016 US$ 0.363) during the period. Adjusted Earnings per share is calculated on a like for like basis for both periods using the number of shares in issue as at 30 June and after adjusting net income for non-operating one-off expenses. Non-operating one-off expenses consisted of unamortised finance fees in respect of the previous syndication loan, transaction costs in respect of business combinations and intangible amortisations in respect of business combinations.

Basic Earnings per share reported at US$ 0.429 for H1, 2017, increased from US$ 0.336 in H1, 2016.

Dividends

The Board remains committed to its previously stated policy to target a dividend pay-out ratio of 20-30% of profit after tax. The Board believes that this is a progressive dividend policy, whilst maintaining an appropriate level of dividend cover. The dividend policy not only reflects the strong cash flow characteristics of the Group, but also allows the retention of cash to fund the ongoing operating requirements and continued investment which the Company has highlighted for its long-term growth.

A dividend of 10.6 pence per share was approved and paid as a final dividend for the full year for 31 December 2016. The Board has determined that an interim dividend will not be declared but that any dividend for the 2017 financial year will be paid fully as a final dividend.

Capital expenditure

Total capital expenditure in the six months ended 30 June 2017 was US$22.9m (H1, 2016: US$ 40.2m), in line with our expectations.

Of the total capital expenditure spend during the period, US$ 10.0m (June 2016: US$27.3m) related to new capital projects and US$12.9m (June 2016: US$12.9m) related to further capital investment in our existing facilities.

In addition, the Group acquired Real Estate properties worth US$100.0m from Gulf Medical Projects Co. PSC during the period. The Real Estate property consists of Land and three buildings being used by Al Zahra Hospital in Sharjah. The Group engaged a third party to value the purchased Real Estate properties. Based on this report, the land is valued at US$13.5m and the buildings at US$86.5m having a useful life of 40 years. The group paid a real estate transfer fee of US$2.0m during the legal tittle transfer process and the same was capitalized on a pro rata basis.

The Group continues to have sufficient cash or debt facilities to progress its current capital projects programme.

Cash

The level of cash in the Group as at 30 June 2017 was in line with management expectations. During the period the number of average receivable days increased slightly from 94 days at 31 December 2016 to 101 days at 30 June 2017.

Debt

Net debt increased to US$ 1,049.9m. Cash and short term bank deposits amounted to US$ 294.9m (2016: 617.8m) with a total debt balance at US$ 1,344.8m (2016: 1,049.1m). This is in line with management expectations.

During the period, the Group entered two new syndicated facilities amounting to US$ 825m (Facility A) and US$ 250m (Facility B) respectively. Facility A was used to repay the balance of an existing syndicated loan, previously entered into in March 2015, of US$ 706 Million with the remaining amount available for general corporate purposes. Facility A is repayable over 60 months with an initial grace period of 12 months. Facility B is for acquisition purposes and is repayable over 84 months with a grace period of 12 months.

In addition to the above facilities, term loans also include other short term revolving loans which get drawn down and repaid over the period.

Going concern

The directors are satisfied that the Group has sufficient resources to continue in operation for the foreseeable future, a period of not less than 12 months from the date of this report. Accordingly the directors continue to adopt the going concern basis in preparing the condensed financial statements.

Statement of directors' responsibilities

The Interim report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the Interim Report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority. The Disclosure and Transparency Rules ("DTR") require that the accounting policies and presentation applied to the half-yearly figures must be consistent with those applied in the latest published annual accounts, except where the accounting policies and presentation are to be changed in the subsequent annual accounts, in which case the new accounting policies and presentation should be followed, and the changes and the reasons for the changes should be disclosed in the Interim Report, unless the United Kingdom Financial Conduct Authority agrees otherwise.

The directors confirm that this condensed set of financial statements has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting' as adopted by the European Union, and that to the best of their knowledge, the Business and Finance Reviews contained herein includes a fair review of:

· The important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements as required by DTR 4.2.7R;

· The principal risks and uncertainties for the remaining six months of the year as required by DTR 4.2.7R; and

· Related party transactions that have taken place in the first six months of the current financial year that have materially affected the financial position or performance of the Group during the first six months of the current financial year as required by DTR 4.2.8R.

For and on behalf of the Board of Directors:

Suresh Krishnamoorthy

Chief Financial Officer

22 August 2017

Principal risks and uncertainties

Group Management maintains and reviews a Strategic Risk Register, which is the basis for the list of principal risks and uncertainties, on an on-going basis with the Board retaining oversight over the Register and the risk management process. These risks and uncertainties, the potential effect of them on the Group and the mitigation of them is analysed in the following table.

It should be noted that the order that these risks and uncertainties are expressed in the table do not reflect an order of magnitude as regards their potential impact on the Group

Independent review report to NMC Health plc

Introduction

We have been engaged by the Company to review the condensed set of consolidated financial statements in the half-yearly financial report for the six months ended 30 June 2017 which comprises the condensed consolidated income statement, the condensed consolidated statement of other comprehensive income, the condensed consolidated statement of financial position, the condensed consolidated statement of changes in equity, the condensed consolidated statement of cash flows and related notes 1 to 21. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our work, for this report, or for the conclusions we have formed.

Directors' Responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 2, the annual consolidated financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

Our Responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2017 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

Ernst & Young LLP

London

Date: 22 August 2017

NMC Health plc

CONDENSED CONSOLIDATED INCOME STATEMENT

For the six months ended 30 June 2017

One off items includes unamortised finance fees written off (US$ 6.8m) , transaction costs in respect of business combinations (US$4.5m), and amortisation of acquired intangibles (US$6.8m).

The attached notes 1 to 21 form part of the condensed consolidated financial statements

NMC Health plc

CONDENSED CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME

For the six months ended 30 June 2017

These results relate to continuing operations of the Group. There are no discontinued operations in the current and prior period.

The attached notes 1 to 21 form part of the condensed consolidated financial statements

NMC Health plc

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 June 2017

NMC Health plc

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 June 2017

The condensed consolidated financial statements were authorised for issue by the board of directors on 22 August 2017 and were

signed on its behalf by

The attached notes 1 to 21 form part of the condensed consolidated financial statements

NMC Health plc

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the six months ended 30 June 2017

NMC Health plc

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the six months ended 30 June 2017

NMC Health plc

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS continued

For the six months ended 30 June 2017

The attached notes 1 to 21 form part of the condensed consolidated financial statements.

NMC Health plc

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

At 30 June 2017

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 liability company operating in the Middle East, Europe and South America . The Group is primarily based in United Arab Emirates ("UAE"). The address of the registered office of the Company is Level 1, Devonshire House, One Mayfair Place, London, W1J 8AJ. The registered number of the Company is 7712220. The Company's immediate and ultimate controlling party is a group of three individuals (H.E. Saeed Mohamed Butti Mohamed Al Qebaisi (H.E. Saeed Bin Butti), Dr BR Shetty and Mr Khalifa Butti Omair Yousif Ahmad Al Muhairi (Mr. Khalifa Bin Butti) who are all shareholders and of whom two are directors of the Company and who together have the ability to control the Company.

The Parent and its subsidiaries (collectively the "Group") are engaged in providing professional medical services and the provision of all types of research and medical services in the field of gynaecology, obstetrics and human reproduction, and the rendering of business management services to companies in the health care and hospital sector. The Group is also engaged in wholesale of pharmaceutical goods, medical equipment, cosmetics, food, IT products and services.

The condensed consolidated financial statements of the Group for the six months ended 30 June 2017 were authorised for issue by the Board of Directors on 22 August 2017.

The condensed consolidated financial statements do not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006.

Statutory financial statements for the year ended 31 December 2016 were published and were delivered to Companies House. Those financial statements were approved by the Board of Directors on 7 March 2017. The report of the auditor on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 498 of the Companies Act 2006.

The condensed consolidated financial statements have been reviewed, not audited.

2 BASIS OF PREPARATION

The condensed consolidated financial statements for the six months ended 30 June 2017 have been prepared in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority and with IAS 34, 'Interim financial reporting' as adopted by the European Union.

The condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements and should be read together with the consolidated financial statements of NMC Health plc as of 31 December 2016 which were prepared in accordance with IFRS (as adopted in the European Union).

The consolidated financial statements are prepared under the historical cost convention, except for derivative financial instruments and contingent consideration payable which have been measured at fair value.

Accounting policies

The principal accounting policies adopted in the preparation of these condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual consolidated financial statements for the year ended 31 December 2016, except for the adoption of new standards and interpretations effective as of 1 January 2017. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

The new standards, amendments to IFRS, which are effective as of 1 January 2017 are listed below, have no impact on the Group.

· Amendments to IAS 7 Statement of Cash Flows: Disclosure Initiative

· Amendments to IAS 12 Income Taxes: Recognition of Deferred Tax Assets for Unrecognised Losses

· Annual Improvements 2014-2016 Cycle

o Amendments to IFRS 12 Disclosure of Interests in Other Entities: Clarification of the scope of disclosure requirements in IFRS 12

The new standards and amendments, effective as of 1 January 2017, have no impact on the Group.

As presented in our 2016 Annual report, the Group plans to adopt IFRS 15 on the required effective date using the Modified retrospective method. The Group has performed a preliminary impact assessment which is subject to changes arising from a more detailed ongoing analysis, however management does not expect a significant impact from the application of the standard.

Going concern

The Group's business activities, together with the factors likely to affect its future development, performance and position are set out in the Business Review on page 1 to 7. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Financial Review on pages 8 and 9.

The Group has two diverse operating divisions, Healthcare and Distribution, both of which operate in a growing market.

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

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

The Group delivered a strong performance during the first half of 2017. Both the Healthcare and Distribution divisions have continued their positive growth in revenue during the first half of 2017. Net profit and EBITDA of both healthcare and distribution divisions have increased during first half in 2017. EBITDA margin of Healthcare is increased whereas EBITDA margin of Distribution remained comparable to last year. The directors have reviewed the business plan for the year end 2017 and the five year cash flow, together with growth forecasts for the healthcare sector in the UAE. The directors consider the Group's future forecasts to be reasonable.

The directors have not identified any other matters that may impact the viability of the Group in the medium term and therefore they continue to adopt the going concern basis in preparing the condensed consolidated financial statements

The directors expect that the Group has adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the interim condensed consolidated financial statements.

Significant accounting judgements and estimates 

The preparation of the condensed consolidated financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

In preparing these condensed consolidated financial statements, the significant judgements and estimates made by management in applying the Group's accounting policies and the key sources of estimation and uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended 31 December 2016.

3 FINANCIAL RISK MANAGEMENT

The primary risk arising from the Group's financial instruments are interest rate risk, foreign currency risk, credit risk and liquidity risk. These risks and the Group's financial risk management objectives and policies are consistent with that disclosed in the consolidated financial statements as at and for the year ended 31 December 2016.

4 SEASONALITY OF OPERATIONS

The Group does not have any operations of a seasonal or cyclical nature.

5 BUSINESS COMBINATIONS

The fair value of the identifiable assets and liabilities of entities acquired as at the date of acquisition are as follows:

Until last year, each acquisition was shown separately. From current period, smaller acquisitions have been clubbed together as "others". This is done to make disclosure concise.

The fair value assessment of identifiable net assets at the acquisition date remains in progress

and therefore the fair values of the identifiable net assets are provisional.

Analysis of cash flows on acquisitions is as follows:

The transaction costs reported in the condensed consolidated income statement comprise of the following:

The non-controlling interest in all acquired entities is measured at the proportionate share of net assets of subsidiaries.

Acquisition of Al Zahra Hospital ("Al Zahra")

On 14 December 2016, the Group agreed to acquire a 100% controlling stake in the voting shares of Al Zahra, UAE providing both in-patient and outpatient service to the highest standards, supported by state of art facilities. Al Zahra is one of the largest full service multi-speciality hospitals in the UAE in Sharjah and Northern Emirates. The hospital has 137 active in-patients beds and a capacity of 154 beds (expandable to at least 200 beds), treating approximately 400,000 outpatients and 23,000 in-patients bed days per year. It has strong relationships with a number of major insurance providers in Sharjah with approximately 85% of outpatients referred through the insurance channel.

NMC acquired control of Al Zahra on 13 February 2017, date on which all conditions precedent were completed, meaning that control has passed to the Group. For convenience, the closest available balance sheet date has been used for the purposes of measuring net assets acquired. This date is 31 January 2017, with full consolidation commencing on 1 February 2017. We are not aware of any material transactions in the period between 01 February 2017 and 13 February 2017. The consolidated financial statements include the results of Al Zahra for 5 months period.

Included in property and equipment are land and building of US$100 million acquired as part of Al Zahra acquisition.

At the date of acquisition, the fair value of identifiable intangible assets included brand amounting to US$3,539,000 and software amounting to US$460,000.

Goodwill represents the future business potential and profit growth of the acquired business. It comprises all of the intangibles that cannot be individually recognised such as the assembled workforce, the customer service, future client relationships, the presence in geographic markets, the synergies that acquired entities & NMC will obtain.

Between 1 February 2017 to 30 June 2017 turnover of US$ 51,564,000 arising from Al Zahra was included in Groups turnover. If the business had been acquired at the beginning of the year, the estimated Groups turnover for the half year ending 30 June 2017 would have been US$ 61,580,000 higher. The business has been integrated to the Groups existing activities and is not practical to identify the impact on the Groups profit in the period.

At the date of the acquisition the fair value of the trade receivables was US$ 44,143,000. The gross amount of trade receivables is US$ 51,637,000.

Other Acquisitions

In the Kingdom of Saudi Arabia, the Group agreed to acquire a 70% controlling stake in the voting shares of As Salama Hospital LLC ("ASH") on 28 August 2016, an unlisted private general hospital which exists to serve the healthcare needs of all people in Al-Khobar by providing acute and long-term care. ASH is the fifth largest hospital in the Eastern province of Saudi Arabia and account for 10% of market share. Regulatory approvals and legal formalities were completed on 02 January 2017, meaning that control has passed to the Group. For convenience, the closest available balance sheet date i.e. 01 January 2017 has been used for the purposes of measuring net assets acquired.

In the Sultanate of Oman, the Group acquired a general hospital and a private clinic.

The Group agreed to acquire the Healthcare Business and assets of Atlas Healthcare on 05 December 2016. Atlas Healthcare is one of the leading providers of comprehensive healthcare services in Al Ruwi and Al Ghoubra a suburb of Muscat, the capital city of the Sultanate of Oman. Regulatory approvals and legal formalities Completed on 13 February 2017, meaning that control has passed to the Group. For convenience, the closest available balance sheet date i.e. 01 February 2017 has been used for the purposes of measuring net assets acquired.

The Group also agreed to acquire the Healthcare Business and assets of Bin Said, a private clinic on 04 October 2016 in Muscat. Regulatory approvals and legal formalities Completed on 01 January 2017, meaning that control has passed to the Group.

At the date of acquisition, the fair value of identifiable intangible assets included brand amounting to US$5,043,000, private contracts amounting to US$7,355,000 and software amounting to US$65,000 for ASH.

Goodwill represents the future business potential and profit growth of the acquired business. It comprises all of the intangibles that cannot be individually recognised such as the assembled workforce, the customer service, future client relationships, the presence in geographic markets, the synergies that acquired entities & NMC will obtain.

We have also completed several other minor acquisitions that continued to expand our service offerings in healthcare which have been clubbed under others. The contribution to revenue and attributable profit from these acquisitions are immaterial. If these acquisitions have occurred at the beginning of the year, their contribution to the revenue and attributable profit would also have been immaterial. The same applies for gross amount and fair value of receivables.

The fair value of the identifiable assets and liabilities of entities acquired in previous year at the dates of acquisition were as follows:

Under others acquisitions:

Purchase price allocation for Copenhagen Fertility Centre ("CFC") and Huntington Centro De Medina Reproductiva S/A ("HCMR") were provisional as of 31 December 2016 and have been completed during the year. Purchase price allocation of CFC remain same, however updated for HCMR. For HCMR Brand amounting to US$ 3,824,000 and private contracts amounting to US$ 1,818,000 have been recognised. Corresponding credit has been recognised in goodwill of US$ 2,376,000 deferred tax liability of US$ 1,359,000, NCI of US$ 1,631,000 and exchange gain of US$ 276,000. On the ground of materiality purchase price adjustment have been recognised in current period.

Analysis of cash flows for acquisitions done in previous year disclosed in 2016 consolidated financial statements was as follows:

During the period deferred consideration amounting to US$ 4,356,000 in respect of Fakih IVF and Nadia has been paid.

Other financial information with respect to entities acquired in previous year disclosed in 2016 consolidated financial statements was as follows:

6 SEGMENT INFORMATION

The following tables present revenue and profit information regarding the Group's operating segments for the six months ended 30 June 2017 and 2016, respectively.

There is no difference from the last annual report in the basis of segmentation or the basis of measurement of segment profit or loss. The newly acquired companies/businesses Al Zahra, ASH, Atlas, and Bin Said come under the healthcare segment.

The following table presents segment assets and segment liabilities of the Group's operating segments as at 30 June 2017 and 31 December 2016.

Segment assets

Segment liabilities

Other disclosures

Capital expenditure

Inter-segment revenues are eliminated upon consolidation and reflected in the 'adjustments and eliminations' column. All other adjustments and eliminations are part of detailed reconciliations presented further below.

Adjustments and eliminations

Finance income and group overheads are not allocated to individual segments as they are managed on a group basis.

Term loans, bank overdrafts 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 and intangible assets.

Reconciliation of Segment EBITDA to Group profit

Reconciliation of Segment profit to Group profit

Geographical information

7 TAX

The Group is primarily based in UAE. As there is no corporation tax in the UAE, no taxes are recognised or payable on the operations in the UAE. There is no taxable income in the UK and accordingly there is no tax liability arising in the UK.

With respect to operations in Spain and certain other countries, the tax disclosures are as follows:

Consolidated income statement

Current income tax:

No Tax is included in other comprehensive income (six months ended 30 June 2016: NIL).

Deferred tax assets and liabilities comprise of:

Deferred tax assets:

Deferred tax liabilities:

8 EARNINGS PER SHARE (EPS)

Basic EPS amounts are calculated by dividing net profit for the period attributable to ordinary equity holders of the Parent Company by the weighted average number of ordinary shares outstanding during the period.