Integrated Diagnostics Holdings Plc

FY 2021 Results

Thursday, 21 April 2022

Integrated Diagnostics Holdings Plc concludes outstanding 2021 reporting revenues in excess of EGP 5 billion and record-high margins

(Cairo and London) - Integrated Diagnostics Holdings ("IDH," "the Group," or "the Company"), a leading consumer healthcare company with operations in Egypt, Jordan, Sudan and Nigeria, released today its audited financial statements and operational performance for the year ended 31 December 2021, reporting revenue of EGP 5,225 million, up 97% compared to FY 2020. Profitability came in at an all-time high, with adjusted EBITDA1 growing 116% year-on-year to record EGP 2,530 million, and net profit recording a 145% year-on-year increase to reach EGP 1,493 million in FY 2021. In the final quarter of the year, IDH reported revenue of EGP 1,458 million, 48% above the previous year's figure, and net profit of EGP 345 million, up 47% from the comparable three month period of 2020. It is important to note that information in relation to the Company's full year results has been extracted from our audited annual report. Meanwhile, disclosures and statements in respect of quarterly information are unaudited.

In light of IDH's outstanding performance for the twelve months ended 31 December 2021, IDH's board of directors has recommended a dividend distribution of EGP 2.17 per share, or EGP 1.3 billion in aggregate, to shareholders (exact US dollar amount is subject to the exchange rate at the time of the upstreaming from the subsidiaries to the holding company). This represents a significant increase compared to a final dividend of US$ 29.1 million distributed for the previous financial year.

Financial Results (IFRS)

EGP mn	Q4 2020	Q4 2021	Change	FY 2020	FY 2021	Change
Revenues	986	1,458	48%	2,656	5,225	97%
Cost of Sales	(474)	(821)	73%	(1,314)	(2,421)	84%
Gross Profit	513	638	24%	1,343	2,804	109%
Gross Profit Margin	52%	44%	-8.3 pts	51%	54%	3.1 pts
Adjusted Operating Profit2	410	468	14%	986	2,292	132%
Adjusted EBITDA1	460	537	17%	1,171	2,530	116%
Adjusted EBITDA Margin	47%	37%	-9.8 pts	44%	48%	4.4 pts
Net Profit	234	345	47%	609	1,493	145%
Net Profit Margin	24%	24%	-	23%	29%	5.6 pts
Cash Balance	877	2,350	168%	877	2,350	168%

Note (1): Adjusted operating profit, EBITDA and adjusted EBITDA are measures utilized by management in assessing performance of the group. These adjusted measures eliminate the one off impacts of items in the year to provide a measure of underlying performance. EBITDA is an important measure as it shows the performance of the Group and the Group's ability to reinvest funds generated and this is a widely used term for acquisitive businesses such as ourselves.

Note (2): Throughout the FY 2021 Earnings release, percentage changes between reporting periods are calculated using the exact value (as reported in the Company's Consolidated Financials) and not the corresponding rounded figure.

Note (3): Quarterly results are unaudited.

Key Operational Indicators3

	FY 2020	FY 2021	change
Branches	481	502	21
Patients ('000)	7,113	10,317	45%
Revenue per Patient (EGP)	373	489	31%
Tests ('000)	27,073	33,659	24%
Revenue per Test (EGP)	98	150	53%
Test per Patient	3.8	3.3	-14%

 

¹Adjusted EBITDA is calculated as operating profit plus depreciation and amortization and excluding one-off fees incurred in FY 2021 (EGP 29.0 million) related to the Company's dual listing on the EGX completed in May 2021.

²Adjusted Operating Profit excludes one-off fees incurred in FY 2021 (EGP 29.0 million) related to the Company's dual listing on the EGX completed in May 2021.

³Key operational indicators are calculated based on net sales for the year of EGP 5,048 million. More details on the difference between net sales and total revenues is available below.

Important Notice: Treatment of Revenue Sharing Agreements and Use of Alternative Performance Measures

As part of IDH's efforts to support local authorities in Egypt and Jordan in the fight against the pandemic, Biolab (IDH's Jordanian subsidiary) secured several revenue-sharing agreements to operate testing stations, primarily dedicated to PCR testing for Covid-19, in multiple locations across the country including Queen Alia International Airport (QAIA) and Aqaba Port. Under these agreements, Biolab receives the full revenue (gross sales) for each test performed and pays a proportion to QAIA (38% of gross sales) and Aqaba Port (36% of gross sales) as concession fees to operate in the facilities, thus effectively earning the net of these amounts (net sales) for each test supplied. During Q3 2021, management had reported the net sales generated from these contracts. The treatment has been altered during Q4 2021 in accordance with IFRS 15 paragraph B34, which considers Biolab as a Principal (and not an Agent). Subsequently, revenues generated from these agreements are reported in the Consolidated Financial Statements as gross (inclusive of concession fees) and the fees paid to QAIA and Aqaba Port are reported as a separate line item in the direct cost.

For IFRS purposes Biolab is considered the principal in this relationship and record the full amount received as revenue. For internal purposes management considers the net amount earned to be net sales, and have therefore included this measure as an "alternative performance measure" (APM) alongside the IFRS measure when describing the business' performance. The decision to present APMs reflects the Directors' view that they provide the user of the accounts with additional information to the IFRS information reported to help understand the performance of the business, and is consistent with how the Company's performance is reviewed internally. Moreover, it allows further comparability when describing the performance of the Group's regions and year-on-year analysis.

Throughout the report, management utilizes net sales of EGP 5,048 million for FY 2021 (IFRS revenues stand at EGP 5,225 million for the year), and cost of net sales of EGP 2,244 million (IFRS cost of sales recorded EGP 2,421 million). Net sales for the period are calculated as total gross revenues (IFRS compliant measure) excluding concession fees and sales taxes paid as part of Biolab's revenue sharing agreements with Queen Alia International Airport (QAIA) and Aqaba Port.

It is important to note that aside from revenue and cost of sales, all other figures related to gross profit, operating profit, EBITDA, and net profit are identical in the APM and IFRS calculations. However, the margins related to the aforementioned items differ between the two sets of performance indicators due to the use of Net Sales in the APM calculations and the use of Revenues for the IFRS calculations. More specifically, under the APM, in FY 2021 IDH reported a gross profit margin on net sales of 56%, an EBITDA margin on net sales of 50%, and a net profit margin on net sales of 30%. Under the IFRS regime, gross profit margin recorded 54%, EBITDA margin stood at 48%, and net profit margin recorded 29%. Furthermore, this amendment has no impact on the prior year reported revenues.

Adjustments Breakdown

EGP mn	Q4 2021	FY 2021
Net Sales	1,281	5,048
QAIA and Aqaba Port Concession Fees	177	177
Revenues	1,458	5,225
Cost of Net Sales	(644)	(2,244)
Adjustment for QAIA, and Aqaba Port Agreements	(177)	(177)
Cost of Sales	(821)	(2,421)

 

 

 

 

 

Adjustments by Country

EGP mn	Q4 2021 (IFRS)	Q4 2021 (APM)	FY 2021 (IFRS)	FY 2021 (APM)
Egypt	986	986	4,108	4,108
Jordan	454	277	1,046	869
Nigeria	13	13	54	54
Sudan	4	4	17	17
Group total	1,458	1,281	5,225	5,048

 

 

Alternative Performance Measures (APM)

EGP mn	Q4 2020	Q4 2021	Change	FY 2020	FY 2021	Change
Net Sales	986	1,281	30%	2,656	5,048	90%
Cost of Net Sales	(474)	(644)	36%	(1,314)	(2,244)	71%
Gross Profit	513	638	24%	1,343	2,804	109%
Gross Profit Margin on Net Sales	52%	50%	-2.2 pts	51%	56%	5.0 pts
Adjusted Operating Profit*	410	468	14%	986	2,292	132%
Adjusted EBITDA**	460	537	17%	1,171	2,530	116%
Adjusted EBITDA Margin on Net Sales	47%	42%	-4.7 pts	44%	50%	6.1 pts
Net Profit	234	345	47%	609	1,493	145%
Net Profit Margin on Net Sales	24%	27%	3.2 pts	23%	30%	6.6 pts
Cash Balance	877	2,350	168%	877	2,350	168%

*Adjusted Operating Profit excludes one-off fees incurred in FY 2021 (EGP 29.0 million) related to the Company's dual listing on the EGX completed in May 2021.

**Adjusted EBITDA is calculated as operating profit plus depreciation and amortization and excluding one-off fees incurred in FY 2021 (EGP 29.0 million) related to the Company's dual listing on the EGX completed in May 2021.

Note (1): Adjusted operating profit, EBITDA and adjusted EBITDA are measures utilized by management in assessing performance of the group. These adjusted measures eliminate the one off impacts of items in the year to provide a measure of underlying performance. EBITDA is an important measure as it shows the performance of the Group and the Group's ability to reinvest funds generated and this is a widely used term for acquisitive businesses such as ourselves.

Note (2): Quarterly results are unaudited.

 

 

Important notice: A reconciliation between IFRS and APM measures is provided earlier in this announcement.

 

Introduction

 

i.    Financial Highlights

·    Net Sales surpassed the EGP 5 billion mark to record EGP 5,048 million in FY 2021, representing a 90% year-on-year expansion. Net sales growth for the year was dual driven, with total tests performed increasing 24% year-on-year and average price per test expanding 53% versus FY 2020. Consolidated net sales were supported by strong demand for both IDH's Covid-19-related4 and conventional tests portfolios, with the segments contributing to 51% and 49% of consolidated FY 2021 net sales, respectively. Covid-19-related tests witnessed high demand throughout FY 2021, supported by rising infection rates in the first half of the year and the widespread lifting of travel bans in the second half of 2021. On the conventional tests front, demand recorded a sustained recovery following the Covid-19-related slowdown experienced in the previous year, with conventional test net sales expanding 22% versus FY 2020, and coming in 13% above pre-covid levels recorded in FY 2019. On a quarterly basis, net sales stood at EGP 1,281 million in Q4 2021, up 30% versus Q4 2020.

·    It is important to note that within the Covid-19-related tests classification, the Company includes both "core Covid-19 tests" (Polymerase Chain Reaction (PCR), Antigen, and Antibody) as well as other routine inflammatory and clotting markers including, but not limited to, Complete Blood Picture, Erythrocyte Sedimentation Rate (ESR), D-Dimer, Ferritin and C-reactive Protein (CRP), which the Company opted to include in the classification as "other Covid-19-related tests" due to the strong rise in demand for these tests witnessed following the outbreak of Covid-19. During the twelve months to 31 December 2021, core Covid-19 tests made up 44% of the Company's consolidated net sales, while other Covid-19-related tests made an 8% contribution to consolidated net sales for the year.

·    Throughout the year, IDH's ability to effectively ramp up its house call capabilities in both Egypt and Jordan, saw the service make a significant contribution to consolidated net sales. More specifically, net sales generated from the service expanded an impressive 87% year-on-year in FY 2021, with its contribution to total net sales standing at 20%, unchanged from the previous year. It is worth highlighting that tests performed through IDH's house call service, are offered at the same price as at traditional branches, with an additional house call delivery fee charged to patients to cover the chemist transportation costs.

·    Gross Profit grew 109% year-on-year in FY 2021 to record EGP 2,804 million. Gross Profit Margin on net sales stood at 56%, a solid five percentage point expansion compared to the previous twelve months. Improved gross profitability continued to be supported by strong net sales growth and the subsequent dilution of fixed costs for the year such as direct salaries and wages and other expenses. On a three-month basis, gross profit came in at EGP 638 million in Q4 2021, representing a 24% increase from Q4 2020. Gross profit margin on net sales for the quarter recorded 50% versus 52% in the same three months of 2020 and 58% during Q3 2021. Lower gross profit margins versus both periods reflects a decline in the average price of Covid-19-related tests during the quarter as well as lower demand for Covid-19-related tests as the spike in demand from passengers traveling abroad  witnessed in the third quarter of 2021 subsided.

·    Adjusted Operating Profit5 recorded EGP 2,292 million, up 132% year-on-year. Adjusted operating profit margin on net sales stood at 45% for the year, up eight percentage points from FY 2020. Strong operating profit growth came on the back of solid gross profitability for the year, and was further buoyed by the normalisation of provisions booked in FY 2021, which stood at EGP 25 million down from the EGP 42 million recorded in FY 2020 to account for expected credit losses in accordance with IFRS 9.

·    Adjusted EBITDA6 increased 116% year-on-year in FY 2021 to reach EGP 2,530 million, while EBITDA margin on net sales expanded six percentage points to record 50% for the year. Strong EBITDA profitability was supported by the Company's strong net sales growth for the year and the subsequent dilution of its fixed costs. In Q4 2021, adjusted EBITDA recorded EGP 537 million, 17% above the previous year's figure and with an adjusted EBITDA margin on net sales of 42% for the quarter, down from 47% in Q4 2020 and 54% in Q3 2021. Lower margins versus both periods reflect relatively lower gross profitability combined with increased marketing and administrative expenses for the quarter.

·    Net Profit reached EGP 1,493 million in FY 2021, up 145% versus FY 2020. Net profit margin on net sales expanded seven percentage points from FY 2020 to record 30% for the year. The remarkable net profit growth comes on the back of strong EBITDA level profitability and despite the Company booking EGP 29 million in one-off fees related to its dual-listing in May 2021 as well as EGP 20 million in fees related to the IFC loan also secured in May 2021. In the last three months of the year, net profit recorded EGP 345 million, up 47% year-on-year and with an associated margin on net sales of 27% versus 24% in the same quarter of 2020.

·    Earnings per share stood at EGP 2.35 in FY 2021 compared to EGP 0.99 in FY 2020.

·    IDH's board of directors has recommended a dividend distribution of EGP 2.17 per share, or EGP 1.3 billion in aggregate, to shareholders in respect of the financial year ended 31 December 2021 (exact US dollar amount is subject to the exchange rate at the time of the upstreaming from the subsidiaries to the holding company). This represents a significant increase compared to a final dividend of US$ 29.1 million distributed for the previous financial year.

 

4Covid-19-related tests include both core Covid-19 tests (Polymerase Chain Reaction (PCR), Antigen, and Antibody) as well as other routine inflammatory and clotting markers including, but not limited to, Complete Blood Picture, Erythrocyte Sedimentation Rate (ESR), D-Dimer, Ferritin and C-reactive Protein (CRP), which the Company opted to include in the classification as "other Covid-19-related tests" due to the strong rise in demand for these tests witnessed following the outbreak of Covid-19.

5Adjusted Operating Profit excludes one-off fees incurred in FY 2021 (EGP 29.0 million) related to the Company's dual listing on the EGX completed in May 2021.

⁶Adjusted EBITDA is calculated as operating profit plus depreciation and amortization and minus one-off fees incurred in FY 2021 (EGP 29 million) related to the Company's EGX listing completed in May 2021.

 

 

ii.  Operational Highlights

·    IDH's branch network stood at 502 branches as at year-end 2021, up from 481 branches as of 31 December 2020.

·    Total tests performed increased 24% year-on-year to reach 33.7 million in FY 2021. Test volume growth was driven by both strong demand for IDH's Covid-19-related7 test offering, which nearly doubled versus the previous year, coupled with a 15% year-on-year increase in conventional tests performed. During the final quarter of the year, IDH performed 8.7 million tests, up 5% year-on-year.

·    Average revenue per test increased 53% year-on-year to EGP 150 in FY 2021. Controlling for the generally higher value Covid-19-related⁷ tests, average revenue per test increased 7% versus the previous year.

·    Total patients served surpassed the 10 million mark for the first time, reaching 10.3 million in FY 2021, an increase of 45% from the previous year. Average test per patient declined to 3.3 in FY 2021 from 3.8 in FY 2020 due to the increasing number of patients who visited the Group's labs for single Covid-19 tests (PCR, Antigen and Antibody) throughout the year.

·    In Egypt, IDH recorded revenue of EGP 4,108 million (contributing to 81% of IDH net sales), up 89% year-on-year in FY 2021 on the back of solid growth in both patient and test volumes. Revenue growth in IDH's home market was supported by both Covid-19-related⁷ and conventional tests, and was further boosted by the Group's house call service which in the twelve months ended on 31 December 2021 saw its revenue nearly double, contributing 23% of Egypt's revenues versus 22% in FY 2020. Throughout 2021, demand for conventional tests continued to recover following the Covid-19-related slowdown recorded in 2020, with conventional test revenue increasing 23% year-on-year on the back of a 15% year-on-year increase in conventional test volumes.

·    Al-Borg Scan recorded year-on-year revenue growth of 81%, with the venture's revenues reaching EGP 45 million in FY 2021. Revenue growth was supported by solid growth in volumes, with both tests performed and patients served standing 70% above the preceding year's figures. To capitalise on Al-Borg Scan's growing popularity, the Group inaugurated two Al-Borg Scan branches in the second half of 2021, and a third in March 2022. In the coming months, IDH is looking to inaugurate additional branches to expand its reach across Greater Cairo.

·    Wayak recorded strong year-on-year standalone revenue growth in FY 2021, which when combined with management's cost optimisation strategy continued to support a narrowing of the venture's standalone EBITDA losses in FY 2021 versus the previous year.

·    Meanwhile, in Jordan net sales reached EGP 869 million (IFRS revenues8 recorded EGP 1,046 million in FY 2021), representing a 112% expansion versus the previous year. Strong growth for the year, saw the country's contribution to total consolidated net sales reach a record high of 17.2%, up from 15.4% in the previous twelve months. The impressive performance was supported by solid growth in both tests performed and average revenue per test. Covid-19-related tests made up 68% of the country's net sales with the contribution further bolstered by Biolab's multiple revenue-sharing partnerships. In particular, Biolab's agreement with Queen Alia International Airport (QAIA) generated c. EGP 185 million in the five months from August to December 2021, contributing to 21% of the country's total net sales for the year. In parallel, demand for Biolab's conventional test offering rose steadily throughout the year, with the number of conventional tests performed and net sales generated during FY 2021 increasing 28% and 26% year-on-year, respectively.

·    In Georgia, where Biolab has partnered with Georgia Healthcare Group (GHG) to establish a 7,500 sqm Mega Lab, the ramp up phase is progressing as scheduled, with Biolab concluding the roll out of the new Laboratory Information Management System (LIMS) across all of GHG's 76 medical facilities (7 hospitals and 69 clinics) in 1H 2021. The Mega Lab is the region's largest diagnostic medical laboratory which will leverage the advanced technological systems provided by Biolab to connect more than 40 hospitals and diagnostic centers that are part of GHG's network. As compensation for the LIMS roll out, Biolab has received an 8.025% equity interest in Mega Lab. Moreover, in exchange for management services, which Bio Lab will be supplying for a two-year period with the option to extend, the company will receive an annual fee as well as a fixed percentage of Mega Lab's annualized EBITDA.

·    IDH's Nigerian operations reported year-on-year revenue growth of 49% in FY 2021, on the back of a 16% and 31% year-on-year rise in patients served and tests performed, respectively. Consistent revenue growth coupled with successful cost optimisation efforts implemented by the venture's new management team, see Echo-Lab on track to turn EBITDA positive in early 2022.

·    In Sudan, despite the operational difficulties and heightened uncertainty faced throughout the past year, operations are continuing without major interruptions. While results for the year were significantly impacted by the devaluation of the Sudanese Pound in February 2021, in local currency terms, IDH's Sudanese operations reported year-on-year revenue growth of 159%, as management continued to successfully raise test prices in step with inflation.

 

⁷Covid-19-related tests include both core Covid-19 tests (Polymerase Chain Reaction (PCR), Antigen, and Antibody) as well as other routine inflammatory and clotting markers including, but not limited to, Complete Blood Picture, Erythrocyte Sedimentation Rate (ESR), D-Dimer, Ferritin and C-reactive Protein (CRP), which the Company opted to include in the classification as "other Covid-19-related tests" due to the strong rise in demand for these tests witnessed following the outbreak of Covid-19.

8 Biolab's revenues for the period are calculated as net sales and including concession fees paid to QAIA and Aqaba Port as part of their revenue sharing agreements.

 

iii. Management Commentary

Commenting on the Group's full-year performance, IDH Chief Executive Officer Dr. Hend El-Sherbini said: "2021 was an exceptional year for IDH which saw our 5,000 employees serve more than 10 million patients and perform more tests than ever before, helping us deliver outstanding financial results. In parallel, we added new services to our roster, expanded our reach across both digital and physical channels, enhanced the overall experience of our patients, grew our footprint, and completed our dual-listing on the Egyptian Exchange, complementing our LSE listing. This saw us end the year having built new foundations on which to drive the next phase of growth across all our markets.

 

Heading into 2022, there are several exciting developments I am looking forward to across both new and existing markets. In Egypt and Jordan, we are aiming to capitalise on our market leading position, expanded product offering and patient base, increased service delivery capabilities, and growing visibility to continue delivering robust growth in the year ahead. In particular, we are eager to capitalise on the post-Covid-19 rebound in conventional testing as patients' focus shifts back to conventional healthcare as the threat of Covid-19 subsides. Moreover, across both markets, our attention will now pivot towards patient retention as well look to maintain the new relationships we were able to establish during the pandemic thanks to our Covid-19-dedicated offering. In Nigeria, thanks to the consistent revenue growth and the stellar work being done by Dr. Bhatia and his team to streamline operations, Echo-Lab is on track to turn EBITDA positive in 2022. We are confident that the investments undertaken since the acquisition of Echo-Lab back in 2018 have built a stronger, leaner, and growth-oriented business which is well-placed to take full advantage of the significant growth opportunities offered Nigeria's diagnostics market.

 

In the first few months of the new year, globally we have been confronted with a new set of challenges related to the long-term economic spill overs of the pandemic coupled with the impacts of the ongoing Russia-Ukraine war. Supply chain issues, fast-rising consumer demand, and the increased volatility in commodity prices which has been exacerbated by the ongoing war in Eastern Europe, are continuing to push up prices, with countries around the world recording inflation figures not seen for many years. In light of rising inflation, central banks around the world have commenced a cycle of monetary tightening, with many raising interest rates for the first time in years. Here in Egypt, on 21 March 2022, the Central Bank raised policy rates by 100bps and allowed the Egyptian Pound to devalue by more than 17% against the US Dollar. Despite the heightened uncertainty following the announcement, we are confident that our proven track record in navigating similar turbulent times and the strong mitigation frameworks we have in place provide ample protection from the short and longer-term impacts of the decision."

 

- End -

Analyst and Investor Call Details

An analyst and investor call will be hosted at 2pm (UK) | 3pm (Egypt) on Tuesday, 26 April 2022. You can access the call by clicking on this link, and you may dial in using the conference call details below:

 

• Event number: 2379 872 7421

• Event password: 2FHc5saY2Cn

 

For more information about the event, please contact: halaa@EFG-HERMES.com 

 

About Integrated Diagnostics Holdings (IDH)

IDH is a leading consumer healthcare company in the Middle East and Africa with operations in Egypt, Jordan, Sudan and Nigeria. The Group's core brands include Al Borg, Al Borg Scan and Al Mokhtabar in Egypt, as well as Biolab (Jordan), Ultralab and Al Mokhtabar Sudan (both in Sudan) and Echo-Lab (Nigeria). A long track record for quality and safety has earned the Company a trusted reputation, as well as internationally recognised accreditations for its portfolio of over 2,000 diagnostics tests. From its base of 502 branches as of 31 December 2021, IDH will continue to add laboratories through a Hub, Spoke and Spike business model that provides a scalable platform for efficient expansion. Beyond organic growth, the Group's expansion plans include acquisitions in new Middle Eastern, African, and East Asian markets where its model is well-suited to capitalise on similar healthcare and consumer trends and capture a significant share of fragmented markets. IDH has been a Jersey-registered entity with a Standard Listing on the Main Market of the London Stock Exchange (ticker: IDHC) since May 2015 with a secondary listing on the EGX since May 2021 (ticker: IDHC.CA).

 

Shareholder Information

LSE: IDHC.L

EGX: IDHC.CA

Bloomberg: IDHC:LN

Listed on LSE: May 2015

Listed on EGX: May 2021

Shares Outstanding: 600 million

 

Contact

Nancy Fahmy

Investor Relations Director

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

 

Forward-Looking Statements

These results for the year ended 31 December 2021 have been prepared solely to provide additional information to shareholders to assess the group's performance in relation to its operations and growth potential. These results should not be relied upon by any other party or for any other reason. This communication contains certain forward-looking statements. A forward-looking statement is any statement that does not relate to historical facts and events, and can be identified by the use of such words and phrases as "according to estimates", "aims", "anticipates", "assumes", "believes", "could", "estimates", "expects", "forecasts", "intends", "is of the opinion", "may", "plans", "potential", "predicts", "projects", "should", "to the knowledge of", "will", "would" or, in each case their negatives or other similar expressions, which are intended to identify a statement as forward-looking. This applies, in particular, to statements containing information on future financial results, plans, or expectations regarding business and management, future growth or profitability and general economic and regulatory conditions and other matters affecting the Group.

 

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

 

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

Important notice: A reconciliation between IFRS and APM measures is provided earlier in this announcement.

 

Chairman's Message

 

I am pleased to report that despite the continued operational challenges posed by Covid-19, your Company delivered an outstanding performance in 2021, providing its services to a record number of patients, while laying new foundations from which to generate sustainable growth in the coming years.

 

Record-Breaking Results

In our seventh year as a publicly listed company on the London Stock Exchange, we were proud to see our revenue surpass EGP 5 billion for the first time, growing year-on-year by over 90%.

 

Leveraging  on our expanded service offerings, we attracted a record number of patients to our laboratories, serving over 10 million patients in 2021.

 

In both Egypt and Jordan, we continued to honour our responsibility as a leading healthcare provider, assisting local authorities tackle the pandemic and supporting the recovery of international travel.

 

During the year, we performed more than 2.6 million PCR, antigen, and antibody tests, and continued to improve our delivery capabilities to bring our services to as many people as possible.

 

We also achieved a robust recovery in our conventional business offerings, which now exceeds our pre-Covid-19 levels enhancing our long established track record in our core business.

 

In Nigeria, following our restructuring of the business and with our strong management team we achieved solid and sustainable results. We are expecting Echo-Lab to turn EBITDA positive in the coming months.

 

A Forward-looking Business

As firm believers in proactive healthcare, at IDH we take pride in our ability to deliver service excellence today, while always keeping an eye to the future. Throughout the year, we continued to invest in developing all aspects of our business, from adding new services to our portfolio and world-class doctors to our team, to expanding our delivery channels and enhancing our digital infrastructure.

 

We have successfully expanded our house call services.

 

We have also accomplished steady growth of our radiology venture, Al-Borg Scan.

 

In the ever burgeoning data analytics business environment, we are exploring ways to utilize our vast database to develop new services increasingly tailored to patients' individual needs.

 

We continue to ensure strict data privacy and remain vigilant in strengthening our IT infrastructure to proactively address all cybersecurity risks.

 

Expanding our Footprint

Your Company continues to enjoy strong organic growth momentum while  constantly evaluating potential M&A opportunities across new African, Middle Eastern, and Asian markets.

 

On this front, we look forward to potentially adding Pakistan to our footprint and commencing our partnership with Islamabad Diagnostics Centre and Dr. Uppal once all pending conditions precedent are satisfied. The combination of our two businesses will see us well-placed to meet the country's growing healthcare needs.

 

Environmental, Social, and Governance (ESG)

We are proud to have published our first Sustainability Report and are cognizant of our social responsibilities while seeking  to constantly monitor and address all areas of ESG within the business in Egypt and elsewhere in our offices around the world.

 

Management regularly monitors and revises our risk matrix and heat map to ensure we have  the right checks and balances in place and ensuring business continuity processes.

 

A United Team

We have benefitted hugely over the past three years  having most of our team working out of our headquarters in Cairo's Smart Village.

 

We value our loyal and hard-working workforce and constantly review their KPIs to help them progress professionally in line with their ambitions while providing a long-term incentive programme (LTIP) starting 2022.

 

We have also recently expanded and strengthened your Company's Board of Directors, welcoming Yvonne Stillhart as a Non-Executive Director. Yvonne brings a wealth of experience across multiple sectors, and replaces James Nolan who stepped down in September of last year.

 

We are enormously grateful to James for his excellent service and wise counsel to IDH.

 

Broadening our Shareholder Base

IDH's shares are now listed  on both the London Stock Exchange and Egyptian Stock Exchange. We are confident that this will expand our shareholder base to include local institutional and retail investors in Egypt, while increasing liquidity and visibility in our largest market.

 

In 2022 we also welcomed IFC as a strategic shareholder, and look forward to carrying on working closely together to continue meeting the strong demand for healthcare services across our footprint.

 

As our countries of operation prepare to transition into a post-Covid-19 world, your Company is well positioned to maintain growth and profitability and continue delivering exceptional and consistent value to patients and shareholders.

 

Lord St John of Bletso

Chairman

 

Important notice: A reconciliation between IFRS and APM measures is provided earlier in this announcement.

 

Chief Executive's Review

 

2021 was an exceptional year for IDH which saw our 5,000 employees serve more than 10 million patients and perform more tests than ever before, helping us deliver outstanding financial results. In parallel, we added new services to our roster, expanded our reach across both digital and physical channels, enhanced the overall experience of our patients, grew our footprint, and completed our dual-listing on the Egyptian Exchange, complementing our LSE listing. This saw us end the year having built new foundations on which to drive the next phase of growth across all our markets.

 

Similar to the previous year, 2021 was heavily impacted both economically and socially by Covid-19, as countries around the world combatted various waves of new infections and confronted multiple new variants. Despite this, 2021 was also a turnaround year for the fight against the pandemic as vaccines were gradually rolled out and governments and individuals became increasingly willing to coexist with the virus, driving widespread economic recovery from the previous year's lows.

 

In the midst of a challenging operating environment, we displayed a remarkable ability to adapt to changing market and demand dynamics and consistently cater to the evolving needs of our growing patient base, ensuring we continue to provide our communities with access to high quality, affordable healthcare and diagnostic services. Over the past twelve months, we continued to effectively care for both our conventional and Covid-19 patients leveraging an expanded branch network, a ramped-up house call service, and a growing digital presence to make our services increasingly accessible and our payment methods increasingly convenient. Our efforts translated in significant improvements in our patients' overall experience, with the Group's net promoter score for the year recording consistently above the 80 mark, ahead of last year's value and well above industry averages.

 

During 2021, we continued to serve our Covid-19 patients by ensuring we were well-equipped to handle peaks in demand when infection rates increased, while promptly adapting our offering to the requirements of patients. In the twelve months to 31 December 2021, we performed over 2.6 million PCR, antigen and antibody tests, continuing to provide patients and healthcare workers with a trustworthy first line of defence against the virus. At the same time we secured multiple partnerships with international air carriers and regional healthcare providers like National Aviation Services (NAS) Kuwait and Pure Health UAE to conduct PCR testing for passengers traveling from Egypt to other regional destinations. We also offered PCR testing for passengers on a walk-in basis, and were the first lab in Egypt to provide QR codes on travel certificates. This enabled us to not only to play an important role in supporting the recovery of international travel, but also ensured that we successfully captured a leading market share for the service.

 

In parallel, despite the challenges posed by the pandemic, we never lost sight of the needs of our conventional patients, continuing to care for them even at the height of the Covid-19 crisis. Our efforts focused on expanding our service offering and delivery capabilities, as well as organising special campaigns to raise healthcare awareness specifically targeting patients suffering from chronic diseases, a particularly vulnerable category in light of the ongoing pandemic.

 

Throughout the year, we also devoted increasing attention and resources towards developing our digital infrastructure to expand our reach, provide new services to our patients, and improve their overall experience. Highlights for the year included the roll out of multiple new patient touch points including a revamped IDH app, a new chatbot function, as well as an additional call centre. At the same time, we also made it increasingly convenient for our patients to pay for our services.

 

Record-breaking Growth and Operational Results

Our ability to transform the business in step with changing demand dynamics enabled us to build on an already strong 2020, to deliver a formidable set of operational and financial results in 2021. More specifically, in the twelve months to 31 December 2021, we recorded consolidated revenue of EGP 5.2 billion, up 97% year-on-year and representing the highest full-year revenue figure on record. Meanwhile, net sales expanded an impressive 90% from the previous year, coming in at EGP 5.0 billion in FY 2021. Net sales growth for the year was dual driven, as we performed 24% more tests than in the previous year and recorded a 53% year-on-year rise in average price per test versus 2020.

 

Throughout the year, consolidated net sales was supported by strong demand for both our Covid-19-related  and conventional tests portfolios, with each segment contributing to around half of consolidated net sales for the year. On the conventional tests front, demand recorded a sustained recovery following the Covid-19-related slowdown experienced in the previous year, with conventional test net sales expanding 22% versus 2020, and coming in a noteworthy 13% above pre-Covid-19 levels recorded in 2019.

 

Volume and net sales growth for the year also reflected our ongoing investments to expand our delivery capabilities, which over the course of 2021 saw us grow our patient reach across both traditional branches and our house call service. On the one hand, we inaugurated 23 new branches in Egypt and an additional branch in Jordan, taking the total number of operational branches as at year-end 2021 to 502. Our ability to consistently rollout new branches within and outside the Greater Cairo area currently sees us operate the largest network of branches amongst private players in the country, enabling us to strengthen our brand name and maintain our leadership position in the market. Moreover, it is also important to note that our Mega Lab, which continues to be the sole CAP-accredited facility in Egypt, typically operates at around 55% of its maximum capacity leaving abundant room for further growth. In 2021, we also continued to work closely with local authorities in Egypt to obtain the necessary certifications to take part in the government's Universal Healthcare Insurance (UHI) system which is being rolled out across the entire country. As at year-end 2021, IDH had 13 out of the 19 UHI-accredited labs in the country, with several more of our labs looking to obtain accreditation in the coming year. On the other hand, in response to the growing demand for our house call services in both Egypt and Jordan, we continued to ramp up our house call capabilities. In our home market of Egypt, where sample collected directly in patient homes made up 23% of the country's revenues for the year, we added a second call centre, expanded our house call team to an average of 400 chemists, and streamlined logistics to further decrease turnaround times. On this last point, we were particularly happy to note our success in keeping turnaround times strictly below 24 hours even throughout the multiple peaks in infection rates witnessed in 2021. Our ability to effectively ramp up the service to match its growing popularity is enabling us to perform over five thousand house visits per day, the most out of any other player in the market, and process over ten thousand calls each day.

 

Regionally, in Egypt, as with the consolidated performance, our revenues were supported by both our Covid-19-related test offering, which in 2021 made up 49% of the country's revenues, as well as the country's conventional test offering, which made up the remaining 51%. During the year, we continued to lead the market in terms of core Covid-19 tests performed, further testament to the high quality of our offering and the extensive reach of our services. At the same time, we observed a sustained recovery in our conventional business, with revenues generated by conventional tests increasing a solid 23% versus the previous year supported by a 15% rise in conventional tests performed and a 7% expansion in average revenue per conventional test.

 

Egypt's revenues were further buoyed by revenues generated by our house call service, which expanded an impressive 94% versus 2020, contributing an additional EGP 935 million to the country's total revenues for the year. Meanwhile, at our fast-growing radiology venture, Al-Borg Scan, we witnessed a solid 81% year-on-year increase in revenue to EGP 45 million supported by a 70% year-on-year rise in both tests performed and patients served, which recorded 78 thousand and 62 thousand, respectively. I am particularly happy to note the growing success of Al-Borg Scan, which is helping us to capitalise on the important growth opportunities offered by Egypt's fragmented radiology market while delivering on our vision of providing patients with a one-stop-shop service offering featuring both pathology and radiology. To capitalise on the rising patient demand for our radiology services, we inaugurated two new Al-Borg Scan branches in 2021 and a third in March 2022. In the coming months, we plan to continue launching additional branches, further expanding our reach across Great Cairo.  Finally, it is also worth highlighting Wayak's growing market traction, with the venture continuing to expand its patient base and product offering. The company's EBITDA losses have narrowed significantly and management has ambitious plans to build on this momentum by rolling out multiple new services in 2022.

 

Jordan was the standout performer for the year, with Biolab reporting year-on-year net sales  growth of 112% and contributing a record share of consolidated net sales at 17.2%. During the year, Covid-19-related tests contributed to 68% of Biolab's net sales as the venture continued to record strong demand at both its regular branches and across its testing booths located in the country's main airports and ports. In fact, Covid-19-related net sales in Jordan was boosted by strong contributions from Biolab's new partnership with Queen Alia International Airport, King Hussain International Airport, and Aqaba Port. As part of these agreements, Biolab has been operating testing stations across all three locations primarily focused on offering PCR testing for Covid-19 to passengers arriving in Jordan. Through these initiatives, Biolab was able to continue playing a frontline role in the country's fight against the pandemic and simultaneously expand its patient base and reach across new segments of the population. Meanwhile, we were also very pleased to note the robust recovery in Biolab's conventional test net sales, which increased 26% year-on-year on the back of a solid rise in conventional tests performed.

 

In Nigeria, we continued to record steady revenue growth throughout the entire year on the back of growing test and patient volumes. In 2021, Echo-Lab's revenues expanded 49% year-on-year on the back of a 31% increase in tests performed coupled with a 14% rise in average revenue per test. Growing volumes continue to highlight the effectiveness of our investments to revamp Echo-Lab's operations and the success of our targeted marketing efforts. The consistent growth delivered by our Nigerian operations also reflect the incredible work done by Dr. Alok Bhatia, who joined Echo-Lab as CEO in March 2021. Dr. Bhatia and his team have brought the skills and expertise needed to deliver on our long-term vision for Echo-Lab and we look forward to reaping the rewards of their hard work in the coming years.

 

Finally, in Sudan our results for the year were heavily impacted by the devaluation of the Sudanese Pound in February 2021 as well as the rise in social and political unrest witnessed in the final months of the year. However, management's continued success in raising prices in step with inflation, saw revenue in local currency terms grow an impressive 159% in 2021. It is also worth highlighting that despite the operational difficulties and heightened uncertainty faced throughout the past year, operations are continuing without major interruptions.

 

Further down the income statement, we reported impressive margin expansions at all levels of profitability supported by strong revenue growth and the subsequent dilution of IDH's fixed costs. More specifically gross profit for the year more than doubled with a five-point margin expansion. Meanwhile, EBITDA adjusted for one-off listing fees expanded 116% with a margin on net sales of 50%, up six percentage points from 2020 (adjusted EBITDA margin on revenues stood at 48% in FY 2021). Strong adjusted EBITDA level profitability supported a 145% year-on-year expansion in net profit which reached EGP 1,493 million in 2021. Net profit margin on net sales expanded seven percentage points versus 2020 to record 30% for the year (net profit margin on revenues stood at 29% in FY 2021). It is worth highlighting that the remarkable net profit growth comes despite the Company booking EGP 29 million in one-off fees related to our dual-listing as well as EGP 20 million in fees related to the IFC loan secured in May of last year.

 

Expanding Our Footprint

While effectively serving our patients and delivering exceptional results across our existing geographies, we also worked to expand our footprint into new territories. On this front, in December 2021, we signed a sale and purchase agreement to acquire 50% of Islamabad Diagnostic Centre (IDC), one of Pakistan's largest, most respected, and fastest growing integrated diagnostics companies, for a total consideration of USD 72.35 million. The deal, which is currently pending regulatory approval, would see us partner with IDC's founder and CEO, Dr Rizwan Uppal, and acquire a stake in an established provider with a strong track-record, solid financial performance, and an ambitious growth plan. The transaction will see us add a fifth country to our footprint and help us further diversify our revenue base in line with our long-term strategy. IDC will be fully consolidated on IDH's accounts following the completion of the transaction and the transfer of funds to the Evercare Group. Under the agreement, IDH will hold four of the seven seats on IDC's board. The transaction, which is subject to the satisfaction of a number of conditions precedent should be completed later in 2022.

 

With a population of over 200 million, 63% of which is under the age of 30, Pakistan boasts an attractive demographic profile providing long-term sustainable demand for quality healthcare services. Meanwhile, like many of the markets we currently operate in, its healthcare industry is characterised by a widening demand-supply gap for high quality healthcare services, a high degree of out-of-pocket payments (medical expenses not reimbursed by insurance), and increasingly favourable regulations aimed at encouraging private sector participation. Similar to our existing businesses, IDC boasts an established position in the Pakistani market with network of over 85 branches across 30 cities, and offers a full roster of pathology and radiology diagnostic services. These characteristics make IDC the perfect partner for IDH, and Pakistan an ideal location where our proven business model is well placed to drive new value and help meet the rising demand for high quality healthcare.

 

Dual-listing on the EGX

Adding to this past year's list of achievements, in May 2021 we successfully completed our dual-listing on the Egyptian Exchange (EGX), successfully meeting our goal of offering IDH's unique value proposition to the widest investor base possible. With our shares now listed on the both the LSE and the EGX and tradeable in a fully fungible manner, we have provided local retail and institutional investors as well as global emerging markets specialists who regularly invest through the EGX with the possibility to capitalize on our attractive growth profile. We remain optimistic that going forward investors will find having two venues on which to trade IDH shares increasingly useful, realizing our target of having a larger number of the Company's shares being traded on the EGX. 

 

Our Sustainability Journey

Across our operations, we continue to place a strong focus on strengthening our environmental, social and governance (ESG) monitoring and compliance frameworks to ensure we continue working to the betterment of our communities and safeguarding the interests of all our stakeholders. Throughout 2021, we devoted our attention to developing a more assertive road map that draws clear guidelines and methods to monitor, evaluate, and improve our sustainability practices. Under the guidance of a top-tier ESG consultant, we undertook a rigorous ESG assessment across all functions to highlight key sustainability initiatives while identifying areas of improvement. This allowed us to set the foundation for future ESG implementation by internally mapping key performance indicators to the newly developed sustainability framework. As a critical sector, the healthcare industry stands at the threshold of each of the UN's Sustainable Development Goals (SDGs). Throughout our operations, we have direct impacts on a number of key SDGs, and indirectly impact multiple others. Through our Sustainability Report, we were able to successfully share with our peers and wider community our contributions across all 17 SDGs, providing stakeholders with a clear framework to benchmark our contributions and hold us accountable in the years to come.

 

In a world where investment decisions are being taken with an increasing focus on the ESG profile of a company, we have provided investors with an in-depth analysis of our ESG performance, facilitating their due diligence processes. On this front, we have dedicated a chapter of the report to address our investors' inquiries related to our ESG performance and strategy, aligning ourselves with the global action plan set by the Principles of Responsible Investment. As we leave 2021 behind us, we are proud of the progress made on this front, but remain cognizant that of the long road ahead of us. As we enter this exciting new chapter for IDH, we welcome all our stakeholders to share their insights and help us generate additional social and environmental value for our communities.

 

Throughout this process, we have been closely guided by our world-class Board of Directors, which has been overseeing all aspects of the business since our listing on the LSE in 2015. Our Board is composed in the majority by independent, non-executive directors and is backed by a robust and constantly enhanced policy framework. In early 2022, our Board of Directors was further strengthened with the appointment of Ms. Yvonne Stillhart, as a Non-Executive Director. Yvonne is a seasoned Senior Executive working with innovation and growth driven companies across a wide range of industries and geographical regions, including Europe, USA, North Africa and Sub-Saharan Africa.

 

Dividend Policy and Proposed Dividend

In view of the strong cash-generative nature of our business and its asset-light strategy, our dividend policy is to return to shareholders the maximum amount of excess cash after taking careful account of the cash needed to support operations and expansions. As such, IDH is delighted to recommend a final dividend in respect of the financial year ended 31 December 2021 of EGP 2.17 per share, or EGP 1.3 billion in aggregate. The equivalent value, which will depend on the exchange rate at the time of the upstreaming from the subsidiaries to the holding company, represents a significant increase from the dividend of US$ 29.1 million distributed for the previous financial year.

 

2022 Outlook

We kicked off 2022 recording another surge in Covid-19 infections across our markets as the highly-infective Omicron variant became increasingly prevalent. Throughout this new wave, in both Egypt and Jordan we continued to provide our patients with widespread access to Covid-19-related testing, helping to keep our communities safe and providing local authorities with vital support in the fight against the virus. In the final weeks of the first quarter, as vaccines continued to be rolled out, we witnessed a sustained decline in new infections with governments around the world signalling a strong will to transition into a post-Covid-19 normality. While the Group remains vigilant and ready to respond to possible new waves in infections, we are prepared and excited to kickstart our post-pandemic strategy and venture into a new chapter of sustainable growth. During the course of 2021, while our priority remained helping governments combat the Covid-19 pandemic, we also worked tirelessly to improve all aspects of the business and lay solid foundations on which to build out next phase of development and value creation.

 

Heading into 2022, there are several exciting developments I am looking forward to across both new and existing markets. In Egypt and Jordan, we are aiming to capitalise on our market leading position, expanded product offering and patient base, increased service delivery capabilities, and growing visibility to continue delivering robust growth in the year ahead. In particular, we are eager to capitalise on the post-Covid-19 rebound in conventional testing as patients' focus shifts back to conventional healthcare as the threat of Covid-19 subsides. Moreover, across both markets, our attention will now pivot towards patient retention as well look to maintain the new relationships we were able to establish during the pandemic thanks to our Covid-19-dedicated offering. On this front, we have recently launched a new dedicated loyalty programme in partnership with a leading loyalty solutions provider, and are working to roll out multiple new marketing campaigns making full use of our growing social media presence. In parallel, we are also leveraging our enhanced digital and data analytics capabilities to monitor patient records and disease cycles, and provide tailored services and increase cross-selling. Our efforts continue to ensure that our patients enjoy a hassle-free experience from start to finish, further enhancing their overall experience. At the same time, we are targeting the roll out of an additional 25 to 30 branches in and outside the Greater Cairo area, and continue to take advantage of the abundant spare capacity at our house call division to further scale up the service. In Nigeria, thanks to the consistent revenue growth and the stellar work being done by Dr. Bhatia and his team to streamline operations, Echo-Lab is on track to turn EBITDA positive in 2022. We are confident that the investments undertaken since the acquisition of Echo-Lab back in 2018 have built a stronger, leaner, and growth-oriented business which is well-placed to take full advantage of the significant growth opportunities offered Nigeria's diagnostics market. Finally, in Sudan, we are continuing to monitor the ongoing political and social instability and have put in place strong mitigation strategies to protect our people and operations.

 

Beyond our current markets, we are also looking forward to obtaining the remaining regulatory approvals and add Pakistan to our footprint. IDC is expected to generate substantial value from the very start and we are thrilled to kick off our partnership with Dr. Uppal in the coming months. In parallel, we will continue to assess other potential value-accretive acquisition opportunities both across new and existing markets in Africa, the Middle East, and Asia which present similar characteristics to our current markets and where our operational model would be best-suited to drive long-term value creation.

 

A Turbulent Start to the Year

In the first few months of the new year, globally we have been confronted with a new set of challenges related to the long-term economic spill overs of the pandemic coupled with the impacts of the ongoing Russia-Ukraine war. Supply chain issues, fast-rising consumer demand, and the increased volatility in commodity prices which has been exacerbated by the ongoing war in Eastern Europe, are continuing to push up prices, with countries around the world recording inflation figures not seen for many years. In light of rising inflation, central banks around the world have commenced a cycle of monetary tightening, with many raising interest rates for the first time in years.

 

Here in Egypt, on 21 March 2022, the Central Bank raised policy rates by 100bps and allowed the Egyptian Pound to devalue by more than 17% against the US Dollar. Despite the heightened uncertainty following the announcement, we are confident that our proven track record in navigating similar turbulent times and the strong mitigation frameworks we have in place provide ample protection from the short and longer-term impacts of the decision. Going forward, we will continue to keep a close eye on the evolving situation, and have taken proactive steps to build up our inventory to safeguard ourselves from any potential future disruptions.

 

I would like to conclude by thanking all my colleagues for their exceptional work over the course of the last year. 2021 was the outstanding year that it was in great part due to your relentless efforts to deliver on our vision and goals. I am honoured to have the opportunity to work with you, and I am confident that by working together we will be able to continue delivering exceptional value in 2022.

 

Dr. Hend El-Sherbini

Chief Executive Officer

 

 

 

Important notice: A reconciliation between IFRS and APM measures is provided earlier in this announcement.

 

Group Operational & Financial Review

 

i.    Revenue/Net Sales and Cost Analysis

 

Revenue/Net Sales Consolidated Analysis IDH reported total revenues of EGP 5,225 million in FY 2021, up 97% year-on-year. Consolidated net sales9 surpassed the EGP 5 billion mark, recording EGP 5,048 million in FY 2021, up 90% versus FY 2020. The remarkable growth was dual driven with tests performed during the year growing 24% and average price per test rising 53% year-on-year.   On a service basis, net sales growth was supported by both IDH's Covid-19-related10 and conventional test portfolios, both of which recorded growing demand during the period. IDH's Covid-19-related offering contributed to just over half of consolidated net sales in FY 2021 compared to the 24% contribution made in FY 2020. The segment witnessed high demand throughout the entire year, supported by rising infection rates in the first half of the year and the widespread lifting of travel bans in the second half of 2021.   In parallel, a steady recovery in demand for conventional tests, saw conventional net sales expand 22% year-on-year supported by a 15% year-on-year rise in tests performed and a 7% increase in average price per conventional test. Conventional test net sales for the year stood 13% above its pre-pandemic level, a testament to the Company's impressive ability to expand its service accessibility and delivery capabilities, to drive a rapid recovery across its conventional test portfolio despite the difficult operating conditions faced over the last two years.   On a quarterly basis, consolidated revenue recorded EGP 1,458 million, up 48% year-on-year, while net sales recorded EGP 1,281 million, up 30% year-on-year. Despite the strong growth versus the previous year, net sales for the quarter posted a 13% quarter-on-quarter decline. This was largely attributable to a 17% quarter-on-quarter decline in net sales generated by IDH's core Covid-19 tests, which recorded EGP 627 million in Q4 2021 versus EGP 760 million in Q3 2021. Falling Covid-19-related net sales reflect both a decrease in average price of Covid-19-related tests as well as lower demand generated by passengers traveling abroad as the surge in traveling-related demand witnessed in Q3 2021 following the lifting of travel bans subsided.   House Call Service The Group's consolidated net sales was buoyed by its house call services in Egypt and Jordan, which generated EGP 990 million in revenue in FY 2021, up 87% versus the previous year. By test type, in FY 2021 revenue net sales generated by core Covid-19 tests stood at EGP 544 million, making up 55% of total house call revenue for the year. Geographically, in Egypt house call services generated EGP 935 million in revenue, contributing 23% to the country's revenue. Meanwhile, In Jordan house call revenue stood at EGP 55 million, making up 6% of the country's revenue for the year. It is worth highlighting that in FY 2021, average net sales per house call test stood at EGP 202, significantly above the Group's average of EGP 150.

 

9 A reconciliation between revenue and net sales is available earlier in this announcement.

¹⁰ Covid-19-related tests include both core Covid-19 tests (Polymerase Chain Reaction (PCR), Antigen, and Antibody) as well as other routine inflammatory and clotting markers including, but not limited to, Complete Blood Picture, Erythrocyte Sedimentation Rate (ESR), D-Dimer, Ferritin and C-reactive Protein (CRP), which the Company opted to include in the classification as "other Covid-19-related tests" due to the strong rise in demand for these tests witnessed following the outbreak of Covid-19.

 

 

 

Detailed Consolidated Performance Breakdown

	Q1 2020	Q1 2021	Q2 2020	Q2 2021	Q3 2020	Q3 2021	Q4 2020	Q4 2021	FY 2020	FY 2021
Total net sales (EGP mn)	500	1,130	450	1,164	720	1,473	986	1,281	2,656	5,048
Total tests (mn)	6.1	8.1	5.1	8.3	7.5	8.6	8.3	8.7	27.1	33.7
Conventional test net sales (EGP mn)	495	594	367	594	568	667	577	597	2,007	2,452
Conventional tests performed (mn)	6.1	6.8	4.6	6.9	7.0	7.5	7.3	7.3	24.9	28.5
Total Covid-19-related test net sales (EGP mn)	5	536	83	569	152	806	409	684	649	2,596
Core Covid-19 tests (PCR, Antigen, Antibody) (EGP mn)	5	399	26	431	92	760	314	627	437	2,217
Core Covid-19 tests performed (k)	4	407	42	387	92	882	300	935	438	2,610
Other Covid-19-related tests (EGP mn)	0	137	57	138	60	47	95	58	213	379
Other Covid-19-related tests performed (k)	0	874	531	933	477	284	714	416	1,722	2,507
Contribution to consolidated results
Conventional test net sales	99%	53%	82%	51%	79%	45%	59%	47%	76%	49%
Conventional tests performed	100%	84%	89%	84%	92%	87%	88%	84%	92%	85%
Total Covid-19-related tests	1%	47%	18%	49%	21%	55%	41%	53%	24%	51%
Core Covid-19 tests (PCR, Antigen, Antibody)	1%	35%	6%	37%	13%	52%	32%	49%	16%	44%
Core Covid-19 tests performed	0%	5%	1%	5%	1%	10%	4%	11%	2%	8%
Other Covid-19-related tests	0%	12%	13%	12%	8%	3%	10%	5%	8%	8%
Other Covid-19-related tests performed	0%	11%	10%	11%	6%	3%	9%	5%	6%	7%

Note: Quarterly results included in the table above are unaudited.

Net Sales Analysis: Contribution by Patient Segment   Contract Segment Revenue generated by IDH's contract segment reached EGP 3,062 million in FY 2021, representing a 113% year-on-year increase versus the previous twelve months. Meanwhile, net sales generated by the Group's contract segment more than doubled year-on-year to record EGP 2,885 million in FY 2021 supported by a 25% increase in contract tests performed and a 61% rise in the average net sales per contract test. The segment's contribution to total net sales subsequently increased to reach 57% from 54% in FY 2020. Covid-19-related11 testing contributed 53% of contract net sales in FY 2021 as the Company continued to record strong patient demand in both Egypt and Jordan. Controlling for contributions made by Covid-19-related tests during the year, the contract segment would record a 23% year-on-year increase in conventional test net sales on the back of a 17% increase in tests performed and a 6% expansion in average net sales per test.   The contract segment's results include contributions from IDH's multiple partnerships to conduct PCR testing for passengers. More specifically, IDH's agreement with Pure Health UAE and with National Aviation Services Kuwait (NAS) generated EGP 89 million and EGP 91 million, respectively, in FY 2021. The number of PCR tests performed during the year as part of IDH's partnerships with Pure Health stood at 83 thousand, making up 7% of total PCR tests performed in Egypt for the year. Meanwhile, tests performed as part of the Company's agreement with NAS stood at 51 thousand, representing 4% of total PCR tests performed in Egypt during FY 2021.   In Jordan, the Group's partnership with Queen Alia International Airport (QAIA) generated net sales of EGP 185 million. As part of the agreement, Biolab carried out 503 thousand PCR tests, representing 41% of total PCR tests performed in Jordan for the year. At the same time, Biolab's agreements with Aqaba's King Hussein International Airport (KHIA) and Aqaba Port contributed an additional EGP 107 million to the segment. It is worth noting that Biolab's partnership with KHIA started in August 2020, followed by the company's agreement with Aqaba Port which kicked off in May 2021, and its partnership with QAIA which commenced in August 2021.   Walk-in Segment The Group's walk-in segment recorded revenue and net sales (IFRS and APM measures for walk-in segment were identical for the year) of EGP 2,162 million in FY 2021, up 77% versus the previous year. The year-on-year growth was supported by a 23% increase in tests performed and a 44% increase in average price per test. The segment's contribution to total net sales stood at 43% versus the 46% in FY 2020. Meanwhile, the contribution of Covid-19-related tests to the walk-in segment stood at 49% in FY 2021, compared to 26% in FY 2020. Excluding Covid-19-related contributions, conventional walk-in net sales recorded a 21% increase versus the previous year, as conventional walk-in tests volumes grew 9% year-on-year and net sales per conventional walk-in test increased 11% versus FY 2020.   11 Covid-19-related tests include both core Covid-19 tests (Polymerase Chain Reaction (PCR), Antigen, and Antibody) as well as other routine inflammatory and clotting markers including, but not limited to, Complete Blood Picture, Erythrocyte Sedimentation Rate (ESR), D-Dimer, Ferritin and C-reactive Protein (CRP), which the Company opted to include in the classification as "other Covid-19-related tests" due to the strong rise in demand for these tests witnessed following the outbreak of Covid-19.

Key Performance Indicators

	Walk-in Segment			Contract Segment			Total
	FY20	FY21	Change	FY20	FY21	Change	FY20	FY21	Change
Net sales^ (EGP mn)	1,222	2,162	77%	1,434	2,885	101%	2,656	5,048	90%
Total Covid-19-related net sales (EGP mn)	314	1,063	239%	335	1,533	357%	649	2,596	300%
Patients ('000)	2,288	3,464	51%	4,825	6,853	42%	7,113	10,317	45%
% of Patients	32%	34%		68%	66%
Net sales per Patient (EGP)	534	624	17%	297	421	42%	373	489	31%
Tests ('000)	7,052	8,693	23%	20,021	24,966	25%	27,073	33,659	24%
% of Tests	26%	26%		74%	74%
Total Covid-19-related tests ('000)	659	1,745	165%	1,501	3,372	125%	2,160	5,117	137%
Net Sales per Test (EGP)	173	249	44%	72	116	61%	98	150	53%
Test per Patient	3.1	2.5	-19%	4.1	3.6	-12%	3.8	3.3	-14%
Revenue Analysis: Contribution by Geography   Egypt In Egypt, IDH reported revenue of EGP 4,108 million, 89% above the previous year's figure and contributing to 81.4% of total net sales for the year. The impressive result was supported by a 21% year-on-year rise in test performed coupled with a 56% year-on-year increase in average revenue per test. As with the consolidated performance, Egypt's revenues were supported by both the Group's Covid-19-related12 test offering which in FY 2021 made up 49% of the Egypt's revenues, as well as the country's conventional test offering, which made up the remaining 51% of Egypt's revenues. When controlling for contributions made by Covid-19-related tests during the year, revenue generated by conventional tests increased a solid 23% versus the previous year supported by a 15% rise in conventional tests performed and a 7% expansion in average revenue per conventional test.   On a quarterly basis, net sales generated by IDH's Egyptian operations reached EGP 986 million in Q4 2021, up 29% versus the final three months of FY 2020. Despite the strong year-on-year rise, on a quarter-on-quarter basis, revenue declined 17% primarily driven by lower revenue generated by the Company's core Covid-19 test offering versus the previous quarter. Lower Covid-19-related revenue reflect a more than 21% quarter-on-quarter fall in the average price for core Covid-19 test during Q4 2021 coupled with lower demand from international travellers, which had boosted results in the third quarter following a widespread lifting of international travel restrictions.   House Call Service IDH's house call service in Egypt, which has been successfully ramped up to capitalise on the service's growing popularity, recorded revenue of EGP 935 million in FY 2021, up 94% year-on-year. The service's contribution to the country's revenues stood at 23% in FY 2021, versus the 22% contribution made in FY 2020. Core Covid-19 tests performed through its house call service made up 30% of total core Covid-19 tests performed by IDH in the country throughout the year. It is also important to note that, tests performed through IDH's house call service are offered at the same price as at traditional branches, with only an additional house call delivery fee charged to patients to cover the transportation costs of the chemist.   Al-Borg Scan IDH's fast-growing radiology venture, Al-Borg Scan, reported revenue of EGP 45 million in FY 2021, a solid 81% year-on-year increase. Revenue growth was supported by a 70% rise in both tests performed and patients served versus the previous year. To capitalise on Al-Borg Scan's growing popularity, the Group inaugurated two Al-Borg Scan branches in the second half of 2021, and a third in March 2022. In the coming months, IDH is looking to inaugurate additional branches to expand its reach across Greater Cairo.   Overall, IDH served 8.5 million patients in Egypt and performed 29.7 million tests in FY 2021, up 34% and 21% year-on-year, respectively.   12 Covid-19-related tests include both core Covid-19 tests (Polymerase Chain Reaction (PCR), Antigen, and Antibody) as well as other routine inflammatory and clotting markers including, but not limited to, Complete Blood Picture, Erythrocyte Sedimentation Rate (ESR), D-Dimer, Ferritin and C-reactive Protein (CRP), which the Company opted to include in the classification as "other Covid-19-related tests" due to the strong rise in demand for these tests witnessed following the outbreak of Covid-19.

Detailed Egypt Revenue Breakdown

EGP mn	Q1 2020	Q1 2021	Q2 2020	Q2 2021	Q3 2020	Q3 2021	Q4 2020	Q4 2021	FY 2020	FY 2021
Total Revenue	424	920	381	1,015	602	1,187	767	986	2,173	4,108
Conventional Revenue	424	507	314	510	482	573	493	513	1,713	2,103
Total Covid-19-related Revenue	0	414	67	504	120	614	273	474	460	2,005
Core Covid-19 tests (PCR, Antigen, Antibody)	0	277	10	366	60	567	178	416	248	1,626
Other Covid-19-related tests	0	137	57	138	60	47	95	58	213	379
Contribution to Egypt Net Sales
Conventional tests	100%	55%	82%	50%	80%	48%	64%	52%	79%	51%
Total Covid-19-related tests	0%	45%	18%	50%	20%	52%	36%	48%	21%	49%
Core Covid-19 tests (PCR, Antigen, Antibody)	0%	30%	3%	36%	10%	48%	23%	42%	11%	40%
Other Covid-19-related tests	0%	15%	15%	14%	10%	4%	12%	6%	10%	9%

Note: Quarterly results included in the table above are unaudited.

Jordan In Jordan, the Group recorded revenue of EGP 1,046 million in FY 2021, up 156% from the previous year. Meanwhile, IDH's Jordanian operations saw net sales13 more than double year-on-year to reach EGP 869 million for the year, up 113% versus FY 2020. Net sales growth was driven by an 75% increase in test performed coupled with a 21% rise in Biolab's average net sales per test. During the year, Covid-19-related tests contributed to 68% of Biolab's net sales and to 37% of its tests performed. Covid-19-related net sales in Jordan was boosted by contributions of EGP 185 million from Biolab's new partnership with QAIA coupled with the EGP 107 million in net sales coming from its partnerships with KHIA and Aqaba Port. As part of these agreements, Biolab has been operating testing stations across all three locations primarily focused on PCR testing for Covid-19 to passengers arriving in Jordan. The stations also offer additional diagnostic tests to patients including rapid PCR testing for Covid-19 for departing passengers and other, more generic diagnostic tests. Meanwhile, conventional test net sales increased 26% year-on-year on the back of a 28% increase in conventional tests performed. Meanwhile, the country's net sales continued to be supported by Biolab's house call service which generated EGP 55 million in net sales in FY 2021, up 12% year-on-year.   In Q4 2021, Jordan's net sales recorded EGP 277 million, representing a 45% increase from Q4 2020 and up 3% versus Q3 2021 (Jordan's revenues (IFRS) in Q4 2021 recorded EGP 454 million, up 137% versus Q4 2020). During the quarter, Biolab's partnership with QAIA generated EGP 101 million in net sales while net sales from its partnerships with KHIA and Aqaba Port stood at EGP 48 million. In Q4 2021, PCR tests performed as part of Biolab's agreement with QAIA recorded 278 thousand (55% of Jordan's total PCR tests for the quarter). In parallel, during the quarter Biolab performed 118 thousand PCR tests at KHIA and Aqaba Port, representing 23% of total PCR tests carried out by Biolab in the year. Robust volumes generated though these agreements more than offset a general decrease in demand for Covid-19-related testing as infection rates declined following the continued ramp up of the country's vaccination campaign.

Detailed Jordan Net Sales Breakdown

EGP mn	Q1 2020	Q1 2021	Q2 2020	Q2 2021	Q3 2020	Q3 2021	Q4 2020	Q4 2021	FY 2020	FY 2021
Total Net Sales	58	190	59	134	100	269	191	277	409	869
Conventional Net Sales	53	68	44	68	68	76	55	66	220	278
Total Covid-19-related Net Sales (PCR and Antibody)	5	122	16	65	32	192	136	211	189	591
Contribution to Jordan Net Sales
Conventional Net Sales	91%	36%	74%	51%	68%	28%	29%	24%	54%	32%
Total Covid-19-related Net Sales (PCR and Antibody)	9%	64%	26%	49%	32%	72%	71%	76%	46%	68%

Note: Quarterly results included in the table above are unaudited.

1³ Biolab's net sales for the period are calculated as revenues excluding concession fees paid to QAIA and Aqaba Port as part of their revenue sharing agreement.

Nigeria At the Group's Nigerian subsidiary, revenue expanded 49% year-on-year to reach EGP 54 million in FY 2021. Growth was even more pronounced in local currency terms with revenue up 53% year-on-year supported by a 31% year-on-year expansion in tests performed (patients served were up 16%) coupled with a 14% rise in average revenue per test. Over the last two years, Echo-Lab's has consistently delivered solid volume growth thanks to an effective revamp strategy which has involved the complete renovation of the venture's branches combined with the rollout of targeted marketing campaigns aimed at stimulating demand for the venture's services. Volumes for the year also benefitting from a gradual normalisation of traffic following the easing of restrictive measures enforced to curb the spread of Covid-19 throughout 2020.   In Q4 2021, IDH's Nigeria operations recorded year-on-year revenue growth of 18% to record EGP 13.4 million. As part of the venture's revamp strategy, Echo-Lab's management team was strengthened with several key hires. Most notably, Dr. Alok Bhatia, an industry expert with over 25 years of experience in the field, joined Echo-Lab as CEO in March 2021.   Sudan Finally in Sudan, IDH reported a 56% year-on-year contraction in revenue to EGP 17 million for the year. The country's results continue to be significantly impacted by the devaluation of the Sudanese pound in early 2021 with the average SDG/EGP rate in FY 2021 standing at 0.05 versus 0.29 in FY 2020. Nonetheless, management's continued success in raising prices in step with inflation throughout the year, saw revenue in local currency terms grow an impressive 159% in FY 2021.   Net Sales Contribution by Country FY 2020 FY 2021 Change Egypt Net Sales (EGP mn) 2,173 4,108 89% Covid-19-related (EGP mn) 460 2,005 335% Egypt Contribution 82% 81% Jordan Net Sales (EGP mn) 409 869 112% Covid-19-related (EGP mn) 189 591 213% Jordan Revenues (EGP mn) (IFRS) 409 1,046 156% Jordan Net Sales (JOD mn) 19 39 113% Jordan Revenues (JOD mn) (IFRS) 18 47 157% Jordan Contribution 15% 17% Nigeria Net Sales (EGP mn) 36 54 49% Nigeria Net Sales (NGN mn) 898 1,373 53% Nigeria Contribution 1% 1% Sudan Net Sales (EGP mn) 38 17 -56% Sudan Net Sales (SDG mn) 129 335 159% Sudan Contribution 1.4% 0.3% --- Patients Served and Tests Performed by Country FY 2020 FY 2021 Change Egypt Patients Served (mn) 6.3 8.5 34% Egypt Tests Performed (mn) 24.4 29.7 21% Covid-19-related tests (mn) 1.9 3.8 102% Jordan Patients Served (k) 550 1,627 196% Jordan Tests Performed (k) 2,011 3,529 75% Covid-19-related tests (k) 269 1,302 383% Nigeria Patients Served (k) 131 153 16% Nigeria Tests Performed (k) 215 281 31% Sudan Patients Served (k) 130 70 -46% Sudan Tests Performed (k) 409 182 -55% Total Patients Served (mn) 7.1 10.3 45% Total Tests Performed (mn) 27.1 33.7 24%   Branches by Country 31 December 2020 31 December 2021 Change Egypt 429 452 23 Jordan 20 21 1 Nigeria 12 10 -2 Sudan 20 19 -1 Total Branches 481 502 21   -Cost of Net Sales14 IDH's cost of net sales rose 71% year-on-year to record EGP 2,244 million15 in FY 2021, rising at a slower pace than the Group's revenue for the year. This supported a 109% year-on-year rise in IDH's gross profit for FY 2021 which recorded EGP 2,804 million. IDH's gross profit margin on consolidated revenue recorded 54% in FY 2021 versus 51% in the previous year. Meanwhile, gross profit margin on  net sales of 56% versus 51% in FY 2020.   Cost of Net Sales Breakdown as a Percentage of Net Sales FY 2020 FY 2021 Raw Materials 18.4% 19.6% Wages & Salaries 14.7% 12.6% Depreciation & Amortisation 6.1% 4.2% Other Expenses 10.3% 8.1% Total 49.5% 44.4%   Raw material costs, which include cost of specialized analysis at other laboratories, recorded EGP 987 million for the year, continuing to make up the largest share of total COGS at 44%. As a share of net sales, raw material costs increased to 19.6% in FY 2021 compared to 18.4% in the previous year. This increase is primarily attributable to higher raw material costs as a share of net sales recorded by Biolab, driven by both the retesting of Covid-19 positive cases in the first part of the year, and by additional fees incurred by the company as part of its revenue sharing agreement with QAIA. On a quarterly basis, raw material costs as a share of on net sales reached 23% in Q4 2021 versus 19% in Q3 2021. This is mainly attributable to IDH's Egyptian operations which saw their raw material to net sales ratio expand five percentage points quarter-on-quarter in Q4 2021, on the back of a 23% decline in the average price of core Covid-19 tests coupled with a 12% increase in the average cost per PCR test kit versus the third quarter of this year.   Direct salaries and wages for the year rose 63% year-on-year to EGP 635 million, making the second largest share of total COGS at 28%. The increase comes on the back of a 116% year-on-year rise in the share of profits allocated to direct salaries and wages to EGP 175 million in FY 2021 from EGP 81 million in FY 2020 following higher net profit recorded at its Egyptian operations,16 in addition to higher bonuses and incentives paid during FY 2021 in light of this year's record-breaking performance.   Direct depreciation and amortisation increased 31% year-on-year in FY 2021 to EGP 214 million, principally due to the incremental amortisation of new branches (IFRS 16 right-of-use assets).   Other expenses for the year increased 49% versus FY 2020, to record EGP 407 million. The increase was primarily driven by higher transportation costs related to IDH's house call service, and increased utilities and cleaning expenses mainly due to the net addition of 21 new branches throughout the year.   14Cost of net sales is calculated as cost of sales (IFRS) for the period excluding commission fees paid to QAIA and Aqaba Port by Biolab as part of its revenue sharing agreements with the two terminals. 15 According to IFRS 15, cost of sales recorded EGP 2,421 million in FY 2021, up 84% year-on-year. In the final quarter of the year, IDH recorded a cost of sales of EGP 821 million. Meanwhile, gross profit margin recorded 44% in Q4 2021 versus 52% in Q4 2020. 16According to IAS1, employee profit share is recorded in wages and salaries.   Selling, General and Administrative Expenses Total SG&A outlays for the year stood at EGP 513 million, up 44% from FY 2020. The increase was driven by rising salaries and marketing spending, coupled with higher call center costs and a new contract with PwC for external auditing services.   Marketing and advertising expenses came in at EGP 97 million in FY 2021, up 57% year-on-year. The increase largely reflects an overall expansion in IDH's marketing and advertisement efforts, which throughout the year saw the Company launch targeted campaigns across a wide variety of channels.   EBITDA IDH's adjusted EBITDA17 recorded EGP 2,530 million (identical in absolute terms when using IFRS or APM) in the twelve months to 31 December 2021, up a solid 116% versus the previous year. Adjusted EBITDA margin on consolidated revenue recorded 48% in FY 2021 versus 44% in the previous year. Meanwhile, adjusted EBITDA margin on net sales expanded to 50% in FY 2021 versus 44% in FY 2020.18 Improved EBITDA level profitability was supported by robust revenue growth for the year and the subsequent dilution of fixed costs. EBITDA growth was also supported by a decrease in level of receivable provisions for expected credit, which recorded EGP 25 million versus the EGP 42 million booked in the previous twelve months to account for expected credit losses in accordance with IFRS 9. It is important to note that adjusted EBITDA excludes one-off listing fees of EGP 29 million incurred in FY 2021 related to the Company's dual listing on the EGX completed in May 2021.   On a three-month basis, adjusted EBITDA expanded 17% year-on-year to record EGP 537 million in the final quarter of 2021 (identical in absolute terms between IFRS and APM). However, on a quarter-on-quarter basis normalized EBITDA declined 32% versus Q3 2021 mainly due to a quarter-on-quarter decrease in net sales and concurrent increase in outlays for the quarter, in particular sales and marketing expenses. Adjusted EBITDA margin on consolidated revenue recorded 37% in Q4 2021 versus 47% in the same quarter of the previous year. Meanwhile, adjusted EBITDA margin on net sales stood at 42% for the quarter, down from 47% recorded in Q4 2020 and the 54% margin recorded in Q3 2021.   In IDH's home market of Egypt, EBITDA recorded EGP 2,206 million in FY 2021, up 112% year-on-year on the back of strong revenue growth. EBITDA margin on net sales increased six percentage points to 54% the year.   IDH's Jordanian operations recorded EBITDA of EGP 331 million in FY 2021, up 155% versus the previous year on the back of strong growth. In local currency terms, EBITDA grew 156% compared to the previous year. EBITDA margin on net sales recorded 38% in FY 2021 compared to 32% in FY 2020. It is important to note that Jordan's EBITDA calculated using revenues for the year (in compliance with IFRS), recorded the same absolute value as the APM figure for the year which utilises net sales. However, EBITDA margin calculated on revenues (IFRS compliant) would stand at 32% in FY 2021 unchanged versus last year.   Operations in Nigeria posted an EBITDA loss of EGP 7 million, in line with the previous year's figure. Losses for the year partially reflect a one-off EGP 4.4 million adjustment related to the previous year. Controlling for the one-off adjustment, EBITDA losses would come in at EGP 2.6 million, significantly narrowing from the previous year's figure. In light of the steady improvements witnessed throughout 2021,  Nigeria is expected to turn EBITDA positive during the first half of 2022.   17 Adjusted EBITDA is calculated as operating profit plus depreciation and amortization and minus one-off fees incurred in FY 2021 related to the Company's EGX listing completed in May 2021. 18It is important to note that while in absolute terms the Normalised EBITDA figure is identical when using IFRS or APM, its margin differs between the two sets of performance indicators.   Finally, in Sudan the Company recorded an EBITDA loss of EGP 0.5 million in FY 2021, compared to a positive EBITDA of EGP 6.1 million in FY 2020. EBITDA for the year was impacted by the sharp SDG devaluation in February 2021. In SDG terms EBITDA declined 148% year-on-year.   Regional EBITDA in Local Currency Mn FY 2020 FY 2021 Change   Egypt EGP 1,041 2,206 112%   Margin on net sales 48% 54%   Jordan JOD 6 15 156%   Margin on net sales 32% 38% Margin on revenues (IFRS) 32% 32% Nigeria NGN -170 -179 6%   Margin on net sales -19% -13%   Sudan SDG 21 -10 -148%   Margin on net sales 16% -3%     Interest Income / Expense IDH recorded interest income of EGP 113 million in FY 2021, up 113% year-on-year on the back of higher cash balances during the year coupled with an optimised cash allocation between T-bills and time deposits.   Interest expense recorded EGP 118 million in the twelve months to year-end 2021, up 65% year-on-year. The increase in attributable to: ·    Higher interest on lease liabilities related to IFRS 16 following the addition of new branches in Egypt and Jordan and the renewal of medical equipment agreements with our main equipment suppliers. ·    Higher bank charges resulting from increased penetration of, and reliance on, POS machines and electronic payments in both Egypt and Jordan during the period. It is important to note that bank charges recorded by IDH's Jordanian operations represented 58% of total bank charges during FY 2021, which is mainly related to Biolab's partnership with QAIA. ·    Loan-related expenses incurred by IDH during the period as the Company secured a new eight-year US$ 45 million facility with the International Finance Corporation (IFC) in May 2021. More specifically, IDH booked loan-related expenses of EGP 20.3 million in FY 2021 including a front-end fee, syndication fee, and legal advisory fees.   Interest Expense Breakdown EGP Mn FY 2020 FY 2021 Change Interest on Lease Liabilities (IFRS 16) 51.4 59.5 16% Interest Expenses on Borrowings19  12.4 9.4 -24% Loan-related Expenses on IFC facility - 20.3 N/A Interest Expenses on Leases  4.1  8.8 117% Bank Charges  3.7  20.0 445% Total Interest Expense  71.5  118.0 65%   19Interest expenses on medium-term loans divided as EGP 2.6 million related to its medium term facility with the Commercial International Bank (CIB) and EGP 6.5 million to its facility with Ahli United Bank Egypt (AUBE).   Foreign Exchange IDH recorded a net foreign exchange loss of EGP 18 million in FY 2021 compared to EGP 13 million in FY 2020. The figure largely reflects FX losses on the back of the SDG devaluation versus the EGP in February 2021.   Taxation Tax expenses recorded EGP 740 million in FY 2021 versus EGP 360 million in the previous twelve months. The effective tax rate stood at 33% for the year versus 37% in FY 2020. The lower effective tax rate largely reflects the recognition of Echo-Scan's deferred tax assets. It is important to note that there is no tax payable for IDH's two companies at the holding level, while tax was paid on profits generated by operating subsidiaries.   Taxation Breakdown by Region EGP Mn FY 2020 FY 2021 Change Egypt  340.6 704.8 107% Jordan  19.0 54.0 184% Nigeria -1.0 -20.0 N/A Sudan 1.0 1.0 0% Total Tax Expenses  359.6 739.8 106%   Net Profit IDH's consolidated net profit expanded 145% year-on-year in FY-2021 to record EGP 1,493 million (identical in absolute terms between IFRS and APM measures). Net profit margin on consolidated revenue recorded 29% for the year, versus 23% in FY 2020. Meanwhile, net profit margin20 on net sales stood at 30% for the year, up seven percentage points from the previous twelve month period. Net profitability improvements for the year were supported by strong revenue growth coupled with the dilution of fixed costs, and normalising provisions for the year. In Q4 2021, net profit stood at EGP 345 million, up 47% year-on-year. Net profit margin on consolidated revenue stood at 24% unchanged year-on-year. Net profit margin on net sales recorded 27%, up three percentage points year-on-year.   20 It is important to note that while in absolute terms the net profit figure is identical when using IFRS or APM, its margin differs between the two sets of performance indicators.

 

ii.  Balance Sheet Analysis

Assets Property, Plant and Equipment IDH held gross property, plant and equipment (PPE) of EGP 1,659 million as at year-end 2021, up from the EGP 1,252 million as of 31 December 2020. Meanwhile, CAPEX outlays excluding payments on account and accounting for the impact of hyperinflation, represented 8.6% of consolidated net sales in FY 2021. The increase in CAPEX outlays as a share of total net sales for the year is in part attributable to EGP 115.7 million in equipment related to the Reagent deals and to EGP 53.7 million spent on the purchase of a new radiology branch  during the year. It is worth noting that IDH engages in Reagent deals whereby the majority of its testing equipment is provided at no upfront payment as part of a wider agreement to purchase a minimum volume of kits from the equipment supplier. These contracts typically have tenors ranging from 5 to 7 years, with the equipment substituted following the contract's renewal.   Total CAPEX Breakdown EGP Mn FY 2021 % of Net Sales Mega Lab 132.5 2.6% Al-Borg Scan Expansion 154.0 3.1% Leasehold Improvements/others 147.6 2.9% Total CAPEX Additions 434.1 8.6%   Accounts Receivable and Provisions As at 31 December 2021, accounts receivables' Days on Hand (DOH) stood at 107 days compared to 144 days at year-end 2020. The significant decline witnessed throughout the year highlights a sustained improvement in collections versus the previous year. Accounts receivables' DOH is calculated based on credit revenues (credit revenues relates to patients who paid for IDH's services on credit) amounting to EGP 1.28 billion during FY 2021.   The receivables balance in Egypt and Jordan stood at EGP 366 million as at year-end 2021. More specifically, in Egypt account receivables' DOH declined to 96 days as at 31 December 2021 compared to 145 days as at year-end 2020. Accounts receivables' DOH for Egypt is calculated based on credit revenues amounting to EGP 1.04 billion during FY 2021. Meanwhile, in Jordan accounts receivables' DOH increased from 150 days to 154 days as at year-end 2021 largely due to agreements with various airline companies as part of QAIA and KHIA agreements. Accounts receivables' DOH for Jordan is calculated based on credit revenues amounting to EGP 221 million during FY 2021.   Provision for doubtful accounts established during the twelvemonths to 31 December 2021 amounted to EGP 25 million, down from the EGP 42 million booked in the previous year.   Inventory As at year-end 2021, the Group's inventory balance reached EGP 223 million, up from EGP 100 million as at year-end 2020. Meanwhile, days Inventory Outstanding (DIO) decreased to 61 days as at year-end 2021 from 72 days as at year-end 2020. The decline largely reflects the high turnover of PCR testing for Covid-19.   Cash and Net Debt/Cash IDH's cash balances increased to EGP 2,350 million as at year-end 2021 compared to EGP 877 million as at 31 December 2020.   EGP million 31 Dec 2020 31 Dec 2021 Time Deposits  162 628 T-Bills 461 1,461 Current Accounts 234 239 Cash on Hand 19 22 Total 877 2,350   Net cash balance21 amounted to EGP 1,483 million as of year-end 2021, an increase of 361% compared to EGP 321 million as of 31 December 2020.   EGP million 31 Dec 2020 31 Dec 2021 Cash and Financial Assets at Amortised Cost22 877 2,350 Interest Bearing Debt ("Medium Term Loans")23 96 106 Lease Liabilities Property 390 532 Long-term Equipment Liabilities 69 229 Net Cash Balance 321            1,483 Note: Interest Bearing Debt includes accrued interest for each period.   21The net cash balance is calculated as cash and cash equivalent balances including includes financial assets at amortised cost, less interest-bearing debt (medium term loans), finance lease and Right-of-use liabilities. 22 As outlined in Note 18 of IDH's Consolidated Financial Statements, some term deposits and treasury bills cannot be accessed for over 90 days and are therefore not treated as cash. Term deposits which cannot be accessed for over 90 days stood at EGP 148 million in FY 2021, while there were no such term deposits in the previous year. Meanwhile, treasury bills not accessible for over 90 days stood at EGP 1,311 million in FY 2021, up from EGP 277 million in FY 2020. 23IDH's interest bearing debt as at year-end 2021 is split as EGP 13 million related to its medium term facility with the Commercial International Bank (CIB) and EGP 85 million to its facility with Ahli United Bank Egypt (AUBE).   Lease liabilities on property stood at EGP 532 million as at year-end 2021, up from the EGP 390 million booked as at year-end 2020. The increase is attributable to the addition of new branches throughout 2021. Meanwhile, financial obligations related to equipment recorded EGP 229 million as of 31 December 2021, up from EGP 69 million as of year-end 2020, reflecting the renewal of the Company's contracts and the addition of new equipment. The main components of total financial obligations related to equipment in FY 2021 included EGP 116 million related to equipment at IDH's Mega Lab, and EGP 54 million for equipment at Al-Borg Scan. The rise in interest-bearing debt is related to IDH's two medium-term facilities with Commercial International Bank (CIB) and Ahli United Bank of Egypt (AUBE). More specifically, IDH's interest-bearing debt as of year-end 2021 is split as EGP 13 million related to its medium-term facility with CIB and EGP 85 million related to its facility with AUBE. It is worth noting that interest-bearing debt in both twelve-month periods includes accrued interest.   Liabilities Accounts Payable24 As of year-end 2021, accounts payable balance recorded EGP 311 million up from EGP 178 million as of 31 December 2020. Nonetheless, the Group's days payable outstanding (DPO) decreased to 93 days as of year-end 2021 down from 127 days as at 31 December 2020. The decline is mainly related to the fact that PCR testing kit suppliers are paid within a period of 15 days.   Put Option The put option current liability is related to the option granted in 2011 to Dr. Amid, Biolab's CEO, to sell his stake (40%) to IDH. The put option is in the money and exercisable since 2016 and is calculated as 7 times LTM EBITDA minus net debt. Biolab's put option liability increased following the subsidiary's EBITDA year-on-year growth of 155% in EGP terms. The vendor has not exercised this right at 31 December 2021. It is important to note that the put option liability is treated as current as it could be exercised at any time by the non-controlling interest (NCI). However, based on discussions and ongoing business relationship, there is no expectation that this will happen in next 18 months.   The put option non-current liability is related to the option granted in 2018 to the International Finance Corporation from Dynasty - shareholders in Echo Lab - and it is exercisable in 2024. The put option is calculated based on fair market value (FMV).

2⁴Accounts payable is calculated based on average payables at the end of each year.

 

iii. Cash Flow Analysis

Net cash flow from operating activities recorded EGP 2,269 million in FY 2021 compared to EGP 883 million in FY 2020. The 157% year-on-year increase versus FY 2020 demonstrates once more IDH's strong cash generation ability.

 

iv. Principal Risks, Uncertainties & Their Mitigation

As in any corporation, IDH has exposure to risks and uncertainties that may adversely affect its performance. IDH Chairman Lord St John of Bletso has emphasised that ownership of the risk matrix is sufficiently important to the Group's long-term success that it must be equally shared by the Board and senior management. While no system can mitigate every risk - and some risks, as at the country level, are largely without potential mitigants - the Group has in place processes, procedures and baseline assumptions that provide mitigation. The Board and senior management agree that the principal risks and uncertainties facing the Group include:

 

Country/regional risk - Economic & Forex The Group is subject to the economic conditions of Egypt specifically and, to a lesser extent, those of the other geographies. Egypt accounted for c. 81% of our revenues in 2021 (2020: 82%).     Economic risk: On the 21st of March 2022, the Central Bank of Egypt (CBE) raised policy rates by 100bps and allowed the Egyptian Pound (EGP) to depreciate against the United States Dollar (USD) by around 17%, which will impose Inflationary pressures in the short to medium term.  Inflation rates are expected to average around 13% to 15% during 2022, up from 5.9% in December 2021. Moreover, GDP growth in FY22/23 was revised downward to 5.5% from 5.7% by the Egyptian government in March 2022.	Overall, management notes that IDH has a resilient business model and that the business continued to grow year-on-year through two revolutions, as well as under extremely difficult operating conditions in 2016 and in 2020.   Foreign investors welcomed March 2022 CBE move as it demonstrated the Egyptian government's willingness to improve investment climate.    IDH management is closely monitoring the impact of the rise of inflation on its cost base, especially raw material.  The risk is partially mitigated given its long-term contractual agreement with its raw material suppliers.
Country/regional risk - Economic & Forex   Foreign currency risk: The Group is exposed to foreign currency risk on the cost side of the business. The majority of supplies it acquires are paid in Egyptian pounds (EGP), but given they are imported, their price will vary with the rate of exchange between the EGP and foreign currencies. In addition, a portion of supplies are priced and paid in foreign currencies.   High Inflation in Sudan: Following substantial currency devaluation in Sudan during 2018 the currency lost 85% of its value. In 2019, the Sudanese Pound's official rate versus the US Dollar remained relatively stable at 45.11 as 31 December according to the Central Bank of Sudan. However, in July 2020 the Sudanese government announced it would devalue its currency and cut fuel subsidies due to a huge budget deficit and an economic crisis aggravated by the coronavirus pandemic. In February 2021, the Sudanese government announced it would float the Sudanese Pound in an effort to bridge the gap with the forex prices at the parallel market. This led to a significant increase in the currency rates. The US Dollar rate for instance rose from SDG 55 to more than SDG 375. This was followed by the removal of fuel subsidies in June 2021, which again led to the increase of consumer prices. According to data from Sudan's Central Bureau of Statistics, the country's headline inflation rate averaged 359% in 2021, up from 163% in 2020.   Nigeria: Capital controls could make profit repatriation difficult in the short term.   Nigeria: Depreciation of the Naira would make imported products and raw materials more expensive and would reduce Nigeria's contribution to consolidated Company revenues. Whilst capital controls have helped the official exchange converge with the black market rate, the central bank has yet to allow the naira to float freely.	During FY2021, only 10% of IDH's cost of supplies (c.2% of revenues) are payable in US dollars, minimising the Group's exposure to foreign exchange (FX) scarcity and in part, the volatility of the Egyptian pound.         The Group is closely monitoring the economic situation in Sudan and has implemented several price increases to keep instep with inflationary pressures. IDH is also working to limit expatriate salaries and foreign currency needs by increasing dependence on local hires.                                   In Nigeria, until currency exchange policy is clarified and there is greater visibility regarding profit repatriation, IDH expects to reinvest early profits into its Nigerian business. Dividend payments are expected to be repatriated after the completion of the branch roll-out plan.
Country risk - Political & Security Sudan is currently undergoing a significant political transition which began in 2019 when severe political unrest and protests led the military to remove long-time president Omar Al-Bashir. Following his removal, the military signed a power-sharing agreement with an opposition coalition in July 2019, with the aim of eventually transferring power to a civilian government. On 25 October 2021, Sudan's Prime Minister was detained by armed forces, and Army chief General Abdel Fattah al-Burhan announced that the civilian government and other transitional bodies have been dissolved. Throughout November, the country witnessed several mass rallies and increased civil unrest with protesters asking for the reinstatement of the civilian Prime Minister, Abdalla Hamdok. The protests led to the temporary closure of all of IDH's Sudanese branches. All locations were reopened within a few days and quickly gained back momentum. On 21 November 2021, Mr. Hamdok took office once again but later stepped down on 2 January 2022. Civil unrest and protests are continuing as the country's future remains unclear. The situation in Sudan is volatile and continued civil unrest could adversely affect IDH's business.   Nigeria faced security challenges on several fronts, including re-emerging ethnic tensions and resurgent attacks by Islamist militants in the northeast. Against the backdrop of a sluggish economy and the slow implementation of reforms, mounting discontent could translate into further social unrest.   The government dissolved the special division known as SARS (Special Anti-Robbery Squad) in October 2021. In late 2020 and throughout 2021, protests have decreased significantly across the country but a potential escalation of civil unrest remains possible.	It is important to note that in FY 2021 Sudan made up just 0.3% of IDH's net sales. Moreover, while nationwide protests do affect patient and test volumes in Sudan, the diagnostic industry is relatively immune given the inelastic demand for healthcare services. Additionally, management in Sudan has been successful in offsetting the effect of lower volumes due to protest with higher pricing, and in 2019, 2020, and 2021 the geography recorded solid year-on-year revenue growth in SDG terms.   In December 2020, US removed Sudan from its States Sponsors of Terrorism list. The change in the country's designation is expected to allow Sudan to have access to international funds and investment, including the International Monetary Fund, paving the way for the country's economic growth.   IDH's management on the ground continues to monitor the evolving situation and has put in place an all-encompassing mitigation strategy to safeguard staff and patient wellbeing and protect IDH's operations.     While this is relatively hard to mitigate, IDH is continuously evaluating its processes to safeguard its employees and operations. Overall, IDH applies rigorous standards to evaluating all aspects of its business processes in Nigeria to ensure it is well-equipped to respond to the evolving situation.
Covid-19 The ongoing Covid-19 pandemic presents business continuity risks to IDH including, but not limited to, supply-chain disruptions, government enforced quarantines and their effect on IDH's business operations and risk of infection among IDH employees. In 2021, the rollout of vaccines across its countries of operation coupled with governments' willingness and ability to coexist with the virus, saw restrictions imposed to curb the spread being lifted and operations running normally throughout the year. No new restrictions have been imposed following the rise of new Covid-19 variants throughout the year, with countries across IDH's footprint continuing to push forward their vaccination campaigns. As at the end of March 2022, the share of the population having received at least one Covid-19 vaccine dose stood at approximately: 45% in Egypt, 45% in Jordan, 10% in Nigeria, and at 13% in Sudan.   Covid-19 global economic impact: Rising inflation rates, supply chain disruptions, and the rise of new, more fast-spreading Covid-19 variants continue to pose a threat for the global economic recovery.   Covid-19 impact on IDH Financials Throughout FY 2021, IDH generated around 50% of its revenues from Covid-19-related testing. In light of the increasing roll out of vaccines and the widespread decline in infection rates, Covid-19-related revenues are expected to gradually decline throughout 2022.	All of IDH staff use appropriate protective equipment when interacting with patients, including those suspected of having Covid-19 or any other infectious disease. IDH is currently administering PCR, Antibody, and Antigen testing for Covid-19 in Egypt and Jordan.   All of the Group's employees have been fully vaccinated during 2021 and they are subject to regular communications reminding them that they may not report to work if they have symptoms of a Covid-19 infection.   The effective rollout of vaccines and the increasing ability and willingness of governments to coexist with the virus and its variants have supported a steady recovery of the global economy throughout 2021.                 Throughout the Covid-19 crisis, IDH has maintained a strong focus on growing its conventional (non-Covid-19-related) business, which in FY 2021 expanded 22% versus FY 2020, and came in 13% above pre-covid levels recorded in FY 2019. Moreover, in both Egypt and Jordan, IDH enjoys a market leading position and plans to capitalise on its expanded product offering and patient base, increased service delivery capabilities, and growing visibility to continue delivering growth in the year ahead. Across both markets, the Group's strategy will now pivot towards patient retention as it looks to maintain the new relationships established during the pandemic thanks to its Covid-19-dedicated offering.
Global Supply Chain Disruptions Throughout 2021, restrictions imposed to curb the spread of Covid-19, labour shortages, and fast-rising demand for goods saw global supply chains come under strong pressure causing delays and shortages worldwide. The ongoing global supply chain disruptions have had no impacts on IDH's operations throughout the year.	IDH's management team continually monitors the evolving situation and have taken proactive steps to build up its inventory to shield the Group from any potential future disruptions. IDH is in continual dialogue with key suppliers to gauge the risk associated with a shortage of materials and is yet to identify a weakness.   IDH's test kits are purchased on fixed-price contracts with tenors ranging from five to seven years, providing effective protection from short-term price fluctuations.
Supplier risk IDH faces the risk of suppliers re-opening negotiations in the face of cost pressure owing to the prevailing inflationary environment and/or a possible albeit limited devaluation risk.         IDH's supplier risk is concentrated amongst three key suppliers - Siemens, Roche and BM (Sysmex)- who provide it with kits representing 24% of the total value of total raw materials in 2021 (2020: 52%).	IDH has strong, longstanding relationships with its suppliers, to whom it is a significant regional client. Due to the volumes of kits the Group purchases, IDH is able to negotiate favourable pricing and maintain raw material costs increases at a rate slower than inflation. It is worth highlighting that IDH's supplier relations were not impacted by COVID-19.   Total raw materials costs as a percentage of net sales were 19.6% in 2021 compared with 18.4% in 2020.
Remittance of dividend regulations and repatriation of profit risk The Group's ability to remit dividends abroad may be adversely affected by the imposition of remittance restrictions. More specifically, under Egyptian law, companies must obtain government clearance to transfer dividends overseas and are subject to higher taxation on payment of dividends.	As a foreign investor in Egypt, IDH does not have issues with the repatriation of dividends, yet given the recent depreciation in the EGP value, the Company foresees probable delays in FX sourcing and repatriation.   As a provider of medical diagnostic services, IDH's operations in Sudan are not subject to sanctions. Notably, in October 2017 the US lifted a host of sanctions imposed 20 years ago that included a comprehensive trade embargo, a freeze on government assets and tight restrictions on financial institutions dealing with the country. More recently, in December 2020 the US removed Sudan from its States Sponsors of Terrorism list.
Legal and regulatory risk to the business The Group's business is subject to, and affected by, extensive, stringent and frequently changing laws and regulations, as well as frequently changing enforcement regimes, in each of the countries in which it operates. Moreover, as a significant player in the Egyptian private clinical laboratory market, the Group is subject to antitrust and competition-related restrictions, as well as the possibility of investigation by the Egyptian Competition Authority.	The Group's general counsel and the quality assurance team work together to keep IDH abreast of, and in compliance with, both legislative and regulatory changes.   On the antitrust front, the private laboratory segment (of which IDH is a part) accounts for a small proportion of the total market, which consists of small private labs, private chain labs and large governmental and quasigovernmental institutions.
Risk from contract clients Contract clients including private insurers, unions and corporations, account for c. 57% of the Group's net sales in 2021. Should IDH's relationship with these clients deteriorate, for example if the Group were unable to negotiate and retain similar fee arrangements or should these clients be unable to make payments to the Group, IDH's business could be materially and adversely affected.	IDH diligently works to maintain sound relationships with contract clients. All changes to pricing and contracts are arrived at through discussion rather than blanket imposition by IDH. Relations are further enhanced by regular visits to contract clients by the Group's sales staff.   IDH's attractiveness to contract clients is enhanced by the extent of its national network.   It should be highlighted that, excluding the contributions from IDH's multiple partnerships to conduct PCR testing for passengers (Pure Health, NAS, QAIA), which in 2021 generated EGP 365 million in contract segment net sales, no single client contract accounts for more than 1% of total net sales or 1.4% of contract net sales.
Pricing pressure in a competitive, regulated environment The Group faces pricing pressure from various third-party payers, including national health insurance, syndicates, other governmental bodies, which could materially and adversely affect its revenue. Pricing may be restrained in cases by recommended or mandatory fees set by government ministries and other authorities.   This risk may be more pronounced in the context of the imminent inflationary pressures following the recent depreciation of the Egyptian Pound.             The Group might face pricing pressure from existing competitors and new entrants to the market.	This is an external risk for which there exist few mitigants.   In the event there is escalation of price competition between market players, the Group sees its wide national footprint as a mitigant; c. 57% of IDH net sales in 2021 is generated by servicing contract clients (private insurer, unions and corporations) who prefer IDH's national network to patchworks of local players.   IDH has a limited ability to influence changes to mandatory pricing policies imposed by government agencies, as is the case in Jordan, where basic tests that account for the majority of IDH's business in that nation are subject to price controls.   IDH enjoys a strong brand equity in its markets of operation which enables all its brands to enjoy a solid positioning in the markets in which it operates.  As such, IDH is a price maker, especially in Egypt, where the Group currently controls the largest network of branches amongst all private sector players. Moreover, in its home market of Egypt, which in FY 2021 accounted for 81.4% of total revenues, the Group faces no potential risk of price regulation by the government.
Cybersecurity risks The Company controls a vast amount of confidential data for its patients' records; to this end, there is a cybersecurity risk for both data confidentiality and data security.	The Company has stringent control over its data security and regularly stress tests its IT infrastructure to assess the robustness of its internal controls. Moreover, its cybersecurity controls and protocols are regularly updated to proactively address potential shortcomings, keep them in full adherence with data security regulations in the Group's markets of operation, and maintain them in line with global best practices.
Business continuity risks Management concentration risk: IDH is dependent on the unique skills and experience of a talented management team. The loss of the services of key members of that team could materially and adversely affect the Company's operations and business.           Business interruption: IT systems are used extensively in virtually all aspects of the Group's business and across each of its lines of business, including test and exam results reporting, billing, customer service, logistics and management of medical data. Similarly, business interruption at one of the Group's larger laboratory facilities could result in significant losses and reputational damage to the Group's business as a result of external factors such as natural disasters, fire, riots or extended power failures. The Group's operations therefore depend on the continued and uninterrupted performance of its systems.   Business Interruption: across its geographies, the reimposition of restrictive measures related to Covid-19 (including curfews and lockdowns) could impact the working hours of branches and in extreme cases could lead to their temporary closure.	IDH understands the need to support its future growth plans by strengthening its human capital and engaging in appropriate succession planning. The Company is committed to expanding the senior management team, led by its CEO Dr. Hend El Sherbini, to include the talent needed for a larger footprint. The Group has constituted an Executive Committee led by Dr. El Sherbini and composed of heads of departments. The Executive Committee meets every second week.   The Group has in place a full disaster recovery plan, with procedures and provisions for spares, redundant power systems and the use of mobile data systems as alternatives to landlines, among multiple other factors. IDH tests its disaster recovery plans on a regular basis.         In Egypt and Jordan, to mitigate the impact of potential branch closures on operations, the Group has been ramping up its house call services. Moreover, the Group's important role in conducting PCR testing for Covid-19 in both Egypt and Jordan makes it unlikely that branches would be closed even if new restrictive measures were introduced.

 

-End-