NMC.L Regulatory News (NMC)

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

At 30 June 2018

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 2018 were authorised for issue by the Board of Directors on 19 August 2018.

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 2017 were published and were delivered to Companies House. Those financial statements were approved by the Board of Directors on 6 March 2018. 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 AND CHANGES TO GROUP'S ACCOUNTING POLICIES

2.1 Basis of preparation

The condensed consolidated financial statements for the six months ended 30 June 2018 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 2017 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 contingent consideration payable which have been measured at fair value.

2.2 Changes to Group's 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 2017, except as fallows:

Convertible bonds

Convertible bonds are separated into liability and equity components based on the terms of the contract. On issuance of the convertible bonds, the fair value of the liability component is determined using a market rate for an equivalent non-convertible instrument. This amount is classified as a financial liability measured at amortised cost (net of transaction costs) until it is extinguished on conversion or redemption.

The remainder of the proceeds is allocated to the conversion option that is recognised and included in equity. Transaction costs are deducted from equity. The carrying amount of the conversion option is not remeasured in subsequent years. Transaction costs are apportioned between the liability and equity components of the convertible bond, based on the allocation of proceeds to the liability and equity components when the instruments are initially recognised.

New standards, interpretations and amendments adopted by the Group

The Group has applied new standards and interpretations effective as of 1 January 2018. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

The Group applied, for the first time, IFRS 15 Revenue from Contracts with Customers, and IFRS 9 Financial Instruments. As required by IAS 34, the nature and effect of these changes are described below.

IFRS 15 Revenue from Contracts with Customers

The adoption of IFRS 15 from 1 January 2018 resulted in changes in accounting policies and immaterial adjustments to the amounts recognised in the condensed consolidated financial statements.

The new accounting policies are set out below:

The Group's core business includes the provision of healthcare services, distribution of health care items and the provision of healthcare management services. Its revenue streams include clinic service revenues, sale of goods - Pharmacy, sale of goods -Distribution and Healthcare management fees

1. Clinic, homecare and long-term care service revenues:

Clinic, homecare and long-term care service revenues primarily comprise fees charged for inpatient and outpatient medical services. Services include charges for accommodation, theatre, medical professional services, equipment, radiology, laboratory, and pharmaceutical items used. Revenue is recorded and recognized during the period in which medical service is provided based on the amounts due from the patients and/ or medical funding entities. Fees are calculated and billed based on various tariffs agreed with insurers.

Judgements:

The Group applied the following judgements that significantly affect the determination of the amount and timing of revenue from the above revenue stream:

- Principal v/s agent considerations:

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. NMC has determined that it is acting as Principal in these arrangements if it has the responsibility for providing the medical services to the patient, it sets the prices for services which are provided, it acts as the primary obligator and it bears the risk of providing the medical service.

- Identifying performance obligations in a bundled sale medical packages:

For bundled packages provided to patients, the Group accounts for individual products and services separately if they are distinct i.e. if a product or service is separately identifiable from other items in the bundled package and if a customer can benefit from it. The Group concludes that in the case of maternity packages the individual products and services separately are distinct.

- Follow up consultations:

As per normal business practice, the Group allows follow up consultation within certain period of time after initial consultation and in post surgeries consultation. Judgement is applied to assess if the follow up consultations is a separate and distinct service from initial consultation. The Group concludes that in the case of follow up consultations the individual services are separate and distinct.

Impact of adoption of IFRS 15:

The adoption of IFRS 15 had an immaterial impact with respect to clinic, homecare and long-term services.

2. Gynaecology, obstetrics and human reproduction:

Revenue in respect of the different types of gynaecology, obstetrics and human reproduction services is recognized as follows:

- Donor IVF and Own IVF sales (In Vitro Fecundation): Revenue in respect of gynaecology, obstetrics and human reproduction is mainly from In Vitro Fertilization (IVF) treatment.

Revenue from IVF treatment is recognized over time on an input method based on stage of the treatment. The treatment is divided into three stages. Each stage takes about 20 days. 24%-25% of revenue is booked in the first stage (at the beginning of the treatment), 50%-65% of revenue is booked in the middle stage (at patient's egg extraction in the case of the use of the patient's own egg or in the case of the use of a donor egg at the fertilization date) and 11%-25% of revenue is booked at the final stage (embryo implantation). These percentages are based on an internal study of the costs incurred in the different streams performed in prior years.

- Cryo transfer sales: Revenue from cyrotransfers are recognised over time based on the stage of treatment. 25% is recorded when treatment is initialized and 75% at the embryo implantation. The time between both phases is about 2-3 weeks.

- Intrauterine insemination Revenue is recognized in full at the insemination date.

Judgements:

The Group applied the following judgements that significantly affect the determination of the amount and timing of revenue from the above revenue stream:

- Under IFRS 15, the Group concluded that revenue from IVF treatment and Cryo transfer sales will continue to be recognised over time, using a percentage derived from input method to measure progress towards complete satisfaction of the service similar to the previous accounting policy, because the customer simultaneously receives and consumes the benefits provided by the Group.

Impact of adoption of IFRS 15

The adoption of IFRS 15 had immaterial impact on gynecology, obstetrics and human reproduction.

3. Sale of Goods - Pharmacy & distribution:

The sales of goods from pharmacy relates to the sale of pharmaceutical and other products from hospitals and pharmacies. Revenue from the sale of goods - Pharmacy & distribution is recognised when control of the goods has passed to the buyer i.e. at the point of sale / delivery to the customer.

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

Judgements:

The Group applied the following judgements that significantly affect the determination of the amount and timing of revenue from the above revenue stream:

- Principal v/s agent considerations:

The Group does not establish the prices for the pharmaceutical products sold as both the purchase and selling prices for all pharmaceutical products are fixed by the Ministry of Health, UAE. NMC has determined that it is acting as Principal in respect of these sales if it provides the goods for sale, it bears the inventory risk, and is the primary obligator for supplying the items to its customers.

- Determining method to estimate variable consideration and assessing the constraint IFRS

Certain contracts for the sale of goods include a right of return that give rise to variable consideration. In estimating the variable consideration, the Group is required to use either the expected value method or the most likely amount method based on which method better predicts the amount of consideration to which it will be entitled. The Group determined that the expected value method is the appropriate method to use in estimating the variable consideration for the sale of goods with rights of return and volume rebates.

Impact of adoption of IFRS 15:

The adoption of IFRS 15 has not had an impact on the timing and amount of revenue recognised.

4. 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.

Judgements:

There were no significant judgement applied in recognition of management fees

Impact of adoption of IFRS 15

The adoption of IFRS 15 has not had an impact on the timing and amount of revenue recognised.

IFRS 9 Financial Instruments

IFRS 9 Financial Instruments replaces IAS 39 Financial Instruments: Recognition and Measurement for annual periods beginning on or after 1 January 2018, bringing together all three aspects of the accounting for the financial instruments: classification and measurement: impairment; and hedge accounting.

With the exception of hedge accounting, which the Group applied prospectively, the Group has applied IFRS 9 modified retrospectively, with the initial application date of 1 January 2018 and adjusting the retained earnings as of 31 December 2017 for any impact.

The adoption of IFRS 9 Financial Instruments from 1 January 2018 resulted in changes in accounting policies and adjustments to the amounts recognised in the financial statements. The new accounting policies and explanations for the adoption adjustments are set out below:

Classification and measurement:

Except for certain trade receivables, under IFRS 9, the Group initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs.

Under IFRS 9, debt financial instruments are subsequently measured at fair value through profit or loss (FVPL), amortised cost, or fair value through other comprehensive income (FVOCI). The classification is based on two criteria: the Group's business model for managing the assets; and whether the instruments' contractual cash flows represent 'solely payments of principal and interest' on the principal amount outstanding (the 'SPPI criterion').

The new classification and measurement of the Group's debt financial assets are, as follows:

• Debt instruments at amortised cost for financial assets that are held within a business model with the objective to hold the financial assets in order to collect contractual cash flows that meet the SPPI criterion. This category includes the Group's Trade and other receivables, and Loans included under Other non-current financial assets.

• Debt instruments at FVOCI, with gains or losses recycled to profit or loss on derecognition. Financial assets in this category are any quoted debt instruments that meet the SPPI criterion and are held within a business model both to collect cash flows and to sell. Under IAS 39, the any quoted debt instruments were classified as available-for-sale (AFS) financial assets. The Group does not have any debt instruments under this category.

Other financial assets are classified and subsequently measured, as follows:

• Equity instruments at FVOCI, with no recycling of gains or losses to profit or loss on derecognition. This category only includes equity instruments, which are held for the foreseeable future and which are irrevocably elected to so classify upon initial recognition or transition. The Group does not have any equity instruments classified under this category.

• Financial assets at FVPL comprise derivative instruments and quoted equity instruments which are not irrevocably elected, at initial recognition or transition, to classify at FVOCI. This category would also include debt instruments whose cash flow characteristics fail the SPPI criterion or are not held within a business model whose objective is either to collect contractual cash flows, or to both collect contractual cash flows and sell. The Group does not have any financial assets at FVPL.

The accounting for the Group's financial liabilities remains largely the same as it was under IAS 39. Similar to the requirements of IAS 39, IFRS 9 requires contingent consideration liabilities to be treated as financial instruments measured at fair value, with the changes in fair value recognised in the consolidated income statement. Under IFRS 9, embedded derivatives are no longer separated from a host financial asset. Instead, financial assets are classified based on their contractual terms and the Group's business model.

The accounting for derivatives embedded in financial liabilities and in non-financial host contracts has not changed from that required by IAS 39.

No material reclassification adjustments have been identified as a result of adopting the requirements of IFRS 9 as at 1 January 2018.

Hedge accounting:

As the group does not have any significant hedging relationships, the changes to hedge accounting principles as required by IFRS 9 has had no significant impact on the Group's financial statements.

Impairment:

The adoption of IFRS 9 has fundamentally changed the Group's accounting for impairment losses for financial assets by replacing IAS 39's incurred loss approach with a forward-looking expected credit loss (ECL) approach. IFRS 9 requires the Group to record an allowance for ECLs for all loans and other debt financial assets not held at FVPL.

ECLs are based on the difference between the contractual cash flows due in accordance with the contract and all the cash flows that the Group expects to receive. The shortfall is then discounted at an approximation to the asset's original effective interest rate.

For trade receivables, the Group has applied the standard's simplified approach and has calculated ECLs based on lifetime expected credit losses. The Group has established a provision matrix that is based on the Group's historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment.

The Group considers a financial asset in default when contractual payment are 90 days past due. However, in certain cases, the Group may also consider a financial asset to be in default when internal or external information indicates that the Group is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Group.

The adoption of the ECL requirements of IFRS 9 resulted in increases in impairment allowances of the Group's trade receivables. The increase in allowance resulted in adjustment in retained earnings of US$ 10,695,000.

Several other amendments and interpretations, as listed below, applied for the first time in 2018, but do not have an impact on the interim consolidated financial statements of the Group.

· IFRIC Interpretation 22 Foreign Currency and Advance Considerations

· Amendments to IAS 40 Transfers of Investment Property

· Amendments to IFRS 2 Classification and Measurement of Share-based Payment Transactions

· Amendments to IFRS 4 Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts

· Amendments to IAS 28 Investments in Associates and Joint Ventures - Clarification that measuring investees at fair value through profit or loss is an investment-by-investment choice

· Amendments to IFRS 1 First time Adoption of International Financial Reporting Standards- Deletion of short-term exemptions for first-time adopters

2.3 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 8. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Financial Review on pages 9 and 10.

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 2018. Both the Healthcare and Distribution divisions have continued their positive growth in revenue during the first half of 2018. Net profit and EBITDA of both healthcare and distribution divisions have increased during first half in 2018. 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 2018 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.

2.4 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 2017.

2.5 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 interim condensed consolidated financial statements are listed below. The Group intends to adopt these standards, if applicable, when they become effective.

IFRS 16 Leases

IFRS 16 replaces existing guidance on the accounting for leases, including IAS17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases- Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. The standard is applicable for annual periods beginning on or after 1 January 2019. Early adoption is permitted.

IFRS 16 introduces a single comprehensive, on-balance sheet lease accounting model for lessees. IFRS 16 distinguishes leases and service contracts on the basis of whether an identified asset is controlled by a customer. Distinctions of operating leases (off balance sheet) and finance leases (on balance sheet) are removed for lessee accounting and is replaced by a model where a right-of-use asset and a corresponding liability have to be recognised for leases by lessees (i.e. all on balance sheet) except for short-term leases and leases of low value assets.

At the date of the condensed consolidated financial information, the following other standards, amendments and Interpretations have not been effective and have not been early adopted by the Group:

a) IFRIC 23 Uncertainty Over Income Tax Treatments - effective 1 January 2019

b) Prepayment Features with Negative Compensation (Amendments to IFRS 9) - effective 1 January 2019

c) Annual Improvements to IFRS 2015 - 2017 Cycle (Amendments to IFRS 3, IFRS 11, IAS 12 and IAS 23) - effective 1 January 2019

d) Long-term Interests in Associates and Joint Ventures (Amendments to IAS 28) - effective 1 January 2019

e) Sale or Contribution of Assets between an Investor and its Associates or Joint Venture (Amendments to IFRS 10 and IAS 28) - Available for optional adoption/effective date deferred indefinitely

Management anticipates that the application of the above Standards and Interpretations in future periods will have no material impact on the condensed consolidated interim financial information of the Group in the period of initial application with the exception of IFRS 16 Leases which management is currently assessing. However, it is not practicable to provide a reasonable estimate of the effects of the application of IFRS 16 until the Group completes its detailed impact assessment review.

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 2017.

4 SEASONALITY OF OPERATIONS

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

5 ACQUISITION OF NON-CONTROLLING INTEREST

· On 03 January 2018, the Group acquired an additional 29% interest in the voting shares of As Salama Hospital LLC ("As Salama"), increasing its ownership interest to 99% for cash consideration of US$12,404,000. Excess of consideration paid over the carrying amount of the non-controlling interests amounting to US$5,380,000 been recognised in retained earnings.

· On 08 February 2018, the Group acquired an additional 49% interest in the voting shares of Fakih IVF Fertility Centre LLC and Fakih IVF LLC, increasing its ownership interest to 100% for consideration of US$212,928,000. Excess of consideration paid over the carrying amount of the non-controlling interests amounting to US$179,026,000 been recognised in retained earnings.

Consideration of US$ 212,928,000 is settled by payment of cash of US$ 71,228,000, deferred consideration of US$ 2,510,000 and issuance of equity shares of the Company for an amount of US$ 139,190,000 representing 3,534,000 shares (Note 16).

6 BUSINESS COMBINATIONS

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

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.

Between acquisition dates to 30 June 2018 profit of US$4,665,000 arising from all above acquisitions was included in Groups results. If the business had been acquired at the beginning of the year, the Groups profit for the half year ending 30 June 2018 would have been US$3,786,000.

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 CosmeSurge Investment LLC ("CosmeSurge" or "CS")

On 18 January 2018, the Group agreed to acquire 70% controlling stake of CS. CS is an industry leader in the UAE in providing quality cosmetic surgery and aesthetic medicine. The assets being acquired include 17 operational clinics, and a 10-bed hospital and two new clinics which are being constructed and scheduled to open in 2018. NMC currently provides invasive cosmetic procedures and complex surgeries and the addition of CS will expand the Group's offering. Having managed CS under an Operation and Management ("O&M") contract since September 2017, NMC has already identified a number of revenue and cost synergy opportunities.

NMC acquired control of CosmeSurge on 21 March 2018, date on which all conditions precedents 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 March 2018, with full consolidation commencing on 1 April 2018. We are not aware of any material transactions in the period between 21 March 2018 and 31 March 2018.

At the date of acquisition, the fair value of identifiable intangible assets included brands amounting to US$11,571,000 and customer relationship of US$4,901,000. The fair values of brands have been assessed using the relief from royalties' method and customer relationship have been assessed using the multi-period excess earning method. No deferred tax liability has been recognized as there is no Corporation tax applicable in UAE.

The goodwill recognised is attributable to the expected synergies and other benefits from combining the assets and activities of CosmeSurge with those of the Group. Goodwill represents the future business potential and profit growth of the CosmeSurge. It comprises all of the intangibles that cannot be individually recognised such as the assembled workforce, future client relationships, the presence in geographic markets, the synergies that CosmeSurge & NMC will obtain. Goodwill is allocated to the healthcare segment. None of the recognised goodwill is expected to be deductible for income tax purposes as there is no corporation tax in the UAE.

Between 1 April 2018 to 30 June 2018 turnover of US$ 16,843,000 arising from CosmeSurge was included in Groups turnover. If the business had been acquired at the beginning of the year, the Groups turnover for the half year ending 30 June 2018 would have been US$ 30,530,000.

At the date of the acquisition the fair value of the trade receivables was US$ 4,136,000.

Acquisition of Al Salam Medical Group ("Al Salam" or "ASMG")

On 21 January 2018, the Group agreed to acquire 80% controlling stake of Al Salam. Al Salam Medical Group's hospital and clinics focus on a number of key specialties, including cardiology and paediatrics and served over 900k patients in 2017. ASMG served over 900,000 patients in 2017 and has a healthy mix of cash and insurance patients. The assets and businesses of ASMG comprise:

o Al Salam Medical Centre (established in 1985) - This includes 31 clinics across 16 specialties. The company employs over 200 staff

o Ishbilia Medical Center (established in 2003) - This includes 34 clinics across 15 specialties. The company employs 174 staff and

o Al Salam Hospital (commenced operations in Q4 2016) - This is a 100-bed hospital.

Regulatory approvals and legal formalities were completed on 2 April 2018, meaning that control has passed to the Group and full consolidation of results will commence from that date. For convenience, the closest available balance sheet date has been used for the purposes of measuring net assets acquired. This date is 1 April 2018, with full consolidation commencing on 1 April 2018. We are not aware of any material transactions in the period between 1 April 2018 and 2 April 2018.

The agreed purchase consideration for the business was US$36,527,000 of which US$7,065,000 is deferred consideration.

At the date of acquisition, the fair value of identifiable intangible assets included brands amounting to US$8,345,000 and license right of US$3,733,000. The fair values of brands have been assessed using the relief from royalties' method and license have been assessed using replacement cost method.

Provisional goodwill has been calculated being the difference between the fair value of the consideration paid and payable, and the fair value of the net assets acquired. Goodwill represents the future business potential and profit growth of Al Salam. It comprises all the intangibles that cannot be individually recognized such as the assembled workforce, future client relationships, the presence in geographic markets, the synergies that Al Salam & NMC will obtain.

Between 1 April 2018 to 30 June 2018 turnover of US$ 7,012,000 arising from Al Salam was included in Groups turnover. If the business had been acquired at the beginning of the year, the Groups turnover for the half year ending 30 June 2018 would have been US$ 14,893,000.

At the date of the acquisition the fair value of the trade receivables was US$ 7,337,000.

Acquisition of Chronic Care Specialist Medical Center ("CCSMC")

On 05 February 2018, the Group agreed to acquire a 100% controlling stake in the voting shares of Chronic Care Specialist Medical Center ("CCSMC"), an unlisted long-term care provider based in the Kingdom of Saudi Arabia having a licenced capacity of about 220 beds. NMC acquired control of CCSMC on 21 March 2018 when NMC obtained the required regulatory approvals from the authorities in the Kingdom of Saudi Arabia. For convenience, the closest available balance sheet date has been used for the purposes of measuring net assets acquired. This date is 31 March 2018, with full consolidation commencing on 1 April 2018. We are not aware of any material transactions in the period between 21 March 2018 and 1 April 2018. An amount of US$13.3m was paid to shareholders of CCSMC to acquire its entire share capital. As at the date of acquisition, included in the net liabilities of CCSMC were long term loans payable to NMC amounting to US$ 39.2m. The acquisition transaction in effect settles the pre-existing relationship between the NMC and the previous shareholders of CCSMC therefore the total purchase consideration is deemed to be US$ 52.5m. There is no deferred and contingent consideration payable.

Between 1 May 2018 to 30 June 2018 turnover of US$ 1,358,000 arising from Al Salam was included in Groups turnover. If the business had been acquired at the beginning of the year, the Groups turnover for the half year ending 30 June 2018 would have been US$ 3,977,000.

At the date of the acquisition the fair value of the trade receivables was US$ 5,487,000.

Other Acquisitions

In the Kingdom of Saudi Arabia ("KSA"), the Group acquired a general hospital and a private clinic

On 25 December 2017, the Group agreed to acquire, 100% controlling stake in the voting shares of Al Rashid Hospital ("Al Rashid"), subject to the completion of all the conditions precedent referred in SPA. Al Rashid Hospital is the first private hospital in the Hail province of KSA, operating 64 active inpatient beds, serving approximately 110,000 outpatients and 9,500 inpatient bed days per year. This asset would be difficult to replicate, and considerably marks NMC's presence in the Northern region of KSA. Regulatory approvals and legal formalities Completed on 03 January 2018, meaning that control has passed to the Group. For convenience, the closest available balance sheet date i.e. 01 January 2018 has been used for the purposes of measuring net assets acquired. The total purchase consideration was US$28.7m. There is no deferred and contingent consideration payable. The acquisition of Al Rashid has resulted in provisional goodwill of US$ 12,160,000.

In the Sultanate of Oman, the Group acquired a medical centre

· On 18 February 2018, the Group entered into a sale and purchase agreement to acquire 100% of the equity shareholding of Emirates Medical Center Group ("EMC"). EMC operates 5 clinics and 5 pharmacies in Oman. NMC acquired control of EMC on 18 April 2018 when NMC obtained the required regulatory approvals from the authorities in the Sultanate of Oman. For convenience, the closest available balance sheet date has been used for the purposes of measuring net assets acquired. This date is 30 April 2018, with full consolidation commencing on 1 May 2018. We are not aware of any material transactions in the period between 18 April 2018 and 30 April 2018.The purchase consideration with respect to this acquisition is broken down into an initial cash consideration amount of US$19m and a deferred consideration amount of US$976K. The acquisition of EMC has resulted in provisional goodwill of US$ 12,118,000.At the date of acquisition, the fair value of identifiable intangible assets included brands amounting to US$6,096,000. The fair values of brands have been assessed using the relief from royalties' method.

With respect to the IVF business, the Group acquired various IVF clinics

· On 06 February 2018, the Group agreed to acquire 60% controlling stake in the voting shares of Pró-Criar Participações E Empreendimentos S/A ("Pro-Crair"), an unlisted company based in Brazil and specialising in research and medical services in the fields of gynaecology, obstetrics and human reproduction. The total purchase consideration was US$4.3m. There is no deferred and contingent consideration payable. The acquisition of Pro-Criar has resulted in provisional goodwill of US$ 3,609,000. The Group entered into put option agreements with the minority shareholders of Pro-Criar for new acquisition. A redemption liability for the value of the option at the acquisition date was created amounting to US$2,472,000.

· On 30 May 2018, the Group agreed to acquire 100% controlling stake in the voting shares of Centro Riproduzione E Andrologia ("CREA"), an unlisted company based in Italy and specialising in research and medical services in the fields of gynaecology, obstetrics and human reproduction. The total purchase consideration was US$1.1m. The acquisition of CREA has resulted in provisional goodwill of US$ 967,000.

· On 08 June 2018, the Group agreed to acquire 75% controlling stake in the voting shares of Eugin Sweden AB ("Sweden IVF") , an unlisted holding company based in Sweden newly created to hold 5 local IVF clinics and specialising in research and medical services in the fields of gynaecology, obstetrics and human reproduction. The above 5 clinics are a) Nordic Eggbank AB, b) Nordic IVF Center Göteborg AB, c) Nordic IVF Center Malmö AB, d) Nordic IVF och gynekologi Stockholm AB and e) Stockholm IVF AB. The total purchase consideration was US$19m, of which US$8.8m is contingent consideration based on EBITDA target. The acquisition of Sweden IVF has resulted in provisional goodwill of US$ 20,034,000. The Group entered into put option agreements with the minority shareholders of Sweden IVF for new acquisition. A redemption liability for the value of the option at the acquisition date was created amounting to US$4,418,000.

In United Arab Emirates, the Group acquired medical centres and a general hospital

· On 05 November 2017, the Group entered into a sale and purchase agreement to acquire 100% of the equity shareholding of Royal Medical centre ("RAK"). RAK the leading chain of medical centres situated in Ras Al Khaimah emirates of UAE. NMC acquired control of RAK on 03 January 2018 when NMC obtained the required regulatory approvals from the authorities in UAE. For convenience, the closest available balance sheet date has been used for the purposes of measuring net assets acquired. This date is 31 December 2017, with full consolidation commencing on 1 January 2018. The purchase consideration with respect to this acquisition is broken down into an initial cash consideration amount of US$6.0m, and deferred consideration of US$1.1m. The acquisition of Royal RAK has resulted in provisional goodwill of US$ 4,950,000.

· On 3 January 2018, the Group agreed to acquire the entire shareholding of Fakih Medical Centre LLC ("FMC") and Fakih Medical Centre Pharmacy LLC ("FMCP"). FMC has the right to manage, operate and has the full economic interest in Bareen International Hospital ("BIH") and BIH Pharmacy located in Abu Dhabi, United Arab Emirates for a period of 21 years subject to renewal and the same has been consolidated. BIH offers an extensive range of medical care programs, easy access to doctors and a wide variety of specialties. Regulatory approvals and legal formalities completed on 18 February 2018, meaning that control has passed to the Group and full consolidation of results will commence from that date. For convenience, the closest available balance sheet date has been used for the purposes of measuring net assets acquired. This date is 28 February 2018, with full consolidation commencing on 1 March 2018. We are not aware of any material transactions in the period between 18 February 2018 and 28 March 2018. The agreed purchase consideration for the business was US$73.8 m of which US$ 68.1 m is cash payable and US$5.7m is an earn out based on future financial KPI's. The acquisition of FMC has resulted in provisional goodwill of US$ 59,805,000.

Post-dated cheques liability and related indemnified asset recognized on acquisition of Fakih IVF in 2016 has been reversed during the year, as both liability and indemnified asset were relating to Fakih Medical Center which has become now part of the Group. Carrying value of the liability and asset as of 31 December 2017 was US$ 40,068,000. It was classified as other liabilities and other assets in previous year.

· On 18 January 2018, the Group agreed to acquire 75% controlling stake of Aesthetic clinics ("Aesthetic"). Aesthetic is an industry leader in the UAE in providing quality aesthetic medicine. The assets being acquired include 2 operational clinics. NMC currently provides invasive cosmetic procedures and complex surgeries and the addition of Aesthetic clinics will expand the Group's offering. NMC acquired control of Aesthetic on 21 March 2018, date on which all conditions precedents 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 March 2018, with full consolidation commencing on 1 April 2018. We are not aware of any material transactions in the period between 21 March 2018 and 31 March 2018. The purchase consideration with respect to this acquisition is cash consideration amount of US$40.8m. The acquisition of Aesthetic has resulted in provisional goodwill of US$ 38,385,000.

At the date of acquisition, the fair value of identifiable intangible assets included brands amounting to US$1,851,000. The fair values of brands have been assessed using the relief from royalties' method. No deferred tax liability has been recognized as there is no Corporation tax applicable in UAE.

· On 18 February 2018, the Group entered into a sale and purchase agreement to acquire 70% of the equity shareholding of Premier Care Home Medical and Health Care LLC ("Premier"). Premier is the leading Home Medical and Home Health Care solution provider company in UAE. NMC acquired control of EMC on 18 April 2018 when NMC obtained the required regulatory approvals from the authorities in the UAE. For convenience, the closest available balance sheet date has been used for the purposes of measuring net assets acquired. This date is 30 April 2018, with full consolidation commencing on 1 May 2018. The purchase consideration with respect to this acquisition is broken down into an initial cash consideration amount of US$33.8m, and a further contingent consideration amount of US$6.06m which is payable depending on the future operating profits of the acquired entities. The acquisition of Premier has resulted in provisional goodwill of US$ 38,216,000.

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

Analysis of cash flows for acquisitions done in previous year disclosed in 2017 consolidated financial statements was as follows:

Under others acquisitions:

As of 31 December 2017, an amount of US$ 4,016,000 payable to non-controlling interest of Al Qadi Hospital was not included in purchase price allocation. This is now corrected in current period and recorded as financial liability. This resulted in increase in goodwill by an amount of US$ 2,410,000 and reduction of non-controlling interest by an amount of US$ 1,606,000.

Further, during the current period, out of total payable of US$ 4,016,000 to non-controlling interest, an amount of US$ 1,886,000 was converted to equity, an amount of US$ 1,564,000 was paid to non-controlling interest and US$ 566,000 was waived by non-controlling interest and transferred to retained earnings.

Acquisitions in process:

There were some acquisitions which were in progress during the period for which we paid advances of US$69,055,000.

7 SEGMENT INFORMATION

The following tables present revenue and profit information regarding the Group's operating segments for the six months ended 30 June 2018 and 2017, 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 new acquired companies/businesses (CosmeSurge, Aesthetics, Al Salam, Al Rashid, CCSMC, EMC, Pro-Criar, FMC, Royal RAK, CREA, Sweden IVF and Premier) come under the healthcare segment.

The following table presents segment assets and segment liabilities of the Group's operating segments as at 30 June 2018 and 31 December 2017.

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, convertible bond, 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

Analysis of revenue by category:

8 TAX

The Group operates in the United Arab Emirates, Spain and certain other countries. As there is no corporation tax in the United Arab Emirates, no taxes are recognised or payable on the operations in the United Arab Emirates. There is no taxable income in the UK and accordingly there is no tax liability arising in the UK.

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

Deferred tax assets and liabilities comprise of:

9 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.

Diluted EPS amounts are calculated by dividing the profit attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares.

The following reflects the income and share data used in the basic and diluted earnings per share computations:

Convertible bond has anti-dilutive effect, accordingly it is not considered for the calculation of diluted EPS.

The table below reflects the income and share data used in the adjusted earnings per share computations. All one off expenses, amortization of intangibles arises on business combination, impairment of assets have been adjusted from the profit attributable to the equity holders of the parent to arrive at the adjusted earnings per share:

Adjusted profit for the period of the Group is calculated as follows:

10 PROPERTY AND EQUIPMENT

As part of the Group's capital expenditure programme, borrowing costs of US$151,000 (six months ended 30 June 2017: US$ nil) have been capitalised during the period. The rate used to determine the amount of borrowing costs eligible for capitalisation was 4.80%  (30 June 2017: 3.29%) which is the effective rate of the borrowings used to finance the capital expenditure. Companies in UAE are not subject to taxation and as such there is no tax relief in respect of capitalised interest.

Total capital expenditure in the six months ended 30 June 2018 was US$ 55,725,000 (six months ended 30 June 2017: US$ 22,914,000). Of the total capital expenditure spend during this period, US$ 17,242,000  (six months ended 30 June 2017: US$ 10,049,000) related to new capital projects and US$ 38,483,000 (six months ended 30 June 2017: US$ 12,865,000) related to further capital investment in our existing facilities.

Generally hospital and distribution operations are carried out on land and buildings which are leased from Government authorities or certain private parties. The majority of the lease periods range from five to twenty seven years apart from New Medical Centre Hospital LLC-Dubai ("Dubai General Hospital") and the warehouse facilities which have leases renewable on an annual basis. As at 30 June 2018 US$ 440,000 (31 December 2017 US$ 569,000) of the amounts included in property and equipment related to assets with annually renewable leases.

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. The land with a carrying amount of US$ 4,144,000 (31 December 2017: US$ 4,144,000) is held in the name of a previous shareholder for the beneficial interest of the Group. As the beneficial interest of such land resides with the Group, this asset is recorded within freehold land in the Group consolidated financial statements. The directors takes into account this local legal registration requirement, the Group's entitlement to the beneficial interest arising from this asset, as well as other general business factors, when considering whether such asset is impaired.

As of 30 June 2018 the Group has recorded impairment of US$ 106,000 (31 December 2017: US$ nil) against this.

11 INTANGIBLE ASSETS

Others include intellectual property, rental contracts, private contracts and non-compete arrangements.

Additions to goodwill in the period relate to provisional goodwill measured in respect of the acquisitions of CosmeSurge, Aesthetics, Al Salam, Al Rashid, CCSMC, EMC, Pro-Criar, FMC, Royal RAK, CREA, Sweden IVF and Premier.

Included in software are an HIS and ERP Projects which are amounting to US$ 1,783,000 (31 December 2017: US$ 1,783,000) represents work-in-progress as of period/year end. As of 30 June 2018 the Group has recorded accumulated impairment of US$ 2,000,000 (31 December 2017: US$ 2,000,000) against this.

12 LOAN RECEIVABLE

In 2018, the Group acquired 100% voting shares of CCSMC by utilising the loan funded in prior years amounting US$32,187,000 and additional funding US$7,024,000 during the period and accordingly loan receivable was reclassified as investment in subsidiary.

In addition, the Group, invested US$2 million in a company's convertible promissory note. As the instrument doesn't meet all the features of a puttable instrument to be classified as equity in the event of liquidation, we classified the above instrument as loan receivable.

13 INVENTORIES

During the six months ended 30 June 2018, the Group wrote down US$ 895,000 of obsolete and damaged inventories (six months ended 30 June 2017: US$ 740,000). This expense is included in direct costs within the condensed consolidated income statement. The provision for old and obsolete inventories as of 30 June 2018 was US$ 1,295,000 (31 December 2017: US$ 1,219,000).

14 ACCOUNTS RECEIVABLE AND PREPAYMENTS

Receivables from suppliers relate to advertising and promotional expenses incurred by the Group.

Accounts receivable are stated net of provision for doubtful debts of US$22,721,000 (31 December 2017: US$15,747,000). During the six months ended 30 June 2018, the Group has provided an additional provision based on IFRS 9 impact analysis US$10,695,000, written off a provision of US$ 3,721,000 (six months ended 30 June 2017: US$1,495,000) due to bad debts.

The ageing of unimpaired accounts receivable is as follows: