INTEGRATED DIAGNOSTICS HOLDINGS plc - "IDH"

1. Reporting entity  

Integrated Diagnostics Holdings plc "IDH" or "the Company" is a Company which was incorporated in Jersey on 4 December 2014 and established according to the provisions of the Companies (Jersey) Law 1991 under Registered No. 117257.  These condensed consolidated interim financial statements as at and for the six months ended 30 June 2015 comprise the Company and its subsidiaries (together referred as the 'Group'). 

The Group's financial year starts on 1 January and ends on 31 December each year. The first accounting period for IDH will be from 4 December 2014 (date of incorporation) to 31 December 2015.

These condensed consolidated interim financial statements were approved for issue by the Directors of the Company on 21 August 2015.

These condensed consolidated interim financial statements include the IDH's financial statements and its subsidiaries. The Group's main activity is concentrated in the field of medical diagnostics.

 

2. Basis of preparation

The accounts for the 6 months ended 30 June 2015 and 30 June 2014 included within condensed consolidated interim financial statements are unaudited although the accounts for the 6 months ended 30 June 2015 have been reviewed.

The financial information presented for the comparative year ended 31 December 2014 essentially represents the financial performance and position of the same continuing business albeit that the Parent Company of the Group changed in 2014 as a result of group reorganisation.

 

On 23 December 2014, as a necessary step to its Initial Public Offering on 06 May 2015, the Company (i.e. Integrated Diagnostics Holdings plc),  issued 150 million shares to the shareholders of the previous Parent Company of the Group, Integrated Diagnostics Holdings LLC ("Caymans"), in exchange for 100% of the issued shares of Caymans.

 

The effect of this was to add a new parent company on top of the existing group - this being the only change - prior to its flotation and gave rise to reverse acquisition accounting by the new parent company. In considering the requirements of IFRS 3, consideration was given as to whether this was a business combination. The conclusion reached by the Directors was that this was not a business combination by the new parent company merely the addition of a new holding company to a continuing business, i.e., a group reorganisation. The impact, for accounting purposes, of the transaction on 23 December 2014 was to present the Company as if it had always been the Parent Company of the Group with the consequent continuation of the book values and history previously reported by Caymans, save for alteration of the equity section of the prior year's statement of consolidated financial position to reflect that of the new Parent Company.

Basis of preparation (continued)

 

A.  Statement of compliance

 

These condensed consolidated interim financial statements have been prepared in accordance with IAS 34 'Interim Financial Reporting' (as adopted by the EU). They do not include all the information required for a complete set of IFRS financial statements as adopted by European Union ("IFRS-EU"), and should be read in conjunction with the special purpose consolidated financial statements published as at and for the year ended 31 December 2014 and included in the prospectus for the Initial Public Offering by the Company dated 6 May 2015 which is available at www.idhcorp.com 

 

B.  Going concern

 

These condensed consolidated interim financial statements have been prepared on the going concern basis. At 30 June 2015, the Group had net assets amounting to EGP 1,876,094,506.  The Group is profitable and cash generative and the Directors have considered the Group's cash forecasts for a period of 12 months from the signing of the balance sheet. The Directors have a reasonable expectation that the Group has adequate resources to meet its liabilities as they fall due for at least 12 months from the date of approval of these condensed consolidated interim financial statements. Thus, they continue to adopt the going concern basis in preparing the financial information.

 

C.  Basis of measurement

 

The condensed consolidated interim financial statements have been prepared on the historical cost basis except where adopted IFRS mandates that fair value accounting is required.

 

D.  Functional and presentation currency

 

These condensed consolidated interim financial statements and financial information are presented in Egyptian Pounds (EGP). The functional currency of the majority of the Group's entities is the Egyptian Pounds (EGP) and is the currency of the primary economic environment in which the Group operates.

 

E.   Use of estimates and judgements

 

There are no material changes in management judgments, estimates and assumptions during the six month period ended 30 June 2015 from those applied in the special purpose consolidated financial statements published as at and for the year ended 31 December 2014 and included in the prospectus for the Initial Public Offering by the Company dated 6 May 2015 which is available at www.idhcorp.com 

In preparing these condensed consolidated interim financial statements, management have made a material judgment, estimate and assumptions that affect the application of the Group's lease accounting policy and the reported amounts of assets, liabilities, and expenses. Actual results may differ from these estimates. Information about judgment, estimate and assumptions applied is set below and in note 11. 

 

3. Significant accounting policies

 

The accounting policies applied by the Group in these condensed consolidated interim financial statements are consistent with those applied in the special purpose consolidated financial statements published as at and for the year ended 31 December 2014 and included in the prospectus for the Initial Public Offering by the Company dated 6 May 2015 and available at www.idhcorp.com. These special purpose consolidated financial statements were prepared in accordance with IFRS as adopted by the European Union.

Due to the significance of the agreement entered into for the supply of equipment in the Mega-Lab during the period, and judged to be a finance lease (see note 11) the Group's lease accounting policy has been confirmed below.

A.  Leases

i.          Determining whether an arrangement contains a lease

At inception of an arrangement, the Group determines whether the arrangement is or contains a lease.

At inception or on reassessment of an arrangement that contains a lease, the Group separates out payments and other consideration required by the arrangement into those for the lease and those for other elements on the basis of their relative fair values. If the Group concludes for a finance lease that it is impractical to separate the payments reliably, then an asset and a liability are recognized at an amount equal to the fair value of the underlying asset; subsequently, the liability is reduced as payments are made and an imputed finance cost on the liability is recognised using the Group's incremental borrowing rate.

ii. Leased assets

Assets held by the Group under leases that transfer to the Group substantially all of the risks and rewards of ownership are classified as finance leases. The leased assets are measured initially at an amount equal to the lower of their fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the assets are accounted for in accordance with the accounting policy applicable to that asset. Assets held under other leases are classified as operating leases and are not recognised in the Group's statement of financial position.

 

ii.          Lease payments

 

Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease. Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.

 

New standards and interpretations not yet adopted

 

New standards, amendments to standards and interpretations that are not yet effective for the period ended 30 June 2015 have not been applied in preparing these condensed consolidated interim financial statements. None of these is expected to have a significant effect on these condensed consolidated interim financial statements of the Group.

  

 

4. Property, plant and equipment

 

	Land & Buildings	Medical, electric & information system equipment	Leasehold improvements	Fixtures, fittings & vehicles	Building & Leasehold improvements in construction	Total
Cost
At 1 January 2015	129,044,532	93,381,661	52,354,609	25,641,758	53,812,991	354,235,551
Additions	-	86,272,879	17,910,301	3,370,480	3,680,295	111,233,955
Disposals	-	(1,820,704)	(482,448)	(170,613)	-	(2,473,765)
Translation differences	408,166	353,090	202,714	1,065,320	32,249	2,061,539
Transfers	38,000,000	15,419,721	-	-	(53,419,721)	-
At 30 June 2015	167,452,698	193,606,647	69,985,176	29,906,945	4,105,814	465,057,280
Depreciation
At 1 January 2015	16,522,156	61,163,003	22,566,570	10,110,260	-	110,361,989
Charge for the period	1,249,026	7,808,167	3,667,503	1,216,450	-	13,941,146
On disposals	-	(1,594,951)	(427,203)	(103,915)	-	(2,126,069)
Translation differences	177,907	153,901	88,357	464,340	-	884,505
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At 30 June 2015	17,949,089	67,530,120	25,895,227	11,687,135	-	123,061,571
Net book value At 30 June 2015	149,503,609	126,076,527	44,089,949	18,219,810	4,105,814	341,995,709
At 31 December 2014	112,522,376	32,218,658	29,788,039	15,531,498	53,812,991	243,873,562

 

Leased equipment

 

EGP 74m of medical and electric equipment was supplied under finance lease arrangements during the period ended 30 June 2015. This equipment was supplied to service the Group's new state-of-the-art Mega Lab. The Mega Lab commenced limited operations in the period and is expected to be fully operational by the end of 31 December 2015. The equipment secures lease obligations, see note 11 for further details on the recognition and the leasing arrangement.

  

 

5.  Intangible assets and goodwill

Intangible assets represented in goodwill, brand names and customer lists are allocated as follows:

	30 June 2015		31 December 2014
	(unaudited)
Goodwill	1,234,432,398		1,234,432,398
Brand names	374,055,000		374,055,000
Customer lists	-		351,750
	1,608,487,398		1,608,839,148

 

Goodwill

The majority of the Group's goodwill balance as of 30 June 2015 arose on the acquisition of Al Mokhtabar Company for Medical Labs and Al Borg Laboratory Company amounting to EGP 699,101,575 and 497,275,010 respectively.

Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. No indicators of impairment have been identified at 30 June 2015.

 

6.  Inventories

	30 June 2015		31 December 2014
	(unaudited)
Chemicals and operating supplies	33,024,631		36,007,252
	33,024,631		36,007,252

 

7. Trade and other receivables

	30 June 2015		31 December 2014
	(unaudited)
Trade receivables	110,561,860		86,563,899
Other receivables	7,104,201		2,893,795
Prepayments	11,504,542		10,446,230
Due from related parties (Note 15-a)	2,116,321		1,807,556
Accrued revenue	297,787		500,258
	131,584,711		102,211,738
Less:
Impairment of trade receivables	(13,184,363)		(12,136,865)
	118,400,348		90,074,873

8. Cash and cash equivalents

 

		30  June   2015		31 December 2014
		(unaudited)
Time deposit*		122,253,984		185,775,882
Cash at bank		82,696,453		63,442,494
Cash in hand		4,651,117		2,891,564
Cash and cash equivalents		209,601,554		252,109,940

*The maturity date of these time deposits is less than 3 months.

 

9. Trade and other payables

 

	30 June 2015		31 December 2014
	(unaudited)
Trade payable	69,124,236		59,350,629
Accrued expenses	72,340,691		35,034,253
Other payables	8,795,031		29,772,001
Finance lease liabilities	13,246,577		857,645
	163,506,535		125,014,528

 

 

10. Equity

 

The Company's ordinary share capital is $150,000,000 equivalent to EGP 1,072,500,000.

 

	Ordinary shares 30 June 2015		Ordinary shares 31 December 2014
	(unaudited)
In issue at beginning of the period/year	150,000,000		-
Issued during the period/year	-		150,000,000
In issue at the end of the period/year	150,000,000		150,000,000

 

 

On 23 December 2014, as a necessary step to its Initial Public Offering on 11 May 2015, the Company (i.e. Integrated Diagnostics Holdings plc),  issued 150 million shares to the shareholders of the previous Parent Company of the Group, Integrated Diagnostics Holdings LLC ("Caymans"), in exchange for 100% of the issued shares of Caymans.

 

There were no changes in rights or proportions of control in Caymans and its consolidated subsidiaries, and after 23 December 2014 (the date after which Caymans ceased to be the parent of the group) IDH and its consolidated subsidiaries as a result of this transaction.

 

Whilst, the equity instruments of Caymans were legally acquired, in substance the Directors have determined that Caymans is the accounting acquirer of IDH. As such, this transaction has been accounted for as a reverse acquisition.

 

Accordingly, these condensed consolidated financial statements are issued in the name of the new legal parent, IDH, but are a continuation of the consolidated financial statements of Caymans. In accordance with the requirements of IFRS 3: 'Business Combinations', the comparatives for 31 December 2014 within the condensed consolidated financial statements of IDH have been retroactively adjusted to transfer EGP 2,002,192,727 from capital contribution to capital reserve to reflect the legal capital position of IDH as shown in the condensed consolidated statement of changes in equity. One other adjustment has been made to reinstate the legal reserve in the amount of EGP 26,945,448 which is required under Egyptian Law governing Egyptian subsidiaries.

 

11. Long term financial obligation

 

The long-term financial obligation represent the finance lease liabilities due over 1 year for agreements entered into by the Group.

	30 June 2015		31 December 2014
	(unaudited)
Finance lease liability - laboratory equipment	62,833,708		-
Finance lease liability - other	282,622		582,162
	63,116,330		582,162

Finance lease liabilities for the laboratory equipment are payable as follows:

 

	Minimum lease payments	Interest	Principal
	30 June 2015	30 June 2015	30 June 2015
Less than one year	16,905,455	5,457,965	11,447,490
Between one and five years	67,621,818	21,831,859	45,789,959
More than five years	27,000,000	9,956,250	17,043,750
	111,527,273	37,246,074	74,281,199

 

The Group entered into 2 significant agreements during the period ended 30 June 2015 to service the Group's new state-of-the-art Mega Lab which commenced limited operations in the period and is expected to be fully operational by the end of 31 December 2015.

 

Both agreements have minimum annual commitment payments to cover the supply of medical diagnostic equipment, kits and chemicals to be used for testing and ongoing maintenance and support services over the term of the agreement. The agreement periods are 5 and 8 years which is deemed to reflect the useful life of the equipment.

 

If the minimum annual commitment payments are met over the agreement period ownership of the equipment supplied will transfer to the IDH. Management fully expect to be able to fulfil the minimum payments and the basis of treating the proportion of payments relating to the supply of equipment as a finance lease.

 

Management have performed a fair value exercise in order to allocate payments between the different elements of the arrangements and identify the implicit interest rate of the finance lease. Due to the difficulty in reliably splitting the payments for the supply of medical equipment from the total payments made, the finance asset and liability has been recognised at an amount equal to the fair value of the underlying equipment. This is based on the current cost price of the equipment supplied provided by the suppliers of the agreement. The implicit interest rate of both finance leases has been estimated to be 11.5%. The equipment is being depreciated based on a units of production method and expected to match the length of each agreement term.

  

 

 

12. Expenses

 

12-1 Cost of sales

	30 June 2015		30 June 2014
	(unaudited)		(unaudited)
Chemicals and supplies	89,710,378		78,794,611
Wages and salaries for employees	78,543,602		62,790,919
Other expenses	37,886,986		32,764,976
Depreciation of property and equipment	12,368,577		10,337,740
Cost of  specialized analysis at other laboratories	3,283,393		4,874,326
Amortisation of intangible assets	351,750		68,435,062
	222,144,686		257,997,634

 

12-2 Marketing and advertising expenses

	30 June 2015			30 June 2014
	(unaudited)		(unaudited)
Advertising expenses	14,739,269		17,006,903
Others	4,213,595		3,862,350
Marketing salaries	3,492,863		3,990,320
Depreciation of property and equipment	19,560		19,172
	22,465,287		24,878,745

 

12-3 Administrative Expenses

	30 June 2015		30 June 2014
	(unaudited)		(unaudited)
Advisory fees*	125,056,334		943,404
Administrative salaries & wages	15,383,899		12,589,734
Other	11,049,503		5,847,305
Board of directors salaries, remunerations & allowances	5,367,068		6,662,444
Depreciation of property and equipment	1,553,009		1,261,520
	158,409,813		27,304,407

 

* In the period to 30 June 2015 advisory fees included EGP 123 million relating to the costs for the IPO. No new shares were issued on IPO and so all costs relating to the IPO have been expensed.

 

  

 

12-4 Other Expenses

	30 June 2015		30 June 2014
	(unaudited)		(unaudited)
Impairment of trade and other receivables	2,478,171		2,913,179
Provisions made in the period	1,010,033		703,777
Loss on disposal of fixed assets	80,592		426,977
	3,568,796		4,043,933

 

13. Net finance income

	30 June 2015		30 June 2014
Finance income	(unaudited)		(unaudited)
Interest income on - time deposits	3,752,238		2,731,650
Net foreign exchange gain	2,672,104		-
Gains on sale of financial investments in investment funds	-		38,652
Total finance income	6,424,343		2,770,302
Finance cost
Bank charges	(113,485)		(193,537)
Interest expense	(1,268,124)		(197,398)
Net foreign exchange loss	-		(2,768,732)
Total finance cost	(1,381,609)		(3,159,667)
Net finance income/(cost)	5,042,734		(389,365)

 

 

  

14.  Deferred tax liabilities and other provisions

 

Deferred tax

 

Deferred tax assets and liabilities resulted from the temporary differences between the tax base of an asset and liability and the carrying amount of these assets and liabilities in the consolidated financial statements:

	30 June 2015			31 December 2014
	Assets	Liabilities			Assets	Liabilities
	(unaudited)				(unaudited)
Fixed assets (accumulated depreciation)	-	(2,879,659)			-	(3,990,128)
Revaluation of identifiable assets	-	(116,198,908)				(115,157,488)
Other provisions	1,988,839	-			2,114,164	-
Net deferred tax liability		(117,089,728)				(117,033,452)
Other Provisions
Egyptian Government Training Fund for employees		(7,250,914)				(6,606,281)
Provision for legal claims		(1,840,621)				(2,372,117)
Total deferred tax liabilities and other provisions		(126,181,263)				(126,011,850)

 

The amount of deferred tax income recognized in the consolidated statement of income as follows:

 

	30 June 2015		30 June 2014
	(unaudited)		(unaudited)
Net tax which creates a liability at the end of the period	(117,089,728)		(121,758,488)
Less:
Net tax resulting in tax liability at the beginning of  period	117,033,452		133,387,400
Deferred tax (expense)/income	(56,276)		11,628,912

 

 

15. Related party transactions

 

Some of the Group's companies carried out during the period certain transactions with its related parties, transactions with those related parties are transacted according to the conditions and terms set by the Group's board of directors and in light of the contracts and agreements with those parties after the authorization to carry out such transactions in light of decisions of the Ordinary Assembly Meeting for this purpose. 

 

Transaction with key management personnel

 

The significant transactions with key management personnel and their nature volumes during the six month period ended:

 

Related Party		Nature of relationship		Nature of transaction		30 June 2015		30 June 2014
						(unaudited)		(unaudited)
Dr. Hend IDH CEO		Board of director member		Salary		1,695,750		1,645,167
IDH Representatives		Board of director member		Remuneration		-		5,362,500
						1,695,750		7,007,667

 

Related party transactions (continued)

 

 

The significant transactions with other related parties, their nature volumes and balance during the period 30 June 2015 and 2014 are as follows:

 

A.  Due from related parties

 

					30 June 2015
Related Party	Nature of transaction		Nature of relationship		Amount of transaction		Balance
					(unaudited)		(unaudited)
Health-care Tech Company	Expenses paid on behalf		Affiliate*		75,300		188,336
Integrated Treatment for Kidney Diseases (S.A.E)	Expenses paid on behalf		Entity owned by Company's CEO		233,465		1,927,985
Total							2,116,321
					31 December 2014
Related Party	Nature of transaction		Nature of relationship		Amount of transaction		Balance
Health-care Tech Company	Expenses paid on behalf		Affiliate		75,208		113,036
Integrated Treatment for Kidney Diseases (S.A.E)	Bank transfers		Entity owned by Company's CEO		1,694,520		1,694,520
	Value of assets and expenses paid on behalf
Total							1,807,556

 

* Health-care Tech is a company whose shareholders include Dr. Moamena Kamel (a beneficial owner of Hena Holdings) and Dr. Seham Ibrahim (a member of the Senior Management).

 

 

16. Tax Status

 

A)  Amendments on the Tax law

 

The profit of the company is subjected to corporate tax according to income tax law No. 91 of 2005 and the company is also subjected to the provisions of Law No. (44) of 2014 that was issued on 4 June 2014 concerning " imposing a temporary annual additional tax for three years as of the current taxation period at the rate of 5 % on the amounts exceeding one million Egyptian pounds of the taxable income of the natural persons or on the profits of the juristic persons." 

 

 

Tax Status (continued)

 

B)  Integrated Diagnostics Holdings plc - "IDH"

 

Integrated Diagnostics Holdings plc "IDH" has been established according to the provisions of the Companies (Jersey) law 1991 under No. 117257. The company is not subject to tax in accordance with the Jersey law.

 

 

 

C)  Income tax liabilities

	30  June 2015		31 December  2014
	(unaudited)
Balance b/f	123,683,208		87,716,000
Withholding tax	7,096,081		3,866,376
Income tax for the year	70,259,678		133,517,669
Tax paid	(118,438,409)		(101,416,837)
Balance c/f	82,600,558		123,683,208

 

 

17. Financial Instruments

 

The Group has reviewed the financial assets and liabilities held at 30 June 2015 and 31 December 2014. It has been deemed that the carrying amounts for all financial instruments are a reasonable approximation of fair value.

Finance lease agreements significant to the Group were entered into during the period ended 30 June 2015 for medical equipment to service the Group's new Mega Lab. Due to the judgement required to allocate payments between lease payments and payments related to other elements of the arrangements an extensive fair value assessment was performed. This included identifying the fair value of the underlying equipment supplied, the ongoing maintenance and support costs during the lease period and the interest rate implicit to the lease to estimate the finance cost.

Further details of the valuation techniques used to calculate the fair value can be seen in note 11.

 

18. Contingent liabilities

 

There are no contingent liabilities relating to the group's transactions and commitment with banks, this has been assessed and not deemed to have a material effect on the group's future financial position.

 

19. Operating lease

 

The group leases certain branches for the operation of the business. The rental costs of those branches are accounted for as an operating lease and recorded within the consolidated statement of income as a cost of sales.

 

The following represent the number of branches and their rental value:

 

	30 June 2015		30 June 2014
	(unaudited)		(unaudited)
Number of rented branches	241		225
Total rental cost for the period	8,967,388		7,481,141
Average rent cost per branch	37,209		33,250

 

20.  Earnings per share

 

	30 June 2015		30 June 2014
	(unaudited)		(unaudited)
Profit attributed to owners of the parent	16,900,969		56,562,856
Weighted average number of ordinary shares in issue	150,000,000		150,000,000
Basic and diluted earnings per share	0.11		0.38

 

The Company has no potential diluted shares as of the June 30, 2015 and June 30, 2014 therefore; the earning per diluted share are equivalent to basic earnings per share.

 

 

21. Segment reporting

 

The group is viewed as a single reportable segment, as the group's CODM reviews the internal management reports and KPIs of the group as whole and not at a further aggregated level.

 

The group operates in three geographic areas, Egypt, Sudan and Jordan. Each area offers similar services and the KPIs of each are viewed to be the same. The revenue split between the three regions is set out below, as it can be seen Sudan and Jordan combined make up less than 10% of the group's total revenue.

 

	Revenue by geographic location
	(unaudited)
For the six month period ended	Egypt region		Sudan region		Jordan region		Total
30 June 2015	445,687,641		14,484,316		33,059,631		493,231,588
30 June 2014	370,141,127		18,798,743		27,890,189		416,830,059