Integrated Diagnostics Holdings plc - "IDH" and its subsidiaries

 

Annual report and Consolidated Financial Statements

for the year ended 31 December 2015

 

1.   Corporate information

The consolidated financial statements of Integrated Diagnostics Holdings plc and its subsidiaries (collectively, the Group) for the year ended 31 December 2015 were authorized for issue in accordance with a resolution of the directors on 24 March 2016. Integrated Diagnostics Holdings plc "IDH" or "the company" has been established according to the provisions of the Companies (Jersey) law 1991 under No. 117257.

IDH's purpose is not restricted and the group has full authority to do any activity as long as it is not banned by the Companies law unless amended from time to time or depending on the Companies (Jersey) law.

The Group's financial year starts on 1 January and ends on 31 December each year. The Group's main activity is concentrated in the field of medical diagnostics.

2.   Basis of accounting

2.1.    Basis of preparation

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.

Statement of compliance

The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (adopted IFRS) issued by the International Accounting Standards Board (IASB) and the Jersey Law 1991 an amendment to which means separate company financial statements are not required.

Basis of measurement

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

Functional and presentation currency

Each of the Group's entities is using the currency of the primary economic environment in which the entity operates ('the functional currency'). The Group's consolidated financial statements are presented in Egyptian Pounds, being the reporting currency of the main Egyptian trading subsidiaries within the Group and the primary economic environment in which the Group operates. For each entity, the Group determines the functional currency and items included in the financial statements of each entity are measured using that functional currency. The Group uses the direct method of consolidation and on disposal of a foreign operation; the gain or loss that is reclassified to profit or loss reflects the amount that arises from using this method.

Going concern

These consolidated financial statements have been prepared on the going concern basis. At 31 December 2015, the Group had net assets amounting to EGP 1,942,473K. 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.

2.2. Basis of consolidation

The consolidated financial statements comprise the financial statements of the Group and its subsidiaries as at 31 December 2015. Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee.

On 23 December 2014 the entire share capital of Integrated Diagnostics Holdings LLC (IDH Caymans) or "the previous parent company", was acquired by Integrated Diagnostics Holdings plc "IDH" funded by an issue of the equity instruments of IDH in exchange for these equity instruments.

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

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

Accordingly, these consolidated financial statements are issued in the name of the new legal parent, IDH, but are a continuation of the consolidated financial statements of IDH Caymans. In accordance with the requirements of IFRS 3: 'Business Combinations', the consolidated financial statements of IDH Caymans, including comparative information, have been retroactively adjusted to transfer EGP 2,099,888,000 from capital reserve to reflect the legal capital position of IDH as shown in the consolidated statement of changes in equity.  No other adjustments have arisen in respect of this reverse acquisition accounting.

Various restatements have been made to the balance sheets as at 1january 2014 and 31 December 2014 and for the income statement and statement in changes in equity for the year ended 31 December 2014.

i.    As disclosed in the consolidated statement of changes in equity, the individual amounts within equity as at 1 January 2014 has been restated. There are three main reasons for these changes being:

a.   The push back of the capital structure of IDH to retroactively account for its share capital structure to be that of the Group as required by IFRS 3. Previously these changes had mostly been reported as changes in equity during the year ended 31 December 2014.

b.   To adjust the share premium to reflect the accounting required in the individual financial statements of IDH as required by IAS 27 for its cost of investment in IDH Caymans.

c.   The accounting of the put options in the Group see note (iii) below.

Only point (c) results in a change in the total amount of the equity as at 1 January 2014 as all others are reallocations within equity.

ii.   Certain reclassifications of the 31 December 2014 balance sheet have been retroactively adjusted, which are not material to the overall financial statements.  A prepayment of EGP 1,088,000 had been included in Property, Plant and Equipment which has been re-allocated to trade and other receivables. Certain income tax balances included within trade debtors and other receivables of EGP 4,247,000 and other provisions of EGP 9,492,000 have been reallocated to current tax liabilities. Included in provisions was an accrual for holiday leave of EGP 729,000 which has been reallocated to trade and other payables.

These reclassifications to the 31 December 2014 balance sheet do not result in a change to the total equity as at 31 December 2014.

iii.  In addition there has been restatements made to the balance sheets as at 31 December 2013 and 31 December 2014 and to the statement in changes in equity for the year ended 31 December 2014 due the existence of NCI put options.

Through Al Borg the Group made two separate acquisitions in 2011 of Al Makhbariyoun Al Arab and Golden Care Medical Services.

Under both the sale and purchase agreement for the two acquisitions the vendors have a put option allowing them to force Al Borg to purchase all the remaining equity interest for a formulae agreed e equity value price. The option is exercisable in whole from the fifth anniversary of completion of the original purchase agreement being 30 June 2016.

At the date of the agreement the put option and the associated liability was not accounted for within the Group financial statements or on the conversion to IFRS on the 1 September 2012.

An adjustment has been made to 1 January 2014 position to correctly reflect this transactions within the Group financial statements. An initial liability has been recognised for the net present value at 1 January 2014 for the exercise price of the option with the corresponding amount recognized as equity within the put option reserve of the Group. The initial entry for the put option in Al Makhbariyoun Al Arab being EGP 30,148k and for the put option in Golden Care Medical Services being EGP 10,834k with the total liability being EGP 40,982k upon initial recognition.

The accounting policy for put options after initial recognition is to recognise all changes in the carrying value of the put liability within equity. The put liability recognised at 31 December 2014 and at 31 December 2015 year end were as follows:

Put Option Liability	31 Dec 2015 EGP'000	31 Dec 2014 EGP'000
Makhbariyoun Al Arab	47,087	36,856
Golden Care Medical Services	16,982	13,564
Total	64,069	50,420

iv.  Finally a reclassification of tax related expenses from other expenses to income tax expenses of EGP 5,391,108. This reclassification is to present all tax related expenses and credits within income tax expense.

i. Subsidiaries

Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. In assessing control, the Group takes into consideration potential voting rights that are currently exercisable. The acquisition date is the date on which control is transferred to the acquirer. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance.

ii.  Change in subsidiary ownership and loss of control

Changes in the Group's interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. Where the group loses control of a subsidiary, the assets and liabilities are derecognised along with any related NCI and other components of equity.  Any resulting gain or loss is recognised in profit or loss.  Any interest retained in the former subsidiary is measured at fair value when control is lost.

Transactions eliminated on consolidation of Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated. Unrealised gains arising from transactions with equity-accounted investees are eliminated against the investment to the extent of the Group's interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

2.3. Significant accounting policies

Except for the changes below, the accounting policies set out below have been applied consistently applied to all the years presented in these consolidated financial statements.

The Group has adopted the following new standard, including any inconsequential amendments to other standards, with a date of initial application of 1 January 2015.

·    Annual Improvements to IFRSs - 2010-2012 Cycle

This new standard had a non-material impact on these consolidated financial statements.

a)    Business combinations and goodwill

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, which is measured at acquisition date fair value, and the amount of any non-controlling interests in the acquiree. For each business combination, the Group elects whether to measure the non-controlling interests in the acquiree at fair value or at the proportionate share of the acquiree's identifiable net assets. Acquisition-related costs are expensed as incurred and included in administrative expenses.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.

Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Contingent consideration classified as an asset or liability that is a financial instrument and within the scope of IAS 39 Financial Instruments: Recognition and Measurement, is measured at fair value with the changes in fair value recognised in the statement of profit or loss.

Goodwill is initially measured at cost (being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interests) and any previous interest held over the net identifiable assets acquired and liabilities assumed. If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the Group re-assesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed and reviews the procedures used to measure the amounts to be recognised at the acquisition date. If the reassessment still results in an excess of the fair value of net assets acquired over the aggregate consideration transferred, then the gain is recognised in profit or loss.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group's cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.

Where goodwill has been allocated to a cash-generating unit (CGU) and part of the operation within that unit is disposed of, the goodwill associated with the disposed operation is included in the carrying amount of the operation when determining the gain or loss on disposal. Goodwill disposed in these circumstances is measured based on the relative values of the disposed operation and the portion of the cash-generating unit retained.

b)    Fair value measurement

The Group measures financial instruments such as non-derivative financial instruments, available-for-sale financial assets and contingent consideration assumed in a business combination, at fair value at each balance sheet date.

When measuring the fair value of an asset or a liability, the Group uses observable market data as far as possible. Fair value is categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:

Ø Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities

Ø Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable

Ø Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable

For assets and liabilities that are recognised in the financial statements at fair value on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

For the purpose of fair value disclosures, the Group has determined classes of assets and liabilities on the basis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy, as explained above.

The fair value less any estimated credit adjustments for financial assets and liabilities with maturity dates less than one year is assumed to approximate their carrying value.   The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contracted cash flows at the current market interest rate that is available to the Group for similar transactions.

c)     Revenue recognition

Revenue represents the medical value of medical diagnostic services rendered in the year, and is stated net of discounts. The Company has two types of customers: Walk-in patients and patients served under contract. For patients under contract, rates are agreed in advance on a per-test, client-by-client basis. For both types of customers, revenue is recognized on completion of the services rendered. Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured, regardless of when the payment is received. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty.

 

d)    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.

iii.    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.

e)   Income Taxes

Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

i.    Current tax

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

ii.   Deferred tax

Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes at the reporting date.

Deferred tax is recognized on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements.

However, deferred tax liabilities are not recognized if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future.

Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unused tax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised.

Deferred tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the reporting date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.

f)    Foreign currency

Transactions in foreign currencies are initially recorded by the Group's entities at their respective functional currency spot rates at the date the transaction first qualifies for recognition. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rates of exchange at the reporting date.

Differences arising on settlement or translation of monetary items are recognised in the income statement.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined.

On consolidation, the assets and liabilities of foreign operations are translated into Egyptian Pounds at the rate of exchange prevailing at the reporting date and their statements of profit or loss are translated at average rate (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions). The exchange differences arising on translation for consolidation are recognised in other comprehensive income and accumulated in the translation reserve or NCI as the case may be. On disposal of a foreign operation, the component of other comprehensive income relating to that particular foreign operation is recognised in profit or loss.

Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying amounts of assets and liabilities arising on the acquisition are treated as assets and liabilities of the foreign operation and translated at the spot rate of exchange at the reporting date.

g)   Property, plant and equipment

All property and equipment are stated at historical cost less accumulated depreciation.  Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs are included in the asset's carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the consolidated statement of income during the financial period in which they are incurred.

Land is not depreciated. 

Laboratory Equipment held to perform the 'Hub spoke' at the Mega Lab and provided under finance lease arrangements are depreciated under a unit of production method as this most closely reflects the consumption of benefits from the equipment. 

Depreciation on other assets is calculated using the straight-line method to allocate their cost or revalued amounts to their residual value over their estimated useful lives, as follows:

Buildings                                                                                  50 years

Medical, electric and information systems equipment           4-10 years

Leasehold improvements                                                       4-5 years

Fixtures, fittings & vehicles                                                     4-16 years

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized within 'Other (losses)/gains - net' in the consolidated statement of income.

h)   Intangible assets

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses. Internally generated intangibles, excluding capitalised development costs, are not capitalised and the related expenditure is reflected in profit or loss in the period in which the expenditure is incurred.

The useful lives of intangible assets are assessed as either finite or indefinite.

Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are considered to modify the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the statement of profit or loss in the expense category that is consistent with the function of the intangible assets.

Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually, either individually or at the cash-generating unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis.

 

Goodwill

Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred over interest in net fair value of the net identifiable assets, liabilities and contingent liabilities of the acquiree and the fair value of the non-controlling interest in the acquiree.

Goodwill is stated at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash-generating units (CGUs), or groups of CGUs, that is expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes.

Brand

Brands acquired in a business combination are recognized at fair value at the acquisition date and have an indefinite useful life.

Customer list

Customer lists acquired in a business combination are recognized at fair value at the acquisition date and have finite useful life. Amortization method on a straight-line basis and the estimated useful live is 4 years, as determined by management.

i)  Financial instruments - initial recognition and subsequent measurement

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

i.         Financial assets

Initial recognition and measurement

Financial assets are classified, at initial recognition, as financial assets at fair value through profit or loss, loans and receivables, AFS financial assets, as appropriate. All financial assets are recognised initially at fair value plus, in the case of financial assets not recorded at fair value through profit or loss, transaction costs that are attributable to the acquisition of the financial asset.

Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Group commits to purchase or sell the asset.

Subsequent measurement

For purposes of subsequent measurement, financial assets are classified in three categories:

Ø Financial assets at fair value through profit or loss

Ø Loans and receivables

Ø AFS financial assets

The Group did not hold financial assets classified as financial assets at fair value through the profit or loss or AFS financial assets at 31 December 2015 and 31 December 2014.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest method ("EIR"), less impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the statement of profit or loss. The losses arising from impairment are recognised in the statement of profit or loss in finance costs for loans and in cost of sales or other operating expenses for receivables.

Derecognition

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is primarily derecognised (i.e. removed from the Group's consolidated statement of financial position) when:

Ø The rights to receive cash flows from the asset have expired

Or

Ø The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a 'pass-through' arrangement; and either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass- through arrangement, it evaluates if, and to what extent, it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the Group continues to recognise the transferred asset to the extent of its continuing involvement. In that case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Group has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

Impairment of financial assets

Further disclosures relating to impairment of financial assets are also provided in the following notes:

Ø Disclosures for significant estimates and assumptions                      Note 2

Ø Financial assets                                                                                  Note 15

Ø Trade receivables                                                                               Note 17

The Group assesses, at each reporting date, whether there is objective evidence that a financial asset or a group of financial assets is impaired. An impairment exists if one or more events that has occurred since the initial recognition of the asset (an incurred 'loss event'), has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and observable data indicating that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

ii.      Financial liabilities

Initial recognition and measurement

All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of directly attributable transaction costs.

All of the Group's financial liabilities are classified as financial liabilities carried at amortised cost using the effective interest method.  The Group does not use derivative financial instruments or hedge account for any transactions. Unless otherwise indicated, the carrying amounts of the Group's financial liabilities are a reasonable approximation of their fair values.

The Group's financial liabilities include trade and other payables, finance lease liabilities and loans and borrowings including bank overdrafts.

Derecognition

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.

iii.     Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.

j)  Impairment of non-financial assets

Further disclosures relating to impairment of non-financial assets are also provided in the following notes:

Ø Disclosures for significant assumptions and estimates                      Note 2

Ø Goodwill and intangible assets with indefinite lives                            Note 14

The Group assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or CGU's fair value less costs of disposal and its value in use. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs of disposal, recent market transactions are taken into account. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded companies or other available fair value indicators.

The Group bases its impairment calculation on detailed budgets and forecast calculations, which are prepared separately for each of the Group's CGUs to which the individual assets are allocated. These budgets and forecast calculations generally cover a period of five years. A long-term growth rate is calculated and applied to project future cash flows after the fifth year.

Impairment losses of continuing operations are recognised in the statement of profit or loss in expense categories consistent with the function of the impaired asset, except for properties previously revalued with the revaluation taken to OCI. For such properties, the impairment is recognised in OCI up to the amount of any previous revaluation.

For assets excluding goodwill, an assessment is made at each reporting date to determine whether there is an indication that previously recognised impairment losses no longer exist or have decreased.

If such indication exists, the Group estimates the asset's or CGU's recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the asset's recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the statement of profit or loss unless the asset is carried at a revalued amount, in which case, the reversal is treated as a revaluation increase.

Goodwill is tested for impairment annually as at 31 October and when circumstances indicate that the carrying value may be impaired.

Impairment is determined for goodwill by assessing the recoverable amount of each CGU (or group of CGUs) to which the goodwill relates. When the recoverable amount of the CGU is less than its carrying amount, an impairment loss is recognised. Impairment losses relating to goodwill cannot be reversed in future periods.

Intangible assets with indefinite useful lives are tested for impairment annually as at 31 October at the CGU level, as appropriate, and when circumstances indicate that the carrying value may be impaired.

Intangible assets that have an indefinite useful life or intangible assets not ready to use are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely independent cash inflows (CGU). Prior impairments of non-financial assets (other than goodwill) are reviewed for possible reversal at each reporting date.

k) Inventories

Inventories are stated at the lower of cost and net realizable value. Cost is determined using the weighted average method. Net realizable value is the estimated selling price in the ordinary course of business, less estimated selling and distribution expenses.

l)  Cash and short-term deposits

Cash and short-term deposits in the statement of financial position comprise cash at banks and on hand and short-term deposits with a maturity of three months or less, which are subject to an insignificant risk of changes in value.

For the purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash and short-term deposits, as defined above, net of outstanding bank overdrafts as they are considered an integral part of the Group's cash management. 

m)  Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the Group expects some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain. The expense relating to a provision is presented in the statement of profit or loss net of any reimbursement.

If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, when appropriate, the risks specific to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense. 

n)   Pensions and other post-employment benefits

A defined contribution plan is a pension plan under which the group pays fixed contributions into a separate entity. The group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods. Obligations for contributions to defined contribution pension plans are recognized as an expense in the income statement in the periods during which services are rendered by employees.

o)   Share-based payment transactions

The grant-date fair value of equity-settled share-based payment awards granted to employees is generally recognized as an expense, with a corresponding increase in equity, over the vesting period of the awards. The amount recognized as an expense is adjusted to reflect the number of awards for which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognized is based on the number of awards that meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with non-vesting conditions, the grant-date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.

p)   Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the steering committee that makes strategic decisions.

The Group has not early adopted any other standard, interpretation or amendments that have been issued but not yet effective for the year ended 31 December 2015. None of these are expected to have a material effect on these consolidated financial statements of the Group, except for the following which could change the classification and measurements of financial assets.

·    IFRS 9 "Financial instruments" (expected effective date of January 2018).

·    Annual improvements to IFRSs - 2012 - 2014 cycle (effective date of January 2016)

IFRS 16 'Leases' (effective date of January 2019) introduces an on balance sheet accounting model for operating leases. The Group has significant operating lease commitments through the lease of branches and is anticipated to have a material effect when these arrangements are required to be brought on balance sheet.

3.   Significant accounting judgments, estimates and assumptions

The preparation of the Group's consolidated financial statements in conformity with adopted IFRSs requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

Other disclosures relating to the Group's exposure to risks and uncertainties includes:

Ø Capital management                                                              Note 5

Ø Financial instruments risk management and policies             Note 15

Ø Sensitivity analyses disclosures                                            Notes 15

Judgments

In preparing these consolidated financial statements, management have made a material judgment, that affect the application of the Group's lease accounting policy and the reported amounts of assets, liabilities, and expenses. Information about judgment, estimate and assumptions relating to finance leases are set out in note 25.

Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Group based its assumptions and estimates on parameters available when the consolidated financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Group. Such changes are reflected in the assumptions when they occur.

Impairment of intangible assets

The Group tests annually whether goodwill and other intangibles with indefinite lives have suffered any impairment. Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The recoverable amounts of cash generating units have been determined based on value in use. The value in use calculation is based on a DCF model. The cash flows are derived from the budget for the next five years and do not include restructuring activities that the Group is not yet committed to or significant future investments that will enhance the asset's performance of the CGU being tested. The recoverable amount is sensitive to the discount rate used for the DCF model as well as the expected future cash-inflows and the growth rate used for extrapolation purposes.

Impairment of trade and notes receivables

The requirement for impairment of trade receivables is made through monitoring the debts aging and reviewing customer's credit position and their ability to make payment as they fall due. An impairment is recorded against receivables for the irrecoverable amount estimated by management. At the year end, the provision for impairment of trade receivables was EGP 17,030k (31 December 2014: EGP 12,138k).

4.   Segment information

The group is viewed as a single operating segment, as the Group's Chief Operating Decision Maker (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 and they are not viewed as individual operating segments. The revenue split between the three regions is set out below, the combined Sudan and Jordan operations make up less than 10% of the Group's total revenue.

	Revenue by geographic location
For the year ended	Egypt region EGP'000	Sudan region EGP'000	Jordan region EGP'000	Total EGP'000
31 December 2015	910,886	30,740	73,218	1,014,844
31 December 2014	768,660	31,527	60,044	860,231

The operating segment profit measure reported to the CODM is Normalised EBITDA, as follows:

	2015 EGP'000	2014 EGP'000
Profit from operations	267,461	250,485
Property, plant and equipment depreciation	35,840	24,104
Amortization of Intangible assets	352	91,481
EBITDA	303,653	366,070
Non Recurring Items
IPO Expenses	125,152	8,355
Closure of Molecular Diagnostics Centre in Cairo	3,429	-
Write off of set up costs for Qatar office now not being pursued	1,051	-
Write-Off of surplus stationary included within inventory	1,558	-
Normalised EBITDA	434,843	374,425

The operating segment assets and liabilities measure reported to the CODM is in accordance with IFRS as shown in the Group's Consolidated Statement of Financial Position.

5.   Capital management

The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

The repatriation of a declared dividend is subject to regulation by Egyptian authorities. The outcome of an Ordinary General Meeting of Shareholders declaring a dividend is first certified by the General Authority for Investment and Free Zones (GAFI). Approval is subsequently transmitted to Misr for Central Clearing, Depository and Registry (MCDR) to distribute dividends to all shareholders, regardless of their domicile, following notification of shareholders via publication in two national newspapers.

The Group monitors capital on the basis of the net debt to equity ratio. This ratio is calculated as net debt divided by total equity. Net debt is calculated as total liabilities (being total current liabilities plus long-term financial obligations) less cash and cash equivalents.

 

 

	2015 EGP'000	2014 EGP'000
Total liabilities	401,437	299,745
Less: cash and short-term deposits (Note 18)	(387,716)	(252,110)
Net debt	13,721	47,635
Total Equity	1,942,473	1,805,148
Capital and net debt	1,928,752	1,757,513
Net debt to equity ratio	0.7%	2.6%

 

No changes were made in the objectives, policies or processes for managing capital during the years ended 31 December 2015 and 2014.

Although Sudan sanctions impose restrictions on the distribution of dividends within one year, the amount of undistributed dividends is not significant to the Group total capital management. Total equity, is as shown in the statements of financial position. No funds will be remitted from Sudan in the form of cash payments for services provided or dividends from the company until such a time as the sanctions imposed on Sudan are clarified or released. The total of profits that could be distributed from Sudan is EGP 4,720K and the amount of cash in Sudan is EGP 16,166K.

6.   Group information

Information about subsidiaries

The consolidated financial statements of the Group include:

	Principal activities	Country of Incorporation	% equity interest
			2015	2014
Al Borg Laboratory Company	Medical diagnostics service	Egypt	99.3%	99.3%
Al Mokhtabar Company for Medical Labs	Medical diagnostics service	Egypt	99.9%	99.9%
Molecular Diagnostic Center	Medical diagnostics service	Egypt	99.9%	99.9%
Medical Genetic Center	Medical diagnostics service	Egypt	55.0%	55.0%
Al Makhbariyoun Al Arab Group (Hashemite Kingdom of Jordan)	Medical diagnostics service	Jordan	60.0%	60.0%
Golden Care for Medical Services	Holding company of (Sama)	Egypt	75.0%	75.0%
Integrated Medical Analysis Company (S.A.E)	Medical diagnostics service	Egypt	99.6%	33.3%
SAMA Medical Laboratories Co.  "Ultralab medical laboratory "	Medical diagnostics service	Sudan	60.0%	60.0%
AL-Mokhtabar Sudanese Egyptian Co.	Medical diagnostics service	Sudan	65.0%	65.0%
Integrated Diagnostics Holdings Limited	Intermediary holding company	Cayman Island	100.0%	100.0%

 

Full details of the historic acquisitions of the group can be found in the prospectus for the initial public offering by the Company dated 6 May 2015 and available at www.idhcorp.com.

7.   Business combinations and acquisition of non-controlling interests

Acquisition of Integrated Medical Analysis Company (IMA)

At 21 December 2014 and in accordance with Al Mokhtabar Company's board of directors' resolution, the company acquired 33.33% of the share capital of Integrated Medical Analysis Company (S.A.E). Integrated Medical Analysis Company (S.A.E) was considered a subsidiary of Al Mokhtabar Company even though Al Mokhtabar Company had only a 33.33% ownership interest.  The remaining 66.67% was allocated equally between Dr. Momena Kamel (the Chairman of Al Mokhtaber), and Mr Amr Helal of Abraaj Group.  Dr. Momena Kamel had waived her rights in the ownership and voting in relation to the shares of 83,333 shares held in Integrated Company for Medical Analysis, which accounted for 33.33% of the capital paid and Al Mokhtabar shall be considered as the beneficiary owner of these shares until it is completely transferred before all the authorities.

As a result the directors of the company consider Al Mokhtabar Company has control over Integrated Medical Analysis Company (S.A.E). Al Mokhtabar Company has the practical ability to direct the relevant activities of Integrated Medical Analysis Company (S.A.E)  unilaterally. 

During the current year, Al Mokhtabar Company increased its share equity of the acquiree by 66.25%, as a result, the percentage of total shares of the company in Integrated Medical Analysis Company (S.A.E) became 99.58%.

8.   Non-Controlling interest

Financial information of subsidiaries that have material non-controlling interests is provided below:

Proportion of equity interest held by non-controlling interests:

 

	Country of incorporation		2015	2014
Medical Genetic Center		Egypt	45.0%	45.0%
Al Makhbariyoun Al Arab Group (Hashemite Kingdom of Jordan)		Jordan	40.0%	40.0%
SAMA Medical Laboratories Co.  " Ultra lab medical laboratory "		Sudan	40.0%	40.0%
Golden Care for Medical Services		Egypt	25.0%	25.0%
Alborg Laboratory Company		Egypt	0.7%	0.7%

 

The summarised financial information of these subsidiaries is provided below. This information is based on amounts before inter-company eliminations.

 

	Medical Genetic Center EGP'000	Al Makhbariyoun Al Arab Group (Hashemite Kingdom of Jordan) EGP'000	SAMA Medical Laboratories Co.  "Ultralab medical laboratory " EGP'000	Alborg Laboratory Company EGP'000	Golden Care for Medical Services EGP'000	Other individually subsidiaries EGP'000		Intra-Group eliminations EGP'000		Total EGP'000
Summarised statement of profit or loss for 2015:
Revenue	12,468	73,523	24,518	433,944	-	126,063			670,516
Profit	3,818	10,894	4,720	135,008	4,905	29,626			188,971
Other comprehensive income	-	3,016	850	-	-	(297)			3,569
Total comprehensive income	-	3,016	850	-	-	(297)			3,569
Profit allocated to non-controlling interest	1,719	4,358	1,888	956	1,226	199	(247)		10,099
Other comprehensive income allocated to non-controlling interest	-	1,033	340	-	-	70	-		1,443
Summarised statement of financial position as at 31 December 2015:
Non-current assets	920	35,038	4,612	126,539	935	81,428			249,472
Current assets	8,442	17,853	18,765	167,615	9,964	99,458			322,097
Non-current liabilities	(2)	-	-	(1,297)	-	(2,155)			(3,454)
Current liabilities	(3,239)	(12,046)	(14,368)	(97,957)	(144)	(66,903)			(194,657)
Net assets	6,121	40,845	9,009	194,900	10,755	111,828			373,458
Net assets attributable to non-controlling interest	2,756	16,338	3,604	1,379	2,689	(509)	20,616		46,873

 

	Medical Genetic Center EGP'000	Al Makhbariyoun Al Arab Group (Hashemite Kingdom of Jordan) EGP'000	SAMA Medical Laboratories Co.  "Ultralab medical laboratory " EGP'000	Alborg Laboratory Company EGP'000	Golden Care for Medical Services EGP'000	Other individually subsidiaries EGP'000	Intra-Group eliminations EGP'000		Total EGP'000
Summarised cash flow information for year ended 31 December 2015:
Operating	2,727	13,711	7,254	63,675	(771)	39,823			126,419
Investing	181	(5,665)	(1,228)	(2,968)	-	(30,224)			(39,904)
Financing	(2,759)	(9,019)	(1,390)	(73,933)	-	39,750			(47,351)
Net increase/(decrease) in cash and cash equivalents	149	(973)	4,636	(13,226)	(771)	49,349			39,164
Summarised statement of profit or loss for 2014:
Revenue	363,114	60,355	26,298	363,114	-	16,301		829,182
Profit	3,326	12,011	6,385	96,090	3,710	2,995		124,517
Other comprehensive income	-	922	(511)	-	-	607		1,018
Total comprehensive income	-	922	(511)	-	-	607		1,018
Profit allocated to non-controlling interest	1,497	4,804	2,554	680	928	(240)	(1,304)	8,919
Other comprehensive income allocated to non-controlling interest	-	554	(369)	-	-	306		491

 

	Medical Genetic Center EGP'000	Al Makhbariyoun Al Arab Group (Hashemite Kingdom of Jordan) EGP'000	SAMA Medical Laboratories Co.  "Ultralab medical laboratory " EGP'000	Alborg Laboratory Company EGP'000	Golden Care for Medical Services EGP'000	Other individually subsidiaries EGP'000	Intra-Group eliminations EGP'000	Total EGP'000
Summarised statement of financial position as at 31 December 2014:
Non-current assets	965	30,491	4,001	129,974	935	55,317		221,683
Current assets	8,148	14,229	13,724	158,786	6,507	49,283		250,677
Non-current liabilities	(4)	-	-	(1,560)	-	(50)		(1,506)
Current liabilities	(5,630)	(36,754)	(9,823)	(150,620)	(5,849)	(43,234)		(251,910)
Net assets	3,479	7,966	7,902	136,580	1,593	61,316		218,944
Net assets attributable to non-controlling interest	2,535	14,701	3,929	1,066	1,462	(2,197)	20,027	41,523
Summarised cash flow information for year ended 31 December 2014:
Operating	3,139	13,850	6,968	111,491	(1,037)	1,550		135,961
Investing	991	(6,252)	(607)	(5,866)	-	(672)		(12,406)
Financing	(2,714)	(2,719)	(914)	(93,031)	(3,326)	-		(102,704)
Net increase/(decrease) in cash and cash equivalents	1,416	4,879	5,447	12,594	(4,363)	878		20,851

9.   Expenses and other income

Included in profit and loss are the following:

	2015 EGP'000	2014 EGP'000
Impairment on trade and other receivables	9,230	7,556
Charge for increase in provisions	2,881	1,703
Operating lease payments (buildings)	22,278	17,989
Professional and advisory fees*	138,436	10,524
Amortisation	352	91,481
Depreciation	35,840	24,104
Total	209,017	153,357

* In the year professional and advisory fees included EGP 125 million relating to the costs for the IPO. No shares were issued on IPO and so all costs have been expensed.

9.1.    Auditor's remuneration

The group paid or accrued the following amounts to its auditor and its associates in respect of the audit of the financial statements and for other services provided to the group

	2015	2014
	EGP'000	EGP'000
Audit of these financial statements	821	-
Amounts receivable by the company's auditor and its associates in respect of:
Audit of financial statements of subsidiaries of the company	629	614
Audit-related assurance services	1,040	-
Other assurance services	1,994	1,645
	4,484	2,259

9.2.    Net finance costs

Finance cost	2015 EGP'000	2014 EGP'000
Finance charges payable under finance leases	(5,725)	(395)
Net foreign exchange loss	-	(8,590)
Bank Charges	(655)	(215)
	(6,380)	(9,200)
Finance income
Interest income	9,930	5,956
Gains on sale of financial investments in investment funds	-	38
Net foreign exchange gain	3,482	-
	13,412	5,994
Net finance income/(expense)	7,032	(3,206)

9.3.    Employee numbers and costs

The average number of persons employed by the Group (including directors) during the year and the aggregate payroll costs of these persons, analysed by category, were as follows:

		2015			2014
	Medical		Administration	Total		Medical	Administration	Total
Average number of employees	3,917		406	4,323		3,680	348	4,028

 

	2015 EGP'000			2014  EGP'000
Wages and salaries	148,604	43,229	191,833	120,144	34,219	154,363
Social security costs	9,238	1,818	11,056	5,526	1,305	6,831
Contributions to defined contribution plan	2,216	386	2,602	1,893	354	2,247
Equity settled shared based payments	-	1,034	1,034	-	-	-
Total	160,058	46,467	206,525	127,563	35,878	163,441

 

Details of Directors' and Key Management remuneration and share incentives are disclosed in the Remuneration Report and note 26.

10. Income tax

a)   Amounts recognised in profit or loss

	2015 EGP'000		2014 EGP'000
Current tax:
Current year	(108,128)		(121,944)
Deferred tax:
Effect of reduction in tax rate to 22.5%	13,139		-
Deferred tax arising on change in tax legislation relating to undistributed reserves in subsidiaries	(22,614)		-
Relating to origination and reversal of temporary differences		(1,918)	16,353
Tax expense recognised in profit or loss		(119,521)	(105,591)

b)   Reconciliation of effective tax rate

The Company is treated as a tax resident of Jersey for the purpose of Jersey tax laws and is subject to a tax rate of 0%. The current income tax charge for the Group represents tax charges on profits arising in Egypt, Jordan and Sudan.  The significant profits arising within the group subject to corporate income tax are generated from the Egyptian operations and subject to 22.5% (2014: 30%) tax rate. The reconciliation of effective income tax rate has been performed using this rate.

	2015	2014
	EGP'000	EGP'000
Profit before tax	274,493	247,279
Profit before tax multiplied by rate of corporation tax in Egypt of 22.5% (2014: 30%)	61,761	74,184
Effect of tax rate in Jersey of 0% (2014: 0%)	27,985	-
Effect of tax rates in Jordan and Sudan of 15% (2014: 15%)	(805)	(3,497)
Tax effect of:
Unrecognised tax losses	-
Change in unrecognized deferred tax assets	(1,476)	(1,419)
Deferred tax arising on undistributed reserves	22,614	-
Reduction in tax rate on deferred tax balances	(13,139)	-
Non-deductible expenses for tax purposes - employee profit share	7,549	7,531
Non-deductible expenses for tax purposes - other	15,032	28,792
Tax expense recognised in profit or loss	119,521	105,591

Deferred tax

Deferred tax relates to the following:

	2015				2014
	Assets EGP'000	Liabilities EGP'000			Assets EGP'000	Liabilities EGP'000
Property, plant and equipment	-		(5,668)		-	(3,990)
Intangible assets	-		(102,113)		-	(115,158)
Undistributed reserves from group subsidiaries*	-		(22,614)		-	-
Provisions	1,968		-		2,114	-
Net deferred tax liability			(128,427)			(117,034)

* Undistributed reserves from group subsidiaries

The Group's dividend policy is to distribute any excess cash after taking into consideration all business cash requirements and potential acquisition considerations. The expectation is to distribute profits held within subsidiaries of the Group in the near foreseeable future. During 2015 the Egyptian

Government imposed a tax on dividends at a rate of 5% of dividends distributed from Egyptian entities. As a result a deferred tax liability has been recorded for the future tax expected to be incurred from undistributed profits held within the Group which will be taxed under the new legislation imposed and were as follows:

	2015 EGP'000
Al Mokhtabar Company for Medical Labs	8,859
Alborg Laboratory Company	5,776
Integrated Medical Analysis Company	2,192
Molecular Diagnostic Center	2,724
Golden Care for Medical Services	677
Medical Genetics Center	236
Al Makhbariyoun Al Arab Group	2,150
	22,614

Reconciliation of deferred tax liabilities, net

	2015	2014
	EGP'000	EGP'000
Net tax which creates a liability at the end of the period	(128,427)	(117,034)
Less:
Net tax resulting in tax liability at the beginning of  period	117,034	133,387
Deferred tax (expense)/income	(11,393)	16,353

Unrecognized deferred tax assets

The following deferred tax assets were not recognized due to the uncertainty that those items will have a future tax benefit:

	2015 EGP'000	2014 EGP'000
Impairment of trade receivables (Note 17)	17,030	12,138
Impairment of other receivables (Note 17)	10,110	9,036
Provision for legal claims (Note 22)	2,967	2,372
	30,107	23,546
Unrecognized deferred tax asset based on enacted tax rate 2015: 22.5% (2014: 30%)	6,774	7,064

Tax Status

A) Amendments to Egyptian Tax law

The profits of Egyptian subsidiaries within the Group are subjected to corporate tax according to income tax law No. 91 of 2005 and the general applicable tax rate on all Egyptian corporations is 25%. However, the Egyptian Government imposed an additional 5% tax on corporations with income in excess of EGP 1.0 million beginning on January 1, 2014. Accordingly, we applied this tax rate in 2014. The Egyptian Government reduced the tax rate to 22.5% beginning in January 2015, and the Egyptian Government imposed tax on dividends paid by the company to its shareholders (non-resident natural persons and to corporate bodies, whether resident or non-resident) will be subject to withholding tax at a rate determined by the percentage of an investor's shareholding in the Issuer, except for dividends in the form of bonus shares. Shareholders holding 25% or more of the Issuer's share capital or voting rights will be subject to tax on dividends at a rate of 5% of the distributed dividend (without deducting any costs or expenses), provided they hold the shares for minimum two years Shareholders holding less than 25% of the Issuer's share capital or voting rights will be subject to tax on dividends at a flat rate of 10% (without deducting any costs or expenses), which have been applied accordingly when calculating current and deferred tax in 2015.

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 subject to tax in Jersey at 0% in accordance with Jersey law.

11. Earnings per share (EPS)

Basic EPS is calculated by dividing the profit for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year. There are no dilutive effects from ordinary share and no adjustment required to weighted-average numbers of ordinary shares.

The following table reflects the income and share data used in the basic and diluted EPS computation:

	2015 EGP'000	2014 EGP'000
Profit attributable to ordinary equity holders of the parent for basic earnings	144,873	132,769
Weighted average number of ordinary shares for basic and dilutive EPS	150,000	150,000
Basic and dilutive earnings per share (expressed in EGP)	0.97	0.89

There is no dilutive effect from equity settled share based payment arrangements detailed in note 20. Shares issued by the Company under the arrangement will be purchased from the market on the award date and no shares are held in treasury.

12. Property, plant and equipment

	Land & Buildings EGP'000	Medical, electric & information system equipment EGP'000	Leasehold       improvements EGP'000	Fixtures, fittings & vehicles EGP'000	Building & Leasehold improvements in construction EGP'000	Total EGP'000
Cost
At 1 January 2014	124,960	80,211	40,155	23,073	10,218	278,617
Additions	-	11,577	8,127	2,447	53,813	75,964
Disposals	-	(60)	(408)	(82)	-	(550)
Exchange differences	183	(86)	(96)	300	-	301
Transfers	3,960	1,712	4,546	-	(10,218)	-
At 31 December 2014	129,103	93,354	52,324	25,738	53,813	354,332
Additions	-	95,422	24,788	5,094	3,144	128,448
Disposals	-	(9,179)	(1,391)	(584)	-	(11,154)
Exchange differences	509	1,697	551	1,701	78	4,536
Transfers	38,000	15,459	-	-	(53,459)	-
At 31 December 2015	167,612	196,753	76,272	31,949	3,576	476,162
Depreciation and impairment
At 1 January 2014	14,089	48,263	15,901	8,005	-	86,258
Depreciation charge for the year	2,434	12,900	6,665	2,105	-	24,104
Exchange differences	59	(28)	(31)	96	-	96
At 31 December 2014	16,582	61,135	22,535	10,206	-	110,458
Depreciation charge for the year	2,600	21,390	9,726	2,124	-	35,840
Disposals	-	(7,588)	(1,335)	(367)	-	(9,290)
Exchange differences	149	466	162	500	-	1,277
At 31 December 2015	19,331	75,403	31,088	12,463	-	138,285
Net book value At 31 December 2015	148,281	121,350	45,184	19,486	3,576	337,877
At 31 December 2014	112,521	32,219	29,789	15,532	53,813	243,874

 

Leased equipment

EGP 74m of medical and electric equipment was supplied under finance lease arrangements during the year ended 31 December 2015. This equipment was supplied to service the Group's new state of the art Mega Lab, The Mega Lab. The equipment secures lease obligations, see note 25 for further details on the recognition and the leasing arrangement.

13. Intangible assets

 

	Goodwill EGP'000	Brand Name EGP'000	Customer list EGP'000	Supplier list EGP'000	Non to compete agreement EGP'000	Total EGP'000
Cost
At 31 December 2014	1,234,432	374,055	17,043	240,812	64,722	1,931,064
Effect of movements in exchange rates	(3,233)	971	-	-	-	(2,262)
At 31 December 2015	1,231,199	375,026	17,043	240,812	64,722	1,928,802
Amortisation and impairment
At 1 January 2014	-	-	11,766	176,846	42,132	230,744
Amortisation	-	-	4,925	63,966	22,590	91,481
At 31 December 2014	-	-	16,691	240,812	64,722	322,225
Amortisation	-	-	352	-	-	352
At 31 December 2015	-	-	17,043	240,812	64,722	322,577
Net book value
At 31 December 2015	1,231,199	375,026	-	-	-	1,606,225
At 31 December 2014	1,234,432	374,055	352	-	-	1,608,839

14. Goodwill and intangible assets with indefinite lives

Goodwill acquired through business combinations and intangible assets with indefinite lives are allocated to the Group's CGUs as follows:

 

	2015 EGP'000	2014 EGP'000
Molecular Diagnostic Center
Goodwill	1,849	1,849
	1,849	1,849
Medical Genetics Center
Goodwill	1,755	1,755
	1,755	1,755
Al Makhbariyoun Al Arab Group ("Biolab")
Goodwill	20,576	16,041
Brand name	9,965	7,769
	30,541	23,810
Golden Care for Medical Services ("Ultralab")
Goodwill	10,641	18,409
Brand name	1,677	2,902
	12,318	21,311
Alborg Laboratory Company ("Al-Borg")
Goodwill	497,275	497,275
Brand name	142,066	142,066
	639,341	639,341
Al Mokhtabar Company for Medical Labs ("Al-Mokhtabar")
Goodwill	699,102	699,102
Brand name	221,319	221,318
	920,421	920,420
Balance at 31 December	1,606,225	1,608,486

The Group performed its annual impairment test in October 2015. The Group considers the relationship between its market capitalisation and its book value, among other factors, when reviewing for indicators of impairment.

Key assumptions used in value in use calculations and sensitivity to changes in assumptions

 IDH instructed FinCorp Investment holding (referred to hereafter as "Fincorp") an independent financial advisor, to prepare an independent impairment assessment of the Group's CGUs. The assessment was carried out based on business plans provided by IDH.  These plans have been prepared based on criteria set out below: 

		Ultra Lab	Bio Lab	Al-Mokhtabar	Al-Borg
Annual revenue growth rates		9%	11%	8%	9%
Average revenue per branch		1,933	600	3,227	3,382
EGP'000
Average gross margin		53%	43%	63%	55%
Annual growth in costs		9%	11%	8%	9%
Terminal value growth rate from 1 January 2021		2%	2%	3%	3%
Discount rate		25.2%	18.5%	16.8%	16.8%

Fincorp has prepared discounted cash flow projections using the key assumptions above so as to be able to calculate the net present value of the asset in use and determine the recoverable amount. The projected cash flows from 2016- 2020 have been based on detailed forecasts prepared by management for each CGU and a terminal value thereafter. Management have used past experience and historic trends achieved in order to determine the key growth rate and margin assumptions set out above. The terminal value growth rate applied is not considered to exceed the average growth rate for the industry and geographic locations of the CGUs.

This recoverable amount is then compared to the carrying value of the asset as recorded in the books and records of IDH plc.  The discount rate is the pre-tax rate taking into account the risks of each CGU.

These risks include country risk, currency risk as well as the beta factor relating to the CGU and how it performs relative to the market. 

 The conclusions from the impairment review were that there was significant headroom within the forecasts and therefore no impairment is required.

15. Financial assets and financial liabilities

15.1. Financial assets and financial liabilities

The fair values of all financial assets and financial liabilities by class shown in the balance sheet are as follows:

	2015 EGP'000	2014 EGP'000
Loans and receivables
Cash and cash equivalent	387,716	252,110
Trade and other receivables	117,155	90,075
Total financial assets	504,871	342,185
Financial liabilities measured at amortised cost
Trade and other payables	151,320	124,157
Other interest-bearing loans and borrowings	-	45
Put option liability	64,069	50,420
Finance lease liabilities	74,569	1,440
Total financial liabilities	289,958	176,062
Total financial instruments	214,913	166,123

The fair values of all of the Group's financial instruments are the same as their carrying values. All financial instruments are deemed Level 3.

15.2. Financial instruments risk management objectives and policies

The Group's principal financial liabilities are trade and other payables, put option liability and finance lease liabilities. The Group's principal financial assets include trade and other receivables, and cash and short-term deposits that derive  directly from its operations.

The Group is exposed to market risk, credit risk and liquidity risk. The Group's overall risk management program focuses on the unpredictability of markets and seeks to minimize potential adverse effects on the Group's financial performance. The Group's senior management oversees the management of these risks. The Board of Directors reviews and agrees policies for managing each of these risks, which are summarised below.

The board provides written principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk, and credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.

Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, currency risk and other price risk, such as equity price risk and commodity risk. Financial instruments affected by market risk include loans and borrowings and deposits.   

The sensitivity analyses in the following sections relate to the position as at 31 December in 2015 and 2014. The sensitivity analyses have been prepared on the basis that the amount of net debt, the ratio of fixed to floating interest rates of the debt and the proportion of financial instruments in foreign currencies are all constant.

The analyses exclude the impact of movements in market variables on: the carrying values of pension and other post-retirement obligations; provisions; and the non-financial assets and liabilities of foreign operations.

The following assumptions have been made in calculating the sensitivity analyses:

Ø The sensitivity of the relevant statement of profit or loss item is the effect of the assumed changes in respective market risks. This is based on the financial assets and financial liabilities held at 31 December 2015 and 2014 including the effect of hedge accounting.

Ø The sensitivity of equity is calculated by considering the effect of any associated cash flow hedges and hedges of a net investment in a foreign subsidiary at 31 December 2015 for the effects of the assumed changes of the underlying risk.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. During the year ending 2015 the Group was not exposed to the risk of changes in floating interest rates. The only interest-bearing financial liabilities held by the Group at 31 December 2015 were for finance lease liabilities held and disclosed in note 25. The implicit interest rate for the finance leases in place was estimated to be 11.5%.

Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of an exposure will fluctuate because of changes in foreign exchange rates. The Group's exposure to the risk of changes in foreign exchange rates relates primarily to the Group's operating activities (when revenue or expense is denominated in a foreign currency) and the Group's net investments in foreign subsidiaries.

The group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US Dollar, Sudanese Pound and the Jordanian Dinar. Foreign exchange risk arises from future commercial transactions, recognized assets and liabilities and net investments in foreign operations. However, the management aims to minimize open positions in foreign currencies to the extent that is necessary to conduct its activities.

Management has set up a policy to require group companies to manage their foreign exchange risk against their functional currency. Foreign exchange risk arises when future commercial transactions or recognized assets or liabilities are denominated in a currency that is not the entity's functional currency.

The group has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk. Currency exposure arising from the net assets of the group's foreign operations is managed primarily through borrowings denominated in the relevant foreign currencies.

At year end, major financial assets / (liabilities) in foreign currencies were as follows (the amounts presented are shown in the foreign currencies):

	2015
	Assets '000			Liabilities '000		Net exposure '000
US Dollar	12,581			(1,958)		10,623
Euros	87			(126)		(39)
GBP	11			(8)		3
JOD	1,642			(5,425)		(3,783)
SDG	16,831			(17,652)		(821)
	2014
	Assets '000			Liabilities '000		Net exposure '000
US Dollar	15,389			(345)		15,044
Euros	1,176			(59)		1,117
JOD	300			(3,666)		(3,366)
SDG	9,630			-		9,630

 

The following is the exchange rates applied against EGP:
			Average rate for the year ended
			2015				2014
US Dollar			7.70				7.09
Euros			8.48				9.34
GBP			11.73				11.63
JOD			10.81				10.04
SAR			2.05				1.89
SDG			1.20				1.14
			Spot rate at the year ended against EGP
			31-Dec-15				31-Dec-14
US Dollar			7.78				7.15
Euros			8.46				8.68
GBP			11.52				11.11
JOD			10.90				10.11
SAR			2.07				1.9
SDG			1.28				1.1

At 31 December 2015, if the Egyptian Pounds had weakened / strengthened by 10% against the US Dollar with all other variables held constant, pre-tax profit for the year would have been increased / decreased by EGP 8,264k (2014: EGP 10,757k ) higher / lower, mainly as a result of foreign exchange gains/losses on translation of US dollar-denominated financial assets and liabilities.

At 31 December 2015, if the Egyptian Pounds had weakened / strengthened by 10% against the Jordanian Dinar with all other variables held constant, pre-tax profit for the year / period would have been increased / decreased by EGP (4,124)k (2014: EGP (3,403)k) higher / lower, mainly as a result of foreign exchange gains/losses on translation of JOD - denominated financial assets and liabilities.

At 31 December 2015, if the Egyptian Pounds had weakened / strengthened by 10% against the Sudanese Pound with all other variables held constant, pre-tax profit for the year / period would have been increased / decreased by EGP (105)k (2014: EGP 1,059k ) higher / lower, mainly as a result of foreign exchange gains/losses on translation of SDG -denominated financial assets and liabilities.

Price risk

The group does not have investments in equity securities or bonds and accordingly is not exposed to price risk related to the change in the fair value of the investments.

Credit risk

Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing activities, including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments.       

Credit risk is managed on group basis, except for credit risk relating to accounts receivable balances. Each local entity is responsible for managing and analysing the credit risk for each of their new clients before standard payment and delivery terms and conditions are offered. Credit risk arises from cash and cash equivalents, derivative financial instruments and deposits with banks and financial institutions, as well as credit exposures to customers, including outstanding receivables and committed transactions.

For banks and financial institutions, the Group is only dealing with the banks which have a high independent rating and a good reputation.

Trade receivables

Customer credit risk is managed by each business unit subject to the Group's established policy, procedures and control relating to customer credit risk management. Credit quality of a customer is assessed based on an individual credit limits are defined in accordance with this assessment. Outstanding customer receivables are regularly monitored at 31 December 2015.

An impairment analysis is performed at each reporting date on an individual basis for major clients. In addition, a large number of minor receivables are grouped into homogenous groups and assessed for impairment collectively. The calculation is based on actual incurred historical data. The Group does not hold collateral as security.

The maximum exposure to credit risk at the reporting date is the carrying value of each class of financial assets disclosed in Note 17.

Cash and cash equivalents

Credit risk from balances with banks and financial institutions is managed by the Group's treasury department in accordance with the Group's policy. Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counterparty. Counterparty credit limits are reviewed by the Group's Board of Directors on an annual basis, and may be updated throughout the year subject to approval of the Group's management. The limits are set to minimise the concentration of risks and therefore mitigate financial loss through a counterparty's potential failure to make payments.

The maximum exposure to credit risk at the reporting date is the carrying value of cash and cash equivalents disclosed in Note 18.

Liquidity risk

The Group's objective is to maintain a balance between continuity of funding and flexibility through the use of finance leases and loans.

The table below summarises the maturity profile of the Group's financial liabilities based on contractual undiscounted payments:

Year ended 31 December 2015	1 year or less EGP'000	1 to 5 years EGP'000	more than 5 years EGP'000	Total EGP'000
Obligations under finance leases	22,321	62,681	21,375	106,377
Put option liability	69,956	-	-	69,956
Trade and other payables	151,320	-	-	151,230
	243,597	62,681	21,375	327,653
Year ended 31 December 2014	1 year or less EGP'000	1 to 5 years EGP'000	more than 5 years EGP'000	Total EGP'000
Interest-bearing loans and borrowings	45	-	-	45
Obligations under finance leases	858	582	-	1,440
Put option liability	-	66,254	-	66,254
Trade and other payables	124,157	-	-	124,157
	125,060	66,836	-	191,896

Cash flow forecasting is performed in the operating entities of the group and aggregated by group finance. Group finance monitors rolling forecasts of the group's liquidity requirements to ensure it has sufficient cash to meet operational needs. Such forecasting takes into consideration the group's compliance with internal financial position ratio targets and, if applicable external regulatory or legal requirements - for example, currency restrictions.

The group's management retain cash balances in order to allow repayment of obligations in due dates, without taking into account any unusual effects which it cannot be predicted such as natural disasters. All suppliers and creditors will be repaid over a period of 45 days from the date of the invoice or the date of the commitment.

16. Inventories

	2015 EGP'000	2014 EGP'000
Chemicals and operating supplies	34,326	36,007
	34,326	36,007

During 2015, EGP 172,354k (2014: EGP 163,867k) was recognised as an expense for inventories carried at net realisable value. This was recognised in cost of sales.

17.       Trade and other receivables

	2015 EGP'000	2014 EGP'000
Trade receivables	100,033	74,427
Prepaid expenses	13,467	10,446
Receivables due from related parties	465	1,808
Other receivables	2,143	2,894
Accrued revenue	1,047	500
	117,155	90,075

For terms and conditions relating to related party receivables, refer to Note 26.

As at 31 December 2015, trade and other receivables with an initial carrying value of EGP 27,140k (2014: EGP 21,174k) were impaired and fully provided for. Below shows the movements in the provision for impairment of trade and other receivables:

	2015 EGP'000	2014 EGP'000
At 1 January	21,174	16,213
Net increase during the year	9,230	7,556
Utilised during the year	(2,921)	(2,486)
Unused amounts reversed	(343)	(109)
At 31 December	27,140	21,174

As at 31 December, the ageing analysis of trade receivables is as follows:

	Total   EGP'000		1 - 30 days   EGP'000	30-60 days   EGP'000	61-90 days   EGP'000	Over 90 days   EGP'000
2015	100,033		29,508	28,774	20,668	21,083
2014	74,427		25,698	11,293	9,896	27,540

18. Cash and cash equivalent

	2015 EGP'000	2014 EGP'000
Cash at banks and on hand	124,332	66,334
Short-term deposits	263,384	185,776
	387,716	252,110

EGP 16,166K (2014: EGP 10,896K) of total cash and cash equivalents are held in subsidiaries operating in Sudan. Prior approval is required to transfer these funds abroad.

Cash at banks earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying periods of between one day and three months, depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates ranging from 7%- 8% per annum.

19.       Share capital

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

	Ordinary shares 31 December 2015	Ordinary shares 31 December 2014
In issue at beginning of the year	150,000,000	-
Issued during the year	-	150,000,000
In issue at the end of the 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. This created a share premium of $130,026,958 equivalent to EGP 929,693,000.

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.

Capital reserve

Balances have arisen in the capital reserve when the Group's previous parent company, Integrated Diagnostics Holdings LLC - IDH (Caymans) arranged its own acquisition by Integrated Diagnostics Holdings PLC, a new legal parent. The balances arising represent the difference between the value of the equity structure of the previous and new parent companies. When the capital position of the parent company is rearranged, the capital reserve is adjusted appropriately such that the equity balances presented in the Group accounts best reflect the underlying structure of the Group's capital base.

Legal reserves

Legal reserve was formed based on the legal requirements of the Egyptian law governing the Egyptian subsidiaries. According to the Egyptian subsidiaries' article of association 5% (at least) of the annual net profit is set aside to from a legal reserve. The transfer to legal reserve ceases once this reserve reaches 50% of the entity's issued capital. If the reserve falls below the defined level, then the entity is required to resume forming it by setting aside 5% of the annual net profits until it reaches 50% of the issued share capital. 

Put option reserve

Through acquisitions made within the Group, put option arrangements have been entered into to purchase the remaining equity interests in subsidiaries from the vendors at a subsequent date. At acquisition date an initial put option liability is recognised and a corresponding entry recognised within the put option reserve. After initial recognition the accounting policy for put options is to recognise all changes in the carrying value of the liability within put option reserve. When the put option is exercised by the vendors the amount recognised within the reserve will be reversed.

Translation reserve

The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries, including gains or losses arising on net investment hedges.

20. Equity settled share based payment arrangements

The Company has established annual equity awards for the Chairman and Chief Executive Officer. The Chairman and Chief Executive Officer receive annually the number of ordinary shares in the Company equal to US$75,000 and EGP 450,000 (at the prevailing USD:EGP conversion rate on the date of grant), respectively and is deemed to be the fair value of the arrangement. In each case, the number of shares attributable to the award will be calculated by dividing the notional dollar amount of the award (pro-rated as necessary to reflect their actual service in their first and last years of service) by a reference price. In the case of their first award, the reference price shall be the price at which the ordinary shares were acquired by new investors in the Company's IPO. For each subsequent financial year of service, the reference price shall be the average quoted closing price of the ordinary shares on the London Stock

Exchange over the last 30 days of that financial year (provided that, if such 30 day period would otherwise fall within a close period, the Company's board of directors shall determine the appropriate reference period in its absolute discretion).

The grant and vesting of each Annual Award and the release of any shares will be subject to such other conditions as the Company may determine in its absolute discretion after prior discussion with the Executives. The first Annual Award to be made under this agreement has been granted by year end.

21. Distributions made and proposed

	2015 EGP'000	2014 EGP'000
Cash dividends on ordinary shares declared and paid:
Dividend paid	-	229,714
	-	229,714
Proposed dividends on ordinary shares:
Final dividend for the year 2015: US$0.06 per share (2014: nil) per share	70,020	-

The proposed 2015 dividend on ordinary shares are subject to approval at the annual general meeting and is not recognised as a liability as at 31 December 2015.

22.   Provision

	Egyptian Government Training Fund for employees EGP'000		Provision for legal claims EGP'000		Total EGP'000
At 1 January 2015	6,606		2,372		8,978
Provision made during the year	1,389		1,492		2,881
Provision used during the year	-		(891)		(891)
Provision reversed during the year	-		(6)		(6)
At 31 December 2015	7,995		2,967		10,962
Current	-		-		-
Non- Current	7,995		2,967		10,962
		Egyptian Government Training Fund for employees EGP'000		Provision for legal claims EGP'000		Total EGP'000
At 1 January 2014		5,579		2,603		8,182
Provision made during the year		1,027		676		1,703
Provision used during the year		-		(35)		(35)
Provision reversed during the year		-		(872)		(872)
At 31 December 2014		6,606		2,372		8,978
Current		-		-		-
Non- Current		6,606		2,372		8,978

Employees training provision

The provision for employees training fund have been provided for in accordance with the Egyptian law and regulations.

Legal claims provision

The amount comprises the gross provision in respect of legal claims brought against the Group. Management's opinion, after taking appropriate legal advice, is that the outcome of these legal claims will not give rise to any significant loss beyond the amounts provided as at 31 December 2015.

23. Trade and other payables

	2015 EGP'000	2014 EGP'000
Trade payables	70,743	59,351
Accrued expenses	73,747	57,738
Other payables	6,830	7,068
Put option liability	64,069	-
Finance lease liabilities	14,242	858
	229,631	125,015

24. Long-term financial obligations

	2015 EGP'000	2014 EGP'000
Put option liability	-	50,420
Finance lease liabilities (see note 25)	60,327	582
	60,327	51,002

Through acquisitions made within the Group, put option arrangements have been entered into to purchase the remaining equity interests in subsidiaries from the vendors at a subsequent date. At acquisition a put option liability has been recognised for the net present value for the exercise price of the option.

25. Commitments and contingencies

Operating lease commitments

Non-cancellable operating lease rentals are payable as follows:

	2015 EGP'000	2014 EGP'000
Less than one year	21,706	20,033
Between one and five years	68,817	73,680
More than five years	37,450	50,644
	127,973	144,357

The Group lease certain branches for the operation of the business. During the year EGP 22,278K was recognised as an expense in the income statement in respect of operating leases (2014: EGP 17,989K).

Finance lease 

The Group has finance leases for various items of plant and machinery. Future minimum lease payments under finance leases and hire purchase contracts, together with the present value of the net minimum lease payments are, as follows:

	2015 EGP'000		2014 EGP'000
Finance lease liability - laboratory equipment	74,023		858
Finance lease liability - other	461		582
	74,484		1,440

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

	Minimum lease payments	Interest	Principal
	2015 EGP'000	2015 EGP'000	2015 EGP'000
Less than one year	21,860	7,965	13,895
Between one and five years	62,681	20,290	42,391
More than five years	21,375	3,638	17,737
	105,916	31,893	74,023

The Group entered into 2 significant agreements during the period ended 31 December 2015 to service the Group's new state-of-the-art Mega Lab.

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 legally 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 units of production method as this most closely reflects the consumption of the benefits from the equipment.

Contingent liabilities

There are no contingent liabilities relating to the group's transactions and commitment with banks.

26. Related party disclosures

The significant transactions with related parties, their nature volumes and balance during the period 31 December 2015 and 2014 are as follows:

31-Dec-15

Related Party

Nature of transaction

Nature of relationship

Transaction amount in the year EGP'000

Amount due from EGP'000

Health-care Tech Company

Expenses paid on behalf

Affiliate*

75

188

Life Scan (S.A.E)

Expenses paid on behalf

Affiliate**

277

277

Integrated Treatment for Kidney Diseases (S.A.E)

Entity owned by Company's CEO

-

Rental income

274

Total

465

 

31-Dec-14

Related Party

Nature of transaction

Nature of relationship

Transaction amount in the year EGP'000

Amount due from EGP'000

Health-care Tech Company

Expenses paid on behalf

Affiliate

75

113

Integrated Treatment for Kidney Diseases (S.A.E)

Bank transfers Value of assets and expenses paid on behalf

Entity owned by Company's CEO

1,695

1,695

Total

1,808

* Health-care Tech is a company whose shareholders include Dr. Seham Ibrahim (a member of the Senior Management)

** Life Scan is a company whose shareholders include Dr. Alaa Abd El-Rehim (a member of the Senior Management)

Terms and conditions of transactions with related parties

The transactions with the related parties are made on terms equivalent to those that prevail in arm's length transactions. Outstanding balances at the year-end are unsecured and interest free and settlement occurs in cash. There have been no guarantees provided or received for any related party receivables or payables. For the year ended 31 December 2015, the Group has not recorded any impairment of receivables relating to amounts owed by related parties (2014: nil). This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates.

IDH commits up to 1% of the net after-tax profit of the subsidiaries Al Borg and Al Mokhtabar to the Moamena Kamel Foundation for Training and Skill Development. Established in 2006 by Dr. Moamena Kamel, a Professor of Pathology at Cairo University and founder of IDH subsidiary Al-Mokhtabar Labs and mother to the CEO Dr. Hend El Sherbini. The Foundation allocates this sum to organizations and groups in need of assistance. The foundation deploys an integrated program and vision for the communities it helps that include economic, social, and healthcare development initiatives. In 2015 EGP 800,000 (2014: EGP 1,998,000) was paid to the foundation by the IDH Group.

Compensation of key management personnel of the Group

The amounts disclosed in the table are the amounts recognised as an expense during the reporting period related to key management personnel.

	2015 EGP'000	2014 EGP'000
Short-term employee benefits	17,252	18,540
Share-based payment transactions	1,034	-
Total compensation paid to key management personnel	18,286	18,540

 

27. Establishment of saving fund to employees

The Al Borg Laboratory Company's board of directors on 8 October 2006 approved unanimously to establish an employees' saving fund according to the provisions of Egyptian law No. 54 for the year 1975 on private insurance funds with the following conditions and terms:

Ø The participation by the employee in the Fund is optional and only for the company's permanent employees.

            The employees saving fund will be financed as follows:

- 10 % calculated monthly of annual basic salaries and incentives and contributed for by the Company.

- 2.5 % calculated monthly of annual basic salaries and incentives, and contributed for by the employees.

Ø The benefits and collection of contributions (source of financing the Fund) starts from 1/1/2007.

The subscribed employees in the fund will obtain the following benefits: The employee or his heirs will be reimbursed for the contribution he/she made to the Fund upon end of his service- for any reason of the following reasons (either total or partial disability or reach the age of retirement or death, or retirement after three years from the date the employee started his/ her contributions to the fund) plus his share of the company's contributions and his/her share in return of the Fund's investment.

At 31 December 2015 EGP 274K (2014: EGP 237K) was held in trade and other payables in relation to this fund.