Integrated Diagnostics Holdings Plc

Q1 2023 Results

Thursday, 01 June 2023

Integrated Diagnostics Holdings Plc kicks off 2023 with a solid first quarter, recording 43% growth in conventional revenues

(Cairo and London) - Integrated Diagnostics Holdings ("IDH," "the Group," or "the Company"), a leading provider of diagnostic services with operations in Egypt, Jordan, Nigeria and Sudan, released today its reviewed financial statements and operational performance for the quarter ended 31 March 2023, booking revenue of EGP 915 million, 22% below revenues reported in the first quarter of the previous year when Covid-19-related¹ testing had significantly boosted the consolidated figure. Excluding² the contribution made by Covid-19-related testing in the comparable three months of 2022, the Group's conventional³ revenues recorded an impressive 43% year-on-year expansion supported by a 12% year-on-year increase in conventional test volumes and a 27% year-on-year increase in average revenue per conventional test for the quarter. IDH recorded a net profit of EGP 168 million, declining 46% from Q1 2022 and with an associated margin of 18%.

 

Financial Results (IFRS)⁴

EGP mn	Q1 2022	Q1 2023	Change
Revenues	1,180	915	-22%
Conventional Revenues	640	915	43%
Covid-19-related Revenues	540	-	-
Cost of Sales	(649)	(591)	-9%
Gross Profit	532	325	-39%
Gross Profit Margin	45%	35%	-10 pts
Operating Profit	396	129	-68%
EBITDA5	468	227	-51%
EBITDA Margin	40%	25%	-15 pts
Net Profit	314	168	-46%
Net Profit Margin	27%	18%	-8 pts
Cash Balance	2,659	813	-69%

Note (1): Throughout the document, percentage changes between reporting periods are calculated using the exact value (as per the Consolidated Financials) and not the corresponding rounded figure.

 

Key Operational Indicators⁶

	Q1 2022	Q1 2023	Change
Branches	520	576	56
Patients ('000)	2,649	1,939	-27%
Revenue per Patient (EGP)	446	472	6%
Tests ('000)	8,402	8,036	-4%
Conventional Tests ('000)	7,148	8,036	12%
Covid-19-related Tests ('000)	1,254	-	-
Revenue per Test	140	114	-19%
Revenue per Conventional Test (EGP)	90	114	27%
Revenue per Covid-19-related Test (EGP)	431	-	-
Test per Patient	3.2	4.1	31%

 

¹Covid-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.

²Starting Q1 2023, IDH has opted to stop reporting on its Covid-19-related revenues and test volumes due to their material insignificance to the consolidated figures and to Egypt's and Jordan's country-level results for the quarter. In the comparable period of last year (Q1 2022) IDH had recorded EGP 540 million in Covid-19-related revenues and had performed 1.3 million Covid-19-related tests.

³Conventional (non-Covid) tests include all of the Group's test offering with the exception of its Covid-19-related test offering outlined above.

⁴Important notice: In the Company's earnings releases covering the five quarters starting from Q4 2021 and ending Q4 2022, management had opted to present Alternative Performance Measures (APM) alongside IFRS-compliant figures as outlined on page 2 of the Company's FY 2022 Earnings Release. Starting in Q1 2023, due to the material insignificance of Covid-19-related revenues on consolidated results, the Company will only report IFRS-compliant figures. It is worth noting that revenues for the comparable period (Q1 2022), include concession fees amounting to EGP 63 million paid by Biolab as part of its agreement with QAIA and Aqaba Port.

⁵EBITDA is calculated as operating profit plus depreciation and amortization.

⁶Key operational indicators are calculated based on revenues for the quarter of EGP 915 million and EGP 1,180 million for Q1 2023 and Q1 2022, respectively.

 

Introduction

 

i.    Financial Highlights

·    Conventional⁷ revenue recorded EGP 915 million in Q1 2023 compared to EGP 640 million (including concession fees paid as part of Biolab's agreements with QAIA, KHIA, and Aqaba Port amounting to EGP 63 million) in the same period of the previous year, representing an impressive 43% year-on-year growth.

·    Conventional top-line growth continues to be driven by simultaneous rises in test volumes and average revenue per test, which in Q1 2023 increased 12% and 27% year-on-year, respectively. It is worth highlighting that a portion of the rise in average revenue per test reflects the translation effect resulting from the multiple devaluations of the Egyptian Pound during FY 2022 and the beginning of FY 2023.

·    Consolidated revenues recorded EGP 915 million in Q1 2023 contracting 22% from the high base of EGP 1,180 million in Q1 2022. It is important to note that the comparable three months of 2022 included a significant EGP 540 million contribution (46% of Q1 2022 revenues) from IDH's Covid-19-related⁸ offering in Egypt and Jordan (of which EGP 63 million related to concession fees paid by Biolab to Queen Alia International Airport and Aqaba Port).

·    Gross Profit booked EGP 325 million in Q1 2023, down 39% year-on-year, with a Gross Profit Margin (GPM) of 35% in Q1 2023 versus 45% in Q1 2022. Lower gross profitability during the quarter primarily reflects a normalisation of margins following the year-on-year decline in Covid-19-related business which had significantly boosted revenue and profitability in Q1 2022. Gross margins were further diluted by higher direct salaries and wages to counteract the current inflationary pressures and staff the newly rolled out branches.

·    EBITDA⁹ stood at EGP 227 million during Q1 2023, declining 51% year-on-year and recording an EBITDA margin of 25% versus 40% in Q1 2022. Decreased EBITDA profitability for the period came on the back of lower gross profitability combined with increased SG&A outlays including higher salary, marketing, auditing, and consulting expenses. The rise in auditing and consulting expenses is partially attributable to a weaker EGP.  

·    Net Profit for the three-month period ended 31 March 2023 booked EGP 168 million, down 46% year-on-year and with an associated Net Profit Margin (NPM) of 18%.

 

⁷Conventional (non-Covid) tests include IDH's full service offering excluding the Covid-19 related tests outlined below.

⁸Covid-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.

⁹EBITDA is calculated as operating profit plus depreciation and amortization.

 

ii.  Operational Highlights

·    IDH's branch network increased to 576 branches in Q1 2023, up by 56 branches compared to the same period of the previous year. Since the start of the year, IDH has inaugurated 24 new branches including 20 in Egypt, three in Jordan, and one in Sudan.

·    Conventional tests performed during Q1 2023 increased by 12% year-on-year to record 8.0 million tests for the quarter. Consolidated tests performed for the period declined 4% year-on-year, as Q1 2022 test volumes include a significant contribution for IDH's Covid-19-related offering.

·    Average net revenue per conventional test increased a robust 27% (out of which translation effect accounted for 9%) versus Q1 2022 to book EGP 114 in Q1 2023. Consolidated average net revenue per test declined 19% to EGP 114 in Q1 2022 from the EGP 140 recorded in the same quarter a year ago when consolidated results had been boosted by significant contributions made by IDH's generally higher-priced Covid-19-related offering.

·    Total patients served by the Company during the quarter came in at 1.9 million, down 27% year-on-year. Simultaneously, average test per patient increased to 4.1 in Q1 2023 from 3.2 in Q1 2022 largely reflecting a normalisation in IDH's patient mix in favour of conventional patients who typically opt for multiple tests when visiting IDH's branches.

·    In Egypt (79.9% of consolidated revenues) IDH continued to record robust growth at its conventional business, which expanded 33% year-on-year for the quarter. Conventional revenue growth was supported by a 13% year-on-year rise in test volumes and an 18% year-on-year increase in average revenue per test. Meanwhile, consolidated revenues in IDH's home market declined 17% versus Q1 2022 when results had been boosted by contributions made from the Company's Covid-19-related offering (38% of Egypt revenues in Q1 2022).

·    In Jordan (15.8% of consolidated revenues), the Group recorded conventional revenue growth in EGP terms of 105% year-on-year in Q1 2023. In local currency terms, conventional revenues also posted a remarkable 12% year-on-year expansion on the back of higher conventional test. Including contributions from Covid-19-related testing in the first three months of last year, consolidated revenues in Jordan recorded a 48% year-on-year decline during Q1 2023.

·    In Nigeria (3.4% of consolidated revenue in Q1 2023), the Company continued recording impressive revenue growth, increasing 109% year-on-year to EGP 31 million in Q1 2023. In NGN terms, revenue increased 26% year-on-year to reach NGN 468 million during Q1 2023, supported by a 16% increase in test volumes.

·    In Sudan (1.0% of consolidated revenue in Q1 2023), IDH posted an impressive year-on-year revenue growth of 55% in EGP terms, and 11% in SDG terms. It is important to note that due to recent political unrest in Sudan, 16 of IDH's 18 branches in Sudan have temporarily ceased operations, with only two branches, in Madani and Port Sudan, still operational. The closure of these branches will have a significant impact on Sudan's operational and financial results for the coming quarter.

 

iii. Management Commentary

Commenting on the Group's performance, IDH Chief Executive Officer Dr. Hend El-Sherbini said: "With the first five months of the year now behind us, I am happy to report another quarter of sustained growth at our conventional business and of solid progress on our longer-term value creation and growth strategies. Looking at our results for the first quarter of the year in more detail, I am particularly pleased to note that we recorded solid conventional top-line expansions across all four of our markets in both EGP and local currency terms. At the consolidated level, conventional revenue growth was driven by steady rises in both patient and test volumes coupled with rising average revenue per test as our strategic price hikes come into effect. The 43% year-on-year expansion of our conventional business was especially impressive as it comes in the midst of an increasingly difficult operating environment with our markets, and the global economy in general, continuing to face rising inflation, tightening monetary policies, and weakening currencies, as was the case in Egypt, Nigeria, and Sudan. On top of this, it is worth noting that our results in March were also impacted by the expected seasonal slowdown related to the holy month of Ramadan which in 2023 weighed on patient volumes starting mid-March.

On a geographic basis, across our two largest markets of Egypt and Jordan, conventional revenues continued to record double-digit growth showcasing the underlying health of both geographies. Since the start of the year, we delivered on several of our key strategic priorities across both markets. In Egypt, in the first three months of the year we rolled out 20 new branches, taking the total number of branches in the country to 520, and further securing our position as the largest private provider in the country. In parallel, we also introduced planned price hikes across our service portfolio, continuing to prioritise patient retention and loyalty by sharing the inflationary burden with them. During the quarter, we also saw Al-Borg Scan's contribution to the country's top-line double versus the same three months of last year, testament to the effectiveness of our radiology ramp-up strategy, and the contribution of our house call services remain well above pre-pandemic averages. Meanwhile, in Jordan, we went ahead with the launch of three new labs, taking the total number of Biolab branches to 26. New branch roll outs have been supporting Biolab's conventional test volumes which we were pleased to see return to double-digit growth following a Covid-19-related slowdown. In both Nigeria and Sudan, we continued to record solid revenue growth in line with recent trends. Here it is important to mention that we expect our second quarter results in Sudan to be significantly impacted by the ongoing political and social unrest, with 16 of our 18 branches in the country currently shut down. We continue to closely monitor the evolving situation and are confident that our management team on the ground has put in place a solid mitigation plan to safeguard our staff, patients, and operations.

On the cost front, I am pleased to note that we recorded only a moderate increase in raw material costs for the quarter, well below the inflation caused by the weakening Egyptian pound. This was possible thanks to successful negotiations with our main test kit providers who continue to value IDH as a long-term partner. Meanwhile, as part of our efforts to retain staff, we adjusted staff compensation packages to ensure we continue to support our people during these difficult times and remain an employer of choice across all of our markets. Further down the income statement, we recorded lower margins at all levels of profitability largely reflecting a post-Covid-19 normalization.

Heading into the second half of 2023, we remain on track to deliver on our financial and operational targets for the year. I am particularly looking forward to the launch of our first branch in Saudi Arabia, which is currently scheduled for September 2023. Meanwhile, across our current markets our priorities remain unchanged as we continue to navigate the ongoing macroeconomic turbulence to drive further conventional revenue growth, safeguard our margins, and continue to deliver world-class quality to our patients. In Egypt, we are planning to roll out several more branches as the year progresses, with a particular focus on growing our radiology network to capitalise on the strong momentum currently enjoyed by the segment.

In light of our strong start to the year and the solid strategies in place, we are looking to record year-on-year conventional revenue growth of around 30% in FY 2023."

- End -

Analyst and Investor Call Details

An analyst and investor call will be hosted at 1pm (UK) | 3pm (Egypt) on Monday, 5 June 2023. You can register for the call by clicking on this link, and you may dial in using the conference call details below:

·      Webinar ID: 939 3911 9373

·      Webinar Passcode: 756126

For more information about the event, please contact: amr.amin@cicapital.com

About Integrated Diagnostics Holdings (IDH)

IDH is a leading diagnostics services provider in the Middle East and Africa offering a broad range of pathology and radiology tests to patients 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 552 branches as of 31 December 2022, IDH served over 8.7 million patients and performs more than 32.7 million tests in 2022. 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 quarter ended 31 March 2023 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: In the Company's earnings releases covering the five quarters starting from Q4 2021 and ending Q4 2022, management had opted to present Alternative Performance Measures (APM) alongside IFRS-compliant figures as outlined on page 2 of the Company's FY 2022 Earnings Release. Starting in Q1 2023, due to the material insignificance of Covid-19-related revenues on consolidated results, the Company will only report IFRS-compliant figures. It is worth noting that revenues for the comparable period (Q1 2022), include concession fees amounting to EGP 63 million paid by Biolab as part of its agreement with QAIA and Aqaba Port.

Group Operational & Financial Review

 

i.    Revenue and Cost Analysis

 

Consolidated Revenue

IDH started the year on a strong note, recording conventional revenues of EGP 915 million in Q1 2023, up an impressive 43% from the same three months of last year. Sustained top-line growth was driven by increases in the Group's average revenue per test, which increased by 27% to EGP 114 in Q1 2023 from EGP 90 in Q1 2022, as well as in test volumes which increased 12% year-on-year. It is important to note that this quarter's top-line partially reflects the translation effect resulting from the multiple devaluations of the Egyptian pound throughout FY 2022.

 

On a consolidated level, IDH recorded revenues of EGP 915 million in Q1 2023, down 22% year-on-year compared to EGP 1,180 million Q1 2022 when consolidated results had included a significant contribution from IDH's Covid-19-related offering impacting Egyptian and Jordanian operations.

 

Revenue Analysis   Q1 2022 Q1 2023 % Total revenue (EGP mn) 1,180 915 -22% Conventional revenue (EGP mn) 640 915 43% Total Covid-19-related revenue (EGP mn) 540 - - Contribution to Consolidated Results Conventional revenue 54% 100% Total Covid-19-related revenue 46% -   Test Volume Analysis Total tests (mn) 8.4 8.0 -4% Conventional tests performed (mn) 7.1 8.0 12% Total Covid-19-related tests performed (mn) 1.3 - - Contribution to Consolidated Results Conventional tests performed 85% 100% Total Covid-19-related tests performed 15% - Revenue per Test Analysis Total revenue per test (EGP) 140 114 -19% Conventional revenue per test (EGP) 90 114 27% Covid-19-related revenue per test (EGP) 431 - -

 

Revenue Analysis: Contribution by Patient Segment   Contract Segment (63% of Group revenue) IDH's contract segment recorded conventional revenue of EGP 579 million during the first quarter of 2023, a 46% year-on-year expansion from EGP 396 million in Q1 2022. The increase was driven by a sustained increase in test volumes at the Company's conventional business, which rose 16% year-on-year to reach 6.5 million and was further bolstered by an increase in average revenue per conventional test, which grew 26% year-on-year to EGP 89 in Q1 2023.   Walk-in Segment (37% of Group revenue) In parallel, IDH's walk-in segment also recorded strong conventional revenue growth of 38% in Q1 2023 driven by a 39% increase in average revenue per test. Conventional test volumes at the segment remained largely stable, recording 1.5 million tests in Q1 2023. Total walk-in revenues for the quarter recorded EGP 337 million, down 37% year-on-year. Lower walk-in revenues for the quarter mainly reflect the high base effect resulting from the significant contribution made by Covid-19-related testing in the comparable three months of 2022.   It is important to highlight that the average number of tests per patient at both the Company's contract and walk-in segments are continuing to normalize following a decrease associated with the Covid-19 pandemic. More specifically, test per patients at the contract and walk-in segments in Q1 2023 reached 4.3 and 3.6 tests per patient, respectively.

Key Performance Indicators

	Walk-in Segment			Contract Segment			Total
	1Q22	1Q23	Change	1Q22	1Q23	Change	1Q22	1Q23	Change
Revenue (EGP mn)	535	337	-37%	645	579	-10%	1,180	915	-22%
Conventional Results (EGP mn)	244	337	38%	396	579	46%	640	915	43%
Total Covid-19-related revenue (EGP mn)	291	-	-	250	-	-	540	-	-
Patients ('000)	971	422	-57%	1,678	1,517	-10%	2,649	1,939	-27%
% of Patients	37%	22%		63%	78%
Revenue per Patient (EGP)	551	798	45%	385	381	-1%	446	472	6%
Tests ('000)	2,144	1,519	-29%	6,258	6,517	4%	8,402	8,036	-4%
% of Tests	26%	19%		74%	81%
Conventional tests ('000)	1,530	1,519	-0.7%	5,618	6,517	16%	7,148	8,036	12%
Total Covid-19-related tests ('000)	614	-	-	641	-	-	1,254	-	-
Revenue per Test (EGP)	250	222	-11%	103	89	-14%	140	114	-19%
Conventional Revenue per Test (EGP)	160	222	39%	70	89	26%	90	114	27%
Test per Patient	2.2	3.6	63%	3.7	4.3	15%	3.2	4.1	31%

 

Revenue Analysis: Contribution by Geography   Egypt (79.9% of Group revenue) At IDH's home market, Egypt, the Company continued posting strong conventional revenue growth on the back of higher test volumes and average revenue per test. More specifically, Egypt recorded conventional revenue growth of 33% year-on-year, booking revenues of EGP 731 million in Q1 2023 compared to EGP 549 million one year prior. Throughout the quarter, IDH's Egyptian operations recorded conventional test volume year-on-year growth of 13% and an 18% year-on-year increase in average revenue per test. Consolidated revenues in Egypt recorded a 17% year-on-year contraction versus the first quarter of 2022 when Covid-19-related revenues has significantly boosted the country's consolidated top-line.   Al-Borg Scan IDH's Egyptian radiology venture, Al Borg Scan, continued its rapid growth trajectory booking revenues of EGP 28 million in Q1 2023, up a robust 65% versus Q1 2022. Revenue growth for the quarter was supported by a 37% year-on-year growth in test volumes as well as by a 21% year-on-year rise in average revenue per test provided. Al Borg Scan continued to see its contribution to Egypt's revenues grow, nearly doubling to reach 4% of Egypt's overall top-line in Q1 2023. Patient and test volumes continue to be supported by the successful ramp up of IDH's newer radiology branches launches throughout FY 2021 and FY 2022. Building on this, the Company is looking to grow its current network of six branches with the rollout of an additional branch by year-end 2023.   House Calls IDH's house call service in Egypt recorded revenue of EGP 114.2 million in the first quarter of the year, contributing to 16% of Egypt's revenues for the period. The robust contribution, which stands well above IDH's pre-pandemic averages, was recorded despite demand for the Company's Covid-19-related offering falling to near zero during the quarter.   Wayak Wayak recorded a 16% year-on-year increase in the number of orders, which came in at 40 thousand in Q1 2023 compared to 34.5 thousand this time last year. EBITDA losses for the quarter recorded EGP 0.4 million, a decline of 21% versus losses recorded in Q1 2022. The venture's EBITDA losses are expected to decrease further in the coming months as management's strategic efforts continue to pay off.   Detailed Egypt Revenue Breakdown EGP mn Q1 2022 Q1 2023 % Total Revenue 879 731 -17% Conventional Revenue 549 731 33% Radiology Revenue 17 28 65% Total Covid-19-related Revenue 330 - - Contribution to Consolidated Results Conventional revenue 62% 100% Radiology revenue 1.9% 3.8%   Total Covid-19-related revenue 38% -

Jordan (15.8% of Group revenue) IDH's Jordanian subsidiary, Biolab, recorded solid conventional revenue year-on-year growth of 12% in JOD terms (in EGP terms revenue was up 105% year-on-year) supported by higher test volumes for the quarter of 12%. On a consolidated level, in EGP terms, Biolab recorded a 48% year-on-year decline in revenue for the quarter reflecting the high base effect resulting from results in Q1 2022 having included a significant contribution from Biolab's Covid-19-related offering. Similarly, in JOD terms, Biolab's consolidated revenues declined 73% year-on-year.   Detailed Jordan Revenue Breakdown EGP mn Q1 2022 Q1 2023 % Total Revenue 281 144 -48% Conventional Results 70 144 105% Total Covid-19-related Revenues (PCR and Antibody) 210 - - Contribution to Consolidated Results Conventional Results 25% 100% Total Covid-19-related Revenue (PCR and Antibody) 75% -

 

Nigeria (3.4% of revenue) Echo-Lab, IDH's Nigerian subsidiary, saw its revenue for the first quarter of the year more than double to record EGP 31 million in Q1 2023 from EGP 15 million in Q1 2022. In local currency terms, revenue expanded a solid 26% year-on-year. Top-line growth for the quarter was dual driven as both test volumes and average revenue per test expanded versus the same three months of 2022. More specifically, total tests performed in the first quarter increased 16% year-on-year. Meanwhile, average revenue per test increased 80% year-on-year in EGP terms and 9% year-on-year in NGN terms. IDH's Nigerian subsidiary now boasts 12 fully operational branches throughout the country, up from 10 branches as of 31 March 2022.   Sudan (1.0% of revenue) IDH's operations in Sudan recorded revenue growth in EGP terms of 55% reflecting a 119% year-on-year increase in average revenue per test in the country. In SDG terms, revenues were up by 11% supported by a 57% year-on-year rise in average revenue per test in local currency terms. As at 31 March 2023, IDH's branches in the country stood at 18 up from 17 this time last year. IDH management continues to closely monitor the evolving situation in the country and a detailed emergency response plan is in place to safeguard IDH's staff and operations. Currently, 16 of IDH's 18 branches in the country have temporarily halted operations. Only two of the 18 branches, located in Madani and Port-Sudan, are currently operational.

 

Revenue Contribution by Country

	Q1 2022	Q1 2023	Change
Egypt Revenue (EGP mn)	879	731	-17%
Conventional (EGP mn)	549	731	33%
Radiology Revenue	17	28	65%
Covid-19-related (EGP mn)	330	-	-
Egypt Contribution to IDH Revenue	74.5%	79.9%
Jordan Revenue (EGP mn)	281	144	-48%
Conventional (EGP mn)	70	144	105%
Covid-19-related (EGP mn)	210	-	-
Jordan Revenues (JOD mn)	12.5	3.4	-73%
Jordan Revenue Contribution to IDH Revenue	23.8%	15.8%
Nigeria Revenue (EGP mn)	15	31	109%
Nigeria Revenue (NGN mn)	371	468	26%
Nigeria Contribution to IDH Revenue	1.3%	3.4%
Sudan Revenue (EGP mn)	5.7	8.8	55%
Sudan Revenue (SDG mn)	152	169	11%
Sudan Contribution to IDH Revenue	0.5%	1.0%

 

Average Exchange Rate

	Q1 2022	Q1 2023	Change
USD/EGP	16.5	30.5	85.0%
JOD/EGP	23.2	42.9	84.5%
NGN/EGP	0.04	0.07	67.1%
SDG/EGP	0.04	0.05	39.1%

 

Patients Served and Tests Performed by Country

	Q1 2022	Q1 2023	Change
Egypt Patients Served (mn)	2.0	1.8	-12%
Egypt Tests Performed (mn)	7.3	7.3	0.6%
Conventional tests (mn)	6.5	7.3	13%
Covid-19-related tests (mn)	0.8	-	-
Jordan Patients Served (k)	552	92	-83%
Jordan Tests Performed (k)	991	582	-41%
Conventional tests (k)	519	582	12%
Covid-19-related tests (k)	472	-	-
Nigeria Patients Served (k)	33	35	4%
Nigeria Tests Performed (k)	62	72	16%
Sudan Patients Served (k)	28	11	-61%
Sudan Tests Performed (k)	47	33	-29%
Total Patients Served (mn)	2.6	1.9	-27%
Total Tests Performed (mn)	8.4	8.0	-4%

 

Branches by Country

	31 March 2022	31 March 2023	Change
Egypt	472	520	48
Jordan	21	26	5
Nigeria	10	12	2
Sudan	17	18	1
Total Branches	520	576	56

 

-Cost of Sales Cost of sales dropped 9% year-on-year in Q1 2023 to book EGP 591 million. The decline in cost of sales for the period was primarily a result of a 27% year-on-year decline in raw material expenses coupled with lower Covid-19-related costs for the three-month period.   Cost of Sales Breakdown as a Percentage of Revenue Q1 2022 Q1 2023 Raw Materials 21.4% 20.2% Conventional raw material costs as % of conventional revenues 17.7% 20.2% Covid-19-related raw material costs as % of Covid-19-related revenues 25.6% - Wages & Salaries 14.1% 20.7% Depreciation & Amortisation 5.5% 9.7% Other Expenses 14.0% 13.9% Total 55.0% 64.5%   Raw material costs including the cost of specialized analysis at other laboratories (31% of consolidated cost of sales), came in as the second largest contributor to cost of sales during the quarter, recording EGP 185 million compared to EGP 253 million in Q1 2022. As a percentage of revenue, raw materials came in at 20.2%, down from 21.4% in the same period of the previous year. The decline wholly reflects the high base effect resulting from Covid-19-related test kits purchased during Q1 2022, when demand for IDH's Covid-19-related test offering was high.  Looking at conventional test kit prices, it is important to note that the Company did register a rise in average prices for conventional test kits throughout the first quarter of the year on the back of a weaker EGP and rising inflation. Rising conventional test kit prices were only partially mitigated by free test kits received during January 2023 from one of IDH's largest suppliers, Siemens.   Wages and salaries including employee share of profits (32% share of consolidated cost of sales) made up the largest share of total cost of sales during the first quarter of 2023, increasing 14% year-on-year to book EGP 190 million versus EGP 167 million in Q1 2022. The increase in direct wages and salaries for the period was primarily driven by increases in salaries and wages in Egypt, both due to higher than usual annual wage increases and adjustments to partially compensate for rising inflation as well as extra staffing costs to support the rollout of new branches. Higher wages and salaries also in part reflected an increase in Jordanian salaries due to the translation impact as a result of the devaluation of the Egyptian pound over the past year. Finally, wages and salaries in Nigeria also contributed to consolidated wages and salaries expansion due to additional radiology staff hires, coupled with annual salary increases.   Direct Wages and Salaries by Region Q1 2022 Q1 2023 Egypt (EGP mn) 127.8 141.1 Jordan (EGP mn) 34.0 39.1 Jordan (JOD mn) 1.5 0.9 Nigeria (EGP mn) 3.7 7.5 Nigeria (NGN mn) 92.4 113.5 Sudan (EGP mn) 1.1 2.0 Sudan (SDG mn) 29.5 38.0   Direct depreciation and amortization costs (15% of consolidated cost of sales) for the period booked EGP 88 million, increasing 37% year-on-year from EGP 64 million in Q1 2022. Depreciation and amortization expenses witnessed a notable increase from the same period of the previous year primarily due to the rollout of new branches across IDH's network, as the Company launched 56 new branches, 24 of which were launched during the first quarter of 2023.   Other expenses (22% of consolidated cost of sales) for the quarter decreased 23% year-on-year, reaching EGP 127 million in Q1 2023. Increases in other expenses for the period came on the back of increased repair & maintenance costs and cleaning costs, which combined accounted for approximately 29% of overall other expenses for the quarter. Increases in repair & maintenance costs and cleaning costs were further heightened by the rollout of additional branches across IDH's network.   Gross Profit IDH's gross profit booked EGP 325 million during Q1 2023, down 39% compared to the same period of the previous year. The Company's gross profit margin on revenue came in at 35% decreasing 10 percentage points year-on-year. The drop in gross profitability for the period is primarily a reflection of a post-Covid-19 normalisation in IDH's test mix, as well as the previously discussed cost increases largely related to direct wages and salaries.   Selling, General and Administrative Expenses Total SG&A outlays recorded during Q1 2023 amounted to EGP 196 million, increasing 45% year-on-year. As a percentage of consolidated revenues, SG&A expenses came in at 21% compared to 11% in Q1 2022. Increases in SG&A expenses are mainly attributable to: ·    An increase in wages and salaries primarily due to an increase in IDH's Board of Directors remuneration as a result of the addition of a board member during the second quarter of 2022, as well as increased salaries in Nigeria to support the hire of new management. ·    An increase in accounting fees related to the external auditor "PwC", reflecting both an increase in the fees paid in US dollars as well as the devaluation of the EGP versus the same period of last year (average rate in Q1 2023 was 30.5 EGP/USD versus 16.5 EGP/USD in Q1 2022). ·    Increased consulting fees related to the Company's 2023 sustainability report. Additionally, one-off expenses related to an information strategy agreement executed in 2023 and legal fees related to the Pakistan transaction. It is important to note that these expenses have been impacted by several devaluations throughout 2022 in IDH's home market of Egypt. ·    Higher marketing and advertisement expenses, which increased 43% year-on-year to reach EGP 32 million, compared to EGP 23 million during Q1 2022. Increases in advertising expenses were the result of marketing efforts aimed at expediting the ramp-up of Al Borg Scan's operations as well as supporting the rollout of new branches in IDH's network. ·    During Q1 2023, IDH recorded other income of EGP 5 million versus other expenses of EGP 1 million in the comparable three-month period of 2022. The figure is partially related to a EGP 1.3 million liability pertaining to a contract with Siemens to equip Al-Borg Scan's Capital Business Park branch with PET-CT equipment, which had weighed down other income in the corresponding period of 2022.   Selling, General and Administrative Expenses Q1 2022 Q1 2023 Change Wages & Salaries         45 69 51% Accounting Fees         8 17 101% Professional Services Fees 9 22 141% Market - Advertisement expenses           23 32 43% Other Expenses           30 33 9% Depreciation & Amortisation 8 10 35% Impairment loss on trade and other receivable           7 11 49% Travelling and transportation expenses 3 6 89% Other income 1 (5) - Total         135         196 45%   Selling, General and Administrative Expenses by Region Q1 2022 Q1 2023 Egypt (EGP mn) 109 155 Jordan (EGP mn) 18 24 Jordan (JOD mn) 0.8 0.6 Nigeria (EGP mn) 6 14 Nigeria (NGN mn) 151 209 Sudan (EGP mn) 2.0 2.3 Sudan (SDG mn) 52 46   Selling, General and Administrative Salaries by Region Q1 2022 Q1 2023 Egypt (EGP mn) 28.1 43.0 Jordan (EGP mn) 12.2 16.7 Jordan (JOD mn) 0.5 0.4 Nigeria (EGP mn) 3.5 7.2 Nigeria (NGN mn) 87.4 108.1 Sudan (EGP mn) 1.7 1.9 Sudan (SDG mn) 44.5 36.4   EBITDA The Company's EBITDA10 booked EGP 227 million during Q1 2023, down 51% year-on-year from the figure recorded in the same period of the previous year. IDH's EBITDA margin came in at 25% for the quarter versus 40% in Q1 2022. Lower EBITDA profitability for the period mainly reflects lower gross profitability coupled with the aforementioned increases in SG&A expenses.   EBITDA by Country In Egypt, EBITDA recorded EGP 198 million in Q1 2023, down 50% year-on-year compared to the EGP 395 million in the same period of the previous year on the back of decreased consolidated revenue from Egyptian operations. EBITDA margin for the period declined to 27% in Q1 2023 from 45% in Q1 2022. Lower profitability at the EBITDA level was dual driven by decreased gross profitability as well as increased SG&A expenses, which grew 47% year-on-year.   In Jordan, IDH's subsidiary, Biolab, booked an EBITDA of EGP 36 million in the current quarter, down 52% year-on-year and with an associated margin of 25%. In JOD terms, EBITDA declined 75% year-on-year during the first quarter of 2023. Decreases in EBITDA and its margin reflect lower gross profitability in Jordanian operations as a result of the post-Covid-19 normalisation, in addition to increased SG&A expenses, which increased 34% y-o-y to record EGP 25 million.   In Nigeria, EBITDA losses widened to EGP 8 million from EGP 1 million in Q1 2022. Widening EBITDA losses were primarily driven by high levels of inflation (in particular fuel inflation) which have weighed on IDH's Nigerian operations over the past year, more than outweighing the venture's consistent revenue growth. In local currency terms, EBITDA contracted 289% year-on-year in the first three months of 2023.   The Company's Sudanese operations reported positive EBITDA of EGP 2 million, up from EGP 0.1 million in the same period of the previous year on the back of increased gross profitability. In SDG terms, EBITDA recorded a 720% year-on-year expansion for the first quarter of the year.   Regional EBITDA in Local Currency Mn Q1 2022 Q1 2023 Change Egypt EBITDA EGP 395 198 -50% Margin   45% 27%   Jordan JOD 3.3 0.8 -75% Margin   27% 25%     Nigeria NGN -31 -121 -289% Margin   -8% -26%   Sudan SDG 3.8 31.3 720% Margin   3% 18%     10EBITDA is calculated as operating profit plus depreciation and amortization. It is important to note that while in absolute terms the EBITDA figure is identical when using IFRS or APM, its margin differs between the two sets of performance indicators only for the comparable period of 2022. Margins for Q1 2023 are identical across both IFRS and APM.   Interest Income / Expense IDH reported interest income of EGP 15 million in Q1 2023, a 66% year-on-year decrease from the EGP 45 million recorded in the same period of the previous year. Decreased interest income is primarily attributable to lower cash balances as a result of the record cash dividend distributed during the previous year.   Interest expense11 booked EGP 43 million during Q1 2023, increasing 29% year-on-year from EGP 33 million one year prior. The increase is mainly attributable to: ·    Increased interest on lease liabilities related to IFRS 16 due to the rollout of new branches. ·    Higher interest expenses following the CBE decision to increase rates by 1,000 bps since March 2022. It is worth highlighting that IDH's interest bearing debt balance increased to EGP 163 million as at 31 March 2023, from EGP 117 million at year-end 2022. The increase in interest bearing debt is primarily attributable to IDH's strategy of reducing foreign currency risk by coming to an agreement with General Electric (GE) for the early repayment of its contractual obligation of USD 5.7 million. To finance the settlement, IDH utilized a bridge loan facility, with half the amount being funded internally, while the other half (amounting to EGP 55 million) was provided through a loan by Ahly United Bank - Egypt.   Interest Expense Breakdown EGP mn Q1 2022 Q1 2023 Change Interest on Lease Liabilities (IFRS 16) 16.9 22.3 32% Interest Expenses on Leases 4.7 8.4 79% Bank Charges 7.1 2.4 -66% Loan-related Expenses on IFC facility12 1.9 4.6 146% Interest Expenses on Borrowings13 2.5 5.1 103% Total Interest Expense 33.1 42.8 29%   11Interest expenses on medium-term loans include EGP 5.0 related to the Group's facility with Ahli United Bank Egypt (AUBE). Meanwhile, the Group's facility with the Commercial International Bank (CIB) was fully repaid as of 5 April 2022. 12Loan-related expenses on IFC facility represents commitment fees on the facility granted by IFC and Mashreq with a total value of USD 60 million. The facility was cancelled in May 2023. 13Interest expenses on medium-term loans include EGP 5.0 million related to the Group's facility with Ahli United Bank Egypt (AUBE). Meanwhile, the Group's facility with the Commercial International Bank (CIB) was fully repaid as of 5 April 2022.   Foreign Exchange IDH booked a foreign exchange gain of EGP 109 million during Q1 2023, up from EGP 61 million in the same period of the previous year.   Taxation Tax expenses (income and deferred tax) came in at EGP 42 million during Q1 2023, down from EGP 157 million in Q1 2022. IDH's effective tax rate for the period stood at 20% in the current period, compared to 33% in Q1 2022. The decrease in effective tax rate for the period was primarily driven by the decline in undistributed reserves from Group's subsidiaries compared to the same period of the previous year, which dropped due to a special dividend paid to shareholders during the third quarter of 2022 (see "Deferred Tax Liabilities Analysis" table below). It is worth noting that there is no tax payable for IDH's two companies at the holding level, while tax was paid on profits generated by its operating subsidiaries (Egypt 22.5%, Jordan 21%, Nigeria 30% and Sudan 30%).   Taxation Breakdown by Region EGP Mn Q1 2022 Q1 2023 Change Egypt 143.6 36.0 -75% Jordan 13.6 5.4 -60% Nigeria 0.0 0.3 N/A Sudan 0.0 0.4 N/A Total Tax Expenses 157.2 42.1 -73%   Deferred Tax Liabilities Breakdown   Q1 2023 Analysis Q1 2022 Analysis EGP Mn 31 Mar 2023 31 Dec 2022 31 Mar 2022 31 Dec 2021 Deferred Tax Liabilities Balance (323.1) (321.7) (384.2) (332.1) DT Expense (Mar-Dec) (1.4) (52.1) DT Translation 0.4 (3.8) Total DT Expenses (1.0)   (55.9)   Income Tax (41.1) (101.4) Current Income Tax as P&L (42.1)   (157.2)     Net Profit IDH reported consolidated net profit of EGP 168 million, down 46% year-on-year from EGP 314 million in Q1 2022. The Company's net profit margin stood at 18%, down 8 points from 27% in Q1 2022.

ii.  Balance Sheet Analysis

Assets Property, Plant and Equipment IDH recorded gross property, plant and equipment (PPE) of EGP 2,425 million as at 31 March 2023, up from EGP 2,208 million as at 31 December 2022. The rise in CAPEX as a share of revenues during Q1 2023 is partially attributable to the EGP 42 million spent on new radiology branches in Egypt, as well as the EGP 134 million translation effect (associated with Jordan, Sudan, and Nigeria) which resulted from the Egyptian Pounds devaluation throughout the past twelve months.   Total CAPEX Addition Breakdown - Q1 2023 EGP mn % of Revenue Leasehold Improvements/new branches 42.0 4.6% Al-Borg Scan Expansion 41.7 4.6% Total CAPEX Additions Excluding Translation 83.8 9.2% Translation Effect 133.6 14.6% Total CAPEX Additions 217.4 23.7%   Accounts Receivable and Provisions As at 31 March 2023, IDH booked accounts receivable of EGP 467 million, up from EGP 395 million as of 31 December 2022. The Company's receivables' Days on Hand (DoH) recorded 122 days, compared to 124 days at year-end 2022.   Provisions for doubtful accounts recorded during Q1 2023 stood at EGP 11 million, up 49% year-on-year from EGP 7 million in Q1 2022. The increase in provisions reflect the slowdown in collections driven by the current economic condition in Egypt region.   Inventory As of the end of Q1 2023, IDH recorded an inventory balance of EGP 296 million, up from EGP 265 million as of year-end 2022. In parallel, Days Inventory Outstanding (DIO) rose to 144 days from 127 days as at 31 December 2022. The increase in DIO was driven by management initiatives to accumulate inventory as a part of its strategy to hedge against ongoing inflation.   Cash and Net Debt/Cash Cash balances booked as at 31 March 2023 remained relatively stable compared to those as at year-end 2022, recording EGP 813 million.   EGP million 31 Dec 2022 31 Mar 2023 T-Bills               296 342 Time Deposits                  123 113 Current Accounts               378 344 Cash on Hand                 18 14 Total           816 813   IDH's net debt14 balance as at 31 March 2023 stood at EGP 424 million, compared to a net debt balance of EGP 374 million as at year-end 2022.   EGP million 31 Dec 2022 31 Mar 2023 Cash and Financial Assets at Amortised Cost15                  816 813 Lease Liabilities Property (727) (782) Total Financial Liabilities (Short-term and Long-term) (335) (278) Interest Bearing Debt ("Medium Term Loans")16 (127) (177) Net Cash/(debt) Balance  (374)  (424) Note: Interest Bearing Debt includes accrued interest for each period.   Lease liabilities and financial obligations on property recorded EGP 782 million as at 31 March 2023, up from EGP 727 as at year-end 2022. The increase in lease liabilities is primarily due to the rollout of 24 new branches across IDH's network.   Meanwhile, financial obligations related to equipment decreased to EGP 278 million, from EGP 335 million as at 31 December 2022. The decline in financial obligations related to equipment reflects the early repayment of IDH's contractual obligations with General Electric (GE) as part of the Company's efforts to limit its foreign currency exposure. To finance the settlement, IDH utilized a bridge loan facility, with half of the amount due funded internally and the other half provided by a loan from Ahly United Bank - Egypt.   Finally, interest bearing debt recorded EGP 163 million, up from EGP 117 million as at year-end 2022. The increase in interest bearing debt was primarily driven by additional usage of MTL to support Al Borg Scan's expansion. It is worth highlighting that interest-bearing debt for both periods excluded accrued interest.   Liabilities Accounts Payable17 IDH recorded accounts payable of EGP 277 million as at 31 March 2023, remaining largely stable from the EGP 270 million recorded as at year-end 2022. Simultaneously, the Group's Days Payable Outstanding (DPO) decreased to 140 from 151 as at 31 December 2022.   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 Biolab's LTM EBITDA minus net debt. Biolab's put option liability decreased following the significant decline in the venture's EBITDA for the period.   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).   14The net cash/(debt) balance is calculated as cash and cash equivalent balances including financial assets at amortised cost, less interest-bearing debt (medium term loans), finance lease and Right-of-use liabilities. 15As outlined in Note 18 of IDH's Consolidated Financial Statements, some term deposits and treasury bills cannot be accessed for over 3 months and are therefore not treated as cash. Term deposits which cannot be accessed for over 3 months stood at EGP 113 million in Q1 2023, versus EGP 123 million as at year-end 2022. Meanwhile, treasury bills not accessible for over 3 months stood at EGP 342 million in Q1 2023, up from EGP 296 million in FY 2022. 16IDH's interest bearing debt as at 31 March 2023 included EGP 172 million to its facility with Ahli United Bank Egypt (AUBE) (outstanding loan balances are excluding accrued interest for the period). 17Accounts payable is calculated based on average payables at the end of each period.

-End-