NMC.L Regulatory News (NMC)

London, 24 August 2016: NMC Health plc (LSE:NMC) ('NMC'), the leading integrated private healthcare network operator in the United Arab Emirates and one of the leading global providers of fertility treatments through its European and Middle Eastern subsidiaries, today announces its interim results for the six months ended 30 June 2016.

· Reported revenues increased by 46.9% year-on-year (YoY, compared to H1 2015) to reach US$578.3m in H1 2016 (US$ 393.8m in H1 2015).

· EBITDA reached US$115.9m (+68.2% YoY), resulting in a Group EBITDA margin of 20.0% (+254bps YoY)

· Adjusted net profits attributable to shareholders increased to US$67.8m (+48.2% YoY)

· Basic EPS reported at US$ 0.336 (H1 2015: 0.213); Diluted EPS at US$0.334 (H1 2015: US$0.213); Adjusted EPS at US$0.365 (H1 2015: US$0.246)

Business review

The strong performance of H1 2016 was underpinned by progress across the business and successful execution of our long-term two-stage strategy which has started to deliver significantly improved growth for the Group despite the more moderate UAE macro environment.

Our initial focus post-IPO was to organically expand our capacity to absorb market growth driven by population increase, insurance penetration, increased healthcare spend retention, delivery of increased complexity and thus higher value added care within our hospitals to the growing patient population of NMC. Today our healthcare network includes the first private sector advanced tertiary and quartenery care capable hospital, benefiting from NMC network cross-referrals and third-party referrals. All new hospitals and medical centres that opened in 2013 and 2014 achieved breakeven ahead of initial guidance and NMC Royal, which opened in September 2015, is on-track to meet the guidance EBITDA breakeven period of 24 months. Both DIP General Hospital and Brightpoint Hospital have ramped up operational beds from being around 50% of licensed capacity when they commenced operations to 72% and 100% respectively as of the start of 2016.

The second stage of our strategy which was initiated at the beginning of 2015 entailed a shift in focus from capacity to capabilities. NMC's objective was to accelerate its expansion into higher medical complexity and thus higher value added specialty healthcare segments through the acquisition of leading global and regional entities and the subsequent establishment of new strategic multi-brand verticals capable of unlocking synergies within the enlarged group and act as stand-alone platforms spearheading the expansion beyond the UAE into some of most accretive healthcare market segments.

As a result, the Group healthcare asset and brand portfolio is today more diversified with significantly enhanced competitive advantages and substantially augmented strategic optionality allowing NMC to expand its growth horizons in what is an increasingly challenging market for static market actors. The combination of this progress with a more optimised resource allocation is leading to a substantially higher growth, margin and return profile.

During the period total patient visits to Group assets increased by 42.6% YoY to 2.1m and more importantly the Group healthcare services1 revenue per patient increased by 35% to US$170 despite very moderate price increases which are broadly consistent with recent trends. This growth was mainly achieved through the entry into higher complexity, less 'commoditised', and thus increased value added medical services segments (examples include advanced tertiary and quaternary care, specialised maternity services, long-term care and fertility services).

In fact, NMC's H1 2016 top-line growth of 46.9% is the highest on record. In comparison, the five year (2011-2015) Group revenue CAGR stands at 18.7%. With most of this recent growth generated through the strategic initiatives undertaken in the healthcare division (higher margin business, which includes four out of the five verticals), NMC has delivered considerable progress towards achieving another very important goal; increased healthcare business contribution to Group revenues and thus the relative dilution of the lower margin distribution division. The healthcare division contributed 66% of revenue in H1 2016 compared to 55% in H1 2015 and 48% at the time of IPO in 2012. While the absolute growth of the distribution division (lower margin business, which includes one out of five verticals) continues to be good at 10.5% YoY, we expect the relative dilution trend will continue which should provide further support to higher future group margins.

As a result, Group EBITDA reached US$115.9m (+68.2% YoY) with a Group EBITDA margin of 20.0% (+254bps YoY) - a 412bps increase compared to the last financial year (2014) before NMC initiated the capabilities focused second stage of its post-IPO growth strategy. The healthcare division margins increased by 107bps YoY to reach 29.6% during the period. Meanwhile, margins of the distribution division remained almost unchanged at 10.2%.

Table: Summary of Reported Income Statement

- Adjusted profit for the period represent, profit before transaction cost towards business combination and amortization of acquired Intangible assets(net of tax).

Net debt increased to US$ 790.2m on expansion progress and remained in line with management expectations. Cash and short term bank deposits amounted to US$ 204.8m with a total debt balance at US$ 995.0m (Dec 2015: 730.3m). This increase in total debt position is mainly due to further drawdown of the acquisition loan facility under the syndicated loan.

Table: Summary Divisional performance Compared to Reported

Healthcare division

Over the past twelve months NMC has complemented its initial organic expansion program by further leveraging its abilities and resources to form five strategic verticals within which it has completed five major acquisitions, entered into four new medical services segments offering higher value specialty procedures, rolled-out 1 organic asset (NMC Royal Hospital) and diversified into 2 new geographical markets (Italy and Denmark).

Multi-specialty vertical

The multi-specialty vertical's exceptional growth in H1 2016 was supported by the continued push towards developing and optimising NMC's service offering, focus on increased asset utilisation, better than expected performance across all post-IPO organic assets, the faster than expected to roll-out of mandatory healthcare insurance in Dubai and the contribution of Dr. Sunny's network of medical centres in Sharjah, which was acquired in 2015.

Revenues reached US$ 257.9m (+32.3% YoY), with all three legacy portfolio specialty hospitals2 delivering double-digit top-line growth coupled with strong performance from both the recently opened NMC Royal Super Specialty Hospital and NMC DIP General Hospital in Dubai.

Total patient visits increased to 1.97m (+35.2% YoY) with revenue per patient of US$131. The licensed beds capacity increased to 655 (+285 beds YoY) out of which the operational beds were 433 beds (+116 beds YoY) with an occupancy rate of 68.7% (-909bps YoY).

Maternity & fertility vertical

The maternity & fertility vertical delivered strong YoY growth across all its assets, with Brightpoint Royal Women's Hospital exceeding management expectations with its outstanding performance during the period. Clinica Eugin reported strong growth compared to the first half of 2015. Fakih IVF was consolidated from February 2016 and has performed well.

Revenues reached US$ 86.2m (+412.7% YoY), with total patient visits reaching 135k (+541.5% YoY) with a revenue per patient of US$636.2. The licensed beds capacity remained at 100 out of which the operational beds increased from 60 to 100beds (+67% beds YoY) with an occupancy rate of 60.6% (+39 percentage points YoY).

Long-term & home care vertical

The long-term & home care vertical is comprised of Provita (long-term care) and Americare (home care), both of which were acquired in 2015. While Americare was consolidated in late H1 2015, Provita was consolidated in H2 2015. Both subsidiaries performed well during the period with Provita's growth being supported by rising bed occupancy and a 30 bed capacity expansion in March 2016.

Revenues reached US$ 42.5m, with total patient visits reaching 4,900 with revenue per patient of US$8,611. The licensed beds capacity increased to 120 with all beds being operational and an occupancy rate of 85.6%.

Operation & management vertical

NMC continued to operate and manage the 205 bed Sheikh Khalifa General Hospital in Umm Al Quwain on behalf of the UAE ministry of presidential affairs since Q4 2012.

NMC has a five year contract to operate this hospital in return for an annual management fee based on qualitative metrics. This is the first such contract to manage a large Government healthcare facility awarded by a Government Department to a local UAE business, demonstrating confidence in NMC's significant healthcare experience and capabilities.

The total revenue contribution from this contract reached US$3.15m in H1 2016 (+5% YoY).

Recent amendments by Health Authority of Abu Dhabi (HAAD)

NMC has consistently focused on contributing towards the rapid advance of locally available healthcare services hand-in-hand with the national strategy. This professional and moral commitment to our nation is unshakeable.

We will continue to work alongside the regulator and local authorities to achieve more constructive and sustainable long-term solutions for the well-being of patients, payors, operators and investors.

In the interim we have taken the necessary steps to mitigate and limit the impact of the above referred changes on the healthcare division - leading us to reiterate our guidance for 2016 and 2017.

Distribution division

Distribution division revenues grew by 10.5% YoY to reach US$ 205.1m. The distribution division's growth was supported by new product introductions and increased sales effort with stock keeping units (SKU's) near to 91,500.

The healthcare segment (pharmaceuticals and laboratory equipment) and fast moving consumer goods segment (FMCG) both contributed equally, in terms of total contribution to divisional revenues, at 42.8% each.

During the period sales staff expanded by 12% YoY to 1,163. We also added 25 (+11.7% YoY) new distribution vehicles compared to the same period last year, for a total of 239.

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

"Our focus has consistently been on delivering a long-term strategy capable of enhancing our growth prospects in a diversified and sustainable manner. We have expanded our asset and brand portfolio organically and inorganically into additional healthcare services segments, extended our presence across the continuum of care, entered into higher growth and margin specialties with very favourable regional supply/demand dynamics and selectively entered into new geographies to position NMC at the intersection of multiple growth channels to the ultimate benefit of all our stakeholders. In H1 2016 we have just started to reap the long-term rewards of several years post IPO work on the two stages of our growth strategy. Despite record growth this year, we expect strong performance to continue going forward supported by the increased utilisation of our organic 485 bed capacity expansion over the past 18 months, recent acqusitions of businesses in high growth segments, very good performance at the major specialty hospitals and in particular Dubai based hospitals and medical centres as mandatory healthcare insurance penetration continues to expand."

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 9 to 11.

Summary and outlook

The general macro-economic outlook in the UAE remains stable with moderate GDP growth expected. The IMF forecasts a real GDP growth of 2.3% and 2.5% in 2016 and 2017 respectively. The ongoing insurance reform in Dubai continues to increase medical insurance penetration rates to expand the UAE healthcare market size and thus the prospects for NMC Health.

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 2016, and FY 2017, with confidence.

Analyst and investor meeting

A conference call and webcast for analysts and investors will take place today, Wednesday 24 August 2016, 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

Investors

NMC

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

Suresh Krishnamoorthy, Chief Financial Officer +971 50 591 5365

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

Media

FTI Consulting, London

Matthew Cole

+44 (0)20 3727 1101

FTI Consulting, Gulf 

Shane Dolan

+971 (0)4 437 2100

Cautionary statement

These 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 acquired 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 3.2m patients in 2015. 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$880.9m in 2015.

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 2016 financial year, the Group continued to demonstrate robust growth at both the Group and divisional level. Group revenues increased by 46.9% to US$578.3m (H1 2015: US$393.8m). Group EBITDA improved by 68.2% to US$115.9m (H1 2015: US$68.9m).

Revenue in the Healthcare division for the first half of 2016 increased by 74.3% to US$389.8m (H1 2015: US$223.6m). Healthcare division EBITDA was US$115.3m for the first half of the year, which represented growth of 81.0% compared to same period last year (H1 2015: US$63.7m). EBITDA margins were at 29.6%, which is a 107bps growth over the comparative period in 2015 (28.5% for H1 2015) due to improved margins and value added services offered in the assets acquired.

Revenue in the Distribution division grew by 10.5% to US$205.1m (H1 2015: US$185.6m) compared to the same period last year. Distribution division EBITDA was US$20.9m (H1 2015: US$18.6m), with an EBITDA margin of 10.2% (H1 2015: 10.0%).

Adjusted Earnings per share were US$ 0.365 (H1 2015 US$ 0.246) 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 transaction costs in respect of business combinations and intangible amortisations in respect of business combinations.

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 6.2 pence per share was approved and paid as a final dividend for the full year for 31 December 2015. The Board has determined that an interim dividend will not be declared but that any dividend for the 2016 financial year will be paid fully as a final dividend.

Capital expenditure

Total capital expenditure in the six months ended 30 June 2016 was US$40.2m (H1 2015: US$ 52.2m), in line with our expectations. Of the total capital expenditure spend during the period H1 2016, US$ 27.3m (June 2015: US$43.6m) related to new capital projects and US$12.9m (June 2015: US$8.6m) related to further capital investment in our existing facilities. The phased opening of our largest new development, the 250 bed NMC Royal Hospital in the Khalifa area of Abu Dhabi City, during the H1 2016 has resulted in substantial reduction of capital expenditure after the second half of 2015. NMC Royal Hospital was inaugurated on 07th of March, 2016. Phased opening is being done, with currently 75 beds being operated out of the licensed capacity of 250 beds.

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 2016 was in line with management expectations. During the period we made a good improvement in the number of average receivable days which declined to 94 days at 30 June 2016 from 100 days at 31 December 2015. This is primarily due to improvement in the payment period taken to settle amounts due by the Group's principal health insurance partners and aggressive receivables follow-up.

Debt

Net debt increased to US$ 790.2m (Dec 15 US$552.9m) with a total debt balance at US$995.0m (Dec 15 US$730.3m). This increase in total debt position is due to further drawdown of the acquisition loan facility under the syndicated loan during H1 2016. A total of US$382m out of US$475m has been drawn down to date from the Delayed acquisition facility, leaving an unutilised portion of US$93m as on 30th June 2016.

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

23 August 2016

Principal risks and uncertainties

In order to enhance the Group's risk management process, towards the end of December 2014 the management team, assisted by an independent third party, PwC, undertook a review the Group's key risks alongside the macro-economic environment within which the Group operates to establish a Strategic Risk Register.

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The Strategic Risk Register, which is the basis for the list of principal risks and uncertainties is reviewed and maintained on an on-going basis by management, 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 2016 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 25. 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 2016 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: 23 August 2016

NMC Health plc

CONDENSED CONSOLIDATED INCOME STATEMENT

For the six months ended 30 June 2016

One off items includes transaction costs in respect of business combinations (US$0.2m), and amortisation of acquired intangibles (US$5.1m).

NMC Health plc

CONDENSED CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME

For the six months ended 30 June 2016

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 25 form part of the condensed consolidated financial statements

NMC Health plc

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 June 2016

NMC Health plc

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 June 2016

The attached notes 1 to 25 form part of the condensed consolidated financial statements

NMC Health plc

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the six months ended 30 June 2016

NMC Health plc

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the six months ended 30 June 2016

The attached notes 1 to 25 form part of the condensed consolidated financial statements.

NMC Health plc

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

At 30 June 2016

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 United Arab Emirates ("UAE"), Spain, Colombia, Italy and Denmark. 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 one is a director of the Company and who together have the ability to control the Company.

The Parent and its subsidiaries (collectively the "Group") are engaged in providing professional medical services 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 2016 were authorised for issue by the Board of Directors on 22 August 2016.

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 2015 were published and were delivered to Companies House. Those financial statements were approved by the Board of Directors on 13 March 2016. 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 2016 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 2015 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.

During the current period, the Group acquired 1% beneficial interest in certain subsidiaries, as listed below, for a consideration of US$419,000. These subsidiaries are registered in the UAE. The Group previously had 99% shareholding in these entities. The Group recorded a gain of US$536,000 on this in retained earnings.

NMC Health plc

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

At 30 June 2016

2 BASIS OF PREPARATION continued

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 2015, except for the adoption of new standards and interpretations effective as of 1 January 2016. 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 2016 are listed below, have no impact on the Group.

· IFRS 14 Regulatory Deferral Accounts

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

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

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

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

· Annual Improvements 2012-2014 Cycle

o IFRS 5 Non-current Assets Held for Sale and Discontinued Operations

o IFRS 7 Financial Instruments: Disclosures

i. Servicing contracts

ii. Applicability of the amendments to IFRS 7 to condensed interim financial statements

o IAS 19 Employee Benefits

NMC Health plc

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

At 30 June 2016

2 BASIS OF PREPARATION continued

Accounting policies continued

o IAS 34 Interim Financial Reporting

o Amendments to IAS 1 Disclosure Initiative

o Amendments to IFRS 10, IFRS 12 and IAS 28 Investment Entities: Applying the Consolidation Exception

The new standards and amendments, effective as of 1 January 2016, have no impact on the Group.

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 5. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Financial Review on pages 7 and 8.

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 2016. Both the Healthcare and Distribution divisions have continued their positive growth in revenue during the first half of 2016. Net profit and EBITDA of both healthcare and distribution divisions have increased during first half in 2016. EBITDA margin of Healthcare is increased whereas EBITDA margin of Distribution is almost same as last year. The directors have reviewed the business plan for the year end 2016 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.

NMC Health plc

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

At 30 June 2016

2 BASIS OF PREPARATION continued

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 2015 except as follows:

Useful economic lives of property and equipment and depreciation method

Depreciation is calculated on all property and equipment other than land and capital work in progress, at the following rates calculated to write off the cost of each asset on a straight line basis over its expected useful life. Management has re-assessed the useful economic lives of all asset categories with effect from 1 January 2016, following a review of the useful economic lives of the Group's assets and market research conducted on depreciation rates and methods in the industry:

The impact of the re-assessment of useful economic lives and depreciation method is decrease in depreciation expenses of US$1,285,000 in the current period.

Lease for NMC Royal Hospital LLC

NMC Royal Hospital LLC is constructed from land leased from Municipality of Abu Dhabi. Remaining period of lease as of 30 June 2016 is 24 years expiring in 2040. Management has determined the useful life of NMC Royal Hospital LLC building 50 years. Carrying amount of NMC Royal Hospital LLC building included in property and equipment as of 30 June 2016 is US$80,322,000.Management believe that lease will be renewed for the full useful life of the building. The directors have considered the facts that throughout the Group's 43 year history it has never had a lease cancelled or not renewed, and the Group enjoys a high degree of respect in the region and believes that it maintains strong relationships with the lessor in determining the likelihood that lease will be renewed.

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 2015.

4 SEASONALITY OF OPERATIONS

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

NMC Health plc

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

At 30 June 2016

5 BUSINESS COMBINATIONS

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

NMC Health plc

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

At 30 June 2016

5 BUSINESS COMBINATIONS continued

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:

NMC Health plc

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

At 30 June 2016

5 BUSINESS COMBINATIONS continued

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

Other financial information with respect to acquired entities is as follows:

Acquisition of Fakih IVF

On 24 November 2015, the Group agreed ,subject to regulatory approval and legal formalities, to acquire a 51% controlling stake in the voting shares of Fakih IVF, an unlisted group registered in Cayman Islands and operationally headquartered in Abu Dhabi, UAE, which is the Middle East's leader in the provision of IVF and fertility services. All controlling rights (i.e. voting, appointment and removal of directors, dividend rights) vest with NMC. These rights cannot be relinquished.

The Group acquired the control of Fakih IVF on 8 February 2016, date on which regulatory approvals and legal formalities were completed. The consolidated financial statements include the results of Fakih IVF for 5 month period from the acquisition date.

The goodwill recognised is attributable to the expected synergies and other benefits from combining the assets and activities of Fakih IVF with those of the Group. 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. Synergistic benefits will arise in the following ways:

· Fakih is recognized as a leading Middle East market leader for IVF treatment. NMC plan to set up an IVF clinic in Bright Point Hospital and NMC Royal, Abu Dhabi will benefit directly from set-up, training and efficiency cost savings as a result of utilising Fakih-IVF processes and procedures.

· NMC patients in UAE can be referred to Fakih clinics in UAE for IVF related treatments.

NMC Health plc

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

At 30 June 2016

5 BUSINESS COMBINATIONS continued

Acquisition of Fakih IVF continued

· The successful and swift launch of IVF clinics in the UAE under the NMC umbrella, and using proven Fakih technologies, is expected to attract additional patients from within the UAE and the wider GCC area. There are only a small number of IVF clinics in the UAE at present. This is a key growth area in the healthcare sector where NMC can use its substantial brand strength, together with Fakih own specialised brand, to attract new customers that may previously have chosen alternative clinic.

At the date of the acquisition, the fair value assessment of identifiable net assets included brands amounting to US$25,214,000. No deferred tax liability has been recognised as there is no corporation tax in UAE.

Deferred consideration is payable in three unequal instalments in a period of two years with last instalment due in 2017.

Purchase consideration includes contingent consideration of US$8,128,000. The full value of the contingent consideration is US$9,030,000 and the present value as at 30 June 2016 is US$8,128,000. The contingent consideration relates to amounts payable in the event that licenses to operate in certain other GCC countries are obtained. As of 30 June 2016, contingent consideration remains payable and is included in other payables. Contingent consideration is expected to be payable by the end of 2016.

Acquisition of CFC

On 10 June 2016, the Group acquired 90% of the voting shares of Copenhagen Fertility Center ("CFC"), an unlisted company based in Denmark and specialising in research and medical services in the fields of gynaecology, obstetrics and human reproduction. The Group acquired CFC to enable Clinica Eugin to reinforce its presence in Denmark and strengthen its brand and positioning at the forefront of its market. All controlling rights (i.e. voting, appointment and removal of directors, dividend rights) vest with NMC. These rights cannot be relinquished.

Goodwill represents future business potential and profit growth of CFC and it comprises all intangibles that cannot be individually recognised such as the assembled workforce, customer service, future client relationships and presence in the geographical market. Goodwill is allocated to the healthcare segment. None of the recognised goodwill is expected to be deductible for income tax purposes.

As of acquisition date, the net assets were very immaterial and accordingly full consideration paid has been recognised as goodwill

NMC Health plc

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

At 30 June 2016

5 BUSINESS COMBINATIONS continued

Nadia Medical Centre LLC (Nadia)

The Group acquired 100 % of Nadia because this acquisition extends gynaecology and paediatric service offerings to complement NMC's growing IVF/women's health franchise including Fakih, Clinica Eugin and Bright Point Royal. This medical centre is expected to contribute to the patient cross-referral capabilities of NMC's nation-wide and multi-specialty hub-and-spoke healthcare services network. All controlling rights (i.e. voting, appointment and removal of directors, dividend rights) vest with NMC. These rights cannot be relinquished.

The Group acquired the control of Nadia on 7 January 2016, date on which regulatory approvals and legal formalities were completed. The consolidated financial statements include the results of Nadia for 6 month period from the acquisition date.

The goodwill recognised is attributable to the expected synergies and other benefits from combining the assets and activities of Nadia with those of the Group. 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. Synergistic benefits will arise in the following ways:

· The ability to cross refer patients from Nadia to the nearby NMC Specialty Hospital and Bright Point Royal in Abu Dhabi.

· Nadia can utilise In Patient and Out Patient facilities at Bright point and NMC Royal for deliveries and other procedures.

· Synergies will arise from Nadia focus on gynaecology and paediatrics and NMC's growth in IVF & women health segments.

Deferred consideration is payable in three unequal instalments in a period of three years with last instalment due in 2018.

Cooper Health Clinic and Cooper Dermatology & Dental Clinic (Cooper)

On 30 December 2015, the Group agreed to acquire 100% of the business of Cooper because this business extends the specialisation in the provision of obstetrics, gynaecology, paediatric and dental services in Dubai region. All controlling rights (i.e. voting, appointment and removal of directors, dividend rights) vest with NMC. These rights cannot be relinquished.

The Group acquired the control of Cooper on 8 March 2016, date on which regulatory approvals and legal formalities were completed. The consolidated financial statements include the results of Nadia for 4 month period from the acquisition date.

The goodwill recognised is attributable to the expected synergies and other benefits from combining the assets and activities of Cooper with those of the Group. 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. Synergistic benefits will arise in the following ways:

· The acquisition of Cooper extends the healthcare segment's market position within Dubai and the UAE as a whole.

· The ability to cross refer patients from Cooper to the nearby NMC Specialty Hospital in Dubai

Deferred consideration is payable in lump sum by the end of 2016.

NMC Health plc

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

At 30 June 2016

5 BUSINESS COMBINATIONS continued

The fair value of the identifiable assets and liabilities of entities acquired in previous year, which were provisional as of 31 December 2015 are now finalised and are as follows:

Fair values stated in above table are same as those disclosed as of 31 December 2015 except for Dr. Sunny Healthcare Group, where fair value of contingent consideration has been updated and an amount of US$2,126,000 is adjusted in purchase consideration and accordingly goodwill on Dr. Sunny is reduced.

Total contingent consideration of US$8,073,000 has been paid in current period in respect of acquisitions made in 2015 (note 23).

NMC Health plc

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

At 30 June 2016

6 SEGMENT INFORMATION

The following tables present revenue and profit information regarding the Group's operating segments for the six months ended 30 June 2016 and 2015, 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 Fakih IVF , Nadia, Cooper and CFC come under the healthcare segment.