-Integrated Diagnostics Holdings Plc

1H 2020 Results Update

Wednesday, 2 September 2020

Integrated Diagnostics Holdings Plc results show resilient performance despite Covid-19; Board approves dividend of USD 28 million

(London) Integrated Diagnostics Holdings ("IDH," "the Group," or "the Company"), a leading consumer healthcare company with operations in Egypt, Jordan, Sudan and Nigeria, released today unaudited highlights of its financial and operational performance for the first half of 2020, recording revenue of EGP 950 million and a net profit of EGP 175 million.

Results*

*The results for 1H 2019 and 1H 2020 reflect the adoption of IFRS 16.

**Excluding the 100 Million Healthy Lives Campaign from 1H 2019 figures, consolidated revenues would have declined by 6% year-on-year. The 100 Million Healthy Lives campaign ran from November 2018 through June 2019. For the first half of 2019 IDH served 224 thousand patients under the campaign's umbrella and performed 2.4 million tests. Total campaign-related revenue in 1H 2019 reached EGP 47 million.

¹ EBITDA is calculated as operating profit plus depreciation and amortization

Financial Highlights

·    Revenue for the first half of the year was EGP 950 million, a 10% year-on-year decline due to the Covid-19 outbreak, as well as a high base effect with 1H 2019 figures having included the impact of the 100 Million Healthy Lives campaign in Egypt. Excluding the campaign, the Group's consolidated revenue records a modest 6% year-on-year decline despite the lockdowns and curfews across IDH's geographies. Performance was supported by a ramp up of IDH's house calls service and higher demand for Covid-19 indicative tests² in Egypt, alongside offering Covid-19 testing in Jordan. Together these efforts drove a steep 38% year-on-year revenue recovery in June 2020.

·    Gross profit decreased in line with revenues by 10% year-on-year to EGP 446 million in 1H 2020. Gross profit margin remained stable at 47%, supported by lower raw material costs as well as lower wages and salaries.

·    Operating profit recorded EGP 277 million in 1H 2020, down by 24% year-on-year as management booked cautionary provisions to account for elongated collection cycles.

·    EBITDA for 1H 2020 was EGP 367 million, down 17% year-on-year on account of higher provisions. EBITDA margin was 39% in 1H 2020 compared to 42% in the same period last year.

·    Net profit recorded EGP 175 million in the first half of 2020, down 19% year-on-year and with a net profit margin of 18% compared to 20% in 1H 2019. As provisions for doubtful accounts are not accounted for in taxable income, net profitability reflects an increase in the effective tax rate by around 1%.

·    Net cash flow from operating activities was EGP 149 million in 1H 2020, with the Group maintaining total cash balances of EGP 719 million as of 30 June 2020, reflecting a strong liquidity position.

·    Owing to the Group's strong cash position and management's confidence in the Group's outlook, the Board of Directors has approved an interim dividend of USD 28 million, or USD 0.187 per share, to be paid to shareholders who appear on the register as at 11 September 2020, with an ex-dividend date of 10 September 2020 and a payment date of 2 October 2020.

²Covid-19 indicative tests include a bundle of inflammatory and clotting markers such as Complete Blood Picture, ESR, D-Dimer, Ferritin and CRP, among others, that witnessed increased demand during the period

Operational Highlights

·    IDH's branch network included 462 branches as at 30 June 2020, up from 452 branches as at 31 December 2019, with IDH resuming its branch rollout plan for the year.

·    IDH served 2.9 million total patients in 1H 2020, down 21% year-on-year due to the impact of Covid-19 on operations during the months of March, April and May. Factoring out the campaign's contribution (224 thousand patients and 2.4 million tests in 1H 2019), total patients served records a 16% year-on-year decline in 1H 2020.

·    Total number of tests performed decreased 28% year-on-year to 11.2 million in 1H 2020 due to Covid-19, however, tests performed during the month of June were up 17% year-on-year. Factoring out the campaign from 1H 2019 figures, tests performed decline 15% year-on-year in 1H 2020.

·    Average revenue per test was up 24% year-on-year to EGP 85 for 1H 2020. The increase was partly driven by a low base effect of the campaign in 1H 2019. Controlling for the campaign's effect, average revenue per test would still have increased 10% year-on-year in 1H 2020.

·    IDH's average test per patient was down 8% year-on-year to 3.9 in 1H 2020. Excluding the campaign, the average test per patient would have increased 2% year-on-year.

·    Branches in Egypt remained operational throughout the six-month period, albeit with reduced working hours. Lower activity was offset with a ramp up of the house calls service and a bundle of Covid-19 indicative testing.

·    In Jordan, following the closure of 17 out of 19 branches during March through May, all of Biolab's 19 branches are now operational. Local currency revenue grew 6% year-on-year supported by Covid-19 testing.

·    In Sudan, branches operated at reduced hours between late March and May 2020, followed by the closure of 15 out of 21 branches due to the imposition of stricter measures by the government. As of June 2020, the number of operational branches increased to nine, operating at reduced hours, while 12 remained closed.

·    Nigeria continued to capitalize on the recently acquired state of art radiology equipment in 4Q 2019, resulting in a 28% increase in test volumes and a similar 28% increase in local-currency revenue. This comes despite Covid-19 related disruptions and reduced traffic during a government-imposed lockdown.

·    Al-Borg Scan launched a second branch in Cairo which commenced operations in February 2020, with revenue increasing 47% year-on-year in 1H 2020. Progress continues toward the launch of a third branch.

Commenting on the Group's performance for the six-month period, IDH Chief Executive Officer Dr. Hend El-Sherbini said: "The Group's results in the first half of 2020 reflect IDH's defensive business model and its success in minimizing the impact of Covid-19. Despite severe operational disruptions across our geographies including complete branch closures for several weeks during the months of April and May, our top-line declined by a relatively modest 10% year-on-year.

Our ability to limit the impact of Covid-19 was in part supported by management's proactive initiatives, including the ramp up of our house calls service in Egypt offered at no extra charge to our patients. The success of this strategy is clearly reflected in the growing contribution to revenue from this service, which expanded from only 12% in the first quarter of the year to constituting almost a third our top line in Egypt by June 2020. We have also captured the growing demand for Covid-19 indicative tests, including inflammation and clotting markers, providing our patients with bundled test packages that helped support our top-line. And owing to IDH's strong brand equity and our position as the only CAP-accredited facility in Egypt, the Group has been requested by the UAE government to conduct PCR testing to screen passengers travelling from Egypt.

In Jordan, Biolab has been at the forefront of PCR testing for Covid-19 since the onset of the outbreak, which along with strong demand for our services helped deliver a 6% growth in local currency revenue despite the closure of multiple branches. I am also very pleased with our performance in Nigeria where volumes and revenue continued to grow even during shelter-in-place orders. Nigeria's performance is supported by the success of our value-building efforts and increased brand awareness, with the geography holding significant growth potential. Finally, in Sudan, we maintained largely stable local-currency revenue despite continued branch closures.

Meanwhile Group profitability remained intact with a stable and robust gross profit margin of 47% made possible through strict cost discipline, including lower raw material costs as well as lower wages and salaries. Our EBITDA margin was 39%, inching down only slightly primarily due to the cautionary provisions to account for doubtful debts and longer collection cycles due to Covid-19.

Overall, our Group remains highly liquid thanks to a strong cash generation profile and over EGP 719 million in cash balances on our under-levered balance sheet.

This resilient performance and our defensive position leave me confident in IDH's ability to contain and mitigate the impact of Covid-19. As such, following on our earlier postponement of the 2019 dividend decision, and after carefully considering the developments in the global pandemic and given the Group's liquidity position, the Board of Directors approved a dividend payment of USD 28.0 million. Management is confident that with the dividend payment, the Group will maintain its ability to meet its financial obligations, including its operational needs and debt service. 

Going forward, we will continue to prioritize the health and safety of our people and patients, while focusing on ensuring business continuity and minimizing the impact of Covid-19 as we navigate through this challenging time. We are cautiously optimistic as regards to the recovery across our markets, with volumes and revenue already having witnessed strong growth beginning in June. Thus, our guidance for the full year is for consolidated revenue of EGP 2.1 to 2.2 billion, with an EBITDA margin of circa 40%. On the long term, management is confident in the strong fundamentals of our geographies as well as our leading market position, and we look forward to the resumption of our historical growth trajectory post Covid-19."

Analyst and Investor Call Details

An analyst and investor call will be hosted at 2pm (UK) | 3pm (Egypt) on Wednesday, 2 September 2020. You may dial in using the conference call details below:

Conference ID: 257185

A live audio webcast can be accessed at this link.

About Integrated Diagnostics Holdings (IDH)

IDH is a leading consumer healthcare company in the Middle East and Africa with operations in Egypt, Jordan, Sudan and Nigeria. The Group's core brands include Al Borg, Al Borg Scan and Al Mokhtabar in Egypt, as well as Biolab (Jordan), Ultralab and Al Mokhtabar Sudan (both in Sudan) and Echo-Scan (Nigeria). A long track record for quality and safety has earned the Company a trusted reputation, as well as internationally recognised accreditations for its portfolio of over 1,400 diagnostics tests. From its base of 462 branches as of 30 June 2020, IDH will continue to add laboratories through a Hub, Spoke and Spike business model that provides a scalable platform for efficient expansion. Beyond organic growth, the Group's expansion plans include acquisitions in new Middle Eastern and African markets where its model is well-suited to capitalise on similar healthcare and consumer trends and capture a significant share of fragmented markets. IDH has been a Jersey-registered entity with a Standard Listing on the Main Market of the London Stock Exchange (ticker: IDHC) since May 2015.

IDH's forward-looking strategy rests on leveraging its established business model to achieve four key strategic goals, namely: (1) continue to expand customer reach; (2) increase the number of tests per patient; (3) expand into new geographic markets through selective, value-accretive acquisitions; and (4) introduce new medical services by leveraging the Group's network and reputable brand position. Learn more at idhcorp.com.

Shareholder Information

LSE: IDHC.L

Bloomberg: IDHC:LN

Listed: May 2015

Shares Outstanding: 150 million

Contact

Nancy Fahmy

Investor Relations Director

T: +20 (0)2 3345 5530 | M: +20 (0)12 2255 7445 | nancy.fahmy@idhcorp.com

Forward-Looking Statements

These six-month 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 six-month results should not be relied upon by any other party or for any other reason. This communication contains certain forward-looking statements. A forward-looking statement is any statement that does not relate to historical facts and events, and can be identified by the use of such words and phrases as "according to estimates", "aims", "anticipates", "assumes", "believes", "could", "estimates", "expects", "forecasts", "intends", "is of the opinion", "may", "plans", "potential", "predicts", "projects", "should", "to the knowledge of", "will", "would" or, in each case their negatives or other similar expressions, which are intended to identify a statement as forward-looking. This applies, in particular, to statements containing information on future financial results, plans, or expectations regarding business and management, future growth or profitability and general economic and regulatory conditions and other matters affecting the Group.

Forward-looking statements reflect the current views of the Group's management ("Management") on future events, which are based on the assumptions of the Management and involve known and unknown risks, uncertainties and other factors that may cause the Group's actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. The occurrence or non-occurrence of an assumption could cause the Group's actual financial condition and results of operations to differ materially from, or fail to meet expectations expressed or implied by, such forward-looking statements.

The Group's business is subject to a number of risks and uncertainties that could also cause a forward-looking statement, estimate or prediction to differ materially from those expressed or implied by the forward-looking statements contained in this communication. The information, opinions and forward-looking statements contained in this communication speak only as at its date and are subject to change without notice. The Group does not undertake any obligation to review, update, confirm or to release publicly any revisions to any forward-looking statements to reflect events that occur or circumstances that arise in relation to the content of this communication.

Operational & Financial Review

Revenue

IDH recorded revenue of EGP 950 million in 1H 2020, down by 10% year-on-year due to the Covid-19 outbreak and its impact during the months of March, April and May. Revenue in April and May 2020 declined by around 49% and 22%, respectively, as lockdowns and curfews imposed across IDH's geographies to contain the spread of Covid-19 impacted patient volumes at IDH's branches. However, IDH witnessed a sharp recovery beginning June 2020, with revenue for the month increasing by approximately 38% versus the same month last year. Improved performance toward the tail end of the period coincided with easing of containment measures across IDH's markets and was also supported by a ramp up of IDH's house calls service in Egypt. Additionally, IDH bundled tests indicative of Covid-19 infection, including inflammatory and clotting markers such as Complete Blood Picture, ESR, D-Dimer, Ferritin and CRP, among others, that witnessed increased demand during the period. Finally, the company's performance was also supported by the application of PCR and antibody testing for COVID-19 in Jordan since the onset of the pandemic.

The decline in consolidated revenue in 1H 2020 is also owing to the comparable period's inflated figures on account of the 100 Million Healthy Lives Campaign in Egypt. Excluding campaign-related figures from 1H 2019, the Group's consolidated revenues record a 6% year-on-year decline in 1H 2020. 

Revenue Analysis: Contribution by Patient Segment

Contract Segment

The Group's contract segment recorded a 22% year-on-year fall in revenues in 1H 2020, making up 53% of consolidated revenues for the period versus the 61% share in 1H 2019. The decline was volume driven on account of Covid-19, and also reflects the normalisation in contract to walk-in ratio following the end of the 100 Million Healthy Lives campaign in Egypt, which contributed 224 thousand patients in 1H 2019.

Additionally, during 2019 management had analysed the segmentation of Egypt's patient base leading to a reclassification between walk-ins and contract volumes. Factoring out campaign-related tests from 1H 2019 figures and controlling for the reclassification, contract revenue and tests would record a 5% and 13% year-on-year decline, respectively, on account of Covid-19.

Walk-in Segment

Revenue from IDH's walk-in segment increased 7% year-on-year in 1H 2020 and made up 47% of IDH's total revenue for the period at EGP 443 million. When controlling for the 2019 reclassifications, walk-in revenue would record a 7% decline in 1H 2020 while walk-in test would record a 19% year-on-year decrease, primarily due to Covid-19.

Key Performance Indicators

* Adjustments related to the 100 Million Healthy Lives campaign include subtracting 224 thousand patients, 2.4 million tests and revenue of EGP 47 million for the 1H 2019 contract segment's KPIs. Additionally, reclassification adjustments include the transfer of 623 thousand tests in 1H 2019 and associated revenue of EGP 64 million from the contact segment to walk-ins.

Revenue Analysis: Contribution by Geography

Egypt

Revenue from Egypt declined 12% year-on-year to EGP 805 million in 1H 2020, driven by lower volumes during the months of March, April, and May due to Covid-19 related restrictions. Lower revenue also reflects the high base effect due to the 100 Million Healthy Lives campaign in 1H 2019. Excluding the campaign's effect, revenue from Egypt would have declined by 7% year-on-year in 1H 2020.

All of the Group's Egypt branches remained operational throughout the six-month period albeit with reduced working hours in accordance with the government-imposed curfews beginning late March and lifted on 27 June 2020. IDH partly offset the decline in branch traffic with higher contribution from its ramped-up house call service, which increased from 12% in 1Q 2020 to 30% in June, and 17% in 1H 2020 versus 10% in 1H 2019. Revenue was also supported by increased demand for IDH's bundle of Covid-19 indicative tests, which contributed EGP 67 million in revenue during May and June 2020. Egypt's revenues also include contributions from Al-Borg Scan, IDH new radiology venture, which generated revenue of EGP 8.9 million in 1H 2020, up 47% year-on-year. Al Borg Scan inaugurated its second branch in Cairo in February 2020, with both branches having served a total of 13.5 thousand patients in 1H 2020, up 61% year-on-year, while total tests performed increased 53% year-on-year to 16.9 thousand.

IDH served 2.6 million patients in Egypt and performed 10.1 million tests, down by 23% and 30% year-on-year, respectively. However, as of June 2020 total tests performed recorded a 17% increase versus June 2019 while total patients served increased by 18% during the same period.

Jordan

In Jordan, revenue recorded EGP 117 million in 1H 2020, down 3% year-on-year and constituting 12.4% of total revenue compared to 11.4% in 1H 2019. However, revenue in JOD terms increased 6% during the period despite Covid-19 related disruptions. Government-imposed curfews and lockdowns led to the closure of 17 out of 19 branches in late March 2020 through the end of April. All branches have since reopened and operations have recovered from the lockdown. Biolab had been administering PCR testing for Covid-19 in Jordan since the onset of the outbreak, which helped drive a 10% increase in number of patients served to 160 thousand in 1H 2020. Overall, Covid-19 related testing contributed 18% to Jordan's revenue and 5% to test volumes.

Sudan

Sudan reported revenue of EGP 12 million in 1H 2020, down 19% versus 1H 2019 as operations were impacted by the closure of branches due to Covid-19. In local currency, revenues declined 2% year-on-year in 1H 2020 on account of a 25% decline in number of patients to 59 thousand and a 31% decrease in number of tests to 188 thousand during the same period. Government-imposed curfews and lockdowns saw branches in Sudan operate at reduced hours between late March 2020 and May. Starting May 2020 only six out of the 21 branches were operational due to the imposition of stricter measures by the government. As of June 2020, the number of operational branches increased to nine, operating at reduced hours, while 12 remained closed.

Nigeria

At the Group's Nigerian subsidiary, revenue increased 12% year-on-year to EGP 15 million, with contribution to total revenue increasing to 1.6% compared to 1.3% in 1H 2019 as the Group reaps the rewards of its renovation and branch upgrade works, including the procurement of new state-of-the-art radiology equipment and the offering of higher-value MRI and CT scans. Revenue growth was even more pronounced in local currency terms, increasing by 28% year-on-year on account of an 18% increase in patients served to 60 thousand and a 28% increase in total tests performed. The strong performance came despite Covid-19 related disruptions, including a complete lockdown and limited traffic as people adhered to shelter-in-place orders.

Revenue Contribution by Country

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Branches by Country

Cost of Goods Sold

IDH's cost of goods sold decreased 11% year-on-year to EGP 503 million in 1H 2020. The Group's gross profit recorded EGP 446 million in the first six months of the year, down 10% year-on-year. Gross profit margin for the period was unchanged at 47%.

COGS Breakdown as a Percentage of Revenue

Raw material costs decreased 27% year-on-year to EGP 151 million in 1H 2020 and made up the second largest share of total consolidated COGS during the period at 30.1%. The average raw material cost per test performed during 1H 2020 stood at EGP 13.5, remaining largely stable compared to EGP 13.3 in 1H 2019. Raw materials as a percentage of sales decreased to 15.9% from last year's 19.6%.

Direct salaries and wages made up the largest share of total COGS in 1H 2020 at 32.1%, reaching EGP 161 million, a 14% year-on-year decline. Salaries and wages also declined as a percentage of sales to 17% in 1H 2020 versus 17.7% in the same period last year, driven by the previous recognition of EGP 20 million in profit shares during 1H 2019, and lower salaries in Nigeria following the restructuring that took place during the second half of 2019. Additionally, IDH incurred lower bonuses, incentive, and overtime payments during the curfew periods.

Direct depreciation and amortisation increased 20% year-on-year to EGP 80 million in 1H 2020 on the back of growth in depreciation due to the addition of new equipment at Al Borg-Scan and Nigeria, as well as the incremental amortisation of additional branches (IFRS 16 right-of-use assets). Direct depreciation and amortization as a percentage of revenues increased to 8.4% in 1H 2020 from 6.3% last year.

EBITDA

IDH's consolidated EBITDA in 1H 2020 reached EGP 367 million, down 17% year-on-year and with an EBITDA margin of 39% compared to 42% in 1H 2019. Lower EBITDA profitability was due to top-line contraction and the consequent increase in SG&A as a percentage of sales to 18% compared to 12% in 1H 2019. IDH recorded a doubtful accounts provision of EGP 28 million for elongated collection cycles; higher operational costs related to the ramp up of the house call service in Egypt totalling EGP 6.9 million; and incremental costs related to IDH's new corporate headquarters of EGP 2 million.

In Egypt, EBITDA recorded EGP 332 million in 1H 2020, down 19% year-on-year. EBITDA margin stood at 41% during the 1H 2020, down 4 percentage points from last year's figure impacted by the Covid-19 outbreak along with establishing the aforementioned doubtful accounts provision.

In Jordan, IDH's operations reported a 12% year-on-year contraction in EBITDA to EGP 38 million in 1H 2020 due to Covid-19 related disruptions and the exchange rate difference between the two reporting periods. The Egyptian pound had appreciated from an average of EGP:JOD of 24.14 in 1H 2019 to 22.12 in 1H 2020. Jordan's EBITDA margin was 33% in 1H 2020 compared 36% in the same period last year, impacted by higher doubtful accounts provision along with higher management remuneration related to performance in 2019.

Sudan's EBITDA declined by 76% year-on-year to EGP 1 million in 1H 2020, with an EBITDA margin of 6% compared to 20% in 1H 2019. EBITDA was impacted by branch closures on account of Covid-19.

Finally, in Nigeria, EBITDA losses narrowed to EGP 4 million in 1H 2020 from the negative EGP 18 million recorded in the same period last year. Losses narrowed due to a 12% year-on-year increase in revenues (28% in NGN terms) and an 18% year-on-year decrease in salaries expense during the period. It is worth noting that Nigeria was poised to turn EBITDA positive in late 2020, however, with the onset of Covid-19 and related disruptions management expects this to be achieved by 2021.

Regional EBITDA in Local Currency

Interest Income / Expense

IDH recorded interest income of EGP 34 million in 1H 2020, up 61% year-on-year. Interest income increased on the back of higher cash balances.

Interest expense recorded EGP 37 million in 1H 2020 compared to EGP 31 million in the comparable period of 2019. The increase in interest expenses is due to higher interest of right-of-use assets following the addition of new branches. Interest expense is broken down as EGP 26.4 million related to IFRS 16; EGP 8.1 million (related to medium-terms loans for the Al Borg Scan expansion (EGP 3 million) and the Group's new headquarters in Cairo's Smart Village (EGP 3.8 million); and EGP 1.3 million related to bank charges.

Foreign Exchange

IDH recorded a net foreign exchange loss of EGP 4 million in 1H 2020 compared to EGP 11 million in 1H 2019. The figure is primarily related to FX losses on the back of the SDG devaluation versus the EGP.

Taxation

Tax expenses recorded in 1H 2020 were EGP 95 million compared to EGP 132 million in the same period of last year. The effective tax rate was 35% in 1H 2020, down from 38% in 1H 2019. There is no tax payable for IDH's two companies at the holding level. Tax was paid on profits generated by operating companies in Egypt and Jordan. It is important to note that the provision for doubtful debt is not accounted for in the taxable income, which led to an increase in the effective tax rate by around 1%.

Net Profit

IDH's consolidated net profit was EGP 175 million in 1H 2020, down 19% year-on-year. Net profit margin stood at 18% for the period compared to 20% in 1H 2019.

Net profit margin contraction was driven by lower revenues, higher SG&A expenses along with an increase in provisions for doubtful accounts and a higher effective tax rate.

Balance Sheet

On the assets side of the balance sheet, IDH held gross property, plant and equipment (PPE) of EGP 1,166 million as at 30 June 2020, an increase from EGP 1,140 million as at 31 December 2019. The increase reflects regular CAPEX outlays during the period.

Accounts receivable recorded EGP 210 million as at 30 June 2020 compared to EGP 261 million at year-end 2019. Accounts receivables' days on hand (DOH) stood at 133 days, up from the 129 days as at year-end 2019 due to lower collection in 2Q 2020 following the imposition of Covid-19-related measures. It should be noted that accounts receivables DOH is calculated based on credit revenues amounting to EGP 277 million in 1H 2020, representing 55% of contract revenues for the period.

The Group's "days inventory outstanding" increased to 130 days at the close of the second quarter of the year compared to 82 days as at 31 December 2019. The increase follows the Group's strategy of increasing its inventory coverage period to mitigate for potential supply disruptions due to Covid-19.

IDH's cash balances increased to EGP 719.4 million as at 30 June 2020 compared to EGP 630 million as at 31 December 2019, indicating the Group's strong liquidity position and its ability to generate cash even during the challenging times due to Covid-19. As at 30 June 2020, IDH recorded a positive net debt position³ amounting to EGP 615 million.

On the liabilities side, accounts payable stood at EGP 153 million at 30 June 2020 versus EGP 145 million at year end 2019. The Group's days payable outstanding (DPO) stood at 191 days compared to 141 days at 31 December 2019.

³Net debt is calculated as cash balance less interest-bearing debt (medium term loans)

Dividend

After consideration of the developments in the global pandemic and given the Group's strong liquidity position and confidence in its financial outlook, the Board of Directors has approved an interim dividend of USD 28.0 million, or USD 0.187 per share, to be paid to shareholders who appear on the register as at 11 September 2020, with an ex-dividend date of 10 September 2020 and a payment date of 2 October 2020.

Going Concern

The uncertainty regarding the impact of a second wave of Covid-19 on the Group has been considered as part of the Group's adoption of the going concern basis. Management has considered the potential impact of a second wave of Covid-19 on the Group's financial position and liquidity and has considered several scenarios and stress tests. One of the stress tests considered the following key assumptions: a complete lockdown with a substantial loss of revenue by 50% for a period of 4 months (from September to December), no fixed costs reductions, forecasted capital expenditure is maintained, and a dividends payment of USD 28 million during September. The reduction of revenues will not affect the Group's ability to meet financial covenants such as Debt Service Coverage Ratio. The conducted stress test displayed the ability of full repayment of the existing loans balances. The downside scenarios showed that the Group's current financial position and cash balance will alleviate any potential downside risk in the Group's cash flow generated from its operational activities, thus the Directors continue to adopt the going concern basis in preparing the financial information.

Principal Risks and Uncertainties

As in any corporation, IDH has exposure to risks and uncertainties that may adversely affect its performance. The Board and senior management agree that the principal risks and uncertainties facing the Group include political and economic risks in Egypt, the Middle East and Nigeria, foreign currency exchange rate variability and associated risks, changes in regulation and regulatory actions, damage to the Group's reputation, failure to maintain the Group's high quality standards and accreditations, failure to maintain good relationships with healthcare professionals and end-users, pricing pressures and business interruption of the Group's testing facilities, among others.

Other short-term risks include operational disruptions related the Covid-19 pandemic; delays in branch openings and renovations in Nigeria and difficulties in growing Echo Lab's customer base; prolonged political unrest in Sudan that  can adversely affect patient and test volumes, while further currency devaluation risks will limit the compensatory effect of price increases.

Statement of Directors' Responsibilities

Responsibility statement of the directors in respect of the half-yearly financial report

We confirm that to the best of our knowledge:

·    The condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU;

·    The interim management report includes a fair review of the information required by:

(a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

For and on behalf of the Board of Directors:

Dr. Hend El Sherbini

Executive Director

1 September 2020

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